<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 9, 1998
REGISTRATION NO. 333-46157
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
PROVANT, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<S> <C> <C>
DELAWARE 8742 04-3395167
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
67 BATTERYMARCH STREET, SUITE 500
BOSTON, MA 02110
(617) 261-1600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
PAUL M. VERROCHI
PROVANT, INC.
67 BATTERYMARCH STREET, SUITE 500
BOSTON, MA 02110
(617) 261-1600
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPIES OF COMMUNICATIONS TO:
<TABLE>
<S> <C>
CONSTANTINE ALEXANDER, ESQUIRE KEITH F. HIGGINS, ESQUIRE
JAMES E. DAWSON, ESQUIRE ROPES & GRAY
NUTTER MCCLENNEN & FISH, LLP ONE INTERNATIONAL PLACE
ONE INTERNATIONAL PLACE BOSTON, MA 02110
BOSTON, MA 02110 TELEPHONE: (617) 951-7000
TELEPHONE: (617) 439-2000 FACSIMILE: (617) 951-7050
FACSIMILE: (617) 973-9748
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If the Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE> 2
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, DATED MARCH 9, 1998
2,600,000 SHARES
PROVANT, INC.
COMMON STOCK
All of the 2,600,000 shares of Common Stock offered hereby are being sold
by Provant, Inc.
Prior to this offering (the "Offering"), there has been no public market
for the Common Stock of the Company. It is currently estimated that the initial
public offering price of the Common Stock will be between $11.00 and $13.00 per
share. See "Underwriting" for a discussion of the factors to be considered in
determining the initial public offering price. Application will be made to list
the Common Stock on the New York Stock Exchange (the "NYSE") under the symbol
"POV."
SEE "RISK FACTORS" COMMENCING ON PAGE 9 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
=======================================================================================================
Price to Underwriting Proceeds to
Public Discount (1) Company (2)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share......................... $ $ $
Total (3)......................... $ $ $
=======================================================================================================
</TABLE>
(1) See "Underwriting" for information concerning indemnification of the
Underwriters and other matters.
(2) Before deducting expenses payable by the Company, estimated at $2,750,000.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 390,000 additional shares of Common Stock solely to cover
over-allotments, if any. If the Underwriters exercise this option in full,
the Price to Public will total $ , the Underwriting Discount will
total $ and the Proceeds to Company will total $ . See
"Underwriting."
The shares of Common Stock are offered by the several Underwriters named
herein, subject to receipt and acceptance by them and subject to their right to
reject any order in whole or in part. It is expected that delivery of the
certificates representing such shares will be made against payment therefor at
the offices of NationsBanc Montgomery Securities LLC on or about
, 1998.
------------------------
NationsBanc Montgomery Securities LLC
Salomon Smith Barney
Piper Jaffray Inc.
, 1998
<PAGE> 3
[MAP/PHOTO]
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK, INCLUDING
PURCHASES OF THE COMMON STOCK TO STABILIZE ITS MARKET PRICE, PURCHASES OF THE
COMMON STOCK TO COVER SOME OR ALL OF A SHORT POSITION IN THE COMMON STOCK
MAINTAINED BY THE UNDERWRITERS AND THE IMPOSITION OF PENALTY BIDS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
2
<PAGE> 4
PROSPECTUS SUMMARY
Simultaneous with and as a condition to the consummation of the Offering
made by this Prospectus, Provant, Inc. will acquire in separate combination
transactions (collectively, the "Combination") seven providers of training and
development services and products (each, a "Founding Company," and collectively,
the "Founding Companies"). See "Combination." Unless otherwise indicated, all
references to the "Company" herein mean Provant, Inc. and the Founding
Companies, and references to "Provant" mean Provant, Inc. and its wholly-owned
subsidiaries prior to the consummation of the Combination. Investors should
carefully consider the information set forth under the heading "Risk Factors."
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements and
related notes appearing elsewhere in this Prospectus. Unless otherwise
indicated, (i) all share, per share and financial information in this
Prospectus: (a) has been adjusted to give effect to the Combination (excluding
the issuance of up to 1,325,000 shares of Common Stock as Additional
Consideration (as defined herein) for six of the Founding Companies and the
payment in Common Stock and cash of the Star Contingent Consideration (as
defined herein) for the seventh Founding Company), (b) assumes an initial public
offering price of $12.00 per share, (c) gives effect to a stock dividend
(assumed to be 871.5263-for-1) that will be declared by Provant prior to the
consummation of the Offering and (d) assumes no exercise of the Underwriters'
over-allotment option; and (ii) unless otherwise noted, all references to fiscal
years mean the Company's or a Founding Company's fiscal year ending on June 30
in the same calendar year (e.g., "fiscal 1997" means the fiscal year ended June
30, 1997).
THE COMPANY
The Company provides a broad range of training and development services and
products to Fortune 1000 companies, other large and medium-sized corporations
and government entities. The Company's services and products are designed to
increase the productivity of organizations by improving employee selection,
recruitment and retention; enhancing employee work skills; developing employee
management and leadership skills; and facilitating organizational assessment,
direction and change. The Company offers both customized and "off-the-shelf"
services and products that are designed to provide measurable improvements in
employee performance and productivity. The Company delivers its services and
products through multiple delivery methods, including instructor-led classroom
training and seminars, certification of client employees as instructors
("train-the-trainer"), interactive multimedia software (such as CD-ROM) and
distance-based media (such as video conferencing, intranets and the Internet).
The seven Founding Companies are recognized leaders in their respective fields
and have developed a wide range of services and products, a substantial
knowledge base created from years of research and development, and a
well-established client base. The Company's objective is to become a leading
single source provider of high-quality training and development services and
products that are distributed through multiple delivery methods.
The Company provided training and development services and products to more
than 1,700 companies and 75 government entities in fiscal 1997, including Abbott
Laboratories, Bank of America, Conoco, Inc., Eli Lilly and Company, Federal
Express, Federated Department Stores, Inc., Hewlett-Packard Company, J.P. Morgan
& Co., Incorporated, Metropolitan Life Insurance Company, Mobil Corporation, the
Department of Defense, the Immigration and Naturalization Service and the
Internal Revenue Service. During this period, the Company generated revenues of
more than $100,000 from each of 75 different corporate clients and from over 15
different federal government entities. For fiscal 1997, the Company had pro
forma revenue of $68.8 million and pro forma income from operations of $8.0
million. From fiscal 1995 through fiscal 1997, the combined revenue of the
Founding Companies grew at a compound annual rate of 21.8%.
The corporate and government training and development market is large and
growing. According to Training Magazine, domestic corporations with over 100
employees budgeted approximately $58.6 billion on training in 1997, compared to
approximately $45.0 billion in 1992, representing a compound annual growth rate
of approximately 5.4%. The size of and growth in the federal government market
can be seen in the Department of Defense's training and development budget,
which for its 1997 fiscal year was approximately $23.9 billion, compared to
approximately $18.0 billion in its 1992 fiscal year, representing a compound
annual
3
<PAGE> 5
growth rate of approximately 5.8%. The portion of the market devoted to external
training is increasing, as corporations and government agencies focus on their
core competencies, shift fixed training costs to variable costs, and obtain
training and development services, products, technology and expertise that may
not be available internally. The Company believes that corporations and
government entities seek external providers that can meet their overall training
and development needs by: (i) providing a broad range of high-quality services
and products in both customized and off-the-shelf formats; (ii) delivering
training through multiple delivery methods capable of reaching large and
geographically dispersed work forces; and (iii) utilizing the most current
technology available.
The Company intends to capitalize on these industry trends and enhance its
position as a leading provider of training and development services and products
by pursuing a multi-faceted growth strategy. The Company intends to seek
internal growth by: (i) capitalizing on cross-selling opportunities among the
Founding Companies; (ii) implementing an aggressive sales and marketing
strategy; (iii) expanding its service and product offerings; and (iv) leveraging
investments in technology and deploying leading technologies. In addition, the
Company intends to pursue strategic acquisitions of providers of training and
development services and products in order to expand its service and product
offerings, delivery methods and client base. The Company believes that its
senior management team, particularly Paul M. Verrochi, its Chairman and Chief
Executive Officer and co-founder and former Chairman of American Medical
Response, Inc., and John H. Zenger, its President and former Chairman of Times
Mirror Training Group, the nation's largest group of training companies, will
provide the Company with a competitive advantage in implementing its growth
strategy.
Provant is a Delaware corporation. Its principal executive offices are
located at 67 Batterymarch Street, Suite 500, Boston, Massachusetts 02110. Its
telephone number is (617) 261-1600.
4
<PAGE> 6
THE OFFERING
Common Stock offered by the Company......... 2,600,000 shares
Common Stock to be outstanding after the
Offering.................................... 9,405,605 shares (1)
Use of proceeds............................. To pay the cash portion of the
purchase price for the Founding
Companies and to repay certain
indebtedness. See "Use of
Proceeds."
Proposed NYSE Symbol........................ POV
- ---------------
(1) Includes 3,826,815 shares of Common Stock to be issued to the stockholders
of the Founding Companies in connection with the Combination. Excludes: (i)
up to an aggregate of 1,325,000 shares of Common Stock that may be issued as
Additional Consideration to the stockholders of six of the Founding
Companies (assuming an initial public offering price of $12.00 per share) as
well as shares of Common Stock that may be issued as Star Contingent
Consideration; (ii) 1,100,000 shares of Common Stock reserved for issuance
under the Company's 1998 Equity Incentive Plan (of which options to purchase
833,464 shares will be outstanding upon the consummation of the Offering at
an exercise price per share equal to the initial public offering price);
(iii) 100,000 shares of Common Stock reserved for issuance under the
Company's Stock Plan for Non-Employee Directors (of which no options will be
outstanding upon the consummation of the Offering); (iv) 500,000 shares of
Common Stock reserved for issuance under the Company's 1998 Employee Stock
Purchase Plan; (v) 10,000 shares of Common Stock reserved for issuance upon
the exercise of an outstanding option having an exercise price of $5.00 per
share; and (vi) an aggregate of 793,656 shares of Common Stock reserved for
issuance upon the exercise of warrants granted to two of the Company's
executive officers, as more fully described under "Certain
Transactions -- Other Transactions; American Business Partners LLC."
5
<PAGE> 7
SUMMARY PRO FORMA COMBINED FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Provant has conducted operations to date only in connection with the
Combination and the Offering, and will acquire the Founding Companies
simultaneously with and as a condition to the consummation of this Offering. For
financial statement presentation purposes, Provant has been designated as the
accounting acquiror. The following table presents summary pro forma combined
financial data of the Company, as adjusted for: (i) the consummation of the
Combination; (ii) certain pro forma adjustments to the historical financial
statements of the Founding Companies; and (iii) the consummation of the Offering
and the application of the net proceeds. See the Company's Unaudited Pro Forma
Combined Financial Statements, each of the Founding Companies' financial
statements and the notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PRO FORMA COMBINED (1)
-----------------------------------
YEAR ENDED THREE MONTHS ENDED
JUNE 30, 1997 SEPTEMBER 30, 1997
------------- ------------------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue................................................... $ 68,846 $ 17,738
Cost of revenue........................................... 30,967 8,056
---------- ----------
Gross profit.............................................. 37,879 9,682
Selling, general and administrative expenses (2).......... 28,663 8,319
Goodwill amortization (3)................................. 1,226 307
---------- ----------
Income from operations.................................... 7,990 1,056
Interest and other income (expense), net.................. (73) 23
---------- ----------
Income before income taxes................................ 7,917 1,079
Provision for income taxes (4)............................ 3,703 558
---------- ----------
Net income................................................ $ 4,214 $ 521
========== ==========
Net income per share...................................... $ 0.45 $ 0.06
========== ==========
Shares used in computing net income per share (5)......... 9,405,605 9,405,605
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
----------------------------------
PRO FORMA
COMBINED (6) AS ADJUSTED (7)
------------ ------------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital (8)....................................... $(14,357) $11,209
Total assets.............................................. 75,095 74,738
Long-term debt, net of current maturities................. 1,481 1,481
Stockholders' equity...................................... 36,523 62,089
</TABLE>
- ---------------
(1) The pro forma combined statement of operations data assumes that the
Combination and the Offering were consummated on July 1, 1996, and is not
necessarily indicative of the results the Company would have obtained if
these events actually then occurred or of the Company's future results. The
pro forma combined statement of operations data is based on preliminary
estimates, available information and assumptions that management deems
appropriate, and should be read in conjunction with the other financial
statements and notes thereto included elsewhere in this Prospectus.
(2) Reflects pro forma adjustments to salary, bonuses and benefits paid to
certain of the owners of the Founding Companies to which they have agreed
prospectively (the "Compensation Differential"). For the year ended June 30,
1997 and the three months ended September 30, 1997, the Compensation
Differential was approximately $4.8 million and $1.3 million, respectively.
6
<PAGE> 8
(3) Reflects amortization of the goodwill to be recorded as a result of the
Combination over a 40-year period and computed on the basis described in the
Notes to the Unaudited Pro Forma Combined Financial Statements.
(4) Assumes that all income is subject to an effective corporate income tax rate
of 40%, and all goodwill from the Combination is non-deductible.
(5) Assumes an initial public offering price of $12.00 per share. Consists of:
(i) 3,826,815 shares to be issued to the stockholders of the Founding
Companies (without giving effect to the issuance of Additional Consideration
or the Star Contingent Consideration); (ii) 2,978,790 shares held by the
management and founders of Provant; and (iii) 2,600,000 shares to be sold in
the Offering.
(6) The pro forma combined balance sheet data assumes that the Combination was
consummated on September 30, 1997. The pro forma combined balance sheet data
is based upon preliminary estimates, available information and assumptions
that management deems appropriate and should be read in conjunction with the
other financial statements and notes thereto included elsewhere in this
Prospectus.
(7) Adjusted for the sale of 2,600,000 shares of Common Stock offered hereby
(assuming an initial public offering price of $12.00 per share) and the
application of the net proceeds therefrom as described under "Use of
Proceeds."
(8) The pro forma combined data gives effect to $22.5 million representing the
cash portion of the consideration for the Combination to be paid from a
portion of the net proceeds of the Offering.
7
<PAGE> 9
SUMMARY INDIVIDUAL FOUNDING COMPANY FINANCIAL DATA
(IN THOUSANDS)
The following table presents summary data for each of the Founding
Companies on a historical (and, with respect to Star, consolidated) basis for
the periods indicated. (See "Combination" for the complete name of each Founding
Company.) Three of the Founding Companies, J. Howard, LSS and Star, historically
operated with fiscal years ending on dates other than June 30. For purposes of
the table below, their operating results have been recast to reflect a June 30
fiscal year end, although they have been derived from financial statements
prepared on the same basis as the audited financial statements. As a result of
this presentation, the operating results for these three companies do not
conform with their audited financial statements contained elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED JUNE 30, SEPTEMBER 30,
--------------------------- ---------------
1995 1996 1997 1996 1997
------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C>
BTI:
Revenue.......................................... $ 3,803 $ 5,685 $ 7,096 $1,712 $1,977
Gross profit..................................... 2,754 4,190 5,608 1,325 1,592
Income from operations........................... 439 142 497 356 286
Pro forma income from operations (1)............. 350 705 1,439 356 623
DECKER:
Revenue.......................................... $ 8,550 $ 8,620 $ 8,410 $1,930 $2,585
Gross profit..................................... 6,131 5,965 6,135 1,381 1,925
Income from operations........................... 461 249 514 120 262
Pro forma income from operations (1)............. 653 441 854 180 372
J. HOWARD:
Revenue.......................................... $ 5,444 $ 7,388 $ 7,317 $1,861 $1,917
Gross profit..................................... 3,646 5,084 5,157 1,275 1,256
Income from operations........................... 519 720 602 459 57
Pro forma income from operations (1)............. 701 1,265 1,548 518 242
LSS (2):
Revenue.......................................... $ 2,983 $ 4,233 $ 5,599 $1,136 $1,050
Gross profit..................................... 1,903 2,549 3,671 755 541
Income (loss) from operations.................... 209 381 610 168 (48)
Pro forma income from operations (1)............. 573 940 1,928 381 75
MOHR:
Revenue.......................................... $ 1,459 $ 2,171 $ 3,015 $ 554 $ 556
Gross profit..................................... 1,288 1,494 2,190 367 352
Income (loss) from operations.................... (26) 343 445 (16) (210)
Pro forma income (loss) from operations (1)...... 47 487 779 44 (105)
NOVATIONS:
Revenue.......................................... $ 7,175 $ 9,039 $ 9,018 $2,167 $2,464
Gross profit..................................... 3,290 4,306 4,179 1,050 1,267
Income from operations........................... 123 212 864 227 179
Pro forma income from operations (1)............. 1,331 1,683 1,525 401 554
STAR:
Revenue.......................................... $11,875 $14,361 $20,790 $4,931 $5,770
Gross profit..................................... 4,507 5,704 8,188 2,431 2,386
Income from operations........................... 1,286 292 1,127 711 496
Pro forma income from operations (1)............. 1,116 696 1,368 787 541
</TABLE>
- ---------
(1) Reflects adjustments to the compensation of certain executives of the
Founding Company to reflect the portion of the Compensation Differential
attributable to such company. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
(2) Includes 1995 data for LSS for the 12 months ended August 31, 1995.
8
<PAGE> 10
RISK FACTORS
The following factors should be considered, together with the other
information in this Prospectus, in evaluating an investment in the Company. This
Prospectus contains, in addition to historical information, forward-looking
statements that involve risks and uncertainties. The Company's actual results
could differ significantly from the results discussed in the forward-looking
statements as a result of any number of factors, including the risk factors set
forth below and other factors discussed elsewhere in this Prospectus.
ABSENCE OF COMBINED OPERATING HISTORY; RISKS OF INTEGRATION
Provant has conducted no operations and generated no revenues to date.
Provant has entered into definitive agreements to acquire the Founding Companies
simultaneously with, and as a condition to, the consummation of the Offering. To
date, the Founding Companies have operated independently of one another.
Currently, the Company has no centralized financial reporting system and
initially will rely on the existing reporting systems of the Founding Companies.
The Company's senior management group has been assembled only recently, and
there can be no assurance that this group will be successful in managing the
combined operations of the Founding Companies or in implementing the Company's
business and growth strategies. Any failure to do so could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Management."
The Founding Companies offer different services and products, use different
capabilities and technologies, target different clients and have different
management styles. Although the Company believes that there are substantial
opportunities to cross-market and integrate the Founding Companies' businesses,
these differences increase the risk inherent in integration. There can be no
assurance that the Company will be able to integrate successfully the operations
of the Founding Companies or institute the necessary Company-wide systems and
procedures to manage successfully the combined enterprise on a profitable basis.
The Company intends to operate the Founding Companies and subsequently acquired
businesses on a decentralized basis. If proper overall business incentives and
controls are not implemented, this decentralized operating strategy could result
in inconsistent operating and financial practices and the Company's overall
profitability could be adversely affected. The failure of the Company to
integrate successfully the operations of the Founding Companies could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business -- Business Strategy."
RISKS RELATED TO INTERNAL GROWTH STRATEGY
The central objective of the Company's growth strategy is to increase the
revenues and profitability of the Founding Companies. One of the key components
of this strategy is to cross-sell the services and products of each Founding
Company to other clients of the Company. There can be no assurance that the
Company will be able to expand its sales of services and products to its
existing clients and those of any subsequently acquired businesses. The
Company's growth strategy of broadening its service and product offerings,
implementing an aggressive marketing plan, pursuing strategic acquisitions and
deploying leading technologies has inherent risks and uncertainties. There can
be no assurance that the Company's growth strategy will be successful or that
the Company will be able to generate cash flow sufficient to fund its operations
and to support internal growth. The Company's inability to achieve internal
earnings growth or otherwise execute its growth strategy could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business -- Growth Strategy."
RISKS ASSOCIATED WITH ACQUISITION STRATEGY
The Company intends to increase its revenues and its service and product
offerings in part through the acquisition of additional providers of training
and development services and products. There can be no assurance that the
Company will be able to identify and acquire additional businesses or integrate
and manage any acquired businesses without substantial costs, delays or other
operational or financial problems. Certain risks inherent in an acquisition
strategy, such as potentially increasing leverage and debt service requirements,
difficulties associated with combining disparate business systems and cultures,
and the failure to retain key
9
<PAGE> 11
personnel, could adversely affect the Company's operating results. The process
of integrating acquired companies may involve unforeseen difficulties and
require a disproportionate amount of management's attention and financial and
other resources. Moreover, increased competition for acquisition candidates may
develop, in which event fewer acquisition opportunities may be available to the
Company and acquisition costs may increase. There can be no assurance that any
business acquired in the future will achieve anticipated revenues and earnings.
In addition, the size, timing and integration of acquisitions may cause
substantial fluctuations in the Company's operating results from quarter to
quarter. The inability of the Company to acquire, integrate and manage
successfully providers of training and development services and products could
have a material adverse effect on the Company's business, financial condition
and results of operations. See "Business -- Growth Strategy."
MANAGEMENT OF GROWTH
The Company expects to grow internally and through acquisitions. The
Company expects to spend significant time and effort in expanding its existing
business and identifying, completing and integrating acquisitions. There can be
no assurance that the Company's systems, procedures and controls will be
adequate to support the Company's operations as they expand. Any future growth
also will impose significant added responsibilities on members of senior
management, including the need to identify, recruit and integrate new senior
level managers and executives. There can be no assurance that such additional
management can be identified and retained by the Company. The inability of the
Company to manage its growth or recruit and retain additional qualified
management could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business -- Growth Strategy"
and "Management."
DEPENDENCE ON KEY PERSONNEL
The Company's operations will depend on the continuing efforts of its
executive officers and the senior management of the Founding Companies. In
particular, the Company will depend on: Paul M. Verrochi, Chairman and Chief
Executive Officer; John H. Zenger, President; and Dominic J. Puopolo, Executive
Vice President and Chief Financial Officer. In addition, the Company relies on
many of the executives of the Founding Companies, whose reputations and client
relationships have contributed in large part to those companies' success. While
the Company will enter into employment agreements with most of these
individuals, there can be no assurance that the Company will be able to retain
the services of any of them. A loss of the services of any of these individuals
following the Offering, could have a material adverse effect on the Company's
business, financial condition and results of operations. See "Management."
DEPENDENCE ON AVAILABILITY OF QUALIFIED PERSONNEL
A significant portion of the Company's revenue is derived from services and
products that are delivered by instructors and consultants. The Company's
success depends upon its ability to continue to attract and retain instructors
and consultants who possess the skills and experience required to meet the
staffing needs of its clients. In order to initiate and develop client
relationships and execute its growth strategy, the Company must maintain and
continue to hire qualified salespeople. There can be no assurance that qualified
personnel will continue to be available to the Company in sufficient numbers,
and any failure to attract or retain qualified instructors, consultants and
salespeople in sufficient numbers could have a material adverse effect on the
Company's business, financial condition and results of operations.
RISKS ASSOCIATED WITH CHANGING ECONOMIC CONDITIONS
The Company's revenues and profitability are related to general levels of
economic activity and employment in the United States. As a result, any
significant economic downturn or recession in the United States could have a
material adverse effect on the Company's business, financial condition and
results of operations.
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<PAGE> 12
FLUCTUATIONS IN OPERATING RESULTS
The Founding Companies have experienced and expect to continue to
experience fluctuations in quarterly operating results. Results for any quarter
therefore are not necessarily indicative of the results that the Company may
achieve for any subsequent quarter or a full fiscal year. Quarterly results may
vary materially as a result of, among other factors, the level of training and
development services and products sold, the gain or loss of material client
relationships, the timing, structure and magnitude of acquisitions, or the
utilization rates of the Company's salaried trainers, consultants and certain
other employees. The timing or completion of client engagements or custom
services and products also could result in fluctuations in the Company's results
of operations for particular quarterly periods. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
RELIANCE ON FEDERAL GOVERNMENT CONTRACTING
Approximately 31% of the Company's pro forma revenue in fiscal 1997 was
generated from services and products provided to over 75 federal government
entities. A general reduction in expenditures by the federal government for
training and development, a Congressional budget impasse, a reduction or
elimination of the use of third party contractors by the federal government, or
an inability of the Company to maintain its relationship with these government
entities could have a material adverse effect on the Company's business,
financial condition and results of operations. In addition, the government
typically shares equally in the ownership of courseware and materials that the
Company develops with government funds, and may share such courseware or
materials with other entities including the Company's competitors. Risks unique
to contracts with federal government entities including potential government
audits and retroactive downward repricing of sales could, if realized, have a
material adverse effect on the Company's business, financial condition and
results of operations.
Some of the Company's contracts require a security clearance from the
federal government. Foreign beneficial ownership of Common Stock following the
Offering in excess of 5% of outstanding amounts may require the Company to place
restrictions on foreign ownership, control, or influence over these contracts.
If the government deems such controls to be inadequate to prevent foreign
control or influence and terminates the classified contracts, there could be a
material adverse effect on the Company's business, financial condition and
results of operations.
RISKS ASSOCIATED WITH INTELLECTUAL PROPERTY
The Company regards many of its training and development services and
products as proprietary and relies primarily on a combination of statutory and
common law copyright, trademark, service mark and trade secret laws, customer
licensing agreements, employee and third-party nondisclosure agreements and
other methods to protect its proprietary rights. Notwithstanding the foregoing,
a third party or parties could copy or otherwise obtain and use the Company's
products in an unauthorized manner or use these products to develop training and
development processes that are substantially similar to those of the Company.
The Company's products generally do not include any mechanisms to prohibit or
prevent unauthorized use by third parties. If substantial unauthorized use of
the Company's products were to occur, there could be a material adverse effect
on the Company's business, financial condition and results of operations. There
can be no assurance that the Company's means of protecting its proprietary
rights will be adequate or that the Company's competitors will not independently
develop similar training products and delivery methods. Additionally, there can
be no assurance that third parties will not claim that the Company's current or
future products or services infringe on the proprietary rights of others. The
Company expects that it will be increasingly subject to such claims as the
number of products and competitors increases in the future. Any such claim could
have a material adverse effect on the Company's business, financial condition
and results of operations. See "Business -- Intellectual Property."
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<PAGE> 13
TECHNOLOGICAL RISK
Traditionally, most of the Company's training and development services and
products have been delivered through instructors, written materials or video.
The Company intends to deliver many of its training and development services and
products, including certain services and products previously delivered in
"traditional" formats, via interactive multimedia software (such as CD-ROM) and
distance-based media (such as video conferencing, intranets and the Internet).
There can be no assurance that the Company will be successful in marketing its
services and products in multimedia software and distance-based media formats,
nor can there be assurance that services and products delivered in the newer
formats will provide comparable training results. In addition, there can be no
assurance that any successful expansion of the methods of distribution of the
Company's services and products will not be rendered moot by subsequent
technological advances. Finally, adding new distribution channels for its
services and products may entail significant costs. The inability of the Company
to develop new distribution channels due to capital, personnel, technological or
other constraints could result in a material adverse effect on the Company's
business, financial condition and results of operations. See "Business -- Growth
Strategy."
RISKS RELATED TO ACQUISITION FINANCING
The Company may choose to finance future acquisitions by issuing shares of
Common Stock for all or a portion of the consideration to be paid. In the event
that the Common Stock does not maintain a sufficient market value, or potential
acquisition candidates otherwise are unwilling to accept Common Stock as part of
the consideration for the sale of their businesses, the Company might not be
able to utilize Common Stock as consideration for acquisitions and would be
required to utilize more of its cash resources, if available, in order to
maintain its acquisition program. If the Company does not have sufficient cash
resources, its growth could be limited unless it could obtain additional capital
through debt or equity financings. The inability of the Company to use its
Common Stock as consideration for future acquisitions or to obtain additional
financing for acquisitions could have a material adverse effect on the Company's
business, financial condition and results of operations. In addition, there can
be no assurance that future issuances of Common Stock in connection with
acquisitions will not be dilutive to the Company's stockholders.
INDEPENDENT CONTRACTOR STATUS
The Company uses many contract instructors who are not employees of the
Company. As a result, the Company does not pay federal employment taxes or
withhold income taxes on behalf of such individuals, or include them in its
employee benefit plans. If state or federal taxing authorities were to require
the Company to treat some or all of its contract instructors as employees, the
Company would become responsible for the taxes required to be paid or withheld
and could incur additional costs associated with employee benefits and other
employee costs on both a current and retroactive basis. The aggregate impact of
such costs could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business -- Independent
Contractors."
COMPETITION
The training and development industry is highly fragmented and competitive,
with low barriers to entry and no single competitor accounting for a significant
market share. The Company's competitors include several large publicly traded
and privately held companies, and thousands of small privately held training
providers and individuals. In addition, many of the Company's clients maintain
internal training departments. Some of the Company's competitors offer services
and products that are similar to those of the Company at lower prices, and some
competitors have significantly greater financial, managerial, technical,
marketing and other resources than the Company. Moreover, the Company expects
that it will face additional competition from new entrants into the training and
development market due, in part, to the evolving nature of the market and the
relatively low barriers to entry. There can be no assurance that the Company
will be successful against such competition. See "Business -- Competition."
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<PAGE> 14
CONTROL BY DIRECTORS, EXECUTIVE OFFICERS AND PRINCIPAL STOCKHOLDERS
Upon completion of the Offering, the Company's directors and executive
officers, together with their affiliates, will beneficially own approximately
47.3% of the Company's outstanding shares of Common Stock (approximately 45.4%
if the Underwriters exercise their over-allotment option in full). As a result,
these stockholders, if they were to act together, would have the ability as a
practical matter to determine the outcome of corporate actions requiring
stockholder approval, including the election of directors and the approval of
significant corporate transactions, such as a merger or sale of substantially
all of the Company's assets, regardless of how other stockholders of the Company
may vote. This concentration of ownership may have the effect of delaying or
preventing a change in control of the Company. See "Management" and "Principal
Stockholders."
POSSIBLE FUTURE SALES OF SHARES
Sales of substantial amounts of Common Stock in the public market after the
Offering under Rule 144 under the Securities Act of 1933, as amended (the
"Securities Act"), or otherwise, or the perception that such sales could occur,
may adversely affect prevailing market prices of the Common Stock and could
impair the future ability of the Company to raise capital through an offering of
its equity securities or to effect acquisitions using shares of its Common
Stock. The shares of Common Stock outstanding prior to the Offering and the
shares to be issued in the Combination will be "restricted securities" within
the meaning of Rule 144. Unless the resale of the shares is registered under the
Securities Act, these shares may not be sold in the open market until after the
first anniversary of the transaction in which they were acquired, and then only
in compliance with the applicable requirements of Rule 144. See "Shares Eligible
for Future Sale." Notwithstanding their right under the Securities Act to sell
shares pursuant to Rule 144, the stockholders of the Founding Companies and the
holders of Provant's Common Stock prior to the Combination and the Offering have
agreed with the Company to certain transfer restrictions for a two-year period
following the Offering on the Common Stock held by them as of the closing of the
Offering and on the Common Stock that may be purchased by them under options and
warrants outstanding as of the closing of the Offering. See "Certain
Transactions -- Organization of the Company" and "-- Other Transactions
Involving Officers and Directors."
The Company, the holders of all shares outstanding prior to the Offering
and all stockholders of the Founding Companies have agreed with the
Representatives of the Underwriters not to sell or otherwise dispose of any
shares of Common Stock, or any securities convertible into or exercisable or
exchangeable for shares of Common Stock, for a period of 180 days after the date
of this Prospectus without the written consent of the Representatives, except
for: (i) in the case of the Company, the grant of options under the Company's
benefit plans or in connection with acquisitions and (ii) in the case of all
such holders, the exercise of stock options pursuant to benefit plans described
herein and shares of Common Stock disposed of as bona fide gifts, subject, in
each case, to any remaining portion of the 180-day period applying to any shares
so issued or transferred. See "Shares Eligible for Future Sale" and
"Underwriting."
CERTAIN ANTI-TAKEOVER PROVISIONS
The Company's Certificate of Incorporation requires that any action
required or permitted to be taken by stockholders of the Company must be
effected at a duly called annual or special meeting of stockholders and may not
be effected by any consent in writing. Special meetings of stockholders may be
called only by the Chairman of the Board or President of the Company or by the
Board of Directors. In addition, the Board of Directors has the authority,
without further action by the stockholders, to fix the rights and preferences
and issue up to 5,000,000 shares of Preferred Stock. These provisions and other
provisions of the Certificate of Incorporation and By-laws may have the effect
of deterring unsolicited acquisition proposals or hostile takeovers or delaying
or preventing changes in control or management of the Company, including
transactions in which stockholders might otherwise receive a premium over the
then current market price for their shares of Common Stock. In addition, these
provisions may limit the ability of stockholders to approve transactions that
they may deem to be in their best interests. The Company also is subject to
Section 203 of the Delaware General Corporation Law (the "DGCL"), which, subject
to certain exceptions, prohibits a Delaware
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<PAGE> 15
corporation from engaging in any of a broad range of business combinations with
any "interested stockholder" for a period of three years following the date that
such stockholder became an interested stockholder. See "Description of Capital
Stock."
NO PRIOR MARKET FOR COMMON STOCK AND POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Offering, there has been no public market for the Common
Stock, and there can be no assurance that an active public market for the Common
Stock will develop or continue after the Offering. The initial public offering
price of the Common Stock will be determined by negotiations between the Company
and the Representatives of the Underwriters, and may not be indicative of the
market price for the Common Stock after the Offering. See "Underwriting" for a
description of the factors to be considered in determining the initial public
offering price. After the Offering, the market price of the Common Stock may be
subject to significant fluctuations in response to numerous factors, including
variations in the annual or quarterly financial results of the Company or its
competitors, changes by financial research analysts in their estimates of the
earnings of the Company or the failure of the Company to meet such estimates,
conditions in the economy in general or the training and development industry in
particular, or unfavorable publicity affecting the Company or the industry. The
equity markets have, on occasion, experienced significant price and volume
fluctuations that have affected the market prices for many companies' securities
and have been unrelated to the operating performance of those companies. Any
such fluctuations following completion of the Offering may adversely affect the
prevailing market price of the Common Stock.
IMMEDIATE AND SUBSTANTIAL DILUTION
The purchasers of the shares of Common Stock offered hereby will experience
immediate and substantial dilution in the net tangible book value of their
shares of Common Stock in the amount of $10.61 per share, and may experience
further dilution in that value from issuances of Common Stock in connection with
future acquisitions. See "Dilution."
ABSENCE OF DIVIDENDS
Provant has never paid dividends on the Common Stock and does not
anticipate paying any dividends in the foreseeable future. Declarations of
dividends on the Common Stock will depend upon, among other things, future
earnings, if any, the operating and financial condition of the Company, its
capital requirements and general business conditions. The Company anticipates
that any future credit facility that it may obtain will prohibit dividend
payments. See "Dividend Policy."
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<PAGE> 16
COMBINATION
Provant's objective is to become a leading provider of training and
development services and products. Although Provant has conducted no operations
to date, it has entered into agreements to acquire the Founding Companies
simultaneously with, and as a condition to, the consummation of the Offering.
For a description of the transactions pursuant to which the Founding Companies
will be acquired by Provant, see "Certain Transactions -- Organization of the
Company."
THE FOUNDING COMPANIES
The seven Founding Companies are recognized leaders in their respective
fields and have developed a broad array of services and products, a substantial
knowledge base created from years of research and development, and a
well-established client base. Set forth below is a brief description of each of
the Founding Companies.
Behavioral Technology, Inc.: Behavioral Technology, Inc. ("BTI") was
founded by Paul C. Green, Ph.D. in 1978. BTI helps clients improve employee
selection and provides managers with a methodology for assessing strengths and
weaknesses of current employees. BTI trains clients to use candidates' and
employees' past actions both as indicators of future performance and as a basis
for discussion regarding improvement in performance. BTI's training services are
delivered through instructor-led training and train-the-trainer programs. The
company's lead product, Behavioral Interviewing(R), accounted for approximately
90% of the company's revenue in fiscal 1997. Dr. Green is credited with
developing the concepts behind behavioral-based interviewing and is widely
acknowledged as a leader in the field. BTI's clients include Hewlett-Packard
Company, Federal Express and Royal Bank of Canada. BTI is headquartered in
Memphis, Tennessee. In its most recent fiscal year, BTI generated revenue of
approximately $7.1 million.
Decker Communications, Inc.: Decker Communications, Inc. ("Decker") was
founded by Bert Decker in 1979. Decker provides training to improve employees'
business communication skills and communications between management and
employees. Decker's services range from helping senior management to communicate
corporate change to working with employees to improve the effectiveness of their
communication skills. Decker's training services are delivered primarily through
instructor-led workshops, some of which are tailored to meet specific client
objectives. Decker's flagship program, Effective Communicating(TM), and its
custom versions of the same product, accounted for approximately 84% of the
company's revenue in fiscal 1997. Decker's clients include Bank of America,
Coopers & Lybrand L.L.P. and Hewlett-Packard Company. Decker is located in San
Francisco, California and has regional offices in New York, Los Angeles and
Chicago. In its most recent fiscal year, Decker generated revenue of
approximately $8.4 million.
J. Howard & Associates, Inc.: J. Howard & Associates, Inc. ("J. Howard")
was founded by Jeffrey P. Howard, Ph.D. in 1977. Marc S. Wallace joined the
company in 1986, and became its President in 1991. J. Howard assists clients in
identifying and addressing potential obstacles to improving workplace
productivity, including race and gender issues, sexual harassment and failure of
employees to take measured risks. J. Howard's training services are delivered
primarily through instructor-led seminars that incorporate small and large group
discussions and self-assessment and skills-building exercises. The company's
lead product, Managing Inclusion, which accounted for approximately 57% of the
company's revenue in its fiscal year ended December 31, 1996, is a two-day
program designed to help individual managers and client companies understand the
ways in which diversity in the work force contributes to the productivity of an
organization. Other related programs include Risk Taking for Professional
Development, Efficacy for Professionals of Color, Efficacy for Women and
Exploring Diversity. J. Howard's clients include Bank of America, J.P. Morgan &
Co. Incorporated and Northwest Airlines, Inc. J. Howard is located in Lexington,
Massachusetts. In its fiscal year ended December 31, 1996, J. Howard generated
revenue of approximately $7.1 million.
Learning Systems Sciences: Robert Steinmetz, Ph.D., and Associates, Inc.,
d/b/a Learning Systems Sciences ("LSS"), was founded in 1979 by Robert A.
Steinmetz, Ph.D. In 1990 John F. King joined the company as President and a 50%
stockholder. LSS designs custom training products primarily for retailers using
multimedia, computer-based formats. LSS's products are designed to facilitate
faster learning of customer interface devices and higher productivity of retail
associates. LSS's training products are delivered
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<PAGE> 17
primarily through interactive multimedia software and distance-based media.
LSS's clients include Federated Department Stores, Inc., J.C. Penney Company,
Inc. and The Kroger Co. LSS is located in North Hollywood, California. In its
fiscal year ended December 31, 1996, LSS generated revenue of approximately $5.1
million.
MOHR Retail Learning Systems, Inc.: MOHR Retail Learning Systems, Inc.
("MOHR") was the retail training division of MOHR Development, Inc. from 1981 to
1991, when the division was purchased by Michael Patrick and one of the
division's founders, Herb Cohen. MOHR's services and products are designed to
help clients in the retail industry improve productivity by fostering a
customer-oriented focus at the sales management and sales associate levels. MOHR
offers its services and products through train-the-trainer seminars and by
licensing its text-based and video-based materials to its clients. MOHR's Retail
Management Series III and Creating Loyal Customers programs, which together
accounted for more than 60% of the company's revenue in fiscal 1997, utilize
well-established learning designs, instructional systems and feedback mechanisms
to train clients' employees to provide superior customer service. In addition,
the company's Bottom-Line Buying Plus program provides negotiation skills
training for buyers at retail organizations. MOHR's clients include Eckerd
Corporation, Victoria's Secret Stores and The Sports Authority, Inc. MOHR is
headquartered in Ridgewood, New Jersey. In its most recent fiscal year, MOHR
generated revenue of approximately $3.0 million.
Novations Group, Inc.: Novations Group, Inc. ("Novations") was founded in
1986 by Norman Smallwood, Jonathan Younger, Joe Folkman and Randy Stott. Joe
Hanson joined the company as a Managing Director in 1989. Novations assists
clients in, among other things, clarifying and communicating their business
strategies and re-designing their organizations and business processes.
Novations also provides its clients with a variety of organizational assessment
tools that are designed to gather and analyze feedback on either an
organizational or individual basis and to initiate change in response to such
feedback. In its most recent fiscal year, approximately 60% of Novations'
revenue was derived from strategic consulting services provided to organizations
in industries such as the petrochemical, financial services, consumer products,
transportation and telecommunications industries. The balance of the company's
revenue resulted from sales to clients of organizational assessment tools
including the Organizational Analysis Survey, the Strategic Alignment Survey,
Total Quality Survey, Customer Service Survey and Leadership and Managerial
Profiles. Novations' clients include Eli Lilly and Company, Motorola, Inc. and
Yellow Corporation. Novations is headquartered in Provo, Utah, and has offices
in New York and Dallas. In its most recent fiscal year, Novations generated
revenue of approximately $9.0 million.
Star Mountain, Inc.: Star Mountain, Inc. (together with its subsidiaries,
"Star") was founded by A. Carl von Sternberg in 1987. Star's core business
consists of providing customized training services and products to individuals
within federal, state and local government entities and corporations. In
addition, Star provides a limited amount of computer network design, sales,
installation and support, and computer network security research and
development. Star delivers its training courseware to clients in a variety of
formats (including written materials and interactive multimedia software), but
typically does not directly train its clients. Approximately 32% of Star's
revenue in its fiscal year ended December 31, 1996 was derived from the United
States Department of Defense, 43% from other federal entities, 1% from state and
local government entities, and the remainder from corporations. In addition to
the Department of Defense, Star's largest government clients include the
Internal Revenue Service and the Immigration and Naturalization Service. Star is
headquartered in Alexandria, Virginia and has 17 branch offices located
throughout the United States. In its fiscal year ended December 31, 1996, Star
generated revenue of approximately $16.3 million. In addition, Star acquired
three businesses since September 1996 that, had they been acquired on January 1,
1996, would have contributed an additional $8.5 million to Star's revenue in the
1996 calendar year.
MERGER CONSIDERATION
The aggregate consideration to be paid by Provant at the closing of the
Combination is $68.4 million, consisting of $22.5 million in cash (representing
approximately 85.5% of the net proceeds of the Offering) and 3,826,815 shares of
Common Stock (assuming an initial public offering price of $12.00 per share). If
the initial public offering price is other than $12.00 per share, the number of
shares issued to the former stockholders of the Founding Companies will be
increased or decreased so that such stockholders receive an
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<PAGE> 18
aggregate of $45.9 million of Common Stock valued at the initial public offering
price. However, the total number of shares of Common Stock outstanding following
the Combination will not vary as a result of an initial public offering price of
other than $12.00 per share because the size of the stock dividend that will be
declared by Provant prior to the consummation of the Combination will increase
as the initial offering price increases and decrease as the initial offering
price decreases. As a result, upon the consummation of the Combination (but
without giving effect to the Offering), there will be outstanding a total of
6,805,605 shares of Common Stock.
In addition to the consideration described above, the former stockholders
of six of the Founding Companies will be eligible to receive up to an aggregate
of 1,325,000 additional shares of Common Stock (assuming an initial public
offering price of $12.00 per share) (the "Additional Consideration") if
specified levels of earnings before interest and taxes ("EBIT") are reached by
their respective companies. In the case of the seventh Founding Company, Star,
Provant has agreed to make a future payment in cash or shares of Common Stock
based on Star's EBIT for fiscal 1999 (the "Star Contingent Consideration"). In
connection with the Combination, the Company will repay approximately $2.9
million of indebtedness of the Founding Companies from the net proceeds of the
Offering. The consideration to be paid by Provant for each Founding Company was
determined by arm's length negotiations between Provant and representatives of
each Founding Company and was based primarily on the pro forma EBIT of each
Founding Company. Additional Consideration paid for a Founding Company and the
Star Contingent Consideration represent, in effect, an upward adjustment in
purchase price. For a more detailed description of these transactions, see
"Certain Transactions -- Organization of the Company."
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USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,600,000 shares of
Common Stock offered hereby (assuming an initial public offering price of $12.00
per share), after deducting the estimated underwriting discount and estimated
Offering expenses, are estimated to be approximately $26.3 million ($30.6
million if the Underwriters' over-allotment option is exercised in full). Of the
net proceeds, approximately $22.5 million will be used to pay the cash portion
of the purchase price for the Founding Companies. In addition, the Company
currently intends to use approximately $2.9 million of the net proceeds to repay
certain indebtedness of the Founding Companies assumed in connection with the
Combination (which indebtedness bears interest at a weighted average interest
rate of 9.0% and matures at various dates through February 2001). The Company
also intends to use $750,000 to pay a fee due upon the closing of the Offering
to a third party for information provided to Provant relating to the training
and development industry.
The Company intends to use approximately $193,000 to repay in part a note
payable of the Company to Paul M. Verrochi and Dominic J. Puopolo. See "Certain
Transactions -- Other Transactions; American Business Partners LLC." Of this
amount, approximately $50,000 is attributable to expenses relating to the
Offering. Pending the use of the net proceeds of the Offering for the purposes
described above, the Company will invest such proceeds in short-term,
interest-bearing, investment grade securities.
DIVIDEND POLICY
The Company intends to retain all of its earnings, if any, to finance the
expansion of its business and for general corporate purposes, including future
acquisitions, and does not anticipate paying cash dividends on its Common Stock
in the foreseeable future. Any future determination as to the payment of
dividends on the Common Stock will be at the discretion of the Board of
Directors and will depend upon, among other things, the Company's future
earnings, if any, the operating and financial condition of the Company, its
capital requirements, general business conditions and any other factors the
Board of Directors of the Company may consider. In addition, in the event that
the Company is successful in obtaining a credit facility at any point in the
future, it is likely that any such facility will include restrictions on the
Company's ability to pay dividends without the consent of the lender.
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<PAGE> 20
CAPITALIZATION
The following table sets forth the short-term debt, including the current
maturities of long-term debt, and capitalization of the Company at September 30,
1997: (i) on a pro forma combined basis to give effect to the Combination, the
increase in the Company's authorized shares of Common Stock, the authorization
of a class of preferred stock and the declaration of a stock dividend; and (ii)
as further adjusted to give effect to the issuance of the 2,600,000 shares of
Common Stock offered hereby and the application of the estimated net proceeds.
See "Use of Proceeds." This table should be read in conjunction with the
Unaudited Pro Forma Combined Financial Statements of the Company and the related
notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
--------------------------
PRO FORMA
COMBINED (1) AS ADJUSTED
------------ -----------
(IN THOUSANDS)
<S> <C> <C>
Short-term debt, including current maturities of long-term
debt (2).................................................. $ 2,980 $ 80
======= =======
Long-term debt, less current maturities (2)................. $ 1,481 $ 1,481
Stockholders' Equity:
Preferred Stock, $0.01 par value; 5,000,000 shares
authorized, none issued or outstanding, pro forma and
as adjusted............................................ -- --
Common Stock, $0.01 par value; 40,000,000 shares
authorized, 6,805,605 shares issued and outstanding,
pro forma; and 9,405,605 shares issued and outstanding,
as adjusted (3)........................................ 38 64
Additional paid-in capital................................ 36,699 62,989
Retained earnings......................................... (214) (964)
------- -------
Total stockholders' equity............................. 36,523 62,089
------- -------
Total capitalization.............................. $38,004 $63,570
======= =======
</TABLE>
- ---------------
(1) Combines the respective accounts of Provant and the Founding Companies at
September 30, 1997 and gives effect to the reclassification of the Founding
Companies' common stock as additional paid-in capital.
(2) For a description of the Company's debt, see the notes to the financial
statements of each of the Founding Companies.
(3) Excludes: (i) up to an aggregate of 1,325,000 shares of Common Stock
(assuming an initial public offering price of $12.00 per share) that may be
issued as Additional Consideration to the former stockholders of six of the
Founding Companies as well as shares of Common Stock that may be issued as
Star Contingent Consideration; (ii) 1,100,000 shares of Common Stock
reserved for issuance under the Company's 1998 Equity Incentive Plan (of
which options to purchase 833,464 shares will be outstanding upon the
consummation of the Offering at an exercise price per share equal to the
Offering price); (iii) 100,000 shares of Common Stock reserved for issuance
under the Company's Stock Plan for Non-Employee Directors (of which no
options will be outstanding upon the consummation of the Offering); (iv)
500,000 shares of Common Stock reserved for issuance under the Company's
1998 Employee Stock Purchase Plan; (v) 10,000 shares of Common Stock
reserved for issuance upon the exercise of an outstanding option having an
exercise price of $5.00 per share; and (vi) an aggregate of 793,656 shares
of Common Stock reserved for issuance upon the exercise of warrants granted
to certain of the Company's executive officers, as more fully described
under "Certain Transactions -- Other Transactions; American Business
Partners LLC."
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DILUTION
The pro forma net tangible book value of the Company as of September 30,
1997 was approximately $(12.5) million, or $(1.84) per share. Net tangible book
value per share represents the book value of the Company's pro forma net
tangible assets less total liabilities divided by the number of shares of Common
Stock outstanding (after giving effect to the Combination). After giving effect
to the sale by the Company of 2,600,000 shares of Common Stock in the Offering
(after deducting the estimated underwriting discount and estimated Offering
expenses) and the application of the net proceeds therefrom, the pro forma net
tangible book value at September 30, 1997 would have been approximately $13.0
million, or $1.39 per share. This represents an immediate increase in pro forma
net tangible book value per share of $3.23 to stockholders as of September 30,
1997, and an immediate dilution in pro forma net tangible book value per share
of $10.61 to new investors purchasing shares of Common Stock in the Offering.
The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price....................... $12.00
------
Pro forma net tangible book value per share before
Offering............................................... $(1.84)
Increase in pro forma net tangible book value per share
attributable to new investors............................. 3.23
------
Pro forma net tangible book value per share after
Offering............................................... 1.39
------
Dilution per share to new investors....................... $10.61
======
</TABLE>
The following table sets forth, on a pro forma basis to give effect to the
Combination, the number of shares of Common Stock purchased from the Company,
the total consideration paid and the average price per share paid by the
Company's existing stockholders and by investors purchasing shares of Common
Stock offered hereby:
<TABLE>
<CAPTION>
SHARES PURCHASED AVERAGE
--------------------- TOTAL PRICE
NUMBER PERCENT CONSIDERATION (1) PER SHARE
---------- ------- ----------------- ---------
<S> <C> <C> <C> <C>
Existing stockholders....... 6,805,605 72.4% $(12,527,000) $(1.84)
New investors............... 2,600,000 27.6 31,200,000 12.00
---------- ----- ------------
Total............. 9,405,605 100.0% $ 18,673,000
========== ===== ============
</TABLE>
- ---------------
(1) Total consideration paid by existing stockholders represents the combined
stockholders' equity of the Founding Companies before the Offering, adjusted
to reflect: (i) the cash portion of the consideration payable to the
stockholders of the Founding Companies in connection with the Combination;
and (ii) the payment of distributions estimated at approximately $1.4
million which certain of the Founding Companies are expected to make to
their stockholders prior to the closing of the Combination. See "Use of
Proceeds" and "Capitalization."
20
<PAGE> 22
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Provant will acquire the Founding Companies simultaneously with and as a
condition to the consummation of the Offering. For financial reporting purposes,
Provant has been designated as the accounting acquiror. To date, Provant has
conducted operations only in connection with the Combination and the Offering.
As a result, Provant has generated no revenue. The following selected unaudited
pro forma combined financial data present data for the Company, adjusted for:
(i) the consummation of the Combination; (ii) certain pro forma adjustments to
the historical financial statements of the Founding Companies; and (iii) the
consummation of the Offering and the application of the net proceeds. See the
Company's Unaudited Pro Forma Combined Financial Statements, each of the
Founding Companies' financial statements and the notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PRO FORMA COMBINED (1)
-------------------------------------
YEAR ENDED THREE MONTHS ENDED
JUNE 30, 1997 SEPTEMBER 30, 1997
------------- --------------------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue..................................................... $ 68,846 $ 17,738
Cost of revenue............................................. 30,967 8,056
---------- ----------
Gross profit................................................ 37,879 9,682
Selling, general and administrative expenses (2)............ 28,663 8,319
Goodwill amortization (3)................................... 1,226 307
---------- ----------
Income from operations...................................... 7,990 1,056
Interest and other income (expense), net.................... (73) 23
---------- ----------
Income before provision for income taxes.................... 7,917 1,079
Provision for income taxes (4).............................. 3,703 558
---------- ----------
Net income.................................................. $ 4,214 $ 521
========== ==========
Net income per share........................................ $ 0.45 $ 0.06
========== ==========
Shares used in computing net income per share (5)........... 9,405,605 9,405,605
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
-------------------------------
PRO FORMA
COMBINED (6) AS ADJUSTED (7)
------------ ---------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital (8)....................................... $(14,357) $11,209
Total assets.............................................. 75,095 74,738
Long-term debt, net of current maturities................. 1,481 1,481
Stockholders' equity...................................... 36,523 62,089
</TABLE>
- ---------------
(1) The pro forma combined statement of operations data assumes that the
Combination and the Offering were consummated on July 1, 1996, and is not
necessarily indicative of the results the Company would have obtained if
these events actually then occurred or of the Company's future results. The
pro forma combined statement of operations data is based on preliminary
estimates, available information and assumptions that management deems
appropriate, and should be read in conjunction with the other financial
statements and notes thereto included elsewhere in this Prospectus.
(2) Reflects pro forma adjustments to salary, bonuses and benefits paid to
certain of the owners of the Founding Companies for the Compensation
Differential, which for the year ended June 30, 1997 and the three months
ended September 30, 1997 was approximately $4.8 million and $1.3 million,
respectively.
(3) Reflects amortization of the goodwill to be recorded as a result of the
Combination over a 40-year period and computed on the basis described in the
Notes to the Unaudited Pro Forma Combined Financial Statements.
21
<PAGE> 23
(4) Assumes that all income is subject to an effective corporate income tax rate
of 40%, and all goodwill from the Combination is non-deductible.
(5) Assumes an initial public offering price of $12.00 per share. Consists of:
(i) 3,826,815 shares to be issued to the stockholders of the Founding
Companies (without giving effect to the issuance of Additional Consideration
or the Star Contingent Consideration); (ii) 2,978,790 shares held by the
management and founders of Provant; and (iii) 2,600,000 shares to be sold in
the Offering.
(6) The pro forma combined balance sheet data assumes that the Combination was
consummated on September 30, 1997. The pro forma combined balance sheet data
is based upon preliminary estimates, available information and assumptions
that management deems appropriate and should be read in conjunction with the
other financial statements and notes thereto included elsewhere in this
Prospectus.
(7) Adjusted for the sale of 2,600,000 shares of Common Stock offered hereby
(assuming an initial public offering price of $12.00 per share) and the
application of the net proceeds therefrom as described under "Use of
Proceeds."
(8) The pro forma combined data gives effect to $22.5 million representing the
cash portion of the consideration for the Combination to be paid from a
portion of the net proceeds of the Offering.
22
<PAGE> 24
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Unless otherwise indicated or the context otherwise requires in this
section, each reference to a year is to the Company's or a Founding Company's
fiscal year which (with the exception of J. Howard, LSS and Star) ends on June
30 of the same calendar year (e.g., "1997" means the fiscal year ended June 30,
1997). The following discussion should be read in conjunction with the Company's
Unaudited Pro Forma Combined Financial Statements and the Founding Companies'
Financial Statements and the related notes thereto appearing elsewhere in this
Prospectus.
INTRODUCTION
The Company provides a broad range of training and development services and
products to Fortune 1000 companies, other large and medium-sized corporations
and government entities. The Company's services and products are designed to
increase the productivity of organizations by improving employee selection,
recruitment and retention; enhancing employee work skills; developing employee
management and leadership skills; and facilitating organizational assessment,
direction and change. The Company offers both customized and off-the-shelf
services and products that are designed to provide measurable improvements in
employee performance and productivity. The Company delivers its services and
products through multiple delivery methods, including instructor-led and
train-the-trainer seminars, interactive multimedia software (such as CD-ROM) and
distance-based media (such as video conferencing, intranets and the Internet).
The Company receives revenue from five main areas: (i) instructor-led and
train-the-trainer seminars; (ii) license fees; (iii) custom services and
products; (iv) consulting services; and (v) off-the-shelf products. The Company
recognizes revenue from instructor-led training and train-the-trainer seminars,
usually on a participant basis, when the training is delivered. From its
train-the-trainer arrangements, the Company also recognizes license fees on a
per-participant basis when a certified client trainer delivers the Company's
courses and materials to other employees of the client. The Company recognizes
revenue from a site license at the time the license is granted. The Company
generally recognizes revenue from its custom services and products based on the
percentage-of-completion method. The Company recognizes revenue from fees for
its consulting services, for which it charges an hourly or per diem rate, when
the consulting is provided. The Company also recognizes revenue for its
off-the-shelf products, such as books or videotapes, when the products are
delivered.
Cost of revenue primarily consists of: (i) salaries and benefits for the
Company's instructors, consultants and course designers and costs of independent
contractors; and (ii) the cost of developing, designing and producing training
courses and materials, including materials costs. As a result, the Company's
gross margins are affected by the number of instructors, consultants and course
designers and the utilization of such employees during any given period.
Selling, general and administrative expenses consist primarily of salaries,
benefits and bonuses for the Company's corporate, sales, marketing and
administrative personnel, and marketing and advertising expenses for the
Company's services and products. Selling, general and administrative expenses
also include incentive and discretionary bonuses paid to owners and other key
employees. Other selling, general and administrative expenses include travel
expenses, rent, depreciation, telecommunication costs, postage and other
operating costs.
The Founding Companies have operated throughout the periods presented as
independent, privately-owned entities, and their results of operations reflect
varying tax structures (S corporations or C corporations) which have influenced
the historical level of owners' compensation. The owners and key employees of
the Founding Companies have agreed to certain adjustments in their annual
historical salaries, bonuses and benefits in connection with the Combination.
The difference (positive or negative) between the base salary of the owners and
key employees of the Founding Companies immediately after the Combination and
their salaries, bonuses and benefits during any comparable period is referred to
as the "Compensation Differential". The aggregate Compensation Differentials for
1995, 1996 and 1997 and for the three months ended September 30, 1996 and 1997
were $1.8 million, $3.9 million, $4.8 million, $642,000, and $1.3 million,
respectively, and have been reflected as a pro forma adjustment in the Unaudited
Pro Forma Combined
23
<PAGE> 25
Statements of Operations. The Unaudited Pro Forma Combined Statements of
Operations include a provision for income tax as if the Company was taxed as a C
corporation.
Following the Combination, the Company expects to realize certain savings
as a result of: (i) consolidation of certain expenses, such as travel and
lodging, advertising, employee benefits, communications, insurance and other
general and administrative expenses; and (ii) the Company's ability to borrow at
lower interest rates than most of the Founding Companies. The Company cannot
quantify these savings until the completion of the Combination. It is
anticipated that these savings will be offset partially by the costs of being a
publicly held company and the incremental increase in costs related to the
Company's new management. However, these costs, like the savings that they
offset, cannot be quantified accurately. Neither the anticipated savings nor the
anticipated costs have been included in the pro forma financial information of
the Company.
In July 1996, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 97 ("SAB 97"), relating to business combinations
immediately prior to an initial public offering, which required that business
combinations like the Combination be accounted for using the purchase method of
acquisition accounting. Under the purchase method, Provant has been designated
as the accounting acquiror. Approximately $49.1 million, representing the excess
of the fair value of the consideration received in the Combination over the fair
value of the net assets to be acquired, will be recorded as goodwill on the
Company's balance sheet. Goodwill will be amortized as a non-cash charge to the
Company's income statement over a 40-year period. The pro forma impact of this
amortization expense is approximately $1.2 million per year. The amount
amortized, however, will not be deductible for tax purposes. See "Certain
Transactions -- Organization of the Company."
RESULTS OF OPERATIONS -- COMBINED
The summary combined Founding Company statement of operations data for
1995, 1996 and 1997 and the three months ended September 30, 1996 and 1997 set
forth in the table below do not purport to present the combined Founding
Companies in accordance with generally accepted accounting principles, but
represent merely a summation of the data of the individual Founding Companies on
a historical basis and do not include the effects of pro forma adjustments. This
data will not be comparable to and may not be indicative of the Company's
post-Combination results of operations because (i) the Founding Companies
historically were not under common control or management and had different tax
structures during the periods presented; (ii) the Company used the purchase
method of accounting to reflect the Combination, resulting in the recording of
goodwill which will be amortized over 40 years; (iii) the Company will incur
incremental costs related to its new corporate management and the costs of being
a public company; and (iv) the combined data does not reflect potential benefits
and cost savings the Company expects to realize when operating as a combined
entity.
The following table sets forth certain unaudited combined statement of
operations data of the Founding Companies on a historical basis and as a
percentage of revenue and excludes the effects of pro forma adjustments for the
periods indicated. Three of the Founding Companies, J. Howard, LSS and Star,
historically operated with fiscal years ending on dates other than June 30. For
purposes of the table below, their operating results have been recast to reflect
a June 30 fiscal year end, although they have been derived from financial
statements prepared on the same basis as the audited financial statements. As a
result of this presentation, the operating results for these three companies do
not conform with their audited financial statements contained elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED JUNE 30, THREE MONTHS ENDED SEPTEMBER 30,
----------------------------------------------------- ----------------------------------
1995 (1) 1996 1997 1996 1997
--------------- --------------- --------------- --------------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue.............. $41,289 100.0% $51,497 100.0% $61,245 100.0% $14,291 100.0% $16,319 100.0%
Cost of revenue...... 17,770 43.0 22,205 43.1 26,117 42.6 5,707 39.9 7,000 42.9
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Gross profit......... $23,519 57.0% $29,292 56.9% $35,128 57.4% $ 8,584 60.1% $ 9,319 57.1%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
</TABLE>
- ---------------
(1) Includes 1995 data for LSS for the 12 months ended August 31, 1995.
24
<PAGE> 26
COMBINED RESULTS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 (THE "1998
PERIOD") COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 1996 (THE "1997
PERIOD")
Revenue. Revenue increased $2.0 million, or 14.2%, from $14.3 million in
the 1997 Period to $16.3 million in the 1998 Period. This increase primarily was
attributable to increased revenues of Star and Decker.
Cost of Revenue. Cost of revenue increased $1.3 million, or 22.7%, from
$5.7 million in the 1997 Period to $7.0 million in the 1998 Period. As a
percentage of revenue, cost of revenue increased from 39.9% in the 1997 Period
to 42.9% in the 1998 Period, primarily due to increased cost of revenue of Star
and LSS.
COMBINED RESULTS FOR 1997 COMPARED TO 1996
Revenue. Revenue increased $9.7 million, or 18.9%, from $51.5 million in
1996 to $61.2 million in 1997. This increase primarily was attributable to
increased revenues of Star, BTI, LSS and MOHR.
Cost of Revenue. Cost of revenue increased $3.9 million, or 17.6%, from
$22.2 million in 1996 to $26.1 million in 1997. As a percentage of revenue, cost
of revenue decreased from 43.1% in 1996 to 42.6% in 1997, primarily due to
improved gross profit margins of BTI, Decker and LSS.
COMBINED RESULTS FOR 1996 COMPARED TO 1995
Revenue. Revenue increased $10.2 million, or 24.7%, from $41.3 million in
1995 to $51.5 million in 1996. This increase primarily was attributable to
increased revenues of Star, J. Howard, BTI and Novations.
Cost of Revenue. Cost of revenue increased approximately $4.4 million, or
25.0%, from $17.8 million in 1995 to $22.2 million in 1996. As a percentage of
revenue, cost of revenue increased slightly from 43.0% in 1995 to 43.1% in 1996,
primarily due to increased cost of revenue of MOHR, Decker and LSS.
COMBINED LIQUIDITY AND CAPITAL RESOURCES
After the consummation of the Combination and the Offering, the Company
will have approximately $2.7 million in cash and approximately $1.6 million of
indebtedness outstanding. The Company anticipates that its cash flow from
operations will provide cash sufficient to satisfy the Company's working capital
needs, debt service requirements and planned capital expenditures for the next
12 months. The Company made capital expenditures of approximately $903,000 in
1997 and approximately $363,000 in the three months ended September 30, 1997 and
currently intends to make capital expenditures of $1.0 million in fiscal 1998,
principally for information systems, facilities, furnishings and equipment.
After the Combination, the Company intends to study the feasibility of upgrading
and integrating certain systems of the Founding Companies. Consequently, the
Company has not yet established its capital needs for such integration and
upgrades. The Company has assessed its various information and technology
systems and does not believe that it will be required to incur significant costs
to correct any Year 2000 deficiencies. To the extent that the Company is
incorrect in this assessment and significant costs will be incurred, the
Company's business, financial condition and results of operations could be
materially adversely affected.
The Company intends to pursue selected acquisition opportunities. The
timing, size or success of any acquisition and the associated potential capital
commitments are unpredictable. The Company expects to fund future acquisitions
primarily through a combination of cash flow from operations and borrowings, as
well as issuances of additional equity. The Company plans to register an
additional 3,000,000 shares of its Common Stock under the Securities Act after
completion of the Offering for use as consideration for future acquisitions.
RESULTS OF OPERATIONS -- BTI
BTI primarily provides train-the-trainer programs designed to help its
clients improve employee selection and to provide managers with a methodology
for assessing strengths and weaknesses of current employees. BTI's revenue is
derived primarily from the licensing to clients of the right to use its training
materials.
25
<PAGE> 27
The following table sets forth certain selected financial data for BTI on a
historical basis and as a percentage of revenue for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, THREE MONTHS ENDED SEPTEMBER 30,
-------------------------------------------------- --------------------------------
1995 1996 1997 1996 1997
-------------- -------------- -------------- -------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue................. $3,803 100.0% $5,685 100.0% $7,096 100.0% $1,712 100.0% $1,977 100.0%
Cost of revenue......... 1,049 27.6 1,495 26.3 1,488 21.0 387 22.6 385 19.5
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Gross profit............ 2,754 72.4 4,190 73.7 5,608 79.0 1,325 77.4 1,592 80.5
Selling, general and
administrative
expenses.............. 2,315 60.9 4,048 71.2 5,111 72.0 969 56.6 1,306 66.0
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Income from
operations............ $ 439 11.5% $ 142 2.5% $ 497 7.0% $ 356 20.8% $ 286 14.5%
====== ===== ====== ===== ====== ===== ====== ===== ====== =====
Compensation
Differential.......... $ (89) (2.3)% $ 563 9.9% $ 942 13.3% $ 0 0% $ 337 17.0%
</TABLE>
THREE MONTHS ENDED SEPTEMBER 30, 1997 (THE "1998 PERIOD") COMPARED TO THREE
MONTHS ENDED SEPTEMBER 30, 1996 (THE "1997 PERIOD") -- BTI
Revenue. Revenue increased $265,000, or 15.5%, from $1.7 million in the
1997 Period to $2.0 million in the 1998 Period, primarily due to increased sales
of existing products as a result of the expansion of the sales force and an
increase in participant fees as a result of an increased base of certified
trainers at the company's clients.
Cost of Revenue. Cost of revenue remained relatively constant, decreasing
from $387,000 in the 1997 Period to $385,000 in the 1998 Period. As a percentage
of revenue, cost of revenue decreased from 22.6% in the 1997 Period to 19.5% in
the 1998 Period, primarily due to a decrease in the average unit cost of
participant materials.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased approximately $337,000, or 34.8%, from
approximately $969,000 in the 1997 Period to $1.3 million in the 1998 Period.
Excluding the Compensation Differential of approximately $337,000 attributable
to BTI in the 1998 Period (there being no Compensation Differential for the 1997
Period), selling, general and administrative expenses would have remained
relatively constant at $1.0 million in the 1997 Period and the 1998 Period. As a
percentage of revenue, selling, general and administrative expenses would have
decreased on an adjusted basis from 56.6% in the 1997 Period to 49.0% in the
1998 Period, primarily due to the company's larger revenue base.
RESULTS FOR 1997 COMPARED TO 1996 -- BTI
Revenue. Revenue increased $1.4 million, or 24.8%, from $5.7 million in
1996 to $7.1 million in 1997, primarily due to increased sales of existing
products as a result of the expansion of the sales force and an increase in
participant fees as a result of an increased base of certified trainers at the
company's clients.
Cost of Revenue. Cost of revenue remained relatively constant at $1.5
million in 1996 and 1997. As a percentage of revenue, cost of revenue decreased
from 26.3% in 1996 to 21.0% in 1997, primarily due to a decrease in the average
unit cost of participant materials.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $1.1 million, or 26.3%, from $4.0 million in
1996 to $5.1 million in 1997. Excluding the Compensation Differential
attributable to BTI of approximately $563,000 and approximately $942,000 in 1996
and 1997, respectively, selling, general and administrative expenses would have
increased approximately $684,000, or 19.6%, from $3.5 million in 1996 to $4.2
million in 1997. As a percentage of revenue, selling, general and administrative
expenses would have decreased on an adjusted basis from 61.3% in 1996 to 58.8%
in 1997. The decrease as a percentage of revenue on an adjusted basis primarily
was due to the company's larger revenue base.
26
<PAGE> 28
RESULTS FOR 1996 COMPARED TO 1995 -- BTI
Revenue. Revenue increased $1.9 million, or 49.5%, from $3.8 million in
1995 to $5.7 million in 1996, primarily due to increased sales of existing
products as a result of the expansion of the sales force and an increase in
participant fees as a result of an increased base of certified trainers at the
company's clients.
Cost of Revenue. Cost of revenue increased approximately $446,000, or
42.5%, from $1.0 million in 1995 to $1.5 million in 1996. As a percentage of
revenue, cost of revenue decreased slightly from 27.6% in 1995 to 26.3% in 1996.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $1.7 million, or 74.9%, from $2.3 million in
1995 to $4.0 million in 1996. Excluding the Compensation Differential
attributable to BTI of approximately $(89,000) and approximately $563,000 in
1995 and 1996, selling, general and administrative expenses would have increased
$1.1 million, or 45.0%, from $2.4 million in 1995 to $3.5 million in 1996. As a
percentage of revenue, selling, general and administrative expenses would have
decreased slightly on an adjusted basis from 63.2% in 1995 to 61.3% in 1996.
LIQUIDITY AND CAPITAL RESOURCES -- BTI
BTI generated net cash from operating activities of approximately $641,000
in 1997. In the 1998 Period, BTI used approximately $63,000 in operating
activities, primarily due to an increase in accounts receivable. Net cash used
in investing activities was approximately $33,000 in 1997 and approximately
$3,000 in the 1998 Period for purchases of property and equipment. At September
30, 1997, BTI had working capital of $2.1 million.
RESULTS OF OPERATIONS -- DECKER
Decker provides instructor-led training to businesses to improve employees'
business communication skills and communications between management and
employees. Decker's revenue is derived primarily from fees charged to
participants in its instructor-led training programs.
The following table sets forth certain selected financial data for Decker
on a historical basis and as a percentage of revenue for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, THREE MONTHS ENDED SEPTEMBER 30,
-------------------------------------------------- --------------------------------
1995 1996 1997 1996 1997
-------------- -------------- -------------- -------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue................. $8,550 100.0% $8,620 100.0% $8,410 100.0% $1,930 100.0% $2,585 100.0%
Cost of revenue......... 2,419 28.3 2,655 30.8 2,275 27.1 549 28.4 660 25.5
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Gross profit............ 6,131 71.7 5,965 69.2 6,135 72.9 1,381 71.6 1,925 74.5
Selling, general and
administrative
expenses.............. 5,670 66.3 5,716 66.3 5,621 66.8 1,261 65.4 1,663 64.4
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Income from
operations............ $ 461 5.4% $ 249 2.9% $ 514 6.1% $ 120 6.2% $ 262 10.1%
====== ===== ====== ===== ====== ===== ====== ===== ====== =====
Compensation
Differential.......... $ 192 2.2% $ 192 2.2% $ 340 4.0% $ 60 3.1% $ 110 4.3%
</TABLE>
THREE MONTHS ENDED SEPTEMBER 30, 1997 (THE "1998 PERIOD") COMPARED TO THREE
MONTHS ENDED SEPTEMBER 30, 1996 (THE "1997 PERIOD") -- DECKER
Revenue. Revenue increased approximately $655,000, or 33.9%, from $1.9
million in the 1997 Period to $2.6 million in the 1998 Period, primarily due to
an increase in the sales force and organizational initiatives undertaken in 1997
as described below, which resulted in an increase in the number of seminars
delivered during the 1998 Period.
Cost of Revenue. Cost of revenue increased approximately $111,000, or
20.2%, from approximately $549,000 in the 1997 Period to approximately $660,000
in the 1998 Period. As a percentage of revenue, cost of revenue decreased from
28.4% in the 1997 Period to 25.5% in the 1998 Period, primarily due to the
increased utilization of trainers for instructor-led programs.
27
<PAGE> 29
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased approximately $402,000, or 31.9%, from $1.3
million in the 1997 Period to $1.7 million in the 1998 Period. Excluding the
Compensation Differential of approximately $60,000 and approximately $110,000
attributable to Decker in the 1997 Period and 1998 Period, respectively,
selling, general and administrative expenses would have increased approximately
$352,000, or 29.3%, from $1.2 million in the 1997 Period to $1.6 million in the
1998 Period. As a percentage of revenue, selling, general and administrative
expenses would have decreased on an adjusted basis from 62.2% in the 1997 Period
to 60.1% in the 1998 Period, primarily due to the company's larger revenue base.
RESULTS FOR 1997 COMPARED TO 1996 -- DECKER
Revenue. Revenue decreased approximately $210,000, or 2.4%, from $8.6
million in 1996 to $8.4 million in 1997, primarily due to a temporary shift in
the focus of Decker's business. During the first six months of 1997, Decker
increased its focus on providing consulting services rather than its traditional
training. This shift in focus resulted in a decline in training revenue and a
high degree of sales force turnover. During the second half of 1997, the company
returned to a business model focused on instructor-led training, and launched
several organizational initiatives, including the hiring of a new president and
the implementation of a new salary structure for its sales force.
Cost of Revenue. Cost of revenue decreased approximately $380,000, or
14.4%, from $2.7 million in 1996 to $2.3 million in 1997. As a percentage of
revenue, cost of revenue decreased from 30.8% in 1996 to 27.1% in 1997,
primarily due to a reduction in the number of trainers and increased utilization
of trainers.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased approximately $95,000, or 1.7%, from $5.7
million in 1996 to $5.6 million in 1997. Excluding the Compensation Differential
attributable to Decker of approximately $192,000 and approximately $340,000 in
1996 and 1997, respectively, selling, general and administrative expenses would
have decreased approximately $243,000, or 4.4%, from $5.5 million in 1996 to
$5.3 million in 1997. As a percentage of revenue, selling, general and
administrative expenses would have decreased on an adjusted basis from 64.1% in
1996 to 62.8% in 1997.
RESULTS FOR 1996 COMPARED TO 1995 -- DECKER
Revenue. Revenue increased approximately $70,000, or 0.8%, from $8.5
million in 1995 to $8.6 million in 1996.
Cost of Revenue. Cost of revenue increased approximately $236,000, or
9.8%, from $2.4 million in 1995 to $2.7 million in 1996. As a percentage of
revenue, cost of revenue increased from 28.3% in 1995 to 30.8% in 1996,
primarily due to higher salaries paid to the company's trainers in 1996.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses remained relatively constant at $5.7 million 1995 and
1996. Excluding the Compensation Differential attributable to Decker of
approximately $192,000 in both 1995 and 1996, selling, general and
administrative expenses would have remained relatively constant at $5.5 million
in 1995 and 1996. As a percentage of revenue, selling, general and
administrative expenses would have remained constant on an adjusted basis at
64.1% in 1995 and 1996.
LIQUIDITY AND CAPITAL RESOURCES -- DECKER
Decker generated net cash from operating activities of approximately
$446,000 in 1997 and $496,000 in the 1998 Period. Net cash used in investing
activities was approximately $11,000 in 1997, primarily for purchases of
property and equipment, and approximately $464,000 in the 1998 Period, primarily
for the purchase of marketable securities. Net cash used in financing activities
was approximately $241,000 in 1997, primarily for the payment of dividends, and
approximately $14,000 in the 1998 Period for payments on notes payable. At
September 30, 1997, Decker had working capital of $1.1 million and approximately
$1.0 million of long-term debt.
28
<PAGE> 30
RESULTS OF OPERATIONS -- J. HOWARD
J. Howard provides instructor-led training to individual managers and
client companies to identify and address potential obstacles to improving
workplace productivity, including race and gender issues, sexual harassment and
failure of employees to take measured risks. J. Howard's revenue is derived
primarily from fees from instructor-led seminars and, to a lesser extent, from
the rendering of consulting services. J. Howard also occasionally enters into
license agreements and then delivers its programs in the train-the-trainer
format; in these instances, revenue from the license agreements is recognized
when the license is signed. Revenue from the trainer certifications is
recognized on a per event basis when the training is delivered.
The following table sets forth certain selected financial data for J.
Howard on a historical basis and as a percentage of revenue for the periods
indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------------------------- --------------------------------
1994 1995 1996 1996 1997
-------------- -------------- -------------- -------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue................. $5,087 100.0% $6,251 100.0% $7,110 100.0% $5,814 100.0% $6,077 100.0%
Cost of revenue......... 1,713 33.7 1,964 31.4 2,166 30.5 1,782 30.7 1,851 30.5
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Gross profit............ 3,374 66.3 4,287 68.6 4,944 69.5 4,032 69.3 4,226 69.5
Selling, general and
administrative
expenses.............. 3,087 60.7 4,158 66.5 4,559 64.1 2,791 48.0 3,170 52.1
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Income from
operations............ $ 287 5.6% $ 129 2.1% $ 385 5.4% $1,241 21.3% $1,056 17.4%
====== ===== ====== ===== ====== ===== ====== ===== ====== =====
Compensation
Differential.......... $ 172 3.4% $ 522 8.4% $ 944 13.3% $ 177 3.0% $ 305 5.0%
</TABLE>
NINE MONTHS ENDED SEPTEMBER 30, 1997 (THE "1997 PERIOD") COMPARED TO NINE MONTHS
ENDED SEPTEMBER 30, 1996 (THE "1996 PERIOD") -- J. HOWARD
Revenue. Revenue increased approximately $263,000, or 4.5%, from $5.8
million in the 1996 Period to $6.1 million in the 1997 Period, primarily due to
increased license revenue generated from one of the company's clients during the
1997 Period.
Cost of Revenue. Cost of revenue increased approximately $69,000, or 3.9%,
from $1.8 million in the 1996 Period to $1.9 million in the 1997 Period. As a
percentage of revenue, cost of revenue decreased slightly from 30.7% in the 1996
Period to 30.5% in the 1997 Period.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased approximately $379,000, or 13.6%, from $2.8
million in the 1996 Period to $3.2 million in the 1997 Period. Excluding the
Compensation Differential of approximately $177,000 and approximately $305,000
attributable to J. Howard in the 1996 Period and 1997 Period, respectively,
selling, general and administrative expenses would have increased approximately
$251,000, or 9.6%, from $2.6 million in the 1996 Period to $2.9 million in the
1997 Period. As a percentage of revenue, selling, general and administrative
expenses would have increased on an adjusted basis from 45.0% in the 1996 Period
to 47.1% in the 1997 Period, primarily due to compensation paid to additional
salespeople hired during the 1997 calendar year who did not generate material
revenue during the 1997 Period.
RESULTS FOR THE YEAR ENDED DECEMBER 31, 1996 COMPARED TO THE YEAR ENDED DECEMBER
31, 1995 -- J. HOWARD
Revenue. Revenue increased approximately $859,000, or 13.7%, from $6.3
million in the year ended December 31, 1995 to $7.1 million in the year ended
December 31, 1996, primarily due to a general increase in the number of client
engagements.
Cost of Revenue. Cost of revenue increased approximately $202,000, or
10.3%, from $2.0 million in the year ended December 31, 1995 to $2.2 million in
the year ended December 31, 1996. As a percentage of revenue, cost of revenue
decreased slightly from 31.4% in the year ended December 31, 1995 to 30.5% in
the year ended December 31, 1996.
29
<PAGE> 31
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased approximately $401,000, or 9.6%, from $4.2
million in the year ended December 31, 1995 to $4.6 million in the year ended
December 31, 1996. Excluding the Compensation Differential attributable to J.
Howard of approximately $522,000 and approximately $944,000 in the year ended
December 31, 1995 and the year ended December 31, 1996, respectively, selling,
general and administrative expenses would have remained relatively constant at
$3.6 million. As a percentage of revenue, selling, general and administrative
expenses would have decreased on an adjusted basis from 58.2% in the year ended
December 31, 1995 to 50.8% in the year ended December 31, 1996.
RESULTS FOR THE YEAR ENDED DECEMBER 31, 1995 COMPARED TO THE YEAR ENDED DECEMBER
31, 1994 -- J. HOWARD
Revenue. Revenue increased $1.2 million, or 22.9%, from $5.1 million in
the year ended December 31, 1994 to $6.3 million in the year ended December 31,
1995, primarily due to the expansion of two existing client relationships in the
1995 calendar year to include licensing and trainer certifications.
Cost of Revenue. Cost of revenue increased approximately $251,000, or
14.7%, from $1.7 million in the year ended December 31, 1994 to $2.0 million in
the year ended December 31, 1995. As a percentage of revenue, cost of revenue
decreased from 33.7% in the year ended December 31, 1994 to 31.4% in the year
ended December 31, 1995.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $1.1 million, or 34.7%, from $3.1 million in
the year ended December 31, 1994 to $4.2 million in the year ended December 31,
1995. Excluding the Compensation Differential attributable to J. Howard of
approximately $172,000 and approximately $522,000 in the year ended December 31,
1994 and the year ended December 31, 1995, respectively, selling, general and
administrative expenses would have increased approximately $721,000, or 24.7%,
from $2.9 million in the year ended December 31, 1994 to $3.6 million in the
year ended December 31, 1995. As a percentage of revenue, selling, general and
administrative expenses would have increased slightly on an adjusted basis from
57.3% in the year ended December 31, 1994 to 58.2% in the year ended December
31, 1995.
LIQUIDITY AND CAPITAL RESOURCES -- J. HOWARD
J. Howard generated net cash from operating activities of approximately
$464,000 in the year ended December 31, 1996 and approximately $715,000 in the
1997 Period. Net cash used in investing activities was approximately $248,000 in
the year ended December 31, 1996 and approximately $105,000 in the 1997 Period,
primarily for purchases of property and equipment. Net cash used in financing
activities was approximately $481,000 in the year ended December 31, 1996 for
distributions to stockholders. At September 30, 1997, J. Howard had working
capital of $1.8 million.
RESULTS OF OPERATIONS -- LSS
LSS creates customized training products that generally are designed to
facilitate faster learning of customer interface devices and higher productivity
of retail associates. LSS's training products are delivered to clients primarily
through interactive multimedia software and, to a lesser extent, distance-based
media. LSS derives revenue from the design, development and delivery of its
products.
30
<PAGE> 32
The following table sets forth certain selected financial data for LSS on a
historical basis and as a percentage of revenue for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------- --------------------------------
1995 1996 1996 1997
-------------- -------------- -------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue....................... $3,332 100.0% $5,123 100.0% $3,570 100.0% $3,960 100.0%
Cost of revenue............... 1,390 41.7 1,696 33.1 1,230 34.5 1,590 40.2
------ ----- ------ ----- ------ ----- ------ -----
Gross profit.................. 1,942 58.3 3,427 66.9 2,340 65.5 2,370 59.8
Selling, general and
administrative expenses..... 1,767 53.0 3,079 60.1 1,713 47.9 1,697 42.8
------ ----- ------ ----- ------ ----- ------ -----
Income from operations........ $ 175 5.3% $ 348 6.8% $ 627 17.6% $ 673 17.0%
====== ===== ====== ===== ====== ===== ====== =====
Compensation Differential..... $ 415 12.5% $1,379 26.9% $ 484 13.6% $ 333 8.4%
</TABLE>
NINE MONTHS ENDED SEPTEMBER 30, 1997 (THE "1997 PERIOD") COMPARED TO NINE MONTHS
ENDED SEPTEMBER 30, 1996 (THE "1996 PERIOD") -- LSS
Revenue. Revenue increased approximately $390,000, or 10.9%, from $3.6
million in the 1996 Period to $4.0 million in the 1997 Period, primarily due to
the expansion of the sales force.
Cost of Revenue. Cost of revenue increased approximately $360,000, or
29.3%, from $1.2 million in the 1996 Period to $1.6 million in the 1997 Period.
As a percentage of revenue, cost of revenue increased from 34.5% in the 1996
Period to 40.2% in the 1997 Period, primarily due to increased video production
costs associated with certain of the company's products during the 1997 Period,
which generally result in lower gross margins.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses remained relatively constant at $1.7 million in the 1996
Period and the 1997 Period. Excluding the Compensation Differential of
approximately $484,000 and approximately $333,000 attributable to LSS in the
1996 Period and 1997 Period, respectively, selling, general and administrative
expenses would have increased approximately $135,000, or 11.0%, from $1.2
million in the 1996 Period to $1.4 million in the 1997 Period. As a percentage
of revenue, selling, general and administrative expenses would have remained
constant on an adjusted basis at approximately 34.4% in the 1996 Period and the
1997 Period.
RESULTS FOR THE YEAR ENDED DECEMBER 31, 1996 COMPARED TO THE YEAR ENDED DECEMBER
31, 1995 -- LSS
Revenue. Revenue increased $1.8 million, or 53.8%, from $3.3 million in
the year ended December 31, 1995 to $5.1 million in the year ended December 31,
1996, primarily due to the increased productivity from the company's expanded
sales force.
Cost of Revenue. Cost of revenue increased approximately $306,000, or
22.0%, from $1.4 million in the year ended December 31, 1995 to $1.7 million in
the year ended December 31, 1996. As a percentage of revenue, cost of revenue
decreased from 41.7% in the year ended December 31, 1995 to 33.1% in the year
ended December 31, 1996, primarily due to several follow-on client engagements
which generally result in lower production costs.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $1.3 million, or 74.3%, from $1.8 million in
the year ended December 31, 1995 to $3.1 million in the year ended December 31,
1996. Excluding the Compensation Differential attributable to LSS of
approximately $415,000 and $1.4 million in the year ended December 31, 1995 and
the year ended December 31, 1996, respectively, selling, general and
administrative expenses would have increased approximately $348,000, or 25.7%,
from $1.4 million in the year ended December 31, 1995 to $1.7 million in the
year ended December 31, 1996. As a percentage of revenue, selling, general and
administrative expenses would have decreased on an adjusted basis from 40.6% in
the year ended December 31, 1995 to 33.2% in the year ended December 31, 1996,
primarily due to the company's larger revenue base.
31
<PAGE> 33
LIQUIDITY AND CAPITAL RESOURCES -- LSS
LSS generated net cash from operating activities of approximately $315,000
in the year ended December 31, 1996 and approximately $295,000 in the 1997
Period. Net cash used in investing activities was approximately $85,000 in the
year ended December 31, 1996 and approximately $61,000 in the 1997 Period for
purchases of property and equipment. At September 30, 1997, LSS had working
capital of approximately $887,000.
RESULTS OF OPERATIONS -- MOHR
MOHR offers train-the-trainer seminars to help clients in the retail
industry primarily to improve productivity by fostering a customer-oriented
focus at the sales management and sales associate levels. In some of its
programs, MOHR trains employees directly through instructor-led seminars. MOHR's
revenue is derived primarily from the licensing to clients of the right to use
its training programs on a participant or site basis.
The following table sets forth certain selected financial data for MOHR on
a historical basis and as a percentage of revenue for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, THREE MONTHS ENDED SEPTEMBER 30,
-------------------------------- ---------------------------------
1996 1997 1996 1997
-------------- -------------- -------------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue......................... $2,171 100.0% $3,015 100.0% $554 100.0% $ 556 100.0%
Cost of revenue................. 677 31.2 825 27.4 187 33.8 204 36.7
------ ----- ------ ----- ---- ----- ----- -----
Gross profit.................... 1,494 68.8 2,190 72.6 367 66.2 352 63.3
Selling, general and
administrative expenses....... 1,151 53.0 1,745 57.9 383 69.1 562 101.1
------ ----- ------ ----- ---- ----- ----- -----
Income (loss) from operations... $ 343 15.8% $ 445 14.7% $(16) (2.9)% $(210) (37.8)%
====== ===== ====== ===== ==== ===== ===== =====
Compensation Differential....... $ 144 6.6% $ 334 11.1% $ 60 10.8% $ 105 18.9%
</TABLE>
THREE MONTHS ENDED SEPTEMBER 30, 1997 (THE "1998 PERIOD") COMPARED TO THREE
MONTHS ENDED SEPTEMBER 30, 1996 (THE "1997 PERIOD") -- MOHR
Revenue. Revenue increased slightly, from approximately $554,000 in the
1997 Period to approximately $556,000 in the 1998 Period.
Cost of Revenue. Cost of revenue increased approximately $17,000, or 9.1%,
from approximately $187,000 in the 1997 Period to approximately $204,000 in the
1998 Period. As a percentage of revenue, cost of revenue increased from 33.8% in
the 1997 Period to 36.7% in the 1998 Period.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased approximately $179,000, or 46.7%, from
approximately $383,000 in the 1997 Period to approximately $562,000 in the 1998
Period. Excluding the Compensation Differential of approximately $60,000 and
approximately $105,000 attributable to MOHR in the 1997 Period and 1998 Period,
respectively, selling, general and administrative expenses would have increased
approximately $134,000, or 41.5%, from approximately $323,000 in the 1997 Period
to approximately $457,000 in the 1998 Period. As a percentage of revenue,
selling, general and administrative expenses would have increased on an adjusted
basis from 58.3% in the 1997 Period to 82.2% in the 1998 Period, primarily due
to compensation paid to additional salespeople hired during 1997 who did not
generate material revenue during the 1998 Period and development costs incurred
to update certain of the company's products.
RESULTS FOR 1997 COMPARED TO 1996 -- MOHR
Revenue. Revenue increased approximately $844,000, or 38.9%, from $2.2
million in 1996 to $3.0 million in 1997, primarily due to the hiring of two
additional salespeople and the increase in license fees during 1997.
32
<PAGE> 34
Cost of Revenue. Cost of revenue increased approximately $148,000, or
21.9%, from approximately $677,000 in 1996 to approximately $825,000 in 1997. As
a percentage of revenue, cost of revenue decreased from 31.2% in 1996 to 27.4%
in 1997, primarily due to the increase in license fees, which result in higher
margins than train-the-trainer seminars.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased approximately $594,000, or 51.6%, from $1.2
million in 1996 to $1.8 million in 1997. Excluding the Compensation Differential
attributable to MOHR of approximately $144,000 and approximately $334,000 in
1996 and 1997, respectively, selling, general and administrative expenses would
have increased approximately $404,000, or 40.1%, from $1.0 million in 1996 to
$1.4 million in 1997. As a percentage of revenue, selling, general and
administrative expenses would have increased slightly from 46.4% in 1996 to
46.8% in 1997.
LIQUIDITY AND CAPITAL RESOURCES -- MOHR
MOHR generated net cash from operating activities of approximately $80,000
in 1997. In the 1998 Period, MOHR used approximately $43,000 in operating
activities. Net cash used in investing activities was approximately $41,000 in
1997 and approximately $6,000 in the 1998 Period for purchases of property and
equipment. At September 30, 1997, MOHR had working capital of approximately
$249,000.
RESULTS OF OPERATIONS -- NOVATIONS
Novations assists clients in, among other things, clarifying and
communicating their business strategies and re-designing their organizations and
work systems. Novations also provides its clients with a variety of
organizational assessment tools that are designed to gather and analyze feedback
on either an organizational or individual basis and to initiate change within
the client's organization in response to such feedback. Novations' revenue is
derived primarily from fees from professional services and, to a lesser extent,
from the sale of services and products to support human resource management.
The following table sets forth certain selected financial data for
Novations on a historical basis and as a percentage of revenue for the periods
indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED JUNE 30, SEPTEMBER 30,
------------------------------------------------ -------------------------------
1995 1996 1997 1996 1997
-------------- -------------- -------------- -------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue.................. $7,175 100.0% $9,039 100.0% $9,018 100.0% $2,167 100.0% $2,464 100.0%
Cost of revenue.......... 3,885 54.1 4,733 52.4 4,839 53.7 1,117 51.5 1,197 48.6
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Gross profit............. 3,290 45.9 4,306 47.6 4,179 46.3 1,050 48.5 1,267 51.4
Selling, general and
administrative
expenses............... 3,167 44.2 4,094 45.3 3,315 36.7 823 38.0 1,088 44.1
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Income from operations... $ 123 1.7% $ 212 2.3% $ 864 9.6% $ 227 10.5% $ 179 7.3%
====== ===== ====== ===== ====== ===== ====== ===== ====== =====
Compensation
Differential........... $1,208 16.8% $1,471 16.3% $ 661 7.3% $ 174 8.0% $ 375 15.2%
</TABLE>
THREE MONTHS ENDED SEPTEMBER 30, 1997 (THE "1998 PERIOD") COMPARED TO THREE
MONTHS ENDED SEPTEMBER 30, 1996 (THE "1997 PERIOD") -- NOVATIONS
Revenue. Revenue increased approximately $297,000, or 13.7%, from $2.2
million in the 1997 Period to $2.5 million in the 1998 Period, primarily due to
an increase in organizational assessment revenues of $213,000 in the 1998
Period.
Cost of Revenue. Cost of revenue increased approximately $80,000, or 7.2%
from $1.1 million in the 1997 Period to $1.2 million in the 1998 Period. As a
percentage of revenue, cost of revenue decreased from 51.5% in the 1997 Period
to 48.6% in the 1998 Period, primarily due to the increased utilization of the
company's consultants.
33
<PAGE> 35
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased approximately $265,000, or 32.2%, from
approximately $823,000 in the 1997 Period to $1.1 million in the 1998 Period.
Excluding the Compensation Differential attributable to Novations of
approximately $174,000 and approximately $375,000 in the 1997 Period and 1998
Period, respectively, selling, general and administrative expenses would have
increased $64,000, or 9.9%, from approximately $649,000 in the 1997 Period to
approximately $713,000 in the 1998 Period. As a percentage of revenue, selling,
general and administrative expenses would have decreased on an adjusted basis
from 29.9% in the 1997 Period to 28.9% in the 1998 Period.
RESULTS FOR 1997 COMPARED TO 1996 -- NOVATIONS
Revenue. Revenue remained relatively constant at $9.0 million in 1996 and
1997.
Cost of Revenue. Cost of revenue increased approximately $106,000, or
2.2%, from $4.7 million in 1996 to $4.8 million in 1997. As a percentage of
revenue, cost of revenue increased from 52.4% in 1996 to 53.7% in 1997,
primarily due to an increase in the size of the consulting staff.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased by $779,000 or 19.0%, from $4.1 million in
1996 to $3.3 million in 1997. Excluding the Compensation Differential
attributable to Novations of $1.5 million and approximately $661,000 in 1996 and
1997, respectively, selling, general and administrative expenses would have
increased approximately $31,000, or 1.2%, from $2.6 million in 1996 to $2.7
million in 1997. As a percentage of revenue, selling, general and administrative
expenses would have increased slightly on an adjusted basis from 29.0% in 1996
to 29.4% in 1997.
RESULTS FOR 1996 COMPARED TO 1995 -- NOVATIONS
Revenue. Revenue increased $1.9 million, or 26.0%, from $7.2 million in
1995 to $9.0 million in 1996, primarily due to the introduction and marketing of
new services and the hiring of additional consultants.
Cost of Revenue. Cost of revenue increased approximately $848,000, or
21.8%, from $3.9 million in 1995 to $4.7 million in 1996. As a percentage of
revenue, cost of revenue decreased slightly from 54.1% in 1995 to 52.4% in 1996.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased approximately $927,000, or 29.3% from $3.2
million in 1995 to $4.1 million in 1996. Excluding the Compensation Differential
attributable to Novations of $1.2 million and $1.5 million in 1995 and 1996,
respectively, selling, general and administrative expenses would have increased
approximately $664,000, or 33.9%, from $2.0 million in 1995 to $2.6 million in
1996. As a percentage of revenue, selling, general and administrative expenses
would have increased on an adjusted basis from 27.3% in 1995 to 29.0%, primarily
due to an expansion of the company's infrastructure to support revenue growth.
LIQUIDITY AND CAPITAL RESOURCES -- NOVATIONS
Novations generated net cash from operating activities of approximately
$153,000 in 1997 and $587,000 in the 1998 Period. Net cash used in investing
activities was approximately $137,000 and $9,000 in 1997 and the 1998 Period,
respectively, for purchases of property and equipment. Net cash provided by
financing activities was approximately $55,000 in 1997, from net proceeds of
long-term debt partially offset by distributions to stockholders. Net cash used
in financing activities was approximately $220,000 in the 1998 Period, for the
repayment of notes payable. At September 30, 1997, Novations had working capital
of approximately $544,000 and approximately $361,000 of long term debt.
RESULTS OF OPERATIONS -- STAR
Star provides customized training and development services and products to
train individuals primarily within agencies of federal, state and local
government. Star delivers its courseware to clients in a variety of formats
(including written materials and interactive multimedia software), but typically
does not directly train
34
<PAGE> 36
its clients. Star's revenue is derived primarily from fees received from the
provision of training services as a contractor or subcontractor under government
contracts.
