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 MARCH 31, 1998
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
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
- --------------------------------- -------------------
(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) 536-8500
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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 March 31, 1998: 7,177,331
<PAGE>
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
New Horizons Worldwide, Inc. and Subsidiaries
March 31, 1998 and December 31, 1997
(Dollars in thousands)
MARCH 31, 1998 DECEMBER 31, 1997
-------------- -----------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 3,235 $ 3,129
Investments 24,643 23,058
Accounts receivable, net 11,172 11,887
Inventories 674 720
Prepaid expenses 787 731
Deferred income tax assets 1,429 1,429
Other current assets 665 887
------- -------
Total current assets 42,605 41,841
Property, plant and equipment, net 7,654 7,848
Intangible assets 13,454 13,546
Other assets 3,656 3,336
------- -------
Total Assets $67,369 $66,571
======= =======
See accompanying notes to condensed consolidated financial statements.
2
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CONDENSED CONSOLIDATED BALANCE SHEETS
New Horizons Worldwide, Inc. and Subsidiaries
March 31, 1998 and December 31,1997
(Dollars in thousands)
MARCH 31, 1998 DECEMBER 31, 1997
-------------- -----------------
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,420 $ 2,489
Current portion of long-term obligations 1,405 1,792
Income taxes payable 119 1,049
Other current liabilities 11,343 9,508
-------- --------
Total current liabilities 15,287 14,838
Long-term obligations, excluding current
portion 671 1,516
Deferred income tax liability 563 563
Deferred rent 679 598
-------- --------
Total liabilities 17,200 17,515
-------- --------
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 7,362,331 shares in 1998
and 7,327,331 shares in 1997 73 73
Additional paid-in capital 27,009 26,646
Retained earnings 24,446 23,635
Treasury stock at cost - 185,000
shares in 1998 and 1997 (1,298) (1,298)
Unrealized investment loss, net of tax (61) --
-------- --------
Total stockholders' equity 50,169 49,056
-------- --------
Total Liabilities and Stockholders'
Equity $ 67,369 $ 66,571
======== ========
See accompanying notes to condensed consolidated financial statements
3
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CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
New Horizons Worldwide, Inc. and Subsidiaries
Three Months Ended March 31, 1998 and March 31, 1997
(Unaudited)
(Dollars in thousands except Earnings Per Share)
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 1998 MARCH 31, 1997
------------------ ------------------
Revenues
Franchising
Franchise fees $ 173 $ 257
Royalties 3,593 2,567
Other 404 127
------- -------
Total franchising revenues 4,170 2,951
Company-owned training centers 10,515 9,018
------- -------
Total revenues 14,685 11,969
Cost of revenues 6,951 6,397
Selling, general and administrative
expenses 6,661 5,500
------- -------
Operating income 1,073 72
Investment income, net 234 150
Gain from release of certain franchise
obligations -- 2,600
------- -------
Income before income taxes 1,307 2,822
Provision for income taxes 496 1,090
------- -------
Net income $ 811 $ 1,732
======= =======
Basic Earnings Per Share $ 0.11 $ 0.25
======= =======
Diluted Earnings Per Share $ 0.11 $ 0.24
======= =======
See accompanying notes to condensed consolidated financial statements.
4
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<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
New Horizons Worldwide, Inc. and Subsidiaries
Three Months Ended March 31, 1998 and March 31, 1997
(Unaudited)
(Dollars in thousands)
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 1998 MARCH 31, 1997
------------------ ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 811 $ 1,732
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 933 916
Loss on disposal of equipment 5 3
Deferred income taxes -- 497
Cash provided (used) from the change in:
Accounts receivable 715 1,794
Inventories 46 1
Prepaid expenses and other current assets 166 4,753
Other assets (320) (169)
Accounts payable (69) (320)
Accrued expenses 1,835 630
Income tax payable (930) 700
Deferred rent 81 --
-------- --------
Net cash provided by operating activities 3,273 10,537
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities (20,786) --
Redemption of marketable securities 19,201 --
Additions to property, plant and equipment (652) (1,583)
-------- --------
Net cash used in investing activities (2,237) (1,583)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 302 482
Proceeds from debt obligations 46 859
Principal payments on debt obligations (1,278) (400)
Other -- (5)
-------- --------
Net cash (used in) provided by financing
activities (930) 936
-------- --------
Net increase in cash and cash equivalents 106 9,890
Cash and cash equivalents at beginning of period 3,129 11,411
-------- --------
Cash and cash equivalents at end of period $ 3,235 $ 21,301
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash was paid for:
Interest $ 71 $ 96
======== ========
Income taxes $ 1,296 $ 150
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
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New Horizons Worldwide, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
For the Three Months Ended March 31, 1998 and March 31, 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 March 31, 1998 and the results of operations
for the three month periods ended March 31, 1998 and March 31, 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 purchase included
net assets totaling approximately $834. 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.
If the results from the acquired locations had been included in the
results for the first quarter of 1998 and 1997, the Company's revenue,
net income and earnings per share would have been the pro forma amounts
shown below:
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 1998 MARCH 31, 1997
------------------ ------------------
Revenue $ 16,995 $ 13,876
Net Income $ 977 $ 1,741
Basic Earnings Per Share $ 0.13 $ 0.24
Diluted Earnings Per Share $ 0.13 $ 0.23
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
options, and Diluted EPS, as defined therein, which
6
<PAGE>
New Horizons Worldwide, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
For the Three Months Ended March 31, 1998 and March 31, 1997
(Unaudited)
(Dollars in thousands except Earnings Per Share)
assumes dilution from the outstanding 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 used in determining
Basic EPS was 7,153,252 in 1998 and 7,024,056 in 1997. The weighted
average number of shares outstanding used in determining Diluted EPS
was 7,372,582 in 1998 and 7,267,811 in 1997.
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 three months ended March 31, 1998 and 1997 is presented below:
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 1998 MARCH 31, 1997
------------------ ------------------
<S> <C> <C>
Net income $ 811 $ 1,732
-------------- -------------
Other comprehensive income (loss),
before tax:
Unrealized holding losses on
securities arising during period (101) -
Income tax benefit related to other
comprehensive income 40 -
-------------- -------------
Other comprehensive income (loss),
net of tax (61) -
-------------- -------------
Comprehensive income $ 750 $ 1,732
============== =============
</TABLE>
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.
7
<PAGE>
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 $2,716 or 22.7% to $14,685 for the first quarter of 1998
compared to $11,969 for the first quarter of 1997. This was primarily due to
improved revenues at company-owned locations, revenue increases at franchises
that were open more for than twelve months and additional franchises added to
the system. System-wide revenues for the first quarter were $78,764, up 34.6%
from $58,498 for the same period in 1997. Revenues from locations open more than
12 months, both franchised and company-owned, grew 31.4% in the first quarter of
1998 compared to the same period in 1997.
COST OF REVENUES
Cost of revenues increased $554 or 8.7% for the first quarter of 1998 compared
to the same period in 1997. As a percentage of revenues, cost of revenues
decreased to 47.3% in the 1998 quarter from 53.4% in the 1997 quarter. The
increase in the cost of revenues in absolute dollars was a result of the
increase in the revenues for the quarter as discussed above and higher training,
facilities and depreciation expenses in and associated with the expansion of the
centers in Los Angeles and New York City. The decrease in cost of revenues as a
percentage of revenues was primarily due to improved absorption of fixed costs
and increased revenues.
8
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased $1,161 or 21.1% for the
1998 quarter as compared to 1997. As a percentage of revenues, selling, general
and administrative expenses decreased to 45.4% for the first quarter of 1998
from 46.0% for the same period in 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 of international
operations, and expenses associated with the expansion of the centers in Los
Angeles and 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 to $1,073 for the first quarter of 1998 compared to
$72 for the first quarter of 1997. The increase in operating income for the
three months ended March 31, 1998 resulted mainly from the increase in revenues
and the reduction in expenses as a percent of revenue.
