EXHIBIT 10.12
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement") is effective as of
December 13, 1999, by and among Dreamcatcher Franchise Corporation ("Buyer"), a
Minnesota corporation, Dreamcatcher Learning Centers, Inc. ("Seller"), a
Colorado corporation, and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ("Seller's
Shareholders").
RECITALS:
A. Seller owns the trademarks "Dreamcatcher Learning Centers" and
Dreamcatcher Direct Instruction Centers(SM). Seller also operates three
Dreamcatcher Learning Centers franchises at the following locations: (i) ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, (ii) ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇,
and (iii) ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (collectively, the "Business").
B. The parties mutually desire that Seller shall sell to Buyer, and
Buyer shall purchase from Seller, substantially all of Seller's assets upon the
terms and subject to the conditions set forth in this Agreement.
C. Contemporaneous with the consummation of the transaction
contemplated in this Agreement, Buyer is purchasing the assets of Dreamcatcher
Franchise Corporation ("DFC"), the Franchisor of Dreamcatcher Learning Centers.
AGREEMENT:
For good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree to the terms set forth
below.
1. PURCHASE OF ASSETS; LIMITED ASSUMPTION OF LIABILITIES
1.1. Purchase of Assets. Subject to the terms and conditions in this
Agreement, Seller agrees on the Closing Date (as defined in Section 7.1) to
assign, sell, transfer, convey, and deliver to Buyer, and Buyer agrees on the
Closing Date to purchase from Seller, substantially all of Seller's assets
(excepting only the assets specifically identified as "Excluded Assets" in
Section 1.2 below), wherever the same may be located (collectively referred to
as the "Purchased Assets"), including, without limitation, the following assets.
1.1.1. All furniture, equipment, inventory, supplies,
including those items described in Exhibit 1.1.1 hereto.
1.1.2. All trade fixtures and leasehold improvements.
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1.1.3. All records, whether tangible or intangible (e.g.,
stored electronically), including, business records and files, marketing
materials, customer and prospect lists, and records relating to pricing,
customers, and suppliers.
1.1.4. All intangible property, goodwill, claims of Seller
against third parties, know-how, technology, trade secrets, processes, design
rights, computer programs, software license rights, web pages, domain names,
rights to all telephone and facsimile numbers of Seller, Seller's corporate
name, assumed names, trademarks, servicemarks, copyrights, other intellectual
property rights, together with applications, goodwill and claims associated
therewith.
1.1.5. All licenses, permits, approvals, governmental or
otherwise, including the licenses and permits identified on Exhibit 1.1.5 hereto
(the "Licenses and Permits").
1.1.6. All contract rights, including those related to the
contracts identified on Exhibit 1.1.6 hereto ("Assumed Contracts").
Notwithstanding anything in this Agreement to the contrary, this Agreement shall
not constitute an assignment of any Assumed Contract if an attempted assignment
thereof, without the consent of a third party thereto, would constitute a breach
thereof or in any way adversely affect the rights of Seller or Buyer thereunder.
If a necessary consent to assignment of an Assumed Contract is not obtained, or
if any attempt at an assignment thereof would be ineffective or would affect the
rights of Seller or Buyer thereunder so that Buyer would not in fact receive all
such rights, Seller shall cooperate with Buyer to the extent necessary to
provide for Buyer the benefits under such Assumed Contract, including
enforcement for the benefit of Buyer of any and all rights of Seller against a
third party thereto arising out of the breach or cancellation by such third
party or otherwise.
1.1.7. Prepaid assets and deposits which Buyer will obtain the
benefit of after the Closing (the "Prepaid Assets and Deposits"), including
those identified on Exhibit 1.1.7 hereto.
1.1.8. All accounts receivable, notes receivable and other
rights to payments, including those identified in the aging on Exhibit 1.1.8
hereto (the "Receivables").
1.1.9. Cash and cash equivalents as of the Closing Date.
1.1.10. Any other tangible and intangible property used in the
Business of whatever type.
1.2. Excluded Assets. Seller does not sell, any of the following assets
("Excluded Assets").
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1.2.1. Property used by the Business under a lease arrangement
which is not listed on Exhibit 1.1.6 and any contracts identified on Exhibit
1.1.6 for which necessary consents to assignment by Seller to Buyer have not
been obtained as of the Closing Date and under which Buyer will not equitably
receive the benefits ("Excluded Contracts").
1.2.2. Corporate record book and tax returns provided tax
returns and related work papers shall be made available for review and copying
by Buyer.
1.2.3. Artwork personally owned by Seller's Shareholders which
is not included in Seller's Financial Statements.
1.3. Assumption of Liabilities. Except as set forth in subsections
1.3.1 and 1.3.2 below (the "Assumed Liabilities"), Buyer shall not assume any
liabilities, obligations or undertakings of Seller of any kind or nature
whatsoever, whether fixed or contingent, known or unknown, determined or
determinable, due or not yet due. Without limiting the generality of the
foregoing and except as otherwise provided for in this Agreement, Buyer
specifically disclaims assumption of: (a) any liabilities or obligations with
respect to taxes, negligence, strict liability, product liability, or breach of
warranty claims asserted with regard to Seller's operation prior to the Closing
Date; (b) any liabilities and obligations growing out of or relating to
relationships and dealings of Seller with competitors, customers, suppliers,
brokers, brokered printing, licensees, employees (including workers compensation
claims), or any other action or inaction of Seller or its predecessors in
interest; (c) any liability for sales or use taxes arising out of the sale of
any of the Purchased Assets under this Agreement.
1.3.1. Liabilities. On the Closing Date, Buyer assumes the
liabilities of Seller specifically listed on Exhibit 1.3.1 but only to those
creditors identified by name and only in the amount stated.
1.3.2. Assumed Contracts and Equitably Assumed Contracts. On
the Closing Date, Buyer assumes Seller's obligations under the Assumed Contracts
that relate to benefits Buyer receives after the Closing but not obligations or
liabilities that relate to benefits received prior to the Closing Date unless
such liability is specifically identified on Exhibit 1.3.1.
2. PURCHASE PRICE: PAYMENT; ALLOCATION
2.1. Purchase Price. The purchase price ("Purchase Price") for the
Purchased Assets and the performance by Seller and Seller's Shareholders of
their obligations under this Agreement shall be the sum of the following:
04.07.1 Buyer's assumption of Assumed Liabilities;
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2.1.2. A payment of Seventy-Five Thousand Dollars ($75,000)
when (or if) the number of Dreamcatcher Learning Centers franchises then
operating equals each of the following levels subject to a maximum cumulative
payment of Three Hundred Seventy-Five Thousand Dollars ($375,000) provided such
obligation ceases eight (8) years after the Closing Date.
Number of Stores Cumulative Payment
---------------- ------------------
25 $75,000
50 $150,000
100 $225,000
150 $300,000
200 $375,000
Stores must be producing revenue at the time to be counted
(e.g., stores that once produced revenue but have since closed
are not counted after the date of closure).
2.2. Allocation of Purchase Price. The Purchase Price is hereby
allocated among the Purchased Assets as set forth in Exhibit 2.2. The parties
agree to report this transaction for tax purposes in accordance with the
allocations set forth in Exhibit 2.2. Buyer and Seller shall file all tax
returns, including Internal Revenue Form 8594, in accordance with the allocation
set forth on Exhibit 2.2.
3. REPRESENTATIONS AND WARRANTIES OF SELLER AND SELLER'S SHAREHOLDERS
Seller and Seller's Shareholders, jointly and severally, make the
following representations and warranties to Buyer with the intention that Buyer
may rely upon the same and acknowledge that the same shall be true as of the
Closing Date (as if made at the Closing) and shall survive the Closing of this
transaction.
3.1. Organization. Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Colorado, has all
requisite corporate power and authority, corporate and otherwise, to own its
properties and assets and conduct the Business.
3.2. Authority. Seller has all requisite power and authority to
execute, perform and carry out the provisions of this Agreement. Seller has
taken all requisite corporate action authorizing and empowering Seller to enter
into this Agreement and to consummate the transactions contemplated in this
Agreement. Seller is qualified to do business and in good standing as a foreign
corporation in all states in which qualification is required by the nature of
its business.
3.3. Seller's Shareholders. The Seller's Shareholders own one hundred
percent (100%) of the issued and outstanding stock of Seller.
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3.4. Financial Statements.
3.4.1. Financial Statements. Seller has furnished Buyer a true
and complete copy of its (i) 1997 and 1998 tax returns, and (ii) balance sheets
and statements of income for its partial fiscal year ending October 31, 1999,
copies of which are attached hereto as Exhibit 3.4.1 (collectively the
"Financial Statements"). The Financial Statements fairly present and will fairly
present in all material respects the financial condition of Seller as of the
represented dates thereof and the results of Seller's operations for the periods
covered thereby. For purposes of this Agreement, the Financial Statements shall
be deemed to include any notes thereto.
3.4.2. Seller's Books and Records. Seller's books of account
and records (including customer files, employment records and tax records) are
complete, and accurate in all material respects.
3.4.3. No Adverse Changes. Since the date of the most recent
Financial Statements, there has not occurred or arisen (whether or not in the
ordinary course of business): (i) any material adverse change in the financial
condition, prospects, or operations of the Business, (ii) any change in Seller's
accounting methods or practices, (iii) any sale or transfer of any asset or any
amendment of any agreement of Seller except in the ordinary course of business,
(iv) any loss of or damage to the Purchased Assets due to abuse, misuse, fire or
other casualty, (v) any labor trouble, (vi) any reasonably foreseeable increase
in operating costs of the Business not commensurate with increased production,
(vii) any warranty or liability claims or losses, or (viii) any other event or
condition known or suspected by Seller or Seller's Shareholders to have occurred
or to exist which, singly or in the aggregate, materially and adversely affect
or may affect the Purchased Assets or the Business.
3.5. Tax Reports, Returns and Payment. Seller has timely filed all
federal and applicable state, local, and foreign tax or assessment reports and
returns of every kind required to be filed by them, including, without
limitation, income tax, sales and use tax, real estate tax, personal property
tax and unemployment tax. Seller has duly paid all taxes and other charges
(including interest and penalties) due to or claimed to be due by any taxing
authorities except for those specifically identified by type and amount as
Assumed Liabilities. True and correct copies of the reports and returns filed by
Seller during the last three (3) tax years have been made available to Buyer.
Where required, timely estimated payments or installment payments of tax
liabilities have been made to all governmental agencies in amounts sufficient to
avoid underpayment penalties or late payment penalties applicable thereto,
except amounts (including penalties, interest and late fees) as are specifically
identified by type and amount as Assumed Liabilities. During the three (3) years
preceding the Closing Date, Seller has not been subjected to or received any
notice that Seller will be subject to investigation, examination or audit by
governmental authorities. Seller is not subject to any current pending action or
investigation and no unexpired waiver of an applicable statute of limitations is
outstanding with respect to Seller.
3.6. Title to Assets. The Purchased Assets constitute all property used
in the conduct of the Business as now conducted. Seller is the owner of the
Purchased Assets. Seller holds title to the Purchased Assets free and clear of
all liens, charges, encumbrances or third party claims or
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interests of any kind whatsoever, except liens for Assumed Liabilities. All of
the Purchased Assets are located at the premises identified in Exhibit 3.11.
3.7. Personal Property. All tangible personal property included in the
Purchased Assets is in reasonable repair and operating condition. Seller hereby
assigns to Buyer as of the Closing Date any and all warranties covering such
property existing as of the Closing Date. All intangible personal property
included within the Purchased Assets is owned by Seller and does not infringe
the rights of any third parties.
3.8. Inventory. The inventory included in the Purchased Assets is in
good, merchantable and saleable in the ordinary course of business and is of a
quality, quantity and mix consistent with Seller's past business practices and
the demands of its customers. The supplies included in the Purchased Assets are
in good, usable condition.
3.9. Receivables. All of Seller's accounts receivable have arisen from
bona fide and actual sales of goods in the ordinary course of the Business. All
of the Receivables are collectible, and there are no defenses, offsets, or
counterclaims threatened or pending with respect to thereto.
3.10. Licenses and Permits. The Licenses and Permits constitute all of
the licenses, permits, and approvals, governmental or otherwise, necessary for
Seller to conduct the Business where it is currently conducted. All of the
Licenses and Permits are transferable to Buyer. The Licenses and Permits are
valid and in good standing and Seller has not received any notice that they will
lapse or be terminated by action of any governmental authority or otherwise.
3.11. Real Property. Exhibit 3.11 contains an accurate and complete
list of all real property owned, leased, subject to an option, purchase
agreement or otherwise used within the prior three (3) years or is currently
planned to be used in the Business (the "Real Property"). Except as may be
otherwise set forth in Exhibit 3.11, the Real Property is usable for its current
uses without violating any federal, state, local or other governmental building,
zoning, health, safety, platting, subdivision or other law, ordinance or
regulation, or any applicable private restriction, and such use is a legal
conforming use. Seller has not received any formal or informal notice of the
initiation or any condemnation or eminent domain proceeding with respect to the
Real Property, and has neither made nor received an offer of sale in lieu
thereof.
3.12. Agreements, Contracts and Commitments. Exhibit 1.1.6 contains an
accurate and complete list of all verbal and written agreements, contracts,
leases, commitments and warranties to which Seller is a party. Except as
specifically set forth therein, all such contracts, commitments or other
arrangements (i) are in ful1 force and effect and have not been amended, (ii)
are not subject to any default and no event is existing which, with notice or
lapse of time, or both, will constitute a default thereunder, and (iii) are not
subject to any default and the transaction as contemplated by this Agreement,
with notice or lapse of time, or both, will not constitute an default
thereunder.