The following table sets forth certain selected financial data for Star on
a historical basis and as a percentage of revenue for the periods indicated:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------------------------- ---------------------------------
1994 1995 1996 1996 1997
-------------- --------------- --------------- --------------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue.............. $9,731 100.0% $14,306 100.0% $16,313 100.0% $11,785 100.0% $17,101 100.0%
Cost of revenue...... 6,350 65.3 8,668 60.6 9,457 58.0 6,559 55.7 10,588 61.9
------ ----- ------- ----- ------- ----- ------- ----- ------- -----
Gross profit......... 3,381 34.7 5,638 39.4 6,856 42.0 5,226 44.3 6,513 38.1
Selling, general and
administrative
expenses........... 3106 31.9 4,611 32.2 5,815 35.6 4,222 35.8 5,638 33.0
------ ----- ------- ----- ------- ----- ------- ----- ------- -----
Income from
operations......... $ 275 2.8% $ 1,027 7.2% $ 1,041 6.4% $ 1,004 8.5% $ 875 5.1%
====== ===== ======= ===== ======= ===== ======= ===== ======= =====
Compensation
Differential....... $ 36 0.4% $ 64 0.4% $ 304 1.9% $ 228 1.9% $ 135 0.8%
</TABLE>
NINE MONTHS ENDED SEPTEMBER 30, 1997 (THE "1997 PERIOD") COMPARED TO NINE MONTHS
ENDED SEPTEMBER 30, 1996 (THE "1996 PERIOD") -- STAR
Revenue. Revenue increased $5.3 million, or 45.1%, from $11.8 million in
the 1996 Period to $17.1 million in the 1997 Period, primarily due to an
increase in the number of federal government contracts undertaken, as well as
revenue of $3.4 million contributed by businesses acquired during the third
calendar quarter of 1996 and the first calendar quarter of 1997. Revenue was
significantly lower during the first half of the 1996 calendar year as a result
of a decline in new client engagements due to prolonged Congressional budget
negotiations.
Cost of Revenue. Cost of revenue increased approximately $4.0 million, or
61.4%, from $6.6 million in the 1996 Period to $10.6 million in the 1997 Period.
As a percentage of revenue, cost of revenue increased from 55.7% in the 1996
Period to 61.9% in the 1997 Period, primarily due to the increased use of
subcontractors during the 1997 Period.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $1.4 million, or 33.5%, from $4.2 million in
the 1996 Period to $5.6 million in the 1997 Period. Excluding the Compensation
Differential of approximately $228,000 and approximately $135,000 attributable
to Star in the 1996 Period and 1997 Period, respectively, selling, general and
administrative expenses would have increased $1.5 million, or 37.8%, from $4.0
million in the 1996 Period to $5.5 million in the 1997 Period. As a percentage
of revenue, selling, general and administrative expenses would have decreased on
an adjusted basis from 33.9% in the 1996 Period to 32.2% in the 1997 Period,
primarily due to the company's larger revenue base.
RESULTS FOR THE YEAR ENDED DECEMBER 31, 1996 COMPARED TO THE YEAR ENDED DECEMBER
31, 1995 -- STAR
Revenue. Revenue increased $2.0 million, or 14.0%, from $14.3 million in
the year ended December 31, 1995 to $16.3 million in the year ended December 31,
1996, due to revenue of $3.6 million contributed by businesses acquired by Star
in the third calendar quarters of 1995 and 1996. The revenue from the acquired
businesses was offset partially by the decline in business generated from
federal government entities as a result of the Congressional budget negotiations
described above.
Cost of Revenue. Cost of revenue increased approximately $789,000, or
9.1%, from $8.7 million in the year ended December 31, 1995 to $9.5 million in
the year ended December 31, 1996. As a percentage of revenue, cost of revenue
decreased from 60.6% in the year ended December 31, 1995 to 58.0% in the year
ended December 31, 1996, primarily due to the acquisition in the third calendar
quarter of 1996 of a business with higher gross profit margins than Star's core
business.
35
<PAGE> 37
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $1.2 million, or 26.1%, from $4.6 million in
the year ended December 31, 1995 to $5.8 million in the year ended December 31,
1996. Excluding the Compensation Differential attributable to Star of
approximately $64,000 and approximately $304,000 in the years ended December 31,
1995 and 1996, respectively, selling, general and administrative expenses would
have increased approximately $964,000, or 21.2%, from $4.5 million in the year
ended December 31, 1995 to $5.5 million in the year ended December 31, 1996. As
a percentage of revenue, selling, general and administrative expenses would have
increased on an adjusted basis from 31.8% in the year ended December 31, 1995 to
33.7% in the year ended December 31, 1996.
RESULTS FOR THE YEAR ENDED DECEMBER 31, 1995 COMPARED TO THE YEAR ENDED DECEMBER
31, 1994 -- STAR
Revenue. Revenue increased $4.6 million, or 47.0%, from $9.7 million in
the year ended December 31, 1994 to $14.3 million in the year ended December 31,
1995, primarily due to an increase in the number of projects undertaken during
the 1995 calendar year, and revenue of $1.0 million contributed by a business
acquired by Star in the third calendar quarter of 1995.
Cost of Revenue. Cost of revenue increased $2.3 million, or 36.5%, from
$6.4 million in the year ended December 31, 1994 to $8.7 million in the year
ended December 31, 1995. As a percentage of revenue, cost of revenue decreased
from 65.3% in the year ended December 31, 1994 to 60.6% in the year ended
December 31, 1995, primarily as a result of the acquisition of a business with
higher gross margin percentages than Star and the improvement in operating
results for Star's core business.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $1.5 million, or 48.5%, from $3.1 million in
the year ended December 31, 1994 to $4.6 million in the year ended December 31,
1995. Excluding the Compensation Differential of approximately $36,000 and
approximately $64,000 attributable to Star in the years ended December 31, 1994
and 1995, respectively, selling, general and administrative expenses would have
increased $1.5 million, or 48.1%, from $3.1 million in the year ended December
31, 1994 to $4.5 million in the year ended December 31, 1995. As a percentage of
revenue, selling, general and administrative expenses would have increased
slightly on an adjusted basis from 31.5% in the year ended December 31, 1994 to
31.8% in the year ended December 31, 1995.
LIQUIDITY AND CAPITAL RESOURCES -- STAR
Star generated net cash from operating activities of $1.1 million in the
year ended December 31, 1996 and approximately $999,000 in the 1997 Period. Net
cash used in investing activities was approximately $565,000 in the year ended
December 31, 1996 and $1.1 million in the 1997 Period, primarily for
acquisitions. Net cash used in financing activities was approximately $478,000
in the year ended December 31, 1996, primarily for purchases of treasury stock.
Net cash provided by financing activities was approximately $360,000 in the 1997
Period, primarily from borrowings on the company's line of credit. At September
30, 1997, Star had working capital of approximately $287,000, and long-term debt
of approximately $379,000.
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BUSINESS
COMPANY OVERVIEW
The Company provides a broad range of training and development services and
products to Fortune 1000 companies, other large and medium-sized corporations
and government entities. The Company's services and products are designed to
increase the productivity of organizations by improving employee selection,
recruitment and retention; enhancing employee work skills; developing employee
management and leadership skills; and facilitating organizational assessment,
direction and change. The Company offers both customized and off-the-shelf
services and products that are designed to provide measurable improvements in
employee performance and productivity. The Company delivers its services and
products through multiple delivery methods, including instructor-led classroom
training and seminars, certification of client employees as instructors
("train-the-trainer"), interactive multimedia software (such as CD-ROM) and
distance-based media (such as video conferencing, intranets and the Internet).
The seven Founding Companies are recognized leaders in their respective fields
and have developed a wide range of services and products, a substantial
knowledge base created from years of research and development, and a
well-established client base. The Company's objective is to become a leading
single source provider of high-quality training and development services and
products that are distributed through multiple delivery methods.
The Company provided training and development services and products to more
than 1,700 companies and 75 government entities in fiscal 1997, including Abbott
Laboratories, Bank of America, Conoco, Inc., Eli Lilly and Company, Federal
Express, Federated Department Stores, Inc., Hewlett-Packard Company, J.P. Morgan
& Co., Incorporated, Metropolitan Life Insurance Company, Mobil Corporation, the
Department of Defense, the Immigration and Naturalization Service and the
Internal Revenue Service. During this period, the Company generated revenues of
more than $100,000 from each of 75 different corporate clients and from over 15
different federal government entities. For fiscal 1997, the Company had pro
forma revenue of $68.8 million and pro forma income from operations of $8.0
million. From fiscal 1995 through fiscal 1997, the combined revenue of the
Founding Companies grew at a compound annual rate of 21.8%.
MARKET OVERVIEW
The corporate and government training and development market is large and
growing. According to Training Magazine, domestic corporations with over 100
employees budgeted approximately $58.6 billion on training in 1997, compared to
approximately $45.0 billion in 1992, representing a compound annual growth rate
of approximately 5.4%. The size of and growth in the federal government market
can be seen in the Department of Defense's training and development budget,
which for its 1997 fiscal year was approximately $23.9 billion, compared to
approximately $18.0 billion in its 1992 fiscal year, representing a compound
annual growth rate of approximately 5.8%. Provant believes that this growth has
been and will continue to be driven by: (i) the evolution from a
manufacturing-based to a service-based economy; (ii) the increasing recognition
by businesses that education, training and effective human resource management
are competitive necessities rather than optional expenses; and (iii) the
expanding use of technology throughout all levels of organizations, which has
increased the overall amount of training required and the number of employees
participating in such training.
Corporations and government entities increasingly are utilizing external
providers to meet their training and development needs. Expenditures on external
training and development by domestic corporations with over 100 employees have
increased from approximately $8.8 billion in 1992 to a budgeted $13.6 billion in
1997, representing a compound annual growth rate of 9.1%, and have increased as
a percentage of the total training budgets of such corporations from
approximately 19.6% in 1992 to 23.2% in 1997. The Company believes that federal
government expenditures on external training and development have increased from
approximately $600 million in the federal government's 1992 fiscal year to a
budgeted $3.8 billion in its 1997 fiscal year, representing a compound annual
growth rate of 44.7%. The Company believes that the growth in the external
training and development market has been driven by the desire of organizations
to: (i) focus on their core competencies; (ii) shift fixed training costs to
variable costs; and (iii) obtain training and development services, products,
technology and expertise that may not be available internally.
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As a result of significant advances in computer and communications
technology, the training and development industry is experiencing rapid change
in the delivery of services and products. Historically, training and development
organizations delivered services and products primarily through instructor-led
seminars. Technological advances, however, now permit organizations to provide
training at distant and multiple locations as well as self-paced training,
allowing a far greater number of participants to learn conveniently and
efficiently. Interactive multimedia software (such as CD-ROM) and distance-based
learning media (such as video conferencing, intranets and the Internet) overcome
many of the cost and space constraints of traditional instructor-led training.
The Company believes that corporations increasingly are using technology-driven
alternatives due to their ability to: (i) increase learning and retention; (ii)
minimize the opportunity costs of time spent away from the job by employees;
(iii) provide access to training and development services and products "on
demand"; (iv) lower overall training and development costs, including travel
expenses of employees; and (v) measure and track employees' progress. Although
instructor-led training currently is the primary means of delivery of training
and development services and products, the Company believes that
technology-based delivery increasingly will be used to both supplement and, in
some cases, replace instructor-led training.
The training and development industry is highly fragmented, with no company
having more than a one percent share of the external training market. Many
companies in the industry provide a narrow range of services and products
through limited delivery methods. The Company believes that these companies
generally have made limited investments in content development, marketing and
the technology necessary to develop or utilize alternative delivery methods. As
corporations and government entities increasingly use external training
providers, the Company believes that they will seek providers that can meet
their overall training and development needs by: (i) providing a broad range of
high-quality services and products in both customized and off-the-shelf formats;
(ii) delivering training through multiple delivery methods capable of reaching
large and geographically dispersed work forces; and (iii) utilizing the most
current technology available. As a result, the Company believes that significant
opportunities are available for well-capitalized companies capable of meeting
these needs on a national and international basis.
BUSINESS STRATEGY
The Company's objective is to meet a significant portion of the training
and development needs of Fortune 1000 companies, other large and medium-sized
corporations and government entities. To achieve this objective, the Company
intends to pursue a business strategy with the following key elements:
OFFER VALUE-ADDED, HIGH-QUALITY TRAINING. The Company is committed to
providing value-added training and development services and products that result
in measurable improvement in the workplace performance of employees. The
Company's services and products are based upon well-researched methodologies,
processes and content, and typically have been developed, refined and used
successfully over many years. Most of the Founding Companies' executives have
advanced degrees and are regarded as leaders in their respective areas. The
Company strives to offer high-quality training by continually updating its
content to reflect changing industry trends and client preferences.
PROVIDE A BROAD RANGE OF SERVICES AND PRODUCTS. The Company seeks to
provide its clients with a broad range of high-quality training and development
services and products in both customized and off-the-shelf formats. These
services and products cover: employee selection, recruitment and retention;
employee work skills enhancement; employee management and leadership skills; and
organizational assessment, direction and change. Specifically, the Company
assists organizations and their employees in, among other things, determining
and implementing hiring criteria, increasing workplace diversity awareness,
improving communication skills, increasing point-of-sale efficiencies, working
in a team environment and soliciting and analyzing employee feedback. In
addition, the Company provides strategic consulting services to its clients,
which are enhanced by the Company's ability to offer complementary training and
development services and products.
UTILIZE MULTIPLE DELIVERY METHODS. The Company offers multiple delivery
methods for its services and products, including instructor-led seminars,
train-the-trainer, interactive multimedia software (such as CD-ROM) and
distance-based media (such as video conferencing, intranets and the Internet).
Two of the
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Founding Companies, LSS and Star, have substantial expertise in delivery
technology which the Company intends to apply to many of the services and
products of the other Founding Companies. By offering multiple delivery methods,
the Company believes that it can better serve the needs, resource constraints
and cost requirements of its clients.
DEVELOP LONG-TERM CLIENT RELATIONSHIPS. The Company seeks to develop
long-term relationships with clients to whom it can provide a full complement of
services and products on a recurring basis. Many of the Company's long-term
clients purchase its services and products on an on-going basis after the
initial delivery of services and products. For example, after a
train-the-trainer seminar where the Company certifies a client's instructors,
the Company continues to receive a fee on a participant or site basis as the
certified instructors continue to train the client's employees. The Company also
offers updated, related or new services and products to its clients in order to
generate recurring revenue.
EMPLOY A DECENTRALIZED MANAGEMENT STRUCTURE. The Company believes that the
experienced management teams of the Founding Companies have a valuable
understanding of their respective training and development markets and have
established strong client relationships. The Company intends to operate with a
decentralized management structure under which management at each of the
Founding Companies will make most of the day-to-day operating decisions and will
have primary responsibility for the profitability and growth of their business.
The Company intends to utilize stock ownership as well as appropriate incentive
compensation to ensure that management's objectives at each of the Founding
Companies are aligned with those of the Company.
IMPLEMENT BEST PRACTICES AND ACHIEVE OPERATING EFFICIENCIES. The Company
intends to evaluate the operating policies and procedures of the Founding
Companies in order to identify and implement Company-wide best practices in
areas such as marketing, sales, product development, human resource policies and
recruiting. In addition, the Company believes that it can achieve operating
efficiencies and cost savings by more efficiently utilizing the Company's
facilities and gaining greater purchasing power in areas such as travel,
employee benefits and communications.
GROWTH STRATEGY
The Company's objective is to become the leading single source provider of
high-quality training and development services and products to Fortune 1000
companies, other large and medium-sized corporations and government entities.
Key elements of the Company's growth strategy include:
CAPITALIZE ON CROSS-SELLING OPPORTUNITIES. The Company believes that
significant opportunities exist for each Founding Company to cross-sell its
services and products to clients of the other Founding Companies. Each of the
Founding Companies has established strong relationships with its clients but
historically has offered its clients only a limited selection of training and
development services and products. The Company provided training and development
services to more than 1,700 companies and more than 75 government entities in
fiscal 1997, and during that period generated revenue of more than $100,000 from
each of 75 different companies and over 15 different federal government
agencies. The Company intends to capitalize on the services and products of each
of the Founding Companies by emphasizing and aggressively cross-selling its
broad range of training and development services and products to its collective
client base.
IMPLEMENT AGGRESSIVE SALES AND MARKETING STRATEGY. The Company intends to
pursue an aggressive sales and marketing strategy designed to establish new
client relationships and expand existing relationships. Specifically, the
Company intends to: (i) hire additional salespeople to supplement the existing
sales efforts of the Founding Companies; (ii) establish a nationwide
telemarketing program focusing primarily on medium-sized corporations; and (iii)
participate in a greater number of conferences and trade shows. The Company
intends to direct its centralized marketing campaign to both new clients and
additional contacts within existing clients (e.g., targeting upper levels of
management if previous services provided by a Founding Company were marketed to
middle management). In addition, the Company intends to pursue relationships
with regional colleges and vocational/technical schools in order to market its
services and products to small and medium-sized companies and their employees.
The Company also intends to establish a national brand identification
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under the Provant name, while preserving the value of the established names,
trademarks and client relationships of the Founding Companies.
EXPAND SERVICE AND PRODUCT OFFERINGS. The Company intends to broaden its
offerings of training and development services and products by developing or
acquiring new or complementary services and products. For example, the Company
currently is introducing a new employee recruitment product, based upon its
Behavioral Interviewing(R) process, that teaches clients how to recruit in a
tight labor market. In addition, the Company intends to capitalize on its
expertise in certain industries, such as the retail industry, by customizing
services and products for other similar industries, such as the hospitality,
transportation and healthcare industries.
PURSUE STRATEGIC ACQUISITIONS. The Company intends to pursue strategic
acquisitions in order to: (i) offer services or products complementary to those
it currently offers; (ii) gain expertise in new areas of training and
development; (iii) access new technology to expand the scope and quality of
delivery methods; and (iv) establish or enhance client relationships. The
Company seeks to acquire companies with strong management, profitable operating
results and leading positions within their respective markets. The Company
believes that acquisitions of this nature will improve its ability to be a
single source provider of high-quality training and development services and
products.
LEVERAGE INVESTMENTS IN TECHNOLOGY AND DEPLOY LEADING TECHNOLOGIES. A key
element of the Company's strategy is to capitalize on the technology investments
of the Founding Companies in order to deliver training and development services
and products to its clients in the most effective manner. For example, the
Company intends to apply the technical expertise of LSS and Star, which provide
training through interactive multimedia software, to convert certain products of
other Founding Companies to interactive multimedia software formats, such as
CD-ROM. The Company expects to deploy leading technologies in the delivery of
many of its services and products, including delivery through distance-based
media, such as video conferencing, intranets and the Internet, that can provide
interactive training to employees at multiple locations.
TRAINING AND DEVELOPMENT SERVICES AND PRODUCTS
The Company's training and development services and products assist
organizations in four principal areas: (i) employee recruitment, selection and
retention; (ii) employee work skills; (iii) employee management and leadership
skills; and (iv) organizational assessment, direction and change. Through these
services and products, the Company's clients can improve the quality of
employees entering the organization, the performance of employees within the
organization, and the ability of the organization as a whole to undergo change.
The Company offers services and products which are off-the-shelf as well as
customized to meet the specialized needs of particular clients. The following
table illustrates the principal training and development areas covered by the
Company's services and products:
<TABLE>
<CAPTION>
EMPLOYEE RECRUITMENT, EMPLOYEE MANAGEMENT ORGANIZATIONAL ASSESSMENT,
SELECTION AND RETENTION EMPLOYEE WORK SKILLS AND LEADERSHIP SKILLS DIRECTION AND CHANGE
- ----------------------- -------------------- --------------------- --------------------------
<S> <C> <C> <C>
Interviewing candidates Customer service Analyzing employee Strategic consulting
Identifying specific training feedback Understanding employee
job competencies Public speaking Presentation skills perceptions
Retaining employees Spoken communication training Assessing organizational
Addressing sexual training Coaching peers and abilities and direction
harassment Buyer negotiating colleagues Measuring customer
Facilitating diversity Point-of-sale training Managing retail stores satisfaction
General retail sales Communicating with Designing quality control
training subordinates processes
Specialized government Understanding diversity Changing corporate
job training issues culture
Industrial skills
training
</TABLE>
EMPLOYEE RECRUITMENT, SELECTION AND RETENTION. The Company offers services
and products designed to assist clients in hiring and retaining effective
employees. In particular, the Company helps clients understand the skills
required of their employees, implement more effective recruitment, selection and
retention processes
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to maximize employee productivity, and reduce turnover rates. Through one of the
Company's products, Behavioral Interviewing(R), managers learn how to identify
specific job competencies required for success, interview prospective candidates
and evaluate their skills. For example, when the Behavioral Interviewing(R)
process was implemented at a large accounting firm seeking to refine its
employee selection process, the Company worked with the firm to determine
critical skills and competencies required of candidates and to develop interview
forms designed to elicit information pertaining to those skills and
competencies. Client recruiting directors were certified, and those certified
instructors then taught the Behavioral Interviewing(R) process to the client's
interviewers nationwide. In the year following the implementation of Behavioral
Interviewing(R), the number of candidates invited for office visits who received
offers of employment increased by 10%, reflecting an increase in the
effectiveness and efficiency of the screening and evaluation process.
SkilMatch(R), a related product, is an interactive software program designed to
streamline the process of developing structured interviews and ensure a
consistent selection process. Complementing these products are the Company's
outplacement services, which it provides to several federal government agencies
to assist in work force restructuring, and its diversity enhancement services,
which facilitate employee retention and development.
EMPLOYEE WORK SKILLS. The Company offers services and products designed to
provide or improve the skills necessary to perform a particular task or job.
These skills include public speaking/presentation, negotiation, general retail
sales, point-of-sale device operation, direct store delivery (receiving) and
customer service. Several of the Company's products, including The POS
Simulator, Direct Store Delivery Simulator, Cashier Ready and Produce
Identification Trainer, are designed to increase employee productivity in the
retail workplace by simulating important retail situations and environments in
interactive multimedia formats. Many of these products allow clients to measure
the effectiveness of the training. For example, a large grocery chain that used
The POS Simulator to improve the efficiency of its cashier training program
reduced the average number of hours required to train cashiers in certain key
competencies from 16 hours of traditional classroom training to six hours with
The POS Simulator. Another Company product, Effective Communicating(TM), is a
two-day workshop designed to enable clients' key staff members to become more
effective in public speaking, sales and other types of oral communication. The
Company also offers specialized industrial skills training for government and
corporate clients.
The Company provides customized work skills training to numerous federal
government entities and various state and local government entities. Most of the
services and products offered in this area involve the training of employees to
perform tasks that are unique to certain government jobs. For instance, the
Company has prepared courses for the Department of Defense covering topics from
technology applications for military aircrews to basic medical care and medical
management information systems for Army and Navy healthcare personnel. Courses
prepared for other federal agencies include Reengineering and Process Mapping
for the Department of Education, Principles of Purchasing for the Postal
Service, Introductory Correctional Training for the Bureau of Prisons, and
Training in the Use of Traffic Records for Problem Identification for the
National Highway Traffic Safety Administration. Typically, these training
courses and course materials are custom-designed by experts from the Company
working closely with members of the respective government entities.
EMPLOYEE MANAGEMENT AND LEADERSHIP SKILLS. The Company offers services and
products that are designed to improve employees' operational management,
supervisory and leadership skills. In particular, the Company helps managers to
create constructive feedback processes, operate retail stores, monitor, motivate
and communicate with subordinates and understand diversity issues. Managing
Individual and Team Effectiveness (MITE(R)), one of the Company's products, is
designed to provide managers in complex work environments with "360-degree"
feedback on their management skills. Another product, Retail Management Series
III (RMSIII), is a multi-component and highly adaptable program designed to
enhance their retail communication and coaching skills in order to improve the
productivity and profitability of managers' salespeople. For example, RMSIII was
used by a national specialty retailer seeking to increase the productivity of
its sales associates by focusing on its sales managers. The Company tailored
RMSIII to cover the sales management skills important to the retailer's
business, including sales management standards, commitment to goals and coaching
skills. The Company trained and certified district managers of the client to
teach RMSIII,
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and those certified instructors trained sales managers and assistant managers in
over 200 of the client's stores. Three months following the introduction of the
Company's RMSIII product, stores using RMSIII reported an average increase in
sales of 27%, as compared to 14% in stores not using RMSIII. A third product,
Managing Inclusion, is a multi-day session designed to help individual managers
and client companies enhance understanding of workplace diversity, build morale
and satisfaction in the work force, and increase productivity through more
effective team relationships.
ORGANIZATIONAL ASSESSMENT, DIRECTION AND CHANGE. The Company provides
services and products designed to help organizations assess their strategic
direction and implement and manage change. The Company provides strategic
consulting services that help improve overall workplace performance by assisting
clients in, among other things, clarifying and communicating their business
strategies and redesigning their organizations and business processes. For
example, the Company assisted a large trucking company in developing alternative
organization designs and cost reduction initiatives. By using the Company's
recommendations to clarify its operating strategy and determine the core work of
its business, the trucking company was able to undertake significant structural
changes and implement cost-cutting measures that were responsible for
significantly increasing overall efficiency. The Company also provides its
clients with a variety of survey tools by which feedback can be gathered and
analyzed on either an organizational or individual basis. The Company develops
the survey forms and methodologies, conducts the surveys, and collects and
analyzes the data for its corporate clients.
DELIVERY METHODS
The Company offers multiple delivery methods for its training services and
products. By doing so, the Company believes that it can better serve the
particular needs, resource constraints, cost requirements and cultures of its
clients. Most of the Company's services and products currently are delivered
through instructor-led and train-the-trainer seminars; however, the Company also
delivers certain of its products on interactive multimedia software or through
distance-based methods. The Company's primary delivery methods are described
below.
INSTRUCTOR-LED TRAINING AND SEMINARS. The Company delivers its programs to
clients' employees primarily through the use of either dedicated Company
instructors or certified contract instructors. Most of the Company's
instructor-led training is delivered at clients' facilities, although the
Company also delivers certain programs at its own training facilities. In some
cases, the Company's programs are delivered in a public seminar format to a
small group of individuals from multiple client companies. The Company provides
textual materials and, in some cases, video tapes as a part of its
instructor-led programs. In addition, the Company sells related published
materials in connection with these programs. The Company also develops custom
courseware that ultimately is delivered by instructors (often client employees)
who are not certified by or otherwise affiliated with the Company. The Company's
courses and programs generally range in length from a few hours to several days
and include from one to hundreds of participants.
TRAIN-THE-TRAINER. For several of its services and products, the Company's
instructors train and certify qualified employees of clients in an
instructor-led program. The certified client employees then are licensed to use
the Company's methodologies and materials to train other employees of the client
in instructor-led classes at client sites. The Company supplies training
materials for these classes and on-going training for the certified trainers.
The Company receives fees for the employee-led classes on either a participant
or site basis.
INTERACTIVE MULTIMEDIA SOFTWARE. The Company delivers several of its
products on interactive multimedia software, such as CD-ROMs. Because of the
demonstrated higher rates of learning and retention achieved through interactive
multimedia training, the Company plans to convert to CD-ROM and other
interactive multimedia software several of its products that to date have been
offered only in the instructor-led or train-the-trainer formats.
DISTANCE-BASED MEDIA. The Company currently delivers a limited number of
its products through distance-based media, such as satellite or other video
conferencing, intranets and the Internet. The Company intends to seek new
technologies that will allow it to deliver its product offerings to clients more
effectively. In
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particular, the Company believes that more of its products will be offered
through the Internet and more clients will seek Internet-delivered training as
the bandwidth of Internet access increases.
OTHER SERVICES AND PRODUCTS
In addition to the Company's training and development services and
products, one of the Founding Companies, Star, also provides certain other
services and products including computer network security research and
development (primarily for federal government entities) and computer network
design, sales, installation and support (primarily for corporations). These
services and products contributed 7.3% of pro forma revenue and (4.6)% of pro
forma income from operations for fiscal 1997. The Company does not anticipate
that sales of these services and products will have a material impact on its
future operating results.
CLIENTS
The Company seeks to establish long-term relationships with Fortune 1000
companies, other large and medium-sized corporations and government entities
with substantial training and development needs. The Company has developed a
broad client base of over 1,700 corporations, with no corporate client
accounting for more than 5% of the Company's pro forma revenue during fiscal
1997 or the three months ended September 30, 1997. The Company generated revenue
of more than $100,000 from each of 75 different corporate clients during fiscal
1997. The top corporate clients of the Founding Companies by revenue generated
during fiscal 1997 include those presented below.
<TABLE>
<S> <C> <C>
Abbott Laboratories Federal Express Metropolitan Life Insurance
Ameritech Corporation Federated Department Stores, Company
Amoco Corporation Inc. Mobil Corporation
Bank of America Flexsys Motorola, Inc.
BOC Gases Fujitsu Business Northwest Airlines, Inc.
Canadian-Hunter Exploration Communication Systems, Norwest Mortgage Inc.
Ltd. Inc. PepsiCo., Inc.
Canadian Imperial Bank of Hewlett-Packard Company Royal Bank of Canada
Commerce J.C. Penney Company, Inc. Siemens Business
Conoco, Inc. J.P. Morgan & Co. Communication Systems,
Consolidated Rail Incorporated Inc.
Corporation The Kroger Co. U.S. West, Inc.
Coopers & Lybrand L.L.P. Lukens Steel Company Venture Stores, Inc.
Dayton Hudson Corporation McDonnell-Douglas Victoria's Secret Stores
Deloitte & Touche LLP Corporation Wakefern Food Corporation
Eli Lilly and Company Yellow Corporation
Exxon Corporation
</TABLE>
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Star derives a substantial majority of its revenues from customized
training and development services and products delivered to entities affiliated
with the federal government. During fiscal 1997 and the three months ended
September 30, 1997, Star's training and development work for federal government
clients generated approximately 31.1% and 30.6%, respectively, of the Company's
pro forma combined revenue. Star also provides services and products to state
and local government entities. The Company's top federal government clients by
revenue generated during fiscal 1997 include the following:
<TABLE>
<S> <C>
Defense Commissary Agency Food Safety and Inspection
Defense Logistics Agency General Accounting Office
Department of Army General Services Office
Department of Energy Immigration and Naturalization
Department of Navy Service
Drug Enforcement Administration Indian Health Service
Federal Aviation Administration Internal Revenue Service
Federal Highway Administration Pension Benefit Guarantee
Federal Law Enforcement Training Corporation
Center United States Marshals Service
United States Postal Service
</TABLE>
SALES AND MARKETING
Historically, the Founding Companies have used a variety of sales
strategies. The majority of the Founding Companies maintain dedicated
salespersons who seek to identify leads, qualify prospects and close sales
related to their specific training services and products. In some instances, the
salespersons also serve as the instructors or consultants for such services and
products. Generally, each of the Founding Companies targets its prospects
primarily through direct sales, public seminars, client referrals and a variety
of media, including direct mailings, the Founding Companies' web sites and trade
publications. In addition, several of the Founding Companies are able to obtain
clients as a result of the visibility of their principals, who have published
articles and books, appeared on television news shows or otherwise created a
strong reputation in their various fields of training. The Company currently
markets its services and products to its clients mainly through their human
resources personnel, business unit managers or regional managers and, to a
lesser extent, through senior executives. However, the Company intends to focus
increasingly on marketing to senior executives of both existing and targeted
clients through initial contacts made by members of the Company's Board of
Directors and senior management, as well as by the principals of the Founding
Companies.
The Company generates significant revenues through sales of services and
products to government entities. Typically, these sales occur through a
competitive bidding process started by a government entity's issuance of a
request for proposal ("RFP") for a contemplated project. The Company may submit
a proposal on its own behalf or as a subcontractor to another company. Many
services and products delivered to federal government agencies are provided
through orders placed under a General Services Administration ("GSA") Supply
Schedule contract and under Office of Personnel Management/Training Management
Assistance ("OPM"). The Company is one of only a few training providers
authorized under both funding mechanisms. The Company (through Star) benefits
from its status as a preferred provider under certain funding mechanisms
(including the GSA and OPM vehicles) which allow it to negotiate contracts
without an RFP.
Following the consummation of the Offering, the Company expects to
capitalize on cross-selling opportunities among the clients of the Founding
Companies. The Company intends to hire additional salespeople to supplement the
existing sales efforts of the Founding Companies and establish a nationwide
telemarketing program focusing on medium-sized corporations. In addition, the
Company is developing a marketing and advertising program to establish a
national brand identification under the Provant name, while preserving the value
of the established names, trademarks and customer relationships of the Founding
Companies.
44
<PAGE> 46
COMPETITION
The training and development industry is highly fragmented and competitive,
and the Company expects this competition to increase. The Company believes the
principal competitive factors in the industry are the strength of client
relationships, quality, price and breadth of service and product offerings,
quality and number of delivery methods, reputation, and the ability to provide
customized services and products. Some of the Company's competitors have
significantly greater financial, managerial, technical, marketing and other
resources than the Company. Moreover, the Company expects that it will face
additional competition from new entrants into the training and development
market due, in part, to the evolving nature of the market and the relatively low
barriers to entry.
The Company competes with thousands of privately-held training companies,
most of which provide a limited range of services and products. In addition to
these small competitors, a number of larger companies are engaged in the
business of providing training and development services and products, including
Times Mirror Training Group (a subsidiary of the Times Mirror Company), The
Forum Corporation, Development Dimensions International, Wilson Learning
Corporation and several large publishers of professional reference materials who
recently have entered the industry. The Company also competes with large
professional service companies such as Andersen Consulting, Ernst & Young LLP,
Towers Perrin and others that generally offer training services in conjunction
with strategic consulting and other client assignments of larger scope. In
addition, many of the Company's clients and potential clients have internal
training departments. See "Business -- Market Overview."
The Company's competitors for government contracts include service
companies such as Booz Allen, as well as contract suppliers of equipment to the
government such as Raytheon Company, McDonnell-Douglas Corporation and Lockheed
Martin Corporation.
INTELLECTUAL PROPERTY
The Company regards many of its training and development services and
products as proprietary and relies primarily on a combination of statutory and
common law copyright, trademark, service mark and trade secret laws, customer
licensing agreements, employee and third-party nondisclosure agreements and
other methods to protect its proprietary rights. Notwithstanding this, a third
party or parties could copy or otherwise obtain and use the Company's products
in an unauthorized manner or use these products to develop training and
development processes that are substantially similar to those of the Company.
The Company's products generally do not include any mechanisms to prohibit or
prevent unauthorized use by third parties. There can be no assurance that the
Company's means of protecting its proprietary rights will be adequate or that
the Company's competitors will not independently develop similar training
products and delivery methods. Additionally, there can be no assurance that
third parties will not claim that the Company's current or future products
and/or services infringe on the proprietary rights of others. See "Risk
Factors -- Risks Associated with Intellectual Property."
EMPLOYEES
The Company currently employs approximately 600 full-time and part-time
employees and believes that its relationships with its employees are good.
INDEPENDENT CONTRACTORS
The Company provides certain of its services and products through
approximately 200 independent contractors. The Company does not pay federal
employment taxes or withhold income taxes with respect to these independent
contractors or include them in the Company's employee benefit plans. See "Risk
Factors -- Independent Contractor Status."
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<PAGE> 47
FACILITIES
The Company leases its principal executive office located in Boston,
Massachusetts, and maintains 23 additional leased office locations in 12 states
and one in Canada. The remaining terms of the Company's leases are less than
eight years. The Company believes that these facilities are adequate to serve
its current level of operations. If additional facilities are required, the
Company believes that suitable additional or alternative space will be available
as needed on commercially reasonable terms.
LEGAL PROCEEDINGS
The Company is from time to time a party to litigation arising in the
ordinary course of business. Management believes that no pending legal
proceeding will have a material adverse effect on the business, financial
condition or results of operations of the Company.
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<PAGE> 48
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information concerning the Company's
directors and executive officers, and those persons who will become directors
and executive officers upon the consummation of the Offering.
<TABLE>
<CAPTION>
NAME AGE POST-OFFERING POSITION
---- --- ----------------------
<S> <C> <C>
Paul M. Verrochi.......................... 49 Chairman and Chief Executive Officer
John H. Zenger............................ 66 President and Director
Dominic J. Puopolo........................ 54 Executive Vice President, Chief Financial Officer
and Director
Rajiv Bhatt............................... 40 Senior Vice President, Treasurer and Chief
Accounting Officer
Philip Gardner............................ 34 Vice President
Herbert A. Cohen.......................... 61 President - MOHR, Director
Bert Decker............................... 57 President - Decker, Director
Paul C. Green............................. 56 President - BTI, Director
Joe Hanson................................ 40 Managing Director - Novations, Director
John F. King.............................. 43 President - LSS, Director
A. Carl von Sternberg..................... 69 President - Star, Director
Marc S. Wallace........................... 50 President - J. Howard, Director
Michael J. Davies......................... 53 Director
</TABLE>
Paul M. Verrochi will become Chairman of the Board and Chief Executive
Officer of the Company upon the consummation of the Offering. Prior to the
Offering, Mr. Verrochi has been President and a director of Provant. Mr.
Verrochi also is Chairman, co-founder and a principal of American Business
Partners LLC ("ABP"). In 1992, Mr. Verrochi co-founded American Medical
Response, Inc. ("AMR"), which prior to its acquisition by Laidlaw Inc. in
January 1997 was the largest provider of ambulance services in the United
States. From August 1992 to January 1996, Mr. Verrochi served as AMR's President
and Chief Executive Officer, and until January 1997 he also served as the
Chairman of the Board of Directors. Mr. Verrochi was selected as the 1995
National Entrepreneur of the Year for Emerging Growth Companies by Inc.
Magazine. Mr. Verrochi serves as an advisory board member to numerous charitable
foundations, including the New England Aquarium and the Boston Symphony
Orchestra. Mr. Verrochi is Chairman of BridgeStreet Accommodations, Inc. and a
director of Coach USA, Inc. Mr. Verrochi received his Bachelor of Science degree
from the United States Merchant Marine Academy at Kings Point, New York.
John H. Zenger will become President and a director of the Company upon the
consummation of the Offering. Prior to the Offering, since May 1997, Mr. Zenger
has been a consultant to Provant. From April 1992 to November 1996, Mr. Zenger
was employed in various capacities, including Vice President and Chairman, by
the Times Mirror Training Group, the nation's largest group of training
companies, consisting of Kaset, Learning International and Zenger Miller, the
company that he founded in 1977. Mr. Zenger has taught at the University of
Southern California School of Business and the Stanford Graduate School of
Business. Mr. Zenger received his Doctorate degree in Business Administration
from the University of Southern California, his Masters in Business
Administration from the University of California, Los Angeles and his Bachelor
of Science degree from Brigham Young University.
Dominic J. Puopolo will become Executive Vice President and Chief Financial
Officer of the Company upon the consummation of the Offering. Prior to the
Offering, Mr. Puopolo has been Treasurer and a director of Provant. Mr. Puopolo
is a co-founder and principal of ABP. In 1992, Mr. Puopolo co-founded AMR. From
August 1992 to January 1996, Mr. Puopolo served as Executive Vice President,
Chief Financial Officer, Treasurer and a member of the Board of Directors of
AMR. Mr. Puopolo serves as a member of the Board of Trustees of Emerson College
of Communications and is Chairman of its Resource Development Committee. Mr.
Puopolo also serves on the Executive Committee of the Boston University School
of Medicine and is a
47
<PAGE> 49
member of the Board of Trustees of Northeastern University. Mr. Puopolo, a
Certified Public Accountant, is a member of the Massachusetts Society of
Certified Public Accountants, The American Institute of Certified Public
Accountants and the National Association of Accountants. Mr. Puopolo received
his Masters in Business Administration degree from Suffolk University and his
Bachelor of Science degree in Business Administration from Northeastern
University.
Rajiv Bhatt will become Senior Vice President, Treasurer and Chief
Accounting Officer of the Company upon the consummation of the Offering. Prior
to the Offering, since August 1997, Mr. Bhatt has been a consultant to Provant.
From September 1994 to August 1997, Mr. Bhatt was Executive Vice President,
Chief Financial Officer and Treasurer of Summit Technology, Inc., a
publicly-traded manufacturer of ophthalmic laser systems. From September 1988 to
September 1994, Mr. Bhatt was Chief Financial Officer, Secretary and a member of
the Board of Directors of Carlisle Plastics, Inc., a publicly-traded plastics
manufacturer. Also from September 1988 to September 1994, Mr. Bhatt was Chief
Financial Officer of Carlisle Capital Corporation, a privately held mergers and
acquisitions company. Mr. Bhatt is a Certified Public Accountant. Mr. Bhatt
received his Masters in Business Administration degree from the University of
Michigan and his Bachelor of Commerce degree from the University of Bombay.
Philip Gardner will become Vice President of the Company upon the
consummation of the Offering. Prior to the Offering, since February 1997, Mr.
Gardner has been a consultant to Provant. From August 1994 to December 1996, Mr.
Gardner was a consultant for McKinsey & Company ("McKinsey"), a management
consulting firm. Prior to joining McKinsey, from 1985 to 1992, Mr. Gardner was
an officer and a highly decorated strike fighter pilot in the United States
Navy. Mr. Gardner received his Masters in Business Administration degree from
Harvard Graduate School of Business Administration and his Bachelor of Arts
degree in Government from Harvard College.
Herbert A. Cohen will become a director of the Company immediately
following the consummation of the Offering. Mr. Cohen has been Chief Executive
Officer of MOHR since February 1991. From September 1978 to January 1991, Mr.
Cohen was a partner and one of the original principals of MOHR Development,
Inc., a training and consulting company. Mr. Cohen has served as President and
Director of the Instructional Systems Association, an association of over 150
training companies dedicated to improving performance through training. Mr.
Cohen received his Bachelor of Science degree in Psychology from the University
of Maine.
Bert Decker will become a director of the Company immediately following the
consummation of the Offering. Mr. Decker has been Chairman and Chief Executive
Officer of Decker since October 1979. Mr. Decker is the author of the
best-selling books You've Got to be Believed to be Heard and Creating Messages
That Motivate. Mr. Decker also is the personal communications trainer for
Charles Schwab and Olympic gold medalist Bonnie Blair. Mr. Decker has appeared
on several national television programs, including The Today Show and 20/20. Mr.
Decker received his Bachelor of Arts degree in Psychology from Yale University.
Paul C. Green, Ph.D. will become a director of the Company immediately
following the consummation of the Offering. Dr. Green has been Chief Executive
Officer of BTI since May 1979. Dr. Green developed the Behavioral
Interviewing(R) seminar, which has been attended by several hundred thousand
managers worldwide. Dr. Green has also served as Assistant Professor in the
Marketing Department at Memphis State University, where he taught courses in
salesmanship, sales promotion, sales management and consumer behavior. Dr. Green
received his Doctorate degree in Industrial-Organizational Psychology from
Memphis State University, his Master of Science degree in Psychology from
Memphis State University and his Bachelor of Arts degree from Lambuth College.
Joe Hanson will become a director of the Company immediately following the
consummation of the Offering. Mr. Hanson has been a Managing Director of
Novations since August 1989. From September 1983 to June 1987 Mr. Hanson was a
consultant for KPMG Peat Marwick LLP. Mr. Hanson is a Certified Public
Accountant. Mr. Hanson received his Masters in Business Administration degree
from Brigham Young University and his Bachelor of Science degree in Accounting
from Brigham Young University.
48
<PAGE> 50
John F. King will become a director of the Company immediately following
the consummation of the Offering. Mr. King has been Chief Executive Officer of
LSS since December 1990. From October 1981 to November 1988, Mr. King was
employed by Wilson Learning where he served in various capacities including
Regional Sales Manager, Account Executive, and Performance Consultant. Mr. King
previously served as Professor of Communications Studies at McKendree College.
Mr. King received his Master of Arts degree in Communication Studies, Mass
Communications from Purdue University and his Bachelor of Arts degree from
California State University, Long Beach.
A. Carl von Sternberg will become a director of the Company immediately
following the consummation of the Offering. Mr. von Sternberg has been President
of Star since September 1987. In 1975, Mr. von Sternberg founded Allen
Corporation of America ("Allen") a firm specializing in training, human factors,
engineering and logistics services. From October 1975 to May 1986, Mr. von
Sternberg was President and Chairman of Allen, which was selected in 1982 by
Inc. Magazine as one of America's 500 fastest growing private companies. Prior
to founding Allen, Mr. von Sternberg served as Executive Vice President and
Chief Operating Officer of Essex Corporation, a behavioral science research
company, which he co-founded in 1969. Mr. von Sternberg received his Bachelor of
Science degree in Industrial Administration from Yale University.
Marc S. Wallace will become a director of the Company immediately following
the consummation of the Offering. Mr. Wallace has been President of J. Howard
since January 1991 and Treasurer since April 1986. Mr. Wallace serves on the
Boards of Directors of Belmont Hill School and the Berklee School of Music, on
the Board of Advisors of First Community Bank in Boston and as a member of the
Northeastern University Corporation. Mr. Wallace also is a member of the Boston
Chamber of Commerce. Mr. Wallace received his Masters in Business Administration
degree with a concentration in Finance from Central Michigan University and his
Bachelor of Arts degree from Adams State College.
Michael J. Davies will become a director of the Company upon the
consummation of the Offering. Mr. Davies has been a consultant to Provant since
February 1997, and will continue to be a consultant following the Offering. From
April 1994 to June 1997, Mr. Davies was a Managing Director of Legg Mason Wood
Walker, Incorporated, specializing in media and communications. From September
1990 to March 1993, Mr. Davies was publisher of The Baltimore Sun. Mr. Davies is
a member of the Board of Directors of Mecklermedia Corporation, a provider of
Internet news, information and analysis through its magazines, trade shows and
web site. Mr. Davies received his Master of Science degree in Journalism from
the Medill School of Journalism at Northwestern University and his Bachelor of
Science degree from Georgia State University.
MANAGEMENT OF THE COMPANY FOLLOWING THE COMBINATION
Upon the consummation of the Offering, the Company intends to operate with
a decentralized management structure. Messrs. Verrochi, Zenger, Puopolo, Bhatt
and Gardner will manage the Company's operations and be responsible for areas
including strategic planning, acquisitions, resource allocation, capital
financing, financial reporting, marketing efforts and human resources. They will
work closely with the Founding Companies to coordinate, integrate and expand
their service and product offerings. Messrs. Cohen, Decker, Green, Hanson, King,
von Sternberg and Wallace (together with the other key executives of the
Founding Companies) will continue to make day-to-day operating decisions and be
primarily responsible for the operations of their respective Founding Companies.
BOARD OF DIRECTORS
After consummation of the Combination and the Offering, the Board of
Directors will consist of 11 directors. In addition, following the Offering, the
Board expects to elect three outside directors. The term of office of each
director of the Company ends at the next annual meeting of the Company's
stockholders and when his or her successor is elected and qualified. Following
the Offering, the Board of Directors will establish an Audit Committee, a
Compensation Committee and such other committees as the Board may determine. The
Audit Committee, a majority of which will be outside directors, will make
recommendations concerning the engagement of independent public accountants,
review with the independent public accountants the plans for and results of the
Company's annual audit, approve professional services provided by and the
independence
49
<PAGE> 51
of the independent public accountants, consider the range of audit and non-audit
fees, and review the adequacy of the Company's internal accounting controls. The
Compensation Committee, all of which will be outside directors, will establish a
general compensation policy for the Company, approve increases in directors'
fees and salaries paid to officers and senior employees of the Company,
administer the Company's 1998 Equity Incentive Plan, Stock Plan for Non-Employee
Directors and 1998 Employee Stock Purchase Plan, and determine, subject to the
provisions of the Company's employee benefit plans, the directors, officers and
employees of the Company eligible to participate in any of the plans, the extent
of such participation and the terms and conditions under which benefits may be
vested, received or exercised.
Officers of the Company serve at the pleasure of the Board of Directors,
subject to the terms of any employment agreements with the Company.
DIRECTOR COMPENSATION
Members of the Board of Directors who also serve as officers of or
full-time consultants to the Company or its subsidiaries do not receive
compensation for serving on the Board. Each other member of the Board will
receive a fee of $3,000 for each Board of Directors meeting attended and an
additional fee of $500 for each committee meeting attended. All directors will
receive reimbursement of reasonable expenses incurred in attending Board and
committee meetings and otherwise carrying out their duties. Non-employee
directors also are entitled to receive an option grant as described in "-- Stock
Plan for Non-Employee Directors."
EXECUTIVE COMPENSATION; EMPLOYMENT AGREEMENTS
The Company was incorporated in 1996 and has conducted no operations and
paid no compensation to its officers in fiscal 1997. The Company has entered
into employment agreements, the terms of which are effective upon the closing of
the Offering, with its executive officers. The material terms of these
agreements are summarized below.
The Company's employment agreement with each of Messrs. Verrochi, Zenger,
Puopolo, Bhatt and Gardner has a term of three years, and provides for an
initial base salary (subject to upward adjustment in the sole discretion of the
Company's Board of Directors) and participation in the Company's bonus and
benefit plans. The initial base salaries for Messrs. Verrochi, Zenger, Puopolo,
Bhatt and Gardner are $50,000, $150,000, $50,000, $200,000 and $125,000,
respectively. The salaries to be paid to Messrs. Verrochi and Puopolo after the
first year of the term of their employment agreements will be determined by the
Company's Board of Directors. Each of the five agreements may be terminated
prior to the expiration of the three-year term either in the event of disability
or for cause (as defined). If any of the individuals does not continue to be
employed by the Company upon the expiration of the agreement, the individual is
entitled to receive six months' severance at his base salary as in effect at the
time of expiration. Each of Messrs. Verrochi, Zenger, Puopolo, Bhatt and Gardner
has agreed not to compete with the Company for a period of five years from the
closing date of the Offering. Under their employment agreements, Messrs.
Verrochi and Puopolo are entitled to receive options to purchase 44,092 shares
of Common Stock each. See "-- Equity Incentive Plan."
The principals of the Founding Companies who will become directors of the
Company immediately following the closing of the Combination will enter into a
three-year employment agreement with the Company or a subsidiary of the Company,
the material terms of which are described in "Certain
Transactions -- Organization of the Company."
EQUITY INCENTIVE PLAN
The Company has adopted the 1998 Equity Incentive Plan (the "Equity
Incentive Plan"), which provides for the award of up to 1,100,000 shares of
Common Stock in the form of incentive stock options ("ISOs"), non-qualified
stock options, stock appreciation rights, performance shares, restricted stock
or stock units (each, an "Award"). All directors and employees of, and all
consultants and advisors to, the Company (including its subsidiaries) are
eligible to participate in the Equity Incentive Plan.
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<PAGE> 52
The Equity Incentive Plan will be administered by the Compensation
Committee (the "Committee"), which determines who shall receive Awards from
those individuals eligible to participate in the Equity Incentive Plan, the type
of Award to be made, the number of shares of Common Stock that may be acquired
pursuant to the Award and the specific terms and conditions of each Award,
including the purchase price, term, vesting schedule, restrictions on transfer
and any other conditions and limitations applicable to the Awards or their
exercise. Options that are ISOs may be exercisable for not more than 10 years
after the date the option is awarded. The Committee may at any time accelerate
the exercisability of all or any portion of an option.
In the event of a merger or consolidation in which the Company is not the
surviving corporation or which results in the acquisition of substantially all
the Company's outstanding shares of capital stock, or in the event of the sale
or transfer of substantially all of the Company's assets, if the Committee so
determines, all outstanding Awards will terminate, provided that on or before 20
days prior to the proposed effective date of any such transaction, the Committee
either (i) makes all outstanding Awards exercisable prior to the consummation of
the transaction or (ii) arranges for the surviving or acquiring corporation, if
any, to assume the Awards or grant to participants replacement Awards.
The Equity Incentive Plan may be amended from time to time or terminated in
its entirety by the Board of Directors; however, no amendment may be made
without stockholder approval if such approval is necessary to comply with any
applicable tax or regulatory requirement.
In connection with the Offering, the Company will grant Messrs. Verrochi,
Zenger, Puopolo, Bhatt and Gardner options to purchase 44,092, 100,000, 44,092,
50,000 and 10,000 shares of Common Stock, respectively, each of which will have
a per share exercise price equal to the initial offering price. The options
granted to Messrs. Zenger, Bhatt and Gardner will become exercisable with
respect to one-third of the underlying shares of Common Stock on each of the
first three anniversaries of the date of grant, and the options granted to
Messrs. Verrochi and Puopolo will become exercisable with respect to all of the
underlying shares of Common Stock upon the closing of the Offering. Mr. Davies
also will be granted an option to purchase 50,000 shares of Common Stock, the
terms of which are described in "Certain Transactions."
In addition to the options to be granted to Messrs. Verrochi, Zenger,
Puopolo, Bhatt, Gardner and Davies, the Company will award to employees and
consultants of the Founding Companies and Provant options under the Equity
Incentive Plan to purchase an aggregate of 535,280 shares of Common Stock, with
each such option having a per share exercise price equal to the initial public
offering price.
STOCK PLAN FOR NON-EMPLOYEE DIRECTORS
The Company's Board of Directors has adopted the Stock Plan for
Non-Employee Directors (the "Directors' Plan"). Subject to adjustment for stock
splits and similar events, a total of 100,000 shares of Common Stock have been
reserved for issuance under the Directors' Plan. Pursuant to the Directors'
Plan, in connection with the Offering, each director and director nominee who is
not an employee of or consultant to the Company or one of its subsidiaries (a
"non-employee director") and is not a stockholder of the Company prior to the
offering will receive an option to purchase 7,500 shares of Common Stock with a
per share exercise price equal to the initial public offering price. Each
non-employee director initially elected following the Offering will be granted
upon such election an option to purchase 7,500 shares of Common Stock. The per
share exercise price of options granted following the Offering will be the fair
market value of the Common Stock on the date of grant. Each option will be
non-transferable except upon death (unless otherwise approved by the Board),
will expire 10 years after the date of grant and will become exercisable with
respect to all of the shares of Common Stock issuable thereunder on the date
that is six months following the date of grant if the individual is a director
at such time. If the director dies or otherwise ceases to be a director prior to
the expiration of an option, the option (if exercisable) will remain exercisable
for a period of one year (following death) or three months (following other
termination of the individual's status as a director), but in no event beyond
the tenth anniversary of the date of grant. The Board of Directors may at any
time or times amend the Directors' Plan for any purpose that at the time may be
permitted by law.
As of the date of the closing of the Offering, no options will have been
granted under the Directors' Plan.
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<PAGE> 53
STOCK PURCHASE PLAN
The 1998 Employee Stock Purchase Plan (the "Employee Stock Purchase Plan")
has been approved by the Board of Directors and stockholders of the Company. The
Employee Stock Purchase Plan is designed to enable eligible employees to
purchase shares of Common Stock at a discount on a periodic basis through
payroll deductions. All employees with at least six months of continuous
service, other than employees owning 5% or more of the combined voting power of
all classes of stock of the Company, will be eligible to participate. Purchases
will occur at the end of option periods, each of six months' duration. The first
such option period will begin on July 1, 1998. The purchase price of Common
Stock under the Employee Stock Purchase Plan will be 85% of the lesser of the
value of the Common Stock at the beginning of an option period and the value of
the Common Stock at the end of the option period. Participants may elect under
the Employee Stock Purchase Plan, prior to each option period, to have from 2%
to 10% of their pay withheld and applied to the purchase of shares at the end of
the option period.
Subject to adjustment for stock splits and similar events, a total of
500,000 shares of Common Stock has been reserved for issuance under the Employee
Stock Purchase Plan. None of these shares has been issued to date.
LIMITATION OF CERTAIN LIABILITY OF OFFICERS AND DIRECTORS
As permitted by the DGCL, the Company's Certificate of Incorporation
provides for the elimination, subject to certain conditions, of the personal
liability of directors of the Company for monetary damages for breach of their
fiduciary duties. The directors, however, remain subject to equitable remedies
and to liability for breach of their duty of loyalty to the Company or its
stockholders. The Company's Certificate of Incorporation and By-laws also
provide that the Company will indemnify its directors and officers. In addition,
the Company maintains an indemnification insurance policy covering all directors
and officers of the Company. In general, the Company's Certificate of
Incorporation, By-laws and the indemnification insurance policy attempt to
provide the maximum protection permitted by Delaware law with respect to
indemnification and exculpation of directors and officers.
Under the indemnification provisions of the Company's Certificate of
Incorporation and By-laws and the indemnification insurance policy, the Company
will repay certain expenses incurred by a director or officer in connection with
any civil or criminal action or proceeding, specifically including actions by or
in the name of the Company (derivative suits), where the individual's
involvement is by reason of the fact that he or she is or was a director or
officer of the Company. Such indemnifiable expenses include, to the maximum
extent permitted by law, attomey's fees, judgments, civil or criminal fines,
settlement amounts, and other expenses customarily incurred in connection with
legal proceedings. A director or officer will not receive indemnification if he
or she is found not to have acted in good faith and in a manner he or she
reasonably believed to be in, or not opposed to, the best interests of the
Company.
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<PAGE> 54
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock, after giving effect to the Combination,
by (i) each director and director nominee of the Company, (ii) certain executive
officers of the Company, (iii) all directors, director nominees and executive
officers as a group, and (iv) each person or entity known to the Company to own
beneficially more than 5% of the outstanding Common Stock. The persons named in
this table have an address c/o the Company's principal executive offices, and,
except as indicated in the footnotes below, have sole investment and voting
power with respect to the shares beneficially owned by them.
<TABLE>
<CAPTION>
PERCENTAGE
OWNED (2)
--------------------
BEFORE AFTER
NAME OF BENEFICIAL OWNER SHARES (1) OFFERING OFFERING
------------------------ ---------- -------- --------
<S> <C> <C> <C>
Paul M. Verrochi (3)(4)..................................... 1,090,591 15.5% 11.3%
John H. Zenger.............................................. 262,678 3.9 2.8
Dominic J. Puopolo (3)(5)................................... 1,023,222 14.6 10.6
Rajiv Bhatt................................................. 88,634 1.3 *
Philip Gardner.............................................. 302,506 4.4 3.2
Herbert A. Cohen (6)........................................ 112,903 1.7 1.2
Bert Decker................................................. 203,047 3.0 2.2
Paul C. Green............................................... 425,352 6.3 4.5
Joe Hanson.................................................. 74,059 1.1 *
John F. King................................................ 316,627 4.7 3.4
A. Carl von Sternberg (7)................................... 548,710 8.1 5.8
Marc S. Wallace............................................. 152,701 2.2 1.6
Michael J. Davies (8)....................................... 335,424 4.9 3.5
All directors, director nominees and executive officers as a
group (13 persons) (9).................................... 4,936,454 67.7 49.9
</TABLE>
- ---------------
* Less than 1%.
(1) Share information assumes an initial public offering price of $12.00 per
share. The Founding Companies' merger agreements specify the aggregate
dollar values, but not the share amounts, of the Common Stock to be received
by their stockholders in the Combination. As a result, if the initial public
offering price is less or greater than $12.00, the Founding Companies'
stockholders (and in particular, Messrs. Cohen, Decker, Green, Hanson, King,
von Sternberg and Wallace) will receive a larger or smaller number of shares
of Common Stock, respectively. In addition, Provant will declare a stock
dividend on all outstanding Common Stock prior to the closing of the
Combination such that, without giving effect to the Offering (but giving
effect to the Combination), there will be outstanding a total of 6,805,605
shares of Common Stock. The size of the stock dividend (and as a result, the
number of shares of Common stock held by Messrs. Verrochi, Zenger, Puopolo,
Bhatt, Gardner and Davies) will vary if the initial offering price is less
or greater than $12.00, with the size of the dividend increasing if the
initial public offering price increases and decreasing if the initial public
offering price decreases.
(2) Percentages in the table are based upon 6,805,605 and 9,405,605 shares of
Common Stock assumed to be outstanding as of the closing of the Combination
and the Offering, respectively.
(3) Includes 176,368 shares (assuming that the individual does not exercise such
warrant prior to the closing of the Offering) issuable pursuant to a warrant
that currently is exercisable, and 44,092 shares issuable upon the exercise
of an option that will become exercisable in full upon the closing of the
Offering. Excludes 220,460 shares issuable upon the exercise of the
Contingent Warrant described in "Certain Transactions."
(4) Includes 54,035 shares held by Mr. Verrochi's wife, and 125,500 shares held
by a trust of which Mr. Verrochi is trustee and as to which Mr. Verrochi
disclaims beneficial ownership.
(5) Includes 54,035 shares held by Mr. Puopolo's wife, and 125,500 shares held
by a trust of which Mr. Puopolo is trustee and as to which Mr. Puopolo
disclaims beneficial ownership.
(6) Includes 56,451 shares held by Mr. Cohen's wife.
(7) Includes 38,481 shares held by Mr. von Sternberg's wife.
(8) Includes 50,000 shares issuable upon the exercise of an option that will
become exercisable in full upon the closing of the Offering.
(9) See notes 3, 4, 5, 6, 7 and 8 above.
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<PAGE> 55
CERTAIN TRANSACTIONS
ORGANIZATION OF THE COMPANY
The Combination will be accomplished through separate mergers of each
Founding Company with a separate, newly formed subsidiary of the Company. As a
result, after the closing of the Combination and the Offering (the "Closing"),
all of the assets, liabilities and business operations formerly held by each
Founding Company will exist in a separate subsidiary of the Company.
Each of the merger agreements provides for the Company to pay the
stockholders of the Founding Company (i) a fixed amount of cash at the Closing
(subject to certain adjustments which have a neutral economic effect, as
discussed below), (ii) shares of Common Stock at the Closing having a fixed
dollar value, with the final number of shares being determined by the Offering
price, and (iii) with respect to six of the Founding Companies, shares of Common
Stock (the "Additional Consideration") deliverable after the Closing having a
value based on the initial public offering price up to a fixed dollar amount.
The Additional Consideration will be paid in shares of Common Stock, with the
number of those shares determined by a formula based on the relationship of the
EBIT of that Founding Company (including its successor following the Closing)
for the fiscal year ending June 30, 1998 to a specified EBIT target. For the
seventh Founding Company, Star, the stockholders will be entitled to receive
additional shares of Common Stock or cash in accordance with a formula based on
the amount by which the EBIT of Star and its successor following the Closing for
the fiscal year ending June 30, 1999 exceeds a specified EBIT target (the "Star
Contingent Consideration").
The aggregate consideration to be paid by the Company in the Combination
shown below consists of approximately $22.5 million in cash (prior to any
adjustments discussed in the following paragraph) and 3,826,815 shares of Common
Stock at the Closing, and up to a maximum of 1,325,000 shares of Common Stock as
Additional Consideration (assuming the achievement of certain EBIT targets)
following the end of fiscal 1998.
<TABLE>
<CAPTION>
AT CLOSING
----------------------------------------
SHARES ADDITIONAL CONSIDERATION
-------------------------- --------------------------
FOUNDING COMPANY CASH (1) DOLLAR VALUE NUMBER (2) DOLLAR VALUE NUMBER (2)
---------------- ---------- ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C> <C>
BTI.......................... $5,000,000 $5,848,656 487,388 $2,000,000 166,666
Decker....................... 1,550,000 4,533,333 377,778 3,000,000 250,000
J. Howard.................... 1,700,000 4,072,043 339,337 3,300,000 275,000
LSS.......................... 2,625,000 7,677,419 639,785 1,000,000 83,333
MOHR......................... 1,200,000 2,709,677 225,806 2,000,000 166,666
Novations.................... 4,987,500 8,887,097 740,592 4,600,000 383,333
Star......................... 5,400,000 12,193,548 1,016,129 * *
</TABLE>
- ---------------
* Excludes the Star Contingent Consideration.
(1) Prior to the adjustments discussed below.
(2) Assuming an initial public offering price of $12.00 per share.
Each of the mergers in the Combination is conditioned upon the applicable
Founding Company meeting certain specified financial standards as of the Closing
(which vary among the Founding Companies), including a specified minimum net
worth. If a Founding Company's net worth as of the Closing exceeds the specified
minimum, the cash portion of the purchase price set forth above will be
increased by a dollar amount equal to that excess. Each Founding Company may
make a cash dividend to its stockholders prior to the Closing so long as doing
so will not prevent such Founding Company from satisfying the financial
standards specified in its merger agreement.
The consideration to be paid for the Founding Companies was determined
through arm's length negotiations between Provant and representatives of each
Founding Company. The factors considered by the
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<PAGE> 56
parties in determining the consideration to be paid included, among others, the
pro forma adjusted EBIT, net worth and future prospects of the Founding
Companies.
In connection with the Combination, the following principals of the
Founding Companies who will become directors of the Company immediately
following the Closing will receive the following: Mr. Cohen, $600,000 and
112,903 shares of Common Stock (including cash and shares issued to his wife);
Mr. Decker, $833,092 and 203,047 shares of Common Stock; Dr. Green, $4,495,414
and 425,352 shares of Common Stock; Mr. Hanson, $498,750 and 74,059 shares of
Common Stock; Mr. King, $968,100 and 316,627 shares of Common Stock; Mr. von
Sternberg, $2,498,655 and 548,710 shares of Common Stock (including cash and
shares issued to his wife); and Mr. Wallace, $765,000 and 152,701 shares of
Common Stock.
The consummation of the Combination is subject to completion of the
Offering and customary conditions including, among others, the continuing
accuracy at the Closing of the representations and warranties made by the
Founding Companies and the Company in the merger agreements, receipt of all
necessary consents and approvals, delivery of opinions of counsel, the
performance of covenants included in the agreements relating to the Combination,
and the nonexistence of a material adverse change in the business, results of
operations or financial condition of each Founding Company. The merger
agreements provide that certain stockholders of the Founding Companies will
indemnify Provant against certain liabilities, including breaches of such
Founding Company's representations and warranties thereunder.
Pursuant to the agreements entered into in connection with the Combination,
the principal stockholders of the Founding Companies have agreed not to compete
with the Company for five years, commencing as of the Closing. In addition, the
principal stockholders and certain other employees of each of the Founding
Companies will enter into three-year employment agreements with the Company.
Each such agreement with a Founding Company's director nominee (i.e., Messrs.
Cohen, Decker, Green, Hanson, King, von Sternberg and Wallace) will provide for
an initial base salary of $175,000 (except for Mr. Decker's agreement which will
provide for a base salary of $125,000), subject to upward adjustment in the sole
discretion of the Company, and in most cases participation in the Company's
bonus and benefit plans. Each agreement may be terminated prior to the
expiration of the three-year term either in the event of disability or for cause
(as defined). If the individual does not continue to be employed by the Company
upon the expiration of the agreement, the individual shall be entitled to
receive six months' severance at his base salary as in effect at the time of
expiration.
Certain of the indebtedness of the Founding Companies currently is
personally guaranteed by their respective stockholders. The Company will repay
such indebtedness at the Closing, and the guarantees will be released. In
particular, the Company will repay amounts owed by Novations (which totalled
approximately $1.0 million as of September 30, 1997) and Star (which totalled
approximately $1.7 million as of September 30, 1997) which are personally
guaranteed by Messrs. Hanson and von Sternberg, respectively. In addition, the
Company will assume in the Combination indebtedness of the Founding Companies
that had an aggregate outstanding balance of $1.5 million as of September 30,
1997.
The former stockholders of the Founding Companies will agree that, for a
period of two years following the Closing, they will not sell any shares of
Common Stock received by them in connection with the Combination other than
pursuant to an effective registration statement under the Securities Act. The
Company has no obligation to provide such a registration statement but, in the
event the Company decides to register any shares received by any stockholder in
the Combination, or any shares of Common Stock issued or issuable pursuant to
options and warrants granted by Provant prior to the Closing, it must give each
of the Company's stockholders (giving effect to the Combination but not the
Offering) the opportunity to register a pro rata amount thereunder. In addition,
between the second and third anniversary of the Closing, these stockholders may
only sell such shares through a broker or brokers designated by the Company.
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<PAGE> 57
OTHER TRANSACTIONS
Organization of Provant
In connection with the founding and organization of Provant, Messrs.
Verrochi, Zenger, Puopolo, Gardner, Davies and Donald W. Glazer purchased shares
of Common Stock for an aggregate purchase price of approximately $3,250. As a
result of such purchases, these individuals beneficially own the following: Mr.
Verrochi, 870,131 shares; Mr. Zenger, 262,678 shares; Mr. Puopolo, 802,762
shares; Mr. Gardner, 302,506 shares; Mr. Davies, 285,424 shares; and Mr. Glazer,
303,116 shares. Mr. Glazer will enter into a consulting agreement with the
Company having a term of two years from the Closing, and providing for an annual
consulting fee of $125,000.
American Business Partners LLC
During 1997, members of the management team and certain consultants were
assembled by American Business Partners LLC ("ABP") to pursue the consolidation
of companies in the training and development industry. Mr. Verrochi, Chairman of
the Board and Chief Executive Officer of the Company, and Mr. Puopolo, Executive
Vice President and Chief Financial Officer of the Company, are members of ABP.
ABP provided the Company with expertise regarding the consolidation process.
Expenses paid by the Company prior to the Closing in connection with the
Combination and the Offering have been financed with funds advanced to the
Company by Messrs. Verrochi and Puopolo. Outstanding advanced amounts bear
interest at an annual rate equal to the prime rate of interest as from time to
time published in The Wall Street Journal. The Company will repay certain of the
advanced amounts plus interest to Messrs. Verrochi and Puopolo at the Closing
out of the proceeds of the Offering. See "Use of Proceeds." As of December 31,
1997, Messrs. Verrochi and Puopolo had advanced approximately $1.0 million to
the Company for such expenses.
As partial consideration for their commitment to extend the financing
described above, Messrs. Verrochi and Puopolo each received two warrants. The
first warrant entitles the holder to purchase 176,368 shares of Common Stock at
a per share exercise price equal to the initial public offering price. The
second warrant entitles the holder to purchase 220,460 shares of Common Stock
which will become exercisable only if the market price of the Common Stock
increases to certain threshold levels (except as otherwise described below) (the
"Contingent Warrant"). Specifically, 20% of the total number of shares issuable
under the Contingent Warrant will become exercisable on each of the three
occasions that the market price of the Common Stock increases by 100%, 200%,
300%, respectively, from the initial public offering price, and the remaining
40% of the total number of shares issuable under the Contingent Warrant will
become exercisable if the market price of the Common Stock increases by 400%.
However, under certain circumstances involving the merger or sale of the
Company, the Contingent Warrant will become exercisable to purchase all of the
warrant shares. The exercise price of the Contingent Warrant increases on each
anniversary of the closing of the Offering. Specifically, the exercise price is
equal to the initial public offering price for the first 12 months following the
closing of the Offering and, for each 12 month period thereafter, is equal to
the initial public offering price plus 10% of the initial public offering price
multiplied by the number of full 12 month periods elapsed since the closing of
the Offering. However, once a portion of the Contingent Warrant becomes
exercisable, that portion's exercise price is fixed as of that date. All four
warrants expire on the seventh anniversary of the closing of the Offering. The
holders of the warrants have the right to require the Company to register the
resale of the shares that may be acquired upon exercise of the warrants under
the Securities Act.
In June 1997, Messrs. Verrochi and Puopolo sold to the Company furniture
and equipment for its corporate executive offices for an aggregate purchase
price of $150,000. The Company believes that the purchase price approximated the
fair market value of the furniture and equipment.
OTHER TRANSACTIONS INVOLVING OFFICERS AND DIRECTORS
Prior to the Offering, Provant had outstanding 2,978,790 shares of Common
Stock. All of such shares currently are beneficially owned by the proposed
management and directors of and consultants to Provant or
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<PAGE> 58
members of their families. The holders of all such shares have agreed with the
Company that, for a period of two years following the Closing, they will not
sell any shares of Common Stock held by them as of the Closing (or that may be
purchased by them under options and warrants outstanding as of the Closing)
other than pursuant to an effective registration statement under the Securities
Act.
Michael J. Davies, who will become a director of the Company upon the
consummation of the Offering, also will become a full-time consultant to the
Company. For the performance of his consulting duties, Mr. Davies will be paid
an annual fee of $100,000. In addition, in consideration for his agreement to
become a consultant, Mr. Davies will receive, prior to the Closing, an option to
purchase 50,000 shares of Common Stock, which will become exercisable upon the
Closing for all of the shares issuable thereunder at a per share exercise price
equal to the initial public offering price. Mr. Davies currently is a consultant
to Provant. For information regarding option grants to individuals who will
become executive officers of the Company upon the Closing, see
"Management -- Equity Incentive Plan."
The Company intends to use $750,000 of the net proceeds of the Offering to
pay a fee due upon the Closing to Legg Mason Wood Walker, Incorporated for
proprietary information relating to the training and development industry
developed by Mr. Davies while he served as Managing Director at that company.
See "Use of Proceeds."
As a result of the Combination, the Company will become a party to a
six-year lease of administrative offices, effective January 1, 1996, from Paul
C. Green, Ph.D., who will become a director of the Company immediately after the
Closing. For the years ended June 30, 1995, 1996 and 1997, rent expense paid to
Dr. Green pursuant to the lease was approximately $90,000, $76,000 and $85,000,
respectively. The Company believes that the terms of the lease are no less
favorable to the Company than could be obtained by the Company from
non-affiliated third parties.
As a result of the Combination, the Company will become a party to a
five-year lease of office facilities renewable for an additional five years,
effective March 1997, from Novations Partners, L.L.C., a Utah limited liability
company (the "LLC") which is controlled by the stockholders of Novations. Joe
Hanson, one of the members of the LLC, will become a director of the Company
immediately after the Closing. The annual rent expense to be paid to the LLC is
$300,000 for the first year of the lease and increases 3% per year thereafter.
The Company believes that the terms of the lease are no less favorable to the
Company than could be obtained from non-affiliated third parties. In addition,
Novations has the right to receive amounts loaned by Novations to the LLC. The
balance due totalled approximately $192,000 as of September 30, 1997. All
outstanding amounts owed to Novations pursuant to these arrangements will be
paid by the LLC at or before the Closing.
A. Carl von Sternberg was indebted to Star during 1997 under a promissory
note. Mr. von Sternberg will become a director of the Company immediately after
the Closing. Borrowings by Mr. von Sternberg under the note totalled
approximately $344,000 as of September 30, 1997. Outstanding principal amounts
owed under the note accrue interest from time to time at the prime rate of
interest as reported in The Wall Street Journal. All principal amounts owed
under the note, together with accrued interest, will be repaid by Mr. von
Sternberg on or before the consummation of the Combination.
In December 1997, Marc S. Wallace, who will become a director of the
Company immediately after the Closing, incurred indebtedness to J. Howard
pursuant to two promissory notes in the aggregate principal amount of $75,000.
Outstanding principal amounts owed under the notes accrue interest from time to
time at an annual rate of 7.0%. The notes mature on May 31, 1998.
COMPANY POLICY
The Company's policy is that any future transactions with directors,
officers, employees or affiliates of the Company be approved in advance by a
majority of the Company's Board of Directors, including a majority of the
disinterested members of the Board, and be on terms no less favorable to the
Company than the Company could obtain from non-affiliated parties.
57
<PAGE> 59
DESCRIPTION OF CAPITAL STOCK
GENERAL
The Company's authorized capital stock consists of 45,000,000 shares of
capital stock, par value $.01 per share, consisting of 40,000,000 shares of
Common Stock and 5,000,000 shares of preferred stock (the "Preferred Stock").
Without giving effect to the issuance of shares in the Offering (but giving
effect to the Combination), the Company has outstanding 6,805,605 shares of
Common Stock held by 70 stockholders, and no shares of Preferred Stock.
COMMON STOCK
Immediately following the Combination and the Offering, the Company will
have outstanding 9,405,605 shares of Common Stock and options and warrants to
purchase an aggregate of 11,042,725 shares of Common Stock. A total of 1,100,000
shares of Common Stock are reserved for issuance under the Equity Incentive
Plan, 100,000 shares of Common Stock under the Directors' Plan and 500,000
shares of Common Stock under the Employee Stock Purchase Plan. Holders of Common
Stock are entitled to one vote for each share held of record on all matters
submitted to a vote of the stockholders, and do not have cumulative voting
rights. Subject to preferences that may be applicable to any outstanding shares
of Preferred Stock, holders of Common Stock are entitled to receive ratably such
dividends, if any, as may be declared from time to time by the Board of
Directors of the Company out of funds legally available therefor. See "Dividend
Policy." All outstanding shares of Common Stock are, and the shares to be issued
in the Combination and sold in the Offering when issued and paid for will be,
fully paid and nonassessable, and the holders thereof will have no preferences
or rights of conversion, exchange or pre-emption. In the event of any
liquidation, dissolution or winding-up of the affairs of the Company, holders of
Common Stock will be entitled to share ratably in the assets of the Company
remaining after payment or provision for payment of all of the Company's debts
and obligations and after liquidation payments to holders of outstanding shares
of Preferred Stock, if any.
PREFERRED STOCK
The Preferred Stock, if issued, would have priority over the Common Stock
with respect to dividends and other distributions, including the distribution of
assets upon liquidation. The Board of Directors has the authority, without
further stockholder authorization, to issue from time to time shares of
Preferred Stock in one or more series and to fix the terms, limitations,
relative rights and preferences and variations of each series. Although the
Company has no present plans to issue any shares of Preferred Stock following
the closing of the Offering, the issuance of shares of Preferred Stock, or the
issuance of rights to purchase such shares, could decrease the amount of
earnings and assets available for distribution to the holders of Common Stock,
could adversely affect the rights and powers, including voting rights, of the
Common Stock, and could have the effect of delaying, deterring or preventing a
change in control of the Company or an unsolicited acquisition proposal.
WARRANTS TO PURCHASE COMMON STOCK
The Company has issued warrants to Messrs. Verrochi and Puopolo, the terms
of which are more fully described in "Certain Transactions."
CERTAIN PROVISIONS
Special Meetings of the Stockholders of the Company. The Company's By-laws
provide that a special meeting of the stockholders of the Company only may be
called by the President, the Chairman of the Board or by order of the Board of
Directors. The By-laws do not authorize the stockholders to call a special
meeting of stockholders, potentially limiting the stockholders' ability to offer
proposals between annual meetings if no special meetings are otherwise called by
the President, Chairman or the Board.
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<PAGE> 60
No Action by Written Consent. The Company's Certificate of Incorporation
does not permit the Company's stockholders to act by written consent. As a
result, any action to be taken by the Company's stockholders must be taken at a
duly called meeting of the stockholders.
STATUTORY BUSINESS COMBINATIONS PROVISION
The Company is subject to the provisions of Section 203 of the DGCL
("Section 203"). Section 203 provides, with certain exceptions, that a Delaware
corporation may not engage in any of a broad range of business combinations with
a person, or an affiliate or associate of such a person, who is an "interested
stockholder" for a period of three years from the date that such person became
an interested stockholder unless: (i) the transaction resulting in a person
becoming an interested stockholder, or the business combination, is approved by
the Board of Directors of the corporation before the person becomes an
interested stockholder; (ii) the interested stockholder acquired 85% or more of
the outstanding voting stock of the corporation in the same transaction that
makes such person an interested stockholder (excluding shares owned by persons
who are both officers and directors of the corporation, and shares held by
certain employee stock ownership plans); or (iii) on or after the date the
person becomes an interested stockholder, the business combination is approved
by the corporation's board of directors and by the holders of at least 66 2/3%
of the corporation's outstanding voting stock at an annual or special meeting,
excluding shares owned by the disinterested stockholder. Under Section 203, an
"interested stockholder" is defined as any person who is (i) the owner of 15% or
more of the outstanding voting stock of the corporation or (ii) an affiliate or
associate of the corporation and who was the owner of 15% or more of the
outstanding voting stock of the corporation at any time within the three-year
period immediately prior to the date on which it is sought to be determined
whether such person is an interested stockholder.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Company will be selected prior to
the closing of the Offering.
SHARES ELIGIBLE FOR FUTURE SALE
Upon the consummation of the Combination and the Offering, the Company will
have 9,405,605 shares of Common Stock issued and outstanding, and 1,637,120
shares of Common Stock issuable upon the exercise of outstanding options and
warrants. Of these shares, 2,600,000 shares sold pursuant to the Offering (or
2,990,000 shares, if the Underwriters' over-allotment option is exercised in
full) will be freely tradeable without restriction under the Securities Act,
except any shares purchased by an "affiliate" (as that term is defined under the
rules and regulations of the Securities Act) of the Company, which shares will
be subject to the resale limitations of Rule 144 of the Securities Act. The
remaining shares outstanding upon completion of the Offering may be resold
publicly only upon registration under the Securities Act or in compliance with
an exemption from the registration requirements of the Securities Act, including
the exemption provided by Rule 144.
In general, under Rule 144, if a period of at least one year has elapsed
between the later of the date on which restricted securities were acquired from
the Company and the date on which they were acquired from an affiliate, then the
holder of such restricted securities (including an affiliate) is entitled to
sell that number of shares within any three-month period that does not exceed
the greater of (i) one percent of the then outstanding shares of Common Stock or
(ii) the average weekly reported volume of trading of Common Stock during the
four calendar weeks preceding such sale. Any shares of Common Stock issued as
Additional Consideration and Star Contingent Consideration will be deemed to
have been acquired at the Closing for purposes of Rule 144. Sales under Rule 144
also are subject to certain requirements pertaining to the manner of sales,
notices of sales and the availability of current public information concerning
the Company. Any shares not constituting restricted securities sold by
affiliates must be sold in accordance with the foregoing volume limitations and
other requirements but without regard to the one year holding period. Under Rule
144(k), if a period of at least two years has elapsed from the later of the date
on which restricted securities were acquired from the Company and the date on
which they were acquired from the affiliate, a
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<PAGE> 61
holder of such restricted securities who is not an affiliate at the time of the
sale and has not been an affiliate for at least three months prior to the sale
would be entitled to sell the shares immediately without regard to the volume
limitations and other conditions described above.
The Company and the holders of all shares outstanding prior to the Offering
(including the holders of shares issued in connection with the Combination) have
agreed with the Representatives of the Underwriters not to offer, sell, contract
to sell or otherwise dispose of any shares of Common Stock, or any securities
convertible into or exercisable or exchangeable for shares of Common Stock, for
a period of 180 days after the date of this Prospectus (the "Lock-up Period")
without the prior written consent of the Representatives, except for: (i) in the
case of the Company, Common Stock issued pursuant to the Company's Equity
Incentive Plan, Directors' Plan and Employee Stock Purchase Plan or in
connection with acquisitions; and (ii) in the case of all such holders, the
exercise of stock options pursuant to the benefit plans described herein and
shares of Common Stock disposed of as bona fide gifts, subject, in each case, to
any remaining portion of the Lock-up Period applying to any shares so issued or
transferred. In evaluating any request for a waiver of the Lock-up Period,
NationsBanc Montgomery Securities LLC will consider, in accordance with its
customary practice, all relevant facts and circumstances at the time of the
request, including, without limitation, the recent trading market for the Common
Stock, the size of the request and, with respect to a request by the Company to
issue additional equity securities, the purpose of such an issuance. See
"Underwriting." In addition, the stockholders of the Founding Companies and all
stockholders of the Company prior to the Offering have agreed to certain
transfer restrictions for a two-year period on all shares of Common Stock held
or to be held by them. See "Certain Transactions -- Organization of the Company"
and "-- Other Transactions Involving Officers and Directors."
In the aggregate, 100,000 shares of Common Stock are reserved for issuance
under the Directors' Plan, 1,100,000 shares are reserved for issuance under the
Equity Incentive Plan and 500,000 shares are reserved for issuance under the
Employee Stock Purchase Plan. The Company presently intends to file a
registration statement under the Securities Act to register Common Stock to be
issued pursuant to the exercise of options or stock granted or to be granted
under the Directors' Plan, Equity Incentive Plan and Employee Stock Purchase
Plan. Common Stock issued after the effective date of such registration
statement upon the exercise of such options (or the purchase of Common Stock
under the Employee Stock Purchase Plan) would be available for immediate resale
in the open market, subject to compliance with Rule 144 in the case of
affiliates.
Prior to the Offering, there has been no public market for the Common Stock
of the Company, and no predictions can be made of the effect, if any, that the
availability of shares for sale or the actual sale of shares will have on market
prices prevailing from time to time. Sales or the availability for sale of
substantial amounts of Common Stock in the public market could adversely affect
prevailing market prices and the ability of the Company to raise equity capital
in the future.
After the Closing, the Company plans to register an additional 3,000,000
shares of Common Stock under the Securities Act for use as consideration for
future acquisitions. Any such shares issued by the Company to affiliates of
companies acquired by the Company will be subject for one year after the
acquisition to the limitations and restrictions on resale imposed by Rule 145
under the Securities Act.
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<PAGE> 62
UNDERWRITING
The underwriters named below (the "Underwriters"), represented by
NationsBanc Montgomery Securities LLC, Salomon Smith Barney and Piper Jaffray
Inc. (the "Representatives"), have severally agreed, subject to the terms and
conditions in the underwriting agreement (the "Underwriting Agreement") by and
among the Company and the Underwriters, to purchase from the Company the number
of shares of Common Stock indicated below opposite its name, at the initial
public offering price less the underwriting discount set forth on the cover page
of this Prospectus. The Underwriting Agreement provides that the obligations of
the Underwriters are subject to certain conditions precedent and that the
Underwriters are committed to purchase all of the shares of Common Stock, if
they purchase any.
<TABLE>
<CAPTION>
NUMBER OF SHARES
----------------
<S> <C>
NationsBanc Montgomery Securities LLC.......................
Smith Barney Inc............................................
Piper Jaffray Inc...........................................
---------
Total............................................. 2,600,000
=========
</TABLE>
The Representatives have advised the Company that the Underwriters propose
initially to offer the Common Stock to the public on the terms set forth on the
cover page of this Prospectus. The Underwriters may allow selected dealers a
concession of not more than $ per share; and the Underwriters may
allow, and such dealers may reallow, a concession of not more than $
per share to certain other dealers. After the initial public offering, the
public offering price and other selling terms may be changed by the
Representatives. The Common Stock is offered subject to receipt and acceptance
by the Underwriters, and to certain other conditions, including the right to
reject orders in whole or in part.
The Company has granted an option to the Underwriters, exercisable during
the 30-day period after the date of this Prospectus, to purchase up to a maximum
of 390,000 additional shares of Common Stock to cover over-allotments, if any,
at the same price per share as the initial shares to be purchased by the
Underwriters. To the extent that the Underwriters exercise such over-allotment
option, the Underwriters will be committed, subject to certain conditions, to
purchase such additional shares in approximately the same proportion as set
forth in the above table. The Underwriters may purchase such shares only to
cover over-allotments made in connection with the Offering.
The Underwriting Agreement provides that the Company, its subsidiaries and
certain stockholders of the Founding Companies will indemnify the Underwriters
against certain liabilities, including civil liabilities under the Securities
Act, or will contribute to payments the Underwriters may be required to make in
respect thereof.
The Company's officers and directors and all of the stockholders of the
Company prior to the Offering (including the holders of shares issued in
connection with the Combination) have agreed that during the Lock-up Period they
will not, without the prior written consent of NationsBanc Montgomery Securities
LLC, directly or indirectly sell, offer, contract or grant any option to sell,
pledge, transfer, establish an open put equivalent position or otherwise dispose
of any shares of Common Stock, options or warrants to acquire shares of Common
Stock or securities exchangeable or exercisable for or convertible into shares
of Common Stock. The Company also has agreed not to issue, offer, sell, grant
options to purchase or otherwise dispose of any of the Company's equity
securities during the Lock-up Period without the prior written consent of
NationsBanc Montgomery Securities LLC, except for securities issued by the
Company in connection with acquisitions and for grants and exercises of stock
options, subject in each case to any remaining portion of the Lock-up Period
applying to shares issued or transferred. In evaluating any request for a waiver
of the Lock-up Period, NationsBanc Montgomery Securities LLC will consider, in
accordance with their customary practice, all relevant facts and circumstances
at the time of the request, including, without limitation, the recent trading
market for the Common Stock, the size of the request, and, with respect to a
request by the Company to issue additional equity securities, the purpose of
such an issuance. See "Shares Eligible for Future Sale."
61
<PAGE> 63
In connection with the Offering, certain Underwriters and selling group
members and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the Common Stock.
Such transactions may include stabilization transactions effected in accordance
with Rule 104 of Regulation M under the Securities Exchange Act of 1934 (the
"Exchange Act"), pursuant to which such persons may bid for or purchase Common
Stock for the purpose of stabilizing its market price. The Underwriters also may
create a short position for the account of the Underwriters by selling more
Common Stock in connection with the Offering than they are committed to purchase
from the Company and, in such case, may purchase Common Stock in the open market
following completion of the Offering to cover all or a portion of such short
position. The Underwriters may also cover all or a portion of such short
position, up to 390,000 shares of Common Stock, by exercising the Underwriters'
over-allotment option referred to above. In addition, NationsBanc Montgomery
Securities LLC, on behalf of the Underwriters, may impose "penalty bids" under
contractual arrangements with the Underwriters whereby it may reclaim from an
Underwriter (or dealer participating in the Offering), for the account of the
other Underwriters, the selling concession with respect to Common Stock that is
distributed in the Offering but subsequently purchased for the account of the
Underwriters in the open market. Any of the transactions described in this
paragraph may result in the maintenance of the price of the Common Stock at a
level above that which might otherwise prevail in the open market. None of the
transactions described in this paragraph is required, and, if they are
undertaken, they may be discontinued at any time.
The Representatives have informed the Company that the Underwriters do not
expect to make sales of Common Stock offered by this Prospectus to accounts over
which they exercise discretionary authority in excess of 5% of the number of
shares of Common Stock offered hereby.
Prior to the Offering, there has been no public trading market for the
Common Stock. Consequently, the initial public offering price of the Common
Stock will be determined by negotiations between the Company and the
Representatives. Among the factors to be considered in such negotiations will be
the results of operations of the Founding Companies in recent periods, the
prospects for the Company and the industry in which the Company competes, an
assessment of the Company's management, its financial condition, the prospects
for future earnings of the Company, the present state of the Company's
development, the general condition of the economy and the securities markets at
the time of the Offering and the market prices of and demand for publicly traded
common stock of comparable companies in recent periods.
LEGAL MATTERS
The validity of the shares of Common Stock offered by this Prospectus will
be passed upon for the Company by Nutter, McClennen & Fish, LLP, Boston,
Massachusetts. Certain legal matters related to the Offering will be passed upon
for the Underwriters by Ropes & Gray, Boston, Massachusetts.
EXPERTS
The financial statements of Provant, Inc. as of June 30, 1997 and for the
period from November 16, 1996 (date of inception) to June 30, 1997, and the
financial statements of Behavioral Technology, Inc., Decker Communications,
Inc., J. Howard & Associates, Inc., Robert Steinmetz, Ph.D., and Associates,
Inc. d/b/a Learning Systems Sciences, MOHR Retail Learning Systems, Inc. and
Novations Group, Inc., have been included herein and in the Registration
Statement in reliance on the reports of KPMG Peat Marwick LLP, independent
certified public accountants, appearing elsewhere herein, upon the authority of
said firm as experts in giving said reports.
The consolidated financial statements of Star Mountain, Inc. and
subsidiaries included in this Prospectus, to the extent of and for the periods
indicated in the report, have been audited by Friedman & Fuller, P.C.,
independent public accountants, as indicated in its report with respect thereto,
and are included herein in reliance upon the authority of said firm as experts
in giving said reports.
62
<PAGE> 64
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (including any and all
amendments thereto, the "Registration Statement") under the Securities Act and
the rules and regulations promulgated thereunder, with respect to the Common
Stock offered hereby. This Prospectus omits certain information contained in the
Registration Statement, and reference is made to the Registration Statement and
the exhibits and schedules thereto for further information with respect to the
Company and the Common Stock offered hereby. Statements contained in this
Prospectus concerning the provisions or contents of any contract, agreement or
any other document referred to herein are not necessarily complete with respect
to each such contract, agreement or document filed as an exhibit to the
Registration Statement, and reference is made to such exhibit for a more
complete description of the matters involved, and each such statement shall be
deemed qualified by such reference. Upon completion of the Offering, the Company
will be subject to the information requirements of the Exchange Act, and in
accordance therewith will file reports, proxy statements and other information
with the Commission. Such reports, proxy statements and other information, as
well as the Registration Statement, including the exhibits and schedules
thereto, may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the regional offices of the Commission
located at 7 World Trade Center, 13th Floor, New York, New York 10048 and at 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
materials may be obtained from such offices, upon payment of the fees prescribed
by the Commission. The Commission maintains a Web site (http://www.sec.gov) that
contains reports, proxy and information statements and other information
regarding registrants that submit electronic filings to the Commission.
The Company intends to furnish its stockholders with annual reports
containing audited consolidated financial statements and an opinion thereon
expressed by an independent public accounting firm, and with quarterly reports
for the first three quarters of each fiscal year containing unaudited interim
consolidated financial information.
63
<PAGE> 65
INDEX TO FINANCIAL STATEMENTS
UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROVANT, INC. PRO FORMA:
Basis of Presentation..................................... F-3
Unaudited Pro Forma Combined Balance Sheet................ F-4
Unaudited Pro Forma Combined Statements of Operations..... F-5
Notes to Unaudited Pro Forma Combined Financial
Statements............................................. F-7
PROVANT, INC.:
Independent Auditors' Report.............................. F-12
Balance Sheets............................................ F-13
Statements of Operations.................................. F-14
Statements of Stockholders' Equity........................ F-15
Statements of Cash Flows.................................. F-16
Notes to Financial Statements............................. F-17
BEHAVIORAL TECHNOLOGY, INC.:
Independent Auditors' Report.............................. F-21
Balance Sheets............................................ F-22
Statements of Operations.................................. F-23
Statements of Stockholders' Equity........................ F-24
Statements of Cash Flows.................................. F-25
Notes to Financial Statements............................. F-26
DECKER COMMUNICATIONS, INC.:
Independent Auditors' Report.............................. F-29
Balance Sheets............................................ F-30
Statements of Operations.................................. F-31
Statements of Stockholders' Equity........................ F-32
Statements of Cash Flows.................................. F-33
Notes to Financial Statements............................. F-34
J. HOWARD & ASSOCIATES, INC.:
Independent Auditors' Report.............................. F-38
Balance Sheets............................................ F-39
Statements of Operations.................................. F-40
Statements of Stockholders' Equity........................ F-41
Statements of Cash Flows.................................. F-42
Notes to Financial Statements............................. F-43
LEARNING SYSTEMS SCIENCES (ROBERT STEINMETZ, PH.D., AND
ASSOCIATES, INC. ):
Independent Auditors' Report.............................. F-47
Balance Sheets............................................ F-48
Statements of Operations.................................. F-49
Statements of Stockholders' Equity........................ F-50
Statements of Cash Flows.................................. F-51
Notes to Financial Statements............................. F-52
</TABLE>
F-1
<PAGE> 66
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
MOHR RETAIL LEARNING SYSTEMS, INC.:
Independent Auditors' Report.............................. F-55
Balance Sheets............................................ F-56
Statements of Operations.................................. F-57
Statements of Stockholders' Equity........................ F-58
Statements of Cash Flows.................................. F-59
Notes to Financial Statements............................. F-60
NOVATIONS GROUP, INC.:
Independent Auditors' Report.............................. F-63
Balance Sheets............................................ F-64
Statements of Operations.................................. F-65
Statements of Stockholders' Equity........................ F-66
Statements of Cash Flows.................................. F-67
Notes to Financial Statements............................. F-68
STAR MOUNTAIN, INC.:
Independent Auditors' Report.............................. F-71
Consolidated Balance Sheets............................... F-72
Consolidated Statements of Operations..................... F-73
Consolidated Statements of Stockholders' Equity........... F-74
Consolidated Statements of Cash Flows..................... F-75
Notes to Consolidated Financial Statements................ F-77
</TABLE>
F-2
<PAGE> 67
PROVANT, INC. AND FOUNDING COMPANIES
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The following unaudited pro forma combined financial statements give effect
to (i) the Combination of Provant and the Founding Companies, (ii) the
consummation of the Offering and the application of the net proceeds therefrom
and (iii) certain other adjustments described below and in the notes to the
unaudited pro forma combined financial statements. See "Combination" and "Use of
Proceeds" included elsewhere herein. In the Combination, subsidiaries of Provant
are merging with the following Founding Companies: Behavioral Technology, Inc.,
Decker Communications, Inc., J. Howard & Associates, Inc., MOHR Retail Learning
Systems, Inc., Novations Group, Inc., Robert Steinmetz, Ph.D., and Associates,
Inc., d/b/a Learning Systems Sciences and Star Mountain, Inc. The Combination
will occur simultaneously with the closing of the Offering and will be accounted
for using the purchase method of accounting. Provant has been identified as the
accounting acquiror in accordance with Securities and Exchange Commission Staff
Accounting Bulletin No. 97. These pro forma statements are based on the
historical financial statements of the Founding Companies included elsewhere in
this Prospectus and the estimates and assumptions set forth below and in the
notes to the unaudited pro forma combined financial statements.
The unaudited pro forma combined balance sheet gives effect to the
Combination and the Offering as if they had occurred on September 30, 1997. The
unaudited pro forma combined statements of operations give effect to these
transactions as if they had occurred on July 1, 1996.
Provant has preliminarily analyzed the benefits that it expects to realize
from reductions in salaries and certain benefits to the owners of the Founding
Companies. To the extent these owners have agreed prospectively to reductions in
salary, bonuses and benefits, these reductions have been reflected in the pro
forma combined statements of operations. With respect to other potential
benefits, Provant cannot quantify these benefits until completion of the
Combination. It is anticipated that these benefits will be offset by costs
related to the Company's new corporate management and by the costs associated
with being a public company. However, because these costs cannot be accurately
quantified at this time, they have not been included in the pro forma financial
information of Provant.
The pro forma adjustments are based on estimates, available information and
certain assumptions and may be revised as additional information becomes
available. The unaudited pro forma combined financial data presented herein does
not purport to represent what the Company's financial position or results of
operations actually would have been had such events occurred at the beginning of
the periods presented, as assumed, or to project the Company's financial
position or results of operations for any future period or the future results of
the Founding Companies. The unaudited pro forma combined financial statements
should be read in conjunction with the historical financial statements of
Provant and the Founding Companies and the related notes thereto included
elsewhere in this Prospectus. Also see "Risk Factors" included elsewhere herein.
