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EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
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This Asset Purchase Agreement ("Agreement") is entered into as
of the 1st day of April, 1999, by and among INNOVAK International Incorporated,
d/b/a New Horizons Computer Learning Center of Charlotte, a South Carolina
corporation ("Seller"), Xxxxxx Xxxxxxxxx, the sole shareholder of Seller (the
"Shareholder"), New Horizons Computer Learning Center of Charlotte, Inc., a
Delaware corporation ("Buyer") and New Horizons Worldwide, Inc., a Delaware
corporation ("New Horizons").
RECITALS:
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A. Seller is engaged in the business of providing computer
training services ("Services") to organizations and individuals primarily
located in and around Charlotte, North Carolina (the "Business") as a franchisee
of New Horizons Computer Learning Centers, Inc. ("NHCLC").
B. The parties desire that (i) Seller sell to Buyer and that
Buyer purchase from Seller substantially all of Seller's assets related to the
Business and (ii) Seller's Franchise Agreement dated July 22, 1992 with NHCLC
for the Charlotte, North Carolina area (the "Charlotte Franchise Agreement") be
terminated upon the terms therein and hereinafter set forth.
In consideration of and in reliance upon the mutual
representations, warranties, covenants, obligations and agreements contained
herein, the parties agree as follows:
1. PURCHASE AND SALE OF ASSETS.
1.1 PURCHASED ASSETS. Seller hereby sells to Buyer,
free of all liens, encumbrances, claims and other restrictions of any kind, and
Buyer hereby purchases, all of Seller's right, title, and interest in and to all
of the properties, assets, and rights owned, used, acquired for use, or arising
or existing in connection with the Business, whether tangible or intangible, and
whether or not recorded on Seller's books and records, as the same exist at the
Closing (as defined below), including, without limitation, books and records,
software and software licenses, permits and other governmental authorizations
pertaining to the Business (to the extent such authorizations may legally be
assigned), know-how, trade secrets, patents, trademarks, trade names, copyrights
(including applications for the foregoing), and all goodwill relating to the
Seller; PROVIDED, HOWEVER, that (i) Seller shall not sell and Buyer shall not
purchase the Retained Assets of Seller described in Section 1.2 hereof, and (ii)
as to contracts only, Seller shall assign and Buyer shall assume only those
contracts of Seller that are set forth or described on SCHEDULE 2.1. The assets
to be purchased and sold pursuant to this Agreement are referred to herein as
the "Purchased Assets."
1.2 RETAINED ASSETS. Seller shall retain, and Buyer
shall not purchase (i) any rights of Seller arising under this Agreement, (ii)
Seller's corporate minute books, stock records, and tax returns or other similar
corporate books and records relating to the Business, and
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those records, originals of which Seller is required to maintain under
applicable laws (PROVIDED, copies of the same are included among the Purchased
Assets), (iii) contracts of Seller that are NOT set forth on SCHEDULE 2.1 and
(iv) the items listed on SCHEDULE 1.2 (collectively, the "Retained Assets").
2. LIABILITIES OF SELLER.
2.1 ASSUMED LIABILITIES. On the Closing Date, Buyer
agrees to assume, and hereby assumes, the following liabilities and obligations
of Seller existing as of the Closing (the "Assumed Liabilities"): (a) Seller's
current liabilities reflected on the Adjusted Balance Sheet appearing in the
Adjusted Financial Statements (as such terms are defined in Section 3.2 below)
and those current liabilities incurred in the ordinary course of business
consistent with past practices since the date of such Adjusted Balance Sheet to
the extent reflected or reserved on the Closing Balance Sheet (as defined in
Section 3.2 below) (b) Seller's long-term liabilities under lease or financing
arrangements of a type required by GAAP to be included on a balance sheet (such
liabilities together with the current liabilities reflected in paragraph (a)
immediately preceding being sometimes referred to herein as the "Assumed Balance
Sheet Liabilities"), (c) the liabilities of Seller under the contracts set forth
on SCHEDULE 2.1 to the extent (i) such contract liabilities accrue and relate
solely to the period after the Closing, and (ii) the corresponding benefits
therefrom are validly assigned to and received by Buyer, and (d) Seller's future
obligation to provide training for which Seller has received payment.
2.2 RETAINED LIABILITIES. Except for the Assumed
Liabilities, Buyer shall not assume nor become responsible for any liability or
obligation of Seller of any nature whatsoever, whether known or unknown,
accrued, absolute, contingent or otherwise, including without limitation (i) any
liabilities or costs associated with or relating to Seller's failure to qualify,
or be qualified, in North Carolina, and (ii) any liabilities, costs, or
contributions associated with or relating to Seller's COBRA coverage (the
"Retained Liabilities").
3. CONSIDERATION. The consideration payable by Buyer for the
Purchased Assets shall consist of the following: (i) Buyer's assumption of the
Assumed Balance Sheet Liabilities, (ii) payment of the consideration payable at
Closing as set forth in Section 3.1 below (the "Closing Payment"), as such may
be subsequently adjusted pursuant to Section 3.2 below, and (iii) the
consideration payable, if any, following the Closing as set forth in Section 3.3
below (the "Earn-Out").
3.1 CLOSING PAYMENT. The Closing Payment shall be
payable as follows:
(a) Three Million Dollars ($3,000,000.00), payable by
wire transfer of immediately available funds to an account designated by Seller
in writing; and
(b) Shares of Common Stock, $.01 par value, of New
Horizons having an aggregate Fair Market Value (as defined below) equal to Eight
Hundred Thousand Dollars ($800,000.00) (the "New Horizons Stock") issued at the
Closing; PROVIDED, that no fractional shares of New Horizons Stock will be
issued or delivered to Seller hereunder. Solely for purposes of determining the
number of shares of New Horizons Stock to be issued to Seller pursuant to this
Section 3.1(b), the "Fair Market Value" of a share of New Horizons Stock shall
mean the average
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per share closing price of New Horizons Stock on the NASDAQ Stock Market (or
successor exchange) for the thirty (30) full trading days ending on the second
trading day prior to the Closing.
(c) Two Hundred Thousand Dollars ($200,000.00) (the
"Holdback Amount"), to be held by Buyer in an interest-bearing account pending
final determination of the Net Worth Adjustment (as defined and determined
below).
3.2 BALANCE SHEET ADJUSTMENT.
(a) Promptly after the Closing, Seller will prepare a
balance sheet as of the Closing ("Closing Balance Sheet") reflecting:
(i) cash and cash equivalents included in the
Purchased Assets;
(ii) trade accounts receivable, net of allowance for
doubtful accounts and reserve for subsequent credit memos, included in the
Purchased Assets;
(iii) inventory, net of applicable reserves, included
in the Purchased Assets;
(iv) prepaid expenses included in the Purchased
Assets the benefit of which is fully available to Buyer;
(v) property, plant and equipment, net of
depreciation and amortization, included in the Purchased Assets;
(vi) any other assets included in the Purchased
Assets of a type required by GAAP to be included on a balance sheet; and
(vii) the Assumed Balance Sheet Liabilities.
