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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): April 1, 1999
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New Horizons Worldwide, Inc.
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(Exact Name of Registrant as Specified in Charter)
Delaware 0-17840 22-2941704
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(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification Number)
500 Campus Drive Morganville, New Jersey 07751
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (732) 536-8501
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(Former Name or Former Address, if Changed Since Last Report)
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Item 2. ACQUISITION OR DISPOSITION OF ASSETS.
A. CHARLOTTE ACQUISITION
On April 1, 1999, New Horizons Worldwide, Inc. (the "Company"), through
its indirect wholly-owned subsidiary, New Horizons Computer Learning Center of
Charlotte, Inc. ("NHCLC-Charlotte"), a Delaware corporation, acquired from
INNOVAK International Incorporated ("Charlotte-Seller"), a South Carolina
corporation, substantially all of the assets (consisting primarily of cash,
equipment, certain intellectual property and contract rights, accounts
receivable and inventory) (collectively, the "Charlotte Assets") used in
connection with Charlotte-Seller's computer training business (the "Charlotte
Business"). The acquisition was accomplished pursuant to an Asset Purchase
Agreement dated April 1, 1999, among Charlotte-Seller, Robert Remington,
NHCLC-Charlotte, and the Company (the "Charlotte Agreement"). A copy of the
Charlotte Agreement is filed as Exhibit 2.1 hereto.
As consideration for this acquisition, NHCLC-Charlotte and the Company
delivered to Charlotte-Seller at Closing (as defined in the Charlotte Agreement)
$3,000,000 in cash and 40,088 shares of common stock, $.01 par value, of the
Company. Additionally, $200,000 was retained by the Company in an
interest-bearing account, to be paid to Charlotte-Seller following the Net Worth
Adjustment (as defined in the Charlotte Agreement). The purchase price and other
terms of the Charlotte Agreement were determined through arms-length
negotiations. Prior to Closing, Charlotte-Seller was a franchisee of New
Horizons Computer Learning Centers, Inc. ("NHCLC"), a wholly-owned subsidiary of
New Horizons Education Corporation, which, in turn, is a wholly-owned subsidiary
of the Company. The franchise agreement between Charlotte-Seller and NHCLC was
terminated at Closing. Robert Remington, the sole shareholder of
Charlotte-Seller, also owns a franchise for the Orlando, Florida area. Except
for the Orlando Franchise, and an employment agreement entered into as of the
Closing with Robert Remington, there are no material relationships between the
Company and Charlotte-Seller or any of their respective affiliates,
shareholders, directors or officers.
The Company paid the cash portion of the purchase price with funds on
hand obtained from its normal business operations.
The Charlotte Business provides computer training services to
individuals and businesses in and around the Charlotte, North Carolina area. The
Company intends to cause NHCLC-Charlotte to utilize the Charlotte Assets in
order to operate the Charlotte Business substantially as operated prior to its
acquisition.
B. SACRAMENTO ACQUISITION
On April 1, 1999, the Company, through its indirect wholly-owned
subsidiary, New Horizons Computer Learning Center of Sacramento, Inc.
("NHCLC-Sacramento"), a Delaware corporation, acquired from X-Tech Incorporated,
a California corporation ("Sacramento-Seller"), substantially all of the assets
(consisting primarily of equipment, certain
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intellectual property and contract rights, accounts receivable and inventory)
(collectively, the "Sacramento Assets") used in connection with
Sacramento-Seller's computer training business (the "Sacramento Business"). The
acquisition was accomplished pursuant to an Asset Purchase Agreement dated April
1, 1999, among Sacramento-Seller, John Xepoleas, Northwestern Technical College,
a California corporation and affiliate of Sacramento-Seller ("NTC"),
NHCLC-Sacramento and NHCLC (the "Sacramento Agreement"). A copy of the
Sacramento Agreement is filed as Exhibit 2.2 hereto.
As consideration for this acquisition, NHCLC-Sacramento delivered to
Sacramento-Seller at Closing (as defined in the Sacramento Agreement) $3,000,000
in cash. Additionally, $200,000 was retained by the Company in an
interest-bearing account, to be paid to Sacramento-Seller following the Net
Worth Adjustment (as defined in the Sacramento Agreement). The purchase price
and other terms of the Sacramento Agreement were determined through arms-length
negotiations. Prior to Closing, Sacramento-Seller was a franchisee of NHCLC. The
franchise agreements between Sacramento-Seller and NHCLC were terminated at
Closing. Except for a noncompetition agreement, there are no material
relationships between the Company and Sacramento-Seller or any of their
respective affiliates, shareholders, directors or officers.
The Company paid the purchase price with funds on hand obtained from
its normal business operations.
The Sacramento Business provides computer training services to
individuals and businesses in and around the Sacramento and Stockton,
California, areas. The Company intends to cause NHCLC-Sacramento to utilize the
Sacramento Assets in order to operate the Sacramento Business substantially as
operated prior to its acquisition.
Item 5. OTHER EVENTS.
The Company issued a News Release on April 5, 1999, a copy of which is
filed as Exhibit 99.1.
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED. The Company has
determined that neither the Charlotte Business nor the Sacramento Business is,
individually or in the aggregate, a business as to which any one of the
conditions specified in the definition of "significant subsidiary" in Rule
1-02(w) of Regulation S-X exceeds 20 percent, and therefore the financial
statements of the Charlotte Business and Sacramento Business are not required to
be filed pursuant to Rule 3-05(b) of Regulation S-X.
(b) PRO FORMA FINANCIAL INFORMATION. The Company has determined that
neither the Charlotte Business nor the Sacramento Business is, individually or
in the aggregate, a business as to which any one of the conditions specified in
the definition of "significant
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subsidiary" in Rule 1-02(w) of Regulation S-X exceeds 20 percent, and therefore
pro forma financial information is not required to be filed pursuant to Article
11 of Regulation S-X.
(c) EXHIBITS.
2.1 Asset Purchase Agreement, dated April 1, 1999, among
Charlotte-Seller, Robert Remington, NHCLC-Charlotte,
and the Company.*
2.2 Asset Purchase Agreement, dated April 1, 1999, among
Sacramento-Seller, John Xepoleas, NTC,
NHCLC-Sacramento, and NHCLC.*
10.1 Employee Agreement, dated April 1, 1999, between
NHCLC-Charlotte and Robert Remington.
10.2 Noncompetition Agreement, dated April 1, 1999, among
Sacramento-Seller, John Xepoleas, NTC,
NHCLC-Sacramento and NHCLC.
99.1 News Release from the Company, dated April 5, 1999.
* The Registrant agrees by this filing to supplementally furnish a copy
of the Exhibits and Schedules to this Asset Purchase Agreement to the
Commission upon request.
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SIGNATURE
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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 hereunto duly authorized.
NEW HORIZONS WORLDWIDE, INC.
Date: April 15, 1999 By: /s/ Robert S. McMillan
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Robert S. McMillan
Vice President, Treasurer, & Chief Financial
Officer
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EXHIBIT INDEX
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EXHIBIT DESCRIPTION OF EXHIBIT
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2.1 Asset Purchase Agreement, dated April 1, 1999, among
Charlotte-Seller, Robert Remington, NHCLC-Charlotte, and the
Company.
2.2 Asset Purchase Agreement, dated April 1, 1999, among
Sacramento-Seller, John Xepoleas, NTC, NHCLC-Sacramento, and
NHCLC.
10.1 Employee Agreement, dated April 1, 1999, between
NHCLC-Charlotte and Robert Remington.
10.2 Noncompetition Agreement, dated April 1, 1999, among
Sacramento-Seller, John Xepoleas, NTC, NHCLC-Sacramento and
NHCLC.
99.1 News Release from the Company, dated April 5, 1999.
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EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
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This Asset Purchase Agreement ("Agreement") is entered into as
of the 1st day of April, 1999, by and among INNOVAK International Incorporated,
d/b/a New Horizons Computer Learning Center of Charlotte, a South Carolina
corporation ("Seller"), Robert Remington, the sole shareholder of Seller (the
"Shareholder"), New Horizons Computer Learning Center of Charlotte, Inc., a
Delaware corporation ("Buyer") and New Horizons Worldwide, Inc., a Delaware
corporation ("New Horizons").
RECITALS:
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A. Seller is engaged in the business of providing computer
training services ("Services") to organizations and individuals primarily
located in and around Charlotte, North Carolina (the "Business") as a franchisee
of New Horizons Computer Learning Centers, Inc. ("NHCLC").
B. The parties desire that (i) Seller sell to Buyer and that
Buyer purchase from Seller substantially all of Seller's assets related to the
Business and (ii) Seller's Franchise Agreement dated July 22, 1992 with NHCLC
for the Charlotte, North Carolina area (the "Charlotte Franchise Agreement") be
terminated upon the terms therein and hereinafter set forth.
In consideration of and in reliance upon the mutual
representations, warranties, covenants, obligations and agreements contained
herein, the parties agree as follows:
1. PURCHASE AND SALE OF ASSETS.
1.1 PURCHASED ASSETS. Seller hereby sells to Buyer,
free of all liens, encumbrances, claims and other restrictions of any kind, and
Buyer hereby purchases, all of Seller's right, title, and interest in and to all
of the properties, assets, and rights owned, used, acquired for use, or arising
or existing in connection with the Business, whether tangible or intangible, and
whether or not recorded on Seller's books and records, as the same exist at the
Closing (as defined below), including, without limitation, books and records,
software and software licenses, permits and other governmental authorizations
pertaining to the Business (to the extent such authorizations may legally be
assigned), know-how, trade secrets, patents, trademarks, trade names, copyrights
(including applications for the foregoing), and all goodwill relating to the
Seller; PROVIDED, HOWEVER, that (i) Seller shall not sell and Buyer shall not
purchase the Retained Assets of Seller described in Section 1.2 hereof, and (ii)
as to contracts only, Seller shall assign and Buyer shall assume only those
contracts of Seller that are set forth or described on SCHEDULE 2.1. The assets
to be purchased and sold pursuant to this Agreement are referred to herein as
the "Purchased Assets."
1.2 RETAINED ASSETS. Seller shall retain, and Buyer
shall not purchase (i) any rights of Seller arising under this Agreement, (ii)
Seller's corporate minute books, stock records, and tax returns or other similar
corporate books and records relating to the Business, and
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those records, originals of which Seller is required to maintain under
applicable laws (PROVIDED, copies of the same are included among the Purchased
Assets), (iii) contracts of Seller that are NOT set forth on SCHEDULE 2.1 and
(iv) the items listed on SCHEDULE 1.2 (collectively, the "Retained Assets").
2. LIABILITIES OF SELLER.
2.1 ASSUMED LIABILITIES. On the Closing Date, Buyer
agrees to assume, and hereby assumes, the following liabilities and obligations
of Seller existing as of the Closing (the "Assumed Liabilities"): (a) Seller's
current liabilities reflected on the Adjusted Balance Sheet appearing in the
Adjusted Financial Statements (as such terms are defined in Section 3.2 below)
and those current liabilities incurred in the ordinary course of business
consistent with past practices since the date of such Adjusted Balance Sheet to
the extent reflected or reserved on the Closing Balance Sheet (as defined in
Section 3.2 below) (b) Seller's long-term liabilities under lease or financing
arrangements of a type required by GAAP to be included on a balance sheet (such
liabilities together with the current liabilities reflected in paragraph (a)
immediately preceding being sometimes referred to herein as the "Assumed Balance
Sheet Liabilities"), (c) the liabilities of Seller under the contracts set forth
on SCHEDULE 2.1 to the extent (i) such contract liabilities accrue and relate
solely to the period after the Closing, and (ii) the corresponding benefits
therefrom are validly assigned to and received by Buyer, and (d) Seller's future
obligation to provide training for which Seller has received payment.
2.2 RETAINED LIABILITIES. Except for the Assumed
Liabilities, Buyer shall not assume nor become responsible for any liability or
obligation of Seller of any nature whatsoever, whether known or unknown,
accrued, absolute, contingent or otherwise, including without limitation (i) any
liabilities or costs associated with or relating to Seller's failure to qualify,
or be qualified, in North Carolina, and (ii) any liabilities, costs, or
contributions associated with or relating to Seller's COBRA coverage (the
"Retained Liabilities").
3. CONSIDERATION. The consideration payable by Buyer for the
Purchased Assets shall consist of the following: (i) Buyer's assumption of the
Assumed Balance Sheet Liabilities, (ii) payment of the consideration payable at
Closing as set forth in Section 3.1 below (the "Closing Payment"), as such may
be subsequently adjusted pursuant to Section 3.2 below, and (iii) the
consideration payable, if any, following the Closing as set forth in Section 3.3
below (the "Earn-Out").
3.1 CLOSING PAYMENT. The Closing Payment shall be
payable as follows:
(a) Three Million Dollars ($3,000,000.00), payable by
wire transfer of immediately available funds to an account designated by Seller
in writing; and
(b) Shares of Common Stock, $.01 par value, of New
Horizons having an aggregate Fair Market Value (as defined below) equal to Eight
Hundred Thousand Dollars ($800,000.00) (the "New Horizons Stock") issued at the
Closing; PROVIDED, that no fractional shares of New Horizons Stock will be
issued or delivered to Seller hereunder. Solely for purposes of determining the
number of shares of New Horizons Stock to be issued to Seller pursuant to this
Section 3.1(b), the "Fair Market Value" of a share of New Horizons Stock shall
mean the average
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per share closing price of New Horizons Stock on the NASDAQ Stock Market (or
successor exchange) for the thirty (30) full trading days ending on the second
trading day prior to the Closing.
(c) Two Hundred Thousand Dollars ($200,000.00) (the
"Holdback Amount"), to be held by Buyer in an interest-bearing account pending
final determination of the Net Worth Adjustment (as defined and determined
below).
3.2 BALANCE SHEET ADJUSTMENT.
(a) Promptly after the Closing, Seller will prepare a
balance sheet as of the Closing ("Closing Balance Sheet") reflecting:
(i) cash and cash equivalents included in the
Purchased Assets;
(ii) trade accounts receivable, net of allowance for
doubtful accounts and reserve for subsequent credit memos, included in the
Purchased Assets;
(iii) inventory, net of applicable reserves, included
in the Purchased Assets;
(iv) prepaid expenses included in the Purchased
Assets the benefit of which is fully available to Buyer;
(v) property, plant and equipment, net of
depreciation and amortization, included in the Purchased Assets;
(vi) any other assets included in the Purchased
Assets of a type required by GAAP to be included on a balance sheet; and
(vii) the Assumed Balance Sheet Liabilities.
Attached hereto as SCHEDULE 3.2(a)(i) is a balance sheet of the Business as of
December 31, 1998 and an income statement for the period then ended, which have
been prepared jointly by Seller and Buyer in accordance with GAAP and which
reflect the New Horizons Methodology (the "Adjusted Balance Sheet" and "Adjusted
Income Statement", respectively, and collectively, the "Adjusted Financial
Statements"). Such Methodology is set forth on SCHEDULE 3.2(a)(ii) hereof. The
Adjusted Balance Sheet was derived from the Seller's Balance Sheet (as defined
in Section 4.3 hereof) by making those modifications set forth on SCHEDULE
3.2(a)(i) hereof. The Closing Balance Sheet shall be prepared in a manner
consistent with the preparation of the Adjusted Balance Sheet. Based on the
Closing Balance Sheet, Seller will also prepare a written calculation of the
amount by which the Net Worth (as defined below) as at the Closing Date is
greater or less than One Hundred Twenty Eight Thousand Dollars ($128,000.00)
("Net Worth Adjustment").
(b) NET WORTH ADJUSTMENT REVIEW. Seller will prepare the
Closing Balance Sheet and the Net Worth Adjustment and deliver the same to Buyer
not later than thirty (30) days after the Closing, together with a written
certification that such have been prepared and
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calculated in accordance herewith. Thereafter, Buyer's Chief Financial Officer
and Buyer's independent accountants will conduct a review of these items, and
Buyer will notify Seller not later than thirty (30) days after receipt thereof,
as to whether they are acceptable to Buyer. If Buyer objects to the Closing
Balance Sheet or the Net Worth Adjustment and Buyer and Seller are able to
resolve their dispute within fifteen (15) days after Buyer's objection, the Net
Worth Adjustment (reflecting the resolution) will become final and binding on
the parties. If Buyer and Seller are unable to resolve their dispute within
fifteen (15) days after Buyer's objection, the dispute will be resolved by a
"Big Six" national accounting firm mutually agreeable to the parties (the
"Independent Accountants"). The Independent Accountants will be instructed to
perform their services as expeditiously as possible and the resolution of the
Independent Accountants shall be final and binding on the parties. The fees and
expenses of the Independent Accountants for the resolution of the dispute shall
be shared by Buyer and Seller in inverse proportion to the respective amounts of
the disputed matters which are resolved in its favor.
(c) FINAL PAYMENT OR REFUND.
(i) POST-CLOSING PAYMENT. If the Net Worth Adjustment
is not a negative amount, the Holdback Amount shall be paid to Seller (along
with any interest accrued thereon) and Buyer shall pay the Net Worth Adjustment
to Seller.
(ii) POST-CLOSING REFUND. If the Net Worth Adjustment
is a negative amount, Seller will refund to Buyer the Net Worth Adjustment
(treated as a positive amount) from the Holdback Amount (which Buyer may retain,
to the extent necessary to pay the Net Worth Adjustment) and, if necessary, also
by the wire transfer of immediately available funds to an account designated in
writing by Buyer (or a combination of both). The balance of the Holdback Amount,
if any, shall be paid to Seller (along with any interest accrued thereon).
(iii) TIME OF POST-CLOSING PAYMENT OR REFUND. Any
post-closing payment or refund (as the case may be) provided for under this
Section 3.2(c) will be made not more than three (3) days after the Net Worth
Adjustment becomes final, as contemplated by Section 3.2(b) hereof.