F-3
<PAGE> 68
PROVANT, INC. AND FOUNDING COMPANIES
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
SEPTEMBER 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
BTI DECKER J. HOWARD LSS MOHR NOVATIONS STAR PROVANT TOTAL
------ ------ --------- ------ ---- --------- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents...... $1,188 $ 526 $ 811 $ 508 $211 $ 446 $ 275 $ 3 $ 3,968
Investments.................... -- 932 -- -- -- -- -- -- 932
Accounts receivable, net....... 1,655 1,441 1,350 697 441 2,364 4,573 -- 12,521
Inventory...................... -- -- -- -- 132 -- 151 -- 283
Due from related parties....... -- 290 52 -- -- 341 344 -- 1,027
Costs in excess of billings.... -- -- -- 359 -- -- -- -- 359
Prepaid expenses and other
current assets............... 160 102 50 56 22 50 164 143 747
------ ------ ------ ------ ---- ------ ------ ----- -------
Total current assets..... 3,003 3,291 2,263 1,620 806 3,201 5,507 146 19,837
Property and equipment, net...... 117 359 290 153 46 456 852 153 2,426
Other assets..................... 9 59 44 105 -- -- 1,928 50 2,195
Goodwill......................... -- -- -- -- -- -- -- -- --
------ ------ ------ ------ ---- ------ ------ ----- -------
Total assets............. $3,129 $3,709 $2,597 $1,878 $852 $3,657 $8,287 $ 349 $24,458
====== ====== ====== ====== ==== ====== ====== ===== =======
Liabilities and Stockholders'
Equity
Current liabilities:
Accounts payable............... $ 267 $ 284 $ 116 $ 97 $143 $ 174 $1,645 $ -- $ 2,726
Accrued expenses............... 186 459 95 174 304 135 814 -- 2,167
Accrued compensation........... 484 849 97 100 12 1,270 -- -- 2,812
Payable to
stockholder/affiliate........ -- -- -- -- -- -- -- 560 560
Billings in excess of costs.... -- -- -- 362 -- -- 1,269 -- 1,631
Deferred revenue............... 15 114 24 -- 98 -- -- -- 251
State income taxes............. -- 62 38 -- -- -- -- -- 100
Distributions payable.......... -- -- 125 -- -- -- -- -- 125
Current portion of long-term
debt......................... -- 410 -- -- -- 1,078 1,492 -- 2,980
------ ------ ------ ------ ---- ------ ------ ----- -------
Total current
liabilities............ 952 2,178 495 733 557 2,657 5,220 560 13,352
Long-term debt, net of current
portion........................ -- 615 -- -- -- 361 505 -- 1,481
Deferred tax liability........... -- -- -- -- -- -- -- -- --
------ ------ ------ ------ ---- ------ ------ ----- -------
Total liabilities........ 952 2,793 495 733 557 3,018 5,725 560 14,833
Redeemable common stock.......... -- 300 -- -- -- -- -- -- 300
Stockholders' equity:
Common stock................... 1 313 272 3 4 1 2,102 -- 2,696
Additional paid-in capital..... 182 -- -- -- -- -- -- 3 185
Translation adjustments........ (6) -- -- -- -- -- -- -- (6)
Unrealized gain on short-term
investments.................. -- 9 -- -- -- -- -- -- 9
Note receivable from stock
sales........................ -- (171) -- -- -- -- -- -- (171)
Retained earnings.............. 2,000 465 1,830 1,142 291 638 1,086 (214) 7,238
Treasury stock................. -- -- -- -- -- -- (626) -- (626)
------ ------ ------ ------ ---- ------ ------ ----- -------
Total stockholders'
equity................. 2,177 616 2,102 1,145 295 639 2,562 (211) 9,325
------ ------ ------ ------ ---- ------ ------ ----- -------
Total liabilities and
stockholders' equity... $3,129 $3,709 $2,597 $1,878 $852 $3,657 $8,287 $ 349 $24,458
====== ====== ====== ====== ==== ====== ====== ===== =======
<CAPTION>
COMBINATION PRO FORMA OFFERING
ADJUSTMENTS COMBINED ADJUSTMENTS AS ADJUSTED
----------- --------- ----------- -----------
(NOTE 3) (NOTE 3)
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents...... $ (943) $ 3,025 $ (357) $ 2,668
Investments.................... -- 932 -- 932
Accounts receivable, net....... -- 12,521 -- 12,521
Inventory...................... -- 283 -- 283
Due from related parties....... 2,564 3,591 -- 3,591
Costs in excess of billings.... -- 359 -- 359
Prepaid expenses and other
current assets............... -- 747 -- 747
------- ------- -------- -------
Total current assets..... 1,621 21,458 (357) 21,101
Property and equipment, net...... -- 2,426 -- 2,426
Other assets..................... (34) 2,161 -- 2,161
Goodwill......................... 49,050 49,050 -- 49,050
------- ------- -------- -------
Total assets............. $50,637 $75,095 $ (357) $74,738
======= ======= ======== =======
Liabilities and Stockholders'
Equity
Current liabilities:
Accounts payable............... $ -- $ 2,726 $ -- $ 2,726
Accrued expenses............... -- 2,167 -- 2,167
Accrued compensation........... -- 2,812 -- 2,812
Payable to
stockholder/affiliate........ 22,463 23,023 (23,023) --
Billings in excess of costs.... -- 1,631 -- 1,631
Deferred revenue............... -- 251 -- 251
State income taxes............. -- 100 -- 100
Distributions payable.......... -- 125 -- 125
Current portion of long-term
debt......................... -- 2,980 (2,900) 80
------- ------- -------- -------
Total current
liabilities............ 22,463 35,815 (25,923) 9,892
Long-term debt, net of current
portion........................ -- 1,481 -- 1,481
Deferred tax liability........... 1,276 1,276 -- 1,276
------- ------- -------- -------
Total liabilities........ 23,739 38,572 (25,923) 12,649
Redeemable common stock.......... (300) -- -- --
Stockholders' equity:
Common stock................... (2,658) 38 26 64
Additional paid-in capital..... 36,514 36,699 26,290 62,989
Translation adjustments........ 6 -- -- --
Unrealized gain on short-term
investments.................. (9) -- -- --
Note receivable from stock
sales........................ 171 -- -- --
Retained earnings.............. (7,452) (214) (750) (964)
Treasury stock................. 626 -- -- --
------- ------- -------- -------
Total stockholders'
equity................. 27,198 36,523 25,566 62,089
------- ------- -------- -------
Total liabilities and
stockholders' equity... $50,637 $75,095 $ (357) $74,738
======= ======= ======== =======
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
F-4
<PAGE> 69
PROVANT, INC. AND FOUNDING COMPANIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
BTI DECKER J. HOWARD LSS MOHR NOVATIONS STAR PROVANT
------ ------ --------- ------ --------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total revenue...................... $7,096 $8,410 $7,317 $5,599 $3,015 $9,018 $20,790 $ --
Cost of revenue.................... 1,488 2,275 2,160 1,928 825 4,839 12,602 --
------ ------ ------ ------ ------ ------ ------- ------
Gross profit............. 5,608 6,135 5,157 3,671 2,190 4,179 8,188 --
Selling, general and administrative
expenses......................... 5,111 5,621 4,555 3,061 1,745 3,315 7,061 149
Goodwill amortization.............. -- -- -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------- ------
Income from operations... 497 514 602 610 445 864 1,127 (149)
Other income (expense), net........ 40 -- 4 -- -- -- -- --
Interest income (expense).......... 31 (9) 26 14 3 (137) (53) --
------ ------ ------ ------ ------ ------ ------- ------
Income before income
taxes.................. 568 505 632 624 448 727 1,074 (149)
Provision (benefit) for income
taxes............................ -- 33 8 9 7 20 429 (60)
------ ------ ------ ------ ------ ------ ------- ------
Net income (loss)........ $ 568 $ 472 $ 624 $ 615 $ 441 $ 707 $ 645 $ (89)
====== ====== ====== ====== ====== ====== ======= ======
Net income per share...............
Shares used in computing net income
per share (Note 5)...............
<CAPTION>
COMBINATION PRO FORMA
TOTAL ADJUSTMENTS COMBINED
------- ----------- ----------
(NOTE 4)
<S> <C> <C> <C>
Total revenue...................... $61,245 $ 7,601 $ 68,846
Cost of revenue.................... 26,117 4,850 30,967
------- ------- ----------
Gross profit............. 35,128 2,751 37,879
Selling, general and administrative
expenses......................... 30,618 (1,955) 28,663
Goodwill amortization.............. -- 1,226 1,226
------- ------- ----------
Income from operations... 4,510 3,480 7,990
Other income (expense), net........ 44 -- 44
Interest income (expense).......... (125) 8 (117)
------- ------- ----------
Income before income
taxes.................. 4,429 3,488 7,917
Provision (benefit) for income
taxes............................ 446 3,257 3,703
------- ------- ----------
Net income (loss)........ $ 3,983 $ 231 $ 4,214
======= ======= ==========
Net income per share............... $ 0.45
==========
Shares used in computing net income
per share (Note 5)............... 9,405,605
==========
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
F-5
<PAGE> 70
PROVANT, INC. AND FOUNDING COMPANIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
BTI DECKER J. HOWARD LSS MOHR NOVATIONS STAR PROVANT
------ ------ --------- ------ ---- --------- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total revenue...................... $1,977 $2,585 $1,917 $1,050 $ 556 $2,464 $5,770 $ --
Cost of revenue.................... 385 660 661 509 204 1,197 3,384 --
------ ------ ------ ------ ----- ------ ------ ------
Gross profit............. 1,592 1,925 1,256 541 352 1,267 2,386 --
Selling, general and administrative
expenses......................... 1,306 1,663 1,199 589 562 1,088 1,890 200
Goodwill amortization.............. -- -- -- -- -- -- -- --
------ ------ ------ ------ ----- ------ ------ ------
Income (loss) from
operations............. 286 262 57 (48) (210) 179 496 (200)
Other income (expense), net........ -- -- (3) -- -- -- -- --
Interest income (expense).......... 7 (3) 5 5 3 (83) 56 (8)
------ ------ ------ ------ ----- ------ ------ ------
Income (loss) before
income taxes........... 293 259 59 (43) (207) 96 552 (208)
Provision for income taxes......... -- 2 1 2 1 11 206 (83)
------ ------ ------ ------ ----- ------ ------ ------
Net income (loss)........ $ 293 $ 257 $ 58 $ (45) $(208) $ 85 $ 346 $ (125)
====== ====== ====== ====== ===== ====== ====== ======
Net income per share...............
Shares used in computing net income
per share (Note 5)...............
<CAPTION>
COMBINATION PRO FORMA
TOTAL ADJUSTMENTS COMBINED
----- ----------- ---------
(NOTE 4)
<S> <C> <C> <C>
Total revenue...................... $16,319 $1,419 $ 17,738
Cost of revenue.................... 7,000 1,056 8,056
------- ------ ----------
Gross profit............. 9,319 363 9,682
Selling, general and administrative
expenses......................... 8,497 (178) 8,319
Goodwill amortization.............. -- 307 307
------- ------ ----------
Income (loss) from
operations............. 822 234 1,056
Other income (expense), net........ (3) -- (3)
Interest income (expense).......... (18) 44 26
------- ------ ----------
Income (loss) before
income taxes........... 801 278 1,079
Provision for income taxes......... 140 418 558
------- ------ ----------
Net income (loss)........ $ 661 $ (140) $ 521
======= ====== ==========
Net income per share............... $ 0.06
==========
Shares used in computing net income
per share (Note 5)............... 9,405,605
==========
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
F-6
<PAGE> 71
PROVANT, INC. AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(1) GENERAL
Concurrently with and as a condition to the closing of the Offering,
Provant will acquire the seven Founding Companies in the Combination. The
acquisitions will be accounted for using the purchase method of accounting with
Provant being treated as the accounting acquiror.
The historical financial statements reflect the financial position and
results of operations of the Founding Companies and were derived from the
respective Founding Companies' financial statements where indicated. The periods
included in these financial statements for the individual Founding Companies are
as of and for the three months ended September 30, 1997 and for the year ended
June 30, 1997. The audited historical financial statements included elsewhere
herein have been included in accordance with Securities and Exchange Commission
Staff Accounting Bulletin No. 80.
(2) ACQUISITION OF FOUNDING COMPANIES
The following table sets forth the consideration to be paid (i) in cash and
(ii) in shares of Common Stock to the stockholders of each of the Founding
Companies. For purposes of computing the estimated purchase price for accounting
purposes, the value of the shares is determined using an estimated fair value of
$9.60 per share, which represents a discount of 20% from the assumed initial
public offering price of $12.00 due to restrictions on the sale and
transferability of the shares issued. The total estimated value of the
consideration of $59.2 million for the acquisitions is based upon preliminary
estimates and is subject to certain purchase price adjustments at the closing.
<TABLE>
<CAPTION>
COMMON STOCK
----------------------------
CASH SHARES VALUE OF SHARES
------- --------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
BTI............................................. $ 5,000 487,388 $ 4,679
Decker.......................................... 1,550 377,778 3,626
J. Howard....................................... 1,700 339,337 3,257
LSS............................................. 2,625 639,785 6,142
MOHR............................................ 1,200 225,806 2,168
Novations....................................... 4,988 740,592 7,110
Star............................................ 5,400 1,016,129 9,755
------- --------- -------
Total................................. $22,463 3,826,815 $36,737
======= ========= =======
</TABLE>
(3) UNAUDITED PRO FORMA COMBINED BALANCE SHEET ADJUSTMENTS
(a) Records the distributions estimated at $1.4 million which are expected
to be paid from cash on hand by certain Founding Companies prior to the
Closing of the Combination.
(b) Records the liability for the cash portion of the consideration to be
paid to the stockholders of the Founding Companies in connection with
the Combination.
(c) Reflects the creation of approximately $49.1 million of goodwill from
the payment of the Common Stock and cash consideration for the Founding
Companies totaling approximately $59.2 million (see note 2) less net
assets of the Founding Companies of approximately $10.2 million.
(d) Records the deferred income taxes attributable to the temporary
differences between the financial reporting and tax basis of assets and
liabilities held in S corporations.
(e) Records the receipt of cash from certain stockholders in satisfaction
of certain receivables and transfer of certain assets.
F-7
<PAGE> 72
PROVANT, INC. AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(f) Records the aggregate receivable from the stockholders of the Founding
Companies to reflect the difference between guaranteed minimum net
worth of each of the Founding Companies and pro forma net worth.
(g) Records the cash proceeds of $26.3 million from the issuance of shares
of Common Stock, net of the estimated underwriting discount and
estimated offering costs of $2.8 million (based on an assumed initial
public offering price of $12.00 per share). Offering costs primarily
consist of accounting fees, legal fees and printing expenses.
(h) Records the cash portion of the consideration to be paid to
stockholders of the Founding Companies in connection with the
Combination, the repayment of funds advanced to Provant by two of its
executive officers and the repayment of long-term debt of the Founding
Companies.
(i) Records the payment of fees for information provided to the Company
related to the training and development industry.
The following table summarizes the adjustments to the unaudited pro forma
combined balance sheet adjustments (in thousands):
<TABLE>
<CAPTION>
Combination Adjustments Total
-------------------------------------------------------- Combination
(a) (b) (c) (d) (e) (f) Adjustments
------- -------- ------- ------- ------ ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents...... $(1,442) $ -- $ -- $ -- $ 499 -- $ (943)
Due from related parties....... -- -- -- -- (344) 2,908 2,564
------- -------- ------- ------- ------ ------ -------
Total current assets......... (1,442) -- -- -- 155 2,908 1,621
Goodwill, net.................. -- -- 49,050 -- -- -- 49,050
Other assets................... -- -- -- 76 (110) -- (34)
------- -------- ------- ------- ------ ------ -------
Total assets......... $(1,442) $ -- $49,050 $ 76 $ 45 $2,908 $50,637
======= ======== ======= ======= ====== ====== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Payable to
stockholder/affiliate........ $ -- $ 22,463 $ -- $ -- $ -- $ -- $22,463
------- -------- ------- ------- ------ ------ -------
Long-term debt, net of current
portion...................... -- -- -- -- -- -- --
Deferred tax liability......... -- -- -- 1,276 -- -- 1,276
------- -------- ------- ------- ------ ------ -------
Total liabilities.... -- 22,463 -- 1,276 -- -- 23,739
Redeemable common stock........ -- -- (300) -- -- -- (300)
Stockholders' equity:..........
Common stock................. -- -- -- -- -- -- --
Additional paid-in capital... (1,442) (22,463) 49,350 (1,200) -- 2,908 27,153
Retained earnings............ -- -- -- -- -- -- --
Treasury stock............... -- -- -- -- -- -- --
Note receivable from stock
sales..................... -- -- -- -- 45 -- 45
------- -------- ------- ------- ------ ------ -------
Total stockholders'
equity............. (1,442) (22,463) 49,050 (1,200) 45 2,908 27,198
------- -------- ------- ------- ------ ------ -------
Total liabilities and
stockholders'
equity............. $(1,442) $ -- $49,050 $ 76 $ 45 $2,908 $50,637
======= ======== ======= ======= ====== ====== =======
</TABLE>
F-8
<PAGE> 73
PROVANT, INC. AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
Offering
Adjustments Total
----------------------------- Offering
(g) (h) (i) Adjustments
-------- -------- ----- -----------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents........................ $ 26,316 $(25,923) $(750) $ (357)
Other.......................................... -- -- -- --
-------- -------- ----- --------
Total current assets........................... 26,316 (25,923) (750) (357)
-------- -------- ----- --------
Total assets........................... $ 26,316 $(25,923) $(750) $ (357)
======== ======== ===== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt................ $ -- $ (2,900) $ -- $ (2,900)
Payable to stockholders/affiliate................ (23,023) -- (23,023)
-------- -------- ----- --------
Total current liabilities.............. -- (25,923) -- (25,923)
-------- -------- ----- --------
Total liabilities...................... -- (25,923) -- (25,923)
-------- -------- ----- --------
Stockholders' equity:
Common stock................................... 26 -- -- 26
Additional paid-in capital..................... 26,290 -- -- 26,290
Retained earnings.............................. -- -- (750) (750)
Treasury stock................................. -- -- -- --
-------- -------- ----- --------
Total stockholders' equity............. 26,316 -- (750) 25,566
-------- -------- ----- --------
Total liabilities and stockholders'
equity............................... $ 26,316 $(25,923) $(750) $ (357)
======== ======== ===== ========
</TABLE>
(4) UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS ADJUSTMENTS
YEAR ENDED JUNE 30, 1997
(a) Reflects the reduction in salaries, bonuses and benefits of $4.8 million to
certain of the owners of the Founding Companies to which they have agreed
prospectively. These reductions in salaries, bonuses and benefits are in
accordance with the terms of the owners' employment agreements with the
Company entered into in connection with the Combination. Such employment
agreements are primarily for three years, contain restrictions related to
competition and provide severance under certain circumstances.
(b) Reflects the amortization of goodwill to be recorded as a result of the
Combination over a 40-year estimated life.
(c) Reflects a pro forma provision for income taxes adjusted to reflect the
Company's estimated consolidated effective tax rate subsequent to the
Combination, after considering nondeductible goodwill amortization.
(d) Reflects the historical results of operations of companies acquired by Star
in February 1997 and October 1997.
(e) Reflects the reduction in interest expense net of income tax benefit,
related to the current portion of bank debt and notes payable to
stockholders that will be repaid with the proceeds of the Offering.
F-9
<PAGE> 74
PROVANT, INC. AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes the adjustments to the unaudited pro forma
combined statements of operations (in thousands):
<TABLE>
<CAPTION>
Adjustments
----------------------------------------------- Total
(a) (b) (c) (d) (e) Adjustments
------- ------- ------- ------ ---- -----------
<S> <C> <C> <C> <C> <C> <C>
Total revenue................... $ -- $ -- $ -- $7,601 -- $ 7,601
Cost of revenue................. -- -- -- 4,850 -- 4,850
Selling, general and
administrative expenses....... (4,782) -- -- 2,827 -- (1,955)
Goodwill amortization........... -- 1,226 -- -- -- 1,226
------- ------- ------- ------ ---- -------
Income from
operations.......... 4,782 (1,226) -- (76) -- 3,480
Interest expense................ -- -- -- (250) 258 8
------- ------- ------- ------ ---- -------
Income before income
taxes............... 4,782 (1,226) -- (326) 258 3,488
Provision (benefit) for income
taxes......................... -- -- 3,284 (130) 103 3,257
------- ------- ------- ------ ---- -------
Net income............ $ 4,782 $(1,226) $(3,284) $ (196) $155 $ 231
======= ======= ======= ====== ==== =======
</TABLE>
THREE MONTHS ENDED SEPTEMBER 30, 1997
(a) Reflects the reduction in salaries, bonuses and benefits of $1.3 million to
certain of the owners of the Founding Companies to which they have agreed
prospectively. These reductions in salaries, bonuses and benefits are in
accordance with the terms of the owners' employment agreements with the
Company entered into in connection with the Combination. Such employment
agreements are primarily for three years, contain restrictions related to
competition and provide severance under certain circumstances.
(b) Reflects the amortization of goodwill to be recorded as a result of the
Combination over a 40-year estimated life.
(c) Reflects a pro forma provision for income taxes adjusted to reflect the
Company's estimated effective tax rate subsequent to the combination after
considering nondeductible goodwill amortization.
(d) Reflects the historical results of operations of a company acquired by Star
in October 1997.
(e) Reflects the reduction in interest expense, net of income tax benefit,
related to the current portion of bank debt and notes payable to
stockholders that will be repaid with the proceeds of the Offering.
(f) Reflects the payment of fees for information provided to the Company related
to the training and development industry, net of tax.
F-10
<PAGE> 75
PROVANT, INC. AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes the adjustments to the unaudited pro forma
combined statements of operations (in thousands):
<TABLE>
<CAPTION>
Adjustments
----------------------------------------------- Total
(a) (b) (c) (d) (e) (f) Adjustments
------- ----- ----- ------ ---- ----- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Total revenue................... $ -- $ -- $ -- $1,419 $ -- $ -- $ 1,419
Cost of revenue................. -- -- -- 1,056 -- -- 1,056
Selling, general and
administrative expenses....... (1,280) -- -- 352 -- 750 (178)
Goodwill amortization........... -- 307 -- -- -- -- 307
------- ----- ----- ------ ---- ----- -------
Income from
operations.......... 1,280 (307) -- 11 -- (750) 234
Other income (expense):
Interest expense.............. -- -- -- (29) 73 -- 44
------- ----- ----- ------ ---- ----- -------
Income before income
taxes............... 1,280 (307) -- (18) 73 (750) 278
Provision (benefit) for income
taxes......................... -- -- 696 (7) 29 (300) 418
------- ----- ----- ------ ---- ----- -------
Net income............ $ 1,280 $(307) $(696) $ (11) $ 44 $(450) $ (140)
======= ===== ===== ====== ==== ===== =======
</TABLE>
(5) NET INCOME PER SHARE
The shares used in computing pro forma net income per share consist of (i)
2,978,790 shares held by the stockholders of Provant prior to the Offering (ii)
3,826,815 shares issued to owners of the Founding Companies (excluding shares
issuable as Additional Consideration and pursuant to the Star Contingent
Consideration) and (iii) 2,600,000 shares of Common Stock sold in the Offering.
F-11
<PAGE> 76
INDEPENDENT AUDITORS' REPORT
The Board of Directors,
Provant, Inc.:
We have audited the accompanying balance sheet of Provant, Inc., as of June
30, 1997 and the related statements of operations, stockholders' equity and cash
flows for the period from November 16, 1996 (date of inception) to June 30,
1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Provant, Inc. as of June 30,
1997 and the results of its operations and its cash flows for the period from
November 16, 1996 (date of inception) to June 30, 1997, in conformity with
generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Boston, Massachusetts
January 9, 1998
F-12
<PAGE> 77
PROVANT, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
1997 1997
-------- -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 1 $ 3
Deferred income taxes....................................... 60 143
------ ----
Total current assets.............................. 61 146
Property and equipment...................................... 150 153
Deferred offering costs..................................... -- 50
------ ----
Total assets...................................... $ 211 $349
====== ====
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Notes payable to stockholders............................... $ 298 $560
------ ----
Total current liabilities......................... 298 560
Stockholders' equity (deficit):
Common stock, $.01 per value; 10,000 shares authorized;
1,992.3 and 3,389.6 shares issued and outstanding at
June 30, 1997 and September 30, 1997, respectively..... -- --
Paid-in capital........................................... 2 3
Accumulated deficit....................................... (89) (214)
------ ----
Total stockholders' equity (deficit).............. (87) (211)
------ ----
Total liabilities and stockholders' equity
(deficit)....................................... $ 211 $349
====== ====
</TABLE>
See accompanying notes to financial statements.
F-13
<PAGE> 78
PROVANT, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM
NOVEMBER 16, 1996
(DATE OF THREE MONTHS
INCEPTION) TO ENDED
JUNE 30, 1997 SEPTEMBER 30, 1997
----------------- ------------------
(UNAUDITED)
<S> <C> <C>
Revenue.................................................... $ -- $ --
-------- --------
General and administrative expenses........................ 149 200
-------- --------
Interest expense........................................... -- 8
Loss before income taxes................................... (149) (208)
-------- --------
Income tax benefit......................................... 60 83
-------- --------
Net loss................................................... $ (89) $ (125)
======== ========
</TABLE>
See accompanying notes to financial statements
F-14
<PAGE> 79
PROVANT, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK
----------------- ACCUMULATED
SHARES AMOUNT DEFICIT TOTAL
------- ------ ----------- -----
<S> <C> <C> <C> <C>
Initial capitalization............................... 1,992.3 $2 $ -- $ 2
Net (loss)................................. -- (89) (89)
------- -- -------- -----
Balance at June 30, 1997............................. 1,992.3 2 (89) (87)
Issuance of management shares........................ 1,397.3 1 -- 1
Net (loss)................................. -- -- (125) (125)
------- -- -------- -----
Balance, September 30, 1997 (Unaudited).............. 3,389.6 $3 $ (214) (211)
======= == ======== =====
</TABLE>
See accompanying notes to financial statements.
F-15
<PAGE> 80
PROVANT, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM
NOVEMBER 16, 1996
(DATE OF THREE MONTHS
INCEPTION) TO ENDED
JUNE 30, 1997 SEPTEMBER 30, 1997
---------------------- ------------------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net (loss)........................................... $ (89) $(125)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Changes in assets and liabilities:
Deferred offering costs......................... -- (50)
Accrued expenses................................ -- 8
Increase in deferred taxes...................... (60) (83)
----- -----
Net cash used in operating activities........ (149) (250)
----- -----
Cash flows from investing activities:
Acquisition of property and equipment................ (150) (3)
----- -----
Net cash used in investing activities........ (150) (3)
----- -----
Cash flows from financing activities...................
Issuance of stock.................................... 2 1
Increase in notes payable to stockholders............ 298 254
----- -----
Net cash provided by financing activities.... 300 255
----- -----
Net increase in cash and cash equivalents.............. 1 2
Cash and cash equivalents, beginning of period......... -- 1
----- -----
Cash and cash equivalents, end of period............... $ 1 $ 3
===== =====
</TABLE>
See accompanying notes to financial statements
F-16
<PAGE> 81
PROVANT, INC.
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS)
(1) BUSINESS AND ORGANIZATION
Provant, Inc. (the "Company"), a Delaware corporation, was incorporated on
November 16, 1996. Provant intends to acquire seven providers of training and
development services and products in separate merger transactions (the
"Combination") simultaneously with its initial public offering (the "Offering")
of its Common Stock. The consummation of the Combination is conditioned upon the
closing of the Offering.
The Company has not conducted any operations, and all activities to date
have related to the Offering and the Combination. The Company's cash balances
were generated from the initial capitalization of the Company (see Note 3). All
other expenditures to date have been funded by loans from two of the Company's
principal stockholders.
The stockholders have committed to loan the Company the expenses and costs
of the Offering and the Combination. As of June 30, 1997 and September 30, 1997,
approximately $298 and $560 (unaudited), respectively, have been loaned by the
stockholders in connection with the Offering and the Combination. Certain costs
have been accounted for as deferred offering costs. There is no assurance that
the pending Combination discussed below will be completed or that the Company
will be able to generate future operating revenues.
(2) INTERIM FINANCIAL INFORMATION
The interim financial statements as of September 30, 1997 and for the three
months then ended are unaudited, and certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been omitted. In the opinion
of management, all adjustments, consisting only of normal recurring adjustments
necessary to present fairly the financial position, results of operations and
cash flows with respect to the interim financial statements, have been included.
The results of operations for the interim periods are not necessarily indicative
of the results for the entire fiscal year.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(3) STOCKHOLDERS' EQUITY
In connection with its organization and initial capitalization, the Company
sold 1,992.3 shares of its common stock, $.01 par value per share (the "Common
Stock"), at $1.00 per share. During the three months ended September 30, 1997,
the Company sold 1,397.3 additional shares for $1.00 per share. Holders of
Common Stock are entitled to one vote for each share held of record on all
matters submitted to a vote of the stockholders, and do not have cumulative
voting rights.
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation," allows entities to choose between a fair value based
method of accounting for employee stock options or similar equity instruments
and the current intrinsic, value-based method of accounting prescribed by
Accounting Principles Board Opinion No. 25 (APB No. 25). Entities electing to
remain with the accounting in APB Opinion No. 25 must make pro forma disclosures
of net income and earnings per share as if the fair
F-17
<PAGE> 82
PROVANT, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
value method of accounting had been applied. The Company will provide pro forma
disclosure of net income and earnings per share, as applicable, in the notes to
future consolidated financial statements.
(4) PRO FORMA STOCKHOLDERS' EQUITY (UNAUDITED)
The following unaudited, pro forma share and per share data is based on the
Company's intentions with respect to the Offering.
In connection with the Offering, the Company will increase the authorized
shares of stock to 45 million, consisting of 40 million shares of Common Stock
and 5 million shares of Preferred Stock, and will declare a stock split of
871.52633-for-1 in the form of a stock dividend that will result in a total
amount of outstanding shares of Common Stock prior to the offering (but giving
effect to the Combination) of 6,805,605.
Preferred Stock
The Preferred Stock, if issued, would have priority over the Common Stock
with respect to dividends and other distributions, including the distribution of
assets upon liquidation. The Board of Directors has the authority, without
further stockholder authorization, to issued from time to time shares of
Preferred Stock in one or more series and to fix the terms, limitations,
relative rights and preferences and variations of each series.
The following presents stockholders' equity on an actual and pro forma
basis (to give effect to the recapitalization and stock split) as of September
30, 1997 (in thousands).
<TABLE>
<CAPTION>
ACTUAL PRO FORMA
------ ---------
<S> <C> <C>
Preferred Stock
None authorized (5 million shares authorized, none
issued and outstanding pro forma).................. $ -- $ --
Common Stock
10,000 shares authorized (40 million shares authorized
pro forma); 3,389.6 shares issued and outstanding,
(2,954,125 shares issued and outstanding, pro
forma)............................................. -- 3
Paid-in capital......................................... 3 --
Accumulated deficit..................................... (214) (214)
----- -----
Total......................................... $(211) $(211)
===== =====
</TABLE>
Equity Incentive Plan
The Company will adopt the 1998 Equity Incentive Plan (the "Equity
Incentive Plan"), which provides for the award of up to 1.1 million shares of
Common Stock in the form of incentive stock options ("ISOs"), non-qualified
stock options, stock appreciation rights, performance shares, restricted stock,
or stock units (each, an "Award"). All directors and employees of, and all
consultants and advisors to, the Company (including its subsidiaries) are
eligible to participate in the Equity Incentive Plan.
The Equity Incentive Plan will be administered by the Compensation
Committee (the "Committee"), which determines who shall receive Awards from
those individuals eligible to participate in the Equity Incentive Plan, the type
of Award to be made, the number of shares of Common Stock that may be acquired
pursuant to the Award and the specific terms and conditions of each Award,
including the purchase price, term, vesting schedule, restrictions on transfer
and any other conditions and limitations applicable to the Awards or their
exercise. Options that are ISOs may be exercisable for not more than 10 years
after the date the option is awarded. The Committee may at any time accelerate
the exercisability of all or any portion of an option.
F-18
<PAGE> 83
PROVANT, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Stock Options
On or prior to the date of the final Prospectus used in connection with the
Offering, the Company has agreed to grant options to purchase an aggregate of
833,464 shares of Common Stock having a per-share exercise price equal to the
initial offering price. Of this amount, options to purchase 665,280 shares will
become exercisable with respect to one-third of the underlying shares of Common
Stock on each of the first three anniversaries of the date of grant. The
remaining options to purchase 168,184 shares will become exercisable with
respect to all of the underlying shares of Common Stock upon the closing of the
Offering.
Stock Warrants
As partial consideration for the extension to the Company of the financing
described in Note 5 below, two of the Company's executive officers each received
two warrants. The first warrant is exercisable for 176,368 shares of common
stock at a per share exercise price equal to the initial public offering price.
The second warrant is a warrant to purchase 220,460 shares of common stock which
will become exercisable only if the market price of the Common Stock increases
to certain threshold levels except as described below (the "Contingent
Warrant"). Specifically, 20% of the total number of shares issuable under the
Contingent Warrants will become exercisable on each of the three occasions that
the market price of the Common Stock increases by 100%, 200%, 300%,
respectively, from the initial public offering price, and the remaining 40% of
the total number of shares issuable under the Contingent Warrant will become
exercisable if the market price of the Common Stock increases by 400%. However,
under certain circumstances involving the merger or sale of the Company, the
Contingent Warrant will become exercisable to purchase all of the warrant
shares. The exercise price of the Contingent Warrant increases on each
anniversary of the closing of the Offering. Specifically, the exercise price is
equal to the initial public offering price for the first 12 months following the
closing of the Offering and, for each 12-month period thereafter, is equal to
the initial public offering price plus 10% of the initial public offering price
multiplied by the number of full 12 month periods elapsed since the closing of
the Offering. However, once a portion of the Contingent Warrant becomes
exercisable, that portion's exercise price is fixed as of that date. All four
warrants expire on the seventh anniversary of the closing of the Offering.
The holders of the warrants have the right to require the Company to
register the resale of the shares that may be acquired upon exercise of the
warrants under the Securities Act of 1933, as amended.
Stock Purchase Plan
The Company will adopt the 1998 Employee Stock Purchase Plan (the "Plan").
The Plan provides for the sale of shares of Common Stock to employees at a
purchase price that is 85% of the lesser of the value of the Common Stock at the
beginning of a purchase period or at the end of a purchase period. The Company
has reserved 500,000 shares of Common Stock for issuance under the Plan.
Non-Employee Directors' Stock Plan
The Company's Board of Directors has adopted the Stock Plan for
Non-Employee Directors (the "Directors' Plan"). A total of 100,000 shares of
Common Stock are reserved for issuance under the Directors' Plan. Pursuant to
the Directors' Plan, on the date of the final Prospectus used in connection with
the Offering, each director and director nominee who is neither an employee of
the Company or one of its subsidiaries (a "non-employee director") will receive
an option to purchase 7,500 shares of Common Stock with a per-share exercise
price equal to the initial public offering price. Each non-employee director
initially elected following the Offering will be granted upon such election an
option to purchase 7,500 shares of Common Stock. Following his or her initial
election, each non-employee director will be granted, immediately following each
annual meeting of stockholders at which he or she is re-elected (and provided he
or she is still is a non-employee director at such time), an option to acquire
an additional 2,500 shares of Common Stock. The per
F-19
<PAGE> 84
PROVANT, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
share exercise price of options granted following the Offering will be the fair
market value of the Common Stock on the date of grant. Each option will be
non-transferable except upon death (unless otherwise approved by the Board),
will expire 10 years after the date of grant will become exercisable with
respect to all of the shares of Common Stock issuable thereunder on the date
that is six months following the date of grant if the individual is a director
at such time. If the director dies or otherwise ceases to be a director prior to
the expiration of an option, the option (if exercisable) will remain exercisable
for a period of one year following death or three months following other
termination of the individual's status as a director, but in no event beyond the
tenth anniversary of the date of grant. The Board of Directors may at any time
or times amend the Directors' Plan for any purpose that at the time may be
permitted by law.
(5) RELATED PARTY TRANSACTION
Expenses paid by the Company prior to the closing of the Offering have been
advanced under a $3 million line of credit issued on October 6, 1997 by two of
the Company's stockholders.
Amounts payable to stockholders under the line of credit are due on the
earlier of October 6, 2000 or the successful completion of the Offering and bear
interest at the prime rate as from time to time published in the Wall Street
Journal (8.5% at June 30, 1997).
The acquisition Company's property and equipment at June 30, 1997, obtained
from stockholders of the Company, was financed under the line of credit.
(6) SUBSEQUENT EVENT (UNAUDITED)
The Company and wholly-owned subsidiaries of the Company have signed
definitive agreements to acquire by merger seven companies ("the Founding
Companies") to be effective contemporaneously with the Offering. The companies
to be acquired are Behavioral Technology, Inc., Decker Communications, Inc., J.
Howard and Associates, Inc., Robert Steinmetz, Ph.D., and Associates, Inc.,
d/b/a, Learning Systems Sciences, MOHR Retail Learning Systems, Inc., Novations
Group, Inc. and Star Mountain, Inc. The aggregate consideration that will be
paid by Provant, Inc. to acquire the Founding Companies is approximately $59.2
million, consisting of $22.5 million in cash and 3,826,815 shares of Common
Stock (assuming an initial public offering price of $12.00 per share).
F-20
<PAGE> 85
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Behavioral Technology, Inc.:
We have audited the accompanying balance sheets of Behavioral Technology,
Inc., as of June 30, 1997 and 1996, and the related statements of operations,
stockholders' equity and cash flows for each of the years in the three-year
period ended June 30, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Behavioral Technology, Inc.
as of June 30, 1997 and 1996, and the results of its operations and its cash
flows for each of the years in the three-year period ended June 30, 1997, in
conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Boston, Massachusetts
January 9, 1998
F-21
<PAGE> 86
BEHAVIORAL TECHNOLOGY, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30,
---------------- SEPTEMBER 30,
1996 1997 1997
------ ------ -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 652 $1,254 $1,188
Accounts receivable, net of allowance for doubtful
accounts of $89 at June 30, 1996 and 1997 and September
30, 1997............................................... 940 1,055 1,655
Prepaid expenses.......................................... 67 143 160
------ ------ ------
Total current assets.............................. 1,659 2,452 3,003
------ ------ ------
Property and equipment, net................................. 194 135 117
Other assets................................................ 8 7 9
------ ------ ------
Total assets...................................... $1,861 $2,594 $3,129
====== ====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 270 $ 268 $ 267
Accrued expenses.......................................... 123 148 186
Accrued compensation...................................... 316 433 484
Deferred revenue.......................................... 12 43 15
------ ------ ------
Total current liabilities......................... 721 892 952
------ ------ ------
Commitments and contingencies
Stockholders' equity:
Common stock, $10 par value; 1,000 shares authorized; 100,
99 and 104 shares issued and outstanding at June 30,
1996, June 30, 1997 and September 30, 1997,
respectively........................................... 1 1 1
Additional paid-in capital................................ -- -- 182
Translation adjustment.................................... -- (6) (6)
Retained earnings......................................... 1,139 1,707 2,000
------ ------ ------
Total stockholders' equity........................ 1,140 1,702 2,177
------ ------ ------
Total liabilities and stockholders' equity........ $1,861 $2,594 $3,129
====== ====== ======
</TABLE>
See accompanying notes to financial statements.
F-22
<PAGE> 87
BEHAVIORAL TECHNOLOGY, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED JUNE 30, SEPTEMBER 30,
-------------------------- ------------------
1995 1996 1997 1996 1997
------ ------ ------ ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue....................................... $3,803 $5,685 $7,096 $1,712 $1,977
Cost of revenue............................... 1,049 1,495 1,488 387 385
------ ------ ------ ------ ------
Gross profit........................ 2,754 4,190 5,608 1,325 1,592
Selling, general and administrative
expenses.................................... 2,315 4,048 5,111 969 1,306
------ ------ ------ ------ ------
Income from operations.............. 439 142 497 356 286
------ ------ ------ ------ ------
Other income:
Royalties................................... 83 82 30 -- --
Interest.................................... 13 27 31 6 7
Other income, net........................... 43 -- 10 -- --
------ ------ ------ ------ ------
Total other income.................. 139 109 71 6 7
------ ------ ------ ------ ------
Net income.......................... $ 578 $ 251 $ 568 $ 362 $ 293
====== ====== ====== ====== ======
</TABLE>
See accompanying notes to financial statements.
F-23
<PAGE> 88
BEHAVIORAL TECHNOLOGY, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
---------------- PAID-IN TRANSLATION RETAINED
SHARES AMOUNT CAPITAL ADJUSTMENT EARNINGS TOTAL
------ ------ ---------- ----------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1994........... 100 $1 $ -- $-- $ 310 $ 311
Net income..................... -- -- -- -- 578 578
--- -- ---- --- ------ ------
Balance, June 30, 1995........... 100 1 -- -- 888 889
Net income..................... -- -- -- -- 251 251
--- -- ---- --- ------ ------
Balance, June 30, 1996........... 100 1 -- -- 1,139 1,140
Net income..................... -- -- -- -- 568 568
Translation adjustment......... -- -- -- (6) -- (6)
Stock surrender................ (1) -- -- -- -- --
--- -- ---- --- ------ ------
Balance, June 30, 1997........... 99 1 -- (6) 1,707 1,702
Net income..................... -- -- -- -- 293 293
Stock grant.................... 5 -- 182 -- -- 182
--- -- ---- --- ------ ------
Balance, September 30, 1997
(Unaudited).................... 104 $1 $182 $(6) $2,000 $2,177
=== == ==== === ====== ======
</TABLE>
See accompanying notes to financial statements.
F-24
<PAGE> 89
BEHAVIORAL TECHNOLOGY, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED JUNE 30, SEPTEMBER 30,
---------------------- --------------
1995 1996 1997 1996 1997
----- ----- ------ ----- ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income........................................ $ 578 $ 251 $ 568 $ 362 $ 293
----- ----- ------ ----- ------
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization................ 57 46 92 65 21
Non-cash compensation........................ -- -- -- -- 182
Changes in operating assets and liabilities:
Increase in accounts receivable........... (176) (195) (115) (205) (600)
Increase in prepaid expenses.............. -- (67) (76) (1) (17)
Decrease in other assets.................. -- -- 1 1 (2)
Increase (decrease) in accounts payable... 90 47 (2) (66) (1)
Increase in accrued expenses.............. 19 172 142 4 89
Increase (decrease) in deferred revenue... 22 (48) 31 -- (28)
----- ----- ------ ----- ------
Total adjustments....................... 12 (45) 73 (202) (356)
----- ----- ------ ----- ------
Net cash provided by (used in) operating
activities........................... 590 206 641 160 (63)
----- ----- ------ ----- ------
Cash flows from investing activities:
Purchases of property and equipment............... (157) (122) (42) (20) (3)
Proceeds from sale of property and equipment...... -- 5 9 -- --
Purchase of trademark............................. -- (7) -- -- --
----- ----- ------ ----- ------
Net cash used in investing activities... (157) (124) (33) (20) (3)
----- ----- ------ ----- ------
Cash flows from financing activities:
Proceeds received on line of credit............... -- -- 200 -- --
Principal payments on line of credit.............. -- -- (200) -- --
----- ----- ------ ----- ------
Net cash used in financing activities... -- -- -- -- --
----- ----- ------ ----- ------
Net increase (decrease) in cash and cash
equivalents....................................... 433 82 608 140 (66)
Effect of exchange rate changes on cash............. -- -- (6) (1) --
Cash and cash equivalents, beginning of period...... 137 570 652 652 1,254
----- ----- ------ ----- ------
Cash and cash equivalents, end of period............ $ 570 $ 652 1,254 $ 791 $1,188
===== ===== ====== ===== ======
Supplemental disclosure:
Cash paid for interest............................ $ -- $ -- $ 2 $ -- $ --
===== ===== ====== ===== ======
</TABLE>
See accompanying notes to financial statements.
F-25
<PAGE> 90
BEHAVIORAL TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS)
(1) NATURE OF OPERATIONS
Behavioral Technology, Inc. (the "Company") was founded in 1978. The
Company primarily provides train-the-trainer programs designed to help its
clients improve employee selection and to provide managers with a methodology
for assessing strengths and weaknesses of current employees. BTI's revenue is
derived primarily from the licensing to clients of the right to use its training
materials.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
Revenue is recognized as services are performed. The Company also licenses
to its clients the use of the Company's behavioral interviewing techniques. The
entire sale price is recognized when the noncancellable contract is signed and
the right to use the intellectual property is transferred. Deferred revenue is
recognized for payments received prior to services being performed.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Interim Financial Information
The interim financial statements as of September 30, 1997 and for the three
months ended September 30, 1996 and 1997, are unaudited, and certain information
and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles, have been omitted. In
the opinion of management, all adjustments, consisting only of normal recurring
adjustments necessary to present fairly the financial position, results of
operations and cash flows with respect to the interim financial statements have
been included. The results of operations for the interim periods are not
necessarily indicative of the results for the entire fiscal year.
Cash Equivalents
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
Prepaid Expenses
Prepaid expenses consist of costs incurred in developing videos and
publishing books. The costs of the videos are being amortized over five years
and the costs of the books are expensed as books are sold.
Property and Equipment
Property and equipment are stated at cost and depreciated using an
accelerated method over periods ranging from five to seven years. Leasehold
improvements are amortized over the term of the lease.
F-26
<PAGE> 91
BEHAVIORAL TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Fair Value of Financial Instruments
Financial instruments of the Company consist primarily of cash and cash
equivalents, short-term certificates of deposit, accounts receivable, accounts
payable and accrued expenses. The carrying value of these financial instruments
approximates their fair value due to the short maturity of these instruments.
Foreign Currency Translation
The Company operates a branch in Canada. Assets and liabilities for the
branch are translated into U.S. Dollars at the end of the year using year-end
exchange rates. Income and expenses are translated using the average exchange
rates for the year. Translation gains and losses are reported as a separate
component of stockholders' equity.
Income Taxes
The Company has elected to be treated as an S corporation. Therefore, the
net income of the Company is reported by the stockholders. Accordingly, no
provision for federal income taxes has been included in the financial
statements. Only certain state taxes are paid by the Company. The Company will
terminate its S corporation status concurrently with the combination described
in note 8.
(3) RELATED PARTY TRANSACTIONS
The Company conducts its administrative operations in a facility leased
from the principal stockholder of the Company. Lease expense for the years ended
June 30, 1995, 1996 and 1997 was $90, $76 and $85, respectively.
Future minimum lease payments under all noncancelable operating leases are
as follows:
<TABLE>
<CAPTION>
YEAR ENDING JUNE 30,
--------------------
<S> <C>
1998.................................................. $ 83
1999.................................................. 86
2000.................................................. 89
2001.................................................. 89
2002.................................................. 45
----
$392
====
</TABLE>
(4) PROPERTY AND EQUIPMENT
Property and equipment consist of the following at:
<TABLE>
<CAPTION>
JUNE 30,
------------
1996 1997
---- ----
<S> <C> <C>
Machinery and equipment..................................... $272 $307
Furniture and fixtures...................................... 97 95
Leasehold improvements...................................... 18 18
---- ----
387 420
Accumulated depreciation and amortization................... 193 285
---- ----
Property and equipment, net....................... $194 $135
==== ====
</TABLE>
Depreciation and amortization expense related to property and equipment for
the years ended June 30, 1995, 1996 and 1997 was $57, $46 and $92, respectively.
F-27
<PAGE> 92
BEHAVIORAL TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(5) LINE OF CREDIT
The Company entered into a line of credit agreement on October 15, 1996 for
borrowings up to $500. The line bears interest at prime plus 1%, is secured by
the accounts receivable of the Company, and is personally guaranteed by the
principal stockholder. The line of credit had a maturity date of October 15,
1997 and was renewed until October 15, 1998. There were no amounts outstanding
under this agreement at June 30, 1997.
(6) EMPLOYEE BENEFITS
The Company adopted a 401(k) profit sharing plan on January 1, 1996 that
covers all employees above the age of twenty-one who have completed one year of
service. Company contributions are made each year at the discretion of the Board
of Directors. The Company contributed $66 to the plan for the year ended June
30, 1996. No contribution was made for the year ended June 30, 1997.
(7) CONCENTRATION OF CREDIT RISK
The Company's credit risks primarily relate to cash and cash equivalents
and accounts receivable. Cash and cash equivalents are primarily held in bank
accounts. Cash deposits in excess of FDIC insurance limits approximated $1,040
at June 30, 1997. The Company has not incurred losses related to these balances
to date.
(8) SUBSEQUENT EVENT (UNAUDITED)
In February 1998, the Company entered into a definitive merger agreement
with Provant, Inc. ("Provant") and one of its subsidiaries, whereby Provant will
acquire the Company upon completion of the proposed initial public offering.
F-28
<PAGE> 93
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Decker Communications, Inc.:
We have audited the accompanying balance sheets of Decker Communications,
Inc., as of June 30, 1997 and 1996, and the related statements of operations,
stockholders' equity, and cash flows for each of the years in the three-year
period ended June 30, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Decker Communications, Inc.,
as of June 30, 1997 and 1996, and the results of its operations and its cash
flows for each of the years in the three-year period ended June 30, 1997 in
conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Boston, Massachusetts
January 9, 1998
F-29
<PAGE> 94
DECKER COMMUNICATIONS, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30,
---------------- SEPTEMBER 30,
1996 1997 1997
------ ------ -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 314 $ 508 $ 526
Investments............................................... 565 533 932
Accounts receivable, net of allowance for doubtful
accounts of $142 at June 30, 1996 and $150 at June 30,
1997 and September 30, 1997............................ 1,123 1,489 1,441
Receivables from related parties.......................... -- -- 290
Prepaid expenses and other current assets................. 170 140 102
------ ------ ------
Total current assets.............................. 2,172 2,670 3,291
------ ------ ------
Property and equipment, net................................. 497 338 359
Other assets................................................ 47 59 59
------ ------ ------
Total assets...................................... $2,716 $3,067 $3,709
====== ====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 251 $ 111 $ 284
Accrued expenses.......................................... 368 466 459
Accrued compensation...................................... 498 668 849
Taxes payable............................................. 44 35 62
Current portion of note payable........................... -- 416 410
Deferred revenue.......................................... 92 89 114
------ ------ ------
Total current liabilities......................... 1,253 1,785 2,178
------ ------ ------
Note payable, net of current portion........................ -- 623 615
Redeemable common stock..................................... -- 300 300
Commitments and contingencies
Stockholders' equity:
Common stock, no par value; 750,000 shares authorized;
176,972, 138,027 and 143,417 shares issued and
outstanding at June 30, 1996, June 30, 1997 and
September 30, 1997, respectively....................... 397 269 313
Unrealized gain on investments............................ 5 9 9
Note receivable from stock sales.......................... (92) (127) (171)
Retained earnings......................................... 1,153 208 465
------ ------ ------
Total stockholders' equity........................ 1,463 359 616
------ ------ ------
Total liabilities and stockholders' equity........ $2,716 $3,067 $3,709
====== ====== ======
</TABLE>
See accompanying notes to financial statements.
F-30
<PAGE> 95
DECKER COMMUNICATIONS, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED JUNE 30, SEPTEMBER 30,
-------------------------- ------------------
1995 1996 1997 1996 1997
------ ------ ------ ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue....................................... $8,550 $8,620 $8,410 $1,930 $2,585
Cost of revenue............................... 2,419 2,655 2,275 549 660
------ ------ ------ ------ ------
Gross profit................................ 6,131 5,965 6,135 1,381 1,925
Selling, general and administrative
expenses.................................... 5,670 5,716 5,621 1,261 1,663
------ ------ ------ ------ ------
Income from operations...................... 461 249 514 120 262
Other (income) expense........................ (54) (74) 9 (15) 3
------ ------ ------ ------ ------
Income before income taxes.................. 515 323 505 135 259
State income taxes............................ 67 30 33 2 2
------ ------ ------ ------ ------
Net income.................................. $ 448 $ 293 $ 472 $ 133 $ 257
====== ====== ====== ====== ======
</TABLE>
See accompanying notes to financial statements.
F-31
<PAGE> 96
DECKER COMMUNICATIONS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
NOTE
COMMON STOCK UNREALIZED RECEIVABLE
---------------- GAIN ON FROM STOCK RETAINED
SHARES AMOUNT INVESTMENTS SALES EARNINGS TOTAL
------- ------ ----------- ---------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1994................. 174,000 $ 314 $-- $ -- $ 986 $ 1,300
Sale of stock........................ 5,500 49 -- (50) -- (1)
Net income........................... -- -- -- -- 448 448
Dividends............................ -- -- -- -- (300) (300)
------- ----- -- ----- ------ -------
Balance, June 30, 1995................. 179,500 363 -- (50) 1,134 1,447
Sale of stock........................ 4,000 42 -- (42) -- --
Repurchase of stock.................. (6,528) (8) -- -- (59) (67)
Unrealized gain on investments....... -- -- 5 -- -- 5
Net income........................... -- -- -- -- 293 293
Dividends............................ -- -- -- -- (215) (215)
------- ----- -- ----- ------ -------
Balance, June 30, 1996................. 176,972 397 5 (92) 1,153 1,463
Sale of stock........................ 8,080 35 -- (35) -- --
Repurchase of stock.................. (37,850) (163) -- -- (963) (1,126)
Unrealized gain on investments....... -- -- 4 -- -- 4
Redeemable common stock.............. (9,175) -- -- -- (300) (300)
Net income........................... -- -- -- -- 472 472
Dividends............................ -- -- -- -- (154) (154)
------- ----- -- ----- ------ -------
Balance, June 30, 1997................. 138,027 269 9 (127) 208 359
Sale of stock........................ 5,390 44 -- (44) -- --
Net income........................... -- -- -- -- 257 257
------- ----- -- ----- ------ -------
Balance, September 30, 1997
(Unaudited).......................... 143,417 $ 313 $9 $(171) $ 465 $ 616
======= ===== == ===== ====== =======
</TABLE>
See accompanying notes to financial statements.
F-32
<PAGE> 97
DECKER COMMUNICATIONS, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED JUNE 30, ENDED SEPTEMBER 30,
----------------------- -------------------
1995 1996 1997 1996 1997
----- ----- ----- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income..................................... $ 448 $ 293 $ 472 $ 133 $ 257
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization............. 127 223 194 55 44
(Gain) loss on disposal of property and
equipment.............................. -- (3) 12 -- --
Changes in operating assets and
liabilities:........................... -- -- -- -- --
(Increase) decrease in accounts
receivable, trade.................... (184) 62 (366) (11) 48
(Increase) decrease in prepaid expenses
and other current assets............. (38) (22) 30 (8) (252)
(Increase) decrease in other assets.... (18) 7 (12) -- --
Increase (decrease) in accounts payable
and accrued expenses................. 221 (28) 119 (135) 374
Increase (decrease) in deferred
revenue.............................. (40) (61) (3) 17 25
----- ----- ----- ----- -----
Total adjustments.................... 68 178 (26) (82) 239
----- ----- ----- ----- -----
Net cash provided by operating
activities........................ 516 471 446 51 496
----- ----- ----- ----- -----
Cash flows from investing activities:
Net change in investments...................... (344) 131 36 -- (399)
Purchases of property and equipment............ (136) (443) (56) (6) (65)
Proceeds from sale of property and equipment... -- 6 9 -- --
----- ----- ----- ----- -----
Net cash used in investing
activities........................ (480) (306) (11) (6) (464)
----- ----- ----- ----- -----
Cash flows from financing activities:
Dividends...................................... (300) (215) (154) -- --
Sale (repurchase) of stock..................... 50 (25) (35) -- --
Payments of notes payable...................... (6) -- (52) (13) (14)
----- ----- ----- ----- -----
Net cash used in financing
activities........................ (256) (240) (241) (13) (14)
----- ----- ----- ----- -----
Net (decrease) increase in cash and cash
equivalents.................................... (220) (75) 194 32 18
Cash and cash equivalents, beginning of period... 609 389 314 314 508
----- ----- ----- ----- -----
Cash and cash equivalents, end of period......... $ 389 $ 314 $ 508 $ 346 $ 526
===== ===== ===== ===== =====
Supplemental disclosure:
Cash paid for interest......................... $ -- $ -- $ 80 $ -- $ 19
===== ===== ===== ===== =====
Supplemental disclosure of non-cash item:
Increase (decrease) in market value of
investments................................. $ 19 $ (11) $ 4 $ -- $ --
===== ===== ===== ===== =====
</TABLE>
See accompanying notes to financial statements.
F-33
<PAGE> 98
DECKER COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS)
(1) NATURE OF OPERATIONS
Decker Communications, Inc. (the "Company") was founded in 1979. The
Company provides instructor-led training to businesses to improve employees'
business communication skills and communication between management and
employees. Revenue is derived primarily from fees charged to participants in its
instructor-led training programs.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
Revenues are recognized as products and services are provided.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Interim Financial Information
The interim financial statements as of September 30, 1997 and for the three
months ended September 30, 1996 and 1997 are unaudited, and certain information
and footnote disclosures normally included in the financial statements prepared
in accordance with generally accepted accounting principles have been omitted.
In the opinion of management, all adjustments consisting only of normal
recurring adjustments necessary to present fairly the financial position,
results of operations and cash flows with respect to the interim financial
statements have been included. The results of operations for the interim periods
are not necessarily indicative of the results for the entire fiscal year.
Cash Equivalents
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
Marketable Securities
Marketable investment securities consist of U.S. treasury bills and equity
securities in various mutual funds. The investments are stated at fair market
value and are accounted for as available for sale securities under the
provisions of Statement of Financial Accounting Standards No. 115, Accounting
for Certain Investments in Debt and Equity Securities. Unrealized gains are
included as a separate component of stockholders' equity.
Property and Equipment
Property and equipment are stated at cost and depreciated using an
accelerated method over periods ranging from five to seven years. Leasehold
improvements are amortized over the lease term.
Fair Value of Financial instruments
Financial instruments of the Company consist of cash and cash equivalents,
investments, accounts and notes receivable, accounts payable and accrued
liabilities. The carrying value of these financial instruments
F-34
<PAGE> 99
DECKER COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
approximates their fair value because of the short maturity of these
instruments. Based upon borrowing rates currently available to the Company for
issuance of similar debt with similar terms and remaining maturities, the
estimated fair value of the long-term debt approximates its carrying amount.
Income Taxes
The Company has elected to be treated as an S corporation. Therefore, the
net income of the Company is reported by the stockholders. Accordingly, no
provision for federal income taxes has been included in the financial
statements. Only certain state taxes are paid by the Company. The Company will
terminate its S corporation status concurrently with the combination described
in note 10.
Library of Copyrighted Materials
The Company derives a substantial portion of its revenue from training
programs which are based on its library of copyrighted materials and other
materials developed within the Company. Costs associated with the development of
these materials have been expensed as incurred.
(3) RELATED PARTY TRANSACTIONS
The Company has a note receivable from a stockholder and officer of the
Company for the purchase of stock. The balance of this note was $92 and $127 at
June 30, 1996 and 1997, respectively. The note bears interest at the prevailing
rate and is secured by shares of Company stock and may be repaid by cash or
redemption of the stock to the Company. The note is reflected as a reduction of
stockholders' equity in the accompanying balance sheets.
(4) PROPERTY AND EQUIPMENT
Property and equipment consist of the following at:
<TABLE>
<CAPTION>
JUNE 30,
----------------
1996 1997
------ ------
<S> <C> <C>
Equipment.................................................. $ 665 591
Furniture and fixtures..................................... 336 334
Software................................................... 129 143
Leasehold improvements..................................... 17 19
------ ------
1,147 1,087
Accumulated depreciation and amortization.................. 650 749
------ ------
Property and equipment, net...................... $ 497 338
====== ======
</TABLE>
Depreciation and amortization expense related to property and equipment for
the years ended June 30, 1995, 1996 and 1997 was $127, $223 and $194,
respectively.
(5) NOTE PAYABLE
The note payable consists of a secured promissory note to a stockholder in
connection with a stock repurchase agreement. The note bears interest at 7.5%,
with principal and interest due monthly through June 30, 2009. The note is
secured by all tangible and intangible assets of the Company.
In connection with the stock repurchase agreement, the stockholder has the
option to accelerate the payment of a portion of the outstanding balance upon
the occurrence of certain events. One such event has occurred, as discussed in
note 10 (unaudited), giving the stockholder the right to accelerate
approximately
F-35
<PAGE> 100
DECKER COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
$416 of the principal balance. This amount has been classified as current in the
accompanying balance sheet at June 30, 1997. The stockholder has not yet chosen
to accelerate the note.
Also in connection with the stock repurchase agreement, the Company issued
a put option to the stockholder which gave him the right, upon occurrence of a
triggering event, to sell his remaining shares of common stock to the Company at
an arbitrated value per share. Payment pursuant to this put option would be made
by amending the principal balance of the note payable by the amount of the
purchase price, effective July 1, 1999. The stockholder has not yet chosen to
exercise the put option. Common shares held under this option have been
reflected as redeemable common stock in the June 30, 1997 balance sheet.
Principal payments on long-term debt are as follows:
<TABLE>
<CAPTION>
YEAR ENDING JUNE 30,
--------------------
<S> <C>
1998.......................................... $ 410
1999.......................................... 60
2000.......................................... 64
2001.......................................... 69
2002.......................................... 75
Thereafter.................................... 347
------
Total..................................... $1,025
======
</TABLE>
(6) LINE OF CREDIT
The Company has a $250 line of credit agreement with a bank, with interest
payable at prime plus 1.5%. The line of credit is secured by substantially all
of the Company's assets and is guaranteed by the principal stockholder of the
Company. At June 30, 1996 and 1997, there were no amounts outstanding under the
agreement.
(7) OPERATING LEASES
The Company leases all of its facilities under cancelable and noncancelable
operating leases that expire on various dates through fiscal 2002. Most of these
leases generally provide for rent escalation based upon changes in real estate
taxes and operating expenses.
Future minimum lease payments under all noncancelable operating leases are
as follows:
<TABLE>
<CAPTION>
YEAR ENDING JUNE 30,
--------------------
<S> <C>
1998.......................................... $ 494
1999.......................................... 502
2000.......................................... 382
2001.......................................... 374
2002.......................................... 108
------
Total $1,860
======
</TABLE>
Rent expense for the years ended June 30, 1995, 1996 and 1997 was $505,
$561 and $510, respectively.
(8) EMPLOYEE BENEFITS
The Company has a 401(k) plan in which it matches 50% of employee annual
contributions up to $1 per employee. The Company contributed $29, $20 and $28 to
the plan for the years ended June 30, 1995, 1996 and 1997, respectively.
F-36
<PAGE> 101
DECKER COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(9) CONCENTRATION OF CREDIT RISK
The Company's three largest customers accounted for approximately 16%, 30%,
and 16% of total revenues for the years ended June 30, 1995, 1996 and 1997,
respectively. Accounts receivable from these customers represented approximately
13% and 16% of the total accounts receivable balance at June 30, 1996 and 1997,
respectively.
(10) SUBSEQUENT EVENT (UNAUDITED)
In February 1998, the Company entered into a definitive merger agreement
with Provant, Inc. ("Provant") and one of its subsidiaries, whereby Provant will
acquire the Company upon completion of the proposed initial public offering.
F-37
<PAGE> 102
INDEPENDENT AUDITORS' REPORT
The Board of Directors
J. Howard & Associates, Inc.:
We have audited the accompanying balance sheets of J. Howard & Associates,
Inc., as of June 30, 1997 and December 31, 1996 and 1995, and the related
statements of operations, stockholders' equity, and cash flows for the six
months ended June 30, 1997 and each of the years in the three-year period ended
December 31, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of J. Howard & Associates,
Inc., as of June 30, 1997 and December 31, 1996 and 1995, and the results of its
operations and its cash flows for the six months ended June 30, 1997 and each of
the years in the three-year period ended December 31, 1996 in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Boston, Massachusetts
January 9, 1998
F-38
<PAGE> 103
J. HOWARD & ASSOCIATES, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------- JUNE 30, SEPTEMBER 30,
1995 1996 1997 1997
------ ------ -------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................ $ 466 $ 201 $ 280 $ 811
Accounts receivable, net of allowance for
doubtful accounts of $34 at December 31, 1995,
$84 at December 31, 1996, $108 at June 30,
1997 and $84 at September 30, 1997............ 761 724 1,688 1,350
Due from employees and related parties........... 68 17 6 52
Prepaid expenses................................. 4 14 85 50
------ ------ ------ ------
Total current assets..................... 1,299 956 2,059 2,263
------ ------ ------ ------
Property and equipment, net........................ 170 365 299 290
Other assets....................................... 53 44 44 44
------ ------ ------ ------
Total assets............................. $1,522 $1,365 $2,402 $2,597
====== ====== ====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................. $ 23 $ 12 $ 151 $ 116
Accrued expenses................................. 37 106 87 95
Accrued compensation............................. 372 32 34 97
Deferred revenue................................. 117 135 48 24
Accrued state income taxes....................... 27 38 38 38
Distributions payable............................ 138 -- -- 125
------ ------ ------ ------
Total current liabilities................ 714 323 358 495
------ ------ ------ ------
Commitments and contingencies
Stockholders' equity:
Class A voting common stock, no par value;
authorized 100,000 shares; issued and
outstanding 66,667 shares at December 31, 1995
and 72,533 shares at December 31, 1996, June
30, 1997 and September 30, 1997............... 64 175 175 175
Class B non-voting common stock, no par value;
authorized 25,000 shares; issued and
outstanding 13,333 shares at December 31, 1995
and 16,267 shares at December 31, 1996, June
30, 1997 and September 30, 1997............... 42 97 97 97
Retained earnings................................ 702 770 1,772 1,830
------ ------ ------ ------
Total stockholders' equity............... 808 1,042 2,044 2,102
------ ------ ------ ------
Total liabilities and stockholders'
equity................................. $1,522 $1,365 $2,402 $2,597
====== ====== ====== ======
</TABLE>
See accompanying notes to financial statements.
F-39
<PAGE> 104
J. HOWARD & ASSOCIATES, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
-------------------------- JUNE 30, ------------------
1994 1995 1996 1997 1996 1997
------ ------ ------ ----------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Revenue........................... $5,087 $6,251 $7,110 $4,160 $5,814 $6,077
Cost of revenue................... 1,713 1,964 2,166 1,190 1,782 1,851
------ ------ ------ ------ ------ ------
Gross profit.................... 3,374 4,287 4,944 2,970 4,032 4,226
Selling, general, and
administrative expenses......... 3,087 4,158 4,559 1,971 2,791 3,170
------ ------ ------ ------ ------ ------
Income from operations.......... 287 129 385 999 1,241 1,056
------ ------ ------ ------ ------ ------
Other income (expense):
Interest and dividend income.... 4 6 31 4 18 9
Interest expense................ (12) (9) -- -- -- --
Other income.................... -- -- 3 3 1 --
------ ------ ------ ------ ------ ------
Total other income
(expense)............. (8) (3) 34 7 19 9
------ ------ ------ ------ ------ ------
Income before income
taxes................. 279 126 419 1,006 1,260 1,065
State income taxes................ -- 10 8 4 4 5
------ ------ ------ ------ ------ ------
Net income.............. $ 279 $ 116 $ 411 $1,002 $1,256 $1,060
====== ====== ====== ====== ====== ======
</TABLE>
See accompanying notes to financial statements.
F-40
<PAGE> 105
J. HOWARD & ASSOCIATES, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
CLASS A VOTING CLASS B NON-VOTING
COMMON STOCK COMMON STOCK
---------------- ------------------ RETAINED
SHARES AMOUNT SHARES AMOUNT EARNINGS TOTAL
------ ------ ------- ------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993.......... 66,667 $ 64 13,333 $ 42 $ 861 $ 967
Net income........................ -- -- -- -- 279 279
Distributions to stockholders..... -- -- -- -- (81) (81)
------ ---- ------ ---- ------ ------
Balance, December 31, 1994.......... 66,667 64 13,333 42 1,059 1,165
Net income........................ -- -- -- -- 116 116
Distributions to stockholders..... -- -- -- -- (473) (473)
------ ---- ------ ---- ------ ------
Balance, December 31, 1995.......... 66,667 64 13,333 42 702 808
Net income........................ -- -- -- -- 411 411
Distributions to stockholders..... -- -- -- -- (343) (343)
Stock grant....................... 5,866 111 2,934 55 -- 166
------ ---- ------ ---- ------ ------
Balance, December 31, 1996.......... 72,533 175 16,267 97 770 1,042
Net income........................ -- -- -- -- 1,002 1,002
------ ---- ------ ---- ------ ------
Balance, June 30, 1997.............. 72,533 175 16,267 97 1,772 2,044
Net income........................ -- -- -- -- 58 58
------ ---- ------ ---- ------ ------
Balance, September 30, 1997
(Unaudited)....................... 72,533 $175 16,267 $ 97 $1,830 $2,102
====== ==== ====== ==== ====== ======
</TABLE>
See accompanying notes to financial statements.
F-41
<PAGE> 106
J. HOWARD & ASSOCIATES, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SIX MONTHS ENDED SEPTEMBER 30,
--------------------- JUNE 30, ------------------
1994 1995 1996 1997 1996 1997
----- ----- ----- ---------------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income............................ $ 279 $ 116 $ 411 $1,002 $1,256 $1,060
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization.... 83 95 104 75 69 130
Non-cash compensation............ -- -- 166 -- -- --
Loss on sale of property and
equipment..................... -- -- -- 15 -- 15
Changes in operating assets and
liabilities:
(Increase) decrease in
accounts receivable......... 181 (116) 37 (964) (344) (626)
(Increase) decrease in prepaid
expenses.................... 7 10 (10) (71) -- (36)
(Increase) decrease in other
assets...................... (12) 12 9 -- 11 --
Increase (decrease) in
accounts payable and accrued
expenses.................... 21 153 (282) 122 (199) 158
Increase (decrease) in state
income taxes................ -- 8 11 -- -- --
Increase (decrease) in
deferred revenue............ (17) 91 18 (87) 28 14
----- ----- ----- ------ ------ ------
Total adjustments........... 263 253 53 (910) (435) (345)
----- ----- ----- ------ ------ ------
Net cash provided by
operating activities..... 542 369 464 92 821 715
----- ----- ----- ------ ------ ------
Cash flows from investing activities:
Purchases of property and equipment... (133) (50) (299) (52) (224) (98)
Proceeds from sale of property and
equipment.......................... -- -- -- 28 -- 28
Net (increase) decrease in amounts due
from employees and related
parties............................ 41 (8) 51 11 22 (35)
----- ----- ----- ------ ------ ------
Net cash used in investing
activities............... (92) (58) (248) (13) (202) (105)
----- ----- ----- ------ ------ ------
Cash flows from financing activities:
Payments on long-term debt............ (50) (42) -- -- -- --
Distributions to stockholders......... (81) (335) (481) -- (449) --
----- ----- ----- ------ ------ ------
Net cash used in financing
activities............... (131) (377) (481) -- (449) --
----- ----- ----- ------ ------ ------
Net increase (decrease) in cash and cash
equivalents........................... 319 (66) (265) 79 170 610
Cash and cash equivalents, beginning of
period................................ 213 532 466 201 466 201
----- ----- ----- ------ ------ ------
Cash and cash equivalents, end of
period................................ $ 532 $ 466 $ 201 $ 280 $ 636 $ 811
===== ===== ===== ====== ====== ======
Supplemental disclosure:
Cash paid for interest................ $ 11 $ 9 $ -- $ -- $ -- $ --
===== ===== ===== ====== ====== ======
</TABLE>
F-42
<PAGE> 107
J. HOWARD & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS)
(1) NATURE OF OPERATIONS
J. Howard & Associates, Inc. (the "Company") was founded in 1977. The
Company provides instructor-led training to individual managers and client
companies to identify and address potential obstacles to improving workplace
productivity, including race and gender issues, sexual harassment and failure of
employees to take measured risks. Revenue is derived primarily from
instructor-led seminars and, to a lesser extent, from rendering consulting
services.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
Revenue is recognized as products and services are provided.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Interim Financial Information
The interim financial statements as of September 30, 1997 and for the nine
months ended September 30, 1996 and 1997, are unaudited, and certain information
and footnote disclosures normally included in the financial statements prepared
in accordance with generally accepted accounting principles, have been omitted.
In the opinion of management, all adjustments consisting only of normal
recurring adjustments necessary to present fairly the financial position,
results of operations and cash flows with respect to the interim financial
statements have been included. The results of operations for the interim periods
are not necessarily indicative of the results for the entire fiscal year.
Cash Equivalents
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
Property and Equipment
Property and equipment are stated at cost and depreciated using accelerated
and straight-line methods over periods ranging from three to seven years.
Leasehold improvements are amortized over the term of the lease.
Fair Value of Financial Instruments
Financial instruments of the Company consist primarily of cash and cash
equivalents, accounts receivable, accounts payable and accrued expenses. The
carrying value of these financial instruments approximates their fair value
because of the short maturity of these instruments.
Income Taxes
The Company has elected to be treated as an S corporation. Therefore, the
net income of the Company is reported by the stockholders. Accordingly, no
provision for federal income taxes has been included in the
F-43
<PAGE> 108
J. HOWARD & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
financial statements. Only certain state taxes are paid by its Company. The
Company will terminate its S corporation status concurrently with the
combination described in note 11.
(3) RELATED PARTY TRANSACTIONS
Due from employees and related parties consists of the following at:
<TABLE>
<CAPTION>
DECEMBER 31,
------------ JUNE 30,
1995 1996 1997
---- ---- --------
<S> <C> <C> <C>
Due from The Efficacy Institute, Inc.................. $ 9 $14 $ 7
Due from (to) stockholders............................ 47 (9) (12)
Due from employees.................................... 12 12 11
--- --- ----
68 17 6
=== === ====
</TABLE>
(4) PROPERTY AND EQUIPMENT
Property and equipment consist of the following at:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------- JUNE 30,
1995 1996 1997
---- ------ --------
<S> <C> <C> <C>
Equipment......................................... $512 $ 677 $ 631
Furniture and fixtures............................ 255 255 255
Leasehold improvements............................ 49 49 49
Investment art.................................... 21 21 21
Computer software................................. 16 113 156
Vehicles.......................................... -- 38 38
---- ------ ------
853 1,153 1,150
Accumulated depreciation and amortization......... 683 788 851
---- ------ ------
Property and equipment, net............. $170 $ 365 $ 299
==== ====== ======
</TABLE>
Depreciation and amortization expense related to property and equipment for
the years ended December 31, 1994, 1995 and 1996 was $83, $95 and $104,
respectively, and $75 for the six months ended June 30, 1997.
(5) LINE OF CREDIT
The Company has a secured revolving line of credit agreement which permits
borrowings of up to $500 at the bank's base rate plus one percent. No amounts
were outstanding under this agreement at December 31, 1995, 1996 and June 30,
1997. Substantially all assets of the Company are pledged as collateral under
this agreement.
(6) DISTRIBUTIONS TO STOCKHOLDERS
As discussed in note 2, the stockholders are taxed on their proportionate
share of the Company's taxable income. It has been the Company's policy to make
distributions to the stockholders for the purpose of funding these income tax
obligations.
F-44
<PAGE> 109
J. HOWARD & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(7) LEASE COMMITMENTS
The Company is committed under various noncancelable operating leases for
office space and equipment through January 2002. Lease expense charged to
operations was $239 in 1994, $256 in 1995, $247 in 1996 and $72 for the six
months ended June 30, 1997.
Future minimum lease payments under all noncancelable operating leases are
as follows:
<TABLE>
<CAPTION>
YEAR ENDING JUNE 30,
--------------------
<S> <C>
1998.................................................. $102
1999.................................................. 71
2000.................................................. 69
2001.................................................. 55
2002.................................................. 35
----
$332
====
</TABLE>
(8) STOCKHOLDERS' EQUITY
During the year ended December 31, 1996, 5,866 shares of Class A common
stock (voting) no par value and 2,934 shares of Class B common stock
(non-voting) no par value were issued 50% each to two new shareholders in
recognition of compensation expense of $111 and $55, respectively.
On June 30, 1995, the Company approved an increase in the authorized common
stock Class A (voting) from 12,500 shares to 100,000 shares and common stock
Class B (non-voting) from 1,000 shares to 25,000 shares. Additionally, the
Company approved an exchange of 40 shares of the newly authorized shares for
each share of the previously authorized shares (or a 40 for 1 stock split). All
share data has been retroactively adjusted to reflect the stock split.
(9) EMPLOYEE BENEFITS
The Company maintains a defined contribution retirement plan for all
eligible employees. Company contributions are at the discretion of the Board of
Directors, but cannot exceed the maximum amount deductible under applicable
provisions of the Internal Revenue Code.
Contributions to the plan during the years ended December 31, 1994, 1995
and 1996 amounted to $23, $34 and $34, respectively. Contributions to the plan
during the six months ended June 30, 1997 totaled $19.
(10) CONCENTRATION OF CREDIT RISK
The Company's three largest customers accounted for approximately 38%, 30%,
63% and 43% of net program revenues for the years ended December 31, 1994, 1995
and 1996 and the six months ended June 30, 1997, respectively. Accounts
receivable from these customers approximated $319, $514 and $532 at December 31,
1995 and 1996 and June 30, 1997, respectively.
The Company maintains cash deposits in two banks located in eastern
Massachusetts and in a money market mutual fund account sponsored by a
registered broker-dealer. Cash deposits in excess of FDIC insurance limits
approximated $140 and $46 at December 31, 1996 and June 30, 1997, respectively.
F-45
<PAGE> 110
J. HOWARD & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(11) SUBSEQUENT EVENTS (UNAUDITED)
In February 1998, the Company entered into a definitive merger agreement
with Provant, Inc. ("Provant") and one of its subsidiaries, whereby Provant will
acquire the Company upon completion of the proposed initial public offering.
In December 1997, the Company entered into a five-year lease of office
space in Burlington, Massachusetts, commencing on April 1, 1998. At that time,
the Company will move its Lexington headquarters to Burlington.
F-46
<PAGE> 111
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Robert Steinmetz, Ph.D., and Associates, Inc.
d/b/a Learning Systems Sciences:
We have audited the accompanying balance sheets of Robert Steinmetz, Ph.D.,
and Associates, Inc., d/b/a Learning Systems Sciences as of June 30, 1997 and
December 31, 1996 and the related statements of operations, stockholders' equity
and cash flows for the six months ended June 30, 1997 and for each of the years
in the two-year period ended December 31, 1996. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Robert Steinmetz, Ph.D., and
Associates, Inc., d/b/a Learning Systems Sciences as of June 30, 1997 and
December 31, 1996 and the results of its operations and its cash flows for the
six months ended June 30, 1997 and for each of the years in the two-year period
ended December 31, 1996 in conformity with generally accepted accounting
principles.
KPMG PEAT MARWICK LLP
Boston, Massachusetts
January 9, 1998
F-47
<PAGE> 112
ROBERT STEINMETZ, PH.D., AND ASSOCIATES, INC.
D/B/A LEARNING SYSTEMS SCIENCES
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, SEPTEMBER 30,
1996 1997 1997
------------ -------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................. $ 274 $ 599 $ 508
Accounts receivable, net of allowance for doubtful
accounts of $88..................................... 703 729 697
Costs in excess of billings............................ 267 276 359
Prepaid expenses and other current assets.............. 53 81 56
------ ------ ------
Total current assets........................... 1,297 1,685 1,620
------ ------ ------
Property and equipment, net.............................. 129 144 153
Other assets............................................. 103 105 105
------ ------ ------
Total assets................................... $1,529 $1,934 $1,878
====== ====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable....................................... $ 64 $ 91 $ 97
Accrued expenses....................................... 166 191 174
Accrued compensation................................... 124 109 100
Billings in excess of costs............................ 710 353 362
------ ------ ------
Total current liabilities...................... 1,064 744 733
------ ------ ------
Commitments and contingencies
Stockholders' equity:
Common stock, $3 par value; 1,000 shares authorized,
issued and outstanding.............................. 3 3 3
Retained earnings...................................... 462 1,187 1,142
------ ------ ------
Total stockholders' equity..................... 465 1,190 1,145
------ ------ ------
Total liabilities and stockholders' equity..... $1,529 $1,934 $1,878
====== ====== ======
</TABLE>
See accompanying notes to financial statements.
F-48
<PAGE> 113
ROBERT STEINMETZ, PH.D., AND ASSOCIATES, INC.
D/B/A LEARNING SYSTEMS SCIENCES
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, ENDED SEPTEMBER 30,
---------------- JUNE 30, ----------------
1995 1996 1997 1996 1997
------ ------ ---------- ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue..................................... $3,332 $5,123 $2,910 $3,570 $3,960
Cost of revenue............................. 1,390 1,696 1,081 1,230 1,590
------ ------ ------ ------ ------
Gross profit.............................. 1,942 3,427 1,829 2,340 2,370
Selling, general and administrative
expenses.................................. 1,767 3,079 1,108 1,713 1,697
------ ------ ------ ------ ------
Income from operations............ 175 348 721 627 673
------ ------ ------ ------ ------
Other income (expense):
Other..................................... (49) -- -- -- --
Interest income, net...................... 2 9 7 4 12
------ ------ ------ ------ ------
Total other income (expense)...... (47) 9 7 4 12
------ ------ ------ ------ ------
Income before income taxes........ 128 357 728 631 685
Income taxes................................ 86 7 3 1 5
------ ------ ------ ------ ------
Net income........................ $ 42 $ 350 $ 725 $ 630 $ 680
====== ====== ====== ====== ======
</TABLE>
See accompanying notes to financial statements.
F-49
<PAGE> 114
ROBERT STEINMETZ, PH.D., AND ASSOCIATES, INC.
D/B/A LEARNING SYSTEMS SCIENCES
STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK
---------------- RETAINED
SHARES AMOUNT EARNINGS TOTAL
------ ------ -------- ------
<S> <C> <C> <C> <C>
Balance, December 31, 1994.............................. 1,000 $3 $ 70 $ 73
Net income............................................ -- -- 42 42
----- -- ------ ------
Balance, December 31, 1995.............................. 1,000 3 112 115
Net income............................................ -- -- 350 350
----- -- ------ ------
Balance, December 31, 1996.............................. 1,000 3 462 465
Net income............................................ -- -- 725 725
----- -- ------ ------
Balance, June 30, 1997.................................. 1,000 3 1,187 1,190
Net loss.............................................. -- -- (45) (45)
----- -- ------ ------
Balance, September 30, 1997 (Unaudited)................. 1,000 $3 $1,142 $1,145
===== == ====== ======
</TABLE>
See accompanying notes to financial statements.
F-50
<PAGE> 115
ROBERT STEINMETZ, PH.D., AND ASSOCIATES, INC.
D/B/A LEARNING SYSTEMS SCIENCES
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SIX MONTHS ENDED SEPTEMBER 30,
------------- JUNE 30, -----------------
1995 1996 1997 1996 1997
----- ----- ---------------- ----- ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income............................... $ 42 $ 350 $ 725 $630 $ 680
----- ----- ----- ---- -----
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization....... 48 43 25 38 37
Changes in operating assets and
liabilities:
(Increase) decrease in accounts
receivable..................... (467) (195) (26) 44 6
(Increase) decrease in prepaid
expenses and other current
assets......................... 12 (30) (28) (55) (3)
(Increase) decrease in costs in
excess of billings............. (184) 14 (9) 229 (92)
(Increase) decrease in other
assets......................... (17) (19) (2) (19) (2)
Increase (decrease) in accounts
payable and accrued expenses... 50 115 37 (39) 17
Increase (decrease) in billings
in excess of costs............. 560 37 (357) (59) (348)
----- ----- ----- ---- -----
Total adjustments.............. 2 (35) (360) 139 (385)
----- ----- ----- ---- -----
Net cash provided by operating
activities.................. 44 315 365 769 295
----- ----- ----- ---- -----
Cash flows from investing activities:
Purchases of property and equipment...... (84) (85) (40) (59) (61)
----- ----- ----- ---- -----
Net (decrease) increase in cash
and cash equivalents........ (40) 230 325 710 234
Cash and cash equivalents, beginning of
period................................... 84 44 274 44 274
----- ----- ----- ---- -----
Cash and cash equivalents, end of period... $ 44 $ 274 $ 599 $754 $ 508
===== ===== ===== ==== =====
</TABLE>
See accompanying notes to financial statements.
F-51
<PAGE> 116
ROBERT STEINMETZ, PH.D., AND ASSOCIATES, INC.
D/B/A LEARNING SYSTEMS SCIENCES
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS)
(1) NATURE OF OPERATIONS
Robert Steinmetz, Ph.D., and Associates, Inc., d/b/a Learning Systems
Sciences, was founded in 1979. The Company creates customized training products
that generally are designed to facilitate faster learning of customer interface
devices and higher productivity of retail associates. Revenue is derived
primarily from the design, development and delivery of its products.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
The Company follows the percentage-of-completion method of accounting for
contracts. Accordingly, income is recognized in the ratio that costs incurred
bear to estimated total costs. Adjustments to cost estimates are made
periodically, and losses expected to be incurred on contracts in progress are
charged to operations in the period such losses are determined. The aggregate of
costs incurred and income recognized on uncompleted contracts in excess of
related billings is shown as a current asset, and the aggregate of billings on
uncompleted contracts in excess of related costs incurred and income recognized
is shown as a current liability.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Interim Financial Information
The interim financial statements as of September 30, 1997 and for the nine
months ended September 30, 1996 and 1997, are unaudited, and certain information
and footnote disclosures normally included in the financial statements prepared
in accordance with generally accepted accounting principles, have been omitted.
In the opinion of management, all adjustments consisting only of normal
recurring adjustments necessary to present fairly the financial position,
results of operations and cash flows with respect to the interim financial
statements have been included. The results of operations for the interim periods
are not necessarily indicative of the results for the entire fiscal year.
Cash Equivalents
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
Property and Equipment
Property and equipment are recorded at cost and depreciated using an
accelerated method over periods ranging from five to seven years. Leasehold
improvements are amortized over the term of the lease.
F-52
<PAGE> 117
ROBERT STEINMETZ, PH.D., AND ASSOCIATES, INC.
D/B/A LEARNING SYSTEMS SCIENCES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS)
Fair Value of Financial Instruments
Financial instruments of the Company consist primarily of cash and cash
equivalents, accounts receivable, accounts payable and accrued liabilities. The
carrying value of these financial instruments approximates their fair value
because of the short maturity of these instruments.
Income Taxes
Effective August 31, 1995, the Company elected to be treated as an S
corporation. Therefore, the net income of the Company is reported by the
stockholders. Accordingly, no provision for federal income taxes has been
included in the financial statements for the periods subsequent to that date.
Only certain state income taxes are paid by the Company. The Company will
terminate its S corporation status concurrently with the combination described
in note 8.
(3) RELATED PARTY TRANSACTIONS
At June 30, 1997, the Company has unsecured, non-interest bearing loans
receivable from its stockholders in the amount of $22. This amount is included
in prepaid expenses and other current assets.
(4) PROPERTY AND EQUIPMENT
Property and equipment consist of the following at:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997
------------ --------
<S> <C> <C>
Machinery and equipment................................ $248 $283
Furniture and fixtures................................. 48 53
Automobiles............................................ 10 10
Leasehold improvements................................. 12 12
---- ----
318 358
Less accumulated depreciation and amortization......... 189 214
---- ----
Property and equipment, net.................. $129 144
==== ====
</TABLE>
Depreciation and amortization expense related to property and equipment for
the years ended December 31, 1995 and 1996 and the six months ended June 30,
1997 was $48, $43 and $25, respectively.
(5) OPERATING LEASES
Operating lease commitments consist of facility and automobile rentals.
Future minimum lease payments under all noncancelable operating leases are as
follows:
<TABLE>
<CAPTION>
YEAR ENDING JUNE 30,
<S> <C>
1998................................................ $135
1999................................................ 103
----
$238
====
</TABLE>
Lease expense for the years ended December 31, 1995 and 1996 and the six
months ended June 30, 1997 totaled $93, $112 and $57, respectively.
F-53
<PAGE> 118
ROBERT STEINMETZ, PH.D., AND ASSOCIATES, INC.
D/B/A LEARNING SYSTEMS SCIENCES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS)
(6) EMPLOYEE BENEFITS
The Company has established a profit sharing plan for the benefit of its
employees. Company contributions are made at the discretion of the Board of
Directors. The Company contributed $83 to the plan in 1995. No contribution was
made for the year ended December 31, 1996 or the six months ended June 30, 1997.
(7) CONCENTRATION OF CREDIT RISK
The Company had three customers that accounted for 41% of total revenue and
one customer that accounted for 15% of total revenue for the year ended December
31, 1996 and the six months ended June 30, 1997, respectively. Accounts
receivable from these customers represented approximately 50% and 41% of the
total accounts receivable balance at December 31, 1996 and June 30, 1997,
respectively.
(8) SUBSEQUENT EVENT (UNAUDITED)
In February 1998, the Company entered into a definitive merger agreement
with Provant, Inc. ("Provant") and one of its subsidiaries, whereby Provant will
acquire the Company upon completion of the proposed initial public offering.
F-54
<PAGE> 119
INDEPENDENT AUDITORS' REPORT
The Board of Directors
MOHR Retail Learning Systems, Inc.:
We have audited the accompanying balance sheets of MOHR Retail Learning
Systems, Inc., as of June 30, 1997 and 1996, and the related statements of
operations, stockholders' equity and cash flows for each of the years in the
two-year period ended June 30, 1997. These financial statements are the
responsibility of MOHR Retail Learning Systems, Inc.'s management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of MOHR Retail Learning
Systems, Inc. as of June 30, 1997 and 1996, and the results of its operations
and its cash flows for each of the years in the two-year period ended June 30,
1997, in conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Boston, Massachusetts
January 9, 1998
F-55
<PAGE> 120
MOHR RETAIL LEARNING SYSTEMS, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30,
------------ SEPTEMBER 30,
1996 1997 1997
---- ---- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $221 $260 $211
Accounts receivable, net of allowance for doubtful
accounts of $46 at June 30, 1996 and 1997 and September
30, 1997............................................... 211 548 441
Inventory................................................. 99 133 132
Prepaid expenses.......................................... 11 14 22
---- ---- ----
Total current assets.............................. 542 955 806
Property and equipment, net................................. 18 44 46
---- ---- ----
Total assets...................................... $560 $999 $852
==== ==== ====
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $118 $ 74 $143
Accrued expenses.......................................... 320 295 304
Accrued compensation...................................... 12 54 12
Deferred revenue.......................................... 48 73 98
---- ---- ----
Total current liabilities......................... 498 496 557
---- ---- ----
Commitments and contingencies
Stockholders' equity:
Common stock, no par value; 2,500 shares authorized; 100
shares issued and outstanding.......................... 4 4 4
Retained earnings......................................... 58 499 291
---- ---- ----
Total stockholders' equity........................ 62 503 295
---- ---- ----
Total liabilities and stockholders' equity........ $560 $999 $852
==== ==== ====
</TABLE>
See accompanying notes to financial statements.
F-56
<PAGE> 121
MOHR RETAIL LEARNING SYSTEMS, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
JUNE 30, SEPTEMBER 30,
---------------- -------------
1996 1997 1996 1997
------ ------ ---- -----
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenue................................................... $2,171 $3,015 $554 $ 556
Cost of revenue........................................... 677 825 187 204
------ ------ ---- -----
Gross profit............................................ 1,494 2,190 367 352
Selling, general and administrative expenses.............. 1,151 1,745 383 562
------ ------ ---- -----
Income (loss) from operations........................... 343 445 (16) (210)
Interest income (expense)................................. (3) 3 -- 3
------ ------ ---- -----
Income (loss) before income taxes....................... 340 448 (16) (207)
State income taxes........................................ 1 7 -- 1
------ ------ ---- -----
Net income (loss)............................... $ 339 $ 441 $(16) $(208)
====== ====== ==== =====
</TABLE>
See accompanying notes to financial statements.
F-57
<PAGE> 122
MOHR RETAIL LEARNING SYSTEMS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK
---------------- RETAINED EARNINGS
SHARES AMOUNT (ACCUMULATED DEFICIT) TOTAL
------ ------ --------------------- -----
<S> <C> <C> <C> <C>
Balance, June 30, 1995......................... 100 $ 4 $(281) $(277)
Net income................................... -- -- 339 339
--- --- ----- -----
Balance, June 30, 1996......................... 100 4 58 62
Net income................................... -- -- 441 441
--- --- ----- -----
Balance, June 30, 1997......................... 100 4 499 503
Net loss..................................... -- -- (208) (208)
--- --- ----- -----
Balance, September 30, 1997 (Unaudited)........ 100 $ 4 $ 291 $ 295
=== === ===== =====
</TABLE>
See accompanying notes to financial statements.
F-58
<PAGE> 123
MOHR RETAIL LEARNING SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
JUNE 30, SEPTEMBER 30,
-------------- --------------
1996 1997 1996 1997
----- ----- ----- -----
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)....................................... $ 339 $ 441 $ (16) $(208)
----- ----- ----- -----
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization...................... 10 15 2 4
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable...... (99) (337) (107) 107
(Increase) decrease in inventory................ 4 (34) (12) 1
(Increase) decrease in prepaid expenses......... 3 (3) (9) (8)
Increase (decrease) in accounts payable......... (1) (44) (23) 69
Increase in accrued expenses.................... (15) 17 (6) (33)
Increase (decrease) in deferred revenue......... (29) 25 46 25
----- ----- ----- -----
Total adjustments............................. (127) (361) (109) 165
----- ----- ----- -----
Net cash provided by (used in) operating
activities................................. 212 80 (125) (43)
----- ----- ----- -----
Cash flows from investing activities:
Purchases of property and equipment..................... (8) (41) (8) (6)
----- ----- ----- -----
Net cash used in investing activities......... (8) (41) (8) (6)
----- ----- ----- -----
Net increase (decrease) in cash and cash equivalents...... 204 39 (133) (49)
Cash and cash equivalents, beginning of period............ 17 221 221 260
----- ----- ----- -----
Cash and cash equivalents, end of period.................. $ 221 $ 260 $ 88 $ 211
===== ===== ===== =====
Supplemental disclosure:
Cash paid for interest.................................. $ -- $ 3 $ -- $ 3
===== ===== ===== =====
</TABLE>
See accompanying notes to financial statements.
F-59
<PAGE> 124
MOHR RETAIL LEARNING SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS)
(1) NATURE OF OPERATIONS
MOHR Retail Learning Systems, Inc. (the "Company") was founded in 1991. The
Company offers train-the-trainer seminars to help clients in the retail industry
to improve productivity by fostering a customer oriented focus at the sales
management and associate levels. In some of its programs, the Company trains
employees directly through instructor-led seminars. Revenue is derived primarily
from the licensing to clients of the right to use the Company's training
programs. Revenue is received on a participant or site basis.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
Revenue is recognized as services are performed. The Company contracts with
customers to provide materials and training seminars. Deferred revenue is
recognized for payments received prior to services being performed.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Interim Financial Information
The interim financial statements as of September 30, 1997 and for the three
months ended September 30, 1996 and 1997, are unaudited, and certain information
and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles, have been omitted. In
the opinion of management, all adjustments, consisting only of normal recurring
adjustments necessary to present fairly the financial position, results of
operations and cash flows with respect to the interim financial statements have
been included. The results of operations for the interim periods are not
necessarily indicative of the results for the entire fiscal year.
Cash Equivalents
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
Inventory
The Company owns training supplies and manuals which are accounted for
using the lower of cost first-in, first-out (FIFO) or market basis of
accounting.
Property and Equipment
Property and equipment are stated at cost and depreciated using an
accelerated method over five years. Leasehold improvements are amortized over
the term of the lease.
F-60
<PAGE> 125
MOHR RETAIL LEARNING SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Fair Value of Financial Instruments
The Company's financial instruments consist primarily of cash and cash
equivalents, accounts receivable, accounts payable and accrued expenses. The
carrying amount of these financial instruments approximates fair value because
of the short maturity of those instruments.
Income Taxes
The Company has elected to be treated as an S corporation. Therefore, the
net income of the Company is reported by the stockholders. Accordingly, no
provision for federal income taxes has been included in the financial
statements. Only certain state taxes are paid by the Company. The Company will
terminate its S corporation status concurrently with the combination discussed
in note 8.
(3) PROPERTY AND EQUIPMENT
Property and equipment consist of the following at:
<TABLE>
<CAPTION>
JUNE 30,
------------
1996 1997
---- ----
<S> <C> <C>
Equipment................................................... $34 61
Furniture................................................... 9 19
Leasehold improvements...................................... -- 4
--- --
43 84
Accumulated depreciation and amortization................... 25 40
--- --
Property and equipment, net....................... $18 44
=== ==
</TABLE>
Depreciation and amortization expense related to property and equipment was
$10 and $15 in the years ended June 30, 1996 and 1997, respectively.
(4) LEASE COMMITMENTS
The Company is committed under various noncancelable operating leases for
office space and equipment through February 2000. Lease expense for the years
ended June 30, 1996 and 1997 was $18 and $34, respectively. Future minimum lease
payments under all noncancelable operating leases are as follows:
<TABLE>
<CAPTION>
YEAR ENDING JUNE 30,
<S> <C>
1998............................................. $41
1999............................................. 40
2000............................................. 1
---
Total....................................... $82
===
</TABLE>
(5) EMPLOYEE BENEFITS
Eligible employees of the Company participate in a profit sharing plan
sponsored by the Company. The Plan provides that the Company make discretionary
contributions to the Plan. The Company made contributions of $145 and $104 for
the years ended June 30, 1996 and 1997, respectively.
F-61
<PAGE> 126
MOHR RETAIL LEARNING SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(6) CONCENTRATION OF CREDIT RISK
The Company's credit risks primarily relate to cash and cash equivalents
and accounts receivable. Cash and cash equivalents are primarily held in bank
accounts. Cash deposits in excess of FDIC insurance limits approximated $108 at
June 30, 1997. The Company has not incurred losses related to these balances to
date.
For the year ended June 30, 1996, the Company had one customer that
accounted for 11 percent of total revenue. For the year ended June 30, 1997, no
customer represented greater than 10 percent of total revenue.
(7) LITIGATION
The Company is involved in legal actions arising in the ordinary course of
business. Management believes that adequate provision has been made for any
liabilities which may result from such matters.
(8) SUBSEQUENT EVENT (UNAUDITED)
In February 1998, the Company entered into a definitive merger agreement
with Provant, Inc. ("Provant") and one of its subsidiaries, whereby Provant will
acquire the Company upon completion of the proposed initial public offering.
F-62
<PAGE> 127
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Novations Group, Inc.:
We have audited the accompanying balance sheets of Novations Group, Inc.,
as of June 30, 1997 and 1996, and the related statements of operations,
stockholders' equity, and cash flows for each of the years in the three-year
period ended June 30, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. The audit includes examining on a test basis evidence supporting
the amounts and disclosures in the financial statements. The audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Novations Group, Inc., as of
June 30, 1997 and 1996, and the results of its operations and its cash flows for
each of the years in the three-year period ended June 30, 1997 in conformity
with generally accepted accounting principles.
