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EXHIBIT 10.2
NONCOMPETITION AGREEMENT
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THIS NONCOMPETITION AGREEMENT (the "Agreement") is entered into as of
this 1st day of April, 1999, between and among New Horizons Computer Learning
Center of Sacramento, Inc., a Delaware corporation ("New Horizons"), New
Horizons Computer Learning Centers, Inc., a California corporation ("NHCLC"),
Xxxx Xxxxxxxx ("Shareholder"), X-Tech Incorporated, d/b/a "New Horizons Computer
Learning Center," a California corporation ("X-Tech"), and Northwestern
Technical College, Inc., a California corporation ("NTC").
RECITALS
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A. New Horizons, Shareholder, X-Tech, NTC and NHCLC are parties to that
certain Asset Purchase Agreement of even date herewith (the "Purchase
Agreement"), pursuant to which New Horizons is purchasing substantially all of
the assets and goodwill of the computer training business conducted by X-Tech
and X-Tech is terminating its relationship as a franchisee of NHCLC.
B. Shareholder is the sole shareholder of X-Tech and, as such, will
directly benefit from the consummation of the transactions contemplated in the
Purchase Agreement.
C. Shareholder is a majority shareholder of NTC, which conducts a
business similar to the Business, but which is directed primarily at students
under certain vocational and retraining programs.
D. The business conducted by NTC is not being purchased by New
Horizons, and Shareholder and NTC intend to continue to conduct such business.
E. Subject to the limitations herein set forth, New Horizons is willing
to permit NTC and Shareholder to continue to conduct such business
notwithstanding that such business is competitive, in certain respects, with the
business acquired from X-Tech.
F. It is a condition to the consummation of the transactions
contemplated in the Purchase Agreement that X-Tech, Shareholder and NTC enter
into this Agreement with New Horizons.
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by Shareholder, X-Tech
and NTC, the parties agree as follows:
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1. DEFINITIONS.
The following terms shall have the following meanings:
1.1 "Affiliate" means a Person that directly or indirectly, through one or
more intermediaries, controls or is controlled by or is under common control
with the Person specified.
1.2 "Company" means New Horizons and any Affiliate of New Horizons.
1.3 "Confidential Information" means information of any type, not generally
known, about (i) the computer training business, processes, services and
products described in either the Franchise Agreements or the Franchise Manuals
or otherwise derived primarily from X-Tech's and/or Shareholder's relationship
with Franchisor, and (ii) quotations, purchasing, accounting, sales, marketing,
or pricing, including financial or business planning information, financial
statements and forecasts, business plans, product pricing information and
customer and supplier lists, and marketing programs and methods of Company
(including the information acquired from X-Tech).
1.4 "Franchise Agreements" means collectively, (i) that certain Franchise
Agreement dated September 15, 1992 between Compulearn Computer Services a/k/a
X-Tech, Inc. and New Horizons Franchising, Inc., a/k/a NHCLC, and (ii) that
certain Franchise Agreement dated November 10, 1995 between X-Tech and New
Horizons Franchising, Inc., a/k/a NHCLC.
1.5 "Franchise Manuals" means any and all manuals distributed by the
Franchisor to X-Tech or Shareholder, including but not limited to, the
Confidential Operations Manual, the General Manager Manual, the Account
Executive Manual, the Customer Service Manual, the Instructor Manual, the
Operations Manager Manual, the Quality Assurance Manual, the Sales Manager
Manual, the Train the Trainer Manual and the Training Manager Manual.
1.6 "Franchisor" means NHCLC f/k/a New Horizons Franchising, Inc. including
any successors, assigns or Affiliates thereof).
1.7 "Person" means any natural person, corporation, partnership, limited
liability corporation, joint venture, unincorporated association, sole
proprietorship, or other entity utilized for conducting business.
2. CONFIDENTIAL INFORMATION.
Neither X-Tech, NTC, Shareholder nor any Affiliate thereof shall
disclose to any unauthorized Persons or use for his/its own account or for the
benefit of any third party any Confidential Information without New Horizons'
prior written consent.