3.3 EARN-OUT. As additional consideration for the
Purchased Assets, Seller shall be entitled to receive (i) with respect to the 12
month period commencing on the first day of the month on or after the Closing
Date and ending on the last day of the twelfth month thereafter, an amount equal
to three (3) times the amount by which Buyer's EBIT for such period exceeds the
Base EBIT, if any, and (ii) with respect to the next 12 month period, an amount
equal to three (3) times the amount by which Buyer's EBIT for such period
exceeds Base EBIT ("Earn Out Payments"). Buyer will prepare the foregoing EBIT
calculations and deliver the same to Seller within forty-five (45) days after
the end of the twelve month period for which they are required, together with a
written certification that such calculations have been prepared and calculated
in accordance herewith. Thereafter, Seller will conduct a review of these items
and notify Buyer not later than thirty (30) days after receipt of such
calculations as to whether they are acceptable to Seller. If Seller objects to
such calculations and Buyer and Seller are able to resolve their dispute within
fifteen (15) days after Seller's objection, such calculations (reflecting the
resolution) will become final and binding on the parties. If Buyer and Seller
are unable to
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resolve their dispute within fifteen (15) days after Seller's objection, the
dispute will be resolved by the Independent Accountants. The Independent
Accountants will be instructed to perform their services as expeditiously as
possible and the resolution of the Independent Accountants shall be final and
binding on the parties. The fees and expenses of the Independent Accountants for
the resolution of the dispute shall be shared by Buyer and Seller in inverse
proportion to the respective amounts of the disputed matters which are resolved
in its favor.
Within ten (10) days after the amount of any Earn Out Payment is
finally determined in accordance with the foregoing it shall be paid (i) by wire
transfer of 75% of such amount in immediately available funds to an account
designated in writing by Seller, and (ii) by issuance to Seller of shares of New
Horizons Stock having an aggregate Fair Market Value equal to 25% of such
amount. For purposes of this Section 3.3, "Fair Market Value" of a share of New
Horizons Stock shall mean the average per share closing price of New Horizons
Stock on the NASDAQ Stock Market (or successor exchange) for the thirty (30)
full trading days ending on the last day of the twelve month period with respect
to which such Earn Out Payment was earned.
For purposes of this Section 3:
"Base EBIT" shall be Six Hundred Sixty-Seven Thousand Dollars
($667,000.00).
"Buyer's EBIT" shall be the amount determined from Buyer's financial
statements for the Business prepared in accordance with GAAP using the New
Horizons Methodology in a manner consistent with the Adjusted Income Statement,
by (a) adding to the net income or loss of the Business: (i) the total of all
federal, state, local and foreign tax expense with respect to income; (ii) the
total of all interest expense with respect to indebtedness for borrowed money
(including capitalized leases and purchase money financing), net of interest
income; and (iii) the amortization of all intangibles resulting from the
transactions contemplated by this Agreement, and (b) deducting royalties which
would have been payable by Seller to NHCLC under the Charlotte Franchise
Agreement in the absence of this Agreement.
"Net Worth" means the assets of the Business (excluding unamortized
organization costs or franchise fees) less total liabilities of the Business,
determined in accordance with GAAP, but excluding the Retained Assets and
Retained Liabilities.
4. REPRESENTATIONS AND WARRANTIES OF SELLER AND THE SHAREHOLDER. Seller
and the Shareholder hereby jointly and severally represent and warrant to Buyer
and New Horizons as follows:
4.1 ORGANIZATION, AUTHORITY AND CAPACITY. Seller is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of South Carolina, is in good standing as a foreign corporation qualified
to do business in such other states where the nature of the business conducted
requires such qualification, and has full corporate power and authority to own,
lease and operate its assets and properties and, carry on the Business as and
where such assets and properties are now owned or leased and as such business is
presently being conducted. Seller and the Shareholder have full power,
authority, and legal capacity to execute, deliver, and perform this Agreement in
accordance with its terms, and such execution, delivery and
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performance has been approved by all requisite corporate action of Seller. This
Agreement has been duly executed and delivered by Seller and the Shareholder and
constitutes the legal, valid and binding obligation of Seller and the
Shareholder, enforceable against Seller and the Shareholder in accordance with
its terms.
4.2 NO CONSENTS OR CONFLICTS. Except as set forth on SCHEDULE 4.2,
no consent of, or filing with, any governmental authority or third party is
required in connection with the execution, delivery or performance of this
Agreement or any of the other agreements, instruments or documents to be
delivered by or on behalf of Seller or the Shareholder in connection herewith.
Neither the execution or delivery nor the performance of this Agreement or any
of the other agreements, instruments or documents to be delivered by or on
behalf of Seller or the Shareholder in connection herewith conflicts with,
violates or results in any breach of: (i) any judgment, decree, order, statute,
rule or regulation applicable to Seller or the Shareholder, (ii) any agreement
or instrument to which Seller or the Shareholder is a party or by which Seller
or any of its assets is bound, or (iii) any provision of the Articles of
Incorporation or the By-Laws of Seller.
4.3 FINANCIAL STATEMENTS. Seller has previously delivered to Buyer
Seller's financial statements for the years ended December 31, 1997 and 1998
(the "Seller Prepared Financial Statements"; the balance sheet dated December
31, 1998 is also referred to as "Seller's Balance Sheet"). The Seller Prepared
Financial Statements present fairly Seller's financial position as of the dates
indicated and results of operations for the periods indicated on a consistent
basis.
4.4 NO LIABILITIES. Seller has no liabilities or obligations of
any kind. (accrued, absolute, contingent, known, unknown or otherwise) except
(i) as reflected on the Adjusted Balance Sheet, (ii) as incurred in the ordinary
course of business, consistent with past practice, since the date of the
Adjusted Balance Sheet, or (iii) as set forth on SCHEDULE 4.4.
4.5 NO CHANGES. Since the date of the Adjusted Balance Sheet which
forms a part of Seller's Adjusted Financial Statements, Seller has operated only
in the ordinary course, consistent with past practice, and there has not been
any material adverse change, or any event, fact or circumstance which might
reasonably be expected to result in a material adverse change, in the assets,
liabilities, operating performance, business relationships, or prospects of the
Business. Without limiting the generality of the foregoing, since the date of
such balance sheet, except as set forth on SCHEDULE 4.5, there has not been with
respect to the Business any:
(a) waiver, release, cancellation or compromise
of any debts owed to it or claims or rights
against others exceeding $10,000 in the
aggregate;
(b) sale, disposition or subjection to any lien
of any assets other than inventory in the
ordinary course of business;
(c) unusual or novel method of transacting
business engaged in by Seller or any change
in Seller's accounting procedures or
practices (except as required by Buyer) or
its financial structure;
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(d) any increase in salaries, bonuses or
benefits paid or payable to employees; or
(e) any material damage, destruction or loss to
or of the assets of Seller.
4.6 TITLE TO PURCHASED ASSETS. Seller owns all of the Purchased
Assets free and clear of all liens, claims, encumbrances and other restrictions
or limitations of any kind whatsoever affecting the ability to use or transfer
the Purchased Assets.
4.7 OWNERSHIP OF SELLER. The Shareholder owns beneficially and of
record, free and clear of all liens and encumbrances, all of the issued and
outstanding capital stock of Seller.
4.8 ASSETS OWNED. Except for the Retained Assets, the Purchased
Assets comprise all of those assets which are used or useful in the operation of
the Business in the ordinary course as presently conducted.
4.9 COMPLIANCE WITH LAWS. Except as set forth on SCHEDULE 4.9,
Seller has conducted the Business in compliance with all laws, regulations or
orders of any jurisdiction or governmental authority, including, without
limitation, those pertaining to, environmental protection, occupational health
or safety, employee benefits, and employment practices. Except as set forth on
SCHEDULE 4.9, Seller has all permits, registrations and licenses necessary to
conduct the Business, and all of Seller's employees utilized in connection with
the Business have obtained all required permits, registrations, and licenses.
All such permits and licenses are in full force and effect, and no proceeding is
pending or, to the knowledge of Seller, threatened, to revoke or limit any of
them.
4.10 NO LITIGATION. Except as set forth on SCHEDULE 4.10, there is
no claim, litigation, investigation or proceeding pending or, to the knowledge
of Seller, threatened against Seller. There are no pending or, to the knowledge
of Seller, threatened controversies, grievances or claims by any employee or
former employee of Seller with respect to their employment, compensation,
benefits or working conditions.
4.11 CONDITION. Except as set forth on SCHEDULE 4.11, all of the
items of tangible property included among the Purchased Assets and used in the
ordinary conduct of Seller's Business are in good operating condition, normal
wear and tear excepted, and do not require nor are reasonably expected to
require any special or extraordinary expenditures to remain in such condition
beyond normal maintenance, and are capable of being used for their intended
purposes in the ordinary course of business consistent with past practice.
4.12 TAXES. All tax returns, reports and declarations (hereinafter
collectively, "Tax Returns") required by any governmental authority to be filed
in connection with the properties, Business, income, expenses, net worth and
franchises of Seller have been timely filed by either Seller or the Shareholder.
All taxes due in connection with the properties, Business, income, expenses, net
worth and franchises of Seller ("Taxes") have been paid by either Seller or
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the Shareholder, other than tax which is not yet due or which, if due, is not
yet delinquent or is being contested in good faith, and for which in all cases
reserves have been established on the Adjusted Balance Sheet. There are no tax
claims, audits or proceedings pending in connection with the properties,
Business, income, expenses, net worth and franchises of Seller, and, to the
knowledge of Seller, there are no such threatened claims, audits or proceedings.
4.13 EMPLOYEE BENEFITS. All employee benefit plans (as such term
is defined in Section 3(3) of Employee Retirement Income Security Act of 1974
("ERISA")) and all other employee benefit programs or arrangements of any type
(collectively, the "Plans") maintained by Seller or to which Seller contributes
are listed on SCHEDULE 4.13, and, except as disclosed on said SCHEDULE 4.13,
such Plans comply, in all material respects, with all applicable provisions of
any laws, rules or regulations, including, without limitation, the Internal
Revenue Code of 1986, as amended ("Code") and ERISA, and have so complied during
all prior periods during which any such provisions are applicable. Except as
disclosed on said SCHEDULE 4.13, Seller (i) has complied in all material
respects with the provisions of ERISA applicable to Seller as an employer, plan
sponsor, plan administrator or fiduciary of any such Plan, (ii) has administered
the Plans in accordance with their terms and (iii) with respect to any Plan
maintained by Seller or to which Seller contributes, has made all contributions
required of it by any law (including, without limitation, ERISA) or contract and
no unfunded liability exists with respect to any Plan.
4.14 CUSTOMERS. Except as set forth on SCHEDULE 4.14, no customer
of the Business accounting for more than One Hundred Thousand Dollars ($100,000)
in revenues during the twelve (12) full calendar months preceding the Closing
has canceled or otherwise terminated, or made any threat to cancel or otherwise
terminate, its relationship with Seller or to materially decrease its purchases
from Seller.
4.15 CONTRACTS. Except as set forth on SCHEDULE 4.15, neither
Seller, nor, to the knowledge of Seller, any other party to any contract set
forth on SCHEDULE 2.1, has breached any obligation under any such contract.
4.16 CONFLICTS. Except as set forth on SCHEDULE 4.16, neither the
Shareholder, nor any other person or entity controlled by or under common
control with Seller or the Shareholder, has any direct or indirect interest in
any business enterprise which does business with Seller or competes with Seller
in any manner.
4.17 ABSENCE OF CERTAIN BUSINESS PRACTICES. Except as set forth on
SCHEDULE 4.17, Seller and the Shareholder have not, and to the knowledge of
Seller no employee or agent of Seller, or any other person acting on its behalf
has, directly or indirectly, given or agreed to give any gift or similar benefit
to any customer, supplier, governmental employee or other person which (i) might
subject Seller to any damage or penalty in any civil, criminal or governmental
litigation or proceeding, (ii) if not given in the past, might have had an
adverse effect on the Purchased Assets or the Business, or (iii) if not
continued in the future, might adversely affect the Purchased Assets, the
Business or the prospects of the Business.
4.18 BROKERS AND FINDERS. Except as set forth on SCHEDULE 4.18, no
broker, finder or other person or entity acting in a similar capacity has
participated on behalf of
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Seller or the Shareholder in bringing about the transactions contemplated
herein, rendered any services with respect hereto, or been in any way involved
herewith. Seller and the Shareholder are fully responsible for any fees and/or
expenses due any such party.
4.19 INVESTMENT MATTERS. Seller is acquiring the New Horizons
Stock for investment purposes, for its own account and not with a view to
distribution or resale thereof or to divide its participation with others;
provided, however, Seller may elect to transfer the New Horizons Stock to the
Shareholder, who hereby confirms that he will thereby acquire the New Horizons
Stock for investment purposes, for his own account and not with a view to
distribution or resale thereof or to divide his participation with others.
Seller and the Shareholder both meet the definition of "accredited investor" as
defined in Regulation D, 17 C.F.R. ss. 230.501(a), under the Securities Act of
1933, as amended (the "Act"). Seller and the Shareholder both have knowledge and
experience in financial and business matters such that they are capable of
evaluating the merits and risks of an investment in the New Horizons Stock.
Seller and the Shareholder acknowledge that they have received and have reviewed
(a) New Horizons' most recent Proxy Statement, (b) New Horizons' Annual Reports
on Form 10-K for the years ending December 31, 1997 and 1998, (c) New Horizons'
Form 10-Q Quarterly Report(s) for the fiscal quarter(s) subsequent to the 1999
Annual Report, (d) draft Proxy Statement for the 1999 New Horizons' Shareholders
Meeting, and (e) all other material and relevant information concerning New
Horizons, which New Horizons has furnished in accordance with the rules of the
Securities and Exchange Commission ("SEC"), and have had the opportunity to ask
questions of, receive answers from and obtain additional information from New
Horizons concerning the business and financial condition of New Horizons.
Seller and the Shareholder understand, acknowledge and agree that:
(i) none of the New Horizons Stock will be registered under the Act and that all
of the New Horizons Stock will constitute "restricted securities" as defined in
Rule 144 (or its successor) under the Act; (ii) the New Horizons Stock must be
held indefinitely unless it is registered under the Act or an exemption from
registration is available; (iii) neither New Horizons nor Buyer is under any
obligation or has made any commitment to provide any such registration or to
take such steps as are necessary to permit sale without registration pursuant to
Rule 144 under the Act or otherwise; (iv) at such time as the New Horizons Stock
may be disposed of in routine sales without registration in reliance on Rule 144
under the Act, such disposition can be made only in limited amounts in
accordance with all of the terms and conditions of Rule 144; (v) if the Rule 144
exemption is not available, compliance with some other exemption from
registration will be required; (vi) all certificates evidencing the New Horizons
Stock will bear an appropriate legend concerning restrictions on transfer; (vii)
the transfer agent and registrar of Buyer will be advised by appropriate
"stop-transfer" instructions of the foregoing restrictions and instructed to
advise Buyer of any proposed transfer of certificate(s) evidencing the New
Horizons Stock; and (viii) in addition to the forgoing restrictions, no shares
of the New Horizons Stock may be sold or transferred during the twelve (12)
months following their issuance.
4.20 SOFTWARE. Except as set forth on SCHEDULE 4.20, all software
used in connection with the Business ("Software") has been designed and
developed by Seller or is used pursuant to valid license agreements, which
agreements are fully paid and in full force and effect. Except as set forth on
SCHEDULE 4.20, Seller has not licensed the Software to any third party and no
third party (including, but not limited to, any of Seller's employees) have any
rights in such
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Software. To Seller's knowledge there are no pending or threatened claims
against or demands upon Seller or the Shareholder alleging that the Software
infringes upon the rights of any third party.
4.21 ACCOUNTS RECEIVABLE. Except for the reserve for doubtful
accounts reflected on the Adjusted Balance Sheet, all accounts receivable of
Seller reflected on the Adjusted Balance Sheet, and as incurred in the normal
course of business since the date thereof, represent arm's length sales actually
made in the ordinary course of business are collectible in the ordinary course
of business.
4.22 MILLENNIUM COMPLIANCE. Seller has taken those steps outlined
on SCHEDULE 4.22 to determine whether its information systems used in connection
with the Business are Millennium Compliant. "Millennium Compliant" means the
ability when used individually or in conjunction with any other systems,
software or equipment to: (a) accurately process Date Data before, after and
across December 31, 1999 and throughout the year 2000 and beyond (including by
recognizing the year 2000 as a leap year); (b) provide correct results when
moving backwards and forwards between the 20th and 21st century; and (c)
function without error or without interruption related to or caused by Date
Data. For the purposes of this definition, "Date Data" means data which
represents or references dates in the same and/or different centuries.
4.23 NO MISREPRESENTATIONS. No representation or warranty made by
Seller or the Shareholder in this Agreement, the Schedules or Exhibits hereto,
or any certificate or document delivered to Buyer contains any untrue statement
of a material fact or omits to state a fact necessary to make the statements and
facts contained therein or herein, in light of the circumstances under which
they are made, not false or misleading. Copies of all documents delivered or
made available to Buyer by Seller were complete and accurate copies of such
documents.
4.24 KNOWLEDGE DEFINED. For purposes of this Section 4, "to the
knowledge of Seller" (or similar phrases) shall mean (i) the actual knowledge of
the Shareholder and Seller's general manager, and (ii) the knowledge any of such
persons would have had after making reasonable inquiry of the Seller's personnel
and reasonable investigation and review of Seller's books and records and other
relevant documentation.
5. REPRESENTATIONS AND WARRANTIES OF BUYER AND NEW HORIZONS. Buyer and
New Horizons, jointly and severally, represent and warrant to Seller and the
Shareholder as follows:
5.1 ORGANIZATION AND AUTHORITY OF BUYER. Buyer and New Horizons
are corporations duly incorporated, validly existing and in good standing under
the laws of the State of Delaware, and have full corporate power and authority
to execute, deliver and perform this Agreement in accordance with its terms.
