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SECURITIES AND EXCHANGE COMMISSION
450 Fifth Street, N.W.
Washington, D. C. 20549
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FORM 10-SB/A-1
General Form for Registration of Securities
Pursuant to Section 12(b) or (g) of
The Securities Exchange Act of 1934
Whitney Information Network, Inc.
(Exact name of registrant as specific in its charter)
Colorado 84-1475486
(State of Incorporation) (I.R.S. Employer
Identification No.)
4818 Coronado Parkway
Cape Coral, Florida 33904
(Address of executive offices, including postal code)
Registrant's telephone number: (941) 542-8999
Copies to: Conrad C. Lysiak, Esq.
601 West First Avenue
Suite 503
Spokane, Washington 99201
Securities to be registered pursuant to Section 12(b) of the Act:
NONE
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(Title of Class)
Securities to be registered pursuant to Section 12(g) of the Act:
COMMON STOCK
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(Title of Class)
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ITEM 1. DESCRIPTION OF BUSINESS.
History
Whitney Information Network, Inc. (the "Company") was incorporated
under the laws of the state of Colorado on February 23, 1996 as Gimmel
Enterprises, Inc. On August 18, 1998, the Company acquired all of the
issued and outstanding shares of common stock of Whitney Education
Group, Inc., formerly, Win Systems, Inc., hereinafter "WSI," a
corporation incorporated under the laws of the state of Florida, on
November 12, 1992. Thereafter, WSI became a wholly owned subsidiary
corporation of the Company. On August 10, 1998, the Company changed its
name to WIN Systems, Inc. and on February 11, 1999, the Company again
changed its name to Whitney Information Network, Inc.
General
The Company is engaged in the business of providing educational
and training services through its publications and lectures to create
wealth, achieve financial independence and protect it. The Company
currently concentrates its principal efforts in the area of real estate
training.
The Company is currently holding approximately 120 basic real
estate courses and real estate training academies per month and
approximately 40 advanced programs per month. The Company has 49
instructors and has approximately 15,000 students per month attending
its programs.
Publications
The Company currently produces approximately twenty-four (24)
publications which are promoted by the Company to the general public
and for use at the Company's training and educational classes. The
publications are written by the Company. The Company then retains
independent publishers to produce the publications. The publications
are sold to the public or incorporated in the cost of training courses.
The Company does not rely exclusively on any one publishing firm. In
the event that one publisher ceased operations or refused to continue
to publish the Company's products, the Company could easily retain
another publisher.
Software
The Company sells a line of software primarily for the real estate
and small business industry. The software is developed and licensed by
Precision Software Services, Inc., a corporation controlled by Russell
Whitney, the Company's Chief Executive Officer and Chairman of the
Board of Directors.
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Lectures
The Company delivers a series of lectures and training programs
which relate to its publications and software. The Company charges
fees its training programs, however, the Company does not charge for
its free informational lectures. The Company has many instructors that
teach throughout the United States and Canada, while at the same time
promoting the Company's publications, software, and the Company's
programs to succeed in business, successfully invest in real estate,
achieve financial independence and protect their assets. The Company
promotes an initial program outlining how to invest in real estate and
how to succeed via small business ownership. Upon completion of the
Company's initial real estate investment training, the Company offers
additional programs that allow a customer to concentrate on a
specialized area. Each lecture topic is supplemented with the
Company's publications.
Real Estate Programs
The Company's base program is a three day seminar on basic real
estate investing. The program is supplemented with its publications
and software. Upon completion of the basic real estate investing
course, the Company promotes an intensified training camp which is
designed to expand the knowledge gained at the basic real estate
investing program. The intensified training camp is held at the
Company's corporate offices in Cape Coral, Florida.
The Company also operates six regional training camps at locations
in the United States and Canada that emphasis specific areas of real
estate investing, small business and asset protection. The camps
consist of lectures and interactive dialogue between the lecturer and
student. The Company promotes its publications and software at the
camps. The specific areas of concentration are: wholesale buying;
foreclosure; landlording; purchase/lease option; asset protection; and
commercial properties.
Mentoring
The Company provides a program whereby trained personnel travel to
a customer's home town and assist the customer in implementing the
knowledge gained at the Company's lectures within the customer's
community.
Financial Management
In addition to the real estate investment programs, the Company
also provides additional ancillary programs relating to enhancing and
the customer's knowledge of managing and protecting his money.
Internet
The Company is currently developing a program to assist business
minded individuals to take advantage of the Internet, including the
creation of a Web-site and marketing thereon. As of the date hereof,
the program has not been fully developed and is currently not available
to the public.
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The Internet Division is still in the development stage. The
Company is testing various methods of marketing its Internet courses
and products. Currently, the Company has developed an Internet
Training Program to teach basis Internet skills and plans to offer two
additional advanced courses. The Company anticipates the Internet
Division to be fully operational in the first quarter on 2000.
Marketing
The Company markets its publications, videos and lectures through
a number of medias, including newspapers, periodic publications, direct
mail, telemarketing, television, radio and world of mouth. The Company
has retained Professional Marketing International, Inc. of Lehigh, Utah
to provide telemarketing services. Further, the Company's wholly owned
subsidiary corporation, Whitney Consulting Services, Inc. furnishes
telemarketing and mail services to the Company.
Proposed Strategic Alliances
The Company has entered into discussions to form alliances with
various e-commerce vendors. The names of the vendors and the area of
expertise is set forth below. The purpose of the alliances is to
assist the Company's customers in developing web-sites to promote their
businesses. As of the date hereof, the Company has not entered into
any definitive agreements with any of following, and there is no
assurance that the Company will enter into a definitive agreements with
any of the following in the future.
Communication Junction, Inc. provides websites, software ware and
e-mail know how.
E-Commerce Exchange, LLC provides credit card services to
businesses.
Etoolz Inc. provides self-designing, turnkey websites services.
Certification
The Company is accredited by the state of Texas as a Certified
Proprietary School. No other state has accredited the Company in any
manner and there is no assurance that the Company will ever be
accredited by any other state for any reason.
Subsidiary Corporations
The Company conducts its business through the following wholly
owned subsidiary corporations: Whitney Education Group, Inc. (formerly,
Win Systems, Inc.); Whitney Internet Services, Inc.; Russ Whitney's
Wealth Education Centers, Inc. and its wholly owned subsidiary
corporation, Russ Whitney's Wealth Education Center of Jackson, MS,
Inc.; Whitney Consulting Services, Inc.; 1311448 Ontario, Inc.;
Whitney Canada, Inc.; and, Wealth Intelligence Network, Inc.
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Wealth Centers
The Company intends to create Russ Whitney's Wealth Education
Centers which will be store front schools which will offer all the
Company's current products and services. Future curricula will include
computer training and courses; and, continuing and professional
education for professionals. The Company intends to joint venture the
Wealth Centers with local entrepreneurs. As of the date hereof, the
Company has not opened any Wealth Centers and there is no assurance
that any Wealth Centers will be opened in the future. Further the
Company has not entered into any agreements with any local
entrepreneurs.
Year 2000
The Year 2000 issue is the result of computer programs written
using two digits rather than four to define the applicable year. As a
result, date sensitive software may recognize a date using "00" as the
year 1900 rather than the year 2000. This could result in system
failures or miscalculations causing disruptions of operations,
including among others, temporary inability to process transactions,
send invoices, or engage in similar normal business activities.
The Company has reviewed its information and non-information
systems and they are Year 2000 compliant. The Company has consulted
with third party vendors and they have advised it that they are Year
2000 compliant. In the event, however, that any of the vendors are not
Year 2000 compliant, the Company believes that an interruption of the
third party vendor's services may adversely affect the Company until
such time as the vendor's services are restored. The cost to bring the
Company's information and non-information systems into Year 2000
compliance was nominal. The Company has not established any
contingency plans in the event it or its vendors' services are
interrupted by a failure of Year 2000 compliance.
The Company has reviewed its current software and made all
necessary adjustments to bring the software into compliance with the
Year 2000 issue. In the future, the planned acquisitions of software
will most likely involve hardware and software which is relatively new
and therefore management does not anticipate that it will incur
significant operating expenses or be required to invest heavily in
computer systems improvements to be Year 2000 compliant. As the Company
makes arrangements with significant hardware and software suppliers,
the Company intends to determine the extent to which the Company's
systems may be vulnerable should those third parties fail to address
and correct their own Year 2000 issues and take measures to reduce the
Company's exposure, such as, finding alternative suppliers or requiring
the suppliers to correct Year 2000 compliance issues prior to the
Company acquiring the product. The Company anticipates that this will
be an ongoing process as the Company begins to implement its marketing
plan through 1999. There can be no assurances that the systems of
suppliers or other companies on which the Company may rely on will be
converted in a timely manner and will not have a materially adverse
effect on the Company's systems. Additionally there can be no
assurances that the computer systems necessary to maintain the
viability of the Internet will be Year 2000 compliant. The Company
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believes that it is taking the steps necessary regarding Year 2000
compliance issues with respect to matters within its control. However,
no assurance can be given that the Company's systems will be made Year
2000 compliant in a timely manner or that the Year 2000 problem will
not have a material adverse effect on the Company's business, financial
condition and results of operations.
Trademarks and Copyrights
^ The Company has licenses to sell and distribute all of
its products. It is currently seeking trademark protection on certain
names and marks. The Company entered into confidential agreements with
all technical employees and consultants and with third parties in
connection with the Company's license agreements. Despite these
precautions, it may be possible for a third party to copy or otherwise
obtain proprietary information without authorization. Third parties
may also develop similar technology independent of the Company.
Competition
The Company is involved in highly competitive business. There are
several other entities which manufacture, publish and conduct training
programs, many of which are much larger companies possessing
substantially greater financial resources and facilities than the
Company. However, said corporations are not using the same
marketing and distribution channels for their products as is the
Company. The Company believes that the principal competitive factors
in its marketing are: (1) brand recognition; (2) a broad selection of
products and services; (3) comprehensive courses and in-depth
curricula; (4) quality and responsiveness of customer service; and, (5)
ease of use of the Company's products.
The Company is currently enhancing its advertising and marketing
to keep its name prominent among those providing similar services. The
Company is developing new courses and new markets for its existing
courses. The Company believes that its responsiveness to its student's
needs has created customer satisfaction.
Company's Office
The Company's headquarters are located 4818 Coronado Parkway, Cape
Coral, Florida 33904 and the telephone number is (941) 542-8999.
Employees
The Company employs eighty-one (81) full time employees and one
(1) part-time employee.
RISK FACTORS
1. Development and Market Acceptance of Products. The Company's
success and growth will depend upon the Company's ability to market its
existing products and services, of which there is no assurance. See
"Business - Real Estate Programs."
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2. Liquidity; Need for Additional Financing. The Company
believes that it has the cash it needs for at least the next twelve
months based upon its internally prepared budget. The Company's cash
requirements, however, are not easily predictable and there is a
possibility that its budget estimates will prove to be inaccurate. If
the Company is unable to generate a positive cash flow before its cash
is depleted, it will be required to curtail operations substantially,
seek additional capital. There is no assurance that the Company will
be able to obtain additional capital if required, or if capital is
available, to obtain it on terms favorable to the Company. The Company
may suffer from a lack of liquidity in the future which could impair
its short-term marketing and sales efforts and adversely affect its
results of operations. See "Management's Discussion and Analysis or
Plan of Operation."
3. Competition. Most of the Company's competitors have
substantially greater financial, technical and marketing resources than
the Company. In addition, the Company's products compete indirectly
with numerous other products. As the market for the Company's products
expand, the Company expects that additional competition will emerge and
that existing competitors may commit more resources to those markets.
See "Business - Competition."
4. Reliance Upon Directors and Officers. The Company is wholly
dependent, at the present, upon the personal efforts and abilities of
its Officer and Directors, Russell A. Whitney, Chief Executive Officer
and Chairman of the Board of Directors; Richard W. Brevoort, President
and a member of the Board of Directors; and Ronald S. Simon,
Secretary/Treasurer and a member of the Board of Directors, who
exercise control over the day to day affairs of the Company. See
"Business" and "Management."
5. Issuance of Additional Shares. 17,500,000 shares of Common
Stock or 70% of the 25,000,000 authorized shares of Common Stock of the
Company are unissued. The Board of Directors has the power to issue
such shares, subject to shareholder approval, in some instances.
Although the Company presently has no commitments, contracts or
intentions to issue any additional shares to other persons, other than
in the exercise of options and warrants, the Company may in the future
attempt to issue shares to acquire products, equipment or properties,
or for other corporate purposes. Any additional issuance by the
Company, from its authorized but unissued shares, would have the effect
of diluting the interest of existing shareholders. See "Description of
Securities."
6. Indemnification of Officers and Directors for Securities
Liabilities. The Company's Articles of Incorporation provide that the
Company will indemnify any Director, Officer, agent and/or employee as
to those liabilities and on those terms and conditions as are specified
in The Company Act of the State of Colorado. Further, the Company may
purchase and maintain insurance on behalf of any such persons whether
or not the corporation would have the power to indemnify such person
against the liability insured against. The foregoing could result in
substantial expenditures by the Company and prevent any recovery from
such Officers, Directors, agents and employees for losses incurred by
the Company as a result of their actions. Further, the Company has
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been advised that in the opinion of the Securities and Exchange
Commission, indemnification is against public policy as expressed in
the Securities Act of 1933, as amended, and is, therefore,
unenforceable.
7. Cumulative Voting, Preemptive Rights and Control. There are
no preemptive rights in connection with the Company's Common Stock.
Shareholders may be further diluted in their percentage ownership of
the Company in the event additional shares are issued by the Company in
the future. Cumulative voting in the election of Directors is not
provided for. Accordingly, the holders of a majority of the shares of
Common Stock, present in person or by proxy, will be able to elect all
of the Company's Board of Directors. See "Description of Securities."
8. No Dividends Anticipated. At the present time the Company
does not anticipate paying dividends, cash or otherwise, on its Common
Stock in the foreseeable future. Future dividends will depend on
earnings, if any, of the Company, its financial requirements and other
factors. See "Dividend Policy."
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto.
Overview
On August 18, 1998, Gimmel Enterprises, Inc., a shell company
listed on the NASD OTC Bulletin Board acquired all of the outstanding
shares of Whitney Education Group, Inc. (formerly Win Systems, Inc.).
Prior to this Gimmel Enterprises, Inc. had no operations and its
activities consisted of efforts to establish a new business. Gimmel
Enterprises, Inc. changed its name to Whitney Information Network, Inc
(the "Company"). Whitney Education Group, Inc. was a privately held
company formed in 1992. For financial and reporting purposes the
acquisition has been treated as a recapitalization of the Company with
the Company as the acquirer (a reverse merger). The historical
financial statements prior to August 19, 1998 are those of Whitney
Education Group, Inc.
The Company is a provider of education in the areas of real
estate, finance, Internet and other post secondary career related
training, Its learning solutions are designed to deploy and manage
knowledge practically and more effectively for use as a competitive
advantage. The Company has accomplished its position in the market and
growth through its innovative distribution channels, including
classroom education, one-on-one mentoring, group instruction, training
centers and Internet marketing.
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Six Months and Quarter Ended June 30, 1999
The significant fluctuations in the Balance Sheet and the
Income Statement are primarily the result of increased business. Sales
for the six months have increased primarily due to increased seminar
activity and increased marketing efforts. The increase in credit sales
this year to date has resulted in increased accounts receivable for the
six months ended June 30, 1998. Substantially larger sales of
intensified training camps result in a substantially greater deferred
revenues.
The intensified training camps sold at seminar prior to the
balance sheet date may not be attended by the student for 90-360 days
thereafter. The Company does not consider the revenue earned until the
intensified training is completed. The Company has shown these
unearned revenues on the balance sheet as "Deferred Educational
Revenues." In conjunction with the deferred revenues, many expenses
associated with selling and marking the intensified training camps are
also deferred to provide a proper matching of income and expenses. The
major component of deferred expenses for the current quarter and the
six months to date, is advertising, comprising approximately 50% of the
amounts deferred, followed by commissions and other direct and indirect
expenses paid for or incurred prior to the balance sheet date and prior
to the fulfillment of the intensified training.
Current liabilities have increased as a direct result of increased
sales. Income taxes currently payable and deferred have increased as
a result of increased profits form operations and from the change from
the cash basis of accounting to the accrual basis for tax purposes.
Revenue
Revenue decreased by 3.5% from $5,833,306 to $5,631,788 for the three
months ended June 30, 1999 as compared to the three months ended June
30, 1998. However, gross revenue before deferrals increased by
$2,283,611 over the comparable prior years quarter as follows:
Second Quarter Second Quarter
1999 1998
Gross Revenues $ 7,719,932 $ 5,436,321
Less: Amounts Deferred
in the second quarter $ (2,088,144) $ 396,985
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Net Revenues $ 5,631,788 $ 5,833,306
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Revenues for the six months ended June 30, 1999 increased to
$10,286,320 as compared with $8,178,965 for the six months ended June
30, 1998 an increase of $2,107,355 or 26%. Total deferred revenues on
the balance sheet were $8,357,501 and $842,304 at June 30, 1999 and
1998, respectively. Cost of sales increased to $2,139,434 in the three
months ending June 30, 1999 from $1,886,438 in the three months ending
June 30,1998. Total cost of sales increased to $4,340,090 in the six
months ending June 30, 1998 from $2,865,029 in the six months ending
June 30, 1998.
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Total Advertising, Selling and General and Administrative expenses
decreased in the 2nd quarter of 1999 to $3,066,759 form $3,746,300 and
remained substantially the same for the six months ending June 30, 1999
as compared with the same six month period in 1998. This lack of change
in total expenses represents a greater number of period costs incurred
in the first six months of 1998 where certain marketing strategies were
being tested and refined, The results of these tests and refinements
have materialized in the first six months of the current year. Thus,
expenses did not increase proportionately with sales due to the
increased expenditures in the first half of 1998.
Sales and marketing expenses consist primarily of TV and newspaper
advertising. direct mailings, travel, public relations, trade shows and
other marketing literature and overhead allocations. General and
administrative expenses consist mainly of salaries and other person
personnel-related expenses for the Company's administrative, executive
and finance personnel as well as outside legal and audit costs.
Net income $274,754 (net of taxes of $150,841) in the 2nd quarter
of 1999 increased by 122% over the prior 2nd quarter of 1998 of
$173,375 or $.04 a share as compared with $.02 a share for the
comparable quarter last year. Six months net income were $626,909 for
the period ending June 30, 1999 and $272,805 for the period ending June
30, 1998, an increase of $354,024 or 130% over the prior period. This
resulted in earnings per share of $.08 per share for the six months
ending June 30, 1999 as compared with $.04 for the six months ending
June 30, 1998.
Liquidity and, Working Capital
At June 30, 1999 the company had cash of $1,512,456 as compared
with $578,013 at June 30, 1998, This increase of $934,442 is
attributable solely to operations, The company anticipates that its
cash flow from operations will be sufficient to meet its working
capital needs for the next 12 months
Years Ended December 31, 1997 and December 31, 1998
Revenues for the year ended December 31, 1998 increased to
$12,760,208 as compared with $5,558,280 for the year ended December 31,
1997 an increase of $7,201,928 or 130%. Total deferred revenues on the
balance sheet were $3,958,244 and $239,000 at December 31, 1998 and
1997, respectively. Cost of sales increased to $4,682,850 in the year
ended December 31, 1998 from $1,910,300 in the year ended December 31,
1997.
Total Advertising, Selling and General and Administrative expenses
increased in the year ended December 31, 1998 to $7,893,922 form
$3,637,716 as compared with 1997. These substantial increases in
revenues and expenses in 1998 over 1997 reflect a general increase in
business and reflect the results of the company's plan to expand its
business into new markets and develop new products.
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Sales and marketing expenses consist primarily of TV and newspaper
advertising, direct mailings, travel, public relations, trade shows and
other marketing literature and overhead allocations. General and
administrative expenses consist mainly of salaries and other person
personnel-related expenses for the Company's administrative, executive
and finance personnel as well as outside legal and audit costs.
Net income $768,436 (net of taxes of $415,000) for the year ended
December 31, 1998 increased dramatically over the year ended December
31, 1997 of $10,264 or $-10 a share as compared with $.01 01 a share
for the comparable year.
Liquidity and Working Capital
At December 31, 1998 the company had cash of $370,571 as compared
with $30,036 at December 31, 1997. This increase of $340,535 is
attributable primarily to operations. The company anticipates that its
cash flow from operations will be sufficient to meet its needs in the
next 12 months.
In addition, the company from time to time evaluates potential
acquisitions of business, products and/or technologies that complement
the company's business. To the extent that resources are insufficient
to fund the company's activities, the company may need to raise
additional funds. There can be no assurance that such additional
funding, if needed, will be available. If adequate funds are not
available on acceptable terms, the company may be unable to expand its
business, develop or enhance its products and services, take advantage
of future opportunities or respond to competitive pressures, any of
which could have a material adverse effect on the Company's business,
operating results and financial condition.
The Company does not anticipate a problem in funding its "Wealth
Centers" (Storefront adult education facilities located in upscale
strip malls), as the up front costs are minimal and its Joint Venture
Partners will pay half of the star-up costs.
Fluctuations in Quarterly Operating Results
The Company's quarterly operating results have varied in the past
and are expected to vary in the future as a result of a variety of
factors, some of which are outside the Company's control. Factors that
may adversely affect the Company's quarterly operating results include
the demand for tech technology-based training in general and demand for
online learning solutions in particular: the size and timing of
educational sessions and registrations, the mix of revenue from
products and services, the mix of products sold, market acceptance,
etc.
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ITEM 3. DESCRIPTION OF PROPERTIES.
The Company has leases office space from Russ Whitney, Chief
Executive Officer and Chairman of the Board of Directors, pursuant to
the terms of a three year lease which commenced on September 1, 1999
and terminates on October 31, 2002 with a monthly rental payment of
$5,805.34. Russ Whitney is the President of the Company and a member
of its Board of Directors. The terms of the lease are no less
favorable as can be obtained from independent third parties.
Prior to filing its registration statement herein, the
Company owned an inventory of undeveloped residential lots that it
intended to sell as part of its business. After obtaining title to the
lots and initiating sales, the Company determined that the paperwork
and licensing requirements were burdensome for the disposition thereof.
The Company sold all of the lots and currently does not own any of the
lots.
Russ Whitney's Wealth Education Center of Jackson, MS, Inc. a
wholly owned subsidiary corporation of Russ Whitney's Wealth Education
Centers, Inc. leases 3000 square feet of office space from Brown
Lakeland Properties/Charles Brown at 110 Jones Lane, Flowod,
Mississippi pursuant to a written lease agreement. The term of the
lease is November 1, 1999 to October 31, 2002. The monthly rental is
$3,550.00.
Whitney Consulting Services, Inc. leases 3,678 square feet of
office space from Draper Business Park L.C. at Suite 200, Building 5,
12227 South Business Park Drive, Draper, Utah pursuant to a written
lease agreement. The term of the lease is from August 8, 1999 to May
14, 2001. The monthly rental is $3,233.58 per month. Whitney
Consulting Services, Inc. leases an additional 3,475 square feet of
office space from Draper Business Park, L.L.C. at Building #5, Draper
Business Park, 12227 South Business Park Drive, Draper, Utah pursuant
to a written lease agreement. The term of the lease is from September
27, 1999 to September 26, 2001. The monthly rental is $2,968.23 the
first year and $3,113.02 the second year.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth the Common Stock ownership of each
person known by the Company to be the beneficial owner of five percent
or more of the Company's Common Stock, each director individually and
all officers and directors of the Company as a group. Each person has
sole voting and investment power with respect to the shares of Common
Stock shown, unless otherwise noted, and all ownership is of record and
beneficial.