3.13. Copies of Contracts; Terms and Binding Effect. True, complete and
correct copies of all written contracts, commitments, understandings, and other
documents referred to in the
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Exhibits have been delivered to Buyer or attached to the Exhibits where required
by this Agreement; there are no amendments to or modifications of, or agreements
of the parties relating to, any such contracts, commitments, and understandings
which have not been delivered to Buyer; and to the knowledge of Seller or
Seller's Shareholders, each such contract, commitment, or understanding, as
amended, is considered valid and binding on the parties to it in accordance with
its respective terms, and the transaction contemplated by this Agreement will
not result in the violation or breach of any such material contract, commitment,
or understanding.
3.14. Contracts with Related Parties. Except as specifically identified
on Exhibit 1.1.6, there are no agreements or contracts between Seller and any
of its employees, agents, officers, directors, shareholders, or entities which
any of them control.
3.15 Employee Plans.
3.15.1. Existence of Plans. Exhibit 3.15.1 is an accurate and
complete list of all Employee Plans of Seller. "Employee Plans" means any
pension, retirement, disability, medical, dental, or other health insurance
plan, life insurance or other death benefit plan, profit sharing, deferred
compensation, stock option, bonus or other incentive plan, vacation benefit
plan, severance plan, or other employee benefit plan or arrangements including,
without limitation, any "pension plan" as defined in Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and any
"welfare plan" as defined in Section 3(1) of ERDA, whether or not any of the
foregoing is funded, (i) to which Seller is a party or by which Seller is bound;
or (ii) with respect to which Seller has made any payments or contributions
since January 1, 1996, or may otherwise have any liability (including any such
plan or other arrangement formerly maintained by Seller or to which Seller
contributed or had an obligation to contribute).
3.15.2. Administration of Employee Plans. Each Employee Plan
in existence has been consistently administered in accordance with its terms and
provisions and as amended in accordance with the terms and provisions of ERISA
and the Internal Revenue Code of 1954, as amended (the "Code"), to the extent
applicable, and is in material compliance with the applicable provisions of
ERISA, the Code and state law; each of such Employee Plans that is intended to
be a "qualified" plan meets the applicable requirements for qualification under
Section 401(a), and exemption under Section 501(a), of the Code; each of such
Employee Plans has not at any time engaged in any "prohibited transaction"
within the meaning of Section 4975 of the Code or Section 406 of ERISA which is
nonexempt under the applicable provisions of ERISA or the Code or an
administrative exemption; no funding deficiency exists with respect to any of
such Employee Plans within the meaning of Section 412 of the Code or Part 3 of
ERISA; all proper and accurate federal and state returns, reports and other
filings with respect to each of such Employee Plans has been timely filed and
any amounts shown thereon to be due and payable has been paid in full; none of
such Employee Plans is a multi-employer plan with the meaning of Section 414(f)
of the Code and the regulations thereunder and Section 3(37)(D) of ERISA and the
regulations thereunder; each of such Employee Plans that is subject to the
continuation of coverage or conversion provisions of Sections 601-608 of ERISA
and the regulations thereunder, Section 4980B of the Code and the regulations
thereunder or the law of any state is in compliance therewith; and no fiduciary
of any such Employee Plan has committed a breach of fiduciary duty in violation
of ERISA.
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3.15.3. Absence of Certain Events Respecting Employee Plans.
Since January 1, 1998, Seller has not instituted or agreed to institute any new
Employee Plan, or made or agreed to make any change in any Employee Plan.
3.16. Union and Employment Contracts and Other Employment Matters.
3.16.1. Seller is not a party to any formal or informal
collective bargaining agreement or any other written employment agreement, nor
is Seller a party to any other contract or understanding (oral or written) that
contains any severance pay liabilities or obligations, except for accrued,
unused vacation pay or accrued and unused sick leave pay. All of Seller's
employee benefits are outlined in the employee handbook, a true and complete
copy of which has been provided to Buyer.
3.16.2. Seller has no, and on the Closing Date will not have,
any obligations to Seller's directors, officers, employees or agents other than
obligations arising in the ordinary course of business on account of wages,
salaries and commissions for prior services performed or business produced.
3.16.3. During the last three (3) years Seller has experienced
no work stoppages, walkouts or strikes or attempts by its employees to organize
a union.
3.16.4. There have been no employee or ex-employee lawsuits or
claims, or any claims of unfair labor practices or the like, in the past three
(3) years.
3.17. Employee Information.
3.17.1. Employee List. Exhibit 3.17.1 hereto is an accurate
and complete list of the names, positions, titles, salary rates and years of
service for all employees of Seller who provide services to the Business,
together with summary of the bonuses, additional compensation and other employee
benefits, if any, paid or payable to such persons as of the date of this
Agreement.
3.17.2. Terminated Employees. Exhibit 3.17.2 hereto is a true
and accurate list of all employees of Seller whose employment has terminated
either voluntarily or involuntarily in the twelve (12) month period preceding
the Closing Date. No claims have been made or to the knowledge of the Seller or
Seller's Shareholders threatened against Seller by any former or present
employee based on employment discrimination, wrongful discharge, or any other
circumstance relating to or arising from the employment relationship with
Seller.
3.17.3. Employee Expenses. Except as otherwise provided for in
this Agreement, all amounts due to the employees of Seller through the Closing
Date for commissions, salary, wages, fringe benefits (except as stated in
Section 1.3.1), pension benefits, including cash bonuses accrued through the
Closing Date and all employment taxes incurred thereon, will be promptly paid by
Seller after the Closing.
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3.17.4. Compliance with Employment Laws. Seller has materially
complied with all applicable federal and state laws relating to the employment
of labor, including the provisions thereof relating to wages, hours, collective
bargaining and the payment of withholding and social security taxes, and is not
liable for any arrears of wages, or any tax or penalties, for failure to comply
with any of the foregoing.
3.18. Significant Customers/Suppliers. Exhibit 3.18 identifies all
customers of Seller that individually account for over five percent (5%) of
Seller's revenues during the current and preceding fiscal year. Exhibit 3.18
also identifies all suppliers of Seller that individually account for over five
percent (5%) of Seller's material purchases during the current fiscal year and
the fiscal year ending prior to the date of this Agreement. Except as disclosed
in Exhibit 3.18, neither Seller nor Seller's Shareholders have any information
indicating that any significant customers or suppliers of Seller intends to
cease doing business with Seller or materially alter the amount of business they
do with Seller.
3.19. Insurance. Seller has maintained the insurance identified on
Exhibit 3.19 for the period stated on Exhibit 3.19 and will maintain such
insurance through the Closing Date. Insurance claims submitted within the three
(3) years prior to the Closing Date are identified on Exhibit 3.19 (including a
summary of workers compensation claims identifying the worker, nature of injury,
date of injury, and current status).
3.20. Litigation and Related Matters. Except as disclosed on Exhibit
3.20, there is no pending or, to Seller's or Seller's Shareholders' knowledge,
threatened litigation, proceeding, or investigation against Seller nor is Seller
subject to any existing judgment, order, decree, or other action affecting
Seller, the operation of the Business or the Purchased Assets, or which would
prevent, impede, or make illegal the consummation of the transactions
contemplated in this Agreement to the knowledge of Seller or Seller's
Shareholders. No basis exists for any warranty, nonconformity or product
liability claims with regard to products sold by the Business and no claims
therefor have been received within the prior one year period. No legal actions
have been commenced against Seller within the three years prior to the Closing
Date.
3.21. Compliance with Laws. Seller has materially complied, and is in
material compliance, with applicable laws, statutes, orders, rules, regulations
and requirements promulgated by governmental or other authorities relating to
Seller (including, without limitation, tax, employment, ERISA, licensing,
environmental, OSHA, and unlawful payments to domestic or foreign governmental
officials). Seller has not received any notification of any asserted past or
present violation in connection with the conduct of any of the Businesses of any
law, ordinance or regulation. Seller has not received any notice of an alleged
violation of law, statute, order, rule, regulation or requirement promulgated by
governmental or other authorities, and has not received any complaint, inquiry,
request for information from any governmental entity or any notification that it
is under investigation.
3.22. Breaches of Contracts; Required Consents. Neither the execution
and delivery of this Agreement by Seller nor compliance by Seller with the terms
and provisions of this Agreement will (a) conflict with or result in a breach
of (i) any of the terms, conditions or provisions of the Articles of
Incorporation, Bylaws or other governing instruments of Seller, (ii)
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any judgment, order, decree or ruling to which the Seller or Seller's
Shareholders are a party, (iii) any injunction of any court or governmental
authority to which either of them is subject, or (iv) any agreement, contract or
commitment which is material to the Business or to Seller's financial condition;
or (b) require the affirmative consent or approval of any third party except as
disclosed in Exhibit 1.1.6.
3.23. Intellectual Property. All right, title and interest in and to
all intellectual property that is necessary to or used in the Business as
presently conducted or proposed to be conducted or in the production of Seller's
products ("Seller's Intellectual Property") is owned by or licensed exclusively
to, without royalties, fees or commissions, Seller, free and clear of any liens
or encumbrances. Neither the Intellectual Property nor any of Seller's products
or services infringes, misuses, or conflicts with the rights of others. Seller's
Intellectual Property is valid and has not been challenged in any judicial or
administrative proceeding. Neither any of Seller's Shareholders nor any employee
or consultant of Seller (or the employer of any such consultant) has any rights
in or to any of the Seller's Intellectual Property. All of Seller's Intellectual
Property that is registered is listed on Exhibit 3.23 and has the status
indicated therein and all applications are still pending in good standing and
have not been abandoned. Seller has not failed to take any necessary steps or
appropriate actions to record its interests, or protect its rights, in Seller's
Intellectual Property. No person nor such person's business nor any of its
products has infringed, misused, misappropriated or conflicted with Seller's
Intellectual Property or currently is infringing, misusing, misappropriating or
conflicting with such rights.
3.24. Cash Locations. Exhibit 3.24 contains a complete list of all of
Seller's bank accounts, savings accounts, certificates of deposit, mutual funds
and other accounts, safe deposit boxes, together with identification of persons
authorized to withdraw or deal with the same.
3.25. Year 2000 Compliance. The Purchased Assets and Business are Year
2000 Compliant. "Year 2000 Compliant" means that means that functioning,
processing and performing in a correct and timely manner will be unaffected when
dealing with time/date data across multiple millennium and century boundaries.
3.26. Binding Obligation. This Agreement constitutes the legal, valid
and binding obligation of Seller and Seller's Shareholders in accordance with
the terms hereof. Neither Seller nor Seller's Shareholders is subject to any
charter, mortgage, lien, lease, agreement, contract, instrument, law, rule,
regulation, order, judgment or decree, or any other restriction of any kind or
character, which would prevent the consummation of the transactions contemplated
in this Agreement.
3.27. Completeness of Disclosures. None of the representations or
warranties made by Seller and Seller's Shareholders in this Agreement or the
Exhibits, and no written statement, certificate or Exhibit furnished or to be
furnished by or on behalf of Seller or Seller's Shareholders to Buyer or its
agents pursuant hereto, or in connection with the transaction contemplated by
this Agreement, contains or will contain any untrue statement of a material fact
or omits or will omit any material fact the omission of which would be
misleading. The Exhibits to this Agreement, where provided by or on behalf of
Seller, completely and correctly present the information required by this
Agreement to be set forth in them.
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4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer makes the following representations and warranties to Seller with
the intention that Seller may rely upon the same, and acknowledges that the same
shall be true as of the Closing Date (as if made at the Closing) and shall
survive the Closing of this transaction.
4.1. Organization. Buyer is a corporation, duly organized, validly
existing in good standing under the laws of the State of Minnesota, and has all
requisite corporate power and authority to own its properties and conduct the
business in which it is presently engaged.
4.2. Authority. Buyer has all requisite power and authority to execute,
perform and carry out the provisions of this Agreement. Buyer has taken all
requisite action authorizing and empowering Buyer to enter into this Agreement
and to consummate the transactions contemplated in this Agreement.
4.3. Breaches of Contracts; Required Consents. Neither the execution
and delivery of this Agreement by Buyer, nor compliance by Buyer with the terms
and provisions of this Agreement, will (a) conflict with or result in a breach
of: (i) any of the terms, conditions or provisions of the Articles of
Incorporation and Bylaws or other governing instruments of Buyer, (ii) any
judgment, order, decree or ruling to which the Buyer is a party, (iii) any
injunction of any court or governmental authority to which it is subject, or
(iv) any agreement, contract or commitment listed on any Exhibit hereto and
which is material to the financial condition of Buyer; or (b) require the
affirmative consent or approval of any third party.
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4.4. Binding Obligation. This Agreement constitutes the legal, valid
and binding obligation of Buyer in accordance with the terms hereof. Buyer is
not subject to any charter, mortgage, lien, lease, agreement, contract,
instrument, law, rule, regulation, order, judgment or decree, or any other
restriction of any kind or character, which would prevent the consummation of
the transactions contemplated in this Agreement.
5. CERTAIN COVENANTS AND AGREEMENTS
5.1. Preserve Accuracy of Representations and Warranties. Seller and
Seller's Shareholders shall refrain from taking any action, except with the
prior written consent of Buyer, which would render any representation, warranty
or agreement of Seller and Seller's Shareholders in this Agreement inaccurate or
breached as of the Closing. At all times prior to the Closing, Seller and
Seller's Shareholders will promptly inform Buyer in writing with respect to any
matters that arise after the date of this Agreement which, if existing or
occurring at the date of this Agreement, would have been required to be set
forth or described in the Exhibits.
5.2. Access to Information. During the period prior to the Closing,
Seller shall give to Buyer and its attorneys, accountants and other authorized
representatives, full access to all of the property, books, contracts,
commitments and records of Seller and shall furnish to them during such period
all such information concerning the Business and the Purchased Assets as they
reasonably may request.
