EXHIBIT 10.11
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement") is effective as of
December 13, 1999, by and among Dreamcatcher Franchise Corporation, a Minnesota
corporation ("Buyer"), IPI, Inc. ("IPI"), Dreamcatcher Franchise Corporation, a
Colorado corporation ("Seller"), and the parties identified on the signature
page as Seller's Shareholders (collectively, "Seller's Shareholders").
RECITALS:
A. Seller is franchiser of a business concept, which provides private
education services to learners of all ages, utilizing a proprietary direct
instruction model that incorporates the trademarks "Dreamcatcher Learning
Centers" and Dreamcatcher Direct Instruction Centers(SM) (the "Business").
B. Buyer is a subsidiary of IPI. Contemporaneously with the closing of
the transactions contemplated in this Agreement, Buyer is purchasing
substantially all of the assets of Dreamcatcher Learning Centers, Inc. (also
doing business as Dreamcatcher Direct Instruction Centers(SM)) ("DDIC"). DDIC
owns and operates three Dreamcatcher franchises.
C. 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.
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.
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, service marks, 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").
1.2.1. Property used by the Business under a lease arrangement
that 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 through 1.3.3 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; and (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. Franchise Agreements. On the Closing Date, Buyer
expressly assumes and agrees to perform Seller's obligations as franchisor under
Seller's franchise agreements identified in Seller's current Uniform Franchise
Offering Circular that is attached hereto as Exhibit 3.12.1.
1.3.3. 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:
2.1.1. Buyer's assumption of Assumed Liabilities.
2.1.2. Payment to Seller of One Hundred Twenty-Five Thousand
Dollars ($125,000) in readily available funds at the Closing.
2.1.3. Issuance by IPI of One Hundred Twenty-Five Thousand
(125,000) shares of IPI common stock (the "IPI Stock"). A certificate evidencing
Buyer's ownership of the IPI Stock will be issued by IPI's transfer agent and
delivered to Seller promptly after the Closing. The IPI Stock will be restricted
stock. At the Closing, Seller agrees to execute and deliver to Buyer an
"Investment Letter" in the form of Exhibit 2.1.3 attached hereto.
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 tile all tax
returns, including Internal Revenue Form 8594, in accordance with the allocation
set forth on Exhibit 2.2.
3. REPRESENTATIONS & 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.
3.4. Financial Statements.
3.4.1. Financial Statements. Seller has furnished Buyer a true
and complete copy of (i) its audited balance sheets, statements of income,
statements of changes in stockholders' equity and statements of cash flows for
its fiscal years ended December 31 of 1997 and 1998; (ii) its unaudited balance
sheet and statement of income as of and for the period ending October 31, 1999;
and (iii) its tax returns for 1997 and 1998 (collectively the "Financial
Statements"). Items (ii) and (iii) above are attached hereto as Exhibit 3.4.1.
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 to have occurred or to exist which,
singly or in the aggregate, materially and adversely affect or may affect the
Purchased Assets of 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 interests of any kind
whatsoever, except liens for Assumed Liabilities. All of the Purchased Assets
are located at 000 Xxxx Xxxxxx, Xxxxxxx XX 00000 (the "Premises").
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 full 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.
3.12.1. Attached as Exhibit 3.12.1 is Seller's current Uniform
Franchise Offering Circular. The information in the Uniform Franchise Offering
Circular is true, correct and complete in all material respects. Also attached
as Exhibit 3.12.1 a current list of the franchisees of Seller and the states
that Seller is authorized to market and sell its franchises.
3.12.2. All of Seller's Franchise Agreements with current
franchisees have been made available to Buyer for review, together with receipt
pages for Seller's Uniform Franchise Offering Circular. All franchises sold by
Seller have been sold in compliance with applicable law.
3.12.3. Except for Area Development Agreements, which have
been made available to Buyer for review, no party has a current option to
acquire any additional franchises or the right to open any additional franchise
locations. All of the current franchisees and franchise locations are identified
in the Seller's Uniform Franchise Offering Circular.
3.12.4. A copy of Seller's current franchise Confidential
Operations Manual has been delivered to Buyer.
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 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. I .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(l) of ERISA, 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 4 12 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.
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. I), 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.
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 (3) 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) 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 Sellers 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. None of Seller's
Intellectual Property is registered nor has application been filed apply for
registration. 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 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.
4. REPRESENTATIONS AND WARRANTIES OF BUYER AND IPI
Buyer and IPI make 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 and IPI each are a corporation, duly
organized, validly existing in good standing under the laws of the State of
Minnesota, with all requisite corporate power and authority to own their
respective properties and conduct the respective businesses in which each of
them is presently engaged.
4.2. Authority. Buyer and IPI each have all requisite power and
authority to execute, perform and carry out the provisions of this Agreement.
Buyer and IPI each have taken all requisite action authorizing and empowering
itself 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 or IPI, nor compliance by Buyer or IPI
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 either
Buyer or IPI; (ii) any judgment, order, decree or ruling to which Buyer or IPI
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 IPI;
or (b) require the affirmative consent or approval of any third party.
4.4. IPI Stock. The IPI Stock to be issued to Seller will be validly
issued, fully paid and nonassessable. The IPI Stock will be restricted stock and
will not be registered under the Securities Act of 1933, as amended. All
documents filed by IPI with the Securities and Exchange Act comply in all
material respects with the provisions of applicable law.
4.5. Binding Obligation. This Agreement constitutes the legal, valid
and binding obligation of Buyer and IPI in accordance with the terms hereof.
Neither Buyer nor IPI 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.
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 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.
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.
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 DDIC Asset Purchase. Buyers purchase of
substantially all of the assets of DDIC.
6.1.4. Lease. Buyer will lease 000 Xxxx Xxxxxx, Xxxxxxx,
Xxxxxxxx 00000, Suites A-E, J&K from Xxxxxxxx Professional Building for $1,500
per month requiring 90 days notice of termination by either party pursuant to
the form of lease attached hereto as Exhibit 6.1.4.
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 and IPI 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 and IPI shall have
performed all material obligations and complied with all covenants and
agreements in this Agreement to be performed prior to Closing.
6.2.2. Lease. Buyer will lease 000 Xxxx Xxxxxx, Xxxxxxx,
Xxxxxxxx 00000, Suites A-E, J&K from Xxxxxxxx Professional Building for $1,500
per month requiring 90 days notice of termination by either party pursuant to
the form of lease attached hereto as Exhibit 6.1.4.
