FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1998
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from NOT APPLICABLE to
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Commission File Number 0-17840
NEW HORIZONS WORLDWIDE, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 22-2941704
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
500 CAMPUS DRIVE, MORGANVILLE, NEW JERSEY 07751
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(Address of principal executive offices)
(Zip Code)
(732) 536-8501
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(Registrant's telephone number, including area code)
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months or for such shorter period that the registrant was
required to file such reports, and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Number of shares of common stock outstanding at June 30, 1998: 7,425,583
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PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
New Horizons Worldwide, Inc. and Subsidiaries
June 30, 1998 and December 31, 1997
(Dollars in thousands)
JUNE 30, 1998 DECEMBER 31, 1997
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ASSETS (unaudited)
Current assets:
Cash and cash equivalents $ 3,488 $ 3,129
Investments 22,091 23,058
Accounts receivable, net 13,632 11,887
Inventories 700 720
Prepaid expenses 774 731
Refundable income tax 218 --
Deferred income tax assets 1,429 1,429
Other current assets 552 887
------- -------
Total current assets 42,884 41,841
Property, plant and equipment, net 7,999 7,848
Intangible assets 21,389 13,546
Cash surrender value of life
insurance 763 763
Other assets 2,841 2,753
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Total Assets $75,876 $66,571
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See accompanying notes to condensed consolidated financial statements.
2
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CONDENSED CONSOLIDATED BALANCE SHEETS
New Horizons Worldwide, Inc. and Subsidiaries
June 30, 1998 and December 31, 1997
(Dollars in thousands)
JUNE 30, 1998 DECEMBER 31, 1997
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(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable $ 2,143 $ 2,489
Current portion of long-term obligations 1,299 1,792
Income taxes payable -- 1,049
Other current liabilities 14,321 9,508
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Total current liabilities 17,763 14,838
Long-term obligations, excluding current portion 458 1,516
Deferred income tax liabilities 539 563
Deferred rent 677 598
-------- --------
Total liabilities 19,437 17,515
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Stockholders' equity:
Preferred stock, without par value,
2,000,000 shares authorized, no
shares issued -- --
Common stock, $.01 par value,
15,000,000 shares authorized;
issued and outstanding
7,610,583 shares in 1998
and 7,327,331 shares in 1997 76 73
Additional paid-in capital 31,603 26,646
Retained earnings 26,083 23,635
Treasury stock at cost - 185,000
shares in 1998 and 1997 (1,298) (1,298)
Unrealized investment loss, net of tax (25) --
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Total stockholders' equity 56,439 49,056
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Total Liabilities and Stockholders' Equity $ 75,876 $ 66,571
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See accompanying notes to condensed consolidated financial statments.
3
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CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
New Horizons Worldwide, Inc. and Subsidiaries
Six and Three Months ended June 30, 1998 and June 30, 1997
(Unaudited)
(Dollars in thousands except Earnings Per Share)
SIX MONTHS ENDED THREE MONTHS ENDED
------------------------------ ------------------------------
JUNE 30, 1998 JUNE 30, 1997 JUNE 30, 1998 JUNE 30, 1997
------------- ------------- ------------- -------------
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Revenues
Franchising
Franchise fees $ 708 $ 471 $ 535 $ 214
Royalties 7,597 5,432 4,004 2,865
Other 944 280 540 153
------- ------- ------- -------
Total franchising revenues 9,249 6,183 5,079 3,232
Company-owned training centers 23,246 18,847 12,731 9,829
------- ------- ------- -------
Total revenues 32,495 25,030 17,810 13,061
Cost of revenues 14,895 13,017 7,944 6,620
Selling, general and
administrative expenses 14,260 11,479 7,599 5,979
------- ------- ------- -------
Operating income 3,340 534 2,267 462
Investment income, net 571 340 337 190
Gain from release of certain
franchise obligations -- 2,600 -- --
------- ------- ------- -------
Income before income taxes 3,911 3,474 2,604 652
Provision for income taxes 1,463 1,288 967 198
------- ------- ------- -------
Net income $ 2,448 $ 2,186 $ 1,637 $ 454
======= ======= ======= =======
Basic Earnings Per Share $ 0.34 $ 0.31 $ 0.22 $ 0.06
======= ======= ======= =======
Diluted Earnings Per Share $ 0.33 $ 0.30 $ 0.21 $ 0.06
======= ======= ======= =======
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See accompanying notes to condensed consolidated financial statements.
4
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
New Horizons Worldwide, Inc. and Subsidiaries
Six Months ended June 30, 1998 and June 30, 1997
(Unaudited)
(Dollars in thousands)
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1998 JUNE 30, 1997
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,448 $ 2,186
Adjustments to reconcile net income to net
cash provided by operating activities (net of acquisitions):
Depreciation and amortization 1,899 1,889
Loss on disposal of equipment 8 1
Deferred income taxes (23) (268)
Cash provided (used) from the change in:
Accounts receivable (1,119) 2,016
Inventories 130 (170)
Prepaid expenses and other current assets 76 4,740
Other assets (252) (174)
Accounts payable (626) (1,876)
Accrued expenses 4,099 1,583
Income tax payable/refundable (1,049) 413
Deferred rent 78 --
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Net cash provided by operating activities 5,669 10,340
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities (22,115) (17,755)
Redemption of marketable securities 23,082 --
Additions to property, plant and equipment (1,265) (2,916)
Cash paid for acquisition, net of cash received (3,791) --
-------- --------
Net cash used in investing activities (4,089) (20,671)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 365 477
Proceeds from debt obligations 61 1,266
Principal payments on debt obligations (1,646) (857)
Other -- (8)
-------- --------
Net cash provided by financing activities (1,220) 878
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Net increase (decrease) in cash and cash equivalents 360 (9,453)
Cash and cash equivalents at beginning of period 3,129 11,411
-------- --------
Cash and cash equivalents at end of period $ 3,489 $ 1,958
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash was paid for:
Interest $ 78 $ 142
======== ========
Income taxes $ 1,194 $ 732
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See accompanying notes to condensed consolidated financial statements.
5
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
New Horizons Worldwide, Inc. and Subsidiaries
Six Months ended June 30, 1998
(Unaudited)
(Dollars in thousands)
Supplemental Disclosure of Noncash Transactions -
On May 1, 1998, the Company acquired the Memphis, Tennessee
franchise in the transaction summarized as follows (Note 4):
Fair value of assets acquired $ 6,401
Value of stock issued to previous owners (1,932)
Cash paid, net of cash acquired (3,849)
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Liabilities assumed $ 620
=======
On May 1, 1998, the Company acquired the Nashville, Tennessee
franchise in the transaction summarized as follows (Note 4):
Fair value of assets acquired $ 2,990
Value of stock issued to previous owners (2,641)
Net cash acquired 57
-------
Liabilities assumed $ 406
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Notes to Condensed Consolidated Financial Statements
New Horizons Worldwide, Inc. and Subsidiaries
For the Six and Three Months Ended June 30, 1998 and June 30, 1997
(Unaudited)
(Dollars in thousands except Earnings Per Share)
Note 1 In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (all of
which are normal and recurring) necessary to present fairly the
financial position of the Company at June 30, 1998 and the results of
operations for the six and three month periods ended June 30, 1998 and
June 30, 1997. The statements and notes should be read in conjunction
with the financial statements and notes thereto included in the
Company's annual report for the year ended December 31, 1997.
Note 2 The investments consist of tax-exempt bonds and municipal funds. The
Company's investments are presented at their aggregate fair value.
Unrealized gains and losses are included as a component of
stockholders' equity, net of tax, until realized.
Note 3 Certain items on the 1997 financial statements have been
reclassified to conform to the 1998 presentation.
Note 4 On May 1, 1998 New Horizons Education Corporation (NHEC), wholly
owned subsidiary of New Horizons Worldwide (NEWH), purchased the
assets of two of its franchises in Memphis and Nashville, Tennessee
and will operate the centers as company-owned locations. The
consideration paid included $3,974 in cash and 248,252 shares of NEWH
stock. Based upon the closing price of the New Horizons stock as of
April 30, 1998 the acquisition is valued at approximately $8.5
million. The selling shareholders will receive additional
consideration, in cash and stock, if certain performance targets are
achieved. The acquisition has been recorded using the purchase method
of accounting and resulted in goodwill at June 30, 1998 of $8,078.
If the results from the acquired locations had been included in the
results for the first six months of 1998 and 1997, the Company's
revenue, net income and earnings per share would have been the pro
forma amounts shown below:
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1998 JUNE 30, 1997
---------------- ----------------
Revenue $ 35,550 $ 28,923
Net Income $ 2,623 $ 2,362
Basic Earnings Per Share $ 0.36 $ 0.32
Diluted Earnings Per Share $ 0.35 $ 0.32
Note 5 As of December 31, 1997 the Company adopted SFAS No. 128, "Earnings
Per Share" (EPS). SFAS No. 128 requires the Company to report Basic
EPS, as defined therein, which assumes no dilution from outstanding
stock options, and Diluted EPS, as defined therein, which
7
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Notes to Condensed Consolidated Financial Statements
New Horizons Worldwide, Inc. and Subsidiaries
For the Six and Three Months Ended June 30, 1998 and June 30, 1997
(Unaudited)
(Dollars in thousands except Earnings Per Share)
assumes dilution from the outstanding stock options. Earnings per
share amounts for all periods presented have been restated to conform
to the requirements of SFAS No. 128.
The computation of Basic EPS is based on the weighted average number
of shares actually outstanding during each year. The computation of
Diluted EPS is based upon the weighted average number of shares
actually outstanding, plus the shares that would be outstanding
assuming the exercise of all outstanding options, computed using the
treasury stock method. Dilutive options are not considered in the
calculation of net loss per share.
The weighted average number of shares outstanding in determining Basic
EPS for the six months ended June 30, 1998 and 1997 was 7,209,502 and
7,047,313 and for the three months ended June 30, 1998 and 1997 was
7,343,742 and 7,071,081. The weighted average number of shares
outstanding used in determining Diluted EPS for the six months ended
June 30, 1998 and 1997 was 7,484,224 and 7,218,581 and for the three
months ended June 30, 1998 and 1997 was 7,677,977,and 7,198,005.
The difference between the shares used for calculating Basic and
Diluted EPS relates to common stock equivalents consisting of stock
options outstanding during the respective periods.
Note 6 Effective January 1, 1998, the Company adopted SFAS No. 130
"Reporting Comprehensive Income". The Company's comprehensive income
for the six months ended June 30 1998 and 1997 is presented below:
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SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1998 JUNE 30, 1997
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Net income $ 2,448 $ 2,186
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Other comprehensive income (loss),
before tax:
Unrealized holding losses on securities
arising during period (58) --
Income tax benefit related to other
comprehensive income 23 --
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Other comprehensive income (loss),
net of tax (25) --
------- -------
Comprehensive income $ 2,423 $ 2,186
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Note 7 In June 1997, The Financial Accounting Standards Board issued SFAS
No.131 "Disclosures About Segments of an Enterprise and Related
Information". SFAS No.131 must be adopted by the Company for the
fiscal year ended December 31, 1998 and will result in expanded
disclosures regarding the Company's operations on a segmented basis.
The disclosure requirements are not required for interim periods in
the year of adoption.
8
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PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in Thousands)
GENERAL
The Company operates computer training centers in the United States and
franchises computer training centers in the United States and abroad.
Corporate revenues are defined as revenues from company-owned training centers,
initial franchise fees and royalties from franchised operations. System-wide
revenues are comprised of total revenues from all centers, both company-owned
and franchised. System-wide revenues are used to gauge the growth rate of the
entire New Horizons training network.
Revenues from company-owned training centers operated by New Horizons consist
primarily of training fees and fees derived from the sale of courseware. Cost of
revenues consists primarily of instructor costs, courseware, rent, utilities,
classroom equipment, and computer hardware, software and peripheral expenses.
Included in selling, general and administrative expenses are costs associated
with technical support personnel, facilities support personnel, scheduling
personnel, training personnel, accounting and finance personnel and sales
executives.
Revenues for the franchising operation consist primarily of initial franchise
fees paid by franchisees for the purchase of specific franchise territories and
franchise rights; royalty and advertising fees based on a percentage of gross
training revenues realized by the franchisees; and percentage royalty fees
received on the gross sales of courseware. Cost of revenues consists primarily
of costs associated with franchise support personnel who provide system
guidelines and advice on daily operating issues including sales, marketing,
instructor training, and general business problems. Included in selling, general
and administrative expenses are technical support, courseware development,
accounting and finance support, major account program support, advertising
expenses, and franchise sales expenses.
REVENUES
Revenues increased $4,749 or 36.4% to $17,810 for the second quarter of 1998 and
increased $7,465 or 29.8% for the first half of 1998 compared to the same
periods in 1997. This was primarily due to improved revenues at company-owned
locations, revenues resulting from the acquisition of the Tennessee franchises,
same-center revenue increases and additional franchises added to the system.
System-wide revenues for the second quarter were $88,791, up 37.0% from $64,789
for the same period in 1997. For the first six months of 1998 system-wide
revenues grew 35.9% to $167,555 from $123,287 for the corresponding first six
months of 1997. System-wide revenues include revenues from both franchised
locations and company-owned training centers. Revenues from locations open more
than 12 months, both franchised and company-owned, grew 30.2% in the second
quarter of 1998 and 30.8% for the first half of 1998 compared to the same
periods in 1997.
9
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COST OF REVENUES
Cost of revenues increased $1,324 or 20.0% for the second quarter of 1998 and
increased $1,878 or 14.4% for the first half of 1998 compared to the same
periods in 1997. As a percentage of revenues, cost of revenues decreased to
44.6% for the second quarter of 1998 and to 45.8% for the first half of 1998,
from 50.7% and 52.0% respectively, for the same periods in 1997. The increase in
the cost of revenues in absolute dollars was a result of the increase in the
revenues for the quarter and the first half of 1998 as discussed above, higher
training, facilities and depreciation expenses in and associated with the
expansion of the centers in Los Angeles and New York City, and the acquisition
of the Memphis and Nashville, Tennessee franchises in the second quarter, 1998.
The decrease in cost of revenues as a percentage of revenues was primarily due
to improved absorption of fixed costs and increased revenues.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased $1,620 or 27.1% for the
second quarter of 1998 and increased $2,781 or 24.2% for the first half of 1998,
compared to the same periods in 1997. As a percentage of revenues, selling,
general and administrative expenses decreased to 42.7% for the second quarter of
1998 and to 43.9% for the first half of 1998 from 45.8% and 45.9% respectively,
for the same periods for 1997. The increase in selling, general and
administrative expenses in absolute dollars was due principally to increased
spending in the areas of sales and marketing, national advertising, the
expansion of the Major Accounts Program, franchise support for international
operations, the acquisition of the Memphis and Nashville, Tennessee franchises,
and expenses associated with expansion of the new centers in Los Angeles and in
New York City. The decrease in selling, general and administrative expenses as a
percent of revenues was primarily due to the increase in revenue and control of
the addition of non-revenue producing employees.
OPERATING INCOME
Operating income increased $1,805 or 391% for the second quarter of 1998 and
increased $2,806 or 525% for the first half of 1998 compared with the same
periods of 1997. As a percentage of revenues, operating income rose to 12.7%
from 3.5% for the second quarter of 1998, and rose to 10.3% for the first half
of 1998 from 2.1% for the same period in 1997. The increase in operating income
for the three months ended June 30, 1998 and the first half of 1998 resulted
mainly from the increase in revenues and the reduction in expenses as a percent
of revenue.
INVESTMENT INCOME, NET
Investment income increased $90 or 28.6% to $405 for the second quarter of 1998
and increased $141 or 23.8% to $733 for the first half of 1998, compared with
the same periods for 1997. As a percentage of revenues, investment income
increased to 2.3% for the second quarter and the first half of 1998, from 2.1%
for the same periods in 1997. The increase in investment income, both in
absolute dollars and as a percentage of revenues was due mainly to the short
term investment of cash provided by operations and the collection of accounts
receivable from discontinued operations subsequent to March 31, 1997.
Interest expense decreased $57 or 45.6% to $68 for the second quarter of 1998
and decreased $90 or 35.7% to $162 for the first half of 1998, compared with the
same periods for 1997. As a percentage of revenues, interest expense decreased
to 0.4% for the second quarter of 1998 and to 0.5% in the first half of 1998,
from 1.0% for the same periods in 1997. The decrease in interest expense, both
in absolute dollars and as a percentage of revenues, was due mainly to lower
outstanding borrowings in these periods in 1998 when compared to the same
periods in 1997.
10
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INCOME TAXES
The provision for income taxes as a percentage of income before income taxes
increased to 37.1% for the second quarter of 1998 and to 37.4% for the first
half of 1998, from 30.4% and 37.1% respectively, for the same periods in 1997.
The increase in the provision for income taxes as a percentage of income before
income taxes was due principally to higher foreign income taxes in 1998 when
compared to 1997.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1998, the Company's working capital was $25,121, and its cash,
cash equivalents and short-term investments totaled $25,579. Working capital as
of June 30, 1998 reflected a decrease of $1,882 or 7.0% from $27,003 as of
December 31, 1997.
The Company currently maintains a credit facility with a commercial bank
providing availability of $3,750. As of June 30, 1998 there was no amount
outstanding under this facility which bears a variable interest rate equal to
1.0% under the bank's prime rate (8.5% at June 30, 1998).
The nature of the computer education and training industry requires substantial
cash commitments for the purchase of computer equipment, software and training
facilities. During the first half of 1998 the Company spent approximately $1,265
on capital items and anticipates spending up to $2,300 for the fiscal year ended
December 31, 1998.
Management believes that its current working capital position and cash flows
from operations, along with its credit facility, will be adequate to support its
current and anticipated capital and operating expenditures and its strategies to
grow its computer education and training business.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, FASB issued Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information" (SFAS
131). SFAS 131 establishes standards for the way public business enterprises are
to report information about operating segments in annual financial statements
and requires those enterprises to report selected information about operating
segments in interim financial reports issued to shareholders. Statement 131 is
effective for financial statements for periods beginning after December 15,
1997. In the initial year of application, comparative information for earlier
years is to be restated, unless it is impracticable to do so. Statement 131 need
not be applied to interim financial statements in the initial year of its
application, but comparative information for interim periods in the initial year
of application shall be reported in financial statements for interim periods in
the second year of application.
YEAR 2000
The inability of computers, software and other equipment utilizing
microprocessors to recognize and properly process data fields containing a 2
digit year is commonly referred to as the Year 2000 Compliance issues. As the
year 2000 approaches, such systems may be unable to accurately process certain
date-based information.
The Company has identified all significant applications that will require
modification to ensure Year 2000 Compliance. Internal and external resources are
being used to make the required modifications and test Year 2000 Compliance. The
modification process of all significant applications is substantially complete.
The Company plans on completing the testing process of all significant
applications by December 31, 1999.
11
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In addition, the Company has communicated with others with whom it does
significant business to determine their Year 2000 Compliance readiness and the
extent to which the Company is vulnerable to any third party Year 2000 issues.
However, there can be no guarantee that the systems of other companies on which
the Company's systems rely will be timely converted, or that a failure to
convert by another company, or a conversion that is incompatible with the
Company's systems, would not have a material adverse effect on the Company.
The total cost to the Company of these Year 2000 Compliance activities has not
been and is not anticipated to be material to its financial position or results
of operations in any given year. These costs and the date on which the Company
plans to complete the Year 2000 modification and testing processes are based on
management's best estimates, which were derived utilizing numerous assumptions
of future events, including the continued availability of certain resources,
third party modification plans and other factors. However, there can be no
guarantee that these estimates will be achieved and actual results could differ
from those plans.
INFORMATION ABOUT FORWARD LOOKING STATEMENTS
The statements made in this Quarterly Report on Form 10-Q that are not
historical facts are forward looking statements. Such statements are based on
current expectations but involve risks, uncertainties, and other factors which
may cause actual results to differ materially from those contemplated by such
forward looking statements. Important factors which may result in variations
from results contemplated by such forward looking statements include, but are by
no means limited to: (i) the Company's ability to respond effectively to
potential changes in the manner in which computer training is delivered,
including the increasing acceptance of technology based training which could
have more favorable economics with respect to timing and delivery costs and the
emergence of "just in time" interactive training; (ii) the Company's ability to
attract and retain qualified instructors; (iii) the rate at which new software
applications are introduced by manufacturers and the Company's ability to keep
up with new applications and enhancements to existing applications; (iv) the
level of expenditures devoted to enhancements upgrading information systems and
computer software by customers; (v) the Company's ability to compete effectively
with low cost training providers who may not be authorized by software
manufacturers; (vi) the Company's ability to manage the growth of its business
and (vii) the Company's ability to effectively manage the timely modification of
its information systems and monitor the modification of its vendors' and
customers' systems regarding the year 2000.