5.3. Approvals and Consents. Seller shall use its best efforts to
obtain all approvals and consents to transfer the Purchased Assets to Buyer,
except such approvals required to assign obligations solely for the payment of
money which are included within the Assumed Liabilities. Seller agrees to
consult with Buyer, and Buyer agrees to cooperate with Seller, in connection
with Seller obtaining such approvals and consents.
5.4. Restrictions. Seller and Seller's Shareholders represent and
covenant that since January 1, 1999 and during the period from the date of this
Agreement to the Closing (except as Buyer otherwise has consented in writing):
5.4.1. Seller's has conducted and will conduct the Business
only in the usual and ordinary manner.
5.4.2. Seller has and will timely pay and discharge all bills
and monetary obligations and timely and properly performed all of its
obligations and commitments under all existing contracts and agreements
pertaining to or affecting Seller.
12
5.4.3. Seller and Seller's Shareholders have used and shall
continue to use their reasonable business efforts to preserve the Business and
the Purchased Assets and to keep available to Buyer the services of Seller's
present employees, and not to impair relationships with suppliers, customers and
others having business relations with the Seller; provided, Seller shall consult
with Buyer and obtain Buyer's written consent prior to committing to material
obligations to be assumed by Buyer.
5.5. Risk of Loss. Prior to completion of the Closing, the risk of loss
or destruction to any of Seller's assets shall be that of Seller. Seller shall
replace such damaged or destroyed Purchased Assets with similar assets of equal
value and shall use any insurance proceeds received for such damage to make such
replacements. Buyer shall be permitted to terminate this Agreement in the event
of any material event of damage or destruction to any of the Purchased Assets
prior to the Closing.
5.6. Non-Solicitation. Seller, Seller's Shareholders, and their
representatives, will not, directly or indirectly discuss or negotiate with any
person (other than Buyer), encourage the submission of inquiries, proposals or
offers from any person (other than Buyer), or otherwise provide information to
any other person, with respect to the sale of any of Seller's rights in the
Business or Purchased Assets or an investment in Seller (whether by merger, sale
of stock, or otherwise), other than the sale of product or services in the
ordinary course of business. Seller and Seller's Shareholders agree to promptly
disclose to Buyer any inquiries by parties that indicate interest in discussing
a potential purchase, merger or other acquisition of the assets of the Business
or any stock of any of Seller's Shareholders.
6. CONDITIONS OF CLOSING: ABANDONMENT OF TRANSACTION
6.1. Conditions to Obligations of Buyer to Proceed on the Closing Date.
The obligations of Buyer to proceed on the Closing Date shall be subject (at its
discretion) to the satisfaction, on or prior to the Closing, of all of the
following conditions:
6.1.1. Truth of Representations and Warranties and Compliance
with Obligations. The representations and warranties of Seller and the Seller's
Shareholders in this Agreement shall be true in all material respects on the
Closing Date with the same effect as though made at such time. Seller and the
Seller's Shareholders shall have complied with all of their covenants and
agreements in this Agreement to be performed prior to Closing.
6.1.2. Review of Business. A review by Buyer of the Business,
with full cooperation of Seller, shall have been completed with results
satisfactory to Buyer, in Buyer's sole discretion.
6.1.3. Closing DFC Asset Purchase. Buyer purchases
substantially all of the assets of DFC.
13
6.2. Conditions to Obligation of Seller to Proceed on the Closing Date.
The obligation of Seller to proceed on the Closing Date shall be subject (at its
discretion) to the satisfaction, on or before the Closing, of the following
conditions:
6.2.1. Truth of Representations and Warranties and Compliance
with Obligations. The representations and warranties of Buyer in this Agreement
contained shall be true in all material respects on the Closing Date with the
same effect as though made at such time. Buyer shall have performed all material
obligations and complied with all covenants and agreements in this Agreement to
be performed prior to Closing.
6.3. Absence of Exhibits. The parties hereby acknowledge that as of the
date of Buyer's execution of this Agreement certain exhibits required under this
Agreement are not attached hereto and/or will need to be updated. Seller
acknowledges that Buyer, in executing this Agreement, is relying on the absence
of any materially adverse information which may be disclosed upon delivery of
any of the required exhibits or any documents referenced therein. Buyer reserves
the right to cancel this Agreement if Buyer reasonably determines that
materially adverse information is added to the exhibits or any documents after
the date of this Agreement.
7. CLOSING
7.1. Closing. The closing of the transaction contemplated by this
Agreement shall be held at ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, on
January 5, 2000, at 10:00 a.m. local time, or at such other date or time as the
parties may mutually agree upon in writing. The consummation of the transaction
contemplated by this Agreement shall be effective as 12:01 a.m. on January 5,
2000 and such date and time shall be deemed the "Closing" and "Closing Date."
7.2. Documents to be Delivered by Seller and Seller's Shareholders.
Seller and Seller's Shareholders agree to deliver the following documents, duly
executed as appropriate, to Buyer at the Closing:
7.2.1. All certificates, schedules, exhibits, and attachments
in completed form and specifying the information required by the provisions of
this Agreement.
7.2.2. An opinion of counsel from Seller's counsel as to the
Seller's authority to enter into this Agreement and that the Agreement is a
legally binding obligation of Seller.
7.2.3. Appropriate documentation for filing changing the name
of Seller's corporation and such documentation reasonably requested by Buyer
permitting Buyer to use Seller's name.
7.2.4. Documentation transferring Seller's Intellectual
Property that is registered.
7.2.5. Such other documents as Buyer may reasonably request
for the purpose of assigning, transferring, granting, conveying, and confirming
to Buyer or reducing to its
14
possession, any and all assets, property and rights to be conveyed and
transferred by this Agreement.
7.3. Documents Delivered by Buyer. Buyer agrees to deliver the
following documents, duly executed as appropriate, to Seller at the Closing:
7.3.1. Employment Agreements in the form of Exhibit 8.5 for
Seller's Shareholders.
7.3.2. Such other documents as Seller reasonably may request
to carry out the transactions contemplated under this Agreement.
8. POST CLOSING COVENANTS AND OBLIGATIONS
8.1. Further Documents and Assurances. At any time and from time to
time after the Closing Date, each party shall, upon request of another party,
execute, acknowledge and deliver all such further and other assurances and
documents, and will take such action consistent with the terms of this
Agreement, as may be reasonably requested to carry out the transactions
contemplated by this Agreement and to permit each party to enjoy its rights and
benefits under this Agreement.
8.2. Restrictive Covenant.
8.2.1. Noncompete Covenant. Seller and Seller's Shareholders
covenant and agree that for a period of five (5) years after the Closing Date,
they will not engage in any business which competes with the Business in the
United States (the "Territory"). This covenant of noncompetition shall be
interpreted to prohibit, without limiting the generality of the foregoing,
Seller and Seller's Shareholders from serving as a shareholder, partner,
director, officer, employee, agent of or independent contractor to, any person
or entity which directly or indirectly competes in the Territory with Seller's
instructional learning business or other instructional learning businesses,
including Sylvan Learning Systems and Huntington Learning Centers, or conspire
with others to do so.
8.2.2. Interference with the Business. For a period of five
(5) years after the Closing Date, Seller and Seller's Shareholders covenant and
agree not to directly or indirectly attempt to divert or interfere with Buyer's
conduct of the Business or the Business's relationships with its customers,
employees, suppliers or other person with which it does business.
8.2.3. Derogatory Statements. Seller and Seller's Shareholders
covenant and agree that neither of them will disparage, vilify, slander 01:
defame Buyer, or their employees or business practices.
15
8.2.4. Injunctive Relief and Reasonableness. Seller and
Seller's Shareholders stipulate and agree that the remedy at law for breach of
the covenant in the subsections of Section 8.2 would be inadequate and that
Buyer shall be entitled to injunctive relief to enforce such covenants. Seller
and Seller's Shareholders further stipulate and agree that the prohibitions
contained in Section 8.2.1 are reasonable as to time and area, and Seller and
Seller's Shareholders specifically waive any objection to the reasonableness of
said prohibitions. In the event that a provision of this Agreement is held
invalid by a court of competent jurisdiction, the remaining provisions shall
nonetheless be enforceable in accordance with their terms. Further, in the event
that any provision is held to be overbroad as written, such provision shall be
deemed amended to narrow its application to the extent necessary to make the
provision enforceable according to applicable law and shall be enforced as
amended. Damages and injunctive relief shall not be considered alternative
remedies.
8.3. Confidentiality. Seller and Seller's Shareholders shall hold in
strictest confidence and not disclose or use any confidential information
relating to the Business, except for disclosure of confidential information of
the Business to Buyer in connection with the transaction contemplated by this
Agreement.
8.4. Payment of Debts and Liabilities. Seller shall pay all of its
liabilities and debts which have arisen on or prior to the Closing Date as they
become due and payable, except for Assumed Liabilities and amounts which Seller
contests in good faith for which it maintains an adequate reserve.
8.5. Employment of Seller's Shareholders. Buyer agrees to offer
employment to each of Seller's Shareholders pursuant to the form of Employment
Agreement attached hereto as Exhibit 8.5.
8.6. Lease. Seller and Seller's Shareholders shall make the existing
learning space at ▇▇▇ ▇▇▇▇ ▇▇., ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Suites E-2, F&G, available
without charge on an as needed basis in order for Buyer to complete the existing
commitments to Seller's customers relating to that location.
9. INDEMNIFICATION
9.1. Indemnification by Seller and Seller's Shareholders. Seller and
Seller's Shareholders, jointly and severally, shall indemnify and hold Buyer
harmless at all times from and after the date of this Agreement, against and in
respect of all damages, losses, costs and expenses (including reasonable
attorneys' fees) which Buyer may suffer or incur in connection with any of the
following matters:
9.1.1. Any claim, demand, action or proceeding asserted by a
creditor of Seller under the provisions of any applicable Bulk Transfer Act or
asserted by any other person respecting any liabilities of Seller which are not
expressly assumed by Buyer under this Agreement.
16
9.1.2. The breach by Seller or Seller's Shareholders of any of
their representations, warranties or covenants in this Agreement.
9.2. Indemnification by Buyer. Buyer shall indemnify and hold Seller
harmless at all times from and after the date of this Agreement, against and in
respect of all losses, damages, costs and expenses (including reasonable
attorneys' fees) which Seller may suffer or incur in connection with any of the
following matters:
9.2.1. Any claim, demand, action or proceeding asserted by a
creditor of Buyer respecting any liabilities of Buyer.
9.2.2. The breach by Buyer of any of Buyer's representations,
warranties or covenants in this Agreement.
9.3. Set off. In the event Seller or Seller's Shareholders fails to pay
when due any claim Buyer may have for indemnification pursuant to Section 9.1,
or otherwise, Buyer may, in addition to any other remedies to which Buyer may be
entitled, set-off an amount equal to Buyer's claim against the amounts otherwise
owed by Buyer to Seller.
10. GENERAL
10.1. Waiver of Compliance. The parties hereby waive compliance with
the provisions of any applicable bulk transfer act. Seller and Seller's
Shareholders hereby jointly and severally agree to indemnify and hold Buyer
harmless from any damages, losses or expenses (including reasonable attorney
fees) suffered by Buyer from any claims which may be asserted against Buyer by
creditors of Seller which result from such noncompliance.
10.2 Counterparts and Facsimile. This Agreement may be executed in
counterparts and by different parties on different counterparts with the same
effect as if the signatures thereto were on the same instrument. This Agreement
shall be effective and binding upon all parties to this Agreement at such time
as all parties have executed a counterpart of this Agreement. The parties hereby
agree that a facsimile copy of this Agreement will be deemed an original for all
purposes, and each party hereby waives the necessity of providing the original
copy of this Agreement to bind the other.
10.3 Notice. Any notice required or permitted to be given under this
Agreement shall be deemed to have been duly delivered: (i) when received if
delivered by hand or telegram; (ii) the same day if delivery by facsimile sent
no later than 4:00 p.m. (receiver's time) on a business day provided
transmission is evidenced by a written confirmation from sender's facsimile
machine; (iii) the next business day if sent by facsimile on a non-business day
or after 4:00 p.m. (receiver's time) on a business day provided transmission is
evidenced by a written confirmation from sender's facsimile machine; (iv) one
(1) business day after placement with a reputable overnight carrier for next
morning delivery provided recipient must sign for receipt; or (v) four (4)
business days after depositing if placed in the U.S. mails for delivery by
registered or certified mail, return receipt requested, postage prepaid and
addressed to the appropriate party at the
17
address set forth below. If a party changes its address or facsimile number, it
shall notify the other part of such different address or facsimile number
pursuant to the provisions of this Section.
Buyer and IPI: with copy to:
IPI/Dreamcatcher Franchise Corporation ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
15 155 Technology Drive ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, P.A.
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ 1100 International Centre
Attn: President ▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Tele: ▇▇▇-▇▇-▇▇▇▇ Tele: ▇▇▇-▇▇▇-▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇ Fax: ▇▇▇-▇▇▇-▇▇▇▇
Seller and Seller's Shareholders: with copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇ ▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
Tele: ▇▇▇-▇▇▇-▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇ Tele: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
10.4 Headings and Construction. The descriptive headings of the several
Articles and Sections of this Agreement and of the several Exhibits to this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement. This Agreement shall not be construed against either party since each
party has negotiated its provisions and contributed to its drafting.
10.5. Benefit. Nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties to this Agreement or
their respective successors or assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement. Buyer shall be permitted to
assign its rights and obligations under this Agreement.
10.6. Costs and Expenses. Each party hereto shall bear its own costs
and expenses (including, but not limited to, its accountants' and attorneys'
fees) in connection with the performance of its obligations under this
Agreement. Seller's transactional expenses shall not be assumed by Buyer unless
specifically identified by provider and amount within the Assumed Liabilities.