KPMG Peat Marwick LLP
Boston, Massachusetts
January 9, 1998
F-63
<PAGE> 128
NOVATIONS GROUP, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30,
---------------- SEPTEMBER 30,
1996 1997 1997
------ ------ -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 17 $ 88 $ 446
Accounts receivable, net of allowance for doubtful
accounts of $158....................................... 1,976 2,202 2,364
Receivable from related parties........................... 179 414 341
Prepaid expenses.......................................... 63 115 50
------ ------ ------
Total current assets.............................. 2,235 2,819 3,201
Property and equipment, net................................. 552 492 456
------ ------ ------
Total assets...................................... $2,787 $3,311 $3,657
====== ====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of notes payable.......................... 1,079 1,298 1,078
Accounts payable.......................................... 225 118 174
Accrued compensation...................................... 836 803 1,270
Accrued expenses.......................................... 275 177 135
------ ------ ------
Total current liabilities......................... 2,415 2,396 2,657
------ ------ ------
Notes payable............................................... 459 361 361
Commitments and contingencies
Stockholders' equity:
Common stock, $1.00 par value; 1,000,000 shares
authorized; 922, 1,000 and 1,000 shares issued and
outstanding at June 30, 1996, 1997 and September 30,
1997, respectively..................................... 1 1 1
Retained earnings......................................... (88) 553 638
------ ------ ------
Total stockholders' equity........................ (87) 554 639
------ ------ ------
Total liabilities and stockholders' equity........ $2,787 $3,311 $3,657
====== ====== ======
</TABLE>
See accompanying notes to financial statements.
F-64
<PAGE> 129
NOVATIONS GROUP, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED JUNE 30, SEPTEMBER 30,
-------------------------- ------------------
1995 1996 1997 1996 1997
------ ------ ------ ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue....................................... $7,175 $9,039 $9,018 $2,167 $2,464
Cost of revenue............................... 3,885 4,733 4,839 1,117 1,197
------ ------ ------ ------ ------
Gross profit........................ 3,290 4,306 4,179 1,050 1,267
Selling, general, and administrative
expenses.................................... 3,167 4,094 3,315 823 1,088
------ ------ ------ ------ ------
Income from operations.............. 123 212 864 227 179
------ ------ ------ ------ ------
Interest expense, net......................... 98 98 137 43 83
Income before income taxes.......... 25 114 727 184 96
Income taxes.................................. 22 40 20 -- 11
------ ------ ------ ------ ------
Net income.......................... $ 3 $ 74 $ 707 $ 184 $ 85
====== ====== ====== ====== ======
</TABLE>
See accompanying notes to financial statements.
F-65
<PAGE> 130
NOVATIONS GROUP, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
RETAINED
COMMON STOCK EARNINGS
---------------- (ACCUMULATED
SHARES AMOUNT DEFICIT) TOTAL
------ ------ ------------ -----
<S> <C> <C> <C> <C>
Balance, June 30, 1994............................... 896 $ 1 $ (45) $ (44)
Net income......................................... -- -- 3 3
Distributions to stockholders...................... -- -- (79) (79)
------ --- ----- -----
Balance, June 1995................................... 896 1 (121) (120)
Net income......................................... -- -- 74 74
Distributions to stockholders...................... -- -- (26) (26)
Stock issued....................................... 63 -- -- --
Stock buy back..................................... (37) -- (15) (15)
------ --- ----- -----
Balance, June 30, 1996............................... 922 1 (88) (87)
Net income......................................... -- -- 707 707
Distributions to stockholders...................... -- -- (66) (66)
Stock issued....................................... 78 -- -- --
------ --- ----- -----
Balance, June 30, 1997............................... 1,000 1 553 554
Net income......................................... -- -- 85 85
------ --- ----- -----
Balance, September 30, 1997 (Unaudited).............. 1,000 $ 1 $ 638 $ 639
====== === ===== =====
</TABLE>
See accompanying notes to financial statements.
F-66
<PAGE> 131
NOVATIONS GROUP, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED JUNE 30, SEPTEMBER 30,
--------------------- -------------
1995 1996 1997 1996 1997
----- ----- ----- ----- -----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income............................................. $ 3 $ 74 $ 707 $ 184 $ 85
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization....................... 203 167 197 45 45
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable........ (670) (357) (226) (92) (162)
(Increase) decrease in prepaid expenses and other
current assets................................. (250) 86 (287) (45) 138
Increase (decrease) in accounts payable and
accrued expenses............................... 358 (88) (238) 165 481
----- ----- ----- ----- -----
Total adjustments.............................. (359) (192) (554) 73 502
----- ----- ----- ----- -----
Net cash (used by) provided by operating
activities................................... (356) (118) 153 257 587
----- ----- ----- ----- -----
Cash flows from investing activities:
Purchases of property and equipment.................... (217) (427) (137) (143) (9)
----- ----- ----- ----- -----
Cash flows from financing activities:
Net repayments/proceeds from long-term debt............ 340 117 121 2 (220)
Capital distribution................................... (40) (41) (66) -- --
----- ----- ----- ----- -----
Net cash provided by financing activities...... 300 76 55 2 (220)
----- ----- ----- ----- -----
Net (decrease) increase in cash and cash equivalents..... (273) (469) 71 116 358
Cash and cash equivalents, beginning of period........... 759 486 17 17 88
----- ----- ----- ----- -----
Cash and cash equivalents, end of period................. $ 486 $ 17 $ 88 $ 133 $ 446
===== ===== ===== ===== =====
Supplemental disclosure:
Cash paid for interest................................. $ 120 $ 120 $ 151 $ 47 $ 87
===== ===== ===== ===== =====
</TABLE>
See accompanying notes to financial statements.
F-67
<PAGE> 132
NOVATIONS GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS)
(1) NATURE OF OPERATIONS
Novations Group, Inc. (the "Company") was founded in 1986. The Company
assists clients in, among other things, clarifying and communicating their
business strategies and re-designing their organizations and work systems.
Revenue is derived primarily from fees for professional services and, to a
lesser extent, from the sale of services and products to support human resources
management.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
Revenue is recognized as services are performed and products are provided.
Use of Estimates
The preparation of financial statements, in conformity with generally
accepted accounting principles, requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Interim Financial Information
The interim financial statements as of September 30, 1997 and for the three
months ended September 30, 1996 and 1997, are unaudited, and certain information
and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles, have been omitted. In
the opinion of management, all adjustments, consisting only of normal recurring
adjustments necessary to present fairly the financial position, results of
operations and cash flows with respect to the interim financial statements have
been included. The results of operations for the interim periods are not
necessarily indicative of the results for the entire fiscal year.
Cash Equivalents
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
Property and Equipment
Property and equipment are stated at cost and depreciated using the
straight-line method over periods ranging from five to seven years. Leasehold
improvements are amortized over the term of the lease.
Fair Value of Financial Instruments
Financial instruments of the Company consist of cash, marketable
securities, accounts receivable, accounts payable and accrued liabilities and
debt. The carrying value of these financial instruments approximates their fair
value due to the short maturity of these instruments. The carrying value of debt
approximates fair value because the interest rates on the debt approximate the
rates currently available to the Company.
F-68
<PAGE> 133
NOVATIONS GROUP, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Income Taxes
The Company has elected to be treated as an S corporation. Therefore, the
net income of the Company is reported by the stockholders. Accordingly, no
provision for federal income taxes has been included in the financial
statements. Only certain state taxes are paid by the Company. The Company will
terminate its S corporation status concurrently with the combination described
in note 10.
(3) RELATED PARTY TRANSACTIONS
The Company advanced cash to an entity controlled by the stockholders of
the Company. The balance due to the Company as of June 30, 1996, 1997 and
September 30, 1997 was $140, $332 and $192, respectively. Also included in
receivables from related parties are employee advances of $39, $82 and 149 at
June 30, 1996, 1997 and September 30, 1997, respectively.
The Company leases certain office facilities from a partnership controlled
by the Company's stockholders.
The terms of the lease require annual payments of $300,000, increasing by
3% per year, through March 2002. The Company has an option to renew the lease
for an additional five-year term. The Company has guaranteed a $1.2 million note
payable to a financial institution by the partnership.
(4) PROPERTY AND EQUIPMENT
Property and equipment consist of the following at:
<TABLE>
<CAPTION>
JUNE 30,
----------------
1996 1997
------ ------
<S> <C> <C>
Computer equipment and software............................ $ 922 945
Leasehold improvements..................................... 167 198
Office equipment........................................... 108 170
Furniture and fixtures..................................... 94 115
------ ------
1,291 1,428
Accumulated depreciation and amortization.................. 739 936
------ ------
Property and equipment, net........................... $ 552 492
====== ======
</TABLE>
Depreciation and amortization expense related to property and equipment for
the years ended June 1995, 1996 and 1997, was $203, $167 and $197, respectively.
(5) NOTES PAYABLE
Notes payable consist of notes to former stockholders, with interest
imputed at 8.75%. Payments are due monthly or annually through March 2002.
Aggregate maturities required on these notes at June 30, are as follows:
<TABLE>
<S> <C>
1998.................................................. $ 59
1999.................................................. 97
2000.................................................. 98
2001.................................................. 98
2002.................................................. 68
----
Total............................................ $420
====
</TABLE>
F-69
<PAGE> 134
NOVATIONS GROUP, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(6) OPERATING LEASES
The Company leases all of its facilities and certain office equipment under
cancelable and noncancelable operating leases that expire on various dates
through 2003.
Future minimum lease payments under all noncancelable operating leases,
including leases to related parties, are as follows:
<TABLE>
<CAPTION>
YEAR ENDING JUNE 30:
--------------------
<S> <C>
1998.................................................. $ 585
1999.................................................. 654
2000.................................................. 632
2001.................................................. 534
2002.................................................. 334
Thereafter............................................ 48
------
Total............................................ $2,787
======
</TABLE>
Lease expense for the years ended June 30, 1995, 1996 and 1997 was $71,
$211 and $385, respectively.
(7) LINE OF CREDIT
The Company has a $1,500 line of credit agreement with a bank, with
interest payable at the bank's prime rate. The interest rate at June 30, 1996
and 1997 was 10 percent. The line of credit is secured by substantially all of
the Company's assets and is guaranteed by the principal stockholders of the
Company.
The Company had $1,000 and $1,239 at June 30, 1996 and 1997, respectively,
outstanding under the agreement.
(8) EMPLOYEE BENEFITS
The Company has a 401(k) plan in which it matches 50% of employee
contributions up to a maximum of 4%. The Company contributed $44, $60 and $75 to
the plan for the years ended June 30, 1995, 1996 and 1997, respectively.
(9) CONCENTRATION OF CREDIT RISK
For the year ended June 30, 1995, the Company had two customers that each
accounted for greater than 10 percent of revenue. For each of the years ended
June 30, 1996 and 1997, the Company had one customer that accounted for greater
than 10 percent of revenue.
(10) SUBSEQUENT EVENT (UNAUDITED)
In February 1998, the Company entered into a definitive merger agreement
with Provant, Inc. ("Provant") and one of its subsidiaries, whereby Provant
will acquire the Company upon completion of the proposed initial public
offering.
F-70
<PAGE> 135
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Star Mountain, Inc. and Subsidiaries:
We have audited the accompanying consolidated balance sheets of Star
Mountain, Inc. and Subsidiaries as of December 31, 1995 and 1996, and June 30,
1997, and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the years in the three year period ended
December 31, 1996, and the six month period ended June 30, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Star Mountain,
Inc. and Subsidiaries as of December 31, 1995 and 1996, and June 30, 1997, and
the consolidated results of their operations and their cash flows for each of
the years in the three year period ended December 31, 1996, and the six month
period ended June 30, 1997, in conformity with generally accepted accounting
principles.
Friedman & Fuller, P.C.
Rockville, Maryland
December 5, 1997
F-71
<PAGE> 136
STAR MOUNTAIN, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------- JUNE 30, SEPTEMBER 30,
1995 1996 1997 1997
------------ ------------ -------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash.......................................... $ 4 $ 39 $ 233 $ 275
Accounts receivable........................... 3,758 4,395 5,240 4,573
Current portion of notes receivable, related
parties.................................... 60 181 307 344
Inventory..................................... -- 100 161 151
Other current assets.......................... 36 71 170 122
Deferred income taxes......................... -- 29 42 42
------ ------ ------ ------
Total current assets.................. 3,858 4,815 6,153 5,507
------ ------ ------ ------
Property and equipment:
Furniture and fixtures........................ 69 65 531 672
Office equipment.............................. 611 746 1,406 1,444
Computer software............................. 69 69 75 91
Leasehold improvements........................ 15 16 81 86
Automobiles................................... 21 31 31 41
------ ------ ------ ------
785 927 2,124 2,334
Less accumulated depreciation and
amortization............................... 385 423 1,416 1,482
------ ------ ------ ------
400 504 708 852
------ ------ ------ ------
Other assets:
Notes receivable, related parties, net of
current portion............................ 292 267 317 317
Other assets.................................. 71 140 318 604
Land held for investment...................... -- 110 110 110
Goodwill, net of accumulated amortization of
$16, $23, $40, and $51..................... 154 147 918 897
------ ------ ------ ------
517 664 1,663 1,928
------ ------ ------ ------
$4,775 $5,983 $8,524 $8,287
====== ====== ====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable, bank............................ $ 991 $ 905 $1,144 $1,360
Current portion of notes payable.............. 35 95 222 132
Accounts payable.............................. 1,127 1,295 2,028 1,645
Accrued expenses.............................. 439 573 732 814
Billings in excess of costs and earnings...... 324 1,076 1,681 1,269
------ ------ ------ ------
Total current liabilities............. 2,916 3,944 5,807 5,220
------ ------ ------ ------
Long-term liabilities:
Notes payable, net of current portion......... -- -- 379 379
Deferred income taxes......................... -- 29 126 126
------ ------ ------
Total long-term liabilities........... -- 29 505 505
------ ------ ------
Total liabilities..................... 2,916 3,973 6,312 5,725
------ ------ ------ ------
Commitments and contingencies
Stockholders' equity:
Common stock.................................. 8 8 2,098 2,102
Additional paid-in capital.................... 1,991 2,058 -- --
Retained earnings (deficit)................... (75) 529 740 1,086
------ ------ ------ ------
1,924 2,595 2,838 3,188
Less common stock held in treasury at cost.... (65) (585) (626) (626)
------ ------ ------ ------
1,859 2,010 2,212 2,562
------ ------ ------ ------
$4,775 $5,983 $8,524 $8,287
====== ====== ====== ======
</TABLE>
See accompanying notes to consolidated financial statements
F-72
<PAGE> 137
STAR MOUNTAIN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
------------------------------------------ JUNE 30, -----------------------------
1994 1995 1996 1997 1996 1997
------------ ------------ ------------ ---------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Revenue................. $9,731 $14,306 $16,313 $11,331 $11,785 $17,101
Direct costs............ 6,350 8,668 9,457 7,204 6,559 10,588
------ ------- ------- ------- ------- -------
Gross profit.......... 3,381 5,638 6,856 4,127 5,226 6,513
Operating expenses...... 2,973 4,411 5,476 3,674 4,085 5,647
------ ------- ------- ------- ------- -------
Income from
operations............ 408 1,227 1,380 453 1,141 866
------ ------- ------- ------- ------- -------
Other income (expense):
Interest income....... 25 19 25 37 7 100
Interest expense...... (86) (54) (65) (80) (45) (87)
Other, net............ (133) (200) (339) (74) (137) 9
------ ------- ------- ------- ------- -------
(194) (235) (379) (117) (175) 22
------ ------- ------- ------- ------- -------
Income before income
taxes................. 214 992 1,001 336 966 888
Income taxes............ 0 0 397 125 360 331
------ ------- ------- ------- ------- -------
Net income.............. $ 214 $ 992 $ 604 $ 211 $ 606 $ 557
====== ======= ======= ======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements
F-73
<PAGE> 138
STAR MOUNTAIN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RETAINED TREASURY STOCK
------------------ PAID-IN EARNINGS -------------------
SHARES AMOUNT CAPITAL (DEFICIT) SHARES AMOUNT TOTAL
--------- ------ ---------- --------- ---------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993..... 729,257 $ 7 $ 1,916 $ (902) -- $ -- $1,021
Issuance of common stock upon
exercise of options.......... 11,595 1 39 -- -- -- 40
Net income..................... -- -- -- 214 -- -- 214
--------- ------ ------- ------ ---------- ----- ------
Balance, December 31, 1994..... 740,852 8 1,955 (688) -- -- 1,275
Issuance of common stock upon
exercise of options.......... 11,827 -- 36 -- -- -- 36
Distributions to
shareholders................. -- -- -- (379) -- -- (379)
Purchase of treasury stock..... -- -- -- -- 22,700 (65) (65)
Net income..................... -- -- -- 992 -- -- 992
--------- ------ ------- ------ ---------- ----- ------
Balance, December 31, 1995..... 752,679 8 1,991 (75) 22,700 (65) 1,859
Issuance of common stock upon
exercise of options.......... 9,414 -- 67 -- -- -- 67
Purchase of treasury stock..... -- -- -- -- 65,671 (520) (520)
Net income..................... -- -- -- 604 -- -- 604
--------- ------ ------- ------ ---------- ----- ------
Balance, December 31, 1996..... 762,093 8 2,058 529 88,371 (585) 2,010
Issuance of common stock upon
exercise of options.......... 87,621 32 -- -- -- -- 32
Purchase of treasury stock..... -- -- -- -- 12,584 (41) (41)
Stock split, conversion to no
par stock.................... 7,272,518 2,058 (2,058) -- 1,110,505 -- --
Net income..................... -- -- -- 211 -- -- 211
--------- ------ ------- ------ ---------- ----- ------
Balance, June 30, 1997......... 8,122,232 2,098 0 740 1,211,460 (626) 2,212
Issuance of common stock upon
exercise of options.......... 5,100 4 -- -- -- -- 4
Net income (unaudited)......... -- -- -- 346 -- -- 346
--------- ------ ------- ------ ---------- ----- ------
Balance, September 30, 1997
(unaudited).................. 8,127,332 $2,102 $ 0 $1,086 1,211,460 $(626) $2,562
========= ====== ======= ====== ========== ===== ======
</TABLE>
See accompanying notes to consolidated financial statements
F-74
<PAGE> 139
STAR MOUNTAIN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
----------------------------- JUNE 30, ------------------------
1994 1995 1996 1997 1996 1997
------- -------- -------- ---------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Cash received from customers............ $ 9,381 $ 13,419 $ 16,428 $ 11,189 $ 12,742 $ 17,626
Cash paid to suppliers and employees.... (9,401) (12,620) (14,890) (10,210) (10,862) (16,354)
Interest received....................... 25 19 25 37 7 100
Interest paid........................... (86) (54) (65) (80) (45) (87)
Income taxes paid....................... -- -- (420) (96) (358) (286)
------- -------- -------- -------- -------- --------
Net cash provided by (used in)
operating activities.......... (81) 764 1,078 840 1,484 999
------- -------- -------- -------- -------- --------
Cash flows from investing activities:
Issuance of notes receivable............ (113) (64) (96) (176) (247) (213)
Acquisition of property and equipment... (60) (159) (61) (79) (41) (289)
Business acquisitions................... -- (100) (300) (621) (300) (621)
Purchase of land held for investment.... -- -- (110) -- (110) --
Other................................... 174 (8) 2 -- 15 --
------- -------- -------- -------- -------- --------
Net cash provided by (used in)
investing activities.......... 1 (331) (565) (876) (683) (1,123)
------- -------- -------- -------- -------- --------
Cash flows from financing activities:
Net borrowings (payments) on
line-of-credit....................... 122 (15) (86) 239 (241) 455
Principal payments on long-term debt.... (178) -- -- -- -- (90)
Proceeds from other notes payable....... 100 25 95 -- -- --
Payments on other notes payable......... (3) (34) (35) -- (35) --
Proceeds from issuance of common
stock................................ 39 35 68 32 33 36
Purchase of treasury stock.............. -- (65) (520) (41) (520) (41)
Distributions to shareholders........... -- (378) -- -- -- --
------- -------- -------- -------- -------- --------
Net cash provided by (used in)
financing activities.......... 80 (432) (478) 230 (763) 360
------- -------- -------- -------- -------- --------
Net increase (decrease) in cash........... 0 1 35 194 38 236
Cash, beginning of year................... 3 3 4 39 4 39
------- -------- -------- -------- -------- --------
Cash, end of year......................... $ 3 $ 4 $ 39 $ 233 $ 42 $ 275
======= ======== ======== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements
F-75
<PAGE> 140
STAR MOUNTAIN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
------------------------ JUNE 30, ----------------------
1994 1995 1996 1997 1996 1997
----- ------- ------ ---------- ------ -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Reconciliation of net income to net cash provided
by (used in) operating activities:
Net income..................................... $ 214 $ 992 $ 604 $ 211 $ 606 $ 557
----- ------- ------ ----- ------ -----
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................. 72 96 139 110 92 197
Loss on sale of assets......................... -- -- 4 12 4 12
Deferred income taxes.......................... -- -- -- 17 -- 17
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable......................... (344) (1,053) (637) (142) 372 525
Inventory................................... -- -- 18 (61) (45) (51)
Other current assets........................ (3) 47 (34) (62) 5 (14)
Other assets................................ (2) (25) (69) (105) (275) (391)
Increase (decrease) in:
Accounts payable............................ (45) 425 168 474 50 86
Accrued expenses............................ 33 116 133 (219) 90 (132)
Billings in excess of costs and anticipated
profits................................... (6) 166 752 605 585 193
----- ------- ------ ----- ------ -----
Total adjustments.............................. (295) (228) 474 629 878 442
----- ------- ------ ----- ------ -----
Net cash provided by (used in) operating
activities.................................. $ (81) $ 764 $1,078 $ 840 $1,484 $ 999
===== ======= ====== ===== ====== =====
</TABLE>
Non cash investing and financing activities: During the period ended June 30,
1997, the Company issued a note payable for $506,000 for a portion of the
purchase price of ORA.
See accompanying notes to consolidated financial statements
F-76
<PAGE> 141
STAR MOUNTAIN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS)
(1) NATURE OF OPERATIONS
Star Mountain, Inc. (the "Company") was founded in 1987. The Company is
primarily engaged in contracting with the U.S. Government to provide technical
and professional services in the form of computer-based training, software
development and computer applications support. In August 1996, the Company
formed a wholly-owned subsidiary, Star Digital, Inc. ("Star") to acquire the
assets of Computer Visions, Inc. Star is primarily a value added distributor of
computer equipment. In February 1997, the Company acquired the stock of Odyssey
Research Associates, Inc. ("ORA"). ORA is primarily engaged in contracting with
the U.S. Government to perform research relating to computer access and
security. ORA includes the accounts of 168004 Canada, Inc. ("ORA Canada"), a
wholly-owned subsidiary. ORA Canada performs similar contracts for the Canadian
Government.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
A major portion of the Company's revenue results from services performed
under U.S. government contracts, either directly or through subcontracts. The
majority of the Company's contracts are fixed-price contracts. Revenue on fixed
price contracts is recognized using the percentage of completion method based on
costs incurred in relation to total estimated costs. Revenue on
time-and-materials contracts is recognized to the extent of fixed billable rates
for hours delivered plus reimbursable costs. Revenue on cost-plus-fee contracts
is recognized based on reimbursable costs incurred plus estimated fees earned
thereon. At the time it is recognized that it is probable that a contract will
result in a loss and the loss can be reasonably estimated, the entire estimated
loss is included in the determination of net income. In accordance with industry
practice, amounts relating to long-term contracts are classified as current
assets although an indeterminable portion of these amounts is not expected to be
realized within one year.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Interim Financial Information
The interim financial statements as of September 30, 1997, and for the nine
months ended September 30, 1996 and 1997, are unaudited, and certain information
and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles, have been omitted. In
the opinion of management, all adjustments, consisting only of normal recurring
adjustments necessary to present fairly the financial position, results of
operations and cash flows with respect to the interim financial statements have
been included. The results of operations for the interim periods are not
necessarily indicative of the results for the entire fiscal year.
Credit Risk
The Company's accounts receivable consist principally of unsecured amounts
due from the U.S. Government.
Cash Equivalents
Cash equivalents are defined as highly liquid short-term investments whose
maturity dates do not extend past three months from the original date of
purchase. The Company has held no such instruments.
F-77
<PAGE> 142
STAR MOUNTAIN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Property and Equipment
Property and equipment are stated at cost and include additions and major
replacements or betterments. Depreciation and amortization are provided for in
amounts which amortize the cost of properties utilizing the straight-line method
over estimated useful lives of three to seven years. Maintenance, repairs and
minor renewals are expensed as incurred. Any gain or loss on disposition is
included in the determination of net income.
Goodwill
Goodwill represents the excess of the cost of business acquisitions,
accounted for by the purchase method, over the fair value of the net assets
thereof. Goodwill is being amortized on a straight-line basis principally over
14 years.
Fair Value of Financial Instruments
Financial instruments of the Company consist primarily of cash and cash
equivalents, accounts receivable, note payable, bank, accounts payable and
accrued expenses. The carrying value of these financial instrument approximates
their fair value because of the short maturity of these instruments.
Income Taxes
Through December 31, 1995, the Company had elected to be taxed as an S
Corporation and, accordingly, the financial statements for 1994 and 1995 do not
reflect any provision for income taxes since elements of income and deduction
passed through directly to the shareholders. Effective January 1, 1996, the
Company terminated its election to be taxed as an S corporation.
Deferred income tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial reporting and
tax bases of assets and liabilities. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be settled. Future
tax benefits recognized as deferred tax assets must be reduced by a valuation
allowance where it is more likely than not that the benefits may not be
realized.
(3) ACQUISITIONS
On June 19, 1995, the Company acquired all of the assets of BZ Academy,
Inc. (BZ). The acquisition has been accounted for as a purchase and has operated
as the AIT division of the Company. Tangible assets were recorded at their book
value at the date of purchase, which approximated their fair value. The
difference between the purchase price and the assets' book value was recorded as
goodwill.
On August 1, 1996, the Company formed a new corporation, Star Digital,
Inc., to acquire the assets of Computer Visions, Inc. The acquisition has been
accounted for as a purchase. Computer Visions' tangible assets were recorded at
their fair value, which approximated the purchase price. No goodwill was
recorded.
On February 21, 1997, the Company acquired the outstanding stock of ORA.
The acquisition has been accounted for as a purchase. The excess of the purchase
price over the book value of the net assets of ORA at the purchase date has been
recorded as goodwill.
On September 30, 1997, the Company acquired certain assets of Simms
Industries. The assets acquired consisted primarily of accounts receivable and
fixed assets.
F-78
<PAGE> 143
STAR MOUNTAIN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
See Note 13 regarding an additional acquisition after September 30, 1997,
and the pro forma acquisition information.
(4) ACCOUNTS RECEIVABLE
Accounts receivable consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------- JUNE 30, SEPTEMBER 30,
1995 1996 1997 1997
------ ------ -------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Government contracts:
Billed................................... $2,304 $3,333 $3,961 $3,268
Unbilled................................. 958 698 833 896
Other...................................... 496 364 446 409
------ ------ ------ ------
$3,758 $4,395 $5,240 $4,573
====== ====== ====== ======
</TABLE>
Included in unbilled accounts receivable are retainages due upon completion
of the contracts of approximately $54, $65, $70, and $55.
(5) NOTES RECEIVABLE
Notes receivable consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------ JUNE 30, SEPTEMBER 30,
1995 1996 1997 1997
---- ---- -------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Due to/from majority shareholder, unsecured
interest at prime, due December 1997........ $ 10 $131 $307 $344
Due from former employee, secured, interest at
10 percent, due December 31, 1998........... 342 317 317 317
---- ---- ---- ----
352 448 624 661
Less current portion.......................... 60 181 307 344
---- ---- ---- ----
$292 $267 $317 $317
==== ==== ==== ====
</TABLE>
(6) NOTE PAYABLE, BANK
The Company maintains a bank line of credit arrangement that provides for
borrowings of 90% of billed accounts receivable less than 90 days old, not to
exceed $3,500 in total. Advances bear interest at LIBOR plus 250 basis points.
The line is collateralized by substantially all of the Company's assets. The
agreement requires the Company to meet certain covenants including limitations
on dividends, and maintenance of adjusted tangible net worth, as defined. The
Company has been in compliance with the lender's covenants during each of the
periods presented. At December 31, 1995 and 1996, June 30, 1997, and September
30, 1997, overdrafts in the payroll and operating bank accounts amounting to
$722, $236, $346, and $217, respectively, have been included in the outstanding
balance on the line since such overdrafts are automatically covered by the bank
as checks are presented for payment.
F-79
<PAGE> 144
STAR MOUNTAIN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(7) OTHER NOTES PAYABLE
<TABLE>
<CAPTION>
DECEMBER 31,
------------- JUNE 30, SEPTEMBER 30,
1995 1996 1997 1997
----- ----- -------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Note payable, shareholder, representing temporary
advances of working capital, interest at LIBOR plus
250 basis points, due on demand. Unsecured.......... $35 $95 $ 95 $ 5
Note payable, purchase of subsidiary, ORA, interest at
9%, payable in four annual installments of $126,500
beginning February 1998. ........................... -- -- 506 506
--- --- ---- ----
Total................................................. 35 95 601 511
Less current portion.................................. 35 95 222 132
--- --- ---- ----
Long-term portion..................................... $ 0 $ 0 $379 $379
=== === ==== ====
</TABLE>
(8) EMPLOYEE BENEFITS
The Company has a 401(k) plan in which it matches 50% of employee
contributions, up to a maximum of 3% of each employee's gross annual
compensation. In addition, the Company may contribute a discretionary amount
annually. Total expense under the plan for the years ended December 31, 1994,
1995 and 1996, was $97, $121, and $123, respectively. Expense for the periods
ended June 30, 1997, September 30, 1996, and September 30, 1997, was $47, $91
and $75, respectively.
(9) COMMITMENTS AND CONTINGENCIES
Substantially all of the Company's revenue and costs for all periods since
December 31, 1995, are subject to audit by agencies of the U.S. Government.
Management does not expect the results of these audits to have a material impact
on the financial position or future results of operations of the Company.
The Company leases equipment and office space under various noncancellable
operating leases. The office leases provide for future rental increases based on
the Company's pro-rata share of increases in building operating expenses and
real estate taxes, and for inflation adjustments based on increases in the
Consumer Price Index. Rent expense, including month-to-month leases, for the
years ended December 31, 1994, 1995, and 1996, totalled $372, $557 and $595,
respectively. Rent expense for the periods ended June 30, 1997, September 30,
1996, and September 30, 1997, were $399, $558 and $653, respectively. Future
minimum lease commitments under non-cancellable operating leases for years
ending June 30, are as follows:
<TABLE>
<CAPTION>
OFFICE/
WAREHOUSE EQUIPMENT TOTAL
--------- --------- ------
<S> <C> <C> <C>
1998..................................................... $ 604 $166 $ 770
1999..................................................... 496 88 584
2000..................................................... 492 26 518
2001..................................................... 469 14 483
2002..................................................... 403 -- 403
------ ---- ------
$2,464 $294 $2,758
====== ==== ======
</TABLE>
F-80
<PAGE> 145
STAR MOUNTAIN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(10) COMMON STOCK
Common stock consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------- JUNE 30, SEPTEMBER 30,
1995 1996 1997 1997
------------ ------------ ---------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Par value............................. $ .01 .01 N/A N/A
Shares:
Authorized.......................... 1,000,000 1,000,000 15,000,000 15,000,000
Issued.............................. 752,679 762,093 8,122,232 8,127,332
</TABLE>
Effective February 14, 1997, the Company's voting common stock was
increased from 800,000 shares of $.01 par value to 12,000,000 shares of no par
value, and the non-voting stock was increased from 200,000 shares of $.01 par
value to 3,000,000 shares of no par value.
(11) STOCK OPTIONS
The Company offers key employees the opportunity to purchase stock through
the Star Mountain Key Person Stock Option Plan (the "Plan"). Under the Plan, the
Company issues options to eligible employees who must have one year of service
with the Company. The exercise price for the options is at or above the current
market price of the Company's shares, as determined by management. Management
has applied a consistent formula which includes gross revenue and net income in
determining the Company's share price. Options are exercisable upon issuance for
periods of 3 to 5 years from the date of the grant.
The activity in the Plan since 1994 is presented below. All options and
option prices have been restated to reflect the 12:1 stock split in February
1997.
<TABLE>
<CAPTION>
NUMBER OF OPTIONS WEIGHTED
OUTSTANDING AND AVERAGE
EXERCISABLE EXERCISE PRICE
----------------- --------------
<S> <C> <C>
Balance, December 31, 1993............................ 828,000 $0.26
Granted............................................. 264,000 0.42
Exercised........................................... (127,356) 0.23
Forfeited........................................... (52,644) 0.23
---------
Balance, December 31, 1994............................ 912,000 0.31
Granted............................................. 384,000 0.47
Forfeited........................................... (360,000) 0.21
---------
Balance, December 31, 1995............................ 936,000 0.42
Granted............................................. 936,000 0.49
Forfeited........................................... (348,000) 0.46
---------
Balance, December 31, 1996............................ 1,524,000 0.45
Granted............................................. 123,000 1.00
Exercised........................................... (73,200) 0.24
Forfeited........................................... (120,000) 0.49
---------
Balance, June 30, 1997................................ 1,453,800 0.50
Granted............................................. 60,000 1.00
---------
Balance, September 30, 1997........................... 1,513,800 0.52
=========
</TABLE>
F-81
<PAGE> 146
STAR MOUNTAIN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The weighted average price for options outstanding and exercisable at June
30, 1997, was $.50 and at September 30, 1997, was $.52. The weighted average
remaining term of the outstanding options is 3.2 years.
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation". SFAS No. 123 defines a "fair value based method" of accounting
for an employee stock option. Under this method, compensation cost is measured
at the grant date based on the value of the award and is recognized over the
service period. The Company has historically accounted for employee stock
options under the "intrinsic value method" as defined by APB Opinion No. 25,
"Accounting for Stock Issued to Employees". Under the intrinsic value method,
compensation cost is the excess, if any, of the quoted market price of the stock
at grant date over the amount an employee must pay to acquire the stock. The
Company's Plan, accounted for under APB Opinion No. 25, does not result in any
compensation cost.
SFAS No. 123 allows an entity to continue to use the intrinsic value method
and management has elected to do so. However, entities electing to remain on the
intrinsic value method must make pro forma disclosures of net income, as if the
fair value based method of accounting had been applied. Because the method of
accounting in SFAS No. 123 has not been applied to options granted prior to
January 1, 1994, the resulting pro forma compensation costs may not be
representative of the cost to be expected in future years.
Under SFAS No. 123, net income would have been as follows:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
------------------ JUNE 30, -------------
1994 1995 1996 1997 1996 1997
---- ---- ---- -------- ----- -----
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net income, as reported................... $214 $992 $604 $211 $606 $557
Pro forma net income...................... $211 $984 $586 $200 $593 $539
</TABLE>
The fair value of each option is estimated on the date of grant using the
following assumptions: no dividend yield, no volatility, risk-free interest
rates approximating 6% and expected lives of 3 to 5 years. The weighted average
grant date fair value of the options was as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, JUNE 30, SEPTEMBER 30, SEPTEMBER 30,
1994 1995 1996 1997 1996 1997
------------ ------------ ------------ -------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Weighted average fair
value.............. $.11 $.11 $.13 $.16 $.13 $.16
</TABLE>
(12) INCOME TAXES
Income tax expense consists of the following amounts:
<TABLE>
<CAPTION>
SEPTEMBER 30,
DECEMBER 31, JUNE 30, --------------
1996 1997 1996 1997
------------ -------- ----- -----
(UNAUDITED)
<S> <C> <C> <C> <C>
Current:
Federal...................................... $313 $139 $302 $322
State........................................ 84 30 58 53
Deferred:
Federal...................................... -- (41) -- (41)
State........................................ -- (3) -- (3)
---- ---- ---- ----
$397 $125 $360 $331
==== ==== ==== ====
</TABLE>
F-82
<PAGE> 147
STAR MOUNTAIN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The differences between the effective income tax rate and the statutory
federal income tax rates are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
DECEMBER 31, JUNE 30, ------------------------------
1996 1997 1996 1997
------------ -------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Computed "expected" tax on
income........................... 34.0% 34.0% 34.0% 34.0%
State taxes, net of federal
benefit.......................... 4.1 4.1 4.1 4.1
Other, net.................... 1.6 (0.9) (0.8) (0.8)
----- ----- ----- -----
Taxes on income.................... 39.7% 37.2% 37.3% 37.3%
===== ===== ===== =====
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities are presented below:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, SEPTEMBER 30,
1996 1997 1997
------------ -------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Deferred tax assets result from
accrued employee benefits,
principally vacation........................... $ 29 $ 42 $ 42
==== ==== ====
Deferred tax liabilities result from:
Differences in depreciation methods............ $ 29 $ 27 $ 27
Change in accounting method from cash to
accrual for ORA............................. -- 99 99
---- ---- ----
$ 29 $126 $126
==== ==== ====
</TABLE>
(13) SUBSEQUENT EVENT (UNAUDITED)
On October 1, 1997, the Company acquired the net assets of the Systems
Effectiveness Division (SED) of Essex Corporation for a total price of $1,475.
The net assets represent substantially all of the operating assets of the
division. The excess of the purchase price over the book value of the tangible
assets acquired of approximately $930 has been recorded as goodwill.
The following table sets forth the pro forma information assuming that all
acquisitions had occurred on January 1, 1995 (the earliest date information is
available). The pro forma information takes into account amortization of
goodwill and additional interest costs, net of tax benefits.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS
---------------------------- ENDED
1995 1996 JUNE 30, 1997
------------ ------------ -------------
<S> <C> <C> <C>
Gross revenue................................ $22,668 $24,818 $14,520
Operating income............................. 1,081 1,524 1,087
Net income................................... 723 529 121
</TABLE>
In November 1997, the Company entered into a definitive merger agreement
with Provant, Inc. ("Provant") and one of its subsidiaries, whereby Provant will
acquire the Company upon completion of the proposed initial public offering.
F-83
<PAGE> 148
================================================================================
No dealer, sales representative or any other person has been authorized to
give any information or to make any representations in connection with the
Offering other than those contained in this Prospectus, and, if given or made,
such information or representations must not be relied upon as having been
authorized by the Company or the Underwriters. This Prospectus does not
constitute an offer to sell or a solicitation of any offer to buy any securities
other than the shares of Common Stock to which it relates or an offer to, or a
solicitation of, any person in any jurisdiction where such an offer or
solicitation would be unlawful. Neither the delivery of this Prospectus nor any
sale made hereunder shall, under any circumstances, create any implication that
there has been no change in the affairs of the Company or that information
contained herein is correct as of any time subsequent to the date hereof.
----------------------------
TABLE OF CONTENTS
----------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................... 3
Risk Factors............................. 9
Combination.............................. 15
Use of Proceeds.......................... 18
Dividend Policy.......................... 18
Capitalization........................... 19
Dilution................................. 20
Selected Financial Data.................. 21
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................. 23
Business................................. 37
Management............................... 47
Principal Stockholders................... 53
Certain Transactions..................... 54
Description of Capital Stock............. 58
Shares Eligible for Future Sale.......... 59
Underwriting............................. 61
Legal Matters............................ 62
Experts.................................. 62
Additional Information................... 63
Index to Financial Statements............ F-1
</TABLE>
Until , 1998 (25 days after the date of this Prospectus), all
dealers effecting transactions in the registered securities offered hereby,
whether or not participating in this distribution, may be required to deliver a
Prospectus. This is in addition to the obligation of dealers to deliver a
Prospectus when acting as Underwriters and with respect to their unsold
allotments or subscriptions.
================================================================================
================================================================================
2,600,000 SHARES
PROVANT, INC.
COMMON STOCK
------------------------
PROSPECTUS
------------------------
NationsBanc Montgomery
Securities LLC
Salomon Smith Barney
Piper Jaffray Inc.
, 1998
================================================================================
<PAGE> 149
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered, other than
underwriting discounts and commissions. All of the amounts shown are estimated
except the Securities and Exchange Commission registration fee and the NASD
filing fee.
<TABLE>
<S> <C>
SEC registration fee........................................ $ 11,467
NASD filing fee............................................. 4,387
Blue Sky fees and expenses.................................. 1,500
New York Stock Exchange listing fee......................... 100,000
Printing and engraving expenses............................. 275,000
Legal fees and expenses..................................... 950,000
Accounting fees and expenses................................ 900,000
Transfer agent and registrar fees........................... 5,000
Premium for directors' and officers' insurance.............. 100,000
Miscellaneous............................................... 402,646
----------
Total............................................. $2,750,000
==========
</TABLE>
To the extent the foregoing fees and expenses are incurred prior to the
Closing, certain of the Company's executive officers will advance to the Company
the funds required to pay such fees and expenses, and the Company will reimburse
those individuals for such fees and expenses out of the proceeds of the
Offering.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company is a Delaware corporation. Reference is made to Section 145 of
the DGCL, as amended, which provides that a corporation may indemnify any person
who was or is a party to or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
corporation) by reason of the fact that he or she is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him or her in connection with such action,
suit or proceeding if he or she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceedings, had no
reasonable cause to believe his or her conduct was unlawful. Section 145 further
provides that a corporation similarly may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he or she is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees) actually and reasonably incurred by him or
her in connection with the defense or settlement of such action or suit if he or
she acted in good faith and in a manner he or she reasonably believed to be in
or not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Delaware Court of Chancery or the court
in which such action or suit was brought shall determine upon application that,
despite an adjudication of liability, but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper. The
Company's Certificate of Incorporation further provides that the Company shall
indemnify its directors and officers to the full extent permitted by the law of
the State of Delaware.
II-1
<PAGE> 150
The Company's Certificate of Incorporation provides that the Company's
directors shall not be liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director, except to the extent that
exculpation from liability is not permitted under the DGCL as in effect at the
time such liability is determined.
The Certificate of Incorporation and By-laws also provide that each person
who was or is made a party to, or is involved in, any action, suit, proceeding
or claim by reason of the fact that he or she is or was a director or officer of
the Registrant (or is or was serving at the request of the Registrant as a
director or officer of any other enterprise including service with respect to
employee benefit plans) shall be indemnified and held harmless by the
Registrant, to the full extent permitted by Delaware law, as in effect from time
to time, against all expenses (including attorneys' fees and expenses),
judgments, fines, penalties and amounts to be paid in settlement incurred by
such person in connection with the investigation, preparation to defend or
defense of such action, suit, proceeding or claim. The Company's By-laws allow
for similar rights of indemnification to be afforded, in the Company's
discretion, to its employees and agents.
The rights to indemnification and the payment of expenses provided by the
Certificate of Incorporation and By-laws do not apply to any action, suit,
proceeding or claim initiated by or on behalf of a person otherwise entitled to
the benefit of such provisions. Any person seeking indemnification under the
Certificate of Incorporation shall be deemed to have met the standard of conduct
required for such indemnification unless the contrary shall be established. Any
repeal or modification of such indemnification provisions shall not adversely
affect any right or protection of a director or officer with respect to any
conduct of such director or officer occurring prior to such repeal or
modification.
The Company maintains an indemnification insurance policy covering all
directors and officers of the Company and its subsidiaries.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In December 1996, the Company issued (i) 298.8, 762 and 762.1 shares of
Common Stock, respectively, at a purchase price of $1.00 per share, to the
Company's initial stockholders and (ii) 169.4 shares of Common Stock at a
purchase price of $1.00 per share to a consultant. In July 1997, the Company
issued 80.5, 260.4 and 351.6 shares of Common Stock, respectively, at a purchase
price of $1.00 per share, to additional consultants. In September 1997, the
Company issued (i) 134.2 and 201.4 shares of Common Stock, respectively, at a
purchase price of $1.00 per share, to two of the Company's initial stockholders
and (ii) 67.1, 100.7 and 201.4 shares of Common Stock, respectively, at a
purchase price of $1.00 per share, to consultants. In November 1997, the Company
issued 27.3 shares and one share of Common Stock, respectively, at a purchase
price of $1.00 per share, to two consultants.
In September 1997, the Company issued to a consultant an option to purchase
10,000 shares of Common Stock of the Company at a purchase price of $5.00 per
share, exercisable immediately upon the Closing. The option shall terminate
three years following the Closing.
As partial consideration for an agreement to extend financing to the
Company in connection with the Offering and the Combination, on October 6, 1997,
the Company issued two warrants to each of Paul M. Verrochi and Dominic J.
Puopolo. The first warrant entitles the holder to purchase (i) 68 shares of
Common Stock at $1.00 per share prior to the Offering or (ii) following the
Offering 2.0% of the Common Stock outstanding immediately prior to the Offering
(but giving effect to the Combination) at a per share exercise price equal to
the initial public offering price. The second warrant entitles the holder
following the Offering to purchase 2.5% of the Common Stock immediately prior to
the Offering (but giving effect to the Combination). The second warrant will be
exercisable only if the market price of the Common Stock increases to certain
threshold levels, or earlier under certain circumstances involving the merger or
sale of the Company.
All such issuances of Common Stock have been made in reliance upon the
exemption from registration afforded by Section 4(2) under the Securities Act.
II-2
<PAGE> 151
The foregoing amounts (except with respect to the option granted in
September 1997) have not been adjusted for the stock dividend that will be
declared by the Board of Directors of Provant prior to the consummation of the
Offering.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT DESCRIPTION PAGE NO.
- ------- ----------- ----------
<C> <S> <C>
**1 Form of Underwriting Agreement..............................
+2.1 Form of Agreement and Plan of Merger by and among Provant,
Inc., Behavioral Acquisition Corp., Paul M. Verrochi,
Dominic J. Puopolo, Behavioral Technology, Inc. and Paul C.
Green, Ph.D. ...............................................
+2.2 Form of Agreement and Plan of Merger by and among Provant,
Inc., Decker Acquisition Corp., Paul M. Verrochi, Dominic J.
Puopolo, Decker Communications, Inc., Bert Decker and
Kenneth Taylor..............................................
+2.3 Form of Agreement and Plan of Merger by and among Provant,
Inc., Howard Acquisition Corp., Paul M. Verrochi, Dominic J.
Puopolo, J. Howard & Associates, Inc., Jeffrey P. Howard and
Marc S. Wallace.............................................
+2.4 Form of Agreement and Plan of Merger by and among Provant,
Inc., LSS Acquisition Corp., Paul M. Verrochi, Dominic J.
Puopolo, Robert Steinmetz, Ph.D., and Associates, Inc.,
Edwin Bauch as Trustee of the Steinmetz Children's Trust
u/d/t dated December 31, 1996, Edwin Bauch as Trustee of the
King Children's Trust u/d/t dated December 31, 1996, John F.
King and Robert A. Steinmetz, Ph.D. ........................
+2.5 Form of Agreement and Plan of Merger by and among Provant,
Inc., MOHR Acquisition Corp., Paul M. Verrochi, Dominic J.
Puopolo, MOHR Retail Learning Systems, Inc., Herbert Cohen,
Judith Cohen and Michael Patrick............................
*2.6 Form of Agreement and Plan of Merger by and among Provant,
Inc., Paul M. Verrochi, Dominic J. Puopolo, Star Mountain,
Inc., Star Acquisition Corp. and Carl von Sternberg.........
+2.7 Form of Agreement and Plan of Merger by and among Provant,
Inc., Novations Acquisition Corp., Paul M. Verrochi, Dominic
J. Puopolo, Novations Group, Inc., Joseph Folkman, Joseph
Hanson, Kurt Sandholtz, Norman Smallwood, Randy Stott and
Jonathan Younger............................................
+3.1 Certificate of Incorporation of the Company.................
+3.2 By-laws of the Company......................................
*4.1 Form of Specimen Stock Certificate..........................
+5 Opinion of Nutter, McClennen & Fish, LLP....................
+10.1 1998 Equity Incentive Plan..................................
+10.2 Stock Plan for Non-Employee Directors.......................
*10.3 1998 Employee Stock Purchase Plan...........................
*10.4 Form of Warrants to Messrs. Verrochi and Puopolo............
*10.5 Form of Contingent Warrants to Messrs. Verrochi and
Puopolo.....................................................
*10.6 Form of Employment Agreement between Rajiv Bhatt and
Provant, Inc. ..............................................
+10.7 Form of Employment Agreement between MOHR Acquisition Corp.,
Herbert A. Cohen, and Provant, Inc. ........................
+10.8 Form of Employment Agreement between Decker Acquisition
Corp., Bert Decker, and Provant, Inc. ......................
*10.9 Form of Employment Agreement between Philip Gardner and
Provant, Inc. ..............................................
+10.10 Form of Employment Agreement between Behavioral Acquisition
Corp., Paul C. Green, and Provant, Inc. ....................
+10.11 Form of Employment Agreement between Novations Acquisition
Corp., Joe Hanson, and Provant, Inc. .......................
+10.12 Form of Employment Agreement between LSS Acquisition Corp.,
John F. King, and Provant, Inc. ............................
*10.13 Form of Employment Agreement between Dominic J. Puopolo and
Provant, Inc. ..............................................
</TABLE>
II-3
<PAGE> 152
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT DESCRIPTION PAGE NO.
- ------- ----------- ----------
<C> <S> <C>
+10.14 Form of Employment Agreement between A. Carl von Sternberg,
Star Acquisition Corp. and Provant, Inc. ...................
*10.15 Form of Employment Agreement between Paul M. Verrochi and
Provant, Inc. ..............................................
+10.16 Form of Employment Agreement between Howard Acquisition
Corp., Marc S. Wallace, and Provant, Inc. ..................
*10.17 Form of Employment Agreement between John H. Zenger and
Provant, Inc. ..............................................
*10.18 Form of Consulting Agreement between Michael J. Davies and
Provant, Inc................................................
*10.19 Lease Agreement between Behavioral Technology, Inc. and Paul
C. Green, Ph.D..............................................
*10.20 Lease Agreement between Novations Group, Inc. and Novations
Partners, L.L.C. ...........................................
*10.21 Promissory note of A. Carl von Sternberg....................
*10.22 Form of Consulting Agreement between Donald W. Glazer and
Provant, Inc................................................
**21 Subsidiaries of the Registrant..............................
+23.1 Consent of KPMG Peat Marwick LLP............................
+23.2 Consent of Friedman & Fuller, P.C...........................
+23.3 Consent of Nutter, McClennen & Fish, LLP (contained in
Exhibit 5)..................................................
**24 Power of Attorney (contained in the signature page to this
Registration Statement).....................................
**27 Financial Data Schedule.....................................
**99.1 Consent of Rajiv Bhatt......................................
**99.2 Consent of Herbert A. Cohen.................................
**99.3 Consent of Michael J. Davies................................
**99.4 Consent of Bert Decker......................................
**99.5 Consent of Philip Gardner...................................
**99.6 Consent of Paul C. Green....................................
**99.7 Consent of Joe Hanson.......................................
**99.8 Consent of John F. King.....................................
**99.9 Consent of Dominic J. Puopolo...............................
**99.10 Consent of A. Carl von Sternberg............................
**99.11 Consent of Paul M. Verrochi.................................
**99.12 Consent of Marc S. Wallace..................................
**99.13 Consent of John H. Zenger...................................
</TABLE>
- ---------------
* To be filed by amendment.
** Previously filed.
+ Filed herewith.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnifica-
II-4
<PAGE> 153
tion by it is against public policy as expressed in the Act and will be governed
by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A under the
Securities Act and contained in a form of prospectus filed by the
Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities
Act shall be deemed to be part of this Registration Statement as of the
time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new Registration Statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-5
<PAGE> 154
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Boston, the
Commonwealth of Massachusetts, on the 9th day of March 1998.
PROVANT, INC.
By: /s/ DOMINIC J. PUOPOLO
------------------------------------
Dominic J. Puopolo
Treasurer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ PAUL M. VERROCHI* Chief Executive Officer and March 9, 1998
- --------------------------------------------------- Director
Paul M. Verrochi
/s/ DOMINIC J. PUOPOLO Chief Financial Officer and March 9, 1998
- --------------------------------------------------- Director
Dominic J. Puopolo
/s/ RAJIV BHATT* Chief Accounting Officer March 9, 1998
- ---------------------------------------------------
Rajiv Bhatt
*By: /s/ DOMINIC J. PUOPOLO
- --------------------------------------------------
Dominic J. Puopolo
Attorney-in-Fact
</TABLE>
Powers of Attorney have been filed with this Registration Statement.
II-6
<PAGE> 155
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT DESCRIPTION PAGE NO.
- ------- ----------- ----------
<C> <S> <C>
**1 Form of Underwriting Agreement..............................
+2.1 Form of Agreement and Plan of Merger by and among Provant,
Inc., Behavioral Acquisition Corp., Paul M. Verrochi,
Dominic J. Puopolo, Behavioral Technology, Inc. and Paul C.
Green, Ph.D. ...............................................
+2.2 Form of Agreement and Plan of Merger by and among Provant,
Inc., Decker Acquisition Corp., Paul M. Verrochi, Dominic J.
Puopolo, Decker Communications, Inc., Bert Decker and
Kenneth Taylor..............................................
+2.3 Form of Agreement and Plan of Merger by and among Provant,
Inc., Howard Acquisition Corp., Paul M. Verrochi, Dominic J.
Puopolo, J. Howard & Associates, Inc., Jeffrey P. Howard and
Marc S. Wallace.............................................
+2.4 Form of Agreement and Plan of Merger by and among Provant,
Inc., LSS Acquisition Corp., Paul M. Verrochi, Dominic J.
Puopolo, Robert Steinmetz, Ph.D., and Associates, Inc.,
Edwin Bauch as Trustee of the Steinmetz Children's Trust
u/d/t dated December 31, 1996, Edwin Bauch as Trustee of the
King Children's Trust u/d/t dated December 31, 1996, John F.
King and Robert A. Steinmetz, Ph.D. ........................
+2.5 Form of Agreement and Plan of Merger by and among Provant,
Inc., MOHR Acquisition Corp., Paul M. Verrochi, Dominic J.
Puopolo, MOHR Retail Learning Systems, Inc., Herbert Cohen,
Judith Cohen and Michael Patrick............................
*2.6 Form of Agreement and Plan of Merger by and among Provant,
Inc., Paul M. Verrochi, Dominic J. Puopolo, Star Mountain,
Inc., Star Acquisitions Corp. and Carl von Sternberg........
+2.7 Form of Agreement and Plan of Merger by and among Provant,
Inc., Novations Acquisition Corp., Paul M. Verrochi, Dominic
J. Puopolo, Novations Group, Inc., Joseph Folkman, Joseph
Hanson, Kurt Sandholtz, Norman Smallwood, Randy Stott and
Jonathan Younger............................................
+3.1 Certificate of Incorporation of the Company.................
+3.2 By-laws of the Company......................................
*4.1 Form of Specimen Stock Certificate..........................
+5 Opinion of Nutter, McClennen & Fish, LLP....................
+10.1 1998 Equity Incentive Plan..................................
+10.2 Stock Plan for Non-Employee Directors.......................
*10.3 1998 Employee Stock Purchase Plan...........................
*10.4 Form of Warrants to Messrs. Verrochi and Puopolo............
*10.5 Form of Contingent Warrants to Messrs. Verrochi and
Puopolo.....................................................
*10.6 Form of Employment Agreement between Rajiv Bhatt and
Provant, Inc. ..............................................
+10.7 Form of Employment Agreement between MOHR Acquisition Corp.,
Herbert A. Cohen, and Provant, Inc. ........................
+10.8 Form of Employment Agreement between Decker Acquisition
Corp., Bert Decker, and Provant, Inc. ......................
*10.9 Form of Employment Agreement between Philip Gardner and
Provant, Inc. ..............................................
+10.10 Form of Employment Agreement between Behavioral Acquisition
Corp., Paul C. Green, and Provant, Inc. ....................
+10.11 Form of Employment Agreement between Novations Acquisition
Corp., Joe Hanson, and Provant, Inc. .......................
+10.12 Form of Employment Agreement between LSS Acquisition Corp.,
John F. King, and Provant, Inc. ............................
*10.13 Form of Employment Agreement between Dominic J. Puopolo and
Provant, Inc. ..............................................
+10.14 Form of Employment Agreement between A. Carl von Sternberg,
Star Acquisition Corp. and Provant, Inc. ...................
*10.15 Form of Employment Agreement between Paul M. Verrochi and
Provant, Inc. ..............................................
</TABLE>
<PAGE> 156
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT DESCRIPTION PAGE NO.
- ------- ----------- ----------
<C> <S> <C>
+10.16 Form of Employment Agreement between Howard Acquisition
Corp., Marc S. Wallace, and Provant, Inc. ..................
*10.17 Form of Employment Agreement between John H. Zenger and
Provant, Inc. ..............................................
*10.18 Form of Consulting Agreement between Michael J. Davies and
Provant, Inc................................................
*10.19 Lease Agreement between Behavioral Technology, Inc. and Paul
C. Green, Ph.D..............................................
*10.20 Lease Agreement between Novations Group, Inc. and Novations
Partners, L.L.C. ...........................................
*10.21 Promissory note of A. Carl von Sternberg....................
*10.22 Form of Consulting Agreement between Donald W. Glazer and
Provant, Inc................................................
**21 Subsidiaries of the Registrant..............................
+23.1 Consent of KPMG Peat Marwick LLP............................
+23.2 Consent of Friedman & Fuller, P.C...........................
+23.3 Consent of Nutter, McClennen & Fish, LLP (contained in
Exhibit 5)..................................................
**24 Power of Attorney (contained in the signature page to this
Registration Statement).....................................
**27 Financial Data Schedule.....................................
**99.1 Consent of Rajiv Bhatt......................................
**99.2 Consent of Herbert A. Cohen.................................
**99.3 Consent of Michael J. Davies................................
**99.4 Consent of Bert Decker......................................
**99.5 Consent of Philip Gardner...................................
**99.6 Consent of Paul C. Green....................................
**99.7 Consent of Joe Hanson.......................................
**99.8 Consent of John F. King.....................................
**99.9 Consent of Dominic J. Puopolo...............................
**99.10 Consent of A. Carl von Sternberg............................
**99.11 Consent of Paul M. Verrochi.................................
**99.12 Consent of Marc S. Wallace..................................
**99.13 Consent of John H. Zenger...................................
</TABLE>
- ---------------
* To be filed by amendment.
** Previously filed.
+ Filed herewith.
<PAGE> 1
Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") dated as of
February 12, 1998 is among Provant, Inc., a Delaware corporation ("Provant"),
BTI Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of
Provant ("Acquisition"), Behavioral Technology, Inc., a Tennessee corporation
(the "Company"), Paul C. Green, Ph.D., the principal stockholder of the Company
(the "Stockholder"), and Paul M. Verrochi and Dominic J. Puopolo (the "Provant
Principals"), and provides for the merger of the Company with and into
Acquisition (the "Merger"). The Boards of Directors of Provant, Acquisition and
the Company have determined that the Merger is in the best interests of their
respective stockholders and the Merger has been unanimously approved by the
stockholders of the Company and Acquisition.
Accordingly, the parties hereto, in consideration of the mutual
representations, warranties and covenants contained herein, agree as follows:
1. CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the
respective meanings set forth below:
1.1 "Additional Companies" means those companies identified on
Schedule 1.1 hereto, with which companies Provant is entering into separate
Agreements and Plans of Merger contemporaneously with the execution and delivery
of this Agreement.
1.2 "Additional Mergers" means the acquisitions (by merger or
otherwise) of each of the Additional Companies by Provant, and "Additional
Merger Agreements" means the agreements and plans of merger or other contracts
(in each case as described in Section 5.9 of the Provant Disclosure Schedule)
pursuant to which Provant will consummate the Additional Mergers.
1.3 "Additional Shares" means the additional shares, if any, of
Provant Common Stock issuable to the holders of Shares pursuant to Section 2.8.
1.4 "Articles and Agreement of Merger" has the meaning given to it in
Section 2.2.
1.5 "Balance Sheet" means the balance sheet of the Company as of June
30, 1997 included in the Financial Statements.
1.6 "Balance Sheet Date" means June 30, 1997.
<PAGE> 2
1.7 "Certificate of Merger" has the meaning given to it in Section 2.2
.
1.8 "Closing" means the closing of the transactions contemplated
by this Agreement as provided in Section 2.2.
1.9 "Closing Net Worth" means the Company's pro forma net worth as of
a date selected by Provant as close as practicable to the Effective Time (but in
no event more than thirty (30) days prior to the Effective Time), determined
using the same principles and assumptions used by Provant in its preparation of
its pro forma financial statements contained in the Registration Statement.
1.10 "Code" means the Internal Revenue Code of 1986, as amended to
date.
1.11 "Commission" means the Securities and Exchange Commission.
1.12 "Company Disclosure Schedule" means the Disclosure Schedule
prepared by the Company and attached hereto and incorporated herein by this
reference.
1.13 "Company Option" means an option to purchase Shares, whether or
not vested or exercisable as of the applicable time.
1.14 "DGCL" means the Delaware General Corporation Law.
1.15 "1998 EBIT" means the earnings before interest and taxes of the
Company for the period beginning July 1, 1997 and ending at the Effective Time
and of the Surviving Corporation for the period beginning at the Effective Time
and ending June 30, 1998 determined in accordance with the Instructions for
Determination of EBIT attached hereto as Exhibit 1; provided, that if the
Effective Time is after June 30, 1998, then 1998 EBIT shall consist solely of
the earnings before interest and taxes of the Company (determined as set forth
above) for the period beginning July 1, 1997 and ending June 30, 1998.
1.16 "Effective Time" means such time as the Articles of Merger are
filed with the Secretary of State of the State of Tennessee in accordance with
Section 48-21-107 of the TBCA and the Certificate of Merger is filed with the
Secretary of State of the State of Delaware in accordance with Section 252 of
the DGCL, whichever is later, unless Acquisition and the Company agree that a
later time shall be the Effective Time, in which case such time shall be
specified in the Articles of Merger and the Certificate of Merger.
1.17 "Employment Contracts" means the employment agreements in the form
attached hereto as Exhibits 2A and 2B.
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<PAGE> 3
1.18 "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
1.19 "Financial Condition" means that (a), using the same principles
and assumptions used by Provant in the preparation of its pro forma financial
statements contained in the Registration Statement, the Company's Closing Net
Worth is not less than $1.2 million (the "Minimum Net Worth"), the Company's pro
forma earnings before interest and taxes for the 12 months ended June 30, 1997
are not less than $1.5 million, the Company's projected pro forma revenues (as
determined in good faith by Provant) for the 12 months ended June 30, 1998 are
not less than $8.5 million, and the Company's projected 1998 EBIT (as determined
in good faith by Provant) is not less than $2.0 million; and (b) the Company's
revenues determined in accordance with generally accepted accounting principles
for the 12 months ended June 30, 1997 were not less than $7.096 million.
1.20 "Financial Statements" means the financial statements of the
Company attached hereto as Exhibit 3, consistent in form and substance with the
requirements of Regulation S-X of the Commission under the Securities Act,
consisting of (a) Balance Sheets at June 30, 1997 and 1996, and at September 30,
1997; (b) Statements of Income for the periods ending June 30, 1997, 1996 and
1995, and ending September 30, 1997; (c) Statements of Stockholders' Equity at
June 30, 1997, 1996, 1995 and 1994, and at September 30, 1997; (d) Statements of
Cash Flow for the periods ending June 30, 1997, 1996 and 1995, and ending
September 30, 1997; and (e) notes to the foregoing.
1.21 "First Accountants" means the firm of independent public
accountants then regularly employed by Provant.
1.22 "Fraction" means that fraction which has one as its numerator and
which has, as its denominator, the pro forma number of Shares outstanding on a
fully diluted basis as of immediately prior to the Effective Time, assuming the
exercise or conversion of all then-outstanding Company Options, warrants and
other instruments exercisable for or convertible into Shares (whether or not
then currently exercisable or convertible).
1.23 "IPO" means the initial underwritten public offering of shares of
Provant Common Stock.
1.24 "IPO Price" shall mean the price at which shares of Provant Common
Stock are sold to the public in the IPO.
1.25 "Investment Letter" means an investment letter in the form
attached hereto as Exhibit 4.
3
<PAGE> 4
1.26 "Merger Stock" means the shares of Provant Common Stock exchanged
for Shares pursuant to Section 2.7(c) and 2.8.
1.27 "Non-Competition and Non-Disclosure Agreements" means
non-competition and non-disclosure agreements in the form attached hereto as
Exhibits 5A and 5B.
1.28 "Prospectus" means the prospectus relating to the IPO first filed
with the Commission pursuant to Rule 424(b) and Rule 430A of the rules and
regulations of the Commission under the Securities Act or (if no such filing is
required) as included in the Registration Statement and, in the event of any
supplement or amendment to such prospectus after the date the Registration
Statement becomes effective under the Securities Act, such prospectus as so
supplemented or amended from and after the filing with the Commission of such
supplement or the effectiveness of such amendment.
1.29 "Provant Disclosure Schedule" means the Disclosure Schedule
prepared by Provant and attached hereto and incorporated herein by this
reference.
1.30 "Provant Common Stock" means the shares of Common Stock, $0.1 par
value, of Provant.
1.31 "Provant Option" means an option to purchase shares of Provant
Common Stock, granted under the Plan to be established by Provant pursuant to
Section 6.11.
1.32 "Registration Statement" means the registration statement on Form
S-1, including the related preliminary prospectus, to be filed with the
Commission in connection with the IPO, including all exhibits and financial
statements, in the form in which it becomes effective under the Securities Act
and, in the event of any amendment thereto after the effective date of any such
registration statement, such registration statement as so amended from and after
the effectiveness of such amendment.
1.33 "Second Accountants" means an accounting firm of national stature,
jointly selected by Provant and the Stockholder, that is not then employed by
Provant, the Stockholder or American Business Partners LLC ("ABP") (or any of
their respective affiliates) and that was not employed by the Company or ABP
during the two-year period immediately preceding the Effective Time; provided,
however, if the parties cannot jointly agree upon the Second Accountants, the
Stockholder and Provant shall each designate one accounting firm (which shall be
of national stature but which may be employed or have been employed by such
party or its affiliates), and the two accounting firms so designated shall
jointly select a third accounting
4
<PAGE> 5
firm, meeting the criteria set forth in the first clause of this sentence, to
serve as the Second Accountants.
1.34 "Securities Act" means the Securities Act of 1933, as amended.
1.35 "Share" means a share of Common Stock of the Company, and "Shares"
means all of such shares.
1.36 "Surviving Corporation" means the corporation that survives the
Merger.
1.37 "TBCA" means the Tennessee Business Corporation Act.
1.38 "Underwriter" means, collectively, the managing underwriters of
the IPO.
1.39 "Underwriters' Discount" means the discount at which the
Underwriter purchases the Provant Common Stock in the IPO, but in no event more
than 7.0% of the IPO Price.
2. THE MERGER
2.1 THE MERGER. The Merger shall occur at the Effective Time upon the
terms and subject to the conditions hereof and in accordance with the TBCA and
the DGCL. Following the Merger, Acquisition shall continue as the Surviving
Corporation and be a subsidiary of Provant, and the separate corporate existence
of the Company shall cease.
2.2 EFFECTIVE TIME. As soon as practicable after satisfaction or waiver
of all conditions to the Merger, the parties (a) shall cause duly executed
articles of merger and an agreement of merger (with an accompanying plan of
merger) (collectively, the "Articles and Agreement of Merger"), all in form and
substance reasonably acceptable to Provant, Acquisition and the Company, with
respect to the Merger to be filed and recorded in accordance with Section
48-21-107 of the TBCA and shall cause a duly executed certificate of merger (the
"Certificate of Merger") with respect to the Merger to be filed and recorded in
accordance with Section 252 of the DGCL and (b) shall take all such further
actions as may be required by law to make the Merger effective. The Merger shall
be effective at the Effective Time. Before the filing of the Articles of Merger
and the Certificate of Merger, a closing (the "Closing") will be held on the
date the IPO closes (or such earlier date as the parties may agree) at the
offices of Nutter, McClennen & Fish, LLP, One International Place, Boston,
Massachusetts (or such other place as the parties may agree) for the purpose of
confirming all the foregoing.
5
<PAGE> 6
2.3 EFFECTS OF THE MERGER. The Merger shall have the effects set forth
in Section 48-21-108 of the TBCA and Sections 259, 260 and 261 of the DGCL.
2.4 TAX CONSEQUENCES. It is intended that the Merger shall constitute a
reorganization within the meaning of Section 368(a)(2)(D) of the Code and that
this Agreement shall constitute a "plan of reorganization" for the purposes of
Section 368 of the Code.
2.5 CERTIFICATE OF INCORPORATION AND BY-LAWS. The Certificate of
Incorporation and the By-Laws of Acquisition, in each case as in effect at the
Effective Time, shall be the Certificate of Incorporation and By-Laws of the
Surviving Corporation, except that the name of the Surviving Corporation shall
be the name of the Company or such other name as Provant may designate.
2.6 DIRECTORS AND OFFICERS. At the Effective Time, the Board of
Directors and officers of the Surviving Corporation shall be as set forth on
Exhibit 6, and each such person shall hold office until his or her respective
successor is duly elected or appointed and qualified.
2.7 CONVERSION OF STOCK.
At the Effective Time:
(a) Each share of Acquisition that is issued and outstanding
immediately prior to the Effective Time shall remain issued and outstanding
without change.
(b) All Shares held in the treasury of the Company immediately prior
to the Effective Time shall be cancelled, without the payment of any
consideration therefor.
(c) Each other Share which is outstanding immediately prior to the
Effective Time shall be converted without any action on the part of the holder
thereof into and be exchangeable for
(i) that number of shares of Provant Common Stock determined
by multiplying the Fraction times the number obtained after (A)
dividing $11.225 million by the IPO Price and (B) subtracting from the
quotient obtained pursuant to clause (A) the number obtained by
dividing $5,000,000 by the IPO Price net of Underwriters' Discount,
(ii) cash equal to the Fraction times the sum of (X)
$5,000,000, plus (Y) the excess, if any, of the Company's Closing Net
Worth over the Minimum Net Worth, and
6
<PAGE> 7
(iii) the right to receive that number of Additional Shares
determined as provided in Section 2.8.
Provant shall not issue any fractional share of Provant Common Stock; in lieu of
issuing a fractional share, Provant shall make a cash payment in accordance with
Section 2.9. Notwithstanding the foregoing, which quantifies the merger
consideration to be received by the Stockholder in the aggregate, the allocation
of merger proceeds between the holders of Shares and among the Shares shall be
as indicated on Schedule 2.7.
2.8 RIGHT TO RECEIVE ADDITIONAL SHARES.
(a) Promptly following June 30, 1998 (but in no event later than
October 15, 1998), Provant will determine 1998 EBIT.
(i) In the event 1998 EBIT is $1.65 million or less, no
Additional Shares shall be issued in respect of the Shares.
(ii) In the event 1998 EBIT is greater than $1.65 million but
less than $2.3 million, there shall be issued in respect of each Share
that number of Additional Shares determined by (A) multiplying $2.0
million by a fraction, the numerator of which shall be the amount by
which 1998 EBIT exceeds $1.65 million and the denominator of which
shall be $650,000, (B) dividing the product obtained pursuant to clause
(A) by the IPO Price, and (C) multiplying the quotient obtained
pursuant to clause (B) by the Fraction.
(iii) In the event 1998 EBIT equals or exceeds $2.3 million,
there shall be issued in respect of each Share that number of
Additional Shares determined by multiplying the Fraction times the
quotient obtained by dividing $2.0 million by the IPO Price.
Provant shall not issue any fractional share of Provant Common Stock; in lieu of
issuing a fractional share, Provant shall make a cash payment in accordance with
Section 2.9.
(b) No later than October 15, 1998, Provant shall deliver to each
former holder of Shares a statement showing in reasonable detail Provant's
computation of 1998 EBIT, together with a stock certificate representing any
Additional Shares and a check in payment for any fractional Additional Share to
which such holder may be entitled pursuant to subsection (a). Provant shall
maintain, and shall cause the Surviving Corporation to maintain, complete books
and records necessary for the proper computation of 1998 EBIT. The Stockholder,
and only the Stockholder, on behalf of all former holders of Shares, shall have
the right at his expense, through an
7
<PAGE> 8
independent certified public accountant reasonably acceptable to Provant, to
audit such books and records and the books and records of the Company solely for
the purpose of satisfying the accuracy of the computation of 1998 EBIT made by
Provant, and the Company and Provant shall cooperate fully in all reasonable
respects with any such audit. In no event shall the Stockholder have the right
to conduct more than one such audit. If the Stockholder does not elect within 90
days of delivery of the statement of Provant referred to in this subsection (b)
to cause an audit of the books and records of the Surviving Corporation as
provided in this subsection (b), the Stockholder, on behalf of all former
holders of Shares, shall be deemed to have agreed that such statement was
correct in all respects.
(c) Any dispute as to the correct computation of 1998 EBIT shall be
referred to the First Accountants for determination. If the Stockholder does not
elect to dispute the First Accountants' determination of 1998 EBIT within 30
days following the delivery thereof to the former holders of Shares, such
determination shall be final, binding and conclusive and shall not be subject to
challenge by Provant, Stockholder, or any other former holders of Shares, and in
such event the fees and expenses of the First Accountants shall be borne by
Provant. In the event the Stockholder does elect within such 30 day period to
dispute the determination of the First Accountants, the Stockholder shall
specify the amount (in dollars) that he contends to be the correct 1998 EBIT
(the Stockholder's "EBIT Position"), and the final calculation of 1998 EBIT
shall be referred to the Second Accountants. Absent manifest error or willful
misconduct, the determination of the Second Accountants shall be final, binding
and conclusive and shall not be subject to challenge by Provant, Stockholder or
any other former holder of Shares. In the event the calculation of 1998 EBIT is
referred to the Second Accountants, the fees and expenses of both the First
Accountants and the Second Accountants shall be borne by that party (i.e., the
Stockholder or Provant) whose EBIT Position is furthest, in gross dollars, from
the 1998 EBIT as finally determined by the Second Accountants. For purposes of
the preceding sentence, Provant's "EBIT Position" shall be deemed to be the
amount determined by the First Accountants to be the 1998 EBIT. The parties
recognize that in making such determinations, each such firm of accountants will
be performing a function separate and distinct from their audit function, if
any, and shall be entitled to the immunities, rights and discretion of
arbitrators in general. Any issuance of Additional Shares (or cash in lieu of
fractional Additional Shares) which is finally determined to be due to the
former holders of Shares in accordance with this subsection (c) shall be made by
Provant (i) if based on the determination of the First Accountants, within 10
days after such determination becomes final, and (ii) if based on the
determination of the Second Accountants, within 10 days after Provant receives
notice of such determination, if Provant is responsible for the fees and
expenses of the accountants pursuant to this Section, and within 10 days after
the Stockholder has paid the fees and expenses of the accountants, if the
Stockholder is responsible for such fees and expenses pursuant to this Section.
In the event the 1998 EBIT has not been finally determined as of the date one
year following the Effective Time, or the 1998 EBIT has
8
<PAGE> 9
been finally determined and Additional Shares are due to be issued but have not
been issued to the former holders of Shares as of such date because the
Stockholder is obligated to pay but has not yet paid the fees and expenses of
the First and Second Accountants, then on or before such date Provant shall
issue and place into escrow, with an institutional escrow agent reasonably
selected by Provant, the number of Additional Shares that would be issued if the
Stockholder's EBIT Position were determined to be the actual 1998 EBIT (or, if
the 1998 EBIT has been finally determined, the actual number of Additional
Shares to be issued). Such shares shall be held in escrow pending final
determination of 1998 EBIT, upon which the final number of Additional Shares, if
any, shall be released from escrow to the former holders of Shares and any
escrowed shares not distributed as Additional Shares shall be released to the
Company. The expenses of the escrow agent will be allocated in the same manner
as the expenses of the First Accountants and Second Accountants, as set forth
above.
(d) The Stockholder, on his own behalf and on behalf of all holders of
Shares, acknowledges and agrees that Provant and the Surviving Corporation shall
be free to pursue their respective business goals and that 1998 EBIT may be
affected thereby. Notwithstanding the foregoing, Provant hereby agrees that it
will take no action and adopt no policy (and will not cause the Surviving
Corporation to take any action or adopt any policy) during the period from the
Effective Time through June 30, 1998 that a majority-in-interest of the former
holders of Shares have reasonably asserted (in advance of or contemporaneously
with such action or adoption), in good faith and in writing, can reasonably be
expected to result (directly or indirectly) in a reduction of 1998 EBIT.
(e) The right of the holders of Shares to receive Additional Shares
and/or cash payment for fractional shares may not be transferred or assigned
except by operation of law or pursuant to the laws of descent and distribution.
(f) If, subsequent to the IPO and prior to final determination of the
number of Additional Shares, if any, issuable pursuant to this Section 2.8, the
outstanding shares of Provant Common Stock shall have been changed into a
different number of shares or a different class by reason of any
reclassification, recapitalization, split-up, combination, exchange of shares or
readjustment, or a stock dividend thereon shall be declared with a record date
within said period, the IPO Price shall be correspondingly and appropriately
adjusted.
(g) The Stockholder is hereby appointed as the representative of all
holders of Shares and Company Options for purposes of this Section 2.8. The
Stockholder shall have no liability to any other holder of Shares or Company
Options for any action taken or position asserted (or any failure to act or to
assert any position) pursuant to this Section 2.8, provided only that the
Stockholder has acted in a
9
<PAGE> 10
manner he believed in good faith to be in the interest of all holders of Shares
and Company Options.
2.9 EXCHANGE OF AND PAYMENT FOR SHARES AS OF EFFECTIVE TIME.
(a) As soon as practicable after the Effective Time and after surrender
to Provant of any certificate which prior to the Effective Time shall have
represented any Shares, subject to the provisions of paragraphs (c) and (d) of
this Section 2.9 and to the provisions of Article 8, Provant shall cause to be
distributed to the person in whose name such certificate shall have been
registered certificates registered in the name of such person representing the
shares of Provant Common Stock into which any shares previously represented by
the surrendered certificate shall have been converted at the Effective Time and
a check payable to such person representing the payment of cash due such person
by reason of the Merger including cash in lieu of fractional shares determined
in accordance with paragraph (g) of this Section 2.9. Until surrendered as
contemplated by the preceding sentence, each certificate which immediately prior
to the Effective Time shall have represented any Shares shall be deemed at and
after the Effective Time to represent only the right to receive upon such
surrender the certificates and payment contemplated by the preceding sentence
and by Section 2.8.
(b) No dividends or other distributions declared after the Effective
Time with respect to Provant Common Stock shall be paid to the holder of any
unsurrendered certificate representing Shares until the holder thereof shall
surrender such certificate in accordance with this Section 2.9. After the
surrender of such certificate in accordance with this Section 2.9, the record
holder thereof shall be entitled to receive any such dividends or other
distributions, without any interest thereon, which theretofore had become
payable with respect to shares of Provant Common Stock represented by such
certificate.
(c) No certificate representing Merger Stock shall be issued to any
person, and no person shall be treated as a holder of shares of Provant Common
Stock constituting Merger Stock for any purpose whatsoever (including without
limitation any right to vote the shares of Provant Common Stock into which such
person's Shares are to be converted) unless and until such person has executed
and delivered to provant an Investment Letter.
(d) If any cash or certificate representing shares of Provant Common
Stock is to be paid to or issued in a name other than that in which the
certificate surrendered in exchange therefor is registered, it shall be a
condition of the payment or issuance thereof that the certificate so surrendered
shall be properly endorsed and otherwise in proper form for transfer and that
the person requesting such exchange shall pay to Provant any transfer or other
taxes required by reason of the issuance of a certificate representing shares of
Provant Common Stock in any name other than
10
<PAGE> 11
that of the registered holder of the certificate surrendered, or otherwise
required, or shall establish to the satisfaction of Provant that such tax has
been paid or is not payable.
(e) All Provant Common Stock and cash, including cash in lieu of
fractional shares, shall be deemed, when paid or issued hereunder, to have been
paid or issued, as the case may be, in full satisfaction of all rights
pertaining to the Shares.
(f) After the Effective Time, there shall be no further registration of
transfers on the stock transfer books of the Surviving Corporation of the Shares
which were outstanding immediately prior to the Effective Time. If, after the
Effective Time, certificates representing such shares are presented to the
Surviving Corporation, they shall be cancelled and exchanged for cash or
certificates representing the shares of Provant Common Stock into which they
were converted, or both, as provided herein.
(g) Notwithstanding any other provision of this Agreement, no
certificates or scrip representing fractional shares of Provant Common Stock
shall be issued upon the surrender for exchange of certificates which prior to
the Effective Time shall have represented any Shares, no dividend or
distribution of Provant shall relate to any fractional share and such fractional
share interests will not entitle the owner thereof to vote or to any rights of a
shareholder of Provant. In lieu of any fractional shares, there shall be paid to
each holder of Shares who otherwise would be entitled to receive a fractional
share of Provant Common Stock an amount of cash equal to the amount of such
fraction times the IPO Price.
(h) In the event any certificate representing Shares shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
holder of such Shares claiming such certificate to be lost, stolen or destroyed
and, if required by Provant or its stock transfer agent, the posting by such
holder of a bond in such amount as Provant or its stock transfer agent may
direct as indemnity against any claim that may be made against it with respect
to such certificate, Provant will issue in exchange for such lost, stolen or
destroyed certificate the Merger Stock and cash deliverable in respect thereof.
2.10 RESERVED.
3. REPRESENTATIONS AND WARRANTIES OF THE
COMPANY AND THE STOCKHOLDERS
The Company and the Stockholder represent and warrant to Provant and
Acquisition that, except as expressly provided in the Company Disclosure
Schedule by specific reference to a Section of this Article 3:
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3.1 ORGANIZATION AND AUTHORITY. The Company is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Tennessee and has all requisite corporate power and authority to conduct its
business and own its properties as now conducted and owned. The Company is duly
qualified or licensed and in good standing as a foreign corporation, and has at
all times when legally required been so qualified or licensed and in good
standing, in those states listed on the Company Disclosure Schedule, which are
the only jurisdictions in which the property owned, leased or operated by it or
the nature of the business conducted by it would cause a failure to be so
qualified or licensed to have a material adverse effect on the business of the
Company. The Company has full power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby and perform its
obligations hereunder. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby by the Company and the
performance of the Company's obligations hereunder have been duly and validly
authorized by a unanimous vote of the Board of Directors of the Company of the
Company and the stockholders of the Company, and no other corporate proceedings
on the part of the Company are necessary to authorize this Agreement or to
consummate the transactions so contemplated or to perform the Company's
obligations hereunder. This Agreement has been duly and validly executed and
delivered by the Company and constitutes a legal, valid and binding obligation
of the Company enforceable against it in accordance with its terms, except as
enforcement may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting enforcement of creditors' rights
generally.
3.2 CAPITALIZATION OF THE COMPANY; NO SUBSIDIARIES. The Company has
authorized capital consisting of 1,000 shares of Common Stock. As of the date
hereof, there are 104 issued and outstanding Shares. As of immediately prior to
the Effective Time, the Shares issued and outstanding shall consist solely of
the foregoing number plus the number of Shares, if any, issued between the date
hereof and the Effective Time upon the exercise or conversion of Company Options
and other instruments (in each case solely if existing on the date hereof and
disclosed on the Company Disclosure Schedule pursuant to Section 3.3), which
exercise or conversion and which issuance are in accordance with the terms of
such instruments as in effect on the date hereof. All of the Shares are duly
authorized, validly issued, fully paid and non-assessable. As of the date of the
approval of this Agreement by the stockholders of the Company and as of the date
hereof, the Shares were and are owned of record and beneficially by the
stockholders of the Company in the respective amounts listed on the Company
Disclosure Schedule. The Company has no other authorized class of capital stock
other than the Common Stock. The Company does not own and has not owned any
shares of capital stock or other securities of, or any other interest in, nor
does it control or has it controlled, directly or indirectly, any other
corporation, association, joint venture, partnership, or other business
organization. The Shares have been issued and sold in full compliance with all
applicable Federal and state
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securities laws. No holder of Shares has any dissenting shareholder or appraisal
rights with regard to the Merger.
3.3 NO RIGHTS TO PURCHASE OR REGISTER STOCK. No person, firm, or
corporation has any written or oral agreement, option, warrant, call,
understanding, commitment, or any right or privilege capable of becoming a
binding agreement, for either the purchase of any Shares or the acquisition of
shares of any other class of capital stock of the Company, and the Company has
not otherwise agreed to issue or sell any shares of its capital stock and has no
obligation to register any of the Shares under the Securities Act. The Company
is not obligated directly, indirectly or contingently to purchase any Shares.
3.4 NAME. The Company has not had any other name and does not conduct
or operate, and has not heretofore conducted or operated, its business under any
name other than its current name.
3.5 NO VIOLATION OF EXISTING AGREEMENTS. The execution and delivery of
this Agreement, together with all documents and instruments contemplated herein,
the consummation by the Company of the transactions contemplated hereby and
thereby, the performance by the Company or its obligations hereunder and
thereunder and compliance with the terms, conditions and provisions hereof and
thereof by the Company do not (i) contravene any provisions of the Company's
Charter or By-Laws; (ii) conflict with or result in a breach of or constitute a
default (or an event that might, with the passage of time or the giving of
notice or both, constitute a default) or give rise to any right to terminate,
cancel or accelerate or to any loss of benefit under any of the material terms,
conditions, or provisions of any indenture, mortgage, loan, or credit agreement
or any other agreement or instrument to which the Company is a party or by which
it or its assets may be bound or affected; (iii) violate or constitute a
material breach of any decision, judgment, or order of any court or arbitration
board or of any governmental department, commission, board, agency, or
instrumentality, domestic or foreign, by which the Company is bound or to which
it is subject; or (iv) violate any applicable law, rule, or regulation to which
the Company or any of its property is bound.
3.6 NO CONSENTS OR APPROVALS OF GOVERNMENTAL AUTHORITIES. No consent or
approval of, or filing and expiration of a period for disapproval by, any
governmental authority is required for the Company to consummate the
transactions contemplated by this Agreement, except for filing the Articles of
Merger pursuant to the TBCA and for filing the Certificate of Merger pursuant to
the DGCL. Notwithstanding the immediately preceding sentence, the Company and
the Stockholder make no representation or warranty regarding whether any filing
is required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), but the Company and the Stockholder do represent and
warrant that (a) the aggregate gross assets of the Company plus those of any
direct or indirect legal or beneficial
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holder of 50% or more of the Shares were less than $100 million as of September
30, 1997, and (b) the aggregate revenues of the Company plus those of any direct
or indirect legal or beneficial holder of 50% or more of the Shares were less
than $100 million for the Company's most recently completed fiscal year.
3.7 FINANCIAL STATEMENTS.
(a) The Financial Statements fairly present the financial position of
the Company as of their respective dates, and the results of operations and cash
flows for the periods presented therein, all in conformity with generally
accepted accounting principles applied on a consistent basis, except as
otherwise noted therein.
(b) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and with
statutory accounting principles and to maintain accountability for assets; (iii)
access to assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
3.8 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth or reserved
against in the Balance Sheet, the Company (a) did not have as of the Balance
Sheet Date any material liability or obligation of any nature, whether accrued,
absolute, contingent, or otherwise and whether due or to become due, including
without limitation liabilities that may become known or arise after the date
hereof and which relate to transactions entered into or any state of facts
existing on or before the Balance Sheet Date and which would be required under
generally accepted accounting principles to be shown in such balance sheet or
referenced in the notes thereto, and (b) has not incurred since the Balance
Sheet Date any such liability or obligation except in the ordinary course of
business. Without limiting the foregoing, and except as specifically reserved
against in the Balance Sheet or in the calculation of the Closing Net Worth, the
Company has no material liability or obligation of any nature, whether accrued,
absolute, contingent, or otherwise, to any government entity for any adjustment
or reimbursement of any amount previously paid to the Company by such entity
under any agreement relating to the provision of any goods or services by the
Company.
3.9 CONDUCT OF BUSINESS SINCE THE BALANCE SHEET DATE. Since the Balance
Sheet Date, the Company has not taken (or suffered the occurrence of) any of the
following actions or events, agreed to take any of the following actions, or
taken any action that would otherwise result in any of the following (in each
case except directly in connection with this Agreement):
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<PAGE> 15
(a) entered into any transaction, agreement, or commitment other than
in the ordinary course of business; or
(b) entered into any transaction, agreement, or commitment, suffered
the occurrence of any event or events, or experienced any change in financial
condition, business, results of operations, prospects, or otherwise, (i) that
has interfered or is reasonably likely to interfere with the normal and usual
operations of the Company's business or its business prospects in any material
respect or (ii) that, singly or in the aggregate, has resulted or is reasonably
likely to result in a material adverse change in the financial condition,
assets, liabilities, earnings, business, or business prospects of the Company;
or
(c) incurred any indebtedness for borrowed money, or assumed,
guaranteed, endorsed, or otherwise become responsible for the obligations of any
other individual, partnership, firm, or corporation (except to endorse checks
for collection for deposit in the ordinary course of business), or made any loan
or advance to any individual, partnership, firm, or corporation; or
(d) mortgaged, pledged, or otherwise encumbered, or, other than in the
ordinary course of business, sold, transferred, or otherwise disposed of, any of
the properties or assets of the Company, including any cancelled, released,
hypothecated, or assigned indebtedness owed to the Company, or any claims held
by the Company, except for purchase money mortgages arising in the ordinary
course of business and statutory liens arising or incurred in the ordinary
course of business with respect to which the underlying obligations are not
delinquent; or
(e) made any investment of a capital nature or entered into a
commitment for such investment either by purchase of stock or securities,
contributions to capital, property transfer, or otherwise, or by the purchase of
any property or assets of any other individual, partnership, firm, or
corporation; or
(f) declared, set aside, or paid any dividend or other distribution
(whether in cash, stock, or property or any combination thereof) in respect of
the capital stock of the Company, or redeemed or otherwise acquired, directly or
indirectly, any shares of capital stock of the Company, excepting only
dividends, distributions and redemptions that have not resulted and will not
result, directly or indirectly, in the Company not satisfying the Financial
Condition; or
(g) paid any long-term liability, otherwise than in accordance with its
terms; or
(h) paid any bonus compensation to any officer, director, shareholder,
or employee of the Company or otherwise increased the compensation paid or
payable to any of the foregoing; or
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<PAGE> 16
(i) sold, assigned, or transferred any trademarks, trade names, logos,
copyrights, formulae, or other intangible assets; or
(j) contracted with or committed to any third party (i) to sell any
capital stock of the Company, (ii) to sell any material assets of the Company
other than in the ordinary course of business, (iii) to effect any merger,
consolidation, or other reorganization of the Company, or (iv) to enter into any
agreement with respect thereto; or
(k) incurred or paid any expenses or fees of counsel, accountants, or
consultants for services in preparation for or in connection with this Agreement
or the transactions contemplated hereunder.
3.10 TITLE TO ASSETS. The Company owns no real property. The Company
has good and clear record and marketable title to all properties owned by it,
including, without limitation, all property reflected in the Balance Sheet,
other than property disposed of in the ordinary course of business subsequent to
the Balance Sheet Date (none of such dispositions being individually or
collectively materially adverse), free and clear of any mortgage, lien, pledge,
charge, claim or encumbrance, or rights, title and interest in others, except
(a) as reflected in the Balance Sheet, or as specified in the notes thereto, (b)
the lien of taxes not yet due or payable or being contested in good faith by
appropriate proceedings and as to which appropriate reserves have been set aside
in the Balance Sheet, and (c) such imperfections of title and encumbrances, if
any, as do not materially detract from the value or interfere with the use of
the properties subject thereto or affected thereby, or otherwise materially
impair business operations.
3.11 INTELLECTUAL PROPERTY.
(a) The Company Disclosure Schedule contains a correct and complete
list of all copyrights, copyright registrations and copyright applications,
trademark registrations and applications for registration, patents and patent
applications, trademarks, service marks and trade names used in the Company's
business as presently conducted or contemplated and all licenses, assignments
and releases of the intellectual property rights of others in material works
embodied in its products. There is (i) no existing or, to the Company's
knowledge, threatened infringement, misuse or misappropriation of Proprietary
Information (as hereinafter defined) by others and (ii) no pending or threatened
claim by the Company against others for infringement, misuse or misappropriation
of any patent, patent application, invention disclosure, trademark, trade name,
service mark, trade secret, technology, technique, know-how, or copyright owned
by the Company or used in its business as presently conducted or contemplated
(the "Proprietary Information"). The Proprietary Information is sufficient to
carry on the business of the Company as presently conducted or contemplated, and
the Company has the right to use, free and clear of
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<PAGE> 17
claims or rights of others, all Proprietary Information required for or incident
to its products or services or its business as presently conducted or
contemplated. The Company is the exclusive owner of all right, title and
interest in the Proprietary Information as purported to be owned by the Company,
and such Proprietary Information is valid and in full force and effect. Neither
the present nor contemplated business activities or products of the Company
infringe, misuse or misappropriate any patent, trademark, trade name, service
mark, trade secret, copyright or other intellectual property right of others,
and to the Company's knowledge no one is claiming nor is it anticipated that
anyone will claim any such infringement, misuse or misappropriation. To the
knowledge of the Company, the Proprietary Information is presently valid and
protectible and is not part of the public domain or knowledge, nor, to the
knowledge of the Company, has any of it been used, divulged or appropriated for
the benefit of any person other than the Company to the detriment of the
Company. The Company has not granted to any person any license or other right to
use in any manner any of the Proprietary Information, whether or not requiring
the payment of royalties. The Company has no obligation still outstanding to
compensate other persons for the use of any Proprietary Information or for the
sale of any service or product comprising or derived from Proprietary
Information. No university, government agency (whether federal or state) or
other organization which sponsored research and development conducted by the
Company has any claim of right to or ownership of or other encumbrance upon the
Proprietary Information.
(b) The Company has taken all reasonable measures to protect and
preserve the security, confidentiality and value of the Proprietary Information,
including its trade secrets and other confidential information. All present and
previous officers, employees and consultants of or to the Company have executed
and delivered to and in favor of the Company an agreement regarding the
protection of confidential and proprietary information and the assignment to the
Company of all intellectual property rights arising from the services performed
for the Company by such persons in the forms attached to the Company Disclosure
Schedule. To the Company's knowledge, no employee or consultant of the Company
has used any trade secrets or other confidential information of any other person
in the course of his or her work for the Company. To the Company's knowledge,
the Company is not making unlawful use of any confidential information or trade
secrets belonging to any past or present employees of the Company. Neither the
Company nor, to the knowledge of the Company, any of the Company's employees or
consultants have any agreements or arrangements with former employers of such
employees or consultants relating to confidential information or trade secrets
of such employers or are bound by any consulting agreement relating to
confidential information or trade secrets of another entity. The activities of
the Company's employees on behalf of the Company do not violate any agreements
or arrangements known to the Company which any such employees have with former
employers or any other entity to whom such employees may have rendered
consulting services.
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3.12 OBLIGATIONS TO OR FROM AFFILIATES.
(a) All material transactions between the Company and any stockholder,
officer or director of the Company, or any Affiliate (as defined below) of any
stockholder, officer or director of the Company, entered into on or after
January 1, 1993 have been conducted on an arm's-length basis on terms no
different than would be obtained if the transaction had been between the Company
and an unrelated party. Except for debts or other outstanding obligations
reflected on the Balance Sheet, there are no debts or other obligations of the
Company to, or to the Company from, any stockholder, officer or director of the
Company, or any Affiliate of a stockholder, officer or director of the Company.
As used herein, "Affiliate" of a stockholder, officer or director means any
member of the immediate family of such person or any entity in which such person
or any such family member is an officer or owner of more than five percent of
beneficial interest in the outstanding equity securities.
(b) The Company Disclosure Schedule sets forth all information that
would be required to be provided under Item 404 of Regulation S-K of the
Commission under the Securities Act if a registration statement on Form S-1 were
filed by the Company with the Commission on the date hereof.
3.13 MATERIAL CONTRACTS. The Company Disclosure Schedule lists all
material leases, contracts, instruments, agreements or commitments (whether
written or oral) relating to the conduct of the business of the Company (the
"Material Company Contracts"). The Company has delivered to Provant true and
correct copies of each written Material Company Contract and a written
description, accurate in all material respects, of each oral arrangement so
listed. Without limiting the generality of the foregoing, the aforesaid list
includes all contracts, agreements and instruments of the following types to
which the Company is a party:
(a) labor union contracts, together with a list of all labor unions
representing or, to the Company's knowledge, attempting to represent employees
of the Company;
(b) pension, retirement, deferred compensation, death benefit, profit
sharing, bonus or other employee incentive, fringe benefit, stock purchase,
stock option, hospitalization or insurance plans or arrangements (and grant
certificates or other documents issued thereunder) or vacation pay, severance
pay and other similar benefit arrangements for officers, employees or agents,
together with a list of all pensioned employees or obligations to provide any
pensions hereafter other than pursuant to the plans hereinbefore in this item
described;
(c) employment contracts or agreements, consulting agreements,
agreements providing for termination or severance benefits, non-competition
agreements, non-
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disclosure agreements, contracts for professional personal services, contracts
with other persons engaged in sales or distributing activities, and advertising
contracts;
(d) written or oral agreements, understandings and arrangements of any
kind with any officer, director, employee, shareholder or agent of the Company
relating to present or future compensation or other benefits available to such
person or otherwise, together with a list of the names and current annual salary
rates of all present officers and employees of the Company whose current salary
rate is $25,000 or more and any bonuses paid or payable to each such person for
the 1996 fiscal year;
(e) indentures, loan agreements, notes, security agreements, mortgages,
conditional sales contracts, leases of real or personal property, contracts for
the purchase of sale or real or personal property, and agreements for financing;
(f) property, casualty, crime, directors and officers, and other forms
of insurance;
(g) all bank accounts and safety deposit boxes identifying all
authorized signatories, together with a list of all effective powers of attorney
granted by the Company to anyone;
(h) agreements, contracts or other arrangements to which the Company is
a guarantor, surety or endorser;
(i) contracts, agreements, commitments, arrangements or understandings
providing for the purchase or sale of all or substantially all of the Company's
requisites of a particular product from a single supplier or to a single
customer;
(j) contracts, agreements, commitments, arrangements or understandings
which limit the freedom of the Company from competing in any line of business or
with any person or entity;
(k) license agreements (as licensor or licensee);
(l) leases of real and personal property with a term of more than one
year (regardless of whether the Company is lessor or lessee); and
(m) contracts, agreements, instruments, arrangements or understandings
which have not been included in items (a) through (l) above involving payment by
or to the Company of more than $50,000 or not terminable without penalty or
otherwise materially affecting the assets, financial condition, properties or
business of the Company.