The Company's strategy focuses on enhancing revenues and profits at current
locations, and also includes the possible opening of new company-owned
locations, the sale of additional franchises, the selective acquisition of
existing franchises in the United States, and the acquisition of companies in
similar or complementary businesses. The Company's growth strategy is premised
on a number of assumptions concerning trends in the information technology
training industry. These include the continuation of growth in the market for
information technology training and the trend toward outsourcing. To the extent
that the Company's assumptions with respect to any of these matters are
inaccurate, its results of operations and financial condition could be adversely
affected.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
None required.
12
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Annual Meeting of Stockholders of the Company was held on
May 5, 1998. The following matters were voted on at the
meeting:
1. ELECTION OF DAVID A. GOLDFINGER AND RICHARD L. OSBORNE AS
DIRECTORS OF THE COMPANY FOR A TERM OF THREE YEARS.
The nominees were elected as Directors with the following
votes:
DAVID A. GOLDFINGER
For 6,711,744
Against -0-
Abstain 4,025
RICHARD L. OSBORNE
For 6,711,744
Against -0-
Abstain 4,025
2. APPROVAL OF THE NEW HORIZONS WORLDWIDE, INC. 1997 OUTSIDE
DIRECTORS ELECTIVE STOCK OPTION PLAN:
For 5,658,377
Against 54,800
Abstain 13,204
3. APPROVAL OF THE NEW HORIZONS WORLDWIDE, INC. OMNIBUS EQUITY PLAN:
For 5,499,750
Against 218,647
Abstain 21,879
For a description of the bases used in tabulating the above-referenced votes,
see the Company's definitive Proxy Statement used in connection with the Annual
Meeting of Stockholders on May 5, 1998.
13
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FORM 10Q - PART II: OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit Index
(b) REPORTS ON FORM 8-K. During the quarter ended June 30, 1998, the
Company filed a Current Report on Form 8-K dated April 30, 1998, to
report (i) the Company's acquisition, through its indirect
wholly-owned subsidiary, New Horizons Computer Learning Center of
Memphis, Inc., a Delaware corporation, of substantially all of the
assets used in the computer training business conducted by New
Horizons Computer Learining Center of Memphis, Inc., a Tennessee
corporation; and (ii) the Company's acquisition, through its
wholly-owned subsidiary, New Horizons Education Corporation, a
Delaware corporation, of substantially all of the assets used in the
computer training business conducted by New Horizons Computer Learning
Center of Nashville, Inc., a Tennessee corporation.
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENTS
- -------- ------------------------
4.1 Secured Straight Line of Credit, guaranteed by the Registrant*
10.1 Amendment No. 4 to New Horizons Education Corporation 401(k) Profit
Sharing Trust and Plan*
10.2 Lease Agreement dated July 11, 1996 between New Horizons Computer
Learning Center of Nashville, Inc. and Heritage Place Associates,
Ltd.*
10.3 Lease Agreement dated November 3, 1997 between New Horizons Computer
Learning Center of Memphis, Inc. and American Way L.L.C.*
10.4 1997 Outside Directors Elective Stock Option Plan of the Registrant(1)
10.5 Form of Option Agreement executed by recipients of options under 1997
Outside Directors Elective Stock Option Plan(1)
10.6 Omnibus Equity Plan of the Registrant(1)
10.7 Stock Option Agreement dated September 19, 1996 between the Registrant
and David A. Goldfinger(1)
10.8 Stock Option Agreement dated September 19, 1996 between the Registrant
and William H. Heller(1)
10.9 Stock Option Agreement dated September 19, 1996 between the Registrant
and Richard L. Osborne(1)
10.10 Stock Option Agreement dated September 19, 1996 between the Registrant
and Scott R. Wilson(1)
27 Financial Data Schedule*
- ------------------------
* File herewith
(1) Incorporated herein by reference to the approprate Exhibits to the
Registrant's Registration Statement on Form S-8 (Reg. No. 333-56585)
14
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
NEW HORIZONS WORLDWIDE, INC.
(Registrant)
Date: August 14, 1998 By: /s/ CURTIS LEE SMITH, JR.
--------------------------
Curtis Lee Smith, Jr., Chairman
And Chief Executive Officer
(Principal Executive Officer)
By: /s/ ROBERT S. MCMILLAN
--------------------------
Robert S. McMillan, Vice President
Treasurer and Chief Financial Officer
(Principal Financial and Accounting
Officer)
15
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
4.1 Secured Straight Line of Credit, guaranteed by the Registrant
10.1 Amendment No. 4 to New Horizons Education Corporation 401(k)
Profit Sharing Trust and Plan
10.2 Lease Agreement dated July 11, 1996 between New Horizons
Computer Learning Center of Nashville, Inc. and Heritage Place
Associates, Ltd.
10.3 Lease Agreement dated November 3, 1997 between New Horizons
Computer Learning Center of Memphis, Inc. and American Way L.L.C.
27 Financial Data Schedule
COMMERCIAL GUARANTY
<TABLE>
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Principal Loan Date Maturity Loan No. Call Collateral Account Officer Initials
$3,750,000.00 06-01-98 06-01-99 20 310
- --------------------------------------------------------------------------------------------
</TABLE>
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
- -------------------------------------------------------------------------------
BORROWER: NEW HORIZONS EDUCATION CORPORATION LENDER: MARINE NATIONAL BANK
1231 EAST DYER ROAD, SUITE 110 NEWPORT BEACH OFFICE
SANTA ANA, CA 92705-5643 500 NEWPORT CENTER DRIVE
NEWPORT BEACH, CA 92660
GUARANTOR: NEW HORIZONS WORLDWIDE, INC.
500 CAMPUS DRIVE
MORGANVILLE, NJ 07751
AMOUNT OF GUARANTY. THE PRINCIPAL AMOUNT OF THIS GUARANTY IS THREE MILLION SEVEN
HUNDRED AND FIFTY THOUSAND & 00/100 DOLLARS ($3,750,000.00).
GUARANTY. FOR GOOD AND VALUABLE CONSIDERATION, NEW HORIZONS WORLDWIDE, INC.
("GUARANTOR") ABSOLUTELY AND UNCONDITIONALLY GUARANTEES AND PROMISES TO PAY TO
MARINE NATIONAL BANK (" LENDER") OR ITS ORDER, ON DEMAND, IN LEGAL TENDER OF THE
UNITED STATES OF AMERICA, THE INDEBTEDNESS (AS THAT TERM IS DEFINED BELOW) OF
NEW HORIZONS EDUCATION CORPORATION ("BORROWER") TO LENDER ON THE TERMS AND
CONDITIONS SET FORTH IN THIS GUARANTY. THE OBLIGATIONS OF GUARANTOR UNDER THIS
GUARANTY ARE CONTINUING.
DEFINITIONS. The following words shall have the following meanings when used in
this Guaranty:
BORROWER. The word Borrower means NEW HORIZONS EDUCATION CORPORATION
GUARANTOR. The word Guarantor means NEW HORIZONS WORLDWIDE, INC.
GUARANTY. The word "Guaranty" means this Guaranty made by Guarantor for the
benefit of Lender dated JUNE 1, 1997.
INDEBTEDNESS. The word "Indebtedness" means the Note, including (a) all
principal, (b) all interest, (c) all late charges, (d) all loan fees and loan
charges, and (e) all collection costs and expenses relating to the Note or to
any collateral for the Note. Collection costs and expenses include without
limitation all of Lender's attorney's fees and Lender's legal expenses, whether
or not suit is instituted, and attorney's fees and legal expenses for bankruptcy
proceedings (including efforts to modify or vacate any automatic stay or
injunction), appeals, and any anticipated post-judgment collection services.
LENDER. The word "Lender" means MARINE NATIONAL BANK, its successors and
assigns.
NOTE. The word "Note" means the promissory note or credit agreement dated June
1, 1998, IN THE ORIGINAL PRINCIPAL AMOUNT OF $3,750,000.00 from Borrower to
Lender, together with all renewals of, extensions of, modifications of,
refinancings of, consolidations of, and substitutions for the promissory note or
agreement.
RELATED DOCUMENTS. The words "Related Documents" mean and include without
limitation all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgages, deeds of
trust, and all other instruments, agreements and documents, whether now or
hereafter existing, executed in connection with the Indebtedness.
MAXIMUM LIABILITY. THE MAXIMUM LIABILITY OF GUARANTOR UNDER THIS GUARANTY SHALL
NOT EXCEED AT ANY ONE TIME THE SUM OF THE PRINCIPAL AMOUNT OF $3,750,000.00,
PLUS ALL INTEREST THEREON, PLUS ALL OF LENDER'S COSTS, EXPENSES, AND ATTORNEY'S
FEES INCURRED IN CONNECTION WITH OR RELATING TO (A) THE COLLECTION OF THE
INDEBTEDNESS, (B) THE COLLECTION AND SALE OF ANY COLLATERAL FOR THE INDEBTEDNESS
OR THIS GUARANTY, OR (C) THE ENFORCEMENT OF THIS GUARANTY. ATTORNEY'S FEES
INCLUDE, WITHOUT LIMITATION, ATTORNEY'S FEES WHETHER OR NOT THERE IS A LAWSUIT,
AND IF THERE IS A LAWSUIT, ANY FEES AND COSTS FOR TRIAL AND APPEALS.
The above limitation on liability is not a restriction on the amount of the
Indebtedness of Borrower to Lender either in the aggregate or at any one time.
If Lender presently holds one or more guaranties, or hereafter receives
additional guaranties from Guarantor, the rights of Lender under all guaranties
shall be cumulative. This Guaranty shall not (unless specifically provided below
to the contrary) affect or invalidate any such other guaranties The liability of
Guarantor will be the aggregate liability of Guarantor under the terms of this
Guaranty and any such other unterminated guaranties.
NATURE OF GUARANTY. Guarantor intends to guarantee at all times the performance
and prompt payment when due, whether at maturity or earlier by reason of
acceleration or otherwise, of all Indebtedness within the limits set forth in
the preceding section of this Guaranty.
DURATION OF GUARANTY. This Guaranty will take effect when received by Lender
without the necessity of any acceptance by Lender, or any notice to Guarantor or
to Borrower, and will continue in full force until all indebtedness shall have
been fully and finally paid and satisfied and all other obligations of Guarantor
under this Guaranty shall have been performed in full. Release of any other
guarantor or termination of any other guaranty of the Indebtedness shall not
affect the liability of Guarantor under this Guaranty. A revocation received by
Lender from any one or more Guarantors shall not affect the liability of any
remaining Guarantors under this Guaranty.
GUARANTOR'S AUTHORIZATION TO LENDER. GUARANTOR AUTHORIZES LENDER, EITHER BEFORE
OR AFTER ANY REVOCATION HEREOF, WITHOUT NOTICE OR DEMAND AND WITHOUT LESSENING
GUARANTOR'S LIABILITY UNDER THIS GUARANTY, FROM TIME TO TIME: (A) PRIOR TO
REVOCATION AS SET FORTH ABOVE, MAKE ONE OR MORE ADDITIONAL SECURED OR UNSECURED
LOANS TO BORROWER, TO LEASE EQUIPMENT OR OTHER GOODS TO BORROWER, OR OTHERWISE
TO EXTEND ADDITIONAL CREDIT TO BORROWER; (B) TO ALTER, COMPROMISE, RENEW,
EXTEND, ACCELERATE, OR OTHERWISE CHANGE ONE OR MORE TIMES THE TIME FOR PAYMENT
OR OTHER TERMS OF THE INDEBTEDNESS OR ANY PART OF THE INDEBTEDNESS, INCLUDING
INCREASES AND DECREASES OF THE RATE OF INTEREST ON THE INDEBTEDNESS; EXTENSIONS
MAY BE REPEATED AND MAY BE FOR LONGER THAN THE ORIGINAL LOAN TERM; (C) TO
RELEASE, SUBSTITUTE, AGREE NOT TO SUE, OR DEAL WITH ANY ONE OR MORE OF
BORROWER'S SURETIES, ENDORSERS, OR OTHER GUARANTORS ON ANY TERMS OR IN ANY
MANNER LENDER MAY CHOOSE; (D) TO DETERMINE HOW, WHEN AND WHAT APPLICATION OF
PAYMENTS AND CREDITS SHALL BE MADE ON THE INDEBTEDNESS; (E) TO APPLY SUCH
SECURITY AND DIRECT THE ORDER OR MANNER OF SALE THEREOF, INCLUDING WITHOUT
IMITATION, ANY NONJUDICIAL SALE PERMITTED BY THE TERMS OF THE CONTROLLING
SECURITY AGREEMENT OR DEED OF TRUST, AS LENDER IN ITS
<PAGE>
DISCRETION MAY DETERMINE; (F) TO SELL, TRANSFER, ASSIGN, OR GRANT PARTICIPATIONS
IN ALL OR ANY PART OF THE INDEBTEDNESS; AND (G) TO ASSIGN OR TRANSFER THIS
GUARANTY IN WHOLE OR IN PART.
GUARANTOR'S REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants to
Lender that (a) no representations or agreements of any kind have been made to
Guarantor which would limit or qualify in any way the terms of this Guaranty;
(b) this Guaranty is executed at Borrower's request and not at the request of
Lender; (c) Guarantor has full power, right and authority to enter into this
Guaranty; (d) the provisions of this Guaranty do not conflict with or result in
a default under any agreement or other instrument binding upon Guarantor and do
not result in a violation of any law, regulation, court decree or order
applicable to Guarantor; (e) Guarantor has not and will not, without the prior
written consent of Lender, liquidate, or otherwise dispose of all or
substantially all of Guarantor's assets, or any interest therein; (f) upon
Lender's request, Guarantor will provide to Lender financial and credit
information in form acceptable to Lender, and all such financial information
which currently has been, and all future financial information which will be
provided to Lender is and will be true and correct in all material respects and
fairly present the financial condition of Guarantor as of the dates the
financial information is provided; (g) no material adverse change has occurred
in Guarantor's financial condition since the date of the most recent financial
statements provided to Lender and no event has occurred which may materially
adversely affect Guarantor's financial condition; (h) no litigation, claim,
investigation, administrative proceeding or similar action (including those for
unpaid taxes) against Guarantor is pending or threatened; (i) Lender has made no
representation to Guarantor as to the creditworthiness of Borrower; and j)
Guarantor has established adequate means of obtaining from Borrower on a
continuing basis information regarding Borrower's financial condition. Guarantor
agrees to keep adequately informed from such means of any facts, events, or
circumstances which might in any way affect Guarantor's risks under this
Guaranty, and Guarantor further agrees that, absent a request for information,
Lender shall have no obligation to disclose to Guarantor any Information or
documents acquired by Lender in the course of its relationship with Borrower.
GUARANTOR'S WAIVERS. Except as prohibited by applicable law, Guarantor waives
any right to require Lender to (a) make any presentment, protest, demand, or
notice of any kind, including notice of change of any terms of repayment of the
Indebtedness, default by Borrower or any other guarantor or surety, any action
or nonaction taken by Borrower, Lender, or any other guarantor or surety of
Borrower, or the creation of new or additional Indebtedness; (b) proceed against
any person, including Borrower, before proceeding against Guarantor; (c) proceed
against any collateral for the Indebtedness, including Borrower's collateral,
before proceeding against Guarantor; (d) apply any payments or proceeds received
against the Indebtedness in any order; (e) give notice of the terms, time, and
place of any sale of the collateral pursuant to the Uniform Commercial Code or
any other law governing such sale; (f) disclose any information about the
Indebtedness, the Borrower, the collateral, or any other guarantor or surety, or
about any action or nonaction of Lender; or (g) pursue any remedy or course of
action in Lender's power whatsoever. Guarantor also waives any and all rights or
defenses arising by reason of (h) any disability or other defense of Borrower,
any other guarantor or surety or any other person; (i) the cessation from any
cause whatsoever, other than payment in full, of the Indebtedness; (j) the
application of proceeds of the Indebtedness by Borrower for purposes other than
the purposes understood and intended by Guarantor and Lender; (k) any act of
omission or commission by Lender which directly or indirectly results in or
contributes to the discharge of Borrower or any other guarantor or surety, or
the Indebtedness, or the loss or release of any collateral by operation of law
or otherwise; (I) any statute of limitations in any action under this Guaranty
or on the Indebtedness; or (m) any modification or change in terms of the
Indebtedness, whatsoever, including without limitation, the renewal, extension,
acceleration, or other change in the time payment of the Indebtedness is due and
any change in the interest rate, and including any such modification or change
in terms after revocation of this Guaranty on Indebtedness incurred prior to
such revocation. Until all Indebtedness is paid in full, Guarantor waives all
rights and any defenses Guarantor may have arising out of an election of
remedies by Lender even though that election of remedies, such as a nonjudicial
foreclosure with respect to security for a guaranteed obligation, has destroyed
Guarantor's rights of subrogation and reimbursement against Borrower or any
other guarantor or surety by operation of Section 580a, 580b, 580d and 726 of
the California Code of Civil Procedure or otherwise. This waiver includes,
without limitation, any loss of rights Guarantor may suffer by reason of any
rights or protections of Borrower in connection with any anti-deficiency laws or
other laws limiting or discharging the Indebtedness or Borrower's obligations
(including, without limitation, Sections 726, 580a, 580b, and 580d of the
California Code of Civil Procedure). Guarantor waives all rights and protections
of any kind which Guarantor may have for any reason, which would affect or limit
the amount of any recovery by Lender from Guarantor following a nonjudicial sale
or judicial foreclosure of any real or personal property security for the
Indebtedness including, but not limited to, the right to any fair market value
hearing pursuant to California Code of Civil Procedure Section 580a. Guarantor
understands and agrees that the foregoing waivers are waivers of substantive
rights and defenses to which Guarantor might otherwise be entitled under state
and federal law. The rights and defenses waived include, without limitation,
those provided by California laws of suretyship and guaranty, anti-deficiency
laws, and the Uniform Commercial Code. Guarantor acknowledges that Guarantor has
provided these waivers of rights and defenses with the intention that they be
fully relied upon by Lender. Until all Indebtedness is paid in full, Guarantor
waives any right to enforce any remedy Lender may have against Borrower or any
other guarantor, surety, or other person, and further, Guarantor waives any
right to participate in any collateral for the Indebtedness now or hereafter
held by Lender.
If now or hereafter (a) Borrower shall be or become insolvent, and (b) the
Indebtedness shall not at all times until paid be fully secured by collateral
pledged by Borrower, Guarantor hereby forever waives and relinquishes in favor
of Lender and Borrower, and their respective successors, any claim or right to
payment Guarantor may now have or hereafter have or acquire against Borrower, by
subrogation or otherwise, so that at no time shall Guarantor be or become a
"creditor of Borrower within the meaning of 11 U.S.C. section 547(b), or any
successor provision of the Federal bankruptcy laws.
GUARANTOR'S UNDERSTANDING WITH RESPECT TO WAIVERS. Guarantor warrants and agrees
that each of the waivers set forth above is made with Guarantor's full knowledge
of its significance and consequences and that, under the circumstances, the
waivers are reasonable and not contrary to public policy or law. If any such
waiver is determined to be contrary to any applicable law or public policy, such
waiver shall be effective only to the extent permitted by law or public policy.
LENDER'S RIGHT OF SETOFF. In addition to all liens upon and rights of setoff
against the moneys, securities or other property of Guarantor given to Lender by
law, Lender shall have, with respect to Guarantor's obligations to Lender under
this Guaranty and to the extent permitted by law, a contractual possessory
security interest in and a right of setoff against, and Guarantor hereby
assigns, conveys, delivers, pledges, and transfers to Lender all of Guarantor's
right, title and interest in and to, all deposits, moneys, securities and other
property of Guarantor now or hereafter in the possession of or on deposit with
Lender, whether held in a general or special account or deposit, excluding
however all IRA, Keogh, and trust accounts. Every such security interest and
right of setoff may be exercised without demand upon or notice to Guarantor. No
security interest or right of setoff shall be deemed to have been waived by any
act or conduct on the part of Lender or by any neglect to exercise such right of
setoff or to enforce such security interest or by any delay in so doing. Every
right of setoff and security interest shall continue in full force and effect
until such right of setoff or security interest is specifically waived or
released by an instrument in writing executed by Lender.
<PAGE>
SUBORDINATION OF BORROWER'S DEBTS TO GUARANTOR. Guarantor agrees that the
Indebtedness of Borrower to Lender, whether now existing or hereafter created,
shall be prior to any claim that Guarantor may now have or hereafter acquire
against Borrower, whether or not Borrower becomes insolvent. Guarantor hereby
expressly subordinates any claim Guarantor may have against Borrower, upon any
account whatsoever, to any claim that Lender may now or hereafter have against
Borrower. In the event of insolvency and consequent liquidation of the assets of
Borrower, through bankruptcy, by an assignment for the benefit of creditors, by
voluntary liquidation, or otherwise, the assets of Borrower applicable to the
payment of the claims of both Lender and Guarantor shall be paid to Lender and
shall be first applied by Lender to the Indebtedness of Borrower to Lender.
Guarantor does hereby assign to Lender all claims which it may have or acquire
against Borrower or against any assignee or trustee in bankruptcy of Borrower;
provided however, that such assignment shall be effective only for the purpose
of assuring to Lender full payment in legal tender of the Indebtedness. If
Lender so requests, any notes or credit agreements now or hereafter evidencing
any debts or obligations of Borrower to Guarantor shall be marked with a legend
that the same are subject to this Guaranty and shall be delivered to Lender.
Guarantor agrees, and Lender hereby is authorized, in the name of Guarantor,
from time to time to execute and file financing statements and continuation
statements and to execute such other documents and to take such other actions as
Lender deems necessary or appropriate to perfect, preserve and enforce its
rights under this Guaranty.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Guaranty:
INTEGRATION, AMENDMENT. Guarantor warrants, represents and agrees that this
Guaranty, together with any exhibits or schedules incorporated herein, fully
Incorporates the agreements and understandings of Guarantor with Lender with
respect to the subject matter hereof and all prior negotiations, drafts, and
other extrinsic communications between Guarantor and Lender shall have no
evidentiary effect whatsoever. Guarantor further agrees that Guarantor has read
and fully understands the terms of this Guaranty; Guarantor has had the
opportunity to be advised by Guarantor's attorney with respect to this Guaranty;
the Guaranty fully reflects Guarantor's intentions and parol evidence is not
required to interpret the terms of this Guaranty. Guarantor hereby indemnifies
and holds Lender harmless from all losses, claims, damages, and costs (including
Lender's attorneys' fees) suffered or incurred by Lender as a result of any
breach by Guarantor of the warranties, representations and agreements of this
paragraph. No alteration or amendment to this Guaranty shall be effective unless
given in writing and signed by the parties sought to be charged or bound by the
alteration or amendment.
APPLICABLE LAW. This Guaranty has been delivered to Lender and accepted by
Lender in the State of California. If there is a lawsuit, Guarantor agrees upon
Lender's request to submit to the jurisdiction of the courts of ORANGE County,
State of California. Lender and Guarantor hereby waive the right to any jury
trial in any action, proceeding, or counterclaim brought by either Lender or
Guarantor against the other. This Guaranty shall be governed by and construed in
accordance with the laws of the State of California.
ATTORNEYS' FEES; EXPENSES. Guarantor agrees to pay upon demand all of Lender's
costs and expenses, including attorney's fees and Lender's legal expenses,
incurred in connection with the enforcement of this Guaranty. Lender may pay
someone else to help enforce this Guaranty, and Guarantor shall pay the costs
and expenses of such enforcement. Costs and expenses include Lender's attorneys
fees and legal expenses whether or not there is a lawsuit, including attorney's
fees and legal expenses for bankruptcy proceedings (and including efforts to
modify or vacate any automatic stay or injunction), appeals, and any anticipated
post-judgment collection services. Guarantor also shall pay all court costs and
such additional fees as may be directed by the court.
NOTICES. All notices required to be given under this Guaranty and all requests
and other communications shall be in writing and shall be deemed to have been
duly delivered if delivered either personally, by overnight delivery service or
THREE DAYS FROM THE DATE OF MAILING by certified mail, return receipt requested,
or on the date of first refusal of delivery, to the parties at their addresses
set forth above or such other address as a party may designate in the manner
provided herein for giving of notices. All revocation notices by Guarantor shall
be in writing and shall be effective only upon delivery to Lender as provided
above in the section titled "DURATION OF GUARANTY." If there is more than one
Guarantor, notice to any Guarantor will constitute notice to all Guarantors. For
notice purposes, Guarantor agrees to keep Lender informed at all times of
Guarantor's current address.
INTERPRETATION. In all cases where there is more than one Borrower or Guarantor,
then all words used in this Guaranty in the singular shall be deemed to have
been used in the plural where the context and construction so require; and where
there is more than one Borrower named in this Guaranty or when this Guaranty is
executed by more than one Guarantor, the words "Borrower" and "Guarantor"
respectively shall mean all and any one or more of them. The words "Guarantor,"
"Borrower," and "Lender" include the heirs, successors, assigns, and transferees
of each of them. Caption headings in this Guaranty are for convenience purposes
only and are not to be used to interpret or define the provisions of this
Guaranty. If a court of competent jurisdiction finds any provision of this
Guaranty to be invalid or unenforceable as to any person or circumstance, such
finding shall not render that provision invalid or unenforceable as to any other
persons or circumstances, and all provisions of this Guaranty in all other
respects shall remain valid and enforceable. If any one or more of Borrower or
Guarantor are corporations or partnerships, it is not necessary for Lender to
inquire into the powers of Borrower or Guarantor or of the officers, directors,
partners, or agents acting or purporting to act on their behalf, and any
Indebtedness made or created in reliance upon the professed exercise of such
powers shall be guaranteed under this Guaranty.
WAIVER. Lender shall not be deemed to have waived any rights under this Guaranty
unless such waiver is given in writing and signed by Lender. No delay or
omission on the part of Lender in exercising any right shall operate as a waiver
of such right or any other right. A waiver by Lender of a provision of this
Guaranty shall not prejudice or constitute a waiver of Lender's right otherwise
to demand strict compliance with that provision or any other provision of this
Guaranty. No prior waiver by Lender, nor any course of dealing between Lender
and Guarantor, shall constitute a waiver of any of Lender's rights or of any of
Guarantor's obligations as to any future transactions. Whenever the consent of
Lender is required under this Guaranty, the granting of such consent by Lender
in any instance shall not constitute continuing consent to subsequent instances
where such consent is required and in all cases such consent may be granted or
withheld in the sole discretion of Lender.
<PAGE>
EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS
GUARANTY AND AGREES TO ITS TERMS. IN ADDITION, EACH GUARANTOR UNDERSTANDS THAT
THIS GUARANTY IS EFFECTIVE UPON GUARANTOR'S EXECUTION AND DELIVERY OF THIS
GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE UNTIL TERMINATED IN THE
MANNER SET FORTH IN THE SECTION TITLED "DURATION OF GUARANTY." NO FORMAL
ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE. THIS GUARANTY
IS DATED JUNE 1, 1998.
GUARANTOR:
NEW HORIZONS WORLDWIDE, INC.
BY:_____________________________________
THOMAS J. BRESNAN, PRESIDENT
SIGNED, ACKNOWLEDGED AND DELIVERED IN THE PRESENCE OF:
X_______________________________________
WITNESS
X_______________________________________
WITNESS
================================================================================
LASER PRO, Reg. U.S. Pat. & T.M. O't., Ver. 3.23 (C) 1996 CFI ProServices, Inc.
All rights reserved. [CA-E20A NEW.LN C2.0VL]
<PAGE>
PROMISSORY NOTE
<TABLE>
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Principal Loan Date Maturity Loan No. Call Collateral Account Officer Initials
- ------------------------------------------------------------------------------------------------
$3,750,000.00 06-01-1998 06-01-1999 100000295 20 310
- ------------------------------------------------------------------------------------------------
</TABLE>
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
- --------------------------------------------------------------------------------
Borrower: New Horizons Education Corporation Lender: Marine National Bank
1231 East Dyer Road, Suite 110 Newport Beach Office
Santa Ana, CA 92705 500 Newport Center Drive
Newport Beach, CA 92660
================================================================================
Principal Amount: $3,750,000.00 Initial Rate: 7.500% Date of Note: June 1, 1998
PROMISE TO PAY. NEW HORIZONS EDUCATION CORPORATION ("Borrower") promises to pay
to MARINE NATIONAL BANK ("Lender"), or order, in lawful money of the United
States of America, the principal amount of Three Million Seven Hundred Fifty
Thousand & 00/100 Dollars ($3,750,000.00) or so much as may be outstanding,
together with interest on the unpaid outstanding principal balance of each
advance. Interest shall be calculated from the date of each advance until
repayment of each advance.
PAYMENT. Borrower will pay this loan on demand, or if no demand is made, in one
payment of all outstanding principal plus all accrued unpaid interest on June 1,
1999. In addition, Borrower will pay regular monthly payments of accrued unpaid
interest beginning July 1, 1998, and all subsequent interest payments are due on
the same day of each month after that. Interest on this Note is computed on a
360 simple interest basis; that is, by applying the ratio of the annual interest
rate over a year of 360 days, multiplied by the outstanding principal balance,
multiplied by the actual number of days the principal balance is outstanding.
Borrower will pay Lender at Lender's address shown above or at such other place
as Lender may designate in writing. Unless otherwise agreed or required by
applicable law, payments will be applied first to accrued unpaid interest, then
to principal, and any remaining amount to any unpaid collection costs and late
charges.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from
time to time based on changes in an Independent Index which is the NATIONAL
PRIME, WHICH IS THE COMMERICAL PRIME RATE AS REPORTED IN THE WESTERN EDITION OF
THE WALL STREET JOURNAL (the "Index"). The Index is not necessarily the lowest
rate charged by Lender on its loans. If the Index becomes unavailable during the
term of this loan, Lender may designate a substitute Index after notice to
Borrower. Lender will tell Borrower the current Index rate upon Borrower's
request. Borrower understands that Lender may make loans based on other rates as
well. The interest rate change will not occur more often than each DAY. The
Index currently is 8.500% per annum. The interest rate to be applied to the
unpaid principal balance of this Note will be at a rate of 1.000 percentage
points under the Index, resulting in an initial rate of 7.500% per annum.
NOTICE: Under no circumstances will the interest rate on this Note be more than
the maximum rate allowed by applicable law.
PREPAYMENT; MINIMUM INTEREST CHARGE. In any event, even upon full prepayment of
this Note, Borrower understands that Lender is entitled to a minimum interest
charge of $100.00. Other than Borrower's obligation to pay any minimum interest
charge, Borrower may pay without penalty all or a portion of the amount owed
earlier than it is due. Early payments will not, unless agreed to by Lender in
writing, relieve Borrower of Borrower's obligation to continue to make payments
of accrued unpaid interest. Rather they will reduce the principal balance due.
LATE CHARGE. If a payment is 10 days or more late, Borrower will be charged
5.000% of the regularly scheduled payment or $5.00, whichever is greater.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform when
due any other term, obligation, covenant, or condition contained in this Note or
any agreement related to this Note, or in any other agreement or loan Borrower
has with Lender. (c) Any representation or statement made or furnished to Lender
by Borrower or on Borrower's behalf is false or misleading in any material
respect either now or at the time made or furnished. (d) Borrower becomes
insolvent, a receiver is appointed for any part of Borrower's property, Borrower
makes an assignment for the benefit of creditors, or any proceeding is commenced
either by Borrower or against Borrower under any bankruptcy or insolvency laws.
(e) Any creditor tries to take any of Borrower's property on or in which Lender
has a lien or security interest. This includes a garnishment of any of
Borrower's accounts with Lender. (f) Any guarantor dies or any of the other
events described in this default section occurs with respect to any guarantor of
this Note. (g) A material adverse change occurs in Borrower's financial
condition, or Lender believes the prospect of payment or performance of the
indebtedness is impaired. (h) Lender in good faith deems itself insecure.
If any default, other than a default in payment, is curable and if Borrower has
not been given a notice of a breach of the same provision of this Note within
the preceding twelve (12) months, it may be cured (and no event of default will
have occurred). If Borrower, after receiving written notice from Lender
demanding cure of such default: (a) cures the default within fifteen (15) days;
or (b) if the cure requires more than fifteen (15) days, immediately initiates
steps which Lender deems in Lender's sole discretion to be sufficient to cure
the default and thereafter continues and completes all reasonable and necessary
steps sufficient to produce compliance as soon as reasonably practical.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, without
notice, and then Borrower will pay that amount. Upon Borrower's failure to pay
all amounts declared due pursuant to this section, including failure to pay upon
final maturity, Lender, at its option, may also, if permitted under applicable
law, increase the variable interest rate on this Note to 5.500 percentage points
over the Index. Lender may hire or pay someone else to help collect this Note if
Borrower does not pay. Borrower also will pay Lender that amount. This includes,
subject to any limits under applicable law, Lender's attorneys' fees and
Lender's legal expenses whether or not there is a lawsuit, including attorneys'
fees and legal expenses for bankruptcy proceedings (including efforts to modify
or vacate any automatic stay or injunction), appeals, and any anticipated
post-judgment collection services. Borrower also will pay any court costs, in
addition to all other sums provided by law. This Note has been delivered to
Lender and accepted by Lender in the State of California. If there is a lawsuit,
Borrower agrees upon Lender's request to submit to the jurisdiction of the
courts of ORANGE County, the State of California. Lender and Borrower hereby
waive the right to any jury trial in any action, proceeding, or counterclaim
brought by either Lender or Borrower against the other. This Note shall be
governed by and construed in accordance with the laws of the State of
California.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA and Keogh accounts,
and all trust accounts for which the grant of a security interest would be
prohibited by law. Borrower authorizes Lender, to the extent permitted by
applicable law, to charge or setoff all sums owing on this Note against any and
all such accounts.
COLLATERAL. This Note is secured by COMMERCIAL SECURITY AGREEMENT DATED June 1,
1998, EXECUTED BY BORROWER OR PLEDGOR IN CONNECTION WITH THIS NOTE.
LINE OF CREDIT. This Note evidences a straight line of credit. Once the total
amount of principal has been advanced, Borrower is not entitled to further loan
advances. Advances under this Note may be requested either orally or in writing
by Borrower or by an authorized person. Lender may, but need not, require that
all oral requests be confirmed in writing. All communications, instructions, or
directions by telephone or otherwise to Lender are to be directed to Lender's
office shown above. The following party or parties are authorized to request
advances under the line of credit until Lender receives from Borrower at
Lender's address shown above written notice of revocation of their authority:
ROBERT S. MCMILLAN, CHIEF FINANCIAL OFFICER; CHARLES G. KINCH, PRESIDENT AND
CEO; and THOMAS J. BRESNAN, CHAIRMAN OF THE BOARD & CEO. Borrower agrees to be
liable for all sums either: (a) advanced in accordance with the instructions of
an authorized person or (b) credited to any of Borrower's accounts with Lender.
The unpaid principal balance owing on this Note at any time may be evidenced by
endorsements on this Note or by Lender's internal records, including daily
computer print-outs. Lender will have no obligation to advance funds under this
Note if: (a) Borrower or any guarantor is in default under the terms of this
Note or any agreement that Borrower or any guarantor has with Lender, including
any agreement made in connection with the signing of this Note; (b) Borrower or
any guarantor ceases doing business or is insolvent; (c) any guarantor seeks,
claims or otherwise attempts to limit, modify or revoke such guarantor's
guarantee of this Note or any other loan with Lender; (d) Borrower has applied
funds provided pursuant to this Note for purposes other than those authorized by
Lender; or (e) Lender in good faith deems itself insecure under this Note or any
other agreement between Lender and Borrower.
PRIOR NOTE. THIS NOTE IS A REVEWAL OF LOAN #100000295
GENERAL PROVISIONS. This Note is payable on demand. The inclusion of specific
default provisions or rights of Lender shall not preclude Lender's right to
declare payment of this Note on its demand. Lender may delay or forgo enforcing
any of its rights or remedies under this Note without losing them. Borrower and
any other person who signs, guarantees or endorses this Note, to the extend
allowed by law, waive any applicable statute of limitations, presentment, demand
for payment, protest and notice of dishonor. Upon any change in the terms of
this Note, and unless otherwise expressly stated in writing, no party who signs
this Note, whether as maker, guarantor, accommodation maker or endorser, shall
be released from liability. All such parties agree that Lender may renew or
extend (repeatedly and for any length of time) this loan, or release any party
or guarantor or collateral; or impair, fail to realize upon or perfect Lender's
security interest in the collateral; and take any other action deemed necessary
by Lender without the consent of or notice to anyone. All such parties also
agree that Lender may modify this loan without the consent of or notice to
anyone other than the party with whom the modification is made.
<PAGE>
================================================================================
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE.
BORROWER:
NEW HORIZONS EDUCATION CORPORATION
By: _________________________________________________
ROBERT S. MCMILLAN, SENIOR VICE PRESIDENT & CFO
================================================================================
Variable Rate. Line of Credit LASER PRO, Reg. U.S. Pat. & T.M. Off., Ver.
3.24(C)1996 CFI ProServices, Inc. All rights reserved. [CA-D20 NEW2.LN C2.0VL]
EXHIBIT 10.1
AMENDMENT NO. 4
TO
NEW HORIZONS EDUCATION CORPORATION
401(K) PROFIT SHARING TRUST AND PLAN
This Amendment No. 4 is made this ______ day of June, 1998, by NEW
HORIZONS EDUCATION CORPORATION, a Delaware corporation (hereinafter called the
"Company").
WITNESSETH:
WHEREAS, the Company established the New Horizons Education
Corporation 401(k) Profit Sharing Trust and Plan (hereinafter called the "Trust
and Plan") effective the first day of January, 1995; and
WHEREAS, the Company reserved the right, pursuant to Section
19.1 of the Trust and Plan, to amend the Trust and Plan; and
WHEREAS, it is the desire of the Company to amend the Trust
and Plan in order to add certain entities as Participating Companies, to change
the entry dates, to grant service with a predecessor employer, to provide for
discretionary matching contributions and to provide for special ADP
contributions under the Trust and Plan;
NOW, THEREFORE, pursuant to Section 19.1 of the Trust and
Plan, the Company hereby amends the Trust and Plan effective as of the dates
specified herein, as follows:
1. Effective May 1, 1998, Exhibit A to the Trust and Plan is
hereby amended by the addition of "New Horizons Computer Learning Center of
Memphis, Inc." and "New Horizons Computer Learning Center of Nashville, Inc." as
Participating Companies with an Adoption Date of "May 1, 1998."
<PAGE>
2. Effective January 1, 1998, Section 2.1 of Article 2 of the
Trust and Plan is hereby amended by the deletion of said Section 2.1 in its
entirety and the substitution in lieu thereof of a new Section 2.1 to read as
follows:
"2.1 The word "accounts" shall mean "cash option accounts"
established pursuant to Article 4 hereof, "employer contribution
accounts" established pursuant to Article 5 hereof, "matching
contribution accounts" established pursuant to Article 5 hereof and
"ADP accounts" established pursuant to Article 5 hereof."
3. Effective May 1, 1998, Section 2.15 of Article 2 of the
Trust and Plan is hereby amended by the addition at the end of said Section 2.15
of the following:
"Solely for the purpose of determining eligibility and vesting service
hereunder, the date of hire of an employee who was employed by New
Horizons Computer Learning Center of Memphis, Inc. or New Horizons
Computer Learning Center of Nashville, Inc. ("Acquired Companies")
prior to the date on which such Acquired Companies were acquired by the
Company and who became employees of the Company on the dates on which
such Acquired Companies were acquired by the Company shall be the date
on which he first commenced employment and worked at least one (1) hour
for such Acquired Company."
4. Effective January 1, 1998, Section 2.37 of Article 2 of the
Trust and Plan is hereby amended by the deletion of said Section 2.37 in its
entirety and the substitution in lieu thereof of a new Section 2.37 to read as
follows:
"2.37 The words "vested interest" shall mean with respect to
any participant the sum of (a) plus (b) minus (c) below where:
(a) equals the amounts credited to his employer
contribution and matching contribution accounts
multiplied by his Vested Percentage;
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<PAGE>
(b) equals any distributions made to the participant from
his employer contribution account and matching
contribution account since his earliest date of hire
which has not been followed by five (5) consecutive
One (1) Year Breaks-In-Service, multiplied by his
Vested Percentage; and
(c) equals the amount of any distributions made to the
participant from his employer contribution account or
matching contribution account since his earliest date
of hire which has not been followed by five (5)
consecutive One (1) Year Breaks-In-Service."
5. Effective July 1, 1998, Section 3.2 of Article 3 of the
Trust and Plan is hereby amended by the deletion of said Section 3.2 in its
entirety and the substitution in lieu thereof of a new Section 3.2 to read as
follows:
"3.2 Every employee of a Participating Company who becomes
eligible on or after July 1, 1998 shall become a participant as of the
January 1, April 1, July 1 or October 1 coinciding with or next
following the date he becomes qualified."
6. Effective January 1, 1998, Article 5 of the Trust and Plan
is hereby amended by the addition of new Sections 5.3 and 5.4 to read as
follows:
"5.3 The Participating Companies may make special ADP
contributions to this Trust and Plan for any plan year. The amounts of
such special ADP contributions shall be determined by the Company from
time to time. Such amount, if any, shall be allocated to the ADP
accounts of some or all of the participants who are not highly
compensated employees in such manner as the Company shall designate at
the time any such special ADP contribution is made to this Trust and
Plan. Any amounts credited to a participant's ADP account shall be
fully vested and nonforfeitable at all times. In no event may a
participant withdraw any amounts credited to his ADP account prior to
the time such amounts become distributable to him pursuant to Articles
9 and 10 hereof.
-3-
<PAGE>
5.4 Each Participating Company may, but shall not be required
to, make a matching contribution to this Trust and Plan for any plan
year in such percentage of each eligible participant's pre-tax
contribution as shall be determined by the Participating Company prior
to the first day of any such plan year. The percentage of each eligible
participant's pre-tax contributions which is to be matched for any plan
year shall be announced to participants prior to the first day of such
plan year. The matching contribution shall be allocated to the matching
contribution account of each participant on whose behalf it is made and
shall be in addition to any amounts contributed under Article 4,
Section 5.1 or Section 5.3. In no event may a participant withdraw any
amounts credited to his matching contribution account prior to the time
such amounts become distributable to him pursuant to Articles 9 and 10
hereof."
7. Effective January 1, 1998, Article 7 of the Trust and Plan
is hereby amended by the deletion of said Article 7 in its entirety and the
substitution in lieu thereof of a new Article 7 to read as follows:
ARTICLE 7
LIMITATIONS ON CONTRIBUTIONS AND ALLOCATIONS
7.1 The amount and allocation of contributions under this
Trust and Plan, including any contributions made pursuant to a
Supplemental Agreement, shall be subject to several limitations. Those
limitations are as follows:
(a) contributions made pursuant to participant's cash or
deferral elections shall be subject to the individual
dollar limit described in Section 7.2 hereof;
(b) contributions made pursuant to participant's cash or
deferral elections shall be subject to the deferral
percentage limit set forth in Section 7.3 hereof;
(c) matching contributions shall be subject to the
contribution percentage limit set forth in Section
7.4 hereof;
-4-
<PAGE>
(d) the contributions described in subparagraphs (b) and
(c) above shall be subject to the limit on "multiple
use" set forth in Section 7.5 hereof;
(e) all contributions made pursuant to Articles 4 and 5
hereof shall, in the aggregate, be subject to the
deductibility limit set forth in Section 7.6 hereof;
and
(f) the allocation of all of the foregoing contributions,
in the aggregate, shall be subject to the limitation
on annual additions set forth in Article 22 hereof.
In addition, the following rules and procedures shall apply
for purposes of this Article:
(i) For purposes of determining a participant's deferral
or contribution percentage pursuant to Section 7.8(b)
or 7.8(c) hereof, all salary deferral contributions
that are made under two (2) or more plans (or
after-tax and matching contributions, as appropriate)
that are aggregated for purposes of Sections
401(a)(4) or 410(b) of the Code (other than Section
410(b)(2)(A)(ii) of the Code) shall be treated as
made under a single plan.
(ii) If two (2) or more plans are permissively aggregated
for purposes of Section 401(k) or 401(m) of the Code,
the aggregated plans shall also satisfy Sections
401(a)(4) and 410(b) of the Code as though they were
a single plan.
(iii) The deferral or contribution percentage of any highly
compensated employee shall be determined by treating
all plans maintained by the Company and any
affiliates that are subject to Section 401(k) or
401(m) of the Code (other than those that may not be
permissively aggregated) as a single plan.
7.2 The contributions made to the Trust and Plan by the
Participating Companies pursuant to a participant's cash or deferred
election under Article 4 with respect to the taxable year of the
participant, plus similar amounts contributed on a similar basis by any
other employer (whether or not related to a Participating Company)
required by law to be aggregated with his salary deferral contributions
under this Trust and Plan, shall not exceed Ten Thousand Dollars
($10,000.00), plus any adjustment for cost-of-
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<PAGE>
living after 1998 as determined pursuant to regulations issued by the
Secretary of the Treasury or his delegate pursuant to Section 415(d) of
the Code.
In the event that the cash or deferred contributions for a
participant's taxable year exceed such limit, or in the event that the
Administrator shall receive notice from a participant by the March 1
next following the close of a participant's taxable year that his cash
or deferred contributions, together with similar contributions under
plans of other employers shall have exceeded such limit, the
Administrator shall cause the amount of excess contributions, together
with any earnings allocable to such excess contributions, to be
refunded to the participant by the following April 15th. Any such
refund of excess contributions shall be debited from the participant's
cash option account.
7.3 Contributions made on behalf of a participant pursuant to
Article 4 hereof for a plan year (hereinafter sometimes referred to as
the "current plan year") shall be limited so that the average deferral
percentage for the highly compensated employees who are participants or
who are eligible to become participants for such plan year shall not
exceed an amount determined based upon the average deferral percentage
for the employees who are participants or who are eligible to become
participants but are not highly compensated employees for the preceding
plan year or, if the Company elects, for the current plan year, as
follows:
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<PAGE>
(A) (B)
AVERAGE DEFERRAL LIMIT ON AVERAGE DEFERRAL
PERCENTAGE FOR EMPLOYEES PERCENTAGE FOR EMPLOYEES
ELIGIBLE TO PARTICIPATE ELIGIBLE TO PARTICIPATE
WHO ARE NOT HIGHLY WHO ARE HIGHLY
COMPENSATED COMPENSATED
--------------------------- -----------------------------
Less than 2% 2 times Column (A)
2% or more but less than 8% Column (A) plus 2%
8% or more 1.25 times Column (A)
In the event the Company elects to determine the average deferral
percentages of employees who are not highly compensated employees on
the basis of the current plan year rather than the preceding plan year
in accordance with Section 401(k)(3)(A) of the Code, such election by
the Company may not be changed for plan years commencing after December
31, 1998, except as provided by the Secretary of the Treasury.
If, for any plan year, special ADP contributions are made to
this Plan and Trust then the Company may elect, in such manner as the
Secretary of the Treasury or his delegate may provide, to take into
account, as additional amounts for purposes of this Section, all or a
part of the special ADP contributions, if any, made for the plan year.
7.4 The contributions made for a plan year (hereinafter
sometimes referred to as "current plan year") as matching contributions
shall be limited so that the average contribution percentage for the
highly compensated employees who are participants or who are eligible
to become participants for such plan year shall not exceed an amount
determined based upon the average contribution percentage for the
employees who are participants or who are eligible to become
participants but are not highly compensated employees for the preceding
plan year or, if the Company elects, for the current plan year, in
accordance with the table set forth in Section 7.3 hereof.
-7-
<PAGE>
In the event the Company elects to determine the average
contribution percentages of employees who are not highly compensated
employees on the basis of the current plan year rather than the
preceding plan year in accordance with Section 401(m)(2)(A) of the
Code, such election by the Company may not be changed for plan years
commencing after December 31, 1998, except as provided by the Secretary
of the Treasury.
If, for any plan year, this Trust and Plan satisfies the
requirements of Section 7.3 hereof, then the Company may elect, in such
manner as the Secretary of the Treasury or his delegate may provide, to
take into account, as additional amounts for purposes of this Section,
all or a part of the cash or deferred contributions made to this Trust
and Plan.
7.5 If the sum of the deferral percentage and the contribution
percentage for one or more highly compensated employees exceeds the
aggregate limit defined in Section 7.8(a) hereof, the contribution
percentage for such employee or employees shall be reduced in
accordance with Section 7.7 hereof so that the aggregate limit is not
exceeded. The amount by which a highly compensated employee's
contribution percentage is reduced shall be treated as an excess
contribution pursuant to Section 7.7. The deferral percentage and
contribution percentage of the highly compensated employees shall be
determined after any corrections are made to meet the deferral
percentage and contribution percentage limits. Multiple use does not
occur if neither the average deferral percentage nor the average
contribution percentage of the highly compensated employees exceeds one
and twenty-five hundredths (1.25) multiplied by the corresponding
average deferral percentage or average contribution percentage of the
non-highly compensated employees.
7.6 In no event shall the total of all contributions made
pursuant to Articles 4 and 5 hereof exceed the maximum amount allowable
as a deduction under Section
-8-
<PAGE>
404(a)(3) of the Code or any statute of similar import, including the
amount of any contribution carryforward allowable under said Section
404(a)(3). This limitation shall not apply to contributions which may
be required in order to provide the minimum contributions described in
Article 23 hereof for any plan year in which this Trust and Plan is
top-heavy. Nor shall this limitation apply to contributions which may
be required in order to recredit the account of any rehired participant
whose account is to be recredited with prior forfeitures as described
in Section 9.3 hereof.
7.7 In the event that the limitations set forth in Section
7.2, 7.3, 7.4 or 7.5 hereof shall be exceeded, the Administrator shall
take action to reduce future cash or deferred contributions made
pursuant to Article 4 hereof and/or future matching contributions made
pursuant to Article 5 hereof, as appropriate. Such action may include a
reduction in the future rate of cash or deferred contributions of any
highly compensated employee pursuant to any legally permissible
procedure. In the event that such action shall fail to prevent the
excess, prior salary deferral contributions made pursuant to Article 4
hereof, plus any income and minus any losses allocable thereto to the
date of distribution, shall be distributed to the participant on whose
behalf such contributions were made. In the event that any cash or
deferred contributions made pursuant to Article 4 hereof are
distributed to a participant, any related matching contributions, plus
any income and minus any losses allocable thereto to the date of
distribution, shall be:
(a) forfeited and disposed of if such matching
contributions are not vested; and
(b) distributed to the participant if such matching
contributions are vested.
In the event of such a distribution or forfeiture, the cash option
account, and if applicable the matching contribution account, of such
participant shall be debited with the amount of
-9-
<PAGE>
such distribution or forfeiture. Any such adjustments made in
participants' accounts shall be made in a uniform manner for similarly
situated participants.
In the event that distributions must be made in order to bring
this Trust and Plan into compliance with Section 7.3, 7.4 or 7.5
hereof, the Administrator shall reduce the dollar amount of deferrals
of highly compensated employees in descending order, beginning with the
highly compensated employee(s) with the highest total deferral amount
until such limitations have been satisfied. In performing such
reduction, the reduced deferral amount of any affected highly
compensated employee shall, in no event, be lower than that of the
highly compensated employee with the next highest deferral amount.
Any excess cash or deferred contributions to be distributed to
a participant pursuant to this Section shall be reduced by any excess
cash or deferred contributions previously distributed to such
participant for such participant's taxable year ending with or within
the plan year in accordance with Code Section 402(g)(2).
Any excess matching contributions for a plan year, together
with any income allocable to such excess matching contributions, which
are distributable as described above shall be distributed to a
participant within one (1) year after the end of such plan year. If
such excess amounts are not distributed within two and one-half (2-1/2)
months of the end of the plan year, a ten percent (10%) excise tax on
such excess amounts shall be imposed on the Company. Excess matching
contributions shall be treated as annual additions under Article 22
hereof.
7.8 For purposes of this Article, the following definitions
and special rules shall apply:
(a) "aggregate limit" shall mean the greater of (i) or
(ii), where:
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<PAGE>
(i) equals the sum of:
(A) one and twenty-five hundredths
(1.25) times the greater of the
deferral percentage or the
contribution percentage for the
non-highly compensated employees;
and
(B) two (2) percentage points plus the
lesser of the deferral percentage or
the contribution percentage for the
non-highly compensated employees;
and
(ii) equals the sum of:
(A) one and twenty-five hundredths
(1.25) times the lesser of the
deferral percentage or the
contribution percentage for the
non-highly compensated employees;
and
(B) two (2) percentage points plus the
greater of the deferral percentage
or the contribution percentage for
the non-highly compensated
employees.
In no event, however, shall the amounts set
forth in subparagraphs (i)(B) and (ii)(B)
above exceed twice the greater of the
deferral percentage or the contribution
percentage for the non-highly compensated
employees.
(b) "contribution percentage" shall mean for a
participant for any plan year a fraction:
(i) the numerator of which shall equal matching
contributions made on his behalf; and
(ii) the denominator of which shall equal his
compensation for such plan year;
provided, however, that the Company may elect to take
into account additional contributions pursuant to
Section 7.4 hereof. In addition, "contribution
percentage" shall mean zero percent (0%) for an
employee who is eligible to become a participant but
who is not a participant. In addition, matching
contributions shall be considered to be made on a
participant's behalf for a plan year if such matching
contributions are made as a result of the
participant's cash or deferred contributions, are
allocated to the participant's matching contribution
account during such plan year and are paid to this
Trust and Plan no later than twelve (12) months after
the end of such plan year.
(c) "deferral percentage" shall mean for a participant
for any plan year a
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<PAGE>
fraction:
(i) the numerator of which shall equal the total
of the cash or deferred contributions made
on his behalf for such plan year; and
(ii) the denominator of which shall equal his
compensation for such plan year;
provided, however, that the Company may elect to take
into account additional contributions pursuant to
Section 7.3 hereof. In addition, "deferral
percentage" shall mean zero percent (0%) for an
employee who is eligible to become a participant but
who is not a participant. In addition, cash or
deferred contributions shall be considered to be made
on a participant's behalf for a plan year if such
cash or deferred contributions are not contingent on
participation or performance of services after the
end of such plan year, such cash or deferred
contributions would have been received (but for the
deferral election) within two and one-half (2-1/2)
months after the end of such plan year and are paid
to this Trust and Plan no later than twelve (12)
months after the end of such plan year."
8. Effective January 1, 1998, Section 9.1 of Article 9 of the
Trust and Plan is hereby amended by the deletion of said Section 9.1 in its
entirety and the substitution of a new Section 9.1 to read as follows:
"9.1 In the event of the termination of employment of a
participant for any reason other than death, permanent and total
disability, or retirement pursuant to Article 10 hereof, the
participant shall be entitled to receive a distribution of the sum of
the following amounts:
(a) the amount credited to his cash option account, ADP
account and rollover account; and
(b) his vested interest."
9. Effective January 1, 1998, Sections 9.3, 9.4 and 9.5 of
Article 9 of the Trust and Plan are hereby amended by the deletion of said
Sections 9.3, 9.4 and 9.5 in their entireties and the substitution in lieu
thereof of new Sections 9.3, 9.4 and 9.5 to read as follows:
"9.3 If a terminated participant's Vested Percentage in his
employer contribution
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<PAGE>
and matching contributions accounts is less than 100%, an amount equal
to (a) minus (b) below where:
(a) equals the amount credited to his employer
contribution and matching contribution accounts; and
(b) equals his vested interest;
shall be forfeited as of the earliest of (1) the date on or after the
participant's termination of employment on which the participant
receives a distribution of the amounts described in Section 9.1 hereof;
(2) the last day of the plan year during which the participant shall
incur five consecutive One (l) Year Breaks-In-Service; or (3) the date
the participant dies. Any such forfeited amount shall be debited to the
participant's employer contribution account and matching contribution
account. If any amounts remain credited to his employer contribution
account and/or matching contribution account after said forfeiture,
said amounts shall thereafter be held, administered and distributed in
accordance with Section 9.2 above. Notwithstanding the preceding
provisions of this Section 9.3, if a terminated participant's Vested
Percentage is zero (0) and there are no amounts credited to his cash
option account, ADP account or rollover account the amounts which are
credited to his employer contribution account and matching contribution
account shall be forfeited as of the date of the participant's
termination of employment.
If the terminated participant shall be rehired by a
Participating Company or any affiliate prior to the time the terminated
participant incurs five consecutive One (1) Year Breaks-In-Service, he
shall immediately be reinstated as a participant in this Trust and Plan
and the amount which had been previously debited to his employer
contribution account and matching contribution account and forfeited
pursuant to the provisions of this Section 9.3 shall be recredited to
his employer contribution account and matching
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<PAGE>
contribution account on the date such participant is rehired.
Notwithstanding any other provision of this Trust and Plan to
the contrary, in order to balance the accounts maintained under the
Trust and Plan after giving effect to the recrediting of the rehired
participant's employer contribution account and matching contribution
account and the later adjustment of such accounts pursuant to Article 8
or Article 16 hereof, the Company may, at its option:
(a) if none of the accounts have been segregated for
investment purposes pursuant to Article 16 hereof,
reduce the gain, if any, in the value of the Trust
and Plan's assets (since the most recent allocation
date) for purposes of adjusting the accounts pursuant
to Article 8 hereof as of any allocation dates which
coincide with or follow the date of the participant's
rehire up to and including the allocation date which
coincides with the last day of the plan year during
which such participant was rehired; and/or
(b) reduce the value of the forfeitures which are
otherwise reallocable as of the allocation date which
coincides with the last day of the plan year during
which such participant was rehired; and/or
(c) reduce the amount of the employer contributions which
are otherwise allocable among the employer
contribution accounts of participants pursuant to
Article 5 for the plan year during which such
participant was rehired; and/or
(d) take some combination of the actions described in
(a), (b) and (c) above as the Company shall in its
sole discretion determine;
provided that the total of the amounts described in (a), (b) and (c)
above with respect to any plan year shall not exceed the aggregate
amounts which were recredited to the employer contribution accounts and
matching contribution accounts of all participants who were rehired
during such plan year. Any amounts recredited to a rehired
participant's employer contribution account and matching contribution
account pursuant to this Section 9.3 shall not be an annual addition
for purposes of Article 22 of this Trust and Plan with respect to the
plan year during which such recrediting occurs.
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To the extent that the sum of the amounts described in (a),
(b) and (c) above for any plan year is less than the aggregate amounts
which were recredited to the employer contribution accounts and
matching contribution accounts (as later adjusted pursuant to Article 8
or Article 16 hereof) of all participants who were rehired during the
plan year, the Company shall cause the Participating Companies to
contribute to the Trust and Plan an amount equal to the difference
between the aggregate amounts which were recredited to the employer
contribution accounts and matching contribution accounts (as later
adjusted pursuant to Article 8 or Article 16 hereof) of all
participants who were rehired during the plan year and the sum of the
amounts described in (a), (b) and (c) above, and such contribution
shall be made by any such Participating Company no later than the close
of the plan year next following the plan year during which such
participants were rehired.
9.4 The amounts forfeited pursuant to Section 9.3 hereof shall
be used to reduce either the employer contributions or the matching
contributions to be made by the Participating Companies for the taxable
year which includes the date of forfeiture at the Company's discretion.
The amounts forfeited pursuant to Section 9.3 hereof shall be
reallocated among the employer contribution and/or matching
contribution accounts of active participants who are employed by one of
the Participating Companies on the allocation date which is the last
day of the taxable year which includes the date of forfeiture as though
such amounts were contributed by the Participating Companies with
respect to such taxable year. In no event shall forfeitures be used to
increase the benefits any participant would otherwise receive under the
Trust and Plan.
9.5 If the accounts have been segregated for investment
purposes pursuant to Article 16 hereof, any amounts forfeited pursuant
to Section 9.3 hereof shall be invested
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in such media as the Administrator shall direct until reallocated among
the employer contribution and/or matching contribution accounts of the
remaining active participants pursuant to Section 9.4 hereof."
IN WITNESS WHEREOF, the Company, by its duly authorized
officer, has caused this Amendment No. 4 to be executed as of the day and year
first above written.
NEW HORIZONS EDUCATION CORPORATION
("Company")
By:________________________________
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EXHIBIT 10.2
LEASE AGREEMENT
THIS LEASE AGREEMENT entered into on the 11th day of July, 1996,
between HERITAGE PLACE ASSOCIATES, LTD. ("Landlord"), a Tennessee limited
partnership, and the lessee named below ("Tenant").
1. TENANT. The name of Tenant and Tenant's present address for the
purposes of the Lease Agreement are:
NEW HORIZONS COMPUTER LEARNING CENTERS OF MEMPHIS, INC.
SUITE 1300, 2600 THOUSAND OAKS BLVD.
MEMPHIS, TN 38118
After the Commencement of this Lease Agreement, Tenant's address for the
purposes of this Lease Agreement shall be:
SUITE 400, 227 FRENCH LANDING DRIVE
NASHVILLE, TN 37228
2. BUILDING AND DEMISED PREMISES.
a) BUILDING. The building in which the Demised Premises are located
(the "Building") is located on that land in Davidson County, Tennessee,
described in Exhibit A to this Lease Agreement. The street address of the
building is 227 French Landing Drive, Nashville, Tennessee 37228.
(b) DEMISED PREMISES. This Lease Agreement pertains to approximately
9,483 square feet of rentable space KNOWN AS Suite 400 on the fourth floor of
the Building, which is referred to herein as the "Demised Premises."
3. LEASE OF THE PREMISES. Landlord hereby leases the Demised Premises
to TENANT, AND Tenant hereby leases the Demised Premises from Landlord, subject
to the terms and conditions of this Lease Agreement.
4. TERM. The Term of this Lease Agreement shall begin on the
"Commencement Date, " which shall be the earlier of (a) the date on which Tenant
occupies the Demised Premises, or (b) TEN days after the date on which Landlord
tenders in writing the Demised Premises to Tenant after substantial completion
of construction of the Demised Premises according to Tenant's Approved Floor
Plan attached hereto as Exhibit B (TAFP). The Term of this Lease Agreement shall
end 60 months after the Commencement Date, at midnight of the last day of the
month which precedes the month in which the Commencement date occurred. Landlord
shall notify Tenant in writing of the rental commencement date within 5 days of
TENANTS occupancy of the Premises.
5. RENT. Rent for the Demised Premises during each Lease year of the
term of this Lease Agreement shall be as follows:
Lease Year Annual Monthly
1 - 5 $147,934.80 $12,327.90
together with Tenant's share of the maintenance expenses as provided in
Paragraph 6 hereof. (Rent is based on 9,483 rentable square feet and may be
increased or decreased based on the final square footage determined by
Landlord's space planner.) The measurement of the leasable area shall be
according to ANSIZ 65.11980 "Method of Measuring Floor Areas in Office
Buildings" plus 13% of such which represents Tenant's pro rata share of the
Common Areas of the Building. All rent amounts shall be paid without
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notice or demand in advance in equal monthly installments due on the first day
of each month, without deduction or offset kind. Payments of rent shall be
prorated for fractions of any months. The Lease Year shall be a 12 month period
commencing on the first day of the month during which rental payments or
occupancy whichever is sooner commenced.
6. MAINTENANCE CHARGE. Together with the rent specified in Paragraph 5
hereof, Tenant shall pay to Landlord a sum equal to Tenant's proration charge of
the Maintenance Expenses defined hereinbelow (said amount being referred to
herein as "Maintenance Charge". ) The Maintenance Charge shall be computed by
taking the rentable area within the Demised Premises as the numerator, and the
total rented area, which shall be not less than 90% of the total rentable area
within the Building, as the denominator of a fraction which, when multiplied by
the total amount of Landlord's Maintenance Expenses minus the Maintenance
Expenses for 1996 shall yield the Annual Maintenance Charge due from TENANT.
LANDLORD shall estimate the Maintenance Charge for each calendar year and
furnish such estimate within thirty (30) days after said year ends. Landlord may
adjust said amount from time to time by thirty (30) days written notice to
Tenant. In the event the Maintenance Charge exceeds the actual expenditure in
said calendar year, the excess shall be credited against the next month's
payment of Maintenance Charge. In the event the Maintenance Charge is less than
the actual expenditure for said calendar year, TENANT SHALL promptly pay the
excess due upon notice of the excess amount to Landlord.
Notwithstanding the previous paragraph, Tenant shall not be obligated to pay any
Maintenance Charge for calendar year 1996. Thereafter the Maintenance Charge
shall be in accordance with this Article 6. Excluding taxes and insurance such
Maintenance Expenses shall not increase by more than 6% per year on a cumulative
and compounded basis with the first year being 1996.
The maintenance expenses which may be included by the Landlord, in Landlord's
Maintenance Expenses for purposes of calculating the Maintenance Charge shall be
any and all costs incurred by Landlord in connection with the maintenance,
janitorial, upkeep, providing utility services and repair of THE BUILDING AND
Common Areas, including, without limitation, electricity, gas, water, and sewer
for the Building and Common Areas, the landscaping and maintenance of the
outdoor areas and parking areas, the insurance on the Building and Common Areas,
(including liability insurance for personal injury, death, and property damage,
insurance with extended coverage against fire, theft, or other casualty, and
other insurance deemed advisable by Landlord), provision of security services,
payment of real estate taxes, provision of building and grounds MAINTENANCE
SERVICES, reasonable replacement reserve, reasonable management administration
costs, and a management fee (which shall not exceed six (6-%) percent of the
gross collectible Building income) in connection with the operation of the
building as a first-class office facility ("Landlord's Maintenance Expenses").
Landlord and TENANT AGREE that Landlord shall have the sole discretion to
determine whether or not a particular service is advisable, and to employ such
persons and require such equipment as Landlord deems advisable in order to
provide said service; provided, however, that Landlord shall at times be
obligated to provide the services listed in Paragraph 13 hereof.
In connection with the foregoing, Landlord agrees that it shall furnish to
Tenant an annual statement showing in reasonable detail the amount of Landlord's
Maintenance Expenses for the calendar year, which statements shall be furnished
within sixty (60) days after said calendar year ends. It is agreed that all
obligations of Tenant and/ or Landlord contained in this Paragraph 6 shall
survive the term of this Lease Agreement.
7. INITIAL RENT AND SECURITY DEPOSIT. On the date of execution
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of this Lease Agreement, Tenant shall pay one month's installment of rent, which
shall be applied to Tenant's initial installment(s) of rent due under this Lease
Agreement, and Tenant shall also pay an amount equal to one monthly installment
of rent to be held as security for the performance of Tenant's obligations under
this Lease Agreement. Tenant agrees that the deposit may be commingled with
other funds of Landlord, and shall not be considered an advance of rent or a
measure of Landlord's damage in the event of a default by Tenant. If no such
default has occurred, then the security deposit shall be applied to Tenant's
last monthly rental due hereunder.
8. PAYMENTS. All payments of rent and other amounts due Landlord
hereunder shall be made payable to and mailed or delivered to Manager, c/o Trion
Properties, Inc., 227 French Landing Drive, Suite 100, Nashville, Tennessee
37228, or to such other person, entity, or address as Landlord may hereafter
designate in writing. Payments shall be considered received only upon Landlord's
actual receipt thereof. Tenant agrees to pay Landlord a service fee of for each
check presented to Landlord and dishonored by the drawee bank. Any rent received
more than 5 days after due date shall be subject to a late fee of 5% of the
unpaid balance.
9. COMPLETION OF THE DEMISED PREMISES. As an inducement to Tenant to
enter into this Lease Agreement, Landlord shall provide Tenant and allowance of
Ninety Four Thousand Eight Hundred Forty Three Dollars ($94,843), (the "Tenant
Allowance").
It is an express condition of this Lease Agreement cause construction of the
Demised Premises to be that Landlord substantially completed in accordance with
the plans and specifications attached hereto as Exhibit C (TAFP). The plans and
specifications are prepared by Landlord's space planner -and- the cost of such
plans shall be deducted from the Tenant Allowance. Landlord shall construct
Tenant improvements in accordance with Tenant's Approved Floor Plan, (TAFP) and
Exhibit C. In the event Landlord determines that the total cost of providing
said Tenant finish in accordance with building standard finishes and Tenant's
approved Floor Plan exceeds the Tenant Allowance less the cost of TAFP, then
Tenant shall pay the mount of such excess to Landlord upon demand or revise
finishes to reduce costs. Landlord shall reasonably complete all "punch list
items" within 30 days of Tenant's occupancy or rent shall abate by one fourth
until such items are completed. Landlord's space planner shall be the arbitrator
of whether said "punch list" items are reasonably complete. "Punch list items"
resulting from Tenant's move in are excluded from this requirement and rent
shall not abate.
10. DELAYS BY TENANT. At all reasonable times prior to the Commencement
Date, Landlord shall allow persons, firms, or corporations employed by Tenant
access to the Demised Premises for the purpose of inspecting and performing work
not included in the TAFP. Provided, however, Landlord shall not be obligated to
grant such access if it interferes with work being performed by Landlord or its
contractor(s) in construction of the Building or the Demised Premises_ If
substantial completion of-the Demised Premises is delayed because of changes or
modifications in the TAFP or because of work performed by persons, firms, or
corporations employed by Tenant, Landlord shall immediately notify Tenant in
writing of such delay. Tenant shall pay to Landlord, upon demand, the sum equal
to the annual rent as provided in Paragraph 5 hereof divided by three hundred
sixty (360) for each day of such delay.
11. COMMON AREAS. Throughout the term of this Lease Agreement, Tenant
shall have the non-exclusive right to use the sidewalks, landscaped areas,
hallways, elevators, entrances and exits, rest rooms, parking areas, stairways,
and similar areas designated by Landlord for the general use of all of the
occupants of the Building (the "Common Areas" ). In order to prevent
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the dedication of the same to the public, Landlord shall have the right to close
the same from time to time, as it determines advisable in its sole discretion.
12. ENJOYMENT OF PREMISES. Tenant is entitled to peaceful possession
and quiet enjoyment of the Demised Premises during the term of this Lease
Agreement, subject to the terms and conditions hereof.
13. LANDLORD'S OBLIGATIONS.
(a) TENDER OF PREMISE. Landlord will tender the Demised Premises to
Tenant in good condition in accordance with the terms and conditions hereof.
(b) INSURANCE. Landlord will carry standard fire and extended coverage
insurance on the Demised Premises, including all permanent leasehold
improvements.
(c) Taxes.Landlord will pay all ad valorem real property taxes assessed
against the Building.
(d) General MAINTENANCE. Landlord will maintain the Demised Premises,
the Common Areas and the roof and exterior of the Building in tenantable
condition.
(e) Elevator SERVICE. Landlord will provide elevator service in the
Building
(f) JANITORIAL Service. Landlord will furnish ordinary janitorial
services to the Demised Premises.
(g) Utilities. Landlord will furnish water, electricity, replacement of
bulbs for lighting, and sewage disposal utilities to the Demised Premises.
Provided, Landlord need only provide electricity sufficient to operate small
(desk top) business machines such as electric typewriters and small calculators,
as more completely defined on Exhibit C and Landlord need only provide water in
sufficient quality for ordinary drinking, lavatory, and cleaning use.
(h) HEATING AND AIR CONDITIONING. Landlord will furnish air
conditioning and heat sufficient, in Landlord's judgement, to reasonably heat
and cool the Demised Premises as more completely defined on Exhibit C.
(i) BUSINESS HOURS. Landlord shall be required to furnish the services
listed in subparagraphs (d) through (h) above during regular business hours from
7:00 a.m. through 6:00 p.m., Monday through Friday, and from 7:00 a.m. to 3:00
p.m. on Saturdays, except for the 6 major holidays ie. New Year's Day, Memorial
Day, 4th of July, Labor Day, Thanksgiving, and Christmas. Landlord shall provide
said services during hours in addition to the hours listed herein upon written
notice to Landlord's manager, and provided that Tenant shall pay for such
additional services, including without limitation, usage fees and the cost of
operating and maintaining the services and equipment at the rate of $31.75 per
hour.
(j) FORCE MAJEURE. Landlord will make reasonable efforts to provide the
services listed in subparagraphs (d) through (h) above, and to otherwise perform
its other obligations under this Lease Agreement but shall not be liable for
damages arising from its failure to meet said obligations or the interruption or
inadequacy of any such services as a result of mechanical breakdown, accident,
emergency, design deficiency, strike, civil disorder, unavailability of
sufficient quantities of electricity or water, Act of God, force majeure, or any
other reason beyond the control of Landlord. Such failure on the part of
Landlord or such interruption or inadequacy of services shall not
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terminate this Lease Agreement or entitle Tenant to abate or offset rent except
as provided in paragraph 18 hereof.
14. TENANT'S OBLIGATIONS.
(a) USE. Tenant will use the Demised Premises for office purposes only
and will conduct its business in a quiet, lawful, and orderly manner. No
dangerous substances shall be located on the Demised Premises, and no
manufacturing processes may be conducted on the Demised Premises. Tenant shall
neither conduct nor allow any activity or condition on the Demised Premises
which is either unlawful or, in Landlord's reasonable judgement, increases the
risk of harm to any person or property beyond the minimal risk normally
associated with business office activities.
(b) RENT. Tenant will timely pay all rent and other amounts as provided
in this Lease Agreement, without any deduction or setoff. This covenant to pay
rent is independent of all other covenants herein.
(c) SURRENDER OF PREMISES. Upon the termination of this Lease
Agreement, Tenant will immediately remove its personal property from the Demised
Premises and will peacefully surrender possession of the Demised Premises
without further notice and in as good condition as when entered, ordinary wear
and tear excepted. Personal property remaining on the Demised Premises after the
expiration of this Lease Agreement may be stored by Landlord or, if ten days
prior notice is sent to Tenant, Landlord may dispose of such property in such
manner as it may elect, and shall not be accountable for any proceeds of such
disposition.
(d) Rules. Tenant will obey rules established by Landlord for tenants
of the Building, as amended or supplemented by Landlord from time to time upon
written notice to TENANT.' A copy of the present rules is attached hereto as
Exhibit D.
(e) NOTICE OF HAZARDS. Tenant will promptly notify Landlord of any
known material damage to the Demised Premises or Building or of any known
hazards or defects, whether obvious or latent, on the Demised Premises or the
Building.
(f) Insurance.
(1.) Tenant will keep in force at its expense so long as this
Lease Agreement remains in effect and during such time as Tenant occupies
following: the Demised Premises or any part thereof the
(i) Public liability insurance, including
contractual liability, with respect to the Demised
Premises with companies and in a form acceptable to
Landlord, to afford protection to the limit, per
occurrence, of not less than One Million Dollars
($1,000,000) with respect to personal injury or
death, and Fifty Thousand Dollars ($50,000) with
respect to property damage; and
(ii) All-risk insuranca- written at replacement cost
value on Tenant's personal property, trade fixtures,
floor coverings, furniture,and other property movable
by Tenant and Tenant's leasehold improvements
installed by it pursuant to the terms of this Lease.
Tenant shall deposit a duplicate copy of the policies or
certificates of insurance with Landlord, which policies shall name Landlord and
its designees as additional named
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insureds, and shall provide that said policy or policies shall not be canceled
except after thirty days (30) written notice to Landlord.
(2) Tenant shall require any contractor of Tenant employed
pursuant to Paragraph 16 herein below to keep in force at contractor's expense
during such times as contractor is working in the Demised Premises the
following:
(i) Comprehensive general liability insurance,
including contractor's liability coverage,
contractual liability coverage, completed operations
coverage, broad form property damage endorsement, and
contractor's protective liability coverage in
companies and in form acceptable to Landlord, to
afford protection to the limit, per occurrence, of
not less than Three Million Dollars ($3,000,000) with
respect to personal injury or death, and One Million
Dollars ($1,000,000) with respect to property damage.
Tenant will cause Tenant's contractors to deposit duplicate copies of
the policy or policies of such insurance or certificates thereof with Landlord
prior to commencing any such work, which policies shall also name Landlord or
its designees as additional named insureds, and shall also contain a provision
stating that such policy or policies shall not be canceled except after thirty
(30) days written notice to Landlord. Tenant shall also require its contractors
to keep in effect workmen's compensation or similar insurance offering statutory
coverage and containing statutory limits during the period such contractor is
performing work in the Demised Premises on Tenant's behalf. Tenant shall
indemnify and hold harmless Landlord with respect to any aforesaid work and
contractors.
(g) TAXES. Tenant will timely pay all taxes that may be assessed
against the contents of the Demised Premises. Tenant will also timely pay sales
taxes or the like, if any, that may be imposed upon any rent payments or other
payments required hereunder. Any costs of contesting such tax impositions may be
included in Landlord's Maintenance Expenses.
(h) DISCHARGE OF LIENS. Tenant will promptly discharge all liens,
including mechanics and materialmen's liens, that may attach to the Demised
Premises or the Building, as a result of Tenant's obligations or transactions.
(i) NO WASTE OF PREMISES. Tenant will not damage or commit waste of the
Demised Premises. Tenant will pay to Landlord, upon demand, the cost of repairs
to the Demised Premises, to the extent that such repairs exceed repairs that
would be necessary due to ordinary wear and tear.
15. LANDLORD'S RIGHT TO CURE DEFAULT OF TENANT. If Tenant fails to
maintain the insurance required by this Lease Agreement or to timely perform any
other obligation under this Lease Agreement, Landlord may, but is not obligated
to, cause such obligations to be performed, and Tenant shall pay to Landlord,
upon demand, all expenses so incurred by Landlord. Notwithstanding the above
Tenant shall such rights as are specified in Paragraph 24a hereof.
16. ADDITIONS AND ALTERATIONS. Tenant shall submit to Landlord final
plans and specifications for any alterations or improvements which Tenant
proposes to make to the Demised Premises. No alterations or improvements of the
Demised Premises shall be made by Tenant unless such plans and specifications
have been first reasonably approved in writing by Landlord. In performing any
alterations or improvements, Tenant will use only Landlord's contractor or
contractors or Tenant's workmen approved by Landlord. Any work performed by the
Tenant shall not interfere with the use by the other tenants of premises in the
Building, and
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shall be performed in accordance with all building codes and other applicable
laws and regulations. Any work that creates a substantial amount of noise,
vibration, dust, noxious fumes, or other types of disturbance which may
reasonably be expected to interfere with the use by the other tenants of
premises in the building shall not be performed during business hours, but shall
be performed before 8:00 a.m. or after 5:00 p.m. on weekdays and on the
weekends, whenever possible. All leasehold improvements made by Tenant, or made
by property of Landlord, Premises without the prior written consent of Landlord.
if Landlord so requests, Tenant shall provide Landlord with copies of all
building and other permits obtained in connection with the construction of
improvements or alterations to the Demised Premises.
17. ASSIGNMENT AND SUBLETTING. Tenant shall not, without the prior
written consent of Landlord, mortgage, pledge, hypothecate, assign, transfer,
encumber, sublease, or grant a license with respect (collectively "transfer")
any interest in this Lease Agreement or the Demised Premises. Landlord's consent
to any particular transfer shall not waive this provision, and all later
transfers shall be made Landlord. If Tenant desires to assign to another party
with a comparable business record to Tenant's, a net worth at least as large as
Tenant, and a similar on going contract with the State of Tennessee or other
significantly credit worthy company to provide services over a sustained period
of time (at least one year) then Landlord's consent to such assignment shall not
be unreasonably withheld. Even with Landlord's approval, no such transfer shall
relieve Tenant of its obligations hereunder. Any attempted transfer of an
interest in this Lease Agreement or the Demised Premises without Landlord's
prior written approval shall be null and void. If Tenant is a corporation, the
merger of Tenant into or the change of ownership of a majority issuance 9 shall
be deemed a "transfer" of an interest in this Lease Agreement for the purposes
of this Paragraph. If Tenant is a partnership, the addition or withdrawal of any
partner(s) shall be deemed a "transfer" of an interest in this Lease Agreement
for the purposes of this Paragraph. Landlord may assign, transfer, or encumber
its interest in this Lease Agreement or the Building or Demised Premises for any
purpose. Additionally, if Landlord's transferee agrees in writing to assume all
of Landlord's obligations hereunder, Landlord shall be deemed released from its
obligations under this Lease Agreement, including, but not limited to,
Landlord's obligations with respect to the security deposit as set forth in
Paragraph 7 hereof only on the prior written consent of another corporation
interest of Tenant's of new shares or by voting stock (whether caused by the
transfer of existing shares.
18. DAMAGE TO PREMISES. If the Demised Premises or any other part of
the Building affording access to them are damaged by any casualty covered by
fire and extended coverage insurance as to render 50% of the square footage of
the Demised Premises untenantable, rent shall proportionately abate for the
period that the Demised Premises are untenantable, and Landlord shall apply any
and all insurance proceeds to promptly repair the same within 180 days to the
condition existing prior to the casualty (strikes, walkouts, delay due to
insurance negotiations, and force majeure excepted) but only to the extent of
available insurance proceeds. If the cost of performing Landlord's obligations
hereunder exceeds the account of such casualty, Landlord may terminate this
Lease Agreement on written notice unless Tenant, within fifteen days (15) after
demand therefor, deposits with Landlord a sum of money sufficient to pay the
difference between the cost of repair and the proceeds of the insurance
available for such purpose. Tenant shall replace all work and improvements not
originally installed or performed by Landlord at its expense. Provided, however,
if said casualty is uninsured, or if it occurs within the last two (2) years of
the term of this Lease Agreement (exclusive of subsequent option periods,
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if any), Landlord may elect not to repair such damage, and shall so notify
Tenant, upon which notice either party may then or within thirty (30) days
thereafter terminate this Lease Agreement by notifying the other party in
writing.
19. EMINENT DOMAIN. If the Demised Premises are rendered unfit for
their intended purpose as a result of the taking of all or a part of the Demised
Premises, Building or adjacent ground by eminent domain, by sale in lieu of
condemnation, or as the result of any law, order, regulation, or ordinance of
any government or governmental agency, Landlord or Tenant may, at its option,
terminate this Lease Agreement. Tenant shall have the right to pursue a separate
claim against the condemning authority for damages it may sustain as the result
of such taking providing however that in no event shall any such claim reduce
the award otherwise payable to Landlord.
20. INSPECTION AND REPAIR OF PREMISES; CARDING.
Landlord may show the Demised Premises to prospective purchasers or tenants
during Landlord's normal business hours or at any other reasonable time during
the last Lease Year of the Term hereof. Landlord may enter the Demised Premises
at any time to inspect the Demised Premises, to perform repairs or maintenance,
or to protect the Demised Premises or the Building from damage.
21. INDEMNITY; EXPENSES
(a) EXPENSE CAUSED BY TENANT. Tenant shall indemnify, defend,
and save Landlord harmless from all claims, actions, damages, liability and
expenses (including reasonable attorney's fees) resulting from the occupancy or
use by Tenant of the Demised Premises, Building or Common Areas, and caused
wholly or in part by any act or omission of Tenant, its agents, servants,
contractors, employees, licensees, invitees, or guests.
(b) EXPENSE CAUSED BY OTHER TENANTS. Landlord shall not be
liable to Tenant or to those claiming by, through, or under Tenant for any loss
or expense resulting from the acts or omissions of persons occupying other
premises in the Building.
(c) EXPENSE NOT CAUSED BY LANDLORD. Landlord, its agents and
employees, shall not be liable to Tenant or to those claiming by, through or
under Tenant for any damage to Tenant's property stored in the Demised Premises
or Building or entrusted to persons employed to provide such services in the
Building, or for any injury or damage to persons, property, or business of the
Tenant which results from any latent or apparent defect or change of condition
in the Demised Premises, the Building or the Common Areas, crime, accident,
natural disorder, electrical, mechanical or plumbing equipment, water, or any
other cause not the result of the act or omission of Landlord.
(d) LITIGATION. If Landlord, without fault on its part, is
made a party to or is required to testify in connection with any litigation or
administrative proceeding commenced by, against or concerning Tenant, then
Tenant shall protect and hold Landlord harmless and shall pay all costs,
expenses, and reasonable attorneys' fees incurred by Landlord in connection with
such proceeding.
(e) COSTS OF ENFORCEMENT. Tenant shall pay all costs,
expenses, and reasonable attorneys' fees that may be incurred by Landlord in
enforcing the terms of this Lease Agreement. All amounts of rent, additional
rent, or other amounts due under this Lease Agreement shall bear interest after
they are due at the lower of (i) eighteen percent (18%) per annum or (ii) the
maximum lawful rate.
(f) INSURANCE RECOVERY FOR CASUALTY. Tenant hereby releases
Landlord from any and all claims, demands, liabilities or obligations whatsoever
for damage to the Demised
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Premises or loss of rents or profits resulting from or in any way connected with
any fire, accident, or other casualty is caused by the negligence or
contributory negligence of Landlord, or by any agent, independent contractor or
employee of Landlord, except to the extent of the insurance recovery therefor,
if any.
(g) Limitation of Liability. Tenant against Landlord shall be
limited to the interest of Landlord in the real property, or applicable
insurance proceeds described on Exhibit A hereto.
(h) Survival. The terms of this Paragraph 21 shall survive the
term of this Lease Agreement.
22. INTENTIONALLY OMITTED.
23. WAIVER OF SUBROGATION. Landlord and Tenant agree (to the extent
that such agreement does not invalidate coverage under any policy of insurance)
that, in the event the Demised Premises, or any part thereof, are damaged or
destroyed by fire or other casualty that is covered by insurance of the Landlord
or Tenant, or the subleases, assignees or transferees of Tenant, the rights of
any party against the other or against the employees, agents or licensees of any
party, with respect to such damage or destruction and with respect to any loss
resulting therefrom, including the interruption of the business of any of the
parties, are hereby waived to the extent of the coverage of said insurance.
Landlord and Tenant further agree that all policies of fire, extended coverage,
business interruption and other insurance covering the Demised Premises or the
contents therein shall, if possible, provide that the insurance shall not be
impaired if the insureds have waived their right of recovery from any person or
persons prior to the date and time of loss or damage. Any additional premiums
for such clause or endorsement shall be paid by the primary insured.
23. DEFAULT.
(a) Events of Default. In the event that (i) Tenant defaults
in THE PAYMENT OF RENT, ADDITIONAL RENT, OR OTHER AMOUNTS REQUIRED HEREBY WHEN
DUE; or (ii) if Tenant defaults in performing any of its other obligations under
this Lease Agreement and fails to cure such default within thirty (30) days
after the giving of notice of default by Landlord; or (iii) if a receiver is
appointed for Tenant's property; or (iv) if, whether voluntarily or
involuntarily, Tenant takes advantage of any debtor relief proceedings under any
present or future law; or (v) if Tenant makes an assignment for benefit of
creditors; or (vi) if any property of Tenant should be levied upon or attached
under process against Tenant; or (vii) if a final judgement is rendered against
Tenant and remains unpaid for thirty (30) days; or (viii) if Tenant causes a
lien to be placed against the Demised Premises or the Building; or (ix) if the
Demised Premises are abandoned by Tenant or are vacant for more than ten (10)
consecutive days during the term hereof (unless such vacancy is caused by damage
to the Demised Premises or Building); then, Landlord, at its' option, may
terminate this Lease Agreement by written notice to Tenant.
(b) REMEDIES UPON DEFAULT. Upon Landlord's termination of this
Lease Agreement pursuant to subparagraph (a) above, Landlord may, without
prejudice to any other remedy, use the security deposit described in Paragraph 7
herein to the extent necessary to pay any arrears of rent or liabilities of
Tenant to Landlord. Immediately upon such termination, Tenant shall at once
surrender possession of the Demised Premises to Landlord, and Landlord may
immediately, and without further notice, or at any time thereafter re-enter the
Demised Premises and remove all persons and all or any property therefrom, by
any suitable action or proceeding at law, without being liable for any
9
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prosecution therefor or damages therefrom, and repossess the Demised Premises.
Landlord may, at its option, repair, alter, remodel or change the character of
the Demised Premises as it may deem appropriate. Landlord shall further be
entitled to obtain judgement against TENANT FOR the balance of the then current
and future rent and rent in arrears and other monetary obligations agreed to be
paid for the full term of this Lease Agreement, along with all other direct and
consequential damages, INCLUDING ALL cost and expenses incurred by Landlord in
reletting or attempting to relet the Demised Premises, land reasonable
attorney's fees and court costs. The aggregate of all such rents shall be
computed on a lump sum basis at the time of the default or TERMINATION,
CREDITING against such claim, however, any amount obtained by reason of any
reletting, less the cost of such reletting incurred by Landlord. Landlord agrees
to use its best efforts to relet the Premises.
c) WAIVER OF NOTICE. TENANT HEREBY expressly waives the
service of any notice of INTENTION TO reenter or of the INSTITUTION OF legal
proceedings to that end, and Tenant on ANY assignee or creditor of TENANT, ALSO
WAIVES ANY right of redemption or reentry or repossession or to restore the
operation of this Lease Agreement in case Tenant shall be dispossessed by
summary proceedings or otherwise or in case of reentry or repossession by
Landlord, or in case of any expiration or termination of this Lease Agreement in
accordance with its terms. The terms "enter, "reentry," and "reenter, " as used
in this Lease Agreement, are not restricted to their technical legal meaning.
(d) SPECIFIC PERFORMANCE. If Tenant breaches any of the
provisions hereof, Landlord shall be entitled to obtain specific performance
thereof, and shall be further entitled to obtain any other remedies which it may
have at law or equity.
(e) LANDLORD'S DEFAULT. In no event shall Landlord be deemed
to be in default of any omits obligations contained herein until it has received
thirty (30) days written notice from TENANT SPECIFYING the alleged default, and
has had a reasonable opportunity to cure such default.
25. LOSS TO PERSONAL PROPERTY. All personal property brought into the
Demised Premises by TENANT, OR TENANT'S employees or business visitors, shall be
at the risk of TENANT ONLY, and Landlord shall not be liable for theft thereof
or any damage there to occasioned by any act of co tenants, or any other person,
unless such theft or damage is caused by the negligent act or omission of
Landlord, its agents, or employees. Landlord shall not at any time be liable for
damage to any property in or upon the Demised Premises, which results from gas,
smoke, water, rain, ice or snow which issues or leaks from or forms upon any
part of the Building, or from the pipes or plumbing work of the same, or from
any other place whatsoever.
26. REQUIREMENTS OF LAW. Landlord shall comply with all present and
future laws, ordinances, requirements, rules and regulations of governmental
authorities having jurisdiction pertaining to the structure, operation, design,
and safety of the Common Areas. Tenant shall likewise observe and comply with
such laws, ordinances, requirements, rules and regulations of governmental
authorities having jurisdiction as they may pertain to the structure, operation,
design, safety and use of the Demised Premises.
27. SUBORDINATION; NONDISTURBANCE. This Lease Agreement is subordinate
to any present underlying lease, mortgage, or Deed of Trust on the Building,
upon the land upon which it stands, or both. Additionally, this Lease Agreement
shall be subordinate to the lien of any such future mortgage or Deed of Trust by
operation of this paragraph, with no further INSTRUMENT OF subordination being
necessary. Provided, the owner or beneficiary
10
<PAGE>
of any such mortgage or Deed of Trust may subordinate the same to this Lease
Agreement by executing and recording a written instrument including language to
that effect. If the Demised Premises are sold at foreclosure or by deed in lieu
of foreclosure pursuant to a mortgage or Deed of Trust, Tenant shall attorney to
such purchaser and recognize the same as Landlord hereunder, provided that such
purchaser agrees in writing not to disturb Tenant's possession of the Demised
Premises except in accordance with the terms of this Lease Agreement.
28. TIME IS OF THE ESSENCE. Time is of the essence in fulfilling all
terms and conditions of this Lease Agreement.
29. TENANT'S PUNCHLIST. Within five (5) days after the Commencement
Date, Tenant shall deliver to Landlord a punch list of any defects which it
finds in the construction work required under the Tenant's Floor Plan. Landlord
shall repair, replace, or correct all of said items that are in noncompliance
therewith. Landlord shall be under no obligation to repair, replace, or correct
any defective construction work not included on said punch list. Landlord shall
have the right, but not the obligation, to repair any damage to the Demised
Premises as a result of Tenant's moving into the Demised Premises, with the cost
of such repair to be borne by Tenant and paid to Landlord upon demand but only
after Tenant has had a reasonable opportunity to make such repairs at its
expense.
30. ESTOPPEL INSTRUMENTS; SHORT FORM LEASE.
(a) ESTOPPEL INSTRUMENTS. Tenant agrees to furnish Landlord,
within five (5) business days of Landlord's demand, instruments of estoppel in
recordable form relating to the current status of rental payments and other
evidence which a purchaser or mortgagee may reasonably require.
(b) SHORT FORM LEASE. Upon written request of Landlord, a
memorandum of security agreement and lease shall be prepared by Landlord
describing the Demised Premises, giving the Commencement Date, the term of this
Agreement, and the name and address of the Landlord and Tenant, and other terms
hereof as Landlord may require, which shall be promptly executed and
acknowledged by both parties. The memorandum of lease may be recorded by either
party, at the sole cost and expense of the party so recording.
31. INTENTIONALLY OMITTED.
32. NOTICES. All notices to be given to Landlord under this Lease
Agreement shall be effective only when made in writing and received by Landlord
at the following address: Heritage Place Associates, Ltd. 227 French Landing
Drive, Suite 100 Nashville, TN 37228 With a copy to: Trion Financial, Inc. 2171
Kingston Court, Suite I Atlanta, GA 30067
All notices to be given Tenant under this Lease Agreement shall be effective
when received by Tenant or when made in writing and delivered to the following:
New Horizon Computer Learning Center, Inc., Suite 1300, 2600 Thousand Oaks
Blvd., Memphis, Tennessee 38118. Either party may change its address for notice
hereunder by notifying by notifying the other party in writing.
33. TERMS SEVERABLE. If any provision hereof is held void or
unenforceable for any reason, the remainder of this Lease Agreement shall
continue in full effect.
11
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34. HOLDING OVER. If Tenant remains in possession of the Demised
Premises after expiration of the term hereof, with or without Landlord's
acquiescence and without any express written agreement of parties, Tenant's
occupancy shall become a tenancy from month to month at a rental rate equal to
150% of that monthly rate in effect at the expiration hereof. There shall be no
renewal of this Lease Agreement by operation of law. Such conditions. (except as
to term and rent) as contained in this Lease Agreement.
35. RIGHTS CUMULATIVE. All rights and powers conferred hereunder upon
Landlord and Tenant shall be cumulative but not restrictive to those given by
law.
36. NO WAIVER OF RIGHTS. No failure of Landlord or Tenant to exercise
any right hereunder, or to insist upon strict compliance by Tenant with its
obligations hereunder, and no custom or practice of the parties at variance with
the terms hereof shall constitute a waiver of Landlord's rights to demand exact
compliance with the terms hereof.
37. EXHIBITS. The Exhibits referenced herein are hereby incorporated in
this Lease Agreement by reference. Such Exhibits may themselves reference other
writings, which are also incorporated herein by this reference.
38. BUSINESS DAYS. If the due date of any payment or last day of any
time period provided for herein falls due on a Saturday, Sunday, or holiday
observed by any national bank in Nashville, Tennessee, such payment may be made
on, and such time period shall not expire until, the next following business
day.
39. SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided, all
provisions herein shall be binding upon and shall insure to the benefit of the
parties, their permitted heirs, executors, administrators, legal
representatives, successors, and assigns.
40. NO OPTION. Submission of this Lease Agreement for examination does
not constitute an option to lease or reservation of space for the Demised
Premises. This lease shall be effective only when executed by both parties and
received by Landlord in executed original or executed counterpart form. If this
Lease Agreement has been submitted to Tenant in form already signed by Landlord,
it evidences only of Landlord's offer to enter into this Lease Agreement on the
exact terms provided as delivered, which offer may be revoked at any time and
which may additionally expire at any certain time established by Landlord in
writing.
41. LEASING COMMISSION. Landlord agrees with Trion Properties, Inc.
("Trion") that Trion is entitled to a leasing commission from Landlord by virtue
of this Lease Agreement, which leasing commission shall be paid by Landlord to
Trion in accordance with that certain Management and Leasing Agreement between
Landlord and Trion dated March 28, 1984. Tenant represents that it has dealt
with no other Brokers and hereby indemnifies Landlord against claims by any
other brokers, including without limitation, attorney's fees and court costs.
42. HEADINGS. The caption, numbers and headings appearing herein are
inserted only as a matter of convenience and do not limit or expand the content
of the respective paragraphs.
43. GOVERNING LAW. The laws of the State of Tennessee shall govern the
validity, performance and enforcement of this Lease Agreement.
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44. EXISTING LEASE. Landlord and New Horizon's Computer Learning Center
of Nashville have an existing lease dated August 8, 1994, (the "Existing
Lease"). Upon rental commencement under this Lease the Existing Lease shall
terminate and be of no further force or effect and Landlord shall immediately
refund the security deposit pursuant to the terms of the Existing Lease.
45. ENTIRE AGREEMENT. This Lease Agreement and the attached Exhibits
set forth the entire agreement between the parties- -Any prior or
contemporaneous- conversa t ions or writings are merged herein. No provision
hereof can be waived or amended except by a writing signed by the party against
whom enforcement of such waiver or amendment is sought. Additional terms of this
Lease Agreement, if any, are attached hereto as Collective Exhibit F. If any
provision contained in Exhibit F is inconsistent with a printed provision of
this Lease Agreement, the provision contained in said Exhibit shall supersede
the printed provision. The following Exhibits, as indicated are attached hereto:
<TABLE>
<CAPTION>
ATTACHED NOT
ATTACHED
----------- ------------
<S> <C> <C> <C>
----------- ------------
Exhibit A (description of real property) x
----------- ------------
Exhibit B (description of Premises/and Tenant's Floor Plan) x
----------- ------------
Exhibit C (Plans and Specifications for Construction of
Demised Premises) x
----------- ------------
Exhibit D (Rules and Regulations) x
----------- ------------
Exhibit E (Landlord's Standard Tenant Finishes) x
----------- ------------
Exhibit F (additional terms) x
----------- ------------
</TABLE>
IN WITNESS WHEREOF, Landlord and Tenant have, executed this Lease
Agreement, with all blanks completed, as of the date first written above.
LESSOR: LESSEE:
HERITAGE PLACE ASSOCIATES, LTD.
By: MK Holding Company, Inc.,
Managing General Partner
By: Henry E. J Kromer By: David Weinstein
Title: President Title: President
13
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EXHIBIT A
A parcel of land in Davidson County, Tennessee, being known as Tract 6C, on Plan
of MetroCenter of record in Plat Book 5190, page 491, Register's Office for
Davidson County, TENNESSEE BOUND on the west by the centerline of French Landing
Drive, l ocated generally north of Vantage Way and being more particularly
described as follows:
BEGINNING at a concrete monument in the easterly margin of French
Landing Drive, 535 feet, more or less, from the centerline ,of Vantage Way;
thence, northerly with a curve to the left having o central angle of 22 degrees
04' 59", a radius of 1130.00 feet and distance of 435.53 feet to a concrete
monument; thence, leaving French Landing Drive, N 83 degrees 50' 39"E, 432.11
feet to an iron pin, thence, S 22 degrees 44' 13" E, 355.63 feet to an iron pin,
thence S 67 degrees 15' 47" W, 380.75 feet to an iron pin, thence S 86 degrees
25' 00" W, 214.73 feet to an iron pin; thence N 74 degrees 04' 22" W, 40.00 feet
to a concrete monument, the point of beginning. Containing 4.93 acres, more or
less.
Being the same property conveyed to Intereal Company of deed of record in Book
5713, page 578, Register's Office for Davidson County, Tennessee.