INVESTMENT INCOME/(EXPENSE)
Investment income increased $51 or 18.4% for the first quarter of 1998 compared
to the same period in 1997. As a percentage of revenues, investment income
decreased to 2.2% for the first quarter of 1998 when compared to 2.3% in the
first quarter of 1997. The increase in investment income in absolute dollars was
due mainly to the short term investment of funds received from the income from
operations and the collection of accounts receivable from discontinued
operations subsequent to March 31, 1997.
Interest expense decreased $33 or 26.0% for the first quarter of 1998 when
compared to the first quarter of 1997. The lower interest expense was due mainly
to lower outstanding borrowings in the first three months of 1998 compared to
the corresponding period for 1997.
INCOME TAXES
The Company's effective tax rate decreased to 37.9% for the first quarter 1998
from 38.6% for the first three months of 1997. The decrease in the effective tax
rate was due principally to higher tax free interest income, partially offset by
higher foreign income taxes.
9
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1998, the Company's working capital was $27,318 and its cash,
cash equivalents and short-term investments totaled $27,878. Working capital as
of March 31, 1998 reflected an increase of $315 or 1.2% from $27,003 as of
December 31, 1997.
The Company currently maintains a $2,750 credit facility for the purchases of
equipment with a commercial bank. The full amount was available at March 31,
1998. This facility bears interest at a variable interest rate equal to .5% over
the bank's prime rate. At the expiration date the Company intends to enter into
a similar credit facility for future equipment purchases.
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 three months of 1998 the Company spent
approximately $652 on capital items and anticipates spending up to $2,160 during
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.
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.
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.
10
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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; and (vi) the Company's ability to manage the growth of its
business.
The Company's strategy focuses on enhancing revenues and profits at
company-owned and franchise locations and the sale of additional franchises, and
also includes the possible opening of new company-owned locations, 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.
11
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FORM 10Q - PART II: OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit Index
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENTS
- ------- -------------------------
10.1 Stock Option Agreement dated January 22, 1998, between the Registrant
and Robert S. McMillan *
10.2 Stock Option Agreement dated January 22, 1998, between the Registrant
and Kenneth Hagerstrom *
10.3 Stock Option Agreement dated January 22, 1998, between the Registrant
and Charles G. Kinch *
27 Financial Data Schedule*
* Filed herewith
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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: May 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)
13
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EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
10.1 Stock Option Agreement dated January 22, 1998, between the Registrant
and Robert S. McMillan
10.2 Stock Option Agreement dated January 22, 1998, between the Registrant
and Kenneth Hagerstrom
10.3 Stock Option Agreement dated January 22, 1998, between the Registrant
and Charles G. Kinch
27 Financial Data Schedule
EXHIBIT 10.1
STOCK OPTION AGREEMENT
THIS AGREEMENT is entered into as of January 22, 1998, by and
between New Horizons Worldwide, Inc., (f/k/a Handex Corporation and Handex
Environmental Recovery, Inc.), a Delaware corporation (the "Company"), and
Robert S. McMillan (the "Optionee").
WITNESSETH:
WHEREAS, the Committee is currently charged with administering
the New Horizons Worldwide, Inc. Key Employees Stock Option Plan (the
"Plan"); and
WHEREAS, the Committee has determined that the Optionee, as a Key
Employee (as such term is defined in the Plan), should be granted a stock option
under the Plan upon the terms and conditions set forth in this Agreement, and
for the number of shares of the $.01 par value common stock of the Company set
forth hereinbelow (the "Shares");
NOW, THEREFORE, the Company and the Optionee hereby agree as
follows:
1. DEFINITIONS. The following terms shall have the meanings set
forth below whenever used in this instrument:
(a) The word "Affiliate" shall mean any corporation which is, within
the meaning of Section 1563(a) of the Code, a member of a controlled group of
corporations which includes the Company.
(b) The word "Agreement" shall mean this instrument. (c) The word
"Board" shall mean the Board of Directors of the Company.
(d) The word "Code" shall mean the United States Internal Revenue
Code (Title 26 of the United States Code).
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(e) The word "Committee" shall mean the Compensation Committee
appointed by the Board or the Board if no such committee exists or is acting
with respect to the Plan.
(f) The word "Company" shall mean New Horizons Worldwide, Inc., a
Delaware corporation, and any successor thereto which shall maintain the Plan.
(g) The word "Disability" shall mean the Optionee's inability, due
to a mental or physical condition, to perform services for the Company
substantially consistent with past practice, as determined by the Committee
pursuant to written certification of such condition from a physician acceptable
to the Committee.
(h) The word "Employee" shall mean any person who is an employee of
either the Company or any Subsidiary.
(i) The words "1999 Exercise Date" shall mean the third business day
following the day the Company receives its audited financial statements for
calendar year 1998 from its independent certified public accountants.
(j) The word "Option" shall mean the right and option of the
Optionee to purchase Shares pursuant to the terms of this Agreement.
(k) The words "Option Price" shall mean the price at which Shares
may be acquired upon the exercise of any Option.
(l) The word "Optionee" shall mean the person to whom an Option has
been granted pursuant to this Agreement.
(m) The words "Personal Representative" shall mean, following the
Optionee's death, the person who shall have acquired, by Will or by the laws of
descent and distribution, the right to exercise any Option.
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(n) The word "Plan" shall mean the New Horizons Worldwide, Inc. Key
Employees Stock Option Plan, as it was originally adopted and as it may later be
amended.
(o) The words "Pre-Tax Net Income" shall mean the Net Income Before
Tax of the Company for 1998 as determined by the Company for purposes of the
Incentive Bonus described in the letter attached hereto as Exhibit A.
(p) The words "Reporting Company" shall mean any entity with a class
of equity securities which is registered under Section 12 of the Securities
Exchange Act of 1934, as amended.
(q) The word "Shares" shall mean shares of the $.01 par value common
stock of the Company.
(r) The word "Subsidiary" shall mean any corporation at least 50% of
the common stock of which is owned directly or indirectly by the Company.
2. GRANT OF OPTION. Effective as of the date of this Agreement, the
Company grants to the Optionee, upon the terms and conditions set forth
hereinafter, the right and option to purchase all or any lesser whole number of
an aggregate of Six Thousand Five Hundred (6,500) Shares at an Option Price of
$12.78 per Share.
3. TERM OF OPTION. Except as otherwise provided herein, the Option
shall expire at the close of regular business hours at the Company's principal
office at 500 Campus Drive, Morganville, New Jersey 07751, on January 2, 2004,
or, if earlier, on the applicable expiration date provided for in Section 6, or
7, or 8, or 9 hereof.
4. EXERCISE DATES. Except as otherwise provided herein, the Optionee
shall be entitled to exercise the Option with respect to the number of Shares
indicated below on or after the date indicated opposite such number below:
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INITIAL AND ADDITIONAL TOTAL SHARES WITH
NUMBER OF SHARES WITH RESPECT TO WHICH DATE BEGINNING
RESPECT TO WHICH THE THE OPTION MAY ON WHICH OPTION
OPTION MAY BE EXERCISED BE EXERCISED MAY BE EXERCISED
----------------------- ----------------- ----------------
2,500 2,500 1999 Exercise Date
2,500 5,000 January 1, 2000
Except as provided in Sections 6 and 7 hereof, the Option may not be exercised
at any time unless the Optionee shall be an Employee at such time.
5. LIMITATION UPON RIGHT TO EXERCISE OPTION. Notwithstanding Section
4 hereof:
(a) if the Pre-Tax Net Income is less than $7,807,000, the Option
may not be exercised in respect of any Shares;
(b) if the Pre-Tax Net Income is at least $7,807,000, but less
than $9,185,000, the number of Shares for which the Option may
be exercised as set forth in the Table in Section 4 shall be
reduced (to the nearest whole Share) by the percentage
(rounded down to the nearest whole percent) derived from the
formula set forth below:
$9,185,000 minus Pre-Tax Net Income
_______________________________ x 75%
$1,378,000
(c) if the Pre-Tax Net Income is at least $9,185,000 the number of
Shares for which the Option may be exercised as set forth in
the Table in Section 4 shall not be reduced.
