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Exhibit 2.1
EXECUTION COPY
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ASSET PURCHASE AGREEMENT
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This Asset Purchase Agreement ("AGREEMENT") is entered into as
of the 2nd day of April, 2001 among APPLETREE TECHNOLOGIES INCORPORATED, a
Georgia corporation ("SELLER"), Seller's shareholders, ▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ (collectively, the "PRINCIPALS" and each a "PRINCIPAL"), New Horizons
Computer Learning Centers of Atlanta, 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 Atlanta, Georgia (the "ATLANTA BUSINESS") as a franchisee
of New Horizons Computer Learning Centers, Inc., a California corporation (f/k/a
New Horizons Franchising, Inc.) ("NHCLC").
B. In addition, Seller, as a franchisee of NHCLC, is engaged
in the business of providing computer training services to organizations and
individuals located in and around Tampa, Florida and Jacksonville, Florida
(collectively, the "FLORIDA BUSINESS") pursuant to the terms of conditions of
certain Franchise Agreements dated March 1, 1997 and May 31, 1996 (each as may
have been amended) (the "FLORIDA FRANCHISE AGREEMENTS").
C. The Principals own all of the issued and outstanding
capital stock of ▇▇▇▇▇-▇▇▇▇▇ Holdings, Ltd., a Georgia corporation ("PARENT")
and Seller is a wholly owned subsidiary of Parent.
D. The parties desire that (i) Seller sell to Buyer and that
Buyer purchase from Seller substantially all of Seller's assets related to the
Atlanta Business and (ii) Seller's Franchise Agreement dated February 27, 1993
(as the same has been amended and modified) with NHCLC for the Atlanta, Georgia
area (the "ATLANTA 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 other
than Permitted Encumbrances (as defined herein), 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 Atlanta 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,
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books and records, software and software licenses, permits and other
governmental authorizations pertaining to the Atlanta 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."
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 Atlanta Business and the Florida
Business, and those records, originals of which Seller is required to maintain
under applicable laws, (c) any assets of Seller used in the operation of the
Florida Business or relating to the negotiation and consummation of the
transactions contemplated by this Agreement, (d) those contracts of Seller that
are NOT set forth on Schedule 2.1, (e) all records, intangible rights, prepaid
items and contracts rights relating to any Retained Asset or to any Retained
Liability, (f) all accounts and notes receivable of the Florida Business or any
other corporation or business in which the Principals have an interest, (g) the
items listed on SCHEDULE 1.2, and (h) any assets of Seller not used by the
Atlanta Business, including, without limitation, any assets of the Florida
Business or any real property owned by Seller (collectively, the "RETAINED
ASSETS").
2. LIABILITIES OF SELLER.
2.1 ASSUMED LIABILITIES. On the Closing Date, notwithstanding
anything to the contrary contained in this Agreement or in any exhibit or any
disclosure schedule hereto, Buyer agrees to assume, and thereafter, discharge
(after the Closing) the following liabilities and obligations of the Atlanta
Business existing as of the Closing (the "ASSUMED LIABILITIES"): (a) current
liabilities of the Atlanta Business 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 solely to the extent reflected or reserved on the Closing Balance
Sheet (as defined in Section 3.2 below), (b) long-term liabilities of the
Atlanta Business 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 the Atlanta Business 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) future
obligation of the Atlanta Business 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").