14
<PAGE>
EXHIBIT D
Rules and Regulations
1. Tenant shall be required to use the graphics specified by Landlord
for identification of the Demised Premises and name placement in the Building
Directory. Coordination of ordering and installation of said graphics shall be
performed by Landlord. Tenant shall use Landlord's standard suite identification
signage, which shall be installed by Tenant ant Tenant's expense. The cost of
inserting Tenant's primary identification in the Building Directory shall be
borne by Landlord.
2. No additional locks shall be place on the doors of the Demised
Premises by Tenant, nor shall any existing locks be changed. Landlord will
without charge furnish Tenant with two keys for each lock existing upon the
Building entrance doors, and two keys for Tenant's front door of the Demised
Premises when Tenant assumes possession with the understanding that at the
termination of the Lease Agreement these keys shall be returned. Tenant shall
pay Landlord Fifty Dollars ($50.00) per key, for each key not returned at the
termination of this Lease Agreement.
3. Tenant will refer to all contractors, contractors representatives
and installation technicians, rendering any service on or to the Demised
Premises for Tenant, to Landlord's manager prior to beginning of any contractual
service. This provision shall apply to all work performed in the Building
including installation of telephones, telegraph equipment, electrical devices,
and attachments and installations of any nature affecting floors, walls,
woodwork, trim, windows, ceilings, equipment or any other physical portion of
the Building.
4. No Tenant shall at any time occupy any part of the Building as
sleeping or lodging quarters.
5. Tenant shall not place, install, or operate on the Demised Premises
or in any part of the Building, any engine, stove, or machinery , or conduct
mechanical operations or cook thereon or therein, or place or use in or about
premises any explosives, gasoline, kerosene, oil, acids, caustics, or any other
flammable, explosive, or hazardous material without written consent of Landlord.
6. Landlord will not be responsible for lost or damaged or stolen
personal property, equipment, money, or jewelry from Tenant's area or public
rest rooms, common areas or parking facilities, regardless of whether such loss
occurs when area is locked against entry or not.
7. Tenant shall not at any time display a "For Rent" sign upon the
Demised Premises.
8. Safes and other unusually heavy objects shall be placed by the
Tenant only in such places as may be approved by Landlord. In no event shall any
weight be placed upon such floor by Tenant so as to exceed the floor load
allowances required by local building code design requirements.
9. Landlord will not permit entrance to Tenant's offices by use of pass
key controlled by Landlord, to any person at any time without written permission
by Tenant, except employees, contractors, or service personnel directly
supervised by Landlord.
10. None of the entries, passages, doors, or hallways shall be blocked
or obstructed, or any rubbish, litter, trash, or material of any nature placed,
emptied, thrown into these areas, including any alleyways to the rear of the
Demised Premises, or such areas be USED AT ANY time except for
15
<PAGE>
access or egress by Tenant, Tenant's agents, employees, or invitees. Trash is to
be emptied into containers (dumpsters) provided by the Landlord at a location
specified by Landlord.
11. The water closets and other water fixtures shall not be used for
any purpose other than those for which they were constructed. No person shall
waste water by Interfering with the faucets or otherwise.
12. No bicycles or other vehicles or animals shall be brought into the
Building.
13. No sign, tag, label, picture, advertisement, or notice shall be
displayed, distributed, inscribed, painted or affixed by Tenant on any part of
the outside or inside of the Building or of the Demised Premises without- the
prior written consent of Landlord.
14. In the event Landlord should advance upon the request, or for the
account of the Tenant, any amount for labor, material, packing, shipping,
postage, freight, or express upon articles delivered to the Demised Premises or
for the safety, care, and cleanliness of the Demised Premises, the amount so
paid shall be regarded as additional rent and shall be due and payable for with
to the Landlord from the Tenant.
15. Tenant shall not do or permit to be done within the Demised
Premises anything which would unreasonably annoy or interfere with the rights of
other tenants of the Building.
16. Tenant agrees that its use of electrical current shall never exceed
the capacity of existing feeders, risers, or wiring installation. Any additional
electrical wiring shall be done by Landlord's electrician or supervised by such
electrician, and Tenant shall bear the expense of such additional materials and
installation.
17. Parking provided around the Building shall be on a "first
come-first serve" basis. Tenants and occupants shall observe and obey all
parking and traffic regulations as imposed by Landlord on the premises. Landlord
in all cases retain-- the power -to designate "no parking" zones, traffic right
of ways, and general parking area procedures. Failure of Tenant to comply with
this rule shall constitute a violation of this Lease Agreement.
18. Canvassing, peddling, soliciting, and distribution of handbills or
any other written materials in the Building are prohibited, and each Tenant
shall cooperate to prevent the same.
16
<PAGE>
EXHIBIT E
Landlord's Standard TENANT FINISH
1. Walls-
a. Partitions (to ceiling): 75 lf/ 1,000 sq. ft.
b. Demising (to structure): 20 lfl 1,000 sq. ft.
2. Doors-
a. Entrance- (3' x 8' - 10" solid core, mahogany veneer)
1 / 3,000 sq. ft.
b. Interior- (3' x 8' - 10" solid core, mahogany veneer)
1 / 3,000 sq. ft.
3. Ceiling Tile (already stocked on the floor)- Move from floor to place in
ceiling grid.
4. Carpet and Pad- Material and INSTALLATION AT $12.00/ sq. yd.
5. Wallcovering- 25 lf/1,000 sq. ft. standard grade.
6. Power
a. Duplex Outlets: 8/1,000
b. Single Pole Switches: 3/1,000 sq. ft.
7.Telephone Outlet Box INCLUDING 751 3/4" conduit homerun to telephone
backboard- 5/1,000 sq. ft.
8. Tenant Diffusers w/Flex - 3.5/1,000 sq. ft.
9. PAINTING OF tenant partitions, not including reveals.
10. Window treatment on all windows equal to building standard.
17
<PAGE>
EXHIBIT F
SPECIAL STIPULATIONS
1. ATTORNEY I S FEES: In the event of a dispute between the parties not
involving the payment of rent or other monetary provisions of the Lease the
non-prevailing party shall bear the costs of attorney fees for both the Landlord
and Tenant.
2. RENEWAL OPTION: Provided Tenant is not then in default, Tenant shall have the
option to extend the term of this Lease for one (1) additional five (5) year
term after the expiration of the initial term of the Lease. Tenant may exercise
such option by ,written notice to Landlord at least one hundred eighty (180)
days prior to the expiration hereunder. If Tenant exercises such option, the
rental hereunder shall be adjusted to equal the then current market rental for
comparable size tenants in comparable type buildings (the Building being
acknowledged to be a Class A Building) in the MetroCenter Area. Except for the
rent payable and this renewal option, all other terms and conditions shall
remain the same as set forth herein.
3. EXCLUSIVITY: Landlord acknowledges that Tenant is engaged in the teaching of
the use of computer programs and other than existing tenants (specifically
Turnkey Business Systems) agrees not to lease to other parties having a similar
business.
18
EXHIBIT 10.3
L E A S E A G R E E M E N T
1. Parties THIS LEASE, dated the 3rd day of November, 1997, between
AMERICAN WAY L.L.C., 4646 Poplar Avenue, Suite 245, Memphis,
Tennessee 38117, party of the first part, hereinafter called
Lessor, and NEW HORIZONS COMPUTER LEARNING CENTER OF MEMPHIS,
INC., party of the second part, hereinafter called Lessee.
2. Consideration In consideration of rents, covenants and agreements
& Premises hereinafter reserved and contained on the part of Lessee to be
observed and performed, Lessor leases to Lessee and Lessee
rents from Lessor, those certain premises now erected at 4775
American Way [herein called "Property"] having approximately
27,473 square feet herein Called "Leased Premises".
The use and occupation by Lessee of the leased premises shall
include the use in common with other entitled thereto of the
common areas, employees' car parking areas, service roads,
loading facilities, sidewalks, customer car parking areas and
other facilities as may be designated from time to time by
Lessor.
Lessee leases the leased premises for the sole purpose of use
as a Computer Training Center.
3. Term TO HAVE AND TO HOLD the leased premises unto Lessee for a
period of Ten (10) Years. Said period shall commence on April
15, 1998, and expire on April 14, 2008.
4. Base Lessee agrees to pay to Lessor at Lessor's designated address
on the first day of every month during the term of this Lease,
without demand AND WITHOUT ANY REDUCTION or set-off
whatsoever, a fixed minimum base rent before escrows as stated
below.
In the event any payment due from Tenant shall remain unpaid
more than ten (10) days following the due date of such
payment, in addition to any amounts payable hereunder, Tenant
shall pay to Landlord as a late charge an amount equal to five
(5%) percent of any past due amount.
MINIMUM GUARANTEED RENTAL - MONTHLY $20,319.33
INITIAL COMMON AREA MAINTENANCE-MONTHLY 350.00
INITIAL INSURANCE ESCROW - MONTHLY 200.00
INITIAL TAX ESCROW PAYMENT MONTHLY 1,065.00
--------
TOTAL MONTHLY PAYMENT $21,934.33
<PAGE>
L E A S E A G R E E M E N T
5. Waiver of Lessee hereby covenants to pay any and all sums designated
Notice rent without any demand or notice for payment of rent from
and Lessor, or his agent said demand or notice being expressly
Demand waived by Lessee.
6. Taxes PROPERTY TAXES - Lessee shall be liable for all taxes levied
& Insurance against the personal property and trade fixtures Insurance
placed by Lessee in the Demised Premises. If any such taxes
are levied against Lessor or Lessor's PROPERTY and if Lessor
elects to pay the same or if the assessed value of Lessor's
property is increased by inclusion of personal property and
trade fixtures placed by Lessee in the Demised Premises and
Lessor elects to pay the taxes based on such increase, Lessee
shall pay Lessor upon demand that part of such taxes for which
Lessee is primarily liable hereunder.
Lessee agrees to pay its proportionate share of all taxes,
assessments, and governmental charges of any kind and nature
whatsoever [hereinafter collectively referred to as the
"Taxes"], levied or assessed against the Property. During each
month of the term of this lease, Lessee shall make a monthly
escrow deposit with Lessor equal to 1/12th of its
proportionate share of the Taxes on the Property which will be
due and payable for that particular year. Lessee authorizes
Lessor to use the funds deposited by him with the Lessor under
this Article #7 to pay the Taxes levied or assessed against
the Property. Each Tax Escrow Payment shall BE DUE AND payable
at the same time in the same manner as the time and manner of
the payment of Minimum Guaranteed Rental as provided herein.
The AMOUNT OF THE INITIAL MONTHLY Tax Escrow payment is based
upon the Lessee's proportionate share of the estimated taxes
on the Property for year in question, and monthly Tax Escrow
Payment is subject to increase or decrease as determined by
Lessor to reflect an accurate escrow of Lessee's estimated
proportionate share of the Taxes. The Tax Escrow Payment
account of Lessee shall BE RECONCILED annually. If Lessee's
total Tax Escrow Payments are less than Lessee's total prorata
share of the Taxes on the Property, Lessee shall pay Lessor
upon demand the difference; if the total Tax Escrow Payments
are greater than Lessee's actual prorata share of the Taxes on
the Property, Lessor shall retain such excess and credit it to
the Lessee's Tax Escrow Account. Lessee's proportionate share
of the Taxes on the Property shall he computed by multiplying
the Taxes by a fraction, the numerator of which shall be the
number of square feet of floor space in the Demised Premises
and the denominator of which shall be the number of square
feet of all stores in the Property.
-2-
<PAGE>
L E A S E A G R E E M E N T
If Lessee should fail to pay any taxes, assessments or
governmental charges required to be paid by Lessee hereunder,
in addition to any other remedies provided herein, Lessor may,
if it so elect, pay such taxes/ assessments and governmental
charges. Any sums paid by Lessor shall be deemed to be so much
additional rental owing by Lessee to Lessor and due and
payable upon demand as additional rental plus interest at the
rate of ten [10%] percent per annum from the date of payment
by Lessor until repaid by Lessee.
If at any time during the term of this lease, the present
method of taxation shall be changed to that in lieu of the
whole or any part of any taxes, assessments, levies or charges
levied, assessed or imposed on real estate and the
improvements thereon there shall be levied, assessed or
imposed on Lessor a capital levy or other tax directly on the
rents received therefrom and/or a franchise tax, assessment,
levy or charges, measured by or based, in whole or in part,
upon such rents on the present or any future building or
buildings on the Property, then all such taxes, assessments,
levies, or charges, or the part thereof so measured or based
shall be deemed to be included within the term "Taxes" for the
purposes hereof.
Lessee may, alone or along with any other Lessee of building
at its or their sole cost and expense, in its or their own
name(s) dispute and contest any "Taxes" by appropriate
proceedings diligently conducted in good faith, but only after
Lessee and all OTHER LESSEES, if any, joining with Lessee in
such contest have deposited with Lessor the amount so
contested and unpaid, or their proportionate share thereof as
the case may be, which shall be held by Lessor without
obligation for interest until the termination of the
proceedings, at which time the amount(s) deposited shall be
applied by Lessor toward the payment of the items held valid
(plus any COURT COSTS, INTEREST, PENALTIES AND OTHER
liabilities associated with the proceedings), and Lessee's
share of any excess shall be returned to Lessee. Lessee
further agrees to pay to Lessor upon demand Lessee's share (as
among all Lessees who participated in the contest) of all
court costs, interest, penalties and other liabilities
relating to such proceedings. Lessee hereby Indemnifies and
agrees to hold harmless, Lessor from and against any cost,
damage or expense (including attorney fees) in connection with
any such proceedings.
Any payment to be made pursuant to this Article with respect
to the real estate tax year in which this lease commences or
terminates shall bear the same ratio to
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<PAGE>
L E A S E A G R E E M E N T
the payment which would be required to be made for the full
tax year as that part of such tax year covered by the term of
this lease bears to a full tax year.
INSURANCE - Lessee agrees to pay its proportionate share of
Lessor's cost of carrying fire and extended coverage insurance
on the Property. During each month of the term of this lease,
Lessee shall make a monthly escrow deposit with the Lessor
equal to 1/12th of its proportionate share of the Insurance on
the Property which will be due and payable for the particular
year. Lessee authorizes Lessor to use the funds deposited by
him with Lessor under this Article 7, to pay cost of such
Insurance. Each Insurance Escrow payment shall be due and
payable at the same time and manner of the payment of
Guaranteed Rental as provided herein. The amount of the
initial monthly Insurance Escrow Payment will be that amount
set out in Article 4 above. The initial monthly Insurance
Escrow Payment is based upon Lessee's proportionate share of
the estimated Insurance on the Property for the year in
question, and the monthly Insurance Escrow Payment is subject
to increase or decrease as determined by Lessor to reflect an
accurate monthly escrow of Lessee's estimated proportionate
share of the Insurance. The Insurance Escrow Payment Account
of Lessee shall be reconciled annually. If the Lessee's total
Insurance Escrow Payments are less than Lessee's actual
prorata share of the Insurance on the Property, Lessee shall
pay to Lessor upon demand the difference; if the total
Insurance Escrow Payments by Lessee are more than Lessee's
actual prorata share of the insurance on the Property, Lessor
shall retain such excess and credit it to Lessee's Insurance
Escrow Payment account. Lessee's proportionate share of the
cost of Insurance on the Property shall be computed by
multiplying the cost of Insurance by a fraction, the numerator
of which shall be the number of square FEET OF FLOOR SPACE IN
THE DEMISED Premises and the denominator of which shall be the
number of square feet of all stores in the Property.
7. Addi- The Lessee shall pay as additional rent any money required to
tional be paid under this lease whether or not the same be designated
Rents "additional rent". If such amounts or charges are not paid at
the time provided in this ease, nevertheless, if not paid when
due, be collectible as additional rent with the next year
installment of rent thereafter falling due hereunder, but
nothing herein contained shall be deemed to suspend or delay
the payment of any amount of money or charge at the time
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<PAGE>
L E A S E A G R E E M E N T
the same becomes due and payable hereunder or limit any other
remedy of the Lessor.
8. Proof of The Burden of proof of payment of rent in case of controversy
Payment shall be upon the Lessee
9. Security Lessee, contemporaneously with the execution of thislease, has
Deposit deposited with Lessor a sum equal to one month's rent, receipt
of which is hereby acknowledged by Lessor. Said deposit shall
be held by Lessor, without liability for interest, as security
for the faithful performance by Lessee of all the terms,
covenants-, and conditions of this lease by said Lessee to be
kept and performed during the term hereof. If at any time
during the term of this lease any of the rent herein reserved
shall be overdue and unpaid, or any other sum payable by
Lessee to Lessor hereunder shall be overdue and unpaid then
Lessor may, at the option of the Lessor (but Lessor shall not
be required to), appropriate and apply any portion of said
deposit to the payment of any such overdue rent or other sum.
Should Lessee comply with all of said terms, covenants and
conditions and promptly pay all of the rental herein provided
for as it falls due, and all other sums payable by Lessee to
Lessor hereunder, the said deposit shall be in full to Lessee
at the end of this lease, or upon the earlier termination of
this lease.
10. Subordi- Lessor shall have the right at any time and from time to,time
nation during the term of this Lease, as security for any
Non-Dis- indebtedness owed by Lessor, to create an encumbrance against
turbance its estate in the Premises OR ANY PARTY THEREOF; and provided,
and however, Lessor shall have first delivered to a written
Attornment Non-Disturbance and Attornment Agreement containing the
following:
a) Lessee's right to possession of the Premises pursuant to
all the terms and provisions of this Lease shall not be
disturbed if Lessee is not in default hereunder and so
long as Lessee shall pay the rent and observe and
perform all the provisions of this lease;
b) Should any beneficiary become the owner of the property
so encumbered or should said property be sold by reason
of foreclosure, Trustee's sale or other proceedings
brought to enforce said encumbrance, or should said
property be transferred by Deed in Lieu of Foreclosure,
this Lease shall continue in full force and effect as a
direct Lease between the then owner of the property
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<PAGE>
L E A S E A G R E E M E N T
and Lessee upon the subject to all the terms, covenants and
conditions of this Lease for the balance of the term of lease
then remaining.
An express condition precedent to this Lease shall be the
delivery of said Nondisturbance Agreement, in the event the
premises or any estate therein owned by the Lessor is or has
been encumbered prior to the execution of this Lease.
11. Control of All parking areas, driveways, entrances and exits there to and
Common other facilities furnished by Lessor in or near the Property,
Areas including employee parking areas, truck ways, loading docks,
garbage pickup stations, pedestrian sidewalks, landscape
areas, and other improvements provided by Lessor for general
use, in common of Lessee, their officers, agents, employees
and customers, shall at all times be subject to the exclusive
control and management of Lessor. Lessor shall have both the
right from time to time to establish, modify and enforce
reasonable rules and regulations with respect to all common
areas mentioned and the right to construct or remove
facilities thereon; to police the same; and from time to time
change the area, level, location and arrangement of parking
areas and-other facilities hereinabove referred to; restrict
parking by Lessee, their officers, agents and employees to
employee parking areas designated from time to-time by Lessor.
Lessee WILL BE OBLIGATED TO ENFORCE forthwith the parking
restrictions imposed by Lessor and as a further part of its
obligation, Lessee agrees to furnish Lessor with the
automobile license numbers of its employees within fifteen
(15) days after being requested by the Lessor for such
numbers.
All common areas and facilities not within the leased
premises, which Lessee may be permitted to use and occupy, are
under a revocable license, and if the amount of such areas be
diminished, Lessor shall not be subject to any liability nor
shall Lessee be entitled to any compensation or diminution or
abatement of rent, nor shall such diminution of such areas be
deemed constructive or actual eviction.
The boundaries and location of the leased premises are
outlined on the site plan of the Property, which is deemed to
represent 48% of the Property space for purposes of
determining Lessee's share of the Center's costs under this
lease.