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All of the Material Company Contracts are in full force and effect. Except to
the extent that a material adverse effect on the Company's financial condition,
assets, liabilities, earnings, business or prospects would not result if the
following were not true: (A) the Company and each other party to each of the
Material Company Contracts have performed all the obligations required to be
performed by them to date, have received no notice of default and are not in
default (with due notice or lapse of time or both) under any of the Material
Company Contracts; (B) the Company has no present expectation or intention of
not fully performing all of its obligations under any of the Material Company
Contracts, and the Company has no knowledge of any breach or anticipated breach
by any other party to any of the Material Company Contracts; (C) there exists no
actual or, to the knowledge of the Company, threatened termination, cancellation
or limitation of the business relationship of the Company with any party to any
Material Company Contract; and (D) consummation of the transactions contemplated
hereby and performance by the Company of its obligations hereunder shall not
require the consent or permission of any party to any Material Company Contract
or permit any party to terminate, suspend or alter the terms of any Material
Company Contract.
3.14 LITIGATION. There are no actions, suits, causes of action, claims,
litigation, arbitration, administrative hearings, or other form of proceedings
or disputes of any kind pending or, to the best knowledge of the Company,
threatened against the Company or involving, affecting, or relating to its
capacity to complete the transactions contemplated herein, the Company, or its
officers or directors (in their capacities as such), in any court, at law or in
equity, or before any arbitration board or any governmental department,
commission, board, bureau, agency, or instrumentality; nor has the Company been,
nor is it, subject to any orders, awards, fines, judgments, decrees, or
injunctions the effect of which in the aggregate would have a material adverse
effect on the business or financial position or prospects of the Company. The
Company does not know or have grounds to know of any basis for any such action,
suits, or other form of proceeding or disputes or of any governmental
investigation relating to the Company or its business.
3.15 TAXES.
(a) (i) All Tax Returns (as defined below) of, relating to or which
include the Company which are required to have been filed have been filed on a
timely basis with the appropriate authorities and all such Tax Returns are true,
correct and complete in all respects; (ii) all Taxes (as defined below) required
to have been paid by the Company (including amounts collected or withheld from
third parties required to have been paid over to the appropriate authorities)
have been paid in full on a timely basis to the appropriate authorities; and
(iii) all Taxes or other amounts required to have been collected or withheld by
the Company have been timely and properly collected or withheld.
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(b) (i) No taxing authority has asserted in writing to the Company any
adjustment, deficiency, or assessment that could result in additional Tax for
which the Company is or may be liable; (ii) there is no pending audit,
examination, investigation, dispute, proceeding or claim for which the Company
has received notice relating to any Tax for which the Company is or may be
liable; (iii) no statute of limitations with respect to any Tax for which the
Company is or may be liable has been waived or extended; (iv) the due date of
any Tax Returns that the Company is required to file has not been extended; and
(v) Company is not a party to any Tax sharing or Tax allocation agreement,
arrangement or understanding.
(c) There are no liens on any of the assets of the Company which arose
in connection with any failure or asserted failure to pay any Tax, other than
liens for current Taxes not yet due and payable.
(d) The Company is not a party to any contract, agreement, plan or
arrangement that, individually or collectively, could give rise to any payment
that would not be deductible by reason of Section 162, 280G or 404 of the Code.
(e) The Company has not been a member of an affiliated group filing a
consolidated federal income Tax Return, and the Company is not liable for the
Taxes of any person under Treasury Regulation 1.1502-6 (or any similar provision
of state, local, or foreign law) as transferee or successor, by contract or
otherwise.
(f) Copies of (i) any Tax examinations, (ii) extensions of statutory
limitations, (iii) the federal, state and local income Tax Returns and franchise
Tax Returns of the Company, and (iv) correspondence between the Company and all
taxing authorities for its last three (3) taxable years previously have been
furnished to Provant and such Tax Returns are true, correct and complete.
(g) The provision for Taxes, if any, shown on the Balance Sheet is
adequate to cover the aggregate liability of the Company arising out of facts or
circumstances occurring on or prior to the Balance Sheet Date for all Taxes.
(h) The Company has filed federal and state, and if applicable, local
Tax Returns for each period ending on or prior to the Effective Time.
(i) For purposes of this Section 3.15:
"Tax Returns" shall mean all returns, amended returns, declarations,
reports, estimates, information returns and statements regarding Taxes which are
or were filed or required to be filed under applicable law, whether on a
consolidated, combined, unitary or individual basis.
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"Taxes" shall mean any federal, state, local, foreign or other tax,
fee, levy, assessment or other governmental charge, including without
limitation any income, franchise, gross receipts, property, sales, use,
hotel, bed, services, value added, withholding, social security, estimated,
accumulated earnings, alternative or add-on minimum, transfer, license,
privilege, payroll, profits, capital stock, employment, unemployment,
excise, severance, stamp, occupancy, customs or occupation tax, and any
interest, additions to tax and penalties in connection therewith.
3.16 ABSENCE OF MATERIAL EVENTS. Since January 1, 1997 there has not
been (a) any material adverse change in the business, affairs or prospects of
the Company nor, to the best of the Company's knowledge, are any such changes
threatened, anticipated or contemplated; (b) any actual or, to the Company's
knowledge, threatened, anticipated or contemplated damage, destruction, loss,
conversion, termination, cancellation, default or taking by eminent domain or
other action by governmental authority which has materially affected or may
hereafter materially affect the properties, assets, business affairs or
prospects of the Company; (c) any material and adverse pending or, to the
Company's knowledge, threatened, anticipated or contemplated dispute of any kind
with any material customer, supplier, source of financing, employee, landlord,
subtenant or licensee of the Company, or any pending or, to the Company's
knowledge, threatened, anticipated or contemplated occurrence or situation of
any kind, nature or description which is reasonably likely to result in any
reduction in the amount, or any change in the terms or conditions, of business
with any material customer, supplier, or source of financing; or (d) any
pending, or to the Company's knowledge, threatened, anticipated or contemplated
occurrence or situation of any kind, nature or description materially and
adversely affecting the properties, assets, business, affairs or prospects of
the Company.
3.17 ABSENCE OF IMPROPER PAYMENTS. Since January 1, 1994 the Company:
(a) has not made any contributions, payments or gifts of its property to or for
the private use of any governmental official, employee or agent where either the
payment or the purpose of such contribution, payments or gift is illegal under
the laws of the United States, any state thereof or any other jurisdiction
(foreign or domestic); (b) has not established or maintained any unrecorded fund
or asset for any purpose, or has made any false or artificial entries on its
books or records for any reason; (c) has not made any payments to any person
where the Company intended or understood that any part of such payment was to be
used for any other purpose other than that described in the documents supporting
the payment; or (d) has not made any contribution, or has reimbursed any
political gift or contribution made by any other person, to candidates for
public office, whether Federal, state or local, where such contribution would be
in violation of applicable law.
3.18 ERISA.
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(a) None of the employee benefit plans maintained at any time by the
Company or the trusts (if any) forming part of such plans has engaged in a
prohibited transaction which could subject any such employee benefit plan or
trust to a material tax or penalty on prohibited transactions imposed under
Internal Revenue Code Section 4975 or ERISA.
(b) None of the employee benefit plans maintained at any time by the
Company which are employee pension benefit plans and which are subject to Title
IV of ERISA or the trusts that are part of such plans has been terminated so as
to result in a material liability of the Company under ERISA or the Code, nor
has any such employee benefit plan of the Company incurred any material
liability to the Pension Benefit Guaranty Corporation, other than for required
insurance premiums which have been paid or are not yet due and payable; neither
the Company nor any affiliate thereof has withdrawn, in either a complete or
partial withdrawal, from any multi-employer Plan resulting in any unpaid
withdrawal liability; the Company has made or provided for all contributions to
all such employee pension benefit plans which it maintains and which are
required by law or such plans as of the end of the most recent fiscal year under
each such plan; the Company has not incurred any accumulated funding deficiency
with respect to any such plan, subject to Section 412 of the Code, whether or
not waived; nor has there been any reportable event, or other event or
condition, which presents a material risk of termination of, or liability with
respect to, any such employee benefit plan by the Pension Benefit Guaranty
Corporation.
(c) The benefit liabilities under the employee pension benefit plans
which are subject to Title IV of ERISA, maintained by the Company, do not exceed
the current value of the assets of such employee benefit plans allocable to such
benefits, determined under the actuarial methods and assumptions that would
apply if such plans were terminated in accordance with ERISA and the Code.
(d) To the best of the Company's knowledge, each employee benefit plan
maintained by the Company has been administered in accordance with its terms in
all material respects and is in compliance in all material respects with all
applicable requirements of ERISA (if applicable) and other applicable laws,
regulations and rules. Each employee benefit plan maintained by the Company that
is intended to be "qualified" under Section 401(a) of the Code has received a
favorable determination letter of the Internal Revenue Service, which letter
remains in effect, and nothing has occurred since the date of such determination
that could adversely affect the qualification of such plan.
(e) As used in this Agreement, the terms "employee benefit plan",
"employee pension benefit plan", "multi-employer plan", "accumulated funding
deficiency", "reportable event", "benefit liabilities", "withdrawn" (including
its correlative forms "complete withdrawal" and "partial withdrawal") and
"accrued benefits" shall have the
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respective meanings assigned to them in ERISA, and the term "prohibited
transactions" shall have the meaning assigned to it in Code Section 4975 and
ERISA. Employee benefit plans "maintained by the Company" include any such plan
maintained, established or contributed to at any time by the Company or any
entity affiliated with or under common control with the Company.
(f) The Company has no liability not disclosed on any of the Financial
Statements, contingent or otherwise, under any plan or program or the equivalent
for unfunded post-retirement benefits, including pension, medical and death
benefits, which liability would have a material adverse effect on the financial
condition of the Company.
3.19 LABOR MATTERS. A true and complete list of all of the Company's
officers, employees (the "Employees") and consultants (the "Consultants") and
their respective salaries, wages, other compensation, dates of employment, date
and amount of last salary or compensation increase, and positions has been
provided to Provant by the Company. There are no material disputes, employee
grievances, or disciplinary actions pending or, to the knowledge of the Company,
threatened by or between the Company and any of the Employees or Consultants.
With respect to the Employees and Consultants, the Company has complied in all
respects with all provisions of all laws relating to the employment of labor and
has no liability for any arrears of wages or taxes or penalties for failure to
comply with any such law or for any severance or termination payments of any
type. None of the Consultants are or were (while classified by the Company as
Consultants) employees of the Company for any purpose whatsoever. No employees
of the Company are or ever have been represented by a bargaining representative
with respect to the Company, and no election or proceedings relating to the
labor relations of the Company is pending or, to the best of the Company,
knowledge, threatened. The Company has not had any material union activity or
had any material labor disruption or material dispute with its employees of any
kind, nature or description at any time heretofore. All personnel policies and
manuals of the Company are listed on the Company Disclosure Schedule and true
and complete copies thereof have been provided to Provant. No Employee or
Consultant shall have the right to receive from the Surviving Corporation or
Provant a severance payment or other payment in the nature thereof in the event
his or her employment is terminated by the Surviving Corporation following the
Merger, whether such right arises as a matter of contract, past policy or
understanding, by operation of law, or otherwise.
3.20 PERMITS: COMPLIANCE WITH LAW. The Company possesses all
franchises, permits, licenses, certificates, approvals, and other authorizations
("Permits") necessary to own or lease and operate its properties and to conduct
its business as now conducted, except for incidental Permits that would be
readily obtainable without undue burden in the event of any lapse, termination,
cancellation, or forfeiture or that if not obtained would not materially and
adversely affect the Company's business.
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All such material Permits are in full force and effect, and, to the knowledge of
the Company, no suspension or cancellation of any of them is threatened, and no
material Permits will be adversely affected by the consummation of the Merger.
The Company has not failed nor is it failing to comply with any applicable law,
rule, regulation, or order, where such failure would have a material adverse
effect on the Company's business, and there are no proceedings pending or, to
the Company's knowledge, threatened, nor has the Company received any notice,
regarding any such failure.
3.21 ENVIRONMENTAL MATTERS. The Company is, and to the Company's
knowledge all real property owned or otherwise occupied by the Company are and
have been at all times when so owned or occupied, in material compliance with
all applicable existing federal, state and local laws and regulations relating
to protection of human health or the environment or imposing liability or
standards of conduct concerning any Hazardous Material (as hereinafter defined)
("Environmental Laws"), except, in each case, where such noncompliance, singly
or in the aggregate, would not have a material adverse effect on the condition,
financial or otherwise, or the earnings, business affairs or business prospects
of the Company. No Hazardous Materials are stored, utilized or otherwise present
on any property owned or otherwise occupied by the Company, excepting only (x)
cleaning supplies and similar materials customarily used by businesses in the
Company's industry in quantities consistent with such use, and (y) petroleum
products that are used for heating (including water heating) in facilities
located on such property, none of which are stored in underground storage tanks,
or that are present in vehicles located on such property. There has not occurred
any release of Hazardous Materials on, under or affecting any real property
during or prior to the period of the Company's ownership, occupation or
operation of such property (including its participation in or exercise of any
degree of control over the management of any business located on such property).
The term "Hazardous Material" means (a) any "hazardous substance" as defined in
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended through the date hereof, (b) any "hazardous waste" as defined
by the Resource Conservation and Recovery Act, as amended through the date
hereof, (c) any petroleum or petroleum product, (d) any polychlorinated biphenyl
and (e) any pollutant or contaminant or hazardous, dangerous, or toxic chemical,
material, waste or substance regulated under or within the meaning of any other
Environmental Law as amended through the date hereof. For purposes of this
Section 3.21, real property owned by third parties but "occupied" by the Company
shall mean only that portion of such property as is either leased by the Company
or in fact otherwise physically occupied or utilized by the Company. There is no
alleged liability, or to the best knowledge of the Company, potential liability
(including, without limitation, alleged or potential liability for investigatory
costs, cleanup costs, governmental response costs, natural resources damages,
property damages, personal injuries or penalties) of the Company arising out of,
based on or resulting from (i) the presence or release into the environment of
any Hazardous Material at any location,
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whether or not owned by the Company or (ii) any violation or alleged violation
of any Environmental Law, which alleged or potential liability, singly or in the
aggregate, would have a material and adverse effect on the condition, financial
or otherwise, or the earnings, business affairs or business prospects of the
Company.
3.22 FURTHER ASSURANCES. The Company will use all commercially
reasonable efforts to have all present officers and directors of the Company
execute whatever minutes of meetings or other instruments and take whatever
action as may be necessary or desirable to effect, perfect or confirm of record
of otherwise, in the Surviving Corporation, full right, title and interest in
and to the business, properties and assets now conducted or owned by the
Company, free and clear of all restrictions, liens, encumbrances, rights, title
and interests in others (excepting only liens reflected on the Balance Sheet),
or to collect, realize upon, gain possession of, or otherwise acquire full
right, title and interest in and to such business, properties and assets, and
will otherwise use its reasonable best efforts to carry out the intent and
purposes of the transactions contemplated hereby and the IPO.
3.23 CORPORATE RECORDS. The corporate record books of the Company are
in all material respects in good order, complete, accurate, up to date, with all
necessary signatures, and set forth all meetings and actions taken by the
shareholders and directors, and all votes of the shareholders or directors set
forth in certificates furnished to anyone at any time heretofore.
3.24 CONDITION OF ASSETS. All premises, fixtures and equipment owned or
used by the Company and material to its business have been properly maintained
and are in good operating order and repair, free from known defects in
construction or design, sound and properly functioning (normal wear and tear
excepted), usable and not obsolete, and (to the Company's knowledge in the case
of leased property) in material compliance with all applicable zoning, building
and fire codes and all other applicable laws, rules, regulations and
requirements of governmental authorities and the fire insurance rating
association having jurisdiction.
3.25 ACCOUNTS RECEIVABLE. All of the accounts receivable of the Company
shown or reflected on the Balance Sheet in the Financial Statements, less the
reserve for doubtful accounts in the amount shown on the Balance Sheet, are
valid and enforceable claims and subject to no set off or counterclaim. All of
the accounts receivable of the Company shown or reflected on the Balance Sheet
and as at December 31, 1997 (as reflected on the Company's balance sheet as of
such date, when and as delivered to Provant) will be collected in full within
150 days thereafter except to the extent of the reserve for doubtful accounts
shown on the Balance Sheet or posted on the books of the Company of such date.
The reserve for doubtful accounts as at December 31, 1997 will not be in excess
of said reserve as shown on the Balance Sheet. The Company has no accounts or
loans receivable from any of its directors, officers or employees.
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3.26 CHARTER DOCUMENTS. The Company has heretofore delivered to Provant
copies of its Charter, as amended to date, certified by the appropriate
governmental authority, and copies of its By-Laws, as amended to date, and a
list of the officers and directors of the Company in office, all as certified by
its Secretary.
3.27 DISCLOSURE OF ALL MATERIAL MATTERS.
(a) No statement of a material fact set forth in this Agreement
(including without limitation all information in the Financial Statements, the
Company Disclosure Schedule and the other Schedules, Exhibits and attachments
hereto, taken as a whole) with respect to the Company or the Stockholder is
false or misleading in any respect, nor does this Agreement (including, without
limitation all information in the Financial Statements, Company Disclosure
Schedule and the other Schedules, Exhibits and attachments hereto, taken as a
whole) omit to state a material fact necessary in order to make the statements
made or information disclosed, in the light of the circumstances under which
they were made or disclosed, not misleading.
(b) Provided only that Provant has accurately incorporated any
information furnished in writing by the Company to Provant specifically for
inclusion in the Registration Statement or the Prospectus (as applicable) and
has deleted from the Registration Statement or the Prospectus (as applicable)
any statement that the Company has specifically requested in writing be so
deleted, (i) at the time the Registration Statement becomes effective under the
Securities Act, it will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading, and (ii) at the time of each closing in
connection with the IPO, the Prospectus will not include an untrue statement of
a material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. The representations and warranties in this Section shall
not apply to statements in or omissions from the Registration Statement and
Prospectus relating to any person or entity other than the Company and its
officers, directors and stockholders.
3.28 BROKERS. No broker, finder, or investment banker is entitled to
any brokerage, finder's, or other fee or commission in connection with the
Merger or the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company.
4. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER
The Stockholder represents and warrants to Provant and Acquisition as
follows:
4.1 TITLE TO THE SHARES. All of the issued and outstanding Shares
listed on the Disclosure Schedule as owned by the Stockholder are owned by the
Stockholder
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free and clear of any claims, liens, charges, encumbrances, security interests
and rights of others whatsoever, and such Shares are not bound by or subject to
any proxy, agreement, voting trust or other restriction regarding the voting
thereof.
4.2 AUTHORITY. The Stockholder has full power, authority and capacity
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby, and no other action is necessary by the Stockholder to
consummate the transactions contemplated by the Agreement. This Agreement has
been duly and validly executed and delivered by the Stockholder and constitutes
a legal, valid and binding obligation of the Stockholder enforceable against him
in accordance with its terms, except as enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting enforcement of creditors' rights generally.
4.3 NO CONFLICTS. The execution, delivery and performance of this
Agreement by the Stockholder do not and will not violate, conflict with, result
in a breach of or constitute a default under (or an event which with due notice
or lapse of time, or both, would constitute a breach of or default under) or
result in the creation of any lien, security interest or other encumbrance under
(a) any material term of any note, agreement, contract, license, instrument,
lease or other obligation to which the Stockholder is a party or by which he is
bound, (b) any material provision of any judgment, order, decree, ruling or
injunction or (c) any statute, law, regulation or rule of any governmental
agency or authority.
5. REPRESENTATIONS AND WARRANTIES
OF PROVANT, ACQUISITION AND THE PROVANT PRINCIPALS
Provant, Acquisition and the Provant Principals represent and warrant
to the Company and the Stockholder that, except as expressly provided in the
Provant Disclosure Schedule by specific reference to a Section of this Article
5:
5.1 ORGANIZATION AND AUTHORITY. Each of Provant and Acquisition is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware, and each has all requisite corporate power and
authority to conduct its business and own its properties as now conducted and
owned, and is qualified and in good standing as a foreign corporation, and has
at all times when legally required been so qualified and in good standing, in
each jurisdiction where the failure to be so qualified would, in the aggregate,
have a material adverse effect on the business or financial condition of
Provant. Each of Provant and Acquisition has full power and authority to execute
and deliver this Agreement and the agreements being executed and delivered in
connection with the Additional Mergers and the IPO to which it is a party, and
to consummate the transactions contemplated hereby and thereby and to perform
its obligations hereunder and thereunder. The
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execution and delivery of this Agreement and the other agreements referenced
above and the consummation of the transactions contemplated hereby and thereby,
and the performance of Provant's and its subsidiaries' (including Acquisition's)
obligations hereunder and thereunder have been duly and validly authorized by
the unanimous votes of the respective Boards of Directors of Provant and such
subsidiaries (including Acquisition) and by Provant as the sole stockholder of
such subsidiaries (including Acquisition), and no other corporate proceedings on
the part of Provant or its subsidiaries (including Acquisition) are necessary to
authorize this Agreement or the other agreements referenced above or to
consummate the transactions contemplated hereby or thereby or to perform the
obligations of Provant and its subsidiaries (including Acquisition) hereunder or
thereunder. This Agreement has been duly and validly executed and delivered by
each of Provant and Acquisition and constitutes a valid and binding agreement of
each, enforceable against each in accordance with its terms, except as
enforcement may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting enforcement of creditors' rights
generally.
5.2 CAPITALIZATION OF PROVANT; SUBSIDIARIES. Provant has authorized
capital consisting of 10,000 shares of Provant Common Stock, $.01 per share par
value, of which no shares are held in Provant's treasury. As of the date hereof,
there are 3,417.9 issued and outstanding shares of Provant Common Stock, all of
which are duly authorized, validly issued, fully paid and non-assessable and are
owned of record and beneficially by those persons listed on the Provant
Disclosure Schedule. Provant has no other authorized class of capital stock
other than the Provant Common Stock. As of the date hereof and at all times
prior to the Effective Time, Provant does not (and will not) own and has not
owned any shares of capital stock or other securities of, or any other interest
in, nor does (or will) it control or has it controlled, directly or indirectly,
any other corporation, association, joint venture, partnership, or other
business organization, other than Acquisition and the subsidiaries intended to
be merged with the Additional Companies. All of the issued and outstanding
shares of capital stock of Acquisition, and of each subsidiary that will be
merged with an Additional Company, are owned of record and beneficially by
Provant. All outstanding shares of Provant Common Stock have been issued and
sold in full compliance with all applicable Federal and state securities laws.
No holder of outstanding shares of Provant Common Stock has any dissenting
shareholder or appraisal rights with regard to the Merger. Provant does not have
knowledge of any voting agreements, voting trusts or similar agreements
governing the manner in which any shares of Provant Common Stock are voted by
the holders thereof.
5.3 NO RIGHTS TO PURCHASE OR REGISTER STOCK. Excepting only (a) the
shares of Provant Common Stock to be issued as Merger Shares and as merger
consideration in the Additional Mergers, (b) the shares of Provant Common Stock
to be sold in the IPO, and (c) the shares of Provant Common Stock to be issued
pursuant to Provant Options under the Plan, no person, firm, or corporation has
any written or oral
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agreement, option, warrant, call, understanding, commitment, or any right or
privilege capable of becoming a binding agreement, for either the purchase of
any shares of Provant Common Stock or the acquisition of shares of any other
class of capital stock of Provant, and Provant has not otherwise agreed to issue
or sell any shares of its capital stock and has no obligation to register any
shares of Provant Common Stock under the Securities Act. Provant is not
obligated directly, indirectly or contingently to purchase any shares of Provant
Common Stock. No person, firm, or corporation has any written or oral agreement,
option, warrant, call, understanding, commitment, or any right or privilege
capable of becoming a binding agreement, for the purchase or other acquisition
of any shares of capital stock of Acquisition or of any subsidiary of Provant
that will be merged with an Additional Company, and neither Acquisition nor any
such other subsidiary has otherwise agreed to issue or sell any shares of its
capital stock or to register any shares of its capital stock under the
Securities Act.
5.4 MERGER STOCK. The Merger Stock has been duly authorized by all
necessary corporate action and, when issued and delivered by Provant pursuant to
this Agreement, will be validly issued, fully paid and non-assessable.
5.5 CONSENTS AND APPROVALS; NO VIOLATION; NO KNOWN IMPEDIMENTS. Neither
the execution and delivery of this Agreement by Provant and Acquisition nor the
consummation of the transactions contemplated hereby will (i) conflict with or
result in any breach of any provision of the respective charter documents or
By-Laws of Provant or Acquisition; (ii) subject to the last sentence of this
Section 5.5, require on the part of Provant any consent, approval,
authorization, or permit of, or filing with or notification to, any governmental
or regulatory authority, except (A) filing the Articles of Merger pursuant to
the TBCA and the Certificate of Merger pursuant to the DGCL and (B) any filings
required under the Securities Act and the securities or blue sky laws of the
various states; (iii) result in a default (or give rise to any right of
termination, cancellation, or acceleration) under any of the material terms,
conditions, or provisions of any note, license, lease, agreement, or other
instrument or obligation to which Provant or Acquisition is a party or by which
Provant or Acquisition or any of their respective assets may be bound, other
than as previously disclosed in writing to the Company; or (iv) violate or
constitute a material breach of any order, writ, injunction, decree, statute,
law, rule, or regulation applicable to Provant or Acquisition or any of their
respective assets. Assuming no material change after the date hereof in the
condition of the capital markets or in the business or financial condition of
the Company or any of the Additional Companies and assuming the Commission
declares the Registration Statement effective in due course, Provant has no
knowledge of any matter (including without limitation any law or regulation)
that should reasonably be expected to prohibit the consummation of the
transactions contemplated hereby, the Additional Mergers or the IPO. The
representation and warranty contained in clause (ii) above is, with respect to
compliance with the HSR Act, made in reliance upon, and is expressly conditioned
upon, the accuracy of the
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representations and warranties of the Company and the Stockholder made in the
second sentence of Section 3.6.
5.6 OPERATIONS AND FINANCIAL CONDITION; Absence of Undisclosed
Liabilities. Neither Provant nor Acquisition has conducted any material business
operations other than in connection with the Merger, the Additional Mergers and
the IPO or in preparation for operations to be conducted after the Effective
Time. Neither Provant nor Acquisition has any material tangible assets or
material liabilities or obligations of any nature, whether accrued, absolute,
contingent, or otherwise and whether due or to become due, including without
limitation liabilities that may become known or arise after the date hereof and
which relate to transactions entered into or any state of facts existing on or
before the date hereof and which would be required under generally accepted
accounting principles to be shown in a balance sheet or referenced in the notes
thereto prepared as of the date hereof, other than those incurred in connection
with the Merger, the Additional Mergers and the IPO or in connection with
Provant's preparation for future operations. Set forth on the Provant Disclosure
Schedule are all liabilities and obligations of Provant and Acquisition (by
type) that are as of the date hereof, or are expected to be as of the Effective
Time, in excess of $10,000.
5.7 LITIGATION. There are no actions, suits, causes of action, claims,
litigation, arbitration, administrative hearings or other form of proceedings or
disputes pending, or, to the best knowledge of Provant or Acquisition,
threatened, against, involving or affecting Provant or Acquisition, in any
court, at law or in equity, or before any arbitration board or any governmental
department, commission, board, bureau, agency, or instrumentality, that either
singly or in the aggregate might prevent Provant and Acquisition from
consummating the transactions contemplated hereby, the IPO or the Additional
Mergers, or which would have a material adverse effect on the business,
operations, or financial condition of Provant and its subsidiaries taken as a
whole.
5.8 MATERIAL CONTRACTS. The Provant Disclosure Schedule lists all
material leases, contracts, instruments, agreements or commitments (whether
written or oral), other than the Additional Merger Agreements, relating to the
conduct of the business of Provant or its subsidiaries (including Acquisition)
in effect on the date hereof (the "Material Provant Contracts"). Without
limiting the generality of the foregoing, the aforesaid list includes all
contracts, agreements and instruments of the following types to which Provant or
its subsidiaries is a party or by which any of them is bound:
(a) employment or employment-related contracts or agreements (including
pension, retirement, deferred compensation, death benefit, profit sharing, bonus
or other employee incentive, fringe benefit, stock purchase or stock option
agreements), consulting agreements, agreements providing for termination or
severance benefits, non-competition agreements, non-disclosure agreements,
contracts for professional
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personal services, contracts with other persons engaged in sales or distributing
activities, and advertising contracts;
(b) written or oral agreements, understandings and arrangements of any
kind with any officer, director, employee, shareholder or agent of Provant or
Acquisition relating to present or future compensation or other benefits
available to such person or otherwise;
(c) indentures, loan agreements, notes, security agreements, mortgages,
conditional sales contracts, leases of real or personal property, contracts for
the purchase or sale of real or personal property, and agreements for financing;
(d) agreements, contracts or other arrangements to which the Provant or
Acquisition is a guarantor, surety or endorser;
(e) contracts, agreements, instruments, arrangements or understandings
which have not been included in items (a) through (d) above involving payment by
or to Provant or Acquisition of more than $50,000 or not terminable without
penalty or otherwise materially affecting the assets, financial condition,
properties or business of Provant or Acquisition.
All of the Material Provant Contracts are in full force and effect. Except to
the extent that a material adverse effect on Provant's financial condition,
assets, liabilities, earnings, business or prospects (each considered on a
consolidated basis giving effect to the Merger and the Additional Mergers) would
not result if the following were not true: (A) Provant, Acquisition and each
other party to each of the Material Provant Contracts have performed all the
obligations required to be performed by them to date, have received no notice of
default and are not in default (with due notice or lapse of time or both) under
any of the Material Provant Contracts; (B) Provant and Acquisition have no
present expectation or intention of not fully performing all of their respective
obligations under any of the Material Provant Contracts, and Provant and
Acquisition have no knowledge of any breach or anticipated breach by any other
party to any of the Material Provant Contracts; (C) there exists no actual or,
to the knowledge of Provant and Acquisition, threatened termination,
cancellation or limitation of the business relationship of Provant or
Acquisition with any party to any Material Provant Contract; and (D)
consummation of the transactions contemplated hereby and performance by Provant
and Acquisition of their respective obligations hereunder shall not require the
consent or permission of any party to any Material Provant Contract or permit
any party to terminate, suspend or alter the terms of any Material Provant
Contract.
5.9 ADDITIONAL MERGER AGREEMENTS. The Provant Disclosure Schedule sets
forth, with respect to the Additional Merger Agreements, the material economic
terms
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of each such Agreement and any other material terms of each such Agreement that
differ substantially from the corresponding terms of this Agreement.
5.10 DISCLOSURE OF ALL MATERIAL MATTERS. No statement of a material
fact made by Provant or Acquisition in this Agreement (including without
limitation all information in the Provant Disclosure Schedule and the other
Schedules, Exhibits and attachments hereto, taken as a whole) is false or
misleading in any respect, nor does this Agreement (including without limitation
all information in the Provant Disclosure Schedule and the other Schedules,
Exhibits and attachments hereto, taken as a whole) omit to state a material fact
necessary in order to make the statements made or information disclosed, in the
light of the circumstances under which they were made or disclosed, not
misleading.
5.11 BROKERS. No broker, finder, or investment banker is entitled to
any brokerage, finder's, or other fee or commission in connection with the
Merger or the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Provant or Acquisition.
6. COVENANTS
6.1 CONDUCT OF BUSINESS OF THE COMPANY.
(a) Except as contemplated by this Agreement, during the period from
the date of this Agreement to the Effective Time, the Company will conduct its
operations only in the ordinary and usual course of business and consistent with
past practice and will use all commercially reasonable efforts to preserve
intact its present business organization, keep available the services of its
present officers and employees, and preserve its relationships with customers,
suppliers, contractors, and others having business dealings with it to the end
that its goodwill and on-going business shall not be impaired at the Effective
Time.
(b) Without limiting the generality of subsection (a) and except as
otherwise expressly provided in this Agreement, before the Effective Time, the
Company will comply with all laws applicable to the conduct of its business and
continue in effect its present insurance coverage and will not, without the
prior written consent of Provant, (i) issue, sell, or pledge, or authorize or
propose the issuance, sale, or pledge of (A) any shares of capital stock of any
class (including the Shares), or securities convertible into any such shares, or
any rights, warrants or options to acquire any such shares or other convertible
securities, excepting only pursuant to the exercise or conversion of Company
Options and other instruments or securities outstanding on the date hereof and
disclosed on the Company Disclosure Schedule which exercise or conversion and
which issuance are in accordance with the terms of such instruments or
securities as in effect on the date hereof, or (B) any other securities in
respect of, in
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lieu of, or in substitution for, Shares outstanding on the date hereof; (ii)
purchase or otherwise acquire, or propose to purchase or otherwise acquire, any
outstanding Shares; (iii) declare or pay any dividend or distribution on any
shares of its capital stock; (iv) authorize, recommend, propose or announce an
intention to authorize, recommend or propose, or enter into an agreement in
principle or an agreement with respect to, any change in its capitalization,
merger, consolidation or business combination (other than the Merger), any
acquisition of a material amount of assets or securities, any disposition of a
material amount of assets or securities, or any entry into a material contract
or any release or relinquishment of any material contract rights, not in the
ordinary course of business; (v) propose or adopt any amendments to its Charter
or By-Laws (other than as effected by the Merger); (vi) incur, assume, or prepay
any long-term debt or, except in the ordinary course of business under existing
lines of credit, incur or assume any short term debt; (vii) make any loans,
advances, or capital contributions to, or investments in, any other person,
other than travel or other advances to employees consistent with past practice;
(viii) assume, guarantee, endorse, or otherwise become liable or responsible
(whether directly, contingently, or otherwise) for the obligations of any other
person, except to endorse checks for collection or deposit in the ordinary
course of business; or (ix) agree in writing or otherwise to take any of the
foregoing actions or any action that would make any representation or warranty
in this Agreement untrue or incorrect as of the date hereof or as of the
Effective Time, as if made as of such time. The foregoing provisions of this
Section 6.1(b) notwithstanding, prior to the Effective Time the Company may (a)
make a cash dividend to its stockholders so long as doing so will not prevent
the Company from satisfying the Financial Condition (with any such dividend
being accounted for prior to the calculation of the Closing Net Worth), and (b)
transfer to the stockholders of the Company for no consideration term life
insurance policies maintained on the lives of such stockholders by the Company.
6.2 NO SOLICITATION. The Company shall not, nor shall it permit any of
its officers, directors, employees, agents, or representatives (including,
without limitation, investment bankers, attorneys and accountants), directly or
indirectly to (a) initiate, contract with, solicit or encourage any inquiries or
proposals by, or (b) enter into any discussions or negotiations with, or
disclose directly or indirectly any information concerning its business and
properties to, or afford any access to its properties, books, and records to,
any corporation, partnership, person, or other entity or group in connection
with any possible proposal (an "Acquisition Proposal") regarding a sale of the
Company's capital stock or a merger, consolidation, or sale of all or a
substantial portion of the assets, or any similar transaction that is material
to the Company. The Company will notify Provant within one business day of
receipt if any discussions or negotiations are sought to be initiated, any
inquiry or proposal is made, or any such information is requested with respect
to an Acquisition Proposal or potential Acquisition Proposal or if any
Acquisition Proposal is received or indicated to be forthcoming. Such notice
shall state all substantive terms and conditions of any proposal or Acquisition
Proposal and the identity of the person making the proposal
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or Acquisition Proposal or seeking to initiate discussions or negotiations or
requesting information.
6.3 ACCESS TO INFORMATION.
(a) From the date of this Agreement, the Company will give Provant and
the Underwriter and their respective representatives full access, at reasonable
times and with reasonable notice, to the offices and other facilities and to the
books and records of the Company, will permit Provant and the Underwriter and
their respective representatives to make such inspections as they may reasonably
require, and will cause its officers and representatives (including, without
limitation, its firm of certified public accountants) to furnish Provant and the
Underwriter and their respective representatives with such financial and
operating data and other information with respect to the business, operations,
assets, liabilities and prospects of the Company as Provant and the Underwriter
and their respective representatives may from time to time reasonably request.
From the date of this Agreement, Provant and Acquisition will give the Company
full access, at reasonable times, to the offices and other facilities and to the
books and records of Provant and Acquisition, will permit the Company and its
representatives to make such inspections as they may reasonably require, and
will cause their respective officers and representatives (including, without
limitation, their firm of certified public accountants) to furnish the Company
and its representatives with such financial and operating data and other
information with respect to the business, operations, assets and liabilities of
Provant, Acquisition and the Additional Companies (in the last case to the
extent such information is in the possession of Provant and the applicable
Additional Company does not object to disclosure) as the Company and its
representatives may from time to time reasonably request.
(b) Provant and Acquisition, on the one hand, and the Company, on the
other hand, will, and will cause their respective employees and agents
(including, in the case of Provant, the Underwriter and its employees and
agents) (collectively, "Representatives") to, hold in strict confidence, unless
compelled to disclose by judicial or administrative process or, in the opinion
of its counsel, by other requirements of law, all Confidential Information (as
hereinafter defined) and will not disclose the same to any person. If this
Agreement is terminated, each party having received or created any documents
containing Confidential Information (including documents received or created by
its Representatives), will promptly return to the other party or destroy (or
cause to be returned or destroyed) all documents (including all copies thereof)
so received or created containing such Confidential Information. For purposes
hereof, "Confidential Information" shall mean all information of any kind
concerning the Company, or concerning any of Provant, Acquisition or any
Additional Company, respectively, except information (i) ascertainable or
obtained from public or published information, (ii) received from a third party
not known to Provant, Acquisition or their Representatives, or to the Company or
its
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Representatives, as applicable, to be under an obligation to the Company or
Provant, as applicable, to keep such information confidential, (iii) that is or
becomes known to the public (other than through a breach of this Agreement),
(iv) that was in the receiving party's possession before disclosure thereof to
it in connection with this Agreement, or (v) that is independently developed by
Provant or by the Company (including their respective Representatives), as
applicable.
6.4 REASONABLE BEST EFFORTS. Subject to the terms and conditions
hereof, each party to this Agreement agrees to fully cooperate in all reasonable
respects with the others and the others' counsel, accountants and
representatives in connection with any steps required to be taken as part of its
obligations under this Agreement and in connection with the IPO. Each of the
Company, Provant and Acquisition agrees that it will use its reasonable best
efforts to cause all conditions to its obligations under this Agreement to be
satisfied as promptly as possible, and will not undertake a course of action
inconsistent with this Agreement or which would make any of its representations,
warranties, agreements or covenants in this Agreement untrue in any material
respect or any conditions precedent to its obligations under this Agreement
unable to be satisfied at or prior to the Closing. The Provant Principals hereby
covenant and agree that, subject to the satisfaction (or, in Provant's sole
discretion, waiver) of the conditions set forth in Section 7.1, they will use
their reasonable best efforts to cause Provant to calculate the Financial
Condition in good faith and to cause Provant, Acquisition or Provant's counsel,
as applicable, to execute and/or deliver each of the items identified in
subsections 7.2(e), (h), (i) and (k) and to take the action described in
subsection 7.2(j).
6.5 CONSENTS. Each of Provant, Acquisition and the Company will use
reasonable efforts to obtain as promptly as practicable such consents of third
parties to agreements that would otherwise be violated by any provisions hereof
and to make such filings with governmental authorities as are necessary to
consummate the transactions contemplated by this Agreement.
6.6 PUBLIC ANNOUNCEMENTS. Except as provided in the immediately
following sentence, all public announcements, notices or other communications
regarding this Agreement and the transactions contemplated hereby to third
parties other than the parties hereto and their respective advisors and the
shareholders of the Company shall require the prior approval of Provant and of
the Company. Notwithstanding the foregoing, neither the filing of the
Registration Statement (or any other document filed with any public official in
connection with the IPO), nor the distribution of the Prospectus (whether in
preliminary or final form), nor any selling activity conducted by Provant or the
Underwriter in connection with the IPO, including without limitation those
conducted as part of the so-called road show, shall be construed to be public
announcements, notices or other communications requiring the prior approval of
the Company.
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6.7 NOTIFICATION OF CERTAIN MATTERS. Each of the parties (the
"Notifying Party") shall give prompt notice to the other parties of (i) the
occurrence or non-occurrence of any event that would be likely to cause any
representation or warranty of the Notifying Party contained in this Agreement to
be untrue or inaccurate in any material respect at or prior to the Effective
Time and (ii) any material failure of the Notifying Party to comply with or
satisfy any covenant, condition, or agreement to be complied with or satisfied
by it hereunder. Without limiting the foregoing, from time to time prior to the
Closing the Company will promptly supplement or amend the Company Disclosure
Schedule both to correct any inaccuracy in the Company Disclosure Schedule when
delivered and to reflect any development which, if existing at the date of this
Agreement, would have been required to be set forth in the Company Disclosure
Schedule or which has rendered inaccurate the information contained in the
Company Disclosure Schedule (each notice furnishing such information being
called a "Company Disclosure Supplement"), and approximately six business days
prior to the Closing the Company will deliver to Provant a final Company
Disclosure Supplement consisting of a complete update of the Company Disclosure
Schedule as though all representations and warranties contained in Article 3
hereof were to be made as of the date of the Closing. In addition, the Company
shall promptly notify Provant in writing if at any time prior to a closing in
connection with the IPO it shall obtain knowledge of any facts relating to the
Company or its officers, directors or stockholders that might make it necessary
or appropriate to amend or supplement the Prospectus in order to make the
statements contained therein not misleading or comply with applicable law. The
delivery of any Company Disclosure Supplement or other notice pursuant to this
Section 6.7 shall not render correct any representation or warranty that was
incorrect when made or limit or otherwise affect the remedies available
hereunder to the party receiving such Company Disclosure Supplement or notice.
6.8 COVENANTS OF THE STOCKHOLDER. The Stockholder hereby covenants and
agrees with Provant and Acquisition that he shall:
(a) take no action which the Company may not take pursuant to Section
6.2;
(b) take action and refrain from action to the extent required of the
Company pursuant to Section 6.4;
(c) cause the Company to provide to Provant the notifications required
of the Company under Section 6.7;
(d) execute and deliver at the Closing his Employment Contract,
Non-Competition and Non-Disclosure Agreement, and Investment Letter and use his
best efforts to obtain signatures by Thomas McKenzie on his employment contract,
non-competition and non-disclosure agreement and investment letter; and
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(e) subject to the other terms of this Agreement, (i) use all
commercially reasonable efforts to take whatever action may be reasonably
necessary or desirable to effect, perform or confirm of record or otherwise in
the Surviving Corporation full right, title and interest in and to the business,
properties and assets now conducted or owned by the Company, free and clear of
all restrictions, liens, encumbrances, rights, title and interests in others
(excepting only liens reflected on the Balance Sheet or otherwise disclosed on
the Disclosure Schedule) or to collect, realize upon, gain possession of, or
otherwise acquire, full right, title and interest in and to such business,
properties and assets; (ii) use his reasonable best efforts to take whatever
action may be reasonably necessary or desirable to carry out the intent and
purposes of the transactions contemplated hereby and to permit Provant to
undertake and complete the IPO;
(f) notify Provant in writing if at any time prior to a closing in
connection with the IPO he shall obtain knowledge of any facts relating to the
Company or its officers, directors or stockholders that might make it necessary
or appropriate to amend or supplement the Prospectus used in the registration
statement filed in connection with the IPO in order to make the statements
contained therein not misleading or comply with applicable law (with the
delivery of any notice pursuant to this Section 6.8(f) not limiting or otherwise
affecting the remedies available hereunder to the party receiving such notice);
(g) execute and deliver such other instruments and take such other
actions as may be reasonably required by the Company or the Underwriter in order
to carry out the intent of this Agreement and to complete and close the IPO,
subject to the other terms of this Agreement; and
(h) satisfy (or cause to be satisfied) prior to the Effective Time any
indebtedness to the Company owed by such Stockholder or by any Affiliate of such
Stockholder, and cause to be discharged any guaranty granted by the Company in
favor of such Stockholder or in favor of any Affiliate of such Stockholder.
6.9 TAX FREE REORGANIZATION. From and after the Effective Time, neither
Provant nor the Surviving Corporation shall take or suffer to be taken any
action which will cause the Merger not to constitute a reorganization within the
meaning of Section 368(a)(2)(D) of the Code.
6.10 MONTHLY FINANCIAL INFORMATION. Within thirty days after the end of
each month ending after the date of this Agreement and prior to the Effective
Time, the Company will furnish to Provant internally prepared financial
statements comparable to the Financial Statements prepared in a manner
consistent with the Financial Statements and certified by the chief financial
officer of the Company.
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6.11 PROVANT OPTION PLAN. Prior to the Effective Time, Provant shall
adopt an employee stock option plan (the "Plan") providing for the granting of
Provant Options from time to time as provided in the Plan. The Plan shall make
available for grant at or before the Closing and the Board of Directors of
Provant shall so grant, Provant Options with respect to a number of shares of
Provant Common Stock equal to 5.0% of the shares of Provant Common Stock
outstanding as of immediately following the Closing of the Merger, the
Additional Mergers (excluding any Additional Merger that is terminated without
consummation) and the IPO, giving effect to the issuance of all shares of Merger
Stock issuable as of Closing, all shares of Provant Common Stock issuable as of
the Closing as merger consideration in each of the Additional Mergers and the
issuance of Provant Common Stock in the IPO. The Provant Options granted as of
such time shall have an exercise price equal to the IPO Price, shall by their
terms (i) become exercisable ratably over a period of three years (provided that
the holder remains employed by Provant or one of its affiliates and subject to
accelerated vesting in the event of a change in control of Provant), (ii) have a
term of seven years, and (iii) in the case of vested options, remain exercisable
for a period of one year following any termination of employment without cause
(including termination resulting from the expiration of any employment agreement
in accordance with its terms and termination upon death or disability) and for a
period of ten business days following any termination of employment for cause
(conditioned, in the latter case, upon the terminated employee's delivery of a
general release to the Surviving Corporation, Provant and their respective
affiliates), and shall have such other terms as the Board of Directors of
Provant may determine. The Provant Options granted as of such time shall be
allocated among the employees of, respectively, the Surviving Corporation and
the surviving corporations of the Additional Mergers in accordance with Schedule
6.11 hereto, and shall be granted to individual employees of such corporations
in accordance with directions to the Board of Directors of Provant given by the
executive officers of the Company and the Additional Companies absent a good
faith determination by the Board of Directors of Provant that such a direction
is manifestly contrary to the interests of the Surviving Corporation; provided,
however, that (a) Provant Options for not fewer than 80,000 shares shall be
allocated to the employees of the Surviving Corporation, based on an IPO Price
of $10.00 (adjusted proportionately if the IPO Price is higher or lower), and
(b) one-half of the Provant Options allocated to employees of the Surviving
Corporation shall in any event be granted to Thomas McKenzie.
7. CONDITIONS TO CONSUMMATION OF THE MERGER
7.1 CONDITIONS TO THE OBLIGATIONS OF PROVANT AND ACQUISITION. The
obligations of Provant and Acquisition to consummate the Merger are subject to
the satisfaction at the Closing, or waiver by Provant in writing, in whole or in
part, of each of the following conditions:
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(a) The IPO and each of the Additional Mergers shall have been
completed at the same time.
(b) The Financial Condition shall have been satisfied, in the good
faith determination of Provant.
(c) Each of the representations, warranties, agreements and covenants
of the Company and the Stockholder (giving effect to the Company Disclosure
Schedule, but not to any Company Disclosure Supplement) shall be true and
correct as of, and shall not have been violated in any respect at, the Closing
as though made on and as of the Closing, except for (i) representations,
warranties, agreements and covenants which make reference to a specific date
(including the date of this Agreement), which need only be true and correct as
of the specified date, and (ii) failures of representations or warranties to be
true and correct as of the Closing solely on account of matters arising between
the date hereof and the Effective Time in the ordinary course of the Company's
business, if and to the extent such matters are consistent with past practice of
the Company and are not materially adverse to the Company, either singly or in
the aggregate.; the Company and the Stockholder shall, on or before the Closing,
have performed all of their respective obligations under this Agreement which by
the terms hereof are to be performed on or before the Closing; and there shall
have delivered to Provant and Acquisition a certificate signed by the President
of the Company on behalf of and in the name of the Company and by the
Stockholder dated as of the date of the Closing to the foregoing effect.
(d) No action or proceeding by or before any court or other
governmental body shall have been instituted by any governmental body or other
person or entity or threatened in writing by any governmental body which seeks
to restrain, prohibit or invalidate the transactions contemplated by this
Agreement or which would materially adversely affect the right of the Surviving
Corporation, as a subsidiary of Provant, to conduct the business of the Company
as presently conducted by the Company or which claims damages from Provant with
respect to the transactions contemplated hereby.
(e) Provant and Acquisition shall have received the opinion of counsel
to the Company, dated the date of the Closing and in form and substance
reasonably satisfactory to Provant and its counsel, substantially to the effect
set forth on Exhibit 7 (subject to qualifications and assumptions customary in
transactions such as the Merger), which opinion provides that it may be relied
upon by the Underwriter.
(f) All proceedings taken by the Company and all instruments executed
and delivered by the Company prior to the date of the Closing in connection with
the transactions herein contemplated shall be satisfactory in form and substance
to counsel for Provant acting reasonably.
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(g) No statute, rule or regulation shall have been enacted or
promulgated which makes illegal or prohibits consummation of the transactions
contemplated hereby or which materially and adversely affects the ability of the
Surviving Corporation, as a subsidiary of Provant, to conduct the business of
the Company as presently conducted by the Company.
(h) The Stockholder shall have executed and delivered to Provant the
Employment Contract, the Non-Competition and Non-Disclosure Agreement and the
Investment Letter, and Thomas McKenzie shall have executed and delivered to
Provant his employment contract, his non-competition and non-disclosure
agreement, and his investment letter.
(i) The Company shall have delivered to Provant and Acquisition a
certificate of its Secretary certifying as to requisite corporate or other
action authorizing the transactions contemplated by this Agreement, the
incumbency of officers and directors, and the status of record ownership of the
Shares.
(j) The Company shall have delivered to Provant such other
certificates, documents and consents as Provant and its counsel shall reasonably
require.
7.2 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY AND THE STOCKHOLDER.
The obligation of the Company and the Stockholder to consummate this Agreement
is subject to the satisfaction at the Closing, or waiver by the Company in
writing, in whole or in part, of each of the following conditions:
(a) The IPO shall have been completed at the same time, and appropriate
measures shall have been adopted and shall be in place to ensure that the
Stockholder shall receive out of the proceeds of the IPO all cash to which he
will become entitled as of the Effective Time.
(b) Each of the Additional Mergers shall have been completed at the
same time as the Merger, and there shall have occurred no event (or series of
events, whether or not related) with respect to any Additional Company that (i)
constitutes a failure of a closing condition set forth in the applicable
Additional Merger Agreement such that, in the reasonable judgment of Provant,
Provant is not contractually obligated to consummate the applicable Additional
Merger, and (ii) has resulted in a material adverse change between the date
hereof and the date of the Closing in the financial condition, assets,
liabilities, earnings, business, or business prospects of the applicable
Additional Company.
(c) Each of the representations, warranties and agreements of Provant,
Acquisition and the Provant Principals (giving effect to the Provant Disclosure
Schedule) shall be true and correct as of, and shall not have been violated in
any respect at, the Closing as though made on and as of the Closing except for
(i)
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representations and warranties and agreements which make reference to a specific
date (including the date of this Agreement), which need only be true and correct
as of the specified date, and (ii) failures of representations or warranties to
be true and correct as of the Closing solely on account of matters arising
between the date hereof and the Effective Time in the ordinary course of
Provant's or Acquisition's business, if and to the extent such matters are not
materially adverse to Provant (considered on a consolidated basis giving effect
to the Merger and the Additional Mergers), either singly or in the aggregate;
Provant and Acquisition shall, on or before the Closing, have performed all of
their respective obligations under this Agreement which by the terms hereof are
to be performed on or before the Closing (including without limitation the
adoption of the Plan and the grant of Provant Options to persons who will be
employees of the Surviving Corporation in accordance with Schedule 6.11); and
Provant and Acquisition shall have delivered to the Company a certificate of
their respective Presidents signed on their behalf and in their names dated as
of the date of the Closing to the foregoing effect.
(d) No action or proceeding by or before any court or other
governmental body shall have been instituted by any governmental body or other
person or entity or threatened in writing by any governmental body which seeks
to restrain, prohibit or invalidate the transactions contemplated by this
Agreement or which would materially adversely affect the right of the Company to
consummate the Merger.
(e) The Company shall have received the opinion, dated the date of the
Closing and in form and substance satisfactory to the Company and its counsel,
of Messrs. Nutter, McClennen & Fish, counsel to Provant, substantially to the
effect set forth on Exhibit 8 (subject to qualifications and assumptions
customary in transactions such as the Merger).
(f) All proceedings taken by Provant and Acquisition and all
instruments executed and delivered by Provant and Acquisition prior to the date
of the Closing in connection with the transactions herein contemplated, and any
instruments to be executed by the Stockholder at the request of Provant, shall
be satisfactory in form and substance to counsel for the Company, acting
reasonably.
(g) No statute, rule or regulation shall have been enacted or
promulgated which makes illegal or prohibits consummation of the transactions
contemplated hereby or which materially and adversely affects the ability of the
Surviving Corporation, as a subsidiary of Provant, to conduct the business of
the Company as presently conducted by the Company.
(h) Provant and Acquisition shall have delivered to the Company a
certificate of its Secretary, certifying as to requisite corporate or other
action authorizing the transactions contemplated by this Agreement.
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(i) The Surviving Corporation shall have executed and delivered each
Employment Contract to the appropriate party.
(j) The individual listed on Schedule 7.2 as the designee of the
Company shall have been elected to the Board of Directors of Provant as of
immediately following the closing of the IPO.
(k) Provant and Acquisition shall have delivered to the Company such
other certificates and documents pertaining to the Merger (including the legal
existence and good standing of Provant and Acquisition) as the Company and its
counsel shall reasonably require.
8. RESTRICTIONS ON SALE OR TRANSFER OF MERGER STOCK
8.1 RESTRICTIONS ON SALE. The shares of Merger Stock will not have been
registered under the Securities Act or the blue sky laws of any state by reason
of their contemplated issuance in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act and of such state laws.
Such shares may not be sold, transferred, or otherwise disposed of without
registration under the Securities Act and such state laws or an exemption
therefrom, or in contravention of the restrictions contained in the Investment
Letter attached hereto as Exhibit 4.
8.2 REGISTRATION ON A PARI PASSU BASIS. Provant agrees that, in the
event that at any time after the closing of the IPO it conducts a public
offering of Common Stock registered under the Act and Provant and its
underwriter determine, in their sole discretion, to permit (i) any holder of
Merger Stock, (ii) any holder of Provant Common Stock issued as merger
consideration in any of the Additional Mergers, or (iii) any Provant Principal
to sell Provant Common Stock in such offering, then Provant shall permit each
holder of Merger Stock to sell shares of such Merger Stock in such offering in
the same proportion as the person referenced in any of clauses (i) through (iii)
above who is then being permitted to sell the highest proportion of his or her
shares of Provant Common Stock (all such proportions being based on the
respective number of shares of Provant Common Stock that each applicable person
then holds); provided, however, that the foregoing right shall not apply to
shares that are no longer subject to the two-year restriction period under the
Investment Letter and that are tradeable either without regard to Rule 144
promulgated under the Act or tradeable within a 90 day period under such Rule
144. For purposes of the foregoing, an agreement granting a person a right to
have shares registered in the future shall not be construed as "permitting" such
person to sell shares in an offering until such time as such right is properly
exercised under the terms of such agreement.
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9. INDEMNIFICATION
9.1 AGREEMENTS TO INDEMNIFY.
(a) As used in this Article 9:
(i) "Damages" means claims, damages, liabilities, losses,
judgments, settlements, and expenses, including, without
limitation, all reasonable fees and disbursements of counsel
incident to the investigation or defense of any claim or
proceeding or threatened claim or proceeding.
(ii) "Provant Indemnified Party" means, collectively, each of
Provant, the Surviving Corporation, and their respective
affiliates.
(iii) "Company Indemnified Party" means, after the Effective
Time, the Stockholder.
(iv) "Indemnified Party" means either of the Provant Indemnified
Party or the Company Indemnified Party, as applicable under the
circumstances.
(b) On the terms and subject to the limitations set forth in this
Agreement, the Company, prior to the Effective Time, shall, and, after the
Effective Time, the Stockholder shall indemnify, defend, and hold the Provant
Indemnified Party harmless from, against and in respect of any and all Damages
incurred by any Provant Indemnified Party arising from or in connection with any
of the following (collectively referred to herein as "Claims"):
(i) any breach of any representation, warranty, covenant or
agreement made by the Company or by the Stockholder in this
Agreement or in any exhibit, schedule, certificate or other
document delivered or to be delivered at the Closing by or on
behalf of the Company or the Stockholder pursuant to the terms of
this Agreement or otherwise referred to or incorporated in this
Agreement, including any allegation by a third party which, if
true, would constitute such a breach; and
(ii) those matters identified on Schedule 9.1.
(c) In addition to the foregoing, and solely in the event the Merger
shall be consummated, the Stockholder shall indemnify Provant as set forth in
the immediately following sentence from any failure by the Company to have a
Closing Net Worth equal to or greater than the Minimum Net Worth. In the event
the
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Closing Net Worth shall be less than the Minimum Net Worth (and Provant shall
have elected, in its sole discretion, to waive the failure of the closing
condition set forth in Section 7.1(b) caused thereby), the Stockholder shall
reimburse Provant at the Closing for the amount of such deficit on a dollar for
dollar basis. Such reimbursement shall be the sole remedy of Provant on account
of a failure of the Closing Net Worth to equal or exceed the Minimum Net Worth
(other than Provant's right to terminate this Agreement), and neither the
Company nor the Stockholder shall be liable for any consequential damages on
account of any such failure. Any indemnity and reimbursement required by this
Section 9.1(c) shall not be subject to Section 9.2(c).
(d) From and after the Effective Time and solely if the Merger shall
have been consummated, on the terms and subject to the limitations set forth in
this Agreement, Provant and the Provant Principals shall indemnify, defend, and
hold the Company Indemnified Party harmless from, against and in respect of any
and all Damages incurred by any Company Indemnified Party arising from or in
connection with any actual or alleged breach of any representation, warranty,
covenant or agreement made by Provant or Acquisition in this Agreement or in any
exhibit, schedule, certificate or other document delivered or to be delivered at
the Closing by or on behalf of Provant or Acquisition pursuant to the terms of
this Agreement or otherwise referred to or incorporated in this Agreement (also
referred to herein as "Claims"); provided, however, that this provision shall
not be construed to provide to the Company Indemnified Party any indemnification
with respect to the Registration Statement and the information contained
therein, or with respect to any failure of the IPO to be consummated.
(e) Subject to Section 9.2, the Company's representations and
warranties set forth in Article 3, the Stockholders' representations and
warranties set forth in Article 4 and Provant's and Acquisition's
representations and warranties set forth in Article 5 shall, for purposes of
this Article 9, be deemed to have survived the Effective Time and the Closing of
the Merger and the other transactions contemplated hereby notwithstanding any
contrary terms of this Agreement, and whenever such representations, warranties,
covenants and agreements are referred to in this Article 9, the text of the same
as set forth in the aforesaid Articles shall be deemed to be set forth in their
entirety herein, and the same are hereby incorporated herein by such references.
Each representation, warranty, covenant and agreement of the Company and the
Stockholder shall be deemed to have been relied upon by the Provant Indemnified
Party, and each representation, warranty, covenant and agreement of Provant and
Acquisition shall be deemed to have been relied upon by the Company Indemnified
Party, notwithstanding any investigation or inspection made by or on behalf of
any Provant Indemnified Party or the Company Indemnified Party, as applicable,
and shall not be affected in any respect of any such investigation or
inspection. No waiver of a closing condition by an Indemnified Party shall be
deemed to relieve a party that is otherwise obligated to provide indemnification
of its
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obligations pursuant to this Section 9.1 on account of the matters that were the
subject of such waiver.
(f) In addition to and not in limitation of the rights and remedies of
Provant under this Section 9.1, Provant may withhold from any shares of Provant
Common Stock issuable to the Stockholder and all amounts payable under Section
2.8 to the Stockholder the amount of any Damages of Provant arising out of or in
connection with Claims asserted hereunder (as estimated in good faith by Provant
in the event such Damages are not yet fixed, subject to future release if
appropriate upon final resolution of the applicable Claim). For purposes of this
subsection (f), shares of Provant Common Stock otherwise issuable under Section
2.8 shall be valued at the lower of (i) the closing price for a share of Provant
Common Stock on the last trading day immediately preceding the date Provant
gives notice that it has a claim under this Article 9 and (ii) the IPO Price
adjusted as provided in Section 2.8(f).
(g) In the event the Stockholder shall indemnify the Provant
Indemnified Party for any breach of the warranties contained in Section 3.25 on
account of a failure of accounts receivable of the Company to be collected, the
Surviving Corporation shall assign to the Stockholder those accounts receivable
as to which such indemnity has been paid.
9.2 LIMITATIONS ON INDEMNITY OBLIGATIONS AND LIABILITY FOR BREACHES.
The indemnity obligations of the Company or the Stockholder, as applicable (in
either case, the "Company Indemnifying Party"), or Provant and the Provant
Principals (collectively, the "Provant Indemnifying Party") (both the Company
Indemnifying Party and the Provant Indemnifying Party being called generically
the "Indemnifying Party"), under this Agreement shall be subject to the
following limitations:
(a) The indemnity obligations of the Indemnifying Party shall expire on
September 15, 1999 (the "Cut-off Date"); provided, however, that such
obligations with respect to (i) the representations and warranties contained in
Sections 3.1, 3.2, 3.10, and 3.22, Article 4, and Sections 5.1, 5.2, 5.3 and 5.4
of this Agreement and the matters identified in Section 9.1(c) shall continue
forever without limitation, (ii) the representations and warranties regarding
taxes, which are contained in Section 3.15, shall remain in effect until all
claims for taxes due by or on account of the Company for any period up to and
including the Effective Time have been settled and any statute of limitations
period with respect to such taxes has expired, and (iii) the matters identified
on Schedule 9.1 shall continue for the periods set forth on such Schedule; and
provided further that the indemnity obligations of the Indemnifying Party for
Claims asserted by an Indemnified Party before the expiration of the applicable
indemnity period, if any, in the manner provided in this Agreement shall
continue until such Claims are finally resolved and discharged.
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(b) (i) Subject to the maximum aggregate amounts provided elsewhere in
this Subsection 9.2(b) with respect to a Stockholder's indemnity obligations, in
the event of any Damages for which the Stockholder is liable pursuant to Section
9.1, the Stockholder shall be liable solely for a fraction of each dollar of
Damages suffered equal to the fraction derived by dividing the number of Shares
held by the Stockholder as of the date hereof by the total number of Shares
outstanding. Subject to subsection (b)(ii) below, the aggregate indemnity
obligations of the Stockholder for Damages arising out of Claims the operative
facts of which were actually known to the Stockholder as of the date of this
Agreement ("Known Claims") shall not in any event exceed an amount equal to the
sum of (A) the cash received by all Stockholders pursuant to Section 2.7(c),
plus (B) the product obtained by multiplying the number of shares of Merger
Stock received by the Stockholder by the IPO Price, minus (C) any amounts paid
pursuant to Section 9.1 by the Stockholder with respect to Claims that are not
Known Claims. Subject to subsection (b)(ii) below, the aggregate indemnity
obligations of the Stockholder for any Damages arising out of Claims that do not
constitute Known Claims shall not in any event exceed Five Million Dollars
($5,000,000); provided, however, that the aggregate indemnity obligations of the
Stockholder for all Claims, whether or not constituting Known Claims, shall not
in any event exceed the sum of the amounts referenced in clauses (A) and (B) of
the immediately preceding sentence. The aggregate indemnity obligations of the
Provant Principals for any Damages shall not in any event exceed an amount equal
to (X) the aggregate number of shares of Provant Common Stock held by the
Provant Principals as of immediately following the closing of the IPO plus the
aggregate number of warrant shares covered by those certain warrants for the
purchase of Provant Common Stock issued to the Provant Principals as of the
closing of the IPO, multiplied by (Y) the IPO Price, minus (Z) the aggregate
exercise price of such warrants.
(ii) Solely in the event that both (A) the Damages to be paid
by the Stockholder pursuant to Section 9.1(b) on account of the then-asserted
Claim, in aggregation with all such Damages previously paid by the Stockholder,
equal or exceed the aggregate amount of the cash received by the Stockholder
pursuant to Section 2.7, and (B) the Average Closing Price (as defined below) of
Provant Common Stock during the ten trading days immediately following (but not
including) the date on which notice of the liquidated amount of the claimed
Damages is given to the Stockholder (which may, if applicable, be the date on
which the initial notice of the Claim is given) (in either event, the "Claim
Date") is less than the IPO Price, then the Stockholder may, at his election,
satisfy such portion of the Damages as exceeds the cash received by the
Stockholder pursuant to Section 2.7 by tendering to Provant, for cancellation,
shares of Provant Common Stock equal in value to the Damages to be so satisfied,
with such shares valued at the Average Closing Price determined under clause (B)
of this sentence. Notwithstanding subsection (b)(i) above, if the foregoing
clauses (A) and (B) are satisfied and the Stockholder is therefore permitted to
satisfy his obligations to pay Damages by tendering shares of Provant Common
Stock, and
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the Stockholder elects to so tender Provant Common Stock, the Stockholder's
obligation for Damages shall be limited to the number of shares of Provant
Common Stock received by the Stockholder pursuant to Sections 2.7 and 2.8. In
the event that Damages are to be paid by the Stockholder before the final
distribution of Provant Common Stock (if any) on account of 1998 EBIT and if
this subsection (b)(ii) shall apply, the final number of shares of Provant
Common Stock that the Stockholder shall be obligated to tender to Provant shall
be left undetermined until such time as the distribution of Provant Common Stock
(if any) is to be made under Section 2.8. As used herein, "Average Closing
Price" means the average of the closing prices of Provant Common Stock on each
trading day during the stated period, as recorded on the New York Stock Exchange
or on such other exchange or market as is then the principal exchange or market
on which Provant Common Stock is traded.
(c) Except as provided in Section 9.1(c), which Damages shall be
indemnified without respect to the threshold provided in this Section 9.2(c), an
Indemnified Party shall be entitled to indemnification only if the aggregate and
collective Damages incurred or suffered by it exceeds $132,250, in which event
it shall be entitled to indemnification of the full amount of such Damages. No
amounts indemnified by the Company or the Stockholder pursuant to Section 9.1(c)
shall be treated as Damages incurred and suffered by the Indemnified Party for
purposes of the immediately preceding sentence, provided only that the amounts
so indemnified have been duly paid.
(d) Notwithstanding the preambles to, respectively, Article 3 and
Article 5, the contractual liability of the Stockholder and the Provant
Principals for any breach of the representations and warranties contained in,
respectively, Article 3 and Article 5 shall be limited to such Stockholder's or
Provant Principal's liability provided in this Article 9.
9.3 NOTICE OF THIRD PARTY CLAIMS. An Indemnified Party shall promptly
notify the Indemnifying Party in writing of any Claim consisting of a matter
asserted by a third person that might give rise to any indemnity obligation of
the Indemnifying Party hereunder (a "Third Party Claim"), specifying in
reasonable detail the nature thereof and indicating the amount (if known, or
estimated if necessary) of the Damages that have been or may be sustained by the
Indemnified Party. Failure of any Indemnified Party to promptly give such notice
shall not relieve the Indemnifying Party of its or his obligation to indemnify
under this Article 9, but as a result of any such failure, the Indemnified Party
shall be liable to the Indemnifying Party for, and only for, the amount of
actual damages caused by such failure, which amount shall be an offset against
the amount of Damages for which the Indemnifying Party is liable hereunder.
Together with or following such notice, the Indemnified Party shall deliver to
the Indemnifying Party copies of all notices and documents received by the
Indemnified Party relating to the Third Party Claim (including court papers).
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9.4 DEFENSE AND SETTLEMENT OF THIRD PARTY CLAIMS. The Indemnifying
Party shall have the right (without prejudice to the right of any Indemnified
Party to participate at its or his own expense through counsel of its or his own
choosing) to defend against any Third Party Claim at its or his expense and
through counsel of its or his own choosing and to control such defense if the
Indemnifying Party gives written notice of its or his intention to do so within
15 business days of its or his receipt of notice of the Third Party Claim. The
Indemnified Party shall cooperate fully in all reasonable respects in the
defense of such Third Party Claim and shall make available to the Indemnifying
Party or its or his counsel all pertinent information under their control
relating thereto. The Indemnified Party shall have the right to elect to settle
any Third Party Claim; provided, however, the Indemnifying Party shall not have
any indemnification obligation with respect to any monetary payment to any third
party required by such settlement unless the Indemnifying Party shall have
consented thereto. The Indemnifying Party shall have the right to elect to
settle any Third Party Claim subject to the consent of the Indemnified Party;
provided, however, that if the Indemnified Party fails to give such consent
within 15 business days of being requested to do so, the Indemnified Party
shall, at its expense, assume the defense of such Third Party Claim and
regardless of the outcome of such matter, the Indemnifying Party's liability
hereunder shall be limited to the amount of any such proposed settlement. The
foregoing provisions notwithstanding, in no event (a) may either Indemnifying
Party adjust, compromise or settle any Third Party Claim unless such adjustment,
compromise or settlement unconditionally releases the Indemnified Party from all
liability, (b) may the Company Indemnifying Party adjust, compromise or settle
any Third Party Claim if such adjustment, compromise or settlement affects the
absolute and sole right of Provant or the Surviving Corporation to own or use
any of the Company's assets or (c) may the Company Indemnifying Party defend any
Third Party Claim which, if adversely determined, would materially impair the
financial condition, business or prospects of Provant or the Surviving
Corporation.
9.5 NOTICE OF OTHER CLAIMS. In the event any Indemnified Party should
incur any Claim that does not involve a Third Party Claim, the Indemnified Party
shall deliver a notice of such Claim with reasonable promptness to the
Indemnifying Party. If the Indemnifying Party notifies the Indemnified Party
that it does not dispute the Claim described in such notice or fails to notify
the Indemnified Party within 30 days after delivery of such notice by the
Indemnified Party whether the Indemnifying Party disputes the Claim described in
such notice, the Damages in the amount specified in the Indemnified Party's
notice will be conclusively deemed a liability of the Indemnifying Party and the
Indemnifying Party shall pay the amount of such Damages to the Indemnified Party
on demand. Failure of any Indemnified Party to promptly give such notice shall
not relieve the Indemnifying Party of its or his obligation to indemnify under
this Article 9, but as a result of any such failure, the Indemnified Party shall
be liable to the Indemnifying Party for, and only for, the amount of the actual
damages caused by such failure, which amount shall be an
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offset against the amount of Damages for which the Indemnifying Party is liable
hereunder.
10. TERMINATION; AMENDMENTS; WAIVER
10.1 TERMINATION. This Agreement may be terminated at any time prior to
the Effective Time, notwithstanding approval thereof by the stockholders of the
Company:
(a) by mutual consent of the Board of Directors of Provant and the
Company;
(b) by any party, in its sole discretion, if the Merger and the IPO
shall not have been consummated on or before June 30, 1998, unless the failure
of the Merger to occur by such date shall be due to the failure of the party
seeking to terminate this Agreement to perform or observe the covenants and
agreements of such party set forth herein;
(c) by the Company if there has been a misrepresentation or breach on
the part of Provant or Acquisition in the representations, warranties, covenants
or obligations of Provant or Acquisition set forth herein, provided that in the
case of a breach of any such covenant or obligation, such breach has not been
cured within ten (10) business days after the Company has notified Provant and
Acquisition of such breach;
(d) by Provant if there has been a misrepresentation or breach on the
part of the Company or the Stockholder in the representations, warranties,
covenants and obligations of the Company and the Stockholder set forth herein,
provided that in the case of a breach of any such covenant or obligation, such
breach has not been cured within ten (10) business days after Provant has
notified the Company or the Stockholder of such breach; or
(e) by any party if any court shall have issued an order, decree or
ruling or taken any other action permanently enjoining, restraining or otherwise
prohibiting the Merger and such order, decree, ruling or other action shall have
become final and non-appealable.
The power of termination provided for by this Section 10.1 may be
exercised for Provant or the Company only by their respective Boards of
Directors in its sole discretion, and will be effective only after written
notice thereof, signed on behalf of the party for which it is given by its
Chairman of the Board, President or other duly authorized officer, shall have
been given to the other. If this Agreement is terminated
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in accordance with this Section 10.1, the Merger shall be abandoned without
further action by Provant or the Company.
10.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement by any party as provided in Section 10.1, this Agreement shall
forthwith become void and have no effect, and neither Provant, nor the Company,
nor any of the officers or directors of either of them, nor the Stockholder
shall have any liability of any nature whatsoever hereunder, or in connection
with the transactions contemplated hereby, except (a) Sections 6.3(b) and 11.8
shall survive any termination of this Agreement, (b) notwithstanding anything to
the contrary contained in this Agreement, no party shall be relieved of or
released from any liabilities or damages arising out of its breach of any
provision of this Agreement and (c) until September 30, 1998, neither the
Company nor the Stockholder shall, directly or indirectly, discuss, negotiate,
submit or respond to proposals relating to, or enter into an agreement with any
other person with respect to, a transaction with other training companies to be
accompanied or followed by a public offering.
10.3 AMENDMENT. Subject to compliance with applicable law, this
Agreement may be amended by the parties hereto, by action taken or authorized
(in the case of Provant, Acquisition and the Company) by their respective Boards
of Directors, at any time before or after approval of the matters presented in
connection with the Merger by the stockholders of the Company. This Agreement
may not be amended except by an instrument in writing signed on behalf of each
of the parties hereto.
10.4 EXTENSION; WAIVER. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized (in the case of Provant,
Acquisition and the Company) by their respective Boards of Directors, may, to
the extent legally allowed, subject to Section 10.3, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party, but such
extension or waiver or failure to insist on strict compliance with an
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure.
11. MISCELLANEOUS
11.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Except as provided in
Article 9 with respect to the representations and warranties contained in
Articles 3, 4 and 5 and except for the provisions of Section 10.2, the
representations and warranties made in this Agreement shall not survive beyond
the Effective Time.
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11.2 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement (a) constitutes, with
the Company Disclosure Schedule, the Provant Disclosure Schedule, the other
Schedules and the Exhibits hereto, the entire agreement among the parties with
respect to the subject matter hereto and supersedes all other prior agreements
and understandings, both written and oral, among the parties or any of them with
respect to the subject matter hereof (including, without limitation, the letter
of intent between the Company and American Business Partners LLC) and (b) shall
not be assigned by operation of law or otherwise, provided that Provant or
Acquisition may assign its respective rights and obligations to any direct or
indirect subsidiary of Provant, but no such assignment shall relieve Provant of
its obligations hereunder.
11.3 VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, each of which shall remain in full force and
effect.
11.4 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person or by electronic facsimile transmission,
cable, telegram, or telex, or when mailed by registered or certified mail
(postage prepaid, return receipt requested) or delivered to a courier of
national reputation to the respective parties as follows:
If to Provant or Acquisition, to it at:
67 Batterymarch Street, Suite 500
Boston, MA 02110
Facsimile: (617) 261-1610
with a copy to:
Nutter, McClennen & Fish, LLP
One International Place
Boston, Massachusetts 02110-2699
Attention: Constantine Alexander, Esq.
Facsimile: (617) 973-9748
If to the Company or any Stockholder, to it or him at:
6260 Poplar Avenue
Memphis, TN 38119
Facsimile: (901) 761-7031
with a copy to:
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The Bogatin Law Firm
860 Ridge Lake Boulevard
Suite 360
Memphis, TN 38120
Attention: Matthew P. Cavitch, Esq.
Facsimile: (901) 767-2803
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
11.5 GOVERNING LAW. This Agreement and all rights of the parties
arising in connection with the transactions contemplated hereby (including the
negotiation hereof, and whether or not such transactions shall be consummated)
shall be governed by and construed in accordance with the internal laws of the
State of Tennessee, regardless of the laws that might otherwise govern under
applicable principles of conflicts of laws thereof.
11.6 DESCRIPTIVE HEADINGS. The descriptive headings herein are inserted
for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
11.7 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same agreement. Copies (photostatic,
facsimile or otherwise) of signatures to this Agreement shall be deemed to be
originals and may be relied upon to the same extent as originals, and delivery
of a duly executed signature page to this Agreement shall be deemed to be
delivery of this Agreement in its entirety.
11.8 EXPENSES. All costs and expenses incurred in connection with the
transactions contemplated by this Agreement shall be paid by the party incurring
such expenses, provided that (i) solely in the event the Merger is consummated,
the reasonable legal and accounting expenses of the Company, up to a maximum of
$50,000, shall be paid by (at the election of Provant) either Provant or the
Surviving Corporation, and (ii) all expenses of the Company not payable pursuant
to clause (i) shall be paid directly by the Stockholder or expensed (and not
capitalized) by the Company prior to the computation of the Company's net worth
for purposes of determining satisfaction of the Financial Condition. An account
receivable for expenses reimbursable by Provant or the Surviving Corporation
under clause (i) above may be included on the books of the Company for purposes
of calculating the Closing Net Worth, to the extent such amounts have previously
been expensed by the Company.
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11.9 JOINT AND SEVERAL. The representations, warranties, agreements,
covenants and obligations of the Stockholder under this Agreement are joint and
several. The indemnity obligations of Provant and the Provant Principals under
this Agreement are joint and several.
11.10 PARTIES IN INTEREST. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Agreement.
11.11 INTERPRETATION. The Parties acknowledge and agree that each party
and its counsel reviewed and negotiated the terms and provisions of this
Agreement and has contributed to its revision and that the rule of construction
to the effect that any ambiguities are resolved against the drafting party shall
not be employed in the interpretation of this Agreement.
11.12 MOST FAVORED NATION TREATMENT.. Subject to the last sentence of
this Section 11.12, Provant covenants and agrees that the Company and the
Stockholder will be accorded "most favored nation" treatment with respect to any
material amendments adopted after the date hereof with respect to any Additional
Merger Agreement or any other agreement materially altering the rights or
obligations of any Additional Company or the stockholders thereof. The parties
agree to amend this Agreement as necessary from time to time to effect any
changes required pursuant to such "most favored nation" treatment.
Notwithstanding the foregoing, such "most favored nation" treatment shall not
apply to (a) amendments of any provisions not applicable generally to this
Agreement and all (or substantially all) of the Additional Merger Agreements, or
(b) any waiver of a closing condition or an affirmative or negative covenant or
comparable undertaking contained in any Additional Merger Agreement.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, each of the parties has caused this Agreement and
Plan of Merger to be executed on its behalf by its officers thereunto duly
authorized, all as of the day and year first above written.
PROVANT, INC.
By:
Name:________________________________________
Title:
BTI ACQUISITION CORP.
By:
Name:________________________________________
Title:
BEHAVIORAL TECHNOLOGY, INC.
By: .
Name: Paul C. Green, Ph.D.
Title: President and Chief Executive Officer
STOCKHOLDER:
---------------------------------------------
PAUL C. GREEN, PH.D.
PROVANT PRINCIPALS:
---------------------------------------------
PAUL M. VERROCHI
---------------------------------------------
DOMINIC J. PUOPOLO
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Exhibit 2.2
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this Agreement") dated as of
February 12, 1998 is among Provant, Inc., a Delaware corporation ("Provant"),
Decker Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary
of Provant ("Acquisition"), Decker Communications, Inc., a California
corporation (the "Company"), Bert Decker and Kenneth Taylor, the principal
stockholders of the Company (the "Stockholders"), and Paul M. Verrochi and
Dominic J. Puopolo (the "Provant Principals") and provides for the merger of the
Company with and into Acquisition (the "Merger"). The Boards of Directors of
Provant, Acquisition and the Company have determined that the Merger is in the
best interests of their respective stockholders and the Merger has been approved
by Provant as the holder of all of the outstanding Common Stock of Acquisition.
Accordingly, the parties hereto, in consideration of the mutual
representations, warranties and covenants contained herein, agree as follows:
1. CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the
respective meanings set forth below:
1.1 "Additional Companies" means those companies identified on Schedule
1.1 hereto, with which companies Provant is entering into separate Agreements
and Plans of Merger contemporaneously with the execution and delivery of this
Agreement.
1.2 "Additional Mergers" means the acquisitions (by merger or
otherwise) of each of the Additional Companies by Provant, and "Additional
Merger Agreements" means the agreements and plans of merger or other contracts
(in each case as described in Section 5.9 of the Provant Disclosure Schedule)
pursuant to which Provant will consummate the Additional Mergers.
1.3 "Additional Shares" means the additional shares, if any, of Provant
Common Stock issuable to the stockholders of the Company pursuant to Section
2.8.
1.4 "Balance Sheet" means the balance sheet of the Company as of June
30, 1997 included in the Financial Statements.
1.5 "Balance Sheet Date" means June 30, 1997.
1.6 "Certificate of Merger" has the meaning given to it in Section 2.2.
<PAGE> 2
1.7 "CGCL" means the California General Corporation Law.
1.8 "Closing" means the closing of the transactions contemplated by
this Agreement as provided in Section 2.2.
1.9 "Closing Net Worth" means the Company's pro forma net worth as of a
date selected by Provant as close as practicable to the Effective Time (but in
no event more than thirty (30) days prior to the Effective Time), determined
using the same principles and assumptions used by Provant in its preparation of
its pro forma financial statements contained in the Registration Statement.
1.10 "Code" means the Internal Revenue Code of 1986, as amended to
date.
1.11 "Commission" means the Securities and Exchange Commission.
1.12 "Company Disclosure Schedule" means the Disclosure Schedule
prepared by the Company and attached hereto and incorporated herein by this
reference.
1.13 "Company Option" means an option to purchase Shares, whether or
not vested or exercisable as of the applicable time.
1.14 "DGCL" means the Delaware General Corporation Law.
1.15 "Dissenting Share" means any Share the holder of which has
perfected, and not legally abandoned, dissenters rights of appraisal under
Chapter 13 of the CGCL.
1.16 "Dissenting Share Holdback" means a dollar amount equal to the
Fraction, multiplied by the number of Shares that are Dissenting Shares,
multiplied by $9.2 million.
1.17 "1998 EBIT" means the earnings before interest and taxes of the
Company for the period beginning July 1, 1997 and ending at the Effective Time
and of the Surviving Corporation for the period beginning at the Effective Time
and ending June 30, 1998 determined in accordance with the Instructions for
Determination of EBIT attached hereto as Exhibit 1; provided, that if the
Effective Time is after June 30, 1998, then 1998 EBIT shall consist solely of
the earnings before interest and taxes of the Company (determined as set forth
above) for the period beginning July 1, 1997 and ending June 30, 1998.
1.18 "Effective Time" means such time as the Certificate of Merger is
filed with the Secretary of State of the State of Delaware in accordance with
Section 252 of the DGCL, unless Acquisition and the Company agree that a later
time shall be the Effective Time, in which case such time shall be specified in
the Certificate of Merger.
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1.19 "Employment Contract" means the employment agreements in the form
attached hereto as Exhibit 2.
1.20 "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
1.21 "Financial Condition" means that, using the same principles and
assumptions used by Provant in the preparation of its pro forma financial
statements contained in the Registration Statement, the Company's Closing Net
Worth is not less than $1.3 million (the "Minimum Net Worth"), the Company's pro
forma revenues for the 12 months ended June 30, 1997 are not less than $8.41
million, the Company's pro forma earnings before interest and taxes for the 12
months ended June 30, 1997 are not less than $810,000, the Company's projected
pro forma revenues (as determined in good faith by Provant) for the 12 months
ended June 30, 1998 are not less than $10.9 million and the Company's projected
1998 EBIT (as determined in good faith by Provant) is not less than $1.6
million.
1.22 "Financial Statements" means the financial statements of the
Company attached hereto as Exhibit 3, consistent in form and substance with the
requirements of Regulation S-X of the Commission under the Securities Act,
consisting of (a) Balance Sheets at June 30, 1997 and 1996, and at September 30,
1997; (b) Statements of Income for the periods ending June 30, 1997, 1996 and
1995, and ending September 30, 1997; (c) Statements of Stockholders' Equity at
June 30, 1997, 1996, 1995 and 1994, and at September 30, 1997; (d) Statements of
Cash Flow for the periods ending June 30, 1997, 1996 and 1995, and ending
September 30, 1997; and (e) notes to the foregoing.
1.23 "First Accountants" means the firm of independent public
accountants then regularly employed by Provant.
1.24 "Fraction" means that fraction which has one as its numerator and
which has, as its denominator, the pro forma number of Shares outstanding on a
fully diluted basis as of immediately prior to the Effective Time, assuming the
exercise or conversion of all then-outstanding Company Options, warrants and
other instruments exercisable for or convertible into Shares (whether or not
then currently exercisable or convertible).
1.25 "IPO" means the initial underwritten public offering of shares of
Provant Common Stock.
1.26 "IPO Price" shall mean the price, at which shares of Provant
Common Stock are sold to the public in the IPO.
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1.27 "Investment Letter" means an investment letter, in the case of
holders of Shares who are "accredited investors" (as defined in Regulation D
promulgated under the Securities Act), in the form attached hereto as Exhibit
4A, and in the case of all other holders of Shares, in the form attached hereto
as Exhibit 4B.
1.28 "Merger Stock" means the shares of Provant Common Stock exchanged
for Shares pursuant to Section 2.7(c) and 2.8.
1.29 "Non-Competition and Non-Disclosure Agreement" means a
non-competition and non-disclosure agreement in the form attached hereto as
Exhibit 5.
1.30 "Provant Disclosure Schedule" means the Disclosure Schedule
prepared by Provant and attached hereto and incorporated herein by this
reference.
1.31 "Provant Common Stock" means the shares of Common Stock, $.01 par
value, of Provant.
1.32 "Prospectus" means the prospectus relating to the IPO first filed
with the Commission pursuant to Rule 424(b) and Rule 430A of the rules and
regulations of the Commission under the Securities Act or (if no such filing is
required) as included in the Registration Statement and, in the event of any
supplement or amendment to such prospectus after the date the Registration
Statement becomes effective under the Securities Act, such prospectus as so
supplemented or amended from and after the filing with the Commission of such
supplement or the effectiveness of such amendment.
1.33 "Registration Statement" means the registration statement on Form
S-1, including the related preliminary prospectus, to be filed with the
Commission in connection with the IPO, including all exhibits and financial
statements, in the form in which it becomes effective under the Securities Act
and, in the event of any amendment thereto after the effective date of any such
registration statement, such registration statement as so amended from and after
the effectiveness of such amendment.
1.34 "Second Accountants" means an accounting firm of national stature,
jointly selected by Provant and the Stockholders, that is not then employed by
Provant, either Stockholder or American Business Partners LLC ("ABP") (or any of
their respective affiliates) and that was not employed by the Company or ABP
during the two-year period immediately preceding the Effective Time; provided,
however, if the parties cannot jointly agree upon the Second Accountants, the
Stockholders (collectively) and Provant shall each designate one accounting firm
(which shall be of national stature but which may be employed or have been
employed by such party or its affiliates), and the two accounting firms so
designated shall jointly select a third
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accounting firm, meeting the criteria set forth in the first clause of this
sentence, to serve as the Second Accountants.
1.35 "Securities Act" means the Securities Act of 1933, as amended.
1.36 "Share" means a share of Common Stock, no par value, of the
Company, and "Shares" means all of such shares.
1.37 "Surviving Corporation" means the corporation that survives the
Merger.
1.38 "Underwriter" means, collectively, the managing underwriters of
the IPO.
1.39 "Underwriters' Discount" means the discount at which the
Underwriter purchases the Provant Common Stock in the IPO, but in no event more
than 7.0% of the IPO Price.
2. THE MERGER
2.1 THE MERGER. The Merger shall occur at the Effective Time upon the
terms and subject to the conditions hereof and in accordance with the CGCL and
the DGCL. Following the Merger, Acquisition shall continue as the Surviving
Corporation and be a subsidiary of Provant, and the separate corporate existence
of the Company shall cease.
2.2 EFFECTIVE TIME. As soon as practicable after satisfaction or waiver
of all conditions to the Merger, the parties (a) shall cause a duly executed
certificate of merger (the "Certificate of Merger") with respect to the Merger,
together with an appropriate tax clearance certificate, to be filed and recorded
in accordance with Section 1103 of the CGCL and shall cause a duly executed
counterpart of the Certificate of Merger to be filed and recorded in accordance
with Section 252 of the DGCL and (b) shall take all such further actions as may
be required by law to make the Merger effective (including without limitation
the assumption by Acquisition of any tax liability of the Company to the State
of California, provided that such assumption shall not relieve the Stockholders
of any indemnity obligation with respect to such tax liability as is otherwise
provided under Section 9.1 hereof). The Merger shall be effective at the
Effective Time. Before the filing of the Certificate of Merger, a closing (the
"Closing") will be held on the date the IPO closes (or such earlier date as the
parties may agree) at the offices of Nutter, McClennen & Fish, LLP, One
International Place, Boston, Massachusetts (or such other place as the parties
may agree) for the purpose of confirming all the foregoing.
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2.3 EFFECTS OF THE MERGER. The Merger shall have the effects set forth
in Sections 1107 and 1108 of the CGCL and Sections 259, 260 and 261 of the DGCL.
2.4 TAX CONSEQUENCES. It is intended that the Merger shall constitute a
reorganization within the meaning of Section 368(a)(2)(D) of the Code and that
this Agreement shall constitute a "plan of reorganization" for the purposes of
Section 368 of the Code.
2.5 CERTIFICATE OF INCORPORATION AND BY-LAWS. The Certificate of
Incorporation and the By-Laws of Acquisition, in each case as in effect at the
Effective Time, shall be the Certificate of Incorporation and By-Laws of the
Surviving Corporation, except that the name of the Surviving Corporation shall
be the name of the Company or such other name as Provant may designate.
2.6 DIRECTORS AND OFFICERS. At the Effective Time, the Board of
Directors and officers of the Surviving Corporation shall be as set forth on
Exhibit 6, and each such person shall hold office until his or her respective
successor is duly elected or appointed and qualified.
2.7 CONVERSION OF STOCK.
At the Effective Time:
(a) Each share of Acquisition that is issued and outstanding
immediately prior to the Effective Time shall remain issued and outstanding
without change.
(b) All Shares held in the treasury of the Company immediately prior to
the Effective Time shall be cancelled, without the payment of any consideration
therefor.
(c) Each other Share which is outstanding immediately prior to the
Effective Time shall be converted without any action on the part of the holder
thereof into and be exchangeable for
(i) that number of shares of Provant Common Stock determined
by multiplying the Fraction times the number obtained after (A)
dividing $6.2 million by the IPO Price and (B) subtracting from the
quotient obtained pursuant to clause (A) the number obtained by
dividing $1.55 million by the IPO Price net of underwriters' discount,
(ii) cash equal to the Fraction times the sum of (X) $1.55
million, plus (Y) the excess, if any, of the Company's Closing Net
Worth over the Minimum Net Worth, minus (Z) the Dissenting Share
Holdback, if any, and
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(iii) the right to receive that number of Additional Shares
determined as provided in Section 2.8.
Provant shall not issue any fractional share of Provant Common Stock; in lieu of
issuing a fractional share, Provant shall make a cash payment in accordance with
Section 2.9.
(d) Notwithstanding subsection 2.7(c), Dissenting Shares shall not be
converted into the right to receive cash or Provant Common Stock (including
Additional Shares, if any) pursuant to such subsection. At the Effective Time,
in lieu thereof, holders of Dissenting Shares shall be entitled solely to
payment of the appraised value of such Dissenting Shares in accordance with the
provisions of Chapter 13 of the CGCL.
2.8 RIGHT TO RECEIVE ADDITIONAL SHARES.
(a) Promptly following June 30, 1998 (but in no event later than
October 15, 1998), Provant will determine 1998 EBIT.
(i) In the event 1998 EBIT is $810,000 or less, no
Additional Shares shall be issued in respect of the Shares.
(ii) In the event 1998 EBIT is greater than $810,000 but
less than $1.6 million, there shall be issued in respect of
each Share that number of Additional Shares determined by (A)
multiplying $3 million by a fraction, the numerator of which
shall be the amount by which 1998 EBIT exceeds $810,000 and
the denominator of which shall be $790,000, (B) dividing the
product obtained pursuant to clause (A) by the IPO Price, and
(C) multiplying the quotient obtained pursuant to clause (B)
by the Fraction.
(iii) In the event 1998 EBIT equals or exceeds $1.6
million, there shall be issued in respect of each Share that
number of Additional Shares determined by multiplying the
Fraction times the quotient obtained by dividing $3 million by
the IPO Price.
Provant shall not issue any fractional share of Provant Common Stock; in lieu of
issuing a fractional share, Provant shall make a cash payment in accordance with
Section 2.9.
(b) No later than October 15, 1998, Provant shall deliver to each
former stockholder of the Company a statement showing in reasonable detail
Provant's computation of 1998 EBIT, together with a stock certificate
representing any Additional Shares and a check in payment for any fractional
Additional Share to
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which such stockholder may be entitled pursuant to subsection (a). Provant shall
maintain, and shall cause the Surviving Corporation to maintain, complete books
and records necessary for the proper computation of 1998 EBIT. The Stockholders
(and only the Stockholders, acting as representatives of all former stockholders
of the Company and all former holders of Company Options, as provided in
subsection (g) below), acting unanimously, shall have the right at their
expense, through an independent certified public accountant reasonably
acceptable to Provant, to audit such books and records and the books and records
of the Company solely for the purpose of satisfying the accuracy of the
computation of 1998 EBIT made by Provant, and the Company and Provant shall
cooperate fully in all reasonable respects with any such audit. In no event
shall the Stockholders, or either of them, have the right to conduct more than
one such audit. If the Stockholders do not unanimously elect within 90 days of
delivery of the statement of Provant referred to in this subsection (b) to cause
an audit of the books and records of the Surviving Corporation as provided in
this subsection (b), the Stockholders shall be deemed to have agreed that such
statement was correct in all respects.
(c) Any dispute as to the correct computation of 1998 EBIT shall be
referred to the First Accountants for determination. If the Stockholders do not
unanimously elect to dispute the First Accountants' determination of 1998 EBIT
within 30 days following the delivery thereof to the Stockholders, such
determination shall be final, binding and conclusive and shall not be subject to
challenge by Provant, either Stockholder or any other former stockholder of the
Company, and in such event the fees and expenses of the First Accountants shall
be borne by Provant. In the event the Stockholders do unanimously elect within
such 30 day period to dispute the determination of the First Accountants, the
Stockholders shall specify the amount (in dollars) that they contend to be the
correct 1998 EBIT (the Stockholders' "EBIT Position"), and the final calculation
of 1998 EBIT shall be referred to the Second Accountants. Absent manifest error
or willful misconduct, the determination of the Second Accountants shall be
final, binding and conclusive and shall not be subject to challenge by Provant
or either Stockholder. In the event the calculation of 1998 EBIT is referred to
the Second Accountants, the fees and expenses of both the First Accountants and
the Second Accountants shall be borne by that party (i.e., the Stockholders,
jointly and severally, or Provant) whose EBIT Position is furthest, in gross
dollars, from the 1998 EBIT as finally determined by the Second Accountants. For
purposes of the preceding sentence, Provant's "EBIT Position" shall be deemed to
be the amount determined by the First Accountants to be the 1998 EBIT. The
parties recognize that in making such determinations, each such firm of
accountants will be performing a function separate and distinct from their audit
function, if any, and shall be entitled to the immunities, rights and discretion
of arbitrators in general. Any issuance of Additional Shares (or cash in lieu of
fractional Additional Shares) which is finally determined to be due to the
Stockholders in accordance with this subsection (c) shall be made by Provant (i)
if based on the determination of the First Accountants, within 10 days after
such determination becomes final, and (ii) if based
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on the determination of the Second Accountants, within 10 days after Provant
receives notice of such determination, if Provant is responsible for the fees
and expenses of the accountants pursuant to this Section, and within 10 days
after the Stockholders have paid the fees and expenses of the accountants, if
the Stockholders are responsible for such fees and expenses pursuant to this
Section. In the event the 1998 EBIT has not been finally determined as of the
date one year following the Effective Time, or the 1998 EBIT has been finally
determined and Additional Shares are due to be issued but have not been issued
to the Stockholders as of such date because the Stockholders are obligated to
pay but have not yet paid the fees and expenses of the First and Second
Accountants, then on or before such date Provant shall issue and place into
escrow, with an institutional escrow agent reasonably selected by Provant, the
number of Additional Shares that would be issued if the Stockholders' EBIT
Position were determined to be the actual 1998 EBIT (or, if the 1998 EBIT has
been finally determined, the actual number of Additional Shares to be issued).
Such shares shall be held in escrow pending final determination of 1998 EBIT,
upon which the final number of Additional Shares, if any, shall be released from
escrow to the Stockholders and any escrowed shares not distributed as Additional
Shares shall be released to the Company. The expenses of the escrow agent will
be allocated in the same manner as the expenses of the First Accountants and
Second Accountants, as set forth above.
(d) The Stockholders acknowledge and agree, on behalf of themselves and
the other stockholders of the Company, that Provant and the Surviving
Corporation shall be free to pursue their respective business goals and that
1998 EBIT may be affected thereby. Notwithstanding the foregoing, Provant hereby
agrees that it will take no action and adopt no policy (and will not cause the
Surviving Corporation to take any action or adopt any policy) during the period
from the Effective Time through June 30, 1998 that a majority-in-interest of the
Stockholders have asserted (in advance of or contemporaneously with such action
or adoption), in good faith and in writing, can reasonably be expected to result
(directly or indirectly) in a reduction of 1998 EBIT.
(e) The right of the stockholders of the Company to receive Additional
Shares and/or cash payment for fractional shares may not be transferred or
assigned except by operation of law or pursuant to the laws of descent and
distribution.
(f) If, subsequent to the IPO and prior to final determination of the
number of Additional Shares, if any, issuable pursuant to this Section 2.8, the
outstanding shares of Provant Common Stock shall have been changed into a
different number of shares or a different class by reason of any
reclassification, recapitalization, split-up, combination, exchange of shares or
readjustment, or a stock dividend thereon shall be declared with a record date
within said period, the IPO Price shall be correspondingly and appropriately
adjusted.