<TABLE>
<CAPTION>
Name and Number of Percent of
address of owner Shares Position Class
<S> <C> <C> <C>
Russell A. Whitney 6,480,000 Chief Executive Officer 86.40%
4818 Corodado Parkway and Chairman of the
Cape Coral, Florida Board of Directors
33904
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Richard W. Brevoort 146,500[1] President and a 1.95%
4500 S.E. Fifth Place member of the Board of
#206 Directors
Cape Coral, Florida
33904
Ronald S. Simon 34,000[2] Secretary/Treasurer 0.45%
1402 Beechwood Trail and a member of the
Fort Myers, Florida Board of Directors
33919
All officers and 6,660,500 88.52%
directors as a
group (3 persons)
</TABLE>
[1] Does not include warrant to purchase up to 68,000 shares of common
stock at an exercise price of $4.00 per share which expires on
August 21, 2003.
[2] Does not include warrant to purchase up to 68,000 shares of common
stock at an exercise price of $4.00 per shares which expires on
August 21, 1999.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
The officers and directors of the Company are as follows:
Name Age Position
Russell A. Whitney 43 Chief Executive Officer and
Chairman of the Board of Directors
Richard W. Brevoort 62 President and a member of the Board
of Directors
Ronald S. Simon 56 Secretary/Treasurer, Chief
Financial Officer, and a member of
the Board of Directors
Each director serves for a term of three years and one-third of
the directors are elected at the annual meeting of shareholders. The
Company's officers are appointed by the Board of Directors and hold
office at the discretion of the Board.
Russell A. Whitney - Chief Executive Officer and Chairman of the Board
of Directors
Mr. Whitney was a founder and has been the Chief Executive Officer
and Chairman of the Board of Directors of the Company and its
predecessor, since 1987. Since 1992, Mr. Whitney has been Chief
Executive Officer of Whitney Education Group, Inc. (formerly Win
Systems, Inc.) which is engaged in the business of education and
training. Since October 1998, Mr. Whitney has been the President and
a member of the Board of Directors of 1311448 Ontario, Inc. 1311448
Ontario is in the business of education and training. Since October
1998, Mr. Whitney has been the President and a member of the Board of
Directors of Whitney Canada, Inc. Whitney Canada is in the business of
education and training. Since February 1999, Mr. Whitney has been the
<PAGE> 14
President and a member of the Board of Directors of Wealth Intelligence
Network, Inc. Wealth Intelligence Network is in the business of
education and training. Since June 1999, Mr. Whitney has been the
President and a member of the Board of Directors of Whitney Internet
Services, Inc. Whitney Internet Services is in the business of
providing Internet services, education and training. Since June 1999,
Mr. Whitney has been the President and a member of the Board of
Directors of Whitney Consulting Services, Inc. Whitney Consulting is
in the business of providing telemarketing services. Since June 1999,
Mr. Whitney has been the President and a member of the Board of
Directors of Russ Whitney's Wealth Education Centers, Inc. Russ
Whitney's Wealth Education Centers are in the business of education and
training. Since June 1999, Mr. Whitney has been the President and a
member of the Board of Directors of Russ Whitney's Wealth Education
Centers of Jackson, Mississippi, Inc. Since March 1991, Mr. Whitney
has been Chief Executive Officer of Whitney Leadership Group, Inc., a
Florida corporation located in Cape Coral, Florida, engaged in the
business of publishing and marketing. Since February 1995, Mr. Whitney
has been President of RAW, Inc., a Florida corporation engaged in the
business of buying, selling and investing in real estate which is
located in Cape Coral, Florida, Since August 1993, Mr. Whitney has
been Vice President of Precision Software Services, Inc., a Florida
corporation located in Cape Coral, Florida, which is engaged in the
business of developing and licensing software primarily for the real
estate and small business industries. Since March 1992, Mr. Whitney
has been President of MRS Equity Corp., a Florida corporation located
in Cape Coral, Florida, which is engaged in the business of selling
mortgage related products and services. Since November 1996, Mr.
Whitney has been affiliated with Teamwork Communications, Inc., a
company that provides sales and marketing services located in Cape
Coral, Florida.
Richard W. Brevoort - President and a member of the Board of Directors.
Since August 1998, Mr. Brevoort has been a member of the Board of
Directors of the Company and spends substantially full-time on Company
matters. Mr. Brevoort became the President of Whitney Education Group,
Inc. (formerly, Win Systems, Inc.) in February 1997, and President of
the Company in August 1998. From January 1984 to February 1991, Mr.
Brevoort was the President of the Hudson Agency, a marketing company
based in New York City. From September 1970 to October 1975, Mr.
Brevoort was a Deputy Finance Administrator and Commissioner of Tax
Collection. From June 1969 to August 1970, Mr. Brevoort was an
Assistant Administrator of Economic Development. From August 1968 to
March 1969, Mr. Brevoort was a Deputy Commissioner of Commerce. From
March 1966 to November 1966, Mr. Brevoort was a Director of Weights and
Measures for the City of New York. From November 1975 to December
1983, Mr. Brevoort was the Chief of Staff for the Democratic Party in
the New York State Senate. From 1982 to 1987, Mr. Brevoort was a member
of the Board of Directors of the New York City Convention Center. From
1996 to 1997, Mr. Brevoort was an Instructional Supervisor of the
Trace Program at Bronx Community College. From 1968 to 1969, Mr.
Brevoort was a member of an Advisory Committee for the New York City
Superintendent of Schools. Mr. Brevoort has been included in the 1996
Who's Who in America and 1996 Who's Who in the World.
<PAGE> 15
Ronald S. Simon - Secretary/Treasurer, Chief Financial Officer, and a
member of the Board of Directors.
Since August 1998, Mr. Simon was been the Secretary/Treasurer,
Chief Financial Officer, and a member of the Board of Directors of the
Company and spends such time that is necessary on Company matters.
Since August 1998, Mr. Simon has been the Secretary/Treasurer and a
member of the Board of Directors of Whitney Education Group, Inc.
(formerly, Win Systems, Inc.). Whitney Education Group is in the
business of education and training. Since August 1998, Mr. Simon has
been the Secretary/Treasurer and a member of the Board of Directors of
Wealth Intelligence Network, Inc. Wealth Intelligence Network is in the
business of education and training. Since June 1999, Mr. Simon has
been the Secretary/Treasurer and a member of the Board of Directors of
Whitney Consulting Group, Inc. Whitney Consulting Group is in the
business of telemarketing. From October 1995 to January 1999, Mr. Simon
was the President of On Line Services USA, Inc., an Internet service
provider and web site design company. Since 1971, Mr. Simon has been
Certified Public Accountant in the states of Florida and Illinois.
Since 1993, Mr. Simon has had his real estate license in the state of
Florida. Since 1996, Mr. Simon has had his insurance license in the
state of Florida. Mr. Simon graduated from the University of Illinois
with Bachelor of Science degree in accounting.
ITEM 6. EXECUTIVE COMPENSATION.
Summary Compensation.
The following table sets forth the compensation paid by the
Company during the last three years, for each officer and director of
the Company. This information includes the dollar value of base
salaries, bonus awards and number of stock options granted, and certain
other compensation, if any.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Restricted Securities
Name and Annual Stock Underlying LTIP All
Other
Principal Compen- Options/ Compen-
Position Year Salary Bonus sation Award(s) SARs Payouts sation
($) ($) ($) ($) (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Russell 1998 $52,000 0 0 0 0 0 $52,000
Whitney 1997 $39,365 0 0 0 0 0 $39,365
CEO 1996 -0- 0 0 0 0 0 -0-
Richard 1998 $30,281 0 0 0 0 0 $30,281
Brevoort 1997 $32,224 0 0 0 0 0 $32,224
President 1996 $19,480 0 0 0 0 0 $19,480
Ronald 1998 $ 5,927 0 0 0 0 0 $ 5,927
Simon 1997 -0- 0 0 0 0 0 -0-
Secretary 1996 -0- 0 0 0 0 0 -0-
</TABLE>
<PAGE> 16
The Company anticipates paying the following salaries in 1999,
subject to the Company beginning profitable operations and generating
sufficient revenues to pay the same:
Russell Whitney President 1999 $ 75,000
Richard Brevoort Treasurer 1999 $ 40,000
Ronald Simon Secretary 1999 $ 36,000
There are no retirement, pension, or profit sharing plans for the
benefit of the Company's officers and directors. The Company has
adopted a Non-Qualified Incentive Stock Option Plan and the Company
supplies health insurance to its officers, directors and employees.
The following grants of stock options, whether or not in tandem
with stock appreciation rights ("SARs") and freestanding SARs have been
made to officers and/or directors:
<TABLE>
<CAPTION>
Number of
Securities
Number of Underlying
Securities Options/SARs
Underlying Granted Exercise Number of
Options During Last or Base Options Expiration
Name SARs Granted 12 Months[1] Price ($/Sh) Exercised Date
<S> <C> <C> <C> <C> <C>
Richard Brevoort 75,000 75,000 $1.875 -0- 09/01/2008
Ronald Simon 125,000 125,000 $1.875 -0- 09/01/2008
</TABLE>
Long-Term Incentive Plan Awards.
The Company does not have any long-term incentive plans that
provide compensation intended to serve as incentive for performance.
Compensation of Directors.
Directors do not receive any compensation for serving as members
of the Board of Directors. The Board has not implemented a plan to
award options to any Directors. There are no contractual arrangements
with any member of the Board of Directors.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On August 18, 1998, the Company acquired all (100 shares) of the
issued and outstanding shares of common stock of Win Systems, Inc. in
exchange for 6,750,000 shares, 187,500 Class A Warrants, and 340,000
Class B Warrants. All the shares of Win Systems, Inc. were owned by
Russell Whitney, the current Chief Executive Officer and Chairman of
the Board of Directors of the Company.
The Company has leased office space from Russ Whitney, its Chief
Executive Officer and a member of the Board of Directors pursuant to
the terms of a three year lease which commenced on September 1, 1999
and terminates on October 31, 2002 with a monthly rental payment of
$5,805.34. Russ Whitney is the Chief Executive Officer of the Company
and Chairman of its Board of Directors. The terms of the lease are no
less favorable as can be obtained from independent third parties.
<PAGE> 17
The Company is indebted to Russ Whitney, the Company's Chief
Executive Officer and Chairman of the Board of Directors in the sum of
$19,979 for cash advances.
The Company has advanced to Precision Software Services, Inc. and
MRS Equity Corp., the amount of $528.00 and $8.00, respectively. The
aforementioned corporations are owned and controlled by Russ Whitney.
In addition, the Company has receivables from Whitney Leadership
Group, Inc. in the amount of $94,417 for sales of products and from
Teamwork Communication, Inc. in the amount of $20,000 in the form of a
short-term loan. The aforementioned corporations are controlled by
Russ Whitney.
MRS Equity Corp. provides products and services for the Company
and the Company provides MRS Equity Corp. with payroll services. MRS
Equity is a wholly owned subsidiary corporation of Equity Corp.
Holdings which is owned and controlled by Russell Whitney, the
Company's Chief Executive Officer and Chairman of the Board of
Directors.
Precision Software Services, Inc. develops and licenses software
to the Company. Russell Whitney, the Company's Chief Executive Officer
and Chairman of the Board of Directors owns controlling interest in
Precision Software Services, Inc.
The Company provides payroll services to Whitney Leadership Group,
Inc. and in the past, Whitney Leadership Group, Inc. has lent money to
the Company. Russell Whitney, the Company's Chief Executive Officer
and Chairman of the Board of Directors President and Chief Operating
Officer of Whitney Leadership Group.
In January 1997, RAW, Inc. a corporation owned and controlled by
Russell Whitney, the Company's Chief Executive Officer and Chairman of
the Board of Directors, sold to the Company a portion of its inventory
consisting of vacant land.
The amount of purchased products (software books, tapes, and
supplies) from affiliates is as follows:
MRS Equity Corp. $148,350
Precision Software Services, Inc. $180,123
The payroll service amounts are as follows:
MRS Equity Corp. $ 51,747
Precision Software Services, Inc. $ 22,367
Whitney Leadership Group, Inc. $ 46,747
The terms of all of the transactions between related parties were
no less favorable than could be obtained from independent third
parties.
ITEM 8. LEGAL PROCEEDINGS.
The Company is not a party defendant in any pending or threatened
litigation and to its knowledge, no action, suit or proceedings has
been threatened against its officers and its directors.
<PAGE>
<PAGE> 18
ITEM 9. MARKET PRICE FOR COMMON EQUITY AND OTHER SHAREHOLDER MATTERS.
The Company's shares are traded on the Bulletin Board operated by
the National Association of Securities Dealers, Inc. (the "Bulletin
Board") under the trading symbol "RUSS." The Company's shares began
trading in August 1998. These quotations reflected inter-dealer prices,
without retail mark-up, mark-down or commissions and may not represent
actual transactions. Summary trading by quarter for the 1998 and 1997
fiscal years and the first and second quarter of 1999 are as follows:
Fiscal Quarter High Bid Low Bid
1999
Second Quarter $ 2.00 $ 1.87
First Quarter $ 2.00 $ 1.75
1998
Fourth Quarter $ 2.50 $ 2.00
Third Quarter $ 3.50 $ 3.00
Second Quarter $ 0.00 $ 0.00
First Quarter $ 0.00 $ 0.00
1997
Fourth Quarter $ 0.00 $ 0.00
Third Quarter $ 0.00 $ 0.00
The source for the foregoing high and low bid information was
Michael Kirby a registered representative of Spencer Edwards, Inc. a
market maker in the Company's common stock.
As of July 26, 1999, the Company has 195 holders of record of its
Common Stock.
The Company has not paid any dividends since its inception and
does not anticipate paying any dividends on its Common Stock in the
foreseeable future.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES.
The Company has 7,524,022 shares of Common Stock issued and
outstanding as of July 26, 1999. Of the 7,524,022 shares of the
Company's Common Stock outstanding, 750,022 shares are freely tradeable
and 6,770,000 shares can only be resold in compliance with Reg. 144
adopted under the Securities Act of 1933 (the "Act").
In general, under Rule 144 as currently in effect, a person (or
persons whose Shares are aggregated) who has beneficially owned Shares
privately acquired directly or indirectly from the Company or from an
affiliate, for at least one year, or who is an affiliate, is entitled
to sell within any three month period a number of such Shares that does
not exceed the greater of 1% of the then outstanding shares of the
Company's Common Stock or the average weekly trading volume in the
Company's Common Stock during the four calendar weeks, immediately
preceding such sale. Sales under Rule 144 are also subject to certain
manner of sale provisions, notice requirements and the availability of
current public information about the Company. A person (or persons
<PAGE> 19
whose Shares are aggregated) who is not deemed to have been an
affiliate at any time during the 90 day preceding a sale, and who has
beneficially owned Restricted Shares for at least two years, is
entitled to sell all such Shares under Rule 144 without regard to the
volume limitations, current public information requirements, manner of
sale provisions or notice requirements.
In 1996, the Company issued 976,200 shares of common stock to its
officers, directors and others pursuant to Reg. 504 of the Securities
Act of 1933.
On or about August 18, 1998, the Company reverse split its shares
of common stock on a 1 for 1.3016 basis.
On or about August 18, 1998, the Company issued 93,750 Class A
Warrants to Earnest Mathis, Jr. in consideration of $100.00 and 93,750
Class A Warrants to Gary Agron in consideration of $100.00. Messrs.
Mathis and Agron are former directors of the Company. The Class A
Warrants were issued pursuant to Section 4(2) of the Securities Act of
1933 (the "Act") and are deemed "restricted" securities as that term is
defined in Reg. 144 of the Act. As of the date hereof, Messrs. Mathis
and Agron have not exercised any of the foregoing Class A Warrants.
For a description of the Class A Warrants, see "Description of
Securities."
On August 18, 1998, the Company acquired all of the issued and
outstanding shares of common stock of Win Systems, Inc., a corporation
controlled by Russell Whitney, the Company's Chief Executive Officer
and Chairman of the Board of Directors in consideration of 6,750,000
shares of the Company's common stock and 340,000 Class B Warrant
entitling the holders thereof to acquire an addition 340,000 shares of
the Company's common stock at an exercise price of $4.00 per share up
to August 18, 2002. The shares of common stock and warrants were
issued pursuant to Section 4(2) of the Securities Act of 1933. For a
description of the Class B Warrants, see "Description of Securities."
On February 1, 1999, the Company issued 20,000 "restricted" shares
to James Francis in exchange for the stock of Wealth Intelligence
Network, Inc. which is now a subsidiary of Whitney Information Network,
Inc. Also on May 31, 1999 and again on June 30, 1999, the Company
issued 2,000 "restrictecd" shares (4,000 total) to Visibility
Consulting, Inc., a financial public relations firm, for services. The
issuances of the foregoing shares were exempt from registration under
the Securities Act of 1933 pursuant to Section 4(2) of the Act.
ITEM 11. DESCRIPTION OF SECURITIES.
Common Stock
The authorized Common Stock of the Company consists of 25,000,000
shares, $0.001 par value per share. All shares have equal voting
rights, are non-assessable and have one vote per share. Voting rights
are not cumulative and, therefore, the holders of more than 50% of the
Common Stock could, if they choose to do so, elect all of the directors
of the Company.
<PAGE> 20
Upon liquidation, dissolution or winding up of the Company, the
assets of the Company, after the payment of liabilities, will be
distributed pro rata to the holders of the Common Stock. The holders
of the Common Stock do not have preemptive rights to subscribe for any
securities of the Company and have no right to require the Company to
redeem or purchase their shares. The shares of Common Stock presently
outstanding are fully paid and non-assessable.
Dividends
Holders of the Common Stock are entitled to share equally in
dividends when, as and if declared by the Board of Directors of the
Company, out of funds legally available therefore. No dividend has
been paid on the Common Stock since inception, and none is contemplated
in the foreseeable future.
Warrants
There are currently outstanding, 187,500 Class A Warrants and
340,000 Class B Warrants.
The Class A Warrants are exercisable at anytime prior to the
expiration of two (2) years from the date the Class A Warrants are
first registered with the Securities and Exchange Commission (the
"SEC"). As of the date hereof, the Class A Warrants have not been
registered with the SEC. Each Class A Warrant entitles the warrant
holder to purchase one additional share of common stock at an exercise
price of $4.00 per share. The Class A Warrants may not be exercised by
the holder thereof unless a current registration statement covering the
shares underlying the Class A Warrants is effective with the SEC. The
exercise price of the Class A Warrants is subject to adjustment upon
the occurrence of certain events and the Company may reduce the
exercise price of the Class A Warrants, subject to notifying the
warrant holder of such adjustment. The Class A Warrants are subject to
the terms and conditions of a Warrant Agreement between the Company and
Corporate Stock Transfer. The foregoing is a brief summary of the
material conditions of said Warrant Agreement and is qualified by the
terms of the Warrant Agreement.
The Class B Warrants are exercisable at anytime prior to the
expiration of four (4) years from the date the Class B Warrants are
first registered with the SEC. As of the date hereof, the Class B
Warrants have not been registered with the SEC. Each Class B Warrant
entitles the warrant holder to purchase one additional share of common
stock at an exercise price of $4.00 per share. The Class B Warrants
may not be exercised by the holder thereof unless a current
registration statement covering the shares underlying the Class B
Warrants is effective with the SEC. The exercise price of the Class B
Warrants is subject to adjustment upon the occurrence of certain events
and the Company may reduce the exercise price of the Class B Warrants,
subject to notifying the warrant holder of such adjustment. The Class
B Warrants are subject to the terms and conditions of a Warrant
Agreement between the Company and Corporate Stock Transfer. The
foregoing is a brief summary of the material conditions of said Warrant
Agreement and is qualified by the terms of the Warrant Agreement.
<PAGE> 21
Transfer and Warrant Agent
The Company's transfer and warrant agent is Corporate Stock
Transfer, Republic Plaza, 370 17th Street, Suite 2350, Denver Colorado
80202-46147 and its telephone number is (303) 595-3300.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The laws of the state of Colorado under certain circumstances
provide for indemnification of the Company's Officers, Directors and
controlling persons against liabilities which they may incur in such
capacities. A summary of the circumstances in which such
indemnification is provided for is contained herein, but this
description is qualified in its entirety by reference to the Company's
Articles of Incorporation and to the statutory provisions.
In general, any Officer, Director, employee or agent may be
indemnified against expenses, fines, settlements or judgments arising
in connection with a legal proceeding to which such person is a party,
if that person's actions were in good faith, were believed to be in the
Company's best interest, and were not unlawful. Unless such person is
successful upon the merits in such an action, indemnification may be
awarded only after a determination by independent decision of the Board
of Directors, by legal counsel, or by a vote of the shareholders, that
the applicable standard of conduct was met by the person to be
indemnified.
The circumstances under which indemnification is granted in
connection with an action brought on behalf of the Company is generally
the same as those set forth above; however, with respect to such
actions, indemnification is granted only with respect to expenses
actually incurred in connection with the defense or settlement of the
action. In such actions, the person to be indemnified must have acted
in good faith and in a manner believed to have been in the Company's
best interest, and have not been adjudged liable for negligence or
misconduct.
ITEM 13. FINANCIAL STATEMENTS.
Financial Statements begin on following page.
<PAGE> 22
LARRY LEGEL, CPA
5100 NORTH FEDERAL HIGHWAY, #409
FORT LAUDERDALE, FL 33308
(954) 493-8900
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors of the
WHITNEY INFORMATION NETWORK, INC.
Cape Coral, FL
I have audited the accompanying consolidated balance sheet of Whitney
Information Network, Inc. as of December 31, 1998 and 1997, and the
related statements of consolidated operations, changes in consolidated
stockholders' equity and consolidated cash flows for the years ended
December 31, 1998 and 1997. These financial statements are the
responsibility of the Company's management. My responsibility is to
express an opinion on these consolidated financial statements based on
my audits.
I have conducted my audit in accordance with generally accepted
auditing standards. Those standards require that I plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. I believe that my audits provide a reasonable basis for
my opinion.
In my opinion, the consolidated financial statements referred to above
present fairly, the financial position of Whitney Information Network,
Inc. as of December 31, 1998 and 1997, and the results of its
consolidated operations and its consolidated cash flows for the years
then ended, in conformity with generally accepted accounting principles
consistently applied.
LARRY LEGEL
/s/ Larry Legel
Certified Public Accountant
June 9, 1999
Fort Lauderdale, Florida
F-1
<PAGE> 23
WHITNEY INFORMATION NETWORK, INC.
Consolidated Balance Sheet
At December 31, 1998 and 1997
<TABLE>
<CAPTION>
ASSETS 1998 1997
<S> <C> <C>
Current Assets:
Cash $ 370,571 $ 30,036
Accounts Receivable $ 980,263 $ 78,116
Notes Receivable $ 10,558 $ 25,537
Prepaid Advertising and Other $ 141,448 $ 179,688
Due From Affiliates $ 117,322
Land for Resale $ 12,336 $ 79,961
Deferred Production Costs $ 114,953
Deferred Seminar Costs $ 3,983,689 $ 66,000
Miscellaneous Receivable $ 17,831 $ 8,226
----------- ---------
Total Current Assets $ 5,748,971 $ 467,564
----------- ---------
Total Assets $ 5,748,971 $ 467,564
=========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Current Liabilities
Accounts Payable $ 564,708 $ 84,107
Income Taxes Currently Payable $ 148,000
Loans From Affiliates $ 12,428 $ 171,437
Deferred Educational Revenues $ 3,958,244 $ 239,000
Other Accrued Liabilities $ 62,948 $ 5,813
----------- ---------
Total Current Liabilities $ 4,746,328 $ 500,357
----------- ---------
Other Liabilities and Deferred Credits
Deferred Income Taxes $ 267,000
Loans from Shareholder $ 64,979 $ 64,979
----------- ---------
Total Other Liabilities $ 331,979 $ 64,979
----------- ---------
Total Liabilities $ 5,078,307 $ 565,336
----------- ---------
SHAREHOLDERS' EQUITY
Shareholders' Equity
Common Stock (no par value stock,
7,500,047 shares issued
and outstanding) $ 2,602 $ 2,602
Paid In Capital $ 900 $ 900
Retained Earnings $ 667,162 $(101,274)
----------- ---------
Total Shareholders' Equity $ 670,664 $ (97,772)
----------- ---------
Total Liabilities and
Shareholders' Equity $ 5,748,971 $ 467,564
=========== =========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
F-2
<PAGE> 24
WHITNEY INFORMATION NETWORK, INC.