PROVIDED, that the amounts of Pre-Tax Net Income shown above in this Section 5
may be equitably adjusted by the Committee to take account of (i) any material
expansion or contraction
17
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of the Company's business operations during calendar year 1998, or (ii) any
extraordinary events which occur during 1998, or (iii) any changes in the
Company's accounting methodology that became effective in respect of calendar
year 1998. Any such adjustment shall be made no later than the 1999 Exercise
Date and shall be final and binding upon the Company and the Optionee. The
Committee shall inform the Optionee of any such adjustment no later than the
1999 Exercise Date.
6. TERMINATION OF EMPLOYMENT OTHER THAN BECAUSE OF DEATH OR
DISABILITY. So long as the Optionee shall continue to be an Employee, the Option
shall not be affected by (a) any temporary leave of absence approved in writing
by the Company or a Subsidiary and described in Section 1.421-7(h) of the
Federal Income Tax Regulations or any lawful successor regulations thereto, or
(b) any change of duties or position (including transfer to or from a
Subsidiary). Subject to Section 8 hereof, if the Optionee ceases to be an
Employee for any reason other than death or Disability, the Option may be
exercised only to the extent of the purchase rights, if any, which, pursuant to
Section 4 hereof, after giving effect to Section 5 hereof, existed as of the
date the Optionee ceases to be an Employee (assuming, for this purpose only,
that the 1999 Exercise Date was January 1, 1999) and which have not theretofore
been exercised; PROVIDED, however, that the Committee may in its absolute
discretion determine (but shall not be under any obligation to determine) that
such purchase rights shall be deemed to include additional Shares which are
subject to the Option. Upon an Optionee's ceasing to be an Employee, such
purchase rights shall in any event terminate upon the earlier of either (a)
three (3) months after the date the Optionee ceased to be an Employee (one (1)
year if the Optionee dies or becomes Disabled during the three (3) month
period), or (b) the last day of the term of the Option.
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7. OPTIONEE'S DEATH OR DISABILITY. If, after 1998, while the
Optionee is an Employee, the Optionee dies or becomes Disabled, the Optionee or
the Optionee's Personal Representative may, on or after the 1999 Exercise Date,
exercise the Option with respect to all of the Shares for which the Optionee
could have exercised the Option had he survived and continued to be an Employee
until January 1, 2000. The Option shall in any event terminate upon the earlier
of either (a) the first anniversary of the date the Optionee ceased to be an
Employee, or (b) the last day of the term of the Option.
8. EVENTS OF FORFEITURE. Notwithstanding any other provision of this
Agreement, unless the Committee shall otherwise determine, upon (a) the
Optionee's ceasing to be an Employee for any reason prior to January 1, 1999, or
(b) the Optionee's ceasing to be an Employee by reason of an involuntary
termination of such status for good cause, as determined by the Committee, or
(c) the Optionee's voluntary termination with the intention of rendering
services to a competitor of the Company or any of its Subsidiaries or otherwise
entering into competition with the Company or any of its Subsidiaries, directly
or indirectly, or (d) the commission by the Optionee of a material breach of his
obligations under any agreement with the Company or any of its Subsidiaries, the
Optionee's right to purchase Shares pursuant to the exercise of the Option shall
terminate. Nothing in this Agreement shall confer upon any Optionee any right to
continue in the employ of the Company or a Subsidiary, or to serve as a member
of the Board of Directors of the Company or a Subsidiary, or to interfere with
or limit either the right of the Company or a Subsidiary to terminate his
employment at any time or the right of the shareholders of the Company to remove
him as a member of the Board of Directors of the Company or a Subsidiary with or
without cause.
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9. CHANGE OF CONTROL, DISSOLUTION, LIQUIDATION AND CERTAIN MERGERS.
Upon the occurrence of a "change of control" (as defined herein), or immediately
prior to a dissolution or liquidation of the Company (but only if the
distributee of substantially all of the Company's assets upon the liquidation of
the Company was not, immediately prior to the liquidation, an Affiliate) or a
merger or consolidation in which the Company is not the surviving corporation
(but only if the corporation which is the surviving corporation in such merger
or consolidation was not, immediately prior to the merger or consolidation, an
Affiliate), the Optionee shall have the immediate and nonforfeitable right to
exercise the Option with respect to all Shares for which the Option could have
been exercised prior to its expiration, and any such exercise shall be
irrevocable. The Optionee shall be entitled to exercise the Option as provided
in the immediately preceding sentence regardless of whether the other
corporation which is the surviving corporation in a merger or consolidation
shall adopt and maintain the Plan. In the event the Option becomes exercisable
pursuant to this Section 9, the Company shall notify the Optionee of his right
to exercise the Option. The term "change of control" shall mean the acquisition
(other than from the Company) by any person, entity or "group" (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934
(the "Exchange Act")) but excluding for this purpose the Company or any
Subsidiary or any employee benefit plan of the Company or any Subsidiary which
acquires beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of voting securities of the Company of 50% or more (35%
or more if the Company is a Reporting Company) of either the then outstanding
Shares or the combined voting power of the Company's then outstanding voting
securities entitled to vote generally in the election of Directors. Upon either
the dissolution or liquidation of the Company (but only if the distributee of
substantially all of the Company's assets upon the liquidation of the
20
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Company was not, immediately prior to the liquidation, an Affiliate) or upon the
occurrence of a merger or consolidation in which the Company is not the
surviving corporation (but only if the corporation which is the surviving
corporation in such merger or consolidation was not, immediately prior to the
merger or consolidation, an Affiliate) and immediately following which the
surviving corporation fails to maintain the Plan, the Option shall terminate
unless the surviving corporation assumes the Option.
10. ADJUSTMENT OF NUMBER OF SHARES, ETC. In the event that
subsequent to the date of this Agreement, the outstanding Shares are, as a
result of a stock split, stock dividend, combination or exchange of shares,
exchange for other securities, reclassification, reorganization, redesignation,
merger, consolidation, recapitalization, spin-off, split-off or split-up or
other such change (including, without limitation, any transaction described in
Section 424(a) of the Code), or a special dividend or other distribution to the
Company's shareholders, increased or decreased or changed into or exchanged for
a different number or kind of shares of stock or other securities of the
Company, then (i) there shall automatically be substituted for each Share
subject to the Option the number and kind of shares of stock or other securities
into which each outstanding Share shall be exchanged, (ii) the option price per
Share or unit of securities shall be increased or decreased proportionately so
that the aggregate purchase price for the securities subject to the Option shall
remain the same as immediately prior to such event, and (iii) the Committee
shall make such other adjustments to the securities subject to the Option as may
be appropriate, equitable and in compliance with the provisions of Section
424(a) of the Code to the extent applicable and any such adjustment shall be
final, binding and conclusive as to the Optionee. Any such adjustment shall
provide for the elimination of fractional shares if the Committee shall so
direct.
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11. EXERCISE OF OPTION. The Option may be exercised by delivering to
the Chairman, President or Chief Financial Officer of the Company at its
principal office, 500 Campus Drive, Morganville, New Jersey, 07751, a completed
Notice of Exercise of Option (obtainable from the Chief Financial Officer of the
Company) setting forth the number of Shares with respect to which the Option is
being exercised. Such Notice shall be accompanied by payment in full for the
Shares, unless other arrangements satisfactory to the Company for prompt payment
of such amount are made. Payments shall be made by such type of check or other
means of funds transfer as is acceptable to the Company in the amount of the
aggregate purchase price for such Shares or, with the consent of the Committee,
payment may be made in whole or in part in Shares having a fair market value on
the date the Option is exercised equal to that portion of the purchase price for
which payment in cash is not made; provided, however, that payment in Shares
held by the Optionee less than one (1) year may be made only with the consent of
the Committee.
