Document:

EX-10.1

 

Exhibit 10.1

NEW HORIZONS WORLDWIDE, INC.

SERIES C STOCK AND WARRANT PURCHASE AGREEMENT

DATED
AS OF JULY 2, 2007

 

 

SERIES C STOCK AND WARRANT PURCHASE AGREEMENT

     THIS SERIES C STOCK AND WARRANT PURCHASE AGREEMENT (this “Agreement”) is entered into
as of July 2, 2007 by and among New Horizons Worldwide, Inc., a Delaware corporation
(the “Company”), ATMF New Horizons, LLC, a Michigan limited liability company as agent for
the Investors (in such capacity, “Agent,”) and each of the persons listed on Schedule
A hereto, each of which is herein referred to as an “Investor.”

     WHEREAS, the Company desires to issue to each Investor, and each Investor desires to
subscribe for and acquire from the Company, an equity interest in the Company, upon the
terms and conditions hereinafter set forth;

     NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and
agreements hereinafter set forth, the parties hereto hereby agree as follows:

1. DEFINITIONS

     For all purposes of this Agreement, certain capitalized terms specified in Exhibit
A shall have the meanings set forth in that Exhibit A, except as otherwise
expressly provided.

2. SALE AND PURCHASE OF SHARES AND WARRANTS

2.1. Authorization of the Series C Stock and Series C Warrants.

     The Company has authorized the sale and issuance of up to 172,043shares of its Series C
Convertible Preferred Stock, no par value per share (the “Series C Stock”), having the
rights, restrictions, privileges and preferences set forth in the Certificate of
Designations, a copy of which is attached hereto as Exhibit B (the “Certificate”)
and the issuance of warrants in the form attached hereto as Exhibit C to purchase up
to 1,066,667 shares of the Company’s common stock at an exercise price of $0.75 per share
(the “Series C Warrants”). The Company has, or on or before the Closing will have,
designated the terms of the Series C Stock by filing the Certificate with the Secretary of
State of the State of Delaware.

2.2. Sale and Purchase of Shares

     On the basis of the representations, warranties and agreements contained herein, and
subject to the terms and conditions hereof, the Company agrees to sell and issue to each
Investor, and each Investor agrees, severally and not jointly, to purchase from the Company
on the Closing Date, that number of shares of the Company’s Series C Stock, and Series C
Warrants to purchase the number of shares of the Company’s common stock, set forth opposite
the Investor’s name on Schedule A, at for the purchase price (the “Purchase Price”)
set forth opposite such Investor’s name on Schedule A. The

 

 

Company’s agreement with each Investor is a separate agreement, and the sale of the
Series C Stock and Series C Warrants to each Investor is a separate sale.

2.3. Closing

     The closing of the sale and purchase of the Series C Stock and Series C Warrants (the
“Closing”) shall take place at the offices of Butzel Long, 150 West Jefferson Ave., Suite
100, Detroit, Michigan 48226, at 10:00 a.m., Eastern time, as soon as practical following
satisfaction of all of the conditions to the Closing set forth herein, or at such other
location, date and time as may be agreed upon between the Company and Agent (the “Closing
Date”). At the Closing, the Company shall issue and deliver to the Investors stock
certificates in definitive form, registered in the name of each Investor, representing the
Series C Stock being purchased by each Investor, and Series C Warrants in the name of each
Investor, as set forth on Schedule A. As payment in full for the shares of Series C
Stock and Series C Warrants being purchased by it at the Closing, and against delivery of
the stock certificate or certificates and the Series C Warrants, at the Closing, each
Investor shall deliver to the Company by wire transfer of immediately available funds, the
amount set forth under the heading “Purchase Price Payable at Closing” on Schedule
A. In the event that Agent reallocates the “Shares to be Purchased at Closing” after
the Closing, upon written notice of the reallocation, the Company agrees to amend
Schedule A to reflect such reallocation.

3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY

     Except as disclosed in the correspondingly numbered section of the disclosure letter
dated the date of this Agreement and delivered by the Company to Agent immediately prior to
the execution of this Agreement (the “Company Disclosure Letter”), that specifically relates
to such section or in another section of the Company Disclosure Letter to the extent that it
is reasonably apparent from the text of such disclosure that such disclosure is applicable
to such section, the Company hereby represents and warrants to each Investor as follows:

3.1. Organization and Standing

     The Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, and has all requisite corporate power and authority
to own, operate and lease its Assets, to carry on its business as currently conducted, to
execute, deliver and perform its obligations under this Agreement, the Registration Rights
Agreement, the Stockholders’ Agreement and the Certificate of Incorporation (collectively,
the “Company Agreements”). The Company is duly qualified to conduct its business, and is in
good standing, in each jurisdiction in which the nature of the business conducted by the
Company or the character of the Assets owned, leased or otherwise held by it makes any such
qualification necessary, except where the failure to be so qualified would not have a
Material Adverse Effect.

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3.2. Capitalization

     (a) As of the date hereof, the authorized capital stock of the Company consists of (i)
20,000,000 shares of Common Stock, $.01 par value and (ii) 2,000,000 shares of Preferred
Stock, without par value, of which 200,000 shares are designated as Series B Convertible
Preferred Stock (“Series B Stock”) and 200,000 shares are designated as Series C Convertible
Preferred Stock. Of the 20,000,000 authorized shares of Common Stock, as of the date hereof
immediately prior to the Closing, (i) 10,935,073 shares are issued and outstanding, (ii)
185,280 shares are held in the Company’s treasury, (iii) 1,881,966 shares are reserved for
issuance pursuant to options awarded to current and former employees and directors, (iv)
3,639,432 shares are reserved for issuance pursuant to conversion of the Series B Stock, (v)
2,000,000 shares are reserved for issuance upon exercise of the Series A Warrants, (vi)
666,667 shares are reserved for issuance upon exercise of the Series B Warrants. As of the
Closing, (i) the shares of Common Stock reserved for conversion of the Series B Shares shall
be 4,253,879, (ii) the 2,000,000 shares of Common Stock reserved for issuance upon exercise
of the Series A Warrants shall be reserved for issuance upon exercise of the Series A-1
Warrants, and (iii) the 666,667 shares of Common Stock reserved for issuance upon exercise
of the Series B Warrants shall be reserved for issuance upon exercise of the Series B-1
Warrants. After the Amendment shall have been approved by the Company’s stockholders and
become effective, 984,335 shares of Common Stock shall be reserved for issuance upon
exercise of the Series A-2 Warrants and 150,818 shares of Common Stock shall be reserved for
issuance upon exercise of the Series B-2 Warrants. Of the 2,000,000 authorized shares of
Preferred Stock, as of the date hereof immediately prior to the Closing (i) 174,693 shares
of Series B Stock are issued and outstanding and (ii) no shares of Series C Stock are issued
and outstanding. As of the date hereof, all issued and outstanding shares of Common Stock
and Series B Stock have been validly issued and are fully paid and nonassessable.

     (b) No shares of the Company’s capital stock are subject to preemptive rights or any
other similar rights or any liens or encumbrances suffered or permitted by the Company.

     (c) There are no outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights convertible
into, or exercisable or exchangeable for, any shares of capital stock of the Company or any
of its Subsidiaries, or contracts, commitments, understandings or arrangements by which the
Company or any of its Subsidiaries is or may become bound to issue additional shares of
capital stock of the Company or any of its Subsidiaries or options, warrants, scrip, rights
to subscribe to, calls or commitments of any character whatsoever relating to, or securities
or rights convertible into, or exercisable or exchangeable for, any shares of capital stock
of the Company or any of its Subsidiaries.

     (d) There are no outstanding debt securities, notes, credit agreements, credit
facilities or other agreements, documents or instruments evidencing indebtedness of the
Company or any of its Subsidiaries for borrowed money or by which the Company or any of its
Subsidiaries is or may become bound.

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     (e) There are no agreements or arrangements under which the Company or any of its
Subsidiaries is obligated to register the sale of any of their securities under the
Securities Act.

     (f) There are no outstanding securities or instruments of the Company or any of its
Subsidiaries which contain any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or any of its Subsidiaries
is or may become bound to redeem a security of the Company or any of its Subsidiaries.

     (g) There are no securities or instruments containing anti-dilution or similar
provisions that will be triggered by the issuance of the Series C Stock or the Series C
Warrants. The Company does not have any stock appreciation rights or “phantom stock” plans
or agreements or any similar plan or agreement.

     (h) The Company has Furnished to each Investor true, correct and complete copies of the
Company’s Restated Certificate of Incorporation, as amended and as in effect on the date
hereof (the “Certificate of Incorporation”), and the Company’s Amended and Restated Bylaws,
as amended and as in effect on the date hereof (the “Bylaws”), and the terms of all
securities convertible into, or exercisable or exchangeable for, Common Stock and the
material rights of the holders thereof in respect thereto.

3.3. SEC Reports; Financial Statements

     (a) The Company has timely filed all SEC Reports. Each SEC Report filed by the Company
complied in all material respects with the applicable requirements of the Securities Act or
the Exchange Act, as applicable, and did not contain any untrue statement of material fact
or omit to state a material fact required to be stated therein or necessary in order to make
the statements in the SEC Reports, in light of the circumstances under which they were made,
not misleading.

     (b) The statements contained in the Company’s report on Form 8-K dated April 3, 2007,
if made as of the date of this Agreement and the Closing Date, would not contain an untrue
statement of any material fact and would not omit any material fact necessary to make the
statements made therein, in light of the circumstances under which they were made, not
misleading.

     (c) Each of the Company’s financial statements (including, in each case with respect to
audited financial statements, any related notes) contained in the SEC Reports complied as to
form in all material respects with applicable accounting requirements and the published
rules and regulations of the Commission with respect thereto, was prepared in accordance
with GAAP applied on a consistent basis throughout the periods involved (except, with
respect to audited financial statements, as may be indicated in the notes to such financial
statements) and fairly presented the consolidated financial position of the Company and its
Subsidiaries as of and at the respective date and the results of operations and cash flows
for the periods indicated, except that unaudited financial statements were subject to normal
and recurring year-end adjustments which were not or are not expected

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to be material in amount or effect and the absence of footnote disclosure. The Company
has Furnished to each Investor or its respective representatives true, correct and complete
copies of the SEC Reports not available on the EDGAR system.

     (d) Since January 1, 2006, except as described in the SEC Reports filed with the
Commission prior to the date hereof or as otherwise publicly disclosed by press release
prior to the date hereof,(i) each of the Company and its Subsidiaries has operated in the
ordinary course and (ii) there has occurred no fact, event, circumstance or development
that, individually or in the aggregate, has had or would reasonably be expected to have a
Material Adverse Effect.

     (e) The Company has not taken any steps to seek protection pursuant to any bankruptcy
law nor does the Company have any knowledge or reason to believe that its creditors intend
to initiate involuntary bankruptcy proceedings or any actual knowledge of any fact that
would reasonably lead a creditor to do so. After giving effect to the transactions
contemplated hereby to occur at the Closing, the Company will not be Insolvent (as defined
below). For purposes of this Section 3.3(e), “Insolvent” means (i) the present fair
saleable value of the Company’s assets is less than the amount required to pay the Company’s
total current Indebtedness, (ii) the Company is unable to pay its debts and liabilities,
subordinated, contingent or otherwise, as such debts and liabilities become absolute and
matured, (iii) the Company intends to incur or believes that it will incur debts that would
be beyond its ability to pay as such debts mature or (iv) the Company has unreasonably small
capital with which to conduct the business in which it is engaged as such business is now
conducted and is proposed to be conducted.

3.4. No Undisclosed Liabilities

     Neither the Company nor any of its Subsidiaries has any material liabilities or
obligations of any nature, whether or not accrued, contingent or otherwise, except (a)
liabilities or obligations disclosed or reserved against in the SEC Reports filed prior to
the date of this Agreement or in the financial and other information provided by the Company
referenced in the Disclosure Letter (collectively, the “Financial Reports”), (b) liabilities
or obligations which arose after the last date of any such Financial Report, in the Ordinary
Course of Business consistent with past practice that, individually or in the aggregate,
have not had, and could not reasonably be expected to have, a Material Adverse Effect, (c)
obligations under contracts and commitments incurred in the ordinary course of business and
not required under generally accepted accounting principals to be reflected in the financial
statements contained in the Financial Reports, which in both cases individually and in the
aggregate would not have a Material Adverse Effect, (d) liabilities incurred in connection
with or as a result of the transactions contemplated by this Agreement, or (e) liabilities
resulting from matters expressly disclosed elsewhere in this Section 3.

3.5. Accounting; Disclosure Controls

     (a) Except as set forth in the SEC Reports, the Company and each Significant Subsidiary
maintain a system of internal accounting controls which the Company

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believes are sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management’s general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset and liability
accountability, (iii) access to assets or incurrence of liabilities is permitted only in
accordance with management’s general or specific authorization and (iv) the recorded
accountability for assets and liabilities is compared with the existing assets and
liabilities at reasonable intervals and appropriate action is taken with respect to any
difference.

     (b) Except as set forth in the SEC Reports, the Company maintains disclosure controls
and procedures (as such term is defined in Rule 13a-14 under the Exchange Act) that are
effective in ensuring that information required to be disclosed by the Company in the
reports that it files or submits under the Exchange Act is recorded, processed, summarized
and reported, within the time periods specified in the rules and forms of the Commission,
including, without limitation, controls and procedures designed in to ensure that
information required to be disclosed by the Company in the reports that it files or submits
under the Exchange Act is accumulated and communicated to the Company’s management,
including its principal executive officer or officers and its principal financial officer or
officers, as appropriate, to allow timely decisions regarding required disclosure.

3.6. No Consents

     Except for the filing of a Form D with the Commission and any state securities
regulators, no consent, approval, exemption or authorization of or designation, declaration
or filing with any Governmental Entity on the part of the Company or any Significant
Subsidiary is necessary or required in connection with the execution, delivery and
performance of this Agreement, the offer, sale or issuance of the Series C Stock or Series C
Warrants, or the consummation of any other transaction contemplated hereby. All consents
and waivers required from any Person in order to carry out the transactions contemplated
hereby under any contract, lease or agreement to which the Company or any Significant
Subsidiary is a party are set forth in Section 3.6 of the Company Disclosure Letter, except
those that the failure to make or obtain would not, individually or in the aggregate, be
reasonably likely to have a Material Adverse Effect or prevent, materially delay or
materially impair the ability of the Company to consummate the transactions contemplated by
this Agreement.

3.7. Intellectual Property

     (a) The Company and its Subsidiaries own, or are licensed or otherwise possess all
necessary rights to use, all patents, patent applications, patent disclosures, trademarks,
trade names, service marks, trade dress, copyrights and any applications therefore,
maskworks, schematics, technology, know-how, trade secrets, inventions, improvements
thereto, ideas, algorithms, processes, computer software programs and applications (source
code or object code form) and tangible or intangible proprietary information or material
(“Intellectual Property”) that are used in the business or products of the Company and its
Subsidiaries.