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3. CONSIDERATION. The 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) Fifteen Million Eight Hundred Thousand ($15,800,000)
Dollars payable by wire transfer of immediately available funds to an account
designated by Seller in writing;
(b) 113,984 Shares of Common Stock, $.01 par value, of New
Horizons having an aggregate Fair Market Value (as defined below) equal to One
Million Eight Hundred Thousand ($1,800,000) Dollars (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 March 28, 2001; and
(c) Four Hundred Thousand ($400,000) Dollars (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, the Principals shall cause
Seller to prepare a balance sheet of the Atlanta Business 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;
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(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 Atlanta Business
as of December 31, 2000 and an income statement for the year 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 unreviewed and unaudited balance
sheet of the Atlanta Business as of December 31, 2000 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. The Closing Balance Sheet need not include inventories
based on a physical count nor footnotes customarily required in connection with
an audit. Based on the Closing Balance Sheet, Seller will also prepare a written
calculation of the amount by which the Net Worth (as defined below) of the
Atlanta Business as at the Closing Date is greater or less than negative One
Hundred Ten Thousand, Five Hundred Sixty Four Dollars (-$110,564) ("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 ( which objection shall be reasonably specific with respect to
the items or amounts Buyer asserts are incorrect) 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) NO REFUND OR PAYMENT. If there is no Net Worth Adjustment,
Buyer shall refund the Holdback Amount in its entirety (along with any interest
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accrued therein) to Seller by wire transfer of immediately available funds to an
account designated by Seller.
(ii) 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 (together
with the Holdback Amount) to Seller by wire transfer of immediately available
funds to an account designated by Seller.
(iii) 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 and, if necessary (to the extent
the Holdback Amount is insufficient), 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) by wire transfer of immediately
available funds to an account designated by Buyer.
(iv) 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 (a) with respect to the 12 month period
commencing on April 1, 2001 and ending on March 31, 2002, 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 12 month period commencing on
April 1, 2002 and ending on March 31, 2003, 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"). The period of time during which any Earn-Out Payment may
be earned shall be extended by an amount of time equal to any period(s) of time
during which, due to force ▇▇▇▇▇▇, the Atlanta Business cannot be operated at
substantially the same level of operation prior to the Closing. For purposes of
this Section 3.3, the term "force ▇▇▇▇▇▇" shall mean any Act of God or other
independent event beyond the control of the Atlanta Business which cannot be
cured by the exercise of due care or the payment of money. Buyer will prepare
the foregoing EBIT calculations and deliver the same to Seller within forty-five
(45) days after the end of the twelve month period for which they are required,
together with a written certification that such calculations have been prepared
and calculated in accordance herewith. Thereafter, Seller will conduct a review
of these items and notify Buyer not later than thirty (30) days after receipt of
such calculations as to whether they are acceptable to Seller. If Seller objects
to such calculations and Buyer and Seller are able to resolve their dispute
within fifteen (15) days after Seller's objection, such calculations (reflecting
the resolution) will become final and binding on the parties. If Buyer and
Seller are unable to resolve their dispute within fifteen (15) days after
Seller's objection, the dispute will be resolved by the Independent Accountants.
The Independent Accountants will be instructed to perform their services as
expeditiously as possible and the resolution of the Independent Accountants
shall be final and binding on the parties. The fees and expenses of the
Independent Accountants for the resolution of the dispute
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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, such amount shall be paid
(a) by wire transfer of 90% 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 10% 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 Three Million Dollars ($3,000,000).
"BUYER'S EBIT" shall be the amount determined from Buyer's
financial statements for the Atlanta 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 Atlanta
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 New Horizons may charge Buyer appropriately for certain
expenses relating to the operation of the Atlanta Business, including: (i) audit
and tax preparation fees incurred by New Horizons resulting from work performed
by New Horizons' certified public accountants and allocable to the Atlanta
Business, (ii) New Horizons' obligation to make matching contributions made or
benefits provided by New Horizons or any of its affiliates to or on behalf of
employees of Buyer under any benefit plan in which they participate with respect
to the Atlanta Business, (iii) services which replace those functions
historically provided by persons directly employed by Buyer, (iv) services which
are directly necessary to the continued growth and success of Buyer as mutually
determined by New Horizons and Seller, or (v) for services required to be
provided by New Horizons on behalf of Buyer due to Buyer's obligations under the
Cost Sharing and Services Agreement (the "COST SHARING AGREEMENT") between
Seller, Buyer and Principals dated the date hereof (if and only if New Horizons,
on behalf of Buyer, provides the services contemplated by the Cost Sharing
Agreement to the Florida Business).