12. ISSUANCE OF SHARE CERTIFICATES. Subject to the last sentence of
this Section 12, upon receipt by the Company prior to expiration of the Option
of a duly completed Notice of Exercise of Option to either exercise the Option
accompanied by full payment for the Shares being purchased pursuant to such
Notice (and, with respect to any Option exercised pursuant to Section 12 hereof
by someone other than the Optionee, accompanied in addition by proof
satisfactory to the Committee of the right of such person to exercise the
Option), the Company shall cause to be made or otherwise delivered to the
Optionee, within thirty (30) days of such receipt, a certificate for the number
of Shares so purchased. The Optionee shall not have any of the rights of a
shareholder with respect to the Shares which are subject to the Option unless
and until a certificate representing such Shares is issued to the Optionee. The
Company
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<PAGE>
shall not be required to issue any certificates for Shares upon the exercise of
the Option prior to (i) obtaining any approval from any governmental agency
which the Committee shall, in its sole discretion, determine to be necessary or
advisable, and/or (ii) the admission of such Shares to listing on any national
securities exchange on which the Shares may be listed, and/or (iii) completion
of any registration or other qualification of the Shares under any state or
federal law or ruling or regulations of any governmental body which the
Committee shall, in its sole discretion, determine to be necessary or advisable,
or the determination by the Committee, in its sole discretion, that any
registration or other qualification of the Shares is not necessary or advisable.
13. SUCCESSORS IN INTEREST, ETC. This Agreement shall be binding
upon and inure to the benefit of any successor of the Company and the heirs,
estate, and Personal Representative of the Optionee. The Option shall not be
transferable other than by Will or the laws of descent and distribution, and the
Option may be exercised during the lifetime of the Optionee only by the Optionee
provided that a guardian or other legal representative who has been duly
appointed for such Optionee may exercise the Option on behalf of the Optionee. A
deceased Optionee's Personal Representative shall act in the place and stead of
the deceased Optionee with respect to exercising an Option or taking any other
action pursuant to this Agreement.
14. PROVISIONS OF PLAN CONTROL. This Agreement is subject to all of
the terms, conditions, and provisions of the Plan and to such rules,
regulations, and interpretations relating to the Plan as may be adopted by the
Committee and as may be in effect from time to time. A copy of the Plan is
attached hereto as Exhibit "B" and is incorporated herein by reference. In the
event and to the extent that this Agreement conflicts or is inconsistent with
the terms, conditions,
23
<PAGE>
and provisions of the Plan, the Plan shall control, and this Agreement shall be
deemed to be modified accordingly.
15. NO LIABILITY UPON DISTRIBUTION OF SHARES. The liability of the
Company under this Agreement and any distribution of Shares made hereunder is
limited to the obligations set forth herein with respect to such distribution
and no term or provision of this Agreement shall be construed to impose any
liability on the Company or the Committee in favor of any person with respect to
any loss, cost or expense which the person may incur in connection with or
arising out of any transaction in connection with this Agreement.
16. WITHHOLDING. The Optionee agrees that the Company may make
appropriate provision for tax withholding with respect to the transactions
contemplated by this Agreement.
17. CAPTIONS. The captions and section numbers appearing in this
Agreement are inserted only as a matter of convenience. They do not define,
limit, construe or describe the scope or intent of the provisions of this
Agreement.
18. NUMBER. The use of the singular or plural herein shall not be
restrictive as to number and shall be interpreted in all cases as the context
shall require.
19. GENDER. The use of the feminine, masculine or neuter pronoun
shall not be restrictive as to gender and shall be interpreted in all cases as
the context may require.
20. INVESTMENT REPRESENTATION. Optionee hereby represents and
warrants that any Shares which he may acquire by virtue of the exercise of the
Option shall be acquired for investment purposes only and not with a view to
distribution or resale; provided, however, that this restriction shall become
inoperative in the event the Shares which are subject to the Option shall be
registered under the Federal Securities Act of 1933, as amended, or in the event
there is
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<PAGE>
presented to the Company evidence satisfactory to the Company to the effect that
the offer or sale of the Shares which were acquired upon exercise of the Option
may lawfully be made without registration under the Federal Securities Act of
1933, as amended.
21. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware and any applicable federal
law.
22. NONQUALIFIED OPTION. The Option shall for all purposes be a
nonqualified stock option subject to the federal income tax treatment described
in Section 1.83-7 of the Federal Income Tax Regulations. Both the Company and
the Optionee shall, on their respective federal income tax returns, report any
transaction relating to the Option in a manner consistent with the preceding
sentence.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed on its behalf by its duly authorized officer, and the Optionee has
hereunto set his hand, all as of the day and year first above written.
_____________________________________
("Optionee")
NEW HORIZONS WORLDWIDE, INC.
("Company")
By:__________________________________
Thomas J. Bresnan, President
25
EXHIBIT 10.2
STOCK OPTION AGREEMENT
THIS AGREEMENT is entered into as of January 22, 1998, by and
between New Horizons Worldwide, Inc., (f/k/a Handex Corporation and Handex
Environmental Recovery, Inc.), a Delaware corporation (the "Company"), and
Kenneth Hagerstrom (the "Optionee").
WITNESSETH:
WHEREAS, the Committee is currently charged with administering
the New Horizons Worldwide, Inc. Key Employees Stock Option Plan (the
"Plan"); and
WHEREAS, the Committee has determined that the Optionee, as a Key
Employee (as such term is defined in the Plan), should be granted a stock option
under the Plan upon the terms and conditions set forth in this Agreement, and
for the number of shares of the $.01 par value common stock of the Company set
forth hereinbelow (the "Shares");
NOW, THEREFORE, the Company and the Optionee hereby agree as
follows:
1. DEFINITIONS. The following terms shall have the meanings set
forth below whenever used in this instrument:
(a) The word "Affiliate" shall mean any corporation which is, within
the meaning of Section 1563(a) of the Code, a member of a controlled group of
corporations which includes the Company.
(b) The word "Agreement" shall mean this instrument. (c) The word
"Board" shall mean the Board of Directors of the Company.
(d) The word "Code" shall mean the United States Internal Revenue
Code (Title 26 of the United States Code).
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(e) The word "Committee" shall mean the Compensation Committee
appointed by the Board or the Board if no such committee exists or is acting
with respect to the Plan.
(f) The word "Company" shall mean New Horizons Worldwide, Inc., a
Delaware corporation, and any successor thereto which shall maintain the Plan.
(g) The word "Disability" shall mean the Optionee's inability, due
to a mental or physical condition, to perform services for the Company
substantially consistent with past practice, as determined by the Committee
pursuant to written certification of such condition from a physician acceptable
to the Committee.
(h) The word "Employee" shall mean any person who is an employee of
either the Company or any Subsidiary.
(i) The words "1999 Exercise Date" shall mean the third business day
following the day the Company receives its audited financial statements for
calendar year 1998 from its independent certified public accountants.
(j) The word "Option" shall mean the right and option of the
Optionee to purchase Shares pursuant to the terms of this Agreement.
(k) The words "Option Price" shall mean the price at which Shares
may be acquired upon the exercise of any Option.
(l) The word "Optionee" shall mean the person to whom an Option has
been granted pursuant to this Agreement.
(m) The words "Personal Representative" shall mean, following the
Optionee's death, the person who shall have acquired, by Will or by the laws of
descent and distribution, the right to exercise any Option.
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<PAGE>
(n) The word "Plan" shall mean the New Horizons Worldwide, Inc. Key
Employees Stock Option Plan, as it was originally adopted and as it may later be
amended.
(o) The words "Pre-Tax Net Income" shall mean the Pretax Income for
1998 as determined by the Company for purposes of the Incentive Bonus Program
for Optionee described in the letter attached hereto as Exhibit A.
(p) The words "Reporting Company" shall mean any entity with a class
of equity securities which is registered under Section 12 of the Securities
Exchange Act of 1934, as amended.
(q) The word "Shares" shall mean shares of the $.01 par value common
stock of the Company.
(r) The word "Subsidiary" shall mean any corporation at least 50% of
the common stock of which is owned directly or indirectly by the Company.
2. GRANT OF OPTION. Effective as of the date of this Agreement, the
Company grants to the Optionee, upon the terms and conditions set forth
hereinafter, the right and option to purchase all or any lesser whole number of
an aggregate of Twelve Thousand Five Hundred (12.500) Shares at an Option Price
of $12.78 per Share.
3. TERM OF OPTION. Except as otherwise provided herein, the Option
shall expire at the close of regular business hours at the Company's principal
office at 500 Campus Drive, Morganville, New Jersey 07751, on January 2, 2004,
or, if earlier, on the applicable expiration date provided for in Section 6, or
7, or 8, or 9 hereof.