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(g) The Stockholders are hereby appointed as the representatives of all
stockholders of the Company and all holders of Company Options for purposes of
this Section 2.8. No Stockholder shall have any liability to any other holder of
Shares or Company Options, including the other Stockholder, for any action taken
or position asserted (or any failure to act or to assert any position) pursuant
to this Section 2.8, provided only that such Stockholder has acted in a manner
he believed in good faith to be in the interest of all holders of Shares and
Company Options.
2.9 EXCHANGE OF AND PAYMENT FOR SHARES.
(a) As soon as practicable after the Effective Time and after surrender
to Provant of any certificate which prior to the Effective Time shall have
represented any Shares, subject to the provisions of paragraphs (c) and (d) of
this Section 2.9 and to the provisions of Article 8, Provant shall cause to be
distributed to the person in whose name such certificate shall have been
registered certificates registered in the name of such person representing the
shares of Provant Common Stock into which any shares previously represented by
the surrendered certificate shall have been converted at the Effective Time and
a check payable to such person representing the payment of cash due such person
by reason of the Merger including cash in lieu of fractional shares determined
in accordance with paragraph (g) of this Section 2.9. Until surrendered as
contemplated by the preceding sentence, each certificate which immediately prior
to the Effective Time shall have represented any Shares shall be deemed at and
after the Effective Time to represent only the right to receive upon such
surrender the certificates and payment contemplated by the preceding sentence
and by Section 2.8.
(b) No dividends or other distributions declared after the Effective
Time with respect to Provant Common Stock shall be paid to the holder of any
unsurrendered certificate representing Shares until the holder thereof shall
surrender such certificate in accordance with this Section 2.9. After the
surrender of such certificate in accordance with this Section 2.9, the record
holder thereof shall be entitled to receive any such dividends or other
distributions, without any interest thereon, which theretofore had become
payable with respect to shares of Provant Common Stock represented by such
certificate.
(c) No certificate representing Merger Stock shall be issued to any
Person, and no Person shall be treated as a holder of shares of Provant Common
Stock constituting Merger Stock for any purpose whatsoever (including without
limitation any right to vote the shares of Provant Common Stock into which such
Person's Shares are to be converted) unless and until such Person has executed
and delivered to Provant an Investment Letter.
(d) If any cash or certificate representing shares of Provant Common
Stock is to be paid to or issued in a name other than that in which the
certificate
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surrendered in exchange therefor is registered, it shall be a condition of the
payment or issuance thereof that the certificate so surrendered shall be
properly endorsed and otherwise in proper form for transfer and that the person
requesting such exchange shall pay to Provant any transfer or other taxes
required by reason of the issuance of a certificate representing shares of
Provant Common Stock in any name other than that of the registered holder of the
certificate surrendered, or otherwise required, or shall establish to the
satisfaction of Provant that such tax has been paid or is not payable.
(e) All rights to receive Provant Common Stock and cash, including cash
in lieu of fractional shares, shall be deemed, when paid or issued hereunder, to
have been paid or issued, as the case may be, in full satisfaction of all rights
pertaining to the Shares.
(f) After the Effective Time, there shall be no further registration of
transfers on the stock transfer books of the Surviving Corporation of the Shares
which were outstanding immediately prior to the Effective Time. If, after the
Effective Time, certificates representing such shares are presented to the
Surviving Corporation, they shall be cancelled and exchanged for cash or
certificates representing the shares of Provant Common Stock into which they
were converted, or both, as provided herein.
(g) Notwithstanding any other provision of this Agreement, no
certificates or scrip representing fractional shares of Provant Common Stock
shall be issued upon the surrender for exchange of certificates which prior to
the Effective Time shall have represented any Shares, no dividend or
distribution of Provant shall relate to any fractional share and such fractional
share interests will not entitle the owner thereof to vote or to any rights of a
shareholder of Provant. In lieu of any fractional shares, there shall be paid to
each holder of Shares who otherwise would be entitled to receive a fractional
share of Provant Common Stock an amount of cash equal to the amount of such
fraction times the IPO Price.
(h) In the event any certificate representing Shares shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
holder of such Shares claiming such certificate to be lost, stolen or destroyed
and, if required by Provant or its stock transfer agent, the posting by such
holder of a bond in such amount as Provant or its stock transfer agent may
direct as indemnity against any claim that may be made against it with respect
to such certificate, Provant will issue in exchange for such lost, stolen or
destroyed certificate the Merger Stock and cash deliverable in respect thereof.
2.10 RESERVED.
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3. REPRESENTATIONS AND WARRANTIES OF THE
COMPANY AND THE STOCKHOLDERS
The Company and the Stockholders represent and warrant to Provant and
Acquisition that, except as expressly provided in the Company Disclosure
Schedule by specific reference to a Section of this Article 3:
3.1 ORGANIZATION AND AUTHORITY. The Company is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
California and has all requisite corporate power and authority to conduct its
business and own its properties as now conducted and owned. The Company is duly
qualified or licensed and in good standing as a foreign corporation, and has at
all times when legally required been so qualified or licensed and in good
standing, in those states listed on the Company Disclosure Schedule, which are
the only jurisdictions in which the property owned, leased or operated by it or
the nature of the business conducted by it would cause a failure to be so
qualified or licensed to have a material adverse effect on the business of the
Company. The Company has full power and authority to execute and deliver this
Agreement and, subject to the approval of its stockholders under the CGCL, to
consummate the transactions contemplated hereby and perform its obligations
hereunder. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby by the Company and the performance of the
Company's obligations hereunder have been duly and validly authorized by a
unanimous vote of the Board of Directors of the Company and, excepting only the
affirmative vote of the holders of a majority of the outstanding shares of the
Company's Common Stock in accordance with the CGCL, no other corporate
proceedings on the part of the Company are necessary to authorize this Agreement
or to consummate the transactions so contemplated or to perform the Company's
obligations hereunder. This Agreement has been duly and validly executed and
delivered by the Company and constitutes a legal, valid and binding obligation
of the Company enforceable against it in accordance with its terms, except as
enforcement may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting enforcement of creditors' rights
generally.
3.2 CAPITALIZATION OF THE COMPANY; NO SUBSIDIARIES. The Company has
authorized capital consisting of 750,000 shares of Common Stock, no par value,
of which no shares are held in the Company's treasury. As of the date hereof,
there are 152,592 issued and outstanding Shares. As of immediately prior to the
Effective Time, the Shares issued and outstanding shall consist solely of the
foregoing number plus the number of Shares, if any, issued between the date
hereof and the Effective Time upon the exercise or conversion of Company Options
and other instruments (in each case solely if existing on the date hereof and
disclosed on the Company Disclosure Schedule pursuant to Section 3.3), which
exercise or conversion and which issuance are in accordance with the terms of
such instruments as in effect on the date hereof.
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All of the Shares are duly authorized, validly issued, fully paid and
non-assessable and are owned of record and, to the Company's knowledge,
beneficially by the stockholders of the Company in the respective amounts listed
on the Company Disclosure Schedule. The Company has no other authorized class of
capital stock other than the Common Stock. The Company does not own and has not
owned any shares of capital stock or other securities of, or any other interest
in, nor does it control or has it controlled, directly or indirectly, any other
corporation, association, joint venture, partnership, or other business
organization. The Shares have been issued and sold in full compliance with all
applicable Federal and state securities laws. No holder of Shares has any
dissenting shareholder or appraisal rights with regard to the Merger.
3.3 NO RIGHTS TO PURCHASE OR REGISTER STOCK. No person, firm, or
corporation has any written or oral agreement, option, warrant, call,
understanding, commitment, or any right or privilege capable of becoming a
binding agreement, for either the purchase of any Shares or the acquisition of
shares of any other class of capital stock of the Company, and the Company has
not otherwise agreed to issue or sell any shares of its capital stock and has no
obligation to register any of the Shares under the Securities Act. The Company
is not obligated directly, indirectly or contingently to purchase any Shares.
3.4 NAME. The Company has not had any other name and does not conduct
or operate, and has not heretofore conducted or operated, its business under any
name other than its current name.
3.5 NO VIOLATION OF EXISTING AGREEMENTS. The execution and delivery of
this Agreement, together with all documents and instruments contemplated herein,
the consummation by the Company of the transactions contemplated hereby and
thereby, the performance by the Company of its obligations hereunder and
thereunder and compliance with the terms, conditions and provisions hereof and
thereof by the Company do not (i) contravene any provisions of the Company's
Articles of Incorporation or By-Laws; (ii) conflict with or result in a breach
of or constitute a default (or an event that might, with the passage of time or
the giving of notice or both, constitute a default) or give rise to any right to
terminate, cancel or accelerate or to any loss of benefit under any of the
material terms, conditions, or provisions of any indenture, mortgage, loan, or
credit agreement or any other agreement or instrument to which the Company is a
party or by which it or its assets may be bound or affected; (iii) violate or
constitute a material breach of any decision, judgment, or order of any court or
arbitration board or of any governmental department, commission, board, agency,
or instrumentality, domestic or foreign, by which the Company is bound or to
which it is subject; or (iv) violate any applicable law, rule, or regulation to
which the Company or any of its property is bound.
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3.6 NO CONSENTS OR APPROVALS OF GOVERNMENTAL AUTHORITIES. No consent or
approval of, or filing and expiration of a period for disapproval by, any
governmental authority is required for the Company to consummate the
transactions contemplated by this Agreement, except for filing the Merger
Agreement pursuant to the CGCL and for filing the Certificate of Merger pursuant
to the DGCL. Notwithstanding the immediately preceding sentence, the Company and
the Stockholders make no representation or warranty regarding whether any filing
is required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), but the Company and the Stockholders do represent and
warrant that (a) the aggregate gross assets of the Company plus those of any
direct or indirect legal or beneficial holder of 50% or more of the Shares were
less than $100 million as of September 30, 1997, and (b) the aggregate revenues
of the Company plus those of any direct or indirect legal or beneficial holder
of 50% or more of the Shares were less than $100 million for the Company's most
recently completed fiscal year.
3.7 FINANCIAL STATEMENTS.
(a) The Financial Statements fairly present the financial position of
the Company as of their respective dates, and the results of operations and cash
flows for the periods presented therein, all in conformity with generally
accepted accounting principles applied on a consistent basis, except as
otherwise noted therein.
(b) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and with
statutory accounting principles and to maintain accountability for assets; (iii)
access to assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
3.8 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth or reserved
against in the Balance Sheet, the Company (a) did not have as of the Balance
Sheet Date any material liability or obligation of any nature, whether accrued,
absolute, contingent, or otherwise and whether due or to become due, including
without limitation liabilities that may become known or arise after the date
hereof and which relate to transactions entered into or any state of facts
existing on or before the Balance Sheet Date and which would be required under
generally accepted accounting principles to be shown in such balance sheet or
referenced in the notes thereto, and (b) has not incurred since the Balance
Sheet Date any such liability or obligation except in the ordinary course of
business. Without limiting the foregoing, and except as specifically reserved
against in the Balance Sheet or in the calculation of the Closing Net Worth, the
Company has no material liability or obligation of any
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nature, whether accrued, absolute, contingent, or otherwise, to any government
entity for any adjustment or reimbursement of any amount previously paid to the
Company by such entity under any agreement relating to the provision of any
goods or services by the Company.
3.9 CONDUCT OF BUSINESS SINCE THE BALANCE SHEET DATE. Since the Balance
Sheet Date, the Company has not taken (or suffered the occurrence of) any of the
following actions or events, agreed to take any of the following actions, or
taken any action that would otherwise result in any of the following (in each
case except directly in connection with this Agreement):
(a) entered into any transaction, agreement, or commitment other than
in the ordinary course of business; or
(b) entered into any transaction, agreement, or commitment, suffered
the occurrence of any event or events, or experienced any change in financial
condition, business, results of operations, prospects, or otherwise, (i) that
has interfered or is reasonably likely to interfere with the normal and usual
operations of the Company's business or its business prospects in any material
respect or (ii) that, singly or in the aggregate, has resulted or is reasonably
likely to result in a material adverse change in the financial condition,
assets, liabilities, earnings, business, or business prospects of the Company;
or
(c) incurred any indebtedness for borrowed money, or assumed,
guaranteed, endorsed, or otherwise become responsible for the obligations of any
other individual, partnership, firm, or corporation (except to endorse checks
for collection for deposit in the ordinary course of business), or made any loan
or advance to any individual, partnership, firm, or corporation; or
(d) mortgaged, pledged, or otherwise encumbered, or, other than in the
ordinary course of business, sold, transferred, or otherwise disposed of, any of
the properties or assets of the Company, including any cancelled, released,
hypothecated, or assigned indebtedness owed to the Company, or any claims held
by the Company, except for purchase money mortgages arising in the ordinary
course of business and statutory liens arising or incurred in the ordinary
course of business with respect to which the underlying obligations are not
delinquent; or
(e) made any investment of a capital nature or entered into a
commitment for such investment either by purchase of stock or securities,
contributions to capital, property transfer, or otherwise, or by the purchase of
any property or assets of any other individual, partnership, firm, or
corporation; or
(f) declared, set aside, or paid any dividend or other distribution
(whether in cash, stock, or property or any combination thereof) in respect of
the capital stock
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of the Company, or redeemed or otherwise acquired, directly or indirectly, any
shares of capital stock of the Company, excepting only dividends, distributions
and redemptions that have not resulted and will not result, directly or
indirectly, in the Company not satisfying the Financial Condition; or
(g) paid any long-term liability, otherwise than in accordance with its
terms; or
(h) paid any bonus compensation to any officer, director, shareholder,
or employee of the Company or otherwise increased the compensation paid or
payable to any of the foregoing; or
(i) sold, assigned, or transferred any trademarks, trade names, logos,
copyrights, formulae, or other intangible assets; or
(j) contracted with or committed to any third party (i) to sell any
capital stock of the Company, (ii) to sell any material assets of the Company
other than in the ordinary course of business, (iii) to effect any merger,
consolidation, or other reorganization of the Company, or (iv) to enter into any
agreement with respect thereto; or
(k) incurred or paid any expenses or fees of counsel, accountants, or
consultants for services in preparation for or in connection with this Agreement
or the transactions contemplated hereunder.
3.10 TITLE TO ASSETS. The Company owns no real property. The Company
has good and clear record and marketable title to all properties owned by it,
including, without limitation, all property reflected in the Balance Sheet,
other than property disposed of in the ordinary course of business subsequent to
the Balance Sheet Date (none of such dispositions being individually or
collectively materially adverse), free and clear of any mortgage, lien, pledge,
charge, claim or encumbrance, or rights, title and interest in others, except
(a) as reflected in the Balance Sheet, or as specified in the notes thereto, (b)
the lien of taxes not yet due or payable or being contested in good faith by
appropriate proceedings and as to which appropriate reserves have been set aside
in the Balance Sheet, and (c) such imperfections of title and encumbrances, if
any, as do not materially detract from the value or interfere with the use of
the properties subject thereto or affected thereby, or otherwise materially
impair business operations.
3.11 INTELLECTUAL PROPERTY.
(a) The Company Disclosure Schedule contains a correct and complete
list of all copyrights, copyright registrations and copyright applications,
trademark registrations and applications for registration, patents and patent
applications,
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trademarks, service marks and trade names used in the Company's business as
presently conducted or contemplated and all licenses, assignments and releases
of the intellectual property rights of others in material works embodied in its
products. There is (i) no existing or, to the Company's knowledge, threatened
infringement, misuse or misappropriation of Proprietary Information (as
hereinafter defined) by others and (ii) no pending or threatened claim by the
Company against others for infringement, misuse or misappropriation of any
patent, patent application, invention disclosure, trademark, trade name, service
mark, trade secret, technology, technique, know-how, or copyright owned by the
Company or used in its business as presently conducted or contemplated (the
"Proprietary Information"). The Proprietary Information is sufficient to carry
on the business of the Company as presently conducted or contemplated, and the
Company has the right to use, free and clear of claims or rights of others, all
Proprietary Information required for or incident to its products or services or
its business as presently conducted or contemplated. The Company is the
exclusive owner of all right, title and interest in the Proprietary Information
as purported to be owned by the Company, and such Proprietary Information is
valid and in full force and effect. Neither the present nor contemplated
business activities or products of the Company infringe, misuse or
misappropriate any patent, trademark, trade name, service mark, trade secret,
copyright or other intellectual property right of others, and to the Company's
knowledge no one is claiming nor is it anticipated that anyone will claim any
such infringement, misuse or misappropriation. To the knowledge of the Company,
the Proprietary Information is presently valid and protectible and is not part
of the public domain or knowledge, nor, to the knowledge of the Company, has any
of it been used, divulged or appropriated for the benefit of any person other
than the Company to the detriment of the Company. The Company has not granted to
any person any license or other right to use in any manner any of the
Proprietary Information, whether or not requiring the payment of royalties. The
Company has no obligation still outstanding to compensate other persons for the
use of any Proprietary Information or for the sale of any service or product
comprising or derived from Proprietary Information. No university, government
agency (whether federal or state) or other organization which sponsored research
and development conducted by the Company has any claim of right to or ownership
of or other encumbrance upon the Proprietary Information.
(b) The Company has taken all reasonable measures to protect and
preserve the security, confidentiality and value of the Proprietary Information,
including its trade secrets and other confidential information. All present and
previous officers, employees and consultants of or to the Company have executed
and delivered to and in favor of the Company an agreement regarding the
protection of confidential and proprietary information and the assignment to the
Company of all intellectual property rights arising from the services performed
for the Company by such persons in the forms attached to the Company Disclosure
Schedule. To the Company's knowledge, no employee or consultant of the Company
has used any trade secrets or
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other confidential information of any other person in the course of his or her
work for the Company. To the Company's knowledge, the Company is not making
unlawful use of any confidential information or trade secrets belonging to any
past or present employees of the Company. Neither the Company nor, to the
knowledge of the Company, any of the Company's employees or consultants have any
agreements or arrangements with former employers of such employees or
consultants relating to confidential information or trade secrets of such
employers or are bound by any consulting agreement relating to confidential
information or trade secrets of another entity. The activities of the Company's
employees on behalf of the Company do not violate any agreements or arrangements
known to the Company which any such employees have with former employers or any
other entity to whom such employees may have rendered consulting services.
3.12 OBLIGATIONS TO OR FROM AFFILIATES.
(a) All material transactions between the Company and any stockholder,
officer or director of the Company, or any Affiliate (as defined below) of any
stockholder, officer or director of the Company, entered into on or after
January 1, 1993 have been conducted on an arm's-length basis on terms no
different than would be obtained if the transaction had been between the Company
and an unrelated party. Except for debts or other outstanding obligations
reflected on the Balance Sheet, there are no debts or other obligations of the
Company to, or to the Company from, any Stockholder or any officer or director,
or any Affiliate of a Stockholder, officer or director of the Company. As used
herein, "Affiliate" of a Stockholder, officer or director means any member of
the immediate family of such person or any entity in which such person or any
such family member is an officer or owner of more than five percent of
beneficial interest in the outstanding equity securities.
(b) The Company Disclosure Schedule sets forth all information that
would be required to be provided under Item 404 of Regulation S-K of the
Commission under the Securities Act if a registration statement on Form S-1 were
filed by the Company with the Commission on the date hereof.
3.13 MATERIAL CONTRACTS. The Company Disclosure Schedule lists all
material leases, contracts, instruments, agreements or commitments (whether
written or oral) relating to the conduct of the business of the Company (the
"Material Company Contracts"). The Company has delivered to Provant true and
correct copies of each written Material Company Contract and a written
description, accurate in all material respects, of each oral arrangement so
listed. Without limiting the generality of the foregoing, the aforesaid list
includes all contracts, agreements and instruments of the following types to
which the Company is a party:
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(a) labor union contracts, together with a list of all labor unions
representing or, to the Company's knowledge, attempting to represent employees
of the Company;
(b) pension, retirement, deferred compensation, death benefit, profit
sharing, bonus or other employee incentive, fringe benefit, stock purchase,
stock option, hospitalization or insurance plans or arrangements (and grant
certificates or other documents issued thereunder) or vacation pay, severance
pay and other similar benefit arrangements for officers, employees or agents,
together with a list of all pensioned employees or obligations to provide any
pensions hereafter other than pursuant to the plans hereinbefore in this item
described;
(c) employment contracts or agreements, consulting agreements,
agreements providing for termination or severance benefits, non-competition
agreements, non-disclosure agreements, contracts for professional personal
services, contracts with other persons engaged in sales or distributing
activities, and advertising contracts;
(d) written or oral agreements, understandings and arrangements of any
kind with any officer, director, employee, shareholder or agent of the Company
relating to present or future compensation or other benefits available to such
person or otherwise, together with a list of the names and current annual salary
rates of all present officers and employees of the Company whose current salary
rate is $25,000 or more and any bonuses paid or payable to each such person for
the 1996 fiscal year;
(e) indentures, loan agreements, notes, security agreements, mortgages,
conditional sales contracts, leases of real or personal property, contracts for
the purchase or sale of real or personal property, and agreements for financing;
(f) property, casualty, crime, directors and officers, and other forms
of insurance;
(g) all bank accounts and safety deposit boxes identifying all
authorized signatories, together with a list of all effective powers of attorney
granted by the Company to anyone;
(h) agreements, contracts or other arrangements to which the Company is
a guarantor, surety or endorser;
(i) contracts, agreements, commitments, arrangements or understandings
providing for the purchase or sale of all or substantially all of the Company's
requisites of a particular product from a single supplier or to a single
customer;
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(j) contracts, agreements, commitments, arrangements or understandings
which limit the freedom of the Company from competing in any line of business or
with any person or entity;
(k) license agreements (as licensor or licensee);
(l) leases of real and personal property with a term of more than one
year (regardless of whether the Company is lessor or lessee); and
(m) contracts, agreements, instruments, arrangements or understandings
which have not been included in items (a) through (l) above involving payment by
or to the Company of more than $50,000 or not terminable without penalty or
otherwise materially affecting the assets, financial condition, properties or
business of the Company.
All of the Material Company Contracts are in full force and effect. Except to
the extent that a material adverse effect on the Company's financial condition,
assets, liabilities, earnings, business or prospects would not result if the
following were not true: (A) the Company and each other party to each of the
Material Company Contracts have performed all the obligations required to be
performed by them to date, have received no notice of default and are not in
default (with due notice or lapse of time or both) under any of the Material
Company Contracts; (B) the Company has no present expectation or intention of
not fully performing all of its obligations under any of the Material Company
Contracts, and the Company has no knowledge of any breach or anticipated breach
by any other party to any of the Material Company Contracts; (C) there exists no
actual or, to the knowledge of the Company, threatened termination, cancellation
or limitation of the business relationship of the Company with any party to any
Material Company Contract; and (D) consummation of the transactions contemplated
hereby and performance by the Company of its obligations hereunder shall not
require the consent or permission of any party to any Material Company Contract
or permit any party to terminate, suspend or alter the terms of any Material
Company Contract.
3.14 LITIGATION. There are no actions, suits, causes of action, claims,
litigation, arbitration, administrative hearings, or other form of proceedings
or disputes of any kind pending or, to the best knowledge of the Company,
threatened against the Company or involving, affecting, or relating to its
capacity to complete the transactions contemplated herein, the Company, or its
officers or directors (in their capacities as such), in any court, at law or in
equity, or before any arbitration board or any governmental department,
commission, board, bureau, agency, or instrumentality; nor has the Company been,
nor is it, subject to any orders, awards, fines, judgments, decrees, or
injunctions the effect of which in the aggregate would have a material adverse
effect on the business or financial position or prospects of the Company. The
Company does not know or have grounds to know of any basis for
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any such action, suits, or other form of proceeding or disputes or of any
governmental investigation relating to the Company or its business.
3.15 TAXES.
(a) (i) All Tax Returns (as defined below) of, relating to or which
include the Company which are required to have been filed have been filed on a
timely basis with the appropriate authorities and all such Tax Returns are true,
correct and complete in all respects; (ii) all Taxes (as defined below) required
to have been paid by the Company (including amounts collected or withheld from
third parties required to have been paid over to the appropriate authorities)
have been paid in full on a timely basis to the appropriate authorities; and
(iii) all Taxes or other amounts required to have been collected or withheld by
the Company have been timely and properly collected or withheld.
(b) (i) No taxing authority has asserted in writing to the Company any
adjustment, deficiency, or assessment that could result in additional Tax for
which the Company is or may be liable; (ii) there is no pending audit,
examination, investigation, dispute, proceeding or claim for which the Company
has received notice relating to any Tax for which the Company is or may be
liable; (iii) no statute of limitations with respect to any Tax for which the
Company is or may be liable has been waived or extended; (iv) the due date of
any Tax Returns that the Company is required to file has not been extended; and
(v) Company is not a party to any Tax sharing or Tax allocation agreement,
arrangement or understanding.
(c) There are no liens on any of the assets of the Company which arose
in connection with any failure or asserted failure to pay any Tax, other than
liens for current Taxes not yet due and payable.
(d) The Company is not a party to any contract, agreement, plan or
arrangement that, individually or collectively, could give rise to any payment
that would not be deductible by reason of Section 162, 280G or 404 of the Code.
(e) The Company has not been a member of an affiliated group filing a
consolidated federal income Tax Return, and the Company is not liable for the
Taxes of any person under Treasury Regulation 1.1502-6 (or any similar provision
of state, local, or foreign law) as transferee or successor, by contract or
otherwise.
(f) Copies of (i) any Tax examinations, (ii) extensions of statutory
limitations, (iii) the federal, state and local income Tax Returns and franchise
Tax Returns of the Company, and (iv) correspondence between the Company and all
taxing authorities for its last three (3) taxable years previously have been
furnished to Provant and such Tax Returns are true, correct and complete.
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(g) The provision for Taxes, if any, shown on the Balance Sheet is
adequate to cover the aggregate liability of the Company arising out of facts or
circumstances occurring on or prior to the Balance Sheet Date for all Taxes.
(h) The Company has filed federal and state, and if applicable, local
Tax Returns for each period ending on or prior to the Effective Time.
(i) For purposes of this Section 3.15:
"Tax Returns" shall mean all returns, amended returns, declarations,
reports, estimates, information returns and statements regarding Taxes
which are or were filed or required to be filed under applicable law,
whether on a consolidated, combined, unitary or individual basis.
"Taxes" shall mean any federal, state, local, foreign or other tax,
fee, levy, assessment or other governmental charge, including without
limitation any income, franchise, gross receipts, property, sales, use,
hotel, bed, services, value added, withholding, social security, estimated,
accumulated earnings, alternative or add-on minimum, transfer, license,
privilege, payroll, profits, capital stock, employment, unemployment,
excise, severance, stamp, occupancy, customs or occupation tax, and any
interest, additions to tax and penalties in connection therewith.
3.16 ABSENCE OF MATERIAL EVENTS. Since January 1, 1997 there has not
been (a) any material adverse change in the business, affairs or prospects of
the Company nor, to the best of the Company's knowledge, are any such changes
threatened, anticipated or contemplated; (b) any actual or, to the Company's
knowledge, threatened, anticipated or contemplated damage, destruction, loss,
conversion, termination, cancellation, default or taking by eminent domain or
other action by governmental authority which has materially affected or may
hereafter materially affect the properties, assets, business affairs or
prospects of the Company; (c) any material and adverse pending or, to the
Company's knowledge, threatened, anticipated or contemplated dispute of any kind
with any material customer, supplier, source of financing, employee, landlord,
subtenant or licensee of the Company, or any pending or, to the Company's
knowledge, threatened, anticipated or contemplated occurrence or situation of
any kind, nature or description which is reasonably likely to result in any
reduction in the amount, or any change in the terms or conditions, of business
with any material customer, supplier, or source of financing; or (d) any
pending, or to the Company's knowledge, threatened, anticipated or contemplated
occurrence or situation of any kind, nature or description materially and
adversely affecting the properties, assets, business, affairs or prospects of
the Company.
3.17 ABSENCE OF IMPROPER PAYMENTS. Since January 1, 1994 the Company:
(a) has not made any contributions, payments or gifts of its property to or for
the
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private use of any governmental official, employee or agent where either the
payment or the purpose of such contribution, payments or gift is illegal under
the laws of the United States, any state thereof or any other jurisdiction
(foreign or domestic); (b) has not established or maintained any unrecorded fund
or asset for any purpose, or has made any false or artificial entries on its
books or records for any reason; (c) has not made any payments to any person
where the Company intended or understood that any part of such payment was to be
used for any other purpose other than that described in the documents supporting
the payment; or (d) has not made any contribution, or has reimbursed any
political gift or contribution made by any other person, to candidates for
public office, whether Federal, state or local, where such contribution would be
in violation of applicable law.
3.18 ERISA.
(a) None of the employee benefit plans maintained at any time by the
Company or the trusts (if any) forming part of such plans has engaged in a
prohibited transaction which could subject any such employee benefit plan or
trust to a material tax or penalty on prohibited transactions imposed under
Internal Revenue Code Section 4975 or ERISA.
(b) None of the employee benefit plans maintained at any time by the
Company which are employee pension benefit plans and which are subject to Title
IV of ERISA or the trusts that are part of such plans has been terminated so as
to result in a material liability of the Company under ERISA or the Code, nor
has any such employee benefit plan of the Company incurred any material
liability to the Pension Benefit Guaranty Corporation, other than for required
insurance premiums which have been paid or are not yet due and payable; neither
the Company nor any affiliate thereof has withdrawn, in either a complete or
partial withdrawal, from any multi-employer Plan resulting in any unpaid
withdrawal liability; the Company has made or provided for all contributions to
all such employee pension benefit plans which it maintains and which are
required by law or such plans as of the end of the most recent fiscal year under
each such plan; the Company has not incurred any accumulated funding deficiency
with respect to any such plan, subject to Section 412 of the Code, whether or
not waived; nor has there been any reportable event, or other event or
condition, which presents a material risk of termination of, or liability with
respect to, any such employee benefit plan by the Pension Benefit Guaranty
Corporation.
(c) The benefit liabilities under the employee pension benefit plans
which are subject to Title IV of ERISA, maintained by the Company, do not exceed
the current value of the assets of such employee benefit plans allocable to such
benefits, determined under the actuarial methods and assumptions that would
apply if such plans were terminated in accordance with ERISA and the Code.
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(d) To the best of the Company's knowledge, each employee benefit plan
maintained by the Company has been administered in accordance with its terms in
all material respects and is in compliance in all material respects with all
applicable requirements of ERISA (if applicable) and other applicable laws,
regulations and rules. Each employee benefit plan maintained by the Company that
is intended to be "qualified" under Section 401(a) of the Code has received a
favorable determination letter of the Internal Revenue Service, which letter
remains in effect, and nothing has occurred since the date of such determination
that could adversely affect the qualification of such plan.
(e) As used in this Agreement, the terms "employee benefit plan",
"employee pension benefit plan", "multi-employer plan", "accumulated funding
deficiency", "reportable event", "benefit labilities", "withdrawn" (including
its correlative forms "complete withdrawal" and "partial withdrawal") and
"accrued benefits" shall have the respective meanings assigned to them in ERISA,
and the term "prohibited transactions" shall have the meaning assigned to it in
Code Section 4975 and ERISA. Employee benefit plans "maintained by the Company"
include any such plan maintained, established or contributed to at any time by
the Company or any entity affiliated with or under common control with the
Company.
(f) The Company has no liability not disclosed on any of the Financial
Statements, contingent or otherwise, under any plan or program or the equivalent
for unfunded post-retirement benefits, including pension, medical and death
benefits, which liability would have a material adverse effect on the financial
condition of the Company.
3.19 LABOR MATTERS. A true and complete list of all of the Company's
officers, employees (the "Employees") and consultants (the "Consultants") and
their respective salaries, wages, other compensation, dates of employment, date
and amount of last salary or compensation increase, and positions has been
provided to Provant by the Company. There are no material disputes, employee
grievances, or disciplinary actions pending or, to the knowledge of the Company,
threatened by or between the Company and any of the Employees or Consultants.
With respect to the Employees and Consultants, the Company has complied in all
respects with all provisions of all laws relating to the employment of labor and
has no liability for any arrears of wages or taxes or penalties for failure to
comply with any such law or for any severance or termination payments of any
type. None of the Consultants are or were (while classified by the Company as
Consultants) employees of the Company for any purpose whatsoever. No employees
of the Company are or ever have been represented by a bargaining representative
with respect to the Company, and no election or proceedings relating to the
labor relations of the Company is pending or, to the best of the Company,
knowledge, threatened. The Company has not had any material union activity or
had any material labor disruption or material dispute with its employees of any
kind, nature or description at any time heretofore. All personnel
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policies and manuals of the Company are listed on the Company Disclosure
Schedule and true and complete copies thereof have been provided to Provant. No
Employee or Consultant shall have the right to receive from the Surviving
Corporation or Provant a severance payment or other payment in the nature
thereof in the event his or her employment is terminated by the Surviving
Corporation following the Merger, whether such right arises as a matter of
contract, past policy or understanding, by operation of law, or otherwise.
3.20 PERMITS: Compliance with Law. The Company possesses all
franchises, permits, licenses, certificates, approvals, and other authorizations
("Permits") necessary to own or lease and operate its properties and to conduct
its business as now conducted, except for incidental Permits that would be
readily obtainable without undue burden in the event of any lapse, termination,
cancellation, or forfeiture or that if not obtained would not materially and
adversely affect the Company's business. All such material Permits are in full
force and effect, and, to the knowledge of the Company, no suspension or
cancellation of any of them is threatened, and no material Permits will be
adversely affected by the consummation of the Merger. The Company has not failed
nor is it failing to comply with any applicable law, rule, regulation, or order,
where such failure would have a material adverse effect on the Company's
business, and there are no proceedings pending or, to the Company's knowledge,
threatened, nor has the Company received any notice, regarding any such failure.
3.21 ENVIRONMENTAL MATTERS. The Company is, and to the Company's
knowledge all real property owned or otherwise occupied by the Company are and
have been at all times when so owned or occupied, in material compliance with
all applicable existing federal, state and local laws and regulations relating
to protection of human health or the environment or imposing liability or
standards of conduct concerning any Hazardous Material (as hereinafter defined)
("Environmental Laws"), except, in each case, where such noncompliance, singly
or in the aggregate, would not have a material adverse effect on the condition,
financial or otherwise, or the earnings, business affairs or business prospects
of the Company. No Hazardous Materials are stored, utilized or otherwise present
on any property owned or otherwise occupied by the Company, excepting only (x)
cleaning supplies and similar materials customarily used by businesses in the
Company's industry in quantities consistent with such use, and (y) petroleum
products that are used for heating (including water heating) in facilities
located on such property, none of which are stored in underground storage tanks,
or that are present in vehicles located on such property. There has not occurred
any release of Hazardous Materials on, under or affecting any real property
during or prior to the period of the Company's ownership, occupation or
operation of such property (including its participation in or exercise of any
degree of control over the management of any business located on such
property).The term "Hazardous Material" means (a) any "hazardous substance" as
defined in the Comprehensive Environmental Response, Compensation and Liability
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Act of 1980, as amended through the date hereof, (b) any "hazardous waste" as
defined by the Resource Conservation and Recovery Act, as amended through the
date hereof, (c) any petroleum or petroleum product, (d) any polychlorinated
biphenyl and (e) any pollutant or contaminant or hazardous, dangerous, or toxic
chemical, material, waste or substance regulated under or within the meaning of
any other Environmental Law through the date hereof. For purposes of this
Section 3.21, real property owned by third parties but "occupied" by the Company
shall mean only that portion of such property as is either leased by the Company
or in fact otherwise physically occupied or utilized by the Company. There is no
alleged liability, or to the best knowledge of the Company, potential liability
(including, without limitation, alleged or potential liability for investigatory
costs, cleanup costs, governmental response costs, natural resources damages,
property damages, personal injuries or penalties) of the Company arising out of,
based on or resulting from (i) the presence or release into the environment of
any Hazardous Material at any location, whether or not owned by the Company or
(ii) any violation or alleged violation of any Environmental Law, which alleged
or potential liability, singly or in the aggregate, would have a material and
adverse effect on the condition, financial or otherwise, or the earnings,
business affairs or business prospects of the Company.
3.22 FURTHER ASSURANCES. The Company will use all commercially
reasonable efforts to have all present officers and directors of the Company
execute whatever minutes of meetings or other instruments and take whatever
action as may be necessary or desirable to effect, perfect or confirm of record
of otherwise, in the Surviving Corporation, full right, title and interest in
and to the business, properties and assets now conducted or owned by the
Company, free and clear of all restrictions, liens, encumbrances, rights, title
and interests in others (excepting only liens reflected on the Balance Sheet),
or to collect, realize upon, gain possession of, or otherwise acquire full
right, title and interest in and to such business, properties and assets, and
will otherwise use its reasonable best efforts to carry out the intent and
purposes of the transactions contemplated hereby and the IPO.
3.23 CORPORATE RECORDS. The corporate record books of the Company are
in all material respects in good order, complete, accurate, up to date, with all
necessary signatures, and set forth all meetings and actions taken by the
shareholders and directors, and all votes of the shareholders or directors set
forth in certificates furnished to anyone at any time heretofore.
3.24 CONDITION OF ASSETS. All premises, fixtures and equipment owned or
used by the Company and material to its business have been properly maintained
and are in good operating order and repair, free from known defects in
construction or design, sound and properly functioning (normal wear and tear
excepted), usable and not obsolete, and (to the Company's knowledge in the case
of leased property) in material compliance with all applicable zoning, building
and fire codes and all other
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applicable laws, rules, regulations and requirements of governmental authorities
and the fire insurance rating association having jurisdiction.
3.25 ACCOUNTS RECEIVABLE. All of the accounts receivable of the Company
shown or reflected on the Balance Sheet in the Financial Statements, less the
reserve for doubtful accounts in the amount shown on the Balance Sheet, are
valid and enforceable claims and subject to no set off or counterclaim. All of
the accounts receivable of the Company shown or reflected on the Balance Sheet
and as at December 31, 1997 (as reflected on the Company's balance sheet as of
such date, when and as delivered to Provant) will be collected in full within
150 days thereafter except to the extent of the reserve for doubtful accounts
shown on the Balance Sheet or posted on the books of the Company as of such
date. The reserve for doubtful accounts as at December 31, 1997 will not be in
excess of said reserve as shown on the Balance Sheet. The Company has no
accounts or loans receivable from any of its directors, officers or employees.
3.26 CHARTER DOCUMENTS. The Company has heretofore delivered to Provant
copies of its Articles of Incorporation, as amended to date, certified by the
appropriate governmental authority, and copies of its by-laws, as amended to
date, and a list of the officers and directors of the Company in office, all as
certified by its Secretary.
3.27 DISCLOSURE OF ALL MATERIAL MATTERS.
(a) No statement of a material fact set forth in this Agreement
(including without limitation all information in the Financial Statements, the
Company Disclosure Schedule and the other Schedules, Exhibits, and attachments
hereto, taken as a whole) with respect to the Company or its stockholders is
false or misleading in any respect, nor does this Agreement (including, without
limitation all information in the Financial Statements, Company Disclosure
Schedule and the other Schedules, Exhibits, and attachments hereto, taken as a
whole) omit to state a material fact necessary in order to make the statements
made or information disclosed, in the light of the circumstances under which
they were made or disclosed, not misleading.
(b) Provided only that Provant has accurately incorporated any
information furnished in writing by the Company to Provant specifically for
inclusion in the Registration Statement or the Prospectus (as applicable) and
has deleted from the Registration Statement or the Prospectus (as applicable)
any statement that the Company has specifically requested in writing be so
deleted, (i) at the time the Registration Statement becomes effective under the
Securities Act, it will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading and (ii) at the time of each closing in
connection with the IPO, the Prospectus will not include an untrue statement of
a material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which
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they were made, not misleading. The representations and warranties in this
Section shall not apply to statements in or omissions from the Registration
Statement and Prospectus relating to any person or entity other than the Company
and its officers, directors and stockholders.
3.28 BROKERS. No broker, finder, or investment banker is entitled to
any brokerage, finder's, or other fee or commission in connection with the
Merger or the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company.
4. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
The Stockholders represent and warrant to Provant and Acquisition as
follows:
4.1 TITLE TO THE SHARES. All of the issued and outstanding Shares
purported to be owned by the Stockholders as set forth on the Disclosure
Schedule pursuant to Section 3.2 are owned by the Stockholders free and clear of
any claims, liens, charges, encumbrances, security interests and rights of
others whatsoever, and such Shares are not bound by or subject to any proxy,
agreement, voting trust or other restriction regarding the voting thereof.
4.2 AUTHORITY. The Stockholders have full power, authority and capacity
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby, and no other action is necessary by the Stockholders to
consummate the transactions contemplated by the Agreement. This Agreement has
been duly and validly executed and delivered by the Stockholders and constitutes
a legal, valid and binding obligation of the Stockholders enforceable against
them in accordance with its terms, except as enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting enforcement of creditors' rights generally.
4.3 NO CONFLICTS. The execution, delivery and performance of this
Agreement by the Stockholders do not and will not violate, conflict with, result
in a breach of or constitute a default under (or an event which with due notice
or lapse of time, or both, would constitute a breach of or default under) or
result in the creation of any lien, security interest or other encumbrance under
(a) any material term of any note, agreement, contract, license, instrument,
lease or other obligation to which a Stockholder is a party or by which he is
bound or create any lien or encumbrance on any of such Stockholder's Shares, (b)
any material provision of any judgment, order, decree, ruling or injunction or
(c) any statute, law, regulation or rule of any governmental agency or
authority.
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5. REPRESENTATIONS AND WARRANTIES
OF PROVANT, ACQUISITION AND THE PROVANT PRINCIPALS
Provant, Acquisition and the Provant Principals represent and warrant
to the Company and the Stockholders that, except as expressly provided in the
Provant Disclosure Schedule by specific reference to a Section of this Article
5:
5.1 ORGANIZATION AND AUTHORITY. Each of Provant and Acquisition is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware, and each has all requisite corporate power and
authority to conduct its business and own its properties as now conducted and
owned, and is qualified and in good standing as a foreign corporation, and has
at all times when legally required been so qualified and in good standing, in
each jurisdiction where the failure to be so qualified would, in the aggregate,
have a material adverse effect on the business or financial condition of
Provant. Each of Provant and Acquisition has full power and authority to execute
and deliver this Agreement and the agreements being executed and delivered in
connection with the Additional Mergers and the IPO to which it is a party, and
to consummate the transactions contemplated hereby and thereby and to perform
its obligations hereunder and thereunder. The execution and delivery of this
Agreement and the other agreements referenced above and the consummation of the
transactions contemplated hereby and thereby, and the performance of Provant's
and its subsidiaries' (including Acquisition's) obligations hereunder and
thereunder have been duly and validly authorized by the unanimous votes of the
respective Boards of Directors of Provant and such subsidiaries (including
Acquisition) and by Provant as the sole stockholder of such subsidiaries
(including Acquisition), and no other corporate proceedings on the part of
Provant or its subsidiaries (including Acquisition) are necessary to authorize
this Agreement or the other agreements referenced above or to consummate the
transactions contemplated hereby or thereby or to perform the obligations of
Provant and its subsidiaries (including Acquisition) hereunder or thereunder.
This Agreement has been duly and validly executed and delivered by each of
Provant and Acquisition and constitutes a valid and binding agreement of each,
enforceable against each in accordance with its terms, except as enforcement may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting enforcement of creditors' rights generally.
5.2 CAPITALIZATION OF PROVANT; SUBSIDIARIES. Provant has authorized
capital consisting of 10,000 shares of Provant Common Stock, $.01 per share par
value, of which no shares are held in Provant's treasury. As of the date hereof,
there are 3,417.9 issued and outstanding shares of Provant Common Stock, all of
which are duly authorized, validly issued, fully paid and non-assessable and are
owned of record and beneficially by those persons listed on the Provant
Disclosure Schedule. Provant has no other authorized class of capital stock
other than the Provant Common Stock. As of the date hereof and at all times
prior to the Effective Time,
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Provant does not (and will not) own and has not owned any shares of capital
stock or other securities of, or any other interest in, nor does (or will) it
control or has it controlled, directly or indirectly, any other corporation,
association, joint venture, partnership, or other business organization, other
than Acquisition and the subsidiaries intended to be merged with the Additional
Companies. All of the issued and outstanding shares of capital stock of
Acquisition, and of each subsidiary that will be merged with an Additional
Company, are owned of record and beneficially by Provant. All outstanding shares
of Provant Common Stock have been issued and sold in full compliance with all
applicable Federal and state securities laws. No holder of outstanding shares of
Provant Common Stock has any dissenting shareholder or appraisal rights with
regard to the Merger. Provant does not have knowledge of any voting agreements,
voting trusts or similar agreements governing the manner in which any shares of
Provant Common Stock are voted by the holders thereof.
5.3 NO RIGHTS TO PURCHASE OR REGISTER STOCK. Excepting only (a) the
shares of Provant Common Stock to be issued as Merger Shares and as merger
consideration in the Additional Mergers, (b) the shares of Provant Common Stock
to be sold in the IPO, and (c) the shares of Provant Common Stock to be issued
pursuant to Provant Options under the Plan, no person, firm, or corporation has
any written or oral agreement, option, warrant, call, understanding, commitment,
or any right or privilege capable of becoming a binding agreement, for either
the purchase of any shares of Provant Common Stock or the acquisition of shares
of any other class of capital stock of Provant, and Provant has not otherwise
agreed to issue or sell any shares of its capital stock and has no obligation to
register any shares of Provant Common Stock under the Securities Act. Provant is
not obligated directly, indirectly or contingently to purchase any shares of
Provant Common Stock. No person, firm, or corporation has any written or oral
agreement, option, warrant, call, understanding, commitment, or any right or
privilege capable of becoming a binding agreement, for the purchase or other
acquisition of any shares of capital stock of Acquisition or of any subsidiary
of Provant that will be merged with an Additional Company, and neither
Acquisition nor any such other subsidiary has otherwise agreed to issue or sell
any shares of its capital stock or to register any shares of its capital stock
under the Securities Act.
5.4 MERGER STOCK. The Merger Stock has been duly authorized by all
necessary corporate action and, when issued and delivered by Provant pursuant to
this Agreement, will be validly issued, fully paid and non-assessable.
5.5 CONSENTS AND APPROVALS; No Violation; No Known Impediments. Neither
the execution and delivery of this Agreement by Provant and Acquisition nor the
consummation of the transactions contemplated hereby will (i) conflict with or
result in any breach of any provision of the respective charter documents or
By-Laws of Provant or Acquisition; (ii) subject to the last sentence of this
Section 5.5, require on the part of Provant any consent, approval,
authorization, or permit of, or filing with
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or notification to, any governmental or regulatory authority, except (A) filing
the Merger Agreement pursuant to the CGCL and the Certificate of Merger pursuant
to the DGCL and (B) filings required under the Securities Act and the securities
or blue sky laws of the various states; (iii) result in a default (or give rise
to any right of termination, cancellation, or acceleration) under any of the
material terms, conditions, or provisions of any note, license, lease,
agreement, or other instrument or obligation to which Provant or Acquisition is
a party or by which Provant or Acquisition or any of their respective assets may
be bound, other than as previously disclosed in writing to the Company; or (iv)
violate or constitute a material breach of any order, writ, injunction, decree,
statute, law, rule, or regulation applicable to Provant or Acquisition or any of
their respective assets. Assuming no material change after the date hereof in
the condition of the capital markets or in the business or financial condition
of the Company or any of the Additional Companies and assuming the Commission
declares the Registration Statement effective in due course, Provant has no
knowledge of any matter (including without limitation any law or regulation)
that should reasonably be expected to prohibit the consummation of the
transactions contemplated hereby, the Additional Mergers or the IPO. The
representation and warranty contained in clause (ii) above is, with respect to
compliance with the HSR Act, made in reliance upon, and is expressly conditioned
upon, the accuracy of the representations and warranties of the Company and the
Stockholders made in the second sentence of Section 3.6.
5.6 OPERATIONS AND FINANCIAL CONDITION; ABSENCE OF UNDISCLOSED
LIABILITIES. Neither Provant nor Acquisition has conducted any material business
operations other than in connection with the Merger, the Additional Mergers and
the IPO or in preparation for operations to be conducted after the Effective
Time. Neither Provant nor Acquisition has any material tangible assets or
material liabilities or obligations of any nature, whether accrued, absolute,
contingent, or otherwise and whether due or to become due, including without
limitation liabilities that may become known or arise after the date hereof and
which relate to transactions entered into or any state of facts existing on or
before the date hereof and which would be required under generally accepted
accounting principles to be shown in a balance sheet or referenced in the notes
thereto prepared as of the date hereof, other than those incurred in connection
with the Merger, the Additional Mergers and the IPO or in connection with
Provant's preparation for future operations. Set forth on the Provant Disclosure
Schedule are all liabilities and obligations of Provant and Acquisition (by
type) that are as of the date hereof, or are expected to be as of the Effective
Time, in excess of $10,000.
5.7 LITIGATION. There are no actions, suits, causes of action, claims,
litigation, arbitration, administrative hearings or other form of proceedings or
disputes pending, or, to the best knowledge of Provant or Acquisition,
threatened, against, involving or affecting Provant or Acquisition, in any
court, at law or in equity, or before any arbitration board or any governmental
department, commission, board, bureau,
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agency, or instrumentality, that either singly or in the aggregate might prevent
Provant and Acquisition from consummating the transactions contemplated hereby,
the IPO or the Additional Mergers, or which would have a material adverse effect
on the business, operations, or financial condition of Provant and its
subsidiaries taken as a whole.
5.8 MATERIAL CONTRACTS. The Provant Disclosure Schedule lists all
material leases, contracts, instruments, agreements or commitments (whether
written or oral), other than the Additional Merger Agreements, relating to the
conduct of the business of Provant or its subsidiaries (including Acquisition)
in effect on the date hereof (the "Material Provant Contracts"). Without
limiting the generality of the foregoing, the aforesaid list includes all
contracts, agreements and instruments of the following types to which Provant or
its subsidiaries is a party or by which any of them is bound:
(a) employment or employment-related contracts or agreements (including
pension, retirement, deferred compensation, death benefit, profit sharing, bonus
or other employee incentive, fringe benefit, stock purchase or stock option
agreements), consulting agreements, agreements providing for termination or
severance benefits, non-competition agreements, non-disclosure agreements,
contracts for professional personal services, contracts with other persons
engaged in sales or distributing activities, and advertising contracts;
(b) written or oral agreements, understandings and arrangements of any
kind with any officer, director, employee, shareholder or agent of Provant or
Acquisition relating to present or future compensation or other benefits
available to such person or otherwise;
(c) indentures, loan agreements, notes, security agreements, mortgages,
conditional sales contracts, leases of real or personal property, contracts for
the purchase or sale of real or personal property, and agreements for financing;
(d) agreements, contracts or other arrangements to which the Provant or
Acquisition is a guarantor, surety or endorser;
(e) contracts, agreements, instruments, arrangements or understandings
which have not been included in items (a) through (d) above involving payment by
or to Provant or Acquisition of more than $50,000 or not terminable without
penalty or otherwise materially affecting the assets, financial condition,
properties or business of Provant or Acquisition.
All of the Material Provant Contracts are in full force and effect. Except to
the extent that a material adverse effect on Provant's financial condition,
assets, liabilities, earnings, business or prospects (each considered on a
consolidated basis giving effect to the Merger and the Additional Mergers) would
not result if the following were not
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true: (A) Provant, Acquisition and each other party to each of the Material
Provant Contracts have performed all the obligations required to be performed by
them to date, have received no notice of default and are not in default (with
due notice or lapse of time or both) under any of the Material Provant
Contracts; (B) Provant and Acquisition have no present expectation or intention
of not fully performing all of their respective obligations under any of the
Material Provant Contracts, and Provant and Acquisition have no knowledge of any
breach or anticipated breach by any other party to any of the Material Provant
Contracts; (C) there exists no actual or, to the knowledge of Provant and
Acquisition, threatened termination, cancellation or limitation of the business
relationship of Provant or Acquisition with any party to any Material Provant
Contract; and (D) consummation of the transactions contemplated hereby and
performance by Provant and Acquisition of their respective obligations hereunder
shall not require the consent or permission of any party to any Material Provant
Contract or permit any party to terminate, suspend or alter the terms of any
Material Provant Contract.
5.9 ADDITIONAL MERGER AGREEMENTS. The Provant Disclosure Schedule sets
forth, with respect to the Additional Merger Agreements, the material economic
terms of each such Agreement and any other material terms of each such Agreement
that differ substantially from the corresponding terms of this Agreement.
5.10 DISCLOSURE OF ALL MATERIAL MATTERS. No statement of a material
fact made by Provant or Acquisition in this Agreement (including without
limitation all information in the Provant Disclosure Schedule and the other
Schedules, Exhibits, and attachments hereto, taken as a whole) is false or
misleading in any respect, nor does this Agreement (including, without
limitation all information in the Provant Disclosure Schedule and the other
Schedules, Exhibits, and attachments hereto, taken as a whole) omit to state a
material fact necessary in order to make the statements made or information
disclosed, in the light of the circumstances under which they were made or
disclosed, not misleading.
5.11 BROKERS. No broker, finder, or investment banker is entitled to
any brokerage, finder's, or other fee or commission in connection with the
Merger or the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Provant or Acquisition.
6. COVENANTS
6.1 CONDUCT OF BUSINESS OF THE COMPANY.
(a) Except as contemplated by this Agreement, during the period from
the date of this Agreement to the Effective Time, the Company will conduct its
operations only in the ordinary and usual course of business and consistent with
past practice
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and will use all commercially reasonable to preserve intact its present business
organization, keep available the services of its present officers and employees,
and preserve its relationships with customers, suppliers, contractors, and
others having business dealings with it to the end that its goodwill and
on-going business shall not be impaired at the Effective Time.
(b) Without limiting the generality of subsection (a) and except as
otherwise expressly provided in this Agreement, before the Effective Time, the
Company will comply with all laws applicable to the conduct of its business and
continue in effect its present insurance coverage and will not, without the
prior written consent of Provant, (i) issue, sell, or pledge, or authorize or
propose the issuance, sale, or pledge of (A) any shares of capital stock of any
class (including the Shares), or securities convertible into any such shares, or
any rights, warrants or options to acquire any such shares or other convertible
securities, excepting only pursuant to the exercise or conversion of Company
Options and other instruments or securities outstanding on the date hereof and
disclosed on the Company Disclosure Schedule which exercise or conversion and
which issuance are in accordance with the terms of such instruments or
securities as in effect on the date hereof, or (B) any other securities in
respect of, in lieu of, or in substitution for, Shares outstanding on the date
hereof; (ii) purchase or otherwise acquire, or propose to purchase or otherwise
acquire, any outstanding Shares; (iii) declare or pay any dividend or
distribution on any shares of its capital stock; (iv) authorize, recommend,
propose or announce an intention to authorize, recommend or propose, or enter
into an agreement in principle or an agreement with respect to, any change in
its capitalization, merger, consolidation or business combination (other than
the Merger), any acquisition of a material amount of assets or securities, any
disposition of a material amount of assets or securities, or any entry into a
material contract or any release or relinquishment of any material contract
rights, not in the ordinary course of business; (v) propose or adopt any
amendments to its Articles of Incorporation or By-Laws (other than as effected
by the Merger); (vi) incur, assume, or prepay any long-term debt or, except in
the ordinary course of business under existing lines of credit, incur or assume
any short term debt; (vii) make any loans, advances, or capital contributions
to, or investments in, any other person, other than travel or other advances to
employees consistent with past practice; (viii) assume, guarantee, endorse, or
otherwise become liable or responsible (whether directly, contingently, or
otherwise) for the obligations of any other person, except to endorse checks for
collection or deposit in the ordinary course of business; or (ix) agree in
writing or otherwise to take any of the foregoing actions or any action that
would make any representation or warranty in this Agreement untrue or incorrect
as of the date hereof or as of the Effective Time, as if made as of such time.
Notwithstanding the foregoing provision of this Section 6.1 (b), prior to the
Effective Time the Company may make a cash dividend to the holders of Shares so
long as doing so will not prevent the Company from satisfying the Financial
Condition (with any such dividend being accounted for prior to the calculation
of the Financial Condition).
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6.2 NO SOLICITATION. The Company shall not, nor shall it permit any of
its officers, directors, employees, agents, or representatives (including,
without limitation, investment bankers, attorneys and accountants), directly or
indirectly to (a) initiate, contract with, solicit or encourage any inquiries or
proposals by, or (b) enter into any discussions or negotiations with, or
disclose directly or indirectly any information concerning its business and
properties to, or afford any access to its properties, books, and records to,
any corporation, partnership, person, or other entity or group in connection
with any possible proposal (an "Acquisition Proposal") regarding a sale of the
Company's capital stock or a merger, consolidation, or sale of all or a
substantial portion of the assets, or any similar transaction that is material
to the Company. The Company will notify Provant within one business day of
receipt if any discussions or negotiations are sought to be initiated, any
inquiry or proposal is made, or any such information is requested with respect
to an Acquisition Proposal or potential Acquisition Proposal or if any
Acquisition Proposal is received or indicated to be forthcoming. Such notice
shall state all substantive terms and conditions of any proposal or Acquisition
Proposal and the identity of the person making the proposal or Acquisition
Proposal or seeking to initiate discussions or negotiations or requesting
information.
6.3 ACCESS TO INFORMATION.
(a) From the date of this Agreement, the Company will give Provant and
the Underwriter and their respective representatives full access, at reasonable
times and with reasonable notice, to the offices and other facilities and to the
books and records of the Company, will permit Provant and the Underwriter and
their respective representatives to make such inspections as they may reasonably
require, and will cause its officers and representatives (including, without
limitation, its firm of certified public accountants) to furnish Provant and the
Underwriter and their respective representatives with such financial and
operating data and other information with respect to the business, operations,
assets, liabilities and prospects of the Company as Provant and the Underwriter
and their respective representatives may from time to time reasonably request.
From the date of this Agreement, Provant and Acquisition will give the Company
full access, at reasonable times, to the offices and other facilities and to the
books and records of Provant and Acquisition, will permit the Company and its
representatives to make such inspections as they may reasonably require, and
will cause their respective officers and representatives (including, without
limitation, their firm of certified public accountants) to furnish the Company
and its representatives with such financial and operating data and other
information with respect to the business, operations, assets and liabilities of
Provant, Acquisition and the Additional Companies (in the last case to the
extent such information is in the possession of Provant and the applicable
Additional Company does not object to disclosure) as the Company and its
representatives may from time to time reasonably request.
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(b) Provant and Acquisition, on the one hand, and the Company, on the
other hand, will, and will cause their respective employees and agents
(including, in the case of Provant, the Underwriter and its employees and
agents) (collectively, "Representatives") to, hold in strict confidence, unless
compelled to disclose by judicial or administrative process or, in the opinion
of its counsel, by other requirements of law, all Confidential Information (as
hereinafter defined) and will not disclose the same to any person. If this
Agreement is terminated, each party having received or created any documents
containing Confidential Information (including documents received or created by
its Representatives), will promptly return to the other party or destroy (or
cause to be returned or destroyed) all documents (including all copies thereof)
so received or created containing such Confidential Information. For purposes
hereof, "Confidential Information" shall mean all information of any kind
concerning the Company, or concerning any of Provant, Acquisition or any
Additional Company, respectively, except information (i) ascertainable or
obtained from public or published information, (ii) received from a third party
not known to Provant, Acquisition or their Representatives, or to the Company or
its Representatives, as applicable, to be under an obligation to the Company or
Provant, as applicable, to keep such information confidential, (iii) that is or
becomes known to the public (other than through a breach of this Agreement),
(iv) that was in the receiving party's possession before disclosure thereof to
it in connection with this Agreement, or (v) that is independently developed by
Provant or by the Company (including their respective Representatives), as
applicable.
6.4 REASONABLE BEST EFFORTS; SHAREHOLDER APPROVAL.
(a) Subject to the terms and conditions hereof, each party to this
Agreement agrees to fully cooperate in all reasonable respects with the others
and the others' counsel, accountants and representatives in connection with any
steps required to be taken as part of its obligations under this Agreement and
in connection with the IPO. Each of the Company, Provant and Acquisition agrees
that it will use its reasonable best efforts to cause all conditions to its
obligations under this Agreement to be satisfied as promptly as possible, and
will not undertake a course of action inconsistent with this Agreement or which
would make any of its representations, warranties, agreements or covenants in
this Agreement untrue in any material respect or any conditions precedent to its
obligations under this Agreement unable to be satisfied at or prior to the
Closing. The Provant Principals hereby covenant and agree that, subject to the
satisfaction (or, in Provant's sole discretion, waiver) of the conditions set
forth in Section 7.1, they will use their reasonable best efforts to cause
Provant to calculate the Financial Condition in good faith and to cause Provant,
Acquisition or Provant's counsel, as applicable, to execute and/or deliver each
of the items identified in subsections 7.2(f), (i), (j), and (l) and to take the
action described in subsection 7.2(k).
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(b) Without limiting the foregoing, the Company will promptly and duly
call (and the Stockholders will cause the Company to so call) a special meeting
of its stockholders for the purpose of voting on the Merger and this Agreement.
The Board of Directors of the Company and the Stockholders shall give their
respective unqualified recommendations to the stockholders of the Company that
such stockholders approve the Merger and this Agreement, and the Company and the
Stockholders will otherwise use their reasonable best efforts to obtain
stockholder approval.
6.5 CONSENTS. Each of Provant, Acquisition and the Company will use
reasonable efforts to obtain as promptly as practicable such consents of third
parties to agreements that would otherwise be violated by any provisions hereof
and to make such filings with governmental authorities as are necessary to
consummate the transactions contemplated by this Agreement.
6.6 PUBLIC ANNOUNCEMENTS. Except as provided in the immediately
following sentence, all public announcements, notices or other communications
regarding this Agreement and the transactions contemplated hereby to third
parties other than the parties hereto and their respective advisors and the
shareholders of the Company shall require the prior approval of Provant and of
the Company. Notwithstanding the foregoing, neither the filing of the
Registration Statement (or any other document filed with any public official in
connection with the IPO), nor the distribution of the Prospectus (whether in
preliminary or final form), nor any selling activity conducted by Provant or the
Underwriter in connection with the IPO, including without limitation those
conducted as part of the so-called road show, shall be construed to be public
announcements, notices or other communications requiring the prior approval of
the Company.
6.7 NOTIFICATION OF CERTAIN MATTERS. Each of the parties (the
"Notifying Party") shall give prompt notice to the other parties of (i) the
occurrence or non-occurrence of any event that would be likely to cause any
representation or warranty of the Notifying Party contained in this Agreement to
be untrue or inaccurate in any material respect at or prior to the Effective
Time and (ii) any material failure of the Notifying Party to comply with or
satisfy any covenant, condition, or agreement to be complied with or satisfied
by it hereunder. Without limiting the foregoing, from time to time prior to the
Closing the Company will promptly supplement or amend the Company Disclosure
Schedule both to correct any inaccuracy in the Company Disclosure Schedule when
delivered and to reflect any development which, if existing at the date of this
Agreement, would have been required to be set forth in the Company Disclosure
Schedule or which has rendered inaccurate the information contained in the
Company Disclosure Schedule (each notice furnishing such information being
called a "Company Disclosure Supplement"), and approximately six business days
prior to the Closing the Company will deliver to Provant a final Company
Disclosure Supplement consisting of a complete update of the Company
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Disclosure Schedule as though all representations and warranties contained in
Article 3 hereof were to be made as of the date of the Closing. In addition, the
Company shall promptly notify Provant in writing if at any time prior to a
closing in connection with the IPO it shall obtain knowledge of any facts
relating to the Company or its officers, directors or stockholders that might
make it necessary or appropriate to amend or supplement the Prospectus in order
to make the statements contained therein not misleading or comply with
applicable law. The delivery of any Company Disclosure Supplement or other
notice pursuant to this Section 6.7 shall not render correct any representation
or warranty that was incorrect when made or limit or otherwise affect the
remedies available hereunder to the party receiving such Company Disclosure
Supplement or notice.
6.8 COVENANTS OF THE STOCKHOLDERS. The Stockholders hereby covenant and
agree with Provant and Acquisition that they shall:
(a) take no action which the Company may not take pursuant to Section
6.2;
(b) take action and refrain from action to the extent required of the
Company pursuant to Section 6.4;
(c) vote, or cause to be voted, all of their respective Shares for the
approval of each aspect of this Agreement (including the Merger) requiring the
approval of the stockholders of the Company, and against the approval of any
other agreement providing for a merger, consolidation, sale of assets or other
business combination of the Company with any person or entity other than Provant
or an entity controlled by Provant;
(d) cause the Company to provide to Provant the notifications required
of the Company under Section 6.7;
(e) execute and deliver at the Closing the Employment Contracts, the
Non- Competition and Non-Disclosure Agreements, and the Investment Letters; and
(f) subject to the other terms of this Agreement, (i) use all
commercially reasonable efforts to take whatever action may be reasonably
necessary or desirable to effect, perform or confirm of record or otherwise in
the Surviving Corporation full right, title and interest in and to the business,
properties and assets now conducted or owned by the Company, free and clear of
all restrictions, liens, encumbrances, rights, title and interests in others
(excepting only liens reflected on the Balance Sheet or otherwise disclosed on
the Disclosure Schedule) or to collect, realize upon, gain possession of, or
otherwise acquire, full right, title and interest in and to such business,
properties and assets; (ii) use their reasonable best efforts to take whatever
action may be reasonably necessary or desirable to carry out the intent and
purposes
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of the transactions contemplated hereby; and (iii) cause or permit Provant to
undertake and complete the IPO;
(g) notify Provant in writing if at any time prior to a closing in
connection with the IPO they shall obtain knowledge of any facts relating to the
Company or its officers, directors or stockholders that might make it necessary
or appropriate to amend or supplement the Prospectus used in the registration
statement filed in connection with the IPO in order to make the statements
contained therein not misleading or comply with applicable law (with the
delivery of any notice pursuant to this Section 6.8(g) not limiting or otherwise
affecting the remedies available hereunder to the party receiving such notice);
(h) execute and deliver such other instruments and take such other
actions as may be reasonably required by the Company or the Underwriter in order
to carry out the intent of this Agreement and to complete and close the IPO,
subject to the other terms of this Agreement; and
(i) satisfy (or cause to be satisfied) prior to the Effective Time any
indebtedness to the Company owed by such Stockholder or by any Affiliate of such
Stockholder, excepting only indebtedness of Mr. Taylor under that certain
promissory note dated August 31, 1997 in the original principal amount of
$171,631.50.
6.9 TAX FREE REORGANIZATION. From and after the Effective Time, neither
Provant nor the Surviving Corporation shall take or suffer to be taken any
action which will cause the Merger not to constitute a reorganization within the
meaning of Section 368(a)(2)(D) of the Code.
6.10 MONTHLY FINANCIAL INFORMATION. Within thirty days after the end of
each month ending after the date of this Agreement and prior to the Effective
Time, the Company will furnish to Provant internally prepared financial
statements comparable to the Financial Statements prepared in a manner
consistent with the Financial Statements and certified by the chief financial
officer of the Company.
6.11 PROVANT OPTION PLAN. Prior to the Effective Time, Provant shall
adopt an employee stock option plan (the "Plan") providing for the granting of
Provant Options from time to time as provided in the Plan. The Plan shall make
available for grant at or before the Closing, and the Board of Directors of
Provant shall so grant, Provant Options with respect to a number of shares of
Provant Common Stock equal to 5.0% of the shares of Provant Common Stock
outstanding as of immediately following the Closing of the Merger and the
Additional Mergers (excluding any Additional Merger that is terminated without
consummation) and the IPO, giving effect to the issuance of all shares of Merger
Stock issuable as of Closing, all shares of Provant Common Stock issuable as of
the Closing as merger consideration in each of the Additional Mergers, and the
issuance of Provant Common Stock in the IPO. The Provant
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Options granted as of such time shall have an exercise price equal to the IPO
Price, shall by their terms (i) become exercisable ratably over a period of
three years (provided that the holder remains employed by Provant or one of its
affiliates and subject to accelerated vesting in the event of a change in
control of Provant), (ii) have a term of seven years, and (iii) in the case of
vested options, will remain exercisable for a period of one year following any
termination of employment without cause (including termination resulting from
the expiration of any employment agreement in accordance with its terms and
termination upon death or disability) and for a period of ten business days
following any termination of employment for cause (conditioned, in the latter
case, upon the terminated employee's delivery of a general release to the
Surviving Corporation, Provant and their respective affiliates), and shall have
such other terms as the Board of Directors of Provant may determine. The Provant
Options granted as of such time shall be allocated among the employees of,
respectively, the Surviving Corporation and the surviving corporations of the
Additional Mergers in accordance with Schedule 6.11 hereto, and shall be granted
to individual employees of such corporations in accordance with directions to
the Board of Directors of Provant given by the executive officers of the Company
and the Additional Companies absent a good faith determination by the Board of
Directors of Provant that such a direction is manifestly contrary to the
interests of the Surviving Corporation.
7. CONDITIONS TO CONSUMMATION OF THE MERGER
7.1 CONDITIONS TO THE OBLIGATIONS OF PROVANT AND ACQUISITION. The
obligations of Provant and Acquisition to consummate the Merger are subject to
the satisfaction at the Closing, or waiver by Provant in writing, in whole or in
part, of each of the following conditions:
(a) The IPO and each of the Additional Mergers shall have been
completed at the same time.
(b) The Financial Condition shall have been satisfied in the good faith
determination of Provant.
(c) Each of the representations, warranties, agreements and covenants
of the Company and the Stockholders (giving effect to the Disclosure Schedule,
but not to any Company Disclosure Supplement) shall be true and correct as of,
and shall not have been violated in any respect at, the Closing as though made
on and as of the Closing, except for (i) representations, warranties, agreements
and covenants which make reference to a specific date (including the date of
this Agreement), which need only be true and correct as of the specified date,
and (ii) failures of representations or warranties to be true and correct as of
the Closing solely on account of matters arising between the date hereof and the
Effective Time in the ordinary course of the
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Company's business, if and to the extent such matters are consistent with past
practice of the Company and are not materially adverse to the Company, either
singly or in the aggregate; the Company and the Stockholders shall, on or before
the Closing, have performed all of their respective obligations under this
Agreement which by the terms hereof are to be performed on or before the
Closing; and there shall have delivered to Provant and Acquisition a certificate
signed by the President of the Company on behalf of and in the name of the
Company and by the Stockholders dated as of the date of the Closing to the
foregoing effect.
(d) The Merger and this Agreement shall have been approved by the
requisite vote of the stockholders of the Company, and not more than 5.0% of the
Shares shall constitute Dissenting Shares.
(e) No action or proceeding by or before any court or other
governmental body shall have been instituted by any governmental body or other
person or entity or threatened in writing by any governmental body which seeks
to restrain, prohibit or invalidate the transactions contemplated by this
Agreement or which would materially adversely affect the right of the Surviving
Corporation, as a subsidiary of Provant, to conduct the business of the Company
as presently conducted by the Company or which claims damages from Provant with
respect to the transactions contemplated hereby.
(f) Provant and Acquisition shall have received the opinion of counsel
to the Company, dated the date of the Closing and in form and substance
reasonably satisfactory to Provant and its counsel, substantially to the effect
set forth on Exhibit 7 (subject to qualifications and assumptions customary in
transactions such as the Merger), which opinion provides that it may be relied
upon by the Underwriter.
(g) All proceedings taken by the Company and all instruments executed
and delivered by the Company prior to the date of the Closing in connection with
the transactions herein contemplated shall be satisfactory in form and substance
to counsel for Provant acting reasonably.
(h) No statute, rule or regulation shall have been enacted or
promulgated which makes illegal or prohibits consummation of the transactions
contemplated hereby or which materially and adversely affects the ability of the
Surviving Corporation, as a subsidiary of Provant, to conduct the business of
the Company as presently conducted by the Company.
(i) The Stockholders shall have executed and delivered to Provant the
Employment Contracts, the Non-Competition and Non-Disclosure Agreements, and the
Investment Letters.
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(j) The Company shall have delivered to Provant and Acquisition a
certificate of its Secretary certifying as to requisite corporate or other
action authorizing the transactions contemplated by this Agreement, the
incumbency of officers and directors, and the status of record ownership of the
Shares.
(k) The Company shall have delivered to Provant such other
certificates, documents and consents as Provant and its counsel shall reasonably
require.
7.2 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY AND THE STOCKHOLDERS.
The obligation of the Company and the Stockholders to consummate this Agreement
is subject to the satisfaction at the Closing, or waiver by the Company in
writing, in whole or in part, of each of the following conditions:
(a) The IPO shall have been completed at the same time, and appropriate
measures shall have been adopted and shall be in place to ensure that the
stockholders of the Company shall receive out of the proceeds of the IPO all
cash to which they will become entitled as of the Effective Time.
(b) Each of the Additional Mergers shall have been completed at the
same time as the Merger, and there shall have occurred no event (or series of
events, whether or not related) with respect to any Additional Company that (i)
constitutes a failure of a closing condition set forth in the applicable
Additional Merger Agreement such that, in the reasonable judgment of Provant,
Provant is not contractually obligated to consummate the applicable Additional
Merger, and (ii) has resulted in a material adverse change between the date
hereof and the date of the Closing in the financial condition, assets,
liabilities, earnings, business, or business prospects of the applicable
Additional Company.
(c) Each of the representations, warranties and agreements of Provant,
Acquisition and the Provant Principals (giving effect to the Provant Disclosure
Schedule) shall be true and correct as of, and shall not have been violated in
any respect at, the Closing as though made on and as of the Closing except for
(i) representations and warranties and agreements which make reference to a
specific date (including the date of this Agreement), which need only be true
and correct as of the specified date, and (ii) failures of representations or
warranties to be true and correct as of the Closing solely on account of matters
arising between the date hereof and the Effective Time in the ordinary course of
Provant's or Acquisition's business, if and to the extent such matters are not
materially adverse to Provant (considered on a consolidated basis giving effect
to the Merger and the Additional Mergers), either singly or in the aggregate;
Provant and Acquisition shall, on or before the Closing, have performed all of
their respective obligations under this Agreement which by the terms hereof are
to be performed on or before the Closing (including without limitation the
adoption of the Plan and the grant of Provant Options to persons who will be
employees of the Surviving Corporation in accordance with Schedule 6.11);
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and Provant and Acquisition shall have delivered to the Company a certificate of
their respective Presidents signed on their behalf and in their names dated as
of the date of the Closing to the foregoing effect.
(d) The Merger and this Agreement shall have been approved by the
requisite vote of the stockholders of the Company.
(e) No action or proceeding by or before any court or other
governmental body shall have been instituted by any governmental body or other
person or entity or threatened in writing by any governmental body which seeks
to restrain, prohibit or invalidate the transactions contemplated by this
Agreement or which would materially adversely affect the right of the Company to
consummate the Merger.
(f) The Company shall have received the opinion, dated the date of the
Closing and in form and substance satisfactory to the Company and its counsel,
of Messrs. Nutter, McClennen & Fish, counsel to Provant, substantially to the
effect set forth on Exhibit 8 (subject to qualifications and assumptions
customary in transactions such as the Merger).
(g) All proceedings taken by Provant and Acquisition and all
instruments executed and delivered by Provant and Acquisition prior to the date
of the Closing in connection with the transactions herein contemplated, and any
instruments to be executed by the Stockholders at the request of Provant, shall
be satisfactory in form and substance to counsel for the Company, acting
reasonably.
(h) No statute, rule or regulation shall have been enacted or
promulgated which makes illegal or prohibits consummation of the transactions
contemplated hereby or which materially and adversely affects the ability of the
Surviving Corporation, as a subsidiary of Provant, to conduct the business of
the Company as presently conducted by the Company.
(i) Provant and Acquisition shall have delivered to the Company a
certificate of its Secretary, certifying as to requisite corporate or other
action authorizing the transactions contemplated by this Agreement.
(j) The Surviving Corporation shall have executed and delivered each
Employment Contract to the appropriate party.
(k) The individual listed on Schedule 7.2 as the designee of the
Company shall have been elected to the Board of Directors of Provant.
(l) Provant and Acquisition shall have delivered to the Company such
other certificates and documents pertaining to the Merger (including the legal
existence and
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good standing of Provant and Acquisition) as the Company and its counsel shall
reasonably require.
8. RESTRICTIONS ON SALE OR TRANSFER OF MERGER STOCK
8.1 RESTRICTIONS ON SALE. The shares of Merger Stock will not have been
registered under the Securities Act or the blue sky laws of any state by reason
of their contemplated issuance in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act and of such state laws.
Such shares may not be sold, transferred, or otherwise disposed of without
registration under the Securities Act and such state laws or an exemption
therefrom, or in contravention of the restrictions contained in the Investment
Letter attached hereto as Exhibit 4.
8.2 REGISTRATION ON A PARI PASSU BASIS. Provant agrees that, in the
event that at any time after the closing of the IPO it conducts a public
offering of Common Stock registered under the Act and Provant and its
underwriter determine, in their sole discretion, to permit (i) any holder of
Merger Stock, (ii) any holder of Provant Common Stock issued as merger
consideration in any of the Additional Mergers, or (iii) any Provant Principal
to sell Provant Common Stock in such offering, then Provant shall permit each
holder of Merger Stock to sell shares of such Merger Stock in such offering in
the same proportion as the person referenced in any of clauses (i) through (iii)
above who is then being permitted to sell the highest proportion of his or her
shares of Provant Common Stock (all such proportions being based on the
respective number of shares of Provant Common Stock that each applicable person
then holds); provided, however, that the foregoing right shall not apply to
shares that are no longer subject to the two-year restriction period under the
Investment Letter and that are tradeable either without regard to Rule 144
promulgated under the Act or tradeable within a 90 day period under such Rule
144. For purposes of the foregoing, an agreement granting a person a right to
have shares registered in the future shall not be construed as "permitting" such
person to sell shares in an offering until such time as such right is properly
exercised under the terms of such agreement.
9. INDEMNIFICATION
9.1 AGREEMENTS TO INDEMNIFY.
(a) As used in this Article 9:
(i) "Damages" means claims, damages, liabilities,
losses, judgments, settlements, and expenses, including,
without limitation, all reasonable fees and disbursements of
counsel incident to the
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investigation or defense of any claim or proceeding or
threatened claim or proceeding.
(ii) "Provant Indemnified Party" means, collectively,
each of Provant, the Surviving Corporation, and their
respective affiliates.
(iii) "Company Indemnified Party" means, after the
Effective Time, the former stockholders of the Company
collectively.
(iv) "Indemnified Party" means either of the Provant
Indemnified Party or the Company Indemnified Party, as
applicable under the circumstances.
(b) On the terms and subject to the limitations set forth in this
Agreement, the Company, prior to the Effective Time, shall, and, after the
Effective Time, the Stockholders shall indemnify, defend, and hold the Provant
Indemnified Party harmless from, against and in respect of any and all Damages
incurred by any Provant Indemnified Party arising from or in connection with any
of the following (collectively referred to herein as "Claims"):
(i) any breach of any representation, warranty,
covenant or agreement made by the Company or by the
Stockholders in this Agreement or in any exhibit, schedule,
certificate or other document delivered or to be delivered at
the Closing by or on behalf of the Company or the Stockholders
pursuant to the terms of this Agreement or otherwise referred
to or incorporated in this Agreement, including any allegation
by a third party which, if true, would constitute such a
breach; and
(ii) those matters identified on Schedule 9.1.
(c) In addition to the foregoing, and solely in the event the Merger
shall be consummated, the Stockholders shall indemnify Provant as set forth in
the immediately following sentence from any failure by the Company to have a
Closing Net Worth equal to or greater than the Minimum Net Worth. In the event
the Closing Net Worth shall be less than the Minimum Net Worth (and Provant
shall have elected, in its sole discretion, to waive the failure of the closing
condition set forth in Section 7.1(b) caused thereby), the Stockholders shall
reimburse Provant at the Closing for the amount of such deficit on a dollar for
dollar basis. Such reimbursement shall be the sole remedy of Provant on account
of a failure of the Closing Net Worth to equal or exceed the Minimum Net Worth
(other than Provant's right to terminate this Agreement), and neither the
Company nor the Stockholders shall be liable for any consequential damages on
account of any such failure. Any
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indemnity and reimbursement required by this Section 9.1(c) shall not be subject
to Section 9.2(c).
(d) From and after the Effective Time and solely if the Merger shall
have been consummated, on the terms and subject to the limitations set forth in
this Agreement, Provant and the Provant Principals shall indemnify, defend, and
hold the Company Indemnified Party harmless from, against and in respect of any
and all Damages incurred by any Company Indemnified Party arising from or in
connection with any actual or alleged breach of any representation, warranty,
covenant or agreement made by Provant or Acquisition in this Agreement or in any
exhibit, schedule, certificate or other document delivered or to be delivered at
the Closing by or on behalf of Provant or Acquisition pursuant to the terms of
this Agreement or otherwise referred to or incorporated in this Agreement (also
referred to herein as "Claims"); provided, however, that this provision shall
not be construed to provide to the Company Indemnified Party any indemnification
with respect to the Registration Statement and the information contained
therein, or with respect to any failure of the IPO to be consummated.
(e) Subject to Section 9.2, the Company's representations and
warranties set forth in Article 3, the Stockholders' representations and
warranties set forth in Article 4 and Provant's and Acquisition's
representations and warranties set forth in Article 5 shall, for purposes of
this Article 9, be deemed to have survived the Effective Time and the Closing of
the Merger and the other transactions contemplated hereby notwithstanding any
contrary terms of this Agreement, and whenever such representations, warranties,
covenants and agreements are referred to in this Article 9, the text of the same
as set forth in the aforesaid Articles shall be deemed to be set forth in their
entirety herein, and the same are hereby incorporated herein by such references.
Each representation, warranty, covenant and agreement of the Company and the
Stockholders shall be deemed to have been relied upon by the Provant Indemnified
Party, and each representation, warranty, covenant and agreement of Provant and
Acquisition shall be deemed to have been relied upon by the Company Indemnified
Party, notwithstanding any investigation or inspection made by or on behalf of
any Provant Indemnified Party or the Company Indemnified Party, as applicable,
and shall not be affected in any respect of any such investigation or
inspection. No waiver of a closing condition by an Indemnified Party shall be
deemed to relieve a party that is otherwise obligated to provide indemnification
of its obligations pursuant to this Section 9.1 on account of the matters that
were the subject of such waiver.
(f) In addition to and not in limitation of the rights and remedies of
Provant under this Section 9.1, Provant may withhold from any shares of Provant
Common Stock issuable and all amounts payable under Section 2.8 the amount of
any Damages of Provant arising out of or in connection with Claims asserted
hereunder (as estimated in good faith by Provant in the event such Damages are
not yet fixed,
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subject to future release if appropriate upon final resolution of the applicable
Claim). For purposes of this subsection (f), shares of Provant Common Stock
otherwise issuable under Section 2.8 shall be valued at the lower of (i) the
closing price for a share of Provant Common Stock on the last trading day
immediately preceding the date Provant gives notice that it has a claim under
this Article 9 and (ii) the IPO Price adjusted as provided in Section 2.8(f).
(g) In the event the Stockholders shall indemnify the Provant
Indemnified Party for any breach of the warranties contained in Section 3.25 on
account of a failure of accounts receivable of the Company to be collected, the
Surviving Corporation shall assign to the Stockholders those accounts receivable
as to which such indemnity has been paid.
9.2 LIMITATIONS ON INDEMNITY OBLIGATIONS. The indemnity obligations of
the Company or the Stockholders, as applicable (in either case, the "Company
Indemnifying Party"), or Provant and the Provant Principals (collectively, the
"Provant Indemnifying Party") (both the Company Indemnifying Party and the
Provant Indemnifying Party being called generically the "Indemnifying Party"),
under this Agreement shall be subject to the following limitations:
(a) The indemnity obligations of the Indemnifying Party shall expire on
September 15, 1999 (the "Cut-off Date"); provided, however, that such
obligations with respect to (i) the representations and warranties contained in
Sections 3.1, 3.2, 3.10, and 3.22, Article 4, and Sections 5.1, 5.2, 5.3 and 5.4
of this Agreement and the matters identified on Schedule 9.1 and in Section
9.1(c) shall continue forever without limitation, and (ii) the representations
and warranties regarding taxes, which are contained in Section 3.15, shall
remain in effect until all claims for taxes due by or on account of the Company
for any period up to and including the Effective Time have been settled and any
statute of limitations period with respect to such taxes has expired; and
provided further that the indemnity obligations of the Indemnifying Party for
Claims timely asserted by an Indemnified Party before the expiration of the
applicable indemnity period, if any, in the manner provided in this Agreement
shall continue until such Claims are finally resolved and discharged.
(b) (i) Subject to the maximum aggregate amounts provided elsewhere in
this Subsection 9.2(b) with respect to a Stockholder's indemnity obligations, in
the event of any Damages for which a Stockholder is liable pursuant to Section
9.1, each Stockholder shall be liable solely for a fraction of each dollar of
Damages suffered equal to the fraction derived by dividing the number of Shares
held by all Stockholders as of the date hereof by the total number of Shares
outstanding. Subject to subsection (b)(ii) below, the aggregate indemnity
obligations of each Stockholder for Damages arising out of Claims the operative
facts of which were actually known to any Stockholder as of the date of this
Agreement ("Known Claims") shall not in any event exceed an amount equal to the
sum of (A) the cash received by all Stockholders
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pursuant to Section 2.7(c), plus (B) the product obtained by multiplying the
number of shares of Merger Stock received by all Stockholders by the IPO Price,
minus (C) any amounts paid pursuant to Section 9.1 by any Stockholder with
respect to Claims that are not Known Claims. Subject to subsection (b)(ii) below
(and notwithstanding Section 11.9), the aggregate indemnity obligations of each
Stockholder for any Damages arising out of Claims that do not constitute Known
Claims shall not in any event exceed Five Million Dollars ($5,000,000);
provided, however, that the aggregate indemnity obligations of all Stockholders
for all Claims, whether or not constituting Known Claims, shall not in any event
exceed the sum of the amounts referenced in clauses (A) and (B) of the
immediately preceding sentence. The aggregate indemnity obligations of the
Provant Principals for any Damages shall not in any event exceed an amount equal
to (X) the aggregate number of shares of Provant Common Stock held by the
Provant Principals as of immediately following the closing of the IPO plus the
aggregate number of warrant shares covered by those certain warrants for the
purchase of Provant Common Stock issued to the Provant Principals as of the
closing of the IPO, multiplied by (Y) the IPO Price, minus (Z) the aggregate
exercise price of such warrants.
(ii) Solely in the event that both (A) the Damages to be paid
by the Stockholders pursuant to Section 9.1(b) on account of the then-asserted
Claim, in aggregation with all such Damages previously paid by all Stockholders,
equal or exceed the aggregate amount of the cash received by all Stockholders
pursuant to Section 2.7, and (B) the Average Closing Price (as defined below) of
Provant Common Stock during the ten trading days immediately following (but not
including) the date on which notice of the liquidated amount of the claimed
Damages is given to the Stockholders (which may, if applicable, be the date on
which the initial notice of the Claim is given) (in either event, the "Claim
Date") is less than the IPO Price, then any Stockholder may, at his election,
satisfy such portion of the Damages as exceeds the cash received by all
Stockholders pursuant to Section 2.7 by tendering to Provant, for cancellation,
shares of Provant Common Stock equal in value to the Damages to be so satisfied,
with such shares valued at the Average Closing Price determined under clause (B)
of this sentence. Notwithstanding subsection (b)(i) above, if the foregoing
clauses (A) and (B) are satisfied and the Stockholders are therefore permitted
to satisfy their obligations to pay Damages by tendering shares of Provant
Common Stock, and a Stockholder elects to so tender Provant Common Stock, such
Stockholder's obligation for Damages shall be limited to the number of shares of
Provant Common Stock received by all Stockholders pursuant to Sections 2.7 and
2.8. In the event that Damages are to be paid by the Stockholders before the
final distribution of Provant Common Stock (if any) on account of 1998 EBIT and
if this subsection (b)(ii) shall apply, the final number of shares of Provant
Common Stock that the Stockholder shall be obligated to tender to Provant shall
be left undetermined until such time as the distribution of Provant Common Stock
(if any) is to be made under Section 2.8. As used herein, "Average Closing
Price" means the average of the closing prices of Provant Common Stock on each
trading day during the stated period, as recorded on
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the New York Stock Exchange or on such other exchange or market as is then the
principal exchange or market on which Provant Common Stock is traded.
(c) Except (i) as provided in Section 9.1(c), and (ii) with respect to
Damages arising out of the matters identified on Schedule 9.1, which Damages
shall be indemnified without respect to the threshold provided in this Section
9.2(c), an Indemnified Party shall be entitled to indemnification only if the
aggregate and collective Damages incurred or suffered by it exceeds $92,000, in
which event it shall be entitled to indemnification of the full amount of such
Damages. No amounts indemnified by the Company or the Stockholders pursuant to
Section 9.1(c) or with respect to matters identified on Schedule 9.1 shall be
treated as Damages incurred and suffered by the Indemnified Party for purposes
of the immediately preceding sentence, provided only that the amounts so
indemnified have been duly paid.
(d) Notwithstanding the preambles to, respectively, Article 3 and
Article 5, the contractual liability of the Stockholders and the Provant
Principals for any breach of the representations and warranties contained in,
respectively, Article 3 and Article 5 shall be limited to such Stockholder's or
Provant Principal's liability provided in this Article 9.
9.3 NOTICE OF THIRD PARTY CLAIMS. An Indemnified Party shall promptly
notify the Indemnifying Party in writing of any Claim consisting of a matter
asserted by a third person that might give rise to any indemnity obligation of
the Indemnifying Party hereunder (a "Third Party Claim"), specifying in
reasonable detail the nature thereof and indicating the amount (if known, or
estimated if necessary) of the Damages that have been or may be sustained by the
Indemnified Party. Failure of any Indemnified Party to promptly give such notice
shall not relieve the Indemnifying Party of its or his obligation to indemnify
under this Article 9, but as a result of any such failure, the Indemnified Party
shall be liable to the Indemnifying Party for, and only for, the amount of
actual damages caused by such failure, which amount shall be an offset against
the amount of Damages for which the Indemnifying Party is liable hereunder.
Together with or following such notice, the Indemnified Party shall deliver to
the Indemnifying Party copies of all notices and documents received by the
Indemnified Party relating to the Third Party Claim (including court papers).
9.4 DEFENSE AND SETTLEMENT OF THIRD PARTY CLAIMS. The Indemnifying
Party shall have the right (without prejudice to the right of any Indemnified
Party to participate at its or his own expense through counsel of its or his own
choosing) to defend against any Third Party Claim at its or his expense and
through counsel of its or his own choosing and to control such defense if the
Indemnifying Party gives written notice of its or his intention to do so within
15 business days of its or his receipt of notice of the Third Party Claim. The
Indemnified Party shall cooperate fully in all reasonable respects in the
defense of such Third Party Claim and shall
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make available to the Indemnifying Party or its or his counsel all pertinent
information under their control relating thereto. The Indemnified Party shall
have the right to elect to settle any Third Party Claim; provided, however, the
Indemnifying Party shall not have any indemnification obligation with respect to
any monetary payment to any third party required by such settlement unless the
Indemnifying Party shall have consented thereto. The Indemnifying Party shall
have the right to elect to settle any Third Party Claim subject to the consent
of the Indemnified Party; provided, however, that if the Indemnified Party fails
to give such consent within 15 business days of being requested to do so, the
Indemnified Party shall, at its expense, assume the defense of such Third Party
Claim and regardless of the outcome of such matter, the Indemnifying Party's
liability hereunder shall be limited to the amount of any such proposed
settlement. The foregoing provisions notwithstanding, in no event (a) may either
Indemnifying Party adjust, compromise or settle any Third Party Claim unless
such adjustment, compromise or settlement unconditionally releases the
Indemnified Party from all liability, (b) may the Company Indemnifying Party
adjust, compromise or settle any Third Party Claim if such adjustment,
compromise or settlement affects the absolute and sole right of Provant or the
Surviving Corporation to own or use any of the Company's assets or (c) may the
Company Indemnifying Party defend any Third Party Claim which, if adversely
determined, would materially impair the financial condition, business or
prospects of Provant or the Surviving Corporation.
9.5 NOTICE OF OTHER CLAIMS. In the event any Indemnified Party should
incur any Claim that does not involve a Third Party Claim, the Indemnified Party
shall deliver a notice of such Claim with reasonable promptness to the
Indemnifying Party. If the Indemnifying Party notifies the Indemnified Party
that it does not dispute the Claim described in such notice or fails to notify
the Indemnified Party within 30 days after delivery of such notice by the
Indemnified Party whether the Indemnifying Party disputes the Claim described in
such notice, the Damages in the amount specified in the Indemnified Party's
notice will be conclusively deemed a liability of the Indemnifying Party and the
Indemnifying Party shall pay the amount of such Damages to the Indemnified Party
on demand. Failure of any Indemnified Party to promptly give such notice shall
not relieve the Indemnifying Party of its or his obligation to indemnify under
this Article 9, but as a result of any such failure, the Indemnified Party shall
be liable to the Indemnifying Party for, and only for, the amount of the actual
damages caused by such failure, which amount shall be an offset against the
amount of Damages for which the Indemnifying Party is liable hereunder.
10. TERMINATION; AMENDMENTS; WAIVER
10.1 TERMINATION. This Agreement may be terminated at any time prior to
the Effective Time, notwithstanding approval thereof by the stockholders of the
Company:
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(a) by mutual consent of the Board of Directors of Provant and the
Company;
(b) by any party, in its sole discretion, if the Merger and the IPO
shall not have been consummated on or before June 30, 1998, unless the failure
of the Merger to occur by such date shall be due to the failure of the party
seeking to terminate this Agreement to perform or observe the covenants and
agreements of such party set forth herein;
(c) by the Company if there has been a misrepresentation or breach on
the part of Provant or Acquisition in the representations, warranties, covenants
or obligations of Provant or Acquisition set forth herein, provided that in the
case of a breach of any such covenant or obligation, such breach has not been
cured within ten (10) business days after the Company has notified Provant and
Acquisition of such breach;
(d) by Provant if there has been a misrepresentation or breach on the
part of the Company or the Stockholders in the representations, warranties,
covenants and obligations of the Company and the Stockholders set forth herein,
provided that in the case of a breach of any such covenant or obligation, such
breach has not been cured within ten (10) business days after Provant has
notified the Company or the Stockholders of such breach; or
(e) by any party if any court shall have issued an order, decree or
ruling or taken any other action permanently enjoining, restraining or otherwise
prohibiting the Merger and such order, decree, ruling or other action shall have
become final and non-appealable.
The power of termination provided for by this Section 10.1 may be
exercised for Provant or the Company only by their respective Boards of
Directors in its sole discretion and will be effective only after written notice
thereof, signed on behalf of the party for which it is given by its Chairman of
the Board, President or other duly authorized officer, shall have been given to
the other. If this Agreement is terminated in accordance with this Section 10.1,
the Merger shall be abandoned without further action by Provant or the Company.
10.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement by any party as provided in Section 10.1, this Agreement shall
forthwith become void and have no effect, and neither Provant, nor the Company,
nor any of the officers or directors of either of them, nor the Stockholders
shall have any liability of any nature whatsoever hereunder, or in connection
with the transactions contemplated hereby, except (a) Sections 6.3(b) and 11.8
shall survive any termination of this Agreement, (b) notwithstanding anything to
the contrary contained in this Agreement, no party shall be relieved of or
released from any liabilities or damages arising out of its breach
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of any provision of this Agreement; and (c) until September 30, 1998, neither
the Company nor the Stockholders shall, directly or indirectly, discuss,
negotiate, submit or respond to proposals relating to, or enter into an
agreement with any other person with respect to, a transaction with other
training companies to be accompanied or followed by a public offering.
10.3 AMENDMENT. Subject to compliance with applicable law, this
Agreement may be amended by the parties hereto, by action taken or authorized
(in the case of Provant, Acquisition and the Company) by their respective Boards
of Directors, at any time before or after approval of the matters presented in
connection with the Merger by the stockholders of the Company. This Agreement
may not be amended except by an instrument in writing signed on behalf of each
of the parties hereto.
10.4 EXTENSION; WAIVER. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized (in the case of Provant,
Acquisition and the Company) by their respective Boards of Directors, may, to
the extent legally allowed, subject to Section 10.3, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party, but such
extension or waiver or failure to insist on strict compliance with an
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure.
11. MISCELLANEOUS
11.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Except as provided in
Article 9 with respect to the representations and warranties contained in
Article 3, 4 and 5 and except for the provisions of Section 10.2, the
representations and warranties made in this Agreement shall not survive beyond
the Effective Time.
11.2 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement (a) constitutes, with
the Company Disclosure Schedule, the Provant Disclosure Schedule, the other
Schedules and the Exhibits hereto, the entire agreement among the parties with
respect to the subject matter hereto and supersedes all other prior agreements
and understandings, both written and oral, among the parties or any of them with
respect to the subject matter hereof (including, without limitation, the letter
of intent between the Company and American Business Partners LLC) and (b) shall
not be assigned by operation of law or otherwise, provided that Provant or
Acquisition may assign its respective rights and obligations to any direct or
indirect subsidiary of Provant, but no such assignment shall relieve Provant of
its obligations hereunder.
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11.3 VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, each of which shall remain in full force and
effect.
11.4 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person or by electronic facsimile transmission,
cable, telegram, or telex, or when mailed by registered or certified mail
(postage prepaid, return receipt requested) or delivered to a courier of
national reputation to the respective parties as follows:
If to Provant or Acquisition, to it at:
67 Batterymarch Street, Suite 500
Boston, MA 02110
Facsimile: (415) 391-7776
with a copy to:
Nutter, McClennen & Fish, LLP
One International Place
Boston, Massachusetts 02110-2699
Attention: Constantine Alexander, Esq.
Facsimile: (617) 973-9748
If to the Company or any Stockholder, to it, him or her at:
44 Montgomery Street
San Francisco, CA 94104
Facsimile: (415) 391-7776
with a copy to:
Carter & Carter
425 California Street
19th Floor
San Francisco, CA 94104-2204
Attention: James A. Carter, Esq.
Facsimile: (415) 989-4864
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
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11.5 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of California, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
11.6 DESCRIPTIVE HEADINGS. The descriptive headings herein are inserted
for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
11.7 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same agreement. Copies (photostatic,
facsimile or otherwise) of signatures to this Agreement shall be deemed to be
originals and may be relied upon to the same extent as originals, and delivery
of a duly executed signature page to this Agreement shall be deemed to be
delivery of this Agreement in its entirety.
