** Certain information in this exhibit has been
omitted and has been filed separately with the Securities and Exchange
Commission pursuant to a confidential treatment request under Rule 24b-2 of the
General Rules and Regulations under the Securities Act of 1934.
ASSET PURCHASE AGREEMENT
Asset Purchase Agreement (Agreement) is entered into as of the close
of business on March 31, 2007 (the Effective Date) by and among:
New Horizons Computer Learning Center of Cleveland,
Ltd., L.L.C., a Delaware limited liability company (Seller) and New
Horizons Worldwide, Inc. (Parent), on the one hand;
and NH Cleveland, LLC, a Michigan limited liability
company (Buyer), and M&J L.L.C., a Michigan limited liability
company (M&J) that is an Affiliate of Buyer, on the other hand.
Seller and Buyer are hereinafter sometimes
individually referred to as a Party or collectively as the Parties.
Seller wishes to sell to Buyer, and Buyer wishes to purchase from Seller,
substantially all of Sellers assets related to Sellers computer training
business located in Cleveland, Ohio (the Business); and
concurrent with the transactions described in this Agreement, Buyer desires to
become a franchisee of New Horizons Franchising Group, Inc. (Franchisor)
in Cleveland, Ohio, it being understood that Franchisor is an Affiliate of
THEREFORE, in consideration of the covenants and agreements contained herein,
the Parties agree as follows:
Section 1 Certain Definitions
used in this Agreement the following terms shall have the following respective
Employees shall have the meaning set forth in Section 5.7.
Payable shall mean all of Sellers trade accounts payable (including all trade
accounts payable with respect to goods and services received by Seller but for
which invoices have not yet been received by Seller) that arise from the
conduct of the Business and relate to the period prior to the Closing.
Payable Aging shall mean a report prepared by Seller showing the aging of the
Non-Current Accounts Payable of Seller as of the Effective Date.
Action shall mean any
action, suit, complaint, charge, hearing, arbitration, inquiry, proceeding or
investigation by or before any court of competent jurisdiction, governmental or
other regulatory or administrative agency or commission or arbitral panel.
(and, with a correlative meaning, Affiliated) shall mean, with respect to any
Person, any other Person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
such first Person. As used in this
definition, control (including, with correlative meanings, controlled by
and under common control with) shall mean possession, directly or indirectly,
of power to direct or cause the direction of management or policies (whether
through ownership of securities or partnership or other ownership interests, by
contract or otherwise).
shall have the meaning set forth in the preamble hereto.
Agreements shall mean, collectively, any agreements, certificates or other
documents delivered at or prior to the Closing in connection with the
transactions contemplated by this Agreement and shall include, without limitation,
the Assignment and Assumption Agreement, the Assignment of Lease, the Bill of
Sale, and the Franchisor Consent.
Contracts shall have the meaning set forth in Section 2.1(F).
and Assumption Agreement shall have the meaning set forth in Section 3.1(B).
Liabilities shall have the meaning set forth in Section 3.4.
of Sale shall have the meaning set forth in Section 4.2(A)(3).
shall have the meaning set forth in the first recital hereof.
shall have the meaning set forth in the preamble hereto.
Indemnified Party shall have the meaning set forth in Section 8.2.
shall have the meaning set forth in Section 8.4.
shall mean all cash, time deposits, certificates of deposit, marketable
securities, short-term investments and other cash equivalents of Seller.
Payment shall have the meaning set forth in Section 3.1(A).
means (i) any right to payment, whether or not such right is reduced to
judgment, liquidated, fixed, contingent, unmatured, disputed, legal, equitable,
or secured and (ii) any right to an equitable remedy for breach of
performance if such breach gives rise to a right to payment, whether or not
such right to an equitable remedy is reduced to judgment, fixed, contingent,
matured, unmatured, disputed, undisputed, secured, or unsecured.
Agreement shall mean that certain Asset Purchase Agreement dated of even date
herewith between, inter alia, New Horizons Computer Learning Center of Chicago,
Inc., and Chicago Buyer.
Chicago Buyer shall
mean NH Chicago, LLC, a Michigan limited liability company.
Seller shall mean New Horizons Computer Learning Center of Chicago, Inc.
shall have the meaning set forth in Section 4.1.
Balance Sheet shall have the meaning set forth in Section 3.2(A).
Financial Data shall have the meaning set forth in Section 3.2(A).
Working Capital shall have the meaning set forth in Section 3.2(A).
shall have the meaning set forth in Section 5.7(B).
shall mean the Internal Revenue Code of 1986, as amended, and any successor
shall mean all existing instruments, contracts, agreements, arrangements,
understandings and commitments, whether written or oral, of Seller or its
Affiliates related to or arising from the conduct of the Business.
Contracts shall have the meaning set forth in Section 2.1(F).
Accounts Payable shall have the meaning set forth in Section 3.4(A)(1).
shall have the meaning set forth in
shall have the meaning set forth in Section 9.9(A).
Date shall have the meaning set forth in the preamble hereto.
Benefit Plans shall have the meaning set forth in Section 6.15(B).
Law shall mean any currently applicable local, state or federal statute or any
rule, regulation, code, or ordinance issued or promulgated thereunder, that
relates to the operations of the Business and/or the use of the Leased
Premises, concerning protection of human health, safety, or the environment or
that regulates, restricts or governs the use, storage, disposition or release
of Hazardous Materials.
shall have the meaning set forth in Section 2.1(B).
shall mean the Employee Retirement Income Security Act of 1974, as amended.
Date shall have the meaning set forth in Section 5.7(B).
Facilities Lease shall have the meaning set
forth in Section 2.1(A).
Final Closing Working
Capital shall have the meaning set forth in Section 3.2(C).
Purchase Price shall have the meaning set forth in Section 3.2(E).
Statements shall have the meaning set forth in Section 6.7(A).
Agreement shall have the meaning set forth in Section 4.5(B).
Consent shall have the meaning set forth in Section 4.2(A)(7).
shall mean United States generally accepted accounting principles, consistently
Heights Lease shall have the meaning set forth in Section 2.1(A).
shall have the meaning set forth in Section 2.1(C).
Authority means any United States federal, state or local or any foreign
government, governmental regulatory or administrative authority, agency,
commission, department, board, bureau, or instrumentality or any court,
tribunal or judicial or arbitral body.
Permits shall have the meaning set forth in Section 2.1(C).
Materials shall mean any substance that is designated as a hazardous
substance, hazardous waste, hazardous material, toxic substance, toxic
pollutant, contaminant, pollutant, or words of similar import under any
Party shall have the meaning set forth in Section 8.3(A).
Party shall have the meaning set forth in Section 8.3(A).
Franchise Fee shall have the meaning set forth in Section 4.3(A).
Working Capital shall mean the sum of $25,605, which the Parties agree was the
amount of Sellers Working Capital as of February 28, 2007 (after the add back
of the March 2007 rent which was inadvertently posted to the February 2007
Personal Property shall have the meaning set forth in Section 2.1(C).
Property shall mean all patents, patent rights, trade names, trade marks,
trade mark registrations, service marks, service mark registrations,
copyrights, inventions, trade secrets, databases, data collections, know-how,
logos, marks (including brand names, product names, logos and slogans), methods,
network configurations and architectures, processes, software, software code
(in any form, including source code and executable or object code), web sites,
works of authorship, and other similar rights (including other unpatented
and/or unpatentable proprietary or confidential information systems or
procedures), applications for any of the foregoing, and licenses therefor, in
each case presently used or held for use by Seller in the Business.
Inventory shall have
the meaning set forth in Section 2.l(B).
shall mean the United States Internal Revenue Service.
and words of similar import shall mean such facts or other matters of which the
referenced Person is aware or which such Person could be expected to discover
or otherwise become aware of after having made due inquiry and reasonable
investigation of the appropriate Persons having responsibility for such matters
or having access to the relevant information.
A Person that is an entity shall be deemed to have Knowledge of a particular
fact or matter if any individual who is serving as a director, officer,
management level employee, manager, partner, executor or trustee of such Person
(or in any similar capacity) has, or at any time had, Knowledge of such fact or
Premises shall have the meaning set forth in Section 2.1(A).
means any liability (whether known or unknown, whether asserted or unasserted,
whether absolute or contingent, whether accrued or unaccrued, whether
liquidated or unliquidated, and whether due or to become due and regardless of
when asserted), including, without limitation, any liability for Taxes.
shall have the meaning set forth in Section 4.2(A).
shall mean any loss, cost, Liability, lost profits, diminution of value, damage
(including consequential damages), penalty, fine, judgment, Claim or expense
(including reasonable attorneys fees).
Recent Financial Statements shall have the meaning set forth in Section
Auditors shall have the meaning set forth in Section 3.2(C).
Accounts Payable shall have the meaning set forth in Section 3.4(A)(2).
means any decree, order, injunction, rule, judgment, consent of or by any court
or Governmental Authority.
Course shall mean the ordinary course of Sellers conduct of the Business
consistent with past practice.
Liens shall have the meaning set forth in Section 4.2(A).
shall mean any individual, firm, corporation, partnership, limited liability
company, joint venture, association, estate, trust, governmental agency or body
or other entity, and shall include any successor (by merger or otherwise) of
shall have the meaning set forth in Section 2.1(C).
Assets shall have the meaning set forth in Section 2.1.
Purchase Price shall
have the meaning set forth in Section 3.1.
shall have the meaning set forth in Section 2.1(G).
shall have the meaning set forth in Section 2.1(E).
Period shall have the meaning set forth in Section 3.2(B).
Assets shall have the meaning set forth in Section 2.2.
Liabilities shall have the meaning set forth in Section 3.4(B).
shall mean returns, reports, statements, notices, forms or other documents or
information required to be filed with any U.S. Taxing Authority or foreign
taxing authority in connection with the determination, assessment, collection
or payment of any Taxes or in connection with the administration, implementation
or enforcement of or compliance with any legal requirement relating to any Tax.
Credit shall have the meaning set forth in Section 4.5(B).
Payments shall have the meaning set forth in Section 3.2(D).
shall have the meaning set forth in the preamble hereto.
Indemnified Party shall have the meaning set forth in Section 8.1(A).
shall have the meaning set forth in Section 2.1(D).
Personal Property shall have the meaning set forth in Section 2.1(B).
shall mean all taxes, charges, fees, levies, impositions, or like other
assessments (whether U.S. federal, state, local or foreign) based upon or
measured by income and any other tax whatsoever, including, without limitation,
single business, gross receipts, profits, premium, sales, use, occupation,
value added, ad valorem, transfer, franchise, withholding, payroll, employment,
unemployment, excise, windfall profits, transfer, license, occupation or real
or personal property taxes, together with any interest, penalties or additions
to tax resulting from, attributable to, or incurred in connection with any such
taxes or any contest or dispute thereof.
Party Claim shall have the meaning set forth in Section 8.3(B).
Obligations shall have the meaning set forth in Section 3.4(A)(3).
shall have the meaning set forth in Section 2.1(B).
Act shall have the meaning set forth in Section 3.4(B)(3).
Working Capital shall
mean (a) the book value of the following current assets of Seller that comprise
a part of the Purchased Assets: trade accounts receivable (less A/R
Control-Contra, A/R-Suspense, A/R-CES Suspense, A/R Co-Owned Suspense, Reserve
for Futures, Reserves for Subsequent CM, and Allowance for Doubtful Accounts), A/R-ELS,
A/R-COL to COL and total
Inventory-Reserve), less (b) the book value of the following current
liabilities of Seller that comprise a part of the Assumed Liabilities: accounts
payable outstanding less than 31 days from the date of invoice, Customer
Deposits, Payable to Other Franchisees and Refund Reserve Liability, all as
determined in accordance with GAAP. The
calculation of Working Capital shall be made in a manner consistent with the
calculation shown in Exhibit E attached
Capital Adjustment shall have the meaning set forth in Section 3.2(D).
Capital Deficiency shall have the meaning set forth in Section 3.2(D).
Capital Surplus shall have the meaning set forth in Section 3.2(D).
Section 2 Purchase and Sale of Assets; Excluded Assets
2.1 Purchased Assets.
Pursuant to the terms and subject to the conditions set forth in this
Agreement, on the Effective Date, Seller hereby agrees to sell, grant,
transfer, convey, assign and deliver to Buyer, and Buyer agrees to purchase and
acquire from Seller, all of Sellers right, title and interest in all of the
properties, assets and rights owned, used, acquired for use, or arising or
existing in connection with the Business wherever located, whether tangible or
intangible, and whether or not recorded on Sellers books and records, except
for and excluding solely the Retained Assets provided for in Section 2.2 below
(all the foregoing being collectively referred to as the Purchased Assets). The Purchased Assets shall include, but not
be limited to, the following:
(A) All rights of Seller under its occupancy lease (the Facilities
Lease) covering the facilities at 1 Infinity Corporate Centre Dr.,
Garfield Heights, Ohio 44125 (the Leased Premises), a true and
complete copy of the Facilities Lease, as amended to date, being included at Schedule 2.1(A) attached hereto;
(B) All of Sellers (x) vehicles used in connection with the conduct
of the Business (Vehicles), (y) furniture, furnishings,
fixtures, equipment, machinery, trade fixtures, leasehold improvements,
computers, computer discs, telephone systems and security systems (Equipment),
and (z) supplies, training and course materials, computer training kits
and manuals, catalogs, advertising copy and other properties of a similar type
used or held for use in the conduct of the Business (Inventory and,
together with the Vehicles and Equipment, whether owned or leased, the Tangible
Personal Property), a listing of all of which is included at Schedule 2.1(B) attached hereto (which Schedule indicates
whether the Vehicles and Equipment are owned or leased and, if leased, includes
a true and complete copy of the lease or other agreement(s) governing the same,
as amended to date);
of Sellers (u) telephone and facsimile numbers, post office boxes,
e-mail addresses, websites, Internet domain names, trade names and assumed
names relating to the Business, (v) permits and other governmental
authorizations pertaining to the Business (Governmental Permits), to
the extent such authorizations may legally be assigned, (w) goodwill
with customers, vendors or prospective customers, and all customer lists,
relating to the conduct of the Business (Goodwill), (x)
security or similar deposits relating to the Business but
(i) such shall exclude security deposits
under any lease or agreement not comprising a part of the Assigned Contracts,
and (ii) such shall exclude the security deposit made under the Facilities
Lease (Deposits), (y) prepaid advertising (inclusive of yellow
page advertising), prepaid expenses and other prepayments relating to the
conduct of the Business (Prepayments), and (z) all other
intangible assets relating to the Business or any of the Purchased Assets (the
foregoing being collectively called the Intangible Personal Property),
a listing of all of which is included at Schedule 2.1(C)
(D) All of Sellers software (including rights under Sellers software
licenses), including SAGE accounting software, and other software used in the
conduct of the Business (Software), but excluding the CMS software
otherwise provided for in the Franchise Agreement (as defined in Section
4.5(B)), a listing of all of such Software being included at Schedule 2.1(D) attached hereto (and, as to each,
identifying whether such is owned by Seller or licensed for use by Seller and,
if licensed, includes a true and complete copy of the license agreement or
other agreement(s) governing the same, as amended to date, and all of Sellers
rights in and to all other Intellectual Property used in connection with the
Business (except for such Intellectual Property as is licensed to Buyer
pursuant to the Franchise Agreement);
(E) All of Sellers accounts and notes receivable, and other rights to
receive payment, from customers, employees or others arising from the conduct
of the Business (Receivables), a listing of all of which (showing, as
to each, the name of the account debtor, the amount owed and an aging schedule
thereof) is included at Schedule
2.1(E) attached hereto;
(F) Except as provided in Section 2.2(E), all rights of Seller under any
Contracts which relate to or arise from the operation of the Business and are
accepted in writing by Buyer (Assigned Contracts), including any
thereof with customers or prospective customers which benefit the Business from
and after the Effective Date, including, but not limited to, computer training
center agreements and, further, including all rights to receive payment from
customers for services to be performed and invoiced after the Effective Date (Customer
Contracts), including without limitation the right to payment with regard
to coupon sales and redemptions, PC Club sales, corporate technical club sales
or applications, and future training classes, a listing of all of which
Assigned Contracts is included at Schedule
2.1(F) attached hereto; and
(G) Sellers books and records, books of account, personnel files and
records for those employees of Seller who become employees of Buyer, files,
invoices, accounting records, and correspondence relating to any of the
Business, the Purchased Assets or the Assumed Liabilities (Records).
2.2 Retained Assets.
Notwithstanding the provisions of Section 2.1, the Purchased Assets
shall not include any of the following (the Retained Assets):
Customer Contracts between Sellers Affiliate and third party customers for the
delivery of training managed through the Enterprise Learning Solutions
department of Sellers Affiliate, provided that Buyer shall be entitled to
deliver training in its capacity as a New Horizons franchisee and shall be
deemed the selling center which shall
entitle Buyer to receive customary revenue
sharing offered by the Enterprise Learning Solutions department of Sellers
(B) Sellers Cash;
(C) Sellers rights under this Agreement;
(D) Sellers corporate minute books, stock records and tax returns or other
similar corporate books and records relating to the Business, to any of the
Retained Assets, to any Retained Liability, or to the negotiation and
consummation of the transactions provided for in this Agreement, and those
Records, if any, originals of which Seller is required to maintain under
(E) Sellers rights arising under any Contracts which are not an Assigned
(F) Any rights of Seller relating to its conduct of the Business which
arise from or are related to services previously provided by the regional
office of Sellers affiliate (such as accounting, payroll, legal or other
similar services, except as otherwise expressly provided herein); and.
(G) Any assets owned by any of Sellers Affiliates, none of which is
physically located at the Leased Premises nor used in the conduct of the
2.3 Non-Transferability of Certain Contracts.
Nothing in this Agreement shall be construed as an attempt to assign any
Contract intended to be an Assigned Contract included in the Purchased Assets
that is by its terms or law non-assignable without the consent of the other
party or parties thereto, unless such consent shall have been given or as to
which all the remedies for the enforcement thereof enjoyed by Seller would, as
a matter of law, pass to Buyer as an incident of the assignments provided for
by this Agreement. Seller shall use
commercially reasonable efforts to obtain the consent of any third party to the
assignment to Buyer of any Assigned Contract for which such consent is
required. In the event (a) an Assigned
Contract either does not permit or expressly prohibits the assignment by Seller
of its rights and obligations thereunder, or (b) Seller has not obtained the
necessary consents to assignment from all parties to any Assigned Contract
prior to the Effective Date, or (c) direct assumption of any Assigned Contract
is not practical, Buyer shall fulfill such Assigned Contract and shall assume
the obligations and liabilities of such Assigned Contract accruing after the
Closing for and on behalf of Seller but for the account of Buyer and Seller
shall cooperate with Buyer in any reasonable arrangements designed to provide
for Buyer the benefits under such Assigned Contracts accruing after the Closing
including the enforcement for the benefit and at the expense of Buyer of any
rights comparable to the rights previously enjoyed by Seller in connection with
such Assigned Contracts.
Section 3 Purchase Price
Payment. In consideration for the transfer of the
Purchased Assets, Buyer shall pay to Seller the following amounts (the Purchase
(A) Cash Payment.
Subject to the provisions of Section 3.2 below, on April 2, 2007, Buyer
shall pay to Seller the sum of Two Hundred Fifty Thousand and 00/100 Dollars
($250,000.00) (the Cash Payment) in the form of a wire transfer to an
account of Seller designated in writing by Seller; provided, however, the Cash
Payment shall be reduced by the amount of the Non-Current Accounts Payable of
Seller assumed by Buyer pursuant to Section 3.4(A)(2); and
(B) Assumption of Liabilities. Upon
the Effective Date, Buyer shall execute and deliver an agreement (the Assignment
and Assumption Agreement) in form and content as provided for in Section
4.2(A)(1) obligating Buyer to assume Sellers obligations with regard to the
Assumed Liabilities as defined in Section 3.4(A) below.
3.2 Purchase Price Adjustment.
(A) As soon as practicable, but in no event later than thirty (30) days
following the Closing, Seller shall prepare a balance sheet of the Business as
of the Closing (the Closing Balance Sheet) and a calculation of the
Working Capital of the Business as of the Closing based on the Closing Balance
Sheet (the Closing Working Capital and, together with the Closing
Balance Sheet, the Closing Financial Data). The Closing Balance Sheet shall be prepared
in accordance with GAAP, consistently applied with the manner in which Sellers
Most Recent Financial Statements were prepared.
(B) Seller shall deliver a copy of the Closing Financial Data to Buyer
promptly after it has been prepared.
After receipt of the Closing Financial Data, Buyer shall have fifteen
(15) days to review the Closing Financial Data.
Buyer and its authorized representatives shall have reasonable access
during normal business hours to all relevant books and records of Seller to the
extent required to complete their review of the Closing Financial Data. Unless Buyer delivers written notice to
Seller on or prior to the thirtieth (30th)
day after Buyers receipt of the Closing Financial Data specifying in
reasonable detail the amount, nature and basis of all disputed items, Buyer
shall be deemed to have accepted and agreed to the calculation of the Closing
Working Capital. If Buyer timely
notifies Seller of its objection to the calculation of the Closing Working
Capital as described above, Seller and Buyer shall, within thirty (30) days (or
such longer period as the Parties may agree in writing) following such notice
(the Resolution Period), attempt to resolve their differences and any
resolution by them as to any disputed amounts shall be final, binding and
(C) If, at the conclusion of the Resolution Period, there are any amounts
remaining in dispute, then such amounts remaining in dispute shall be submitted
to a firm of nationally recognized independent certified public accountants
(the Neutral Auditors) selected by Seller and Buyer within ten (10)
days after the expiration of the Resolution Period. If Seller and Buyer are unable to agree on
the Neutral Auditors, then each of Seller and Buyer shall have the right to
request the office of the American Arbitration Association to appoint the Neutral
Auditors, which Neutral Auditors shall not have had a material relationship
with Seller, Buyer or any of their respective Affiliates within the past two
years. Each of Seller and Buyer agree to
execute, if requested by the Neutral Auditors, a reasonable engagement letter,
including customary indemnities. All
fees and expenses relating to the work, if any, to be performed by
the Neutral Auditors shall be borne equally
between Seller and Buyer. The Neutral Auditors shall act as an arbitrator to
determine, based solely on the provisions of this Section 3.2 and the
presentations by Seller and Buyer only those issues still in dispute. The Neutral Auditors determination shall be
made within thirty (30) days of their selection, shall be set forth in a written
statement delivered to Seller and Buyer and shall be deemed a final, binding
and conclusive arbitration award. A
judgment of a court of competent jurisdiction may be entered upon the Neutral
Auditors determination. The term Final
Closing Working Capital shall mean the definitive Closing Working Capital
agreed to (or deemed to be agreed to) by Buyer and Seller in accordance with
Section 3.2(B) hereof or resulting from the determinations made by the Neutral
Auditors in accordance with this Section 3.2(C) (in addition to those items
theretofore agreed to by Seller and Buyer).
(D) Seller, Parent and Franchisor expressly agree that, subject to
adjustment as provided in the last sentence of this Section 3.2(D), Buyer and
Cleveland Buyer shall be entitled to a credit in the aggregate amount of
$126,120 (the Royalty Credit) against any royalty or other payments (Royalty
Payments) coming due by Buyer under the Franchise Agreement or Cleveland
Buyer under its franchise agreement. The
Royalty Credit shall be applied against Royalty Payments of Buyer and Cleveland
Buyer first coming due after the Effective Date at the aggregate rate of
$10,000 per month.
addition to the Royalty Credit, if the Final Closing Working Capital is less
than the Initial Working Capital by more than $7,500, then the amount of such
deficiency (the Working Capital Deficiency) shall be set off against the
Royalty Payments as follows:
(i) If the sum (the Working
Capital Adjustment) of (a) the Working Capital Deficiency under this Agreement,
plus (b) the Working Capital Deficiency or less the Working Capital Surplus
under the Cleveland Agreement, as applicable, is greater than $53,880 (such
that the total credit against the Royalty Payments, consisting of the $126,120
Royalty Credit plus the $53,880 or greater Working Capital Adjustment, is
greater than $180,000), then the amount of the Working Capital Adjustment shall
be set off by Buyer and/or its Affiliates:
(1) against the Royalty
Payments coming due over the six (6) month period immediately following the
first anniversary of the Effective Date at the rate of $10,000 per month, plus
(2) with respect to the
amount of the Working Capital Adjustment in excess of $53,880, at the rate of
an additional $10,000 per month, commencing with the first month following the
date of determination of the Working Capital Adjustment, and continuing until
such excess amount of the Working Capital Adjustment is exhausted; and
(ii) If the Working Capital
Adjustment is less than or equal to $53,880, then such amount shall be set off
by Buyer and/or its Affiliates against the Royalty Payments coming due
immediately following the first anniversary of the Effective Date at the rate
of $10,000 per month.
If the Final Closing Working Capital is greater than the Initial
Working Capital by more than $7,500 (the Working Capital Surplus), then the
amount of such Working Capital Surplus shall reduce the Royalty Credit.
(E) The Cash Payment, as adjusted pursuant to this Section 3.2, plus the
amount of the Assumed Liabilities assumed by Buyer pursuant to Section 3.4 is
referred to herein as the Final Purchase Price.
3.3 Purchase Price Allocation.
Buyer and Seller agree to allocate the Final Purchase Price as follows:
first, to the current assets comprising a part of the Purchased Assets at their
respective book values as determined in the Final Closing Working Capital;
second, to the fixed assets comprising a part of the Purchased Assets at their
respective book values as determined in the Closing Balance Sheet; [***************************************************]. For purposes of all Taxes, the Parties agree
to report the transactions contemplated in this Agreement in a manner
consistent with this Section 3.3 and the allocation to be so agreed upon and
none of them will take any position inconsistent therewith in any Returns, in
any refund claim, in any litigation, or otherwise. Each Party agrees to notify the other if any
taxing authority proposes to reallocate the Final Purchase Price. Seller and Buyer shall cooperate in good
faith in the joint preparation of IRS Form 8594 on a basis consistent with the
allocation of the Final Purchase Price in accordance with this Section 3.3.
3.4 Assumed and Retained Liabilities.
(A) Assumed Liabilities. The
following shall constitute, and are herein together referred to as, the Assumed
(1) the Accounts Payable that, as of the Effective Date, are outstanding
[********************** ****************************************], all accrued
expenses of Seller and all other current liabilities of Seller, in each case
solely to the extent included in the calculation of the Final Closing Working
Accounts Payable of Seller that, as of the Effective Date, are outstanding
[********** ******************************************************], but only
to the extent included in the reduction to the Cash Purchase Price as provided
in Section 3.1(A) [*****************************************************************
(3) Subject to the provisions set forth in Section 4.3(D), Sellers
obligations to all individual and corporate customers to provide training which
has been purchased by such customers prior to the Effective Date but not yet
delivered as of the Effective Date (the Training Obligations), which
Training Obligations are listed in Schedule
3.4(A)(3) attached hereto;
(4) Any obligation for cash refunds to customers in respect to any prepaid
(5) Any obligation to pay for training provided by any other franchisee or
Affiliate of the Franchisor in respect to national training coupons sold by
Seller, except to the extent such constitutes a Retained Liability under
Section 3.4(B)(5)(e); and
(6) all liabilities and obligations of Seller (other than liabilities or
obligations arising out of any breach or default by Seller prior to the
Closing) under the Assigned Contracts that are assigned to Buyer pursuant to
Section 2.1 or under which the full benefits are provided to Buyer by Seller
pursuant to Section 2.3, and which were incurred or otherwise first arise from
and after the Closing; provided that, notwithstanding anything to the contrary,
Buyer does not assume, and shall not be responsible for, any Liabilities which
arise from (i) defaults thereunder or breaches thereof on or prior to the
Closing; or (ii) events occurring on or prior to the Closing, which, after
notice or lapse of time or both, would constitute a default or breach, in each
case whether or not a claim for such default or breach is made prior to or
following the Closing.
(B) Retained Liabilities.
Buyer shall not be obligated to pay, perform or abide by, and Seller
shall retain exclusive responsibility for, any Liabilities, debts, obligations,
undertakings or commitments of Seller (the Retained Liabilities),
other than the Assumed Liabilities. The
Retained Liabilities shall include, but not be limited to, the following:
(1) Any Tax imposed by or payable to any Governmental Authority with
respect to any period ending on or prior to the Effective Date;
(2) Any Liability or obligation accruing, arising out of or relating to any
fact or circumstance which occurred on or prior to the Effective Date in
respect to (a) Liabilities and obligations to employees of Seller, including
those for accident, disability, health (including unfunded medical liabilities)
and workers compensation insurance or benefits, and all other Liabilities and
obligations to employees arising from facts or circumstances which occurred on
or prior to the Effective Date, (b) any Employee Benefit Plan or any other
employee benefit arrangement or commitment which is or has been maintained or
contributed to by Seller, (c) any portion of any bonuses earned or accrued upon
the basis of any events occurring on or prior to the Effective Date, (d) any
accrued vacation benefits, (e) any obligation to reimburse any employee for
expenses incurred on or prior to the Effective Date, or (f) any obligation to
pay sales commissions to employees on account of sales made on or prior to the
Effective Date and with respect to which sales Seller has received payment on
or prior to the Effective Date;
(3) Liabilities and obligations arising from or relating to claims or
Liabilities for benefits or pay under any severance arrangement of or binding
upon Seller, including those related to any alleged wrongful termination of
employment solely as a result of the transactions contemplated hereby including
Workers Adjustment Retraining and Notification Act (the WARN Act)
liabilities and obligations;
(4) Any Liability or obligation which, absent this provision, comprises a
part of the Assumed Liabilities but which is covered by any insurance policy
maintained by Seller or any of Sellers Affiliates (but, then, only to the
extent of such insurance coverage and the amount of any deductible or
(5) Any (a) inter-company charges or amounts due to Parent or any Affiliate
of Seller or Parent, (b) claims relating to inter-franchise payment obligations
which are based on the non-payment of amounts owing any other franchisee of the
Franchisor, except to the extent that amounts therefor are included in the
calculation of the Final Closing Working Capital, (c) amounts due for borrowed
money, (d) obligations arising under any agreement, instrument or other
contractual undertaking or commitment that is not an Assigned Contract or which
is not an Assumed Liability, (e) inter-franchise obligations relating to
payment for training provided by franchisees of the Franchisor other than Buyer
or its Affiliates upon redemption of national training coupons sold by Seller
on or prior to the Effective Date in circumstances where the same are redeemed
more than one (1) year after the issuance of such coupons.
(6) Any Accounts Payable not included in the calculation of the Final
Closing Working Capital or not included in the reduction to the Cash Purchase
Price as provided in Section 3.1(A);
(7) Any (a) Liability or obligation to indemnify any director, officer,
employee or agent of Seller, except with regard to indemnification obligations
owed to Seller from Buyer arising under this Agreement, (b) with respect to
periods ending on or prior to the Effective Date, Liability arising out of or
in connection with any violation of a statute or governmental rule, regulation,
directive or other requirement, and any Liability or obligation of a
conditional, contingent or similar nature, or (c) Liability or obligation which
arises from or is based on a claim for injury to or death of persons, or damage
to or destruction of property, regardless of when asserted, but which arises
from facts or circumstances which occurred on or prior to the Effective Date;
(8) [This section intentionally left blank.];
(9) The obligations of Seller, Parent or their Affiliate(s) on any guaranty
of the Facilities Lease;
(10) Any debts, Liabilities or obligations incurred by Seller, or actions,
claims or lawsuits asserted against either Buyer or Seller which relate to the
operation of the Business prior to the Effective Date, except for (y)
the Assumed Liabilities, and/or (z) the Training Obligations;
(11) Any Liabilities or obligations which arise from or relate to any
(12) Any Liabilities and obligations relating to the operation prior to
Closing of the Leased Premises or the Business or any other real property,
buildings, improvements or other premises utilized by Seller or its Affiliates,
including Liabilities arising from any Environmental Laws;
(13) Any Liabilities and obligations of Seller to any of its Affiliates or
to any of Sellers or its Affiliates past or present directors, officers or
(14) Except for the Assumed Liabilities, all other Liabilities and
obligations of Seller or related to the operation of the Business prior to
Section 4 Closing
4.1 Closing. The consummation of the
transactions provided for in this Agreement (the Closing) has been
held on, and shall be effective as of the close of business on, the Effective
4.2 Acts of Seller and Parent. At
the Closing, Seller and Parent have taken such actions and executed and
delivered, or caused to be executed and delivered, to Buyer such certificates,
instruments and documents, as are required by this Agreement or as are required
to give full effect to the transactions provided for herein. Such actions and materials include, but are
not limited to, the following:
(A) Conveyance Documentation.
Seller has executed and delivered to Buyer or shall execute and deliver
to Buyer (with such acknowledgments required by the circumstances) documents of
conveyance which are required to convey to Buyer the Purchased Assets free and
clear of all restrictions or conditions to sale, conveyance or transfer and
free and clear of all liens, mortgages, pledges, encumbrances, charges, claims,
security interests, Taxes, conditions or restrictions of any nature or
description whatsoever, whether secured or unsecured, choate or inchoate, fixed
or contingent, scheduled or unscheduled, noticed or unnoticed, recorded or
unrecorded, known or unknown (Liens) (other than those specifically
identified on Schedule
4.2(A) hereto, the Permitted
Liens) and consistent with the other requirements of this Agreement. Except as otherwise expressly provided in
this Agreement, the Purchased Assets are being sold as is, where is without
any express or implied warranties whatsoever.
Without limiting the generality of the foregoing, the documents of
conveyance shall include the following:
(1) An assignment and assumption agreement (Assignment and Assumption
Agreement) in form and content substantially as shown on Exhibit A attached hereto pursuant to which, among
other things, Seller conveys and assigns to Buyer all right, title and interest
of Seller arising under, provided for in, or governed by any Assigned Contracts
(other than the Facilities Lease);
(2) An assignment and assumption agreement (Assignment of Lease)
in form and content substantially as shown on Exhibit B attached
hereto pursuant to which, among other things, Seller conveys and assigns to
Buyer all right, title and interest of Seller arising under, provided for in,
or governed by the Facilities Lease (included herewith at Exhibit B); and, therewith, Seller shall deliver a
writing signed by the landlord named in the Facilities Lease or other Person
whose approval or consent is required in connection therewith setting forth
such Persons consent to said assignment and certifying to Buyer that the lease
attached to the consent is a true and complete copy of the lease as amended to
date, that there is no default existing under the lease and there is no fact,
circumstance or condition known to such
person that would, with or without the giving
of notice, the lapse of time, or both, constitute a breach or default under the
lease, and certifying as to the amount of the current monthly rent and of the
security deposit, if any;
(3) A bill of sale (Bill of Sale) in form and content
substantially as shown on Exhibit
C attached hereto and
conveying to Buyer all of the Purchased Assets (other than as provided for in
the Assignment and Assumption Agreement, the Assignment of Lease, or in any
document of title provided for in Section 4.2(A)(4) below;
(4) An endorsement and delivery of certificates of title required to
effectuate the transfer to Buyer of any Vehicles or other Equipment, and any
instruments the endorsement and delivery of which is required to effectuate
transfer to Buyer;
(5) The written consent to assignment (in form and substance reasonably
satisfactory to Buyer) of third Persons whose approval of any conveyance
contemplated herein is required in order to comply with the requirements of any
agreement or legal requirement binding on Seller, Parent or their Affiliates.
(6) The written consent of Franchisor (the Franchisor Consent) to
Buyers and its Affiliates right to setoff or recoup the amount of any of
Sellers and/or Parents indemnification obligations under Section 8.2 hereof
against any payments that become due under their respective franchise
agreements with Franchisor, dated the Effective Date, in form and content
substantially as shown on Exhibit
D attached hereto.
(7) An executed Ohio Form 590 (Consent for Use of Similar Name) by which
Seller consents to the use by Buyer of the name New Horizons Computer Learning
Center of Cleveland for the transaction of business in the State of Ohio.
(8) Consents to the transactions contemplated by this Agreement and
discharge(s) of all Liens on any of the Purchased Assets by each of the senior
lenders to Seller; and
(9) Any other documents and instruments required by this Agreement or
reasonably requested by Buyer to effect or evidence the transactions
contemplated by this Agreement.
(B) Delivery of Possession.
Seller has delivered or will deliver to Buyer, or cause to be delivered
to Buyer, physical possession of all Records, the originals of all Assigned
Contracts, and other tangible properties comprising any part of the Purchased
Assets, and all keys, combinations and other mechanisms for controlling access
to the Leased Premises and to any lock box or other repository to which
Receivables or other correspondence of Seller is routinely received.
(C) Receivables. Seller maintains with Sun
Trust (the Custodial Bank) administrative arrangements regarding the
collection of Receivables. Such arrangement
provides for a lock box arrangement with all items of payment delivered
thereto. At the Closing, Seller will
deliver, or cause to be delivered, to the Custodial Bank a writing which
account/lock box arrangement and irrevocably
instructs the Custodial Bank to remit directly to Buyer all correspondence,
items of payment and other materials received by it pursuant to any
arrangements maintained with Seller. To
the extent that Seller shall, from and after the Effective Date, receive any items
of payment or be credited with any items of payment in respect to any
Receivables, Seller will hold such items in trust for Buyer and promptly remit
such items of payment to Buyer in the form received and pay to Buyer any
amounts so credited to Seller.
(D) Closing Certificates.
Seller and Parent will cause the Franchisor to execute and deliver to
Buyer a certificate, dated as of the Effective Date, and to the effect that the
execution of the Franchise Agreement with Franchisor shall comply with federal
and state law regarding the sale of franchises in the State of Ohio.
(E) Secretarys Certificate; Resolutions. The
secretary or other executive officer of Seller and Parent shall deliver to
Buyer a certificate, dated as of the Effective Date, and to the effect (i) that
all action required to authorize and direct Sellers and Parents execution and
performance of this Agreement and any other agreement or instrument of
conveyance provided for herein has been taken; and (ii) that all such action so
taken remains in effect without modification or revocation. There shall be or is attached to such
certificate a true and complete copy of the resolutions adopted by Sellers and
Parents governing bodies which are required in order to effectuate such
(F) Sellers Name.
Seller agrees to and shall permit Buyer to use the name New Horizons
Computer Learning Center of Cleveland as a fictitious business name for so
long as the Franchise Agreement remains in effect and, in that regard, shall
(i) from time to time at or after the Closing, execute such documents and take
such actions as are reasonably requested by Buyer to effectuate such result and
(ii) refrain from using or permitting others to use such name or any name
similar thereto in the active conduct of business.
(G) Deliveries Regarding Receivables. From
time to time at the request of Buyer, Seller will provide Buyer with such
assistance as Buyer shall reasonably request in order to enable Buyer to enjoy
the benefits intended to be conveyed with regard to the Receivables (but no
such request shall require the expenditure of funds by Seller).
4.3 Acts of Buyer. At
the Closing, Buyer will execute and deliver or cause to be executed and
delivered to Seller such certificates, instruments and documents as are
required by this Agreement or as are required to give full effect to the
transactions provided for herein. Such
shall include, but not be limited to, the following:
(A) Cash Payment.
Buyer shall pay to Seller the Cash Payment, subject to adjustment as
provided for in Section 3.1(A), which shall also satisfy Buyers obligation to
pay an initial franchise fee (the Initial Franchise Fee) to Franchisor
in connection with the matters provided for in Section 4.5(B) below.
(B) Assumption. Buyer will execute and
deliver, or has executed and delivered, to Seller (i) the Assignment and
Assumption Agreement pursuant to which Buyer assumes the Assumed Liabilities,
and (ii) the Assignment of Lease pursuant to which Buyer assumes the
obligations of Seller under the Facilities Lease to the extent such obligations
accrue from and after the Effective Date.
(C) Secretarys Certificate; Resolutions. The
secretary or other officer of Buyer has delivered or shall deliver to Seller a
certificate, dated as of the Effective Date, and to the effect that all action
required to authorize and direct the execution and performance of this
Agreement and any other agreement or instrument of conveyance provided for
herein has been taken; and that all such action so taken remains in effect
without modification or revocation.
There shall be attached to such certificate a true and complete copy of
the resolutions adopted by the members of Buyer authorizing such actions.
(D) [This section intentionally left blank.]
4.4 Prorations at Closing.
Except to the extent included in the calculation of the Final Closing
Working Capital, any and all real property Taxes, personal property taxes,
assessments, lease rentals, and other charges applicable to the Leased
Premises, the Purchased Assets or the Assumed Liabilities will be prorated to
the Effective Date, and such Taxes and other charges shall be allocated between
the Parties by adjustment at the Closing, or as soon thereafter as the Parties
4.5 Other Agreements. In
addition to the matters provided for elsewhere in this Agreement, at or prior
to the Closing, the Parties shall additionally execute, or cause their
affiliates named therein to execute, the following separate agreements:
(A) Employment Arrangements.
Notwithstanding any restrictions to the contrary contained in this
Agreement or in any other agreement contemplated hereby, Seller shall permit
Buyer to offer employment to, and to employ, such Persons employed in
connection with the operation of the Business as may be designated by Buyer in
its sole discretion. Buyer shall have no
obligation to offer to employ or to employ any employees of Seller and, with
respect to any employee of Seller to whom Buyer makes an offer of employment,
Buyer shall be free to determine in its sole discretion the terms of such
offer; provided, however, Buyer shall be responsible for and shall indemnify
and defend Seller and Parent in accordance with Section 8 hereof against Claims
brought by any employee of Seller alleging unlawful discrimination by Buyer as
the basis for Buyers decision not to hire such employee.
(B) Franchise Agreement.
Buyer and Franchisor (a wholly-owned direct or indirect subsidiary of
Parent), shall execute a franchise agreement with a term from the Effective
Date through [*****************] (the Franchise Agreement). The Franchise Agreement shall be in
substantially the same form as the franchise agreement between the Franchisor
and M&J, Buyers Affiliate, for the Detroit, Michigan territory. Seller further acknowledges and agrees that
Buyer shall have the right to setoff or recoup against amounts that may become
due to Buyer under this Agreement any amounts now or hereafter owing by Buyer
to Franchisor or its Affiliates under the Franchise Agreement as provided in
the Franchisor Consent.
(C) Consents and Approvals. All
consents, approvals or authorizations of any governmental agency, the landlord
named in the Facilities Lease and any other person whose approval is required
to assign and convey to Buyer the Assigned Contracts and any other