Consolidated Statement of Operations
For the Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Sales $ 13,760,208 $ 5,558,280
Cost of Sales $ 4,682,850 $ 1,910,300
----------- -----------
Gross Profit $ 9,077,358 $ 3,647,980
----------- -----------
Expenses
Advertising and Sales Expense $ 5,351,293 $ 2,769,896
General and Administrative Expense $ 2,542,629 $ 867,820
----------- -----------
$ 7,893,922 $ 3,637,716
----------- -----------
Income Before Taxes $ 1,183,436 $ 10,264
Income Taxes (see Note) $ (415,000)
----------- -----------
NET INCOME $ 768,436 $ 10,264
Retained Earnings, beginning of year $ (101,274) $ (111,538)
----------- -----------
Retained Earnings, end of Year $ 667,162 $ (101,274)
=========== ===========
Basic and Fully Diluted Earnings
per share ** $ 0.10 $ 0.01
=========== ===========
</TABLE>
** Adjusted for Reverse Split
The accompanying notes are an integral part of the consolidated
financial statements.
F-3
<PAGE> 25
WHITNEY INFORMATION NETWORK, INC.
Consolidated Statement of Changes in Stockholders' Equity
For the Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
Common Stock Paid Retained Total
Number of In Earnings Shareholders
Shares Value Capital (Deficit) Equity
<S> <C> <C> <C> <C> <C>
Balance
December 31, 1996 976,200 $ 2,602 $ (2,500) $ 102
Net loss for 1997 $ (64) $ (64)
Balance
December 31, 1997 976,200 $ 2,602 $ (2,564) $ 38
Reverse Split (226,153)
Acquisition of
Win Systems, Inc. 6,750,000 $ 900 $ (98,710) $ (97,810)
Net income for the
period ending
December 31, 1998 $ 768,436 $ 768,436
--------- ------- ----- ---------- ---------
7,500,047
Balance =========
December 31, 1998 $ 2,602 $ 900 $ 667,162 $ 670,664
======= ===== ========== =========
Weighted Average Number
of Shares Outstanding
During the Period 7,500,047 **
=========
</TABLE>
** Assumes the merger took place at the beginning of the period
The accompanying notes are an integral part of the consolidated
financial statements.
F-5
<PAGE> 26
WHITNEY INFORMATION NETWORK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31,1998 AND 1997
SIGNIFICANT ACCOUNTING POLICIES
General
WHITNEY INFORMATION NETWORK, INC. (formerly Win Systems International,
Inc.) was incorporated under the laws of the State of Colorado and
began operations in the Educational Seminar industry on August 18, 1998
when it merged with Win Systems, Inc,
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principals requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenue
and expenses during the reporting period. Actual results could differ
from those estimates.
Fair Value of Financial Statements
The Company's financial instruments consist principally of cash,
accounts receivable and notes receivable, deferred seminar costs,
accounts payable, accrued expenses, deferred educational revenues, and
notes payable. The carrying amounts of such financial instruments as
reflected in the balance sheets approximate their estimated fair value
as of December 31, 1998. The estimated fair value is not necessarily
indicative of the amounts the Company could realize in a current market
exchange or of future earnings or cash flows.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts
of WHITNEY INFORMATION NETWORK, INC. and its wholly owned subsidiaries,
Win Systems, Inc, Whitney Canada, Ltd. and 1311448 Ontario Corp. All
significant intercompany accounts and transactions have been
eliminated.
F-6
<PAGE> 27
WHITNEY INFORMATION NETWORK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
Revenue Recognition
Revenue from product sales is recognized at the time the sale is made.
Revenue from educational seminars is recorded (1) when the non
refundable deposit is received for the seminars (2) when it is
reasonably certain that the balance of the option to purchase
additional educational programs will be exercised and paid and (3)
revenues are deferred when the seminar proceeds are received in full in
the current period and the seminar takes place in a subsequent period.
See liability for Deferred Revenues on the balance sheet in the amount
of $3,958,244.
Deferred Expenses for Future Educational Programs
The Company incurs a liability when a student signs up to attend a
future educational seminar with the Company and the tuition that was
collected or accrued is deferred. The expenses related to the deferred
tuition are also deferred. The deferred expenses associated with future
educational programs is shown on the balance sheet as Deferred Seminar
Costs in the amount of $3,983,689. The components of the Deferred
Expenses at December 31, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
Component of Deferred Expenses 1998 1997
<S> <C> <C>
Advertising Expense $ 2,099,998 $ 40,000
Instructors and Trainers Compensation 676,899 10,000
Support Services 385,992 6,000
Travel and Facility Costs 551,456 7,000
Administrative Expense 269,344 3,000
----------- --------
Total $ 3,983,689 $ 66,000
=========== ========
</TABLE>
Property and Equipment
The Company owned no property or equipment at the balance sheet dates.
However; it did own some land for resale at December 31, 1998, which it
plans to sell to an affiliate in 1999 (at the same price it purchased
the land from the affiliate at the beginning of 1997). See related
party transactions.
F-7
<PAGE> 28
WHITNEY INFORMATION NETWORK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
Income Taxes
The Company adopted Statement of Financial Accounting Standards No. 109
(SFAS No. 109), "Accounting for Income Taxes" in 1993. SFAS No. 109
requires the liability method of accounting for income taxes. Deferred
income taxes result in temporary differences in the recognition of
revenue and expenses for income tax and financial reporting purposes.
These differences are primarily due to the differences in accrual basis
reporting for statement purposes and cash basis reporting for tax
purposes.
Accounts and Notes Receivable
Notes Receivable represent one-year notes at various interest rates
received on sales of real estate. The accounts receivable are trade
receivables arising from the sale of educational products and seminars.
The company believes the allowance for doubtful accounts is sufficient
to cover any uncollectible amounts as of December 31, 1998.
Land for Resale
The land held for resale on the balance sheet is recorded at cost and
is reasonably expected to be sold or exchanged during the succeeding
year.
Net Income Per Common Share
In 1997 the Company adopted SFAS No. 128 "Earnings Per Share." SFAS No.
128 (the "Statement") establishes standards for computing and
presenting earnings per share ("EPS"). This Statement replaces the
presentation of primary EPS with a presentation of basic EPS and
requires dual presentation of basic and diluted EPS on the face of the
statement of operations for all entities with complex capital
structures. This Statement also requires a reconciliation of the
numerator and denominator of the basic EPS computation to the numerator
and denominator of the diluted EPS computation.
F-8
<PAGE> 29
WHITNEY INFORMATION NETWORK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
Acquisitions and Mergers
On August 18, 1998. WHITNEY INFORMATION NETWORK, INC. (formerly Win
Systems International, Inc. and prior to that Gimmel Enterprises, Inc.)
purchased Win Systems, Inc. by exchanging 100% of its shares for 90% of
Gimmel's shares bringing the total shares of WHITNEY INFORMATION
NETWORK, INC. (issued and outstanding) at August 18, 1998 to 7,500,047.
Win Systems, Inc. became a wholly owned subsidiary of Whitney
Information Network, Inc. (WIN). The financial statements from January
1, 1997 through December 31, 1998 are based upon the assumption that
the companies were combined for the entire period and all stock splits
have been reflected in the statements as of the beginning of the
period.
Also on August 18, 1998, WIN issued 187,500 Class A stock purchase
warrants and 340,000 Class B stock purchase warrants. Both the Class A
and Class B warrants are exercisable at $4.00 per share. The Class A
warrants and the Class B warrants are exercisable 2 years and 4 years
respectively after the underlying stock is registered. The Company also
instituted a stock option plan for key personnel. Under the plan
options are to be granted at the fair market value at the date of the
grant and exercisable for a 1 10-year period after the grant with a
three-year vesting schedule. The Company has reserved 750,000 shares
for the stock option plan of which 385,000 option shares have been
granted (at an exercise price of $2.00 per share) to the balance sheet
date. None have been exercised or expired to date.
Related Party Transactions
The Company has rented its premises since 1992 from the Chairman of the
Board and pays rent on annual leases. Rentals under the related party
lease were $37,657 $17,025 for the years ended 31, 1998 and 1997,
respectively. The company leases approximately 8,200 square feet
presently. Its space requirements doubled in 1998. Future minimum
payments, by year and in the aggregate under capital and noncancellable
operating leases with initial or remaining terms of one year or more
are $44,202 for 1999.
F-9
<PAGE> 30
WHITNEY INFORMATION NETWORK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
Related Party Transactions (continued)
At December 31,1997 and December 31, 1998 the related party receivables
and payables on the balance sheet were as follows:
<TABLE>
<CAPTION>
December December
31, 1997 31, 1998
<S> <C> <C>
Payables:
Long-term
Loans Payable to the Chairman
of the Board $ 64,979 $ 64,979
========= =========
Short-Term
Accounts Payable to Precision
Software Services, Inc. $ 21,466 $ -0-
Amounts due to Whitney
Leadership Group, Inc. $ 97,938 $ -0-
Amounts Due to RAW, Inc. $ 37,552 $ 1,220
Amounts Due to MRS Equity Corp, $ 14,481 $ 11,208
--------- ---------
$ 171,437 $ 12,428
Receivables:
Due from Whitney Leadership Group $ 89,754
Due form MRS Equity Corp $ 1,073
Due from Precision Software Services, Inc. $ 6,495
Due from Teamwork Communications, Inc. $ 20,000
$ 117,322
=========
</TABLE>
The Company has receivables from Whitney Leadership Group in the amount
of $89,754; Precision Software Services, Inc. in the amount of $6,495;
MRS Equity Corp. in the amount of $1,073 and Teamwork Communications,
Inc. in the amount of $20,000 shown on the balance sheet as Due from
Affiliates at December 31, 1998.
F-10
<PAGE> 31
WHITNEY INFORMATION NETWORK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
Related Party Transactions (continued)
MRS Equity Corp. provides certain products and services for WHITNEY
INFORMATION NETWORK, INC. and WHITNEY INFORMATION NETWORK, INC.
provides MRS Equity Corp. with payroll services including leased
employees. WHITNEY INFORMATION NETWORK, INC. provides payroll services
to MRS Equity Corp in the amount of $115,583 for 1997 - and $100,272
for 1998. MRS Equity Corp. provided WHITNEY INFORMATION NETWORK, INC.
with $43,212 and $216,500 for product costs for 1997 and 1998
respectively. MRS Equity Corp. is a 100 percent subsidiary of Equity
Corp. Holdings, Inc. of which the Chairman of the Board of WHITNEY
INFORMATION NETWORK, INC. owns a controlling interest.
Precision Software Services, Inc. is a Company that develops and
licenses software primarily for the real estate and small business
industries. The Chairman of the Board of Directors of WHITNEY
INFORMATION NETWORK, INC. owns a majority interest in Precision
Software Services, Inc. During 1997 and 1998 the Company provided
WHITNEY INFORMATION NETWORK, INC. $115,791 and $67,925 in product cost,
respectively. WHITNEY INFORMATION NETWORK, INC. provides payroll
services to Precision Software Services, Inc in the amount of $30,704
for 1997 and $44,135 for 1998.
WHITNEY INFORMATION NETWORK, INC. provides payroll services to Whitney
Leadership Group, Inc. in the amount of $123,051 for 1997 and $133,928
for 1998. Whitney Leadership Group, Inc. also loaned WHITNEY
INFORMATION NETWORK, INC. $50,000 in 1997 and provided office and other
services to WHITNEY INFORMATION NETWORK, INC. amounting to $123,489 for
1998. The Chairman of the Board of WHITNEY INFORMATION NETWORK, INC. is
the President andd Chief Operating Officer of Whitney Leadership Group,
Inc.
RAW, Inc. is a company owned by the Chairman of the Board of WHITNEY
INFORMATION NETWORK, INC., which buys, sells and invests in real
property. It was felt that WIN SYSTEMS, INC. could enhance its
operations if it could also provide the same services that RAW, Inc.
did. RAW, Inc. on January 1, 1997 sold Win Systems, Inc a portion of
its inventory of real estate on hand at that date for $70,077.
Repayments on this loan were $68,857 through December 31, 1998 leaving
a balance of $1,220 at that date. During 1997 RAW, Inc. sold real
estate valued at $94,075 to WIN SYSTEMS, INC. Management decided in
late 1997 to discontinue this practice in WIN SYSTEMS, INC. as this
practice detracted WIN SYSTEMS, INC. from its primary focus of
education and training.
F-11
<PAGE> 32
WHITNEY INFORMATION NETWORK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
Related Party Transactions (continued)
In 1998, the company's outside accountant became the Chief Financial
Officer of the company and a shareholder of the company. In the year
ended December 31, 1997 the company paid $ 5,000 in accounting fees to
its now Chief Financial Officer and $19,052 for 1998.
Those items above that are- reasonably expected to be collected within
one year are shown as short term and those, which are not expected to
be collected during the next twelve months, are shown as long-term.
Income Taxes
The reconciliation between the provision for income taxes and the
amount which results from applying the federal statutory rate of 34% to
the income before income taxes is as follows:
Income tax expense at the statutory
rate for continuing operations $ 404,000
State taxes, net of federal tax benefit $ 45,000
Utilization of net operating losses $ (34,000)
---------
Income tax expense per books $ 415,000
=========
Currently Payable $ 148,000
Deferred $ 267,000
---------
$ 415,000
=========
INDEBTEDNESS
There were no short or long-term borrowings from unrelated third
parties for 1997 and the year ended December 31, 1998. The interest
expense was $-0- for 1997 and 1998 to date. (See Related Party
Transactions). The Company was indebted to its Chairman for short term
non-interest bearing advances in the amount of $64,979 at both December
31,1997 and December 31, 1998.
F-12
<PAGE> 33
WHITNEY INFORMATION NETWORK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
INCOME TAXES
At December 31, 1997 the company had Federal net operating loss
carryforwards of approximately $96,000 that will be used in 1998. The
company has previously reported its revenues and expenses for income
tax purposes on the "cash basis" of accounting. A small provision has
been recorded in 1997 due to the further utilization of prior year's
net operating losses. Deferred income taxes reflect the net tax effects
of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for
income tax purposes.
COMMITMENTS AND CONTINGENCIES
The company carries liability insurance coverage, which it considers
sufficient to meet regulatory and consumer requirements and to protect
the company's employees, assets and operations.
The company, in the ordinary course of conducting its business, is
subject to various state and federal requirements. In the opinion of
management, the company is in compliance with these requirements.
The company is currently working to resolve the potential impact of the
Year 2000 on the processing of date-sensitive information by the
Company's computerized information systems. The year 2000 problem is
the result of computer programs being written using two digits (rather
than four) to define the applicable year. Any of the Company's programs
that have time-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000, which could result in
miscalculations or system failures. Costs of addressing potential
problems are expensed as incurred and are not expected to have a
material adverse impact on the Company's financial position, results of
operations or cash flows in future periods. However, if the Company or
its vendors are unable to resolve such issues in a timely manner, it
could result in a financial risk. Accordingly, the Company plans to
devote the necessary resources to resolve all significant Year 2000
issues in a timely manner. While the Company does not at this time
anticipate significant problems with suppliers, it will develop
contingency plans, if required, with these third parties due to the
possibility of compliance issues.
Subsequent Event
At a meeting on May 26, 1999, the Company, with the consent of the
Board of Directors, the shareholders voted unanimously voted in favor
of changing the name of the Company from Win Systems International,
Inc. to WHITNEY INFORMATION NETWORK, INC.
F-13
<PAGE> 34
WHITNEY INFORMATION NETWORK, INC.
Consolidated Balance Sheet
At June 30, 1999 and 1998
<TABLE>
<CAPTION>
ASSETS
1999 1998
<S> <C> <C>
Current Assets:
Cash $ 1,512,455 $ 578,013
Accounts Receivable $ 1,730,688 $ 588,122
Notes Receivable $ 29,687
Prepaid Advertising and Other $ 531,949 $ 300,605
Due From Affiliates $ 114,015
Land for Resale $ 12,336 $ 15,596
Deferred Production Costs $ 114,953
Deferred Seminar Costs $ 6,831,389 $ 351,000
Miscellaneous Receivable $ 58,008 $ 25,271
------------ -----------
Total Current Assets $ 10,905,793 $ 1,888,294
------------ -----------
Property and Equipment
depreciation of $7,659 in 1999 $ 127,444 $ -
------------ -----------
Other Assets
Contract Rights (net of
amortization) $ 49,500 $ -
------------ -----------
Total Assets $ 11,082,737 $ 1,888,294
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Current Liabilities
Accounts Payable $ 666,667 $ 471,746
Income Taxes Currently Payable $ 342,868 $ 107,000
Loans From Affiliates $ 192,616
Deferred Educational Revenues $ 8,357,501 $ 842,304
Other Accrued Liabilities $ 74,199 $ 35,264
------------ -----------
Total Current Liabilities $ 9,441,235 $ 1,648,930
------------ -----------
Other Liabilities and Deferred Credits
Deferred Income Taxes $ 267,000
Loans from Shareholder $ 19,979 $ 64,979
------------ -----------
Total Other Liabilities $ 286,979 $ 64,979
------------ -----------
Total Liabilities $ 9,728,214 $ 1,713,909
------------ -----------
1-a
<PAGE> 35
WHITNEY INFORMATION NETWORK, INC.
Consolidated Balance Sheet
At June 30, 1999 and 1998
SHAREHOLDERS' EQUITY
1999 1998
<S> <C> <C>
Shareholders' Equity
Common Stock (no par value stock,
7,500,047 shares issued and
outstanding) $ 60,352 $ 100
Paid In Capital $ 900 $ 900
Retained Earnings $ 1,293,271 $ 173,375
------------ -----------
Total Shareholders' Equity $ 1,354,523 $ 174,375
------------ -----------
Total Liabilities and
Shareholders' Equity $ 11,082,737 $ 1,888,284
============ ===========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
1-b
<PAGE> 36
WHITNEY INFORMATION NETWORK, INC.
Consolidated Statement of Operations
For the Six Months Ended June 30, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Sales $ 10,286,320 $ 8,178,965
Cost of Sales $ 4,340,090 $ 2,865,929
------------ -----------
Gross Profit $ 5,946,230 $ 5,313,036
------------ -----------
Expenses
Advertising and Sales Expense $ 2,974,198 $ 3,256,358
General and Administrative Expense $ 2,002,042 $ 1,677,593
------------ -----------
$ 4,976,240 $ 4,933,951
------------ -----------
Income Before Taxes $ 969,990 $ 379,085
Income Taxes (see note) $ (343,881) $ (107,000)
------------ -----------
NET INCOME $ 626,109 $ 272,085
Retained Earnings, beginning
of period $ 667,162 $ (98,710)
------------ -----------
Retained Earnings, end of period $ 1,293,271 $ (101,274)
============ ===========
Basic and Fully Diluted Earnings
Per Share** $ 0.08 $ 0.04
============ ===========
Weighted average number of shares
outstanding during the period. 7,513,859 7,500,047
============ ===========
</TABLE>
Prior periods have been restated to reflect
the merger as if it took place at the beginning
of the period.
The accompanying notes are an integral part of the consolidated
financial statements.
2
<PAGE> 37
WHITNEY INFORMATION NETWORK, INC.
Consolidated Statement of Cash Flows
For the Six Months Ended June 30, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings from operations $ 626,109 $ 272,086
Add back Depreciation and Amortization $ 8,476
----------- ----------
$ 634,585 $ 272,086
Changes in operating assets and liabilities
Increase in Accounts Receivable $ (750,425) $ (510,006)
Increase in Deferred Production Costs $ (285,000)
Decrease in Notes Receivable $ 10,558 $ (4,150)
(Increase) Decrease in Prepaids and
other assets $ (390,501) $ (120,917)
Increase in Other Receivables $ (40,137) $ (16,945)
Increase in Accounts Payable $ 101,959 $ 387,639
Increase in Deferred Income $ 4,399,257 $ 888,304
Increase in Income Tax Payable $ 194,868 $ 107,000
Increase in Other Liabilities $ 11,211 $ 29,451
----------- ----------
Net cash flow from operations $ 4,171,375 $ 747,462
----------- ----------
CASH USED IN INVESTING ACTIVITIES
Purchase of Property and Equipment $ (135,103)
Real Estate Sold $ 64,375
Acquisition of Contract Rights $ (50,317)
Loans made to Affiliates $ 3,307 $ 21,178
----------- ----------
Net cash used in investing activities $ (182,113) $ 85,553
----------- ----------
CASH USED IN FINANCING ACTIVITIES
Issuance of Common Stock $ 57,750
Loans from affiliates $ (57,428)
Increase in Deferred Expenses $(2,847,700) $ (285,000)
----------- ----------
Net cash used in financing activities $(2,847,378) $ (285,000)
----------- ----------
Increase in cash $ 1,141,884 $ 548,015
Cash at beginning of year $ 370,571 $ 29,998
----------- ----------
Cash at end of year $ 1,512,455 $ 578,013
=========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
3
<PAGE> 38
WHITNEY INFORMATION NETWORK, INC.
Consolidated Statement of Changes in Stockholders' Equity
For the Six Months Ended June 30, 1999 and 1998
<TABLE>
<CAPTION>
Common Stock Retained Total
Number of Paid-In Earnings Shareholders'
Shares Value Capital (Deficit) Equity
<S> <C> <C> <C> <C> <C>
Balance
December 31, 1996 976,200 $ 2,602 $ (2,500) $ 102
Net loss for 1997 $ (64) $ (64)
--------- ------- ----- ----------- -----------
Balance
December 31, 1997 976,200 $ 2,602 $ (2,564) $ 38
Reverse Split (226,153)
Merger with Win Systems,
Inc. 6,750,000 $ 900 $ (98,710) $ (97,810)
Net income for the
period ending
December 31, 1998 $ 768,436 $ 768,436
--------- ------- ----- ----------- -----------
Balance
December 31, 1998 7,500,047 $ 2,602 $ 900 $ 667,162 $ 670,664
Issuance of Shares
for Acquisitions 20,000 $50,000 $ 50,000
Issuance of Shares
for Services 4,000 $ 7,750 $ 7,750
Net income for the
six months ending
June 30, 1999 $ 626,109 $ 626,109
--------- ------- ----- ----------- -----------
Balance
June 30, 1999 7,524,047 $60,352 $ 900 $ 1,293,271 $ 1,354,523
========= ======== ===== =========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
4
<PAGE> 39
WHITNEY INFORMATION NETWORK, INC.