Attached hereto as SCHEDULE 3.2(a)(i) is a balance sheet of the Business as of
December 31, 1998 and an income statement for the period then ended, which have
been prepared jointly by Seller and Buyer in accordance with GAAP and which
reflect the New Horizons Methodology (the "Adjusted Balance Sheet" and "Adjusted
Income Statement", respectively, and collectively, the "Adjusted Financial
Statements"). Such Methodology is set forth on SCHEDULE 3.2(a)(ii) hereof. The
Adjusted Balance Sheet was derived from the Seller's Balance Sheet (as defined
in Section 4.3 hereof) by making those modifications set forth on SCHEDULE
3.2(a)(i) hereof. The Closing Balance Sheet shall be prepared in a manner
consistent with the preparation of the Adjusted Balance Sheet. Based on the
Closing Balance Sheet, Seller will also prepare a written calculation of the
amount by which the Net Worth (as defined below) as at the Closing Date is
greater or less than One Hundred Twenty Eight Thousand Dollars ($128,000.00)
("Net Worth Adjustment").
(b) NET WORTH ADJUSTMENT REVIEW. Seller will prepare the
Closing Balance Sheet and the Net Worth Adjustment and deliver the same to Buyer
not later than thirty (30) days after the Closing, together with a written
certification that such have been prepared and
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calculated in accordance herewith. Thereafter, Buyer's Chief Financial Officer
and Buyer's independent accountants will conduct a review of these items, and
Buyer will notify Seller not later than thirty (30) days after receipt thereof,
as to whether they are acceptable to Buyer. If Buyer objects to the Closing
Balance Sheet or the Net Worth Adjustment and Buyer and Seller are able to
resolve their dispute within fifteen (15) days after Buyer's objection, the Net
Worth Adjustment (reflecting the resolution) will become final and binding on
the parties. If Buyer and Seller are unable to resolve their dispute within
fifteen (15) days after Buyer's objection, the dispute will be resolved by a
"Big Six" national accounting firm mutually agreeable to the parties (the
"Independent Accountants"). The Independent Accountants will be instructed to
perform their services as expeditiously as possible and the resolution of the
Independent Accountants shall be final and binding on the parties. The fees and
expenses of the Independent Accountants for the resolution of the dispute shall
be shared by Buyer and Seller in inverse proportion to the respective amounts of
the disputed matters which are resolved in its favor.
(c) FINAL PAYMENT OR REFUND.
(i) POST-CLOSING PAYMENT. If the Net Worth Adjustment
is not a negative amount, the Holdback Amount shall be paid to Seller (along
with any interest accrued thereon) and Buyer shall pay the Net Worth Adjustment
to Seller.
(ii) POST-CLOSING REFUND. If the Net Worth Adjustment
is a negative amount, Seller will refund to Buyer the Net Worth Adjustment
(treated as a positive amount) from the Holdback Amount (which Buyer may retain,
to the extent necessary to pay the Net Worth Adjustment) and, if necessary, also
by the wire transfer of immediately available funds to an account designated in
writing by Buyer (or a combination of both). The balance of the Holdback Amount,
if any, shall be paid to Seller (along with any interest accrued thereon).
(iii) TIME OF POST-CLOSING PAYMENT OR REFUND. Any
post-closing payment or refund (as the case may be) provided for under this
Section 3.2(c) will be made not more than three (3) days after the Net Worth
Adjustment becomes final, as contemplated by Section 3.2(b) hereof.
3.3 EARN-OUT. As additional consideration for the
Purchased Assets, Seller shall be entitled to receive (i) with respect to the 12
month period commencing on the first day of the month on or after the Closing
Date and ending on the last day of the twelfth month thereafter, an amount equal
to three (3) times the amount by which Buyer's EBIT for such period exceeds the
Base EBIT, if any, and (ii) with respect to the next 12 month period, an amount
equal to three (3) times the amount by which Buyer's EBIT for such period
exceeds Base EBIT ("Earn Out Payments"). Buyer will prepare the foregoing EBIT
calculations and deliver the same to Seller within forty-five (45) days after
the end of the twelve month period for which they are required, together with a
written certification that such calculations have been prepared and calculated
in accordance herewith. Thereafter, Seller will conduct a review of these items
and notify Buyer not later than thirty (30) days after receipt of such
calculations as to whether they are acceptable to Seller. If Seller objects to
such calculations and Buyer and Seller are able to resolve their dispute within
fifteen (15) days after Seller's objection, such calculations (reflecting the
resolution) will become final and binding on the parties. If Buyer and Seller
are unable to
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resolve their dispute within fifteen (15) days after Seller's objection, the
dispute will be resolved by the Independent Accountants. The Independent
Accountants will be instructed to perform their services as expeditiously as
possible and the resolution of the Independent Accountants shall be final and
binding on the parties. The fees and expenses of the Independent Accountants for
the resolution of the dispute shall be shared by Buyer and Seller in inverse
proportion to the respective amounts of the disputed matters which are resolved
in its favor.
Within ten (10) days after the amount of any Earn Out Payment is
finally determined in accordance with the foregoing it shall be paid (i) by wire
transfer of 75% of such amount in immediately available funds to an account
designated in writing by Seller, and (ii) by issuance to Seller of shares of New
Horizons Stock having an aggregate Fair Market Value equal to 25% of such
amount. For purposes of this Section 3.3, "Fair Market Value" of a share of New
Horizons Stock shall mean the average per share closing price of New Horizons
Stock on the NASDAQ Stock Market (or successor exchange) for the thirty (30)
full trading days ending on the last day of the twelve month period with respect
to which such Earn Out Payment was earned.
For purposes of this Section 3:
"Base EBIT" shall be Six Hundred Sixty-Seven Thousand Dollars
($667,000.00).
"Buyer's EBIT" shall be the amount determined from Buyer's financial
statements for the Business prepared in accordance with GAAP using the New
Horizons Methodology in a manner consistent with the Adjusted Income Statement,
by (a) adding to the net income or loss of the Business: (i) the total of all
federal, state, local and foreign tax expense with respect to income; (ii) the
total of all interest expense with respect to indebtedness for borrowed money
(including capitalized leases and purchase money financing), net of interest
income; and (iii) the amortization of all intangibles resulting from the
transactions contemplated by this Agreement, and (b) deducting royalties which
would have been payable by Seller to NHCLC under the Charlotte Franchise
Agreement in the absence of this Agreement.
"Net Worth" means the assets of the Business (excluding unamortized
organization costs or franchise fees) less total liabilities of the Business,
determined in accordance with GAAP, but excluding the Retained Assets and
Retained Liabilities.