3. NON-COMPETITION.
3.1 Neither X-Tech, NTC, Shareholder nor any successor, assign or Affiliate
thereof shall, directly or indirectly, for the period commencing on the Closing
Date (as defined in the Purchase Agreement) and terminating on October 1, 2002
(the "Restricted Period"), accept employment with or render computer training
services to any Person, including any customer of
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Company which is engaged in the business of Company, or any franchisee of
Company, or otherwise participate in any business whether as a shareholder,
partner, joint venturer, sole proprietor, director, trustee, officer, employee,
agent, consultant, independent contractor, or otherwise which is engaged in the
business of Company within a fifty (50) mile radius of any office of Company or
any of its franchisees then in operation; PROVIDED, however, that NTC and
Shareholder, solely on behalf of NTC, shall be permitted to provide computer
training services in the counties listed on EXHIBIT A attached hereto to the
following categories of students: (i) individuals whose tuition and fees are
paid or funded pursuant to Title IV of the Department of Education, Higher
Education Act ("Title IV"); (ii) individuals who (a) would otherwise qualify for
Title IV but for their failure to satisfy the financial requirements thereunder,
and (b) are unemployed or work less than 20 hours a week (each of the foregoing
(i) and (ii) are referred to for purposes of this Agreement as "Vocational
Programs"); (iii) individuals who are eligible to receive training under the Job
Training Partnership Act Title III; (iv) individuals whose tuition and fees are
paid through Private Industry Councils; (v) individuals participating in
vocational rehabilitation programs pursuant to the State of California's
Worker's Compensation Statutes; (vi) individuals participating in vocational
rehabilitation programs funded by the Department of Veteran's Affairs; (vii)
individuals whose tuition and fees are paid pursuant to California Government
Code Section 13695; (viii) individuals whose tuition and fees are funded
pursuant to the Workforce Investment Act; or (ix) individuals whose tuition and
fees are paid or funded by the Bureau of Indian Affairs (each of the foregoing
(iii) - (ix) are collectively referred to as "Retraining Programs").
Notwithstanding the foregoing clauses (i) - (ix) of the preceding sentence,
neither Shareholder nor NTC shall be permitted to provide instructor led
computer training services pursuant to a Vocational or Retraining Program which
(x) is less than twelve (12) weeks in duration, (y) exceeds four and one-half (4
1/2) hours of instruction per day, or (z) which does not strictly adhere to any
applicable standard issued by the state or federal agency administering such
Vocational Program or Retraining Program. Each of X-Tech, Shareholder and NTC
(including any successor, assign or Affiliate of the foregoing) acknowledges and
agrees that neither X-Tech, Shareholder, NTC nor any Affiliate thereof shall,
during the Restricted Period, provide any computer training services to or for
any corporation, partnership, limited liability company, business, commercial
enterprise or governmental agencies.
3.2 The Company shall not, directly or indirectly, during the Restricted
Period render computer training services to those students who are categorized
by Vocational Programs hereunder in the counties identified on EXHIBIT A.
3.3 On or before October 1, 2000, Shareholder, X-Tech, NTC and all
Affiliates thereof shall have ceased doing business with, and shall no longer be
associated in any way, directly or indirectly, with any Person which is a
Microsoft Certified Technical Education Center or a Novell Authorized Education
Center. Notwithstanding the foregoing, Shareholder, X-Tech, NTC and any
Affiliate thereof shall be permitted to become either a Microsoft Authorized
Academic Training Partner or a Novell Education Academic Partner or both.
4. NON-SOLICITATION; NON-INTERFERENCE.
4.1 Neither X-Tech, NTC, Shareholder nor any Affiliate thereof shall, at
any time hereafter, directly or indirectly, individually or on behalf of any
Person, solicit or induce or assist in any manner in the solicitation or
inducement of any then employee of Company or any
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franchisee to render services to or for their respective benefit or that of
another Person, except that X-Tech, NTC or Shareholder shall be permitted to
solicit and offer Xxxx Xxxxxx employment.
4.2 The Company shall not, at any time hereafter, directly or indirectly,
individually on behalf of any person, solicit or induce or assist in any manner
in the solicitation or inducement of any then employee of X-Tech, NTC or
Shareholder to render services to or for their respective benefit or that of
another person.