Comparative Consolidated Statement of Operations
For the Six Months and Three Months Ended June 30, 1999 and 1998
<TABLE>
<CAPTION>
Quarter Quarter Six Months Six Months
Ended Ended Ended Ended
June 30, June 30,
1999 1998 1999 1998
<C> <C> <C> <C> <C>
Sales $ 5,631,788 $ 5,833,306 $10,286,320 $ 8,178,965
Cost of Sales $ 2,139,434 $ 1,886,438 $ 4,340,090 $ 2,865,929
----------- ----------- ----------- -----------
Gross Profit $ 3,492,354 $ 3,946,868 $ 5,946,230 $ 5,313,036
----------- ----------- ----------- -----------
Expenses
Advertising and
Sales Expense $ 2,102,307 $ 2,752,179 $ 2,974,198 $3,256,358
General and
Administrative
Expense $ 964,452 $ 994,121 $ 2,002,042 $ 1,677,593
----------- ----------- ----------- -----------
$ 3,066,759 $ 3,746,300 $ 4,976,240 $ 4,933,951
----------- ----------- ----------- -----------
Income Before Taxes $ 425,595 $ 200,568 $ 969,990 $ 379,085
Income Taxes
(see note) $ (150,841) $ (77,000) $ (343,881) $ (107,000)
----------- ----------- ----------- -----------
NET INCOME $ 274,754 $ 123,568 $ 626,109 $ 272,085
Retained Earnings,
beginning
of year $ 1,018,517 $ 49,807 $ 667,162 $ (98,710)
----------- ----------- ----------- -----------
Retained Earnings,
end of year $ 1,293,271 $ 173,375 $ 1,293,271 $ 173,375
=========== =========== =========== ===========
Basic and Fully
Diluted Earnings
Per Share** $ 0.04 $ 0.02 $ 0.08 $ 0.04
=========== =========== =========== ===========
Weighted average
number of shares
outstanding during
the period. 7,513,859 7,500,047 7,510,398 7,500,047
=========== =========== =========== ===========
</TABLE>
Prior periods have been restated to reflect
the merger as if it took place at the beginning
of the period.
The accompanying notes are an integral part of the consolidated
financial statements.
5
<PAGE> 40
WHITNEY INFORMATION NETWORK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
SIGNIFICANT ACCOUNTING POLICIES
General
WHITNEY INFORMATION NETWORK, INC. (formerly Win Systems International,
Inc.) was incorporated under the laws of the State of Colorado and began
operations in the Educational Seminar industry on August 18, 1998 when
it merged with Win Systems, Inc.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principals requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those
estimates.
Fair Value of Financial Statements
The Company's financial instruments consist principally of cash, accounts
receivable and notes receivable, deferred seminar costs, accounts
payable, accrued expenses, deferred educational revenues, and notes
payable. The carrying amounts of such financial instruments as reflected
in the balance sheets approximate their estimated fair value as of
December 31, 1998. The estimated fair value is not necessarily
indicative of the amounts the Company could realize in a current market
exchange or of future earnings or cash flows.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts
of WHITNEY INFORMATION NETWORK, INC. and its wholly owned subsidiaries,
Whitney Education Group, Inc. (formerly Win Systems, Inc,) Whitney
Canada, Ltd. and 1311448 Ontario Corp and Wealth Intelligence Network,
Inc., Whitney Consulting Services, Russ Whitney's Wealth Centers, Inc.
and Whitney Consulting, Inc. All significant inter-company accounts and
transactions have been eliminated.
5
<PAGE> 41
WHITNEY INFORMATION NETWORK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
Revenue Recognition
Revenue from product sales is recognized at the time the sale is made.
Revenue from educational seminars is recorded (1) when the non refundable
deposit is received for the seminars (2) when it is reasonably certain
that the balance of the option to purchase additional educational
programs will be exercised and paid and (3) revenues are deferred when
the seminar proceeds are received in full in the current period and the
seminar takes place in a subsequent period. See liability for Deferred
Revenues on the balance sheet in the amount of $8.657,501 at June 30,
1999 and $842,304 at June 30, 1998.
Deferred Expenses for Future Educational Programs
The Company incurs a liability when a student signs up to attend a future
educational seminar with the Company and the tuition that was collected
or accrued is deferred. The expenses related to the deferred tuition are
also deferred. The deferred expenses associated with future educational
programs are shown on the balance sheet as Deferred Seminar Costs in the
amount of $6,831,389 at June 30, 1999 and $351,000 at June 30, 1998.
Property and Equipment
Property and equipment are carried at cost. Depreciation is provided
using accelerated and straight-line methods over the following useful
lives:
Office Furniture 7 years
Office Equipment 5 years
Intangibles (Contract Rights) 15 years
Also; the Company owned land for resale at June 30, 1999, which it plans
to sell to an affiliate in the second half of1999 (at the same price it
purchased the land from the affiliate at the beginning of 1997). See
related party transactions.
6
<PAGE> 42
WHITNEY INFORMATION NETWORK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
Income Taxes
The Company adopted Statement of Financial Accounting Standards No. 109
(SFAS No. 109), "Accounting for Income Taxes" in 1993. SFAS No. 109
requires the liability method of accounting for income taxes. Deferred
income taxes result in temporary differences in the recognition of
revenue and expenses for income tax and financial reporting purposes.
These differences are primarily due to the differences in accrual basis
reporting for statement purposes and cash basis reporting for tax
purposes.
Accounts and Notes Receivable
Notes Receivable represent one-year notes at various interest rates
received on sales of real estate. The accounts receivable are trade
receivables arising from the sale of educational products and seminars.
The company believes the allowance for doubtful accounts is sufficient
to cover any uncollectible amounts as of December 31, 1998.
Land for Resale
The land held for resale on the balance sheet is recorded at cost and is
reasonably expected to be sold or exchanged during the succeeding year.
Net Income Per Common Share
In 1997 the Company adopted SFAS No. 128 "Earnings Per Share." SFAS No.
128 (the "Statement") establishes standards for computing and presenting
earnings per share ("EPS"). This Statement replaces the presentation of
primary EPS with a presentation of basic EPS and requires dual
presentation of basic and diluted EPS on the face of the statement of
operations for all entities with complex capital structures. This
Statement also requires a reconciliation of the numerator and denominator
of the basic EPS computation to the numerator and denominator of the
diluted EPS computation.
7
<PAGE> 43
WHITNEY INFORMATION NETWORK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
Merger With Win Systems, Inc.
On August 18, 1998, Win Systems, Inc. was acquired by WHITNEY INFORMATION
NETWORK, INC. (formerly Win Systems International, Inc. and prior to that
Gimmel Enterprises, Inc.) in a reverse merger whereby Win Systems, Inc.
exchanged 100% of its shares for 90% of Gimmel's shares bringing the
total shares of WHITNEY INFORMATION NETWORK, INC. (issued and
outstanding) at August 18, 1998 to 7,500,047. Win Systems, Inc. became
a wholly owned subsidiary of Whitney Information Network, Inc. (WIN).
The acquisition was treated as a pooling of interests. The financial
statements from January 1, 1997 through December 31, 1998 are based upon
the assumption that the companies were combined for the entire period and
all stock splits have been reflected in the statements as of the
beginning of the period. Also on August 18, 1998, WIN issued 187,500
Class A stock purchase warrants and 340,000 Class B stock purchase
warrants. Both the Class A and Class B warrants are exercisable at $4.00
per share.
The Class A warrants and the Class B warrants are exercisable 2 years and
4 years respectively after the underlying stock is registered. The
Company also instituted a stock option plan for key personnel. Under the
plan options are to be granted at the fair market value at the date of
the grant and exercisable for a 10-year period after the grant with a
three-year vesting schedule. The Company has reserved 750,000 shares for
the stock option plan of which 415,000 option shares have been granted
(at an exercise price of approximately $2.00 per share) to the balance
sheet date. None have been exercised or expired to date.
Related Party Transactions
The Company has rented its headquarters premises in Cape Coral, Florida
since 1992 from the Chairman of the Board and pays rent on annual leases.
Rentals under the related party lease were $22,100 and $13,233 for the
six months ended June 30, 1999 and 1998, respectively. The company leases
approximately 8,200 square feet presently. Future minimum payments, by
year and in the aggregate under capital and noncancellable operating
leases with initial or remaining terms of one year or more are shown in
the Commitments footnote.
8
<PAGE> 44
WHITNEY INFORMATION NETWORK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
Related Party Transactions (continued)
At June 30,1999 and June 30, 1998 the related party receivables and
payables on the balance sheet were as follows:
<TABLE>
<CAPTION>
June 30, 1998 June 30,1999
<S> <C> <C>
Payables:
Long-term
Loans Payable to the Chairman
of the Board $ 64,979 $ 19,979
========= =========
Short-Term
Accounts Payable to Precision
Software Services, Inc. $ 21,466 $ -0-
Amounts due to Whitney
Leadership Group, Inc. $ 119,117 $ -0-
Amounts Due to RAW, Inc. $ 37,552 $ -0-
Amounts Due to MRS Equity
Corp, $ 14,481 $ -0-
--------- ---------
$ 192,616 $
========= =========
Receivables:
Due from Whitney Leadership Group $ 94,417
Due form MRS Equity Corp $ 528
Due from Precision Software Services, Inc. $ 8
Due from Teamwork Communications, Inc. $ 20,000
---------
$ 114,953
=========
</TABLE>
The Company has receivables from Whitney Leadership Group in the amount
of $94,917; Precision Software Services, Inc. in the amount of $8; MRS
Equity Corp. in the amount of $528 and Teamwork Communications, Inc. in
the amount of $20,000 shown on the balance sheet as Due from Affiliates
at December 31, 1999.
9
<PAGE> 45
WHITNEY INFORMATION NETWORK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
Related Party Transactions (continued):
MRS Equity Corp. provides certain products and services for WHITNEY
INFORMATION NETWORK, INC. and WHITNEY INFORMATION NETWORK, INC. provides
MRS Equity Corp. with payroll services including leased employees.
WHITNEY INFORMATION NETWORK, INC. provides payroll services to MRS Equity
Corp in the amount of $51,747 for the six months ended June 30 1999 and
$51,795 for the six months ended June 30,1998. MRS Equity Corp.
provided WHITNEY INFORMATION NETWORK, INC. with $148,350 and $89,600 for
product costs for the six months ending1999 and 1998 respectively. MRS
Equity Corp. is a 100 percent subsidiary of Equity Corp. Holdings, Inc.
of which the Chairman of the Board of WHITNEY INFORMATION NETWORK, INC.
owns a controlling interest.
Precision Software Services, Inc. is a Company that develops and licenses
software primarily for the real estate and small business industries.
The Chairman of the Board of Directors of WHITNEY INFORMATION NETWORK,
INC. owns a majority interest in Precision Software Services, Inc.
During the first six months of1999 and 1998 the Company provided WHITNEY
INFORMATION NETWORK, INC. $180,123 and $115,791 in product cost,
respectively. WHITNEY INFORMATION NETWORK, INC. provides payroll
services to Precision Software Services, Inc in the amount of $22,367 for
the six months ended June 30,1999 and $16,119 for six months ended June
30,1998.
WHITNEY INFORMATION NETWORK, INC. provides payroll services to Whitney
Leadership Group, Inc. in the amount of $46,767 for 1999 and $75,071 for
1998. The Chairman of the Board of WHITNEY INFORMATION NETWORK, INC. is
the President and Chief Operating Officer of Whitney Leadership Group,
Inc.
RAW, Inc. is a company owned by the Chairman of the Board of WHITNEY
INFORMATION NETWORK, INC., which buys, sells and invests in real
property. It was felt that the Company could enhance its operations if
it could also provide the same services that RAW, Inc. did. RAW, Inc.
on January 1, 1997 sold WHITNEY INFORMATION NETWORK, INC., a portion of
its inventory of real estate on hand at that date, Management decided in
late 1997 to discontinue real estate purchases in WHITNEY INFORMATION
NETWORK, INC., as this practice detracted the Company from its primary
focus of education and training.
10
<PAGE> 46
WHITNEY INFORMATION NETWORK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
Related Party Transactions (continued):
In 1998, the company's outside accountant became the Chief Financial
Officer of the company and a shareholder of the company. In the year
ended December 31, 1998 the company paid $ 19,052 in accounting fees to
its now Chief Financial Officer and $-0- in 1999.
Those items above that are reasonably expected to be collected within one
year are shown as short term and those, which are not expected to be
collected during the next twelve months, are shown as long-term.
Income Taxes
The reconciliation between the provision for income taxes and the amount
which results from applying the federal statutory rate of 34% to the
income before income taxes is as follows:
Income tax expense at the statutory rate
for continuing operations $ 314,881
State taxes, net of federal tax benefit $ 29.000
----------
Income tax expense per books $ 343,881
Currently Payable $ 343,881
Deferred -0-
----------
$ 343,881
==========
At December 31, 1997 the company had Federal net operating loss carry
forwards of approximately $96,000 that were used in 1998. The company
has previously reported its revenues and expenses for income tax purposes
on the "cash basis" of accounting. Deferred income taxes reflect the net
tax effects of temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts
used for income tax purposes.
INDEBTEDNESS
There were no short or long-term borrowings from unrelated third parties
for the six months ending June 30, 1998 and 1999. The interest expense
was $-0- for the six months ending June 30, 1998 and 1999 to date. (See
Related Party Transactions). The Company was indebted to its Chairman
for short-term non-interest bearing advances in the amount of $64,979 at
both June 30, 1998 and $19,979 at June 30, 1999.
11
<PAGE> 47
WHITNEY INFORMATION NETWORK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
COMMITMENTS AND CONTINGENCIES
The company carries liability insurance coverage, which it considers
sufficient to meet regulatory and consumer requirements and to protect
the company's employees, assets and operations.
The company, in the ordinary course of conducting its business, is
subject to various state and federal requirements. In the opinion of
management, the company is in compliance with these requirements.
The company is currently working to resolve the potential impact of the
Year 2000 on the processing of date-sensitive information by the
Company's computerized information systems. The year 2000 problem is the
result of computer programs being written using two digits (rather than
four) to define the applicable year. Any of the Company's programs that
have time-sensitive software may recognize a date using "00" as the year
1900 rather than the year 2000, which could result in miscalculations or
system failures. Costs of addressing potential problems are expensed as
incurred and are not expected to have a material adverse impact on the
Company's financial position, results of operations or cash flows in
future periods. However, if the Company or its vendors are unable to
resolve such issues in a timely manner, it could result in a financial
risk. Accordingly, the Company plans to devote the necessary resources
to resolve all significant Year 2000 issues in a timely manner. While
the Company does not at this time anticipate significant problems with
suppliers, it will develop contingency plans, if required, with these
third parties due to the possibility of compliance issues.
The Company leases the following properties: (1) Its headquarters
building in Cape Coral Florida at an annual rental of $69,664 for
approximately 8,200 square feet, (2) Its telemarketing facility in
Draper, Utah at an annual rental of $46,563 for 3,678 square feet
beginning August 8, 1999 and (3) a Wealth Center facility in Jackson, MS
for $42,600 per year for 3,000 square feet beginning September 1, 1999.
Future minimum payments, by year and in the aggregate under capital and
noncancellable operating leases with initial or remaining terms of one
year or more are as follows:
First year $ 133,795
Second Year $ 158,820
Third Year $ 120,020
Fourth Year $ 39,675
12
<PAGE> 48
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
There have been no disagreements on accounting and financial
disclosures from the inception of the Company through the date of this
Registration Statement.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS.
(a) List of Financial Statements
Independent Auditors' Report
Balance Sheet
Statement of Income
Statement of Cash Flows
Statement of Shareholders' Equity
Notes to Financial Statements
Unaudited Quarterly Financial Statements for 6/30/99
b) List of Exhibits.
Exhibit No. Description
3.1* Articles of Incorporation.
3.2* Bylaws.
3.3* Amended Articles of Incorporation
3.4* Amended Articles of Incorporation
4.1* Specimen Stock Certificate.
27.1* Financial Data Schedule
99.1* Class A Warrant Agreement
99.2* Class B Warrant Agreement
99.3* Non-Qualified Incentive Stock Option Plan
99.4* Office Lease between Russ Whitney and Win Systems, Inc.
99.5 Office Lease between Brown Lakeland Properties and Russ
Whitney's Wealth Education Center.
99.6 Office Lease between Draper Business Park, L.C. and
Whitney Consulting Services, Inc. dated August 8, 1999.
99.7 Office Lease between Draper Business Park, L.L.C. and
Whitney Consulting Services, Inc. dated September __,
1999.
* Previously Filed.
<PAGE> 49
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of
1934, the registrant caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
Whitney Information Network, Inc.
BY: /s/ Richard Brevoort
Richard Brevoort, President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Form 10-SB Registration Statement has been signed by the following
persons in the capacities and on the dates indicated:
Signatures Title Date
/s/ Russell A. Whitney
Russell A. Whitney Chief Executive Officer September 17, 1999
and Chairman of the Board
of Directors
/s/ Richard W. Brevoort
Richard W. Brevoort President and a member September 17, 1999
of the Board of Directors
/s/ Ronald S. Simon
Ronald S. Simon Secretary, Treasurer, September 17, 1999
Chief Financial Officer,
and a member of the Board
of Directors
<PAGE> 50
EXHIBIT 99.5
FACE PAGE
LEASE DATE: AUGUST 4, 1999
LANDLORD: BROWN LAKELAND PROPERTIES/CHARLES H. BROWN
LANDLORD'S ADDRESS: 4294 LAKELAND DR. SUITE 100
FLOWOOD, MS. 39208
OFFICE CENTER: 4294 LAKELAND DR.
FLOWOOD, MS. 39208
TENANT: RUSS WHITNEY'S WEALTH EDUCATION CENTER OF JACKSON,
MS, Inc
TENANT'S PHONE# N/A
NAME (D/B/A TO BE USED BY TENANT) RUSS WHITNEY'S WEALTH
EDUCATION CENTER OF JACKSON, INC.
TENANT'S USE OF
DEMISED PREMISES: TRAINING CENTER
LEASE TERM: 3 YEARS
COMMENCEMENT DATE: AUGUST 4,1999
RENT START DATE: SEPTEMBER 1, 1999 (Immediately upon completion of
buildout)
DEMISED PREMISES: SPACE# C (SEE EXHIBIT' "A" (SITE PLAN) FOR
APPROXIMATE STORE LOCATION AS MARKED IN RED;
OFFICE CENTER IN GREEN)
SIZE SQUARE FEET: 3000
ANNUAL BASE RENT
INCREASE: 0
INITIAL CHARGES: MINIMUM RENTAL $ 14.20 P/S/F $3550.00 PER MONTH
$42,600.00 PER YEAR
C.A.M. $ P/S/F $ PER MONTH $ PER YEAR
TAX $ P/S/F $ PER MONTH $ PER YEAR
TOTAL $ 14.20 P/S/F 3550.00 PER MONTH $42,600.00 PER YEAR
THE LAWS OF THE STATE OF MISSISSIPPI AND COUNTY OF RANKIN SHALL GOVERN
THE VALIDITY PERFORMANCE AND ENFORCEMENT OF THIS LEASE.
THIS IS A LEGALLY BINDING CONTRACT, PLEASE READ IT THOROUGHLY BEFORE
YOU SIGN; THE ITEMS CONTAINED ON THIS FACE PAGE RELATE TO VARIOUS
CONTENTS OF THE LEASE. THERE ARE NO OTHER AGREEMENTS BETWEEN THE
PARTIES UNLESS CONTAINED IN WRITING IN THE LEASE.
LATE CHARGE: THERE WILL BE A LATE CHARGE IF RENT IS RECEIVED AFTER THE
5TH OF THE MONTH. THE LATE CHARGE WILL BE 10% OF THE RENT OR $250.00,
WHICHEVER IS GREATER
<PAGE> 51
LEASE
THIS LEASE is made this the 4th day of August, 1999, between Brown
Lakeland Properties/Charles H. Brown, hereinafter called Landlord, Russ
Whitney's Wealth Education Center of Jackson, Ms, Inc., hereinafter
called Tenant.
IT IS AGREED between the parties hereto as follows:
PREMISES
(1) Landlord leases to Tenant and Tenant hires from Landlord,
those certain premises described as follows:
Approximately 3000 square feet of rentable office space, located
at 110 Jones Lane Suite C Flowood, Ms. 39208.
Landlord will provide Tenant with suitable parking in a parking
lot adjacent to and convenient to the front entrance of the leased
premises, at no cost to Tenant
TERM
(2) The term of this lease is for a period of three (3) years
beginning as of date of occupancy and ending three years thereafter
Tenant shall be granted an option to extend this lease for an
additional five (5) year term beginning as of the day after the last
day of this lease upon the same terms and conditions herein Tenant
shall give written notice of its intent to exercise each such election
no less than sixty (60) days prior to the expiration of the original
term of this lease or an option period thereunder.
UTILITIES
(3) Tenant shall pay all utility deposits and costs incurred as
measured by the meters for electricity, gas, and waters for its space.
Tenant shall be responsible for maintenance, and repair of the systems
attached to these meters and, Tenant shall be responsible for the
repair, maintenance, and replacement of these systems and their related
elements and parts, when failure or inability to properly perform shall
be due to causes other than normal wear and tear or Tenant's abuse.
Tenant shall be responsible for replacement of light bulbs in its
offices, and Landlord shall be responsible for the replacement of
fixtures which fail to perform.
RENT AND EXPENSES
(4) Tenant shall pay base rent in the amount of $3550.00 per
month. In addition to the base rent Tenant shall pay their pro share of
operation of signage on Lakeland Dr. to be determined each month based
on electrical usage. Tenant shall also be responsible for their own
insurance. Maintenance of the exterior of the building, parking area,
and landscaping shall be the sole responsibility of the Landlord. The
sum of the above costs shall be computed for such year as though the
building had been fully occupied during such year Tenant's liability
for these expenses shall be in the same ratio as the number of square
feet occupies by Tenant is to the total number of leasable square feet
in the building.
<PAGE> 52
Payments for rent and expenses shall be made to Landlord at his
office, on or before the first day of each month beginning with
occupancy on or before the first of each of the following months during
the term of tins Lease, with a two hundred fifty dollar ($250.00) late
charge to be applied if not received by the fifth of the month. Rent
for any period of less than one (1) month shall be apportioned, based
on the number of days in the month.
The rent for the last month of the lease shall be paid in advance
as a security deposit.
USE
(5) Tenant shall. not use the premises or permit them to be used
for any offensive, noisy or dangerous trade, business, manufacture or
occupation of any nuisance or anything against public policy, or for
any purpose or use in violation of any of the laws, ordinances and
regulations of any governmental body or authority applicable to the
premises. Tenant shall not do or permit any act or omission which will,
increase the rate of insurance by such an act, then Tenant agrees to
pay Landlord such increased cost of insurance.
Tenant shall. not keep or permit to be kept 4 or about the Demised
Premises any gasoline, distillate, or other petroleum produce, or any
other substance or material of an explosive or infiammable nature in
such quantities as may endanger any part of the Demised Premises,
Tenant shall. be liable for any damages to the Demised Premises.
MAINTENANCE AND REPAIRS
(6) Landlord agrees to keep the heating, ventilating and
air-conditioning equipment, concealed plumbing, sidewalks, roof,
foundations and exterior walls of the premises of the building in which
the premises are located in good condition and repair. Landlord also
agrees to make all repairs that may become necessary by reason of fire
damage, action of the elements or other insurable casualty including
damage by termites, fungus growth or dry rotExcept as specifically
provided herein, Tenant agrees at its own expense to keep and maintain
the interior of the premises in good condition and repair, natural
deterioration by ordinary use and reasonable wear and injury by fire,
the elements, acts of God, or acts of war excepted Any re-decoration of
the premises, including painting of exterior Walls and columns,
interior partitions and doors, and where necessary replacement of vinyl
floors or carpet will be at the expense of the Tenant.
ALTERATIONS
(7) Tenant may, at its expense, add any electrical or telephone
outlets that its desires. Tenant may install, at its expense, trade
fixtures, movable office partitions, furniture and equipment and other
personal property which shall remain the property of Tenant, and may
remove, alter or remodel the same at any time without Landlord's
consent provided Tenant shall repair any damage to the premises caused
thereby and shall, at the termination of this lease, remove such
installations at the written request of the Landlord. Tenant shall not
install or maintain any equipment partitions, furniture or apparatus,
the weight or operation of which would tend to injure or be detrimental
to the premises. Tenant shall at all times keep the premises free and
clear of any hen or encumbrance of any land created by Tenant's act
under this paragraph or otherwise or by its omissions.
<PAGE> 53
SIGNAGE
(8) Tenant shall pay for the cost of an appropriate sign for its
business on the outside of said budding. Tenant shall have the
opportunity to have signage on Lakeland Dr. on the existing sign for
the Lakeland Office Center. This sign will be approximately 96 inches
wide by 15 inches high. Signage will be paid by leasor. Such sign
will conform with existing signage, and must be approved in advance by
the Landlord.
SERVICES AND UTILITIES
(9) The Tenant shall pay for All other services supplied to its
romises, including any extra utilities used for computers, etc.
ENTRY BY LANDLORD
(10) Landlord shall have the right to enter the premises at
reasonable times, for the purpose of inspection, posting notices or
supervising any necessary repairs and maintenance required herein to be
performed by Landlord. Landlord may maintain. such notices on the
premises as may be necessary to protect him against loss from echanics,
hens or otherwise. All repair and maintenance work done on or about the
premises by Landlord shall be done in such a manner as to inconvenience
Tenant as little as possible.
ASSIGNMENT AND SUBLETTING
(11) Tenant shall have the right subject to approval by Landlord,
which shall not be unreasonably withheld, to make assignments or
subleases of all or any portion of the premises. Any assignee or
sublessee may use the same for any lawful purpose that does not
interfere with the quiet enjoyment of other tenants leasing space in
the building. If Tenant shall make any assignments or subleases, it
shall remain liable hereunder as though no assignments or subleases had
been made, unless Landlord shall in writing expressly release Tenant
from such liability.
DEFAULT BY TENANT
(12) The occurrence of any of the following events shall.
constitute a breach of this lease, and with reference to paragraphs (b)
and (c), such rights of the parties shall be governed by the applicable
Bankruptcy Code and related statutes and cases:
(a) The failure of Tenant to pay rent or to make any other payment
of money as herein required when due for a period of fifteen (15) days
after delivery by Landlord of a written notice of any such failure.
(b) The expiration of a period of sixty (60) days following (1)
the adjudication of Tenant as a bankrupt by any court of competent
jurisdiction, (ii) the entry of an order approving a petition filed by
one other than Tenant seeking reorganization of Tenant under the
National Bankruptcy Act or any other applicable law of the United
States or of any State, or (iii) the appointment of a Trustee or
Receiver of all or substantially A of the business or property of
Tenant or (iv) the levy of any attachment execution or garnishment upon
the interest of Tenant hereunder, or upon the leasehold estate hereby
created, unless during such period such adjudication, order or
appointment of a Receiver or Trustee, attachment, execution or
<PAGE> 54
garnishment shall be vacated, or unless within such period Tenant shall
have taken proper action to vacate such adjudication, order or
appointment of a Receiver or Trustee, attachment, execution or
garnishment, and in such event such occurrence shall not constitute a
breach of this lease until final adjudication of the matter.
(c) The filing by Tenant of a voluntary petition in bankruptcy or
the making of an assignment for the benefit of creditors; the
consenting by Tenant to the appointment of a Receiver or Trustee of all
or any part of its property, the filing by Tenant of a petition or
answer seeking reorganization under the National Bankruptcy Act or any
other applicable law; or the filing by Tenant of a petition to take,
advantage of any insolvency act.
(d) The failure of Tenant to correct any default hereunder, other
than those specified in subdivisions (a), (b) and (c) of Paragraph
(12), within thirty (30) days after delivery by Landlord to Tenant of
a written notice of such default; or, if the default is of such a
nature that it can not be corrected within thirty (30) days, then the
failure of Tenant within such period to commence and thereafter proceed
diligently to cure such default
If any of the above mentioned events of default shall occur, the
Landlord at its option may re-enter and take possession of the premises
and remove all persons and property therefrom and at its option
terminate this lease. In the event the Landlord elects to re-enter and
take possession of said premises but not to terminate this lease,
Tenant agrees to pay Landlord on demand, the cost of recovering
possession of said premises and cost of reletting, including the usual
commissions, and also to pay monthly, on demand, any deficiency in the
rent. It is agreed by Landlord and Tenant that if this lease shall be
terminated by Landlord by reason of any event of default by Tenant
Landlord shall thereupon be entitled to recover from Tenant the worth,
at the time of such termination, of the excess, if any, of the amount
of rent and charges equivalent to rent reserved in this lease for the
balance of the term as provided in Paragraph (2) hereof, over the then
reasonable rental value of the pemises for the same period. The several
rights and remedies herein granted to Landlord shall be cumulative and
in addition to any others it may be entitled to by law, and the
exercise of one or more rights or remedies shall not impair Landlord's
right to exercise any other right or remedy
DESTRUCTION OF PREMISES
(13) Should the premises be damaged by fire, earthquake, incidents
of war, or other sudden violent action of the elements, so as to render
them unfit for Tenant's occupancy, and sad premises cannot by restored
with reasonable diligence within sixty (60) working days from the date
of such damage, this lease may be terminated at the option of the
Tenant upon written notice to Landlord. Upon any termination under this
Paragraph (13), Tenant shall surrender the premises and shall not be
liable for any further rental, and Landlord shall refund any unearned
rent paid in advance by Tenant, calculated at the daily rate, based on
the then applicable total monthly rental costs. Should this lease not
be so terminated or in the event of any lesser damage by any such
cause, the premises shall be restored within one hundred twenty (120)
days at Landlord's expense, and Tenant shall pay no rents or other
charges during the period of such restoration for such part of the
premises until the lease premises, parking lot, and all common spaces
shall be determined by Tenant as being fit for occupancy by Tenant, and
<PAGE> 55
Tenant shall be entitled to any damages for any loss occasioned by the
injury to, or the destruction of, said building or of Tenant's
property. If not so restored within the one hundred twenty (120) day
period as set out herein, then lease may, at Tenant's option, be
canceled and all sums as defined in this paragraph, shall be refunded
to Tenant.
CONDEMNATION
(14) The Landlord shall notify the Tenant if a substantial part of
the building and parking area (10% or more) is to be taken by exercise
of the power of Eminent Domain. Tenant shall have thirty (30) days
after occurrence of said event to give the Landlord written notice as
to whether the remaining portion is suitable for its use and occupancy.
if Tenant shall reasonably determine that the remaining portion of the
premises are not reasonably suitable for its operation, then this lease
shall terminate, and Landlord shall return to Tenant any unearned rent
and other costs as set out herein, paid in advance. If Tenant does not
terminate this lease as provided above, this lease shall continue in
force as to the remaining portion of the demised premises, and in such
event the monthly rental thereafter payable by Tenant hereunder shall
be adjusted and prorated in the exact ration which the value of the
premises remaining after such condemnation bears to the value of the
premises immediately preceding the condemnation, and Landlord shalt at
its own expense, make any repairs or alterations to said premises which
may be necessary by such condemnation.
In the event of the taking of all or any portion of the premises,
Landlord and Tenant shall be free to make claim against the condemning
or taking authority for the amount of any damage done to them
respectively as a result thereof
SALE OF BUILDING
(15) If during the term of this lease, or any option term,
Landlord shall sell its interest in the premises, said sale shall be
subject to this lease.
LICENSE
(16) Anything in this lease to the contrary notwithstanding, the
parties hereto understand and agree dig if the Tenant is required to
obtain approval from state regulatory authorities to occupy the demised
premises, the Tenant agrees to promptly apply for such authority and in
the event such occupation is not approved by said regulatory
authorities within forty-five (45) days from the date hereof, then this
lease shall terminate and be of no further force and effect and the
parties shall be released of all liability, each to the other. Any
monies pad by Tenant to Landlord shall be returned to Tenant
MUTUAL WAIVER OF SUBROGATION RIGHTS
(17) The Landlord and Tenant do hereby mutually release each other
from any subrogation rights which could result under insurance policies
or otherwise from any claims or liability which could be asserted
arising out of loss or damage to Landlord's real estate of Tenant's
property from fire or any other risk for which the Landlord or Tenant
becomes entitled to receive proceeds from the insurance policy.
<PAGE> 56
ATTORNEY'S FEE
(18) if any action at law or in equity shall be brought to recover
any rent under this lease, or for or on account of any breach of or to
enforce or interpret any of the covenants, terms or conditions of this
lease, or for the recovery of the possession of the leased premises,
breaching or defaulting party agrees to pay allomey's fee, court costs,
or other damages which, may be fixed by the Court and may be made a
part of any judgment rendered.
QUIET ENJOYMENT
(19) Landlord agrees that Tenant keeping and performing the
covenants herein contained on the part of Tenant to be kept and
performed, shall at all times during the term of this lease peaceably
and quietly have, hold and enjoy the premises.
NOTICES
(20) Any notice, demand or other instrument or written
communication required or premitted to be given, served, made or
delivered hereunder may be given, served, made or delivered by mailing
the same by registered or certified mail in a sealed envelope, postage
prepaid, if to Tenant, addressed to Tenant at their suite in the
subject property, and if the Landlord, addressed to the Landlord at
4924 Lakeland Drive, Suite 100, Flowood, Mississippi. Any such notice,
demand or other instrument or written communication mailed as above
provided shall be deemed to have been given, served, made or delivered
at the time of mailing. Either party may, by written notice given to
the other party, change each party's mailing address from time to time
during the term hereof.
MISCELLANEOUS
(21) Landlord hereby gives Tenant the right of first refusal of
any space in the building adjacent to the described premises which may
become available. Landlord will offer such space to Tenant at the then
current market price of similar space in the building. Tenant shall
have five (5) working days to accept the lease of such additional
space.
This lease shaft inure to the benefit of and bind the heirs,
successors, representatives and assigns of the parties hereto.
Whenever the context requires, the singular number shall. include
the plural, the plural the singular, and the use of any gender shall
include all genders,
Any reference in this lease to a number of days shall mean
calendar days unless otherwise expressly provided.
The headings of the paragraphs of this lease are for convenience
of reference only and are not a part of this lease.
<PAGE> 57
IN WITNESS WHEREOF, the parties hereto have executed this lease
the day and year first above written.
Landlord:
/s/ Charles H. Brown
Charles H. Brown
Tenant:
/s/ Ronald S. Simon, Treasurer
Russ Whitney's Wealth Education Center of Jackson, MS, Inc. Authorized
Signature
COUNTY OF LEE
STATE OF FLORIDA
This day personally appeared before me, the undersigned authority, in
and for the County aforesaid, with the name Russ Whitney's Wealth
Education Center of Jackson, MS Inc. / Ronald S. Simon, Treasurer, who
acknowledged that he signed the foregoing Lease with Brown Lakeland
Properties / Charles H. Brown on the 9th day of August, 1999, for the
intent and purpose therein set forth.
/s/ Ronald S. Simon
Ronald S. Simon, Treasurer
WITNESS MY HAND AND OFFICIAL SEAL, this the 9th day of August 1999,
[seal] /s/ Robin J. Jacobs, Notary Public
COUNTY OF RANKIN
STATE OF MISSISSIPPI
This day personally appeared before me, the undersigned authority,
in and for the State and County aforesaid, the with named Brown
Lakeland Properties / Charles H. Brown, who acknowledged that he signed
and delivered the above and foregoing Lease on the day and year therein
mentioned. For the intent and purpose therein set forth.
/s/ Charles H. Brown
Charles H. Brown
WITNESS MY HAND AND OFFICIAL SEAL, this the 11th August 1999.
[seal] /s/ Kimberly Michelle Gilmore
Notary Public
<PAGE> 58
EXHIBIT 99.6
COMMERCIAL LEASE
THIS LEASE (the "Lease") dated this 8th day of August, 1999, is
entered into by and between Draper Business Park, L.L.C., a Utah
limited liability company ("Landlord"), and Whitney Consulting
Services, Inc., a Wyoming corporation, ("Tenant").
1. PREMISES.
(a) Landlord hereby leases to Tenant, and Tenant hereby leases
from Landlord, for the term and subject to the terms and conditions
hereinafter set forth, to each and all of which Landlord and Tenant
hereby mutually agree, those certain premises (the "Premises"), shown
on Exhibit A (space plan) attached hereto, which include approximately
3678 Rentable square feet of office space (subject to a final space
plan). The location of the Premises is commonly known as: Suite No.
200, Building 5, 12227 South Business Park Drive, Draper, Utah 84020
("Building").
(b) In addition, the Premises shall include the appurtenant right
to use, in common with others, the site, parking and landscaped areas
("Common Area"). Landlord shall provide Tenant 5 non-reserved parking
stalls per 1,000 Usable square feet of Premises in the adjacent parking
lots of the Premises.
(c) Acceptance of Premises. Tenant, by taking possession of the
Premises shall be deemed to accept the Premises as being in the
condition in which Landlord is obligated to deliver the Premises.
Tenant shall at the end of the term and any extension herein surrender
to Landlord the Premises and all alterations, additions and
improvements thereto in the same condition as when received, ordinary
wear and tear, damage by fire, earthquake, or act of God excepted.
Landlord has no liability and has made no representation to alter,
improve, repair, or paint the Premises or any part thereof, except as
specified in Article 2(c), 2(d) and 6 herein.
2. TERM, OPTION, TENANT IMPROVEMENTS, EXPANSIONS.
(a) Lease Term. The initial Lease Term shall be from August 8
1999, ("Commencement Date") to May 14, 2001. Tenant shall not be
responsible for Rents until Landlord delivers possession of the
Premises to Tenant. If Landlord is solely responsible for not
delivering possession of the Premises to Tenant within forty-five (45)
days of the Commencement Date, Tenant may upon ten (10) days written
notice terminate the Lease. In the event of Tenant's termination due to
late delivery, Landlord shall not be liable for such late delivery or
failure to deliver possession of the Premises.
(b) Base Building Improvements. At Landlord's sole cost and
expense, Landlord shall provide the Building's roof and structural
elements ("Shell"), shall provide basic utility access to and an
initial HVAC unit for the Premises, and shall design and construct the
common areas of the Premises and Building, as more specifically
outlined in Exhibit B - Base Building Improvements (collectively "Base
Building Improvements").
(c) Tenant Improvements. At execution of the Lease, Landlord shall
prepare the premises for Tenant's use, by touch-up painting the walls,
repairing the hole in the conference room ceiling, and cleaning the
Premises. Tenant Improvements shall include all improvements to the
Premises, but exclude the Base Building Improvements.
<PAGE> 59
(d) Substantial Completion of Tenant Improvements. The premises
shall be deemed complete when Landlord has substantially completed
Tenant Improvements.
(e) Option to Extend Lease Term Tenant may extend the term for a
period of two years from the expiration date by written notice of its
election to do so given to Landlord at least six months prior to the
expiration date. The extended term will be on all of the terms and
conditions of the Lease applicable at the expiration date; provided
however, that the rent during the balance of the renewal term shall be
increased annually on the anniversary of the Commencement Date of this
Lease by four percent (4%). Tenant will have no further right to extend
the term. Tenant will not have any rights under this paragraph if (a)
an event of default exists on the expiration date or on the date on
which Tenant gives its notice, (b) Tenant makes late payment of any
amounts due under this Lease more than three (3) times in any lease
year, or (c) tenant exercises its rights less than six months before
the expiration date.
(f) Right of First Refusal. Tenant is hereby granted a right of
first refusal to lease the 3475 rentable square feet of office space on
the main floor of Building 5 formerly occupied by WCX. Said right of
first refusal shall be exercisable within three (3) business days of
Landlord giving Tenant notice of the availability of such space and the
terms on which Landlord is willing to lease such space to another
tenant. In the event Tenant elects to lease said space, Tenant agrees
to lease said space on the terms outlined in Landlord's notice. If
Tenant does not exercise the right of first refusal, Landlord may rent
such space to any other person or entity on the terms offered Tenant or
on other terms substantially similar to those offered to Tenant.
3. NON-OCCUPANCY OF IMPROVED SPACE.
In the event Tenant does not occupy the Premises and fails to pay
Rents as required in Article 4 of the Lease, the cost of all Tenant
Improvements shall become due and payable upon invoicing by Landlord.
Further, such invoicing by Landlord does not waive any other rights or
remedies Landlord may have against Tenant for failure to occupy.
4. RENT.
(a) Base Rent. Base Rent shall be $10.55 per Rentable square foot
of the Premises per year, triple net, and shall be increased annually
on each anniversary of the Commencement Date by 4% during the Lease
Term and during any option period. One twelfth (1/12) of the Base Rent
shall be payable in advance each month on or before the 1st day of each
month during the duration of the Lease, with the first such monthly
rental payment plus the security deposit referenced in Article 33 being
due upon the execution of the Lease. Any partial months shall be
prorated accordingly. All Base Rent and Additional Rent (collectively
"Rents") shall be paid as follows, unless otherwise directed in
writing: Draper Business Park, L.C. c/o Prime Commercial Management
Services, Inc. 12257 South Business Park Drive, Suite 110, Draper, UT
84020.
(b) Additional Rent. All obligations payable by Tenant under the
Lease other than Base Rent are called "Additional Rent". Unless
otherwise provided, Additional Rent shall be paid with the monthly
installment of Base Rent.
<PAGE> 60
(c) Interest, Late Charges. Costs and Attorneys' Fees. If Tenant
fails to pay within five (5) days of the date due any Rents which
Tenant is obligated to pay under the Lease, the unpaid amount shall
bear interest at ten (10%) percent per annum. Tenant acknowledges that
any late payments of Rents shall cause Landlord to lose the use of that
money and incur costs and expenses not contemplated under the Lease,
including without limitation administrative, collection and accounting
costs, the exact amount of which is difficult to ascertain. Therefore,
in addition to interest, if any payment is not received by Landlord
within five (5) days from the date it is due, Tenant shall also pay
Landlord a late charge equal to five (5%) percent of the amount of each
such late Rents. Further, as Additional Rent, Tenant shall be liable to
Landlord for costs and attorneys' fees incurred as a result of late
payments or non-payments. Acceptance of any interest, late charge,
costs or attorneys' fees shall, not constitute a waiver of any default
by Tenant nor prevent Landlord from exercising any other rights or
remedies under the Lease or at law.
5. USE.
(a) The Premises shall be used for general office, production,
storage and any other lawful purpose incidental to Tenant's business,
and no other, unless consented to in writing by Landlord. Tenant shall
not do or permit to be done in or about the Premises, Building, or
Common Area, anything which is prohibited by or in any way in conflict
with (in the case of hazardous material, Tenant shall notify Landlord
of any such materials and shall ensure that any such hazardous material
is properly controlled, safeguarded, and disposed of) any and all laws,
statutes, ordinances, rules and regulations now in force or which may
hereafter be enacted or promulgated or which is prohibited by the
standard form of fire insurance policy, or which will increase the
existing rate of or affect any fire or other insurance upon the
Premises, Building or any of its contents, or Common Area or cause a
cancellation of any insurance policy covering the Premises or Building
or any part thereof or any of its contents, or the Common Area. Tenant
shall not do or permit anything to be done in or about the Premises,
Building, or the Common Area which will in any way violate Rules or
Regulations reasonably promulgated by Landlord, obstruct or interfere
with the rights of other tenants, or injure them, or use or allow the
Premises, Building or the Common Area to be used for any improper,
immoral, or unlawful purpose, nor shall Tenant cause, maintain or
permit any nuisance, in, on or about the Premises, Building, or the
Common Area or commit or suffer to be committed any waste in, on or
about the Premises, Building or the Common Area. Tenant shall have
access to the Building and Premises on a 24 hour/7 day a week basis.
(b) Tenant shall not use the name of the Building in which the
Premises are located, in connection with any business carried on in
said Premises (except as Tenant's address) without written consent of
Landlord.
(c) Tenant shall not manufacture, assemble or store materials in
the Common Area.
<PAGE> 61
6. LANDLORD'S SERVICES.
Landlord, at its sole cost and expense, is responsible to maintain
only the roof and structural elements ("Shell") of the Premises and
Building. All Operating Expenses, including but not limited to repairs,
maintenance, Premises and Building utilities, Common Area utilities,
Premises and Building janitorial, Common Area janitorial, tenant
janitorial, sewer and garbage, insurance, taxes, and property
management on the Premises, Building, and Common Area shall be
coordinated by Landlord, but are the financial responsibility of the
Tenant through prorated Operating Expenses as more fully outlined in
Article 7 herein.
7. OPERATING EXPENSES - REPAIRS, MAINTENANCE, INSURANCE, TAXES AND
PROPERTY MANAGEMENT
Since the Premises is part of a Building or group of buildings,
Tenant is responsible for a prorated share of Operating Expenses,
including but not limited to repairs, maintenance, Common Area
utilities, Common Area janitorial, tenant janitorial, sewer and
garbage, insurance, taxes, and property management incurred in the
operation and management of the Premises, Building, and Common Area as
shall be reasonably determined by the Landlord. Proration shall be on
a square footage basis with all other tenants and Tenant's proration
shall be calculated by multiplying the Operating Expenses by an
equation, the numerator being the Rentable square feet of the Premises
and the denominator being the total Rentable square feet of the
Building. Provided, however, that the Operating Expenses that are in
the direct control of the Landlord for any year after the first year
shall not increase more than five percent (5%) over the prior year. The
Operating Expenses shall be prorated to Tenant and be payable by Tenant
as Additional Rent on a monthly basis and subject to the following
terms and conditions:
(a) Tenant's prorated share of the Operating Expenses shall be
computed and paid in twelve (12) equal monthly estimated payments as
determined in the Landlord's reasonable discretion. Such Additional
Rent shall be paid by Tenant on or before the 1st day of each month
with Base Rent. As soon as is reasonably possible, but in any event
within ninety (90) days following the end of each calendar year,
Landlord shall furnish to Tenant a statement showing the Premises' and
Building's actual Operating Expenses for the preceding calendar year.
In the case of a deficiency, Tenant shall promptly remit its prorata
share of such deficiency to Landlord. In the case of a surplus,
Landlord shall apply said surplus to the next Additional Rent due from
Tenant.
(b) Tenant may review at its sole cost and expense any Operating
Expenses prorated to Tenant by Landlord, including assessed real estate
taxes as may be statutorily allowed. Landlord shall make available the
applicable Operating Expenses' invoices and statements. However, any
such review must be requested and completed within sixty (60) days of
receipt of the annual statement.
8. ALTERATIONS.
(a) Tenant will not make or suffer to be made any alterations,
additions or improvements in excess of $1,000, excluding the initial
Tenant Improvements, (collectively "Alterations") to or upon the
Premises, Building, or any part thereof, or attach any fixtures or
equipment thereto, without first obtaining Landlord's written approval,
<PAGE> 62
which shall not be unreasonably withheld or delayed. Any Alterations to
or upon the Premises shall be made by Tenant at Tenant's sole cost and
expense and any contractor selected by Tenant to make the same shall be
subject to Landlord's reasonable prior written approval. All such
Alterations permanent in character, made in or upon the Premises either
by Tenant or Landlord, may at the option of Landlord, become Landlord's
property and, at the end of the term or any extension hereof, shall
remain on the Premises without compensation to Tenant unless Landlord
requests that Tenant remove any such Alterations. Notwithstanding the
above, Tenant's work stations and other items of personal property
shall remain Tenant's property.
(b) Any Alterations shall, when completed, be of such a character
as not to lessen the value of the Premises or such improvements as may
be located thereon. Any Alterations shall be made promptly and in a
good workmanlike manner, and in compliance with all applicable permits,
building and zoning laws, and with all other laws, ordinances, orders,
rules, regulations and requirements of all federal, state and municipal
governments, departments, commissions, boards and offices. The costs of
any such Alterations shall be paid by Tenant, so that the Premises are
free of liens, for services performed, labor and material supplied or
claimed to have been supplied. Before any Alterations shall be
commenced, Tenant shall pay any increase in premiums on insurance
policies (provided for herein) or ensure adequate coverage is in place
for all risks related to the construction of such Alterations and the
increased value of the Premises.
9. SIGNAGE.
Any signage must be approved in writing by, Landlord, Tenant, and
other occupants of space on the same floor, which approval shall be at
Landlord's sole discretion, and conform with applicable statues,
ordinances, regulations or codes. Any signage must be removed, at
Tenant's sole cost, at the end of the Term of the Lease or upon
Tenant's failing to have possession of the Premises.
10. LIENS.
Tenant shall keep the Premises and the Building free from any
mechanics' and/or materialmen's liens or other liens arising out of any
work performed, materials - furnished or obligations incurred by
Tenant. Tenant shall notify Landlord in writing at least seventy-two
(72) hours before any work or activity is to commence on the Premises
which may give rise to such liens to allow Landlord to post and keep
posted on the Premises any notices which Landlord may deem to be proper
for the protection of Landlord and the Premises from such liens.
11. DESTRUCTION OR DAMAGE.
(a) If the Premises is partially damaged by fire, earthquake, or
other Act of God, Landlord shall repair the same at Landlord's expense,
subject to the provisions of this Article and provided such repairs
can, in Landlord's reasonable opinion, be made within sixty (60) days.
During such repairs, the Lease shall remain in full force and effect,
except that if there shall be damage to the Premises and such damage is
not the result of the negligence or willful misconduct of Tenant,
Tenant's employees, agents, or invitees, an abatement of Rents shall be
allowed Tenant for such portion of Premises and period of time as the
Premises was unusable by Tenant.
<PAGE> 63
(b) If in Landlord's reasonable opinion the partially damaged
Premises can be repaired, but not within sixty (60) days, the Landlord
may elect, upon written notice to Tenant within thirty (30) days of
such damages, to repair such damages over a longer time period and
continue the Lease in full force and effect, but with Rents partially
abated as provided in Article 11 (a). In the event such repairs cannot
be made within sixty (60) days, Tenant shall have the option to
terminate the Lease provided that written notice is given to Landlord
within thirty (30) days of receipt of Landlord's notice stated in this
paragraph.
(c) If the partially damaged Premises is to be repaired under this
Article, Landlord shall repair such damages to the Premises itself, and
to the Tenant Improvements supplied by Landlord herein. Except in the
event of Landlord's gross negligence or willful misconduct, Tenant
shall be responsible for Tenant's equipment, furniture and fixtures,
and other alterations, additions and improvements made by Tenant to the
Premises and Building.
(d) If in Landlord's reasonable opinion, the Premises is totally
or substantially destroyed by fire or other casualty, the Lease shall
terminate upon notice by Landlord.
12. SUBROGATION.
Landlord and Tenant shall each, prior to Tenant's taking
possession or immediately after the execution of the Lease, procure
from each of the insurers under all policies of fire, theft, public
liability, workmen's compensation and other insurance now or hereafter
existing during the term and any extension hereof and purchased by
either of them insuring or covering the Premises and/or Building or any
portion thereof or operations therein, a waiver of all rights of
subrogation which the insurer might otherwise, if at all, have against
the other.
13. INDEMNIFICATION.
Tenant agrees to indemnify, defend and hold harmless Landlord and
its officers, directors, partners and employees from and against all
liabilities, judgments, demands, actions, expenses or claims, including
reasonable attorney's fees and court costs, for injury to or death of
any person, the release of any hazardous materials, or for damages to
any property to the extent arising out of or connected with (i) the
use, occupancy or enjoyment of the Leased Premises, Building, or Common
Area by Tenant or Tenant's agents, employees, invitees, licensees, or
contractors (the "Tenant's Agents"), or any work or activity performed
by Tenant or by Tenant's Agents in, or about the Leased Premises,
Building, or Common Area, including any Tenant improvements, (ii) any
breach or default in the performance of any obligation of Tenant under
this lease, (iii) any negligent or intentional tortious act of Tenant
or Tenant's Agents (excluding Tenant's licensees) on or about the
Leased Premises, Building, or Common Area or any negligent or
intentional tortious, act of Tenant's licensees on or about the Leased
Premises, Building or Common Area. Notwithstanding the foregoing,
Tenant shall not be liable to the extent that damage or injury is
determined ultimately to be caused by the negligent or intentional
tortious act of Landlord, or of Landlord's employees, agents, invitees,
licensees, or contractors ("Landlord's Agents"). All property of Tenant
kept or stored on the Leased Premises or in the Building shall be so
kept or stored at the risk of Tenant only, and Tenant shall hold
Landlord free and harmless from any claims arising out of damage to the
<PAGE> 64
same, unless such damage shall be caused by the negligent or
intentional tortious act of Landlord or Landlord's Agents. The
indemnification contained herein shall survive the expiration or
earlier termination of this lease as to acts occurring prior to such
expiration or termination.
Landlord agrees to indemnify, defend and hold harmless Tenant and
its officers, directors, partners and employees from and against all
liabilities, judgments, demands, actions, expenses or claims, including
reasonable attorneys' fees and court costs, for injury to or death of
any person, the release of any hazardous materials or for damages to
any property to the extent arising out of or connected with (i) the
use, management or operation of the Building by Landlord or by
Landlord's Agents, or any work or activity performed by Landlord or by
Landlord's Agents in, on or about the Building, (ii) any breach or
default in the performance of any obligation of Landlord under this
lease, or (iii) any negligent or intentional tortious act of Landlord
or Landlord's Agents on or about the Leased Premises or the Building.
Notwithstanding the foregoing, Landlord shall not be liable to the
extent that damage or injury is determined ultimately to be caused by
the negligent or intentional tortious act of Tenant or Tenant's Agents.
The indemnification contained herein shall survive the expiration or
earlier termination of this lease as to acts occurring prior to such
expiration or termination.
14. COMPLIANCE WITH LEGAL REQUIREMENTS.
Tenant shall, at its sole cost and expense, promptly comply with
all laws, statutes, ordinances and governmental rules, regulations or
requirements now in force or which may hereafter be in force, the
requirements, of any board of fire underwriters or other similar body
now or hereafter constituted, any direction or occupancy certificate
issued pursuant to any law by any public officer or officers, as well
as the provisions of all recorded documents affecting the Premises,
(collectively the "Applicable Laws"), insofar as any thereof relate to
or affect the use or occupancy of the Premises, Building, or Common
Area, excluding requirements of structural changes now related to or
affected by improvements made by or for Tenant.
Landlord shall, at its sole cost and expense, promptly comply with
all Applicable Laws, including the American with Disabilities Act
("ADA"), insofar as any thereof relate to or affect Landlord's
obligations under the Lease, or its ownership of the Premises,
Building, or Common Area, except for Tenant's requirements in the
immediately preceding paragraph herein.
15. INSURANCE.
(a) Commercial General Liability. Tenant shall, maintain a
Commercial General Liability policy including all coverages normally
provided therein. Such policies shall specifically name Landlord as an
additional insured, with a cancellation period of thirty (30) days
prior written notice of an cancellation. A Certificate of Insurance
shall be provided to Landlord. All polices of insurance shall be issued
by responsible insurance companies licensed to do business in the State
of Utah.
The minimum limits of coverage acceptable are:
(i) $2,000,000 Each Occurrence Combined Single Limit for Bodily
Injury and Property Damage
<PAGE> 65
and
(ii) $5,000,000 Annual Aggregate
(b) Premises and Building Insurance. Landlord shall insure the
Premises and Building, including Landlord supplied Core and Shell and
Tenant Improvements as deemed necessary in Landlord's reasonable
discretion. Tenant shall pay for such insurance as outlined in Article
7 herein, involving Tenant's prorated share 'of Operating Expenses. All
policies of insurance shall be issued by responsible insurance
companies licensed to do business in the State of Utah.
(c) Tenant's Additional Insurance. Tenant may, at its sole cost
and expense, cause all equipment, machinery, furniture and fixtures,
personal property, and Tenant Improvements supplied by Tenant from time
to time used or intended to be used in connection with the operation
and maintenance of the Premises, to be insured by Tenant against loss
or damage. Except for losses caused by Landlord's gross negligence or
willful misconduct, Landlord is in no way liable for any uninsured
Tenant's property.
16. ASSIGNMENT AND SUBLETTING.
In the event Tenant should desire to assign the Lease or sublet
the Premises, Tenant shall give Landlord written notice of such desire
at least ninety (90) days in advance of the date on which Tenant
desires to make such assignment or sublease. Landlord shall then have
a period of thirty (30) days following receipt of such notice within
which to notify Tenant in writing that Landlord elects either (i) to
terminate the Lease as of the date so specified by Tenant, in which
event Tenant will be relieved of all further obligations hereunder, or
(ii) to permit Tenant to assign or sublet such space, subject to prior
written approval of the proposed assignee by Landlord, such consent not
to be unreasonably withheld or delayed, so long as the use of the
Premises by the proposed assignee would be a permitted use and the
proposed assignee is of sound financial condition as determined by
Landlord. If Landlord should fail to notify Tenant in writing of such
election within said thirty (30) day period, Landlord shall have deemed
to have waived option (i) above, but written approval by Landlord of
the proposed assignee shall still be required. Failure by Landlord to
approve a proposed assignee shall not cause a termination of the Lease.
Any rents or other consideration realized by Tenant under any such
sublease and assignment in excess of the Rents hereunder, after
amortization of the reasonable costs of extra tenant improvements for
which Tenant has paid and reasonable subletting and assignment costs,
shall be divided and paid ninety (90%) percent to Landlord and ten
(10%) percent to Tenant.
Notwithstanding the above, Tenant shall have the right to sublease
or assign all or any portion of the Premises during the Term or any
Option period to any related entity, subsidiary, or affiliate of
Tenant, having at least fifty-one (51%) percent direct common
ownership, without having to receive Landlord's consent, but still
requiring written notice to Landlord on or before such sublease or
assignment.
No assignment or subletting by Tenant shall relieve Tenant of any
obligation under the Lease. Any assignment or subletting which
conflicts with the provisions hereof shall be void.
<PAGE> 66
17. RULES.
Tenant shall faithfully observe and comply with all Rules and
Regulations reasonably promulgated by Landlord, in writing and after
reasonable notice, during the Term or any Option period herein.
Landlord must apply rules equitably against all Tenants, but shall not
be responsible to Tenant for the non-performance by other Building
tenants, or adjacent buildings' tenants, of any of said Rules and
Regulations.
18. ENTRY BY LANDLORD.
The Landlord may enter the Premises or Building at reasonable
hours and upon 24 hours reasonable written notice to Tenant to (a)
inspect the same, (b) show the same to prospective purchasers, lenders
or tenants, (c) determine whether Tenant is complying with all of
Tenant's obligations hereunder, (d) post notices of non-responsibility
or (e) make repairs required of Landlord under the Lease, repairs to
adjoining space or utility service, or make repairs, alterations or
improvements to the Building, provided that all such work shall be done
as promptly as possible and with as little interference to Tenant as
reasonably possible. Tenant hereby waives any claim for damages for any
inconvenience to or interference with Tenant's business, any loss of
occupancy or quiet enjoyment of the Premises occasioned by such entry.
Landlord shall at all times have and retain a key to unlock all doors
in, on or about the Premises (excluding Tenant's vaults, safes and
similar areas designated in writing by Tenant). In the event of an
emergency, Landlord shall have the right to use any and all means which
Landlord may deem proper to enter the Premises, without notice, for the
limited purpose of abating as quickly as possible said emergency. Such
emergency entrance shall not be construed or deemed to be a forcible or
unlawful entry into or a detainer of the Premises or an eviction,
actual or constructive, of Tenant from the Premises, or any portion
thereof.
19. EVENTS OF DEFAULT.
The occurrence of any one or more of the following events ("Events
of Default") shall constitute a breach of the Lease by Tenant: (a) if
Tenant fails to pay Rents when and as the same becomes due and payable
and such failure continues for more than ten (10) days after written
notice thereof, or (b) if Tenant fails to pay any other sum when and as
the same becomes due and payable and such failure continues for more
than ten (10) days after written notice thereof, or (c) if Tenant fails
to perform or observe any material term or condition of the Lease, such
failure continues for more than thirty (30) days after written notice
from Landlord, and Tenant does not within such period begin with due
diligence and dispatch the curing of such default, or, having so began,
thereafter fails or neglects to complete with due diligence and
dispatch the curing of such default; or (d) if Tenant shall make a
general assignment for the benefit of creditors, or shall admit in
writing its inability to pay its debts as they become due or shall file
a petition in bankruptcy, or shall be adjudicated as bankrupt or
insolvent, or shall file a petition seeking any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or
similar relief under any present or future statute, law or regulation,
or shall file any answer admitting or shall fail timely to contest the
material allegations of a petition filed against it in any such
proceeding, or shall seek or consent to or acquiesce in the appointment
of any trustee, receiver or liquidator of Tenant or any material part
of its properties; or (e) if within thirty (30) days after the
<PAGE> 67
commencement of any proceeding against Tenant seeking any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future statute, law
or regulation, such proceeding shall not have been dismissed, or if,
within thirty (30) days after the appointment without the consent or
acquiescence of Tenant, of any trustee, receiver or liquidator of
Tenant or of any material part of its properties, such appointment
shall not have been vacated; or (f) vacation or abandonment of the
Premises for a continuous period in excess of fifteen (15) days, or (g)
if the Lease or any estate of Tenant hereunder shall be levied upon
under any attachment or execution and such attachment or execution is
not vacated within thirty (10) days of receipt thereof by Tenant.
20. TERMINATION UPON TENANT'S DEFAULT.
If an Event of Default shall occur, Landlord at any time
thereafter may give a written termination notice to Tenant, and on the
date specified in such notice (which shall not be less than three (3)
days after service) Tenant's right to possession shall terminate and
the Lease shall terminate, unless on or before such date all Rents,
arrearages and other sums due by Tenant under the Lease, including
reasonable costs and attorneys' fees incurred by or on behalf of
Landlord, shall have been paid by Tenant and all other Events of
Default by Tenant shall have been fully cured to the satisfaction of
Landlord. Upon such termination, Landlord may recover from Tenant:
(a) the worth at the time of award of the unpaid Rents which had
been earned at the time of termination; plus
(b) the worth at the time of award of the amount by which the
unpaid Rents which would have been earned after termination until the
time of award exceeds the amount of such Rents loss that Tenant proves
could have been reasonably avoided; plus
(c) the worth at the time of award of the amount by which the
unpaid Rents for the balance of the term of the Lease after the time of
award exceeds the amount of such Rents loss that Tenant proves could be
reasonably avoided; and plus
(d) any other amount reasonably necessary to compensate Landlord
for all the detriment proximately caused by Tenant's failure to perform
its obligations under the Lease or which in the ordinary course of
things would be likely to result therefrom; and/or
(e) At Landlord's elections, such other amounts in addition or in
lieu of the foregoing as may be permitted from time to time herein or
by applicable law.
The "worth at the time of award" of the amounts referred to in
clauses (a) and (b) above is computed by allowing interest at the rate
of 10% per annum. The "worth at the time of award" of the amount
referred to in clause (c) above means the monthly sum of the Rents
under the Lease. Failure of Landlord to declare any default immediately
upon occurrence thereof, or delay in taking any action in connection
therewith, shall not waive such default, but Landlord shall have the
right to declare any such default at any time thereafter.
<PAGE> 68
21. CONTINUATION AFTER DEFAULT.
Even though Tenant has defaulted the Lease and abandoned the
Premises, the Lease shall continue in effect as long as Landlord does
not terminate Tenant's right to possession, and Landlord may enforce
all of its rights and remedies under the Lease, including the right to
recover the Rents as they become due under the Lease. Acts of
maintenance or preservation or efforts to relet the Premises or the
appointment of a receiver upon initiative of Landlord to protect
Landlord's interest under the Lease shall not constitute a termination
of Tenant's right to possession. If any fixture, equipment,
improvement, installation or appurtenance shall be required to be
removed from the Premises and/or Building by Tenant, then Landlord (in
addition to all other rights and remedies) may, at its election by
written notice to Tenant, deem that the same has been abandoned by
Tenant to Landlord, or Landlord may remove and store the same and
restore the Premises to its original condition at the reasonable
expense of Tenant, as Additional Rent to be paid within ten (10) days
after written notice to Tenant of such expense.
22. LANDLORD'S DEFAULT.
If Landlord fails to perform or observe any of its material Lease
obligations herein and such failure continues for thirty (30) days
after written notice from Tenant, or such additional time, if any, that
is reasonably necessary to promptly and diligently cure such failure
after receiving written notice, Landlord shall be in breach of the
Lease (a "Default"). If Landlord commits a Default, Tenant may pursue
any remedies given in the Lease or under law.
23. LANDLORD'S RIGHT TO CURE DEFAULTS.
All terms and provisions to be performed by Tenant under the Lease
shall be at Tenant's sole cost and expense and without any abatement of
Rents. If Tenant fails to pay any sum of money, other than Rents,
required hereunder or fails to perform any other act required hereunder
and such failure continues for thirty (30) days after notice by
Landlord, Landlord may, but shall not be obligated, and without waiving
or releasing Tenant from any obligations of Tenant, make any such
payment or perform any such act on Tenant's part to be made or
performed as provided in the Lease. All sums paid by Landlord and all
incidental costs shall be deemed Additional Rent hereunder and shall be
payable within ten (10) days of written notice of such sums paid.
24. OTHER RELIEF.
The remedies provided for in the Lease are in addition to any
other remedies available to Landlord at law or in equity by statute or
otherwise.
25. ATTORNEYS' FEES.
In the event either party places at issue the enforcement of the
Lease, or any part thereof, or the collection of any Rents, or recovery
of the possession of the Premises, or files suit upon the same, then
the prevailing party shall recover its reasonable attorneys' fees and
costs from the other party.
<PAGE> 69
26. EMINENT DOMAIN.
If all or any part of the Premises shall be taken or conveyed as
a result of the exercise of the power of eminent domain, the Lease
shall terminate as to the part so taken as of the date of taking, and,
in the case of a partial taking, either Landlord or Tenant shall have
the right to terminate the Lease as to the balance of the Premises by
written notice to the other within thirty (30) days after such date;
provided, however, that a condition to the exercise by Tenant of such
right to terminate shall be that the portion of the Premises taken or
conveyed shall be of such extent and nature as substantially to
handicap, impede or impair Tenant's use of the balance of the Premises.
In the event of any taking, Landlord shall be entitled to any and all
compensation, damages, income, rent awards or any interest therein
whatsoever which may be paid or made in connection therewith, and
Tenant shall have no claim against Landlord for the value of any
unexpired term of the Lease or otherwise, provided that Tenant shall be
entitled to any and all compensation, damages, income, rent or awards
paid for or on account of Tenant's moving expenses, trade fixtures,
equipment and any leasehold improvements in the Premises, the cost of
which was borne by Tenant, to the extent of the then unamortized value
of such improvements for the remaining term of the Lease. In the event
of a taking of the Premises which does not result in a termination of
the Lease, the monthly rental herein shall be apportioned as of the
date of such taking so that thereafter the rent to be paid by Tenant
shall be in the ratio that the area of the Premises not so taken bears
to the total area of the Premises prior to such taking.
27. SUBORDINATION, ATTORNMENT & NONDISTURBANCE; AND ESTOPPEL
CERTIFICATE.
At Landlord's request, Tenant agrees to execute, acknowledge, and
deliver within ten (10) days to Landlord a Subordination, Attornment &
Nondisturbance Agreement ("Subordination Agreement"), subject to
Landlord's reasonably proposed form(s). Such Subordination Agreement
shall subordinate the Lease to any ground lease, mortgage, deed of
trust, or any other hypothecation for security now or hereafter placed
upon the Premises, Building and/or Common Area, or any part thereof, to
any and all advances made on the security, and to all renewals,
modification, consolidations, replacements and extensions thereof,
whether the Lease is dated prior or subsequent to the date of said
ground lease, mortgage, deed of trust or other hypothecation or the
date of recording thereof. Further, at Landlord's request, Tenant
agrees to execute, acknowledge, and deliver within ten (10) days to
Landlord an Estoppel Certificate, subject to Landlord's proposed
form(s). Such Subordination Agreement and Estoppel Certificate may be
relied upon by any prospective purchaser, mortgagee, or beneficiary
Under any ground lease, mortgage, deed of trust, or any other
hypothecation of the Premises, Building, or common areas, or any part
thereof Notwithstanding such Subordination Agreement, Tenant's right to
quiet possession of the Premises shall not be disturbed so long as
Tenant is not in default under the Lease, unless the Lease is otherwise
terminated pursuant to its terms.
In the event that Tenant fails to execute, acknowledge, and
deliver to Landlord such Subordination Agreement and Estoppel
Certificate within ten (10) days of Landlord's request, the parties
herein expressly agree that Tenant shall be deemed in default of the
Lease without further notice. In event of such Tenant default, the
parties herein further expressly agree that the Subordination Agreement
and Estoppel Certificate are deemed to have been executed by Tenant.
<PAGE> 70
28. NO MERGER.
The voluntary or other surrender of the Lease by Tenant, or a
mutual cancellation thereof, shall not work a merger, and shall, at the
option of Landlord terminate all or any existing subleases or
subtenancies, or may, at the option of Landlord, operate as an
assignment to it of any or all such subleases or subtenancies.
29. SALE.
In the event the original Landlord hereunder, or any successor
owner of the Premises, Building, and Common Area shall sell or convey
the Premises, Building, and Common Areas, and the purchaser assumes the
obligations of Landlord under the Lease, all liabilities and obligation
on the part of the original Landlord, or such successor owner, under
the Lease accruing after such Sale shall terminate, and thereupon all
such liabilities and obligations shall be binding upon the new owner.
Tenant agrees to attorn to such new owner.
30. NO LIGHT OR VIEW EASEMENT.
Any diminution or shutting off of light or view by any structure
erected on lands adjacent to the Building shall in no way affect the
Lease or impose any liability on Landlord.
31. HOLDING OVER.
If, without objection by Landlord, Tenant holds possession of the
Premises after expiration of the Term or any Option period of the
Lease, Tenant shall become a tenant from month to month upon the terms
herein specified, but at a monthly Base Rent equivalent to 125% of the
Base Rent at the end of the term or extension period pursuant to
Article 4, payable in advance on or before the first day of each month.
All Additional Rent shall also apply. Each party shall give the other
notice at least one month prior to the date of termination of such
monthly tenancy of its intention to terminate such tenancy.
32. ABANDONMENT.
If Tenant shall abandon or surrender the Premises, or, be
dispossessed by process of law or otherwise, any personal property
belonging to Tenant and left on the Premises shall be deemed to be
abandoned, at the option of Landlord, except such property as may be
mortgaged to Landlord.
33. SECURITY DEPOSIT.
Tenant shall deposit with Landlord upon execution of the Lease a
security deposit equal to a month's full Base Rent ("Security
Deposit"). The Security Deposit shall be held by Landlord as security
for the faithful performance by Tenant of all of the provisions of the
Lease to be performed or observed by Tenant. In the event Tenant fails
to perform or observe any of the provisions of the Lease to be
performed or observed by it, then, at the option of the Landlord,
Landlord may (but shall not be obligated to do so) apply the Security
Deposit, or so much thereof as may be necessary to remedy such default
or to repair damages to the Premises caused by Tenant. In the event
Landlord applies any portion of the Security Deposit to remedy any such
default or to repair damages to the Premises caused by Tenant, Tenant
shall pay to Landlord, within thirty (30) days after written demand for
such payment by Landlord, all monies necessary to restore the Security
Deposit up to the original amount. Landlord will not be required to
<PAGE> 71
keep the security deposit separate from its general funds and Tenant
will not be entitled to interest on the security deposit. The security
deposit will not be a limitation on Landlord's damages or other rights
under this lease, or a payment of liquidated damages, or an advance
payment of the rent. If Tenant pays the rent and performs all of its
other obligations under this lease, Landlord will return the unused
portion of the security deposit to Tenant within thirty (30) days after
the end of the term.
34. WAIVER.
All waivers by either party herein must be in writing and signed
by such party. The waiver of any term or conditions herein shall not be
deemed to be a waiver of any subsequent breach of the same or any other
agreement, condition or provision herein contained, nor shall any
custom, practice or course of conduct between the parties be construed
to waive or to lessen the right of either party to insist upon the
performance by the other party in strict accordance with said terms.
The subsequent acceptance of Rents hereunder by Landlord shall not be
deemed to be a waiver of any breach by Tenant of any term or condition
of the Lease, regardless of Landlord's knowledge of such breach at the
time of acceptance of such Rents.
35. NOTICES.
All notices and demands which may or are required to be given by
either party to the other under the Lease shall be in writing and shall
be deemed to have been fully given when deposited in the United States
mail, certified or registered, postage prepaid, and addressed as
follows: to Tenant at 12227 South Business Park Drive Suite No. 200,
Draper, Utah 84020, or to such other place as Tenant may from time to
time designate in a notice to Landlord or delivered to Tenant at the
Premises; to Landlord at Draper Business Park, L.C. c/o Prime
Commercial Management Services, 12257 South Business Park Drive, Suite
110, Draper, UT 84020, or to such other place as Landlord may from time
to time designate in a notice to Tenant. Tenant hereby appoints as its
agent to receive the service of all dispossessory or distraint
proceedings and notices hereunder the person in charge of or occupying
the Premises at the time, and if no person shall be in charge of or
occupying the same, then service may be made by attaching same on the
main entrance of the Premises.
36. COMPLETE AGREEMENT.
There are no oral agreements between Landlord and Tenant affecting
the Lease, and the Lease supersedes and cancels any and all previous
negotiations, arrangements, brochures, agreements and understandings,
if any, between Landlord and Tenant with respect to the subject matter
of the Lease. The Lease may not be altered, changed or amended, except
by an instrument in writing signed by both parties hereto.
37. AUTHORITY.
The person(s) executing the Lease on behalf of the parties herein
hereby covenants and warrants that (a) such party is a duly authorized
and validly existing entity under the laws of the State in which it was
formed, (b) such party has and is qualified to do business in Utah, (c)
such entity has full right and authority to enter into the Lease, and
(d) each person executing the Lease on behalf of such entity is
authorized to do so.
<PAGE> 72
38. GUARANTEE OF LEASE.
Tenant guarantees, upon execution of the Lease, to occupy the
Premises. Any failure to occupy the Premises does not release the
Tenant from the obligation of paying Rents or any other terms set forth
herein.
39. MISCELLANEOUS.
(a) The words "Landlord" and "Tenant" as used herein shall include
the plural as well as the singular. If there be more than one Tenant,
the obligations hereunder imposed upon Tenant shall be joint and
several.
(b) Time is of the essence on the Lease and each and all of its
terms and conditions.
(c) The terms and conditions herein shall apply to and bind the
heirs, executors, administrators, successors and assigns of the parties
hereto.
(d) The captions of the Lease are solely to assist the parties and
are not a part of the terms or conditions of the Lease.
(e) The Lease shall be governed by and construed in accordance
with the laws of the State of Utah, and is deemed to be executed within
the State of Utah.
40. SEVERABILITY.
If any term or provision of the Lease, or the application thereof
to any person or circumstance, shall to any extent be invalid or
unenforceable, the remainder of the Lease, or the application of such
provision to persons or circumstances other than those as to which it
is invalid or unenforceable, shall not be affected thereby, and each
provision of the Lease shall be valid and shall be enforceable to the
extent permitted by law.
41. BROKERS.
Landlord is represented by Wesley T. Cornelison and Lora
Ripplinger of Prime Commercial, Inc.
IN WITNESS WHEREOF, the parties have executed the Lease dated the
day and year first above written.
TENANT: LANDLORD:
WHITNEY CONSULTING SERVICES, INC. DRAPER BUSINESS PARK, L.C.
By: /s/ Ronald Simon By: Scott M. Waldron
Its: Treasurer Its: Manager
EXHIBIT A SPACE PLAN
EXHIBIT B BASE BUILDING IMPROVEMENTS
The Base Building Improvements and systems as described below
shall be furnished by Landlord at Landlord's sole cost and expense.
These include:
<PAGE> 73
1. The Building structure will be designed for a minimum floor load
of 50 lb. Live load plus a 20 lb. partition dead load.
2. The Building shell will include a core consisting, elevator with
equipment room, stairwell enclosures, 1 man and 1 woman rest-room
on each floor, finished lobbies and exterior perimeter walls and
windows and all building columns.
3. A Concrete floor will be installed with a smoothed trowel finish
for installation of glued down carpet. The Floor will be poured
level and finished in accordance with current ACI Standard
Specifications 117.
4. A Life Safety system will be installed in accordance with the more
stringent of applicable national, state and local codes or the
Americans with Disabilities Act, throughout the Building,
including all corridors, stairwells and rest-rooms (strobes). The
sprinkler system will be installed to code and connected to
alarms.
5. Electrical distribution will be provided to the main panel boxes
in the electrical closet on each floor. The electrical system
shall be sized for seven (7) watts per usable square foot for
Tenant's consumption, over and above base building electrical
requirements.
6. The Building will be equipped with a packaged-unit heating,
ventilation and air conditioning system sufficient for Tenant's
anticipated occupancy requirements. The system will be designed to
maintain a space temperature between 70'-75' degrees F on a
year-round basis, based on a maximum average occupancy of one (1)
person for each 150 square feet of usable area. The requirements
for ventilation shall comply with present ASHRAE (American Society
of Heating, Refrigeration and Air-Conditioning Engineers) standard
62-1989 as a minimum requirement. Tenant shall be furnished with
a price per ton for package unit if additional air conditioning is
required.
7. Telephone service, as provided by the local utility, will be
brought to Tenant's or Building's main telephone room.
8. Common corridor walls and walls between tenant suites will be
provided with the side finished only to the common areas.
9. Roadways necessary for Tenant's access to and egress from the
Building will be completed, along with parking, landscaping and
sprinklers.
<PAGE> 74
EXHIBIT 99.7
COMMERCIAL LEASE
THIS LEASE (the "Lease") dated this _____ day of September, 1999,
is entered into by and between Draper Business Park, L.L.C., a Utah
limited liability company ("Landlord"), and Whitney Consulting
Services, Inc., a Wyoming corporation, ("Tenant").
1. PREMISES.
(a) Landlord hereby leases to Tenant, and Tenant hereby leases
from Landlord, for the term and subject to the terms and conditions
hereinafter set forth, to each and all of which Landlord and Tenant
hereby mutually agree, those certain premises (the "Premises"), shown
on Exhibit A (space plan) attached hereto, which include approximately
3475 Rentable square feet of office space and 3073 Usable square feet
(subject to a final space plan). The location of the Premises is
commonly known as: Building 5, 12227 South Business Park Drive, Draper,
Utah 84020 ("Building").
(b) In addition, the Premises shall include the appurtenant right
to use, in common with others, the site, parking and landscaped areas
("Common Area"). Landlord shall provide Tenant 5 non-reserved parking
stalls per 1,000 Usable square feet of Premises in the adjacent parking
lots of the Premises.
(c) Acceptance of Premises. Tenant, by taking possession of the
Premises shall be deemed to accept the Premises as being in the
condition in which Landlord is obligated to deliver the Premises.
Tenant shall at the end of the term and any extension herein surrender
to Landlord the Premises and all alterations, additions and
improvements thereto in the same condition as when received, ordinary
wear and tear, damage by fire, earthquake, or act of God excepted.
Landlord has no liability and has made no representation to alter,
improve, repair, or paint the Premises or any part thereof, except as
specified in Article 2(c), 2(d) and 6 herein.
2. TERM, OPTION, TENANT IMPROVEMENTS, EXPANSIONS.
(a) Lease Term. The initial Lease Term shall be two years and
shall commence on or before September 27, 1999, ("Commencement Date").
Tenant shall not be responsible for Rents until Landlord delivers
possession of the Premises to Tenant.
(b) Base Building Improvements. At Landlord's sole cost and
expense, Landlord shall provide the Building's roof and structural
elements ("Shell"), shall provide basic utility access to and an
initial HVAC unit for the Premises, and shall design and construct the
common areas of the Premises and Building, as more specifically
outlined in Exhibit B - Base Building Improvements (collectively "Base
Building Improvements").
(c) Tenant Improvements. Tenant accepts the Premises in "as is"
condition, except that Landlord will clean the carpets, touch-up and
paint on all walls, remove wall paper in one office and repaint to
match the premises, and tack down the black backing in the reception
area. Improvements shall include all improvements to the Premises, but
exclude the Base Building Improvements.
<PAGE> 75
(d) Option to Extend Lease Term.. Tenant may extend the term for
a period of two years from end of the Lease Term (the "Expiration
Date") by written notice of its election to do so given to Landlord at
least three (3) months prior to the Expiration Date. The extended term
will be on all of the terms and conditions of the Lease applicable at
the Expiration Date; provided, however, that the Base Rent during the
balance of the renewal term shall be adjusted for the first year to the
then current market rate for similar space in the area, then increased
annually on each succeeding anniversary of the Commencement Date of the
Lease by three percent (3%). Tenant will have no futher right to extend
the Lease Term. Tenant will not have any rights under this paragraph if
(a) an event of default exists on the Expiration Date or on the date on
which Tenant gives its notice, (b) Tenant makes late payment of any
amounts due under this Lease more than three (3) times in any Lease
year, or (c) Tenant exercises its rights less than three (3) months
before the Expiration Date.
3. NON-OCCUPANCY OF IMPROVED SPACE.
In the event Tenant does not occupy the Premises and fails to pay
Rents as required in Article 4 of the Lease, the cost of all Tenant
Improvements and brokerage commissions shall become due and payable
upon invoicing by Landlord. Further, such invoicing by Landlord does
not waive any other rights or remedies Landlord may have against Tenant
for failure to occupy.
4. RENT.
(a) Base Rent. Base Rent shall be $10.25 per Rentable square foot
of the Premises per year, triple net, for the first year, and $10.75
per Rentable square foot of the premises per year, triple net, for the
second year. One twelfth (1/12) of the Base Rent shall be payable in
advance each month on or before the 1st day of each month during the
duration of the Lease, with the first such monthly rental payment plus
the security deposit referenced in Article being due upon the
execution of the Lease: Any partial months shall be prorated
accordingly. All Base Rent and Additional Rent (collectively "Rents")
shall be paid as follows, unless otherwise directed in writing: Draper
Business Park, L.C. c/o Prime Commercial Management Services, Inc.
12257 South Business Park Drive, Suite 110, Draper, UT 84020.
Notwithstanding the foregoing, Landlord grants Tenant a concession on
or reduction of Base Rent, and Operating Expenses equal to $8,623.15 to
be credited against amounts owing following Commencement, $4,216.00
during the first year and the balance during the second year.
(b) Additional Rent. All obligations payable by Tenant under the
Lease other than Base Rent are called "Additional Rent". Unless
otherwise provided, Additional Rent shall be paid with the monthly
installment of Base Rent.
(c) Interest, Late Charges, Costs and Attorneys' Fees. If Tenant
falls to pay within five (5) days of the date due any Rents which
Tenant is obligated to pay under the Lease, the unpaid amount shall
bear interest at twelve (12%) percent per annum. Tenant acknowledges
that any late payments of Rents shall cause Landlord to lose the use of
that money and incur costs and expenses not contemplated under the
<PAGE> 76
Lease, including without limitation administrative, collection and
accounting costs, the exact amount of which is difficult to ascertain.
Therefore, in addition to interest, if any payment is not received by
Landlord within five (5) days from the date it is due, Tenant shall
also pay Landlord a late charge equal to five (5%) percent of the
amount of each such late Rents. Further, as Additional Rent, Tenant
shall be liable to Landlord for costs and attorneys' fees incurred as
a result of late payments or non-payments. Acceptance of any interest,
late charge, costs or attorneys' fees shall not constitute a waiver of
any default by Tenant nor prevent Landlord from exercising any other
rights or remedies under the Lease or at law.
5. USE.
(a) The Premises shall be used for general office, production,
storage and any other lawful purpose incidental to Tenant's business,
and no other, unless consented to in writing by Landlord. Tenant shall
not do or permit to be done in or about the Premises, Building, or
Common Area, anything which is prohibited by or in any way in conflict
with (in the case of hazardous material, Tenant shall notify Landlord
of any such materials and shall ensure that any such hazardous material
is properly controlled, safeguarded, and disposed of) any and all laws,
statutes, ordinances, rules and regulations now in force or which may
hereafter be enacted or promulgated or which is prohibited by the
standard form of fire insurance policy, or which will increase the
existing rate of or affect any fire or other insurance upon the
Premises, Building or any of its contents, or Common Area or cause a
cancellation of any insurance policy covering the Premises or Building
or any part thereof or any of its contents, or the Common Area. Tenant
shall not do or permit anything to be done in or about the Premises,
Building, or the Common Area which will in any way violate Rules or
Regulations reasonably promulgated by Landlord, obstruct or interfere
with the rights of other tenants, or injure them, or use or allow the
Premises, Building or the Common Area to be used for any improper,
immoral, or unlawful purpose, nor shall Tenant cause, maintain or
permit any nuisance, in, on or about the Premises, Building, or the
Common Area or commit or suffer to be committed any waste in, on or
about the Premises, Building or the Common Area. Tenant shall have
access to the Building and Premises on a 24 hour/7 day a week basis.
(b) Tenant shall not use the name of the Building in which the
Premises are located, in connection with any business carried on in
said Premises (except as Tenant's address) without written consent of
Landlord
(c) Tenant shall not manufacture, assemble or store materials in
the Common Area.
6. LANDLORD'S SERVICES.
Landlord, at its sole cost and expense, is responsible to maintain
only the roof and structural elements ("Shell") of the Premises and
Building. All Operating Expenses, including but not limited to repairs,
maintenance, Premises and Building utilities, Common Area utilities,
Premises and Building Janitorial, Common Area Janitorial, sewer and
garbage, insurance, taxes, and property management on the Premises,
<PAGE> 77
Building, and Common Area shall be coordinated by Landlord, but are the
financial responsibility of the Tenant through prorated Operating
Expenses as more fully outlined in Article 7 herein.
7. OPERATING EXPENSES - REPAIRS, MAINTENANCE, INSURANCE, TAXES AND
PROPERTY MANAGEMENT
Since the Premises is part of a Building or group of buildings,
Tenant is responsible for a prorated share of Operating Expenses,
including but not limited to repairs, maintenance, Common Area
utilities, Common Area janitorial, tenant janitorial, sewer and
garbage, insurance, taxes, and property management incurred in the
operation and management of the Premises, Building, and Common Area as
shall be reasonably determined by the Landlord. Proration shall be on
a square footage basis with all other tenants and Tenant's proration
shall be calculated by multiplying the Operating Expenses by an
equation, the numerator being the Rentable square feet of the Premises
and the denominator being the total Rentable square feet of the
Building. The Operating Expenses shall be prorated to Tenant and be
payable by Tenant as Additional Rent on a monthly basis and subject to
the following terms and conditions:
(a) Tenant's prorated share of the Operating Expenses shall be
computed and paid in twelve (12) equal monthly estimated payments as
determined in the Landlord's reasonable discretion. Such Additional
Rent shall be paid by Tenant on or before the Ist day of each month
with Base Rent. As soon as is reasonably possible, but in any event
within ninety (90) days following the end of each calendar year,
Landlord shall furnish to Tenant a statement showing the Premises' and
Building's actual Operating Expenses for the preceding calendar year.
In the case of a deficiency, Tenant shall promptly remit its prorata
share of such deficiency to Landlord. In the case of a surplus,
Landlord shall apply said surplus to the next Additional Rent due from
Tenant.
(b) Tenant may review at its sole cost and expense any Operating
Expenses prorated to Tenant by Landlord, including assessed real estate
taxes as may be statutorily allowed. Landlord shall make available the
applicable Operating Expenses' invoices and statements. However, any
such review must be requested and completed within sixty (60) days of
receipt of the annual statement.
8. ALTERATIONS.
(a) Tenant will not make or suffer to be made any alterations,
additions or improvements in excess of $1,000, excluding the initial
Tenant Improvements, (collectively "Alterations") to or upon the
Premises, Building, or any part thereof, or attach any fixtures or
equipment thereto, without first obtaining Landlord's written approval,
which shall not be unreasonably withheld or delayed. Any Alterations to
or upon the Premises shall be made by Tenant at Tenant's sole cost and
expense and any contractor selected by Tenant to make the same shall be
subject to Landlord's reasonable prior written approval. All such
Alterations permanent in character, made in or upon the Premises either
by Tenant or Landlord, may at the option of Landlord, become Landlord's
property and, at the end of the term or any extension hereof, shall
<PAGE> 78
remain on the Premises without compensation to Tenant unless Landlord
requests that Tenant remove any such Alterations. Notwithstanding the
above, Tenant's work stations and other items of personal property
shall remain Tenant's property.
(b) Any Alterations shall, when completed, be of such a character
as not to lessen the value of the Premises or such improvements as may
be located thereon, Any Alterations shall be made promptly and in a
good workmanlike manner, and in compliance with all applicable permits,
building and zoning laws, and with all other laws, ordinances, orders,
rules, regulations and requirements of all federal, state and municipal
governments, departments, commissions, boards and offices. The costs of
any such Alterations shall be paid by Tenant, so that the Premises are
free of liens, for services performed, labor and material supplied or
claimed to have been supplied. Before any Alterations shall be
commenced, Tenant shall pay any increase in premiums on insurance
policies (provided for herein) or ensure adequate coverage is in place
for all risks related to the construction of such Alterations and the
increased value of the Premises.
9. SIGNAGE.
Any signage must be approved in writing by Landlord, which
approval shall be at Landlord's sole discretion, and conform with
applicable statues, ordinances, regulations or codes. Any signage
must be removed, at Tenant's sole cost, at the end of the Term of the
Lease or upon Tenant's failing to have possession of the Premises.
10. LIENS.
Tenant shall keep the Premises and the Building free from any
mechanics' and/or materialmen's liens or other liens arising out of any
work performed, materials furnished or obligations incurred by Tenant.
Tenant shall notify Landlord in writing at least seventy-two (72) hours
before any work or activity is to commence on the Premises which may
give rise to such liens to allow Landlord to post and keep posted on
the Premises any notices which Landlord may deem to be proper for the
protection of Landlord and the Premises from such liens.
11. DESTRUCTION OR DAMAGE.
(a) If the Premises is partially damaged by fire, earthquake, or
other Act of God, Landlord shall repair the same at Landlords expense,
subject to the provisions of this Article and provided such repairs
can, in Landlords reasonable opinion, be made within sixty (60) days.
During such repairs, the Lease shall remain in full force and effect,
except that if there shall be damage to the Premises and such damage is
not the result of the negligence or willful misconduct of Tenant,
Tenant's employees, agents, or invitees, an abatement of Rents shall be
allowed Tenant for such portion of Premises and period of time as the
Premises was unusable by Tenant.
(b) If in Landlord's reasonable opinion the partially damaged
Premises can be repaired, but not within sixty (60) days, the Landlord
may elect, upon written notice to Tenant within thirty (30) days of
such damages, to repair such damages over a longer time period and
<PAGE> 79
continue the Lease in full force and effect, but with Rents partially
abated as provided in Article 11 (a). In the event such repairs cannot
be made within sixty (60) days, Tenant shall have the option to
terminate the Lease provided that written notice is given to Landlord
within thirty (30) days of receipt of Landlord's provided notice stated
in this paragraph.
(c) If the partially damaged Premises is to be repaired under this
Article, Landlord shall repair such damages to the Premises itself, and
to the Tenant Improvements supplied by Landlord herein. Except in the
event of Landlord's gross negligence or willful misconduct, Tenant
shall be responsible for Tenant's equipment, furniture and fixtures,
and other alterations, additions and improvements made by Tenant to the
Premises and Building.
(d) If in Landlord's reasonable opinion, the Premises is totally
or substantially destroyed by fire or other casualty, the Lease shall
terminate upon notice by Landlord.
12. SUBROGATION.
Landlord and Tenant shall each, prior to Tenant's taking possession
or immediately after the execution of the Lease, procure from each of
the insurers under all policies of fire, theft, public liability,
workmen's compensation and other insurance now or hereafter existing
during the term and any extension hereof and purchased by either of
them insuring or covering the Premises and/or Building or any portion
thereof or operations therein, a waiver of all rights of subrogation
which the insurer might otherwise, if at all, have against the other.
13. INDEMNIFICATION.
Tenant agrees to indemnify, defend and hold harmless Landlord and
its officers, directors, partners and employees from and against all
liabilities, judgments, demands, actions, expenses or claims, including
reasonable attorney's fees and court costs, for injury to or death of
any person, the release of any hazardous materials, or for damages to
any property to the extent arising out of or connected with (1) the
use, occupancy or enjoyment of the Leased Premises, Building, or Common
Area by Tenant or Tenant's agents, employees, invitees, licensees, or
contractors (the Tenant's Agents"), or any work or activity performed
by Tenant or by Tenant's Agents in, or about the Leased Premises,
Building, or Common Area, including any Tenant improvements, (ii) any
breach or default in the performance of any obligation of Tenant under
this lease, (iii) any negligent or intentional tortious act of Tenant
or Tenant's Agents (excluding Tenant's licensees) on or about the
Leased Premises, Building, or Common Area or any negligent or
intentional tortious act of Tenant's licensees on or about the Leased
Premises, Building or Common Area. Notwithstanding the foregoing,
Tenant shall not be liable to the extent that damage or injury is
determined ultimately to be caused by the negligent or intentional
tortious act of Landlord, or of Landlord's employees, agents, invitees,
licensees, or contractors ("Landlord's Agents"). All property of Tenant
kept or stored on the Leased Premises or in the Building shall be so
kept or stored at the risk of Tenant only, and Tenant shall hold
<PAGE> 80
Landlord free and harmless from any claims arising out of damage to the
same, unless such damage shall be caused by the negligent or
intentional tortious act of Landlord or Landlord's Agents. The
indemnification contained herein shall survive the expiration or
earlier termination of this lease as to acts occurring prior to such
expiration or termination.
Landlord agrees to indemnify, defend and hold harmless Tenant and
its officers, directors, partners and employees from and against all
liabilities, judgments, demands, actions, expenses or claims, including
reasonable attorneys' fees and court costs, for injury to or death of
any person, the release of any hazardous materials or for damages to
any property to the extent arising out of or connected with (i) the
use, management or operation of the Building by Landlord or by
Landlord's Agents, or any work or activity performed by Landlord or by
Landlord's Agents in, on or about the Building, (ii) any breach or
default in the performance of any obligation of Landlord under this
lease, or (111) any negligent or intentional tortious act of Landlord
or Landlord's Agents on or about the Leased Premises or the Building.
Notwithstanding the foregoing, Landlord shall not be liable to the
extent that damage or injury is determined ultimately to be caused by
the negligent or intentional tortious act of Tenant or Tenant's Agents.
The indemnification contained herein shall survive the expiration or
earlier termination of this lease as to acts occurring prior to such
expiration or termination.
14. COMPLIANCE WITH LEGAL REQUIREMENTS.
Landlord shall, at its sole cost and expense, deliver the Premises
to Tenant in compliance with all laws, statutes, ordinances and
governmental rules, regulations or requirements now in force or which
may hereafter be in force, the requirements of any board of fire
underwriters or other similar body now or hereafter constituted, any
direction or occupancy certificate issued pursuant to any law by any
public officer or officers, as well as the provisions of all recorded
documents affecting the Premises, (collectively the "Applicable Laws").