This Agreement and the transactions contemplated by this Agreement, have been
authorized by all necessary corporate action of Buyer and New Horizons. This
Agreement has been duly executed and delivered by Buyer and New Horizons and
constitutes the legal, valid and binding obligation of Buyer and New Horizons,
enforceable against Buyer and New Horizons in accordance with its terms.
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5.2 NO CONSENTS OR CONFLICTS. No consent of, or filing with, any
governmental authority or third party is required in connection with the
execution, delivery or performance of this Agreement by Buyer or New Horizons
which has not been obtained or made or which will be obtained or made before
due. Neither the execution or delivery nor the performance of this Agreement or
any of the other agreements, instruments or documents to be delivered by or on
behalf of Buyer or New Horizons in connection herewith conflicts with, violates
or results in any breach of: (i) any judgment, decree, order, statute, rule or
regulation applicable to Buyer or New Horizons, (ii) any agreement to which
Buyer or New Horizons is a party or by which either of them is bound, or (iii)
any provision of the Certificate of Incorporation or the By-Laws of Buyer or New
Horizons.
5.3 ACCURACY OF PUBLIC DISCLOSURES. As of their respective dates
all reports filed by the Company with the Securities and Exchange Commission did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
5.4 NEW HORIZONS STOCK. The New Horizons Stock issued or to be
issued to Seller hereunder has been duly authorized and, when issued, will be
fully paid and nonassessable.
5.5 BROKERS AND FINDERS. No broker, finder or other person or
entity acting in a similar capacity has participated on behalf of Buyer in
bringing about the transactions contemplated herein, rendered any services with
respect thereto or been in any way involved therewith.
6. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Seller and the Shareholder set forth in Section 4 hereof will
survive the Closing, regardless of any investigation made by any party hereto,
until the second anniversary of the Closing Date, except that the
representations and warranties contained in Sections 4.1, 4.2, 4.6, 4.7, 4.12
and 4.13 will survive for the applicable statute of limitations (including
extensions). The representations and warranties of Buyer set forth in Section 5
hereof will survive the Closing, regardless of any investigation made by any
party hereto, until the second anniversary of the Closing Date, except that the
representations and warranties contained in Section 5.1 and 5.2 will survive for
the applicable statute of limitations.
7. CLOSING. The consummation of the transactions contemplated by this
Agreement (the "Closing") will take place simultaneously with the execution and
delivery of this Agreement by all of the parties hereto as of the date hereof
(the "Closing Date"), at the offices of Seller or at such other place as the
parties may agree in writing, and shall be effective as of the opening of
business on such date.
7.1 SELLER'S CLOSING DELIVERIES. Seller shall deliver the
following items in connection with the Closing, each of which shall be in form
and substance acceptable to Buyer and its counsel:
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(a) CONSENTS. The consent to the transactions contemplated by this
Agreement of any third party whose consent is required for the consummation of
such transactions by Seller or Shareholder;
(b) BOARD AND SHAREHOLDER APPROVAL. Certified copies of the
resolutions of Seller's Board of Directors and sole Shareholder approving the
consummation of the transactions contemplated by this Agreement;
(c) TRANSFER INSTRUMENTS; RELEASES OF LIENS. Bills of sale,
assignments and other transfer instruments and releases of liens, encumbrances
and restrictions sufficient to convey, transfer, and assign to Buyer, and to
effectively and legally vest in Buyer all of Seller's right, title and interest
in and to the Purchased Assets free and clear of all liens, encumbrances and
restrictions whatsoever;
(d) FRANCHISE AGREEMENTS. A written cancellation of and waiver of
all claims by Seller under the Charlotte Franchise Agreement;
(e) EMPLOYMENT. Employment agreements between Buyer and each of
the Shareholder and Chet Wisniewski in the form attached hereto as EXHIBIT
7.1(e) to be effective from and after the Closing Date;
(f) NAME CHANGE. Evidence that Seller has ceased, or within ten
(10) days after the Closing will cease, all uses of the name "New Horizons,"
"New Horizons Computer Learning Center" and all variations thereof; and
(g) OTHER DELIVERIES. Such other instruments and documents as may
be reasonably requested in order to give effect to the transactions contemplated
by this Agreement.
7.2 BUYER'S CLOSING DELIVERIES. Buyer shall deliver the following items
in connection with the Closing, each of which shall be in form and substance
acceptable to Seller, Shareholder and their counsel.
(a) EMPLOYMENT AGREEMENTS. Employment agreements between Buyer and
each of Shareholder and Chet Wisniewski, to be effective from and after the
Closing Date;
(b) CONSENTS. The consent to the transactions contemplated by this
Agreement of any third party whose consent is required for the consummation of
such transactions by Buyer or New Horizons;
(c) BOARD APPROVAL. Certified copies of the resolutions of Buyer's
Board of Directors approving the consummation of the transactions contemplated
by this Agreement;
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(d) CLOSING PAYMENT. The Closing Payment provided for in
Section 3.1; and
(e) ASSUMPTION AGREEMENT. An agreement assuming Seller's
obligations for the Assumed Liabilities.
8. RESTRICTIVE COVENANTS.
8.1 CONFIDENTIALITY. Without the prior written consent of Buyer,
Seller and the Shareholder shall at all times hold in strictest confidence the
terms of this Agreement and any and all non-public information concerning the
Business, Buyer or any of Buyer's affiliated companies.
8.2 NON-COMPETITION. Seller and the Shareholder shall not, for a
period of five (5) years following the Closing, without the prior written
consent of Buyer, engage or invest, directly or indirectly, in any form of
business activity or organization that is substantially similar to the Business
in any area where Buyer, any affiliate of Buyer, including NHCLC, or any
franchisee of Buyer or any affiliate of Buyer conducts such business. Buyer
hereby acknowledges Shareholder's investment in and relationship with the
Orlando franchisee and consents thereto, provided that such does not interfere
with any employment obligations Shareholder may have to Buyer or any affiliate
of Buyer and that any transactions between Buyer and the Orlando franchisee
while Shareholder is serving as an employee of Buyer or any affiliate of Buyer
shall at all times be conducted on commercially reasonable terms consistent with
those offered to or available from other unaffiliated parties.
8.3 NON-INTERFERENCE. Seller and the Shareholder shall not, for a
period of five (5) years following the Closing, without the prior written
consent of Buyer, directly or indirectly induce or attempt to induce any
employee, agent, consultant, representative, supplier, or customer of Buyer or
any of its affiliated companies to terminate its relationship with Buyer or such
affiliate or otherwise interfere with a relationship between Buyer or such an
affiliate and any of their employees, agents, consultants, representatives,
suppliers, or customers.
8.4 ADEQUATE CONSIDERATION. Seller and the Shareholder acknowledge
and agree that the obligations of Buyer hereunder constitute adequate
consideration for their obligations under this Section 8. Buyer acknowledges and
agrees that in addition to any other remedy which Seller or the Shareholder may
have at law, Seller and the Shareholder shall be free of any restrictions
imposed by this Section 8 if Buyer wrongfully fails to make any payment due
under this Agreement.
8.5 REMEDIES. Seller and the Shareholder acknowledge that a breach
of any of the provisions of this Section 8 will result in irreparable damage to
Buyer for which there will be no adequate remedy at law, and agree that Buyer,
in addition to its rights at law, will be entitled to injunctive and other
equitable relief to enforce such provisions, without having to post any bond.
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8.6 REFORMATION. In the event any provision of this Section 8
shall be determined to be unenforceable or invalid, such provision shall be
enforceable in part to the fullest extent permitted by law, such invalidity or
unenforceability shall not otherwise affect any other provision of this
Agreement or any similar agreement, and this Agreement shall otherwise remain in
full force and effect.
9. POST-CLOSING AGREEMENTS/FURTHER ASSURANCES.
9.1 As of the Closing, Buyer may not have all required licenses,
permits and other governmental or vendor authorizations necessary for it to take
title to all of the Purchased Assets and to hereafter operate all aspects of the
Business. Seller agrees to cooperate with Buyer in timely obtaining such
licenses, permits and other governmental and vendor authorizations, and further
agrees that Buyer may operate the Business under the authority of any of
Seller's licenses, permits or other governmental authorizations of the type that
Buyer has not yet obtained, PROVIDED, that such operation does not violate
applicable laws or regulations, and that Buyer and New Horizons, jointly and
severally, indemnify and hold Seller harmless against any and all costs,
liability, loss, damage or deficiency resulting from Seller's good faith
performance of these obligations.
9.2 The parties hereto agree to execute and deliver to any other
party any and all documents and instruments, and do and perform such acts, in
addition to those expressly provided for herein, as may be necessary or
appropriate to carry out or evidence the transactions contemplated by this
Agreement, whether before, at or after the Closing. Notwithstanding anything
contained in this Agreement to the contrary, this Agreement will not constitute
an agreement to assign any contract or claim or any right or benefit arising
thereunder or resulting therefrom if an attempted assignment thereof, without
the consent of a third party thereto, would constitute a breach thereof or in
any way affect the rights of Buyer thereunder. Seller and the Shareholder shall
use their best efforts to obtain the consent of the other party to any of the
foregoing contracts or claims to the assignment thereof to Buyer in all cases
that such consent is required for assignment or transfer.
9.3 Buyer shall use all reasonable efforts to collect the accounts
receivable included in the Purchased Assets, but Buyer shall not be required to
take or threaten legal action to collect any of such receivables.
9.4 Seller shall, within fourteen (14) days after the Closing
Date, provide such notices of continuation health coverage as are required to be
provided to any of Seller's employees, former employees, or the beneficiaries or
dependents of such employees or former employees, under Part 6 of Subtitle B of
Title I of ERISA or Section 4980B(f) of the Code.
9.5 During the period commencing on the Closing Date and ending
upon payment of the last Earn Out Payment contemplated by Section 3.3, Buyer
covenants and agrees as follows:
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(a) Buyer and New Horizons shall cause separate and distinct
books and records for the Business to be maintained;
(b) Buyer and New Horizons shall deliver to the Shareholder
within thirty (30) days of the close of each fiscal quarter of Buyer (other than
that coinciding with the end of its fiscal year, in which event such statements
shall be provided after the completion of New Horizons' year-end audit) copies
of the balance sheet of the Business as of that date and of the statements of
income for the fiscal quarter and year-to-date then ended prepared in accordance
with the provisions of Section 3.2 hereof; and
(c) All transactions between or among Buyer and any of Buyer's
affiliates shall be on terms and conditions no less favorable to Buyer than
those available through comparable transactions with third parties.
9.6 Seller and the Shareholder agree that, except for a transfer
of the New Horizons Stock by Seller to the Shareholder, as contemplated in
Section 4.19 of this Agreement, they will not sell, transfer, pledge otherwise
dispose of any of the New Horizons Stock prior to the expiration of the twelve
(12) month period following the Closing.
10. INDEMNIFICATION.
10.1 Seller and the Shareholder jointly and severally agree to
indemnify and hold Buyer and New Horizons harmless from and against (i) any and
all loss, damage, liability or deficiency resulting from or arising out of any
inaccuracy in or breach of any representation, warranty, covenant, or obligation
made or incurred by Seller or the Shareholder herein, (ii) any imposition
(including, without limitation, by operation of bulk transfer or other law) or
attempted imposition by a third party upon Buyer of any liability or obligation
of Seller which is not an Assumed Liability, and (iii) any and all costs and
expenses (including reasonable attorneys' and accountants' fees) related to any
of the foregoing.
10.2 Buyer and New Horizons jointly and severally agree to
indemnify and hold Seller and the Shareholder harmless from and against (i) any
and all loss, damage, liability or deficiency resulting from or arising out of
any inaccuracy in or breach of any representation, warranty, covenant, or
obligation made or incurred by Buyer or New Horizons herein, (ii) any imposition
or attempted imposition by a third party upon Seller or Shareholder of any
Assumed Liability, and (iii) any and all costs and expenses (including
reasonable attorneys' and accountants' fees) related to any of the foregoing.
10.3 If any legal proceedings shall be instituted or any claim is
asserted by any third party in respect of which any party hereto may be entitled
to indemnity hereunder, the party asserting such right to indemnity shall give
the party from whom indemnity is sought written notice thereof. A delay in
giving notice shall only relieve the recipient of liability to the extent the
recipient suffers actual prejudice because of the delay. The party from whom
indemnity is sought shall have the right, at its option and expense, to
participate in the defense of such a proceeding or claim, but not to control the
defense, negotiation or settlement thereof, which control shall at all
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times rest with the party asserting such right to indemnity, unless the
proceeding or claim involves only money damages and the party from whom
indemnity is sought:
(a) irrevocably acknowledges in writing complete
responsibility for and agrees to indemnify the party
asserting such right to indemnity, and
(b) furnishes satisfactory evidence of the financial
ability to indemnify the party asserting such right
to indemnity,
in which case the party from whom indemnity is sought may assume such control
through counsel of its choice and at its expense, but the party asserting such
right to indemnity shall continue to have the right to be represented, at its
own expense, by counsel of its choice in connection with the defense of such a
proceeding or claim. If the party from whom indemnity is sought does not assume
control of the defense of such a proceeding or claim, the entire defense of the
proceeding or claim by the party asserting such right to indemnity, any
settlement made by the party asserting such right to indemnity, and any judgment
entered in the proceeding or claim shall be deemed to have been consented to by,
and shall be binding on, the party from whom indemnity is sought as fully as
though it alone had assumed the defense thereof and a judgment had been entered
in the proceeding or claim in the amount of such settlement or judgment, except
that the right of the party from whom indemnity is sought to contest the right
of the other to indemnification under this Agreement with respect to the
proceeding or claim shall not be extinguished. If the party from whom indemnity
is sought does assume control of the defense of such a proceeding or claim, it
will not, without the prior written consent of the party asserting such right to
indemnity, settle the proceeding or claim or consent to entry of any judgment
relating thereto which does not include as an unconditional term thereof the
giving by the claimant to the party asserting such right to indemnity a release
from all liability in respect of the proceeding or claim. The parties hereto
agree to cooperate fully with each other in connection with the defense,
negotiation or settlement of any such proceeding or claim.
10.4 The foregoing indemnification provisions are in addition
to, and not in derogation of, any statutory, equitable, or common law remedy
available to any party.
10.5 Notwithstanding the provisions of Section 10.1 hereof,
any claim or claims for indemnity against the Seller or the Shareholder
resulting from or arising out of any inaccuracy in or breach of any
representation or warranty given by Seller or the Shareholder hereunder (other
than those arising solely as a result of the inaccuracy in any representations
and warranties provided for in Sections 4.6 or 4.12 shall not be actionable
until the aggregate loss incurred by Buyer or New Horizons shall with respect to
all such claims exceeds Twenty-Five Thousand Dollars ($25,000.00).
11. REGISTRATION RIGHTS.
11.1 REGISTRATION RIGHTS. Subject to the limitations set forth
in Section 11.2 hereof, in the event that (i) New Horizons files or causes to be
filed a registration statement ("Registration Statement") under the Securities
Act in connection with the proposed offer and sale for cash by it, or by Curtis
Lee Smith, Jr. and Stuart O. Smith, of shares of new Horizons Stock (the
"Registration"), other than a registration on Form S-4 or Form S-8 promulgated
under
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the Securities Act or any successor or similar form, and (ii) the sale of the
New Horizons Stock issued to the Seller and/or the Shareholder remains
restricted pursuant to Rule 144 of the Securities Act or by the terms of this
Agreement, New Horizons will give written notice of its or their intention to
effect the Registration to Seller and/or the Shareholder. Upon written request
from any one or more of the Seller and/or the Shareholder to New Horizons within
15 days after the mailing of any such notice from New Horizons regarding the
Registration, New Horizons shall use its best efforts to cause the shares of New
Horizons Stock as to which such registration has been requested to be included
in the Registration. For purposes of this Agreement, and subject to New
Horizon's rights under Subsection 11.2 hereof, New Horizons shall be deemed to
have used its best efforts to satisfy its obligations under this Section 11 if
it: (i) prepares and files with the Securities and Exchange Commission a
Registration Statement with respect to the New Horizons Stock for which
registration has been properly requested and to use its best efforts to cause
such Registration Statement to become and remain effective for such period as
may be necessary to permit the Seller and/or the Shareholder to dispose of the
shares of New Horizons Stock covered thereby; provided however, that New
Horizons not need file any such Registration Statement (or cause same to become
or remain effective) after the date that such shares of New Horizons Stock are
freely tradable without restriction under the Act by the Seller and/or the
Shareholder pursuant to Rule 144(k) promulgated thereunder and under the terms
of this Agreement (the "Registration Expiration Date") (ii) prepares and files
with the Securities and Exchange Commission such amendments and supplements to
the Registration Statement and the prospectus used in connection with the
Registration Statement as may be necessary to comply with the provisions of the
Act with respect to the disposition of all securities covered by the
Registration Statement, (iii) furnishes to the Seller and/or the Shareholder
such numbers of copies of a prospectus in conformity with the requirements of
the Act, and such other documents as the Seller and/or the Shareholder may
reasonably request in order to facilitate the disposition of the New Horizons
Stock owned by the Seller and/or the Shareholder; and (iv) uses it best efforts
to register and qualify the securities covered by the Registration Statement
under such other securities or Blue Sky law of such jurisdictions as shall be
reasonably appropriate for the distribution of the securities covered by the
Registration Statement, provided that New Horizons shall not be required in
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions. Nothing contained herein shall be construed to confer any rights
upon the Seller and/or the Shareholder to make an underwritten offering of their
New Horizons Stock or to include their New Horizons Stock in any registration
statement that includes securities to be issued by New Horizons for its own
account that does not include shares of New Horizons Stock.