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<PAGE>
L E A S E A G R E E M E N T
12. Cost of In each lease year, Lessee will pay to Lessor, in addition to
Mainte- the rental specified - hereinabove, as further additional
nance on rent, subject to the limitation hereinafter set forth, a
Common proportion of that portion of Shopping operating costs
Areas incurred by Lessor, based upon the ratio of the square feet of
to the total square feet of all the building space owned by
Lessor in the Property. For the purpose of this paragraph, the
"operating expenses or costs" means the total cost and
expenses incurred by Lessor in operating and maintaining the
common facilities, actually used or available for use by
Lessee, excluding only items of expense commonly known as
designated as carrying charges but specifically including,
without limitation, gardening and landscaping, the cost of
public liability and property damage insurance, repairs, line
painting, lighting, sanitary control, removal of snow, trash,
rubbish, garbage and other refuse, depreciation on machinery
and equipment-used in such maintenance, the cost of personnel
to implement such services, to direct parking, and to police
the common facilities. "Common Facilities" means all areas,
space, equipment and special services provided by Lessor for
the common or joint use and benefit of the occupants of the
Property, their employees, agents, servants, customers and
other Invitees, including without limitation parking areas,
access roads, driveways, retaining walls, landscaped areas,
truck service ways or tunnels, loading docks, pedestrian
malls, courts, stairs, ramps and sidewalks, comfort and first
aide stations, washrooms, parcel pick up stations, canopies,
utilities, sprinkler hydrant charges, and hanging baskets or
FLOWER BOXES WITH plants. The additional rent provided herein
shall be computed annually. Lessee shall pay 1/12th of his/her
proportionate share of the Common Area Maintenance monthly
into the Common Area Escrow ACCOUNT. Each escrow payment shall
be due and payable at the same time and manner of the payment
of Guaranteed Rental as provided herein. The escrow payment is
estimated on Lessee's proportionate share of the Common Area
Maintenance and is subject to increase or decrease as
determined by Lessor to reflect an accurate monthly escrow of
Lessee's estimated proportionate share of the actual prorata
share of the Common Area Maintenance. If the Lessee's total
C.A.M. Escrow Payments are less than Lessee's actual prorata
share of the Common Area Maintenance, Lessor shall invoice
Lessee the difference which shall be paid promptly; if the
total Common Area Maintenance Escrow Payments are more than
Lessee's proportionate share of the cost of C.A.M. on the
Property, Lessor shall retain such excess and credit it to the
Lessee's Escrow Payment Account.
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<PAGE>
L E A S E A G R E E M E N T
13. Improve- All improvements, additions and repairs made to the premises
ments & and building during the term of this lease shall at the
Fixtures expiration of same become the property of the Lessor, his
heirs or assigns, without cost to Lessor; it is agreed,
however, that all Trade Fixtures, installed by Lessee, shall
remain the property of the Lessee, and that such Trade
Fixtures will be removed at the expiration of this lease,
provided this lease be not then in default, and provided any
damage caused by such removal shall be repaired by the Lessee
at his own expense and the premises left in good condition.
14. Signs, All signs, both temporary and permanent shall be approved by
Awnings Lessor. All signs must conform to the other signs on Property.
& Canopies
15. Maintenance Lessee shall at all times keep the leased premises and all
of Leased show moldinqs), all partitions, doors, fixtures, equipment,
Premises and Premises appurtenances thereof (including electrical,
lighting, roof, plumbing, and any air conditioning and heating
systems) in good working order (including reasonably periodic
painting as determined by Lessor). Damage by unavoidable
casualty excepted, except for structural portions of the
premises, which shall be maintained by Lessor, but if Lessor
is required to make repairs to structural portions by reason
of Lessee's negligent acts or omission to act, Lessor may add
the cost of such repairs to the rent which shall thereafter
become due. Lessee is responsible for termite and pest control
as necessary. If Lessee refuses or neglects to repair or
maintain property as required hereunder and to the reasonable
satisfaction of Lessor as soon as reasonably possible after
written demand, Lessor may make such repair without liability
to the Lessee for any loss or damage that may accrue to
Lessee's merchandise, fixtures, or other property or to
Lessee's business by reason thereof, and upon completion
thereof, Lessee shall pay Lessor's costs for making such
repairs plus twenty percent (20%) overhead, upon
presentation of bill thereof, as additional rent.
16. Environ Lessor covenants that all handling, transportation, storage,
mental treatment and usage of asbestos, PCB transformers and
Matters hazardous, toxic and contaminated substances which are
regulated by federal, state or local laws and ordinances or
other rules and regulations promulgated pursuant thereto
(collectively, "Hazardous Materials") by Lessor, its agents,
employees or contractors that may occur on the Premises shall
throughout the term of Lease be in compliance with all
applicable federal, state and local laws, rules, regulations
-8-
<PAGE>
L E A S E A G R E E M E N T
and ordinances. Lessor further covenants that no leak, spill,
discharge, emission or disposal of Hazardous Materials will
occur during the term of Lease on the Premises and that the
soil, groundwater, soil vapor on and under the Premises, and
all improvements located thereon, will continue during the
term of Lease to be free of all Hazardous Materials. Subject
to the limitations contained herein, Lessor agrees to
indemnify, defend and hold Lessee and its officers, employees
and agents harmless from any claims, judgments, damages,
fines, penalties, costs, liabilities (including sums paid in
settlement of claims) or loss including attorney's fees
through the trial, appellate and administrative levels,
consultants fees, and expert fees which arise during or after
the term of Lease in connection with the presence or suspected
presence of Hazardous materials in the soil, groundwater, or
soil vapor on or under the Premises, and/or in any
improvements located thereon, unless such Hazardous Materials
are present as the result of the negligence or willful
misconduct of Tenant, its officers, employees or agents.
Without limiting the generality of the foregoing, this
indemnification does specifically cover costs incurred in
connection with any investigation of site conditions or any
cleanup, remedial, removal or restoration work required by a
federal, state or local governmental agency or political
subdivision because of the presence or suspected presence of
Hazardous Materials in the soil, groundwater or soil vapor on
or under the Premises, and any improvements located thereon,
unless the Hazardous Materials are present solely as the
result of the negligence or willful misconduct of Lessee, its
officers, agents or employees. Without limiting the generality
of the foregoing, this indemnification shall also specifically
cover costs in connection with:
a) Hazardous Materials that migrate, flow, percolate, diffuse
or in any way move onto or under the Premises after date
hereof; or
b) Hazardous Materials present on or under the Premises as a
result of any discharge, dumping, spilling (accidental or
otherwise) onto the Premises during or after the term of Lease
by any person or entity.
Lessee covenants that no asbestos or other Hazardous Materials
will be introduced onto the Premises through the actions of
Lessee without prior written approval of Lessor. Lessee
further covenants that all handling,
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<PAGE>
L E A S E A G R E E M E N T
transportation, storage, treatment and usage of Hazardous
Materials by Lessee, its agents, employees or contractors that
may occur on the premises, after approval by lessor, shall
throughout the period from the date possession of the Premises
is delivered to Lessee through the end of the term of Lease
and any renewal, be in compliance with all applicable federal,
state and local laws, rules, regulations and ordinances.
Lessee agrees to indemnify, defend and hold Lessor and its
officers, employees and agents harmless from any claims,
judgments, damages, fines, penalties, costs, liabilities
(including sums paid in settlement of claims) or loss
including attorney's fees through the trial, appellate and
administrative levels, consultant fees, and expert fees which
arise during or after the term of Lease in connection with any
violation by Lessee of the covenants contained herein. Without
limiting the generality of the foregoing, this indemnification
does specifically cover costs incurred in connection with any
investigation of site conditions or any cleanup, remedial,
removal or restoration work required by a federal, state or
local governmental agency or political subdivision because of
the presence of Hazardous Materials in the soil, groundwater
or soil vapor on or under the Premises, and any improvements
located thereon caused by any violation by Lessee of the
covenants contained herein.
17. Liability Lessee shall, during the entire term hereof, keep in full
Insurance force and effect a policy of public liability and property
damage insurance with respect to the leased premises, and the
business operated by Lessee AND ANY subtenants of Lessee in
the leased premises in which the limits of public liability
shall not be less than $500,000 per person and $1,000,000 per
accident and in which the property damage liability shall be
not less than $100,000. The policy shall name Lessor, any
person, firms or corporation designated by Lessor, and Lessee
as insured, and shall contain a clause that the insurer will
not cancel or change the insurance without first giving the
Lessor ten (10) days prior written notice.
18. Increased Lessee agrees not to allow anything upon the premises or
Premium suffer to be done anything which may render invalid or cause
Fire an increase in any policy of insurance which Lessor may now or
Insurance hereafter have upon said building
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<PAGE>
L E A S E A G R E E M E N T
19. Indemni- Lessee will indemnify Lessor and save him harmless from and
fication against any and all claims, action, damages, liability and
of the expense in connection with loss of life, personal injury
Lessor and/or damage to property 'arising from or out of any
occurrence in, upon or at the leased premises or the occupancy
or use by Lessee of the leased premises or any part thereof or
occasioned wholly or in part by any act or omission of Lessee,
it agents, contractors, employees, servants, lessees or
concessionaires. In case Lessor shall, except where Lessor is
negligent, be made a party to any litigation commenced by or
against Lessee, then Lessee shall protect and hold Lessor
harmless and shall pay all costs, expenses and reasonable
attorney's fees incurred or paid by Lessor in connection with
such litigation.Lessee shall also pay all costs, expenses and
reasonable attorney's fees that may be incurred or paid by
Lessor in enforcing the covenants and agreements of this
lease.
20. Utilities All heat, water, electric current, gas, garbage or special
fees, metering charges, or other utilities or charges for the
use of the leased premises are to be paid by Lessee.
21. Default In the event of any failure of Lessee to pay any rental due
by Lessee hereunder within ten (10) days after the same shall be due or
any failure to perform any other of the terms, conditions, or
covenants of this lease to be observed or performed by Lessee
for more than thirty (30) days after written notice of such
default shall have been given to Lessee, or if Lessee or an
agent of Lessee shall falsify any report required to be
furnished to Lessor pursuant to the terms of this lease, or if
Lessee or any guarantor of this lease shall become bankrupt or
insolvent, or file any debtor proceedings or take or have
taken against Lessee or any guarantor of this Lease in any
court pursuant to any statute either of the United States or
any State, a petition in bankruptcy or insolvency or for all
or a portion of Lessee's or any such guarantor's property, or
if Lessee or any such guarantor makes an assignment for the
benefit of creditors, or petition for or enters into an
agreement, or if Lessee shall abandon said premises, or suffer
this lease to be taken under any writ of execution, then
Lessor besides other rights or remedies or may have, shall
have the immediate right or re-entry and the right to change
locks and prohibit entry to all others and may remove all
persons and property from the leased premises and such
property may be removed and stored in a public warehouse or
elsewhere at the cost of, and for the account of Lessee, all
without service of notice or resort to legal process and
without being deemed guilty others and may remove all persons
and property from the leased premises and such property may be
removed and stored in a public warehouse or elsewhere at the
cost of, and for the account of Lessee, all without service of
notice or resort to legal process and without being deemed
guilty of trespass, or becoming liable for any loss or damage
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<PAGE>
L E A S E A G R E E M E N T
which may be occasioned thereby. Moreover, upon the
occurrences of any of the events heretofore cited, Lessor may,
at his option, terminate this lease immediately upon written
notice to Lessee, and thereupon, Lessor shall be entitled to
exercise all rights and remedies of Lessor under this lease.
22. Right to The right of the Lessor to terminate this lease as set forth
terminate above shall not be exclusive of such other rights that the
not Lessor has or causes of action that may accrue to the Lessor
Exclusive because of the Lessee's failure to fulfill, perform or observe
the obligations, agreements or COVENANTS OF his lease, and the
exercise or pursuit by the Lessor the rights or causes of
action accruing hereunder shall not be an exhaustion of such
other rights or causes of action that the Lessor might
otherwise have.
23. Legal In the event of any court action between Lessor and Lessee or
Expenses a Sublessee to enforce any of the provisions or rights
hereunder, the prevailing party shall be entitled to recover
from the other all costs and expenses, including reasonable
attorney's fees, in such amount as the court may determine.
24. Good Lessee, upon request of any part in interest, shall execute
Standing promptly such good standing or estoppel certificates
Certificates certifying to Lessor's compliance with the lease as shall be
requested by Lessor. Lessee's failure to do so within fourteen
(14) days, or to unreasonably withhold such certificates,
shall entitle Lessor on ten (10) days' notice of its intention
to terminate the lease unless such certificate is
deliveredwithin that period.
25. Loss of Lessee agrees to carry plate glass insurance and to promptly
Damage replace at its own expense any broken or cracked glass in the
to Lessee's leased premises, however caused.
Property;
Plate Glass
26. Lien on A first liem is hereby expessly reserved by the Lessor and
Leasehold granted by the Lessee upon the terms and upon all interest of
the Lessee in this leasehold for the payment of rent and also
for the satisfaction of any cause of action which may accrue
to the Lessor by the provisions of this instrument. A first
lien is also expressly reserved by the Lessor and granted by
the Lessee upon all improvements and trade fixtures erected or
put in place or that may be erected or put in place upon the
premises by or through the Lessee or other
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<PAGE>
L E A S E A G R E E M E N T
occupants for the payment of rent and also for the
satisfaction of any causes of action which may accrue to the
Lessor by the provisions of this instrument. To enforce and
protect its rights, Lessor shall at all times have the right
of entry into the premises and the right to change locks and
prohibit entry from any person until his/her rental is paid.
27. Quiet The Lessor hereby covenants that if Lessee shall keep and
Possession perform all of the covenants of this lease on the part of
Lessee to be performed, Lessor will give to Lessee the quiet,
peaceful and uninterrupted possession of the said premises.
28. Altera- Lessee covenants not to make any changes, alterations or
tions additions about the said building or premises without first
obtaining the written consent of the Lessor and in no event to
do anything that shall weaken the building or structure now in
or that may hereafter be erected on the premises.
29. Delivery Upon the expiration of the terms of this lease, Lessee at end
at end of of covenants to deliver unto the Lessor the possession of
Lease Lease said building, lot and premises, cleared of all persons,
goods, and things not properly belonging to the same, in as
good order and condition as the same were received,
destruction or damage by fire, storm or other casualty and
ordinary wear and tear excepted, and no demand for such
delivery shall be necessary.
30. Right of The Lessor reserves the right during the term of this lease to
Entry enter said premises at reasonable hours to show the same to
other persons who may be interested in renting or buying the
property-, and- for the purpose of inspecting the premises and
to make such repairs as Lessor may deem necessary for the
protection and preservation of the said building and premises;
but Lessor is not bound to make any repairs whatever except as
otherwise provided herein, nor to be held liable for any
damage in consequence of leak, or for the stoppage of water,
sewer, gas, or drain pipes by reason of any other cause or
obstruction, not for any other defects about the building and
premises, Lessee having examined the same and being satisfied
therewith, but should such leaks, obstructions, freezing,
stoppages or other defects about the building and premises,
occur during the term of this lease or while the Lessee is
occupying the premises, then the Lessee shall remedy the same
promptly at the Lessee's expense unless the Lessor by written
agreement undertakes to do the same.
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<PAGE>
L E A S E A G R E E M E N T
31. Sub- The Lessee may not assign its interest in this lease nor
letting sublet the demised premises or any part thereof without
written consent of Lessor, provided that such consent shall
not be unreasonably withheld, and provided further that under
no circumstances will Lessee be relieved of its prior
liability under the terms and provisions hereof.
In the event that the rental due and payable by a sublessee
(or a combination of the rental payable under such sublease
plus any bonus or other consideration therefore or incident
thereto) exceeds the rental payable under this lease, or if
with respect to a permitted assignment, permitted license or
other transfer to Lessee by Lessor, the consideration payable
to Lessee by the assignee, licensee, or other transferee
exceeds the rental payable under this lease, then Lessee shall
be bound and obligated to pay Lessor all such excess rental
and other excess consideration within ten (10) days following
receipt thereof by Lessee from such sublessee, licensee, or
other transferee, as the case may be.
32. Destruc- Should the building upon the demised premises be totally
tion by destroyed by fire or other cause, or so damaged that
Fire, Etc. rebuilding or repairs cannot be completed within one hundred
eighty (180) days from date of fire, or other cause of damage,
this lease shall terminate and the Lessee shall be allowed an
abatement of rent from the date of such damage or destruction
and all rent falling due subsequently shall be cancelled.
However, if the damage is such that rebuilding or repairs can
be completed within one hundred eighty (180) days, Lessor
covenants and agrees to make such repairs within reasonable
promptness and dispatch and to allow Lessee an abatement in
the rent for such time as the building is untenable, and the
Lessee covenants and agrees that the terms of this leaseshall
not be otherwise affected.
33. Renewal No renewal, modification or extension of this lease is binding
or unless it is in writing and signed by both Lessor and Lessee,
holding and in the event no renewal is entered into, Lessee shall
over remain on a month-to-month basis for a period of no longer
than three (3) months on the same terms and conditions subject
to cancellation by either party upon one month's written
notice.
34. Waiver It is hereby covenanted and agreed that no waiver of any of
of Breach the covenants of this lease shall be construed to be a waiver
of any succeeding breach of the same or any other covenant.
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<PAGE>
L E A S E A G R E E M E N T
35. Covenants It is hereby covenanted and agreed between the parties hereto
Run to that all covenants, conditions, agreements, and undertakings
Heirs, etc. in this lease contained shall extend to and be binding on the
respective heirs, executors, administrators, successors and
assigns of the respective parties hereto the same as if they
were in every case named and expressed; also that the terms
"Lessor and Lessee" shall be construed in the singular or
plural number according as they respectively represent one or
more than one person.
36. Accord & No payment by Lessee or receipt by Lessor of a lesser amount
Satisfac- than the monthly rent herein stipulated shall be deemed to be
tion other than on account of the earliest stipulated rent, nor
shall any endorsement or statement on any check or any letter
accompany any check or payment as rent be deemed an accord and
satisfaction, and Lessor may accept such check or payment
without prejudice to Lessor's right to recover the balance of
such rent or pursue any other remedy in this lease provided.
37. Notice Any notice, demand, request or other instrument which may be
or are required to be given under this lease shall be
delivered in person or sent by United States certified mail,
postage prepaid, and shall be addressed to Lessor at 4646
Poplar Avenue, Suite 245, Memphis, Tennessee 38117, or at such
other address as Lessor may designate by written notice and to
the Lessee at 4775 American Way, Memphis, Tennessee 38118.
38. Rules Lessee agrees to abide by the Rules and Regulations applicable
& to the lease premises throughout the term of the lease.
Regula-
tions
39. Entire It is expressly understood and agreed by and between the
Agreement parties hereto that this lease and any riders attached hereto
forming part hereof set forth all the promises, agreements,
conditions and understanding between Lessor or his agent and
Lessee relative to the leased premises, and that there are no
other promises, agreements, conditions, or understanding,
either oral or written, between them other than are herein set
forth. It is further understood and agreed that no subsequent
alteration, amendment, change or addition to this lease shall
be binding upon Lessor or Lessee unless reduced to writing and
signed by them and direct reference therein made a part
hereof.
IN TESTIMONY WHEREOF, the above named Lessor and the above
named Lessee have executed this and one other original
instrument of identical tenor and date, on the
-15-
<PAGE>
L E A S E A G R E E M E N T
day and year set forth in paragraph 1 of this lease.
This lease must be signed and returned no later than ten (10)
days from date shown on this lease or this lease shall become
null and void.
AMERICAN WAY L.L.C.
Robert Hussey, III LESSOR
Chief Manager
NEW HORIZONS COMPUTER LEARNG
CENTER OF MEMPHIS, INC.
David L. Weinstein LESSEE
President
-16-
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1998
<CASH> 3,488
<SECURITIES> 22,091
<RECEIVABLES> 14,948
<ALLOWANCES> (1,315)
<INVENTORY> 700
<CURRENT-ASSETS> 42,844
<PP&E> 17,012
<DEPRECIATION> (9,013)
<TOTAL-ASSETS> 75,876
<CURRENT-LIABILITIES> 17,763
<BONDS> 458
76
0
<COMMON> 0
<OTHER-SE> 56,363
<TOTAL-LIABILITY-AND-EQUITY> 75,876
<SALES> 32,495
<TOTAL-REVENUES> 32,495
<CGS> 14,895
<TOTAL-COSTS> 29,155
<OTHER-EXPENSES> (733)
<LOSS-PROVISION> 88
<INTEREST-EXPENSE> 162
<INCOME-PRETAX> 3,911
<INCOME-TAX> 1,463
<INCOME-CONTINUING> 2,448
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,448
<EPS-PRIMARY> 0.34
<EPS-DILUTED> 0.33
</TABLE>
