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Exhibit 2.1
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ASSET PURCHASE AGREEMENT
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This Asset Purchase Agreement ("Agreement") is entered into as
of the 1st day of March, 1999, by and among Computer Learning Centers of New
Mexico, Ltd. Co., a New Mexico limited liability company, fka New Horizons
Computer Learning Center of Albuquerque, Ltd. Co. ("Seller"), Xxxxx Xxxxxxxxxxx,
Xxxxxxx Xxxxxxxx and Xxxxxx Xxxxx, individual owners of the membership interests
("the Members"), New Horizons Computer Learning Center of Albuquerque, 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 Albuquerque, New Mexico (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 September 1, 1997 with
NHCLC for the Santa Fe, New Mexico area (the "Santa Fe Franchise Agreement") and
Seller's Franchise Agreement dated November 25, 1995 with NHCLC for the
Albuquerque, New Mexico area (the "Albuquerque Franchise Agreement") each 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.
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1.1 PURCHASED ASSETS. Seller hereby sells to Buyer, free of all liens,
encumbrances, claims and other restrictions of any kind except as set forth on
SCHEDULE 4.6 hereto, 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
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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 minute
books, membership interest records, and tax returns or other similar limited
liability company 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 (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 assigned to
and received or receivable 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:
(a) Three Million Dollars ($3,000,000.00), payable by wire transfer of
immediately available funds to an account designated by Seller; and
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(b) Shares of Common Stock, $.01 par value, of New Horizons having an
aggregateFair 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 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
earlier of (x) the public announcement by New Horizons of the transactions
contemplated by this Agreement, and (y) the second trading day prior to the
Closing.
(c) Two Hundred Thousand Dollars ($200,000.00) (the "Holdback
Amount"), to be heldby Buyer in an interest-bearing account pending final
determination of the Net Worth Adjustment (as defined and determined below)
3.2 BALANCE SHEET ADJUSTMENT.
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(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 twelve (12) 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
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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 Two Hundred Thirty-Six
Thousand Dollars ($236,000.00) ("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 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" 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.
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(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 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
times the amount by which Buyer's EBIT for such period exceeds Base EBIT PLUS
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$100,000.00, if any ("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 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 (including any expansion thereof to a
location in or around Santa Fe, New Mexico) 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 Albuquerque Franchise
Agreement and the Santa Fe Franchise Agreement in the absence of this Agreement.
In determining Buyer's EBIT, it is further agreed that (y) no intercompany
administrative, accounting or overhead charges shall be made against the
Business; PROVIDED, that Buyer, New Horizons, or an affiliate of either may
charge to the Business the reasonable cost of providing (i) services which
replace those historically provided by persons directly employed by the
Business, or (ii) services which are directly necessary to the continued growth
and success of the Business and (z) if Buyer shall have expanded the Business to
include a center in or around Santa Fe, New Mexico (the "Santa Fe Location"),
the net income or loss resulting from such location shall be combined with that
of the Albuquerque
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location(s), provided that (i) any net loss from the first twelve months
following the opening of operations of the Santa Fe Location shall be
disregarded, (ii) the annual revenues of the Santa Fe Location shall be deemed
to include, with respect to all customers of Seller or Buyer which received
training in or around Santa Fe prior to the opening of the Santa Fe Location,
only such amount as exceeds the aggregate annual revenues from such customers
during the twelve months prior to the opening of such location and (iii) costs
of the Santa Fe Location shall include all expenses directly associated with
forming, opening or operating at or from such location.
"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 MEMBERS. Seller
and the Members hereby jointly and severally represent and warrant to Buyer and
New Horizons as follows:
4.1 ORGANIZATION, AUTHORITY AND CAPACITY. Seller is a limited
liability company validly existing and in good standing under the laws of the
State of New Mexico, 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 Members 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 Members and constitutes the legal, valid and binding obligation of
Seller and the Members, enforceable against Seller and the Members 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 Members 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 Members 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 Members, (ii) any agreement or instrument
to which Seller or the Members is a party or by which Seller or any of its
assets is bound, or (iii) any provision of the Articles of Organization or the
Operating Agreement 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 one (1) month period ended January 31, 1999 (the "Seller Prepared
Financial Statements"), including its balance sheet as of January 31, 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.
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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 or any of the other
Schedules attached hereto.
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;
(d) any increase in salaries, bonuses or
benefits paid or payable to
employees other than in the ordinary
course; or
(e) any material damage, destruction or
loss to or of the assets of Seller.
4.6 TITLE TO PURCHASED ASSETS. Except as set forth on SCHEDULE 4.6,
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 Members own beneficially and of record,
free and clear of all liens and encumbrances, all of the membership interests 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
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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 Members. 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
Members, 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.
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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
Members, nor any other person or entity controlled by or under common control
with Seller or the Members, 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 Members 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 Members in bringing about the
transactions contemplated herein, rendered any services with respect hereto, or
been in any way involved herewith. Seller and the Members 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 Members, who hereby
confirm that they will thereby acquire the New Horizons Stock for investment
purposes, for their own account and not with a view to distribution or resale
thereof or to divide his participation with others. Seller and the Members 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 Members 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 Members acknowledge
that they have received and have reviewed (a) New Horizons' most recent Proxy
Statement, (b) New Horizons' most recent Annual Report on Form 10-K, (c) New
Horizons' Form 10-Q Quarterly Report(s) for the fiscal quarter(s) subsequent to
such Annual Report, and (d) 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
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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 Members 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 the Closing.
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 Software. To Seller's knowledge there are no pending or threatened claims
against or demands upon Seller or the Members 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; and to Seller's and the Members' knowledge are subject to no
counterclaim or set off, and, to Seller's and Members' knowledge, are not in
dispute.
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.
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4.23 RESIDENCY. Each of the Members is a resident of the State of New
Mexico.
4.24 NO MISREPRESENTATIONS. No representation or warranty made by
Seller or the Members 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.
4.25 KNOWLEDGE DEFINED. For purposes of this Section 4, "to the
knowledge of Seller" (or similar phrases) shall mean (i) the actual knowledge of
the Members 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
Members 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.
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 Articles 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.
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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 Members 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:
(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 the Members;
(b) SELLER AND MEMBERS APPROVAL. Certified copies of the
resolutions of Seller and the Members 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 each of the Albuquerque Franchise
Agreement and Santa Fe Franchise Agreement;
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(e) EMPLOYMENT. Employment agreements between Buyer and
each of Xxxxx Xxxxxxxxxxx, Xxxxxxx Xxxxxxxx and Xxxxxx Xxxxx 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, the Members and their counsel.
(a) EMPLOYMENT AGREEMENTS. Employment agreements between
Buyer and each of Xxxxx Xxxxxxxxxxx, Xxxxxxx Xxxxxxxx and Xxxxxx Xxxxx, 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;
(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; and
(f) SALT LAKE CITY FRANCHISE AGREEMENT. If Seller and/or its
Members shall have determined to purchase and open a New Horizons Computer
Learning Center franchise in or around Salt Lake City, Utah, a Franchise
Agreement with NHCLC.
8. RESTRICTIVE COVENANTS.
8.1 CONFIDENTIALITY. Without the prior written consent of Buyer,
Seller and the Members 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. Seller and the Members 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.
8.3 NON-INTERFERENCE. Seller and the Members 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 Members 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 Members may have
at law, Seller and the Members 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 Members 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.
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.
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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 Members 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, 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 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 Members
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 Members agree that, except for a transfer of
the New Horizons Stock by Seller to the Members, 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.
9.7 Buyer acknowledges that a substantial inducement to Seller
and the Members is the undertaking of Buyer to retain the services of the
Members for and during the
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period of the Earn-Out as set forth in Section 3.3 of this Agreement. The
purpose hereof is to give Seller and the Members assurance that decisions
affecting the Business, as conducted by Buyer, will, to the extent practicable
and otherwise compatible with Buyer's and New Horizons' operations and
strategic plans, be reflective of the business philosophy and judgment
possessed by the Members. Accordingly, while Seller and the Members recognize
and agree that Buyer possesses ultimate authority to direct the Business, Buyer
agrees that it will direct and operate the Business with a view to developing a
consensus with such persons on matters which materially affect the Business,
its earnings and prospects. While the Buyer retains authority to discharge and
regulate compensation of employees who are not covered by employment
agreements, neither Buyer nor New Horizons shall, nor shall permit any of their
affiliates to, relocate to other operations conducted by such persons any of
the persons employed in connection with the Business unless the Members shall
approve thereof. Similarly, while Buyer ultimately retains authority to
determine whether to open a Santa Fe location, Buyer agrees to consult with the
Members with respect to that decision and to do so only upon the existence of
credible evidence that such a decision is consistent with sound business
practice.