No party to this Agreement retained the services of a broker in connection with
the transaction contemplated by this Agreement.
18
10.7. Invalidity or Unenforceable Nature. Subject to the provisions in
Section 8.2.4 of this Agreement, in the event that any provision or part thereof
is deemed to be invalid, illegal or unenforceable for any reason, then the
parties to this Agreement hereby mutually acknowledge and agree that it is their
intention to have any such invalid, illegal or unenforceable provision or part
thereof be deleted from this Agreement as if it had never been included in this
Agreement, so that the remainder of this Agreement is valid, binding and
enforceable in accordance with its terms.
10.8. Choice of Law. This Agreement, and the respective rights of the
parties under this Agreement, shall be governed and construed by the laws of the
State of Minnesota, without application of any choice of law considerations.
10.9. Entire Agreement, Modification and Waiver. This Agreement,
together with the Exhibits and the related written agreements specifically
referred to in this Agreement, represents the only agreement among the parties
concerning the subject matter hereof and supersedes all prior agreements,
whether written or oral, relating thereto except any agreements regarding
confidentiality between the parties. No purported amendment, modification or
waiver of any provision hereof shall be binding unless set forth in a written
document signed by all parties (in the case of amendments or modifications) or
by the party to be charged thereby (in the case of waivers). Any waiver shall be
limited to the provision hereof and the circumstance or event specifically made
subject thereto and shall not be deemed a waiver of any other term hereof or of
the same circumstance or event upon any recurrence thereof.
2319880-6 12/13/99
19
Each of the parties hereto has caused this Asset Purchase Agreement to
be executed in the appropriate manner and agrees to be legally bound by the
terms hereof.
BUYER: DREAMCATCHER FRANCHISE CORPORATION
By /s/ (ILLEGIBLE)
------------------------------------
Its President
--------------------------------
SELLER: DREAMCATCHER LEARNING CENTERS, INC.
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------
Its President
--------------------------------
SELLER'S SHAREHOLDERS
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
20
EXHIBITS
Exhibits
--------
1.1.1 Fixed Assets
1.1.5 Licenses and Permits
1.1.6 Assumed Contracts
1.1.7 Prepaid Assets and Deposits
1.1.8 Receivables
1.3.1 Liabilities
2.2 Allocation of Purchase Price
3.4.1 Seller's Financial Statements
3.11 Real Property
3.15.1 Employee Plans
3.17.1 Employee List
3.17.2 Terminated Employees
3.18 Significant Customers/Suppliers
3.19 Insurance
3.20 Litigation/Claims
3.23 Intellectual Property
3.24 Cash Locations
8.5 Employment Agreement Form
21
EXHIBIT 1.1.1
Fixed Assets
Inventory Ft. ▇▇▇▇▇▇▇ Greeley Windsor Total
--------- ----------- ------- ------- -----
Computer System w/Printer 1 1 1 3
Office Desk 1 2 1 4
Desk Chair 1 2 2 5
Phone 1 2 1 4
Fax Machine 1 1 0 2
Photocopy Machine 1 1 0 2
TV/VCR Combo 1 1 0 2
Reception Area Chairs w/Arms 5 0 0 5
3-Piece Sectional Sofa 0 1 0 1
Reception Area Table 1 1 0 2
Table Lamp 1 0 0 1
Credenza (Steel) 0 2 0 2
Small Book Shelf (reception area) 1 0 2 3
2' x 4' Instructional Tables 6 8 0 14
Larger Instructional Tables 0 1 1 2
Blue Stackable Chairs 4 0 6 10
Instructional chairs (Padded w/arms) 13 12 6 31
4-Drawer Steel Filing Cabinet 1 0 1 2
2-Drawer Steel Filing Cabinet 1 1 1 3
Storage Units w/Doors 2 2 0 4
Rolling Stand 1 1 0 2
Microwave Oven 1 1 0 2
Small Cube Refrigerator 1 1 0 2
Electric Pencil Sharpener 1 1 1 3
Vacuum Cleaner 1 1 1 3
Student Desk 2 0 4 6
Dividers 7 13 0 20
Set of DI Instructional Materials 1 1 1 3
Complete Testing Kit 1 1 1 3
Set of Window Signs 1 1 1 3
Credit Card Manual Swipe Machine 1 1 1 3
Large Artificial Tree in Basket 1 0 1 2
Large Lighted Sign 1 1 0 2
Large Unlighted Sign 0 0 1 1
22
EXHIBIT 1.1.6
Assumed Contracts
REAL ESTATE LEASES
------------------
Lessor: TNT Investments
▇▇▇▇ - ▇▇▇▇ ▇▇▇.
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Term: 60 mos.
First Payment: 12/l/97
Last Payment: 11/01/02
MO. Pmt.: $1,100 (escalates yearly)
Mos. Remaining: 36
Renewal Option: 5 yr. Option (120 days notice)
Comments: Base rate renegotiated upon renewal. Lease can be
assigned with Lessor's approval.
Lessor: Everwest
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
875 Sq. Ft.
Term: 60 mos.
First Payment: 06/l/97
Last Payment: 05/01/02
MO. Pmt.: $1,079 (escalates yearly)
Mos. Remaining: 30
Renewal Option: None
Comments: Lease can be assigned with Lessor's approval. 60-day
notice.
NOT assuming existing lease of ▇▇▇ ▇▇▇▇ ▇▇., ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Suites E-2, F&G.
23
EXHIBIT 1.1.7
Prepaid Assets and Deposits
Balance
10/31/99
--------
Security Deposits $3,486.01
Monroe NC Electric Deposit 106.70
▇▇▇▇▇ Bank Account 5,253.89
▇▇▇▇▇ Bank Payroll Account 127.68
Bank of Colorado - Front Range 1.25
24
EXHIBIT 1.1.8
Receivables
Accounts receivable aging is as of December 9, 1999 is attached and will be
updated weekly until the Closing.
Note Receivable from ▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇ in the original principal
amount of $10,000, with only two payments of $888.49 remaining due to each of
them.
25
EXHIBIT 1.1.8
Receivables
Dreamcatcher Direct Instruction Receipts Due
Report Date: 12/09/99
Windsor, CO Total Accounts Receivable: $ 1,968.78
Fort ▇▇▇▇▇▇▇, CO Total Accounts Receivable: 5,463.13
Greeley, CO Total Accounts Receivable: 4,254.50
----------
Total Due $11,686.41
==========
26
EXHIBIT 1.3.1
Liabilities
Balance Due
10-31-99
--------
U.S. Bank $68,015.88
McGraw Hill 6,000.00
▇▇▇▇▇▇▇▇ Photocopy 515.00
Tax Deposits (with estimated 15% penalty) 21,620.53
Miscellaneous Smaller Debt (Refund of lessons,
$1,902.50; DDIC mugs $295.69; Phone $206.35) 2,404.54
$299,529.84
===========
*Upon the mutual agreement of Buyer and Seller, the liabilities may include
Seller's obligations to provide Seller's employees paid vacation days and/or
paid sick leave (list employee, hours/days, and dollar value as of the Closing
Date). Buyer shall give credit to the employees identified in the amounts set
forth (in hours and dollars equivalents). Buyer has no obligation to hire any of
Seller's employees under any conditions and will only agree to permit such
vacation and sick pay liabilities to be included within the Assumed Liabilities
at Buyer's sole discretion.
27
EXHIBIT 2.2
Allocation of Purchase Price*
Accounts Receivable Actual
Inventory Actual
Prepaids Actual
Fixed Assets Up to $
-----------
Intellectual Property/Intangibles
Other than Goodwill Up to $
-----------
Goodwill Balance (if any)
The payment due pursuant to Section 2.1.3 shall included when paid.
28
EXHIBIT 3.4.1
Financial Statements
Unaudited balance sheet and statement of income as of and for the period ending
October 31, 1999.
Tax returns for 1997 and 1998
29
EXHIBIT 3.4.1
Seller's Financial Statements
DLC
Balance Sheet
October 31, 1999
ASSETS
Current Assets
▇▇▇▇▇ Bank Account $ 5,253.89
▇▇▇▇▇ Bank-Payroll Account 127.68
Bank of Colorado-Front Range 1.25
Accounts Receivable (22,357.64)
Employee Advances (749.50)
------------
Total Current Assets (17,724.32)
Property and Equipment
Photocopy Machine 3,815.99
Signs 2,877.89
Furniture & Fixtures 19,881.73
Furniture & Fixtures 1,387.54
Furniture & Fixtures 460.57
Furniture & Fixtures 106.65
Accumulated Depreciation (22,227.00)
Ed. Materials (Permanent) 14,023.96
------------
Total Property and Equipment 20,327.33
Other Assets
Security Deposits 3,486.01
Monroe NC Electric Deposit 106.70
Due from DFC 5,895.37
------------
Total Other Assets 9,488.08
------------
Total Assets $ 12,091.09
============
Unaudited--For Management Purposes Only
30
EXHIBIT 3.4.1
Seller's Financial Statements
DLC
Balance Sheet
October 31, 1999
LIABILITIES AND CAPITAL
Current Liabilities
Fed/FICA Payable $ 11,398.07
State W/H Payable 1,726.46
Futa/Suta Payable (415.13)
------------
Total Current Liabilities 12,709.40
Long-Term Liabilities
Line of Credit--U.S. Bank 67,402.01
N/P Dreamcatcher Franchise 99,736.00
Deposit from Franchise 44,752.44
Note Payable Officer 44,874.09
------------
Total Long-Term Liabilities 256,764.54
------------
Total Liabilities 269,473.94
Capital
Common Stock 40,600.00
Retained Earnings (219,895.94)
Net Income (78,086.91)
------------
Total Capital (257,382.85)
------------
Total Liabilities & Capital $ 12,091.09
============
Unaudited--For Management Purposes Only
31
EXHIBIT 3.4.1
Seller's Financial Statements
DLC
Income Statement
For the Ten Months Ending October 31, 1999
Current Year to Date
Month
Revenues
Lessons-W 1,204.00 13.45 20,807.00 18.23
Lessons-G 2,886.00 32.25 40,015.50 35.05
Lessons-FC 4,129.00 46.14 45,956.00 40.25
Testing-W 265.00 2.96 1,072.50 0.94
Testing-G 480.00 5.36 2,592.50 2.27
Testing-FC 222.50 2.49 1,842.50 1.61
Finance Charge-W 0.00 0.00 37.54 0.03
Credits-W (120.00) (1.34) (120.00) (0.11)
Credits-G (117.00) (1.31) (117.00) (0.10)
Other Income-Books, etc. 0.00 0.00 3,000.00 2.63
Refunds-Loveland 0.00 0.00 (922.00) (0.81)
------------ -----------
Total Revenues 8,949.50 100.0 114,164.54 100.0
------------ -----------
Cost of Sales
Rent-Windsor (500.00) (5.59) (8,500.00) (7.45)
Rent-Greeley (1,000.00) (11.17) (9,000.00) (7.88)
Rent-Fort ▇▇▇▇▇▇▇ (1,000.79) (11.18) (10,412.74) (9.12)
Salaries-Windsor (5,831.50) (65.16) (59,082.48) (51.75)
Salaries-Greeley (1,945.61) (21.74) (22,004.75) (19.27)
Salaries-Fort ▇▇▇▇▇▇▇ (1,378.33) (15.40) (15,109.13) (13.23)
Total Cost of Sales (11,656.23) (130.24) (124,109.10) (108.71)
------------ -----------
Gross Profit (2,706.73) (30.24) (9,944.56) (8.71)
------------ -----------
32
EXHIBIT 3.4.1
Seller's Financial Statements
DLC
Income Statement
For the Ten Months Ending October 31, 1999
Current Year to Date
Month
Expenses
Advertising 0.00 0.00 (2,218.98) (1.94)
Advertising-Windsor 0.00 0.00 (91.00) (0.08)
Advertising-Greeley 0.00 0.00 (308.15) (0.27)
Advertising-Fort ▇▇▇▇▇▇▇ 0.00 0.00 (1,352.95) (1.19)
Auto Expense (662.37) (7.40) (6,018.02) (5.27)
Bank Service Charges (118.11) (1.32) (1,965.17) (1.72)
Contributions 0.00 0.00 (100.00) (0.09)
Dues & Subscriptions (126.00) (1.41) (459.30) (0.40)
Dues & Subscriptions-Greeley 0.00 0.00 (55.00) (0.05)
Dues & Subscriptions-Fort ▇▇▇▇▇▇▇ 0.00 0.00 (55.00) (0.05)
Educational Materials 0.00 0.00 (3,000.00) (2.63)
Utilities-Greeley 0.00 0.00 (871.87) (0.76)
Utilities-Fort ▇▇▇▇▇▇▇ 0.00 0.00 (603.11) (0.53)
Insurance-Auto 0.00 0.00 (1,076.60) (0.94)
Insurance-Health 0.00 0.00 (18,794.49) (16.46)
Insurance-General 0.00 0.00 (2,310.50) (2.02)
Insurance-Windsor 190.07 2.12 1,447.47 1.27
Insurance-Greeley 0.00 0.00 60.48 0.05
Insurance-Fort ▇▇▇▇▇▇▇ 0.00 0.00 290.05 0.25
Insurance-Life (339.15) (3.79) (646.44) (0.57)
Interest Expense 0.00 0.00 (4,700.11) (4.12)
Legal & Accounting (162.20) (1.81) (435.20) (0.38)
Miscellaneous Expense (931.95) (10.41) (3,494.03) (3.06)
Meals 0.00 0.00 (106.40) (0.09)
Office Expense (199.02) (2.22) (931.12) (0.82)
Office Expense-Windsor (65.14) (0.73) (638.30) (0.56)
Office Expense-Greeley 0.00 0.00 (150.16) (0.13)
Office Expense-Fort ▇▇▇▇▇▇▇ 0.00 0.00 (158.04) (0.14)
Postage Expense (232.65) (2.60) (435.60) (0.38)
Payroll Service Expense 0.00 0.00 (267.85) (0.23)
Repairs & Maintenance 0.00 0.00 (125.00) (0.11)
Supplies Expense 0.00 0.00 (515.15) (0.45)
Supplies Expense-Windsor 0.00 0.00 (12.06) (0.01)
33
Supplies Expense-Greeley (31.62) (0.35) (415.05) (0.36)
Supplies Expense-Fort ▇▇▇▇▇▇▇ 0.00 0.00 (60.78) (0.05)
Taxes, Payroll-Windsor (442.50) (4.94) (4,481.58) (3.93)
Taxes, Payroll-Greeley (142.46) (1.59) (1,680.82) (1.47)
Taxes, Payroll-Fort ▇▇▇▇▇▇▇ (101.55) (1.13) (1,106.42) (0.97)
Futa-Windsor (0.25) 0.00 (224.74) (0.20)
Futa-Greeley (2.10) (0.02) (107.57) (0.09)
Futa-Fort ▇▇▇▇▇▇▇ (10.62) (0.12) (115.72) (0.10)
Suta-Windsor (2.41) (0.03) (91.48) (0.08)
▇▇▇▇-▇▇▇▇▇▇▇ (0.53) (0.01) (42.03) (0.04)
Suta-Fort ▇▇▇▇▇▇▇ (2.65) (0.03) (34.77) (0.03)
Telephone Expense (189.64) (2.12) (671.51) (0.59)
Telephone Expense-Windsor 0.00 0.00 (4,660.82) (4.08)
Telephone Expense-Greeley 0.00 0.00 (498.32) (0.44)
Telephone Expense-Fort ▇▇▇▇▇▇▇ 0.00 0.00 (1,302.52) (1.14)
Travel & Entertainment 0.00 0.00 (497.75) (0.44)
Fines & Penalties 0.00 0.00 (1,050.18) (0.92)
Other Income 0.00 0.00 (485.45) (0.43)
Independence Academy 0.00 0.00 (517.24) (0.45)
----------- -----------
Total Expenses (3,572.85) (39.92) (68,142.35) (59.69)
----------- -----------
Net Income $(6,279.58) (70.17) $(78,086.91) (68.40)
=========== ===========
For Management Purposes Only
34
EXHIBIT 3.15.1
EMPLOYEE PLANS
PLAN DESCRIPTIONS
MEDICAL PLAN Company pays 100% of the employees health insurance
premiums and 0% of Spouse/dependents coverage.