11.8 EXPENSES. All costs and expenses incurred in connection with the
transactions contemplated by this Agreement shall be paid by the party incurring
such expenses, provided (i) solely in the event the Merger is consummated, the
reasonable legal and accounting expenses of the Company, up to a maximum of
$50,000, shall be paid by (at the election of Provant) either Provant or the
Surviving Corporation, and (ii) all expenses of the Company not payable pursuant
to clause (i) shall be paid directly by the Stockholders or expensed (and not
capitalized) by the Company prior to the computation of the Company's net worth
for purposes of determining satisfaction of the Financial Condition. An account
receivable for expenses reimbursable by Provant or the Surviving Corporation
under clause (i) above may be included on the books of the Company for purposes
of calculating the Closing Net Worth, to the extent such amounts have previously
been expensed by the Company.
11.9 JOINT AND SEVERAL. The representations, warranties, agreements,
covenants and obligations of the Stockholders under this Agreement are joint and
several. The indemnity obligations of Provant and the Provant Principals under
this Agreement are joint and several.
11.10 PARTIES IN INTEREST. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Agreement.
11.11 INTERPRETATION. The Parties acknowledge and agree that each party
and its counsel reviewed and negotiated the terms and provisions of this
Agreement and has contributed to its revision and that the rule of construction
to the effect that any
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ambiguities are resolved against the drafting party shall not be employed in the
interpretation of this Agreement.
11.12 MOST FAVORED NATION TREATMENT. Subject to the last sentence of
this Section 11.12, Provant covenants and agrees that the Company and the
Stockholders will be accorded "most favored nation" treatment with respect to
any material amendments adopted after the date hereof with respect to any
Additional Merger Agreement or any other agreement materially altering the
rights or obligations of any Additional Company or the stockholders thereof. The
parties agree to amend this Agreement as necessary from time to time to effect
any changes required pursuant to such "most favored nation" treatment.
Notwithstanding the foregoing, such "most favored nation" treatment shall not
apply to (a) amendments of any provisions not applicable generally to this
Agreement and all (or substantially all) of the Additional Merger Agreements, or
(b) any waiver of a closing condition or an affirmative or negative covenant or
comparable undertaking contained in any Additional Merger Agreement.
[Remainder of this page intentionally left blank]
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IN WITNESS WHEREOF, each of the parties has caused this Agreement and
Plan of Merger to be executed on its behalf by its officers thereunto duly
authorized, all as of the day and year first above written.
PROVANT, INC.
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
DECKER ACQUISITION CORP.
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
DECKER COMMUNICATIONS, INC.
By:
------------------------------------
Name: Bert Decker
------------------------------------
Title: Chairman
------------------------------------
STOCKHOLDERS:
--------------------------------------------
Bert Decker
--------------------------------------------
Kenneth Taylor
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PROVANT PRINCIPALS:
-------------------------------------------
PAUL M. VERROCHI
-------------------------------------------
DOMINIC J. PUOPOLO
57
<PAGE> 1
Exhibit 2.3
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this Agreement") dated as of
February 12, 1998 is among Provant, Inc., a Delaware corporation ("Provant"),
Howard Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary
of Provant ("Acquisition"), J. Howard & Associates, Inc., a Massachusetts
corporation (the "Company"), Jeffrey P. Howard and Marc S. Wallace, the
principal stockholders of the Company (the "Stockholders"), and Paul M. Verrochi
and Dominic J. Puopolo (the "Provant Principals"), and provides for the merger
of the Company with and into Acquisition (the "Merger"). The Boards of Directors
of Provant, Acquisition and the Company have determined that the Merger is in
the best interests of their respective stockholders and the Merger has been
approved by Provant as the sole stockholder of Acquisition.
Accordingly, the parties hereto, in consideration of the mutual
representations, warranties and covenants contained herein, agree as follows:
1. CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the
respective meanings set forth below:
1.1 "Additional Companies" mean those companies identified on Schedule
1.1 hereto, with which companies Provant is entering into separate Agreements
and Plans of Merger contemporaneously with the execution and delivery of this
Agreement.
1.2 "Additional Mergers" means the acquisitions (by merger or
otherwise) of each of the Additional Companies by Provant, and "Additional
Merger Agreements" means the agreements and plans of merger or other contracts
(in each case as described in Section 5.9 of the Provant Disclosure Schedule)
pursuant to which Provant will consummate the Additional Mergers.
1.3 "Additional Shares" means the additional shares, if any, of Provant
Common Stock issuable to the holders of Shares pursuant to Section 2.8.
1.4 "Articles of Merger" has the meaning given to it in Section 2.2.
1.5 "Balance Sheet" means the balance sheet of the Company as of June
30, 1997 included in the Financial Statements.
1.6 "Balance Sheet Date" means June 30, 1997.
1.7 "Certificate of Merger" has the meaning given to it in Section 2.2.
<PAGE> 2
1.8 "Closing" means the closing of the transactions contemplated by
this Agreement as provided in Section 2.2.
1.9 "Closing Net Worth" means the Company's pro forma net worth as of a
date selected by Provant as close as practicable to the Effective Time (but in
no event more than thirty (30) days prior to the Effective Time), determined
using the same principles and assumptions used by Provant in its preparation of
its pro forma financial statements contained in the Registration Statement.
1.10 "Code" means the Internal Revenue Code of 1986, as amended to
date.
1.11 "Commission" means the Securities and Exchange Commission.
1.12 "Company Disclosure Schedule" means the Disclosure Schedule
prepared by the Company and attached hereto and incorporated herein by this
reference.
1.13 "Company Option" means an option to purchase Shares, whether or
not vested or exercisable as of the applicable time.
1.14 "DGCL" means the Delaware General Corporation Law.
1.15 "Dissenting Share" means any Share the holder of which has
perfected, and not legally abandoned, dissenters rights of appraisal under
Section 86 of the MBCL.
1.16 Dissenting Share Holdback" means a dollar amount equal to the
Fraction, multiplied by the number of Shares that are Dissenting Shares,
multiplied by $8.625 million.
1.17 "1998 EBIT" means the earnings before interest and taxes of the
Company for the period beginning July 1, 1997 and ending at the Effective Time
and of the Surviving Corporation for the period beginning at the Effective Time
and ending June 30, 1998 determined in accordance with the Instructions for
Determination of EBIT attached hereto as Exhibit 1; provided, that if the
Effective Time is after June 30, 1998, then 1998 EBIT shall consist solely of
the earnings before interest and taxes of the Company (determined as set forth
above) for the period beginning July 1, 1997 and ending June 30, 1998.
1.18 "Effective Time" means such time as the Articles of Merger are
filed with the Secretary of State of Commonwealth of Massachusetts in accordance
with Section 79 of the MBCL or as the Certificate of Merger is filed with the
Secretary of State of the State of Delaware in accordance with Section 252 of
the DGCL, whichever is later, unless Acquisition and the Company agree that a
later time shall be the Effective Time, in which case such time shall be
specified in the Certificate of Merger.
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1.19 "Employment Contracts" mean the employment agreements in the form
attached hereto as Exhibits 2A and 2B.
1.20 "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
1.21 "Financial Condition" means that, using the same principles and
assumptions used by Provant in the preparation of its pro forma financial
statements contained in the Registration Statement, the Company's Closing Net
Worth is not less than $1.175 million (the "Minimum Net Worth"), the Company's
pro forma revenues for the 12 months ended June 30, 1997 are not less than $7.1
million, the Company's pro forma earnings before interest and taxes for the 12
months ended June 30, 1997 are not less than $1.2 million, the Company's
projected pro forma revenues (as determined in good faith by Provant) for the 12
months ended June 30, 1998 are not less than $7.8 million and the Company's
projected 1998 EBIT (as determined in good faith by Provant) is not less than
$1.02 million.
1.22 "Financial Statements" means the financial statements of the
Company attached hereto as Exhibit 3, consistent in form and substance with the
requirements of Regulation S-X of the Commission under the Securities Act,
consisting of (a) Balance Sheets at June 30, 1997 and 1996, and at September 30,
1997; (b) Statements of Income for the periods ending June 30, 1997, 1996 and
1995, and ending September 30, 1997; (c) Statements of Stockholders' Equity at
June 30, 1997, 1996, 1995 and 1994, and at September 30, 1997; (d) Statements of
Cash Flow for the periods ending June 30, 1997, 1996 and 1995, and ending
September 30, 1997; and (e) notes to the foregoing.
1.23 "First Accountants" means the firm of independent public
accountants then regularly employed by Provant.
1.24 "Fraction" means that fraction which has one as its numerator and
which has, as its denominator, the pro forma number of Shares outstanding on a
fully diluted basis as of immediately prior to the Effective Time, assuming the
exercise or conversion of all then-outstanding Company Options, warrants and
other instruments exercisable for or convertible into Shares (whether or not
then currently exercisable or convertible).
1.25 "IPO" means the initial underwritten public offering of shares of
Provant Common Stock.
1.26 "IPO Price" shall mean the price at which shares of Provant Common
Stock are sold to the public in the IPO.
1.27 "Investment Letter" means, with respect to Messrs. Howard and
Wallace, an investment letter in the form attached hereto as Exhibit 4A, and
with respect to any other person, an investment letter in the form attached
hereto as Exhibit 4B.
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1.28 "MBCL" means the Massachusetts Business Corporation Law.
1.29 "Merger Stock" means the shares of Provant Common Stock exchanged
for Shares pursuant to Section 2 .7(c) and 2.8.
1.30 "Non-Competition and Non-Disclosure Agreements" mean the
non-competition and non-disclosure agreements in the form attached hereto as
Exhibits 5A and 5B.
1.31 "Prospectus" means the prospectus relating to the IPO first filed
with the Commission pursuant to Rule 424(b) and Rule 430A of the rules and
regulations of the Commission under the Securities Act or (if no such filing is
required) as included in the Registration Statement and, in the event of any
supplement or amendment to such prospectus after the date the Registration
Statement becomes effective under the Securities Act, such prospectus as so
supplemented or amended from and after the filing with the Commission of such
supplement or the effectiveness of such amendment.
1.32 "Provant Disclosure Schedule" means the Disclosure Schedule
prepared by Provant and attached hereto and incorporated herein by this
reference.
1.33 "Provant Common Stock" means the shares of Common Stock, $0.01 par
value, of Provant.
1.34 "Provant Option" means an option to purchase shares of Provant
Common Stock, granted under the Plan to be established by Provant pursuant to
Section 6.11.
1.35 "Registration Statement" means the registration statement on Form
S-1, including the related preliminary prospectus, to be filed with the
Commission in connection with the IPO, including all exhibits and financial
statements, in the form in which it becomes effective under the Securities Act
and, in the event of any amendment thereto after the effective date of any such
registration statement, such registration statement as so amended from and after
the effectiveness of such amendment.
1.36 "Second Accountants" means an accounting firm of national stature,
jointly selected by Provant and the Stockholders, that is not then employed by
Provant, any Stockholder or American Business Partners LLC ("ABP") (or any of
their respective affiliates) and that was not employed by the Company or ABP
during the two-year period immediately preceding the Effective Time; provided,
however, if the parties cannot jointly agree upon the Second Accountants, the
Stockholders (collectively) and Provant shall each designate one accounting firm
(which shall be of national stature but which may be employed or have been
employed by such party or its affiliates), and the two accounting firms so
designated shall jointly select a third
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accounting firm, meeting the criteria set forth in the first clause of this
sentence, to serve as the Second Accountants.
1.37 "Securities Act" means the Securities Act of 1933, as amended.
1.38 "Share" means a share of the Company's Common Stock, no par value,
or of the Company's Class B Common Stock, no par value, and "Shares" means all
of such shares.
1.39 "Surviving Corporation" means the corporation that survives the
Merger.
1.40 "Underwriter" means, collectively, the managing underwriters of
the IPO.
1.41 "Underwriters' Discount" means the discount at which the
Underwriter purchases the Provant Common Stock in the IPO, but in no event more
than 7.0% of the IPO Price.
2. THE MERGER
2.1 THE MERGER. The Merger shall occur at the Effective Time upon the
terms and subject to the conditions hereof and in accordance with the MBCL and
the DGCL. Following the Merger, Acquisition shall continue as the Surviving
Corporation and be a subsidiary of Provant, and the separate corporate existence
of the Company shall cease.
2.2 EFFECTIVE TIME. As soon as practicable after satisfaction or waiver
of all conditions to the Merger, the parties (a) shall cause duly executed
articles of merger (the "Articles of Merger") with respect to the Merger to be
filed and recorded in accordance with Section 79 of the MBCL and a duly executed
certificate of merger (the "Certificate of Merger") with respect to the Merger
to be filed and recorded in accordance with Section 252 of the DGCL and (b)
shall take all such further actions as may be required by law to make the Merger
effective. The Merger shall be effective at the Effective Time. Before the
filing of the Articles of Merger and the Certificate of Merger, a closing (the
"Closing") will be held on the date the IPO closes (or such earlier date as the
parties may agree) at the offices of Nutter, McClennen & Fish, LLP, One
International Place, Boston, Massachusetts (or such other place as the parties
may agree) for the purpose of confirming all the foregoing.
2.3 EFFECTS OF THE MERGER. The Merger shall have the effects set forth
in Section 79 of the MBCL and Sections 259, 260 and 261 of the DGCL.
2.4 TAX CONSEQUENCES. It is intended that the Merger shall constitute a
reorganization within the meaning of Section 368(a)(2)(D) of the Code and that
this
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Agreement shall constitute a "plan of reorganization" for the purposes of
Section 368 of the Code.
2.5 CERTIFICATE OF INCORPORATION AND BY-LAWS. The Certificate of
Incorporation and the By-Laws of Acquisition, in each case as in effect at the
Effective Time, shall be the Certificate of Incorporation and By-Laws of the
Surviving Corporation, except that the name of the Surviving Corporation shall
be the name of the Company or such other name as Provant may designate.
2.6 DIRECTORS AND OFFICERS. At the Effective Time, the Board of
Directors and officers of the Surviving Corporation shall be as set forth on
Exhibit 6, and each such person shall hold office until his or her respective
successor is duly elected or appointed and qualified.
2.7 CONVERSION OF STOCK.
At the Effective Time:
(a) Each share of Acquisition that is issued and outstanding
immediately prior to the Effective Time shall remain issued and outstanding
without change.
(b) All Shares held in the treasury of the Company immediately prior to
the Effective Time shall be cancelled, without the payment of any consideration
therefor.
(c) Each other Share which is outstanding immediately prior to the
Effective Time shall be converted without any action on the part of the holder
thereof into and be exchangeable for:
(i) that number of shares of Provant Common Stock
determined by multiplying the Fraction times the number obtained
after (A) dividing $5.9 million by the IPO Price and (B)
subtracting from the quotient obtained pursuant to clause (A) the
number obtained by dividing $1.7 million by the IPO Price net of
underwriters' discount,
(ii) cash equal to the Fraction times the sum of (X) $1.7
million plus (Y) the excess, if any, of the Company's Closing Net
Worth over the Minimum Net Worth, minus (Z) the Dissenting Share
Holdback, if any, and
(iii) the right to receive that number of Additional Shares
determined as provided in Section 2.8.
Provant shall not issue any fractional share of Provant Common Stock; in lieu of
issuing a fractional share, Provant shall make a cash payment in accordance with
Section 2.9.
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(d) Notwithstanding subsection 2.7(c), Dissenting Shares shall not be
converted into the right to receive cash or Provant Common Stock (including
Additional Shares, if any) pursuant to such subsection. At the Effective Time,
in lieu thereof, holders of Dissenting Shares shall be entitled solely to
payment of the appraised value of such Dissenting Shares in accordance with the
provisions of Sections 85 through 98 of the MBCL.
2.8 RIGHT TO RECEIVE ADDITIONAL SHARES.
(a) Promptly following June 30, 1998 (but in no event later than
October 15, 1998), Provant will determine 1998 EBIT.
(i) In the event 1998 EBIT is $1.026 million or less, no
Additional Shares shall be issued in respect of the Shares.
(ii) In the event 1998 EBIT is greater than $1.026 million
but less than $1.6 million, there shall be issued in respect of
each Share that number of Additional Shares determined by (A)
multiplying $3.3 million by a fraction, the numerator of which
shall be the amount by which 1998 EBIT exceeds $1.026 million and
the denominator of which shall be $574,000, (B) dividing the
product obtained pursuant to clause (A) by the IPO Price, and (C)
multiplying the quotient obtained pursuant to clause (B) by the
Fraction.
(iii) In the event 1998 EBIT equals or exceeds $1.6 million,
there shall be issued in respect of each Share that number of
Additional Shares determined by multiplying the Fraction times the
quotient obtained by dividing $3.3 million by the IPO Price.
Provant shall not issue any fractional share of Provant Common Stock; in lieu of
issuing a fractional share, Provant shall make a cash payment in accordance with
Section 2.9.
(b) No later than October 15, 1998, Provant shall deliver to each
former stockholder of the Company a statement showing in reasonable detail
Provant's computation of 1998 EBIT, together with a stock certificate
representing any Additional Shares and a check in payment for any fractional
Additional Share to which such stockholder may be entitled pursuant to
subsection (a). Provant shall maintain, and shall cause the Surviving
Corporation to maintain, complete books and records necessary for the proper
computation of 1998 EBIT. The Stockholders (and only the Stockholders, acting as
representatives of all former stockholders of the Company and all former holders
of Company Options, as provided in subsection (g) below), acting unanimously,
shall have the right at their expense, through an independent certified public
accountant reasonably acceptable to Provant, to audit such books and records and
the books and records of the Company solely for the purpose of satisfying the
accuracy of the computation of 1998 EBIT made by Provant,
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and the Company and Provant shall cooperate fully in all reasonable respects
with any such audit. In no event shall the Stockholders, or either of them, have
the right to conduct more than one such audit. If the Stockholders do not
unanimously elect within 90 days of delivery of the statement of Provant
referred to in this subsection (b) to cause an audit of the books and records of
the Surviving Corporation as provided in this subsection (b), the Stockholders,
on their behalf and on behalf of all former holders of Shares, shall be deemed
to have agreed that such statement was correct in all respects.
(c) Any dispute as to the correct computation of 1998 EBIT shall be
referred to the First Accountants for determination. If the Stockholders do not
unanimously elect to dispute the First Accountants' determination of 1998 EBIT
within 30 days following the delivery thereof to the Stockholders, such
determination shall be final, binding and conclusive and shall not be subject to
challenge by Provant, either Stockholder or any other former stockholder of the
Company, and in such event the fees and expenses of the First Accountants shall
be borne by Provant. In the event the Stockholders do unanimously elect within
such 30 day period to dispute the determination of the First Accountants, the
Stockholders shall specify the amount (in dollars) that they contend to be the
correct 1998 EBIT (the Stockholders' "EBIT Position"), and the final calculation
of 1998 EBIT shall be referred to the Second Accountants. Absent manifest error
or willful misconduct, the determination of the Second Accountants shall be
final, binding and conclusive and shall not be subject to challenge by Provant,
either Stockholder or any other former holder of Shares. In the event the
calculation of 1998 EBIT is referred to the Second Accountants, the fees and
expenses of both the First Accountants and the Second Accountants shall be borne
by that party (i.e., the Stockholders, jointly and severally, or Provant) whose
EBIT Position is furthest, in gross dollars, from the 1998 EBIT as finally
determined by the Second Accountants. For purposes of the preceding sentence,
Provant's "EBIT Position" shall be deemed to be the amount determined by the
First Accountants to be the 1998 EBIT. The parties recognize that in making such
determinations, each such firm of accountants will be performing a function
separate and distinct from their audit function, if any, and shall be entitled
to the immunities, rights and discretion of arbitrators in general. Any issuance
of Additional Shares (or cash in lieu of fractional Additional Shares) which is
finally determined to be due to the former holders of Shares in accordance with
this subsection (c) shall be made by Provant (i) if based on the determination
of the First Accountants, within 10 days after such determination becomes final,
and (ii) if based on the determination of the Second Accountants, within 10 days
after Provant receives notice of such determination, if Provant is responsible
for the fees and expenses of the accountants pursuant to this Section, and
within 10 days after the Stockholders have paid the fees and expenses of the
accountants, if the Stockholders are responsible for such fees and expenses
pursuant to this Section. In the event the 1998 EBIT has not been finally
determined as of the date one year following the Effective Time, or the 1998
EBIT has been finally determined and Additional Shares are due to be issued but
have not been issued to the former holders of Shares as of such date because the
Stockholders are obligated to pay but have not yet paid the fees and expenses of
the First and Second Accountants,
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then on or before such date Provant shall issue and place into escrow, with an
institutional escrow agent reasonably selected by Provant, the number of
Additional Shares that would be issued if the Stockholders' EBIT Position were
determined to be the actual 1998 EBIT (or, if the 1998 EBIT has been finally
determined, the actual number of Additional Shares to be issued). Such shares
shall be held in escrow pending final determination of 1998 EBIT, upon which the
final number of Additional Shares, if any, shall be released from escrow to the
former holders of Shares and any escrowed shares not distributed as Additional
Shares shall be released to the Company. The expenses of the escrow agent will
be allocated in the same manner as the expenses of the First Accountants and
Second Accountants, as set forth above.
(d) The Stockholders acknowledge and agree, on behalf of themselves and
the other stockholders of the Company, that Provant and the Surviving
Corporation shall be free to pursue their respective business goals and that
1998 EBIT may be affected thereby. Notwithstanding the foregoing, Provant hereby
agrees that it will take no action and adopt no policy (and will not cause the
Surviving Corporation to take any action or adopt any policy) during the period
from the Effective Time through June 30, 1998 that a majority-in-interest of the
former stockholders of the Company have reasonably asserted (in advance of or
contemporaneously with such action or adoption), in good faith and in writing,
can reasonably be expected to result (directly or indirectly) in a reduction of
1998 EBIT.
(e) The right of the stockholders of the Company to receive Additional
Shares and/or cash payment for fractional shares may not be transferred or
assigned except by operation of law or pursuant to the laws of descent and
distribution.
(f) If, subsequent to the IPO and prior to final determination of the
number of Additional Shares, if any, issuable pursuant to this Section 2.8, the
outstanding shares of Provant Common Stock shall have been changed into a
different number of shares or a different class by reason of any
reclassification, recapitalization, split-up, combination, exchange of shares or
readjustment, or a stock dividend thereon shall be declared with a record date
within said period, the IPO Price shall be correspondingly and appropriately
adjusted.
(g) The Stockholders are hereby appointed as the representatives of all
stockholders of the Company for purposes of this Section 2.8. No Stockholder
shall have any liability to any other holder of Shares, including any other
Stockholder, for any action taken or position asserted (or any failure to act or
to assert any position) pursuant to this Section 2.8, provided only that such
Stockholder has acted in a manner he believed in good faith to be in the
interest of all holders of Shares.
2.9 EXCHANGE OF AND PAYMENT FOR SHARES.
(a) As soon as practicable after the Effective Time and after surrender
to Provant of any certificate which prior to the Effective Time shall have
represented any Shares, subject to the provisions of paragraphs (c) and (d) of
this Section 2.9 and
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to the provisions of Article 8, Provant shall cause to be distributed to the
person in whose name such certificate shall have been registered certificates
registered in the name of such person representing the shares of Provant Common
Stock into which any shares previously represented by the surrendered
certificate shall have been converted at the Effective Time and a check payable
to such person representing the payment of cash due such person by reason of the
Merger including cash in lieu of fractional shares determined in accordance with
paragraph (g) of this Section 2.9. Until surrendered as contemplated by the
preceding sentence, each certificate which immediately prior to the Effective
Time shall have represented any Shares shall be deemed at and after the
Effective Time to represent only the right to receive upon such surrender the
certificates and payment contemplated by the preceding sentence and by Section
2.8.
(b) No dividends or other distributions declared after the Effective
Time with respect to Provant Common Stock shall be paid to the holder of any
unsurrendered certificate representing Shares until the holder thereof shall
surrender such certificate in accordance with this Section 2.9. After the
surrender of such certificate in accordance with this Section 2.9, the record
holder thereof shall be entitled to receive any such dividends or other
distributions, without any interest thereon, which theretofore had become
payable with respect to shares of Provant Common Stock represented by such
certificate.
(c) No certificate representing Merger Stock shall be issued to any
Person, and no Person shall be treated as a holder of shares of Provant Common
Stock constituting Merger Stock for any purpose whatsoever (including without
limitation any right to vote the shares of Provant Common Stock into which such
Person's Shares are to be converted) unless and until such Person has executed
and delivered to Provant an Investment Letter.
(d) If any cash or certificate representing shares of Provant Common
Stock is to be paid to or issued in a name other than that in which the
certificate surrendered in exchange therefor is registered, it shall be a
condition of the payment or issuance thereof that the certificate so surrendered
shall be properly endorsed and otherwise in proper form for transfer and that
the person requesting such exchange shall pay to Provant any transfer or other
taxes required by reason of the issuance of a certificate representing shares of
Provant Common Stock in any name other than that of the registered holder of the
certificate surrendered, or otherwise required, or shall establish to the
satisfaction of Provant that such tax has been paid or is not payable.
(e) All Provant Common Stock and cash, including cash in lieu of
fractional shares, shall be deemed, when paid or issued hereunder, to have been
paid or issued, as the case may be, in full satisfaction of all rights
pertaining to the Shares.
(f) After the Effective Time, there shall be no further registration of
transfers on the stock transfer books of the Surviving Corporation of the Shares
which
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were outstanding immediately prior to the Effective Time. If, after the
Effective Time, certificates representing such shares are presented to the
Surviving Corporation, they shall be cancelled and exchanged for cash or
certificates representing the shares of Provant Common Stock into which they
were converted, or both, as provided herein.
(g) Notwithstanding any other provision of this Agreement, no
certificates or scrip representing fractional shares of Provant Common Stock
shall be issued upon the surrender for exchange of certificates which prior to
the Effective Time shall have represented any Shares, no dividend or
distribution of Provant shall relate to any fractional share and such fractional
share interests will not entitle the owner thereof to vote or to any rights of a
shareholder of Provant. In lieu of any fractional shares, there shall be paid to
each holder of Shares who otherwise would be entitled to receive a fractional
share of Provant Common Stock an amount of cash equal to the amount of such
fraction times the IPO Price.
(h) In the event any certificate representing Shares shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
holder of Shares claiming such certificate to be lost, stolen or destroyed and,
if required by Provant or its stock transfer agent, the posting by such holder
of a bond in such amount as Provant or its stock transfer agent may direct as
indemnity against any claim that may be made against it with respect to such
certificate, Provant will issue in exchange for such lost, stolen or destroyed
certificate the Merger Stock and cash deliverable in respect thereof.
2.10 RESERVED.
3. REPRESENTATIONS AND WARRANTIES OF THE
COMPANY AND THE STOCKHOLDERS
The Company and the Stockholders represent and warrant to Provant and
Acquisition that, except as expressly provided in the Company Disclosure
Schedule by specific reference to a Section of this Article 3:
3.1 ORGANIZATION AND AUTHORITY. The Company is a corporation duly
organized, validly existing, and in good standing under the laws of the
Commonwealth of Massachusetts and has all requisite corporate power and
authority to conduct its business and own its properties as now conducted and
owned. The Company is duly qualified or licensed and in good standing as a
foreign corporation, and has at all times when legally required been so
qualified or licensed and in good standing, in those states listed on the
Company Disclosure Schedule, which are the only jurisdictions in which the
property owned, leased or operated by it or the nature of the business conducted
by it would cause a failure to be so qualified or licensed to have a material
adverse effect on the business of the Company. The Company has full power and
authority to execute and deliver this Agreement and, subject to the approval of
its stockholders under the MBCL, to consummate the transactions
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contemplated hereby and perform its obligations hereunder. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby by the Company and the performance of the Company's obligations hereunder
have been duly and validly authorized by a unanimous vote of the Board of
Directors of the Company and, excepting only the affirmative vote of the holders
of a majority of the outstanding shares of the Company's Common Stock (excluding
the Company's Class B Common Stock) in accordance with the MBCL, no other
corporate proceedings on the part of the Company are necessary to authorize this
Agreement or to consummate the transactions so contemplated or to perform the
Company's obligations hereunder. This Agreement has been duly and validly
executed and delivered by the Company and constitutes a legal, valid and binding
obligation of the Company enforceable against it in accordance with its terms,
except as enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting enforcement of
creditors' rights generally.
3.2 CAPITALIZATION OF THE COMPANY; NO SUBSIDIARIES. The Company has
authorized capital consisting of 100,000 shares of Common Stock, no par value,
and 25,000 shares of Class B Common Stock, no par value. No shares are held in
the Company's treasury. As of the date hereof, there are 72,653 shares of Common
Stock and 16,267 shares of Class B Common Stock issued and outstanding. As of
immediately prior to the Effective Time, the Shares issued and outstanding shall
consist solely of the foregoing number plus the number of Shares, if any, issued
between the date hereof and the Effective Time in accordance with Schedule 6.1
or upon the exercise or conversion of Company Options and other instruments (in
each case solely if existing on the date hereof and disclosed on the Company
Disclosure Schedule pursuant to Section 3.3), which exercise or conversion and
which issuance are in accordance with the terms of such instruments as in effect
on the date hereof. All of the Shares are duly authorized, validly issued, fully
paid and non-assessable and are owned of record and beneficially by the
stockholders of the Company in the respective amounts listed on the Company
Disclosure Schedule. The Company has no other authorized class of capital stock
other than the Common Stock and the Class B Common Stock. The Company does not
own and has not owned any shares of capital stock or other securities of, or any
other interest in, nor does it control or has it controlled, directly or
indirectly, any other corporation, association, joint venture, partnership, or
other business organization. The Shares have been issued and sold in full
compliance with all applicable Federal and state securities laws. No holder of
Shares has any dissenting shareholder or appraisal rights with regard to the
Merger.
3.3 NO RIGHTS TO PURCHASE OR REGISTER STOCK. No person, firm, or
corporation has any written or oral agreement, option, warrant, call,
understanding, commitment, or any right or privilege capable of becoming a
binding agreement, for either the purchase of any Shares or the acquisition of
shares of any other class of capital stock of the Company, and the Company has
not otherwise agreed to issue or sell any shares of its capital stock and has no
obligation to register any of the Shares under
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<PAGE> 13
the Securities Act. The Company is not obligated directly, indirectly or
contingently to purchase any Shares.
3.4 NAME. The Company has not had any other name and does not conduct
or operate, and has not heretofore conducted or operated, its business under any
name other than its current name.
3.5 NO VIOLATION OF EXISTING AGREEMENTS. The execution and delivery of
this Agreement, together with all documents and instruments contemplated herein,
the consummation by the Company of the transactions contemplated hereby and
thereby, the performance by the Company of its obligations hereunder and
thereunder and compliance with the terms, conditions and provisions hereof and
thereof by the Company do not (i) contravene any provisions of the Company's
Articles of Organization or By-Laws; (ii) conflict with or result in a breach of
or constitute a default (or an event that might, with the passage of time or the
giving of notice or both, constitute a default) or give rise to any right to
terminate, cancel or accelerate or to any loss of benefit under any of the
material terms, conditions, or provisions of any indenture, mortgage, loan, or
credit agreement or any other agreement or instrument to which the Company is a
party or by which it or its assets may be bound or affected; (iii) violate or
constitute a material breach of any decision, judgment, or order of any court or
arbitration board or of any governmental department, commission, board, agency,
or instrumentality, domestic or foreign, by which the Company is bound or to
which it is subject; or (iv) violate any applicable law, rule, or regulation to
which the Company or any of its property is bound.
3.6 NO CONSENTS OR APPROVALS OF GOVERNMENTAL AUTHORITIES. No consent or
approval of, or filing and expiration of a period for disapproval by, any
governmental authority is required for the Company to consummate the
transactions contemplated by this Agreement, except for filing the Certificate
of Merger pursuant to the DGCL and the filing of the Articles of Merger pursuant
to the MBCL. Notwithstanding the immediately preceding sentence, the Company and
the Stockholders make no representation or warranty regarding whether any filing
is required under the Hart- Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), but the Company and the Stockholders do represent and
warrant that (a) the aggregate gross assets of the Company plus those of any
direct or indirect legal or beneficial holder of 50% or more of the Shares were
less than $100 million as of September 30, 1997, and (b) the aggregate revenues
of the Company plus those of any direct or indirect legal or beneficial holder
of 50% or more of the Shares were less than $100 million for the Company's most
recently completed fiscal year.
3.7 FINANCIAL STATEMENTS.
(a) The Financial Statements fairly present the financial position of
the Company as of their respective dates, and the results of operations and cash
flows for the periods presented therein, all in conformity with generally
accepted accounting principles applied on a consistent basis, except as
otherwise noted therein.
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(b) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and with
statutory accounting principles and to maintain accountability for assets; (iii)
access to assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
3.8 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth or reserved
against in the Balance Sheet, the Company (a) did not have as of the Balance
Sheet Date any material liability or obligation of any nature, whether accrued,
absolute, contingent, or otherwise and whether due or to become due, including
without limitation liabilities that may become known or arise after the date
hereof and which relate to transactions entered into or any state of facts
existing on or before the Balance Sheet Date and which would be required under
generally accepted accounting principles to be shown in such balance sheet or
referenced in the notes thereto, and (b) has not incurred since the Balance
Sheet Date any such liability or obligation except in the ordinary course of
business. Without limiting the foregoing, and except as specifically reserved
against in the Balance Sheet or in the calculation of the Closing Net Worth, the
Company has no material liability or obligation of any nature, whether accrued,
absolute, contingent, or otherwise, to any government entity for any adjustment
or reimbursement of any amount previously paid to the Company by such entity
under any agreement relating to the provision of any goods or services by the
Company.
3.9 CONDUCT OF BUSINESS SINCE THE BALANCE SHEET DATE. Since the Balance
Sheet Date, the Company has not taken (or suffered the occurrence of) any of the
following actions or events, agreed to take any of the following actions, or
taken any action that would otherwise result in any of the following (in each
case except directly in connection with this Agreement):
(a) entered into any transaction, agreement, or commitment other than
in the ordinary course of business; or
(b) entered into any transaction, agreement, or commitment, suffered
the occurrence of any event or events, or experienced any change in financial
condition, business, results of operations, prospects, or otherwise, (i) that
has interfered or is reasonably likely to interfere with the normal and usual
operations of the Company's business or its business prospects in any material
respect or (ii) that, singly or in the aggregate, has resulted or is reasonably
likely to result in a material adverse change in the financial condition,
assets, liabilities, earnings, business, or business prospects of the Company;
or
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<PAGE> 15
(c) incurred any indebtedness for borrowed money, or assumed,
guaranteed, endorsed, or otherwise become responsible for the obligations of any
other individual, partnership, firm, or corporation (except to endorse checks
for collection for deposit in the ordinary course of business), or made any loan
or advance to any individual, partnership, firm, or corporation; or
(d) mortgaged, pledged, or otherwise encumbered, or, other than in the
ordinary course of business, sold, transferred, or otherwise disposed of, any of
the properties or assets of the Company, including any cancelled, released,
hypothecated, or assigned indebtedness owed to the Company, or any claims held
by the Company, except for purchase money mortgages arising in the ordinary
course of business and statutory liens arising or incurred in the ordinary
course of business with respect to which the underlying obligations are not
delinquent; or
(e) made any investment of a capital nature or entered into a
commitment for such investment either by purchase of stock or securities,
contributions to capital, property transfer, or otherwise, or by the purchase of
any property or assets of any other individual, partnership, firm, or
corporation; or
(f) declared, set aside, or paid any dividend or other distribution
(whether in cash, stock, or property or any combination thereof) in respect of
the capital stock of the Company, or redeemed or otherwise acquired, directly or
indirectly, any shares of capital stock of the Company, excepting only
dividends, distributions and redemptions that have not resulted and will not
result, directly or indirectly, in the Company not satisfying the Financial
Condition; or
(g) paid any long-term liability, otherwise than in accordance with its
terms; or
(h) paid any bonus compensation to any officer, director, shareholder,
or employee of the Company or otherwise increased the compensation paid or
payable to any of the foregoing; or
(i) sold, assigned, or transferred any trademarks, trade names, logos,
copyrights, formulae, or other intangible assets; or
(j) contracted with or committed to any third party (i) to sell any
capital stock of the Company, (ii) to sell any material assets of the Company
other than in the ordinary course of business, (iii) to effect any merger,
consolidation, or other reorganization of the Company, or (iv) to enter into any
agreement with respect thereto; or
(k) incurred or paid any expenses or fees of counsel, accountants, or
consultants for services in preparation for or in connection with this Agreement
or the transactions contemplated hereunder.
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<PAGE> 16
3.10 TITLE TO ASSETS. The Company owns no real property. The Company
has good and clear record and marketable title to all properties owned by it,
including, without limitation, all property reflected in the Balance Sheet,
other than property disposed of in the ordinary course of business subsequent to
the Balance Sheet Date (none of such dispositions being materially adverse),
free and clear of any mortgage, lien, pledge, charge, claim or encumbrance, or
rights, title and interest in others, except (a) as reflected in the Balance
Sheet, or as specified in the notes thereto, (b) the lien of taxes not yet due
or payable or being contested in good faith by appropriate proceedings and as to
which appropriate reserves have been set aside in the Balance Sheet, and (c)
such imperfections of title and encumbrances, if any, as do not materially
detract from the value or interfere with the use of the properties subject
thereto or affected thereby, or otherwise materially impair business operations.
3.11 INTELLECTUAL PROPERTY.
(a) The Company Disclosure Schedule contains a correct and complete
list of all copyrights, copyright registrations and copyright applications,
trademark registrations and applications for registration, patents and patent
applications, trademarks, service marks and trade names used in the Company's
business as presently conducted or contemplated and all licenses, assignments
and releases of the intellectual property rights of others in material works
embodied in its products. There is (i) no existing or, to the Company's
knowledge, threatened infringement, misuse or misappropriation of Proprietary
Information (as hereinafter defined) by others and (ii) no pending or threatened
claim by the Company against others for infringement, misuse or misappropriation
of any patent, patent application, invention disclosure, trademark, trade name,
service mark, trade secret, technology, technique, know-how, or copyright owned
by the Company or used in its business as presently conducted or contemplated
(the "Proprietary Information"). The Proprietary Information is sufficient to
carry on the business of the Company as presently conducted or contemplated, and
the Company has the right to use, free and clear of claims or rights of others,
all Proprietary Information required for or incident to its products or services
or its business as presently conducted or contemplated. The Company is the
exclusive owner of all right, title and interest in the Proprietary Information
as purported to be owned by the Company, and such Proprietary Information is
valid and in full force and effect. Neither the present nor contemplated
business activities or products of the Company infringe, misuse or
misappropriate any patent, trademark, trade name, service mark, trade secret,
copyright or other intellectual property right of others, and to the Company's
knowledge no one is claiming nor is it anticipated that anyone will claim any
such infringement, misuse or misappropriation. To the knowledge of the Company,
the Proprietary Information is presently valid and protectible and is not part
of the public domain or knowledge, nor, to the knowledge of the Company, has any
of it been used, divulged or appropriated for the benefit of any person other
than the Company to the detriment of the Company. The Company has not granted to
any person any license or other right to use in any manner any of the
Proprietary Information, whether or not requiring the payment of royalties. The
Company has no obligation
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<PAGE> 17
still outstanding to compensate other persons for the use of any Proprietary
Information or for the sale of any service or product comprising or derived from
Proprietary Information. No university, government agency (whether federal or
state) or other organization which sponsored research and development conducted
by the Company has any claim of right to or ownership of or other encumbrance
upon the Proprietary Information.
(b) The Company has taken all reasonable measures to protect and
preserve the security, confidentiality and value of the Proprietary Information,
including its trade secrets and other confidential information. All present and
previous officers, employees and consultants of or to the Company have executed
and delivered to and in favor of the Company an agreement regarding the
protection of confidential and proprietary information and the assignment to the
Company of all intellectual property rights arising from the services performed
for the Company by such persons in the forms attached to the Company Disclosure
Schedule. To the Company's knowledge, no employee or consultant of the Company
has used any trade secrets or other confidential information of any other person
in the course of his or her work for the Company. To the Company's knowledge,
the Company is not making unlawful use of any confidential information or trade
secrets belonging to any past or present employees of the Company. Neither the
Company nor, to the knowledge of the Company, any of the Company's employees or
consultants have any agreements or arrangements with former employers of such
employees or consultants relating to confidential information or trade secrets
of such employers or are bound by any consulting agreement relating to
confidential information or trade secrets of another entity. The activities of
the Company's employees on behalf of the Company do not violate any agreements
or arrangements known to the Company which any such employees have with former
employers or any other entity to whom such employees may have rendered
consulting services.
3.12 OBLIGATIONS TO OR FROM AFFILIATES.
(a) All material transactions between the Company and any stockholder,
officer or director of the Company, or any Affiliate (as defined below) of any
stockholder, officer or director of the Company, entered into on or after
January 1, 1993 have been conducted on an arm's-length basis on terms no
different than would be obtained if the transaction had been between the Company
and an unrelated party. Except for debts or other outstanding obligations
reflected on the Balance Sheet, there are no debts or other obligations of the
Company to, or to the Company from, any stockholder, officer or director of the
Company, or any Affiliate of a stockholder, officer or director of the Company.
As used herein, "Affiliate" of a stockholder, officer or director means any
member of the immediate family of such person or any entity in which such person
or any such family member is an officer or owner of more than five percent of
beneficial interest in the outstanding equity securities.
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(b) The Company Disclosure Schedule sets forth all information that
would be required to be provided under Item 404 of Regulation S-K of the
Commission under the Securities Act if a registration statement on Form S-1 were
filed by the Company with the Commission on the date hereof.
3.13 MATERIAL CONTRACTS. The Company Disclosure Schedule lists all
material leases, contracts, instruments, agreements or commitments (whether
written or oral) relating to the conduct of the business of the Company (the
"Material Company Contracts"). The Company has delivered to Provant true and
correct copies of each written Material Company Contract and a written
description, accurate in all material respects, of each oral arrangement so
listed. Without limiting the generality of the foregoing, the aforesaid list
includes all contracts, agreements and instruments of the following types to
which the Company is a party:
(a) labor union contracts, together with a list of all labor unions
representing or, to the Company's knowledge, attempting to represent employees
of the Company;
(b) pension, retirement, deferred compensation, death benefit, profit
sharing, bonus or other employee incentive, fringe benefit, stock purchase,
stock option, hospitalization or insurance plans or arrangements (and grant
certificates or other documents issued thereunder) or vacation pay, severance
pay and other similar benefit arrangements for officers, employees or agents,
together with a list of all pensioned employees or obligations to provide any
pensions hereafter other than pursuant to the plans hereinbefore in this item
described;
(c) employment contracts or agreements, consulting agreements,
agreements providing for termination or severance benefits, non-competition
agreements, non- disclosure agreements, contracts for professional personal
services, contracts with other persons engaged in sales or distributing
activities, and advertising contracts;
(d) written or oral agreements, understandings and arrangements of any
kind with any officer, director, employee, shareholder or agent of the Company
relating to present or future compensation or other benefits available to such
person or otherwise, together with a list of the names and current annual salary
rates of all present officers and employees of the Company whose current salary
rate is $25,000 or more and any bonuses paid or payable to each such person for
the 1996 fiscal year;
(e) indentures, loan agreements, notes, security agreements, mortgages,
conditional sales contracts, leases of real or personal property, contracts for
the purchase or sale of real or personal property, and agreements for financing;
(f) property, casualty, crime, directors and officers, and other forms
of insurance;
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(g) all bank accounts and safety deposit boxes identifying all
authorized signatories, together with a list of all effective powers of attorney
granted by the Company to anyone;
(h) agreements, contracts or other arrangements to which the Company is
a guarantor, surety or endorser;
(i) contracts, agreements, commitments, arrangements or understandings
providing for the purchase or sale of all or substantially all of the Company's
requisites of a particular product from a single supplier or to a single
customer;
(j) contracts, agreements, commitments, arrangements or understandings
which limit the freedom of the Company from competing in any line of business or
with any person or entity;
(k) license agreements (as licensor or licensee);
(l) leases of real and personal property with a term of more than one
year (regardless of whether the Company is lessor or lessee); and
(m) contracts, agreements, instruments, arrangements or understandings
which have not been included in items (a) through (l) above involving payment by
or to the Company of more than $50,000 or not terminable without penalty or
otherwise materially affecting the assets, financial condition, properties or
business of the Company.
All of the Material Company Contracts are in full force and effect. Except to
the extent that a material adverse effect on the Company's financial condition,
assets, liabilities, earnings, business or prospects would not result if the
following were not true: (A) the Company and each other party to each of the
Material Company Contracts have performed all the obligations required to be
performed by them to date, have received no notice of default and are not in
default (with due notice or lapse of time or both) under any of the Material
Company Contracts; (B) the Company has no present expectation or intention of
not fully performing all of its obligations under any of the Material Company
Contracts, and the Company has no knowledge of any breach or anticipated breach
by any other party to any of the Material Company Contracts; (C) there exists no
actual or, to the knowledge of the Company, threatened termination, cancellation
or limitation of the business relationship of the Company with any party to any
Material Company Contract; and (D) consummation of the transactions contemplated
hereby and performance by the Company of its obligations hereunder shall not
require the consent or permission of any party to any Material Company Contract
or permit any party to terminate, suspend or alter the terms of any Material
Company Contract.
3.14 LITIGATION. There are no actions, suits, causes of action, claims,
litigation, arbitration, administrative hearings, or other form of proceedings
or disputes of any
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kind pending or, to the best knowledge of the Company, threatened against the
Company or involving, affecting, or relating to its capacity to complete the
transactions contemplated herein, the Company, or its officers or directors (in
their capacities as such), in any court, at law or in equity, or before any
arbitration board or any governmental department, commission, board, bureau,
agency, or instrumentality; nor has the Company been, nor is it, subject to any
orders, awards, fines, judgments, decrees, or injunctions the effect of which in
the aggregate would have a material adverse effect on the business or financial
position or prospects of the Company. The Company does not know or have grounds
to know of any basis for any such action, suits, or other form of proceeding or
disputes or of any governmental investigation relating to the Company or its
business.
3.15 TAXES.
(a) (i) All Tax Returns (as defined below) of, relating to or which
include the Company which are required to have been filed have been filed on a
timely basis with the appropriate authorities and all such Tax Returns are true,
correct and complete in all respects; (ii) all Taxes (as defined below) required
to have been paid by the Company (including amounts collected or withheld from
third parties required to have been paid over to the appropriate authorities)
have been paid in full on a timely basis to the appropriate authorities; and
(iii) all Taxes or other amounts required to have been collected or withheld by
the Company have been timely and properly collected or withheld.
(b) (i) No taxing authority has asserted in writing to the Company any
adjustment, deficiency, or assessment that could result in additional Tax for
which the Company is or may be liable; (ii) there is no pending audit,
examination, investigation, dispute, proceeding or claim for which the Company
has received notice relating to any Tax for which the Company is or may be
liable; (iii) no statute of limitations with respect to any Tax for which the
Company is or may be liable has been waived or extended; (iv) the due date of
any Tax Returns that the Company is required to file has not been extended; and
(v) Company is not a party to any Tax sharing or Tax allocation agreement,
arrangement or understanding.
(c) There are no liens on any of the assets of the Company which arose
in connection with any failure or asserted failure to pay any Tax, other than
liens for current Taxes not yet due and payable.
(d) The Company is not a party to any contract, agreement, plan or
arrangement that, individually or collectively, could give rise to any payment
that would not be deductible by reason of Section 162, 280G or 404 of the Code.
(e) The Company has not been a member of an affiliated group filing a
consolidated federal income Tax Return, and the Company is not liable for the
Taxes of any person under Treasury Regulation 1.1502-6 (or any similar provision
of state, local, or foreign law) as transferee or successor, by contract or
otherwise.
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(f) Copies of (i) any Tax examinations, (ii) extensions of statutory
limitations, (iii) the federal, state and local income Tax Returns and franchise
Tax Returns of the Company, and (iv) correspondence between the Company and all
taxing authorities for its last three (3) taxable years previously have been
furnished to Provant and such Tax Returns are true, correct and complete.
(g) The provision for Taxes, if any, shown on the Balance Sheet is
adequate to cover the aggregate liability of the Company arising out of facts or
circumstances occurring on or prior to the Balance Sheet Date for all Taxes.
(h) The Company has filed federal and state, and if applicable, local
Tax Returns for each period ending on or prior to the Effective Time.
(i) For purposes of this Section 3.15:
"Tax Returns" shall mean all returns, amended returns,
declarations, reports, estimates, information returns and statements regarding
Taxes which are or were filed or required to be filed under applicable law,
whether on a consolidated, combined, unitary or individual basis.
"Taxes" shall mean any federal, state, local, foreign or other tax,
fee, levy, assessment or other governmental charge, including without limitation
any income, franchise, gross receipts, property, sales, use, hotel, bed,
services, value added, withholding, social security, estimated, accumulated
earnings, alternative or add-on minimum, transfer, license, privilege, payroll,
profits, capital stock, employment, unemployment, excise, severance, stamp,
occupancy, customs or occupation tax, and any interest, additions to tax and
penalties in connection therewith.
3.16 ABSENCE OF MATERIAL EVENTS. Since January 1, 1997 there has not
been (a) any material adverse change in the business, affairs or prospects of
the Company nor, to the best of the Company's knowledge, are any such changes
threatened, anticipated or contemplated; (b) any actual or, to the Company's
knowledge, threatened, anticipated or contemplated damage, destruction, loss,
conversion, termination, cancellation, default or taking by eminent domain or
other action by governmental authority which has materially affected or may
hereafter materially affect the properties, assets, business affairs or
prospects of the Company; (c) any material and adverse pending or, to the
Company's knowledge, threatened, anticipated or contemplated dispute of any kind
with any material customer, supplier, source of financing, employee, landlord,
subtenant or licensee of the Company, or any pending or, to the Company's
knowledge, threatened, anticipated or contemplated occurrence or situation of
any kind, nature or description which is reasonably likely to result in any
reduction in the amount, or any change in the terms or conditions, of business
with any material customer, supplier, or source of financing; or (d) any
pending, or to the Company's knowledge, threatened, anticipated or contemplated
occurrence or situation of any kind, nature or description
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materially and adversely affecting the properties, assets, business, affairs or
prospects of the Company.
3.17 ABSENCE OF IMPROPER PAYMENTS. Since January 1, 1994 the Company:
(a) has not made any contributions, payments or gifts of its property to or for
the private use of any governmental official, employee or agent where either the
payment or the purpose of such contribution, payments or gift is illegal under
the laws of the United States, any state thereof or any other jurisdiction
(foreign or domestic); (b) has not established or maintained any unrecorded fund
or asset for any purpose, or has made any false or artificial entries on its
books or records for any reason; (c) has not made any payments to any person
where the Company intended or understood that any part of such payment was to be
used for any other purpose other than that described in the documents supporting
the payment; or (d) has not made any contribution, or has reimbursed any
political gift or contribution made by any other person, to candidates for
public office, whether Federal, state or local, where such contribution would be
in violation of applicable law.
3.18 ERISA.
(a) None of the employee benefit plans maintained at any time by the
Company or the trusts (if any) forming part of such plans has engaged in a
prohibited transaction which could subject any such employee benefit plan or
trust to a material tax or penalty on prohibited transactions imposed under
Internal Revenue Code Section 4975 or ERISA.
(b) None of the employee benefit plans maintained at any time by the
Company which are employee pension benefit plans and which are subject to Title
IV of ERISA or the trusts that are part of such plans has been terminated so as
to result in a material liability of the Company under ERISA or the Code, nor
has any such employee benefit plan of the Company incurred any material
liability to the Pension Benefit Guaranty Corporation, other than for required
insurance premiums which have been paid or are not yet due and payable; neither
the Company nor any affiliate thereof has withdrawn, in either a complete or
partial withdrawal, from any multi-employer Plan resulting in any unpaid
withdrawal liability; the Company has made or provided for all contributions to
all such employee pension benefit plans which it maintains and which are
required by law or such plans as of the end of the most recent fiscal year under
each such plan; the Company has not incurred any accumulated funding deficiency
with respect to any such plan, subject to Section 412 of the Code, whether or
not waived; nor has there been any reportable event, or other event or
condition, which presents a material risk of termination of, or liability with
respect to, any such employee benefit plan by the Pension Benefit Guaranty
Corporation.
(c) The benefit liabilities under the employee pension benefit plans
which are subject to Title IV of ERISA, maintained by the Company, do not exceed
the current value of the assets of such employee benefit plans allocable to such
benefits,
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determined under the actuarial methods and assumptions that would apply if such
plans were terminated in accordance with ERISA and the Code.
(d) To the best of the Company's knowledge, each employee benefit plan
maintained by the Company has been administered in accordance with its terms in
all material respects and is in compliance in all material respects with all
applicable requirements of ERISA (if applicable) and other applicable laws,
regulations and rules. Each employee benefit plan maintained by the Company that
is intended to be "qualified" under Section 401(a) of the Code has received a
favorable determination letter of the Internal Revenue Service, which letter
remains in effect, and nothing has occurred since the date of such determination
that could adversely affect the qualification of such plan.
(e) As used in this Agreement, the terms "employee benefit plan",
"employee pension benefit plan", "multi-employer plan", "accumulated funding
deficiency", "reportable event", "benefit liabilities", "withdrawn" (including
its correlative forms "complete withdrawal" and "partial withdrawal") and
"accrued benefits" shall have the respective meanings assigned to them in ERISA,
and the term "prohibited transactions" shall have the meaning assigned to it in
Code Section 4975 and ERISA. Employee benefit plans "maintained by the Company"
include any such plan maintained, established or contributed to at any time by
the Company or any entity affiliated with or under common control with the
Company.
(f) The Company has no liability not disclosed on any of the Financial
Statements, contingent or otherwise, under any plan or program or the equivalent
for unfunded post-retirement benefits, including pension, medical and death
benefits, which liability would have a material adverse effect on the financial
condition of the Company.
3.19 LABOR MATTERS. A true and complete list of all of the Company's
officers, employees (the "Employees") and consultants (the "Consultants") and
their respective salaries, wages, other compensation, dates of employment, date
and amount of last salary or compensation increase, and positions has been
provided to Provant by the Company. There are no material disputes, employee
grievances, or disciplinary actions pending or, to the knowledge of the Company,
threatened by or between the Company and any of the Employees or Consultants.
With respect to the Employees and Consultants, the Company has complied in all
respects with all provisions of all laws relating to the employment of labor and
has no liability for any arrears of wages or taxes or penalties for failure to
comply with any such law or for any severance or termination payments of any
type. None of the Consultants are or were (while classified by the Company as
Consultants) employees of the Company for any purpose whatsoever. No employees
of the Company are or ever have been represented by a bargaining representative
with respect to the Company, and no election or proceedings relating to the
labor relations of the Company is pending or, to the best of the Company,
knowledge, threatened. The Company has not had any material union activity or
had any material labor disruption or material dispute with
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<PAGE> 24
its employees of any kind, nature or description at any time heretofore. All
personnel policies and manuals of the Company are listed on the Company
Disclosure Schedule and true and complete copies thereof have been provided to
Provant. No Employee or Consultant shall have the right to receive from the
Surviving Corporation or Provant a severance payment or other payment in the
nature thereof in the event his or her employment is terminated by the Surviving
Corporation following the Merger, whether such right arises as a matter of
contract, past policy or understanding, by operation of law, or otherwise.
3.20 PERMITS: COMPLIANCE WITH LAW. The Company possesses all
franchises, permits, licenses, certificates, approvals, and other authorizations
("Permits") necessary to own or lease and operate its properties and to conduct
its business as now conducted, except for incidental Permits that would be
readily obtainable without undue burden in the event of any lapse, termination,
cancellation, or forfeiture or that if not obtained would not materially and
adversely affect the Company's business. All such material Permits are in full
force and effect, and, to the knowledge of the Company, no suspension or
cancellation of any of them is threatened, and no material Permits will be
adversely affected by the consummation of the Merger. The Company has not failed
nor is it failing to comply with any applicable law, rule, regulation, or order,
where such failure would have a material adverse effect on the Company's
business, and there are no proceedings pending or, to the Company's knowledge,
threatened, nor has the Company received any notice, regarding any such failure.
3.21 ENVIRONMENTAL MATTERS. The Company is, and to the Company's
knowledge all real property owned or otherwise occupied by the Company are and
have been at all times when so owned or occupied, in material compliance with
all applicable existing federal, state and local laws and regulations relating
to protection of human health or the environment or imposing liability or
standards of conduct concerning any Hazardous Material (as hereinafter defined)
("Environmental Laws"), except, in each case, where such noncompliance, singly
or in the aggregate, would not have a material adverse effect on the condition,
financial or otherwise, or the earnings, business affairs or business prospects
of the Company. No Hazardous Materials are stored, utilized or otherwise present
on any property owned or otherwise occupied by the Company, excepting only (x)
cleaning supplies and similar materials customarily used by businesses in the
Company's industry in quantities consistent with such use, and (y) petroleum
products that are used for heating (including water heating) in facilities
located on such property, none of which are stored in underground storage tanks,
or that are present in vehicles located on such property. There has not occurred
any release of Hazardous Materials on, under or affecting any real property
during or prior to the period of the Company's ownership, occupation or
operation of such property (including its participation in or exercise of any
degree of control over the management of any business located on such property).
The term "Hazardous Material" means (a) any "hazardous substance" as defined in
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended through the date hereof, (b) any "hazardous waste"
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<PAGE> 25
as defined by the Resource Conservation and Recovery Act, as amended through the
dated hereof, (c) any petroleum or petroleum product, (d) any polychlorinated
biphenyl and (e) any pollutant or contaminant or hazardous, dangerous, or toxic
chemical, material, waste or substance regulated under or within the meaning of
any other Environmental Law as amended through the date hereof. For purposes of
this Section 3.21, real property owned by third parties but "occupied" by the
Company shall mean only that portion of such property as is either leased by the
Company or in fact otherwise physically occupied or utilized by the Company.
There is no alleged liability, or to the best knowledge of the Company,
potential liability (including, without limitation, alleged or potential
liability for investigatory costs, cleanup costs, governmental response costs,
natural resources damages, property damages, personal injuries or penalties) of
the Company arising out of, based on or resulting from (i) the presence or
release into the environment of any Hazardous Material at any location, whether
or not owned by the Company or (ii) any violation or alleged violation of any
Environmental Law, which alleged or potential liability, singly or in the
aggregate, would have a material and adverse effect on the condition, financial
or otherwise, or the earnings, business affairs or business prospects of the
Company.
3.22 FURTHER ASSURANCES. The Company will use all commercially
reasonable efforts to have all present officers and directors of the Company
execute whatever minutes of meetings or other instruments and take whatever
action as may be necessary or desirable to effect, perfect or confirm of record
of otherwise, in the Surviving Corporation, full right, title and interest in
and to the business, properties and assets now conducted or owned by the
Company, free and clear of all restrictions, liens, encumbrances, rights, title
and interests in others (excepting only liens reflected on the Balance Sheet),
or to collect, realize upon, gain possession of, or otherwise acquire full
right, title and interest in and to such business, properties and assets, and
will otherwise use its reasonable best efforts to carry out the intent and
purposes of the transactions contemplated hereby and the IPO.
3.23 CORPORATE RECORDS. The corporate record books of the Company are
in all material respects in good order, complete, accurate, up to date, with all
necessary signatures, and set forth all meetings and actions taken by the
shareholders and directors, and all votes of the shareholders or directors set
forth in certificates furnished to anyone at any time heretofore.
3.24 CONDITION OF ASSETS. All premises, fixtures and equipment owned or
used by the Company and material to its business have been properly maintained
and are in good operating order and repair, free from known defects in
construction or design, sound and properly functioning (normal wear and tear
excepted), usable and not obsolete, and (to the Company's knowledge in case of
leased property) in material compliance with all applicable zoning, building and
fire codes and all other laws, rules, regulations and requirements of
governmental authorities and the fire insurance rating association having
jurisdiction.
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<PAGE> 26
3.25 ACCOUNTS RECEIVABLE. All of the accounts receivable of the Company
shown or reflected on the Balance Sheet in the Financial Statements, less the
reserve for doubtful accounts in the amount shown on the Balance Sheet, are
valid and enforceable claims and subject to no set off or counterclaim. All of
the accounts receivable of the Company shown or reflected on the Balance Sheet
and as at December 31, 1997 (as reflected on the Company's balance sheet as of
such date, when and as delivered to Provant) will be collected in full within
150 days thereafter except to the extent of the reserve for doubtful accounts
shown on the Balance Sheet or posted on the books of the Company as of such
date. The reserve for doubtful accounts as at December 31, 1997 will not be in
excess of said reserve as shown on the Balance Sheet. The Company has no
accounts or loans receivable from any of its directors, officers or employees.
3.26 CHARTER DOCUMENTS. The Company has heretofore delivered to Provant
copies of its Articles of Organization, as amended to date, certified by the
appropriate governmental authority, and copies of its by-laws, as amended to
date, and a list of the officers and directors of the Company in office, all as
certified by its Secretary.
3.27 DISCLOSURE OF ALL MATERIAL MATTERS.
(a) No statement of a material fact set forth in this Agreement
(including without limitation all information in the Financial Statements, the
Company Disclosure Schedule and the other Schedules, Exhibits, and attachments
hereto, taken as a whole) with respect to the Company or the Stockholders is
false or misleading in any respect, nor does this Agreement (including, without
limitation all information in the Financial Statements, Company Disclosure
Schedule and the other Schedules, Exhibits, and attachments hereto, taken as a
whole) omit to state a material fact necessary in order to make the statements
made or information disclosed, in the light of the circumstances under which
they were made or disclosed, not misleading.
(b) Provided only that Provant has accurately incorporated any
information furnished in writing by the Company to Provant specifically for
inclusion in the Registration Statement or the Prospectus (as applicable) and
has deleted from the Registration Statement or the Prospectus (as applicable)
any statement that the Company has specifically requested in writing be so
deleted, (i) at the time the Registration Statement becomes effective under the
Securities Act, it will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading, and (ii) at the time of each closing in
connection with the IPO, the Prospectus will not include an untrue statement of
a material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. The representations and warranties in this Section shall
not apply to statements or omissions from the Registration Statement and
Prospectus relating to any person or entity other than the Company and its
officers, directors and stockholders.
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3.28 BROKERS. No broker, finder, or investment banker is entitled to
any brokerage, finder's, or other fee or commission in connection with the
Merger or the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company.
4. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
The Stockholders represent and warrant to Provant and Acquisition as
follows:
4.1 TITLE TO THE SHARES. All of the issued and outstanding Shares
listed on the Company Disclosure Schedule as owned by the Stockholders are owned
by the Stockholders free and clear of any claims, liens, charges, encumbrances,
security interests and rights of others whatsoever, and such Shares are not
bound by or subject to any proxy, agreement, voting trust or other restriction
regarding the voting thereof.
4.2 AUTHORITY. The Stockholders have full power, authority and capacity
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby, and no other action is necessary by the Stockholders to
consummate the transactions contemplated by the Agreement. This Agreement has
been duly and validly executed and delivered by the Stockholders and constitutes
a legal, valid and binding obligation of the Stockholders enforceable against
them in accordance with its terms, except as enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting enforcement of creditors' rights generally.
4.3 NO CONFLICTS. The execution, delivery and performance of this
Agreement by the Stockholders do not and will not violate, conflict with, result
in a breach of or constitute a default under (or an event which with due notice
or lapse of time, or both, would constitute a breach of or default under) or
result in the creation of any lien, security interest or other encumbrance under
(a) any material term or any note, agreement, contract, license, instrument,
lease or other obligation to which a Stockholder is a party or by which he is
bound, (b) any material provision of any judgment, order, decree, ruling or
injunction or (c) any statute, law, regulation or rule of any governmental
agency or authority.
5. REPRESENTATIONS AND WARRANTIES OF PROVANT, ACQUISITION
AND THE PROVANT PRINCIPALS
Provant, Acquisition and the Provant Principals represent and warrant
to the Company and the Stockholders that, except as expressly provided in the
Provant Disclosure Schedule by specific reference to a Section of this Article
5:
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5.1 ORGANIZATION AND AUTHORITY. Each of Provant and Acquisition is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware, and each has all requisite corporate power and
authority to conduct its business and own its properties as now conducted and
owned, and is qualified and in good standing as a foreign corporation, and has
at all times when legally required been so qualified and in good standing, in
each jurisdiction where the failure to be so qualified would, in the aggregate,
have a material adverse effect on the business or financial condition of
Provant. Each of Provant and Acquisition has full power and authority to execute
and deliver this Agreement and the agreements being executed and delivered in
connection with the Additional Mergers and the IPO to which it is a party, and
to consummate the transactions contemplated hereby and thereby and to perform
its obligations hereunder and thereunder. The execution and delivery of this
Agreement and the other agreements referenced above and the consummation of the
transactions contemplated hereby and thereby, and the performance of Provant's
and its subsidiaries' (including Acquisition's) obligations hereunder and
thereunder have been duly and validly authorized by the unanimous votes of the
respective Boards of Directors of Provant and such subsidiaries (including
Acquisition) and by Provant as the sole stockholder of such subsidiaries
(including Acquisition), and no other corporate proceedings on the part of
Provant or its subsidiaries (including Acquisition) are necessary to authorize
this Agreement or the other agreements referenced above or to consummate the
transactions contemplated hereby or thereby or to perform the obligations of
Provant and its subsidiaries (including Acquisition) hereunder or thereunder.
This Agreement has been duly and validly executed and delivered by each of
Provant and Acquisition and constitutes a valid and binding agreement of each,
enforceable against each in accordance with its terms, except as enforcement may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting enforcement of creditors' rights generally.
5.2 CAPITALIZATION OF PROVANT; SUBSIDIARIES. Provant has authorized
capital consisting of 10,000 shares of Provant Common Stock, $.01 per share par
value, of which no shares are held in Provant's treasury. As of the date hereof,
there are 3,417.9 issued and outstanding shares of Provant Common Stock, all of
which are duly authorized, validly issued, fully paid and non-assessable and are
owned of record and beneficially by those persons listed on the Provant
Disclosure Schedule. Provant has no other authorized class of capital stock
other than the Provant Common Stock. As of the date hereof and at all times
prior to the Effective Time, Provant does not (and will not) own and has not
owned any shares of capital stock or other securities of, or any other interest
in, nor does (or will) it control or has it controlled, directly or indirectly,
any other corporation, association, joint venture, partnership, or other
business organization, other than Acquisition and the subsidiaries intended to
be merged with the Additional Companies. All of the issued and outstanding
shares of capital stock of Acquisition, and of each subsidiary that will be
merged with an Additional Company, are owned of record and beneficially by
Provant. All outstanding shares of Provant Common Stock have been issued and
sold in full compliance with all applicable Federal and state securities laws.
No holder of
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outstanding shares of Provant Common Stock has any dissenting shareholder or
appraisal rights with regard to the Merger. Provant does not have knowledge of
any voting agreements, voting trusts or similar agreements governing the manner
in which any shares of Provant Common Stock are voted by the holders thereof.
5.3 NO RIGHTS TO PURCHASE OR REGISTER STOCK. Excepting only (a) the
shares of Provant Common Stock to be issued as Merger Shares and as merger
consideration in the Additional Mergers, (b) the shares of Provant Common Stock
to be sold in the IPO, and (c) the shares of Provant Common Stock to be issued
pursuant to Provant Options under the Plan, no person, firm, or corporation has
any written or oral agreement, option, warrant, call, understanding, commitment,
or any right or privilege capable of becoming a binding agreement, for either
the purchase of any shares of Provant Common Stock or the acquisition of shares
of any other class of capital stock of Provant, and Provant has not otherwise
agreed to issue or sell any shares of its capital stock and has no obligation to
register any shares of Provant Common Stock under the Securities Act. Provant is
not obligated directly, indirectly or contingently to purchase any shares of
Provant Common Stock. No person, firm, or corporation has any written or oral
agreement, option, warrant, call, understanding, commitment, or any right or
privilege capable of becoming a binding agreement, for the purchase or other
acquisition of any shares of capital stock of Acquisition or of any subsidiary
of Provant that will be merged with an Additional Company, and neither
Acquisition nor any such other subsidiary has otherwise agreed to issue or sell
any shares of its capital stock or to register any shares of its capital stock
under the Securities Act..
5.4 MERGER STOCK. The Merger Stock has been duly authorized by all
necessary corporate action and, when issued and delivered by Provant pursuant to
this Agreement, will be validly issued, fully paid and non-assessable.
5.5 CONSENTS AND APPROVALS; NO VIOLATION; NO KNOWN IMPEDIMENTS. Neither
the execution and delivery of this Agreement by Provant and Acquisition nor the
consummation of the transactions contemplated hereby will (i) conflict with or
result in any breach of any provision of the respective charter documents or
By-Laws of Provant or Acquisition; (ii) subject to the last sentence to this
Section 5.5, require on the part of Provant any consent, approval,
authorization, or permit of, or filing with or notification to, any governmental
or regulatory authority, except (A) filing the Articles of Merger pursuant to
the MBCL and the Certificate of Merger pursuant to the DGCL and (B) any filings
required under the Securities Act and the securities or blue sky laws of the
various states; (iii) result in a default (or give rise to any right of
termination, cancellation, or acceleration) under any of the material terms,
conditions, or provisions of any note, license, lease, agreement, or other
instrument or obligation to which Provant or Acquisition is a party or by which
Provant or Acquisition or any of their respective assets may be bound, other
than as previously disclosed in writing to the Company; or (iv) violate or
constitute a material breach of any order, writ, injunction, decree, statute,
law, rule, or regulation applicable to Provant or Acquisition or any of their
respective assets. Assuming no material change after the date hereof
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in the condition of the capital markets or in the business or financial
condition of the Company or any of the Additional Companies and assuming the
Commission declares the Registration Statement effective in due course, Provant
has no knowledge of any matter (including without limitation any law or
regulation) that should reasonably be expected to prohibit the consummation of
the transactions contemplated hereby, the Additional Mergers or the IPO. The
representation and warranty contained in clause (ii) above is, with respect to
compliance with the HSR Act, made in reliance upon, and is expressly conditioned
upon, the accuracy of the representations and warranties of the Company and the
Stockholders made in the second sentence of Section 3.6.
5.6 OPERATIONS AND FINANCIAL CONDITION; ABSENCE OF UNDISCLOSED
LIABILITIES. Neither Provant nor Acquisition has conducted any material business
operations other than in connection with the Merger, the Additional Mergers and
the IPO or in preparation for operations to be conducted after the Effective
Time. Neither Provant nor Acquisition has any material tangible assets or
material liabilities or obligations of any nature, whether accrued, absolute,
contingent, or otherwise and whether due or to become due, including without
limitation liabilities that may become known or arise after the date hereof and
which relate to transactions entered into or any state of facts existing on or
before the date hereof and which would be required under generally accepted
accounting principles to be shown in a balance sheet or referenced in the notes
thereto prepared as of the date hereof, other than those incurred in connection
with the Merger, the Additional Mergers and the IPO or in connection with
Provant's preparation for future operations. Set forth on the Provant Disclosure
Schedule are all liabilities and obligations of Provant and Acquisition (by
type) that are as of the date hereof, or are expected to be as of the Effective
Time, in excess of $10,000.
5.7 LITIGATION. There are no actions, suits, causes of action, claims,
litigation, arbitration, administrative hearings or other form of proceedings or
disputes pending, or, to the best knowledge of Provant or Acquisition,
threatened, against, involving or affecting Provant or Acquisition, in any
court, at law or in equity, or before any arbitration board or any governmental
department, commission, board, bureau, agency, or instrumentality, that either
singly or in the aggregate might prevent Provant and Acquisition from
consummating the transactions contemplated hereby, the IPO or the Additional
Mergers, or which would have a material adverse effect on the business,
operations, or financial condition of Provant and its subsidiaries taken as a
whole.
5.8 MATERIAL CONTRACTS. The Provant Disclosure Schedule lists all
material leases, contracts, instruments, agreements or commitments (whether
written or oral), other than the Additional Merger Agreements, relating to the
conduct of the business of Provant or its subsidiaries (including Acquisition)
in effect on the date hereof (the "Material Provant Contracts"). Without
limiting the generality of the foregoing, the aforesaid list includes all
contracts, agreements and instruments of the following types to which Provant or
its subsidiaries is a party or by which any of them is bound:
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(a) employment or employment-related contracts or agreements (including
pension, retirement, deferred compensation, death benefit, profit sharing, bonus
or other employee incentive, fringe benefit, stock purchase or stock option
agreements), consulting agreements, agreements providing for termination or
severance benefits, non-competition agreements, non-disclosure agreements,
contracts for professional personal services, contracts with other persons
engaged in sales or distributing activities, and advertising contracts;
(b) written or oral agreements, understandings and arrangements of any
kind with any officer, director, employee, shareholder or agent of Provant or
Acquisition relating to present or future compensation or other benefits
available to such person or otherwise;
(c) indentures, loan agreements, notes, security agreements, mortgages,
conditional sales contracts, leases of real or personal property, contracts for
the purchase or sale of real or personal property, and agreements for financing;
(d) agreements, contracts or other arrangements to which the Provant or
Acquisition is a guarantor, surety or endorser;
(e) contracts, agreements, instruments, arrangements or understandings
which have not been included in items (a) through (d) above involving payment by
or to Provant or Acquisition of more than $50,000 or not terminable without
penalty or otherwise materially affecting the assets, financial condition,
properties or business of Provant or Acquisition.
All of the Material Provant Contracts are in full force and effect. Except to
the extent that a material adverse effect on Provant's financial condition,
assets, liabilities, earnings, business or prospects (each considered on a
consolidated basis giving effect to the Merger and the Additional Mergers) would
not result if the following were not true: (A) Provant, Acquisition and each
other party to each of the Material Provant Contracts have performed all the
obligations required to be performed by them to date, have received no notice of
default and are not in default (with due notice or lapse of time or both) under
any of the Material Provant Contracts; (B) Provant and Acquisition have no
present expectation or intention of not fully performing all of their respective
obligations under any of the Material Provant Contracts, and Provant and
Acquisition have no knowledge of any breach or anticipated breach by any other
party to any of the Material Provant Contracts; (C) there exists no actual or,
to the knowledge of Provant and Acquisition, threatened termination,
cancellation or limitation of the business relationship of Provant or
Acquisition with any party to any Material Provant Contract; and (D)
consummation of the transactions contemplated hereby and performance by Provant
and Acquisition of their respective obligations hereunder shall not require the
consent or permission of any party to any Material Provant Contract or permit
any party to terminate, suspend or alter the terms of any Material Provant
Contract.
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5.9 ADDITIONAL MERGER AGREEMENTS. The Provant Disclosure Schedule sets
forth, with respect to the Additional Merger Agreements, the material economic
terms of each such Agreement and any other material terms of each such Agreement
that differ substantially from the corresponding terms of this Agreement.
5.10 DISCLOSURE OF ALL MATERIAL MATTERS. No statement of a material
fact made by Provant or Acquisition in this Agreement (including without
limitation all information in the Provant Disclosure Schedule and the other
Schedules, Exhibits, and attachments hereto, taken as a whole) is false or
misleading in any respect, nor does this Agreement (including, without
limitation all information in the Provant Disclosure Schedule and the other
Schedules, Exhibits, and attachments hereto, taken as a whole) omit to state a
material fact necessary in order to make the statements made or information
disclosed, in the light of the circumstances under which they were made or
disclosed, not misleading.
5.11 BROKERS. No broker, finder, or investment banker is entitled to
any brokerage, finder's, or other fee or commission in connection with the
Merger or the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Provant or Acquisition.
6. COVENANTS
6.1 CONDUCT OF BUSINESS OF THE COMPANY.
(a) Except as contemplated by this Agreement, during the period from
the date of this Agreement to the Effective Time, the Company will conduct its
operations only in the ordinary and usual course of business and consistent with
past practice and will use all commercially reasonable efforts to preserve
intact its present business organization, keep available the services of its
present officers and employees, and preserve its relationships with customers,
suppliers, contractors, and others having business dealings with it to the end
that its goodwill and on-going business shall not be impaired at the Effective
Time.
(b) Without limiting the generality of subsection (a) and except as
otherwise expressly provided in this Agreement or on Schedule 6.1 hereto, before
the Effective Time, the Company will comply with all laws applicable to the
conduct of its business and continue in effect its present insurance coverage
and will not, without the prior written consent of Provant, (i) issue, sell, or
pledge, or authorize or propose the issuance, sale, or pledge of (A) any shares
of capital stock of any class (including the Shares), or securities convertible
into any such shares, or any rights, warrants or options to acquire any such
shares or other convertible securities, excepting only pursuant to the exercise
or conversion of Company Options and other instruments or securities outstanding
on the date hereof and disclosed on the Company Disclosure Schedule which
exercise or conversion and which issuance are in accordance with the terms of
such instruments or securities as in effect on the date hereof, or (B) any
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other securities in respect of, in lieu of, or in substitution for, Shares
outstanding on the date hereof; (ii) purchase or otherwise acquire, or propose
to purchase or otherwise acquire, any outstanding Shares; (iii) declare or pay
any dividend or distribution on any shares of its capital stock; (iv) authorize,
recommend, propose or announce an intention to authorize, recommend or propose,
or enter into an agreement in principle or an agreement with respect to, any
change in its capitalization, merger, consolidation or business combination
(other than the Merger), any acquisition of a material amount of assets or
securities, any disposition of a material amount of assets or securities, or any
entry into a material contract or any release or relinquishment of any material
contract rights, not in the ordinary course of business; (v) propose or adopt
any amendments to its Articles of Organization or ByLaws (other than as effected
by the Merger); (vi) incur, assume, or prepay any long-term debt or, except in
the ordinary course of business under existing lines of credit, incur or assume
any short term debt; (vii) make any loans, advances, or capital contributions
to, or investments in, any other person, other than travel or other advances to
employees consistent with past practice; (viii) assume, guarantee, endorse, or
otherwise become liable or responsible (whether directly, contingently, or
otherwise) for the obligations of any other person, except to endorse checks for
collection or deposit in the ordinary course of business; or (ix) agree in
writing or otherwise to take any of the foregoing actions or any action that
would make any representation or warranty in this Agreement untrue or incorrect
as of the date hereof or as of the Effective Time, as if made as of such time.
Notwithstanding the foregoing provisions of this Section 6.1(b), prior to the
Effective Time the Company may make a cash dividend to the holders of Shares so
long as doing so will not prevent the Company from satisfying the Financial
Condition (with any such dividend being accounted for prior to the calculation
of the Closing Net Worth).
6.2 NO SOLICITATION. The Company shall not, nor shall it permit any of
its officers, directors, employees, agents, or representatives (including,
without limitation, investment bankers, attorneys and accountants), directly or
indirectly to (a) initiate, contract with, solicit or encourage any inquiries or
proposals by, or (b) enter into any discussions or negotiations with, or
disclose directly or indirectly any information concerning its business and
properties to, or afford any access to its properties, books, and records to,
any corporation, partnership, person, or other entity or group in connection
with any possible proposal (an "Acquisition Proposal") regarding a sale of the
Company's capital stock or a merger, consolidation, or sale of all or a
substantial portion of the assets, or any similar transaction that is material
to the Company. The Company will notify Provant within one business day of
receipt if any discussions or negotiations are sought to be initiated, any
inquiry or proposal is made, or any such information is requested with respect
to an Acquisition Proposal or potential Acquisition Proposal or if any
Acquisition Proposal is received or indicated to be forthcoming. Such notice
shall state all substantive terms and conditions of any proposal or Acquisition
Proposal and the identity of the person making the proposal or Acquisition
Proposal or seeking to initiate discussions or negotiations or requesting
information.
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6.3 ACCESS TO INFORMATION.
(a) From the date of this Agreement, the Company will give Provant and
the Underwriter and their respective representatives full access, at reasonable
times and with reasonable notice, to the offices and other facilities and to the
books and records of the Company, will permit Provant and the Underwriter and
their respective representatives to make such inspections as they may reasonably
require, and will cause its officers and representatives (including, without
limitation, its firm of certified public accountants) to furnish Provant and the
Underwriter and their respective representatives with such financial and
operating data and other information with respect to the business, operations,
assets, liabilities and prospects of the Company as Provant and the Underwriter
and their respective representatives may from time to time reasonably request.
From the date of this Agreement, Provant and Acquisition will give the Company
full access, at reasonable times, to the offices and other facilities and to the
books and records of Provant and Acquisition will permit the Company and its
representatives to make such inspections as they may reasonably require, and
will cause their respective officers and representatives (including, without
limitation, their firm of certified public accountants) to furnish the Company
and its representatives with such financial and operating data and other
information with respect to the business, operations, assets and liabilities of
Provant, Acquisition and the Additional Companies (in the last case to the
extent such information is in the possession of Provant and the applicable
Additional Company does not object to disclosure) as the Company and its
representatives may from time to time reasonably request.
(b) Provant and Acquisition, on the one hand, and the Company, on the
other hand, will, and will cause their respective employees and agents
(including, in the case of Provant, the Underwriter and its employees and
agents) (collectively, "Representatives") to, hold in strict confidence, unless
compelled to disclose by judicial or administrative process or, in the opinion
of its counsel, by other requirements of law, all Confidential Information (as
hereinafter defined) and will not disclose the same to any person. If this
Agreement is terminated, each party having received or created any documents
containing Confidential Information (including documents received or created by
its Representatives), will promptly return to the other party or destroy (or
cause to be returned or destroyed) all documents (including all copies thereof)
so received or created containing such Confidential Information. For purposes
hereof, "Confidential Information" shall mean all information of any kind
concerning the Company, or concerning any of Provant, Acquisition or any
Additional Company, respectively, except information (i) ascertainable or
obtained from public or published information, (ii) received from a third party
not known to Provant, Acquisition or their Representatives, or to the Company or
its Representatives, as applicable, to be under an obligation to the Company or
Provant, as applicable, to keep such information confidential, (iii) that is or
becomes known to the public (other than through a breach of this Agreement),
(iv) that was in the receiving party's possession before disclosure thereof to
it in connection with this
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Agreement, or (v) that is independently developed by Provant or by the Company
(including their respective Representatives), as applicable.
6.4 REASONABLE BEST EFFORTS; SHAREHOLDER APPROVAL.
(a) Subject to the terms and conditions hereof, each party to this
Agreement agrees to fully cooperate in all reasonable respects with the others
and the others' counsel, accountants and representatives in connection with any
steps required to be taken as part of its obligations under this Agreement and
in connection with the IPO. Each of the Company, Provant and Acquisition agrees
that it will use its reasonable best efforts to cause all conditions to its
obligations under this Agreement to be satisfied as promptly as possible, and
will not undertake a course of action inconsistent with this Agreement or which
would make any of its representations, warranties, agreements or covenants in
this Agreement untrue in any material respect or any conditions precedent to its
obligations under this Agreement unable to be satisfied at or prior to the
Closing. The Provant Principals hereby covenant and agree that, subject to the
satisfaction (or, in Provant's sole discretion, waiver) of the conditions set
forth in Section 7.1, they will use their reasonable best efforts to cause
Provant to calculate the Financial Condition in good faith and to cause Provant,
Acquisition or Provant's counsel, as applicable, to execute and/or deliver each
of the items identified in subsections 7.2(f), (i), (j), and (l) and to take the
action described in subsection 7.2(k).
(b) Without limiting the foregoing, the Company will promptly and duly
call (and the Stockholders will cause the Company to so call) a special meeting
of its stockholders for the purpose of voting on the Merger and this Agreement.
The Board of Directors of the Company and the Stockholders shall give their
respective unqualified recommendations to the stockholders of the Company that
such stockholders approve the Merger and this Agreement, and the Company and the
Stockholders will otherwise use their reasonable best efforts to obtain
stockholder approval.
6.5 CONSENTS. Each of Provant, Acquisition and the Company will use
reasonable efforts to obtain as promptly as practicable such consents of third
parties to agreements that would otherwise be violated by any provisions hereof
and to make such filings with governmental authorities as are necessary to
consummate the transactions contemplated by this Agreement.
6.6 PUBLIC ANNOUNCEMENTS. Except as provided in the immediately
following sentence, all public announcements, notices or other communications
regarding this Agreement and the transactions contemplated hereby to third
parties other than the parties hereto and their respective advisors and the
shareholders of the Company shall require the prior approval of Provant and of
the Company. Notwithstanding the foregoing, neither the filing of the
Registration Statement (or any other document filed with any public official in
connection with the IPO), nor the distribution of the
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Prospectus (whether in preliminary or final form), nor any selling activity
conducted by Provant or the Underwriter in connection with the IPO, including
without limitation those conducted as part of the so-called road show, shall be
construed to be public announcements, notices or other communications requiring
the prior approval of the Company.
6.7 NOTIFICATION OF CERTAIN MATTERS. Each of the parties (the
"Notifying Party") shall give prompt notice to the other parties of (i) the
occurrence or non-occurrence of any event that would be likely to cause any
representation or warranty of the Notifying Party contained in this Agreement to
be untrue or inaccurate in any material respect at or prior to the Effective
Time and (ii) any material failure of the Notifying Party to comply with or
satisfy any covenant, condition, or agreement to be complied with or satisfied
by it hereunder. Without limiting the foregoing, from time to time prior to the
Closing the Company will promptly supplement or amend the Company Disclosure
Schedule both to correct any inaccuracy in the Company Disclosure Schedule when
delivered and to reflect any development which, if existing at the date of this
Agreement, would have been required to be set forth in the Company Disclosure
Schedule or which has rendered inaccurate the information contained in the
Company Disclosure Schedule (each notice furnishing such information being
called a "Company Disclosure Supplement"), and approximately six business days
prior to the Closing the Company will deliver to Provant a final Company
Disclosure Supplement consisting of a complete update of the Company Disclosure
Schedule as though all representations and warranties contained in Article 3
hereof were to be made as of the date of the Closing. In addition, the Company
shall promptly notify Provant in writing if at any time prior to a closing in
connection with the IPO it shall obtain knowledge of any facts relating to the
Company or its officers, directors or stockholders that might make it necessary
or appropriate to amend or supplement the Prospectus in order to make the
statements contained therein not misleading or comply with applicable law. The
delivery of any Company Disclosure Supplement or other notice pursuant to this
Section 6.7 shall not render correct any representation or warranty that was
incorrect when made or limit or otherwise affect the remedies available
hereunder to the party receiving such Company Disclosure Supplement or notice.
6.8 COVENANTS OF THE STOCKHOLDERS. The Stockholders hereby covenant and
agree with Provant and Acquisition that they shall:
(a) take no action which the Company may not take pursuant to Section
6.2;
(b) take action and refrain from action to the extent required of the
Company pursuant to Section 6.4;
(c) vote, or cause to be voted, all of their respective Shares for the
approval of each aspect of this Agreement (including the Merger) requiring the
approval of the stockholders of the Company, and against the approval of any
other agreement
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providing for a merger, consolidation, sale of assets or other business
combination of the Company with any person or entity other than Provant or an
entity controlled by Provant;
(d) cause the Company to provide to Provant the notifications required
of the Company under Section 6.7;
(e) execute and deliver at the Closing (i) in the case of Messrs.
Howard and Wallace, the Employment Contracts and the Non-Competition and
Non-Disclosure Agreements, and (ii) in the case of all holders of Shares, the
Investment Letters; and
(f) subject to the other terms of this Agreement, (i) use all
commercially reasonable efforts to take whatever action may be reasonably
necessary or desirable to effect, perform or confirm of record or otherwise in
the Surviving Corporation full right, title and interest in and to the business,
properties and assets now conducted or owned by the Company, free and clear of
all restrictions, liens, encumbrances, rights, title and interests in others
(excepting only liens reflected in the Balance Sheet or otherwise disclosed on
the Disclosure Schedule) or to collect, realize upon, gain possession of, or
otherwise acquire, full right, title and interest in and to such business,
properties and assets, and (ii) use their reasonable best efforts to take
whatever action may be reasonably necessary or desirable to carry out the intent
and purposes of the transactions contemplated hereby and to permit Provant to
undertake and complete the IPO;
(g) notify Provant in writing if at any time prior to a closing in
connection with the IPO they shall obtain knowledge of any facts relating to the
Company or its officers, directors or stockholders that might make it necessary
or appropriate to amend or supplement the Prospectus used in the registration
statement filed in connection with the IPO in order to make the statements
contained therein not misleading or comply with applicable law (with the
delivery of any notice pursuant to this Section 6.8(g) not limiting or otherwise
affecting the remedies available hereunder to the party receiving such notice);
(h) execute and deliver such other instruments and take such other
actions as may be reasonably required by the Company or the Underwriter in order
to carry out the intent of this Agreement and to complete and close the IPO,
subject to the other terms of this Agreement; and
(i) satisfy (or cause to be satisfied) prior to the Effective Time any
indebtedness to the Company owed by such Stockholder or by any Affiliate of such
Stockholder, and cause to be discharged any guaranty granted by the Company in
favor of such Stockholder or in favor of any Affiliate of such Stockholder.
6.9 TAX FREE REORGANIZATION. From and after the Effective Time, neither
Provant nor the Surviving Corporation shall take or suffer to be taken any
action
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which will cause the Merger not to constitute a reorganization within the
meaning of Section 368(a)(2)(D) of the Code.
6.10 MONTHLY FINANCIAL INFORMATION. Within thirty days after the end of
each month ending after the date of this Agreement and prior to the Effective
Time, the Company will furnish to Provant internally prepared financial
statements comparable to the Financial Statements prepared in a manner
consistent with the Financial Statements and certified by the chief financial
officer of the Company.
6.11 PROVANT OPTION PLAN. Prior to the Effective Time, Provant shall
adopt an employee stock option plan (the "Plan") providing for the granting of
Provant Options from time to time as provided in the Plan. The Plan shall make
available for grant at or before the Closing, and the Board of Directors of
Provant shall so grant, Provant Options with respect to a number of shares of
Provant Common Stock equal to 5.0% of the shares of Provant Common Stock
outstanding as of immediately following the Closing of the Merger and the
Additional Mergers (excluding any Additional Merger that is terminated without
consummation) and the IPO, giving effect to the issuance of all shares of Merger
Stock issuable as of Closing, all shares of Provant Common Stock issuable as of
the Closing as merger consideration in each of the Additional Mergers and the
issuance of Provant Common Stock in the IPO. The Provant Options granted as of
such time shall have an exercise price equal to the IPO Price, shall by their
terms (i) become exercisable ratably over a period of three years (provided that
the holder remains employed by Provant or one of its affiliates and subject to
accelerated vesting in the event of a change in control of Provant), (ii) have a
term of seven years, and (iii) in the case of vested options, will remain
exercisable for a period of one year following any termination of employment
without cause (including termination resulting from the expiration of any
employment agreement in accordance with its terms and termination upon death or
disability) and for a period of ten business days following any termination of
employment for cause (conditioned, in the latter case, upon the terminated
employee's delivery of a general release to the Surviving Corporation, Provant
and their respective affiliates), and shall have such other terms as the Board
of Directors of Provant may determine. The Provant Options granted as of such
time shall be allocated among the employees of, respectively, the Surviving
Corporation and the surviving corporations of the Additional Mergers in
accordance with Schedule 6.11 hereto, and shall be granted to individual
employees of such corporations (in the case of the Surviving Corporation,
excluding Messrs. Howard and Wallace) in accordance with directions to the Board
of Directors of Provant given by the executive officers of the Company and the
Additional Companies absent a good faith determination by the Board of Directors
of Provant that such a direction is manifestly contrary to the interests of the
Surviving Corporation.
6.12 CROSS-LICENSE WITH EFFICACY INSTITUTE. Prior to the Effective
Time, the Company shall enter into a cross-license agreement with Efficacy
Institute, Inc., a Massachusetts non-profit corporation ("Efficacy"), in form
and substance reasonably acceptable to Provant, providing for (a) a perpetual
royalty-free license to the
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Company, its successors and assigns by Efficacy of any intellectual property
owned by Efficacy and utilized in any material respect by the Company at any
time prior to the Effective Time, which license shall be exclusive except with
respect to continued use of such intellectual property by Efficacy, and (b) a
perpetual royalty-free, non-exclusive license to Efficacy by the Company of any
intellectual property owned by the Company and utilized in any material respect
by Efficacy at any time prior to the Effective Time, for use by Efficacy for so
long as Efficacy remains exempt from federal income taxes under Section
501(c)(3) of the Code (or any successor provision thereto) and only in
connection with Efficacy's provision of products and services to the
educational, governmental and non-profit markets, which license shall not be
assignable by Efficacy except to a successor to substantially all of the
business of Efficacy which successor is also exempt from federal income taxes
under Code Section 501(c)(3).
7. CONDITIONS TO CONSUMMATION OF THE MERGER
7.1 CONDITIONS TO THE OBLIGATIONS OF PROVANT AND ACQUISITION. The
obligations of Provant and Acquisition to consummate the Merger are subject to
the satisfaction at the Closing, or waiver by Provant in writing, in whole or in
part, of each of the following conditions:
(a) The IPO and each of the Additional Mergers shall have been
completed at the same time.
(b) The Financial Condition shall have been satisfied in the good faith
determination of Provant.
(c) Each of the representations, warranties, agreements and covenants
of the Company and the Stockholders (giving effect to the Company Disclosure
Schedule, but not to any Company Disclosure Supplement) shall be true and
correct as of, and shall not have been violated in any respect at, the Closing
as though made on and as of the Closing, except for (i) representations,
warranties, agreements and covenants which make reference to a specific date
(including the date of this Agreement), which need only be true and correct as
of the specified date, and (ii) failures of representations or warranties to be
true and correct as of the Closing solely on account of matters arising between
the date hereof and the Effective Time in the ordinary course of the Company's
business, if and to the extent such matters are consistent with past practice of
the Company and are not materially adverse to the Company, either singly or in
the aggregate; the Company and the Stockholders shall, on or before the Closing,
have performed all of their respective obligations under this Agreement which by
the terms hereof are to be performed on or before the Closing; and there shall
have delivered to Provant and Acquisition a certificate signed by the President
of the Company on behalf of and in the name of the Company and by the
Stockholders dated as of the date of the Closing to the foregoing effect.
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(d) The Merger and this Agreement shall have been approved by the
requisite vote of the stockholders of the Company, and not more than 5.0% of the
Shares shall constitute Dissenting Shares.
(e) No action or proceeding by or before any court or other
governmental body shall have been instituted by any governmental body or other
person or entity or threatened in writing by any governmental body which seeks
to restrain, prohibit or invalidate the transactions contemplated by this
Agreement or which would materially adversely affect the right of the Surviving
Corporation, as a subsidiary of Provant, to conduct the business of the Company
as presently conducted by the Company or which claims damages from Provant with
respect to the transactions contemplated hereby.
(f) Provant and Acquisition shall have received the opinion of counsel
to the Company, dated the date of the Closing and in form and substance
reasonably satisfactory to Provant and its counsel, substantially to the effect
set forth on Exhibit 7 (subject to qualifications and assumptions customary in
transactions such as the Merger), which opinion provides that it may be relied
upon by the Underwriter.
(g) All proceedings taken by the Company and all instruments executed
and delivered by the Company prior to the date of the Closing in connection with
the transactions herein contemplated shall be satisfactory in form and substance
to counsel for Provant acting reasonably.
(h) No statute, rule or regulation shall have been enacted or
promulgated which makes illegal or prohibits consummation of the transactions
contemplated hereby or which materially and adversely affects the ability of the
Surviving Corporation, as a subsidiary of Provant, to conduct the business of
the Company as presently conducted by the Company.
(i) Messrs. Howard and Wallace shall have executed and delivered to
Provant the Employment Contracts and the Non-Competition and Non-Disclosure
Agreements, and all holders of Shares shall have executed and delivered to
Provant the Investment Letters.
(j) The Company shall have delivered to Provant and Acquisition a
certificate of its Secretary certifying as to requisite corporate or other
action authorizing the transactions contemplated by this Agreement, the
incumbency of officers and directors, and the status of record ownership of the
Shares.
(k) The Company shall have delivered to Provant such other
certificates, documents and consents as Provant and its counsel shall reasonably
require.
7.2 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY AND THE STOCKHOLDERS.
The obligation of the Company and the Stockholders to consummate this Agreement
is
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subject to the satisfaction at the Closing, or waiver by the Company in writing,
in whole or in part, of each of the following conditions:
(a) The IPO shall have been completed at the same time, and appropriate
measures shall have been adopted and shall be in place to ensure that the
holders of Shares shall receive out of the proceeds of the IPO all cash to which
they will become entitled as of the Effective Time.
(b) Each of the Additional Mergers shall have been completed at the
same time as the Merger, and there shall have occurred no event (or series of
events, whether or not related) with respect to any Additional Company that (i)
constitutes a failure of a closing condition set forth in the applicable
Additional Merger Agreement such that, in the reasonable judgment of Provant,
Provant is not contractually obligated to consummate the applicable Additional
Merger, and (ii) has resulted in a material adverse change between the date
hereof and the date of the Closing in the financial condition, assets,
liabilities, earnings, business, or business prospects of the applicable
Additional Company.
(c) Each of the representations, warranties and agreements of Provant,
Acquisition and the Provant Principals (giving effect to the Provant Disclosure
Schedule) shall be true and correct as of, and shall not have been violated in
any respect at, the Closing as though made on and as of the Closing except for
(i) representations and warranties and agreements which make reference to a
specific date (including the date of this Agreement), which need only be true
and correct as of the specified date, and (ii) failures of representations or
warranties to be true and correct as of the Closing solely on account of matters
arising between the date hereof and the Effective Time in the ordinary course of
Provant's or Acquisition's business, if and to the extent such matters are not
materially adverse to Provant (considered on a consolidated basis giving effect
to the Merger and the Additional Mergers), either singly or in the aggregate;
Provant and Acquisition shall, on or before the Closing, have performed all of
their respective obligations under this Agreement which by the terms hereof are
to be performed on or before the Closing (including without limitation the
adoption of the Plan and the grant of Provant Options to persons who will be
employees of the Surviving Corporation in accordance with Schedule 6.11); and
Provant and Acquisition shall have delivered to the Company a certificate of
their respective Presidents signed on their behalf and in their names dated as
of the date of the Closing to the foregoing effect.
(d) The Merger and this Agreement shall have been approved by the
requisite vote of the stockholders of the Company.
(e) No action or proceeding by or before any court or other
governmental body shall have been instituted by any governmental body or other
person or entity or threatened in writing by any governmental body which seeks
to restrain, prohibit or invalidate the transactions contemplated by this
Agreement or which would materially adversely affect the right of the Company to
consummate the Merger.