10. INDEMNIFICATION.
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10.1 Seller and the Members 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 Members 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, (iii) any claim, suit, action or
proceeding (and any resulting loss, damage, liability or deficiency) resulting
from or arising out of the Agreement between the Members and Xxxx Xxxxxx dated
March 13, 1998, or the Members' association with Xxx Xxxxxx; and (iv) 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 Members 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 any Member 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 Members resulting from
or arising out of any inaccuracy in or breach of any representation or warranty
given by Seller or the Members 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).
10.6 Notwithstanding the provisions of Section 10.1 hereof, any
claim or claims for indemnity against the Seller or the Members pursuant to
Section 10.1 (iii) shall not be subject to the Twenty-Five Thousand Dollar
($25,000.00) limitation in Section 10.5.
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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 Xxxxxx
Xxx Xxxxx, Xx. and Xxxxxx X. Xxxxx, of shares of new Horizons Stock (the
"Registration"), other than a registration on Form S-4 or Form S-8 promulgated
under 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 Members 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 each of the Members. Upon written
request from any one or more of the Seller and/or the Members 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 Members 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
Members 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 Members 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 Members may reasonably
request in order to facilitate the disposition of the New Horizons Stock owned
by the Seller and/or the Members; 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 Members 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
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Horizons, in its reasonable discretion; (ii) New Horizons shall not be obligated
to include the Seller and/or the Members 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 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 Members 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 Members 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 Members shall furnish to New
Horizons such information regarding the Seller and/or the Members, 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 Members
subsequently withdraw the New Horizons Stock from said Registration.
11.6 DELAY OF REGISTRATION. The Seller and/or the Members 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 Members are included in a registration statement under
this Section 11:
11.7.1 INDEMNIFICATION OF SELLER OR THE MEMBERS. To the
extent permitted by law, New Horizons will indemnify and hold harmless the
Seller and/or the Members 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
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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 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 Members 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 Members. 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 Members 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 Members
for use in connection with such registration; and the Seller and/or the Members
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 Members (which consent shall not be unreasonably
withheld).
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11.8 TRANSFER OF REGISTRATION RIGHTS. The registration rights of
the Seller and/or the Members 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 a Member.
11.9 REPORTS UNDER EXCHANGE ACT. With a view to making available
to the Seller and/or the Members 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 Members 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 each Member, so
long as Seller and/or such Member 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 a Member 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 Members, to: Xxxxxxx Xxxxxxxx
4611 Mesa Xxxxxxxxx Xxxxx XX
Xxxxxxxxxxx, Xxx Xxxxxx 00000
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With a copy to: Xxxxxxx X. Xxxxxx, Esq.
Xxxxxx, Xxxxx & Xxxxxx, P.C.
000 Xxxxxxxxxxxx Xxxxxx
Xxxxxxx, XX 00000-0000
Facsimile: (000) 000-0000
If to Buyer or
New Horizons, to: New Horizons Computer Learning
Center of New Mexico, Inc.
0000 Xxxx Xxxx Xxxx, Xxxxx 000
Xxxxx Xxx, XX 00000-0000
Attention: Chief Financial Officer
Facsimile: 000-000-0000
With a copy to: Xxxxxx, Halter & Xxxxxxxx LLP
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxx 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
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 New Mexico without regard to any conflict of laws
provisions.
[Signature page follows]
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IN WITNESS WHEREOF, the parties have executed this Asset Purchase
Agreement on the date first written above.
COMPUTER LEARNING CENTERS OF
NEW MEXICO, LTD. CO.
By: /S/Xxxxx X. Xxxxxxxxxxx
---------------------------
Title: Member
------------------------
/S/Xxxxx Xxxxxxxxxxx
------------------------------
Xxxxx Xxxxxxxxxxx
/S/Xxxxxxx Xxxxxxxx
------------------------------
Xxxxxxx Xxxxxxxx
/S/Xxxxxx Xxxxx
------------------------------
Xxxxxx Xxxxx
NEW HORIZONS COMPUTER LEARNING
CENTER OF ALBUQUERQUE, INC.
By: /S/Xxxxxx X. Xxxxxxx
---------------------------
Title: CEO
------------------------
NEW HORIZONS WORLDWIDE, INC.
By: /S/Xxxxxx X. Xxxxxxx
---------------------------
Title: President
------------------------
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