DENTAL PLAN Paid 100% by employee.
CAFETERIA 125 PLAN Company administers the plan. There is no corporate
contribution.
LIFE INSURANCE All full-time employees are eligible for $10,000 of life
insurance paid by the Company.
PAID VACATION One day per month of employment for the first year. One
and one-half days per month of employment for years 2-5.
Two days per month of employment for subsequent years.
Days are added at the first of the year, but are prorated
down to the termination date.
PAID SICK TIME Half-day per month of employment. Days are added at the
beginning of the year. Unused days are not paid at
termination.
----------------------- -------------- ------------ ------------- --------------- ------------- -------------
Vacation Sick Time
Accrued Accrued
Name Medical * Dental * 125Plan * Life Ins. * (in days) (in days)
------------------------ ------------- ------------ ------------- --------------- ------------- -------------
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ (1) X X X 52.25 20.75
------------------------ ------------- ------------ ------------- --------------- ------------- -------------
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ (1) X X X 52.25 26.75
------------------------ ------------- ------------ ------------- --------------- ------------- -------------
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ (1) X X 8.25 5.75
------------------------ ------------- ------------ ------------- --------------- ------------- -------------
Childs, ▇▇▇▇ (1) X X X X
------------------------ ------------- ------------ ------------- --------------- ------------- -------------
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ (1) -1.75 0.63
------------------------ ------------- ------------ ------------- --------------- ------------- -------------
▇▇▇▇▇▇, ▇▇▇▇▇▇
------------------------ ------------- ------------ ------------- --------------- ------------- -------------
▇▇▇▇▇▇, ▇▇▇▇▇▇
------------------------ ------------- ------------ ------------- --------------- ------------- -------------
▇▇▇▇, ▇▇▇▇▇▇▇ (1) X X X X 41.25 11.75
------------------------ ------------- ------------ ------------- --------------- ------------- -------------
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
------------------------ ------------- ------------ ------------- --------------- ------------- -------------
▇▇▇▇▇, ▇▇▇▇▇
------------------------ ------------- ------------ ------------- --------------- ------------- -------------
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇
------------------------ ------------- ------------ ------------- --------------- ------------- -------------
▇▇▇▇▇▇▇, ▇▇▇▇ (1) X X X X
------------------------ ------------- ------------ ------------- --------------- ------------- -------------
▇▇▇▇▇▇▇, ▇▇▇▇▇
------------------------ ------------- ------------ ------------- --------------- ------------- -------------
▇▇▇▇▇▇▇, ▇▇▇▇▇ (1) X X
------------------------ ------------- ------------ ------------- --------------- ------------- -------------
▇▇▇▇▇▇▇▇, ▇▇▇
------------------------ ------------- ------------ ------------- --------------- ------------- -------------
* (X = enrolled)
(1) These individuals perform services for both Dreamcatcher Learning, Inc. and
Dreamcatcher Franchise Corporation (DFC). The accrued vacation and sick time
represent amounts effective as of December 13, 1999 for both organizations.
35
EXHIBIT 3.11
Real Property
NOT assuming existing lease of ▇▇▇ ▇▇▇▇ ▇▇., ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Suites E-2, F&G.
36
EXHIBIT 3.17.1
EMPLOYEE LIST
--------------------------- ---------------- ------------- ----------- ----------- ------------ ------------ ------------
NAME POSITION DATE OF STATUS HOURLY MONTHLY BONUS ADD'L.
HIRE FT/PT RATES SALARY COMP.
--------------------------- ---------------- ------------- ----------- ----------- ------------ ------------ -----------
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ (1) Owner 1/1/95 FT - 0 - - 0 - ****
--------------------------- ---------------- ------------- ----------- ----------- ------------ ------------ -----------
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ (1) Owner 1/1/95 FT - 0 - - 0 - ****
--------------------------- ---------------- ------------- ----------- ----------- ------------ ------------ -----------
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ (1) Director-Greeley 7/1/98 FT $1,900 Eligible*
--------------------------- ---------------- ------------- ----------- ----------- ------------ ------------ -----------
Childs, ▇▇▇▇ (1) Admin./ 9/15/99 PT $7.50- - 0 -
Instructor $9.50
--------------------------- ---------------- ------------- ----------- ----------- ------------ ------------ -----------
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ (1) Director-Fort 11/8/99 FT $1,800 Eligible*
▇▇▇▇▇▇▇
--------------------------- ---------------- ------------- ----------- ----------- ------------ ------------ -----------
▇▇▇▇▇▇, ▇▇▇▇▇▇ Instructor $10.50 - 0 -
--------------------------- ---------------- ------------- ----------- ----------- ------------ ------------ -----------
▇▇▇▇▇▇, ▇▇▇▇▇▇ Instructor $10.50 - 0 -
--------------------------- ---------------- ------------- ----------- ----------- ------------ ------------ -----------
▇▇▇▇, ▇▇▇▇▇▇▇ (1) Franchisee 3/1/96 FT $2,500 - 0 - **
Training
--------------------------- ---------------- ------------- ----------- ----------- ------------ ------------ -----------
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ Instructor $10.50 - 0 -
--------------------------- ---------------- ------------- ----------- ----------- ------------ ------------ -----------
▇▇▇▇▇, ▇▇▇▇▇ Instructor $10.50 - 0 -
--------------------------- ---------------- ------------- ----------- ----------- ------------ ------------ -----------
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ Instructor $10.50 - 0 -
--------------------------- ---------------- ------------- ----------- ----------- ------------ ------------ -----------
▇▇▇▇▇▇▇, ▇▇▇▇ (1) Director- 6/1/97 PT $1,200 - 0 -
Windsor
--------------------------- ---------------- ------------- ----------- ----------- ------------ ------------ -----------
▇▇▇▇▇▇▇, ▇▇▇▇▇ Instructor $10.50 - 0 -
--------------------------- ---------------- ------------- ----------- ----------- ------------ ------------ -----------
▇▇▇▇▇▇▇, ▇▇▇▇▇ (1) Accountant 9/1/97 FT $2,100 - 0 - ***
--------------------------- ---------------- ------------- ----------- ----------- ------------ ------------ -----------
▇▇▇▇▇▇▇▇, ▇▇▇ Instructor $10.50 - 0 -
--------------------------- ---------------- ------------- ----------- ----------- ------------ ------------ -----------
(1) These individuals perform services for both Dreamcatcher Learning, Inc. and
Dreamcatcher Franchise Corporation (DFC).
* Bonus Plan: For Full-Time Managers / Directors
o Paid $4 per hour of instruction delivered over 50 hrs. per week
o Paid $6 per hour of instruction delivered over 75 hrs. per week
o Paid $10 per hour of instruction delivered over 100 hrs. per week
** Automobile/Insurance; Master's Program at UNC (books/tuition); Stock in DFC
(900 shares)
*** Stock in DFC (900 shares)
**** Automobile/Insurance; Additional Life Insurance
37
EXHIBIT 3.17.2
TERMINATED EMPLOYEES
---------------------- ------------------------------ --------------------- -------------------------
MONTH/YEAR OF
NAME POSITION LOCATION TERMINATION
---------------------- ------------------------------ --------------------- -------------------------
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ Asst. Director/Instructor Fort ▇▇▇▇▇▇▇ 8/99
---------------------- ------------------------------ --------------------- -------------------------
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ Instructor Fort ▇▇▇▇▇▇▇ 5/99
---------------------- ------------------------------ --------------------- -------------------------
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ Instructor Fort ▇▇▇▇▇▇▇ 10/98
---------------------- ------------------------------ --------------------- -------------------------
▇▇▇▇, ▇▇▇▇▇▇ Instructor Fort ▇▇▇▇▇▇▇ 9/98
---------------------- ------------------------------ --------------------- -------------------------
▇▇▇▇▇▇▇, ▇▇▇▇▇ Center Director Greeley 8/98
---------------------- ------------------------------ --------------------- -------------------------
▇▇▇▇, ▇▇▇▇▇▇ Instructor Windsor 8/99
---------------------- ------------------------------ --------------------- -------------------------
▇▇▇▇▇▇, ▇▇▇▇▇▇ Instructor Windsor 7/99
---------------------- ------------------------------ --------------------- -------------------------
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ Instructor/Office Asst. Windsor 9/99
---------------------- ------------------------------ --------------------- -------------------------
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ Instructor Fort ▇▇▇▇▇▇▇ 1/99
---------------------- ------------------------------ --------------------- -------------------------
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ Instructor Fort ▇▇▇▇▇▇▇ 9/99
---------------------- ------------------------------ --------------------- -------------------------
38
EXHIBIT 3.18
Significant Customer/Suppliers
SRA/▇▇▇▇▇▇-▇▇▇▇ -- Instructional Materials (Teacher Presentation Books,
Workbooks, Textbooks)
COREN PRINTING -- Printing company (i.e., brochures, business cards, etc.)
SIGN-A-RAMA -- Sign Designer
ST. ▇▇▇▇ INSURANCE -- Insurance
▇▇▇▇▇▇▇▇ PHOTOCOPY -- Service photocopy machine
PSYCHOLOGICAL CORPORATION -- Test Materials
AMERICAN GUIDANCE SERVICES -- Test Materials
SAXON -- Higher Mathematics Instructional Materials
Currently we have no written or oral distribution agreements with our suppliers.
39
EXHIBIT 3.19
Insurance
Dreamcatcher Learning Centers
Dreamcatcher Franchise Corp
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
St. ▇▇▇▇ Fire & Marine Ins Co
Policy No. CKO8307077
Effective 03/01/98 to 03/01/99
COMMERCIAL PACKAGE POLICY
SECTION I--PROPERTY
Location #1: ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇-▇, J & K, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
-----------
Business Personal Property: Special Causes of Loss Form including theft,
Replacement Cost, subject to a $250 deductible and 90% Coinsurance.
LIMIT: $5,000
Business Income: Special Causes of Loss Form including theft, subject to a
$250 deductible and 100 Coinsurance.
LIMIT: $50,000
Location #2: ▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇, #▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
-----------
Business Personal Property: Special Causes of Loss Form including theft,
Replacement Cost, subject to a $250 deductible and 90% Coinsurance.
LIMIT: $5,000
Business Income: Special Causes of Loss Form including theft, subject to a
$250 deductible and 100 Coinsurance.
LIMIT: $50,000
Location #3: ▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇, #▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
-----------
Business Personal Property: Special Causes of Loss Form including theft,
Replacement Cost, subject to a $250 deductible and 90% Coinsurance.
LIMIT: $5,000
Business Income: Special Causes of Loss Form including theft, subject to a
$250 deductible and 100 Coinsurance.
LIMIT: $50,000
40
Dreamcatcher Learning Centers
Dreamcatcher Franchise Corp
SECTION II--LIABILITY
General Liability: Occurrence Form
LIMITS: $1,000,000 General Aggregate
$1,000,000 Products/Completed Operations Aggregate
$500,000 Personal & Advertising Injury
$500,000 Each Occurrence
$100,000 Premises Damage Limit
$5,000 Medical Expense (Any One Person)
Auto Liability Protection: Hired/Non-Owned Autos
LIMITS: $1,000,000 Each Accident
TOTAL ANNUAL PREMIUM $2,500.00
SECTION V--COVERAGES NOT INCLUDED
1. Building
2. Scheduled Autos
3. Flood/Surface Water
4. Boiler & Machinery
5. Workers' Compensation
6. Life & Health
DISCLAIMER: THE STATEMENTS MADE RELATING TO COVERAGE IN THIS SUMMARY ARE BRIEF
DESCRIPTIONS FOR YOUR REVIEW ONLY. FOR THE ACTUAL NATURE AND INTENT OF COVERAGE,
PLEASE REFER TO YOUR POLICY.