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     (b) The Company and its Subsidiaries have taken all commercially reasonable actions in
all jurisdictions where the Company reasonably believes such action is appropriate, both
domestic and foreign, to register and maintain the registration of all material Intellectual
Property.

     (c) To the Knowledge of the Company, (i) there is no unauthorized use, disclosure,
infringement or misappropriation of any Intellectual Property rights of the Company or any
Subsidiary, or any Third Party Intellectual Property Rights to the extent licensed by or
through the Company or any Subsidiary, by any third party, which is material or which could
reasonably be expected to become material, and (ii) the conduct of the business of the
Company and any Subsidiary does not infringe any patent, trademark, service mark, copyright,
trade secret or other proprietary right of any third party. There are no royalties, fees or
other payments or compensation payable by the Company or its Subsidiaries to any Person in
excess of $25,000 in any twelve (12) month period by reason of the Company’s or its
Subsidiaries ownership, use, sale or disposition of Intellectual Property.

     (d) The Company is not, nor will it be as a result of the execution and delivery of the
Company Agreements or the agreements contemplated thereby, or the performance of its
obligations hereunder and thereunder, in breach of any license, sublicense or other
agreement relating to the Intellectual Property, including Third Party Intellectual Property
Rights.

     (e) All current officers, employees and material consultants of the Company and its
Subsidiaries have executed and delivered to the Company or the applicable Subsidiary an
agreement regarding assignment to the Company or the Subsidiary, as appropriate, of any
Intellectual Property arising from services performed for the Company or the Subsidiary by
such Persons. There is no Intellectual Property developed by a Stockholder, director,
officer, consultant or employee of the Company that is used in the business of the Company
that has not been transferred to, or is not owned free and clear of any liens or
Encumbrances by, the Company.

     (f) The Company has entered into written confidentiality agreements with all third
parties having access to Company-owned confidential Intellectual Property in connection with
the disclosure to, or use or appropriation by, those third parties, of Intellectual Property
owned by the Company.

3.8. Compliance with Laws; Regulatory Approvals

     Except as disclosed in the SEC Reports and except for matters which individually or in
the aggregate would not have a Material Adverse Effect, the operations of the Company and
its Subsidiaries have been conducted in compliance with all applicable Laws. Neither the
Company nor any Subsidiary has received written notice of any material violation (or of any
investigation, inspection, audit, or other proceeding by any Governmental Entity involving
allegations of any violation) of any Law. Except for matters which individually or in the
aggregate would not have a Material Adverse Effect, (a) all Regulatory Approvals required by
the Company and its Subsidiaries to conduct

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their respective business as now conducted by them have been obtained and are in full
force and effect, (b) the Company and its Subsidiaries are in compliance with the terms and
requirements of such Regulatory Approvals, and (c) to the Knowledge of the Company, no event
has occurred which constitutes, or with due notice or lapse of time or both may constitute,
a material default by the Company or any Subsidiary under any Regulatory Approval. No
Regulatory Approvals obtained by the Company will in any way be affected by, or terminate or
lapse by reason of, the transactions contemplated by this Agreement or any of the other
Company Agreements, except for such Regulatory Approvals that would not, individually or in
the aggregate, have a Material Adverse Effect.

3.9. Litigation; Disputes

     (a) Except as set forth in the SEC Reports, there is no legal action, suit, arbitration
or other legal, administrative or other governmental investigation, inquiry or proceeding
pending or, to the Knowledge of the Company, threatened against the Company or any
Subsidiary or relating to any of the Company Agreements or the contemplated transactions
hereof which, if determined adversely to the Company or any such Subsidiary, individually or
in the aggregate, would reasonably be expected to have a Material Adverse Effect or would
reasonably be expected to prohibit or materially delay the Closing. Except as set forth in
the SEC Reports, the Company is not subject to any legal action, suit, arbitration or other
legal, administrative or other governmental investigation, inquiry or proceeding that,
individually or in the aggregate, would reasonably be expected to have a Material Adverse
Effect if determined adversely to the Company.

     (b) The Company is not currently involved in nor reasonably anticipates any dispute
with any of its current or former employees, agents, brokers, distributors, vendors,
customers, business consultants, franchisees, franchisers, representatives or independent
contractors (or any current or former employees of any of the foregoing persons or
entities), which would reasonably be expected to have a Material Adverse Effect if
determined adversely to the Company.

3.10. Material Contracts; Franchise Agreements

     (a) All of the Company’s Contractual Obligations that are required to be described in
the SEC Reports or to be filed as exhibits thereto are described in the SEC Reports or are
filed as exhibits thereto, as so required. Neither the Company nor any of its Subsidiaries
nor (to the Knowledge of the Company) any other party is in breach in any material respect
of, or in default in any material respect under, any of its Contractual Obligations or
organizational documents.

     (b) Each of the franchise agreements to which the Company or any of its Subsidiaries is
a party is currently in effect and no breach or waiver by the Company or any of its
Subsidiaries or, to the Knowledge of the Company, any other party thereto has occurred or is
occurring.

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3.11. Authorization; No Conflict

     The Company has all corporate right, power and authority necessary to enter into this
Agreement and the other Company Agreements and to consummate the transactions contemplated
hereby and thereby. All corporate action on the part of the Company necessary for the
authorization, execution, delivery and performance of this Agreement and the other Company
Agreements by the Company, the authorization, sale, issuance and delivery of Series C Stock
and Series C Warrants contemplated hereby, and the performance of the Company’s obligations
hereunder and under the other Company Agreements, has been taken, except that the
Corporation has insufficient authorized Common Stock to accommodate the conversion of the
Series C Preferred Stock and the exercise of the Series C Warrants. The issuance and sale
of the Series C Stock and the Series C Warrants contemplated hereby will not give rise to
any preemptive rights or rights of first refusal in existence on the date hereof on behalf
of any person.

3.12. Absence of Violation

     The Company is not in violation of or default in any material respect under, nor has it
breached, any term or provision of its Certificate of Incorporation or Bylaws.

3.13. Binding Obligation

     This Agreement constitutes a valid and binding obligation of the Company, enforceable
in accordance with its terms, except as such enforceability may be limited by general
principles of equity (whether applied in a proceeding at law or in equity) or to applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws
relating to, or affecting generally the enforcement of, applicable creditors’ rights and
remedies. Each Company Agreement to be executed by the Company pursuant hereto, when
executed and delivered in accordance with the provisions hereof, will be a valid and binding
obligation of the Company, enforceable in accordance with its terms, except as such
enforceability may be limited by general principles of equity (whether applied in a
proceeding at law or in equity) or to applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation and other similar laws relating, or affecting generally the
enforcement of applicable creditors’ rights and remedies.

3.14. Status of Shares

     The shares of Series C Stock and the Series C Warrants to be issued to each Investor on
the Closing Date have been duly authorized by all necessary corporate action on the part of
the Company. When issued in accordance with this Agreement, the shares of Series C Stock
will be validly issued, fully paid and nonassessable and will be free and clear of all
Encumbrances except for restrictions on transfer under applicable federal and state
securities laws and except as provided in the Company Agreements. After the Amendment shall
have been approved by the Company’s stockholders and become effective, the shares of Common
Stock issuable upon (i) conversion of the shares of Series C Stock and (ii) exercise of the
Series C Warrants and payment of the exercise price therefor, will be validly issued, fully
paid and nonassessable and will be free and

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clear of all Encumbrances except for restrictions on transfer under applicable federal
and state securities laws and except as provided in the Company Agreements.

3.15. Offering of Shares

     (a) Assuming the accuracy of the representations and warranties of each Investor set
forth in Section 4 hereof, the offer and sale of the Series C Stock and the Series C
Warrants to each Investor is exempt from the registration and prospectus delivery
requirements of the Securities Act. Neither the Company nor anyone acting on its behalf has
taken or will take any action (including, without limitation, any offering of any securities
of the Company under circumstances which would require the integration of such offering with
the offering of the Series C Stock and Series C Warrants under the Securities Act and the
rules and regulations of the Commission thereunder) which would subject the offering,
issuance and sale of the Series C Stock or Series C Warrants to the registration
requirements of the Securities Act.

     (b) Neither the Company, nor any of its Affiliates, nor any Person acting on its or
their behalf, has engaged in any form of general solicitation or general advertising (within
the meaning of Regulation D) in connection with the offer or sale of the Series C Stock or
Series C Warrants.

     (c) The Company shall be responsible for the payment of any placement agent’s fees,
financial advisory fees, or brokers’ commissions (other than for persons engaged by any
Investor or its investment advisor) relating to or arising out of the transactions
contemplated hereby. The Company shall pay, and hold each Investor harmless against, any
liability, loss or expense (including, without limitation, attorney’s fees and out-of-pocket
expenses) arising in connection with any such claim.

3.16. Disclosure

     The Company has Furnished the Investors with all applicable or relevant documents and
information that the Investors have requested in writing. True and complete copies of all
documents listed in the Company Disclosure Letter have been Furnished to the Investors. No
representation or warranty of the Company in this Agreement, as qualified by the Company
Disclosure Letter, or the other Company Agreements and no certificate Furnished or to be
Furnished to the Investors at the Closing, contains any untrue statement of a material fact
or omits to state a material fact necessary in order to make the statements contained herein
or therein, in light of the circumstances under which they are made, not misleading.

3.17. Application of Takeover Protections. 

     The Company has taken all necessary action, if any, in order to render inapplicable any
control share acquisition, business combination, or other similar anti-takeover provision
under the Certificate of Incorporation or the laws of the State of Delaware which is or
could become applicable to any Investor as a result of the transactions contemplated by this
Agreement, including, without limitation, the

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Company’s issuance of the Series C Stock and the Series C Warrants and any Investor’s
ownership of the Series C Stock or Series C Warrants.

3.18. No Brokers or Finders

     No agent, broker, finder or investment or commercial banker or other Person (if any)
engaged by or acting on behalf of the Company or any Subsidiary or Affiliate is or will be
entitled to any brokerage or finder’s or similar fee or other commission as a result of the
Company Agreements or the transactions contemplated hereby.

4. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS

     Each Investor hereby, severally and not jointly, represents and warrants to the Company
as to itself as follows:

4.1. Organization and Standing

     The Investor is duly organized, validly existing and in good standing under the laws of
the state or jurisdiction of its organization and has the full and unrestricted power and
authority to carry on its business as currently conducted, to enter into this Agreement and
to carry out the transactions contemplated hereby.

4.2. Authorization

     The execution, delivery and performance by each Investor of each Company Agreement to
which it is a party and the transactions contemplated hereby, the fulfillment of and the
compliance with the respective terms and provisions hereof, and the consummation by each
Investor of the transactions contemplated hereby has been duly authorized (which
authorization has not been modified or rescinded and is in full force and effect), and will
not: (a) conflict with, or violate any provision of, any term or provision of each
Investor’s articles of organization or operating agreement or other governing documents or
(b) conflict with, or result in any breach of, or constitute a default under, any Company
Agreement to which the Investor is a party or by which the Investor is bound. No other
action is necessary for the Investor to enter into each Company Agreement to which it is a
party and to consummate the transactions contemplated hereby.

4.3. Binding Obligation

     This Agreement constitutes a valid and binding obligation of each Investor, enforceable
in accordance with its terms, except as such enforceability may be limited by general
principles of equity (whether applied in a proceeding at law or in equity) or to applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws
relating to, or affecting generally the enforcement of, applicable creditors’ rights and
remedies. Each Company Agreement to be executed by each Investor pursuant hereto, when
executed and delivered in accordance with the provisions hereof, will be a valid and binding
obligation of each Investor, enforceable in accordance with its terms, except as such
enforceability may be limited by general principles of equity (whether

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applied in a proceeding at law or in equity) or to applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation and other similar laws relating to, or affecting
generally the enforcement of, applicable creditors’ rights and remedies.

4.4. No Registration Under the Securities Act

     The Investor understands that the Series C Stock and Series C Warrants to be purchased
by it pursuant to the terms of this Agreement and the Common Stock of the Company into which
the Series C Stock is convertible or for which the Series C Warrants are exercisable
(collectively, the “Securities”) have not been registered under the Securities Act or any
state securities law and will be issued, in reliance upon exemptions contained in the
Securities Act or interpretations thereof and in the applicable state securities laws, and
cannot be offered for sale, sold or otherwise transferred unless the Securities are so
registered or qualify for exemption from registration under the Securities Act.

4.5. Acquisition for Investment

     The Investor is acquiring the Securities under this Agreement in good faith solely for
its own account, for investment and not with a view toward resale or other distribution
within the meaning of the Securities Act. The Investor will not offer for sale, sell or
otherwise transfer the Securities without either registration or exemption from registration
under the Securities Act and any applicable state securities laws.

4.6. Evaluation of Merits and Risks of Investment

     The Investor has such knowledge and experience in financial and business matters such
that it is capable of evaluating the merits and risks of its investment in the Securities
being acquired hereunder. The Investor is an “accredited investor” within the meaning of
Rule 501(a) under the Securities Act. The Investor understands and is able to bear any
economic risks associated with such investment (including, without limitation, the necessity
of holding the Securities for an indefinite period of time, inasmuch as the Securities have
not been registered under the Securities Act).

4.7. Additional Information 

     The Investor acknowledges that it has been afforded the opportunity to ask questions
and receive answers concerning the Company and to obtain additional information that it has
requested to verify the accuracy of the information contained herein. Notwithstanding the
foregoing, nothing contained herein shall operate to modify or limit in any respect the
representations and warranties of the Company or to relieve them from any obligations to the
Investor for breach thereof or the making of misleading statements or the omission of
material facts in connection with the transactions contemplated herein.

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4.8. Legend

     The certificates evidencing the Securities will bear a legend substantially similar to
the following:

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES
LAWS, MAY NOT BE OFFERED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN
THE ABSENCE OF (I) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER SUCH ACT AND ANY APPLICABLE STATE SECURITIES LAW, (II) A “NO ACTION”
LETTER OF THE SECURITIES AND EXCHANGE COMMISSION WITH RESPECT TO SUCH SALE
OR OFFER, OR (III) AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY THAT REGISTRATION UNDER SUCH ACT AND ANY APPLICABLE STATE
SECURITIES LAW IS NOT REQUIRED WITH RESPECT TO SUCH SALE OR OFFER.

     In addition, for so long as the referenced Stockholders’ Agreement is in effect, each
such certificate shall also bear a legend substantially similar to the following:

THE VOTING RIGHTS AND OBLIGATIONS WITH RESPECT TO, AND SALE OR OTHER
DISPOSITION OF, THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
RESTRICTED BY AND SUBJECT TO THE PROVISIONS OF A SECOND AMENDED AND
RESTATED STOCKHOLDERS’ AGREEMENT DATED AS OF JULY 3, 2007, A COPY
OF WHICH IS AVAILABLE FOR INSPECTION AT THE OFFICES OF THE COMPANY.