4. EXERCISE DATES. Except as otherwise provided herein, the Optionee
shall be entitled to exercise the Option with respect to the number of Shares
indicated below on or after the date indicated opposite such number below:
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<PAGE>
INITIAL AND ADDITIONAL TOTAL SHARES WITH
NUMBER OF SHARES WITH RESPECT TO WHICH DATE BEGINNING
RESPECT TO WHICH THE THE OPTION MAY ON WHICH OPTION
OPTION MAY BE EXERCISED BE EXERCISED MAY BE EXERCISED
----------------------- ----------------- ----------------
6,250 6,250 1999 Exercise Date
6,250 12,500 January 1, 2000
Except as provided in Sections 6 and 7 hereof, the Option may not be exercised
at any time unless the Optionee shall be an Employee at such time.
5. LIMITATION UPON RIGHT TO EXERCISE OPTION. Notwithstanding Section
4 hereof:
(a) if the Pre-Tax Net Income is less than $2,928,000, the Option
may not be exercised in respect of any Shares;
(b) if the Pre-Tax Net Income is at least $2,928,000 but less than
$3,101,000, the number of Shares for which the Option may be
exercised as set forth in the Table in Section 4 shall be
reduced (to the nearest whole Share) by the percentage derived
from the formula set forth below:
$3,101,000 MINUS Pre-Tax Net Income
50% PLUS (30% x ___________________________________)
$173,000
(c) if the Pre-Tax Net Income is at least $3,101,000 but less than
$3,445,000, the number of Shares for which the Option may be
exercised as set forth in the Table in Section 4 shall be
reduced (to the nearest whole Share) by the percentage derived
from the formula set forth below:
$3,445,000 MINUS Pre-Tax Net Income
50% x ____________________________________
$344,000
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<PAGE>
PROVIDED, that the amounts of Pre-Tax Net Income shown above in this Section 5
may be equitably adjusted by the Committee to take account of (i) any material
expansion or contraction of the Company's business operations during calendar
year 1998, or (ii) any extraordinary events which occur during 1998, or (iii)
any changes in the Company's accounting methodology that became effective in
respect of calendar year 1998. Any such adjustment shall be made no later than
the 1999 Exercise Date and shall be final and binding upon the Company and the
Optionee. The Committee shall inform the Optionee of any such adjustment no
later than the 1999 Exercise Date.
6. TERMINATION OF EMPLOYMENT OTHER THAN BECAUSE OF DEATH OR
DISABILITY. So long as the Optionee shall continue to be an Employee, the Option
shall not be affected by (a) any temporary leave of absence approved in writing
by the Company or a Subsidiary and described in Section 1.421-7(h) of the
Federal Income Tax Regulations or any lawful successor regulations thereto, or
(b) any change of duties or position (including transfer to or from a
Subsidiary). Subject to Section 8 hereof, if the Optionee ceases to be an
Employee for any reason other than death or Disability, the Option may be
exercised only to the extent of the purchase rights, if any, which, pursuant to
Section 4 hereof, after giving effect to Section 5 hereof, existed as of the
date the Optionee ceases to be an Employee (assuming, for this purpose only,
that the 1999 Exercise Date was January 1, 1999) and which have not theretofore
been exercised; PROVIDED, however, that the Committee may in its absolute
discretion determine (but shall not be under any obligation to determine) that
such purchase rights shall be deemed to include additional Shares which are
subject to the Option. Upon an Optionee's ceasing to be an Employee, such
purchase rights shall in any event terminate upon the earlier of either (a)
three (3) months after the date the Optionee ceased to be an Employee (one (1)
year if the Optionee
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<PAGE>
dies or becomes Disabled during the three (3) month period), or (b) the last day
of the term of the Option.
7. OPTIONEE'S DEATH OR DISABILITY. If, after 1998, while the
Optionee is an Employee, the Optionee dies or becomes Disabled, the Optionee or
the Optionee's Personal Representative may, on or after the 1999 Exercise Date,
exercise the Option with respect to all of the Shares for which the Optionee
could have exercised the Option had he survived and continued to be an Employee
until January 1, 2000. The Option shall in any event terminate upon the earlier
of either (a) the first anniversary of the date the Optionee ceased to be an
Employee, or (b) the last day of the term of the Option.
8. EVENTS OF FORFEITURE. Notwithstanding any other provision of this
Agreement, unless the Committee shall otherwise determine, upon (a) the
Optionee's ceasing to be an Employee for any reason prior to January 1, 1999, or
(b) the Optionee's ceasing to be an Employee by reason of an involuntary
termination of such status for good cause, as determined by the Committee, or
(c) the Optionee's voluntary termination with the intention of rendering
services to a competitor of the Company or any of its Subsidiaries or otherwise
entering into competition with the Company or any of its Subsidiaries, directly
or indirectly, or (d) the commission by the Optionee of a material breach of his
obligations under any agreement with the Company or any of its Subsidiaries, the
Optionee's right to purchase Shares pursuant to the exercise of the Option shall
terminate. Nothing in this Agreement shall confer upon any Optionee any right to
continue in the employ of the Company or a Subsidiary, or to serve as a member
of the Board of Directors of the Company or a Subsidiary, or to interfere with
or limit either the right of the Company or a Subsidiary to terminate his
employment at any time or the
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<PAGE>
right of the shareholders of the Company to remove him as a member of the Board
of Directors of the Company or a Subsidiary with or without cause.
9. CHANGE OF CONTROL, DISSOLUTION, LIQUIDATION AND CERTAIN MERGERS.
Upon the occurrence of a "change of control" (as defined herein), or immediately
prior to a dissolution or liquidation of the Company (but only if the
distributee of substantially all of the Company's assets upon the liquidation of
the Company was not, immediately prior to the liquidation, an Affiliate) or a
merger or consolidation in which the Company is not the surviving corporation
(but only if the corporation which is the surviving corporation in such merger
or consolidation was not, immediately prior to the merger or consolidation, an
Affiliate), the Optionee shall have the immediate and nonforfeitable right to
exercise the Option with respect to all Shares for which the Option could have
been exercised prior to its expiration, and any such exercise shall be
irrevocable. The Optionee shall be entitled to exercise the Option as provided
in the immediately preceding sentence regardless of whether the other
corporation which is the surviving corporation in a merger or consolidation
shall adopt and maintain the Plan. In the event the Option becomes exercisable
pursuant to this Section 9, the Company shall notify the Optionee of his right
to exercise the Option. The term "change of control" shall mean the acquisition
(other than from the Company) by any person, entity or "group" (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934
(the "Exchange Act")) but excluding for this purpose the Company or any
Subsidiary or any employee benefit plan of the Company or any Subsidiary which
acquires beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of voting securities of the Company of 50% or more (35%
or more if the Company is a Reporting Company) of either the then outstanding
Shares or the combined voting power of the Company's then outstanding voting
securities entitled to vote
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<PAGE>
generally in the election of Directors. Upon either the dissolution or
liquidation of the Company (but only if the distributee of substantially all of
the Company's assets upon the liquidation of the Company was not, immediately
prior to the liquidation, an Affiliate) or upon the occurrence of a merger or
consolidation in which the Company is not the surviving corporation (but only if
the corporation which is the surviving corporation in such merger or
consolidation was not, immediately prior to the merger or consolidation, an
Affiliate) and immediately following which the surviving corporation fails to
maintain the Plan, the Option shall terminate unless the surviving corporation
assumes the Option.
10. ADJUSTMENT OF NUMBER OF SHARES, ETC. In the event that
subsequent to the date of this Agreement, the outstanding Shares are, as a
result of a stock split, stock dividend, combination or exchange of shares,
exchange for other securities, reclassification, reorganization, redesignation,
merger, consolidation, recapitalization, spin-off, split-off or split-up or
other such change (including, without limitation, any transaction described in
Section 424(a) of the Code), or a special dividend or other distribution to the
Company's shareholders, increased or decreased or changed into or exchanged for
a different number or kind of shares of stock or other securities of the
Company, then (i) there shall automatically be substituted for each Share
subject to the Option the number and kind of shares of stock or other securities
into which each outstanding Share shall be exchanged, (ii) the option price per
Share or unit of securities shall be increased or decreased proportionately so
that the aggregate purchase price for the securities subject to the Option shall
remain the same as immediately prior to such event, and (iii) the Committee
shall make such other adjustments to the securities subject to the Option as may
be appropriate, equitable and in compliance with the provisions of Section
424(a) of the Code to the extent applicable and any such adjustment shall be
final, binding and conclusive as to the Optionee.
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<PAGE>
Any such adjustment shall provide for the elimination of fractional shares if
the Committee shall so direct.
11. EXERCISE OF OPTION. The Option may be exercised by delivering to
the Chairman, President or Chief Financial Officer of the Company at its
principal office, 500 Campus Drive, Morganville, New Jersey, 07751, a completed
Notice of Exercise of Option (obtainable from the Chief Financial Officer of the
Company) setting forth the number of Shares with respect to which the Option is
being exercised. Such Notice shall be accompanied by payment in full for the
Shares, unless other arrangements satisfactory to the Company for prompt payment
of such amount are made. Payments shall be made by such type of check or other
means of funds transfer as is acceptable to the Company in the amount of the
aggregate purchase price for such Shares or, with the consent of the Committee,
payment may be made in whole or in part in Shares having a fair market value on
the date the Option is exercised equal to that portion of the purchase price for
which payment in cash is not made; provided, however, that payment in Shares
held by the Optionee less than one (1) year may be made only with the consent of
the Committee.
12. ISSUANCE OF SHARE CERTIFICATES. Subject to the last sentence of
this Section 12, upon receipt by the Company prior to expiration of the Option
of a duly completed Notice of Exercise of Option to either exercise the Option
accompanied by full payment for the Shares being purchased pursuant to such
Notice (and, with respect to any Option exercised pursuant to Section 12 hereof
by someone other than the Optionee, accompanied in addition by proof
satisfactory to the Committee of the right of such person to exercise the
Option), the Company shall cause to be made or otherwise delivered to the
Optionee, within thirty (30) days of such receipt, a certificate for the number
of Shares so purchased. The Optionee shall not have
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<PAGE>
any of the rights of a shareholder with respect to the Shares which are subject
to the Option unless and until a certificate representing such Shares is issued
to the Optionee. The Company shall not be required to issue any certificates for
Shares upon the exercise of the Option prior to (i) obtaining any approval from
any governmental agency which the Committee shall, in its sole discretion,
determine to be necessary or advisable, and/or (ii) the admission of such Shares
to listing on any national securities exchange on which the Shares may be
listed, and/or (iii) completion of any registration or other qualification of
the Shares under any state or federal law or ruling or regulations of any
governmental body which the Committee shall, in its sole discretion, determine
to be necessary or advisable, or the determination by the Committee, in its sole
discretion, that any registration or other qualification of the Shares is not
necessary or advisable.
13. SUCCESSORS IN INTEREST, ETC. This Agreement shall be binding
upon and inure to the benefit of any successor of the Company and the heirs,
estate, and Personal Representative of the Optionee. The Option shall not be
transferable other than by Will or the laws of descent and distribution, and the
Option may be exercised during the lifetime of the Optionee only by the Optionee
provided that a guardian or other legal representative who has been duly
appointed for such Optionee may exercise the Option on behalf of the Optionee. A
deceased Optionee's Personal Representative shall act in the place and stead of
the deceased Optionee with respect to exercising an Option or taking any other
action pursuant to this Agreement.
14. PROVISIONS OF PLAN CONTROL. This Agreement is subject to all of
the terms, conditions, and provisions of the Plan and to such rules,
regulations, and interpretations relating to the Plan as may be adopted by the
Committee and as may be in effect from time to time. A
35
<PAGE>
copy of the Plan is attached hereto as Exhibit "B" and is incorporated herein by
reference. In the event and to the extent that this Agreement conflicts or is
inconsistent with the terms, conditions, and provisions of the Plan, the Plan
shall control, and this Agreement shall be deemed to be modified accordingly.
15. NO LIABILITY UPON DISTRIBUTION OF SHARES. The liability of the
Company under this Agreement and any distribution of Shares made hereunder is
limited to the obligations set forth herein with respect to such distribution
and no term or provision of this Agreement shall be construed to impose any
liability on the Company or the Committee in favor of any person with respect to
any loss, cost or expense which the person may incur in connection with or
arising out of any transaction in connection with this Agreement.
16. WITHHOLDING. The Optionee agrees that the Company may make
appropriate provision for tax withholding with respect to the transactions
contemplated by this Agreement.
17. CAPTIONS. The captions and section numbers appearing in this
Agreement are inserted only as a matter of convenience. They do not define,
limit, construe or describe the scope or intent of the provisions of this
Agreement.
18. NUMBER. The use of the singular or plural herein shall not be
restrictive as to number and shall be interpreted in all cases as the context
shall require.
19. GENDER. The use of the feminine, masculine or neuter pronoun
shall not be restrictive as to gender and shall be interpreted in all cases as
the context may require.
20. INVESTMENT REPRESENTATION. Optionee hereby represents and
warrants that any Shares which he may acquire by virtue of the exercise of the
Option shall be acquired for investment purposes only and not with a view to
distribution or resale; provided, however, that
36
<PAGE>
this restriction shall become inoperative in the event the Shares which are
subject to the Option shall be registered under the Federal Securities Act of
1933, as amended, or in the event there is presented to the Company evidence
satisfactory to the Company to the effect that the offer or sale of the Shares
which were acquired upon exercise of the Option may lawfully be made without
registration under the Federal Securities Act of 1933, as amended.
21. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware and any applicable federal
law.
22. NONQUALIFIED OPTION. The Option shall for all purposes be a
nonqualified stock option subject to the federal income tax treatment described
in Section 1.83-7 of the Federal Income Tax Regulations. Both the Company and
the Optionee shall, on their respective federal income tax returns, report any
transaction relating to the Option in a manner consistent with the preceding
sentence.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed on its behalf by its duly authorized officer, and the Optionee has
hereunto set his hand, all as of the day and year first above written.
_____________________________________
("Optionee")
NEW HORIZONS WORLDWIDE, INC.
("Company")
By:__________________________________
Thomas J. Bresnan, President
37
EXHIBIT 10.3
STOCK OPTION AGREEMENT
THIS AGREEMENT is entered into as of January 22, 1998, by and
between New Horizons Worldwide, Inc., (f/k/a Handex Corporation and Handex
Environmental Recovery, Inc.), a Delaware corporation (the "Company"), and
Charles G. Kinch (the "Optionee").
WITNESSETH:
WHEREAS, the Committee is currently charged with administering
the New Horizons Worldwide, Inc. Key Employees Stock Option Plan (the
"Plan"); and
WHEREAS, the Committee has determined that the Optionee, as a Key
Employee (as such term is defined in the Plan), should be granted a stock option
under the Plan upon the terms and conditions set forth in this Agreement, and
for the number of shares of the $.01 par value common stock of the Company set
forth hereinbelow (the "Shares");
NOW, THEREFORE, the Company and the Optionee hereby agree as
follows:
1. DEFINITIONS. The following terms shall have the meanings set
forth below whenever used in this instrument:
(a) The word "Affiliate" shall mean any corporation which is, within
the meaning of Section 1563(a) of the Code, a member of a controlled group of
corporations which includes the Company.
(b) The word "Agreement" shall mean this instrument.
(c) The word "Board" shall mean the Board of Directors of the
Company.
(d) The word "Code" shall mean the United States Internal Revenue
Code (Title 26 of the United States Code).
38
<PAGE>
(e) The word "Committee" shall mean the Compensation Committee
appointed by the Board or the Board if no such committee exists or is acting
with respect to the Plan.
(f) The word "Company" shall mean New Horizons Worldwide, Inc., a
Delaware corporation, and any successor thereto which shall maintain the Plan.
(g) The word "Disability" shall mean the Optionee's inability, due
to a mental or physical condition, to perform services for the Company
substantially consistent with past practice, as determined by the Committee
pursuant to written certification of such condition from a physician acceptable
to the Committee.
(h) The word "Employee" shall mean any person who is an employee of
either the Company or any Subsidiary.
(i) The words "1999 Exercise Date" shall mean the third business day
following the day the Company receives its audited financial statements for
calendar year 1998 from its independent certified public accountants.