11.2 LIMITATIONS ON REGISTRATION RIGHTS. Notwithstanding, the
provisions of Subsection 11.1 of this Agreement: (i) the maximum number of
shares of New Horizons Stock that may be included in any Registration Statement
shall be determined by New Horizons, in its reasonable discretion; (ii) New
Horizons shall not be obligated to include the Seller and/or the Shareholder in
more than two Registrations pursuant to this Agreement; and (iii) New Horizons
may postpone for up to six months the filing or effectiveness of any
Registration Statement if (A) New Horizons determines, in its reasonable
discretion, that such registration would have an adverse effect upon any pending
or proposed transaction which is or may become material to New Horizons and its
subsidiaries and affiliates, taken as a whole, (B) in order to complete any
registration, distribution or lock-up period in connection with any
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underwritten offering of any of New Horizons' securities, or (C) if consistent
with New Horizon's business purposes, to delay the disclosure to the public of
any material event.
11.3 LOCK-UP AGREEMENTS. The Seller and the Shareholder agree
that, if New Horizons or the managing underwriter(s) of any underwritten
offering of New Horizons' securities so requests, the Seller and/or the
Shareholder will not, without the prior written consent of New Horizons or such
underwriter(s), effect any sale, transfer or other disposition of any of the
shares of New Horizons Stock, including sales pursuant to a Registration
Statement or under Rule 144, during the 10-day period prior to, and during the
180-day period commencing on, the effective date of such underwritten
registration (or during such shorter period or periods as such underwriter(s)
may in writing permit).
11.4 OBLIGATION TO FURNISH INFORMATION. It shall be a condition
precedent to the obligations of New Horizons to take any action pursuant to
Subsection 11.1 hereof that the Seller and/or the Shareholder shall furnish to
New Horizons such information regarding the Seller and/or the Shareholder, the
New Horizons Stock held by them, and the intended method of disposition of such
securities as New Horizons shall reasonably request and as shall be required in
connection with the actions to be taken by New Horizons.
11.5 EXPENSES OF REGISTRATION. All expenses incurred in connection
with the Registrations pursuant to Subsection 11.1 (excluding underwriters'
discounts and commission and brokerage or dealer commissions), including without
limitation all registration an qualification fees, costs of complying with
applicable blue sky and other securities laws, printers' and accounting fees,
and fees and disbursements of counsel for New Horizons shall be borne by New
Horizons; provided, however, that New Horizons shall not be required to pay for
any such expenses if the Seller and/or the Shareholder subsequently withdraw the
New Horizons Stock from said Registration.
11.6 DELAY OF REGISTRATION. The Seller and/or the Shareholder
shall not have any right to take any action to restrain, enjoin or otherwise
delay the Registration Statement as the result of any controversy that might
arise with respect to the interpretation or implementation of this Section 11.
11.7 INDEMNIFICATION. If any shares of New Horizons Stock owned by
the Seller and/or the Shareholder are included in a registration statement under
this Section 11:
11.7.1 INDEMNIFICATION OF SELLER OR THE SHAREHOLDER. To the
extent permitted by law, New Horizons will indemnify and hold harmless the
Seller and/or the Shareholder requesting or joining in the Registration
Statement against any losses, claims, damages or liabilities, joint or several,
to which they may become subject under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based on any untrue or alleged untrue statement of any material fact
contained in such Registration Statement, including any prospectus contained
therein or any amendments or supplements thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein, or necessary to make the statements therein not
misleading, or arise out of any violation by New Horizons of any rule or
regulation
18
<PAGE> 19
promulgated under the Act applicable to New Horizons and relating to action or
inaction required by New Horizons in connection with any such registration; and
will reimburse the Seller and/or the Shareholder for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
indemnity agreement contained in this Subsection 11.7.1 shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of New Horizons (which
consent shall not be unreasonably withheld) nor shall New Horizons be liable in
any such case for any such loss, claim, damage, liability or action to the
extent that it arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in connection with such
registration statement, any prospectus, or amendments or supplements thereto, in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by the Seller and/or the Shareholder.
It is expressly understood among the parties to this Agreement that in no event
shall New Horizons be obligated to agree to indemnify, in any respect, any
underwriter, broker, dealer or other entity or person effecting the sale,
purchasing or otherwise distributing any of the New Horizons Stock.
11.7.2 INDEMNIFICATION OF NEW HORIZONS. To the extent
permitted by law, the Seller and/or the Shareholder will indemnify and hold
harmless New Horizons, each of its directors, each of its officers who have
signed the Registration Statement, each person, if any, who controls New
Horizons within the meaning of the Act, and each agent for New Horizons (within
the meaning of the Act) against any losses, claims, damages or liabilities to
which New Horizons or any such directors, officer, controlling person or agent
may become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereto) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, including any prospectus contained
therein or any amendments or supplements thereto, or arise out of or are based
upon the omissions or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
in each case to the extent that such untrue statement or alleged untrue
statement or omission or alleged omission was made in the Registration
Statement, prospectus, or amendments or supplements thereof, in reliance upon
and in conformity with written information furnished by the Seller and/or the
Shareholder for use in connection with such registration; and the Seller and/or
the Shareholder will reimburse any legal or other expenses reasonably incurred
by New Horizons or any such director, officer, controlling person or agent in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the indemnity agreement contained
in this Subsection 11.7.2 shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Seller and/or the Shareholder (which consent shall
not be unreasonably withheld).
11.8 TRANSFER OF REGISTRATION RIGHTS. The registration rights of
the Seller and/or the Shareholder under this Section 11 may not be transferred
to any third party, except that such rights may be transferred to an estate,
trust, or heir, upon the death of the Shareholder.
19
<PAGE> 20
11.9 REPORTS UNDER EXCHANGE ACT. With a view to making available
to the Seller and/or the Shareholder the benefits of Rule 144 promulgated under
the Act and any other rule or regulation of the Securities and Exchange
Commission that may at any time permit the Seller and/or the Shareholder to sell
securities of New Horizons to the public without registration, New Horizons
agrees to use its best efforts to (i) make and keep public information
available, as those terms are understood and defined in Rule 144, (ii) file with
the Securities and Exchange Commission in a timely manner all reports and other
documents required of New Horizons under the Act and the Securities Exchange Act
of 1934, as amended (the "Exchange Act") and (iii) furnish to Seller and/or the
Shareholder, so long as Seller and/or the Shareholder owns any of the New
Horizons Stock, a written statement by New Horizons that it has complied with
the reporting requirements of Rule 144 and of the Act and the Exchange Act, a
copy of the most recent annual or quarterly report of New Horizons, and such
other reports and documents so filed by New Horizons as may be reasonably
requested in availing the Seller and/or the Shareholder of any rule or
regulation of the Securities and Exchange Commission permitting the selling of
any such securities without registration.
12. MISCELLANEOUS.
12.1 AMENDMENTS; BINDING EFFECT. The Agreement (including each
Schedule and Exhibit hereto) may not be amended or modified except by a document
in writing signed by all parties hereto. This Agreement and the rights and
obligations of each party hereunder shall be binding upon and shall inure to the
benefit of the respective successors and permitted assigns of each of the
parties hereto, but neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any party hereto without the prior
written consent of the other parties; provided, however, that Buyer may assign
this Agreement and its rights, interests and obligations hereunder to its parent
companies or to any of its majority-owned subsidiaries or affiliates without the
prior written consent of the other parties hereto.
12.2 NOTICES. All notices or other communications required or
permitted to be given hereunder shall be in writing and shall be deemed to be
effectively served and delivered (a) when delivered personally; (b) when given
by facsimile (with confirmation of receipt and a copy mailed by first-class U.S.
mail); (c) one (1) business day following deposit with a recognized national air
courier service; or (d) three (3) business days after being deposited in the
United States mail in a sealed envelope, postage prepaid, return receipt
requested to the appropriate party at the following address (or such other
address for a party as shall be specified by notice pursuant hereto):
If to Seller or the Shareholder, to: INNOVAK International Incorporated
305 Dumbarton Court
Spartanburg, South Carolina 29307
Facsimile: ____________________
20
<PAGE> 21
With a copy to: Thomas A. Philips
Butler, Means, Evins & Browne, P.A.
234 North Church Street
Spartanburg, SC 29304
Facsimile: (864) 585-2034
If to Buyer or
New Horizons, to: New Horizons Computer Learning Center
of Charlotte, Inc.
1231 East Dyer Road, Suite 140
Santa Ana, CA 92705-5605
Attention: Chief Financial Officer
Facsimile: 714-755-6947
With a copy to: Calfee, Halter & Griswold LLP
800 Superior Avenue, Suite 1400
Cleveland, Ohio 44114
Attention: Scott R. Wilson, Esq.
Facsimile: (216) 241-0816
12.3 CONSTRUCTION. This Agreement (including the Schedules and
Exhibits hereto), sets forth the exclusive statement of the agreement among the
parties concerning the subject matter hereof, and there are no agreements or
understandings between or among any of the parties hereto concerning such
subject matter other than as set forth herein. The headings to the various
provisions of this Agreement are for reference purposes only and shall not be
construed as affecting the meaning or interpretation of this Agreement. This
Agreement may be executed in multiple counterparts, each of which shall be
deemed an original, and all of which together shall constitute one and the same
document. This Agreement shall be governed by and construed in accordance with
the laws of the State of North Carolina without regard to any conflict of laws
provisions.
[Signature Page Follows]
21
<PAGE> 22
IN WITNESS WHEREOF, the parties have executed this Asset
Purchase Agreement on the date first written above.
INNOVAK INTERNATIONAL INCORPORATED
By: /s/ Robert Remington
-------------------------------------
Title: President
----------------------------------
Robert Remington
NEW HORIZONS COMPUTER LEARNING CENTER OF
CHARLOTTE, INC.
By: /s/ Thomas J. Bresnan
-------------------------------------
Title: President
----------------------------------
NEW HORIZONS WORLDWIDE, INC.
By: /s/ Thomas J. Bresnan
-------------------------------------
Title: President
----------------------------------
22
<PAGE> 1
EXHIBIT 2.2
EXECUTION COPY
ASSET PURCHASE AGREEMENT
------------------------
This Asset Purchase Agreement ("Agreement") is entered into as of the 1st
day of April, 1999, among X-Tech Incorporated, dba "New Horizons Computer
Learning Centers of Sacramento and Stockton" ("Seller"), Northwestern Technical
College, Inc., a California corporation ("NTC"), John Xepoleas, as the sole
shareholder of Seller and the majority shareholder of NTC (the "Shareholder"),
New Horizons Computer Learning Center of Sacramento, Inc., a Delaware
corporation ("Buyer") and New Horizons Computer Learning Centers, Inc., a
California corporation ("NHCLC").
Recitals:
---------
A. Seller is engaged in the business of providing computer training
services ("Services") to organizations and individuals primarily located in and
around Sacramento and Stockton and Redding, California (the "Business") as a
franchisee of NHCLC.
B. The parties desire that (i) Seller sell to Buyer and that Buyer
purchase from Seller substantially all of Seller's assets related to the
Business and (ii) Seller's Franchise Agreements each dated September 15, 1992
and November 10, 1995, respectively with NHCLC for the Sacramento and Stockton
area (the "Franchise Agreements") be terminated upon the terms therein and
hereinafter set forth.
C. Shareholder owns 90% of the issued and outstanding capital stock of
NTC, which provides computer training services for vocational and retraining
programs in the Sacramento and Stockton areas.
D. The parties desire to provide for certain limitations on the
business to be conducted by NTC and Buyer in the future.
In consideration of and in reliance upon the mutual representations,
warranties, covenants, obligations and agreements contained herein, the parties
agree as follows:
1. PURCHASE AND SALE OF ASSETS.
1.1 PURCHASED ASSETS. Seller hereby sells to Buyer, free of all
liens, encumbrances, claims and other restrictions of any kind, and Buyer hereby
purchases, all of Seller's right, title, and interest in and to all of the
properties, assets, and rights owned, used, acquired for use, or arising or
existing in connection with the Business, whether tangible or intangible, and
whether or not recorded on Seller's books and records, as the same exist at the
Closing (as defined below), including, without limitation, books and records,
software and software licenses, stationary, business forms, telephone systems,
telephone numbers, telex numbers, permits and other authorizations (governmental
or otherwise) owned by Seller pertaining to the Business (to the extent such
authorizations may legally be assigned), know-how, trade secrets, patents,
trademarks, trade names, copyrights (including applications for the foregoing),
and all goodwill relating to the Seller; PROVIDED, HOWEVER, that (i) Seller
shall not sell
<PAGE> 2
and Buyer shall not purchase the Retained Assets of Seller described in Section
1.2 hereof, and (ii) as to contracts only, Seller shall assign and Buyer shall
assume only those contracts of Seller that are set forth or described on
SCHEDULE 2.1. The assets to be purchased and sold pursuant to this Agreement are
referred to herein as the "Purchased Assets."
1.2 RETAINED ASSETS. Seller shall retain, and Buyer shall not
purchase (i) any rights of Seller arising under this Agreement, (ii) Seller's
corporate minute books, stock records, and tax returns or other similar
corporate books and records relating to the Business, and those records,
originals of which Seller is required to maintain under applicable laws
(PROVIDED, copies of the same are included among the Purchased Assets), (iii)
contracts of Seller that are NOT set forth on SCHEDULE 2.1 and (iv) the items
listed on SCHEDULE 1.2 (collectively, the "Retained Assets").
2. LIABILITIES OF SELLER.
2.1 ASSUMED LIABILITIES. On the Closing Date, Buyer agrees to
assume, and hereby assumes, the following liabilities and obligations of Seller
existing as of the Closing (the "Assumed Liabilities"): (a) Seller's current
liabilities reflected on the Adjusted Balance Sheet appearing in the Adjusted
Financial Statements (as such terms are defined in Section 3.2 below) and those
current liabilities incurred in the ordinary course of business consistent with
past practices since the date of such Adjusted Balance Sheet to the extent
reflected or reserved on the Closing Balance Sheet (as defined in Section 3.2
below) (b) Seller's long-term liabilities under lease arrangements of a type
required by GAAP to be included on a balance sheet other than those liabilities
or accruals relating to lines of credit, loans or other indebtedness with
financial institutions (such liabilities together with the current liabilities
reflected in paragraph (a) immediately preceding being sometimes referred to
herein as "Assumed Balance Sheet Liabilities"), (c) the liabilities of Seller
under the contracts set forth on SCHEDULE 2.1 to the extent (i) such contract
liabilities accrue and relate solely to the period after the Closing, and (ii)
the corresponding benefits therefrom are validly assigned to and received by
Buyer, and (d) Seller's future obligation to provide training for which Seller
has received payment.
2.2 RETAINED LIABILITIES. Except for the Assumed Liabilities,
Buyer shall not assume nor become responsible for any liability or obligation of
Seller of any nature whatsoever, whether known or unknown, accrued, absolute,
contingent or otherwise (the "Retained Liabilities").
3. CONSIDERATION. The consideration for the Purchased Assets shall
consist of the following: (i) Buyer's assumption of the Assumed Balance Sheet
Liabilities, (ii) payment of the consideration payable at Closing as set forth
in Section 3.1 below (the "Closing Payment"), as such may be subsequently
adjusted pursuant to Section 3.2 below, and (iii) the consideration payable, if
any, following the Closing as set forth in Section 3.3 below (the "Earn-Out").
3.1 CLOSING PAYMENT. The Closing Payment shall be payable as
follows:
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<PAGE> 3
(a) Two Million Seven Hundred Three Thousand Seven Hundred Sixty Six and
92/100 Dollars ($2,703,766.92), payable by wire transfer of immediately
available funds to an account designated by Seller;
(b) Two Hundred Ninety Six Thousand Two Hundred Thirty Three and 08/100
Dollars ($296,233.08) payable by wire transfer of immediately available funds to
an account designated by U.S. National Bank; and
(c) Two Hundred Thousand Dollars ($200,000.00) (the "Holdback Amount"), to
be held by Buyer in an interest-bearing account pending final determination of
the Net Worth Adjustment (as defined and determined below)
3.2 BALANCE SHEET ADJUSTMENT.
(a) Promptly after the Closing, Seller will prepare a balance sheet as of
the Closing (the "Closing Balance Sheet") reflecting:
(i) cash and cash equivalents included in the Purchased Assets;
(ii) trade accounts receivable, net of allowance for doubtful accounts
and reserve for subsequent credit memos, included in the Purchased Assets;
(iii) inventory, net of applicable reserves, included in the Purchased
Assets;
(iv) prepaid expenses included in the Purchased Assets the benefit of
which is fully available to Buyer;
(v) property, plant and equipment, net of depreciation and
amortization, included in the Purchased Assets;
(vi) any other assets included in the Purchased Assets of a type
required by GAAP to be included on a balance sheet; and (vii) the Assumed
Balance Sheet Liabilities.
Attached hereto as SCHEDULE 3.2(a)(i) is a balance sheet of the Business as of
December 31, 1998 and an income statement for the twelve (12) month period then
ended, which have been prepared jointly by Seller and Buyer in accordance with
GAAP and which reflect the New Horizons Methodology (the "Adjusted Balance
Sheet" and "Adjusted Income Statement", respectively, and collectively, the
"Adjusted Financial Statements"). Such Methodology is set forth on SCHEDULE
3.2(a)(ii) hereof. The Adjusted Balance Sheet was derived from the Seller's
Balance Sheet (as defined in Section 4.3 hereof) by making those modifications
set forth on SCHEDULE 3.2(a)(iii) hereof. The Closing Balance Sheet shall be
prepared in a manner consistent with the preparation of the Adjusted Balance
Sheet. Based on the Closing Balance Sheet, Seller will also prepare a written
calculation of the amount by which the Net Worth (as defined below) as at the
Closing Date is greater or less than a negative Two Hundred Seventy-Five
Thousand Dollars (-$275,000.00) ("Net Worth Adjustment").