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(f) The Company shall have received the opinion, dated the date of the
Closing and in form and substance satisfactory to the Company and its counsel,
of Messrs. Nutter, McClennen & Fish, counsel to Provant, substantially to the
effect set forth on Exhibit 8 (subject to qualifications and assumptions
customary in transactions such as the Merger).
(g) All proceedings taken by Provant and Acquisition and all
instruments executed and delivered by Provant and Acquisition prior to the date
of the Closing in connection with the transactions herein contemplated, and any
instruments to be executed by the Stockholders at the request of Provant, shall
be satisfactory in form and substance to counsel for the Company, acting
reasonably.
(h) No statute, rule or regulation shall have been enacted or
promulgated which makes illegal or prohibits consummation of the transactions
contemplated hereby or which materially and adversely affects the ability of the
Surviving Corporation, as a subsidiary of Provant, to conduct the business of
the Company as presently conducted by the Company.
(i) Provant and Acquisition shall have delivered to the Company a
certificate of its Secretary, certifying as to requisite corporate or other
action authorizing the transactions contemplated by this Agreement.
(j) The Surviving Corporation shall have executed and delivered each
Employment Contract to the appropriate party.
(k) The individual listed on Schedule 7.2 as the designee of the
Company shall have been elected to the Board of Directors of Provant as of
immediately following the closing of the IPO.
(l) Provant and Acquisition shall have delivered to the Company such
other certificates and documents pertaining to the Merger (including the legal
existence and good standing of Provant and Acquisition) as the Company and its
counsel shall reasonably require.
8. RESTRICTIONS ON SALE OR TRANSFER OF MERGER STOCK
8.1 RESTRICTIONS ON SALE. The shares of Merger Stock will not have been
registered under the Securities Act or the blue sky laws of any state by reason
of their contemplated issuance in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act and of such state laws.
Such shares may not be sold, transferred, or otherwise disposed of without
registration under the Securities Act and such state laws or an exemption
therefrom, or in contravention of the restrictions contained in the Investment
Letter attached hereto as Exhibit 4.
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8.2 REGISTRATION ON A PARI PASSU BASIS. Provant agrees that, in the
event that at any time after the closing of the IPO it conducts a public
offering of Common Stock registered under the Act and Provant and its
underwriter determine, in their sole discretion, to permit (i) any holder of
Merger Stock, (ii) any holder of Provant Common Stock issued as merger
consideration in any of the Additional Mergers, or (iii) any Provant Principal
to sell Provant Common Stock in such offering, then Provant shall permit each
holder of Merger Stock to sell shares of such Merger Stock in such offering in
the same proportion as the person referenced in any of clauses (i) through (iii)
above who is then being permitted to sell the highest proportion of his or her
shares of Provant Common Stock (all such proportions being based on the
respective number of shares of Provant Common Stock that each applicable person
then holds); provided, however, that the foregoing right shall not apply to
shares that are no longer subject to the two-year restriction period under the
Investment Letter and that are tradeable either without regard to Rule 144
promulgated under the Act or tradeable within a 90 day period under such Rule
144. For purposes of the foregoing, an agreement granting a person a right to
have shares registered in the future shall not be construed as "permitting" such
person to sell shares in an offering until such time as such right is properly
exercised under the terms of such agreement.
9. INDEMNIFICATION
9.1 AGREEMENTS TO INDEMNIFY.
(a) As used in this Article 9:
(i) "Damages" means claims, damages, liabilities, losses,
judgments, settlements, and expenses, including, without
limitation, all reasonable fees and disbursements of counsel
incident to the investigation or defense of any claim or proceeding
or threatened claim or proceeding.
(ii) "Provant Indemnified Party" means, collectively, each
of Provant, the Surviving Corporation, and their respective
affiliates.
(iii) "Company Indemnified Party" means, after the Effective
Time, the former stockholders of the Company collectively.
(iv) "Indemnified Party" means either of the Provant
Indemnified Party or the Company Indemnified Party, as applicable
under the circumstances.
(b) On the terms and subject to the limitations set forth in this
Agreement, the Company, prior to the Effective Time, shall, and, after the
Effective Time, the Stockholders shall indemnify, defend, and hold the Provant
Indemnified Party harmless from, against and in respect of any and all Damages
incurred by any
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Provant Indemnified Party arising from or in connection with any of the
following (collectively referred to herein as "Claims"):
(i) any breach of any representation, warranty, covenant or
agreement made by the Company or by the Stockholders in this
Agreement or in any exhibit, schedule, certificate or other
document delivered or to be delivered at the Closing by or on
behalf of the Company or the Stockholders pursuant to the terms of
this Agreement or otherwise referred to or incorporated in this
Agreement, and including any allegation by a third party which, if
true, would constitute such a breach; and
(ii) those matters identified on Schedule 9.1.
(c) In addition to the foregoing, and solely in the event the Merger
shall be consummated, the Stockholders shall indemnify Provant as set forth in
the immediately following sentence from any failure by the Company to have a
Closing Net Worth equal to or greater than the Minimum Net Worth. In the event
the Closing Net Worth shall be less than the Minimum Net Worth (and Provant
shall have elected, in its sole discretion, to waive the failure of the closing
condition set forth in Section 7.1(b) caused thereby), the Stockholders shall
reimburse Provant at the Closing for the amount of such deficit on a dollar for
dollar basis. Such reimbursement shall be the sole remedy of Provant on account
of a failure of the Closing Net Worth to equal or exceed the Minimum Net Worth
(other than Provant's right to terminate this Agreement), and neither the
Company nor the Stockholders shall be liable for any consequential damages on
account of any such failure. Any indemnity and reimbursement required by this
Section 9.1(c) shall not be subject to Section 9.2(c).
(d) From and after the Effective Time and solely if the Merger shall
have been consummated, on the terms and subject to the limitations set forth in
this Agreement, Provant and the Provant Principals shall indemnify, defend, and
hold the Company Indemnified Party harmless from, against and in respect of any
and all Damages incurred by any Company Indemnified Party arising from or in
connection with any actual or alleged breach of any representation, warranty,
covenant or agreement made by Provant or Acquisition in this Agreement or in any
exhibit, schedule, certificate or other document delivered or to be delivered at
the Closing by or on behalf of Provant or Acquisition pursuant to the terms of
this Agreement or otherwise referred to or incorporated in this Agreement (also
referred to herein as "Claims"); provided, however, that this provision shall
not be construed to provide to the Company Indemnified Party any indemnification
with respect to the Registration Statement and the information contained
therein, or with respect to any failure of the IPO to be consummated.
(e) Subject to Section 9.2, the Company's representations and
warranties set forth in Article 3, the Stockholders' representations and
warranties set forth in Article
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4 and Provant's and Acquisition's representations and warranties set forth in
Article 5 shall, for purposes of this Article 9, be deemed to have survived the
Effective Time and the Closing of the Merger and the other transactions
contemplated hereby notwithstanding any contrary terms of this Agreement, and
whenever such representations, warranties, covenants and agreements are referred
to in this Article 9, the text of the same as set forth in the aforesaid
Articles shall be deemed to be set forth in their entirety herein, and the same
are hereby incorporated herein by such references. Each representation,
warranty, covenant and agreement of the Company and the Stockholders shall be
deemed to have been relied upon by the Provant Indemnified Party, and each
representation, warranty, covenant and agreement of Provant and Acquisition
shall be deemed to have been relied upon by the Company Indemnified Party,
notwithstanding any investigation or inspection made by or on behalf of any
Provant Indemnified Party or the Company Indemnified Party, as applicable, and
shall not be affected in any respect of any such investigation or inspection. No
waiver of a closing condition by an Indemnified Party shall be deemed to relieve
a party that is otherwise obligated to provide indemnification of its
obligations pursuant to this Section 9.1 on account of the matters that were the
subject of such waiver.
(f) In addition to and not in limitation of the rights and remedies of
Provant under this Section 9.1, Provant may withhold from any shares of Provant
Common Stock issuable and all amounts payable under Section 2.8 the amount of
any Damages of Provant arising out of or in connection with Claims asserted
hereunder (as estimated in good faith by Provant in the event such Damages are
not yet fixed, subject to future release if appropriate upon final resolution of
the applicable Claim). For purposes of this subsection (f), shares of Provant
Common Stock otherwise issuable under Section 2.8 shall be valued at the lower
of (i) the closing price for a share of Provant Common Stock on the last trading
day immediately preceding the date Provant gives notice that it has a claim
under this Article 9 and (ii) the IPO Price adjusted as provided in Section
2.8(f).
(g) In the event the Stockholders shall indemnify the Provant
Indemnified Party for any breach of the warranties contained in Section 3.25 on
account of a failure of accounts receivable of the Company to be collected, the
Surviving Corporation shall assign to the Stockholders those accounts receivable
as to which such indemnity has been paid.
9.2 LIMITATIONS ON INDEMNITY OBLIGATIONS. The indemnity obligations of
the Company or the Stockholders, as applicable (in either case, the "Company
Indemnifying Party"), or Provant and the Provant Principals (collectively, the
"Provant Indemnifying Party") (both the Company Indemnifying Party and the
Provant Indemnifying Party being called generically the "Indemnifying Party"),
under this Agreement shall be subject to the following limitations:
(a) The indemnity obligations of the Indemnifying Party shall expire on
September 15, 1999 (the "Cut-off Date"); provided, however, that such
obligations with
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respect to (i) the representations and warranties contained in Sections 3.1,
3.2, 3.10, and 3.22, Article 4, and Sections 5.1, 5.2, 5.3 and 5.4 of this
Agreement and the matters identified on Schedule 9.1 and in Section 9.1(c) shall
continue forever without limitation, and (ii) the representations and warranties
regarding taxes, which are contained in Section 3.15, shall remain in effect
until all claims for taxes due by or on account of the Company for any period up
to and including the Effective Time have been settled and any statute of
limitations period with respect to such taxes has expired; and provided further
that the indemnity obligations of the Indemnifying Party for Claims timely
asserted by an Indemnified Party before the expiration of the applicable
indemnity period, if any, in the manner provided in this Agreement shall
continue until such Claims are finally resolved and discharged.
(b) (i) Subject to the maximum aggregate amounts provided elsewhere in
this Subsection 9.2(b) with respect to a Stockholder's indemnity obligations, in
the event of any Damages for which a Stockholder is liable pursuant to Section
9.1, each Stockholder shall be liable solely for a fraction of each dollar of
Damages suffered equal to the fraction derived by dividing the number of Shares
held by all Stockholders as of the date hereof by the total number of Shares
outstanding. Subject to subsection (b)(ii) below, the aggregate indemnity
obligations of each Stockholder for Damages arising out of Claims the operative
facts of which were actually known to either Stockholder as of the date of this
Agreement ("Known Claims") shall not in any event exceed an amount equal to the
sum of (A) the cash received by all Stockholders pursuant to Section 2.7(c),
plus (B) the product obtained by multiplying the number of shares of Merger
Stock received by all Stockholders by the IPO Price, minus (C) any amounts paid
pursuant to Section 9.1 by any Stockholder with respect to Claims that are not
Known Claims. Subject to subsection (b)(ii) below (and notwithstanding Section
11.9), the aggregate indemnity obligations of each Stockholder for any Damages
arising out of Claims that do not constitute Known Claims shall not in any event
exceed Five Million Dollars ($5,000,000); provided, however, that the aggregate
indemnity obligations of all Stockholders for all Claims, whether or not
constituting Known Claims, shall not in any event exceed the sum of the amounts
referenced in clauses (A) and (B) of the immediately preceding sentence. The
aggregate indemnity obligations of the Provant Principals for any Damages shall
not in any event exceed an amount equal to (X) the aggregate number of shares of
Provant Common Stock held by the Provant Principals as of immediately following
the closing of the IPO plus the aggregate number of warrant shares covered by
those certain warrants for the purchase of Provant Common Stock issued to the
Provant Principals as of the closing of the IPO, multiplied by (Y) the IPO
Price, minus (Z) the aggregate exercise price of such warrants.
(ii) Solely in the event that both (A) the Damages to be paid
by the Stockholders pursuant to Section 9.1(b) on account of the then-asserted
Claim, in aggregation with all such Damages previously paid by all Stockholders,
equal or exceed the aggregate amount of the cash received by all Stockholders
pursuant to Section 2.7, and (B) the Average Closing Price (as defined below) of
Provant Common Stock during the ten trading days immediately following (but not
including) the date
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on which notice of the liquidated amount of the claimed Damages is given to the
Stockholders (which may, if applicable, be the date on which the initial notice
of the Claim is given) (in either event, the "Claim Date") is less than the IPO
Price, then any Stockholder may, at his election, satisfy such portion of the
Damages as exceeds the cash received by all Stockholders pursuant to Section 2.7
by tendering to Provant, for cancellation, shares of Provant Common Stock equal
in value to the Damages to be so satisfied, with such shares valued at the
Average Closing Price determined under clause (B) of this sentence.
Notwithstanding subsection (b)(i) above, if the foregoing clauses (A) and (B)
are satisfied and the Stockholders are therefore permitted to satisfy their
obligations to pay Damages by tendering shares of Provant Common Stock, and a
Stockholder elects to so tender Provant Common Stock, such Stockholder's
obligation for Damages shall be limited to the number of shares of Provant
Common Stock received by all Stockholders pursuant to Sections 2.7 and 2.8. In
the event that Damages are to be paid by the Stockholders before the final
distribution of Provant Common Stock (if any) on account of 1998 EBIT and if
this subsection (b)(ii) shall apply, the final number of shares of Provant
Common Stock that the Stockholder shall be obligated to tender to Provant shall
be left undetermined until such time as the distribution of Provant Common Stock
(if any) is to be made under Section 2.8 As used herein, "Average Closing Price"
means the average of the closing prices of Provant Common Stock on each trading
day during the stated period, as recorded on the New York Stock Exchange or on
such other exchange or market as is then the principal exchange or market on
which Provant Common Stock is traded.
(c) Except (i) as provided in Section 9.1(c), and (ii) with respect to
Damages arising out of the matters identified on Schedule 9.1, which Damages
shall be indemnified without respect to the threshold provided in this Section
9.2(c), an Indemnified Party shall be entitled to indemnification only if the
aggregate and collective Damages incurred or suffered by it exceeds $86,250, in
which event it shall be entitled to indemnification of the full amount of such
Damages. No amounts indemnified by the Company or the Stockholders pursuant to
Section 9.1(c) or with respect to matters identified on Schedule 9.1 shall be
treated as Damages incurred and suffered by the Indemnified Party for purposes
of the immediately preceding sentence, provided only that the amounts so
indemnified have been duly paid.
(d) Notwithstanding the preambles to, respectively, Article 3 and
Article 5, the contractual liability of the Stockholders and the Provant
Principals for any breach of the representations and warranties contained in,
respectively, Article 3 and Article 5 shall be limited to such Stockholder's or
Provant Principal's liability provided in this Article 9.
9.3 NOTICE OF THIRD PARTY CLAIMS. An Indemnified Party shall promptly
notify the Indemnifying Party in writing of any Claim consisting of a matter
asserted by a third person that might give rise to any indemnity obligation of
the Indemnifying Party hereunder (a "Third Party Claim"), specifying in
reasonable detail the nature thereof and indicating the amount (if known, or
estimated if necessary) of the Damages that have been or may be sustained by the
Indemnified Party. Failure
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of any Indemnified Party to promptly give such notice shall not relieve the
Indemnifying Party of its or his obligation to indemnify under this Article 9,
but as a result of any such failure, the Indemnified Party shall be liable to
the Indemnifying Party for, and only for, the amount of actual damages caused by
such failure, which amount shall be an offset against the amount of Damages for
which the Indemnifying Party is liable hereunder. Together with or following
such notice, the Indemnified Party shall deliver to the Indemnifying Party
copies of all notices and documents received by the Indemnified Party relating
to the Third Party Claim (including court papers).
9.4 DEFENSE AND SETTLEMENT OF THIRD PARTY CLAIMS. The Indemnifying
Party shall have the right (without prejudice to the right of any Indemnified
Party to participate at its or his own expense through counsel of its or his own
choosing) to defend against any Third Party Claim at its or his expense and
through counsel of its or his own choosing and to control such defense if the
Indemnifying Party gives written notice of its or his intention to do so within
15 business days of his or its receipt of notice of the Third Party Claim. The
Indemnified Party shall cooperate fully in all reasonable respects in the
defense of such Third Party Claim and shall make available to the Indemnifying
Party or its or his counsel all pertinent information under their control
relating thereto. The Indemnified Party shall have the right to elect to settle
any Third Party Claim; provided, however, the Indemnifying Party shall not have
any indemnification obligation with respect to any monetary payment to any third
party required by such settlement unless the Indemnifying Party shall have
consented thereto. The Indemnifying Party shall have the right to elect to
settle any Third Party Claim subject to the consent of the Indemnified Party;
provided, however, that if the Indemnified Party fails to give such consent
within 15 business days of being requested to do so, the Indemnified Party
shall, at its expense, assume the defense of such Third Party Claim and
regardless of the outcome of such matter, the Indemnifying Party's liability
hereunder shall be limited to the amount of any such proposed settlement. The
foregoing provisions notwithstanding, in no event (a) may either Indemnifying
Party adjust, compromise or settle any Third Party Claim unless such adjustment,
compromise or settlement unconditionally releases the Indemnified Party from all
liability, (b) may the Company Indemnifying Party adjust, compromise or settle
any Third Party Claim if such adjustment, compromise or settlement affects the
absolute and sole right of Provant or the Surviving Corporation to own or use
any of the Company's assets or (c) may the Company Indemnifying Party defend any
Third Party Claim which, if adversely determined, would materially impair the
financial condition, business or prospects of Provant or the Surviving
Corporation.
9.5 NOTICE OF OTHER CLAIMS. In the event any Indemnified Party should
incur any Claim that does not involve a Third Party Claim, the Indemnified Party
shall deliver a notice of such Claim with reasonable promptness to the
Indemnifying Party. If the Indemnifying Party notifies the Indemnified Party
that it does not dispute the Claim described in such notice or fails to notify
the Indemnified Party within 30 days after delivery of such notice by the
Indemnified Party whether the
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Indemnifying Party disputes the Claim described in such notice, the Damages in
the amount specified in the Indemnified Party's notice will be conclusively
deemed a liability of the Indemnifying Party and the Indemnifying Party shall
pay the amount of such Damages to the Indemnified Party on demand. Failure of
any Indemnified Party to promptly give such notice shall not relieve the
Indemnifying Party of its or his obligation to indemnify under this Article 9,
but as a result of any such failure, the Indemnified Party shall be liable to
the Indemnifying Party for, and only for, the amount of the actual damages
caused by such failure, which amount shall be an offset against the amount of
Damages for which the Indemnifying Party is liable hereunder.
10. TERMINATION; AMENDMENTS; WAIVER
10.1 TERMINATION. This Agreement may be terminated at any time prior to
the Effective Time, notwithstanding approval thereof by the stockholders of the
Company:
(a) by mutual consent of the Board of Directors of Provant and the
Company;
(b) by any party, in its sole discretion, if the Merger and the IPO
shall not have been consummated on or before June 30, 1998, unless the failure
of the Merger to occur by such date shall be due to the failure of the party
seeking to terminate this Agreement to perform or observe the covenants and
agreements of such party set forth herein;
(c) by the Company if there has been a misrepresentation or breach on
the part of Provant or Acquisition in the representations, warranties, covenants
or obligations of Provant or Acquisition set forth herein, provided that in the
case of a breach of any such covenant or obligation, such breach has not been
cured within ten (10) business days after the Company has notified Provant and
Acquisition of such breach;
(d) by Provant if there has been a misrepresentation or breach on the
part of the Company or the Stockholders in the representations, warranties,
covenants and obligations of the Company and the Stockholders set forth herein,
provided that in the case of a breach of any such covenant or obligation, such
breach has not been cured within ten (10) business days after Provant has
notified the Company or the Stockholders of such breach; or
(e) by any party if any court shall have issued an order, decree or
ruling or taken any other action permanently enjoining, restraining or otherwise
prohibiting the Merger and such order, decree, ruling or other action shall have
become final and non-appealable.
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The power of termination provided for by this Section 10.1 may be
exercised for Provant or the Company only by their respective Boards of
Directors in its sole discretion, and will be effective only after written
notice thereof, signed on behalf of the party for which it is given by its
Chairman of the Board, President or other duly authorized officer, shall have
been given to the other. If this Agreement is terminated in accordance with this
Section 10.1, the Merger shall be abandoned without further action by Provant or
the Company.
10.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement by any party as provided in Section 10.1, this Agreement shall
forthwith become void and have no effect, and neither Provant, nor the Company,
nor any of the officers or directors of either of them, nor the Stockholders
shall have any liability of any nature whatsoever hereunder, or in connection
with the transactions contemplated hereby, except (a) Sections 6.3(b) and 11.8
shall survive any termination of this Agreement, (b) notwithstanding anything to
the contrary contained in this Agreement, no party shall be relieved of or
released from any liabilities or damages arising out of its breach of any
provision of this Agreement; and (c) until September 30, 1998, neither the
Company nor the Stockholders shall, directly or indirectly, discuss, negotiate,
submit or respond to proposals relating to, or enter into an agreement with any
other person with respect to, a transaction with other training companies to be
accompanied or followed by a public offering.
10.3 AMENDMENT. Subject to compliance with applicable law, this
Agreement may be amended by the parties hereto, by action taken or authorized
(in the case of Provant, Acquisition and the Company) by their respective Boards
of Directors, at any time before or after approval of the matters presented in
connection with the Merger by the stockholders of the Company. This Agreement
may not be amended except by an instrument in writing signed on behalf of each
of the parties hereto.
10.4 EXTENSION; WAIVER. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized (in the case of Provant,
Acquisition and the Company) by their respective Boards of Directors, may, to
the extent legally allowed, subject to Section 10.3, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party, but such
extension or waiver or failure to insist on strict compliance with an
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure.
11. MISCELLANEOUS
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11.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Except as provided in
Article 9 with respect to the representations and warranties contained in
Articles 3, 4 and 5, and except for the provisions of Section 10.2, the
representations and warranties made in this Agreement shall not survive beyond
the Effective Time.
11.2 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement (a) constitutes, with
the Company Disclosure Schedule, the Provant Disclosure Schedule, the other
schedules and the Exhibits hereto, the entire agreement among the parties with
respect to the subject matter hereto and supersedes all other prior agreements
and understandings, both written and oral, among the parties or any of them with
respect to the subject matter hereof (including, without limitation, the letter
of intent between the Company and American Business Partners LLC) and (b) shall
not be assigned by operation of law or otherwise, provided that Provant or
Acquisition may assign its respective rights and obligations to any direct or
indirect subsidiary of Provant, but no such assignment shall relieve Provant of
its obligations hereunder.
11.3 VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, each of which shall remain in full force and
effect.
11.4 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person or by electronic facsimile transmission,
cable, telegram, or telex, or when mailed by registered or certified mail
(postage prepaid, return receipt requested) or delivered to a courier of
national reputation to the respective parties as follows:
If to Provant or Acquisition, to it at:
67 Batterymarch Street, Suite 500
Boston, MA 02110
Facsimile: (617) 261-1610
with a copy to:
Nutter, McClennen & Fish, LLP
One International Place
Boston, Massachusetts 02110-2699
Attention: Constantine Alexander, Esq.
Facsimile: (617) 973-9748
If to the Company or any Stockholder, to it or him at:
99 Hayden Street
Lexington, MA 02173
Fascimile:
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with a copy to:
McKenzie & Edwards
One Bulfinch Place, Suite 201
Boston, MA 02114
Attn: Denzil D. McKenzie, Esq.
Facsimile: (617) 723-7234
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
11.5 GOVERNING LAW. This Agreement and all rights of the parties
arising in connection with the transactions contemplated hereby (including the
negotiation hereof, and whether or not such transactions shall be consummated)
shall be governed by and construed in accordance with the internal laws of the
State of Massachusetts, regardless of the laws that might otherwise govern under
applicable principles of conflicts of laws thereof.
11.6 DESCRIPTIVE HEADINGS; GENDER. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement. Wherever used herein,
the masculine gender shall include the femine.
11.7 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same agreement. Copies (photostatic,
facsimile or otherwise) of signatures to this Agreement shall be deemed to be
originals and may be relied upon to the same extent as originals, and delivery
of a duly executed signature page to this Agreement shall be deemed to be
delivery of this Agreement in its entirety.
11.8 EXPENSES. All costs and expenses incurred in connection with the
transactions contemplated by this Agreement shall be paid by the party incurring
such expenses, provided (i) solely in the event the Merger is consummated, the
reasonable legal and accounting expenses of the Company, up to a maximum of
$50,000, shall be paid by (at the election of Provant) either Provant or the
Surviving Corporation, and (ii) all expenses of the Company not payable pursuant
to clause (i) shall be paid directly by the Stockholders or expensed (and not
capitalized) by the Company prior to the computation of the Company's net worth
for purposes of determining satisfaction of the Financial Condition. An account
receivable for expenses reimbursable by Provant or the Surviving Corporation
under clause (i) above may be included on the books of the Company for purposes
of calculating the Closing Net Worth, to the extent such amounts have previously
been expensed by the Company.
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11.9 JOINT AND SEVERAL. The representations, warranties, agreements,
covenants and obligations of the Stockholders under this Agreement are joint and
several. The indemnity obligations of Provant and the Provant Principals under
this Agreement are joint and several.
11.10 PARTIES IN INTEREST. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Agreement.
11.11 INTERPRETATION. The Parties acknowledge and agree that each party
and its counsel reviewed and negotiated the terms and provisions of this
Agreement and has contributed to its revision and that the rule of construction
to the effect that any ambiguities are resolved against the drafting party shall
not be employed in the interpretation of this Agreement.
11.12 MOST FAVORED NATION TREATMENT. Subject to the last sentence of
this Section 11.12, Provant covenants and agrees that the Company and the
Stockholders will be accorded "most favored nation" treatment with respect to
any material amendments adopted after the date hereof with respect to any
Additional Merger Agreement or any other agreement materially altering the
rights or obligations of any Additional Company or the stockholders thereof. The
parties agree to amend this Agreement as necessary from time to time to effect
any changes required pursuant to such "most favored nation" treatment.
Notwithstanding the foregoing, such "most favored nation" treatment shall not
apply to (a) amendments of any provisions not applicable generally to this
Agreement and all (or substantially all) of the Additional Merger Agreements, or
(b) any waiver of a closing condition or an affirmative or negative covenant or
comparable undertaking contained in any Additional Merger Agreement.
* * *
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IN WITNESS WHEREOF, each of the parties has caused this Agreement and
Plan of Merger to be executed on its behalf by its officers thereunto duly
authorized, all as of the day and year first above written.
PROVANT, INC.
By:
-------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------
HOWARD ACQUISITION CORP.
By:
-------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------
J. HOWARD & ASSOCIATES, INC.
By:
-------------------------------------------
Name: Jeffrey P. Howard
-----------------------------------------
Title: Chairman and Chief Executive Officer
----------------------------------------
STOCKHOLDERS:
----------------------------------------------
Jeffrey P. Howard
----------------------------------------------
Marc S. Wallace
<PAGE> 55
PROVANT PRINCIPALS:
----------------------------------------------
Paul M. Verrochi
----------------------------------------------
Dominic J. Puopolo
<PAGE> 1
Exhibit 2.4
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this Agreement") dated as of
February 12, 1998 is among Provant, Inc., a Delaware corporation ("Provant"),
LSS Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of
Provant ("Acquisition"), Robert A. Steinmetz, Ph.D. and Associates, Inc., a
California corporation (the "Company") (d/b/a Learning Systems Sciences), John
F. King, Robert A. Steinmetz, Ph.D., and the trusts identified on the signature
page hereof, who collectively constitute the sole stockholders of the Company
(the "Stockholders"), and Paul M. Verrochi and Dominic J. Puopolo (the "Provant
Principals"), and provides for the merger of the Company with and into
Acquisition (the "Merger"). The Boards of Directors of Provant, Acquisition and
the Company have determined that the Merger is in the best interests of their
respective stockholders and the Merger has been unanimously approved by the
stockholders of the Company and Acquisition.
Accordingly, the parties hereto, in consideration of the mutual
representations, warranties and covenants contained herein, agree as follows:
1. CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the
respective meanings set forth below:
1.1 "Additional Companies" means those companies identified on Schedule
1.1 hereto, with which companies Provant is entering into separate Agreements
and Plans of Merger contemporaneously with the execution and delivery of this
Agreement.
1.2 "Additional Mergers" means the acquisitions (by merger or otherwise)
of each of the Additional Companies by Provant, and "Additional Merger
Agreements" means the agreements and plans of merger or other contracts (in each
case as described in Section 5.9 of the Provant Disclosure Schedule) pursuant to
which Provant will consummate the Additional Mergers.
1.3 "Additional Shares" means the additional shares, if any, of Provant
Common Stock issuable to the Stockholders pursuant to Section 2.8.
1.4 "Balance Sheet" means the balance sheet of the Company as of June
30, 1997 included in the Financial Statements.
1.5 "Balance Sheet Date" means June 30, 1997.
1.6 "Certificate of Merger" has the meaning given to it in Section 2.2.
<PAGE> 2
1.7 "CGCL" means the California General Corporation Law.
1.8 "Closing" means the closing of the transactions contemplated by
this Agreement as provided in Section 2.2.
1.9 "Closing Net Worth" means the Company's pro forma net worth as of a
date selected by Provant as close as practicable to the Effective Time (but in
no event more than thirty (30) days prior to the Effective Time), determined
using the same principles and assumptions used by Provant in its preparation of
its pro forma financial statements contained in the Registration Statement.
1.10 "Code" means the Internal Revenue Code of 1986, as amended to date.
1.11 "Commission" means the Securities and Exchange Commission.
1.12 "Company Disclosure Schedule" means the Disclosure Schedule
prepared by the Company and attached hereto and incorporated herein by this
reference.
1.13 "Company Option" means an option to purchase Shares, whether or
not vested or exercisable as of the applicable time.
1.14 "DGCL" means the Delaware General Corporation Law.
1.15 "1998 EBIT" means the earnings before interest and taxes of the
Company for the period beginning July 1, 1997 and ending at the Effective Time
and of the Surviving Corporation for the period beginning at the Effective Time
and ending June 30, 1998 determined in accordance with the Instructions for
Determination of EBIT attached hereto as Exhibit 1; provided, that if the
Effective Time is after June 30, 1998, then 1998 EBIT shall consist solely of
the earnings before interest and taxes of the Company (determined as set forth
above) for the period beginning July 1, 1997 and ending June 30, 1998 .
1.16 "Effective Time" means such time as Certificate of Merger is filed
with the Secretary of State of the State of Delaware in accordance with Section
252 of the DGCL, unless Acquisition and the Company agree that a later time
shall be the Effective Time, in which case such time shall be specified in the
Merger Agreement and the Certificate of Merger.
1.17 "Employment Contract" means the employment agreements in the form
attached hereto as Exhibit 2.
1.18 "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
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1.19 "Financial Condition" means that, using the same principles and
assumptions used by Provant in the preparation of its pro forma financial
statements contained in the Registration Statement, the Company's Closing Net
Worth is not less than $800,000 (the "Minimum Net Worth"), the Company's pro
forma revenues for the 12 months ended June 30, 1997 are not less than $5.6
million, the Company's pro forma earnings before interest and taxes for the 12
months ended June 30, 1997 are not less than $1.7 million, the Company's
projected pro forma revenues (as determined in good faith by Provant) for the 12
months ended June 30, 1998 are not less than $5.6 million and the Company's
projected 1998 EBIT (as determined in good faith by Provant) is not less than
$1.7 million.
1.20 "Financial Statements" means the financial statements of the
Company attached hereto as Exhibit 3, consistent in form and substance with the
requirements of Regulation S-X of the Commission under the Securities Act,
consisting of (a) Balance Sheets at June 30, 1997 and 1996, and at September 30,
1997; (b) Statements of Income for the periods ending June 30, 1997, 1996 and
1995, and ending September 30, 1997; (c) Statements of Stockholders' Equity at
June 30, 1997, 1996, 1995 and 1994, and at September 30, 1997; (d) Statements of
Cash Flow for the periods ending June 30, 1997, 1996 and 1995, and ending
September 30, 1997; and (e) notes to the foregoing.
1.21 "First Accountants" means the firm of independent public
accountants then regularly employed by Provant.
1.22 "Fraction" means that fraction which has one as its numerator and
which has, as its denominator, the pro forma number of Shares outstanding on a
fully diluted basis as of immediately prior to the Effective Time, assuming the
exercise or conversion of all then-outstanding Company Options, warrants and
other instruments exercisable for or convertible into Shares (whether or not
then currently exercisable or convertible).
1.23 "IPO" means the initial underwritten public offering of shares of
Provant Common Stock.
1.24 "IPO Price" shall mean the price at which shares of Provant Common
Stock are sold to the public in the IPO.
1.25 "Investment Letter" means (i) with respect to the Stockholders, an
investment letter in the form attached hereto as Exhibit 4A, and (ii) with
respect to any other holder of Shares or Company Options, an investment letter
in the form attached hereto as Exhibit 4B.
1.26 "Merger Stock" means the shares of Provant Common Stock exchanged
for Shares pursuant to Section 2.7(c) and 2.8.
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1.27 "Non-Competition and Non-Disclosure Agreement" means a
non-competition and non-disclosure agreement in the form attached hereto as
Exhibit 5.
1.28 "Prospectus" means the prospectus relating to the IPO first filed
with the Commission pursuant to Rule 424(b) and Rule 430A of the rules and
regulations of the Commission under the Securities Act or (if no such filing is
required) as included in the Registration Statement and, in the event of any
supplement or amendment to such prospectus after the date the Registration
Statement becomes effective under the Securities Act, such prospectus as so
supplemented or amended from and after the filing with the Commission of such
supplement or the effectiveness of such amendment.
1.29 "Provant Disclosure Schedule" means the Disclosure Schedule
prepared by Provant and attached hereto and incorporated herein by this
reference.
1.30 "Provant Common Stock" means the shares of Common Stock, $0.01 par
value, of Provant.
1.31 "Registration Statement" means the registration statement on Form
S-1, including the related preliminary prospectus, to be filed with the
Commission in connection with the IPO, including all exhibits and financial
statements, in the form in which it becomes effective under the Securities Act
and, in the event of any amendment thereto after the effective date of any such
registration statement, such registration statement as so amended from and after
the effectiveness of such amendment.
1.32 "Second Accountants" means an accounting firm of national stature,
jointly selected by Provant and the Stockholders, that is not then employed by
Provant, any Stockholder or American Business Partners LLC ("ABP") (or any of
their respective affiliates) and that was not employed by the Company or ABP
during the two-year period immediately preceding the Effective Time; provided,
however, if the parties cannot jointly agree upon the Second Accountants, the
Stockholders (collectively) and Provant shall each designate one accounting firm
(which shall be of national stature but which may be employed or have been
employed by such party or its affiliates), and the two accounting firms so
designated shall jointly select a third accounting firm, meeting the criteria
set forth in the first clause of this sentence, to serve as the Second
Accountants.
1.33 "Securities Act" means the Securities Act of 1933, as amended.
1.34 "Share" means a share of Common Stock, no par value, of the
Company, and "Shares" means all of such shares.
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1.35 "Surviving Corporation" means the corporation that survives the
Merger.
1.36 "Provant Option" means an option to purchase shares of Provant
Common Stock, granted under the Plan to be established by Provant pursuant to
Section 6.11.
1.37 "Underwriter" means, collectively, the managing underwriters of the
IPO.
1.38 "Underwriters' Discount" means the discount at which the
Underwriter purchases the Provant Common Stock in the IPO, but in no event more
than 7.0% of the IPO Price.
2. THE MERGER
2.1 THE MERGER. The Merger shall occur at the Effective Time upon the
terms and subject to the conditions hereof and in accordance with the CGCL and
the DGCL. Following the Merger, Acquisition shall continue as the Surviving
Corporation and be a subsidiary of Provant, and the separate corporate existence
of the Company shall cease.
2.2 EFFECTIVE TIME. As soon as practicable after satisfaction or waiver
of all conditions to the Merger, the parties (a) shall cause a duly executed
certificate of merger (the "Certificate of Merger") with respect to the Merger,
together with an appropriate tax clearance certificate, to be filed and recorded
in accordance with Section 1103 of the CGCL and shall cause a duly executed
counterpart of the Certificate of Merger to be filed and recorded in accordance
with Section 252 of the DGCL and (b) shall take all such further actions as may
be required by law to make the Merger effective (including without limitation
the assumption by Acquisition of any tax liability of the Company to the State
of California, provided that such assumption shall not relieve the Stockholders
of any indemnity obligation with respect to such tax liability as is otherwise
provided under Section 9.1 hereof). The Merger shall be effective at the
Effective Time. Before the filing of the Certificate of Merger, a closing (the
"Closing") will be held on the date the IPO closes (or such earlier date as the
parties may agree) at the offices of Nutter, McClennen & Fish, LLP, One
International Place, Boston, Massachusetts (or such other place as the parties
may agree) for the purpose of confirming all the foregoing.
2.3 EFFECTS OF THE MERGER. The Merger shall have the effects set forth
in Sections 1107 and 1108 of the CGCL and Sections 259, 260 and 261 of the DGCL.
2.4 TAX CONSEQUENCES. It is intended that the Merger shall constitute a
reorganization within the meaning of Section 368(a)(2)(D) of the Code and that
this
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Agreement shall constitute a "plan of reorganization" for the purposes of
Section 368 of the Code.
2.5 CERTIFICATE OF INCORPORATION AND BY-LAWS. The Certificate of
Incorporation and the By-Laws of Acquisition, in each case as in effect at the
Effective Time, shall be the Certificate of Incorporation and By-Laws of the
Surviving Corporation, except that the name of the Surviving Corporation shall
be the name of the Company or such other name as Provant may designate.
2.6 DIRECTORS AND OFFICERS. At the Effective Time, the Board of
Directors and officers of the Surviving Corporation shall be as set forth on
Exhibit 6, and each such person shall hold office until his or her respective
successor is duly elected or appointed and qualified.
2.7 CONVERSION OF STOCK.
At the Effective Time:
(a) Each share of Acquisition that is issued and outstanding
immediately prior to the Effective Time shall remain issued and outstanding
without change.
(b) All Shares held in the treasury of the Company immediately prior to
the Effective Time shall be cancelled, without the payment of any consideration
therefor.
(c) Each other Share which is outstanding immediately prior to the
Effective Time shall be converted without any action on the part of the holder
thereof into and be exchangeable for
(i) that number of shares of Provant Common Stock
determined by multiplying the Fraction times the number
obtained after (A) dividing $10.5 million by the IPO Price and
(B) subtracting from the quotient obtained pursuant to clause
(A) the number obtained by dividing $2,625,000 by the IPO
Price net of underwriters' discount,
(ii) cash equal to the Fraction times the sum of (X)
$2,625,000, plus (Y) the excess, if any, of the Company's
Closing Net Worth over the Minimum Net Worth, and
(iii) the right to receive that number of Additional
Shares determined as provided in Section 2.8.
Provant shall not issue any fractional share of Provant Common Stock; in lieu of
issuing a fractional share, Provant shall make a cash payment in accordance with
Section 2.9. Notwithstanding the foregoing, which quantifies the merger
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consideration to be received by the Stockholders in the aggregate, the
allocation of merger proceeds between the Stockholders and among the Shares
shall be as indicated on Schedule 2.7.
2.8 RIGHT TO RECEIVE ADDITIONAL SHARES.
(a) Promptly following June 30, 1998 (but in no event later than
October 15, 1998), Provant will determine 1998 EBIT.
(i) In the event 1998 EBIT is $1.7 million or less, no
Additional Shares shall be issued in respect of the Shares.
(ii) In the event 1998 EBIT is greater than $1.7 million
but less than $2.0 million, there shall be issued in respect
of each Share that number of Additional Shares determined by
(A) multiplying $1 million by a fraction, the numerator of
which shall be the amount by which 1998 EBIT exceeds $1.7
million and the denominator of which shall be $300,000, (B)
dividing the product obtained pursuant to clause (A) by the
IPO Price, and (C) multiplying the quotient obtained pursuant
to clause (B) by the Fraction.
(iii) In the event 1998 EBIT equals or exceeds $2.0
million, there shall be issued in respect of each Share that
number of Additional Shares determined by multiplying the
Fraction times the quotient obtained by dividing $1 million by
the IPO Price.
Provant shall not issue any fractional share of Provant Common Stock; in lieu of
issuing a fractional share, Provant shall make a cash payment in accordance with
Section 2.9.
(b) No later than October 15, 1998, Provant shall deliver to each
Stockholder a statement showing in reasonable detail Provant's computation of
1998 EBIT, together with a stock certificate representing any Additional Shares
and a check in payment for any fractional Additional Share to which such
Stockholder may be entitled pursuant to subsection (a). Provant shall maintain,
and shall cause the Surviving Corporation to maintain, complete books and
records necessary for the proper computation of 1998 EBIT. The Stockholders,
acting unanimously, shall have the right at their expense, through an
independent certified public accountant reasonably acceptable to Provant, to
audit such books and records and the books and records of the Company solely for
the purpose of satisfying the accuracy of the computation of 1998 EBIT made by
Provant, and the Company and Provant shall cooperate fully in all reasonable
respects with any such audit. In no event shall the Stockholders, or either of
them, have the right to conduct more than one such audit. If the Stockholders do
not unanimously elect within 90 days of delivery of the
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statement of Provant referred to in this subsection (b) to cause an audit of the
books and records of the Surviving Corporation as provided in this subsection
(b), the Stockholders shall be deemed to have agreed that such statement was
correct in all respects.
(c) Any dispute as to the correct computation of 1998 EBIT shall be
referred to the First Accountants for determination. If the Stockholders do not
unanimously elect to dispute the First Accountants' determination of 1998 EBIT
within 15 days following the delivery thereof to the Stockholders, such
determination shall be final, binding and conclusive and shall not be subject to
challenge by Provant or either Stockholder, and in such event the fees and
expenses of the First Accountants shall be borne by Provant. In the event the
Stockholders do unanimously elect within such 15 day period to dispute the
determination of the First Accountants, the Stockholders shall specify the
amount (in dollars) that they contend to be the correct 1998 EBIT (the
Stockholders' "EBIT Position"), and the final calculation of 1998 EBIT shall be
referred to the Second Accountants. Absent manifest error or willful misconduct,
the determination of the Second Accountants shall be final, binding and
conclusive and shall not be subject to challenge by Provant or either
Stockholder. In the event the calculation of 1998 EBIT is referred to the Second
Accountants, the fees and expenses of both the First Accountants and the Second
Accountants shall be borne by that party (i.e., the Stockholders, jointly and
severally, or Provant) whose EBIT Position is furthest, in gross dollars, from
the 1998 EBIT as finally determined by the Second Accountants. For purposes of
the preceding sentence, Provant's "EBIT Position" shall be deemed to be the
amount determined by the First Accountants to be the 1998 EBIT. The parties
recognize that in making such determinations, each such firm of accountants will
be performing a function separate and distinct from their audit function, if
any, and shall be entitled to the immunities, rights and discretion of
arbitrators in general. Any issuance of Additional Shares (or cash in lieu of
fractional Additional Shares) which is finally determined to be due to the
Stockholders in accordance with this subsection (c) shall be made by Provant (i)
if based on the determination of the First Accountants, within 10 days after
such determination becomes final, and (ii) if based on the determination of the
Second Accountants, within 10 days after Provant receives notice of such
determination, if Provant is responsible for the fees and expenses of the
accountants pursuant to this Section, and within 10 days after the Stockholders
have paid the fees and expenses of the accountants, if the Stockholders are
responsible for such fees and expenses pursuant to this Section. In the event
the 1998 EBIT has not been finally determined as of the date one year following
the Effective Time, or the 1998 EBIT has been finally determined and Additional
Shares are due to be issued but have not been issued to the Stockholders as of
such date because the Stockholders are obligated to pay but have not yet paid
the fees and expenses of the First and Second Accountants, then on or before
such date Provant shall issue and place into escrow, with an institutional
escrow agent reasonably selected by Provant, the number of Additional Shares
that would be issued if the Stockholders' EBIT Position were determined to be
the actual
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1998 EBIT (or, if the 1998 EBIT has been finally determined, the actual number
of Additional Shares to be issued). Such shares shall be held in escrow pending
final determination of 1998 EBIT, upon which the final number of Additional
Shares, if any, shall be released from escrow to the Stockholders and any
escrowed shares not distributed as Additional Shares shall be released to the
Company. The expenses of the escrow agent will be allocated in the same manner
as the expenses of the First Accountants and Second Accountants, asset forth
above.
(d) The Stockholders acknowledge and agree that Provant and the
Surviving Corporation shall be free to pursue their respective business goals
and that 1998 EBIT may be affected thereby. Notwithstanding the foregoing,
Provant hereby agrees that it will take no action and adopt no policy (and will
not cause the Surviving Corporation to take any action or adopt any policy)
during the period from the Effective Time through June 30, 1998 that a
majority-in-interest of the Stockholders have reasonably asserted (in advance of
or contemporaneously with such action or adoption), in good faith and in
writing, can reasonably be expected to result (directly or indirectly) in a
reduction of 1998 EBIT.
(e) The right of the Stockholders to receive Additional Shares and/or
cash payment for fractional shares may not be transferred or assigned except by
operation of law or pursuant to the laws of descent and distribution.
(f) If, subsequent to the IPO and prior to final determination of the
number of Additional Shares, if any, issuable pursuant to this Section 2.8, the
outstanding shares of Provant Common Stock shall have been changed into a
different number of shares or a different class by reason of any
reclassification, recapitalization, split-up, combination, exchange of shares or
readjustment, or a stock dividend thereon shall be declared with a record date
within said period, the IPO Price shall be correspondingly and appropriately
adjusted.
2.9 EXCHANGE OF AND PAYMENT FOR SHARES AS OF EFFECTIVE TIME.
(a) As soon as practicable after the Effective Time and after surrender
to Provant of any certificate which prior to the Effective Time shall have
represented any Shares, subject to the provisions of paragraphs (c) and (d) of
this Section 2.9 and to the provisions of Article 8, Provant shall cause to be
distributed to the person in whose name such certificate shall have been
registered certificates registered in the name of such person representing the
shares of Provant Common Stock into which any shares previously represented by
the surrendered certificate shall have been converted at the Effective Time and
a check payable to such person representing the payment of cash due such person
by reason of the Merger including cash in lieu of fractional shares determined
in accordance with paragraph (g) of this Section 2.9. Until surrendered as
contemplated by the preceding sentence, each certificate which immediately prior
to the Effective Time shall have represented any Shares shall be
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deemed at and after the Effective Time to represent only the right to receive
upon such surrender the certificates and payment contemplated by the preceding
sentence and by Section 2.8.
(b) No dividends or other distributions declared after the Effective
Time with respect to Provant Common Stock shall be paid to the holder of any
unsurrendered certificate representing Shares until the holder thereof shall
surrender such certificate in accordance with this Section 2.9. After the
surrender of such certificate in accordance with this Section 2.9, the record
holder thereof shall be entitled to receive any such dividends or other
distributions, without any interest thereon, which theretofore had become
payable with respect to shares of Provant Common Stock represented by such
certificate.
(c) No certificate representing Merger Stock shall be issued to any
Person, and no Person shall be treated as a holder of shares of Provant Common
Stock constituting Merger Stock for any purpose whatsoever (including without
limitation any right to vote the shares of Provant Common Stock into which such
Person's Shares are to be converted) unless and until such Person has executed
and delivered to Provant an Investment Letter.
(d) If any cash or certificate representing shares of Provant Common
Stock is to be paid to or issued in a name other than that in which the
certificate surrendered in exchange therefor is registered, it shall be a
condition of the payment or issuance thereof that the certificate so surrendered
shall be properly endorsed and otherwise in proper form for transfer and that
the person requesting such exchange shall pay to Provant any transfer or other
taxes required by reason of the issuance of a certificate representing shares of
Provant Common Stock in any name other than that of the registered holder of the
certificate surrendered, or otherwise required, or shall establish to the
satisfaction of Provant that such tax has been paid or is not payable.
(e) All rights to receive Provant Common Stock and cash, including cash
in lieu of fractional shares, shall be deemed, when paid or issued hereunder, to
have been paid or issued, as the case may be, in full satisfaction of all rights
pertaining to the Shares.
(f) After the Effective Time, there shall be no further registration of
transfers on the stock transfer books of the Surviving Corporation of the Shares
which were outstanding immediately prior to the Effective Time. If, after the
Effective Time, certificates representing such shares are presented to the
Surviving Corporation, they shall be cancelled and exchanged for cash or
certificates representing the shares of Provant Common Stock into which they
were converted, or both, as provided herein.
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(g) Notwithstanding any other provision of this Agreement, no
certificates or scrip representing fractional shares of Provant Common Stock
shall be issued upon the surrender for exchange of certificates which prior to
the Effective Time shall have represented any Shares, no dividend or
distribution of Provant shall relate to any fractional share and such fractional
share interests will not entitle the owner thereof to vote or to any rights of a
shareholder of Provant. In lieu of any fractional shares, there shall be paid to
each holder of Shares who otherwise would be entitled to receive a fractional
share of Provant Common Stock an amount of cash equal to the amount of such
fraction times the IPO Price.
(h) In the event any certificate representing Shares shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
Stockholder claiming such certificate to be lost, stolen or destroyed and, if
required by Provant or its stock transfer agent, the posting by such Stockholder
of a bond in such amount as Provant or its stock transfer agent may direct as
indemnity against any claim that may be made against it with respect to such
certificate, Provant will issue in exchange for such lost, stolen or destroyed
certificate the Merger Stock and cash deliverable in respect thereof.
2.10 TREATMENT OF COMPANY OPTIONS. Each holder of a Company Option, if
any, outstanding as of immediately prior to the Effective Time (whether or not
then vested and exercisable) shall be entitled to receive (subject to any
required withholding of taxes), in cancellation of such option, consideration
(if greater than zero) equal to the cash and Provant Common Stock (including
rights to receive Additional Shares) which such holder would have been entitled
to receive pursuant to Sections 2.7 and 2.8 had such holder exercised such
Company Option in full (including any unvested portion thereof) immediately
prior to the Effective Time, reduced by the aggregate exercise price of such
Company Option, which aggregate exercise price shall be paid first by reducing
the cash otherwise to be received pursuant to Section 2.7 and second, if
necessary, by reducing the number of shares of Provant Common Stock otherwise to
be received pursuant to Section 2.7 by a number equal to (a) the remaining
balance of such aggregate exercise price divided by (b) the IPO Price net of
underwriters' discount. The Company and the Stockholders shall obtain from each
holder of Company Options, and shall deliver to Provant at the Closing, a
cancellation agreement (an "Option Termination Agreement"), in form and
substance acceptable to Provant, cancelling each outstanding Company Option in
consideration of the applicable consideration (if any) set forth above. Such
payments of cash and Provant Common Stock to each holder of Company Options
shall be made by Provant contemporaneously with the delivery of cash and Provant
Common Stock to the holders of Shares pursuant to Section 2.9, provided only
that (x) such holder has duly executed and delivered an Option Termination
Agreement, and (y) such holder has executed and delivered to Provant an
Investment Letter in accordance with Section 2.9(c). Nothing in this Section
2.10 shall be construed as
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preventing a holder from exercising his or her Company Option prior to the
Effective Time.
3. REPRESENTATIONS AND WARRANTIES OF THE
COMPANY AND THE STOCKHOLDERS
The Company and the Stockholders represent and warrant to Provant and
Acquisition that, except as expressly provided in the Company Disclosure
Schedule by specific reference to a Section of this Article 3:
3.1 ORGANIZATION AND AUTHORITY. The Company is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
California and has all requisite corporate power and authority to conduct its
business and own its properties as now conducted and owned. The Company is duly
qualified or licensed and in good standing as a foreign corporation, and has at
all times when legally required been so qualified or licensed and in good
standing, and has at all times when legally required been so qualified or
licensed and in good standing, in those states listed on the Company Disclosure
Schedule, which are the only jurisdictions in which the property owned, leased
or operated by it or the nature of the business conducted by it would cause a
failure to be so qualified or licensed to have a material adverse effect on the
business of the Company. The Company has duly filed so-called "d/b/a
certificates" (or the equivalent thereof) in those jurisdictions listed on the
Disclosure Schedule, which are the only jurisdictions in which the property
owned, leased or operated by it or the nature of the business conducted by it
would cause a failure to so file to have a material adverse effect on the
business of the Company. The Company has full power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby
and perform its obligations hereunder. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby by the
Company and the performance of the Company's obligations hereunder have been
duly and validly authorized by a unanimous vote of the Board of Directors of the
Company and the Stockholders, and no other corporate proceedings on the part of
the Company are necessary to authorize this Agreement or to consummate the
transactions so contemplated or to perform the Company's obligations hereunder.
This Agreement has been duly and validly executed and delivered by the Company
and constitutes a legal, valid and binding obligation of the Company enforceable
against it in accordance with its terms, except as enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting enforcement of creditors' rights generally.
3.2 CAPITALIZATION OF THE COMPANY; NO SUBSIDIARIES. The Company has
authorized capital consisting of 21,000,000 shares of Common Stock, no par
value, of which no shares are held in the Company's treasury. As of the date
hereof, there are
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14,000,000 issued and outstanding Shares. As of immediately prior to the
Effective Time, the Shares issued and outstanding shall consist solely of the
foregoing number plus the number of Shares, if any, issued between the date
hereof and the Effective Time upon the exercise or conversion of Company Options
and other instruments (in each case solely if existing on the date hereof and
disclosed on the Company Disclosure Schedule pursuant to Section 3.3), which
exercise or conversion and which issuance are in accordance with the terms of
such instruments as in effect on the date hereof. All of the Shares are duly
authorized, validly issued, fully paid and non-assessable and are owned of
record and beneficially by the Stockholders in the respective amounts listed on
the Company Disclosure Schedule. The Company has no other authorized class of
capital stock other than the Common Stock. The Company does not own and has not
owned any shares of capital stock or other securities of, or any other interest
in, nor does it control or has it controlled, directly or indirectly, any other
corporation, association, joint venture, partnership, or other business
organization. The Shares have been issued and sold in full compliance with all
applicable Federal and state securities laws. No holder of Shares has any
dissenting shareholder or appraisal rights with regard to the Merger.
3.3 NO RIGHTS TO PURCHASE OR REGISTER STOCK. No person, firm, or
corporation has any written or oral agreement, option, warrant, call,
understanding, commitment, or any right or privilege capable of becoming a
binding agreement, for either the purchase of any Shares or the acquisition of
shares of any other class of capital stock of the Company, and the Company has
not otherwise agreed to issue or sell any shares of its capital stock and has no
obligation to register any of the Shares under the Securities Act. The Company
is not obligated directly, indirectly or contingently to purchase any Shares.
3.4 NAME. The Company has not had any other name and does not conduct or
operate, and has not heretofore conducted or operated, its business under any
name other than its current name.
3.5 NO VIOLATION OF EXISTING AGREEMENTS. The execution and delivery of
this Agreement, together with all documents and instruments contemplated herein,
the consummation by the Company of the transactions contemplated hereby and
thereby, the performance by the Company of its obligations hereunder and
thereunder and compliance with the terms, conditions and provisions hereof and
thereof by the Company do not (i) contravene any provisions of the Company's
Articles of Incorporation or By-Laws; (ii) conflict with or result in a breach
of or constitute a default (or an event that might, with the passage of time or
the giving of notice or both, constitute a default) or give rise to any right to
terminate, cancel or accelerate or to any loss of benefit under any of the
material terms, conditions, or provisions of any indenture, mortgage, loan, or
credit agreement or any other agreement or instrument to which the Company is a
party or by which it or its assets may be bound or affected; (iii) violate or
constitute a material breach of any decision, judgment, or
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order of any court or arbitration board or of any governmental department,
commission, board, agency, or instrumentality, domestic or foreign, by which the
Company is bound or to which it is subject; or (iv) violate any applicable law,
rule, or regulation to which the Company or any of its property is bound.
3.6 NO CONSENTS OR APPROVALS OF GOVERNMENTAL AUTHORITIES. No consent or
approval of, or filing and expiration of a period for disapproval by, any
governmental authority is required for the Company to consummate the
transactions contemplated by this Agreement, except for filing the Certificate
of Merger and tax clearance certificate pursuant to the CGCL and for filing the
Certificate of Merger pursuant to the DGCL. Notwithstanding the immediately
preceding sentence, the Company and the Stockholders make no representation or
warranty regarding whether any filing is required under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), but the Company
and the Stockholders do represent and warrant that (a) the aggregate gross
assets of the Company plus those of any direct or indirect legal or beneficial
holder of 50% or more of the Shares were less than $100 million as of September
30, 1997, and (b) the aggregate revenues of the Company plus those of any direct
or indirect legal or beneficial holder of 50% or more of the Shares were less
than $100 million for the Company's most recently completed fiscal year.
3.7 FINANCIAL STATEMENTS.
(a) The Financial Statements fairly present the financial position of
the Company as of their respective dates, and the results of operations and cash
flows for the periods presented therein, all in conformity with generally
accepted accounting principles applied on a consistent basis, except as
otherwise noted therein.
(b) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and with
statutory accounting principles and to maintain accountability for assets; (iii)
access to assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
3.8 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth or reserved
against in the Balance Sheet, the Company (a) did not have as of the Balance
Sheet Date any material liability or obligation of any nature, whether accrued,
absolute, contingent, or otherwise and whether due or to become due, including
without limitation liabilities that may become known or arise after the date
hereof and which relate to transactions entered into or any state of facts
existing on or before the Balance Sheet Date and which would be required under
generally accepted
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accounting principles to be shown in such balance sheet or referenced in the
notes thereto, and (b) has not incurred since the Balance Sheet Date any such
liability or obligation except in the ordinary course of business. Without
limiting the foregoing, and except as specifically reserved against in the
Balance Sheet or in the calculation of the Closing Net Worth, the Company has no
material liability or obligation of any nature, whether accrued, absolute,
contingent, or otherwise, to any government entity for any adjustment or
reimbursement of any amount previously paid to the Company by such entity under
any agreement relating to the provision of any goods or services by the Company.
3.9 CONDUCT OF BUSINESS SINCE THE BALANCE SHEET DATE. Since the Balance
Sheet Date, the Company has not taken (or suffered the occurrence of) any of the
following actions or events, agreed to take any of the following actions, or
taken any action that would otherwise result in any of the following (in each
case except directly in connection with this Agreement):
(a) entered into any transaction, agreement, or commitment other than in
the ordinary course of business; or
(b) entered into any transaction, agreement, or commitment, suffered the
occurrence of any event or events, or experienced any change in financial
condition, business, results of operations, prospects, or otherwise, (i) that
has interfered or is reasonably likely to interfere with the normal and usual
operations of the Company's business or its business prospects in any material
respect or (ii) that, singly or in the aggregate, has resulted or is reasonably
likely to result in a material adverse change in the financial condition,
assets, liabilities, earnings, business, or business prospects of the Company;
or
(c) incurred any indebtedness for borrowed money, or assumed,
guaranteed, endorsed, or otherwise become responsible for the obligations of any
other individual, partnership, firm, or corporation (except to endorse checks
for collection for deposit in the ordinary course of business), or made any loan
or advance to any individual, partnership, firm, or corporation; or
(d) mortgaged, pledged, or otherwise encumbered, or, other than in the
ordinary course of business, sold, transferred, or otherwise disposed of, any of
the properties or assets of the Company, including any cancelled, released,
hypothecated, or assigned indebtedness owed to the Company, or any claims held
by the Company, except for purchase money mortgages arising in the ordinary
course of business and statutory liens arising or incurred in the ordinary
course of business with respect to which the underlying obligations are not
delinquent; or
(e) made any investment of a capital nature or entered into a commitment
for such investment either by purchase of stock or securities, contributions to
capital,
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property transfer, or otherwise, or by the purchase of any property or assets of
any other individual, partnership, firm, or corporation; or
(f) declared, set aside, or paid any dividend or other distribution
(whether in cash, stock, or property or any combination thereof) in respect of
the capital stock of the Company, or redeemed or otherwise acquired, directly or
indirectly, any shares of capital stock of the Company, excepting only
dividends, distributions and redemptions that have not resulted and will not
result, directly or indirectly, in the Company not satisfying the Financial
Condition; or
(g) paid any long-term liability, otherwise than in accordance with its
terms; or
(h) paid any bonus compensation to any officer, director, shareholder,
or employee of the Company or otherwise increased the compensation paid or
payable to any of the foregoing; or
(i) sold, assigned, or transferred any trademarks, trade names, logos,
copyrights, formulae, or other intangible assets; or
(j) contracted with or committed to any third party (i) to sell any
capital stock of the Company, (ii) to sell any material assets of the Company
other than in the ordinary course of business, (iii) to effect any merger,
consolidation, or other reorganization of the Company, or (iv) to enter into any
agreement with respect thereto; or
(k) incurred or paid any expenses or fees of counsel, accountants, or
consultants for services in preparation for or in connection with this Agreement
or the transactions contemplated hereunder.
3.10 TITLE TO ASSETS. The Company owns no real property. The Company has
good and clear record and marketable title to all properties owned by it,
including, without limitation, all property reflected in the Balance Sheet,
other than property disposed of in the ordinary course of business subsequent to
the Balance Sheet Date (none of such dispositions being materially adverse),
free and clear of any mortgage, lien, pledge, charge, claim or encumbrance, or
rights, title and interest in others, except (a) as reflected in the Balance
Sheet, or as specified in the notes thereto, (b) the lien of taxes not yet due
or payable or being contested in good faith by appropriate proceedings and as to
which appropriate reserves have been set aside in the Balance Sheet, and (c)
such imperfections of title and encumbrances, if any, as do not materially
detract from the value or interfere with the use of the properties subject
thereto or affected thereby, or otherwise materially impair business operations.
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3.11 INTELLECTUAL PROPERTY.
(a) The Company Disclosure Schedule contains a correct and complete
list of all copyrights, copyright registrations and copyright applications,
trademark registrations and applications for registration, patents and patent
applications, trademarks, service marks and trade names used in the Company's
business as presently conducted or contemplated and all licenses, assignments
and releases of the intellectual property rights of others in material works
embodied in its products. There is (i) no existing or, to the Company's
knowledge, threatened infringement, misuse or misappropriation of Proprietary
Information (as hereinafter defined) by others and (ii) no pending or threatened
claim by the Company against others for infringement, misuse or misappropriation
of any patent, patent application, invention disclosure, trademark, trade name,
service mark, trade secret, technology, technique, know-how, or copyright owned
by the Company or used in its business as presently conducted or contemplated
(the "Proprietary Information"). The Proprietary Information is sufficient to
carry on the business of the Company as presently conducted or contemplated, and
the Company has the right to use, free and clear of claims or rights of others,
all Proprietary Information required for or incident to its products or services
or its business as presently conducted or contemplated. The Company is the
exclusive owner of all right, title and interest in the Proprietary Information
as purported to be owned by the Company, and such Proprietary Information is
valid and in full force and effect. Neither the present nor contemplated
business activities or products of the Company infringe, misuse or
misappropriate any patent, trademark, trade name, service mark, trade secret,
copyright or other intellectual property right of others, and to the Company's
knowledge no one is claiming nor is it anticipated that anyone will claim any
such infringement, misuse or misappropriation. To the knowledge of the Company,
the Proprietary Information is presently valid and protectible and is not part
of the public domain or knowledge, nor, to the knowledge of the Company, has any
of it been used, divulged or appropriated for the benefit of any person other
than the Company to the detriment of the Company. The Company has not granted to
any person any license or other right to use in any manner any of the
Proprietary Information, whether or not requiring the payment of royalties. The
Company has no obligation still outstanding to compensate other persons for the
use of any Proprietary Information or for the sale of any service or product
comprising or derived from Proprietary Information. No university, government
agency (whether federal or state) or other organization which sponsored research
and development conducted by the Company has any claim of right to or ownership
of or other encumbrance upon the Proprietary Information.
(b) The Company has taken all reasonable measures to protect and
preserve the security, confidentiality and value of the Proprietary Information,
including its trade secrets and other confidential information. All present and
previous officers, employees and consultants of or to the Company have executed
and delivered to and
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in favor of the Company an agreement regarding the protection of confidential
and proprietary information and the assignment to the Company of all
intellectual property rights arising from the services performed for the Company
by such persons in the forms attached to the Company Disclosure Schedule. To the
Company's knowledge, no employee or consultant of the Company has used any trade
secrets or other confidential information of any other person in the course of
his or her work for the Company. To the Company's knowledge, the Company is not
making unlawful use of any confidential information or trade secrets belonging
to any past or present employees of the Company. Neither the Company nor, to the
knowledge of the Company, any of the Company's employees or consultants have any
agreements or arrangements with former employers of such employees or
consultants relating to confidential information or trade secrets of such
employers or are bound by any consulting agreement relating to confidential
information or trade secrets of another entity. The activities of the Company's
employees on behalf of the Company do not violate any agreements or arrangements
known to the Company which any such employees have with former employers or any
other entity to whom such employees may have rendered consulting services.
3.12 OBLIGATIONS TO OR FROM AFFILIATES.
(a) All material transactions between the Company and any stockholder,
officer or director of the Company, or any Affiliate (as defined below) of any
stockholder, officer or director of the Company, entered into on or after
January 1, 1993 have been conducted on an arm's-length basis on terms no
different than would be obtained if the transaction had been between the Company
and an unrelated party. Except for debts or other outstanding obligations
reflected on the Balance Sheet, there are no debts or other obligations of the
Company to, or to the Company from, any Stockholder or any officer or director,
or any Affiliate of a Stockholder, officer or director of the Company. As used
herein, "Affiliate" of a Stockholder, officer or director means any member of
the immediate family of such person or any entity in which such person or any
such family member is an officer or owner of more than five percent of
beneficial interest in the outstanding equity securities.
(b) The Company Disclosure Schedule sets forth all information that
would be required to be provided under Item 404 of Regulation S-K of the
Commission under the Securities Act if a registration statement on Form S-1 were
filed by the Company with the Commission on the date hereof.
3.13 MATERIAL CONTRACTS. The Company Disclosure Schedule lists all
material leases, contracts, instruments, agreements or commitments (whether
written or oral) relating to the conduct of the business of the Company (the
"Material Company Contracts"). The Company has delivered to Provant true and
correct copies of each written Material Company Contract and a written
description, accurate in all material respects, of each oral arrangement so
listed. Without limiting the generality of the
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foregoing, the aforesaid list includes all contracts, agreements and instruments
of the following types to which the Company is a party:
(a) labor union contracts, together with a list of all labor unions
representing or, to the Company's knowledge, attempting to represent employees
of the Company;
(b) pension, retirement, deferred compensation, death benefit, profit
sharing, bonus or other employee incentive, fringe benefit, stock purchase,
stock option, hospitalization or insurance plans or arrangements (and grant
certificates or other documents issued thereunder) or vacation pay, severance
pay and other similar benefit arrangements for officers, employees or agents,
together with a list of all pensioned employees or obligations to provide any
pensions hereafter other than pursuant to the plans hereinbefore in this item
described;
(c) employment contracts or agreements, consulting agreements,
agreements providing for termination or severance benefits, non-competition
agreements, non-disclosure agreements, contracts for professional personal
services, contracts with other persons engaged in sales or distributing
activities, and advertising contracts;
(d) written or oral agreements, understandings and arrangements of any
kind with any officer, director, employee, shareholder or agent of the company
relating to present or future compensation or other benefits available to such
person or otherwise, together with a list of the names and current annual salary
rates of all present officers and employees of the Company whose current salary
rate is $25,000 or more and any bonuses paid or payable to each such person for
the 1996 fiscal year;
(e) indentures, loan agreements, notes, security agreements, mortgages,
conditional sales contracts, leases of real or personal property, contracts for
the purchase or sale of real or personal property, and agreements for financing;
(f) property, casualty, crime, directors and officers, and other forms
of insurance;
(g) all bank accounts and safety deposit boxes identifying all
authorized signatories, together with a list of all effective powers of attorney
granted by the Company to anyone;
(h) agreements, contracts or other arrangements to which the Company is
a guarantor, surety or endorser;
(i) contracts, agreements, commitments, arrangements or understandings
providing for the purchase or sale of all or substantially all of the Company's
requisites of a particular product from a single supplier or to a single
customer;
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(j) contracts, agreements, commitments, arrangements or understandings
which limit the freedom of the Company from competing in any line of business or
with any person or entity;
(k) license agreements (as licensor or licensee);
(l) leases of real and personal property with a term of more than one
year (regardless of whether the Company is lessor or lessee); and
(m) contracts, agreements, instruments, arrangements or understandings
which have not been included in items (a) through (l) above involving payment by
or to the Company of more than $50,000 or not terminable without penalty or
otherwise materially affecting the assets, financial condition, properties or
business of the Company.
All of the Material Company Contracts are in full force and effect. Except to
the extent that a material adverse effect on the Company's financial condition,
assets, liabilities, earnings, business or prospects would not result if the
following were not true: (A) the Company and each other party to each of the
Material Company Contracts have performed all the obligations required to be
performed by them to date, have received no notice of default and are not in
default (with due notice or lapse of time or both) under any of the Material
Company Contracts; (B) the Company has no present expectation or intention of
not fully performing all of its obligations under any of the Material Company
Contracts, and the Company has no knowledge of any breach or anticipated breach
by any other party to any of the Material Company Contracts; (C) there exists no
actual or, to the knowledge of the Company, threatened termination, cancellation
or limitation of the business relationship of the Company with any party to any
Material Company Contract; and (D) consummation of the transactions contemplated
hereby and performance by the Company of its obligations hereunder shall not
require the consent or permission of any party to any Material Company Contract
or permit any party to terminate, suspend or alter the terms of any Material
Company Contract.
3.14 LITIGATION. There are no actions, suits, causes of action, claims,
litigation, arbitration, administrative hearings, or other form of proceedings
or disputes of any kind pending or, to the best knowledge of the Company,
threatened against the Company or involving, affecting, or relating to its
capacity to complete the transactions contemplated herein, the Company, or its
officers or directors (in their capacities as such), in any court, at law or in
equity, or before any arbitration board or any governmental department,
commission, board, bureau, agency, or instrumentality; nor has the Company been,
nor is it, subject to any orders, awards, fines, judgments, decrees, or
injunctions the effect of which in the aggregate would have a material adverse
effect on the business or financial position or prospects of the Company. The
Company does not know or have grounds to know of any basis for
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any such action, suits, or other form of proceeding or disputes or of any
governmental investigation relating to the Company or its business.
3.15 TAXES.
(a) (i) All Tax Returns (as defined below) of, relating to or which
include the Company which are required to have been filed have been filed on a
timely basis with the appropriate authorities and all such Tax Returns are true,
correct and complete in all respects; (ii) all Taxes (as defined below) required
to have been paid by the Company (including amounts collected or withheld from
third parties required to have been paid over to the appropriate authorities)
have been paid in full on a timely basis to the appropriate authorities; and
(iii) all Taxes or other amounts required to have been collected or withheld by
the Company have been timely and properly collected or withheld.
(b) (i) No taxing authority has asserted in writing to the Company any
adjustment, deficiency, or assessment that could result in additional Tax for
which the Company is or may be liable; (ii) there is no pending audit,
examination, investigation, dispute, proceeding or claim for which the Company
has received notice relating to any Tax for which the Company is or may be
liable; (iii) no statute of limitations with respect to any Tax for which the
Company is or may be liable has been waived or extended; (iv) the due date of
any Tax Returns that the Company is required to file has not been extended; and
(v) Company is not a party to any Tax sharing or Tax allocation agreement,
arrangement or understanding.
(c) There are no liens on any of the assets of the Company which arose
in connection with any failure or asserted failure to pay any Tax, other than
liens for current Taxes not yet due and payable.
(d) The Company is not a party to any contract, agreement, plan or
arrangement that, individually or collectively, could give rise to any payment
that would not be deductible by reason of Section 162, 280G or 404 of the Code.
(e) The Company has not been a member of an affiliated group filing a
consolidated federal income Tax Return, and the Company is not liable for the
Taxes of any person under Treasury Regulation 1.1502-6 (or any similar provision
of state, local, or foreign law) as transferee or successor, by contract or
otherwise.
(f) Copies of (i) any Tax examinations, (ii) extensions of statutory
limitations, (iii) the federal, state and local income Tax Returns and franchise
Tax Returns of the Company, and (iv) correspondence between the Company and all
taxing authorities for its last three (3) taxable years previously have been
furnished to Provant and such Tax Returns are true, correct and complete.
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(g) The provision for Taxes, if any, shown on the Balance Sheet is
adequate to cover the aggregate liability of the Company arising out of facts or
circumstances occurring on or prior to the Balance Sheet Date for all Taxes.
(h) The Company has filed federal and state, and if applicable, local
Tax Returns for each period ending on or prior to the Effective Time.
(i) For purposes of this Section 3.15:
"Tax Returns" shall mean all returns, amended returns,
declarations, reports, estimates, information returns and statements regarding
Taxes which are or were filed or required to be filed under applicable law,
whether on a consolidated, combined, unitary or individual basis.
"Taxes" shall mean any federal, state, local, foreign or other
tax, fee, levy, assessment or other governmental charge, including without
limitation any income, franchise, gross receipts, property, sales, use, hotel,
bed, services, value added, withholding, social security, estimated, accumulated
earnings, alternative or add-on minimum, transfer, license, privilege, payroll,
profits, capital stock, employment, unemployment, excise, severance, stamp,
occupancy, customs or occupation tax, and any interest, additions to tax and
penalties in connection therewith.
3.16 ABSENCE OF MATERIAL EVENTS. Since January 1, 1997 there has not
been (a) any material adverse change in the business, affairs or prospects of
the Company nor, to the best of the Company's knowledge, are any such changes
threatened, anticipated or contemplated; (b) any actual or, to the Company's
knowledge, threatened, anticipated or contemplated damage, destruction, loss,
conversion, termination, cancellation, default or taking by eminent domain or
other action by governmental authority which has materially affected or may
hereafter materially affect the properties, assets, business affairs or
prospects of the Company; (c) any material and adverse pending or, to the
Company's knowledge, threatened, anticipated or contemplated dispute of any kind
with any material customer, supplier, source of financing, employee, landlord,
subtenant or licensee of the Company, or any pending or, to the Company's
knowledge, threatened, anticipated or contemplated occurrence or situation of
any kind, nature or description which is reasonably likely to result in any
reduction in the amount, or any change in the terms or conditions, of business
with any material customer, supplier, or source of financing; or (d) any
pending, or to the Company's knowledge, threatened, anticipated or contemplated
occurrence or situation of any kind, nature or description materially and
adversely affecting the properties, assets, business, affairs or prospects of
the Company.
3.17 ABSENCE OF IMPROPER PAYMENTS. Since January 1, 1994 the Company:
(a) has not made any contributions, payments or gifts of its property to or for
the
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private use of any governmental official, employee or agent where either the
payment or the purpose of such contribution, payments or gift is illegal under
the laws of the United States, any state thereof or any other jurisdiction
(foreign or domestic); (b) has not established or maintained any unrecorded fund
or asset for any purpose, or has made any false or artificial entries on its
books or records for any reason; (c) has not made any payments to any person
where the Company intended or understood that any part of such payment was to be
used for any other purpose other than that described in the documents supporting
the payment; or (d) has not made any contribution, or has reimbursed any
political gift or contribution made by any other person, to candidates for
public office, whether Federal, state or local, where such contribution would be
in violation of applicable law.
3.18 ERISA.
(a) None of the employee benefit plans maintained at any time by the
Company or the trusts (if any) forming part of such plans has engaged in a
prohibited transaction which could subject any such employee benefit plan or
trust to a material tax or penalty on prohibited transactions imposed under
Internal Revenue Code Section 4975 or ERISA.
(b) None of the employee benefit plans maintained at any time by the
Company which are employee pension benefit plans and which are subject to Title
IV of ERISA or the trusts that are part of such plans has been terminated so as
to result in a material liability of the Company under ERISA or the Code, nor
has any such employee benefit plan of the Company incurred any material
liability to the Pension Benefit Guaranty Corporation, other than for required
insurance premiums which have been paid or are not yet due and payable; neither
the Company nor any affiliate thereof has withdrawn, in either a complete or
partial withdrawal, from any multi-employer Plan resulting in any unpaid
withdrawal liability; the Company has made or provided for all contributions to
all such employee pension benefit plans which it maintains and which are
required by law or such plans as of the end of the most recent fiscal year under
each such plan; the Company has not incurred any accumulated funding deficiency
with respect to any such plan, subject to Section 412 of the Code, whether or
not waived; nor has there been any reportable event, or other event or
condition, which presents a material risk of termination of, or liability with
respect to, any such employee benefit plan by the Pension Benefit Guaranty
Corporation.
(c) The benefit liabilities under the employee pension benefit plans
which are subject to Title IV of ERISA, maintained by the Company, do not exceed
the current value of the assets of such employee benefit plans allocable to such
benefits, determined under the actuarial methods and assumptions that would
apply if such plans were terminated in accordance with ERISA and the Code.
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(d) To the best of the Company's knowledge, each employee benefit plan
maintained by the Company has been administered in accordance with its terms in
all material respects and is in compliance in all material respects with all
applicable requirements of ERISA (if applicable) and other applicable laws,
regulations and rules. Each employee benefit plan maintained by the Company that
is intended to be "qualified" under Section 401(a) of the Code has received a
favorable determination letter of the Internal Revenue Service, which letter
remains in effect, and nothing has occurred since the date of such determination
that could adversely affect the qualification of such plan.
(e) As used in this Agreement, the terms "employee benefit plan",
"employee pension benefit plan", "multi-employer plan", "accumulated funding
deficiency", "reportable event", "benefit liabilities", "withdrawn" (including
its correlative forms "complete withdrawal" and "partial withdrawal") and
"accrued benefits" shall have the respective meanings assigned to them in ERISA,
and the term "prohibited transactions" shall have the meaning assigned to it in
Code Section 4975 and ERISA. Employee benefit plans "maintained by the Company"
include any such plan maintained, established or contributed to at any time by
the Company or any entity affiliated with or under common control with the
Company.
(f) The Company has no liability not disclosed on any of the Financial
Statements, contingent or otherwise, under any plan or program or the equivalent
for unfunded post-retirement benefits, including pension, medical and death
benefits, which liability would have a material adverse effect on the financial
condition of the Company.
3.19 LABOR MATTERS. A true and complete list of all of the Company's
officers, employees (the "Employees") and consultants (the "Consultants") and
their respective salaries, wages, other compensation, dates of employment, date
and amount of last salary or compensation increase, and positions has been
provided to Provant by the Company. There are no material disputes, employee
grievances, or disciplinary actions pending or, to the knowledge of the Company,
threatened by or between the Company and any of the Employees or Consultants.
With respect to the Employees and Consultants, the Company has complied in all
respects with all provisions of all laws relating to the employment of labor and
has no liability for any arrears of wages or taxes or penalties for failure to
comply with any such law or for any severance or termination payments of any
type. None of the Consultants are or were (while classified by the Company as
Consultants) employees of the Company for any purpose whatsoever. No employees
of the Company are or ever have been represented by a bargaining representative
with respect to the Company, and no election or proceedings relating to the
labor relations of the Company is pending or, to the best of the Company,
knowledge, threatened. The Company has not had any material union activity or
had any material labor disruption or material dispute with its employees of any
kind, nature or description at any time heretofore. All personnel
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policies and manuals of the Company are listed on the Company Disclosure
Schedule and true and complete copies thereof have been provided to Provant. No
Employee or Consultant shall have the right to receive from the Surviving
Corporation or Provant a severance payment or other payment in the nature
thereof in the event his or her employment is terminated by the Surviving
Corporation following the Merger, whether such right arises as a matter of
contract, past policy or understanding, by operation of law, or otherwise.
3.20 PERMITS: COMPLIANCE WITH LAW. The Company possesses all franchises,
permits, licenses, certificates, approvals, and other authorizations ("Permits")
necessary to own or lease and operate its properties and to conduct its business
as now conducted, except for incidental Permits that would be readily obtainable
without undue burden in the event of any lapse, termination, cancellation, or
forfeiture or that if not obtained would not materially and adversely affect the
Company's business. All such material Permits are in full force and effect, and,
to the knowledge of the Company, no suspension or cancellation of any of them is
threatened, and no material Permits will be adversely affected by the
consummation of the Merger. The Company has not failed nor is it failing to
comply with any applicable law, rule, regulation, or order, where such failure
would have a material adverse effect on the Company's business, and there are no
proceedings pending or, to the Company's knowledge, threatened, nor has the
Company received any notice, regarding any such failure.
3.21 ENVIRONMENTAL MATTERS. The Company is, and to the Company's
knowledge all real property owned or otherwise occupied by the Company are and
have been at all times when so owned or occupied, in material compliance with
all applicable existing federal, state and local laws and regulations relating
to protection of human health or the environment or imposing liability or
standards of conduct concerning any Hazardous Material (as hereinafter defined)
("Environmental Laws"), except, in each case, where such noncompliance, singly
or in the aggregate, would not have a material adverse effect on the condition,
financial or otherwise, or the earnings, business affairs or business prospects
of the Company. No Hazardous Materials are stored, utilized or otherwise present
on any property owned or otherwise occupied by the Company, excepting only (x)
cleaning supplies and similar materials customarily used by businesses in the
Company's industry in quantities consistent with such use, and (y) petroleum
products that are used for heating (including water heating) in facilities
located on such property, none of which are stored in underground storage tanks,
or that are present in vehicles located on such property. There has not occurred
any release of Hazardous Materials on, under or affecting any real property
during or prior to the period of the Company's ownership, occupation or
operation of such property (including its participation in or exercise of any
degree of control over the management of any business located on such property).
The term "Hazardous Material" means (a) any "hazardous substance" as defined in
the Comprehensive Environmental Response, Compensation and
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Liability Act of 1980, as amended through the date hereof, (b) any "hazardous
waste" as defined by the Resource Conservation and Recovery Act, as amended
through the date hereof, (c) any petroleum or petroleum product, (d) any
polychlorinated biphenyl and (e) any pollutant or contaminant or hazardous,
dangerous, or toxic chemical, material, waste or substance regulated under or
within the meaning of any other Environmental Law as amended through the date
hereof. For purposes of this Section 3.21, real property owned by third parties
but "occupied" by the Company shall mean only that portion of such property as
is either leased by the Company or in fact otherwise physically occupied or
utilized by the Company. There is no alleged liability, or to the best knowledge
of the Company, potential liability (including, without limitation, alleged or
potential liability for investigatory costs, cleanup costs, governmental
response costs, natural resources damages, property damages, personal injuries
or penalties) of the Company arising out of, based on or resulting from (i) the
presence or release into the environment of any Hazardous Material at any
location, whether or not owned by the Company or (ii) any violation or alleged
violation of any Environmental Law, which alleged or potential liability, singly
or in the aggregate, would have a material and adverse effect on the condition,
financial or otherwise, or the earnings, business affairs or business prospects
of the Company.
3.22 FURTHER ASSURANCES. The Company will use all commercially
reasonable efforts to have all present officers and directors of the Company
execute whatever minutes of meetings or other instruments and take whatever
action as may be necessary or desirable to effect, perfect or confirm of record
of otherwise, in the Surviving Corporation, full right, title and interest in
and to the business, properties and assets now conducted or owned by the
Company, free and clear of all restrictions, liens, encumbrances, rights, title
and interests in others (excepting only liens reflected on the Balance Sheet),
or to collect, realize upon, gain possession of, or otherwise acquire full
right, title and interest in and to such business, properties and assets, and
will otherwise use its reasonable best efforts to carry out the intent and
purposes of the transactions contemplated hereby and the IPO.
3.23 CORPORATE RECORDS. The corporate record books of the Company are in
all material respects in good order, complete, accurate, up to date, with all
necessary signatures, and set forth all meetings and actions taken by the
shareholders and directors, and all votes of the shareholders or directors set
forth in certificates furnished to anyone at any time heretofore.
3.24 CONDITION OF ASSETS. All premises, fixtures and equipment owned or
used by the Company and material to its business have been properly maintained
and are in good operating order and repair, free from known defects in
construction or design, sound and properly functioning (normal wear and tear
excepted), usable and not obsolete, and (to the Company's knowledge in the case
of leased property) in material compliance with all applicable zoning, building
and fire codes and all other
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applicable laws, rules, regulations and requirements of governmental authorities
and the fire insurance rating association having jurisdiction.
3.25 ACCOUNTS RECEIVABLE. All of the accounts receivable of the Company
shown or reflected on the Balance Sheet in the Financial Statements, less the
reserve for doubtful accounts in the amount shown on the Balance Sheet, are
valid and enforceable claims and subject to no set off or counterclaim. All of
the accounts receivable of the Company shown or reflected on the Balance Sheet
and as at December 31, 1997 (as reflected on the Company's balance sheet as of
such date, when and as delivered to Provant) will be collected in full within
150 days thereafter to the extent of the reserve for doubtful accounts shown on
the Balance Sheet or posted on the books of the Company of such date. The
reserve for doubtful accounts as at December 31, 1997 will not be in excess of
said reserve as shown on the Balance Sheet. The Company has no accounts or loans
receivable from any of its directors, officers or employees.
3.26 CHARTER DOCUMENTS. The Company has heretofore delivered to Provant
copies of its Articles of Incorporation, as amended to date, certified by the
appropriate governmental authority, and copies of its By-laws, as amended to
date, and a list of the officers and directors of the Company in office, all as
certified by its Secretary.
3.27 DISCLOSURE OF ALL MATERIAL MATTERS.
(a) No statement of a material fact set forth in this Agreement
(including without limitation all information in the Financial Statements, the
Company Disclosure Schedule and the other Schedules, Exhibits, and attachments
hereto, taken as a whole) with respect to the Company or the Stockholders is
false or misleading in any respect, nor does this Agreement (including, without
limitation all information in the Financial Statements, Company Disclosure
Schedule and the other Schedules, Exhibits, and attachments hereto, taken as a
whole) omit to state a material fact necessary in order to make the statements
made or information disclosed, in the light of the circumstances under which
they were made or disclosed, not misleading.
(b) Provided only that Provant has accurately incorporated any
information furnished in writing by the Company to Provant specifically for
inclusion in the Registration Statement or the Prospectus (as applicable) and
has deleted from the Registration Statement or the Prospectus (as applicable)
any statement that the Company has specifically requested in writing be so
deleted, (i) at the time the Registration Statement becomes effective under the
Securities Act, it will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading, and (ii) at the time of each closing in
connection with the IPO, the Prospectus will not include an untrue statement of
a material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which
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they were made, not misleading. The representations and warranties in this
Section shall not apply to statements in or omissions from the Registration
Statement and Prospectus relating to any person or entity other than the Company
and its officers, directors and stockholders.
3.28 BROKERS. No broker, finder, or investment banker is entitled to
any brokerage, finder's, or other fee or commission in connection with the
Merger or the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company.
4. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
The Stockholders represent and warrant to Provant and Acquisition as
follows:
4.1 TITLE TO THE SHARES. All of the issued and outstanding Shares are
owned by the Stockholders free and clear of any claims, liens, charges,
encumbrances, security interests and rights of others whatsoever, and such
Shares are not bound by or subject to any proxy, agreement, voting trust or
other restriction regarding the voting thereof.
4.2 AUTHORITY. The Stockholders have full power, authority and capacity
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby, and no other action is necessary by the Stockholders to
consummate the transactions contemplated by the Agreement. This Agreement has
been duly and validly executed and delivered by the Stockholders and constitutes
a legal, valid and binding obligation of the Stockholders enforceable against
them in accordance with its terms, except as enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting enforcement of creditors' rights generally.
4.3 NO CONFLICTS. The execution, delivery and performance of this
Agreement by the Stockholders do not and will not violate, conflict with, result
in a breach of or constitute a default under (or an event which with due notice
or lapse of time, or both, would constitute a breach of or default under) or
result in the creation of any lien, security interest or other encumbrance under
(a) any material term of any note, agreement, contract, license, instrument,
lease or other obligation to which a Stockholder is a party or by which he is
bound or create any lien or encumbrance on any of such Stockholder's Shares, (b)
any material provision of any judgment, order, decree, ruling or injunction or
(c) any statute, law, regulation or rule of any governmental agency or
authority.
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5. REPRESENTATIONS AND WARRANTIES
OF PROVANT, ACQUISITION AND THE PROVANT PRINCIPALS
Provant, Acquisition and the Provant Principals represent and warrant
to the Company and the Stockholders that, except as expressly provided in the
Provant Disclosure Schedule by specific reference to a Section of this Article
5:
5.1 ORGANIZATION AND AUTHORITY. Each of Provant and Acquisition is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware, and each has all requisite corporate power and
authority to conduct its business and own its properties as now conducted and
owned, and is qualified and in good standing as a foreign corporation, and has
at all times when legally required been so qualified and in good standing, in
each jurisdiction where the failure to be so qualified would, in the aggregate,
have a material adverse effect on the business or financial condition of
Provant. Each of Provant and Acquisition has full power and authority to execute
and deliver this Agreement and the agreements being executed and delivered in
connection with the Additional Mergers and the IPO to which it is a party, and
to consummate the transactions contemplated hereby and thereby and to perform
its obligations hereunder and thereunder. The execution and delivery of this
Agreement and the other agreements referenced above and the consummation of the
transactions contemplated hereby and thereby, and the performance of Provant's
and its subsidiaries' (including Acquisition's) obligations hereunder and
thereunder have been duly and validly authorized by the unanimous votes of the
respective Boards of Directors of Provant and such subsidiaries (including
Acquisition) and by Provant as the sole stockholder of such subsidiaries
(including Acquisition), and no other corporate proceedings on the part of
Provant or its subsidiaries (including Acquisition) are necessary to authorize
this Agreement or the other agreements referenced above or to consummate the
transactions contemplated hereby or thereby or to perform the obligations of
Provant and its subsidiaries (including Acquisition) hereunder or thereunder.
This Agreement has been duly and validly executed and delivered by each of
Provant and Acquisition and constitutes a valid and binding agreement of each,
enforceable against each in accordance with its terms, except as enforcement may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting enforcement of creditors' rights generally.
5.2 CAPITALIZATION OF PROVANT; SUBSIDIARIES. Provant has authorized
capital consisting of 10,000 shares of Provant Common Stock, $.01 per share par
value, of which no shares are held in Provant's treasury. As of the date hereof,
there are 3,417.9 issued and outstanding shares of Provant Common Stock, all of
which are duly authorized, validly issued, fully paid and non-assessable and are
owned of record and beneficially by those persons listed on the Provant
Disclosure Schedule. Provant has no other authorized class of capital stock
other than the Provant Common Stock. As of the date hereof and at all times
prior to the Effective Time,
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Provant does not (and will not) own and has not owned any shares of capital
stock or other securities of, or any other interest in, nor does (or will) it
control or has it controlled, directly or indirectly, any other corporation,
association, joint venture, partnership, or other business organization, other
than Acquisition and the subsidiaries intended to be merged with the Additional
Companies. All of the issued and outstanding shares of capital stock of
Acquisition, and of each subsidiary that will be merged with an Additional
Company, are owned of record and beneficially by Provant. All outstanding shares
of Provant Common Stock have been issued and sold in full compliance with all
applicable Federal and state securities laws. No holder of outstanding shares of
Provant Common Stock has any dissenting shareholder or appraisal rights with
regard to the Merger. Provant does not have knowledge of any voting agreements,
voting trusts or similar agreements governing the manner in which any shares of
Provant Common Stock are voted by the holders thereof.
5.3 NO RIGHTS TO PURCHASE OR REGISTER STOCK. Excepting only (a) the
shares of Provant Common Stock to be issued as Merger Shares and as merger
consideration in the Additional Mergers, (b) the shares of Provant Common Stock
to be sold in the IPO, and (c) the shares of Provant Common Stock to be issued
pursuant to Provant Options under the Plan, no person, firm, or corporation has
any written or oral agreement, option, warrant, call, understanding, commitment,
or any right or privilege capable of becoming a binding agreement, for either
the purchase of any shares of Provant Common Stock or the acquisition of shares
of any other class of capital stock of Provant, and Provant has not otherwise
agreed to issue or sell any shares of its capital stock and has no obligation to
register any shares of Provant Common Stock under the Securities Act. Provant is
not obligated directly, indirectly or contingently to purchase any shares of
Provant Common Stock. No person, firm, or corporation has any written or oral
agreement, option, warrant, call, understanding, commitment, or any right or
privilege capable of becoming a binding agreement, for the purchase or other
acquisition of any shares of capital stock of Acquisition or of any subsidiary
of Provant that will be merged with an Additional Company, and neither
Acquisition nor any such other subsidiary has otherwise agreed to issue or sell
any shares of its capital stock or to register any shares of its capital stock
under the Securities Act.
5.4 MERGER STOCK. The Merger Stock has been duly authorized by all
necessary corporate action and, when issued and delivered by Provant pursuant to
this Agreement, will be validly issued, fully paid and non-assessable.
5.5 CONSENTS AND APPROVALS; NO VIOLATION, NO KNOWN IMPEDIMENTS. Neither
the execution and delivery of this Agreement by Provant and Acquisition nor the
consummation of the transactions contemplated hereby will (i) conflict with or
result in any breach of any provision of the respective charter documents or
By-Laws of Provant or Acquisition; (ii) subject to the last sentence of this
Section 5.5, require on the part of Provant or Acquisition any consent,
approval, authorization, or permit of,
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or filing with or notification to, any governmental or regulatory authority,
except (A) filing the Certificate of Merger and tax clearance certificate
pursuant to the CGCL and the Certificate of Merger pursuant to the DGCL and (B)
any filings required under the Securities Act and the securities or blue sky
laws of the various states; (iii) result in a default (or give rise to any right
of termination, cancellation, or acceleration) under any of the material terms,
conditions, or provisions of any note, license, lease, agreement, or other
instrument or obligation to which Provant or Acquisition is a party or by which
Provant or Acquisition or any of their respective assets may be bound, other
than as previously disclosed in writing to the Company; or (iv) violate or
constitute a material breach of any order, writ, injunction, decree, statute,
law, rule, or regulation applicable to Provant or Acquisition or any of their
respective assets. Assuming no material change after the date hereof in the
condition of the capital markets or in the business or financial condition of
the Company or any of the Additional Companies and assuming the Commission
declares the Registration Statement effective in due course, Provant has no
knowledge of any matter (including without limitation any law or regulation)
that should reasonably be expected to prohibit the consummation of the
transactions contemplated hereby, the Additional Mergers or the IPO. The
representation and warranty contained in clause (ii) above is, with respect to
compliance with the HSR Act, made in reliance upon, and is expressly conditioned
upon, the accuracy of the representations and warranties of the Company and the
Stockholders made in the second sentence of Section 3.6.
5.6 OPERATIONS AND FINANCIAL CONDITION; ABSENCE OF UNDISCLOSED
LIABILITIES. Neither Provant nor Acquisition has conducted any material business
operations other than in connection with the Merger, the Additional Mergers and
the IPO or in preparation for operations to be conducted after the Effective
Time. Neither Provant nor Acquisition has any material tangible assets or
material liabilities or obligations of any nature, whether accrued, absolute,
contingent, or otherwise and whether due or to become due, including without
limitation liabilities that may become known or arise after the date hereof and
which relate to transactions entered into or any state of facts existing on or
before the date hereof and which would be required under generally accepted
accounting principles to be shown in a balance sheet or referenced in the notes
thereto prepared as of the date hereof, other than those incurred in connection
with the Merger, the Additional Mergers and the IPO or in connection with
Provant's preparation for future operations. Set forth on the Provant Disclosure
Schedule are all liabilities and obligations of Provant and Acquisition (by
type) that are as of the date hereof, or are expected to be as of the Effective
Time, in excess of $10,000.
5.7 LITIGATION. There are no actions, suits, causes of action, claims,
litigation, arbitration, administrative hearings or other form of proceedings or
disputes pending, or, to the best knowledge of Provant or Acquisition,
threatened, against, involving or affecting Provant or Acquisition, in any
court, at law or in equity, or before any arbitration board or any governmental
department, commission, board, bureau,
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agency, or instrumentality, that either singly or in the aggregate might prevent
Provant and Acquisition from consummating the transactions contemplated hereby,
the IPO or the Additional Mergers, or which would have a material adverse effect
on the business, operations, or financial condition of Provant and its
subsidiaries taken as a whole.
5.8 MATERIAL CONTRACTS. The Provant Disclosure Schedule lists all
material leases, contracts, instruments, agreements or commitments (whether
written or oral), other than the Additional Merger Agreements, relating to the
conduct of the business of Provant or its subsidiaries (including Acquisition)
in effect on the date hereof (the "Material Provant Contracts"). Without
limiting the generality of the foregoing, the aforesaid list includes all
contracts, agreements and instruments of the following types to which Provant or
its subsidiaries is a party or by which any of them is bound:
(a) employment or employment-related contracts or agreements (including
pension, retirement, deferred compensation, death benefit, profit sharing, bonus
or other employee incentive, fringe benefit, stock purchase or stock option
agreements), consulting agreements, agreements providing for termination or
severance benefits, non-competition agreements, non-disclosure agreements,
contracts for professional personal services, contracts with other persons
engaged in sales or distributing activities, and advertising contracts;
(b) written or oral agreements, understandings and arrangements of any
kind with any officer, director, employee, shareholder or agent of Provant or
Acquisition relating to present or future compensation or other benefits
available to such person or otherwise;
(c) indentures, loan agreements, notes, security agreements, mortgages,
conditional sales contracts, leases of real or personal property, contracts for
the purchase of sale of real or personal property, and agreements for financing;
(d) agreements, contracts or other arrangements to which the Provant or
Acquisition is a guarantor, surety or endorser;
(e) contracts, agreements, instruments, arrangements or understandings
which have not been included in items (a) through (d) above involving payment by
or to Provant or Acquisition of more than $50,000 or not terminable without
penalty or otherwise materially affecting the assets, financial condition,
properties or business of Provant or Acquisition.
All of the Material Provant Contracts are in full force and effect. Except to
the extent that a material adverse effect on Provant's financial condition,
assets, liabilities, earnings, business or prospects (each considered on a
consolidated basis giving effect to the Merger and the Additional Mergers) would
not result if the following were not
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true: (A) Provant, Acquisition and each other party to each of the Material
Provant Contracts have performed all the obligations required to be performed by
them to date, have received no notice of default and are not in default (with
due notice or lapse of time or both) under any of the Material Provant
Contracts; (B) