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Exhibit 2.1
EXECUTION COPY
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("Agreement") is entered into as
of the 1st day of September, 1999 by and among Xxxxxx Business Systems, Inc.
d/b/a New Horizons Computer Learning Centers of Colorado, a Colorado
corporation ("Seller"), Xxxxx Xxxxxx, Xxxxx Xxxx Xxxxxx and Xxxxxxx Xxxxxx
(collectively, the "Shareholders" and each a "Shareholder") New Horizons
Computer Learning Center of Denver, Inc., a Delaware corporation ("Buyer") and
New Horizons Worldwide, Inc., a Delaware corporation ("New Horizons").
RECITALS:
A. Seller is engaged in the business of providing computer
training services ("Services") to organizations and individuals primarily
located in and around Denver, Colorado (the "Business") as a franchisee of New
Horizons Computer Learning Centers, Inc. ("NHCLC").
B. The Shareholders own all of the issued and outstanding
capital stock of Seller.
C. 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 June 23, 1993 with NHCLC
for the area described therein (the "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 (a) Seller shall not sell and
Buyer shall not purchase the Retained Assets of Seller described in Section
1.2 hereof, and (b) 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."
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1.2 RETAINED ASSETS. Seller shall retain, and Buyer shall
not purchase (a) any rights of Seller arising under this Agreement, (b)
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),
(c) those contracts of Seller that are NOT set forth on SCHEDULE 2.1, and (d)
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 the lease or
financing arrangements of a type required by GAAP to be included on a balance
sheet set forth on SCHEDULE 2.1 (such liabilities together with the current
liabilities described in clause (a) above are 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
contractual 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 payable by Buyer for the
Purchased Assets shall consist of the following: (a) Buyer's assumption of the
Assumed Balance Sheet Liabilities, (b) 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 (c) 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) Thirteen Million Seven Hundred Thousand One Dollars
($13,700,001), 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 Three
Hundred Ninety-Nine Thousand
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Nine Hundred Ninety Nine Dollars ($399,999) (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 second trading day prior to the Closing.
(c) Three Hundred Thousand Dollars ($300,000) (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 NET WORTH 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
June 30, 1999 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
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One Million Two Hundred Thirty-Nine Thousand One Hundred Twenty-Two Dollars
($1,239,122) ("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 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) 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 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 from Buyer (a) 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 (b) 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, if any, (the "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
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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 (a) by
wire transfer of 50% of such amount in immediately available funds to an
account designated in writing by Seller, and (b) by issuance to Seller of
shares of New Horizons Stock having an aggregate Fair Market Value equal to
50% 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 Two Million Four Hundred Thousand
Dollars ($2,400,000).
"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 Agreement in the absence of this Agreement. In determining
Buyer's EBIT, it is agreed that no intercompany administrative, accounting or
overhead charges shall be made against the Business; PROVIDED that Buyer, New
Horizons or any affiliate of either entity may charge to the Business the
reasonable cost of providing (i) services which replace those functions
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 as mutually determined by Buyer and Seller.
"Net Worth" means the assets of the Business (excluding
unamortized organization costs or franchise fees) less total liabilities of
Ithe Business, determined in accordance with GAAP, but excluding the Retained
Assets and Retained Liabilities.
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3.4 ALLOCATION OF AGGREGATE CONSIDERATION. The allocation of the
Closing Payment (as adjusted by the Net Worth Adjustment), the Assumed Balance
Sheet Liabilities and the Earn-Out Payment, if any, among the Purchased Assets
shall be made in accordance with the principles established on SCHEDULE 3.4,
and Buyer and Seller agree to be bound by such allocation and to complete and
attach Internal Revenue Service Form 8594 to their respective tax returns
accordingly.