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 that 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 00000 Xxxxxxxxxx Xxxxx, Xxxx Xxxxxxx, XX 00000, 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:O 1 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. The Investment Letter attached hereto as Exhibit 2.1.3.
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 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. Readily available funds from Buyer to Seller in the
amount of One Hundred Twenty-Five Thousand Dollars ($125,000).
7.3.2. Lease Agreement in the form of Exhibit 6.1.5.
7.3.3. 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. Non-compete 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 non-competition 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 within any
aspect of with DDIC'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 or
defame Buyer, or their employees or business practices.
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 that 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. Employee Leasing. Seller shall continue to employ Seller's
employees and shall employ DDIC's employees through January 31,2000 on the same
basis such employees had been previously employed, except Xxxxx X. Xxxxxxxx and
Xxxxxx X. Xxxxxxxx who will be employed by Buyer. Seller shall lease such
employees to Buyer through January 31,2000, at which xxxx Xxxxxx shall terminate
such employees and Buyer may hire such employees. Buyer shall reimburse Seller
for all normal out-of-pocket expenses, including but not limited to salaries,
wages, employer's share of all payroll taxes, benefits and related payroll
expenses (excluding costs resulting from litigation, damage and injury claims
arising from acts of the employees) incurred from the Closing Date through
January 31,2000, in connection with Seller's employment of such persons in order
to lease them to Buyer. Seller shall be solely responsible for withholding and
remittance of taxes. Seller shall invoice Buyer for the costs incurred and
provide Buyer with a detailed report itemizing the expenses incurred by Seller
on a weekly basis. Buyer shall promptly reimburse Seller for such costs. Buyer
shall indemnity Seller for any claims, damages and litigation arising from
actions or directions given to such employees by Buyer.
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.
9.1.2. The breach by Seller or Seller's Shareholders of any of
their representations, warranties or covenants in this Agreement (including,
without limitation, the breach of any of Seller's franchise agreements prior to
the Closing).
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 address set forth below. If a party
changes its address or facsimile number, it shall notify the other party of such
different address or facsimile number pursuant to the provisions of this
Section.
Buyer and IPI: with copy to:
IPI/Dreamcatcher Franchise Corporation Xxxxxx X. Xxxxxxxx
15 155 Technology Drive Xxxxxxxxxx & Xxxxx, P.A.
Xxxx Xxxxxxx, XX 00000 1100 International Centre
Attn: President Xxxxxxxxxxx, XX 00000
Tele: 000-00-0000 Tele: 000-000-000
Fax: 000-000-0000 Fax: 000-000-0000
Seller and Seller's Shareholders: with copy to:
Xxxxx X. Xxxxxxxx Xxxxx X. Xxxxxxx
00000 XXX 00 XXXX
Xxxxxxx, XX 00000 0000 Xxxxx Xxxxxx, Xxxxx 0000
Tele: 000-000-0000 Xxxxxx, XX 00000
Fax: 970-686-l086 Tele: 000-000-0000
Fax: 000-000-0000
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.
10.7. 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.
10.8. 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.
10.9. 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.
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
-------------------------------
IPI, INC.
By /s/ (ILLEGIBLE)
-------------------------------
Its CEO
-------------------------------
SELLER:
DREAMCATCHER FRANCHISE CORPORATION
By /s/ Xxxxx X. Xxxxxxxx
-------------------------------
Its President
-------------------------------
SELLER'S SHAREHOLDERS:
/s/ Xxxxx X. Xxxxxxxx
-------------------------------
Xxxxx X. Xxxxxxxx
/s/ Xxxxxx X. Xxxxxxxx
-------------------------------
Xxxxxx X. Xxxxxxxx
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
2.1.3 Investment Letter
2.2 Allocation of Purchase Price
3.4.1 Seller's Financial Statements
3.11 Real Property
3.12.1 Uniform Franchise Offering Circular/Franchisees/Registered States
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
3.24 Cash Locations
6.1.4 Lease
EXHIBIT 1.1.1
Fixed Assets
Computer System w/Printer 2
Executive Desks (L-shaped) 3
Executive Chairs 3
Phones 4
Toshiba Copier (used/purchased l/99) 1
Fax Machine 1
TV/VCR 1
2-Drawer Filing Cabinets 4
Student Desk 1
Rolling Desk Chair 1
6' Book Shelves 3
Literature Rack 2
Upholstered Chairs 3
Safe 1
Document Shredder 1
Electric Pencil Sharpener 1
Electric Stapler 1
8' Conference Tables 2
Conference Table Chairs 14
Lamps 2
45" Book Case 1
End Table 1
Overhead-Projector 1
Small Inventory of DI Materials (storeroom) 1
(detailed list to follow)
EXHIBIT 1.1.5
Licenses and Permits
Microsoft Licenses: Office Suite 97
Map Point
EXHIBIT 1.1.6
Assumed Contracts
FRANCHISE AGREEMENTS - see attached chart.
--------------------
EQUIPMENT LEASES
----------------
NONE
SOFTWARE AGREEMENT
------------------
Katchemak Data Systems Agreement
REAL ESTATE LEASES
------------------
NOT assuming existing lease of 000 Xxxx Xx., Xxxxxxx, Xx 00000, Suites A-E, J&K.
VEHICLE LEASES
--------------
NOT assuming GE Capital leases of 98 Dodge Durango or Pick-up truck.
NOT assuming American Honda Finance Corp. lease of Honda Civic.
EXHIBIT 1.1.7
Prepaid Assets and Deposits
Balance 10-31-99
----------------
Advertising Fund -- US Bank $66.00
Xxxxx Bank Account $2,706.50
EXHIBIT 1.1.8
Receivables
Outstanding Balance
-------------------
Promissory Note: $6,607.32
Xxxxx XxXxxxx
EXHIBIT 1.3.1
Liabilities
Balance Due
-----------
10-31-99
--------
Xxxxx Bank $194,721.64
EKS&H 5,008.16
American Express 8,687.66
National Bank of Commerce 2,237.76
Xxxxx Xxxxxxx 18,072.98
Xxxx Xxxxxxxx 3,392.50
Texaco 718.08
Conoco 303.28
Xxxx Xxxxx 3,210.00
Citibank 8,662.60
Weld Schools Visa 3,500.00
Weld Schools Line of Credit 7,000.00
Xxxx Xxxxx 34,500.00
Mat Xxxxxxxxx expenses to WA 512.31
US Bank Escrow Accounts 1,015.00
Xxxxx Xxxxx 7,000.00
Capital One 987.91
-----------
$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.
EXHIBIT 2.13
Investment Letter
-------------------------
Date
IPI, Inc. and Dreamcatcher Franchise Corporation
15 000 Xxxxxxxxxx Xxxxx
Xxxx Xxxxxxx, XX 000000
Dreamcatcher Franchise Corporation ("Seller"), a Colorado corporation, is
selling substantially all of its assets to Dreamcatcher Franchise Corporation
("Buyer"), a Minnesota corporation and a subsidiary of IPI, Inc. ("IPI"). As
part of the purchase price, IPI is issuing 125,000 shares of IPI's common stock
("IPI Stock") to Seller, or at Seller's election directly to Seller's
shareholders. The issuance of such stock is conditional upon IPI's receipt of a
signed Investment Letter in this form from each recipient of such stock and the
truthfulness and accuracy of their representations and warranties therein.
The undersigned represents and warrants to IPI, or covenants and agrees as
follows:
1. Information with Respect to IPI. The undersigned has received copies
of each of the following documents: (a) IPI's annual report on Form l0-KSB for
its fiscal year ended November 30, 1998 as filed with the Securities and
Exchange Commission ("Commission"); (b) IPI's quarterly reports on Form l0-QSB
for each of the quarters between December 1,1998 and the date of this Investment
Letter that have been filed with the Commission; (c) IPI's report to
stockholders for its most recent completed fiscal year and its notice and proxy
statement for its most recent annual meeting of stockholders, and (d) all other
documents, if any, filed by IPI with the Commission pursuant to the reporting
requirements of the Securities and Exchange Act of 1934, as amended, between
December 1, 1998 and the date of this Investment Letter. The undersigned
understands that the IPI Stock is being issued as consideration in Buyer's
purchase of substantially all of the assets of Seller for use to franchise
Dreamcatcher Learning Centers.
2. IPI Stock. IPI Stock is common stock with no preemptive rights to
purchase additional shares of any class or series of IPI stock. All of the
issued and outstanding shares of IPI stock are duly authorized validly issued,
fully paid and non-assessable. Each share of IPI common stock entitles the
holder thereof to one vote, in person or by proxy, upon all matters submitted
for a vote by the shareholders of IPI. Holders of shares of IPI common stock do
not have cumulative voting rights for the election of directors. Thus, the
owners of a majority of the voting power outstanding may elect all of the
directors, if they choose to do so, and the owners of the balance of such shares
would not be able to elect any directors.
IPI, Inc.
Page 2
3. Investment Information. The undersigned (a) either alone or together
with the undersigned's "purchaser representative" {as such term is defined in
Rule 501 under the Securities Exchange Act of 1933, as amended (the "Securities
Act")} has such knowledge and experience in financial and business matters that
the undersigned is capable of evaluating the merits and risks of the acquisition
of the IPI Stock; (b) has requested, received, reviewed and considered all
information that the undersigned deems relevant in making an informed decision
to acquire the IPI Stock; and (c) intends to acquire the IPI Stock for the
undersigned's own account and not with a view to distribute, or participate in
the distribution of, within the meaning of the Securities Act, any of the IPI
Stock, except in compliance with the Securities act and the rules and
regulations promulgated thereunder.
4. Investor Information. The undersigned is a resident of (has its
principal place of business in) __________________________. The undersigned
covenants and agrees: (a) to furnish to IPI, in writing, any information
relating to the undersigned which IPI reasonably determines necessary to comply
with applicable federal or state securities laws or regulations, promptly after
request therefor by IPI; (b) that the undersigned or the undersigned's
representative will discuss such information with IPI or its representatives
upon the request of IPI; and (c) that the undersigned or the undersigned's
representative will otherwise cooperate with IPI to achieve compliance with
applicable exemptions and applicable federal and state securities laws. The
undersigned warrants that all information to be furnished by the undersigned or
the undersigned's representative to TPI pursuant to this paragraph 4 will be
true and correct.
5. Transfer Restrictions. The undersigned will not offer to sell,
transfer or otherwise dispose of any of the IPI Stock except: (a) in compliance
with the applicable provisions of Rule 144; (b) in a transaction that is
otherwise exempt from the registration requirements of the Securities Act; or
(c) in an offering registered under the Securities Act. The undersigned consents
to have a restrictive legend endorsed on the certificate evidencing the IPI
Stock. The endorsement may read substantially as follows:
"The shares represented by this certificate were issued in a
transaction to which Rule 144 promulgated under the Securities Act of
1933, as amended (the "Act"), applies, and may be sold or otherwise
transferred only in compliance with the limitations of such Rule 144,
or upon receipt by IPI of an opinion of counsel reasonably satisfactory
to it that some other exemption from registration under the Act is
available, or pursuant to a registration statement under the Act."
IPI's transfer agent shall be given an appropriate stop
transfer order and shall not be required to register any attempted transfer of
any IPI Stock, unless the transfer has been effected in compliance with the
terms of this letter agreement.
IPI, Inc.
Page 3
It is understood and agreed that this letter agreement shall terminate
and be of no further force and effect and the restrictive legend set forth above
shall be removed by delivery of substitute certificates without such legend, and
the related stop transfer restrictions shall be lifted forthwith, if: (i) any
such shares of IPI Stock shall have been registered under the Securities Act for
sale, transfer or other disposition by me or on my behalf and are sold,
transferred or otherwise disposed of; or (ii) any such shares of IPI Stock are
sold in accordance with the provisions of paragraphs (c), (e), (f) and (g) of
Rule 144 promulgated under the Securities Act; or (iii) the undersigned is not
at the time of such disposition an affiliate of IPI and have been the beneficial
owner of such IPI Stock for at least one year (or such other period as may be
prescribed thereunder) and IPI has filed with the Commission all of the reports
it is required to file under the Securities Exchange Act of 1934, as amended,
during the preceding twelve months; or (iv) the undersigned has not been for at
least three months an affiliate of IPI and has been the beneficial owner of such
IPI Stock for at least two years (or such other period as may be prescribed by
the Securities Act, and the rules and regulations promulgated thereunder); or
(v) IPI shall have received an opinion of counsel acceptable to IPI to the
effect that the stock transfer restrictions and the legend are not required.
I have carefully read this letter agreement and have discussed the
requirements and other applicable limitations upon the undersigned's ability to
offer to sell, transfer or otherwise dispose of the IPI Stock, and to the extent
deemed necessary consulted with counsel.
---------------------------------
Signature
---------------------------------
Print Name
EXHIBIT 2.2
Allocation of Purchase Price
Cash Actual
Accounts Receivable Actual
Inventory Actual
Prepaids Actual
Fixed Assets Up to $ ___________
Intellectual Property/Intangibles
Other than Goodwill Up to $ ___________
Non-competition/Goodwill Balance (if any)
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
FRANCHISE AGREEMENTS AND RELATED INFORMATION
------------------------------------------ --------------------------------------- ------------------
FRANCHISE LOCATION DATE F.A. SIGNED
------------------------------------------ --------------------------------------- ------------------
Xxxx Xxx Xxxxxxx, President Dream-on Enterprises, Inc. 3/19/97
Xxxx XxxXxxxx, Vice President 0000 Xxxx Xxxxxx, Xxxxx 000X
Xxxxxxxxxx, XX 00000
(000) 000-0000
------------------------------------------ --------------------------------------- ------------------
Xxxx Xxxxxx Xxxxx Xxxx Xxxxx, DBA DLC 9/19/97
0000 Xxxx 000
Xxx Xxxxxxxxx, XX 00000
(000) 000-0000
------------------------------------------ --------------------------------------- ------------------
Xxxx Xxx Xxxxxxx, President Dream-on Enterprises, Inc. 12/1/97
Xxxx XxxXxxxx, Vice President 0000 Xxxxxx Xxxx., Xxxxx 000
Xxxxxxx, XX 00000
(000) 000-0000
------------------------------------------ --------------------------------------- ------------------
Xxxxx XxXxxxx Xxxxx XxXxxxx, DBA DDIC 12/22/97
Sole Proprietor, President 0000 Xxxxxxxx Xxxx Xxxxxx
Xxxxxxxx, XX 00000
(000) 000-0000
------------------------------------------ --------------------------------------- ------------------
Xxxxxxxx X. Xxx, Sole Proprietor Xxxxxxxx Xxx, DBA DDIC 2/23/98 and 8/3/98
0000 Xxxxxxxxx Xxxxx #0
Xxxxx Xxxx, XX 00000
(000) 000-0000
------------------------------------------ --------------------------------------- ------------------
Xxxxx X. Xxxxxxx Xxxxx Xxxxxxx, DBA DDIC 3/6/98
Sole Properietor 000 Xxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
(000) 000-0000
------------------------------------------ --------------------------------------- ------------------
Xxxxx Xxxxxx, Director Chandeysson LLC 8/7/98
000 Xxxxxx Xxxxxx, Xxxx 00
Xxxxxxxxxx, XX 00000
(000) 000-0000
------------------------------------------ --------------------------------------- ------------------
Xxx X. Xxxxxxx, Partner/Owner K&K Enterprises, LLC 11/17/98
Xxxxx X. Xxxxx, Partner/Owner 000-X Xxxx 00xx Xxxxxx
Xxxxxxxx, XX 00000
(000) 000-0000
------------------------------------------ --------------------------------------- ------------------
Xxxx Xxxxxxxxxx, Manager Xxxxxxxxxx Enterprises, LLC 1/12/99
Xxxx Xxxxxxxxxx, Manager 000 Xxxxxxx Xxx
Xxxxx, XX 00000
(000) 000-0000
------------------------------------------ --------------------------------------- ------------------
Xxx Xxxxxx Xxxxxx, President Apple Tree, Inc. 3/3/99
Xxxxxxxx X. Xxxxxx, Secretary/Treasurer 0000 X. Xxxxxx Xxxx Xx., Xxxxx X
Xxx Xxxxxxx Xxxxxx, Vice President Xxxxxxxxx Xxxxx, XX 00000
(000) 000-0000
------------------------------------------ --------------------------------------- ------------------
Xxxx Xxxxxxxxxxx, Member Edvantage LLC (still pending) 8/30/99
Xxxxxx X. Xxxxxxx, Member
------------------------------------------ --------------------------------------- ------------------
Xxxxxx X. Xxxxx, Xx. Pending 12/1/99
Xxxxxxx X. Xxxxx
------------------------------------------ --------------------------------------- ------------------
EXHIBIT 3.12.1
States Authorized to Sell Franchises
LIST OF STATES QUALIFIED TO DO BUSINESS IN:
-------------------------------------------
Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
District of Columbia
Florida
Georgia
Idaho
Iowa
Kansas
Louisiana
Maine
Massachusetts
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
North Carolina
Ohio
Oklahoma
Oregon
Pennsylvania
South Carolina
Tennessee
Texas
Utah
Vermont
Washington
West Virginia
Wyoming
STATES WE ARE NOT ALLOWED TO DO BUSINESS IN:
-------------------------------------------
Hawaii
Illinois
Indiana
Kentucky
Maryland
Michigan
Minnesota
New York
North Dakota
Rhode Island
South Dakota
Virginia
Wisconsin
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.
--------------------------------------------------------------------------------------------------------
Name Medical * Dental * 125Plan * Life Ins. * Vacation Sick Time
Accrued Accrued
(in days) (in days)
--------------------------------------------------------------------------------------------------------
Xxxxxxxx, Xxxxx (1) X X X 52.25 20.75
--------------------------------------------------------------------------------------------------------
Xxxxxxxx, Xxxxx (1) X X X 52.25 26.75
--------------------------------------------------------------------------------------------------------
Xxxxxxxxx, Xxxxxx (1) X X 8.25 5.75
--------------------------------------------------------------------------------------------------------
Childs, Xxxx (1) X X X X
--------------------------------------------------------------------------------------------------------
Xxxxxxxxxx, Xxxxxxxx (1) -1.75 0.63
--------------------------------------------------------------------------------------------------------
Xxxx, Xxxxxxx (1) X X X X 41.25 11.75
--------------------------------------------------------------------------------------------------------
Xxxxxxx, Xxxx (1) X X X X
--------------------------------------------------------------------------------------------------------
Xxxxxxx, Xxxxx (1) X X - 0 - - 0 -
--------------------------------------------------------------------------------------------------------
* (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.
EXHIBIT 3.17.1
EMPLOYEE LIST
---------------------------------------------------------------------------------------------------------------------
NAME POSITION DATE STATUS HOURLY MONTHLY BONUS ADD'L.
OF HIRE FT/PT RATES SALARY COMP.
---------------------------------------------------------------------------------------------------------------------
Xxxxxxxx, Xxxxx (1) Owner 1/1/95 FT - 0 - - 0 - ****
---------------------------------------------------------------------------------------------------------------------
Xxxxxxxx, Xxxxx (1) Owner 1/1/95 FT - 0 - - 0 - ****
---------------------------------------------------------------------------------------------------------------------
Xxxxxxxxx, Xxxxxx (1) Director-Greeley 7/1/98 FT $1,900 Eligible*
---------------------------------------------------------------------------------------------------------------------
Childs, Xxxx (1) Administration 9/15/99 PT $7.50 - 0 -
---------------------------------------------------------------------------------------------------------------------
Xxxxxxxxxx, Xxxxxxxx (1) Director-Fort
Xxxxxxx 11/8/99 FT $1,800 Eligible*
---------------------------------------------------------------------------------------------------------------------
Xxxx, Xxxxxxx (1) Franchisee
Training 3/1/96 FT $2,500 - 0 - **
---------------------------------------------------------------------------------------------------------------------
Xxxxxxx, Xxxx (1) Director-Windsor 6/1/97 PT $1,200 Eligible*
---------------------------------------------------------------------------------------------------------------------
Xxxxxxx, Xxxxx (1) Accountant 9/1/97 FT $2,100 - 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
o
** Automobile/Insurance; Master's Program at UNC (books/tuition); Stock in DFC
(900 shares)
*** Stock in DFC (900 shares)
**** Automobile/Insurance; Additional Life Insurance
EXHIBIT 3.17.2
TERMINATED EMPLOYEES
------------------ -------------------------- ------------ -------------------
MONTH/YEAR OF
NAME POSITION LOCATION TERMINATION
------------------ -------------------------- ------------ -------------------
Xxxxxxxxx, Xxxx Instructor/Office Asst. Windsor 9/99
------------------ -------------------------- ------------ -------------------
EXHIBIT 3.18
Significant Customers/Suppliers
Xxxxx Xxxxxxx: Franchise Attorney
M. Xxxxx Xxxxx: Franchise Broker
FranNet: Franchise Broker
EXHIBIT 3.19
Insurance
Dreamcatcher Learning Centers
Dreamcatcher Franchise Corp
000 Xxxx Xxxxxx
Xxxxxxx, XX 00000
St. Xxxx Fire & Marine Ins Co
Policy No. CKO8307077
Effective 03/01/98 to 03101199
COMMERCIAL PACKAGE POLICY
SECTION I--PROPERTY
Location #1: 000 Xxxx Xxxxxx, Xxxxxx X-X, X & X, Xxxxxxx, XX 00000
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: 0000 X. 00xx Xxxxxx, #000X, Xxxxxxx, XX 00000
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: 000 X. Xxxxx Xxxx, #000, Xxxx Xxxxxxx, XX 00000
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
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
5. 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.
EXHIBIT 3.20
Litigation/Claims
No written or oral claims are outstanding and, to the best knowledge of
shareholders, no claims are pending.
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 FRANCHISE CORPORATION
By: /s/ Xxxxx X. Xxxxxxxx
---------------------
Its: President/CEO
---------------------
SELLER'S SHAREHOLDERS:
/s/ Xxxxx X. Xxxxxxxx /s/ Xxxxxx X. Xxxxxxxx
--------------------- ----------------------
Xxxxx X. Xxxxxxxx Xxxxxx X. Xxxxxxxx
Dated: 1-5-2000 Dated: 1-5-2000
EXHIBIT 3.24
Cash Locations
US Bank
000 X. Xxxxxxxxxx Xxxx
Xxxx Xxxxxxx, XX 00000
l-800-872-2657
Dreamcatcher Franchise Corporation
Advertising Account
Account #103655758193
Dreamcatcher Franchise Corporation
Escrow Accounts for CA and WA
Account #00000000
EXHIBIT 6.1.5
Lease
THIS LEASE ("Lease") is effective as of January ___, 2000, by and
between Xxxxxxxx Professional Building ("Landlord"), a ___________________, and
Dreamcatcher Franchise Corporation ("Tenant"), a Minnesota corporation, who
hereby mutually covenant and agree as follows:
1. GRANT. Landlord, for and in consideration of payment of the rent set
forth in this Agreement and performance of the covenants and agreements in this
Lease to be performed by Tenant, hereby leases to Tenant, and Tenant hereby lets
from Landlord, the real property, and all buildings, structures, fixtures,
equipment, appurtenances, personal property and other improvements of every kind
(the "Improvements"), now or hereafter situated thereupon (collectively the Land
and the Improvements are referred to herein as the "Premises"), which are
located at 000 Xxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000, Suites A-E, J&K.
2. TERM. The term ("Term") of this Lease shall commence on January ___,
2000 ("Commencement Date") and shall extend until terminated by either party
giving the other party written notice of termination at least ninety (90) days
prior to the effective termination date.
3. POSSESSION. Tenant shall be entitled to, and Landlord shall deliver,
exclusive possession of the Premises to Tenant as of the Commencement Date.
4. PURPOSE. The Premises shall be used for office purposes.
5. RENT. Tenant shall pay monthly rent in the amount of One Thousand
Five Hundred Dollars ($1,500) to the Landlord. The monthly rent payments
provided for herein shall be paid by Tenant in advance, on the first (1st) day
of each month; the rent for the calendar month during which rent shall begin to
accrue and for the last calendar month of the Term, shall be prorated, if
necessary. All rental payments shall be made to Landlord at such address as
Landlord may designate by notice in writing to Tenant.
6. GROSS LEASE. The Rent described in Section 4.0 shall be a "gross
rent" and Tenant shall not be responsible for any additional rent, tax,
assessment or fee that may be payable with respect to the Premises.
7. COMPLIANCE WITH LAW. Landlord shall comply and cause the Premises to
comply with: (a) all federal, state, county, municipal and other laws and
ordinances ("Legal Requirements"); (b) all covenants and restrictions of record;
and (c) the rules, regulations and orders of any governmental authority
affecting the Premises. Tenant shall comply with all Legal Requirements that
affect its business, as distinguished from the Premises, and which do not
require the making of any changes, improvements, additions or alterations to the
Premises.
8. UTILITIES. Beginning on the Commencement Date, Tenant shall pay for
all utilities, including electricity, gas, air conditioning, heat and
ventilation, water and sewer which shall service the Premises during the Lease
Term or a fair amount if Tenant's usage cannot be separately determined.
9. REPAIR AND MAINTENANCE. Tenant shall perform routine non-structural
maintenance of the interior of the building. Landlord shall repair, maintain and
replace, all other portions of the Premises including, without limitation, the
heating, lighting, ventilating and air conditioning systems and equipment,
plumbing and drainage systems, utility systems, the parking area, driveways,
foundations and structural components of the Improvements and shall keep all of
such in good, safe, clean and sanitary condition and repair. Such repair and
maintenance obligation of Landlord includes, but is not limited to, keeping,
repairing and maintaining the exterior walls, foundations, lavatories, roof,
floor slabs, walls, lighting, utility equipment, sidewalks, driveways and
structural components of the building. As used herein, each and every obligation
of Landlord to keep, maintain and repair shall include, without limitation, all
ordinary and extraordinary structural and nonstructural repairs and
replacements.
1
10. ALTERATIONS. Tenant shall not make any additions, improvements and
alterations ("Alterations") to the Premises without the prior written consent of
Landlord (which consent shall not be unreasonably withheld, delayed or
conditioned). Tenant shall have the right at its sole cost and expense to
install its own equipment and other personal property. Tenant shall pay the cost
of all Alterations. Tenant shall have the option of removing such Alterations
(repairing the damage, if any, to the Premises occasioned by such removal) or
abandoning such Alterations, upon termination of the Term; provided, however,
that Landlord shall have the right, by notice given within thirty (30) days
after notice from Tenant of the installation of such Alterations or at the time
consent is given to such Alterations in accordance with this Article 5.3 to
require Tenant to remove such Alterations upon termination of the Term and to
repair all damage, if any, to the Premises occasioned by such removal.
11. INDEMNIFICATION OF LANDLORD. Tenant assumes all risk and
responsibility for injury or death to persons and damage to property (damages to
the Premises being waived to the extent of insurance proceeds paid to or on
behalf of Landlord) arising out of or in any way connected with or related to
Tenant's use and control of the Premises (including matters relating to Tenant's
repair and/or alteration of the Premises) and Tenant shall indemnify and hold
Landlord, its partners, officers, directors and shareholders, from and against
any and all claims, losses, liabilities, actions, proceedings and expenses
(including reasonable attorneys' fees) arising out of or in any way connected
with Tenant's use or control of the Premises, unless such claims, losses,
liabilities, actions, proceedings and expenses (including reasonable attorneys'
fees) arising out of Landlord's negligence, willful misconduct, or breach of
this Lease. The provisions of this Article 6.0 shall survive the termination or
expiration of this Lease.
12. INDEMNIFICATION OF TENANT. Landlord shall at all times indemnify
and hold harmless Tenant, its officers, directors, partners and shareholders,
from and against any and all claims, losses, liabilities, actions, proceedings
and expenses (including reasonable attorneys' fees) arising out of Landlord's
ownership or operation of the Premises prior to the Commencement Date,
including, without limitation, those arising out of or related to Hazardous
Substances. Landlord and its partners and shareholders shall at all times
indemnify and hold harmless Tenant, its officers, directors, partners and
shareholders, from and against any and all claims, losses, liabilities, actions,
proceedings and expenses (including reasonable attorneys' fees) arising out of
any inaccuracy in any representation or breach of any warranty set forth in
Article VIII hereof. The provisions of this Article 6.1 shall survive the
termination or expiration of this Lease.
13. ASSIGNMENT OF SUBLETTING BY TENANT. Tenant shall not assign this
Lease or any interest herein, or sublet the Premises or any part thereof or any
right or privilege appurtenant thereto, or allow any person other than Tenant
and its agents, managers, concessionaires, licensees and employees to occupy or
use the Premises or any part thereof without Landlord's prior written consent,
which consent shall not be unreasonably withheld, conditioned or delayed.
14. SUBORDINATION AND ATTORNMENT. Tenant agrees that upon request of
Landlord in writing, it will subordinate the lien of this Lease to the lien of
any mortgage on the Premises that secures the debt on the Premises, and all
renewals, modifications, amendments, consolidations, replacements and extensions
thereof, provided that Tenant shall be granted a non-disturbance and recognition
agreement from the holder(s) of such mortgage, which agreement shall provide
that Tenant shall receive copies of all notices of default under said mortgage
and that Tenant shall have the right (but not the obligation) to cure any
default thereunder, and shall also be in form and substance satisfactory to
Tenant.
15. QUIET ENJOYMENT. So long as no Event of Default (hereinafter
defined) has occurred and is then continuing, Tenant's quiet and peaceable
enjoyment of the Premises shall not be disturbed or interfered with by Landlord
or by any person claiming by, through or under Landlord.
2
16. SURRENDER. Upon the termination of this Lease, whether by
forfeiture, lapse of time or otherwise, or upon termination of Tenant's right to
possession of the Premises, Tenant will surrender and deliver up the Premises,
to Landlord, broom swept, in the same condition and repair as of the
Commencement Date, ordinary wear and tear, loss by condemnation, casualty, Acts
of God, Landlord's act or omission (and the act or omission of those claiming
by, through or under Landlord) or failure to perform its obligations under this
Lease excepted.
17. DEFAULTS. Tenant agrees that if Tenant shall default in keeping,
observing or performing any of the other covenants or agreements herein
contained to be kept, observed and performed by Tenant, and such default shall
continue for thirty (30) days after notice thereof in writing to Tenant,
provided if the default cannot be remedied within thirty (30) days the cure must
be commenced within such period and Tenant must be diligently pursuing such
cure, such event shall be considered an "Event of Default" hereunder.
18. REMEDIES. Upon the occurrence of any one or more Events of Default,
Landlord may, at its election, terminate this Lease or terminate Tenant's right
to possession only, without terminating the Lease. Upon termination of the
Lease, or upon any termination of the Tenant's right to possession without
termination of the Lease, the Tenant shall surrender possession and vacate the
Premises and deliver possession thereof to the Landlord, and hereby grants to
the Landlord the right, to enter into and upon the Premises in such event with
process of law and to repossess the Premises as the Landlord's former estate and
to expel or remove the Tenant and any others who may be occupying or within the
Premises without being deemed in any manner guilty of trespass, eviction, or
forcible entry or detainer, without incurring any liability for any damage
resulting therefrom and without relinquishing the Landlord's rights to rent or
any other right given to the Landlord hereunder or by operation of law. Upon
termination of the Lease, Landlord shall be entitled to recover as damages all
rent and other sums then due and payable by Tenant on the date of termination.
Landlord shall use reasonable efforts to mitigate its damages and to relet all
or any part of the Premises for such rent and upon such terms as shall be
reasonably satisfactory to Landlord (including the right to relet the Premises
as a part of a larger area, and the right to change the character or use made of
the Premises) and, in any event, Landlord shall not unreasonably reject any
substitute tenant proffered by Tenant. If Landlord does not relet the Premises,
Tenant shall pay to Landlord damages equal to the amount of the rent to be paid
by Tenant as and when required to be paid for the remainder of the Term. If the
Premises are relet and a sufficient sum shall not be realized from such
reletting to satisfy the rent to be paid for the remainder of the Term, Tenant
shall pay to Landlord any deficiency. If Tenant shall default hereunder and if
such default cannot with due diligence be cured within said period of thirty
(30) days after notice in writing shall have been given to Tenant, and if Tenant
promptly commences to eliminate the causes of such default, then Landlord shall
not have the right to declare said Term or Tenant's right of possession ended by
reason of such default or to repossess without terminating the Lease so long as
Tenant is proceeding diligently and with reasonable dispatch to take all steps
and do all work required to cure such default, and does so cure such default.
19. PUBLIC LIABILITY INSURANCE. At all times during the term of this
Lease, Tenant shall keep in full force and effect at its expense a policy or
policies of commercial general liability insurance with respect to the Premises.
20. WAIVER OF SUBROGATION. To the extent such waiver does not void or
diminish the coverage under any policy, Landlord and Tenant hereby waive any
rights each may have against the other on account of any loss or damage
occasioned to Landlord or Tenant, as the case may be, or their respective
property, to the extent such loss or damage is covered by insurance carried by
either Landlord or Tenant or may be insured (regardless of whether coverage is
actually in effect) under standard casualty insurance policies.
21. AMENDMENTS MUST BE IN WRITING. None of the covenants, terms or
conditions of this Lease, to be kept and performed by either party, shall in any
manner be altered, waived, modified, changed or abandoned except by a written
instrument, duly signed and delivered by the other party.
3
22. NOTICES. All notices, requests to or demands upon Landlord or
Tenant desired or required to be given under any of the provisions hereof shall
be in writing, and either personally delivered, sent by United States registered
or certified mail, postage prepaid, return receipt requested, or reputable
overnight courier, addressed to the address set forth after such party's
signature line in this Agreement or to such other address as a party may
designate to the other in writing. All notices shall be deemed given and
effective upon receipt.
23. RELATIONSHIP OF PARTIES. Nothing contained herein shall be deemed
or construed by the parties hereto, or by any third party, as creating the
relationship of principal and agent or of partnership, or of joint venture, by
the parties hereto, it being understood and agreed that no provision contained
in this Lease nor any acts of the parties hereto shall be deemed to create any
relationship other than the relationship of landlord and tenant.
24. CAPTIONS. The captions of this Lease are for convenience only and
are not to be construed as part of this Lease and shall not be construed as
defining or limiting in any way the scope or intent of the provisions hereof.
25. SEVERABILITY. If any term or provision of this Lease shall to any
extent be held invalid or unenforceable, the remaining terms and provisions of
this Lease shall not be affected thereby, but each term and provision of this
Lease shall be valid and be enforced to the fullest extent permitted by law.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of
the day and year first above written.
LANDLORD
XXXXXXXX PROFESSIONAL BLDG.
By:
----------------------------------
Name:
----------------------------------
Its:
----------------------------------
Address:
----------------------------------------
----------------------------------------
----------------------------------------
TENANT
DREAMCATCHER FRANCHISE CORPORATION, a Minnesota corporation
By:
----------------------------------
Name:
----------------------------------
Its:
----------------------------------
Address:
15 000 Xxxxxxxxxx Xxxxx
Xxxx Xxxxxxx, XX 00000
4
EXHIBITS LISTING
1.1.1 Fixed Assets
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
EXHIBIT 1.1.1
Fixed Assets
Computers 4
Computer Systems w/printers 2
Executive Desks (L-shaped) 3
Executive Chairs 3
Phones 4
Toshiba Copier (used/purchased l/99) 1
Fax Machine 1
TV/VCR 1
2 Drawer Filing Cabinets 4
Student Desk 1
Rolling Desk Chair 1
6' Book Shelves 3
Literature Rack 2
Upholstered Chairs 3
Safe 1
Document Shredder 1
Electric Pencil Sharpener 1
Electric Stapler 1
8' Conference Tables 2
Conference Table Chairs 14
Lamps 2
45" Bookcase 1
End Table 1
Overhead Projector 1
Small Inventory of DI Materials (storeroom) 1
(detailed list to follow)
EXHIBIT 1.1.7
Prepaid Assets and Deposits
Balance
1/5/2000
--------
Advertising Fund - US Bank $66.00
Xxxxx Bank Account 0.00
EXHIBIT 1.1.8
Receivables
Outstanding Principal
With interest current to
1/5/2000
--------
Promissory Note: $6,807.52
Xxxxx XxXxxxx
EXHIBIT 1.3.1
Liabilities
Balance Due
10-31-99
-----------
Xxxxx Bank $195,811.12
EKS&H 5,008.16
American Express 8,773.18
National Bank of Commerce 2,237.76
Xxxxx Xxxxxxx 18,072.98
Xxxx Xxxxxxxx 3,392.50
Texaco 0.00
Conoco 0.00
Xxxx Xxxxx 3,210.00
Citibank 8,662.60
Weld Schools Visa 3,500.00
Weld Schools Line of Credit 7,000.00
Xxxx Xxxxx 34,500.00
Mat Xxxxxxxxx expenses to WA 0.00
US Bank Escrow Accounts 1,015.00
Xxxxx Xxxxx 7,000.00
Capital One 0.00
-----------
$298,183.36
===========
*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.
Liabilities assumed by Buyer pursuant to this Exhibit 1.3.1 and Exhibit 1.3.1 to
the Asset Purchase Agreement between Dreamcatcher Learning Centers, Inc. ("DLC")
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.
EXHIBIT 2.2
Allocation of Purchase Price
Cash Actual $66.00
Accounts Receivable Actual 6,807.52
Inventory Actual 0.00
Prepaids Actual 0.00
Fixed Assets Up to $50,000.00
Intellectual Property/Intangibles
Other than Goodwill Up to $100,000.00
Noncompetition/Goodwill Balance (if any) $453,809.84
EXHIBIT 3.4.1 Seller's Financial Statements
Dreamcatcher Franchise Corporation
Income Statement
For the Twelve Months Ending December 31, 1999
Current Month Year to Date
Revenues
Royalty Remited 1,858.69 5.17 39,055.68 16.76
Advertising Fee 229.22 0.64 4,773.33 2.05
Franchise Fee 25,000.00 69.51 130,000.00 55.77
Interest on Promissory Note 0.00 0.00 1,399.11 0.60
Educational Materials 7,677.40 21.35 24,528.51 10.52
Software Program 1,200.00 3.34 3,850.00 1.65
Other Income 0.00 0.00 29,490.23 12.65
----------- -----------
Total Revenues 35,965.31 100.0 233,096.86 100.0
----------- -----------
Cost of Sales 0.00 0.00 0.00 0.00
Total Cost of Sales 0.00 0.00 0.00 0.00
----------- -----------
Gross Profit 35,965.31 100.0 233,096.86 100.0
----------- -----------
Expenses
Advertising Expense 0.00 0.00 5,188.01 2.23
Travel Expense 566.79 1.58 4,254.51 1.83
Auto Expense 3,783.60 10.62 13,144.86 5.64
Bank Service Charges 0.00 0.00 124.99 0.05
Credit Card Charges 0.00 0.00 2.33 0.00
Continuing Education 0.00 0.00 809.92 0.35
Gifts & Promotions 100.00 0.28 449.95 0.19
Dues & Subscriptions 244.85 0.68 1,330.70 0.57
Educational Materials 0.00 0.00 9,192.55 3.94
Escrow Fees 0.00 0.00 515.00 0.22
Fees & Licenses 0.00 0.00 10,594.98 4.55
Insurance Expense 2,310.00 6.42 2,478.75 1.06
Interest Expense 3,994.76 11.11 17,960.51 7.71
Legal & Accounting 0.00 0.00 8,372.00 3.59
Maintenance & Repairs 0.00 0.00 177.15 0.08
Meals 82.18 0.23 2,191.18 0.94
Office Expense 80.89 0.22 1,849.59 0.79
Postage Expense 164.65 0.46 1,776.20 0.76
Rent Expense 3,000.00 8.34 16,000.00 6.86
Software Expense 0.00 0.00 4,565.00 1.96
Supplies Expense 0.00 0.00 1,175.50 0.50
Travel Expense 1,159.31 3.22 6,203.45 2.66
Telephone Expense 546.05 1.52 5,045.65 2.16
Total Expenses 22,990.77 63.92 126,661.77 54.34
----------- -----------
Net Income $ 12,974.54 36.08 $106,435.09 45.66
=========== ===========
For Management Purposes Only
EXHIBIT 3.4.1 Seller's Financial Statements
Dreamcatcher Franchise Corporation
Balance Sheet
December 31, 1999
ASSETS
Current Assets
Xxxxx Bank Account $ 710.95
U.S. Bank-Advertising Fund 66.00
-------------
Total Current Assets 776.95
Property & Equipment
Leasehold Improvements 34,360.67
Equipment 2,095.53
Computer System 11,55.35
Furniture & Fixtures 4,534.24
Accumulated Depreciation (2,037.00)
-------------
Total Property & Equipment 50,508.79
Other Assets 0.00
-------------
Total Other Assets 0.00
-------------
Total Assets $ 51,285.74
=============
LIABILITIES AND CAPITAL
Current Liabilities
Note Payable Officer $ (48,031.67)
Payroll Taxes Payable (34.38)
Futa/Suta Payable 34.38
-------------
Total Current Liabilities (48,031.67)
Long Term Liabilities
Note Payable-Stockholders 195,551.72
Note Payable DCLC (212,877.79)
Accounts Payable (114.59)
-------------
Total Long-Term Liabilities (17,440.66)
-------------
Total Liabilities (65,472.33)
Capital
Common Stock 119,000.00
Retained Earnings (108,677.02)
Net Income 106,435.09
-------------
Total Capital 116,758.07
-------------
Total Liabilities & Capital $ 51,285.74
=============
Unaudited -- For Management Purposes Only
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)
----------------------------------------------------------------------------------------------------------
Xxxxxxxx, Xxxxx (1) X X X 52.25 20.75
----------------------------------------------------------------------------------------------------------
Xxxxxxxx, Xxxxx (1) X X X 52.25 26.75
----------------------------------------------------------------------------------------------------------
Xxxxxxxxx, Xxxxxx (1) X X 5.00 5.75
----------------------------------------------------------------------------------------------------------
Xxxxxxxxxx, Xxxxxxxx (1) 0.00 0.63
----------------------------------------------------------------------------------------------------------
Xxxx, Xxxxxxx (1) X X X X 41.25 11.75
----------------------------------------------------------------------------------------------------------
Xxxxxxx, Xxxx (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.
EXHIBIT 3.17.1
EMPLOYEE LIST
----------------------------------------------------------------------------------------------------------------------
NAME POSITION DATE STATUS HOURLY MONTHLY BONUS ADD'L.
OF HIRE FT/PT RATES SALARY COMP.
----------------------------------------------------------------------------------------------------------------------
Xxxxxxxx, Xxxxx (1) Owner 1/1/95 FT - 0 - - 0 - ****
----------------------------------------------------------------------------------------------------------------------
Xxxxxxxx, Xxxxx (1) Owner 1/1/95 FT - 0 - - 0 - ****
----------------------------------------------------------------------------------------------------------------------
Xxxxxxxxx, Xxxxxx (1) Director-Greeley 7/1/98 FT $1,900 Eligible*
----------------------------------------------------------------------------------------------------------------------
Xxxxxxxxxx, Xxxxxxxx (1) Director-Fort
Xxxxxxx 11/8/99 FT $1,800 Eligible*
----------------------------------------------------------------------------------------------------------------------
Xxxx, Xxxxxx Office Mgr. 1/6/00 PT $1,000 - 0 -
----------------------------------------------------------------------------------------------------------------------
Xxxx, Xxxxxxx (1) Franchisee
Training 3/1/96 FT $2,500 - 0 - **
----------------------------------------------------------------------------------------------------------------------
Xxxxxxx, Xxxx (1) Office Mgr. 6/1/97 PT $1,200 - 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
o
** Automobile/Insurance; Master's Program at UNC (books/tuition); Stock in DFC
(900 shares)
*** Stock in DFC (900 shares)
**** Automobile/Insurance; Additional Life Insurance
EXHIBIT 3.17.2
TERMINATED EMPLOYEES
--------------------------------------------------------------------------------
MONTH/YEAR OF
NAME POSITION LOCATION TERMINATION
--------------------------------------------------------------------------------
Childs, Xxxx Admin./Instructor Windsor 12/99
--------------------------------------------------------------------------------
Xxxxxxxxx, Xxxx Instructor/Office Asst. Windsor 9/99
--------------------------------------------------------------------------------
Xxxxxxx, Xxxxx Accountant Windsor 12/99
--------------------------------------------------------------------------------