41
EXHIBIT 3.20
Litigation/Claims
No written or oral claims are outstanding and, to the best knowledge of
shareholders, no claims are pending.
42
EXHIBIT 3.23
Seller's Intellectual Property
Dreamcatcher Learning Centers, Inc. and design
U.S. Service ▇▇▇▇ Registration Date: October 15, 1996
U.S. Service ▇▇▇▇ Registration No.: 2,008,150
Dreamcatcher Learning Centers
Colorado Registration Date: October 16, 1998
43
EXHIBIT 3.24
Cash Locations
▇▇▇▇▇ Bank
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
Dreamcatcher Franchise Corporation Operating Account
Account #0201015320
Dreamcatcher Franchise Corporation Line of Credit
Account #912246
Dreamcatcher Learning Centers Operating Account
Account #0201013747
Dreamcatcher Learning Centers Payroll Account
Account #0201013754
US Bank
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
l-800-872-2657
Dreamcatcher Learning Centers Line of Credit
Account #30300112125050998
44
EXHIBIT 8.5
Employment Agreement
This Employment Agreement (this "Agreement"), dated January 5, 2000, is
entered into between ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ [▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇] ("Employee") and
Dreamcatcher Franchise Corporation, a Minnesota corporation (the "Company").
RECITALS:
A. Employee is a shareholder of Dreamcatcher Learning Centers, Inc.
("DLC") and Dreamcatcher Franchise Corporation "DFC"), a Colorado corporation.
The Company is purchasing substantially all of the assets of DLC and DFC
pursuant to the terms of Asset Purchase Agreements (the "Purchase Agreements").
As a condition to the Purchase Agreements, the Company and Employee agree to
enter into this Agreement.
B. Employee understands that Employee is being employed in a position
of trust and confidence and will have access to, become familiar with, and
contribute to the confidential information and trade secrets of the Company,
including those purchased in the Purchase Agreements. In addition, as part of
Employee's duties, Employee may develop and maintain close working relationships
with the Company's customers and suppliers.
C. Employee understands that as a condition of Employee's employment,
Employee must protect this information and these relationships and use them for
the Company's benefit only, not for Employee's own or another's benefit.
Employee understands that this Agreement is intended to protect the business
that the Company has purchased and will build. If Employee violates any part of
this Agreement, it will seriously harm the Company's business and cause damage
that will be impossible to measure.
AGREEMENT:
Employee wishes to be employed by the Company in a capacity in which
Employee may receive and/or contribute to confidential information and work with
the Company's customers and suppliers. In consideration of Employee's employment
with the Company, the Company's purchase of DLC and DLA, the opportunity to have
access to and contribute to the Company's confidential information and goodwill
and other valuable consideration, Employee agrees to the terms set forth below.
1. Employment. Effective as of January 5, 2000, the Company agrees to
employ Employee in the capacity of Vice President of the Company and Employee
accepts such employment with the Company subject to the terms and conditions of
this Agreement.
2. Term of Employment. Employee's employment under this Agreement shall
commence as of January 5,2000, and shall continue for a period of two (2) years
unless terminated earlier in accordance with the terms of this Agreement (the
"Employment Period").
45
3. Duties of Employee. Employee agrees to devote Employee's full-time
efforts to serve the Company faithfully and to the best of Employee's ability.
Employee shall perform such services as are reasonably assigned by the Company
from time to time. Employee shall be subject to and comply with the Company's
policies as they exist from time to time, including but not limited to those
identified in the Company's employee handbook. In case of a conflict between any
such policy and this Agreement, the terms of this Agreement shall control.
4. Compensation.
4.1. Salary. The Company shall pay Employee an annual salary
of Seventy-Five Thousand Dollars ($75,000).
4.2. Stock Options. Pursuant to the Company's Long-Term
Incentive Plan, the Company shall issue Employee incentive stock options to
acquire up to Ten Thousand (10,000) shares of IPI's common stock in the form of
the Incentive Stock Option Agreement attached as an Exhibit 4.2 hereto. The
exercise price shall be the greater of (i) Four Dollars ($4.00) per share, or
(ii) the closing price of the stock on the business day immediately preceding
the closing date of the Purchase Agreements.
4.3. Employee Benefits. Employee shall be eligible to receive
those benefits offered by the Company from time to time to its employees
generally, subject to the terms and conditions of such benefit plans or
programs. Employee agrees that the Company shall have the right, in its sole
discretion, to add to, modify, reduce or discontinue such benefits.
4.4. Payroll Practices and Withholding. All compensation paid
to Employee shall be remitted in accordance with the Company's customary payroll
practices in effect from time to time and subject to any ordinary deductions and
withholding required by law.
46
5. Confidential Information.
5.1. Definition. For purposes of this Agreement, "Confidential
Information" means any information or compilation of information, not generally
known, that relates to the Company's existing or reasonably foreseeable
business, including, but not limited to, trade secrets, operating procedures,
customer lists, customer information, supplier information, pricing, marketing
plans and proposals. "Confidential Information" does not include any information
which is generally known by the public.
5.2. Nondisclosure. During the Employment Period and at all
times thereafter, Employee shall hold in strictest of confidence and will never,
without prior written authorization of the Company, disclose, furnish,
communicate, make accessible to any person or use in any way Confidential
Information for Employee's own or another's benefit or permit the same to be
used in competition with the Company. Employee agrees to refrain from any acts
or omissions that would reduce the value of the Confidential Information to the
Company.
5.3. Return of Confidential Information. If either the Company
or Employee terminates Employee's employment with the Company, Employee agrees
to immediately return to the Company all tangible evidence of Confidential
Information that was conceived or generated by Employee or that came into
Employee's possession, including, without limitation, contact lists, rolodexes,
business cards, manuals, books, records, drawings, forms, letters, agreements,
memorandums, notes, note books, reports, data or copies thereof. Employee
acknowledges that all Confidential Information is and shall remain the exclusive
property of the Company.
47
6. Restrictive Covenants.
6.1. Full-Time Efforts. During Employee's employment with the
Company, Employee shall be employed as a full-time employee and agrees to devote
Employee's full work time, energy, and best efforts to furthering the Company's
business. Employee shall not engage in any other business activity, including
but not limited to outside employment or consulting, without the Company's
written consent. Employee shall not take part in any activity that would, in the
Company's sole discretion, conflict with the Company's interests.
6.2. Noncompetition. During Employee's employment with the
Company and for a period of three (3) years immediately thereafter, Employee
shall not, anywhere in the United States, engage in any business, directly or
indirectly, as an officer, director, employee, owner, proprietor, joint
venturer, agent, trustee, advisor, consultant, principal, partner or as a five
percent (5%) or more shareholder, which to any extent competes with DLC's
instructional learning business or other instructional learning businesses,
including Sylvan Learning Systems and Huntington Learning Centers, or conspire
with others to do so.
6.3. Interference. During Employee's employment with the
Company and for a period of three (3) years immediately thereafter, Employee
will not either directly or indirectly, (i) employ or solicit any person
employed by the Company to leave their employment with the Company, or (ii)
attempt to divert or interfere with the relationships of the Company with
existing or likely future customers, suppliers, contractors, or other persons
with which the Company does or has a reasonable expectation of doing business.
6.4. Derogatory Statements. The Company and Employee covenant
and agree not to disparage, slander, defame or vilify the other, or their
employees or business practices as applicable.
7. Intellectual Property.
7.1. Copyrights. Employee agrees that any documents, computer
software, artwork or other work of authorship ("Works") prepared by Employee for
Company's benefit or at its request, shall be considered "work made for hire"
within the meaning of U.S. Copyright law and that all such Works shall belong to
the Company. Employee hereby assigns to the Company all of Employee's right,
title and interest in and to all such Works. Employee agrees to disclose such
Works and agrees to assist Company by executing any such documents or
applications as may be useful to evidence such ownership of such Works by the
Company.
7.2. Inventions. "Invention" means any invention, discovery,
design, improvement, or idea, whether patentable or copyrightable or not, and
whether or not shown or described in writing or reduced to practice.
48
7.2.1. Disclosure. Employee shall promptly and fully
disclose in writing to the Company, and will hold in trust for Company's sole
right and benefit, any Invention (as defined below) that Employee, during the
period Employee is employed by the Company and for one year thereafter, makes,
conceives, or reduces to practice or causes to be made, conceived, or reduced to
practice, either alone or in conjunction with others, that (i) relates to any
subject matter pertaining to Employee's employment; (ii) relates to or is
directly or indirectly connected with the Company's business, products,
processes, or Confidential Information; or (iii) involves the use of any of the
Company's time, material, or facility.
7.2.2. Records/Assignment. Employee will keep
accurate, complete, and timely records for such Inventions, which records shall
be the Company's property and shall not be removed from the Company's premises.
Employee hereby assigns to the Company all of Employee's right, title, and
interest in and to all such Inventions and, upon the Company's request, Employee
shall execute, verify, and delivery to the Company such documents, including
without limitation, assignments and patent applications, and shall perform such
other acts, including, without limitation, appearing as a witness in any action
brought in connection with this Agreement that is necessary to enable the
Company to obtain the sole right, title, and benefit to all such Inventions.
7.2.3. Excluded Inventions. Notwithstanding anything
to the contrary, the Company agrees and Employee is hereby notified that the
above agreements in this Section to assign Inventions to the Company do not
apply to any Invention for which no equipment, supplies, facility, or
Confidential Information of the Company's was used, which was developed entirely
on Employee's own time, and neither (a) relates either (i) directly to the
Company's business; or (ii) to the Company's actual or demonstrably anticipated
research or development; or (b) results directly or indirectly from any work
performed by Employee for the Company.
8. Termination. Notwithstanding anything to the contrary in this
Agreement, Employee's employment with the Company shall automatically terminate
upon Employee's death.
8.1. "Cause" Termination. The Company may terminate Employee's
employment with the Company for "Cause" upon the occurrence of any of the
following events:
49
8.1.1. Nonperformance. Employee engages in (i) acts
or omissions of negligence or gross misconduct in the performance of duties to
the Company; (ii) repeated unexplained or unjustified absences from the Company;
or (iii) a willful violation of any federal or state statute. In the event any
act or omission of negligence or gross misconduct referred to above is curable,
the Company shall give written notice of such negligence or gross misconduct and
ten (10) days to cure it unless such failure is the second failure (whether or
not the first failure was cured) of the same nature within six, months, in which
case termination may be immediate without application of a cure period.
8.1.2. Criminal Action. Employee is convicted of or
enters a plea of guilty or nolo contendere to any felony or gross misdemeanor or
the entry of any final civil judgment against Employee in connection with any
allegation against Employee of fraud, misrepresentation, misappropriation of
property, or any other intentional tort.
8.1.3. Dishonesty. Employee materially impairs the
Company's goodwill or the goodwill associated with the Company's products or in
the event of gross misconduct, dishonesty or disloyalty on the part of Employee.
8.2. Termination During Employment Period Without Cause. If
the Company terminates Employee's employment during the Employment Period (as
defined above) without "Cause," Employee shall be paid as damages all
compensation due to Employee for the remaining term of the Agreement, and
Employee shall not be required to mitigate Employee's damages with respect to
the payment of such amount. Such amount will be paid at the regular intervals to
which Employee would have been entitled to such compensation had Employee
remained employed for the remainder of the Employment Period, which payment
shall be in lieu or any other remedies that Employee is entitled as a result of
such termination. This provision shall not be construed to affect the validity
of any non-competition or non-disclosure covenant contained either in the
Employment Agreement or in the Purchase Agreements.
8.3. Termination of Employment. Immediately upon termination
of Employee's employment pursuant to Section 8, Employee shall have no further
right to compensation, benefits, or payments of any kind (including but not
limited to payment from the Company for unused vacation) except compensation and
benefits actually earned through Employee's last day of employment.
50
9. General Provisions.
9.1. Remedies. If Employee violates or threatens to violate
any provision in Article 5, 6 or 7 of this Agreement, the Company shall be
entitled to injunctive relief, in addition to any other remedies allowed to the
Company by law or equity, and to collect from Employee its reasonable attorneys'
fees and costs incurred in bringing any action against Employee or otherwise
enforcing the terms of this Agreement.
9.2. Severability and Interpretation. If a court rules that
any part of this Agreement is not enforceable, the parties agree that part of
the Agreement shall be modified by the court to make it enforceable to the
maximum extent possible. If that part cannot be modified, that part of the
Agreement may be severed and the other parts of the Agreement shall nonetheless
be enforced in accordance with their terms.
9.3. Understandings. Employee acknowledges and agrees that the
Company informed Employee, as part of the offer of employment and before
Employee accepted employment, that restrictive covenants and confidentiality
provisions would be required as part of the terms and conditions of Employee's
employment. Employee agrees that the restrictions contained in this Agreement
are reasonable, shall not impair Employee's ability to find other employment,
and shall survive the termination of Employee's employment. Employee agrees that
the restrictions contained in this Agreement shall apply to Employee no matter
how Employee's employment terminates (including but not limited to voluntary or
involuntary termination or expiration of the Employment Period) and regardless
of whether Employee's termination is voluntary or involuntary.