4. REPRESENTATIONS AND WARRANTIES OF SELLER AND THE SHAREHOLDER. Seller
and the Shareholder hereby jointly and severally represent and warrant to Buyer
and New Horizons as follows:
4.1 ORGANIZATION, AUTHORITY AND CAPACITY. Seller is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of South Carolina, is in good standing as a foreign corporation qualified
to do business in such other states where the nature of the business conducted
requires such qualification, and has full corporate power and authority to own,
lease and operate its assets and properties and, carry on the Business as and
where such assets and properties are now owned or leased and as such business is
presently being conducted. Seller and the Shareholder have full power,
authority, and legal capacity to execute, deliver, and perform this Agreement in
accordance with its terms, and such execution, delivery and
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performance has been approved by all requisite corporate action of Seller. This
Agreement has been duly executed and delivered by Seller and the Shareholder and
constitutes the legal, valid and binding obligation of Seller and the
Shareholder, enforceable against Seller and the Shareholder in accordance with
its terms.
4.2 NO CONSENTS OR CONFLICTS. Except as set forth on SCHEDULE 4.2,
no consent of, or filing with, any governmental authority or third party is
required in connection with the execution, delivery or performance of this
Agreement or any of the other agreements, instruments or documents to be
delivered by or on behalf of Seller or the Shareholder in connection herewith.
Neither the execution or delivery nor the performance of this Agreement or any
of the other agreements, instruments or documents to be delivered by or on
behalf of Seller or the Shareholder in connection herewith conflicts with,
violates or results in any breach of: (i) any judgment, decree, order, statute,
rule or regulation applicable to Seller or the Shareholder, (ii) any agreement
or instrument to which Seller or the Shareholder is a party or by which Seller
or any of its assets is bound, or (iii) any provision of the Articles of
Incorporation or the By-Laws of Seller.
4.3 FINANCIAL STATEMENTS. Seller has previously delivered to Buyer
Seller's financial statements for the years ended December 31, 1997 and 1998
(the "Seller Prepared Financial Statements"; the balance sheet dated December
31, 1998 is also referred to as "Seller's Balance Sheet"). The Seller Prepared
Financial Statements present fairly Seller's financial position as of the dates
indicated and results of operations for the periods indicated on a consistent
basis.
4.4 NO LIABILITIES. Seller has no liabilities or obligations of
any kind. (accrued, absolute, contingent, known, unknown or otherwise) except
(i) as reflected on the Adjusted Balance Sheet, (ii) as incurred in the ordinary
course of business, consistent with past practice, since the date of the
Adjusted Balance Sheet, or (iii) as set forth on SCHEDULE 4.4.
4.5 NO CHANGES. Since the date of the Adjusted Balance Sheet which
forms a part of Seller's Adjusted Financial Statements, Seller has operated only
in the ordinary course, consistent with past practice, and there has not been
any material adverse change, or any event, fact or circumstance which might
reasonably be expected to result in a material adverse change, in the assets,
liabilities, operating performance, business relationships, or prospects of the
Business. Without limiting the generality of the foregoing, since the date of
such balance sheet, except as set forth on SCHEDULE 4.5, there has not been with
respect to the Business any:
(a) waiver, release, cancellation or compromise
of any debts owed to it or claims or rights
against others exceeding $10,000 in the
aggregate;
(b) sale, disposition or subjection to any lien
of any assets other than inventory in the
ordinary course of business;
(c) unusual or novel method of transacting
business engaged in by Seller or any change
in Seller's accounting procedures or
practices (except as required by Buyer) or
its financial structure;
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(d) any increase in salaries, bonuses or
benefits paid or payable to employees; or
(e) any material damage, destruction or loss to
or of the assets of Seller.
4.6 TITLE TO PURCHASED ASSETS. Seller owns all of the Purchased
Assets free and clear of all liens, claims, encumbrances and other restrictions
or limitations of any kind whatsoever affecting the ability to use or transfer
the Purchased Assets.
4.7 OWNERSHIP OF SELLER. The Shareholder owns beneficially and of
record, free and clear of all liens and encumbrances, all of the issued and
outstanding capital stock of Seller.
4.8 ASSETS OWNED. Except for the Retained Assets, the Purchased
Assets comprise all of those assets which are used or useful in the operation of
the Business in the ordinary course as presently conducted.
4.9 COMPLIANCE WITH LAWS. Except as set forth on SCHEDULE 4.9,
Seller has conducted the Business in compliance with all laws, regulations or
orders of any jurisdiction or governmental authority, including, without
limitation, those pertaining to, environmental protection, occupational health
or safety, employee benefits, and employment practices. Except as set forth on
SCHEDULE 4.9, Seller has all permits, registrations and licenses necessary to
conduct the Business, and all of Seller's employees utilized in connection with
the Business have obtained all required permits, registrations, and licenses.
All such permits and licenses are in full force and effect, and no proceeding is
pending or, to the knowledge of Seller, threatened, to revoke or limit any of
them.
4.10 NO LITIGATION. Except as set forth on SCHEDULE 4.10, there is
no claim, litigation, investigation or proceeding pending or, to the knowledge
of Seller, threatened against Seller. There are no pending or, to the knowledge
of Seller, threatened controversies, grievances or claims by any employee or
former employee of Seller with respect to their employment, compensation,
benefits or working conditions.
4.11 CONDITION. Except as set forth on SCHEDULE 4.11, all of the
items of tangible property included among the Purchased Assets and used in the
ordinary conduct of Seller's Business are in good operating condition, normal
wear and tear excepted, and do not require nor are reasonably expected to
require any special or extraordinary expenditures to remain in such condition
beyond normal maintenance, and are capable of being used for their intended
purposes in the ordinary course of business consistent with past practice.
4.12 TAXES. All tax returns, reports and declarations (hereinafter
collectively, "Tax Returns") required by any governmental authority to be filed
in connection with the properties, Business, income, expenses, net worth and
franchises of Seller have been timely filed by either Seller or the Shareholder.
All taxes due in connection with the properties, Business, income, expenses, net
worth and franchises of Seller ("Taxes") have been paid by either Seller or
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the Shareholder, other than tax which is not yet due or which, if due, is not
yet delinquent or is being contested in good faith, and for which in all cases
reserves have been established on the Adjusted Balance Sheet. There are no tax
claims, audits or proceedings pending in connection with the properties,
Business, income, expenses, net worth and franchises of Seller, and, to the
knowledge of Seller, there are no such threatened claims, audits or proceedings.
4.13 EMPLOYEE BENEFITS. All employee benefit plans (as such term
is defined in Section 3(3) of Employee Retirement Income Security Act of 1974
("ERISA")) and all other employee benefit programs or arrangements of any type
(collectively, the "Plans") maintained by Seller or to which Seller contributes
are listed on SCHEDULE 4.13, and, except as disclosed on said SCHEDULE 4.13,
such Plans comply, in all material respects, with all applicable provisions of
any laws, rules or regulations, including, without limitation, the Internal
Revenue Code of 1986, as amended ("Code") and ERISA, and have so complied during
all prior periods during which any such provisions are applicable. Except as
disclosed on said SCHEDULE 4.13, Seller (i) has complied in all material
respects with the provisions of ERISA applicable to Seller as an employer, plan
sponsor, plan administrator or fiduciary of any such Plan, (ii) has administered
the Plans in accordance with their terms and (iii) with respect to any Plan
maintained by Seller or to which Seller contributes, has made all contributions
required of it by any law (including, without limitation, ERISA) or contract and
no unfunded liability exists with respect to any Plan.
4.14 CUSTOMERS. Except as set forth on SCHEDULE 4.14, no customer
of the Business accounting for more than One Hundred Thousand Dollars ($100,000)
in revenues during the twelve (12) full calendar months preceding the Closing
has canceled or otherwise terminated, or made any threat to cancel or otherwise
terminate, its relationship with Seller or to materially decrease its purchases
from Seller.
4.15 CONTRACTS. Except as set forth on SCHEDULE 4.15, neither
Seller, nor, to the knowledge of Seller, any other party to any contract set
forth on SCHEDULE 2.1, has breached any obligation under any such contract.
4.16 CONFLICTS. Except as set forth on SCHEDULE 4.16, neither the
Shareholder, nor any other person or entity controlled by or under common
control with Seller or the Shareholder, has any direct or indirect interest in
any business enterprise which does business with Seller or competes with Seller
in any manner.
4.17 ABSENCE OF CERTAIN BUSINESS PRACTICES. Except as set forth on
SCHEDULE 4.17, Seller and the Shareholder have not, and to the knowledge of
Seller no employee or agent of Seller, or any other person acting on its behalf
has, directly or indirectly, given or agreed to give any gift or similar benefit
to any customer, supplier, governmental employee or other person which (i) might
subject Seller to any damage or penalty in any civil, criminal or governmental
litigation or proceeding, (ii) if not given in the past, might have had an
adverse effect on the Purchased Assets or the Business, or (iii) if not
continued in the future, might adversely affect the Purchased Assets, the
Business or the prospects of the Business.
4.18 BROKERS AND FINDERS. Except as set forth on SCHEDULE 4.18, no
broker, finder or other person or entity acting in a similar capacity has
participated on behalf of
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Seller or the Shareholder in bringing about the transactions contemplated
herein, rendered any services with respect hereto, or been in any way involved
herewith. Seller and the Shareholder are fully responsible for any fees and/or
expenses due any such party.
4.19 INVESTMENT MATTERS. Seller is acquiring the New Horizons
Stock for investment purposes, for its own account and not with a view to
distribution or resale thereof or to divide its participation with others;
provided, however, Seller may elect to transfer the New Horizons Stock to the
Shareholder, who hereby confirms that he will thereby acquire the New Horizons
Stock for investment purposes, for his own account and not with a view to
distribution or resale thereof or to divide his participation with others.
Seller and the Shareholder both meet the definition of "accredited investor" as
defined in Regulation D, 17 C.F.R. ss. 230.501(a), under the Securities Act of
1933, as amended (the "Act"). Seller and the Shareholder both have knowledge and
experience in financial and business matters such that they are capable of
evaluating the merits and risks of an investment in the New Horizons Stock.
Seller and the Shareholder acknowledge that they have received and have reviewed
(a) New Horizons' most recent Proxy Statement, (b) New Horizons' Annual Reports
on Form 10-K for the years ending December 31, 1997 and 1998, (c) New Horizons'
Form 10-Q Quarterly Report(s) for the fiscal quarter(s) subsequent to the 1999
Annual Report, (d) draft Proxy Statement for the 1999 New Horizons' Shareholders
Meeting, and (e) all other material and relevant information concerning New
Horizons, which New Horizons has furnished in accordance with the rules of the
Securities and Exchange Commission ("SEC"), and have had the opportunity to ask
questions of, receive answers from and obtain additional information from New
Horizons concerning the business and financial condition of New Horizons.
Seller and the Shareholder understand, acknowledge and agree that:
(i) none of the New Horizons Stock will be registered under the Act and that all
of the New Horizons Stock will constitute "restricted securities" as defined in
Rule 144 (or its successor) under the Act; (ii) the New Horizons Stock must be
held indefinitely unless it is registered under the Act or an exemption from
registration is available; (iii) neither New Horizons nor Buyer is under any
obligation or has made any commitment to provide any such registration or to
take such steps as are necessary to permit sale without registration pursuant to
Rule 144 under the Act or otherwise; (iv) at such time as the New Horizons Stock
may be disposed of in routine sales without registration in reliance on Rule 144
under the Act, such disposition can be made only in limited amounts in
accordance with all of the terms and conditions of Rule 144; (v) if the Rule 144
exemption is not available, compliance with some other exemption from
registration will be required; (vi) all certificates evidencing the New Horizons
Stock will bear an appropriate legend concerning restrictions on transfer; (vii)
the transfer agent and registrar of Buyer will be advised by appropriate
"stop-transfer" instructions of the foregoing restrictions and instructed to
advise Buyer of any proposed transfer of certificate(s) evidencing the New
Horizons Stock; and (viii) in addition to the forgoing restrictions, no shares
of the New Horizons Stock may be sold or transferred during the twelve (12)
months following their issuance.
4.20 SOFTWARE. Except as set forth on SCHEDULE 4.20, all software
used in connection with the Business ("Software") has been designed and
developed by Seller or is used pursuant to valid license agreements, which
agreements are fully paid and in full force and effect. Except as set forth on
SCHEDULE 4.20, Seller has not licensed the Software to any third party and no
third party (including, but not limited to, any of Seller's employees) have any
rights in such
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Software. To Seller's knowledge there are no pending or threatened claims
against or demands upon Seller or the Shareholder alleging that the Software
infringes upon the rights of any third party.
4.21 ACCOUNTS RECEIVABLE. Except for the reserve for doubtful
accounts reflected on the Adjusted Balance Sheet, all accounts receivable of
Seller reflected on the Adjusted Balance Sheet, and as incurred in the normal
course of business since the date thereof, represent arm's length sales actually
made in the ordinary course of business are collectible in the ordinary course
of business.
4.22 MILLENNIUM COMPLIANCE. Seller has taken those steps outlined
on SCHEDULE 4.22 to determine whether its information systems used in connection
with the Business are Millennium Compliant. "Millennium Compliant" means the
ability when used individually or in conjunction with any other systems,
software or equipment to: (a) accurately process Date Data before, after and
across December 31, 1999 and throughout the year 2000 and beyond (including by
recognizing the year 2000 as a leap year); (b) provide correct results when
moving backwards and forwards between the 20th and 21st century; and (c)
function without error or without interruption related to or caused by Date
Data. For the purposes of this definition, "Date Data" means data which
represents or references dates in the same and/or different centuries.
4.23 NO MISREPRESENTATIONS. No representation or warranty made by
Seller or the Shareholder in this Agreement, the Schedules or Exhibits hereto,
or any certificate or document delivered to Buyer contains any untrue statement
of a material fact or omits to state a fact necessary to make the statements and
facts contained therein or herein, in light of the circumstances under which
they are made, not false or misleading. Copies of all documents delivered or
made available to Buyer by Seller were complete and accurate copies of such
documents.
4.24 KNOWLEDGE DEFINED. For purposes of this Section 4, "to the
knowledge of Seller" (or similar phrases) shall mean (i) the actual knowledge of
the Shareholder and Seller's general manager, and (ii) the knowledge any of such
persons would have had after making reasonable inquiry of the Seller's personnel
and reasonable investigation and review of Seller's books and records and other
relevant documentation.
5. REPRESENTATIONS AND WARRANTIES OF BUYER AND NEW HORIZONS. Buyer and
New Horizons, jointly and severally, represent and warrant to Seller and the
Shareholder as follows:
5.1 ORGANIZATION AND AUTHORITY OF BUYER. Buyer and New Horizons
are corporations duly incorporated, validly existing and in good standing under
the laws of the State of Delaware, and have full corporate power and authority
to execute, deliver and perform this Agreement in accordance with its terms.
This Agreement and the transactions contemplated by this Agreement, have been
authorized by all necessary corporate action of Buyer and New Horizons. This
Agreement has been duly executed and delivered by Buyer and New Horizons and
constitutes the legal, valid and binding obligation of Buyer and New Horizons,
enforceable against Buyer and New Horizons in accordance with its terms.
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5.2 NO CONSENTS OR CONFLICTS. No consent of, or filing with, any
governmental authority or third party is required in connection with the
execution, delivery or performance of this Agreement by Buyer or New Horizons
which has not been obtained or made or which will be obtained or made before
due. Neither the execution or delivery nor the performance of this Agreement or
any of the other agreements, instruments or documents to be delivered by or on
behalf of Buyer or New Horizons in connection herewith conflicts with, violates
or results in any breach of: (i) any judgment, decree, order, statute, rule or
regulation applicable to Buyer or New Horizons, (ii) any agreement to which
Buyer or New Horizons is a party or by which either of them is bound, or (iii)
any provision of the Certificate of Incorporation or the By-Laws of Buyer or New
Horizons.
5.3 ACCURACY OF PUBLIC DISCLOSURES. As of their respective dates
all reports filed by the Company with the Securities and Exchange Commission did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
5.4 NEW HORIZONS STOCK. The New Horizons Stock issued or to be
issued to Seller hereunder has been duly authorized and, when issued, will be
fully paid and nonassessable.
5.5 BROKERS AND FINDERS. No broker, finder or other person or
entity acting in a similar capacity has participated on behalf of Buyer in
bringing about the transactions contemplated herein, rendered any services with
respect thereto or been in any way involved therewith.
6. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Seller and the Shareholder set forth in Section 4 hereof will
survive the Closing, regardless of any investigation made by any party hereto,
until the second anniversary of the Closing Date, except that the
representations and warranties contained in Sections 4.1, 4.2, 4.6, 4.7, 4.12
and 4.13 will survive for the applicable statute of limitations (including
extensions). The representations and warranties of Buyer set forth in Section 5
hereof will survive the Closing, regardless of any investigation made by any
party hereto, until the second anniversary of the Closing Date, except that the
representations and warranties contained in Section 5.1 and 5.2 will survive for
the applicable statute of limitations.
7. CLOSING. The consummation of the transactions contemplated by this
Agreement (the "Closing") will take place simultaneously with the execution and
delivery of this Agreement by all of the parties hereto as of the date hereof
(the "Closing Date"), at the offices of Seller or at such other place as the
parties may agree in writing, and shall be effective as of the opening of
business on such date.
7.1 SELLER'S CLOSING DELIVERIES. Seller shall deliver the
following items in connection with the Closing, each of which shall be in form
and substance acceptable to Buyer and its counsel:
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(a) CONSENTS. The consent to the transactions contemplated by this
Agreement of any third party whose consent is required for the consummation of
such transactions by Seller or Shareholder;
(b) BOARD AND SHAREHOLDER APPROVAL. Certified copies of the
resolutions of Seller's Board of Directors and sole Shareholder approving the
consummation of the transactions contemplated by this Agreement;
(c) TRANSFER INSTRUMENTS; RELEASES OF LIENS. Bills of sale,
assignments and other transfer instruments and releases of liens, encumbrances
and restrictions sufficient to convey, transfer, and assign to Buyer, and to
effectively and legally vest in Buyer all of Seller's right, title and interest
in and to the Purchased Assets free and clear of all liens, encumbrances and
restrictions whatsoever;
(d) FRANCHISE AGREEMENTS. A written cancellation of and waiver of
all claims by Seller under the Charlotte Franchise Agreement;
(e) EMPLOYMENT. Employment agreements between Buyer and each of
the Shareholder and Xxxx Xxxxxxxxxx in the form attached hereto as EXHIBIT
7.1(e) to be effective from and after the Closing Date;
(f) NAME CHANGE. Evidence that Seller has ceased, or within ten
(10) days after the Closing will cease, all uses of the name "New Horizons,"
"New Horizons Computer Learning Center" and all variations thereof; and
(g) OTHER DELIVERIES. Such other instruments and documents as may
be reasonably requested in order to give effect to the transactions contemplated
by this Agreement.
7.2 BUYER'S CLOSING DELIVERIES. Buyer shall deliver the following items
in connection with the Closing, each of which shall be in form and substance
acceptable to Seller, Shareholder and their counsel.
(a) EMPLOYMENT AGREEMENTS. Employment agreements between Buyer and
each of Shareholder and Xxxx Xxxxxxxxxx, to be effective from and after the
Closing Date;
(b) CONSENTS. The consent to the transactions contemplated by this
Agreement of any third party whose consent is required for the consummation of
such transactions by Buyer or New Horizons;
(c) BOARD APPROVAL. Certified copies of the resolutions of Buyer's
Board of Directors approving the consummation of the transactions contemplated
by this Agreement;
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(d) CLOSING PAYMENT. The Closing Payment provided for in
Section 3.1; and
(e) ASSUMPTION AGREEMENT. An agreement assuming Seller's
obligations for the Assumed Liabilities.
8. RESTRICTIVE COVENANTS.
8.1 CONFIDENTIALITY. Without the prior written consent of Buyer,
Seller and the Shareholder shall at all times hold in strictest confidence the
terms of this Agreement and any and all non-public information concerning the
Business, Buyer or any of Buyer's affiliated companies.
8.2 NON-COMPETITION. Seller and the Shareholder shall not, for a
period of five (5) years following the Closing, without the prior written
consent of Buyer, engage or invest, directly or indirectly, in any form of
business activity or organization that is substantially similar to the Business
in any area where Buyer, any affiliate of Buyer, including NHCLC, or any
franchisee of Buyer or any affiliate of Buyer conducts such business. Buyer
hereby acknowledges Shareholder's investment in and relationship with the
Orlando franchisee and consents thereto, provided that such does not interfere
with any employment obligations Shareholder may have to Buyer or any affiliate
of Buyer and that any transactions between Buyer and the Orlando franchisee
while Shareholder is serving as an employee of Buyer or any affiliate of Buyer
shall at all times be conducted on commercially reasonable terms consistent with
those offered to or available from other unaffiliated parties.
8.3 NON-INTERFERENCE. Seller and the Shareholder shall not, for a
period of five (5) years following the Closing, without the prior written
consent of Buyer, directly or indirectly induce or attempt to induce any
employee, agent, consultant, representative, supplier, or customer of Buyer or
any of its affiliated companies to terminate its relationship with Buyer or such
affiliate or otherwise interfere with a relationship between Buyer or such an
affiliate and any of their employees, agents, consultants, representatives,
suppliers, or customers.
8.4 ADEQUATE CONSIDERATION. Seller and the Shareholder acknowledge
and agree that the obligations of Buyer hereunder constitute adequate
consideration for their obligations under this Section 8. Buyer acknowledges and
agrees that in addition to any other remedy which Seller or the Shareholder may
have at law, Seller and the Shareholder shall be free of any restrictions
imposed by this Section 8 if Buyer wrongfully fails to make any payment due
under this Agreement.
8.5 REMEDIES. Seller and the Shareholder acknowledge that a breach
of any of the provisions of this Section 8 will result in irreparable damage to
Buyer for which there will be no adequate remedy at law, and agree that Buyer,
in addition to its rights at law, will be entitled to injunctive and other
equitable relief to enforce such provisions, without having to post any bond.
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8.6 REFORMATION. In the event any provision of this Section 8
shall be determined to be unenforceable or invalid, such provision shall be
enforceable in part to the fullest extent permitted by law, such invalidity or
unenforceability shall not otherwise affect any other provision of this
Agreement or any similar agreement, and this Agreement shall otherwise remain in
full force and effect.
9. POST-CLOSING AGREEMENTS/FURTHER ASSURANCES.
9.1 As of the Closing, Buyer may not have all required licenses,
permits and other governmental or vendor authorizations necessary for it to take
title to all of the Purchased Assets and to hereafter operate all aspects of the
Business. Seller agrees to cooperate with Buyer in timely obtaining such
licenses, permits and other governmental and vendor authorizations, and further
agrees that Buyer may operate the Business under the authority of any of
Seller's licenses, permits or other governmental authorizations of the type that
Buyer has not yet obtained, PROVIDED, that such operation does not violate
applicable laws or regulations, and that Buyer and New Horizons, jointly and
severally, indemnify and hold Seller harmless against any and all costs,
liability, loss, damage or deficiency resulting from Seller's good faith
performance of these obligations.
9.2 The parties hereto agree to execute and deliver to any other
party any and all documents and instruments, and do and perform such acts, in
addition to those expressly provided for herein, as may be necessary or
appropriate to carry out or evidence the transactions contemplated by this
Agreement, whether before, at or after the Closing. Notwithstanding anything
contained in this Agreement to the contrary, this Agreement will not constitute
an agreement to assign any contract or claim or any right or benefit arising
thereunder or resulting therefrom if an attempted assignment thereof, without
the consent of a third party thereto, would constitute a breach thereof or in
any way affect the rights of Buyer thereunder. Seller and the Shareholder shall
use their best efforts to obtain the consent of the other party to any of the
foregoing contracts or claims to the assignment thereof to Buyer in all cases
that such consent is required for assignment or transfer.
9.3 Buyer shall use all reasonable efforts to collect the accounts
receivable included in the Purchased Assets, but Buyer shall not be required to
take or threaten legal action to collect any of such receivables.
9.4 Seller shall, within fourteen (14) days after the Closing
Date, provide such notices of continuation health coverage as are required to be
provided to any of Seller's employees, former employees, or the beneficiaries or
dependents of such employees or former employees, under Part 6 of Subtitle B of
Title I of ERISA or Section 4980B(f) of the Code.
9.5 During the period commencing on the Closing Date and ending
upon payment of the last Earn Out Payment contemplated by Section 3.3, Buyer
covenants and agrees as follows:
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(a) Buyer and New Horizons shall cause separate and distinct
books and records for the Business to be maintained;
(b) Buyer and New Horizons shall deliver to the Shareholder
within thirty (30) days of the close of each fiscal quarter of Buyer (other than
that coinciding with the end of its fiscal year, in which event such statements
shall be provided after the completion of New Horizons' year-end audit) copies
of the balance sheet of the Business as of that date and of the statements of
income for the fiscal quarter and year-to-date then ended prepared in accordance
with the provisions of Section 3.2 hereof; and
(c) All transactions between or among Buyer and any of Buyer's
affiliates shall be on terms and conditions no less favorable to Buyer than
those available through comparable transactions with third parties.
9.6 Seller and the Shareholder agree that, except for a transfer
of the New Horizons Stock by Seller to the Shareholder, as contemplated in
Section 4.19 of this Agreement, they will not sell, transfer, pledge otherwise
dispose of any of the New Horizons Stock prior to the expiration of the twelve
(12) month period following the Closing.
10. INDEMNIFICATION.
10.1 Seller and the Shareholder jointly and severally agree to
indemnify and hold Buyer and New Horizons harmless from and against (i) any and
all loss, damage, liability or deficiency resulting from or arising out of any
inaccuracy in or breach of any representation, warranty, covenant, or obligation
made or incurred by Seller or the Shareholder herein, (ii) any imposition
(including, without limitation, by operation of bulk transfer or other law) or
attempted imposition by a third party upon Buyer of any liability or obligation
of Seller which is not an Assumed Liability, and (iii) any and all costs and
expenses (including reasonable attorneys' and accountants' fees) related to any
of the foregoing.
10.2 Buyer and New Horizons jointly and severally agree to
indemnify and hold Seller and the Shareholder harmless from and against (i) any
and all loss, damage, liability or deficiency resulting from or arising out of
any inaccuracy in or breach of any representation, warranty, covenant, or
obligation made or incurred by Buyer or New Horizons herein, (ii) any imposition
or attempted imposition by a third party upon Seller or Shareholder of any
Assumed Liability, and (iii) any and all costs and expenses (including
reasonable attorneys' and accountants' fees) related to any of the foregoing.
10.3 If any legal proceedings shall be instituted or any claim is
asserted by any third party in respect of which any party hereto may be entitled
to indemnity hereunder, the party asserting such right to indemnity shall give
the party from whom indemnity is sought written notice thereof. A delay in
giving notice shall only relieve the recipient of liability to the extent the
recipient suffers actual prejudice because of the delay. The party from whom
indemnity is sought shall have the right, at its option and expense, to
participate in the defense of such a proceeding or claim, but not to control the
defense, negotiation or settlement thereof, which control shall at all
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times rest with the party asserting such right to indemnity, unless the
proceeding or claim involves only money damages and the party from whom
indemnity is sought:
(a) irrevocably acknowledges in writing complete
responsibility for and agrees to indemnify the party
asserting such right to indemnity, and
(b) furnishes satisfactory evidence of the financial
ability to indemnify the party asserting such right
to indemnity,
in which case the party from whom indemnity is sought may assume such control
through counsel of its choice and at its expense, but the party asserting such
right to indemnity shall continue to have the right to be represented, at its
own expense, by counsel of its choice in connection with the defense of such a
proceeding or claim. If the party from whom indemnity is sought does not assume
control of the defense of such a proceeding or claim, the entire defense of the
proceeding or claim by the party asserting such right to indemnity, any
settlement made by the party asserting such right to indemnity, and any judgment
entered in the proceeding or claim shall be deemed to have been consented to by,
and shall be binding on, the party from whom indemnity is sought as fully as
though it alone had assumed the defense thereof and a judgment had been entered
in the proceeding or claim in the amount of such settlement or judgment, except
that the right of the party from whom indemnity is sought to contest the right
of the other to indemnification under this Agreement with respect to the
proceeding or claim shall not be extinguished. If the party from whom indemnity
is sought does assume control of the defense of such a proceeding or claim, it
will not, without the prior written consent of the party asserting such right to
indemnity, settle the proceeding or claim or consent to entry of any judgment
relating thereto which does not include as an unconditional term thereof the
giving by the claimant to the party asserting such right to indemnity a release
from all liability in respect of the proceeding or claim. The parties hereto
agree to cooperate fully with each other in connection with the defense,
negotiation or settlement of any such proceeding or claim.
10.4 The foregoing indemnification provisions are in addition
to, and not in derogation of, any statutory, equitable, or common law remedy
available to any party.
10.5 Notwithstanding the provisions of Section 10.1 hereof,
any claim or claims for indemnity against the Seller or the Shareholder
resulting from or arising out of any inaccuracy in or breach of any
representation or warranty given by Seller or the Shareholder hereunder (other
than those arising solely as a result of the inaccuracy in any representations
and warranties provided for in Sections 4.6 or 4.12 shall not be actionable
until the aggregate loss incurred by Buyer or New Horizons shall with respect to
all such claims exceeds Twenty-Five Thousand Dollars ($25,000.00).
11. REGISTRATION RIGHTS.
11.1 REGISTRATION RIGHTS. Subject to the limitations set forth
in Section 11.2 hereof, in the event that (i) New Horizons files or causes to be
filed a registration statement ("Registration Statement") under the Securities
Act in connection with the proposed offer and sale for cash by it, or by 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
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the Securities Act or any successor or similar form, and (ii) the sale of the
New Horizons Stock issued to the Seller and/or the Shareholder remains
restricted pursuant to Rule 144 of the Securities Act or by the terms of this
Agreement, New Horizons will give written notice of its or their intention to
effect the Registration to Seller and/or the Shareholder. Upon written request
from any one or more of the Seller and/or the Shareholder to New Horizons within
15 days after the mailing of any such notice from New Horizons regarding the
Registration, New Horizons shall use its best efforts to cause the shares of New
Horizons Stock as to which such registration has been requested to be included
in the Registration. For purposes of this Agreement, and subject to New
Horizon's rights under Subsection 11.2 hereof, New Horizons shall be deemed to
have used its best efforts to satisfy its obligations under this Section 11 if
it: (i) prepares and files with the Securities and Exchange Commission a
Registration Statement with respect to the New Horizons Stock for which
registration has been properly requested and to use its best efforts to cause
such Registration Statement to become and remain effective for such period as
may be necessary to permit the Seller and/or the Shareholder to dispose of the
shares of New Horizons Stock covered thereby; provided however, that New
Horizons not need file any such Registration Statement (or cause same to become
or remain effective) after the date that such shares of New Horizons Stock are
freely tradable without restriction under the Act by the Seller and/or the
Shareholder pursuant to Rule 144(k) promulgated thereunder and under the terms
of this Agreement (the "Registration Expiration Date") (ii) prepares and files
with the Securities and Exchange Commission such amendments and supplements to
the Registration Statement and the prospectus used in connection with the
Registration Statement as may be necessary to comply with the provisions of the
Act with respect to the disposition of all securities covered by the
Registration Statement, (iii) furnishes to the Seller and/or the Shareholder
such numbers of copies of a prospectus in conformity with the requirements of
the Act, and such other documents as the Seller and/or the Shareholder may
reasonably request in order to facilitate the disposition of the New Horizons
Stock owned by the Seller and/or the Shareholder; and (iv) uses it best efforts
to register and qualify the securities covered by the Registration Statement
under such other securities or Blue Sky law of such jurisdictions as shall be
reasonably appropriate for the distribution of the securities covered by the
Registration Statement, provided that New Horizons shall not be required in
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions. Nothing contained herein shall be construed to confer any rights
upon the Seller and/or the Shareholder to make an underwritten offering of their
New Horizons Stock or to include their New Horizons Stock in any registration
statement that includes securities to be issued by New Horizons for its own
account that does not include shares of New Horizons Stock.
11.2 LIMITATIONS ON REGISTRATION RIGHTS. Notwithstanding, the
provisions of Subsection 11.1 of this Agreement: (i) the maximum number of
shares of New Horizons Stock that may be included in any Registration Statement
shall be determined by New Horizons, in its reasonable discretion; (ii) New
Horizons shall not be obligated to include the Seller and/or the Shareholder in
more than two Registrations pursuant to this Agreement; and (iii) New Horizons
may postpone for up to six months the filing or effectiveness of any
Registration Statement if (A) New Horizons determines, in its reasonable
discretion, that such registration would have an adverse effect upon any pending
or proposed transaction which is or may become material to New Horizons and its
subsidiaries and affiliates, taken as a whole, (B) in order to complete any
registration, distribution or lock-up period in connection with any
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underwritten offering of any of New Horizons' securities, or (C) if consistent
with New Horizon's business purposes, to delay the disclosure to the public of
any material event.
11.3 LOCK-UP AGREEMENTS. The Seller and the Shareholder agree
that, if New Horizons or the managing underwriter(s) of any underwritten
offering of New Horizons' securities so requests, the Seller and/or the
Shareholder will not, without the prior written consent of New Horizons or such
underwriter(s), effect any sale, transfer or other disposition of any of the
shares of New Horizons Stock, including sales pursuant to a Registration
Statement or under Rule 144, during the 10-day period prior to, and during the
180-day period commencing on, the effective date of such underwritten
registration (or during such shorter period or periods as such underwriter(s)
may in writing permit).
11.4 OBLIGATION TO FURNISH INFORMATION. It shall be a condition
precedent to the obligations of New Horizons to take any action pursuant to
Subsection 11.1 hereof that the Seller and/or the Shareholder shall furnish to
New Horizons such information regarding the Seller and/or the Shareholder, the
New Horizons Stock held by them, and the intended method of disposition of such
securities as New Horizons shall reasonably request and as shall be required in
connection with the actions to be taken by New Horizons.
11.5 EXPENSES OF REGISTRATION. All expenses incurred in connection
with the Registrations pursuant to Subsection 11.1 (excluding underwriters'
discounts and commission and brokerage or dealer commissions), including without
limitation all registration an qualification fees, costs of complying with
applicable blue sky and other securities laws, printers' and accounting fees,
and fees and disbursements of counsel for New Horizons shall be borne by New
Horizons; provided, however, that New Horizons shall not be required to pay for
any such expenses if the Seller and/or the Shareholder subsequently withdraw the
New Horizons Stock from said Registration.
11.6 DELAY OF REGISTRATION. The Seller and/or the Shareholder
shall not have any right to take any action to restrain, enjoin or otherwise
delay the Registration Statement as the result of any controversy that might
arise with respect to the interpretation or implementation of this Section 11.
11.7 INDEMNIFICATION. If any shares of New Horizons Stock owned by
the Seller and/or the Shareholder are included in a registration statement under
this Section 11:
11.7.1 INDEMNIFICATION OF SELLER OR THE SHAREHOLDER. To the
extent permitted by law, New Horizons will indemnify and hold harmless the
Seller and/or the Shareholder requesting or joining in the Registration
Statement against any losses, claims, damages or liabilities, joint or several,
to which they may become subject under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based on any untrue or alleged untrue statement of any material fact
contained in such Registration Statement, including any prospectus contained
therein or any amendments or supplements thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein, or necessary to make the statements therein not
misleading, or arise out of any violation by New Horizons of any rule or
regulation
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promulgated under the Act applicable to New Horizons and relating to action or
inaction required by New Horizons in connection with any such registration; and
will reimburse the Seller and/or the Shareholder for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
indemnity agreement contained in this Subsection 11.7.1 shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of New Horizons (which
consent shall not be unreasonably withheld) nor shall New Horizons be liable in
any such case for any such loss, claim, damage, liability or action to the
extent that it arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in connection with such
registration statement, any prospectus, or amendments or supplements thereto, in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by the Seller and/or the Shareholder.
It is expressly understood among the parties to this Agreement that in no event
shall New Horizons be obligated to agree to indemnify, in any respect, any
underwriter, broker, dealer or other entity or person effecting the sale,
purchasing or otherwise distributing any of the New Horizons Stock.
11.7.2 INDEMNIFICATION OF NEW HORIZONS. To the extent
permitted by law, the Seller and/or the Shareholder will indemnify and hold
harmless New Horizons, each of its directors, each of its officers who have
signed the Registration Statement, each person, if any, who controls New
Horizons within the meaning of the Act, and each agent for New Horizons (within
the meaning of the Act) against any losses, claims, damages or liabilities to
which New Horizons or any such directors, officer, controlling person or agent
may become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereto) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, including any prospectus contained
therein or any amendments or supplements thereto, or arise out of or are based
upon the omissions or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
in each case to the extent that such untrue statement or alleged untrue
statement or omission or alleged omission was made in the Registration
Statement, prospectus, or amendments or supplements thereof, in reliance upon
and in conformity with written information furnished by the Seller and/or the
Shareholder for use in connection with such registration; and the Seller and/or
the Shareholder will reimburse any legal or other expenses reasonably incurred
by New Horizons or any such director, officer, controlling person or agent in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the indemnity agreement contained
in this Subsection 11.7.2 shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Seller and/or the Shareholder (which consent shall
not be unreasonably withheld).
11.8 TRANSFER OF REGISTRATION RIGHTS. The registration rights of
the Seller and/or the Shareholder under this Section 11 may not be transferred
to any third party, except that such rights may be transferred to an estate,
trust, or heir, upon the death of the Shareholder.
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11.9 REPORTS UNDER EXCHANGE ACT. With a view to making available
to the Seller and/or the Shareholder the benefits of Rule 144 promulgated under
the Act and any other rule or regulation of the Securities and Exchange
Commission that may at any time permit the Seller and/or the Shareholder to sell
securities of New Horizons to the public without registration, New Horizons
agrees to use its best efforts to (i) make and keep public information
available, as those terms are understood and defined in Rule 144, (ii) file with
the Securities and Exchange Commission in a timely manner all reports and other
documents required of New Horizons under the Act and the Securities Exchange Act
of 1934, as amended (the "Exchange Act") and (iii) furnish to Seller and/or the
Shareholder, so long as Seller and/or the Shareholder owns any of the New
Horizons Stock, a written statement by New Horizons that it has complied with
the reporting requirements of Rule 144 and of the Act and the Exchange Act, a
copy of the most recent annual or quarterly report of New Horizons, and such
other reports and documents so filed by New Horizons as may be reasonably
requested in availing the Seller and/or the Shareholder of any rule or
regulation of the Securities and Exchange Commission permitting the selling of
any such securities without registration.
12. MISCELLANEOUS.
12.1 AMENDMENTS; BINDING EFFECT. The Agreement (including each
Schedule and Exhibit hereto) may not be amended or modified except by a document
in writing signed by all parties hereto. This Agreement and the rights and
obligations of each party hereunder shall be binding upon and shall inure to the
benefit of the respective successors and permitted assigns of each of the
parties hereto, but neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any party hereto without the prior
written consent of the other parties; provided, however, that Buyer may assign
this Agreement and its rights, interests and obligations hereunder to its parent
companies or to any of its majority-owned subsidiaries or affiliates without the
prior written consent of the other parties hereto.
12.2 NOTICES. All notices or other communications required or
permitted to be given hereunder shall be in writing and shall be deemed to be
effectively served and delivered (a) when delivered personally; (b) when given
by facsimile (with confirmation of receipt and a copy mailed by first-class U.S.
mail); (c) one (1) business day following deposit with a recognized national air
courier service; or (d) three (3) business days after being deposited in the
United States mail in a sealed envelope, postage prepaid, return receipt
requested to the appropriate party at the following address (or such other
address for a party as shall be specified by notice pursuant hereto):
If to Seller or the Shareholder, to: INNOVAK International Incorporated
000 Xxxxxxxxx Xxxxx
Xxxxxxxxxxx, Xxxxx Xxxxxxxx 00000
Facsimile: ____________________
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With a copy to: Xxxxxx X. Philips
Xxxxxx, Means, Xxxxx & Xxxxxx, P.A.
000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
If to Buyer or
New Horizons, to: New Horizons Computer Learning Center
of Charlotte, 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 North Carolina 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.
INNOVAK INTERNATIONAL INCORPORATED
By: /s/ Xxxxxx Xxxxxxxxx
-------------------------------------
Title: President
----------------------------------
Xxxxxx Xxxxxxxxx
NEW HORIZONS COMPUTER LEARNING CENTER OF
CHARLOTTE, INC.
By: /s/ Xxxxxx X. Xxxxxxx
-------------------------------------
Title: President
----------------------------------
NEW HORIZONS WORLDWIDE, INC.
By: /s/ Xxxxxx X. Xxxxxxx
-------------------------------------
Title: President
----------------------------------
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