Landlord shall, during the Tenn of Tenant's Lease, at its sole cost and
expense promptly comply with all Applicable Laws, including the
American with Disabilities Act ("ADA"), insofar as any thereof relate
to or affect Landlord's obligations under the Lease, or its ownership
of the Premises, Building, or Common Area, except for Tenant's
requirements in the immediately preceding paragraph herein.
Tenant shall, at its sole cost and expense, promptly comply with
Applicable Laws, insofar as any thereof relate to or affect Tenant's
use or occupancy of the Premises, Building, or Common Area, excluding
requirements of structural changes now related to or affected by
improvements made by or for Tenant.
15. INSURANCE.
(a) Commercial General Liability. Tenant shall, maintain a
Commercial General Liability policy including, all coverages normally
provided therein. Such policies shall specifically name Landlord as an
additional insured, with a cancellation period of thirty (30) days
<PAGE> 81
prior written notice of an cancellation. A Certificate of Insurance
shall be provided to Landlord. All polices of insurance shall be issued
by responsible insurance companies licensed to do business in the State
of Utah.
The minimum limits of coverage acceptable are:
(1) 1,000,000 Each Occurrence Combined Single Limit for Bodily
Injury and
Property Damage and
(2) $2,000,000 Annual Aggregate
(b) Premises and Building Insurance. Landlord shall insure the
Premises and Building, including Landlord supplied Core and Shell and
Tenant Improvements as deemed necessary in Landlord's reasonable
discretion. Tenant shall pay for such insurance as outlined in Article
7 herein, involving Tenant's prorated share of Operating Expenses. All
policies of insurance shall be issued by responsible insurance
companies licensed to do business in the State of Utah.
(c) Tenant's Additional Insurance, Tenant may, at its sole cost
and expense, cause all equipment, machinery, furniture and fixtures,
personal property, and Tenant Improvements supplied by Tenant from time
to time used or intended to be used in connection with the operation
and maintenance of the Premises, to be insured by Tenant against loss
or damage. Except for losses caused by Landlord's gross negligence or
willful misconduct, Landlord is in no way liable for any uninsured
Tenant's property.
16. ASSIGNMENT AND SUBLETTING.
In the event Tenant should desire to assign the Lease or sublet
the Premises, Tenant shall give Landlord written notice of such desire
at least ninety (90) days in advance of the date on which Tenant
desires to make such assignment or sublease. Landlord shall then have
a period of thirty (30) days following receipt of such notice within
which to notify Tenant in writing that Landlord elects to permit Tenant
to assign or sublet such space, subject to prior written approval of
the proposed assignee by Landlord, such consent not to be unreasonably
withheld or delayed, so long as the use of the Premises by the proposed
assignee would be a permitted use and the proposed assignee is of sound
financial condition as determined by Landlord. Failure by Landlord to
approve a proposed assignee shall not cause a termination of the Lease.
Any rents or other consideration realized by Tenant under any such
sublease and assignment in excess of the Rents hereunder, after
amortization of the reasonable costs of extra tenant improvements for
which Tenant has paid and reasonable subletting and assignment costs,
shall be divided and paid ninety (90%) percent to Landlord and ten
(10%) percent to Tenant.
Notwithstanding the above, Tenant shall have the right to sublease
or assign all or any portion of the Premises during the Term or any
Option period to any related entity, subsidiary, or affiliate of
Tenant, having at least fifty-one (5 1 1%) percent direct common
ownership, without having to receive Landlord's consent, but still
requiring written notice to Landlord on or before such sublease or
assignment.
<PAGE> 82
No assignment or subletting by Tenant shall relieve Tenant of any
obligation under the Lease. Any assignment or subletting which
conflicts with the provisions hereof shall be void.
17. RULES.
Tenant shall faithfully observe and comply with all Rules and
Regulations reasonably promulgated by Landlord, in writing and after
reasonable notice, during the Term or any Option period herein.
Landlord must apply rules equitably against all Tenants, but shall not
be responsible to Tenant for the non-performance by other Building
tenants, or adjacent buildings' tenants, of any of said Rules and
Regulations.
18. ENTRY BY LANDLORD.
The Landlord may enter the Premises or Building at reasonable
hours and upon 24 hours reasonable written notice to Tenant to (a)
inspect the same, (b) show the same to prospective purchasers, lenders
or tenants, (c) determine whether Tenant is complying with all of
Tenant's obligations hereunder, (d) post notices of non-responsibility
or (e) make repairs required of Landlord under the Lease, repairs to
adjoining space or utility service, or make repairs, alterations or
improvements to the Building, provided that all such work shall be done
as promptly as possible and with as tittle interference to Tenant as
reasonably possible. Tenant hereby waives any claim for damages for any
inconvenience to or interference with Tenant's business, any loss of
occupancy or quiet enjoyment of the Premises occasioned by such entry.
Landlord shall at all times have and retain a key to unlock all doors
in, on or about the Premises (excluding Tenant's vaults, safes and
similar areas designated in writing by Tenant). In the event of an
emergency, Landlord shall have the right to use any and all means which
Landlord may deem proper to enter the Premises, without notice, for the
limited purpose of abating as quickly as possible said emergency. Such
emergency entrance shall not be construed or deemed to be a forcible or
unlawful entry into or a detainer of the Premises or an eviction,
actual or constructive, of Tenant from the Premises, or any portion
thereof.
19. EVENTS OF DEFAULT.
The occurrence of any one or more of the following events ("Events
of Default") shall constitute a breach of the Lease by Tenant: (a) if
Tenant fails to pay Rents when and as the same becomes due and payable
and such failure continues for more than ten (10) days after written
notice thereof, or (b) if Tenant fails to pay any other sum when and as
the same becomes due and payable
and such failure continues for more than ten (10) days after written
notice thereof, or (c) if Tenant fails to perform or observe any
material term or condition of the Lease, such failure continues for
more than thirty (30) days after written notice from Landlord, and
Tenant does not within such period begin with due diligence and
dispatch the curing of such default, or, having so began, thereafter
falls or neglects to complete with due diligence and dispatch the
curing of such default; or (d) if Tenant shall make a general
assignment for the benefit of creditors, or shall admit in writing its
<PAGE> 83
inability to pay its debts as they become due or shall file a petition
in bankruptcy, or shall be adjudicated as bankrupt or insolvent, or
shall file a petition seeking any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief
under any present or future statute, law or regulation, or shall file
any answer admitting or shall fall timely to contest the material
allegations of a petition filed against it in any such proceeding, or
shall seek or consent to or acquiesce in the appointment of any
trustee, receiver or liquidator of Tenant or any material part of its
properties; or (e) if within thirty (30) days after the commencement of
any proceeding against Tenant seeking any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief
under any present or future statute, law or regulation, such proceeding
shall not have been dismissed, or if, within thirty (30) days after the
appointment without the consent or acquiescence of Tenant, of any
trustee, receiver or liquidator of Tenant or of any material part of
its properties, such appointment shall not have been vacated; or (f)
vacation or abandonment of the Premises for a continuous period in
excess of fifteen (15) days, or (g) if the Lease or any estate of
Tenant hereunder shall be levied upon under any attachment or execution
and such attachment or execution is not vacated within ten (10) days of
receipt thereof by Tenant.
20. TERMINATION UPON TENANT'S DEFAULT.
If an Event of Default shall occur, Landlord at any time
thereafter may give a written termination notice to Tenant, and on the
date specified in such notice (which shall not be less than three (3)
days after service) Tenant's right to possession shall terminate and
the Lease shall terminate, unless on or before such date all Rents,
arrearages and other sums due by Tenant under the Lease, including
reasonable costs and attorneys' fees incurred by or on behalf of
Landlord, shall have been paid by Tenant and all other Events of
Default by Tenant shall have been fully cured to the satisfaction of
Landlord. Upon such termination, Landlord may recover from Tenant:
(a) the worth at the time of award of the unpaid Rents which had
been earned at the time of termination; plus
(b) the worth at the time of award of the amount by which the
unpaid Rents which would have been earned after termination until the
time of award exceeds the amount of such Rents loss that Tenant proves
could have been reasonably avoided; plus
(c) the worth at the time of award of the amount by which the
unpaid Rents for the balance of the term of the Lease after the time of
award exceeds the amount of such Rents loss that Tenant proves could be
reasonably avoided; and plus
(d) any other amount reasonably necessary to compensate Landlord
for all the detriment proximately caused by Tenant's failure to perform
its obligations under the Lease or which in the ordinary course of
things would be likely to result therefrom; and/or
(e) At Landlord's elections, such other amounts in addition or in
lieu of the foregoing as may be permitted from time to time herein or
by applicable law.
<PAGE> 84
The "worth at the time of award" of the amounts referred to in
clauses (a) and (b) above is computed by allowing interest at the rate
of 12% per annum. The "worth at the time of award" of the amount
referred to in clause (c) above means the monthly sum of the Rents
under the Lease. Failure of Landlord to declare any default immediately
upon occurrence thereof, or delay in taking any action in connection
therewith, shall not waive such default, but Landlord shall have the
right to declare any such default at any time thereafter.
21. CONTINUATION AFTER DEFAULT.
Even though Tenant has defaulted the Lease and abandoned the
Premises, the Lease shall continue in effect as long as Landlord does
not terminate Tenant's right to possession, and Landlord may enforce
all of its rights and remedies under the Lease, including-the right to
recover the Rents as they become due under the Lease. Acts of
maintenance or preservation or efforts to relet the Premises or the
appointment of a receiver upon initiative of Landlord to protect
Landlord's interest under the Lease shall not constitute a termination
of Tenant's right to possession. If any fixture, equipment,
improvement, installation or appurtenance shall be required to be
removed from the Premises and/or Building by Tenant, then Landlord (in
addition to all other rights and remedies) may, at its election by
written notice to Tenant, deem that the same has been abandoned by
Tenant to Landlord, or Landlord may remove and store the same and
restore the Premises to its original condition at the reasonable
expense of Tenant, as Additional Rent to be paid within ten (10) days
after written notice to Tenant of such expense.
22. LANDLORD'S DEFAULT.
If Landlord fails to perform or observe any of its material Lease
obligations herein and such failure continues for thirty (30) days
after written notice from Tenant, or such additional time, if any, that
is reasonably necessary to promptly and diligently cure such failure
after receiving written notice, Landlord shall be in breach of the
Lease (a "Default"). If Landlord commits a Default, Tenant may pursue
any remedies given in the Lease or under law.
23. LANDLORDS RIGHT TO CURE DEFAULTS.
All terms and provisions to be performed by Tenant under the Lease
shall be at Tenant's sole cost and expense and without any abatement of
Rents. If Tenant fails to pay any sum of money, other than Rents,
required hereunder or fails to perform any other act required hereunder
and such failure continues for thirty (30) days after notice by
Landlord, Landlord may, but shall not be obligated, and without waiving
or releasing Tenant from any obligations of Tenant, make any such
payment or perform any such act on Tenant's part to be made or
performed as provided in the Lease. All sums paid by Landlord and all
incidental costs shall be deemed Additional Rent hereunder and shall be
payable within ten (10) days of written notice of such sums paid.
<PAGE> 85
24. OTHER RELIEF.
The remedies provided for in the Lease are in addition to any
other remedies available to Landlord at law or in equity by statute or
otherwise.
25. ATTORNEYS' FEES.
In the event either party places at issue the enforcement of the
Lease, or any part thereof, or the collection of any Rents, or recovery
of the possession of the Premises, or files suit upon the same, then
the prevailing party shall recover its reasonable attorneys' fees and
costs from the other party.
26. EMINENT DOMAIN.
If all or any part of the Premises shall be taken or conveyed as
a result of the exercise of the power of eminent domain, the Lease
shall terminate as to the part so taken as of the date of taking, and,
in the case of a partial taking, either Landlord or Tenant shall have
the right to terminate the Lease as to the balance of the Premises by
written notice to the other within thirty (30) days after such date;
provided, however, that a condition to the exercise by Tenant of such
right to terminate shall be that the portion of the Premises taken or
conveyed shall be of such extent and nature as substantially to
handicap, impede or impair Tenant's use of the balance of the Premises.
In the event of any taking, Landlord shall be entitled to any and all
compensation, damages, income, rent awards or any interest therein
whatsoever which may be paid or made in connection therewith, and
Tenant shall have no claim against Landlord for the value of any
unexpired term of the Lease or otherwise, provided that Tenant shall be
entitled to any and all compensation, damages, income, rent or awards
paid for or on account of Tenant's moving expenses, trade fixtures,
equipment and any leasehold improvements in the Premises, the cost of
which was borne by Tenant, to the extent of the then unamortized value
of such improvements for the remaining term of the Lease. In the event
of a taking of the Premises which does not result in a termination of
the Lease, the monthly rental herein shall be apportioned as of the
date of such taking so that thereafter the rent to be paid by Tenant
shall be in the ratio that the area of the Premises not so taken bears
to the total area of the Premises prior to such taking.
27. SUBORDINATION, ATTORNMENT & NONDISTURBANCE; AND ESTOPPEL
CERTIFICATE.
At Landlord's request, Tenant agrees to execute, acknowledge, and
deliver within ten (10) days to Landlord a Subordination, Attornment &
Nondisturbance Agreement ("Subordination Agreement"), subject to
Landlord's reasonably proposed form(s). Such Subordination Agreement
shall subordinate the Lease to any ground lease, mortgage, deed of
trust, or any other hypothecation for security now or hereafter placed
upon the Premises, Building and/or Common Area, or any part thereof, to
any and all advances made on the security, and to all renewals,
modification, consolidations, replacements and extensions thereof,
whether the Lease is dated prior or subsequent to the date of said
ground lease, mortgage, deed of trust or other hypothecation or the
<PAGE> 86
date of recording thereof Further, at Landlord's request, Tenant agrees
to execute, acknowledge, and deliver within ten (10) days to Landlord
an Estoppel Certificate, subject to Landlord's proposed form(s). Such
Subordination Agreement and Estoppel Certificate may be relied upon by
any prospective purchaser, mortgagee, or beneficiary under any ground
lease, mortgage, deed of trust, or any other hypothecation of the
Premises, Building, or common areas, or any part thereof.
Notwithstanding such Subordination Agreement, Tenant's right to quiet
possession of the Premises shall not be disturbed so long as Tenant is
not in default under the Lease, unless the Lease is otherwise
terminated pursuant to its terms.
In the event that Tenant fails to execute, acknowledge, and
deliver to Landlord such Subordination Agreement and Estoppel
Certificate within ten (10) days of Landlord's request, the parties
herein expressly agree that Tenant shall be deemed in default of the
Lease without further notice. In event of such Tenant default, the
parties herein further expressly agree that the Subordination Agreement
and Estoppel Certificate are deemed to have been executed by Tenant.
28. NO MERGER.
The voluntary or other surrender of the Lease by Tenant, or a
mutual cancellation thereof, shall not work a merger, and shall, at the
option of Landlord terminate all or any existing subleases or
subtenancies, or may, at the option of Landlord, operate as an
assignment to it of any or all such subleases or subtenancies.
29. SALE.
In the event the original Landlord hereunder, or any successor
owner of the Premises, Building, and Common Area shall sell or convey
the Premises, Building, and Common Areas, and the purchaser assumes the
obligations of Landlord under the Lease, all liabilities and obligation
on the part of the original Landlord, or such successor owner, under
the Lease accruing after such Sale shall terminate, and thereupon all
such liabilities and obligations shall be binding upon the new owner.
Tenant agrees to attorn to such new owner.
30. NO LIGHT OR VIEW EASEMENT.
Any diminution or shutting off of light or view by any structure
erected on lands adjacent to the Building shall in no way affect the
Lease or impose any liability on Landlord.
31. HOLDING OVER.
If, without objection by Landlord, Tenant holds possession of the
Premises after expiration of the Term or any Option period of the
Lease, Tenant shall become a tenant from month to month upon the terms
herein specified, but at a monthly Base Rent equivalent to 150% of the
Base Rent at the end of the term or extension period pursuant to
Article 4, payable in advance on or before the first day of each month.
All Additional Rent shall also apply. Each party shall give the other
notice at least one month prior to the date of termination of such
monthly tenancy of its intention to terminate such tenancy.
<PAGE> 87
32. ABANDONMENT.
If Tenant shall abandon or surrender the Premises, or be
dispossessed by process of law or otherwise, any personal property
belonging to Tenant and left on the Premises shall be deemed to be
abandoned, at the option of Landlord, except such property as may be
mortgaged to Landlord.
33. SECURITY DEPOSIT.
Tenant shall deposit with Landlord upon execution of the Lease a
security deposit in the amount of $3,113.02 ("Security Deposit"). The
Security Deposit shall be held by Landlord as security for the faithful
performance by Tenant of all of the provisions of the Lease to be
performed or observed by Tenant. In the event Tenant falls to perform
or observe any of the provisions of the Lease to be performed or
observed by it, then, at the option of the Landlord, Landlord may (but
shall not be obligated to do so) apply the Security Deposit, or so much
thereof as may be necessary to remedy such default or to repair damages
to the Premises caused by Tenant. In the event Landlord applies any
portion of the Security Deposit to remedy any such default or to repair
damages to the Premises caused by Tenant, Tenant shall pay to Landlord,
within thirty (30) days after written demand for such payment by
Landlord, all monies necessary to restore the Security Deposit up to
the original amount. Landlord will not be required to keep the security
deposit separate from its general funds and Tenant will not be entitled
to interest on the security deposit. The security deposit wilt not be
a limitation on Landlord's damages or other rights under this lease, or
a payment of liquidated damages, or an advance payment of the rent. If
Tenant pays the rent and performs all of its other obligations under
this lease, Landlord will return the unused portion of the security
deposit to Tenant within thirty (30) 0) days after the end of the term.
34. WAIVER.
All waivers by either party herein must be in writing and signed
by such party. The waiver of any term or conditions herein shall riot
be deemed to be a waiver of any subsequent breach of the same or any
other agreement, condition or provision herein contained, nor shall any
custom, practice or course of conduct between the parties be construed
to waive or to lessen the right of either party to insist upon the
performance by the other party in strict accordance with said terms.
The subsequent acceptance of Rents hereunder by Landlord shall not be
deemed to be a waiver of any breach by Tenant of any term or condition
of the Lease, regardless of Landlord's knowledge of such breach at the
time of acceptance of such Rents.
35. NOTICES.
All notices and demands which may or are required to be given by
either party to the other under the Lease shall be in writing and shall
be deemed to have been fully given when deposited in the United States
mail, certified or registered, postage prepaid, and addressed as
follows: to Tenant at Suite ____, 12227 South Business Park Drive,
Draper, Utah 84020, or to such other place as Tenant may from time to
time designate in a notice to Landlord or delivered to Tenant at the
<PAGE> 88
Premises; to Landlord at Draper Business Park, L.C. c/o Prime
Commercial Management Services, 12257 South Business Park Drive, Suite
110, Draper, UT 84020, or to such other place as Landlord may from time
to time designate in a notice to Tenant. Tenant hereby appoints as its
agent to receive the service of all dispossessory or distraint
proceedings and notices hereunder the person in charge of or occupying
the Premises at the time, and if no person shall be in charge of or
occupying the same, then service may be made by attaching same on the
main entrance of the Premises.
36. COMPLETE AGREEMENT.
There are no oral agreements between Landlord and Tenant affecting
the Lease, and the Lease supersedes and cancels any and all previous
negotiations, arrangements, brochures, agreements and understandings,
if any, between Landlord and Tenant with respect to the subject matter
of the Lease. The Lease may not be altered, changed or amended, except
by an instrument in writing signed by both parties hereto.
37. AUTHORITY.
The person(s) executing the Lease on behalf of the parties herein
hereby covenants and warrants that (a) such party is a duly authorized
and validly existing entity under the laws of the State in which it was
formed, (b) such party has and is qualified to do business in Utah, (c)
such entity has full right and authority to enter into the Lease, and
(d) each person executing the Lease on behalf of such entity is
authorized to do so.
38. GUARANTEE OF LEASE.
Tenant guarantees, upon execution of the Lease, to occupy the
Premises. Any failure to occupy the Premises does not release the
Tenant from the obligation of paying Rents or any other terms set forth
herein.
39. MISCELLANEOUS.
(a) The words "Landlord" and "Tenant" as used herein shall include
the plural as well as the singular. If there be more than one Tenant,
the obligations hereunder imposed upon Tenant shall be joint and
several.
(b) Time is of the essence on the Lease and each and all of its
terms and conditions.
(c) The terms and conditions herein shall apply to and bind the
heirs, executors, administrators, successors and assigns of the parties
hereto.
(d) The captions of the Lease are solely to assist the parties and
are not a part of the terms or conditions of the Lease.
(e) The Lease shall be governed by and construed in accordance
with the laws of the State of Utah, and is deemed to be executed within
the State of Utah.
<PAGE> 89
40. SEVERABILITY.
If any term or provision of the Lease, or the application thereof
to any person or circumstance, shall to any extent be invalid or
unenforceable, the remainder of the Lease, or the application of such
provision to persons or circumstances other than those as to which it
is invalid or unenforceable, shall not be affected thereby, and each
provision of the Lease shall be valid and shall be enforceable to the
extent permitted by law.
41. BROKERS.
Landlord is represented by Prime Commercial, Inc.
IN WITNESS WHEREOF, the parties have executed the Lease dated the
day and year first above written.
TENANT: LANDLORD:
WHITNEY CONSULTING SERVICES, INC. DRAPER BUSINESS PARK, L.L.C.
By: /s/ Ronald S. Simon BY: _________________________
Its: Treasurer Its: ________________________
EXHIBIT A SPACE PLAN (Attached)
EXHIBIT B BASE BUILDING IMPROVEMENTS
The Base Building Improvements and systems as described below
shall be furnished by Landlord at Landlord's sole cost and expense.
These include:
1. The Building structure will be designed for a minimum floor load
of 50 lb. Live load plus a 20 lb. partition dead load.
2. The Building shell will include a core consisting, elevator with
equipment room, stairwell enclosures, 1 man and 1 woman rest-room
on each floor, finished lobbies and exterior perimeter walls and
windows and all building columns.
3. A Concrete floor will be installed with a smoothed trowel finish
for installation of glued down carpet. The Floor will be poured
level and finished in accordance with current ACI Standard
Specifications 117.
4. A Life Safety system will be installed in accordance with the more
stringent of applicable national, state and local codes or the
Americans with Disabilities Act, throughout the Building,
including all corridors, stairwells and rest-rooms (strobes). The
sprinkler system will be installed to code and connected to
alarms.
<PAGE> 90
5. Electrical distribution will be provided to the main panel boxes
in the electrical closet on each floor. The electrical system
shall be sized for seven (7) watts per usable square foot for
Tenant's consumption, over and above base building electrical
requirements.
6. The Building will be equipped with a packaged-unit heating,
ventilation and air conditioning system sufficient for Tenant's
anticipated occupancy requirements. The system will be designed to
maintain a space temperature between 70'-75' degrees F on a
year-round basis, based on a maximum average occupancy of one (1)
person for each 150 square feet of usable area. The requirements
for ventilation shall comply with present ASHRAE (American Society
of Heating, Refrigeration and Air-Conditioning Engineers) standard
62-1989 as a minimum requirement. Tenant shall be furnished with
a price per ton for package unit if additional air conditioning is
required.
7. Telephone service, as provided by the local utility, will be
brought to Tenant's or Building's main telephone room.
8. Common corridor walls and walls between tenant suites will be
provided with the side finished only to the common areas.
9. Roadways necessary for Tenant's access to and egress from the
Building will be completed, along with parking, landscaping and
sprinklers.