5. COVENANTS OF THE COMPANY

     The Company covenants and agrees with each Investor as follows:

5.1. Registered Securities

     (a) The Company will, for so long as any shares of the Series C Stock or Series C
Warrants are outstanding, and in any case for a period of forty (40) calendar days
thereafter, undertake reasonable best efforts to cause its Common Stock to continue to be
registered under Section 12(b) or 12(g) of the Exchange Act and, from and after the date the
Company shall have become current in the filing of its SEC Reports, will timely file all
reports required to be filed with the SEC pursuant to the Exchange Act and will comply in
all material respects with its reporting and filing obligations under said Act. The Company
will not knowingly and voluntarily take any action or file any document (whether or not
permitted by the Securities Act or the Exchange Act or the rules

13

 

thereunder) to terminate or suspend its reporting or filing obligations under said
acts, except as permitted herein.

     (b) The Company will (i) use its reasonable best efforts to cause to be filed, as soon
as reasonably practicable, all SEC Reports that have not been timely filed as of the date
hereof and (ii) use its reasonable best efforts to apply, as soon as reasonably practicable,
for reinstatement of trading of its Common Stock on the Nasdaq or on a national securities
exchange (as defined in the Exchange Act) and to comply in all material respects with the
Company’s reporting, filing and other obligations under the bylaws or rules of the National
Association of Securities Dealers and Nasdaq. The Company will continue such listing for
trading for so long as any of the Series C Stock is outstanding, and in any case for a
period of forty (40) calendar days thereafter.

     (c) Notwithstanding the foregoing, the provisions of this subsection shall not in any
way restrict the Company’s ability to negotiate and consummate the consolidation,
reorganization or merger of the Company with or into any other corporation or corporations
or a sale, conveyance or other disposition of all or substantially all of the Company’s
property or business.

5.2. Proxy Statement and Stockholders Meeting

     (a) Within thirty (30) days following the Closing Date or the filing of the Company’s
Report on Form 10-Q for the quarter ended March 31, 2007, whichever is later, the Company
will file preliminary proxy materials with the SEC for the purpose of holding a meeting of
the Company’s Stockholders (the “Stockholders’ Meeting”) to approve the amendment of the
Company’s Certificate of Incorporation to increase the number of authorized shares of the
Company’s Common Stock to 30,000,000 (the “Amendment”) in addition to such other matters as
the Company determines to submit to a vote of its stockholders. The Company shall file with
the SEC the definitive Proxy Statement as promptly as practicable following the ten-day
period specified in Rule 14a-6 of the Exchange Act or, if later, the date the SEC staff
advises Company that its has no further comments, and shall cause the mailing of the
definitive Proxy Statement to the stockholders of Company to occur on that day or as
promptly as reasonably practicable thereafter. The Company shall use its reasonable best
efforts to respond as promptly as practicable to any comments of the SEC or its staff with
respect to the Proxy Statement. Each of the Company and the Investors shall furnish all
information concerning itself and its Subsidiaries to the other as may be reasonably
requested in connection with the preparation, filing and distribution of the Proxy
Statement. The Company shall promptly notify Agent upon the receipt of any comments from
the SEC or its staff or any request from the SEC or its staff for amendments or supplements
to the Proxy Statement and shall promptly provide Agent with copies of all correspondence
between it and its representatives, on the one hand, and the SEC and its staff, on the other
hand. If, at any time prior to the vote of the Company’s stockholders, any information
relating to Company, the Investors or any of their respective affiliates, officers or
directors, should be discovered by Company or the Investors which should be set forth in an
amendment or supplement to the Proxy Statement, so that the Proxy Statement shall not
contain any untrue statement of a material fact or omit to state any material fact required
to be stated

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therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading, the party which discovers such
information shall promptly notify the other parties hereto and an appropriate amendment or
supplement describing such information shall be filed with the SEC and, to the extent
required by applicable Laws, disseminated to the stockholders of the Company.

     (b) The Company will, as promptly as reasonably practicable after the Closing Date,
duly call, give notice of, establish a record date for, the Stockholders’ Meeting, for the
purpose of obtaining the approval and adoption of the Amendment, and will convene and hold
the Stockholders Meeting not later than 35 days after filing of the definitive Proxy
Statement. If the Company is unable to obtain a quorum of its stockholders at such time, it
may extend the date of the Stockholders’ Meeting by no more than five business days and the
Company shall use its reasonable best efforts during such five business day period to obtain
such a quorum as soon as practicable. The Company will use reasonable best efforts to
solicit from its stockholders proxies in favor of the adoption and approval of the Amendment
and will take all other action necessary or advisable to secure the vote or consent of its
stockholders required by applicable Laws to obtain such approvals.

     (c) Following approval of the Amendment by the Company’s stockholders and filing of the
Amendment with the Secretary of State of the State of Delaware, and for so long as any
shares of the Series C Stock are outstanding, the Company shall at all times reserve and
keep available, free from preemptive rights, out of its authorized but unissued Common
Stock, for issuance upon conversion of shares of Series C Stock and the exercise of the
Series C Warrants, not less than the maximum number of shares that would then be issuable
upon conversion of all outstanding shares of Series C Stock and exercise of all unexercised
and unexpired Series C Warrants.

     (d) Subject to filing of the Amendment with the Secretary of State of the State of
Delaware after approval by the Company’s stockholders, the shares of Common Stock issuable
upon conversion of the Series C Stock and exercise of the Series C Warrants issued to each
Investor on the Closing Date have been duly authorized by all necessary corporate action on
the part of the Company, and upon issuance upon such conversion or exercise will be validly
issued and outstanding, fully paid and nonassessable and will be free and clear of all
Encumbrances, except for restrictions on transfer under applicable federal and state
securities laws and except as provided in the Company Agreements.

5.3. Redemption of Series C Shares and Series C Warrants.

     (a) If the Amendment has not been approved on or before the first anniversary of the
Closing Date, the Company will be obligated upon the election of any Investor to redeem the
Series C Shares and Series C Warrants held by such Investor at the Purchase Price thereof
plus accumulated but unpaid dividends thereon (whether or not previously declared). Such
redemption shall occur not later than ten business days following delivery by any Investor
of a demand in writing for such redemption (provided that no such demand may be delivered
prior to such first anniversary). At the closing of such redemption, the Company will cause
such amount to be paid to the Investors, in immediately available funds by wire transfer to
such account or accounts as the Investors

15

 

designate, against delivery to the Company of certificates for all outstanding shares
of Series C Stock as well as all unexercised Series C Warrants.

     (b) With a view to making available the benefits of certain rules and regulations of
the Commission that may at any time permit the sale of any restricted securities to the
public without registration, the Company agrees from and after the date it shall have become
current in the filing of its SEC Reports, to:

     (i) use its reasonable best efforts to make and keep public information
available, as those terms are understood and defined in Rule 144 under the
Securities Act;

     (ii) subject to Section 5.1(a), use its reasonable best efforts to file with
the Commission in a timely manner all reports and other documents required of the
Company under the Securities Act and the Exchange Act; and

     (iii) so long as any Investor owns any Series C Stock or Series C Warrants,
Furnish to the Investor upon request, a written statement by the Company as to its
compliance with the reporting requirements of said Rule 144 and of the Securities
Act and of the Exchange Act, a copy of the most recent annual or quarterly report
of the Company, and such other reports and documents of the Company as the Investor
may reasonably request in availing itself of any rule or regulation of the
Commission allowing the Investor to sell any such securities without registration.

5.4. Use of Proceeds

     The Company will use the proceeds of the sale of Series C Stock and Series C Warrants
for general corporate purposes associated with development of its business. None of the
proceeds will be used to redeem or otherwise acquire any securities of the Company (other
than in satisfaction of the redemption obligation set forth in Section 5.3), pay any
indebtedness of the Company for borrowed money or any dividend in advance of the due date
thereof or other distribution to the holders of the Company’s securities.

5.5. Form D and Blue Sky

     The Company agrees to file a Form D with respect to the Series C Stock and Series C
Warrants as required under Regulation D and to provide a copy thereof to each Investor
promptly after such filing. The Company, on or before the Closing Date, shall take such
action as the Company shall reasonably determine is necessary in order to obtain an
exemption for or to qualify the Series C Stock and Series C Warrants for sale to the
Investors at the Closing pursuant to this Agreement under applicable securities or “Blue
Sky” laws of the states of the United States (or to obtain an exemption from such
qualification). The Company shall make all filings and reports relating to the offer and
sale of the Series C Stock and Series C Warrants required under applicable securities or
“Blue Sky” laws of the states of the United States following the Closing Date.

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5.6. Listing

     Subject to Section 5.1(a), the Company shall promptly secure the listing of all of the
Registrable Securities (as defined in the Registration Rights Agreement) upon each national
securities exchange and automated quotation system, if any, upon which shares of Common
Stock are then listed (subject to official notice of issuance) and shall maintain, so long
as any other shares of Common Stock shall be so listed, such listing of all Registrable
Securities from time to time issuable under the terms of the Company Agreements. Subject to
Section 5.1(a), the Company will use its reasonable best efforts either to (i) secure
designation and quotation of the Common Stock on the Nasdaq Global Market, or (ii) if,
despite the Company’s reasonable best efforts the Company is unsuccessful in satisfying the
preceding clause (i), to use its reasonable best efforts to secure the inclusion of the
Common Stock for quotation on The Nasdaq Capital Market and, without limiting the generality
of the foregoing, to use its reasonable best efforts to arrange for at least two market
makers to register with the National Association of Securities Dealers, Inc. (“NASD”) as
such with respect to the Common Stock. The Company shall pay all fees and expenses in
connection with satisfying its obligations under this Section 5.6.

5.7. Board of Directors

     As of the Closing, the number of directors of the Company shall be fixed by the Board
of Directors of the Company at nine (9). The Company shall use its reasonable best efforts
to implement the board representation rights of the Investors under the Certificate of
Incorporation and Stockholders Agreement. The Investors shall comply with their obligations
regarding the election of Directors under the Stockholders Agreement.

5.8. Disclosure of the Transaction 

     Upon the Closing, the Company shall promptly issue a press release reasonably
acceptable to Agent disclosing all material terms of the transactions contemplated hereby.
Within four (4) Business Days following the Closing Date, the Company shall file a Current
Report on Form 8-K describing the terms of the transactions contemplated by the Company
Agreements in the form required by the Exchange Act, and attaching the material Company
Agreements (including, without limitation, this Agreement, the Registration Rights Agreement
and the Stockholders Agreement) as exhibits to such filing (the “8-K Filing”). Subject to
the foregoing, neither the Company nor any Investor shall issue any press releases or any
other public statements with respect to the transactions contemplated hereby;
provided, however, that the Company shall be entitled, without the prior
approval of any Investor, to make any press release or other public disclosure with respect
to such transactions (a) in substantial conformity with the 8-K Filing and contemporaneously
therewith and (b) as is required by applicable law and regulations, including the applicable
rules and regulations of NASDAQ (provided that in the case of clause (a), Agent shall be
consulted by the Company in connection with any such press release or other public
disclosure prior to its release).

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6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY

     The obligations of the Company under this Agreement are subject to the fulfillment, at
or prior to the Closing Date, of each of the following conditions, and failure to satisfy
any such condition shall excuse and discharge all obligations of the Company to carry out
the provisions of this Agreement, unless such failure is waived in writing by the Company:

6.1. Representations and Warranties

     The representations and warranties of the Investors contained in Section 4 shall be
true and correct in all material respects on and as of the Closing Date with the same effect
as though such representations and warranties had been made on and as of the date of such
Closing Date, except for representations and warranties made as of a particular date, which
shall be true and correct as of such date and except for representations and warranties that
contain Material Adverse Effect or materiality qualifiers, which shall be true and correct
in all respects.

6.2. Performance

     Each Investor shall have performed, satisfied and complied in all material respects
with all agreements and conditions required by this Agreement to be performed or complied
with by them on or prior to the Closing Date.

6.3. Legal Proceedings

     No action or proceeding by or before any governmental authority shall have been
instituted or threatened (and not subsequently dismissed, settled or otherwise terminated)
which is reasonably expected to restrain, prohibit or invalidate the transactions
contemplated by this Agreement, other than an action or proceeding instituted or threatened
by the Company.

6.4. Certificate of Designations

     The Certificate required to designate the number, preferences and rights of the Series
C Stock, as set forth in Exhibit B shall have been accepted for filing by the
Secretary of State for the State of Delaware.

6.5. Documents at Closing

     All documents required to be Furnished by each Investor to the Company pursuant to
Section 8.2 shall have been so Furnished.

7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE INVESTORS

     The obligations of each Investor under this Agreement are subject to the fulfillment,
at or prior to the Closing, of each of the following conditions, and failure to satisfy any
such condition shall excuse and discharge all obligations of such Investor to

18

 

carry out the provisions of this Agreement, unless such failure is waived in writing by
such Investor:

7.1. Representations and Warranties

     The representations and warranties made by the Company in this Agreement and the
statements contained on the Schedules and Exhibits attached hereto shall be true and correct
in all material respects when made, and on and as of the Closing Date as though such
representations and warranties were made on and as of such date, except for representations
and warranties made as of a particular date, which shall be true and correct as of such date
and except for representations and warranties that contain Material Adverse Effect or
materiality qualifiers, which shall be true and correct in all respects.

7.2. Performance

     The Company shall have performed, satisfied and complied in all material respects with
all agreements, obligations and conditions required by this Agreement to be performed,
satisfied or complied with at or prior to the Closing Date.

7.3. Legal Proceedings

     No action or proceeding by or before any governmental authority shall have been
instituted or threatened (and not subsequently settled, dismissed or otherwise terminated)
which is reasonably expected to restrain, prohibit or invalidate the transactions
contemplated by this Agreement other than an action or proceeding instituted or threatened
by an Investor.

7.4. Consents

     The Company shall have received on or prior to the Closing Date all consents,
authorizations and approvals of governmental, and private parties which are required to be
obtained in order to consummate the transactions contemplated hereby on or prior to the
Closing Date, as indicated in Section 3.6 of the Company Disclosure Letter.

7.5. Amendment of Credit Agreement.

     The Credit Agreement shall have been amended in accordance with the provisions of
Schedule B hereto and Camden III and Camden III-A shall have executed and delivered
the Participation Letter with the Investors.

7.6. Agreement of Warrant Holders.

     The Series A Warrants shall be replaced by the Series A-1 Warrants and the Series B
Warrants shall be replaced by the Series B-1 Warrants. The Series A-2 Warrants and Series
B-2 Warrants shall be issued in full satisfaction of the anti-dilution provisions set forth
in the Series A Warrants and Series B Warrants.

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7.7. Documents at Closing

     All documents required to be Furnished by the Company to each Investor pursuant to
Section 8.1 shall have been so Furnished.

8. CLOSING 

8.1. Deliveries by the Company to the Investors at the Closing

     At the Closing, the Company shall deliver to each Investor the following:

     (a) stock certificates in definitive form registered in the name of each Investor,
representing the Series C Stock being purchased by it at the Closing pursuant hereto;

     (b) a Series C Warrant in the form of Exhibit C in the name of each Investor
and exercisable for the number of shares of common stock indicated for each such Investor in
Schedule A;

     (c) a certificate, in a form reasonably acceptable to Agent, executed by the Secretary
or Assistant Secretary of the Company and dated as of the Closing Date, certifying (i) the
resolutions approving this Agreement and the other Company Agreements and the performance of
the Company’s obligations hereunder and thereunder, as adopted by the Company’s Board of
Directors in a form reasonably acceptable to Agent, (ii) the Certificate of Incorporation
and (iii) the Bylaws;

     (d) a certificate executed by the President and Chief Executive Officer of the Company
certifying that the conditions specified in Sections 7.1 and 7.2 have been fulfilled;

     (e) the Voting Agreement in the form of Exhibit D hereto, executed and
delivered by the Company, the Investors, Camden III, Camden III-A and the other holders of
the Company’s Common Stock listed therein;

     (f) the Stockholders’ Agreement substantially in the form of Exhibit E,
executed by the Company and the other stockholders referenced therein;

     (g) the Registration Rights Agreement substantially in the form of Exhibit F,
executed by the Company and the other shareholders referenced therein;

     (h) an opinion of Calfee, Halter & Griswold LLP, dated as of the Closing Date, in form
and substance reasonably acceptable to the Agent containing opinions customary for
transactions of the nature contemplated by this Agreement;

     (i) an opinion of Richards, Layton & Finger, P.A., dated as of the Closing Date, in
form and substance reasonably acceptable to Agent, containing opinions relating to certain
matters of Delaware law customary for transactions of the nature contemplated by this
Agreement;

20

 

     (j) the Participation Letter;

     (k) such other Documents as the Investors may reasonably request.

8.2. Deliveries by the Investors to the Company at the Closing

     At the Closing, each Investor shall deliver to the Company the following:

     (a) a wire transfer of funds or other payment of funds to an account designated by the
Company in the amount of the Purchase Price attributable to such Investor set forth on
Schedule A hereto;

     (b) the Stockholders’ Agreement substantially in the form of Exhibit E,
executed by the Investors;

     (c) the Registration Rights Agreement substantially in the form of Exhibit F,
executed by the Investors.; and

     (d) such other Documents as the Company may reasonably request.

9. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION

9.1. Survival of Representations

     The
representations and warranties of the Company contained in
Sections 3.3—3.10
(inclusive), 3.15(a), 3.15(b), 3.16 and 3.17 of this Agreement shall survive the Closing
through June 30, 2009, and the other representations and warranties of the Company and all
representations and warranties of the Investors set forth herein shall survive the Closing
indefinitely. Each Investor shall be responsible only for its own representations,
warranties, agreements and covenants hereunder. No investigation, audit or inspection made
at any time by or on behalf of a party shall affect the representations and warranties made
by another party to this Agreement.

9.2. Indemnification

     In consideration of each Investor’s execution and delivery of the Company Agreements
and acquiring the Series C Stock and Series C Warrants thereunder and in addition to all of
the Company’s other obligations under the Company Agreements, the Company shall defend,
protect, indemnify and hold harmless each Investor and all of its stockholders, partners,
members, managers, officers, directors, employees and direct or indirect investors and any
of the foregoing Persons’ agents or other representatives (including, without limitation,
those retained in connection with the transactions contemplated by this Agreement)
(collectively, the “Indemnitees”) from and against any and all actions, causes of action,
suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Indemnitee is a party to the action
for which indemnification hereunder is sought), and including reasonable attorneys’ fees and
disbursements (the “Indemnified Liabilities”), incurred by any Indemnitee as a result of, or
arising out of, or relating to (a) any

21

 

misrepresentation or breach of any representation or warranty made by the Company in
the Company Agreements or any other certificate, instrument or document contemplated hereby
or thereby, (b) any breach of any covenant, agreement or obligation of the Company contained
in the Company Agreements or any other certificate, instrument or document contemplated
hereby or thereby or (c) any cause of action, suit or claim brought or made against such
Indemnitee by a third party (including for these purposes a derivative action brought on
behalf of the Company) and arising out of or resulting from (i) the execution, delivery,
performance or enforcement of the Company Agreements or any other certificate, instrument or
document contemplated hereby or thereby, (ii) any transaction financed or to be financed in
whole or in part, directly or indirectly, with the proceeds of the issuance of the Series C
Stock or Series C Warrants, or (iii) the status of such Investor as an investor in the
Company. To the extent that the foregoing undertaking by the Company may be unenforceable
for any reason, the Company shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities that is permissible under applicable
law. Except as otherwise set forth herein, the mechanics and procedures with respect to the
rights and obligations under this Section 9.2 shall be the same as those set forth in
Section 6 of the Registration Rights Agreement. The aggregate Indemnifiable Liabilities
payable by the Company to the Indemnitees pursuant to this Section 9.2 shall be limited to
the aggregate Purchase Price payable by all Investors hereunder plus any accrued but unpaid
dividends owing to the Investors on the Series C Stock, plus the aggregate exercise price of
any Series C Warrants that have been exercised as of the time of any payment under this
Section 9.2.

10. APPOINTMENT OF AGENT

10.1. Appointment.

     Each Investor hereby irrevocably appoints the Agent as its agent to take such action on
its behalf under the provisions of this Agreement and each other Company Agreement and to
exercise such powers and perform such duties as are expressly delegated to it by the terms
of this Agreement or any other Company Agreement, together with such powers as are
reasonably incidental thereto. The Agent shall not have any duty or responsibility except
those expressly set forth herein or in the other Company Agreements, and the Investors
acknowledge that the Agent does not have any fiduciary relationship with any Investor
arising out of its status as agent.

10.2. No Liability.

     Neither the Agent nor any of its members, managers, employees or agents shall (a) be
liable to any Investor for any action taken or omitted to be taken by any of them under or
in connection with this Agreement or any other Company Agreement or the transactions
contemplated hereby (except to the extent resulting from its own gross negligence or willful
misconduct in connection with its duties expressly set forth herein), or (b) be responsible
in any manner to any Investor for any recital, statement, representation or warranty made by
the Company, or any officer thereof, contained in this Agreement or in any other Company
Agreement, or in any certificate, report, statement or other document referred to or
provided for in, or received by the Agent under or in

22

 

connection with, this Agreement or any other Company Agreement, or for any failure of
the Company to perform its obligations hereunder or thereunder.

10.3. Reliance by Agent.

     The Agent may rely upon any writing or other communication believed by it to be genuine
and correct and to have been signed, sent or made by the proper person or persons, and upon
advice and statements of legal counsel (including counsel to the Company) and other experts
selected by the Agent. The Agent shall be justified in failing or refusing to take any
action under this Agreement or any other Company Agreement unless it shall first receive
such advice or concurrence of the Investors as it deems appropriate.

10.4. No Representations; Reliance by Investors

     Each Investor acknowledges that the Agent has not made any representation or warranty
to it, and that no act by the Agent taken hereafter in such capacity shall be deemed to
constitute any representation or warranty by the Agent to any Investor. Each Investor
acknowledges to the Agent that it has, independently and without reliance upon the Agent and
based on such documents and information as it has deemed appropriate, made its own appraisal
of and investigation into the business, prospects, operations, property, financial and other
condition of the Company, and made its own decision to enter into this Agreement and to
acquire Series C Stock and Series C Warrants hereunder.

11. MISCELLANEOUS

11.1. Additional Actions and Documents

     Each of the parties hereto hereby agrees to take or cause to be taken such further
actions, to execute, deliver and file or cause to be executed, delivered and filed such
further Documents, and will obtain such consents, as may be necessary or as may be
reasonably requested by the other party hereto in order to fully effectuate the purposes,
terms and conditions of this Agreement.

11.2. No Brokers

     Except as otherwise disclosed in this Agreement, each party hereto represents and
warrants to the other parties (and to each of them) that such party has not engaged any
broker, finder or agent in connection with the transactions contemplated by this Agreement
and has not incurred (and will not incur) any unpaid liability to any broker, finder or
agent for any brokerage fees, finders’ fees or commissions, with respect to the transactions
contemplated by this Agreement. Each party agrees to indemnify, defend and hold harmless
each of the other parties from and against any and all claims asserted against such parties
for any such fees or commissions by any persons purporting to act or to have acted for or on
behalf of the indemnifying party.

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11.3. Expenses

     Subject to the provisions of this Section 11.3, each party hereto shall pay its own
expenses incident to this Agreement and the transactions contemplated hereunder, including
all legal and accounting fees and disbursements, except that the Company agrees to pay the
reasonable fees (in an aggregate amount not to exceed $50,000) and out-of-pocket expenses of
Butzel Long, legal counsel to Agent, (a) at the Closing or (b) upon demand by Agent if this
Agreement is terminated prior to the Closing because of a breach by the Company of any of
its representations, warranties, covenants or other obligations under this Agreement.

11.4. Assignment

     This Agreement shall be binding upon and inure to the benefit of the parties and their
respective successors and assigns, including any purchaser of Series C Stock or Series C
Warrants. Each Investor shall have the right to assign its rights and obligations under
this Agreement, in whole or in part, to an Affiliate or to a party reasonably acceptable to
the Company and Agent, in which event such assignee shall be deemed to be an Investor
hereunder with respect to such assigned rights. The Company shall not assign its rights and
obligations under this Agreement, in whole or in part, whether by operation of law or
otherwise, without the prior written consent of Agent, and any such assignment contrary to
the terms hereof shall be null and void and of no force and effect.

11.5. Entire Agreement; Amendment

     This Agreement, including the Schedules and the Exhibits hereto, together with the
other Company Agreements, constitutes the entire agreement between the parties hereto with
respect to the transactions contemplated herein, and it supersedes all prior oral or written
agreements, commitments or understandings with respect to the matters provided for herein.
No amendment, modification or discharge of this Agreement shall be valid or binding unless
set forth in writing and duly executed and delivered by the Company, Agent, and the holders
of the Series C Stock representing a majority of the issued and outstanding Series C Stock.

11.6. Waiver

     No delay or failure on the part of any party hereto in exercising any right, power or
privilege under this Agreement or under any other Documents Furnished in connection with or
pursuant to this Agreement shall impair any such right, power or privilege or be construed
as a waiver of any default or any acquiescence therein. No single or partial exercise of
any such right, power or privilege shall preclude the further exercise of such right, power
or privilege, or the exercise of any other right, power or privilege. No waiver shall be
valid against any party hereto unless made in writing and approved by Agent and the holders
of the Series C Stock representing a majority of the issued and outstanding Series C Stock.
Any waiver effected in accordance with this Section 11.6 shall be binding upon each holder
of any securities purchased under this Agreement at the

24

 

time outstanding (including securities into which such securities are convertible),
each future holder or all such securities and the Company.

11.7. Severability

     If any part of any provision of this Agreement or any other Agreement or document given
pursuant to or in connection with this Agreement shall be invalid or unenforceable in any
respect, such part shall be ineffective to the extent of such invalidity or unenforceability
only, without in any way affecting the remaining parts of such provision or the remaining
provisions of this Agreement.

11.8. Governing Law; Jurisdiction; Jury Trial

     This Agreement, the rights and obligations of the parties hereto, and any claims or
disputes relating thereto, shall be governed by and construed in accordance with the laws of
the State of Delaware (excluding the choice of law rules thereof). Each party hereby
irrevocably submits to the non-exclusive jurisdiction of the state and federal courts
sitting in Wilmington, Delaware for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed herein, and
hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any
claim that it is not personally subject to the jurisdiction of any such court, that such
suit, action or proceeding is brought in an inconvenient forum or that the venue of such
suit, action or proceeding is improper. Each party hereby irrevocably waives personal
service of process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address for such notices to it
under this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed to limit in
any way any right to serve process in any manner permitted by law. EACH PARTY HEREBY
IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT
OR ANY TRANSACTION CONTEMPLATED HEREBY.

11.9. Notices

     All notices, demands, requests, or other communications which may be or are required to
be given, served, or sent by any party to any other party pursuant to this Agreement shall
be in writing and shall be hand delivered, sent by overnight courier or mailed by
first-class, registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:

25

 

     (a) If to the Company:

New Horizons Worldwide, Inc.

1900 S. State College Blvd., Suite 650

Anaheim, California 92806-6135

Attention: Mark A. Miller, President and Chief Executive Officer

with a copy (which shall not constitute notice) to:

Calfee, Halter, & Griswold, LLP

1400 Key Bank Center

800 Superior Avenue E.

Cleveland, Ohio 44114-2688

Attention: Scott R. Wilson

     (b) If to Agent:

ATMF New Horizons, LLC

6735 Telegraph Road Suite 110

Bloomfield Hills, MI 48301

Attention: Arnold M. Jacob

with a copy (which shall not constitute notice) to:

Butzel Long

150 West Jefferson, Suite 100

Detroit, MI 48226

Attention: Justin G. Klimko

     (c) If to any other Investor:

To such Investor’s address shown on Schedule A hereto.

     Each party may designate by notice in accordance with this Section 11.9 a new address
to which any notice, demand, request or communication may thereafter be so given, served or
sent. Each notice, demand, request, or communication which shall be hand delivered, sent,
mailed, in the manner described above, shall be deemed sufficiently given, served, sent,
received or delivered for all purposes at such time as it is delivered to the addressee
(with the return receipt or the delivery receipt being deemed conclusive, but not exclusive,
evidence of such delivery) or at such time as delivery is refused by the addressee upon
presentation.

11.10. No Strict Construction

     The language used in this Agreement will be deemed to be the language chosen by the
parties to express their mutual intent, and no rules of strict construction will be applied
against any party.

26

 

11.11. Remedies

     Each Investor and each holder of the Series C Stock shall have all rights and remedies
set forth in the Company Agreements and all rights and remedies which such holders have been
granted at any time under any other agreement or contract and all of the rights which such
holders have under any applicable Laws. Any Person having any rights under any provision of
this Agreement shall be entitled to enforce such rights specifically (without posting a bond
or other security), to recover damages by reason of any breach of any provision of this
Agreement and to exercise all other rights granted by applicable Laws. Furthermore, the
Company recognizes that in the event that it fails to perform, observe, or discharge any or
all of its obligations under the Company Agreements, any remedy at law may prove to be
inadequate relief to the Investors. The Company therefore agrees that the Investors shall
be entitled to seek temporary and permanent injunctive relief in any such case without the
necessity of proving actual damages and without posting a bond or other security.