4. REPRESENTATIONS AND WARRANTIES OF SELLER AND THE
SHAREHOLDERS. Seller and the Shareholders 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 Colorado, 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 Shareholders
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 corporate action
of Seller. This Agreement has been duly executed and delivered by Seller and
each Shareholder and constitutes the legal, valid and binding obligation of
Seller and each Shareholder, enforceable against Seller and each 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 Shareholders in
connection herewith. Neither the execution or delivery nor the performance of
this Agreement or any 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 any
Shareholder, (ii) any agreement or instrument to which Seller or any
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, 1998
and 1997, and for the six (6) month period ended June 30, 1999 (the "Seller
Prepared Financial Statements"), including its balance sheet as of June 30,
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.
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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; or
(e) any damage, destruction or loss to or of the
assets of Seller in excess of $10,000.
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 Shareholders own 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, labor matters 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
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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, modify 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. Except as set forth on SCHEDULE 4.12, 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 Shareholders. 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
Shareholders, other than a 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 set forth 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
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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 Shareholders, nor any other person or entity controlled by or
under common control with Seller or the Shareholders, 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 Shareholders 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 Shareholders in bringing about the
transactions contemplated herein, rendered any services with respect hereto,
or been in any way involved herewith. Seller and the Shareholders 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 Shareholders, 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 Shareholders both meet the definition of "accredited
investor" as defined in Regulation D, 17 C.F.R. sec. 230.501(a), under the
Securities Act of 1933, as amended (the "Act"). Seller and the Shareholders
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 Shareholders 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
ask questions of, receive answers from and obtain additional information from
New Horizons concerning the business and financial condition of New Horizons.
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Seller and the Shareholders 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 Software. To Seller's knowledge there are no pending or
threatened claims against or demands upon Seller or the Shareholders 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: (i) 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), (ii) provide correct
results when moving backwards and forwards between the 20th and 21st century,
and (iii) 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 Shareholders 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
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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 each Shareholder and any director, officer, general manager or
sales manager of Seller, 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 Shareholders 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 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 New Horizons 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
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contemplated herein, rendered any services with respect thereto or been in any
way involved therewith. Buyer is fully responsible for any fees and/or
expenses due to any such party.
6. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Seller and the Shareholders 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 and New
Horizons 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 Isaacson, Rosenbaum,
Xxxxx & Xxxx, P.C., 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 any Shareholder;
(b) BOARD AND SHAREHOLDER APPROVAL. Certified copies of
the resolutions of Seller's Board of Directors and the Shareholders 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 Agreement;
(e) EMPLOYMENT AGREEMENTS. Employment agreements
between Buyer and each Shareholder in the form attached hereto as EXHIBIT
7.1(e) to be effective from and after the Closing Date;
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(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 Shareholder, 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) OTHER DELIVERIES. Such other instruments and
documents as may be reasonably requested in order to give effect to the
transactions contemplated by this Agreement.
8. RESTRICTIVE COVENANTS.
8.1 CONFIDENTIALITY. Without the prior written consent of
Buyer, Seller and the Shareholders shall at all times hold in strictest
confidence any and all non-public information (financial or otherwise)
concerning the transactions contemplated by this Agreement, (including
negotiations), the Business, Buyer or any of Buyer's affiliated companies.
8.2 NON-COMPETITION. Seller and each Shareholder shall not,
directly or indirectly, for a period of five (5) years following the Closing,
without the prior written consent of Buyer, accept employment with or render
services to, engage or invest in (whether as a shareholder, partner, joint
venturer, sole proprietor, director, trustee, officer, employee, agent
consultant or independent contractor), 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
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of NHCLC, or any affiliate of New Horizons, conducts such business.
8.3 NON-INTERFERENCE. Seller and each Shareholder shall
not, directly or indirectly, for a period of five (5) years following the
Closing, without the prior written consent of Buyer, solicit, induce or
attempt to solicit or induce any customer, supplier or other third party
having a business relationship with Buyer, NHCLC, New Horizons or any of their
affiliated companies to terminate, alter or interfere with its relationship
with Buyer, NHCLC or New Horizons, as the case may be, or, in any manner,
interfere with any prospective business relationship to which Buyer, NHCLC,
New Horizons or any of their affiliated companies have with any third party.
8.4 NON-SOLICITATION. Seller and each Shareholder shall
not, directly or indirectly, individually or on behalf of any third party, for
a period of five (5) years following the Closing, without the prior written
consent of Buyer, solicit, induce or attempt to solicit or induce any
employee, agent or consultant of Buyer, NHCLC, New Horizons or any of their
affiliates, to render services to or on behalf of such other third party.
8.5 ADEQUATE CONSIDERATION. Seller and each Shareholder
acknowledges and agrees 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
such Shareholder may have at law, Seller and such Shareholder shall be free of
any restrictions imposed by this Section 8 if Buyer wrongfully fails to make
any payment due under this Agreement.
8.6 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.
8.7 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 and the Shareholders 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
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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 Shareholders 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
Shareholders 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;
(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; and
(d) Buyer shall not, whether by merger, purchase of
capital stock or purchase of assets, acquire the assets or business of another
entity.
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9.6 New Horizons hereby guarantees the performance of
Buyer's obligations to make any required payments to Seller pursuant to
Section 3.2(c) and Section 3.3 of this Agreement.
9.7 Seller and the Shareholders agree that, except for a
transfer of the New Horizons Stock by Seller to any 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.
Notwithstanding the foregoing, Seller and/or any Shareholder may transfer the
New Horizons Stock to (a) the spouse, children or grandchildren of such
Shareholder, whether directly or in trust for their sole benefit (including
pursuant to any uniform gift to minors laws) or indirectly to an entity, the
majority of which is controlled by Permitted Transferees for their sole
benefit, provided that the transferee agrees in writing to be bound by the
applicable terms of this Agreement, and provided further that such Shareholder
may not disclaim beneficial ownership of such New Horizons Stock for purposes
of any filing pursuant to any securities law, or (b) a trust in which such
Shareholder owns the entire beneficial interest, provided that such trust
agrees in writing to be bound by the applicable terms of this Agreement, and
provided further such Shareholder may not disclaim beneficial ownership of
such New Horizons Stock for purposes of any filing pursuant to any securities
law (either of the foregoing (a) or (b), a "Permitted Transferee").
9.8 Seller and Buyer shall equally bear and pay any and all
sales taxes, use taxes, transfer taxes, or similar taxes, charges, fees or
expenses imposed in connection therewith which may become payable in
connection with the transactions contemplated by this Agreement.
10. INDEMNIFICATION.
10.1 Seller and the Shareholders 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, or
(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 Shareholders 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, or (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
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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 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 Shareholders
resulting from or arising out of any inaccuracy in or breach of any
representation or warranty given by Seller or the Shareholders hereunder
(other than those arising solely as a result of the inaccuracy in any
representations and warranties provided for in Sections 4.6, 4.12 or 4.20)
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).
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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
Shareholder remains restricted in any manner by applicable securities laws or
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 Shareholders.
Upon written request from any one or more of the Seller and/or the
Shareholders 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 Shareholders 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 Shareholders 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
Shareholders may reasonably request in order to facilitate the disposition of
the New Horizons Stock owned by the Seller and/or the Shareholders, 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 requested by Seller and/or the
Shareholders 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 Shareholders 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
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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 Shareholders in more
than two Registrations pursuant to this Agreement, unless Seller and/or the
Shareholders have been previously prohibited by New Horizons or the managing
underwriter from registering all of the shares of New Horizons Stock sought to
be registered in previous Registrations, 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 Shareholder
agree that, if the managing underwriter(s) of any underwritten offering of New
Horizons' securities so requests, the Seller and/or the Shareholders will not,
without the prior written consent of 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); PROVIDED,
HOWEVER, that this Section 11.3 may not be used by the managing underwriter to
preclude only the Seller and/or the Shareholders from selling shares of New
Horizon Stock.