9.4. Modifications and Waivers. No purported amendment,
modification or waiver of any provision of this Agreement shall be binding
unless set forth in a written document signed by both parties (in the case of
amendments or modifications) or by the party to be charged thereby (in the case
of waivers). Any waiver shall be limited to the circumstance or event
specifically referenced in the written waiver document and shall not be deemed a
waiver of any other term of this Agreement or of the same circumstance or event
upon any recurrence thereof.
9.5. Choice of Law. This Agreement, and the respective rights
of the parties under this Agreement, shall be governed and construed by the laws
of the State of Minnesota, without application of any choice of law
considerations.
9.6. Subsequent Employment. Employee agrees to inform any
subsequent employer who competes or may compete with the Company of the
existence of this Agreement and Employee's ongoing obligations hereunder.
Employee also agrees to immediately notify the Company of such employment. The
Company shall have the right to provide a copy of this Agreement to any future
employer of Employee.
51
9.7. Entire Agreement. This Agreement constitutes the entire
agreement between the parties and supersedes any and all prior or
contemporaneous oral or written understandings relating to the subject matter
hereof.
This Agreement constitutes the legal, valid and binding obligation of
each of the undersigned parties.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ [▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
DREAMCATCHER FRANCHISE CORPORATION
By
------------------------------
Its
--------------------------
52
EXHIBIT 4.2
Incentive Stock Option Agreement
IPI, INC.
1994 LONG-TERM INCENTIVE PLAN
INCENTIVE STOCK OPTION AGREEMENT
OPTIONEE: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ GRANT DATE:
-------------------------------
NUMBER OF OPTION SHARES: 10,000
------------------
OPTION PRICE PER SHARE:
-------------------
EXPIRATION DATE:
--------------------------
The Committee administering the IPI, Inc. 1994 Long-Term Incentive Plan
(the "Plan") has, on the Grant Date set forth above, authorized the grant to you
of the following stock option:
1. You are hereby granted the right and option to purchase, on the
terms and conditions hereinafter set forth, all or any part of the aggregate
number of shares set forth above (the "Option Shares") of the common stock, $.01
par value, of IPI, Inc. (the "Common Stock"), at the Option Price per share set
forth above.
2. This option is irrevocable and is intended to conform in all
respects with the Plan, a copy of which has been supplied to you, and the
provisions of which are incorporated in this Agreement by this reference. This
option is intended to qualify as an "Incentive Stock Option" within the meaning
of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), to
the extent that the fair market value of the Option Shares (determined as of the
Grant Date) with respect to which this option becomes exercisable for the first
time in any calendar year does not exceed $100,000.
3. This option may be exercised from time to time with respect to any
number of whole Option Shares, up to the aggregate number of Option Shares set
forth above, except that:
a. it shall not be exercisable prior to the first anniversary
of the Grant Date;
b. it shall become exercisable with respect to 20% of the
Option Shares on the first anniversary of the Grant Date, with respect to an
additional 20% of the Option Shares on each of second, third, fourth, and fifth
anniversaries of the Grant Date; and
c. it shall expire and become nonexercisable on the Expiration
Date set forth above or on any earlier date specified in paragraphs 4 or 5.
53
4. If your employment with the Company and its Affiliates is terminated
for cause, this option shall immediately expire and become nonexercisable with
respect to all Option Shares not previously purchased. For the purposes of this
Agreement, "cause" means dishonesty, willful misconduct, or conviction of a
crime involving, in each case, the property of the Company or any Affiliate, or
the performance of your duties with the Company or any Affiliate. For the
purposes of this Agreement, the term "Affiliate" means any corporation which, at
the relevant time, is a "parent corporation" or a "subsidiary corporation" of
the Company, as such terms are defined in Sections 425 (e) and (f) of the Code,
respectively.
5. If your employment with the Company and its Affiliates terminates
for any reason not specified in paragraph 4, this option shall immediately
expire and become nonexercisable as to any Option Shares with respect to which
it was not, exercisable on the date your employment terminated, but it shall
remain exercisable as to any remaining Option Shares until the first to occur of
the following:
a. the expiration of three months from the date on which your
employment terminates (except that if you die during such three-month period, it
shall remain exercisable for the period specified in subparagraph (b) below);
b. the expiration of 12 months following the date of your
death; or
c. the Expiration Date set forth above.
For the purposes of this Agreement, your employment with the
Company and its Affiliates will be deemed to have terminated if you are on a
leave or absence for more than 90 days, unless (and only for as long as) your
right to reemployment with the Company or an Affiliate is guaranteed by statute
or contract.
6. This option may be exercised by written notice delivered to the
Secretary of the Company, which notice shall specify the number of whole Option
Shares to be purchased and the purchase price to be paid therefor. The date of
delivery of such written notice shall be the date of exercise. Such notice shall
be accompanied by:
a. cash or a bank check payable to the Company in the amount
of the purchase price;
b. certificates for shares of Common Stock endorsed in blank
and having a fair market value as of the date of exercise which, in the
determination of the Committee, is not less than the purchase price; or
c. a combination of certificates for shares of Common Stock
and cash (or a bank check) having a combined value as of the date of exercise
which, in the determination of the Committee, is not less than the purchase
price;
54
provided, that certificates for shares of Common Stock which were acquired
through the exercise of incentive stock options may not be delivered in payment
of the purchase price unless the shares have been held by the optionee for at
least six months prior to the date of exercise.
7. The Company may postpone the issuance and delivery of the Option
Shares upon any exercise of this option until the compliance with applicable
requirements of any securities exchange or system on which the shares of the
Company of the same class have been listed and the completion of such
registration or other qualification of such shares under and the compliance with
other applicable provisions of any State or Federal securities law, rule or
regulation as the Committee may determine to be necessary or advisable. Nothing
herein contained shall be deemed to require the Company to file or amend a
registration statement under the Securities Act.
8. This option shall not be assignable or transferable by you, other
than by will or by the laws of descent and distribution, and shall be
exercisable during your lifetime only by you. If all or any part of this option
remains exercisable after your death, it may be exercised by the personal
representative of your estate or by any person who acquires the right to
exercise it by bequest, inheritance, or otherwise by reason of your death.
9. Nothing in this Agreement confers any right on you to continue in
the employ of the Company or of any of its Affiliates, or affects in any way the
right of the Company or its Affiliates to terminate your employment at any time,
with or without cause, subject to the terms of any employment agreement between
you and the Company or its Affiliates.
10. This Agreement shall be binding upon and inure to the benefit of,
any successor or successors to all or substantially all of the business or
assets of the Company.
11. This Agreement shall be governed by, and construed and interpreted
in accordance with, the laws of the State of Minnesota.
55
In order to evidence the grant of this option, please execute
the extra copy of this Agreement in the space provided and return the same to
the Company, whereupon this Agreement and the copy so signed and returned by you
shall constitute a binding option agreement between us.
IPI, INC.
By:
-------------------------------------
I hereby acknowledge that I have received and carefully read
all of the provisions of the Plan and this Agreement, and agree to be bound by
this Agreement.
Signature:
------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
56
CLOSING DOCUMENT
Pursuant to a purchase agreement signed December 13, 1999 by the undersigned
parties, such parties agree that the attached exhibits have been appropriately
updated for the closing of such agreement. The attached exhibits supersede the
exhibits contained within the December 13, 1999 document.
BUYER:
IPI, INC. DREAMCATCHER FRANCHISE CORPORATION
By: /s/ (ILLEGIBLE) By: /s/ (ILLEGIBLE)
------------------------------- -------------------------------
Its: CEO Its: President
------------------------------ ------------------------------
Dated: 1/5/2000 Dated: 1/5/2000
---------------------------- ----------------------------
SELLER:
DREAMCATCHER LEARNING CENTERS, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------
Its: President/CEO
------------------------------
SELLER SHAREHOLDERS:
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------------- -----------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Dated: 1-5-2000 Dated: 1-5-2000
---------------------------- ----------------------------
57
EXHIBITS LISTING
1.1.7 Prepaid Assets and Deposits
1.1.8 Receivables
1.3.1 Liabilities
2.2 Allocation of Purchase Price
3.4.1 Sellers' Financial Statements, as of 12/31/99
3.15.1 Employee Plans
3.17.1 Employee List
3.17.2 Terminated Employees
58
EXHIBIT 1.1.8
Receivables
Dreamcatcher Direct Instruction Receipts Due
Report Date: 01/05/2000
Windsor, CO Total Accounts Receivable: $ 4,426.98
Fort ▇▇▇▇▇▇▇, CO Total Accounts Receivable: 4,617.50
Greeley, CO Total Accounts Receivable: 1,765.78
----------
Total Due $11,686.41
==========
59
EXHIBIT 1.1.7
Prepaid Assets and Deposits
Balance
1/5/2000
--------
Security Deposits $1,800.00
Monroe NC Electric Deposit 0.00
▇▇▇▇▇ Bank Account 100.00
▇▇▇▇▇ Bank Payroll Account 0.00
Bank of Colorado - Front Range 1.25
60
EXHIBIT 1.1.8
Receivables
Accounts receivable aging is as of December 9, 1999 is attached and will be
updated weekly until the Closing.
61
EXHIBIT 1.3.1
Liabilities
U.S. Bank $68,015.88
McGraw Hill 6,000.00
▇▇▇▇▇▇▇▇ Photocopy 515.00
Tax Deposits (with estimated 15% penalty) 21,620.53
----------
$96,815.69
==========
*Upon the mutual agreement of Buyer and Seller, the liabilities may include
Seller's obligations to provide Seller's employees paid vacation days and/or
paid sick leave (list employee, hours/days, and dollar value as of the Closing
Date). Buyer has no obligation to hire any of Seller's employees under any
conditions and will only agree to permit such vacation and sick pay liabilities
to be included within the Assumed Liabilities at Buyer's sole discretion.
Liabilities assumed by Buyer pursuant to this Exhibit 1.3.1 and Exhibit 1.3.1 to
the Asset Purchase Agreement between Dreamcatcher Franchise Corporation, a
Colorado corporation, and Dreamcatcher Franchise Corporation, a Minnesota
corporation, may not exceed $395,000. To the extent liabilities identified on
such Exhibits do exceed $395,000, Buyer may elect which of such liabilities
Buyer is assuming and limit such aggregate amount to $395,000.
62
EXHIBIT 2.2
Allocation of Purchase Price
Accounts Receivable Actual $101.25
Inventory/Educational Materials Actual 10,810.26
Prepaids Actual 14,023.96
Fixed Assets Up to $ 6,303.37
-------------------
Intellectual Property/Intangibles
Other than Goodwill Up to $ 25,000.00
-------------------
Goodwill Balance (if any)
$38,776.85
----------
Total $96,815.69
==========
63
EXHIBIT 3.4.1
Seller's Financial Statements
DLC
Balance Sheet
December 31, 1999
ASSETS
Current Assets
▇▇▇▇▇ Bank Account $ 2,430.26
▇▇▇▇▇ Bank-Payroll Account 130.13
Bank of Colorado-Front Range 1.25
Accounts Receivable (6,436.02)
Employee Advances (749.50)
-----------
Total Current Assets (4,623.88)
Property and Equipment
Photocopy Machine 3,815.99
Signs 2,877.89
Furniture & Fixtures 19,881.73
Furniture & Fixtures 1,387.54
Furniture & Fixtures 460.57
Furniture & Fixtures 106.65
Accumulated Depreciation (22,227.00)
Ed. Materials (Permanent) 14,023.96
-----------
Total Property and Equipment 20,327.33
Other Assets
Note for Loveland Franchise (8,884.47)
Security Deposits 3,486.01
Monroe NC Electric Deposit 106.70
Due from DFC 5,895.37
-----------
Total Other Assets 603.61
------------
Total Assets $ 16,307.06
============
Unaudited--For Management Purposes Only
64
EXHIBIT 3.4.1
Seller's Financial Statements
DLC
Balance Sheet
December 31, 1999
LIABILITIES AND CAPITAL
Current Liabilities
Fed/FICA Payable $ 16,233.86
State W/H Payable 2,338.46
Futa/Suta Payable (355.27)
------------
Total Current Liabilities 18,217.05
Long-Term Liabilities
Line of Credit--U.S. Bank 68,680.16
N/P Dreamcatcher Franchise 99,736.00
Deposit from Franchise 55,462.54
Note Payable Officer 43,216.09
------------
Total Long-Term Liabilities 267,094.79
------------
Total Liabilities 285,311.84
Capital
Common Stock 40,600.00
Retained Earnings (219,895.94)
Net Income (89,708.84)
------------
Total Capital (269,004.78)
------------
Total Liabilities & Capital $ 16,307.06
============
Unaudited--For Management Purposes Only
65
EXHLBIT 3.4.1
Seller's Financial Statements
DLC
Income Statement
For the Twelve Months Ending December 31, 1999
Current Year to Date
Month
Revenues
Lessons-W 821.00 11.15 22,991.00 17.73
Lessons-G 2,848.00 38.67 45,750.50 35.28
Lessons-FC 3,079.25 41.80 52,841.25 40.75
Testing-W 390.00 5.29 1,747.50 1.35
Testing-G 285.00 3.87 2,975.00 2.29
Testing-FC 62.50 0.85 2,002.50 1.54
Finance Charge-W 0.00 0.00 37.54 0.03
Credits-W (120.00) (1.63) (240.00) (0.19)
Credits-G 0.00 0.00 (507.00) (0.39)
Other Income-Books, etc. 0.00 0.00 3,000.00 2.31
Refunds-Loveland 0.00 0.00 (922.00) (0.71)
----------- -----------
Total Revenues 7,365.75 100.0 129,676.29 100.0
----------- -----------
Cost of Sales
Rent-Windsor (500.00) (6.79) (10,000.00) (7.71)
Rent-Greeley (1,000.00) (13.58) (11,000.00) (8.48)
Rent-Fort ▇▇▇▇▇▇▇ (1,037.25) (14.08) (12,523.70) (9.66)
Salaries-Windsor (6,602.50) (89.64) (71,484.98) (55.13)
Salaries-Greeley (2,156.50) (29.28) (26,233.75) (20.23)
Salaries-Fort ▇▇▇▇▇▇▇ (2,149.25) (29.18) (19,057.13) (14.70)
Total Cost of Sales (13,445.50) (182.54) (150,299.56) (115.90)
----------- -----------
Gross Profit (6,079.75) (82.54) (20,623.27) (15.90)
----------- -----------
66
EXHLBIT 3.4.1
Seller's Financial Statements
DLC
Income Statement
For the Twelve Months Ending December 31, 1999
Current Year to Date
Month
Expenses
Advertising 540.00 7.33 (1,878.98) (1.45)
Advertising-Windsor 0.00 0.00 (91.00) (0.07)
Advertising-Greeley 0.00 0.00 (308.15) (0.24)
Advertising-Fort ▇▇▇▇▇▇▇ 0.00 0.00 (1,352.95) (1.04)
Travel 0.00 0.00 (516.00) (0.40)
Auto Expense (1,270.81) (17.25) (8,120.83) (6.26)
Bank Service Charges (74.57) (1.01) (2,148.16) (1.66)
Contributions 0.00 0.00 (100.00) (0.08)
Dues & Subscriptions 0.99 0.00 (582.28) (0.45)
Dues & Subscriptions-Greeley 0.00 0.00 (55.00) (0.04)
Dues & Subscriptions-Fort ▇▇▇▇▇▇▇ 0.00 0.00 (55.00) (0.04)
Educational Materials 0.00 0.00 (3,000.00) (2.31)
Utilities (195.06) (2.65) (195.06) (0.15)
Utilities-Greeley (345.60) (4.69) (1,255.16) (0.97)
Utilities-Fort ▇▇▇▇▇▇▇ (132.45) (1.80) (799.38) (0.62)
Insurance-Auto (549.70) (7.46) (1,970.30) (1.52)
Insurance-Health 5,655.11 76.78 (14,939.11) (11.52)
Insurance-General 792.07 10.75 213.93 (1.71)
Insurance-Windsor 0.00 0.00 1,637.54 1.26
Insurance-Greeley 0.00 0.00 60.48 0.05
Insurance-Fort ▇▇▇▇▇▇▇ 0.00 0.00 290.05 0.25
Insurance-Life 0.00 0.00 753.22 (0.58)
Interest Expense (1,278.15) (17.35) (5978.26) (4.61)
Legal & Accounting 0.00 0.00 (435.20) (0.34)
Miscellaneous Expense 2,120.00 28.78 (1,574.03) (1.21)
Meals 0.00 0.00 (120.72) (0.09)
Office Expense 2,228.23 30.25 403.73 0.31
Office Expense-Windsor (57.93) (0.79) (696.23) (0.54)
Office Expense-Greeley 0.00 0.00 (150.16) (0.12)
Office Expense-Fort ▇▇▇▇▇▇▇ (24.07) (0.33) (182.11) (0.14)
Postage Expense 0.00 0.00 (267.85) (0.21)
Payroll Service Expense 0.00 0.00 (267.85) (0.23)
Rent Expense-Loveland 400.00 5.43 400.00 0.31
67
Repairs & Maintenance 0.00 0.00 (125.00) (0.10)
Supplies Expense 0.00 0.00 (515.15) (0.40)
Supplies Expense-Windsor 0.00 0.00 (12.06) (0.01)
Supplies Expense-Greeley 0.00 0.00 (518.03) (0.40)
Supplies Expense-Fort ▇▇▇▇▇▇▇ 0.00 0.00 (60.78) (0.05)
Taxes, Payroll 224.22 3.04 224.22 0.17
Taxes, Payroll-Windsor (490.01) (6.65) (5,411.67) (4.17)
Taxes, Payroll-Greeley (164.97) (2.24) (2,004.34) (1.55)
Taxes, Payroll-Fort ▇▇▇▇▇▇▇ (164.41) (2.23) (1,408.43) (1.09)
Futa-Windsor (5.23) (0.07) (229.97) (0.18)
Futa-Greeley (4.45) (0.06) (115.80) (0.09)
Futa-Fort ▇▇▇▇▇▇▇ (17.19) (0.23) (147.30) (0.11)
Suta-Windsor (2.52) (0.03) (96.35) (0.07)
▇▇▇▇-▇▇▇▇▇▇▇ (1.11) (0.02) (44.09) (0.03)
Suta-Fort ▇▇▇▇▇▇▇ (4.30) (0.06) (42.67) (0.03)
Telephone Expense 396.86 5.39 (274.65) (0.21)
Telephone Expense-Windsor 0.00 0.00 (5,335.55) (4.11)
Telephone Expense-Greeley 0.00 0.00 (602.83) (0.46)
Telephone Expense-Fort ▇▇▇▇▇▇▇ 0.00 0.00 (1,611.64) (1.24)
Training Expense 0.00 0.00 (380.00) (0.29)
Travel & Entertainment 0.00 0.00 (497.75) (0.38)
Fines & Penalties 0.00 0.00 (1,050.18) (0.81)
Other Income 0.00 0.00 (485.45) (0.37)
Independence Academy 0.00 0.00 (913.64) (0.70)
----------- -----------
Total Expenses 7,573.96 102.83 (69,085.57) (53.28)
----------- -----------
Net Income $ 1,494.21 20.29 $(89,708.84) (69.18)
=========== ===========
For Management Purposes Only
68
EXHIBIT 3.15.1
EMPLOYEE PLANS
PLAN DESCRIPTIONS
MEDICAL PLAN Company pays 100% of the employees health insurance
premiums and 0% of Spouse/dependents coverage.
DENTAL PLAN Paid 100% by employee.
CAFETERIA 125 PLAN Company administers the plan. There is no corporate
contribution.
LIFE INSURANCE All full-time employees are eligible for $10,000 of life
insurance paid by the Company.
PAID VACATION One day per month of employment for the first year. One
and one-half days per month of employment for years 2-5.
Two days per month of employment for subsequent years.
Days are added at the first of the year, but are prorated
down to the termination date.
PAID SICK TIME Half-day per month of employment. Days are added at the
beginning of the year. Unused days are not paid at
termination.
----------------------- -------------- ------------ ------------- --------------- ------------- -------------
Vacation Sick Time
Accrued Accrued
Name Medical * Dental * 125Plan * Life Ins. * (in days) (in days)
------------------------ ------------- ------------ ------------- --------------- ------------- -------------
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ (1) X X X 52.25 20.75
------------------------ ------------- ------------ ------------- --------------- ------------- -------------
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ (1) X X X 52.25 26.75
------------------------ ------------- ------------ ------------- --------------- ------------- -------------
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ (1) X X 5.00 5.75
------------------------ ------------- ------------ ------------- --------------- ------------- -------------
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ (1) 0.00 0.63
------------------------ ------------- ------------ ------------- --------------- ------------- -------------
▇▇▇▇▇▇, ▇▇▇▇▇▇
------------------------ ------------- ------------ ------------- --------------- ------------- -------------
▇▇▇▇▇▇, ▇▇▇▇▇▇
------------------------ ------------- ------------ ------------- --------------- ------------- -------------
▇▇▇▇, ▇▇▇▇▇▇▇ (1) X X X X 41.25 11.75
------------------------ ------------- ------------ ------------- --------------- ------------- -------------
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
------------------------ ------------- ------------ ------------- --------------- ------------- -------------
▇▇▇▇▇, ▇▇▇▇▇
------------------------ ------------- ------------ ------------- --------------- ------------- -------------
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇
------------------------ ------------- ------------ ------------- --------------- ------------- -------------
▇▇▇▇▇▇▇, ▇▇▇▇ (1) X X X X
------------------------ ------------- ------------ ------------- --------------- ------------- -------------
▇▇▇▇▇▇▇, ▇▇▇▇▇
------------------------ ------------- ------------ ------------- --------------- ------------- -------------
▇▇▇▇▇▇▇▇, ▇▇▇
------------------------ ------------- ------------ ------------- --------------- ------------- -------------
* (X = enrolled)
(1) These individuals perform services for both Dreamcatcher Learning, Inc. and
Dreamcatcher Franchise Corporation (DFC). The accrued vacation and sick time
represent amounts effective as of December 13, 1999 for both organizations.
69
EXHIBIT 3.17.1
EMPLOYEE LIST
---------------------------- ---------------- ----------- ------------ ----------- ------------ ------------ ------------
NAME POSITION DATE OF STATUS HOURLY MONTHLY BONUS ADD'L.
HIRE FT/PT RATES SALARY COMP.
---------------------------- ---------------- ----------- ------------ ----------- ------------ ------------ ------------
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ (1) Owner 1/1/95 FT - 0 - - 0 - ****
---------------------------- ---------------- ----------- ------------ ----------- ------------ ------------ ------------
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ (1) Owner 1/1/95 FT - 0 - - 0 - ****
---------------------------- ---------------- ----------- ------------ ----------- ------------ ------------ ------------
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ (1) Director-Greeley 7/1/98 FT $1,900 Eligible*
---------------------------- ---------------- ----------- ------------ ----------- ------------ ------------ ------------
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ (1) Director-Fort 11/8/99 FT $1,800 Eligible*
▇▇▇▇▇▇▇
---------------------------- ---------------- ----------- ------------ ----------- ------------ ------------ ------------
▇▇▇▇▇▇, ▇▇▇▇▇▇ Instructor $10.50 - 0 -
---------------------------- ---------------- ----------- ------------ ----------- ------------ ------------ ------------
▇▇▇▇, ▇▇▇▇▇▇ Office Mgr. 1/6/00 PT $1,000 - 0 -
---------------------------- ---------------- ----------- ------------ ----------- ------------ ------------ ------------
▇▇▇▇▇▇, ▇▇▇▇▇▇ Instructor $10.50 - 0 -
---------------------------- ---------------- ----------- ------------ ----------- ------------ ------------ ------------
▇▇▇▇, ▇▇▇▇▇▇▇ (1) Franchisee 3/1/96 FT $2,500 - 0 - **
Training
---------------------------- ---------------- ----------- ------------ ----------- ------------ ------------ ------------
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ Instructor $10.50 - 0 -
---------------------------- ---------------- ----------- ------------ ----------- ------------ ------------ ------------
▇▇▇▇▇, ▇▇▇▇▇ Instructor $10.50 - 0 -
---------------------------- ---------------- ----------- ------------ ----------- ------------ ------------ ------------
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ Instructor $10.50 - 0 -
---------------------------- ---------------- ----------- ------------ ----------- ------------ ------------ ------------
▇▇▇▇▇▇▇, ▇▇▇▇ (1) Director- 6/1/97 PT $1,200 - 0 -
Windsor
---------------------------- ---------------- ----------- ------------ ----------- ------------ ------------ ------------
▇▇▇▇▇▇▇, ▇▇▇▇▇ Instructor $10.50 - 0 -
---------------------------- ---------------- ----------- ------------ ----------- ------------ ------------ ------------
▇▇▇▇▇▇▇▇, ▇▇▇ Instructor $10.50 - 0 -
---------------------------- ---------------- ----------- ------------ ----------- ------------ ------------ ------------
(1) These individuals perform services for both Dreamcatcher Learning, Inc. and
Dreamcatcher Franchise Corporation (DFC).
* Bonus Plan: For Full-Time Managers / Directors
o Paid $4 per hour of instruction delivered over 50 hrs. per week
o Paid $6 per hour of instruction delivered over 75 hrs. per week
o Paid $10 per hour of instruction delivered over 100 hrs. per week
** Automobile/Insurance; Master's Program at UNC (books/tuition); Stock in DFC
(900 shares)
*** Stock in DFC (900 shares)
**** Automobile/Insurance; Additional Life Insurance
70
EXHIBIT 3.17.2
TERMINATED EMPLOYEES
------------------------ ------------------------------ --------------------- ---------------------
MONTH/YEAR OF
NAME POSITION LOCATION TERMINATION
------------------------ ------------------------------ --------------------- ---------------------
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ Asst. Director/Instructor Fort ▇▇▇▇▇▇▇ 8/99
------------------------ ------------------------------ --------------------- ---------------------
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ Instructor Fort ▇▇▇▇▇▇▇ 5/99
------------------------ ------------------------------ --------------------- ---------------------
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ Instructor Fort ▇▇▇▇▇▇▇ 10/98
------------------------ ------------------------------ --------------------- ---------------------
Childs, ▇▇▇▇ Admin./Instructor Windsor 12/99
------------------------ ------------------------------ --------------------- ---------------------
▇▇▇▇, ▇▇▇▇▇▇ Instructor Fort ▇▇▇▇▇▇▇ 9/98
------------------------ ------------------------------ --------------------- ---------------------
▇▇▇▇▇▇▇, ▇▇▇▇▇ Center Director Greeley 8/98
------------------------ ------------------------------ --------------------- ---------------------
▇▇▇▇, ▇▇▇▇▇▇ Instructor Windsor 8/99
------------------------ ------------------------------ --------------------- ---------------------
▇▇▇▇▇▇, ▇▇▇▇▇▇ Instructor Windsor 7/99
------------------------ ------------------------------ --------------------- ---------------------
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ Instructor/Office Asst. Windsor 9/99
------------------------ ------------------------------ --------------------- ---------------------
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ Instructor Fort ▇▇▇▇▇▇▇ 1/99
------------------------ ------------------------------ --------------------- ---------------------
▇▇▇▇▇▇▇, ▇▇▇▇▇ Accountant Windsor 12/99
------------------------ ------------------------------ --------------------- ---------------------
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ Instructor Fort ▇▇▇▇▇▇▇ 9/99
------------------------ ------------------------------ --------------------- ---------------------
71