(j) The word "Option" shall mean the right and option of the
Optionee to purchase Shares pursuant to the terms of this Agreement.
(k) The words "Option Price" shall mean the price at which Shares
may be acquired upon the exercise of any Option.
(l) The word "Optionee" shall mean the person to whom an Option has
been granted pursuant to this Agreement.
(m) The words "Personal Representative" shall mean, following the
Optionee's death, the person who shall have acquired, by Will or by the laws of
descent and distribution, the right to exercise any Option.
39
<PAGE>
(n) The word "Plan" shall mean the New Horizons Worldwide, Inc. Key
Employees Stock Option Plan, as it was originally adopted and as it may later be
amended.
(o) The words "Pre-Tax Net Income" shall mean the Pretax Income of
New Horizons Computer Learning Centers, Inc. for 1998 as determined by the
Company for purposes of the Incentive Bonus Program for Optionee described in
the letter attached hereto as Exhibit A.
(p) The words "Reporting Company" shall mean any entity with a class
of equity securities which is registered under Section 12 of the Securities
Exchange Act of 1934, as amended.
(q) The word "Shares" shall mean shares of the $.01 par value common
stock of the Company.
(r) The word "Subsidiary" shall mean any corporation at least 50% of
the common stock of which is owned directly or indirectly by the Company.
2. GRANT OF OPTION. Effective as of the date of this Agreement, the
Company grants to the Optionee, upon the terms and conditions set forth
hereinafter, the right and option to purchase all or any lesser whole number of
an aggregate of Twelve Thousand Five Hundred (12.500) Shares at an Option Price
of $12.78 per Share.
3. TERM OF OPTION. Except as otherwise provided herein, the Option
shall expire at the close of regular business hours at the Company's principal
office at 500 Campus Drive, Morganville, New Jersey 07751, on January 2, 2004,
or, if earlier, on the applicable expiration date provided for in Section 6, or
7, or 8, or 9 hereof.
4. EXERCISE DATES. Except as otherwise provided herein, the Optionee
shall be entitled to exercise the Option with respect to the number of Shares
indicated below on or after the date indicated opposite such number below:
40
<PAGE>
INITIAL AND ADDITIONAL TOTAL SHARES WITH
NUMBER OF SHARES WITH RESPECT TO WHICH DATE BEGINNING
RESPECT TO WHICH THE THE OPTION MAY ON WHICH OPTION
OPTION MAY BE EXERCISED BE EXERCISED MAY BE EXERCISED
----------------------- ------------------ ----------------
6,250 6,250 1999 Exercise Date
6,250 12,500 January 1, 2000
Except as provided in Sections 6 and 7 hereof, the Option may not be exercised
at any time unless the Optionee shall be an Employee at such time.
5. LIMITATION UPON RIGHT TO EXERCISE OPTION. Notwithstanding Section
4 hereof:
(a) if the Pre-Tax Net Income is less than $5,070,000, the Option
may not be exercised in respect of any Shares;
(b) if the Pre-Tax Net Income is at least $5,070,000 but less than
$5,369,000, the number of Shares for which the Option may be
exercised as set forth in the Table in Section 4 shall be
reduced (to the nearest whole Share) by the percentage derived
from the formula set forth below:
$5,369,000 MINUS Pre-Tax Net Income
50% PLUS (30% x ____________________________________)
$299,000
(c) if the Pre-Tax Net Income is at least $5,369,000 but less than
$5,965,000, the number of Shares for which the Option may be
exercised as set forth in the Table in Section 4 shall be
reduced (to the nearest whole Share) by the percentage derived
from the formula set forth below:
$5,965,000 MINUS Pre-Tax Net Income
50% x _____________________________________
$596,000
41
<PAGE>
PROVIDED, that the amounts of Pre-Tax Net Income shown above in this Section 5
may be equitably adjusted by the Committee to take account of (i) any material
expansion or contraction of the Company's business operations during calendar
year 1998, or (ii) any extraordinary events which occur during 1998, or (iii)
any changes in the Company's accounting methodology that became effective in
respect of calendar year 1998. Any such adjustment shall be made no later than
the 1999 Exercise Date and shall be final and binding upon the Company and the
Optionee. The Committee shall inform the Optionee of any such adjustment no
later than the 1999 Exercise Date.
6. TERMINATION OF EMPLOYMENT OTHER THAN BECAUSE OF DEATH OR
DISABILITY. So long as the Optionee shall continue to be an Employee, the Option
shall not be affected by (a) any temporary leave of absence approved in writing
by the Company or a Subsidiary and described in Section 1.421-7(h) of the
Federal Income Tax Regulations or any lawful successor regulations thereto, or
(b) any change of duties or position (including transfer to or from a
Subsidiary). Subject to Section 8 hereof, if the Optionee ceases to be an
Employee for any reason other than death or Disability, the Option may be
exercised only to the extent of the purchase rights, if any, which, pursuant to
Section 4 hereof, after giving effect to Section 5 hereof, existed as of the
date the Optionee ceases to be an Employee (assuming, for this purpose only,
that the 1999 Exercise Date was January 1, 1999) and which have not theretofore
been exercised; PROVIDED, however, that the Committee may in its absolute
discretion determine (but shall not be under any obligation to determine) that
such purchase rights shall be deemed to include additional Shares which are
subject to the Option. Upon an Optionee's ceasing to be an Employee, such
purchase rights shall in any event terminate upon the earlier of either (a)
three (3) months after the date the Optionee ceased to be an Employee (one (1)
year if the Optionee
42
<PAGE>
dies or becomes Disabled during the three (3) month period), or (b) the last day
of the term of the Option.
7. OPTIONEE'S DEATH OR DISABILITY. If, after 1998, while the
Optionee is an Employee, the Optionee dies or becomes Disabled, the Optionee or
the Optionee's Personal Representative may, on or after the 1999 Exercise Date,
exercise the Option with respect to all of the Shares for which the Optionee
could have exercised the Option had he survived and continued to be an Employee
until January 1, 2000. The Option shall in any event terminate upon the earlier
of either (a) the first anniversary of the date the Optionee ceased to be an
Employee, or (b) the last day of the term of the Option.
8. EVENTS OF FORFEITURE. Notwithstanding any other provision of this
Agreement, unless the Committee shall otherwise determine, upon (a) the
Optionee's ceasing to be an Employee for any reason prior to January 1, 1999, or
(b) the Optionee's ceasing to be an Employee by reason of an involuntary
termination of such status for good cause, as determined by the Committee, or
(c) the Optionee's voluntary termination with the intention of rendering
services to a competitor of the Company or any of its Subsidiaries or otherwise
entering into competition with the Company or any of its Subsidiaries, directly
or indirectly, or (d) the commission by the Optionee of a material breach of his
obligations under any agreement with the Company or any of its Subsidiaries, the
Optionee's right to purchase Shares pursuant to the exercise of the Option shall
terminate. Nothing in this Agreement shall confer upon any Optionee any right to
continue in the employ of the Company or a Subsidiary, or to serve as a member
of the Board of Directors of the Company or a Subsidiary, or to interfere with
or limit either the right of the Company or a Subsidiary to terminate his
employment at any time or the
43
<PAGE>
right of the shareholders of the Company to remove him as a member of the Board
of Directors of the Company or a Subsidiary with or without cause.
9. CHANGE OF CONTROL, DISSOLUTION, LIQUIDATION AND CERTAIN MERGERS.
Upon the occurrence of a "change of control" (as defined herein), or immediately
prior to a dissolution or liquidation of the Company (but only if the
distributee of substantially all of the Company's assets upon the liquidation of
the Company was not, immediately prior to the liquidation, an Affiliate) or a
merger or consolidation in which the Company is not the surviving corporation
(but only if the corporation which is the surviving corporation in such merger
or consolidation was not, immediately prior to the merger or consolidation, an
Affiliate), the Optionee shall have the immediate and nonforfeitable right to
exercise the Option with respect to all Shares for which the Option could have
been exercised prior to its expiration, and any such exercise shall be
irrevocable. The Optionee shall be entitled to exercise the Option as provided
in the immediately preceding sentence regardless of whether the other
corporation which is the surviving corporation in a merger or consolidation
shall adopt and maintain the Plan. In the event the Option becomes exercisable
pursuant to this Section 9, the Company shall notify the Optionee of his right
to exercise the Option. The term "change of control" shall mean the acquisition
(other than from the Company) by any person, entity or "group" (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934
(the "Exchange Act")) but excluding for this purpose the Company or any
Subsidiary or any employee benefit plan of the Company or any Subsidiary which
acquires beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of voting securities of the Company of 50% or more (35%
or more if the Company is a Reporting Company) of either the then outstanding
Shares or the combined voting power of the Company's then outstanding voting
securities entitled to vote
44
<PAGE>
generally in the election of Directors. Upon either the dissolution or
liquidation of the Company (but only if the distributee of substantially all of
the Company's assets upon the liquidation of the Company was not, immediately
prior to the liquidation, an Affiliate) or upon the occurrence of a merger or
consolidation in which the Company is not the surviving corporation (but only if
the corporation which is the surviving corporation in such merger or
consolidation was not, immediately prior to the merger or consolidation, an
Affiliate) and immediately following which the surviving corporation fails to
maintain the Plan, the Option shall terminate unless the surviving corporation
assumes the Option.
10. ADJUSTMENT OF NUMBER OF SHARES, ETC. In the event that
subsequent to the date of this Agreement, the outstanding Shares are, as a
result of a stock split, stock dividend, combination or exchange of shares,
exchange for other securities, reclassification, reorganization, redesignation,
merger, consolidation, recapitalization, spin-off, split-off or split-up or
other such change (including, without limitation, any transaction described in
Section 424(a) of the Code), or a special dividend or other distribution to the
Company's shareholders, increased or decreased or changed into or exchanged for
a different number or kind of shares of stock or other securities of the
Company, then (i) there shall automatically be substituted for each Share
subject to the Option the number and kind of shares of stock or other securities
into which each outstanding Share shall be exchanged, (ii) the option price per
Share or unit of securities shall be increased or decreased proportionately so
that the aggregate purchase price for the securities subject to the Option shall
remain the same as immediately prior to such event, and (iii) the Committee
shall make such other adjustments to the securities subject to the Option as may
be appropriate, equitable and in compliance with the provisions of Section
424(a) of the Code to the extent applicable and any such adjustment shall be
final, binding and conclusive as to the Optionee.
45
<PAGE>
Any such adjustment shall provide for the elimination of fractional shares if
the Committee shall so direct.
11. EXERCISE OF OPTION. The Option may be exercised by delivering to
the Chairman, President or Chief Financial Officer of the Company at its
principal office, 500 Campus Drive, Morganville, New Jersey, 07751, a completed
Notice of Exercise of Option (obtainable from the Chief Financial Officer of the
Company) setting forth the number of Shares with respect to which the Option is
being exercised. Such Notice shall be accompanied by payment in full for the
Shares, unless other arrangements satisfactory to the Company for prompt payment
of such amount are made. Payments shall be made by such type of check or other
means of funds transfer as is acceptable to the Company in the amount of the
aggregate purchase price for such Shares or, with the consent of the Committee,
payment may be made in whole or in part in Shares having a fair market value on
the date the Option is exercised equal to that portion of the purchase price for
which payment in cash is not made; provided, however, that payment in Shares
held by the Optionee less than one (1) year may be made only with the consent of
the Committee.
12. ISSUANCE OF SHARE CERTIFICATES. Subject to the last sentence of
this Section 12, upon receipt by the Company prior to expiration of the Option
of a duly completed Notice of Exercise of Option to either exercise the Option
accompanied by full payment for the Shares being purchased pursuant to such
Notice (and, with respect to any Option exercised pursuant to Section 12 hereof
by someone other than the Optionee, accompanied in addition by proof
satisfactory to the Committee of the right of such person to exercise the
Option), the Company shall cause to be made or otherwise delivered to the
Optionee, within thirty (30) days of such receipt, a certificate for the number
of Shares so purchased. The Optionee shall not have
46
<PAGE>
any of the rights of a shareholder with respect to the Shares which are subject
to the Option unless and until a certificate representing such Shares is issued
to the Optionee. The Company shall not be required to issue any certificates for
Shares upon the exercise of the Option prior to (i) obtaining any approval from
any governmental agency which the Committee shall, in its sole discretion,
determine to be necessary or advisable, and/or (ii) the admission of such Shares
to listing on any national securities exchange on which the Shares may be
listed, and/or (iii) completion of any registration or other qualification of
the Shares under any state or federal law or ruling or regulations of any
governmental body which the Committee shall, in its sole discretion, determine
to be necessary or advisable, or the determination by the Committee, in its sole
discretion, that any registration or other qualification of the Shares is not
necessary or advisable.
13. SUCCESSORS IN INTEREST, ETC. This Agreement shall be binding
upon and inure to the benefit of any successor of the Company and the heirs,
estate, and Personal Representative of the Optionee. The Option shall not be
transferable other than by Will or the laws of descent and distribution, and the
Option may be exercised during the lifetime of the Optionee only by the Optionee
provided that a guardian or other legal representative who has been duly
appointed for such Optionee may exercise the Option on behalf of the Optionee. A
deceased Optionee's Personal Representative shall act in the place and stead of
the deceased Optionee with respect to exercising an Option or taking any other
action pursuant to this Agreement.
14. PROVISIONS OF PLAN CONTROL. This Agreement is subject to all of
the terms, conditions, and provisions of the Plan and to such rules,
regulations, and interpretations relating to the Plan as may be adopted by the
Committee and as may be in effect from time to time. A
47
<PAGE>
copy of the Plan is attached hereto as Exhibit "B" and is incorporated herein by
reference. In the event and to the extent that this Agreement conflicts or is
inconsistent with the terms, conditions, and provisions of the Plan, the Plan
shall control, and this Agreement shall be deemed to be modified accordingly.
15. NO LIABILITY UPON DISTRIBUTION OF SHARES. The liability of the
Company under this Agreement and any distribution of Shares made hereunder is
limited to the obligations set forth herein with respect to such distribution
and no term or provision of this Agreement shall be construed to impose any
liability on the Company or the Committee in favor of any person with respect to
any loss, cost or expense which the person may incur in connection with or
arising out of any transaction in connection with this Agreement.
16. WITHHOLDING. The Optionee agrees that the Company may make
appropriate provision for tax withholding with respect to the transactions
contemplated by this Agreement.
17. CAPTIONS. The captions and section numbers appearing in this
Agreement are inserted only as a matter of convenience. They do not define,
limit, construe or describe the scope or intent of the provisions of this
Agreement.
18. NUMBER. The use of the singular or plural herein shall not be
restrictive as to number and shall be interpreted in all cases as the context
shall require.
19. GENDER. The use of the feminine, masculine or neuter pronoun
shall not be restrictive as to gender and shall be interpreted in all cases as
the context may require.
20. INVESTMENT REPRESENTATION. Optionee hereby represents and
warrants that any Shares which he may acquire by virtue of the exercise of the
Option shall be acquired for investment purposes only and not with a view to
distribution or resale; provided, however, that
48
<PAGE>
this restriction shall become inoperative in the event the Shares which are
subject to the Option shall be registered under the Federal Securities Act of
1933, as amended, or in the event there is presented to the Company evidence
satisfactory to the Company to the effect that the offer or sale of the Shares
which were acquired upon exercise of the Option may lawfully be made without
registration under the Federal Securities Act of 1933, as amended.
21. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware and any applicable federal
law.
22. NONQUALIFIED OPTION. The Option shall for all purposes be a
nonqualified stock option subject to the federal income tax treatment described
in Section 1.83-7 of the Federal Income Tax Regulations. Both the Company and
the Optionee shall, on their respective federal income tax returns, report any
transaction relating to the Option in a manner consistent with the preceding
sentence.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed on its behalf by its duly authorized officer, and the Optionee has
hereunto set his hand, all as of the day and year first above written.
_____________________________________
("Optionee")
NEW HORIZONS WORLDWIDE, INC.
("Company")
By:__________________________________
Thomas J. Bresnan, President
49
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