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 Shareholders
shall furnish to New Horizons such information regarding the Seller and/or the
Shareholders, 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
Shareholders 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.
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11.7 INDEMNIFICATION. If any shares of New Horizons Stock
owned by the Seller and/or the Shareholders are included in a registration
statement under this Section 11:
11.7.1 INDEMNIFICATION OF SELLER OR THE SHAREHOLDERS.
To the extent permitted by law, New Horizons will indemnify and hold harmless
the Seller and/or the Shareholders requesting or joining in the Registration
Statement against any losses, claims, damages or liabilities (if any), 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 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 Shareholders 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 Shareholders for use in
connection with such registration; and the Seller and/or the Shareholders will
reimburse any
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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 Shareholders (which consent shall not be unreasonably
withheld).
11.8 TRANSFER OF REGISTRATION RIGHTS. The registration
rights of the Seller and/or the Shareholders under this Section 11 may not be
transferred to any third party, except that such rights may be transferred to
(a) an estate, trust, or heir, upon the death of the Shareholder, or (b) a
Permitted Transferee.
11.9 REPORTS UNDER EXCHANGE ACT. With a view to making
available to the Seller and/or the Shareholders 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
Shareholders 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 Shareholders, so long as Seller and/or the
Shareholders 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) one (1)
business day following deposit with a recognized national air courier service;
or (c) 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 or the
Shareholders, to: Xxxxx Xxxxxx and Xxxxx Xxxx Xxxxxx
000 Xxxxxx Xxxxx
Xxxxxx Xxxx, Xxxxxxxx 00000
Xxxxxxx Xxxxxx
0000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx Xxxxx, Xxxxxxxx 00000
With a copy to: Isaacson, Rosenbaum, Xxxxx & Levy, PC
000 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxx, Esq.
If to Buyer or
New Horizons, to: New Horizons Computer Learning Centers, Inc.
0000 Xxxx Xxxx Xxxx, Xxxxx 000
Xxxxx Xxx, XX 00000-0000
Attention: Chief Financial Officer
With a copy to: Xxxxxx, Halter & Xxxxxxxx LLP
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxx 00000
Attention: Xxxxx X. Xxxxxx, Esq.
12.3 NON-BINDING MEDIATION. In the event the parties hereto
are unable to resolve a dispute which arises among them (other than a dispute
related to the Net Worth Adjustment and/or the Earn-Out Payments, if any), the
parties shall then submit the dispute to non-binding mediation. Either party
may request mediation by sending a written notice to the other party, and the
mediation shall be held in a mutually agreeable place within Denver, Colorado,
at a mutually agreeable time, within thirty (30) days of the date of request
for mediation. The parties shall select a mediator who is acceptable to both
of them, and if they cannot agree on a mediator, then application to the
Federal District Court in Denver, Colorado shall be made seeking the
appointment of a mediator to mediate the dispute and such appointment shall be
binding upon the parties.
12.4 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
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one and the same document. This Agreement shall be governed by and construed
in accordance with the laws of the State of Colorado 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.
XXXXXX BUSINESS SYSTEMS, INC.
By: /s/ Xxxxx Xxxxxx
-----------------------------------
Name: Xxxxx Xxxxxx
Title: President
"Seller"
/s/ Xxxxx Xxxxxx
--------------------------------------
Xxxxx Xxxxxx
/s/ Xxxxx Xxxx Xxxxxx
--------------------------------------
Xxxxx Xxxx Xxxxxx
/s/ Xxxxxxx Xxxxxx
--------------------------------------
Xxxxxxx Xxxxxx
"Shareholders"
NEW HORIZONS COMPUTER LEARNING
CENTER OF DENVER, INC.
By: /s/ Xxxxxx X. Xxxxxxx
-----------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Chief Executive Officer
"Buyer"
NEW HORIZONS WORLDWIDE, INC.
By: /s/ Xxxxxx X. Xxxxxxx
-----------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Chief Executive Officer
"New Horizons"
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