"NET WORTH" means the assets of the Atlanta Business
(excluding unamortized organization costs or franchise fees) less total
liabilities of the Atlanta Business, determined in accordance with GAAP, but
excluding the Retained Assets and Retained Liabilities.
3.4 ALLOCATION OF CONSIDERATION. The allocation of
the Consideration among the Purchased Assets shall be made in accordance with
the principles set forth on SCHEDULE
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3.4. Buyer and Seller agree to be bound by such allocation and report the
transactions contemplated by this Agreement (for federal income and other tax
purposes) in accordance with SCHEDULE 3.4.
4. REPRESENTATIONS AND WARRANTIES OF SELLER AND THE
PRINCIPALS. Seller and the Principals 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 Georgia, 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
Atlanta Business as and where such assets and properties are now owned or leased
and as such business is presently being conducted. Seller and the Principals
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 Principal and
constitutes the legal, valid and binding obligation of Seller and each
Principal, enforceable against Seller and each Principal 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 Principals 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 Principal 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 Principal, (ii) any agreement or
instrument to which Seller or any Principal 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. SCHEDULE 4.3 consists of
(i) audited financial statements of Seller as of and for the fiscal year ended
December 31, 2000 (the "AUDITED FINANCIALS"), (ii) unaudited and unreviewed
financial statements of the Atlanta Business as of and for the fiscal year ended
December 31, 2000 (which financial statements were derived from the Audited
Financial Statements) (the "12/31/00 ATLANTA BUSINESS FINANCIAL STATEMENTS"),
(iii) audited financial statements of Seller as of and for the fiscal year ended
December 31, 1999, and (iv) a balance sheet of the Atlanta Business as of
February 28, 2001 (the "ATLANTA BUSINESS BALANCE SHEET"). The foregoing are
collectively referred to as the "FINANCIAL STATEMENTS." The Financial Statements
have been prepared in accordance with GAAP and present fairly the financial
condition of Seller and the Atlanta Business, respectively, as of the dates
indicated and the results of operations for the periods then ended.
4.4 NO LIABILITIES. The Atlanta Business 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
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practice, since the date of the Adjusted Balance Sheet, (iii) for performance
obligations under the Assumed Contracts from and after the Closing Date, or (iv)
as set forth on SCHEDULE 4.4.
4.5 NO CHANGES. Since January 1, 2001, Seller has
operated the Atlanta Business 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 Atlanta 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 Atlanta 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, replacement 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 or any change
in accounting procedures or
practices (except as required by
Buyer);
(d) any increase in salaries, bonuses
or benefits paid or payable to
employees; or
(e) any damage, destruction or loss to
or of assets in excess of $10,000.
4.6 TITLE TO PURCHASED ASSETS. Other than Permitted
Encumbrances, 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. For
purposes of this Agreement, the term "Permitted Encumbrances" means (i) liens
for ad valorem personal property taxes not yet due and payable, (ii) any
requirements that Seller obtain third party consents or approvals in connection
with Buyer's purchase of the Purchased Assets, which requirement Buyer has
waived in writing, and (iii) those matters set forth on SCHEDULE 4.6.
4.7 OWNERSHIP OF SELLER. The Principals own
beneficially and of record, free and clear of all liens and encumbrances, all of
the issued and outstanding capital stock of Parent and Parent owns 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 Atlanta Business in the ordinary course as presently conducted
and are located, or are in storage, at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
and ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇.