3
<PAGE> 4
(b) NET WORTH ADJUSTMENT REVIEW. Seller will prepare the Closing Balance
Sheet and the Net Worth Adjustment and deliver the same to Buyer not later than
thirty (30) days after the Closing, together with a written certification that
such have been prepared and calculated in accordance herewith. Thereafter,
Buyer's Chief Financial Officer and Buyer's independent accountants will conduct
a review of these items, and Buyer will notify Seller not later than thirty (30)
days after receipt thereof, as to whether they are acceptable to Buyer. If Buyer
objects to the Closing Balance Sheet or the Net Worth Adjustment and Buyer and
Seller are able to resolve their dispute within fifteen (15) days after Buyer's
objection, the Net Worth Adjustment (reflecting the resolution) will become
final and binding on the parties. If Buyer and Seller are unable to resolve
their dispute within fifteen (15) days after Buyer's objection, the dispute will
be resolved by a "Big Five" national accounting firm mutually agreeable to the
parties (the "Independent Accountants"). The Independent Accountants will be
instructed to perform their services as expeditiously as possible and the
resolution of the Independent Accountants shall be final and binding on the
parties. The fees and expenses of the Independent Accountants for the resolution
of the dispute shall be shared by Buyer and Seller in inverse proportion to the
respective amounts of the disputed matters which are resolved in its favor.
(c) FINAL PAYMENT OR REFUND.
(i) POST-CLOSING PAYMENT. If the Net Worth Adjustment is a positive
amount, the Holdback Amount shall be paid to Seller (along with any interest
accrued thereon). In addition to paying the Holdback Amount, Buyer shall pay
Seller the dollar amount equal to the Net Worth Adjustment. The following
example shall illustrate the foregoing:
If the Net Worth as of the Closing Date is negative One Hundred Thousand
Dollars (-$100,000.00), then the Net Worth Adjustment will be a positive
One Hundred Seventy Five Thousand Dollars ($175,000.00). Since the Net
Worth Adjustment is a positive amount, Buyer would pay Seller the entire
Holdback Amount (i.e., $200,000.00) and the amount of the Net Worth
Adjustment ($175,000.00) for a total Post-Closing Payment of Three Hundred
and Seventy Five Thousand Dollars ($375,000.00).
(ii) POST-CLOSING REFUND. If the Net Worth Adjustment is a negative
amount, Seller will refund to Buyer the Net Worth Adjustment (treated as a
positive amount) from the Holdback Amount (which Buyer may retain, to the extent
necessary to pay the Net Worth Adjustment) and, if necessary, also by the wire
transfer of immediately available funds to an account designated in writing by
Buyer (or a combination of both). The balance of the Holdback Amount, if any,
shall be paid to Seller (along with any interest accrued thereon).
(iii) TIME OF POST-CLOSING PAYMENT OR REFUND. Any post-closing payment
or refund (as the case may be) provided for under this Section 3.2(c) will be
made not more than three business (3) days after the Net Worth Adjustment
becomes final, as contemplated by Section 3.2(b) hereof.
3.3 EARN-OUT. As additional consideration for the Purchased Assets, Seller
shall be entitled to receive with respect to the 12 month period commencing on
the first
4
<PAGE> 5
day of the month on or after the Closing Date and ending on the last day of the
twelfth month thereafter, an amount, if any, to be determined as follows (the
"Earn Out Payments"):
<TABLE>
<CAPTION>
-------------------------------------------- ----------------------------------------------
BUYER'S EBIT EARN OUT PAYMENT WILL BE
-------------------------------------------- ----------------------------------------------
<S> <C>
Less than or equal to $700,000 -0-
-------------------------------------------- ----------------------------------------------
Greater than $700,000 and less than One dollar for every dollar that EBIT
or equal to $1,000,000 exceeds $700,000
-------------------------------------------- ----------------------------------------------
Greater than $1,000,000 and less than or $300,000
equal to $1,100,000
-------------------------------------------- ----------------------------------------------
In excess of $1,100,000 $300,000 plus 2.5 times the excess EBIT over
$1,100,000
-------------------------------------------- ----------------------------------------------
</TABLE>
Buyer will prepare the foregoing EBIT calculations and deliver the same to
Seller within forty-five (45) days after the end of the twelve month period for
which they are required, together with a written certification that such
calculations have been prepared and calculated in accordance herewith.
Thereafter, Seller will conduct a review of these items and notify Buyer not
later than thirty (30) days after receipt of such calculations as to whether
they are acceptable to Seller. If Seller objects to such calculations and Buyer
and Seller are able to resolve their dispute within fifteen (15) days after
Seller's objection, such calculations (reflecting the resolution) will become
final and binding on the parties. If Buyer and Seller are unable to resolve
their dispute within fifteen (15) days after Seller's objection, the dispute
will be resolved by the Independent Accountants. The Independent Accountants
will be instructed to perform their services as expeditiously as possible and
the resolution of the Independent Accountants shall be final and binding on the
parties. The fees and expenses of the Independent Accountants for the resolution
of the dispute shall be shared by Buyer and Seller in inverse proportion to the
respective amounts of the disputed matters which are resolved in its favor.
Within ten (10) days after the amount of any Earn Out Payment is finally
determined in accordance with the foregoing it shall be paid by wire transfer of
immediately available funds to an account designated in writing by Seller.
For purposes of this Section 3:
"Buyer's EBIT" shall be the amount determined from Buyer's financial
statements for the Business prepared in accordance with GAAP using the New
Horizons Methodology in a manner consistent with the Adjusted Income Statement,
by (a) adding to the net income or loss of the Business: (i) the total of all
federal, state, local and foreign tax expense with respect to income; (ii) the
total of all interest expense with respect to indebtedness for borrowed money
(including capitalized leases and purchase money financing), net of interest
income; and (iii) the amortization of all intangibles resulting from the
transactions contemplated by this Agreement, and (b) deducting royalties which
would have been payable by Seller to NHCLC under the Franchise Agreements in the
absence of this Agreement. In determining
5
<PAGE> 6
Buyer's EBIT, it is agreed that no intercompany administrative, accounting or
overhead charges shall be made against the Business; PROVIDED that Buyer, NHCLC
or any affiliate of either entity may charge to the Business the reasonable cost
of providing (i) services which replace those historically provided by persons
directly employed in the Business, or (ii) services which are directly necessary
to the continued growth and success of the Business.
"Net Worth" means the assets of the Business (excluding unamortized
organization costs or franchise fees) less total liabilities of the Business,
determined in accordance with GAAP, but excluding the Retained Assets and
Retained Liabilities.
3.4 ACCOUNTING PROCEDURES FOR EBIT CALCULATION. The accounting
procedures used for purposes of determining the Adjusted Balance Sheet and
Adjusted Income Statement shall be the same procedures used for purposes of
calculating Buyer's EBIT during the "earn-out" period, which are more described
on SCHEDULE 3.2(a)(ii). Additionally, any subsequent changes in the New Horizons
Methodology shall not apply for purposes to Buyer's EBIT calculation.
In addition to the exclusions set forth in the definition of "Buyer's
EBIT," all costs associated with Buyer's acquisition of the Business, including,
but not limited to conversion, maintenance of the Holdback Amount, Buyer's
professional legal, accounting and consulting fees, due diligence, governmental
filing fees, travel, lodging, orientation of personnel, notifying customers and
vendors of the transactions contemplated by this Agreement and a change in
accounting methodology shall be excluded from the calculation of Buyer's EBIT.
4. REPRESENTATIONS AND WARRANTIES OF SELLER AND THE SHAREHOLDER. Seller and
the Shareholder hereby jointly and severally represent and warrant to Buyer as
follows:
4.1 ORGANIZATION, AUTHORITY AND CAPACITY. Seller is a corporation duly
formed, validly existing and in good standing under the laws of the State of
California, and except as set forth on SCHEDULE 4.1, is in good standing
qualified to do business in such other states where the nature of the business
conducted requires such qualification, and has full power and authority to own,
lease and operate its assets and properties and, carry on the Business as and
where such assets and properties are now owned or leased and as such business is
presently being conducted. Seller and the Shareholder have full power,
authority, and legal capacity to execute, deliver, and perform this Agreement in
accordance with its terms, and such execution, delivery and performance has been
approved by all requisite action of Seller. This Agreement has been duly
executed and delivered by Seller and the Shareholder and constitutes the legal,
valid and binding obligation of Seller and the Shareholder, enforceable against
Seller and the Shareholder in accordance with its terms.
4.2 NO CONSENTS OR CONFLICTS. Except as set forth on SCHEDULE 4.2, no
consent of, or filing with, any governmental authority or third party is
required in connection with the execution, delivery or performance of this
Agreement or any of the other agreements, instruments or documents to be
delivered by or on behalf of Seller or the Shareholder in connection herewith.
Neither the execution or delivery nor the performance of this Agreement or any
of the other agreements, instruments or documents to be delivered by or on
behalf of Seller or the Shareholder in connection herewith conflicts with,
violates or results in any breach
6
<PAGE> 7
of: (i) any judgment, decree, order, statute, rule or regulation applicable to
Seller or the Shareholder, (ii) any agreement or instrument to which Seller or
the Shareholder is a party or by which Seller or any of its assets is bound, or
(iii) any provision of the Articles of Incorporation or the By-Laws of Seller.
4.3 FINANCIAL STATEMENTS. Seller has previously delivered to Buyer Seller's
financial statements for the years ended December 31, 1997 and 1998, and for the
two (2) month period ended February 28, 1999 (the "Seller Prepared Financial
Statements"), including its balance sheet as of February 28, 1999 ("Seller's
Balance Sheet"). The Seller Prepared Financial Statements present fairly
Seller's financial position as of the dates indicated and results of operations
for the periods indicated on a consistent basis.
4.4 NO LIABILITIES. Seller has no liabilities or obligations of any kind.
(accrued, absolute, contingent, known, unknown or otherwise) except (i) as
reflected on the Adjusted Balance Sheet, (ii) as incurred in the ordinary course
of business, consistent with past practice, since the date of the Adjusted
Balance Sheet, or (iii) as set forth on SCHEDULE 4.4.
4.5 NO CHANGES. Since the date of the Adjusted Balance Sheet which forms a
part of Seller's Adjusted Financial Statements, Seller has operated only in the
ordinary course, consistent with past practice, and there has not been any
material adverse change, or any event, fact or circumstance which might
reasonably be expected to result in a material adverse change, in the assets,
liabilities, operating performance, business relationships, or prospects of the
Business. Without limiting the generality of the foregoing, since the date of
such balance sheet, except as set forth on SCHEDULE 4.5, there has not been with
respect to the Business any:
(a) waiver, release, cancellation or compromise of any debts owed to
it or claims or rights against others exceeding $10,000 in the
aggregate;
(b) sale, disposition, transfer or assignment of any assets other
than inventory in the ordinary course of business;
(c) mortgage, pledge or subjection to any lien of any assets;
(d) unusual or novel method of transacting business engaged in by
Seller or any change in Seller's accounting procedures or
practices (except as required by Buyer) or its financial
structure;
(e) any increase in salaries, bonuses or benefits paid or payable to
employees, except normal salary increases in the ordinary course
of business and previously disclosed to Buyer;
(f) any change in the number or quality of the computers or software
used in conducting the Business; or
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(g) any material damage, destruction or loss to or of the assets of
Seller.
4.6 TITLE TO PURCHASED ASSETS. Seller owns all of the Purchased Assets free
and clear of all liens, claims, encumbrances and other restrictions or
limitations of any kind whatsoever affecting the ability to use or transfer the
Purchased Assets.
4.7 OWNERSHIP OF SELLER. The Shareholder own beneficially and of record,
free and clear of all liens and encumbrances, all of the issued and outstanding
shares of capital stock in Seller.
4.8 ASSETS OWNED. Except for the Retained Assets, the Purchased Assets
comprise all of those assets which are used or useful in the operation of the
Business in the ordinary course as presently conducted. The Purchased Assets
include all assets reflected on the Adjusted Balance Sheet other than the
Retained Assets and those assets disposed of in the ordinary course of business
consistent with prior practice.
4.9 COMPLIANCE WITH LAWS. Except as set forth on SCHEDULE 4.9, Seller has,
to Seller's knowledge, conducted the Business in compliance with all laws,
regulations or orders of any jurisdiction or governmental authority, including,
without limitation, those pertaining to, environmental protection, occupational
health or safety, employee benefits, and employment practices. Except as set
forth on SCHEDULE 4.9, Seller has all permits, registrations and licenses
necessary to conduct the Business, and all of Seller's employees utilized in
connection with the Business have obtained all required permits, registrations,
and licenses. All such permits and licenses are in full force and effect, and no
proceeding is pending or, to the knowledge of Seller, threatened, to revoke or
limit any of them.
4.10 NO LITIGATION. Except as set forth on SCHEDULE 4.10, there is no
claim, litigation, investigation or proceeding pending or, to the knowledge of
Seller, threatened against Seller. There are no pending or, to the knowledge of
Seller, threatened controversies, grievances or claims by any employee or former
employee of Seller with respect to their employment, compensation, benefits or
working conditions.
4.11 CONDITION. Except as set forth on SCHEDULE 4.11, all of the items of
tangible property included among the Purchased Assets and used in the ordinary
conduct of Seller's Business are in good operating condition, normal wear and
tear excepted, and do not require nor are reasonably expected to require any
special or extraordinary expenditures to remain in such condition beyond normal
maintenance, and are capable of being used for their intended purposes in the
ordinary course of business consistent with past practice.
4.12 TAXES. All tax returns, reports and declarations (hereinafter
collectively, "Tax Returns") required by any governmental authority to be filed
in connection with the properties, Business, income, expenses, net worth and
franchises of Seller have been timely filed by either Seller or the Shareholder.
All taxes due in connection with the properties, Business, income, expenses, net
worth and franchises of Seller ("Taxes") have been paid by either Seller or the
Shareholder, other than tax which is not yet due or which, if due, is not yet
delinquent or is being contested in good faith, and for which in all cases
reserves have been
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established on the Adjusted Balance Sheet. There are no tax claims, audits or
proceedings pending in connection with the properties, Business, income,
expenses, net worth and franchises of Seller, and, to the knowledge of Seller,
there are no such threatened claims, audits or proceedings.
4.13 EMPLOYEE BENEFITS. All employee benefit plans (as such term is defined
in Section 3(3) of Employee Retirement Income Security Act of 1974 ("ERISA"))
and all other employee benefit programs or arrangements of any type
(collectively, the "Plans") maintained by Seller or to which Seller contributes
are listed on SCHEDULE 4.13. Except as disclosed on said SCHEDULE 4.13, Seller
(i) has complied in all material respects with the provisions of ERISA
applicable to Seller as an employer, plan sponsor, plan administrator or
fiduciary of any such Plan, (ii) has administered the Plans in accordance with
their terms and (iii) with respect to any Plan maintained by Seller or to which
Seller contributes, has made all contributions required of it by any law
(including, without limitation, ERISA) or contract and no unfunded liability
exists with respect to any Plan.
4.14 CUSTOMERS. Except as set forth on SCHEDULE 4.14, no customer of the
Business accounting for more than One Hundred Thousand Dollars ($100,000) in
revenues during the twelve full calendar months preceding the Closing has
canceled or otherwise terminated, or made any threat to cancel or otherwise
terminate, its relationship with Seller or to materially decrease its purchases
from Seller.
4.15 CONTRACTS. Except as set forth on SCHEDULE 4.15, neither Seller, nor,
to the knowledge of Seller, any other party to any contract set forth on
SCHEDULE 2.1, has breached any obligation under any such contract.
4.16 CONFLICTS. Except as set forth on SCHEDULE 4.16, neither the
Shareholder, nor any other person or entity controlled by or under common
control with Seller or the Shareholder, has any direct or indirect interest in
any business enterprise which does business with Seller or competes with Seller
in any manner.
4.17 ABSENCE OF CERTAIN BUSINESS PRACTICES. Except as set forth on SCHEDULE
4.17, Seller and the Shareholder have not, and to the knowledge of Seller no
employee or agent of Seller, or any other person acting on its behalf has,
directly or indirectly, given or agreed to give any gift or similar benefit to
any customer, supplier, governmental employee or other person which (i) might
subject Seller to any damage or penalty in any civil, criminal or governmental
litigation or proceeding, (ii) if not given in the past, might have had an
adverse effect on the Purchased Assets or the Business, or (iii) if not
continued in the future, might adversely affect the Purchased Assets, the
Business or the prospects of the Business.
4.18 BROKERS AND FINDERS. Except as set forth on SCHEDULE 4.18, no broker,
finder or other person or entity acting in a similar capacity has participated
on behalf of Seller or the Shareholder in bringing about the transactions
contemplated herein, rendered any services with respect hereto, or been in any
way involved herewith. Seller and the Shareholder are fully responsible for any
fees and/or expenses due any such party.
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4.19 SOFTWARE. Except as set forth on SCHEDULE 4.19, all software used
in connection with the Business ("Software") has been designed and developed by
Seller or is used pursuant to valid license agreements, which agreements are
fully paid and in full force and effect. Except as set forth on SCHEDULE 4.19,
Seller has not licensed the Software to any third party and no third party
(including, but not limited to, any of Seller's employees) have any rights in
such Software. To Seller's knowledge there are no pending or threatened claims
against or demands upon Seller or the Shareholder alleging that the Software
infringes upon the rights of any third party.
4.20 ACCOUNTS RECEIVABLE. Except for the reserve for doubtful accounts
reflected on the Adjusted Balance Sheet, all accounts receivable of Seller
reflected on the Adjusted Balance Sheet, and as incurred in the normal course of
business since the date thereof, represent arm's length sales actually made in
the ordinary course of business are collectible in the ordinary course of
business.
4.21 MILLENNIUM COMPLIANCE. Seller has taken those steps outlined on
SCHEDULE 4.21 to determine whether its information systems used in connection
with the Business are Millennium Compliant. "Millennium Compliant" means the
ability when used individually or in conjunction with any other systems,
software or equipment to: (a) accurately process Date Data before, after and
across December 31, 1999 and throughout the year 2000 and beyond (including by
recognizing the year 2000 as a leap year); (b) provide correct results when
moving backwards and forwards between the 20th and 21st century; and (c)
function without error or without interruption related to or caused by Date
Data. For the purposes of this definition, "Date Data" means data which
represents or references dates in the same and/or different centuries.
4.22 NO MISREPRESENTATIONS. No representation or warranty made by
Seller or the Shareholder in this Agreement, the Schedules or Exhibits hereto,
or any certificate or document delivered to Buyer contains any untrue statement
of a material fact or omits to state a fact necessary to make the statements and
facts contained therein or herein, in light of the circumstances under which
they are made, not false or misleading. Copies of all documents delivered or
made available to Buyer by Seller were complete and accurate copies of such
documents.
4.23 KNOWLEDGE DEFINED. For purposes of this Section 4, "to the
knowledge of Seller" (or similar phrases) shall mean (i) the actual knowledge of
the Shareholder, Brett Daly, John Herrera, Mark Crittenden and William
Simoneaux; and (ii) the knowledge any of such persons would have had after
making reasonable inquiry of the Seller's personnel and reasonable investigation
and review of Seller's books and records and other relevant documentation.
5. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and warrants
to Seller and the Shareholder as follows:
5.1 ORGANIZATION AND AUTHORITY OF BUYER. Buyer is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware, and has full corporate power and authority to execute, deliver and
perform this Agreement in
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accordance with its terms. This Agreement and the transactions contemplated by
this Agreement, have been authorized by all necessary corporate action of Buyer.
This Agreement has been duly executed and delivered by Buyer and constitutes the
legal, valid and binding obligation of Buyer, enforceable against Buyer in
accordance with its terms.
5.2 NO CONSENTS OR CONFLICTS. No consent of, or filing with, any
governmental authority or third party is required in connection with the
execution, delivery or performance of this Agreement by Buyer which has not been
obtained or made or which will be obtained or made before due. Neither the
execution or delivery nor the performance of this Agreement or any of the other
agreements, instruments or documents to be delivered by or on behalf of Buyer in
connection herewith conflicts with, violates or results in any breach of: (i)
any judgment, decree, order, statute, rule or regulation applicable to Buyer,
(ii) any agreement to which Buyer is a party or by which it is bound, or (iii)
any provision of the Articles of Incorporation or the By-Laws of Buyer.
5.3 BROKERS AND FINDERS. No broker, finder or other person or entity
acting in a similar capacity has participated on behalf of Buyer in bringing
about the transactions contemplated herein, rendered any services with respect
thereto or been in any way involved therewith.
5.4 NO MISREPRESENTATIONS. No representation or warranty made by Buyer
in this Agreement, the Schedules or Exhibits hereto, or any certificate or
document delivered to Seller contains any untrue statement of a material fact or
omits to state a fact necessary to make the statements and facts contained
therein or herein, in light of the circumstances under which they are made, not
false or misleading. Copies of all documents delivered or made available to
Seller by Buyer were complete and accurate copies of such documents.
5.5 ADEQUATE CAPITALIZATION. At the time of execution of this
Agreement, Buyer is sufficiently capitalized to perform its obligations under
this Agreement and will remain sufficiently capitalized during the "earn-out"
period.
6. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Seller and the Shareholder set forth in Section 4 hereof will
survive the Closing, regardless of any investigation made by any party hereto,
until the second anniversary of the Closing Date, except that the
representations and warranties contained in Sections 4.1, 4.2, 4.6, 4.7, 4.12
and 4.13 will survive for the applicable statute of limitations (including
extensions). The representations and warranties of Buyer set forth in Section 5
hereof will survive the Closing, regardless of any investigation made by any
party hereto, until the second anniversary of the Closing Date, except that the
representations and warranties contained in Section 5.1 and 5.2 will survive for
the applicable statute of limitations.
7. CLOSING. The consummation of the transactions contemplated by this
Agreement (the "Closing") will take place simultaneously with the execution and
delivery of this Agreement by all of the parties hereto as of the date hereof
(the "Closing Date"), at the offices of Seller or at such other place as the
parties may agree in writing, and shall be effective as of the opening of
business on such date.
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7.1 SELLER'S CLOSING DELIVERIES. Seller shall deliver, or cause to be
delivered, the following items in connection with the Closing, each of which
shall be in form and substance acceptable to Buyer and its counsel:
(a) CONSENTS. The consent to the transactions contemplated by this
Agreement of any third party whose consent is required for the consummation of
such transactions by Seller or Shareholder or whose consent is deemed necessary
by Buyer in order to avoid any disruption of the Business, including but not
limited to the approval by the Bureau of Private Postsecondary Vocational
Education on terms acceptable to Pacific Bell;
(b) BOARD AND SHAREHOLDER APPROVAL. Certified copies of the resolutions
of Seller's Board of Directors and Shareholder approving the consummation of the
transactions contemplated by this Agreement;
(c) TRANSFER INSTRUMENTS; RELEASES OF LIENS. Bills of sale, assignments
and other transfer instruments and releases of liens, encumbrances and
restrictions sufficient to convey, transfer, and assign to Buyer, and to
effectively and legally vest in Buyer all of Seller's right, title and interest
in and to the Purchased Assets free and clear of all liens, encumbrances and
restrictions whatsoever;
(d) FRANCHISE AGREEMENTS. A written cancellation of and waiver of all
claims by Seller under the Franchise Agreements;
(e) EMPLOYMENT. Employment agreements between Buyer and each of William
Simoneaux, Mark Crittenden, John Herrera and Brett Daly in the form attached
hereto as EXHIBIT 7.1(e) to be effective from and after the Closing Date;
(f) NAME CHANGE. Evidence that Seller has ceased, or within ten (10)
days after the Closing will cease, all uses of the name "New Horizons," "New
Horizons Computer Learning Center" and all variations thereof;
(g) NONCOMPETITION AGREEMENT. Noncompetition Agreement between Buyer
and each of Seller, NTC and Shareholder in the form attached hereto as EXHIBIT
7.1(g) to be effective from and after the Closing (the "Noncompetition
Agreement");
(h) 1215 HOWE AVENUE LEASE AGREEMENT. Delivery of either (i) a lease
agreement between Buyer and Shareholder for the premises located at 1215 Howe
Avenue, Sacramento, California, to be effective from and after the Closing Date,
or (ii) an extension of the existing lease for the premises located at 1215 Howe
Avenue, Sacramento, California;
(i) STOCKTON AND REDDING LEASE RENEWALS OR REPLACEMENTS. Lease renewal
or replacement for each of Seller's Stockton and Redding, California locations
on terms satisfactory to Buyer;
(j) SACRAMENTO CLASSROOM LEASE. Lease agreement for an additional two
(2) classrooms for the real property located at 1111 Howe Avenue, Suite 295,
Sacramento, California, on terms satisfactory to Buyer; and
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(k) OTHER DELIVERIES. Such other instruments and documents as may
be reasonably requested in order to give effect to the transactions contemplated
by this Agreement.
7.2 BUYER'S CLOSING DELIVERIES. Buyer shall deliver the following items
in connection with the Closing, each of which shall be in form and substance
acceptable to Seller, the Shareholder and their counsel.
(a) EMPLOYMENT AGREEMENTS. Employment agreements between Buyer and
each of William Simoneaux, Mark Crittenden, John Herrera and Brett Daly, to be
effective from and after the Closing Date;
(b) CONSENTS. The consent to the transactions contemplated by this
Agreement of any third party whose consent is required for the consummation of
such transactions by Buyer;
(c) BOARD APPROVAL. Certified copies of the resolutions of Buyer's
Board of Directors approving the consummation of the transactions contemplated
by this Agreement;
(d) CLOSING PAYMENT. The Closing Payment provided for in Section
3.1;
(e) ASSUMPTION AGREEMENT. An agreement assuming Seller's
obligations for the Assumed Liabilities;
(f) SACRAMENTO LEASE AGREEMENT. Lease Agreement between Buyer and
Shareholder for the premises located at 1215 Howe Avenue, Sacramento,
California, to be effective from and after the Closing Date;
(g) NONCOMPETITION AGREEMENT. Noncompetition Agreement between
Buyer and each of Seller, NTC and Shareholder to be effective from and after the
Closing Date; and
(h) FRANCHISE AGREEMENTS. A written cancellation of and mutual
waiver of all claims by Buyer and NHCLC and any of their successors or assigns
under the Franchise Agreements; other than for any and all unpaid royalty,
marketing and advertising fees owed by Seller.
8. RESTRICTIVE COVENANTS.
8.1 CONFIDENTIALITY. Without the prior written consent of Buyer,
Seller, NTC and the Shareholder shall at all times hold in strictest confidence
the terms of this Agreement and any and all non-public information concerning
the Business, Buyer or any of Buyer's affiliated companies.
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8.2 NON-COMPETITION/NON INTERFERENCE. Neither Seller, NTC nor
Shareholder (or any affiliate thereof) shall compete and/or interfere with Buyer
or the Business as contemplated by the Noncompetition Agreement.
8.3 ADEQUATE CONSIDERATION. Seller, NTC and the Shareholder on the one
hand, and Buyer, on the other hand, acknowledge and agree that the obligations
of the parties hereunder constitute adequate consideration for the their
obligations under this Section 8 and under the Noncompetition Agreement.
8.4 REMEDIES. Seller, NTC and the Shareholder acknowledge that a breach
of any of the provisions of this Section 8 or of the Noncompetition Agreement
will result in irreparable damage to the affected parties for which there will
be no adequate remedy at law, and agree that the affected parties, in addition
to its rights at law, will be entitled to injunctive and other equitable relief
to enforce such provisions, without having to post any bond.
8.5 REFORMATION. In the event any provision of this Section 8 or of the
Noncompetition Agreement shall be determined to be unenforceable or invalid,
such provision shall be enforceable in part to the fullest extent permitted by
law, such invalidity or unenforceability shall not otherwise affect any other
provision of this Agreement or any similar agreement, and this Agreement shall
otherwise remain in full force and effect.
9. POST-CLOSING AGREEMENTS/FURTHER ASSURANCES.
9.1 As of the Closing, Buyer may not have all required licenses,
permits and other governmental or vendor authorizations necessary for it to take
title to all of the Purchased Assets and to hereafter operate all aspects of the
Business. Seller agrees to cooperate with Buyer in timely obtaining such
licenses, permits and other governmental and vendor authorizations, and further
agrees that Buyer may operate the Business under the authority of any of
Seller's licenses, permits or other governmental authorizations of the type that
Buyer has not yet obtained, PROVIDED, that such operation does not violate
applicable laws or regulations, and that Buyer and NHCLC, jointly and severally,
indemnify and hold Seller harmless against any and all costs, liability, loss,
damage or deficiency resulting from Seller's good faith performance of these
obligations. Buyer warrants and agrees that all operations shall be in
compliance with all applicable laws, regulations and ordinances.
9.2 The parties hereto agree to execute and deliver to any other party
any and all documents and instruments, and do and perform such acts, in addition
to those expressly provided for herein, as may be necessary or appropriate to
carry out or evidence the transactions contemplated by this Agreement, whether
before, at or after the Closing. Notwithstanding anything contained in this
Agreement to the contrary, this Agreement will not constitute an agreement to
assign any contract or claim or any right or benefit arising thereunder or
resulting therefrom if an attempted assignment thereof, without the consent of a
third party thereto, would constitute a breach thereof or in any way affect the
rights of Buyer thereunder. Seller and the Shareholder shall use their best
efforts to obtain the consent of the other party to any of the foregoing
contracts or claims to the assignment thereof to Buyer in all cases that such
consent is required for assignment or transfer.
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9.3 Buyer shall use all reasonable efforts to collect the accounts
receivable included in the Purchased Assets, but Buyer shall not be required to
take or threaten legal action to collect any of such receivables.
9.4 Seller shall, within fourteen (14) days after the Closing Date,
provide such notices of continuation health coverage as are required to be
provided to any of Seller's employees, former employees, or the beneficiaries or
dependents of such employees or former employees, under Part 6 of Subtitle B of
Title I of ERISA or Section 4980B(f) of the Code, in such form as Seller and
Buyer shall jointly prepare.
9.5 During the period commencing on the Closing Date and ending upon
payment of the last Earn Out Payment contemplated by Section 3.3, Buyer
covenants and agrees as follows:
(a) Buyer shall cause separate and distinct books and records for
the Business to be maintained in a manner consistent with the New Horizons
Methodology described on SCHEDULE 3.2(a)(II);
(b) Buyer shall deliver to the Shareholder within thirty (30) days
of the close of each fiscal quarter of Buyer (other than that coinciding with
the end of its fiscal year, in which event such statements shall be provided
after the completion of Buyer's year-end audit) copies of the balance sheet of
the Business as of that date and of the statements of income for the fiscal
quarter and year-to-date then ended prepared in accordance with the provisions
of Section 3.2 hereof; and
(c) All transactions between or among Buyer and any of Buyer's
affiliates shall be on terms and conditions no less favorable to Buyer than
those available through comparable transactions with third parties.
9.6 Shareholder and/or NTC shall maintain the "tracker" database for as
long as requested by Buyer; PROVIDED, such period does not exceed two (2) years
from the Closing Date. Shareholder and/or NTC shall be paid an aggregate of
seventy-five dollars ($75.00) per hour for maintenance of the database by Buyer.
9.7 On or before May 1, 1999, Seller and/or Shareholder, at its and/or
his sole cost and expense, shall cause Seller to obtain and assign to Buyer any
and all software licenses necessary to operate the Business such that the items
disclosed on SCHEDULE 4.19 are not continuing violations of any software license
agreements.
9.8 NHCLC hereby guarantees the performance of Buyer's obligations
under this Agreement, including, but not limited to, the making any required
payments to Seller pursuant to Section 3.2(c) and Section 3.3 of this Agreement.
10. INDEMNIFICATION.
10.1 Seller and the Shareholder jointly and severally agree to
indemnify and hold Buyer harmless from and against (i) any and all loss, damage,
liability or deficiency resulting from or arising out of any inaccuracy in or
breach of any representation, warranty,
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covenant, or obligation made or incurred by Seller or the Shareholder herein,
(ii) any imposition (including, without limitation, by operation of bulk
transfer or other law) or attempted imposition by a third party upon Buyer of
any liability or obligation of Seller which is not an Assumed Liability,
including but not limited to any loss, damage, liability or deficiency relating
to or arising out of those matters disclosed on SCHEDULE 4.10 or any litigation
or quasi-litigation arising out of or relating thereto, and (iii) any and all
costs and expenses (including reasonable attorneys' and accountants' fees)
related to any of the foregoing.
10.2 Buyer agrees to indemnify and hold Seller and the Shareholder
harmless from and against (i) any and all loss, damage, liability or deficiency
resulting from or arising out of any inaccuracy in or breach of any
representation, warranty, covenant, or obligation made or incurred by Buyer
herein, (ii) any imposition or attempted imposition by a third party upon Seller
of any Assumed Liability, and (iii) any and all costs and expenses (including
reasonable attorneys' and accountants' fees) related to any of the foregoing.
10.3 If any legal proceedings shall be instituted or any claim is
asserted by any third party in respect of which any party hereto may be entitled
to indemnity hereunder, the party asserting such right to indemnity shall give
the party from whom indemnity is sought written notice thereof. A delay in
giving notice shall only relieve the recipient of liability to the extent the
recipient suffers actual prejudice because of the delay. The party from whom
indemnity is sought shall have the right, at its option and expense, to
participate in the defense of such a proceeding or claim, but not to control the
defense, negotiation or settlement thereof, which control shall at all times
rest with the party asserting such right to indemnity, unless the proceeding or
claim involves only money damages and the party from whom indemnity is sought:
(a) irrevocably acknowledges in writing complete responsibility for
and agrees to indemnify the party asserting such right to
indemnity, and
(b) furnishes satisfactory evidence of the financial ability to
indemnify the party asserting such right to indemnity,
in which case the party from whom indemnity is sought may assume such control
through counsel of its choice and at its expense, but the party asserting such
right to indemnity shall continue to have the right to be represented, at its
own expense, by counsel of its choice in connection with the defense of such a
proceeding or claim. If the party from whom indemnity is sought does not assume
control of the defense of such a proceeding or claim, the entire defense of the
proceeding or claim by the party asserting such right to indemnity, any
settlement made by the party asserting such right to indemnity, and any judgment
entered in the proceeding or claim shall be deemed to have been consented to by,
and shall be binding on, the party from whom indemnity is sought as fully as
though it alone had assumed the defense thereof and a judgment had been entered
in the proceeding or claim in the amount of such settlement or judgment, except
that the right of the party from whom indemnity is sought to contest the right
of the other to indemnification under this Agreement with respect to the
proceeding or claim shall not be extinguished. If the party from whom indemnity
is sought does assume control of the defense of such a proceeding or claim, it
will not, without the prior written consent of the party asserting
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such right to indemnity, settle the proceeding or claim or consent to entry of
any judgment relating thereto which does not include as an unconditional term
thereof the giving by the claimant to the party asserting such right to
indemnity a release from all liability in respect of the proceeding or claim.
The parties hereto agree to cooperate fully with each other in connection with
the defense, negotiation or settlement of any such proceeding or claim.
10.4 The foregoing indemnification provisions are in addition to, and
not in derogation of, any statutory, equitable, or common law remedy available
to any party.
10.5 Notwithstanding the provisions of Section 10.1 hereof, any claim
or claims for indemnity against the Seller or the Shareholder resulting from or
arising out of any inaccuracy in or breach of any representation or warranty
given by Seller or the Shareholder hereunder (other than those arising solely as
a result of the inaccuracy in any representations and warranties provided for in
Sections 4.6 or 4.12) shall not be actionable until the aggregate loss incurred
by Buyer shall with respect to all such claims exceeds Twenty-Five Thousand
Dollars ($25,000.00).
10.6 COOPERATION. Buyer agrees to cooperate with Seller in the defense
of any claims initiated by third parties (other than Buyer) relating to the
operation of the Business prior to the Closing Date. Cooperation includes, but
is not limited to, reasonable access to Buyer's employees and company documents
to the extent reasonably necessary for defense of an applicable claim.
11. MISCELLANEOUS.
11.1 AMENDMENTS; BINDING EFFECT. The Agreement (including each Schedule
and Exhibit hereto) may not be amended or modified except by a document in
writing signed by all parties hereto. This Agreement and the rights and
obligations of each party hereunder shall be binding upon and shall inure to the
benefit of the respective successors and permitted assigns of each of the
parties hereto, but neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any party hereto without the prior
written consent of the other parties; provided, however, that Buyer may assign
this Agreement and its rights, interests and obligations hereunder to its parent
companies or to any of its majority-owned subsidiaries or affiliates without the
prior written consent of the other parties hereto.
11.2 NOTICES. All notices or other communications required or permitted
to be given hereunder shall be in writing and shall be deemed to be effectively
served and delivered (a) when delivered personally; (b) when given by facsimile
(with confirmation of receipt and a copy mailed by first-class U.S. mail); (c)
one (1) business day following deposit with a recognized national air courier
service; or (d) three (3) business days after being deposited in the United
States mail in a sealed envelope, postage prepaid, return receipt requested to
the appropriate party at the following address (or such other address for a
party as shall be specified by notice pursuant hereto):
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If to Seller, NTC or the Shareholder, to: John Xepoleas
1111 Howe Avenue, Suite 180
Sacramento, California 95825
Facsimile: (916) 641-8649
With a copy to: The Law Offices of Bruce Kerr
601 University Avenue, Suite 265
Sacramento, California 95825
Facsimile: (916) 567-9420
If to Buyer, to: New Horizons Computer Learning Center
of Sacramento, Inc.
1231 East Dyer Road, Suite 140
Santa Ana, CA 92705-5605
Attention: Chief Financial Officer
Facsimile: 714-755-6947
With a copy to: Calfee, Halter & Griswold LLP
800 Superior Avenue, Suite 1400
Cleveland, Ohio 44114
Attention: Scott R. Wilson, Esq.
Facsimile: (216) 241-0816
11.3 CONSTRUCTION. This Agreement (including the Schedules and Exhibits
hereto), sets forth the exclusive statement of the agreement among the parties
concerning the subject matter hereof, and there are no agreements or
understandings between or among any of the parties hereto concerning such
subject matter other than as set forth herein. The headings to the various
provisions of this Agreement are for reference purposes only and shall not be
construed as affecting the meaning or interpretation of this Agreement. This
Agreement may be executed in multiple counterparts, each of which shall be
deemed an original, and all of which together shall constitute one and the same
document. This Agreement shall be governed by and construed in accordance with
the laws of the State of California without regard to any conflict of laws
provisions.
[Signature Page Follows]
18
<PAGE> 19
IN WITNESS WHEREOF, the parties have executed this Asset
Purchase Agreement on the date first written above.
X-TECH INCORPORATED
By: /s/ John Xepoleas
-----------------------------------
John Xepoleas
President
NORTHWESTERN TECHNICAL COLLEGE, INC.
By: /s/ Glen LaLiberte
-----------------------------------
Glen LaLiberte
President
/s/ John Xepoleas
--------------------------------------
John Xepoleas
NEW HORIZONS COMPUTER LEARNING
CENTER OF SACRAMENTO, INC.
By: /s/ Robert S. McMillan
-----------------------------------
Robert S. McMillan
Chief Financial Officer
NEW HORIZONS COMPUTER
LEARNING CENTERS, INC.
By: /s/ Robert S. McMillan
-----------------------------------
Robert S. McMillan
Chief Financial Officer
19
<PAGE> 1
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
--------------------
I, Robert Remington, for and in consideration of my employment by New
Horizons (as hereinafter defined), my position of responsibility and trust, the
special knowledge I will gain, the wages and benefits to be paid or provided to
me, and being given access to Confidential Information (as hereinafter defined),
hereby make the following promises and agreements.
1. EMPLOYMENT.
Subject to early termination as provided in Section 8 of this Agreement,
for a period of two (2) years commencing on the date hereof (the "Employment
Period"), New Horizons hereby employs me in the position identified on SCHEDULE
1 hereto, and I hereby accept such employment. As such, I will perform such
reasonable and appropriate duties for New Horizons as may be assigned to me by
the Board of Directors or by any executive officer of New Horizons or any
designee thereof to whom I report, provided such duties are consistent in scope
with those duties which I performed prior to the consummation of the
transactions described in the Asset Purchase Agreement of even date herewith
("Purchase Agreement") entered into, INTER ALIA, by and among New Horizons, New
Horizons Computer Learning Center of Charlotte, Inc., a Delaware corporation,
and INNOVAK International Incorporated, d/b/a New Horizons Computer Learning
Center of Charlotte, Inc., a South Carolina corporation. In addition, it is
understood that I shall only be required to perform services for New Horizons
within the geographic areas covered by the Charlotte Franchise Agreement (as
defined in the Purchase Agreement). While employed by New Horizons, I shall
devote my best efforts to the business and welfare of New Horizons in accordance
with and in furtherance of the policies and directives of New Horizons in effect
from time to time; PROVIDED, however, that I shall not be required to devote
more than two (2) days per week on average to performing my services for New
Horizons.
2. COMPENSATION AND BENEFITS.
2.1 SALARY AND BONUS. New Horizons shall pay me a base salary during the
Employment Period at the rate of per year shown on SCHEDULE 2.1 hereto, less
such deductions and withholdings as are required by law. Such salary shall be
payable in accordance with New Horizons' standard payroll practices.
2.2 BENEFITS. While employed New Horizons shall provide me with
substantially the same benefits as are generally provided other similar
employees of New Horizons, which benefits are described on SCHEDULE 2.2 hereto.
2.3 EXPENSES. While employed New Horizons shall reimburse me for reasonable
expenses I incur in the performance of services on behalf of New Horizons. I
shall furnish New Horizons with the documentation in connection with such
expenses required by the Internal Revenue Code and the regulations promulgated
thereunder.
<PAGE> 2
3. DEFINITIONS.
3.1 "Affiliate" means a Person that directly or indirectly, through one or
more intermediaries, controls or is controlled by or is under common control
with New Horizons.
3.2 "Cause" means (i) a material breach of my obligations under this
Agreement or my fiduciary obligations to New Horizons, (ii) my commission of a
felony or any offense involving misappropriation of money or property, or (iii)
my failure, after notice and a reasonable chance to cure, to observe the
reasonable and lawful directives of the Board of Directors of New Horizons or of
any executive officer of Company or any designee thereof to whom I report
related to performance of my duties for Company
3.3 "Company" means New Horizons and any Affiliate of New Horizons.
3.4 "Confidential Information" means information of any type, not generally
known, about the business, processes, services, products, suppliers, customers,
decisions, or plans of Company or of any customer of Company (regardless of
whether Company has executed a confidentiality agreement with such customer),
which is used or useful in the conduct of Company's business, or which confers
or tends to confer a competitive advantage over one who does not possess such
information. Such information includes, but is not limited to: designs,
processes, procedures, formulae and improvements, information relating to trade
secrets, know-how, research, development, design, engineering, quality control
or service techniques, information about existing, new or envisioned Company
products, processes or services, their development or performance, information
relating to quotations, purchasing, accounting, sales, marketing, or pricing,
including financial or business planning information, financial statements and
forecasts, business plans, product pricing information and customer and supplier
lists, and marketing programs and methods.
3.5 "Conflicts of Interest" means any activity which creates a conflict
between Company and my personal interests, including, but not limited to: (i)
owning a financial interest in any Person which does business with Company
(except where such interest consists of ownership of securities in a publicly
owned corporation); (ii) rendering services to any Person which does business
with Company; (iii) accepting gifts (or more than token value), loans (other
than from established financial institutions), excessive entertainment, or other
substantial favors from any Person which does business or is seeking to do
business with Company; (iv) representing the Company in any transaction in which
I have a substantial interest; (v) using Confidential Information for personal
gain; (vi) competing with Company, directly or indirectly, in the purchase or
sale of property, products, or services; (vii) transacting personal business
with any Person so as to cause such Person to believe he is dealing with Company
rather than me as an individual; and (viii) rendering employment services to
Company that may violate a prior contract between me and another Person or
improperly using or disclosing trade secrets of another Person.
3.6 "I, me, my or other personal pronoun" means the individual executing
this agreement and, as applicable, his personal representatives, heirs and
assigns.
2
<PAGE> 3
3.7 "New Horizons" means New Horizons Computer Learning Center of
Charlotte, Inc., a Delaware corporation.
3.8 "Person" means any natural person, corporation, partnership, limited
liability corporation, joint venture, unincorporated association, sole
proprietorship, or other entity utilized for conducting business.
4. CONFIDENTIAL INFORMATION.
4.1 I shall not, directly or indirectly, use or disclose, or take or remove
from the possession of Company any Confidential Information except in connection
with the performance of my authorized duties as an employee of Company.
4.2 I shall not, upon the termination of my employment for any reason or
purpose, without the express written consent of Company, directly or indirectly,
use or disclose, or take or remove from the possession of Company, any
Confidential Information used by me or anyone else in the employment of Company.
4.3 Upon the termination of my employment with Company I shall deliver to
Company all documents in my possession which contain any Confidential
Information, including all copies thereof, regardless of whether such documents
were prepared by me or by others.
5. NON-COMPETITION.
I acknowledge and agree that while employed by Company and for a three (3)
year period following termination of my employment with Company for any reason,
and in no event prior to the fifth anniversary date of the Purchase Agreement, I
shall not, directly or indirectly, accept employment with or render services to
any Person, including any customer of Company which is engaged in the Business
of Company, or any franchisee of Company, or otherwise participate in any
business whether as a shareholder, partner, joint venturer, sole proprietor,
director, trustee, officer, employee, agent, consultant, independent contractor,
or otherwise which is engaged in the Business of Company within a fifty (50)
mile radius of any office of Company or any of its franchisees then in
operation. I further agree that the Business of Company is the training of
individuals in the use of computers and computer software, whether directly
through the actual offering and conducting of such training or indirectly
through the franchising and training of other Persons which offer or conduct
such training, together with any method, training aids, computer software, or
other technology relating to such training now or hereafter utilized or
developed.
6. NON-SOLICITATION; NON-INTERFERENCE.
6.1 While employed by Company and for a three (3) year period thereafter,
and in no event prior to the fifth anniversary of the Purchase Agreement, I
shall not, directly or indirectly, individually or on behalf of any Person,
solicit or induce or assist in any manner in the solicitation or inducement of
any then employee of Company or any franchisee to render services to or for my
benefit or that of another Person.
3
<PAGE> 4
6.2 While employed by Company and thereafter, I shall not, directly or
indirectly, individually or on behalf of any Person, solicit or induce any
customer, franchisee, supplier, or other Person having a contractual or business
relationship with Company to terminate or otherwise alter such relationship, or
in any other manner interfere with such relationship, or interfere with any
prospective business relationship or advantage which Company has with any
Person.
7. CONFLICTS OF INTEREST.
While employed by Company, I will promptly and fully disclose, and unless
the Board of Directors of Company consents, refrain from engaging in, any
Conflict of Interest.
8. TERMINATION.
8.1 This Agreement may be terminated prior to the expiration of the
Employment Period, as follows:
(a) At the option of and by written notice from New Horizons if I shall
become disabled, which, for purposes of this Agreement, shall be deemed to have
occurred if I suffer from any disability or impairment of health that continues
for at least 120 days and which in the reasonable opinion of New Horizons
renders me unable to perform my duties consistent with past practice;
(b) By New Horizons, if it finds "Cause" for termination; or
(c) Upon my death.
8.2 The provisions of Sections 4, 5 and 6 will survive expiration or
earlier termination of this Agreement for any reason, except that Section 5
hereof shall not be applicable in the event my employment is terminated after
the second anniversary hereof without Cause. Notwithstanding anything to the
contrary in this Agreement, all rights of the parties to seek damages and other
relief for breaches of this Agreement occurring prior to or on account of the
termination hereof by the other of this Agreement will survive termination.
Except as set forth in this Section 8.2, all rights and obligations of the
parties hereunder will expire upon expiration or earlier termination of this
Agreement.
9. GENERAL PROVISIONS.
9.1 The agreements which I have made herein, shall be binding upon my heirs
and legal representatives and shall inure to the benefit of Company, its
Affiliates and their successors and assigns.
9.2 In the event of the unenforceability or invalidity of any section or
provision of this Agreement, such section or provision shall be enforceable in
part to the fullest extent permitted by law, such invalidity or unenforceability
shall not otherwise affect any other section or provision of this Agreement, and
this Agreement shall otherwise remain in full force and effect.
4
<PAGE> 5
9.3 This Agreement and the Purchase Agreement constitute the entire
agreement with respect to the subject matter hereof and supersedes all prior
negotiations, understandings, and agreements with respect thereto.
Notwithstanding anything to the contrary set forth herein, Company hereby
acknowledges my investment in and relationship with the Orlando
Company-franchisee and consents thereto, provided that such does not interfere
with my duties hereunder and that any transactions between Company and the
Orlando Company-franchisee or its affiliates shall at all times be conducted on
commercially reasonable terms consistent with those offered to or available from
unaffiliated parties.
9.4 Upon termination of my employment with Company for any reason, and for
a period of two (2) years thereafter, I shall immediately notify Company of any
change of any address and the name and address of my subsequent employers.
9.5 This Agreement may be amended only by an agreement in writing between
the parties.
9.6 This Agreement and the rights and obligations of the parties hereunder
shall be governed by and construed in accordance with the laws of the state
where I am a bona fide resident at the time of enforcement of any provision
herein without regard to the conflicts of laws provisions of any state. The
courts of the same where I am or was last employed by Company shall have
jurisdiction over disputes arising from this agreement and I hereby waive all
objections to such jurisdiction.
9.7 I agree that money damages alone will not be a sufficient remedy for
any breach of the provisions of this Agreement by me, and that in addition to
all other remedies Company may have, Company shall be entitled to specific
performance, injunctive or such other equitable relief determined appropriate by
a court of competent jurisdiction and I waive the securing or posting of any
bond in connection with such remedy.
[Signature page follows]
5
<PAGE> 6
THE UNDERSIGNED HAS READ THIS AGREEMENT IN ITS ENTIRETY AND UNDERSTANDS IT. I
FURTHER ACKNOWLEDGE THAT I HAVE HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL OF
MY CHOICE WITH REGARD TO THE TERMS OF THIS AGREEMENT. FINALLY, I ACKNOWLEDGE
THAT EXECUTION OF THIS AGREEMENT IS MY FREE ACT AND DEED AND THAT I HAVE BEEN
FURNISHED WITH A COPY THEREOF.
Signed at Charlotte, North Carolina, this 1st day of April, 1999.
/s/ Thomas A. Phillips /s/ Robert Remington
- -------------------------------------- -------------------------------------
Witness Signature Robert Remington
Thomas A. Phillips
- --------------------------------------
Witness Printed Name
ACCEPTED AND AGREED to by Company, this 1st day of April, 1999.
NEW HORIZONS COMPUTER LEARNING CENTER OF
CHARLOTTE, INC.
By: /s/ Thomas J. Bresnan
-------------------------------------
Title: President
----------------------------------
6
<PAGE> 7
SCHEDULE 1
----------
President
SCHEDULE 2.1
------------
$42,000.00/year
SCHEDULE 2.2
------------
(Primary Listing Only)
Medical and Dental Insurance
- Consistent in benefits offering and cost to the coverage currently
received from Seller
401(k) Plan Participation
- Employee will be eligible to participate as of May 1, 1999 in the New
Horizons
- Education Corp. 401(k) plan. Employee will be given prior service
credit for the time employed by Seller.
Vacation Policy
- Employee will accrue vacation time at the rate consistent with the
NHEC policy as follows:
- 2 weeks vacation with pay after completing two years of continuous
employment.
- 3 weeks vacation with pay after completing five years of continuous
employment.
Holiday Policy
- NHEC offers 10 paid holidays per year.
Sick Policy
- Employee will be entitled to 40 hours of sick time per year.
7
<PAGE> 1
EXHIBIT 10.2
NONCOMPETITION AGREEMENT
------------------------
THIS NONCOMPETITION AGREEMENT (the "Agreement") is entered into as of
this 1st day of April, 1999, between and among New Horizons Computer Learning
Center of Sacramento, Inc., a Delaware corporation ("New Horizons"), New
Horizons Computer Learning Centers, Inc., a California corporation ("NHCLC"),
John Xepoleas ("Shareholder"), X-Tech Incorporated, d/b/a "New Horizons Computer
Learning Center," a California corporation ("X-Tech"), and Northwestern
Technical College, Inc., a California corporation ("NTC").
RECITALS
--------
A. New Horizons, Shareholder, X-Tech, NTC and NHCLC are parties to that
certain Asset Purchase Agreement of even date herewith (the "Purchase
Agreement"), pursuant to which New Horizons is purchasing substantially all of
the assets and goodwill of the computer training business conducted by X-Tech
and X-Tech is terminating its relationship as a franchisee of NHCLC.
B. Shareholder is the sole shareholder of X-Tech and, as such, will
directly benefit from the consummation of the transactions contemplated in the
Purchase Agreement.
C. Shareholder is a majority shareholder of NTC, which conducts a
business similar to the Business, but which is directed primarily at students
under certain vocational and retraining programs.
D. The business conducted by NTC is not being purchased by New
Horizons, and Shareholder and NTC intend to continue to conduct such business.
E. Subject to the limitations herein set forth, New Horizons is willing
to permit NTC and Shareholder to continue to conduct such business
notwithstanding that such business is competitive, in certain respects, with the
business acquired from X-Tech.
F. It is a condition to the consummation of the transactions
contemplated in the Purchase Agreement that X-Tech, Shareholder and NTC enter
into this Agreement with New Horizons.
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by Shareholder, X-Tech
and NTC, the parties agree as follows:
<PAGE> 2
1. DEFINITIONS.
The following terms shall have the following meanings:
1.1 "Affiliate" means a Person that directly or indirectly, through one or
more intermediaries, controls or is controlled by or is under common control
with the Person specified.
1.2 "Company" means New Horizons and any Affiliate of New Horizons.
1.3 "Confidential Information" means information of any type, not generally
known, about (i) the computer training business, processes, services and
products described in either the Franchise Agreements or the Franchise Manuals
or otherwise derived primarily from X-Tech's and/or Shareholder's relationship
with Franchisor, and (ii) quotations, purchasing, accounting, sales, marketing,
or pricing, including financial or business planning information, financial
statements and forecasts, business plans, product pricing information and
customer and supplier lists, and marketing programs and methods of Company
(including the information acquired from X-Tech).
1.4 "Franchise Agreements" means collectively, (i) that certain Franchise
Agreement dated September 15, 1992 between Compulearn Computer Services a/k/a
X-Tech, Inc. and New Horizons Franchising, Inc., a/k/a NHCLC, and (ii) that
certain Franchise Agreement dated November 10, 1995 between X-Tech and New
Horizons Franchising, Inc., a/k/a NHCLC.
1.5 "Franchise Manuals" means any and all manuals distributed by the
Franchisor to X-Tech or Shareholder, including but not limited to, the
Confidential Operations Manual, the General Manager Manual, the Account
Executive Manual, the Customer Service Manual, the Instructor Manual, the
Operations Manager Manual, the Quality Assurance Manual, the Sales Manager
Manual, the Train the Trainer Manual and the Training Manager Manual.
1.6 "Franchisor" means NHCLC f/k/a New Horizons Franchising, Inc. including
any successors, assigns or Affiliates thereof).
1.7 "Person" means any natural person, corporation, partnership, limited
liability corporation, joint venture, unincorporated association, sole
proprietorship, or other entity utilized for conducting business.
2. CONFIDENTIAL INFORMATION.
Neither X-Tech, NTC, Shareholder nor any Affiliate thereof shall
disclose to any unauthorized Persons or use for his/its own account or for the
benefit of any third party any Confidential Information without New Horizons'
prior written consent.
3. NON-COMPETITION.
3.1 Neither X-Tech, NTC, Shareholder nor any successor, assign or Affiliate
thereof shall, directly or indirectly, for the period commencing on the Closing
Date (as defined in the Purchase Agreement) and terminating on October 1, 2002
(the "Restricted Period"), accept employment with or render computer training
services to any Person, including any customer of
2
<PAGE> 3
Company which is engaged in the business of Company, or any franchisee of
Company, or otherwise participate in any business whether as a shareholder,
partner, joint venturer, sole proprietor, director, trustee, officer, employee,
agent, consultant, independent contractor, or otherwise which is engaged in the
business of Company within a fifty (50) mile radius of any office of Company or
any of its franchisees then in operation; PROVIDED, however, that NTC and
Shareholder, solely on behalf of NTC, shall be permitted to provide computer
training services in the counties listed on EXHIBIT A attached hereto to the
following categories of students: (i) individuals whose tuition and fees are
paid or funded pursuant to Title IV of the Department of Education, Higher
Education Act ("Title IV"); (ii) individuals who (a) would otherwise qualify for
Title IV but for their failure to satisfy the financial requirements thereunder,
and (b) are unemployed or work less than 20 hours a week (each of the foregoing
(i) and (ii) are referred to for purposes of this Agreement as "Vocational
Programs"); (iii) individuals who are eligible to receive training under the Job
Training Partnership Act Title III; (iv) individuals whose tuition and fees are
paid through Private Industry Councils; (v) individuals participating in
vocational rehabilitation programs pursuant to the State of California's
Worker's Compensation Statutes; (vi) individuals participating in vocational
rehabilitation programs funded by the Department of Veteran's Affairs; (vii)
individuals whose tuition and fees are paid pursuant to California Government
Code Section 13695; (viii) individuals whose tuition and fees are funded
pursuant to the Workforce Investment Act; or (ix) individuals whose tuition and
fees are paid or funded by the Bureau of Indian Affairs (each of the foregoing
(iii) - (ix) are collectively referred to as "Retraining Programs").
Notwithstanding the foregoing clauses (i) - (ix) of the preceding sentence,
neither Shareholder nor NTC shall be permitted to provide instructor led
computer training services pursuant to a Vocational or Retraining Program which
(x) is less than twelve (12) weeks in duration, (y) exceeds four and one-half (4
1/2) hours of instruction per day, or (z) which does not strictly adhere to any
applicable standard issued by the state or federal agency administering such
Vocational Program or Retraining Program. Each of X-Tech, Shareholder and NTC
(including any successor, assign or Affiliate of the foregoing) acknowledges and
agrees that neither X-Tech, Shareholder, NTC nor any Affiliate thereof shall,
during the Restricted Period, provide any computer training services to or for
any corporation, partnership, limited liability company, business, commercial
enterprise or governmental agencies.
3.2 The Company shall not, directly or indirectly, during the Restricted
Period render computer training services to those students who are categorized
by Vocational Programs hereunder in the counties identified on EXHIBIT A.
3.3 On or before October 1, 2000, Shareholder, X-Tech, NTC and all
Affiliates thereof shall have ceased doing business with, and shall no longer be
associated in any way, directly or indirectly, with any Person which is a
Microsoft Certified Technical Education Center or a Novell Authorized Education
Center. Notwithstanding the foregoing, Shareholder, X-Tech, NTC and any
Affiliate thereof shall be permitted to become either a Microsoft Authorized
Academic Training Partner or a Novell Education Academic Partner or both.
4. NON-SOLICITATION; NON-INTERFERENCE.
4.1 Neither X-Tech, NTC, Shareholder nor any Affiliate thereof shall, at
any time hereafter, directly or indirectly, individually or on behalf of any
Person, solicit or induce or assist in any manner in the solicitation or
inducement of any then employee of Company or any
3
<PAGE> 4
franchisee to render services to or for their respective benefit or that of
another Person, except that X-Tech, NTC or Shareholder shall be permitted to
solicit and offer Saul Kemble employment.
4.2 The Company shall not, at any time hereafter, directly or indirectly,
individually on behalf of any person, solicit or induce or assist in any manner
in the solicitation or inducement of any then employee of X-Tech, NTC or
Shareholder to render services to or for their respective benefit or that of
another person.
4.3 Neither X-Tech, NTC, Shareholder nor any Affiliate thereof, shall, at
any time hereafter, directly or indirectly, individually or on behalf of any
Person, solicit or induce any customer, franchisee, supplier, or other Person
having a contractual or business relationship with Company or any franchisee of
Company to terminate or otherwise alter such relationship, or in any other
manner interfere with such relationship, or interfere with any prospective
business relationship or advantage which Company has with any Person.
4.4 The Company shall not, at any time hereafter, directly or indirectly,
individually or on behalf of any person, solicit or induce any customer,
franchisee, supplier or other person having a contractual or business
relationship NTC to terminate or otherwise alter such relationship, or in any
other manner interfere with such relationship, or interfere with any prospective
business relationship or advantage which NTC has with any Person.
5. ROYALTIES.
In consideration of Company's willingness to permit NTC to continue to
provide computer training under Retraining Programs in accordance herewith, and
the substantial benefits previously derived by X-Tech, NTC and Shareholder from
X-Tech's having been a franchisee of NHCLC, NTC shall pay NHCLC a Royalty and
Advertising Fee in accordance with EXHIBIT B attached hereto. Such payments
shall be made until the first month following a three (3) consecutive month
period in which eighty (80%) percent of the monthly student enrollment at NTC
consists of students funded by Title IV of the Department of Education, Higher
Education Act. Shareholder shall cause NTC to maintain full, true and accurate
books of accounts and other records, containing all information and data which
may be necessary to ascertain and verify the Royalty and Advertising Fee payable
hereunder. NHCLC shall have the right from time to time (not to exceed twice in
any twelve month period) to inspect, or to have a mutually acceptable accountant
inspect, such books, records and supporting data to confirm the accuracy of the
Royalty and Advertising Fees. In such event, the fees and expenses of such
accountant shall be shared equally by the parties.
6. GENERAL PROVISIONS.
6.1 This Agreement and the rights and obligations of each party hereunder
shall be binding upon and shall inure to the benefit of the respective
successors, assigns, heirs or legal representatives of each of the parties
hereto, but neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any party hereto without the prior
written consent of the other parties; provided, however, that New Horizons may
assign this Agreement
4
<PAGE> 5
and its rights, interests and obligations hereunder to any of its Affiliates
without the prior written consent of the other parties hereto.
6.2 In the event of the unenforceability or invalidity of any section or
provision of this Agreement, such section or provision shall be enforceable in
part to the fullest extent permitted by law, such invalidity or unenforceability
shall not otherwise affect any other section or provision of this Agreement, and
this Agreement shall otherwise remain in full force and effect.
6.3 This Agreement and the Purchase Agreement constitute the entire
agreement with respect to the subject matter hereof and supersedes all prior
negotiations, understandings, and agreements with respect thereto.
6.4 This Agreement may be amended only by an agreement in writing between
the parties.
6.5 This Agreement and the rights and obligations of the parties hereunder
shall be governed by and construed in accordance with the laws of the State of
California without regard to the conflicts of laws provisions of any state. The
courts of the same shall have jurisdiction over disputes arising from this
agreement and each of the parties hereby waive all objections to such
jurisdiction.
6.6 X-Tech, NTC and Shareholder agree that money damages alone will not be
a sufficient remedy for any breach of the provisions of this Agreement by any of
them, and that in addition to all other remedies Company may have, Company shall
be entitled to specific performance, injunctive or such other equitable relief
determined appropriate by a court of competent jurisdiction, and X-Tech, NTC and
Shareholder waive the securing or posting of any bond in connection with such
remedy.
6.7 This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original copy of this Agreement and all of which,
when taken together, will be deemed to constitute one and the same agreement.
[Signature page follows]
5
<PAGE> 6
EACH OF THE UNDERSIGNED HAS READ THIS AGREEMENT IN ITS ENTIRETY AND UNDERSTANDS
IT. EACH OF THE UNDERSIGNED FURTHER ACKNOWLEDGES THAT IT/HE HAS HAD THE
OPPORTUNITY TO CONSULT WITH COUNSEL OF ITS/HIS CHOICE WITH REGARD TO THE TERMS
OF THIS AGREEMENT. FINALLY, EACH OF THE UNDERSIGNED ACKNOWLEDGES THAT EXECUTION
OF THIS AGREEMENT IS ITS/HIS FREE ACT AND DEED AND THAT IT/HE HAS BEEN FURNISHED
WITH A COPY THEREOF.
Signed at Sacramento, California, this 1st day of April 1999.
NEW HORIZONS COMPUTER LEARNING X-TECH INCORPORATED
CENTER OF SACRAMENTO, INC.
/s/ Robert S. McMillan /s/ John Xepoleas
- ------------------------------ ------------------------------
By: Robert S. McMillan By: John Xepoleas
Its: Chief Financial Officer Its: President
NEW HORIZONS COMPUTER LEARNING NORTHWESTERN TECHNICAL
CENTERS, INC. COLLEGE, INC.
/s/ Robert S. McMillan /s/ Glenn LaLiberte
- ----------------------------- ------------------------------
By: Robert S. McMillan By: Glenn LaLiberte
Its: Chief Financial Officer Its: President
/s/ John Xepoleas
-----------------------------
John Xepoleas
6
<PAGE> 7
EXHIBIT A
---------
LIST OF CALIFORNIA COUNTIES:
Alameda Humboldt Nevada Sierra
Alpine Lake Placer Siskiyou
Amador Lassen Plumas Solano
Butte Madera Sacramento Sonoma
Calaveras Marin San Francisco Stanislaus
Colusa Mariposa San Joaquin Sutter
Contra Costa Mendocino San Mateo Tehama
Eldorado Merced Santa Clara Trinity
Frenso Modoc Santa Cruz Yolo
Glenn Napa Shasta Yuba
7
<PAGE> 8
EXHIBIT B
---------
1. ROYALTY:
Effective the date of this Agreement, NTC shall pay to New Horizons a royalty
equal three percent (3%) of all Gross Revenues (as defined below) derived from
Retraining Programs (the "Royalty").
The Royalty must be received by NHCLC on or before the 15th day (or if said day
is a bank holiday, on the next business day) of each month during the term of
this Agreement.
2. ADVERTISING FEE:
Effective on the date of this Agreement, NTC shall pay to New Horizons a
Marketing and Advertising Fee equal to one percent (1%) of NTC's Gross Revenues
derived from the Retraining Programs (the "Advertising Fee").
The Advertising Fee must be received by NHCLC on or before the 15th day (or if
said day is a bank holiday, on the next business day) of each month during the
term of this Agreement.
DEFINITION OF GROSS REVENUES:
"Gross Revenues" shall be computed on an accrual basis in accordance with GAAP,
regardless of the method, timing, or form of payment. Accordingly, the following
accounting procedures will apply:
- - The sale of retraining program packages ("Programs"), individual sales of
courseware or tests to students, shall be accrued as of the date the
student begins the first day of class, or takes possession of the
courseware or test.
- - In the event a Program is to be completed over a period exceeding one
month, the initial sale of the Program shall be deferred for accounting
purposes, and amortized over the Program completion period. For example, if
the CNE/NT Program is to be completed over five months, then the revenue
will be recognized ratably over those five months. The first month of
revenue recognition will be that month in which the student begins the
first day of class. This revenue recognition methodology is conceptually
consistent with that employed by New Horizons.
- - Refunds that arise from student terminations, returns of unused materials
or tests, or other circumstances shall be recorded against the related
revenue accounts; and therefore will reduce Gross Revenues.
Interest income, and gain or loss on the disposal of assets (except for the sale
of courseware) shall be excluded from Gross Revenues.
A student's purchase of a Program, or other products sold by NTC, shall be
accrued and accounted for according to the methodology described above when the
student begins the first
8
<PAGE> 9
day of class at NTC or takes possession of the item being purchased. This
applies regardless of how or when the student pays for the Program or item; and
includes all forms of consideration including cash, credit card, trade for
services or products, execution of a promissory note, etc. In the event the
student's "payment" is in the form of services or items of value, the related
revenue shall be determined according to the fair market value of the service or
item, and/or the face value of any promissory note.
9
<PAGE> 1
COMPANY CONTACTS:
Robert S. McMillan Robert Meloche
Chief Financial Officer Public Relations Manager
New Horizons Worldwide Inc. New Horizons Computer Learning Centers
(714) 438-9473 (714) 431-9249
[email protected] [email protected]
NEW HORIZONS WORLDWIDE ACQUIRES ITS CHARLOTTE,
NORTH CAROLINA AND SACRAMENTO AND STOCKTON,
CALIFORNIA FRANCHISE LOCATIONS
MORGANVILLE, N.J. - APRIL 5, 1999 - New Horizons Worldwide Inc. (Nasdaq: NEWH),
the world's largest independent IT training company, today announced the
acquisition of its franchise locations in Charlotte, North Carolina and
Sacramento and Stockton, California.
New Horizons purchased the assets of the Charlotte location for
consideration including approximately $3.2 million in cash and 40,088 shares of
New Horizons stock. Based upon Thursday's closing price on The Nasdaq Stock
Market of $19 15/16, the transaction is valued at approximately $4 million. The
selling shareholder will also receive additional consideration, in cash and
stock, if certain future performance targets are achieved. The Sacramento and
Stockton locations were purchased for consideration of approximately $3.2
million in cash. New Horizons anticipates the acquisitions to be accretive to
earnings per share.
New Horizons Computer Learning Center of Charlotte had revenues of $4
million in 1998, and is expected to have 1999 revenues in excess of $5 million.
New Horizons Computer Learning Centers of Sacramento and Stockton had combined
revenues of $7 million in 1998, and are expected to have revenues in excess of
$8 million in 1999. Charlotte, Sacramento and Stockton all provide training
under the Microsoft Certified Technical Education Center (CTEC) and Novell
Authorized Education Center (NAEC) programs. The local management teams will
remain in place.
<PAGE> 2
New Horizons Acquires Its Charlotte, Sacramento and Stockton Page 2 of 2
Franchise Locations
"We are very pleased to be adding these centers to our company-owned
division," said Thomas J. Bresnan, president of New Horizons Worldwide Inc. "The
owners in these locations have built strong, profitable businesses and are fully
established in their local markets. We look forward to continued success in
these locations."
With the acquisition of these three locations, New Horizons has
successfully acquired and integrated seven training centers in the last 12
months that had been operated by franchisees. The repurchased locations in
Memphis, Nashville, Hartford, Albuquerque, Charlotte, Sacramento and Stockton
are expected to generate consolidated annualized revenues of $32 million. New
Horizons continues to pursue its strategy of buying back franchise locations
that are profitable, located in strategic markets and have quality management.
The Company expects to close additional transactions this year.
ABOUT NEW HORIZONS WORLDWIDE INC.
New Horizons Worldwide Inc. (Nasdaq: NEWH) is the world's largest
independent IT training company, meeting the needs of more than 2.4 million
students each year. New Horizons offers a variety of flexible training choices:
instructor-led classes, Web-based training, computer-based training, computer
labs, certification exam preparation tools and 24-hour, seven-day-a-week help
desk support. New Horizons has a company-owned and franchised network of more
than 200 locations in 30 countries.
In 1998 New Horizons had corporate revenues of $73 million and system-wide
training revenues of $358 million. For more information, or to find the center
nearest you, visit the New Horizons Web site at www.newhorizons.com or call
1-800-PC-LEARN.
This press release contains forward-looking statements based upon current
expectations which are covered under the "safe harbor" provision within the
Private Securities Litigation Reform Act of 1995. Actual results and events
related to the acquisition may differ from those anticipated as a result of
risks and uncertainties which include, but are not limited to, New Horizons'
ability to effectively integrate the acquired businesses, overall economic,
market and industry conditions, and the risks described from time to time in New
Horizons' reports as filed with the Securities and Exchange Commission.
All brand names, product names, company names and trademarks contained in
this release are the property of their respective owners.