11.12. Independent Nature of Investors’ Obligations and Rights

     The obligations of each Investor under any Company Agreements are several and not joint
with the obligations of any other Investor, and no Investor shall be responsible in any way
for the performance of the obligations of any other Investor under any Company Agreement.
Nothing contained herein or in any other Company Agreement, and no action taken by any
Investor pursuant hereto or thereto, shall be deemed to constitute the Investors as a
partnership, an association, a joint venture or any other kind of entity, or create a
presumption that the Investors are in any way acting in concert or as a group with respect
to such obligations or the transactions contemplated by the Company Agreement. Each
Investor confirms that it has independently participated in the negotiation of the
transaction contemplated hereby with the advice of its own counsel and advisors. Each
Investor shall be entitled to independently protect and enforce its rights, including,
without limitations, the rights arising out of this Agreement or out of any other Company
Agreements, and it shall not be necessary for any other Investor to be joined as an
additional party in any proceeding for such purpose.

11.13. Headings

     Section headings contained in this Agreement are inserted for convenience of reference
only, shall not be deemed to be a part of this Agreement for any purpose, and shall not in
any way define or affect the meaning, construction or scope of any of the provisions hereof.

11.14. Execution in Counterparts

     To facilitate execution, this Agreement may be executed in as many counterparts as may
be required. It shall not be necessary that the signatures of, or on behalf of, each party,
or that the signatures of all persons required to bind any party, appear on each
counterpart; but it shall be sufficient that the signature of, or on behalf of, each party,
or that the signatures of the persons required to bind any party, appear on one or more of
the

27

 

counterparts. All counterparts shall collectively constitute a single Agreement. It
shall not be necessary in making proof of this Agreement to produce or account for more than
a number of counterparts containing the respective signatures of, or on behalf of, all of
the parties hereto.

11.15. Limitation on Benefits

     The covenants, undertakings and agreements set forth in this Agreement shall be solely
for the benefit of, and shall be enforceable only by, the parties hereto and their
respective successors, heirs, executors, administrators, legal representatives and permitted
assigns. Except as specifically set forth or referred to herein, nothing herein expressed
or implied is intended or shall be construed to confer upon or give to any person or entity
other than the parties hereto and their successors or assigns, any rights or remedies under
or by reason of this Agreement, as third party beneficiary or otherwise.

28

 

     IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement, or have caused this
Agreement to be duly executed on their behalf, as of the day and year first above written.

	 	 	 	 	 
	 	NEW HORIZONS WORLDWIDE, INC.

 	 
	 	By:  	 /s/
Mark A. Miller	 
	 	 	Mark A. Miller 	 
	 	 	President and Chief Executive Officer 	 
	 
	 	AGENT

ATMF NEW HORIZONS, LLC

 	 
	 	By:  	 /s/
Arnold M. Jacob	 
	 	 	Arnold M. Jacob 	 
	 	 	Member 	 
	 
	 	INVESTORS:

ATMF NEW HORIZONS, LLC

 	 
	 	By:  	 /s/
Arnold M. Jacob	 
	 	 	Arnold M. Jacob 	 
	 	 	Member 	 
	 
	 	NH INVESTMENT LLC

By: NH Manager, Inc., Manager

 	 
	 	By:  	 /s/
Robert H. Orley	 
	 	 	Robert H. Orley 	 
	 	 	President 	 

Signature
Page for Series C Preferred Stock and Warrant Purchase Agreement 

 

	 	 	 	 	 

	 	 	 	 	 
	 	ALKHALEEJ TRAINING AND EDUCATION CORP.

 	 
	 	By:  	/s/
Alwaleed Aldryaan	 
	 	 	Name:  	Alwaleed Aldryaan	 
	 	 	Title:  	President	 
	 
	 	UTOPIA GROWTH FUND

 	 
	 	By:  	/s/ Paul H. Sutherland	 
	 	 	Name:  	Paul H. Sutherland	 
	 	 	Title:  	President	 
	 
	 	UTOPIA CORE FUND

 	 
	 	By:  	/s/ Paul H. Sutherland	 
	 	 	Name:  	Paul H. Sutherland	 
	 	 	Title:  	President	 
	 
	 	UTOPIA CORE CONSERVATIVE FUND

 	 
	 	By:  	/s/ Paul H. Sutherland	 
	 	 	Name:  	Paul H. Sutherland	 
	 	 	Title:  	President	 
	 
	 	UTOPIA YIELD INCOME FUND

 	 
	 	By:  	/s/
Paul H. Sutherland	 
	 	 	Name:  	Paul H. Sutherland	 
	 	 	Title:  	President	 
	 

Signature
Page for Series C Preferred Stock and Warrant Purchase Agreement  

 

SCHEDULE A

TO SERIES C STOCK AND WARRANT PURCHASE AGREEMENT

DATED AS OF JULY 2, 2007

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Common Shares	 	 
	 	 	Shares of Series C	 	Covered by Series C	 	 
	 	 	Preferred Stock to	 	Warrants to be	 	 
	Name and Address of	 	be Purchased at	 	Purchased at	 	Purchase Price
	Investor	 	Closing	 	Closing	 	Payable at Closing
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	ATMF New Horizons, LLC

6735 Telegraph Road

Suite 110

Bloomfield Hills, MI 48301

	 	 	64,516	 	 	 	400,000	 	 	$	1,499,997.00	
	NH Investment LLC

40900 Woodward Ave.

Suite 130

Bloomfield Hills, MI 48304

	 	 	64,516	 	 	 	400,000	 	 	$	1,499,997.00	 
	Alkhaleej Training and

Education Corp.

P. O. Box 295300

Riyadh 11351Kingdom of

Saudi Arabia

	 	 	14,337	 	 	 	88,889	 	 	$	333,335.25.00	 
	Utopia Growth Fund 

111 Cass Street 

Traverse City, MI 49684

	 	 	11,470	 	 	 	71,111	 	 	$	266,677.50	 
	Utopia Core Fund 

111 Cass Street 

Traverse City, MI 49684

	 	 	8,602	 	 	 	53,333	 	 	$	199,996.50	 
	Utopia Core Conservative 

Fund 

111 Cass Street 

Traverse City, MI 49684

	 	 	5,735	 	 	 	35,556	 	 	$	133,338.75	 
	Utopia Yield Income Fund 

111 Cass Street 

Traverse City, MI 49684

	 	 	2,867	 	 	 	17,778	 	 	$	66,657.75	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	TOTAL

	 	 	172,043	 	 	 	1,066,667	 	 	$	3,999,999.75	 

 

 

EXHIBIT A

TO SERIES C STOCK AND WARRANT PURCHASE AGREEMENT

DATED AS OF JULY 2, 2007

DEFINITIONS

     “Act” has the meaning specified in Section 4.8.

     “Affiliate” means: (a) with respect to an individual, any member of such individual’s
family; (b) with respect to an entity, any officer, director, stockholder or partner of or
in such entity or of or in any Affiliate of such entity; and (c) with respect to a person or
entity, any person or entity which directly or indirectly, through one or more
intermediaries, Controls, is Controlled by, or is under common Control with such person or
entity.

     “Agent” has the meaning specified in the first paragraph of this Agreement.

     “Agreement” means this Series C Stock and Warrant Purchase Agreement, including the
Disclosure Schedule and all Exhibits hereto.

     “Amendment” has the meaning set forth in Section 5.2(a) of this Agreement.

     “Assets” means assets of every kind and everything that is or may be available for the
payment of liabilities (whether inchoate, tangible or intangible), including, without
limitation, real and personal property.

     “Board of Directors” shall mean the Board of Directors of the Company.

     “Bylaws” has the meaning specified in Section 3.2(h).

     “Camden III” means Camden Partners Strategic Fund III, L.P.

     “Camden III-A” means Camden Partners Strategic Fund III-A, L.P.

     “Certificate” has the meaning specified in Section 2.1.

     “Certificate of Incorporation” has the meaning specified in Section 3.2(h).

     “Claims” means all demands, claims, actions or causes of action, assessments,
complaints, directives, citations, information requests issued by government authority,
legal proceedings, orders, notices of potential responsibility, losses, damages (including,
without limitation, diminution in value), liabilities, sanctions, costs and expenses,
including, without limitation, interest, penalties and attorneys’ and experts’ fees and
disbursements.

     “Closing” has the meaning specified in Section 2.3 of this Agreement.

     “Closing Date” has the meaning specified in Section 2.3.

 

 

     “Code” means the Internal Revenue Code of 1986, as amended, and all Laws promulgated
pursuant thereto or in connection therewith.

     “Commission” means the Securities and Exchange Commission.

     “Common Stock” means the common stock, $.01 par value per share, of the Company.

     “Company” means New Horizons Worldwide, Inc., a Delaware corporation.

     “Company Agreements” has the meaning set forth in Section 3.1 of this Agreement.

     “Company Disclosure Letter” has the meaning set forth in the preamble to Section 3.

     “Contractual Obligation” means, as to any Person, any agreement, undertaking, contract,
indenture, mortgage, deed of trust, credit agreement, note, evidence of indebtedness or
other instrument or restriction, written or otherwise, to which such Person is a party or by
which it or any of its property is bound.

     “Credit Agreement” means the Credit Agreement dated July 19, 2006 among the Company,
Camden Partners Strategic III, LLC as Administrative Agent and the Lenders.

     “Documents” means any paper or other material (including, without limitation, computer
storage media) on which is recorded (by letters, numbers or other marks) information that
may be evidentially used, including, without limitation, legal opinions, mortgages,
indentures, notes, instruments, leases, Agreements, insurance policies, reports, studies,
financial statements (including, without limitation, the notes thereto), other written
financial information, schedules, certificates, charts, maps, plans, photographs, letters,
memoranda and all similar materials.

     “8-K Filing” has the meaning specified in Section 5.8.

     “Encumbrance” means any mortgage, lien, pledge, encumbrance, security interest, deed of
trust, option, encroachment, reservation, order, decree, judgment, condition, restriction,
charge, Agreement, claim or equity of any kind.

     “Exchange Act” means the Securities Exchange Act of 1934, as amended and all rules and
regulations promulgated pursuant thereto or in connection therewith.

     “Exhibit” means an exhibit attached to the Agreement.

     “Furnished” means supplied, delivered, provided or made available in any way.

     “GAAP” means United States generally accepted accounting principles in effect from time
to time.

A-2 

 

     “Governmental Entity” means the government of any nation, state, city, locality or
other political subdivision of any thereof, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining to government
or any international regulatory body having or asserting any jurisdiction of a Person, its
business or its property.

     “Indemnitees” has the meaning specified in Section 9.2.

     “Indemnified Liabilities” has the meaning specified in Section 9.2.

     “Investor” means each of the persons listed on Schedule A hereto.

     “Insolvent” has the meaning specified in Section 3.3(e).

     “Intellectual Property” has the meaning specified in Section 3.7(a).

     “Knowledge of the Company” means the knowledge of those individuals set forth on
Schedule B and it shall be deemed that such persons shall have made reasonable
inquiry of all relevant employees and consultants of the Company and any of its
Subsidiaries.

     “Laws” means all foreign, federal, state and local statutes, laws, ordinances,
regulations, rules, resolutions, orders, determinations, writs, injunctions, awards
(including, without limitation, awards of any arbitrator), judgments and decrees applicable
to the specified persons or entities and to the businesses and Assets thereof (including,
without limitation, Laws relating to securities registration and regulation; the sale,
leasing, ownership or management of real property; employment practices, terms and
conditions, and wages and hours; building standards, land use and zoning; safety, health and
fire prevention; and environmental protection, including Environmental Laws).

     “Lenders” means the Persons which loaned funds to the Company pursuant to the Credit
Agreement.

     “Material Adverse Effect” means any material adverse change in or affecting (i) the
business, properties, Assets, liabilities, operations, results of operations, management,
condition, financial or otherwise, or prospects of the Company and its Subsidiaries, taken
as a whole, or (ii) the ability of the Company or its Subsidiaries to consummate the
transactions contemplated by or to perform its obligations under the Company Agreements
other than any effect resulting from changes in general economic conditions.

     “Ordinary Course of Business” means ordinary course of business consistent with past
business practices of the Company.

     “Participation Letter” means a letter agreement among Camden III, Camden III-A, ATMF
New Horizons, LLC (in its capacity as an Investor and not as the Agent) and NH Investment
LLC, in form and substance reasonably satisfactory to ATMF New

A-3 

 

Horizons, LLC, regarding the
participation by ATMF New Horizons, LLC and NH Investment LLC under certain circumstances in collateral pursuant to the Security
Agreement dated July 19, 2006 to which Camden III and Camden III-A are secured parties to
the Company.

     “Person” means any individual, partnership, joint venture, corporation, trust,
unincorporated organization, government or department or agency of a government.

     “Purchase Price” has the meaning specified in Section 2.2.

     “Registration Rights Agreement” means the Amended and Restated Registration Rights
Agreement dated as of the date hereof by and among the Company, the Investors and certain
other parties named therein.

     “Regulatory Approvals” means any and all certificates, permits, licenses, franchises,
concessions, grants, consents, approvals, orders, registrations, authorizations, waivers,
variances or clearance from a Governmental Entity.

     “SEC” means the United States Securities and Exchange Commission.

     “SEC Reports” means all proxy statements, registration statements, reports, schedules,
forms, statements, and other documents filed or required to be filed by the Company and any
of its Subsidiaries with the Commission pursuant to the Securities Act or the Exchange Act
since January 1, 2002.

     “Section” means a Section (or a subsection) of the Agreement.

     “Securities” has the meaning specified in Section 4.4.

     “Securities Act” means the Securities Act of 1933, as amended, and all rules and
regulations promulgated pursuant thereto or in connection therewith.

     “Series A Warrants” means the Series A Warrants issued to the Lenders pursuant to the
Credit Agreement.

     “Series A-1 Warrants” means the Series A-1 Warrants issued to the Lenders in connection
with the transactions contemplated by this Agreement, including the agreement of the Lenders
to amend the Credit Agreement as set forth in Schedule B to this Agreement.

     “Series A-2 Warrants” means the Series A-2 Warrants issued to the Lenders in connection
with the transactions contemplated by this Agreement, including the agreement of the Lenders
to amend the Credit Agreement as set forth in Schedule B to this Agreement.

     “Series B Stock” has the meaning set forth in Section 3.2(a) of this Agreement.

A-4 

 

     “Series B Warrants” means the Series B Warrants issued to the Lenders pursuant to the
Credit Agreement.

     “Series B-1 Warrants” means the Series B-1 Warrants issued to the Lenders in connection
with the transactions contemplated by this Agreement, including the agreement of the Lenders
to amend the Credit Agreement as set forth in Schedule B to this Agreement.

     “Series B-2 Warrants” means the Series B-2 Warrants issued to the Lenders in connection
with the transactions contemplated by this Agreement, including the agreement of the Lenders
to amend the Credit Agreement as set forth in Schedule B to this Agreement.

     “Series C Stock” has the meaning set forth in Section 2.1 of this Agreement.

     “Series C Warrants” has the meaning set forth in Section 2.1 of this Agreement.

     “Significant Subsidiary” has the meaning set forth in Section 1-02 of Regulation S-X,
promulgated by the Commission under the Exchange Act.

     “Stockholders’ Agreement” means the Second Amended and Restated Stockholders’ Agreement
dated as of the date hereof by and among the Company, the Investors and certain parties
named therein.

     “Stockholders’ Meeting” has the meaning described in Section 5.2(a) of this Agreement.

     “Taxes” means all federal, state, local and foreign taxes (including, without
limitation, income, profit, franchise, sales, use, real property, personal property, ad
valorem, excise, employment, social security and wage withholding taxes) and installments of
estimated taxes, assessments, deficiencies, levies, imports, duties, withholdings, or other
similar charges of every kind, character or description imposed by any governmental or
quasi-governmental authorities, and any interest, penalties or additions to tax imposed
thereon or in connection therewith.

     “Third Party Intellectual Property Rights” means all material licenses, sublicenses and
other material agreements to which the Company or any Subsidiary are a party and pursuant to
which the Company or such Subsidiary is authorized to use any third party patents,
trademarks or copyrights, including software.

A-5 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Page
	 
	 	 	 	 	 	 	 	 	 	 
	1.	 	 	DEFINITIONS	 	 	1	 
	 
	 	 	 	 	 	 	 	 	 	 
	2.	 	 	SALE AND PURCHASE OF SHARES AND WARRANTS	 	 	1	 
	 

	 	 	2.1.	 	 	Authorization of the Series C Stock and Series C Warrants
	 	 	1	 
	 

	 	 	2.2.	 	 	Sale and Purchase of Shares
	 	 	1	 
	 

	 	 	2.3.	 	 	Closing
	 	 	2	 
	 
	 	 	 	 	 	 	 	 	 	 
	3.	 	 	REPRESENTATIONS AND WARRANTIES OF THE COMPANY	 	 	2	 
	 

	 	 	3.1.	 	 	Organization and Standing
	 	 	2	 
	 

	 	 	3.2.	 	 	Capitalization
	 	 	3	 
	 

	 	 	3.3.	 	 	SEC Reports; Financial Statements
	 	 	4	 
	 

	 	 	3.4.	 	 	No Undisclosed Liabilities
	 	 	5	 
	 

	 	 	3.5.	 	 	Accounting; Disclosure Controls
	 	 	5	 
	 

	 	 	3.6.	 	 	No Consents
	 	 	6	 
	 

	 	 	3.7.	 	 	Intellectual Property
	 	 	6	 
	 

	 	 	3.8.	 	 	Compliance with Laws; Regulatory Approvals
	 	 	7	 
	 

	 	 	3.9.	 	 	Litigation; Disputes
	 	 	8	 
	 

	 	 	3.10.	 	 	Material Contracts; Franchise Agreements
	 	 	8	 
	 

	 	 	3.11.	 	 	Authorization; No Conflict
	 	 	9	 
	 

	 	 	3.12.	 	 	Absence of Violation
	 	 	9	 
	 

	 	 	3.13.	 	 	Binding Obligation
	 	 	9	 
	 

	 	 	3.14.	 	 	Status of Shares
	 	 	9	 
	 

	 	 	3.15.	 	 	Offering of Shares
	 	 	10	 
	 

	 	 	3.16.	 	 	Disclosure
	 	 	10	 
	 

	 	 	3.17.	 	 	Application of Takeover Protections
	 	 	10	 
	 

	 	 	3.18.	 	 	No Brokers or Finders
	 	 	11	 
	 
	 	 	 	 	 	 	 	 	 	 
	4.	 	 	REPRESENTATIONS AND WARRANTIES OF THE INVESTORS	 	 	11	 
	 

	 	 	4.1.	 	 	Organization and Standing
	 	 	11	 
	 

	 	 	4.2.	 	 	Authorization
	 	 	11	 
	 

	 	 	4.3.	 	 	Binding Obligation
	 	 	11	 
	 

	 	 	4.4.	 	 	No Registration Under the Securities Act
	 	 	12	 
	 

	 	 	4.5.	 	 	Acquisition for Investment
	 	 	12	 
	 

	 	 	4.6.	 	 	Evaluation of Merits and Risks of Investment
	 	 	12	 
	 

	 	 	4.7.	 	 	Additional Information
	 	 	12	 
	 

	 	 	4.8.	 	 	Legend
	 	 	13	 
	 
	 	 	 	 	 	 	 	 	 	 
	5.	 	 	COVENANTS OF THE COMPANY	 	 	13	 
	 

	 	 	5.1.	 	 	Registered Securities
	 	 	13	 
	 

	 	 	5.2.	 	 	Proxy Statement and Stockholders Meeting
	 	 	14	 
	 

	 	 	5.3.	 	 	Redemption of Series C Shares and Series C Warrants
	 	 	15	 
	 

	 	 	5.4.	 	 	Use of Proceeds
	 	 	16	 
	 

	 	 	5.5.	 	 	Form D and Blue Sky
	 	 	16	 
	 

	 	 	5.6.	 	 	Listing
	 	 	17	 

-i-

 

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Page
	 
	 	 	 	 
	 

	 	 	5.7.	 	 	Board of Directors
	 	 	17	 
	 

	 	 	5.8.	 	 	Disclosure of the Transaction
	 	 	17	 
	 
	 	 	 	 	 	 	 	 	 	 
	6.	 	 	CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY	 	 	18	 
	 

	 	 	6.1.	 	 	Representations and Warranties
	 	 	18	 
	 

	 	 	6.2.	 	 	Performance
	 	 	18	 
	 

	 	 	6.3.	 	 	Legal Proceedings
	 	 	18	 
	 

	 	 	6.4.	 	 	Certificate of Designations
	 	 	18	 
	 

	 	 	6.5.	 	 	Documents at Closing
	 	 	18	 
	 
	 	 	 	 	 	 	 	 	 	 
	7.	 	 	CONDITIONS PRECEDENT TO OBLIGATIONS OF THE INVESTORS	 	 	18	 
	 

	 	 	7.1.	 	 	Representations and Warranties
	 	 	19	 
	 

	 	 	7.2.	 	 	Performance
	 	 	19	 
	 

	 	 	7.3.	 	 	Legal Proceedings
	 	 	19	 
	 

	 	 	7.4.	 	 	Consents
	 	 	19	 
	 

	 	 	7.5.	 	 	Amendment of Credit Agreement
	 	 	19	 
	 

	 	 	7.6.	 	 	Agreement of Warrant Holders
	 	 	19	 
	 

	 	 	7.7.	 	 	Documents at Closing
	 	 	20	 
	 
	 	 	 	 	 	 	 	 	 	 
	8.	 	 	CLOSING	 	 	20	 
	 

	 	 	8.1.	 	 	Deliveries by the Company to the Investors at the Closing
	 	 	20	 
	 

	 	 	8.2.	 	 	Deliveries by the Investors to the Company at the Closing
	 	 	21	 
	 
	 	 	 	 	 	 	 	 	 	 
	9.	 	 	SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION	 	 	21	 
	 

	 	 	9.1.	 	 	Survival of Representations
	 	 	21	 
	 

	 	 	9.2.	 	 	Indemnification
	 	 	21	 
	 
	 	 	 	 	 	 	 	 	 	 
	10.	 	 	APPOINTMENT OF AGENT	 	 	22	 
	 

	 	 	10.1.	 	 	Appointment
	 	 	22	 
	 

	 	 	10.2.	 	 	No Liability
	 	 	22	 
	 

	 	 	10.3.	 	 	Reliance by Agent
	 	 	23	 
	 

	 	 	10.4.	 	 	No Representations; Reliance by Investors
	 	 	23	 
	 
	 	 	 	 	 	 	 	 	 	 
	11.	 	 	MISCELLANEOUS	 	 	23	 
	 

	 	 	11.1.	 	 	Additional Actions and Documents
	 	 	23	 
	 

	 	 	11.2.	 	 	No Brokers
	 	 	23	 
	 

	 	 	11.3.	 	 	Expenses
	 	 	24	 
	 

	 	 	11.4.	 	 	Assignment
	 	 	24	 
	 

	 	 	11.5.	 	 	Entire Agreement; Amendment
	 	 	24	 
	 

	 	 	11.6.	 	 	Waiver
	 	 	24	 
	 

	 	 	11.7.	 	 	Severability
	 	 	25	 
	 

	 	 	11.8.	 	 	Governing Law; Jurisdiction; Jury Trial
	 	 	25	 
	 

	 	 	11.9.	 	 	Notices
	 	 	25	 
	 

	 	 	11.10.	 	 	No Strict Construction
	 	 	26	 
	 

	 	 	11.11.	 	 	Remedies
	 	 	27	 
	 

	 	 	11.12.	 	 	Independent Nature of Investors’ Obligations and Rights
	 	 	27	 
	 

	 	 	11.13.	 	 	Headings
	 	 	27	 

-ii-

 

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Page
	 
	 	 	 	 
	 

	 	 	11.14.	 	 	Execution in Counterparts
	 	 	27	 
	 

	 	 	11.15.	 	 	Limitation on Benefits
	 	 	28	 

	 	 	 
	SCHEDULE A
	 	Investors and Purchase Price Payable at Closing
	SCHEDULE B
	 	Amendments to Credit Agreement
	EXHIBIT A
	 	Definitions
	EXHIBIT B
	 	Certificate of Designations
	EXHIBIT C
	 	Form of Series C Warrant
	EXHIBIT D
	 	Voting Agreement
	EXHIBIT E
	 	Stockholders’ Agreement
	EXHIBIT F
	 	Registration Rights Agreement

-iii-EX-10.2

 

Exhibit 10.2

Warrant Number C-___

THESE SECURITIES HAVE BEEN ISSUED PURSUANT TO EXEMPTIONS FOR NONPUBLIC OFFERINGS FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE
SECURITIES LAWS, AND, ACCORDINGLY, THESE SECURITIES MAY NOT BE RESOLD OR OTHERWISE DISPOSED OF
UNLESS, IN THE OPINION OF COUNSEL FOR THE HOLDER, REGISTRATION UNDER THE APPLICABLE FEDERAL OR
STATE SECURITIES LAWS IS NOT REQUIRED OR COMPLIANCE IS MADE WITH SUCH REGISTRATION REQUIREMENTS.

Void after 5:00 p.m. Eastern Time, on ______________, 2012

WARRANT TO PURCHASE 400,000 SHARES OF COMMON STOCK

OF

NEW HORIZONS WORLDWIDE, INC.

(Series C)

          This is to certify that, FOR VALUE RECEIVED,                      or its registered assigns pursuant to
Section (d) hereof (“Holder”), subject to the further provisions of this Warrant, is entitled to
purchase from New Horizons Worldwide, Inc., a Delaware corporation (the “Company”),                     
fully paid, validly issued and nonassessable shares of Common Stock, par value $0.01 per share, of
the Company (the “Common Stock”), at the exercise price of $0.75 per share until                     , 2012.
The number of shares of Common Stock to be received upon the exercise of this Warrant and the price
to be paid for each share of Common Stock may be adjusted from time to time as hereinafter set
forth. The shares of Common Stock deliverable upon such exercise, and as adjusted from time to
time, are hereinafter sometimes referred to as “Warrant Shares,” and the exercise price of a share
of Common Stock as adjusted from time to time is hereinafter sometimes referred to as the “Exercise
Price.”

     (a) EXERCISE OF WARRANT; NOTIFICATION OF EXPIRATION DATE OF WARRANT.

          (i) Subject to the provisions hereof, the Warrant may be exercised as to Warrant Shares at any
time or from time to time, from and after                     , 2007, until the earlier to occur of (A) 5:00
P.M. Eastern time on                     , 2012 (the “Expiration Date”), and (B) the date of cancellation of
the Warrant as described in Section (b) below, provided, however, that if such day is a day on
which banking institutions in the State of Delaware are authorized by law to close, then on the
next succeeding day which shall not be such a day. Notwithstanding the foregoing, the Warrant will
not be exercisable during the period (the “Suspension Period”) from January 1, 2010 until the date
(the “Reactivation Date”) which is three (3) months prior to the

 

 

Expiration Date. The Warrant will become exercisable again on the Reactivation Date to the
extent not previously cancelled and will continue to be exercisable thereafter through the
Expiration Date.

          (ii) The Warrant may be exercised by presentation and surrender hereof to the Company at its
principal office, or at the office of its stock transfer agent, if any, with the Purchase Form
annexed hereto duly executed (with signature guaranteed if required by the Company or its stock
transfer agent) and accompanied by payment of the Exercise Price for the number of Warrant Shares
specified in such form and any applicable taxes. The purchase price for any Warrant Shares
purchased pursuant to the exercise of this Warrant shall be paid in full upon such exercise in cash
or by certified or bank check or pursuant to a cashless exercise procedure in accordance with
Section (l) hereof. As soon as practicable after each such exercise of the Warrants, but not later
than seven (7) business days from the date of such exercise, the Company shall issue and deliver to
the Holder a certificate or certificates for the Warrant Shares issuable upon such exercise,
registered in the name of the Holder or the Holder’s designee. If the Warrant is exercised in part
only, the Company shall, upon surrender of the Warrant for cancellation, execute and deliver a new
Warrant evidencing the rights of the Holder thereof to purchase the balance of the Warrant Shares
purchasable hereunder. In the event of a cash exercise, upon receipt by the Company of the Warrant
at its principal office, or by the stock transfer agent of the Company at its office, in proper
form for exercise, together with the exercise price thereof and taxes as aforesaid in cash or
certified or bank check and the opinion described below, the Holder shall be deemed to be the
holder of record of the shares of Common Stock issuable upon such exercise, notwithstanding that
the stock transfer books of the Company shall then be closed or that certificates representing such
shares of Common Stock shall not then be physically delivered to the Holder. It is further
understood that certificates for the Warrant Shares, if any, to be issued upon exercise of the
Warrant may contain a restrictive legend in accordance with Section (j) hereof.

     (b) CANCELLATION OF WARRANT

          (i) For purposes of this Agreement:

               (A) “20 Day Price” means the volume weighted average trading price for twenty (20)
consecutive trading days of the Common Stock on an Exchange;

               (B) “Exchange” means a recognized national U.S. securities exchange (including without
limitation the Nasdaq Global Market, the Nasdaq Global Select Market or the Nasdaq Capital
Market), but does not include “pink sheet” quotation;

               (C) “Formula Value of the Series C Shares” as of any date means per-share value of the
shares of the Common Stock into which the Series C Shares could then be converted,
determined by dividing

                    (1) the sum of (a) the Company’s trailing twelve months’ earnings before interest,
taxes, depreciation and amortization, determined in accordance with U.S. generally accepted
accounting principles applied consistently with the

2

 

Company’s past practice, multiplied by eight (8), plus (b) the Company’s cash and minus
its indebtedness for borrowed money (including capitalized leases); by

                    (2) the number of shares of Common Stock then outstanding on a Fully Diluted Basis.

               (D) “Fully Diluted Basis” for the Common Stock means all shares of Common Stock
outstanding plus the number of shares that could be acquired upon exercise or conversion of
all options, warrants, convertible securities or other rights to acquire shares of Common
Stock but excluding shares that could be acquired upon exercise of (1) this Warrant, (2) all
other Series C Warrants and (3) all options to acquire Common Stock that are unvested and
which have an exercise price greater than the Market Value of the Series C Shares or the
Formula Value of the Series C Shares, as applicable;

               (E) “Market Value of the Series C Shares” as of any date means the per-share value of
the shares of Common Stock into which the Series C Shares could then be converted,
determined by multiplying the 20 Day Price as of such date by the number of shares of Common
Stock then outstanding on a Fully Diluted Basis.

               (F) “Series C Shares” means the shares of the Company’s Series C Convertible Preferred
Stock issued on the date of this Warrant;

          (ii) Notwithstanding anything to the contrary herein contained, if, at any time during the
Suspension Period:

               (A) the Common Stock is listed for trading on an Exchange and:

                    (1) the Market Value of the Series C Shares equals or exceeds $.75 compounded from the
date of this Warrant at an annual growth rate equal to or greater than fifty percent (50%),
then one-half of the Series C Warrants shall thereupon immediately be deemed cancelled;

                    (2) the Market Value of the Series C Shares equals or exceeds $.75 compounded at an
annual growth rate equal to or greater than seventy percent (70%), then all or the remaining
one-half of such Series C Warrants shall thereupon immediately be deemed cancelled.

               (B) the Common Stock is not listed for trading on an Exchange and

                    (1) the Formula Value of the Series C Shares as of the end of any calendar quarter
equals or exceeds $.75 compounded at an annual growth rate equal to or greater than fifty
percent (50%), then one-half of the Series C Warrants shall thereupon immediately be deemed
cancelled;

                    (2) the Formula Value of the Series C Shares as of the end of any calendar quarter
equals or exceeds $.75 compounded at an annual growth rate equal

3

 

to or greater than seventy percent (70%), then all or the remaining one-half of such
Series C Warrants shall thereupon immediately be deemed cancelled.

               (C) Any portion of the Warrant cancelled hereunder shall be of no further force or
effect as of and following such cancellation.

          (iii) Notwithstanding anything to the contrary herein contained, if all of the outstanding
Series C Shares shall be redeemed by the Company pursuant to the terms of the Certificate of
Designations governing such shares, then all of the Series C Warrants shall thereupon immediately
be deemed cancelled, and this Warrant shall be of no further force or effect as of and following
such cancellation.

     (c) RESERVATION OF SHARES. The Company shall at all times after the Amendment to the
Company’s Certificate of Incorporation to increase the number of authorized shares of Common Stock,
without par value, to 30,000,000 (the “Amendment”) shall have been approved by its stockholders and
become effective, reserve for issuance and/or delivery upon exercise of this Warrant such number of
shares of Common Stock as shall be required for issuance and delivery upon exercise of the
Warrants.

     (d) FRACTIONAL SHARES. No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of the Warrant. With respect to any fraction of a share called for upon
any exercise hereof, the Company shall pay to the Holder an amount in cash equal to such fraction
multiplied by the current market value of a share, determined as follows:

          (i) If the Common Stock is listed for trading or admitted to unlisted trading privileges on an
Exchange, the current market value shall be the last reported sale price of the Common Stock on
such exchange or system on the last business day prior to the date of exercise of this Warrant or
if no such sale is made on such day, the average bid and asked prices for such day on such exchange
or system;

          (ii) If the Common Stock is not listed for trading or admitted to unlisted trading privileges
on an Exchange, the current market value shall be the average of the last reported bid and asked
prices reported by the National Quotation Bureau, Inc. on the last business day prior to the date
of the exercise of this Warrant; or

          (iii) If the Common Stock is not listed for trading or admitted to unlisted trading privileges
on an Exchange and bid and asked prices are not so reported, the current market value shall be an
amount, not less than the book value thereof as at the end of the most recent fiscal year of the
Company ending prior to the date of the exercise of the Warrant, determined in such reasonable
manner as may be prescribed by the Board of Directors of the Company.

     (e) EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT. The Warrant is exchangeable, without
expense, at the option of the Holder, upon presentation and surrender hereof to the Company or at
the office of its stock transfer agent, if any, for other Warrants of different denominations
entitling the Holder thereof to purchase in the aggregate the same number of shares of Common Stock
then purchasable hereunder. Subject to Section (j) hereof, the Holder will not sell, assign or
transfer this Warrant in whole or in part unless this

4

 

Warrant shall have been registered for sale under the Securities Act of 1933, as amended (the
“1933 Act”), or until the Company shall have received from counsel for the Holder an opinion to the
effect that the proposed sale or other transfer of this Warrant by the Holder may be effected
without such registration. Upon surrender of this Warrant to the Company at its principal office
or at the office of its stock transfer agent, if any, with the Assignment Form annexed hereto duly
executed (with signature guaranteed, if required by the Company or its stock transfer agent) and
funds sufficient to pay any transfer tax, the Company shall, without charge, execute and deliver a
new Warrant in the name of the assignee or assignees named in such instrument of assignment and
this Warrant shall promptly be canceled. This Warrant may be divided by or combined with other
Warrants which carry the same rights upon presentation hereof at the principal office of the
Company or at the office of its stock transfer agent, if any, together with a written notice
specifying the names and denominations in which new Warrants are to be issued and signed by the
Holder hereof. The term “Warrant” as used herein includes any Warrants into which this Warrant may
be divided or exchanged. Upon receipt by the Company of evidence satisfactory to it of the loss,
theft, destruction or mutilation of this Warrant, and in the case of loss, theft or destruction, of
reasonably satisfactory indemnification, and upon surrender and cancellation of this Warrant, if
mutilated, the Company will execute and deliver a new Warrant of like tenor, date and amount. Any
such new Warrant executed and delivered shall constitute an additional contractual obligation on
the part of the Company, whether or not the original Warrant shall be at any time enforceable
(subject to the Company’s right of indemnification as provided above) by anyone.

     (f) RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be entitled to any rights
of a shareholder in the Company, either at law or equity, except with respect to shares of Common
Stock for which this Warrant has been duly exercised in accordance with its terms, and the rights
of the Holder are limited to those expressed in the Warrant and are not enforceable against the
Company except to the extent set forth herein. This Warrant shall not impose any liabilities on
the Holder to purchase any securities or as a shareholder of the Company, whether such liabilities
are asserted by the Company or by creditors or shareholders of the Company or otherwise.

     (g) CERTAIN ADJUSTMENTS. So long as this Warrant shall be outstanding, the Exercise Price in
effect at any time and the number and kind of securities purchasable upon the exercise of the
Warrants shall be subject to adjustment from time to time upon the happening of certain events as
follows:

          (i) Reclassification, Consolidation or Merger. In case of any Corporate Transaction,
the Company or the successor or purchasing company or entity in such transaction, as the case may
be, shall execute with the Holder of this Warrant an agreement pursuant to which the Holder of the
Warrant shall have the right thereafter to purchase upon exercise of the Warrant the kind and
amount of shares, and/or other securities and property that the Holder of the Warrant would have
owned or have been entitled to receive after the happening of such Corporate Transaction had the
Warrant been exercised immediately prior to such action. The agreement referred to in this
subsection (g)(i) shall provide for adjustments as nearly equivalent as may be practicable to the
adjustments provided for in this Section (g). The provisions of this subsection (g)(i) shall
similarly apply to successive Corporate Transactions. For purposes of this subsection (g)(i),
“Corporate Transaction” means any reclassification or change of outstanding

5

 

securities of the class issuable upon exercise of this Warrant (other than a change in par
value, or from par value to no par value, or as a result of a subdivision or combination), or in
case of any consolidation or merger of the Company with or into another corporation (other than a
merger (i) with another corporation in which the Company is the surviving corporation and which
does not result in any reclassification or change of outstanding securities issuable upon exercise
of this Warrant or (ii) a merger in which the Company is not the surviving corporation and holders
of equity securities of the Company as a result of such merger receive more than 50% of the equity
securities of the surviving corporation), or in case of any sale of all or substantially all of the
assets of the Company, or in case of a share exchange in which 50% or more of the outstanding
capital stock of the Company is exchanged for capital stock of another corporation,

          (ii) Subdivision or Combination of Shares. If the Company at any time while this
Warrant remains outstanding and unexpired shall subdivide or combine its Common Stock, the Exercise
Price shall be proportionately decreased in the case of a subdivision or increased in the case of a
combination.

          (iii) Stock Dividends. If the Company at any time while this Warrant is outstanding
and unexpired shall pay a dividend with respect to Common Stock payable in, or make any other
distribution of Common Stock with respect to Common Stock (except any distribution provided for in
the foregoing subsection (g)(i) or (g)(ii)), then the Exercise Price shall be adjusted, from and
after the date of determination of shareholders entitled to receive such dividend or distribution,
to that price determined by multiplying the Exercise Price in effect immediately prior to such date
of determination by a fraction (A) the numerator of which shall be the total number of shares of
Common Stock outstanding immediately prior to such dividend or distribution and (B) the denominator
of which shall be the total number of shares of Common Stock outstanding immediately after such
dividend or distribution.

          (iv) Adjustment of Exercise Price for Diluting Issues.

               (A) If at any time while this Warrant is outstanding the Company shall issue or sell,
or is, in accordance with subsections (g)(v)(B) or (g)(v)(C) hereof, deemed to have issued
or sold, any shares of Common Stock for a consideration per share less than the applicable
Exercise Price immediately prior to the time of such issue or sale, then, and in each such
case, the Exercise Price theretofore in effect shall be reduced, concurrently with such
issue or sale, to a price equal to the quotient obtained by dividing:

                    (1) an amount equal to (x) the total number of shares of Common Stock outstanding
immediately prior to such issuance or sale multiplied by the Exercise Price in effect
immediately prior to such issuance or sale, plus (y) the consideration, if any, received or
deemed to be received by the Company upon such issuance or sale as set forth below; by

                    (2) the total number of shares of Common Stock outstanding immediately after such
issuance or sale.

                    For purposes of the foregoing formula, all shares of Common Stock issuable upon the
exercise of outstanding Options (as defined below) or issuable

6

 

upon the conversion of Convertible Securities (as defined below) shall be deemed
outstanding shares of Common Stock.

          (v) For purposes of this Section (g), the following subparagraphs (A) to (H) shall also be
applicable:

          (A) For purposes of this subsection:

                    (1) “Convertible Security” means any stock or other security convertible into or
exchangeable for Common Stock.

                    (2) “Option” means any option, warrant or other right to subscribe for or to purchase
Common Stock or any Convertible Security.

                    (3) The price per share for which Common Stock is issuable upon the exercise of any
Option shall be determined by dividing (a) the total amount, if any, received or receivable
by the Company as consideration for the granting of such Option, plus the minimum aggregate
amount of additional consideration payable to the Company upon the exercise of such Option,
plus, in the case of Options which relate to Convertible Securities, the minimum aggregate
amount of additional consideration, if any, payable upon the issue or sale of such
Convertible Securities and upon the conversion or exchange thereof, by (b) the total maximum
number of shares of Common Stock issuable upon the exercise of such Option or upon the
conversion or exchange of all such Convertible Securities issuable upon the exercise of such
Option.

                    (4) The price per share for which Common Stock is issuable upon the exchange or
conversion of any Convertible Security shall be determined by dividing (a) the total amount
received or receivable by the Company as consideration for the issue or sale of such
Convertible Security, plus the minimum aggregate amount of additional consideration, if any,
payable to the Company upon the conversion or exchange thereof, by (b) the total maximum
number of shares of Common Stock issuable upon the conversion or exchange of such
Convertible Security.

          (B) Issuance of Rights or Options. In case at any time the Company shall in
any manner grant (whether directly or by assumption in a merger or otherwise) any Options,
whether or not such Options, or the right to convert or exchange the Convertible Securities
that may be purchased thereunder, are immediately exercisable, and the price per share for
which Common Stock is issuable upon the exercise of such Options or upon the conversion or
exchange of the Convertible Securities subject to the Options, shall be less than the
applicable Exercise Price immediately prior to the time of the granting of such Options,
then the total maximum number of shares of Common Stock issuable upon the exercise of such
Options or upon conversion or exchange of the total maximum amount of such Convertible
Securities issuable upon the exercise of such Options, shall be deemed to have been issued
for such price per share as of the date of granting of such Options and thereafter shall be
deemed to be outstanding. Except as otherwise provided in subparagraph (D), no adjustment
of any Exercise Price shall be made upon the actual issue of such Common Stock or of such
Convertible Securities

7

 

upon exercise of such Options or upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities.

          (C) Issuance of Convertible Securities. In case the Company shall in any
manner issue (whether directly or by assumption in a merger or otherwise) or sell any
Convertible Securities, whether or not the rights to exchange or convert any such
Convertible Securities are immediately exercisable, and the price per share for which Common
Stock is issuable upon such conversion or exchange shall be less than the applicable
Exercise Price immediately prior to the time of such issue of sale, then the total maximum
number of shares of Common Stock issuable upon conversion or exchange of all such
Convertible Securities shall be deemed to have been issued for such price per share as of
the date of the issue or sale of such Convertible Securities and thereafter shall be deemed
to be outstanding, provided that (1) except as otherwise provided in subparagraph (D), no
adjustment of any Exercise Price shall be made upon the actual issue of such Common Stock
upon conversion or exchange of such Convertible Securities and (2) if any such issue or sale
of such Convertible Securities is made upon exercise of any Options to purchase any such
Convertible Securities for which adjustments of any Exercise Price have been or are to be
made pursuant to other provisions of this Section (g), no further adjustment of such
Exercise Price shall be made by reason of such issue or sale.

          (D) Change in Option Price or Conversion Rate. If (1) the purchase price
provided for in any Option referred to in subparagraph (B), the additional consideration, if
any, payable upon the conversion or exchange of any Convertible Securities referred to in
subparagraph (B) or (C), or the rate at which Convertible Securities referred to in
subparagraph (B) or (C) are convertible into or exchangeable for Common Stock shall change
at any time (including, but not limited to, changes under or by reason of provisions
designed to protect against dilution), the applicable Exercise Price at the time of such
event shall forthwith be readjusted to the Exercise Price which would have been in effect at
such time had such Options or Convertible Securities then outstanding provided for such
changed purchased price, additional consideration or conversion rate, as the case may be, at
the time initially granted, issued or sold, but only if as a result of such adjustment the
Exercise Price then in effect hereunder is thereby reduced; and on the expiration or
termination of such Convertible Securities, the Exercise Price then in effect hereunder
shall forthwith be increased to the Exercise Price which would have been in effect at the
time of such expiration or termination had such Option or Convertible Securities, to the
extent outstanding immediately prior to such expiration or termination, never been issued.

          (E) Stock Dividends. In case the Company shall declare a dividend or make any
other distribution upon any stock of the Company payable in Common Stock (except for
dividends or distributions upon the Common Stock), Options or Convertible Securities, any
Common Stock, Options or Convertible Securities, as the case may be, issuable in payment of
such dividend or distribution shall be deemed to have been issued or sold at a consideration
equal to $.01 per share.

8

 

          (F) Consideration for Stock. In case any shares of Common Stock, Options or
Convertible Securities shall be issued or sold for cash, the consideration received therefor
shall be deemed to be the amount received by the Company therefor, without deduction
therefrom of any expenses incurred or any underwriting commissions or concessions paid or
allowed by the Company in connection therewith. In case any shares of Common Stock, Options
or Convertible Securities shall be issued or sold for a consideration other than cash, the
amount of the consideration other than cash received by the Company shall be deemed to be
the fair value of such consideration as determined in good faith by the Board of Directors
of the Company, without deduction of any expenses incurred or any underwriting commissions
or concessions paid or allowed by the Company in connection therewith. In case any Options
shall be issued in connection with the issue and sale of other securities of the Company,
together comprising one integral transaction in which no specific consideration is allocated
to such Options by the parties thereto, such Options shall be deemed to have been issued for
such consideration as determined in good faith by the Board of Directors of the Company.

          (G) Record Date. In case the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them (1) to receive a dividend or other
distribution payable in Common Stock, Options or Convertible Securities or (2) to subscribe
for or purchase Common Stock Options or Convertible Securities, then such record date shall
be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have
been issued or sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or purchase, as the
case may be.

          (H) Treasury Shares. The disposition of any shares of Common Stock owned or
held by or for the account of the Company shall be considered an issue or sale of Common
Stock for the purpose of this Section (g).

          (vi) No Adjustment in Certain Circumstances. No adjustment of the Exercise Price
shall be made pursuant to this Section (g) pursuant to (A) shares of Common Stock, Options or
Convertible Securities, issued to officers, directors and employees of, and consultants to, the
Company as compensation for bona fide services provided or to be provided to the Company by such
persons and approved by the Board of Directors or the Compensation Committee, as the case may be;
and (B) shares of Common Stock issuable upon exercise of Options, Convertible Securities or other
rights to acquire securities of the Company issued on or outstanding on the date of this Warrant.

          (vii) Adjustment of Number of Warrant Shares. Upon each adjustment in the Exercise
Price, the number of Warrant Shares purchasable hereunder shall be adjusted, to the nearest whole
share, to the product obtained by multiplying the number of Warrant Shares purchasable immediately
prior to such adjustment in the Exercise Price by a fraction, the numerator of which shall be the
Exercise Price immediately prior to such adjustment and the denominator of which shall be the
Exercise Price immediately thereafter.

          (viii) Calculations. All calculations under this Section (g) shall be made to the
nearest cent or to the nearest Warrant Share, as the case may be. No adjustment in the Exercise

9

 

Price shall be required unless such adjustment would require an increase or decrease of at
least $.01 in such price; provided, however, that any adjustments which by reason of this
subparagraph (8) are not required to be made shall be carried forward and taken into account in any
subsequent adjustment required to be made hereunder.

          (ix) Computations by Chief Financial Officer. Each computation required by this
Section (g) for purposes of determining whether the Exercise Price shall be adjusted shall be
performed by the Company’s Chief Financial Officer on the basis of the Company’s internally
prepared unaudited financial statements. Such unaudited financial statements shall be accompanied
by a certificate signed by the President and Chief Financial Officer certifying that such unaudited
statements have been prepared in accordance with GAAP on a basis consistently applied and included
all adjustments (consisting only of normal, recurring accruals) necessary for a fair presentation
of the financial position and results of the Company as of the end of each such period. Any
dispute between a holder and the Company in regard to such a computation shall be referred to and
decided by the Company’s then engaged firm of independent certified public accountants, which shall
be a firm of recognized national reputation (the “Accounting Firm”). The computations of the
Accounting Firm shall be final and binding on the Company and the Holder.

          (x) Adjustment of Shares Received Pursuant to this Section. In the event that at any
time, as a result of an adjustment made pursuant to this Section (g), the Holder of this Warrant
thereafter shall become entitled to receive any shares of the Company, other than Common Stock,
thereafter the number of such other shares so receivable upon exercise of this Warrant shall be
subject to adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Common Stock contained in subsection (g)(i)
above.

          (xi) Warrants Issued Hereafter. Irrespective of any adjustments in the Exercise Price
or the number or kind of Warrant Shares purchasable upon exercise of this Warrant, Warrants
theretofore or thereafter issued may continue to express the same price and number and kind of
shares as are stated in the similar Warrants initially issuable pursuant to this Agreement.

     (h) OFFICER’S CERTIFICATE. Whenever the Exercise Price shall be adjusted as required by the
provisions of the foregoing Section, the Company shall forthwith file in the custody of its
Secretary or an Assistant Secretary at its principal office and with its stock transfer agent, if
any, an officer’s certificate showing the adjusted Exercise Price determined as herein provided,
setting forth in reasonable detail the facts requiring such adjustment, including a statement of
the number of additional shares of Common Stock, if any, and such other facts as shall be necessary
to show the reason for and the manner of computing such adjustment. Each such officer’s
certificate shall be made available at all reasonable times for inspection by the Holder or any
holder of a Warrant executed and/or delivered pursuant to Section (a) or Section (e), and the
Company shall, forthwith after each such adjustment, mail, by certified mail, a copy of such
certificate to the Holder or any such holder.

     (i) NOTICES TO WARRANT HOLDERS. So long as this Warrant shall be outstanding, (i) if the
Company shall pay any dividend or make any distribution upon the Common Stock, or (ii) if the
Company shall offer to the holders of Common Stock for

10

 

subscription or purchase by them any shares of any class or any other rights, or (iii) if any
capital reorganization of the Company, reclassification of the capital stock of the Company,
consolidation or merger of the Company with or into another corporation, sale, lease or transfer of
all or substantially all of the property and assets of the Company to another corporation, or
voluntary or involuntary dissolution, liquidation or winding up of the Company shall be effected,
then in any such case, the Company shall cause to be mailed by certified mail to the Holder or any
holder of a Warrant executed and/or delivered pursuant to Section (a) or Section (e), at least 20
days prior to the date specified in (x) or (y) below, as the case may be, a notice containing a
brief description of the proposed action and stating the date on which (x) a record is to be taken
for the purpose of such dividend, distribution or rights, or (y) such reclassification,
reorganization, consolidation, merger, conveyance, lease, dissolution, liquidation or winding up is
to take place and the date, if any is to be fixed, as of which the holders of Common Stock or other
securities shall receive cash or other property deliverable upon such reclassification,
reorganization, consolidation, merger, conveyance, dissolution, liquidation or winding up.

     (j) SECURITIES LAW COMPLIANCE

          (i) The Holder of the Warrant, by acceptance hereof, acknowledges that the Warrant and the
shares of Common Stock to be issued upon exercise hereof or conversion thereof are being acquired
solely for the Holder’s own account and not as a nominee for any other party, and for investment,
and that the Holder will not offer, sell, transfer, assign or otherwise dispose of this Warrant or
any shares of Common Stock to be issued upon exercise hereof or conversion thereof except under
circumstances that will not result in a violation of the 1933 Act or any state securities laws.
Upon exercise of the Warrant, the Holder shall, if requested by the Company, confirm in writing, in
a form satisfactory to the Company, that the shares of Common Stock so purchased are being acquired
solely for the Holder’s own account and not as a nominee for any other party, for investment, and
not with a view toward distribution or resale.

          (ii) If appropriate, the Warrant and any Warrants issued upon exercise or substitution or upon
assignment or transfer pursuant to Section (a) or Section (d), as the case may be, and all shares
of Common Stock issued upon exercise hereof or conversion thereof shall be stamped or imprinted
with legends setting forth the restrictions on transfer arising under applicable federal and state
securities laws.

     (k) REGISTRATION RIGHTS UNDER THE 1933 ACT; STOCKHOLDERS’ AGREEMENT. The Holder of this
Warrant or of the Warrant Shares, upon execution thereof, shall be entitled to the registration
rights afforded under the Second Amended and Restated Registration Rights Agreement, dated as of
the date hereof, among the Company, the Holder and the other parties named therein. The voting
rights and obligations with respect to, and the sale or other disposition of, the Warrant Shares
shall be restricted by and subject to the provisions of a Second Amended and Restated Stockholders’
Agreement dated as of the date of this Warrant and the certificates or other evidence representing
the Warrant Shares shall bear a legend in substantially the following form:

THE VOTING RIGHTS AND OBLIGATIONS WITH RESPECT TO, AND SALE OR OTHER DISPOSITION OF,
THE SECURITIES REPRESENTED BY

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THIS CERTIFICATE ARE RESTRICTED BY AND SUBJECT TO THE PROVISIONS OF A SECOND AMENDED
AND RESTATED STOCKHOLDERS’ AGREEMENT DATED AS OF JULY 3, 2007, A COPY OF WHICH
IS AVAILABLE FOR INSPECTION AT THE OFFICES OF THE COMPANY.

     (l) CASHLESS EXERCISE. Notwithstanding any provisions to the contrary, if the fair market
value of one (1) share of Common Stock is greater than the Exercise Price (at the date of
calculation as set forth below), in lieu of exercising this Warrant for cash, the Holder may elect
to receive shares of Common Stock equal to the value (as determined below) of this Warrant (or the
portion thereof being canceled) by surrender of this Warrant at the principal office of the Company
together with the properly endorsed Notice of Exercise and notice of such election in which event
the Company shall issue to the Holder a number of shares of Common Stock computed using the
following formula:

      X = Y (A-B)

                A

	 	 	 	 	 	 	 
	 

	 	Where
	 	X =
	 	the number of shares of Common Stock to be issued to the Holder
	 

	 	 	 	Y =
	 	the number of shares of Common Stock purchasable under the Warrant or,
if only a portion of the Warrant is being exercised, the portion of
the Warrant being cancelled (at the date of such calculation)
	 

	 	 	 	A =
	 	the fair market value of one share of Common Stock (at the date of
such calculation and calculated in accordance with Section (c) hereof)
	 

	 	 	 	B =
	 	Exercise Price (as adjusted to the date of such calculation)

     (m) AMENDMENTS. Neither the Warrant nor any term hereof may be changed, waived, discharged or
terminated without the prior written consent of the Holder.

     (n) NO IMPAIRMENT. The Company will not avoid or seek to avoid the observance or performance
of any of the terms to be observed or performed hereunder by the Company, but will at all times in
good faith assist in the carrying out of all the provisions of this Warrant and in the taking of
all such action as may be necessary or appropriate in order to protect the rights of any Holder.
Without limiting the foregoing, the Company

          (i) will not permit the par value of any shares of Common Stock receivable upon the exercise
of the Warrant to exceed the amount payable therefor upon such exercise;

          (ii) will take such action in order that the Company may validly and legally issue fully paid
and nonassessable shares of stock on the exercise of the Warrant from time to time, including but
not limited to using its reasonable best efforts to submit the Amendment to a vote of the
Corporation’s stockholders; and

12

 

          (iii) will not take any action which results in any adjustment in the Exercise Price or the
number or kind of Warrant Shares purchasable upon exercise of this Warrant if the total number of
shares of Common Stock issuable after such action upon the complete exercise of the Warrant would
exceed the total number of shares of Common Stock then authorized by the Company’s certificate of
incorporation and available for the purpose of issue upon such exercise.

     (o) GOVERNING LAW. This Agreement shall be governed by and construed under the laws of the
State of Delaware, without giving effect to conflict of laws principles that would require
application of the laws of any other jurisdiction.

     (p) NOTICES. All notices and other communications required or permitted hereunder shall be in
writing and shall be mailed by first class mail, postage prepaid, addressed (a)                     
or to such other address as the Holder may have furnished to the Company under
the provisions of this Section or (b) if to the Company, to 1900 S. State College Blvd., Suite 650,
Anaheim, CA 92806, or at such other address as the Company may have furnished to the Holder under
the provisions of this Section.

     IN WITNESS WHEREOF, New Horizons Worldwide, Inc. has caused this Warrant to be executed by its
officer thereunto duly authorized.

Dated:                     , 2007

	 	 	 	 	 
	 	NEW HORIZONS WORLDWIDE, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	  	 
	 	 	Title:  	  	 

13

 

PURCHASE FORM

Dated                     , 20__

(Check applicable line and complete)

___ The undersigned hereby irrevocably elects to exercise its rights, pursuant to Warrant No. C-1
to the extent of purchasing ___shares of Common Stock of New Horizons Worldwide, Inc. (the
“Company”), and hereby makes payment of $                    , in cash, in payment of the exercise price
thereof.

___ The undersigned hereby irrevocably elects to exercise its rights, pursuant to Warrant No. C-1,
to the extent of purchasing ___shares of Common Stock and hereby authorizes you to deliver such
shares of Common Stock for sale to                     , and to retain from the proceeds of such sale
$                    , in cash, in payment of the exercise price thereof and to remit to the undersigned the
balance of such proceeds.

___ The undersigned hereby irrevocably elects to exercise its rights, pursuant to Warrant No. C-1,
to the extent of purchasing ___shares of Common Stock through a cashless exercise pursuant
to Section (l) thereof, and hereby directs you to deliver shares of Common Stock to                     , in
payment of the excess of the fair market value over the exercise price thereof.

ASSIGNMENT FORM

     FOR VALUE RECEIVED,                                                                                                                                              hereby sells, assigns and
 transfers unto

Name                                                                
                   
                                                                              
                    
       

                     (Please typewrite or print in block letters)

Address                                                                                 
                 
                
               
               
             
                
        

the right to purchase Common Stock of the Company, represented by this Warrant to the extent of
___shares as to which such right is exercisable and does hereby irrevocably constitute and
appoint ______as Attorney, to transfer the same on the books of the Company
with full power of substitution in the premises.

Date                     , 20___

Signature

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