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4.9 COMPLIANCE WITH LAWS. Except as set forth on
SCHEDULE 4.9, Seller has conducted the Atlanta 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. Seller has all permits, registrations and licenses necessary to
conduct the Atlanta Business, and all of Seller's employees utilized in
connection with the Atlanta 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, 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 the Atlanta Business. There are no
pending or, to the knowledge of Seller, threatened controversies, grievances or
claims by any employee or former employee of the Atlanta Business 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 the Atlanta 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, Atlanta Business, income,
expenses, net worth and franchises of Seller have been timely filed by either
Seller or the Principals. Except as set forth on SCHEDULE 4.12, all taxes due in
connection with the properties, Atlanta Business, income, expenses, net worth
and franchises of Seller ("TAXES") have been paid by either Seller or the
Principals, 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, Atlanta
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, 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 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
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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 Atlanta Business accounting for more than Two Hundred Fifty Thousand
($250,000) Dollars 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. Schedule 4.15 contains a complete and accurate list of
all agreements or contracts (i) to which Seller is a party and relates to the
Atlanta Business, or (ii) which relates or pertains to the Atlanta Business, in
each case, which falls into one or more of the following categories:
(i) contracts or group of related contracts with the same
party providing for the purchase of goods or services and under which the
undelivered balance of such goods or services has a purchase price in excess of
$250,000;
(ii) contracts or group of related contracts with the same
party providing for the sale of goods or services and under which the
undelivered balance of such goods or services has a sale price in excess of
$250,000;
(iii) contracts relating to the borrowing of money, to the
granting of a lien on any of Seller's assets, or any guaranty of any obligation
of another person in respect of borrowed money or otherwise;
(iv) contracts with sales representatives;
(v) contracts for the employment or engagement of any
employee, officer, consultant or management advisor, including any contract with
any labor union;
(vi) contracts limiting the freedom of Seller to engage in any
business anywhere in the world, or which require Seller to maintain the
confidentiality of information;
(vii) contracts pursuant to which Seller is a lessor or a
lessee of real property;
(viii) contracts pursuant to which Seller is a lessor or a
lessee of, or holds or operates any tangible personal property owned by another
person, for which the aggregate annual rent or lease charges exceed $100,000;
(ix) contracts pursuant to which Seller is a licensor or
licensee of any intellectual properties (including "off the shelf" software);
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(xi) contracts or commitments for the purchase, sale or lease
of capital assets in excess of $100,000 individually;
(xi) contracts for the past, present or future acquisition or
disposition by Seller of all or substantially all of the capital stock, other
equity interests, or assets of any person, or of assets constituting a product
line or business unit of any person;
(xii) contracts not otherwise described above in this Section
4.15 with any Principals, or any officer, director, employee or consultant of
Seller, or any affiliate of any such person;
(xiii) contracts not entered into in the ordinary course of
Atlanta Business with past practice; and
(xiv) all commitments by or on behalf of the Company to enter
into any contract described in the foregoing paragraphs (i) through (xiii).
Seller has made available to Buyer correct and complete copies of each written
contract identified on SCHEDULE 4.15 and an accurate and complete written
description of each oral contract thereon, in each case including amendments
thereto. Seller has performed all obligations required to be performed by it in
connection with all contracts required to be disclosed on SCHEDULE 4.15, and, to
the knowledge of Seller, there is no existing or threatened default under or
violation of any of such contracts by any other party thereto.
4.16 CONFLICTS. Except as set forth on SCHEDULE 4.16, neither the
Principals, nor any other person or entity controlled by or under common control
with Seller or the Principals, 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 ATLANTA BUSINESS PRACTICES. Except as set
forth on SCHEDULE 4.17, Seller and the Principals 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 Atlanta Business, or (iii)
if not continued in the future, might adversely affect the Purchased Assets, the
Atlanta Business or the prospects of the Atlanta 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 Principals in bringing about the
transactions contemplated herein, rendered any services with respect hereto, or
been in any way involved herewith. Seller and the Principals are fully
responsible for any fees and/or expenses due any such party.
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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 Principals, 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
Principals 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 Principals 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 Principals acknowledge that they have received and have reviewed
the following documents (collectively, the "NEW HORIZONS' DISCLOSURE
DOCUMENTS"): (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.
Seller and the Principals 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, subject to
Section 9.6, 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 Atlanta 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 Principals alleging that
the Software infringes upon the rights of any third party.
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4.21 ACCOUNTS RECEIVABLE. Except for the reserve for
subsequent credit memos 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 NO MISREPRESENTATIONS. No representation or warranty made
by Seller or the Principals in this Agreement, the Schedules or Exhibits hereto,
or any certificate or document delivered to Buyer contains any untrue statement
of a material fact or omits to state a fact necessary to make the statements and
facts contained therein or herein, in light of the circumstances under which
they are made, not false or misleading. Copies of all documents delivered or
made available to Buyer by Seller were complete and accurate copies of such
documents.
4.23 KNOWLEDGE DEFINED. For purposes of this Section 4, "to
the knowledge of Seller" (or similar phrases) shall mean (i) the actual
knowledge of each Principal and any director, officer, general manager, sales
manager or controller 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
Principals as follows:
5.1 ORGANIZATION AND AUTHORITY. 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 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
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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
validly issued, fully paid and nonassessable.
5.5 LITIGATION. Except as otherwise disclosed in the New
Horizons' Disclosure Documents, there are no suits, claims, proceedings or
investigations pending, or to the knowledge of Buyer or New Horizons, threatened
by any court, arbitrator or governmental authority which seeks to restrain,
enjoin or otherwise prevent Buyer's ability to consummate the transaction
contemplated by the Agreement or materially impact any obligation of either
Buyer or New Horizons hereunder.
5.6 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 Principals set forth in Section 4 hereof will
survive the Closing, regardless of any investigation made by any party hereto,
until the second (2nd) anniversary of the Closing Date, except that the
representations and warranties contained in Sections 4.1 [Organization,
Authority and Capacity], 4.2 [No Consents or Conflicts], 4.6 [Title to Purchased
Assets], 4.12 [Taxes] and 4.13 [Employee Benefits] 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 [Organization and Authority] and 5.2 [No Consents or
Conflicts] will survive for the applicable statute of limitations.
7. CLOSING. The consummation of the transactions contemplated by this
Agreement (the "CLOSING") will take place simultaneously with the execution and
delivery of this Agreement by all of the parties hereto as of the date hereof
(the "CLOSING DATE"), at the offices of Seller, or at such other place as the
parties may agree in writing, and shall be effective as of the opening of
business on such date.
7.1 SELLER'S CLOSING DELIVERIES. Seller shall deliver the
following items in connection with the Closing, each of which shall be in form
and substance acceptable to Buyer and its counsel:
(a) CONSENTS. The consent to the transactions
contemplated by this Agreement of any third party whose consent is required for
the consummation of such transactions by Seller or any Principal;
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(b) BOARD AND PRINCIPAL APPROVAL. Certified copies of the
resolutions of Seller's Board of Directors and the Principals 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 AGREEMENT. A written cancellation of and waiver
of all claims by Seller under the Atlanta Franchise Agreement;
(e) EMPLOYMENT. Employment Agreements between Buyer, on the
one hand, and each Principal and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, on the other hand, in the
form attached hereto as EXHIBIT 7.1(E) to be effective from and after the
Closing Date (the "EMPLOYMENT AGREEMENTS");
(f) COST SHARING AGREEMENT. The Cost Sharing Agreement
executed by Seller and the Principals;
(g) LEASE. A Lease with Seller executed by Seller for its
facility located at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ (the "LEASE"); and
(h) 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, Principal and their counsel.
(a) EMPLOYMENT AGREEMENTS. Employment Agreements contemplated
by Section 7.1(e) between Buyer and each Principal, 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;
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(e) ASSUMPTION AGREEMENT. An agreement assuming Seller's
obligations for the Assumed Liabilities;
(f) LEASE. The Lease contemplated by Section 7.1(g) executed
by Buyer; and
(g) COST SHARING AGREEMENT. The Cost Sharing Agreement duly
executed by Buyer.
8. RESTRICTIVE COVENANTS.
8.1 CONFIDENTIALITY. Without the prior written consent of Buyer,
Seller and the Principals shall, at all times, hold in strictest confidence the
terms of this Agreement and any and all non-public information concerning the
Atlanta Business or any of their respective affiliates (collectively,
"CONFIDENTIAL INFORMATION"). Notwithstanding the foregoing, in the event that
Seller or the Principals are requested or required (by oral questions,
interrogatories, requests for information or documents, subpoena, civil
investigative demand or similar process)by any third party to disclose any
Confidential Information, it is agreed that Seller or the Principals, as the
case may be, will make all reasonable efforts to preclude disclosure of any
Confidential Information including seeking a protective order or other
appropriate remedy, and will provide Buyer with prompt notice of such request(s)
and the identity of such requesting party so that it may seek an appropriate
protective order or other remedy. In the event that such protective order or
other remedy is not obtained, Seller or the Principals may furnish that portion
(and only that portion) of the Confidential Information which Seller or the
Principals are legally compelled to disclose and will exercise its or his best
efforts to obtain reliable assurance that confidential treatment will be
accorded any Confidential Information so furnished. The foregoing restrictions
shall not apply in respect of a dispute between Buyer, on the one hand, and
Seller or the Principals, on the other hand, and such dispute pertains to this
Agreement, but only to the extent disclosure of any Confidential Information is
reasonably necessary.
8.2 NON-COMPETITION. Except with respect to the activities permitted
pursuant to Florida Franchise Agreements, Seller and each Principal shall not,
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,
directly or indirectly, in any form of business activity or organization that is
substantially similar to the Atlanta 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 (other than the areas contemplated by the
Florida Franchise Agreements).
8.3 NON-INTERFERENCE. Seller and each Principal 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 the
Atlanta Business, Buyer or any of its affiliated companies to terminate its
relationship with the Atlanta Business, 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.
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8.4 ADEQUATE CONSIDERATION. Seller and each Principal 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 Principal may
have at law, Seller and such Principal 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 Principal acknowledge that a breach of
any of the provisions of this Section 8 will result in irreparable damage to
Buyer for which there will be no adequate remedy at law, and agree that Buyer,
in addition to its rights at law, will be entitled to injunctive and other
equitable relief to enforce such provisions, without having to post any bond.
8.6 REFORMATION. In the event any provision of this Section 8 shall
be determined to be unenforceable or invalid, such provision shall be
enforceable in part to the fullest extent permitted by law, such invalidity or
unenforceability shall not otherwise affect any other provision of this
Agreement or any similar agreement, and this Agreement shall otherwise remain in
full force and effect.
8.7 TERMINATION OF RESTRICTIONS. In the event that Buyer or New
Horizons should fail and refuse to make any Earn Out Payments earned and
required to be paid as set forth in Section 3.3 hereof, then Seller and the
Principals shall be relieved of their obligations with respect to their
undertakings set forth in Section 8.2 or 8.3 hereof. The Principals and Seller
acknowledge and agree that any dispute with respect to the Earn-Out Payments,
which dispute is being resolved in accordance with Section 3.3, shall not
constitute or a failure or refusal to pay as contemplated by the preceding
sentence.
9. POST-CLOSING AGREEMENTS/FURTHER ASSURANCES.
9.1 As of the Closing, Buyer may not have all required lien
terminations, 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 Atlanta Business. Seller and the Principals agree to
cooperate with Buyer in timely obtaining such lien terminations, licenses,
permits and other governmental and vendor authorizations, and further agrees
that Buyer may operate the Atlanta 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. Seller and Principals shall indemnify and hold
Buyer harmless against any and all loss, damage or liability resulting from the
failure of Seller and the Principals to deliver to Buyer any and all lien
terminations, releases or consents (including, without limitation, releases,
consents or termination statements from any of American Education Fund, L.P.,
First Sierra Financial, Inc., Toshiba American Information Systems, Equipment
Leasing Co., First Union National Bank, Arlington Capital and Leasetech Corp. or
Minolta Business Systems, so that Buyer has clear title to the Purchased Assets.
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9.2 The parties hereto agree to execute and deliver to any other party
any and all documents and instruments, and do and perform such acts, in addition
to those expressly provided for herein, as may be necessary or appropriate to
carry out or evidence the transactions contemplated by this Agreement, whether
before, at or after the Closing. Notwithstanding anything contained in this
Agreement to the contrary, this Agreement will not constitute an agreement to
assign any contract or claim or any right or benefit arising thereunder or
resulting therefrom if an attempted assignment thereof, without the consent of a
third party thereto, would constitute a breach thereof or in any way affect the
rights of Buyer thereunder. Seller and the Principals 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 Atlanta Business to be maintained;
(b) Buyer and New Horizons shall deliver to the Principals 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 Atlanta 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.
9.6 Seller and the Principals agree that, except for a transfer of the
New Horizons Stock by Seller to any Principal, as contemplated in Section 4.19
of this Agreement, they will not sell, transfer, pledge otherwise dispose of any
of the New Horizons Stock prior to the expiration of the twelve (12) month
period following the Closing.
9.7 New Horizons hereby guarantees the performance of Buyer's
obligations to pay Seller pursuant to Section 3.2 or Section 3.3.
9.8 Seller and the Principals agree that on or before August 1, 2001,
Buyer will be required to convert the accounting system of the Atlanta Business
to ACUITY.
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9.9 Although Buyer retains the right and authority to
discharge and determine the compensation of any employee of the Atlanta
Business, neither Buyer nor New Horizons shall, during the Earn-Out Period,
transfer or relocate to other operations of New Horizons, any individuals
employed by the Atlanta Business without the prior written consent of Seller.
9.10 During the Earn-Out Period, New Horizons will not permit
NHCLC to allow the opening of any franchised computer training center in the
State of Georgia, without the prior written consent of Seller, which consent
shall not be unreasonably withheld. For purposes of this Section 9.10, the
determination as to whether Seller has unreasonably withheld its consent will
primarily be based upon whether the opening of any franchised computer training
center in the State of Georgia will have a material adverse effect on Buyer's
EBIT during the Earn-Out Period.
10. INDEMNIFICATION.
10.1 Seller and the Principals 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 Principal 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 Principals 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 Principal 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 notice thereof. A
delay in giving notice shall only relieve the recipient of liability to the
extent the recipient suffers actual prejudice because of the delay. The party
from whom indemnity is sought shall have the right, at its option and expense,
to participate in the defense of such a proceeding or claim, but not to control
the defense, negotiation or settlement thereof, which control shall at all times
rest with the party asserting such right to indemnity, unless the proceeding or
claim involves only money damages and the party from whom indemnity is sought:
(a) irrevocably acknowledges in writing complete
responsibility for and agrees to indemnify the party
asserting such right to indemnity, and
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(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 Principals resulting
from or arising out of any inaccuracy in or breach of any representation or
warranty given by Seller or the Principals hereunder (other than those arising
solely as a result of the inaccuracy in any representations and warranties
provided for in Sections 4.1 [Organization, Authority and Capacity], 4.2 [No
Consents or Conflicts], 4.6 [Title to Purchased Assets], 4.12 [Taxes], 4.13
[Employee Benefits], 4.18 [Brokers and Finders], 4.20 [Software] and 4.21
[Accounts Receivable] shall not be actionable until the aggregate loss incurred
by Buyer or New Horizons shall with respect to all such claims exceeds
Forty-Five Thousand Dollars ($45,000) (the "BASKET").
10.6 Seller and Principals acknowledge that with respect to
any claim for indemnification under this Section 10 based upon a
misrepresentation contained in the Adjusted Income Statement likely to result in
a decrease in the ongoing future earnings (as distinguished from a one-time
charge) of Buyer (an "INDEMNIFIABLE EARNINGS LOSS"), the computation of the
damages resulting from such claim shall include, without limitation, an amount
equal to (x) the total amount of such Indemnifiable Earnings Loss during the
twelve-month period following the occurrence of the action, omission,
circumstance or other event which caused the Indemnifiable Earnings Loss (as
reasonably estimated by Buyer) MULTIPLIED BY (y) the "EARNINGS LOSS FACTOR." For
purposes of this Agreement, the Earnings Loss Factor shall be 6. Notwithstanding
the foregoing, Buyer and New Horizons shall not be permitted to apply the
Earnings Loss Factor unless and until the Basket has been exhausted.
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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 ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇. and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, 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 Principal 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 Principals. Upon written request
from any one or more of the Seller and/or the Principals 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 Principals 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
Principal 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 Principals 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 Principals may reasonably
request in order to facilitate the disposition of the New Horizons Stock owned
by the Seller and/or the Principals, 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 Principals 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 Principals in more than
two Registrations pursuant to this Agreement, and (iii) New Horizons may
postpone for up to six months the filing or effectiveness of any Registration
Statement if (A) New Horizons determines, in its reasonable discretion, that
such registration would have an adverse effect upon any pending or proposed
transaction which is or may become material to New Horizons and its subsidiaries
and affiliates, taken as a whole, (B) in order to complete any registration,
distribution or lock-up period in connection with any underwritten offering of
any of New Horizons' securities, or (C) if consistent with New Horizon's
business purposes, to delay the disclosure to the public of any material event.
11.3 LOCK-UP AGREEMENTS. The Seller and the Principal 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 Principals 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 Principals shall furnish to
New Horizons such information regarding the Seller and/or the Principals, 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 Principal subsequently withdraw the
New Horizons Stock from said Registration.
11.6 DELAY OF REGISTRATION. The Seller and/or the Principals 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 Principals are included in a registration statement under this
Section 11:
11.7.1 INDEMNIFICATION OF SELLER OR THE PRINCIPALS. To the
extent permitted by law, New Horizons will indemnify and hold harmless the
Seller and/or the
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Principals 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 Principals 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 Principal. 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 Principal 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
Principals for use in connection with such registration; and the Seller and/or
the Principals 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
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action if such settlement is effected without the consent of the Seller and/or
the Principals (which consent shall not be unreasonably withheld).
11.8 TRANSFER OF REGISTRATION RIGHTS. The registration rights
of the Seller and/or the Principals 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 Principal.
11.9 REPORTS UNDER EXCHANGE ACT. With a view to making
available to the Seller and/or the Principals 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 Principals
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
Principals, so long as Seller and/or the Principals 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 Principal 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. Notwithstanding the
foregoing, any assignment by Buyer of its rights hereunder shall not relieve
Buyer of its obligations hereunder.
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):
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If to Seller or the Principals, to: Appletree Technologies Incorporated
c/o ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: ____________________
Appletree Technologies Incorporated
c/o ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: ____________________
With a copy to: ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇, ▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to Buyer or
New Horizons, to: New Horizons Computer Learning Centers, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Chief Financial Officer
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇, Halter & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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 Georgia 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.
APPLETREE TECHNOLOGIES INCORPORATED
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: Senior Vice President & COO
"Seller"
--------
/s/ ▇▇▇▇▇ ▇▇▇▇
-----------------------------------
▇▇▇▇▇ ▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
"Principals"
------------
[Reminder of Signatures to Follow]
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NEW HORIZON COMPUTER LEARNING CENTERS
OF ATLANTA, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chief Executive Officer
"Buyer"
-----
NEW HORIZONS WORLDWIDE, INC.
By: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------
Title: Chief Executive Officer
-------------------------------
"New Horizons"
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