4.3 Neither X-Tech, NTC, Shareholder nor any Affiliate thereof, shall, at
any time hereafter, directly or indirectly, individually or on behalf of any
Person, solicit or induce any customer, franchisee, supplier, or other Person
having a contractual or business relationship with Company or any franchisee of
Company to terminate or otherwise alter such relationship, or in any other
manner interfere with such relationship, or interfere with any prospective
business relationship or advantage which Company has with any Person.
4.4 The Company shall not, at any time hereafter, directly or indirectly,
individually or on behalf of any person, solicit or induce any customer,
franchisee, supplier or other person having a contractual or business
relationship NTC to terminate or otherwise alter such relationship, or in any
other manner interfere with such relationship, or interfere with any prospective
business relationship or advantage which NTC has with any Person.
5. ROYALTIES.
In consideration of Company's willingness to permit NTC to continue to
provide computer training under Retraining Programs in accordance herewith, and
the substantial benefits previously derived by X-Tech, NTC and Shareholder from
X-Tech's having been a franchisee of NHCLC, NTC shall pay NHCLC a Royalty and
Advertising Fee in accordance with EXHIBIT B attached hereto. Such payments
shall be made until the first month following a three (3) consecutive month
period in which eighty (80%) percent of the monthly student enrollment at NTC
consists of students funded by Title IV of the Department of Education, Higher
Education Act. Shareholder shall cause NTC to maintain full, true and accurate
books of accounts and other records, containing all information and data which
may be necessary to ascertain and verify the Royalty and Advertising Fee payable
hereunder. NHCLC shall have the right from time to time (not to exceed twice in
any twelve month period) to inspect, or to have a mutually acceptable accountant
inspect, such books, records and supporting data to confirm the accuracy of the
Royalty and Advertising Fees. In such event, the fees and expenses of such
accountant shall be shared equally by the parties.
6. GENERAL PROVISIONS.
6.1 This Agreement and the rights and obligations of each party hereunder
shall be binding upon and shall inure to the benefit of the respective
successors, assigns, heirs or legal representatives of each of the parties
hereto, but neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any party hereto without the prior
written consent of the other parties; provided, however, that New Horizons may
assign this Agreement
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and its rights, interests and obligations hereunder to any of its Affiliates
without the prior written consent of the other parties hereto.
6.2 In the event of the unenforceability or invalidity of any section or
provision of this Agreement, such section or provision shall be enforceable in
part to the fullest extent permitted by law, such invalidity or unenforceability
shall not otherwise affect any other section or provision of this Agreement, and
this Agreement shall otherwise remain in full force and effect.
6.3 This Agreement and the Purchase Agreement constitute the entire
agreement with respect to the subject matter hereof and supersedes all prior
negotiations, understandings, and agreements with respect thereto.
6.4 This Agreement may be amended only by an agreement in writing between
the parties.
6.5 This Agreement and the rights and obligations of the parties hereunder
shall be governed by and construed in accordance with the laws of the State of
California without regard to the conflicts of laws provisions of any state. The
courts of the same shall have jurisdiction over disputes arising from this
agreement and each of the parties hereby waive all objections to such
jurisdiction.
6.6 X-Tech, NTC and Shareholder agree that money damages alone will not be
a sufficient remedy for any breach of the provisions of this Agreement by any of
them, and that in addition to all other remedies Company may have, Company shall
be entitled to specific performance, injunctive or such other equitable relief
determined appropriate by a court of competent jurisdiction, and X-Tech, NTC and
Shareholder waive the securing or posting of any bond in connection with such
remedy.
6.7 This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original copy of this Agreement and all of which,
when taken together, will be deemed to constitute one and the same agreement.
[Signature page follows]
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EACH OF THE UNDERSIGNED HAS READ THIS AGREEMENT IN ITS ENTIRETY AND UNDERSTANDS
IT. EACH OF THE UNDERSIGNED FURTHER ACKNOWLEDGES THAT IT/HE HAS HAD THE
OPPORTUNITY TO CONSULT WITH COUNSEL OF ITS/HIS CHOICE WITH REGARD TO THE TERMS
OF THIS AGREEMENT. FINALLY, EACH OF THE UNDERSIGNED ACKNOWLEDGES THAT EXECUTION
OF THIS AGREEMENT IS ITS/HIS FREE ACT AND DEED AND THAT IT/HE HAS BEEN FURNISHED
WITH A COPY THEREOF.
Signed at Sacramento, California, this 1st day of April 1999.
NEW HORIZONS COMPUTER LEARNING X-TECH INCORPORATED
CENTER OF SACRAMENTO, INC.
/s/ Xxxxxx X. XxXxxxxx /s/ Xxxx Xxxxxxxx
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By: Xxxxxx X. XxXxxxxx By: Xxxx Xxxxxxxx
Its: Chief Financial Officer Its: President
NEW HORIZONS COMPUTER LEARNING NORTHWESTERN TECHNICAL
CENTERS, INC. COLLEGE, INC.
/s/ Xxxxxx X. XxXxxxxx /s/ Xxxxx XxXxxxxxx
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By: Xxxxxx X. XxXxxxxx By: Xxxxx XxXxxxxxx
Its: Chief Financial Officer Its: President
/s/ Xxxx Xxxxxxxx
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Xxxx Xxxxxxxx
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EXHIBIT A
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LIST OF CALIFORNIA COUNTIES:
Alameda Humboldt Nevada Sierra
Alpine Lake Placer Siskiyou
Xxxxxx Xxxxxx Plumas Xxxxxx
Butte Madera Sacramento Sonoma
Calaveras Marin San Xxxxxxxxx Xxxxxxxxxx
Colusa Mariposa San Xxxxxxx Xxxxxx
Contra Costa Mendocino San Mateo Tehama
Eldorado Merced Santa Xxxxx Trinity
Frenso Modoc Santa Xxxx Yolo
Xxxxx Napa Shasta Yuba
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EXHIBIT B
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1. ROYALTY:
Effective the date of this Agreement, NTC shall pay to New Horizons a royalty
equal three percent (3%) of all Gross Revenues (as defined below) derived from
Retraining Programs (the "Royalty").
The Royalty must be received by NHCLC on or before the 15th day (or if said day
is a bank holiday, on the next business day) of each month during the term of
this Agreement.
2. ADVERTISING FEE:
Effective on the date of this Agreement, NTC shall pay to New Horizons a
Marketing and Advertising Fee equal to one percent (1%) of NTC's Gross Revenues
derived from the Retraining Programs (the "Advertising Fee").
The Advertising Fee must be received by NHCLC on or before the 15th day (or if
said day is a bank holiday, on the next business day) of each month during the
term of this Agreement.
DEFINITION OF GROSS REVENUES:
"Gross Revenues" shall be computed on an accrual basis in accordance with GAAP,
regardless of the method, timing, or form of payment. Accordingly, the following
accounting procedures will apply:
- The sale of retraining program packages ("Programs"), individual sales of
courseware or tests to students, shall be accrued as of the date the
student begins the first day of class, or takes possession of the
courseware or test.
- In the event a Program is to be completed over a period exceeding one
month, the initial sale of the Program shall be deferred for accounting
purposes, and amortized over the Program completion period. For example, if
the CNE/NT Program is to be completed over five months, then the revenue
will be recognized ratably over those five months. The first month of
revenue recognition will be that month in which the student begins the
first day of class. This revenue recognition methodology is conceptually
consistent with that employed by New Horizons.
- Refunds that arise from student terminations, returns of unused materials
or tests, or other circumstances shall be recorded against the related
revenue accounts; and therefore will reduce Gross Revenues.
Interest income, and gain or loss on the disposal of assets (except for the sale
of courseware) shall be excluded from Gross Revenues.
A student's purchase of a Program, or other products sold by NTC, shall be
accrued and accounted for according to the methodology described above when the
student begins the first
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day of class at NTC or takes possession of the item being purchased. This
applies regardless of how or when the student pays for the Program or item; and
includes all forms of consideration including cash, credit card, trade for
services or products, execution of a promissory note, etc. In the event the
student's "payment" is in the form of services or items of value, the related
revenue shall be determined according to the fair market value of the service or
item, and/or the face value of any promissory note.
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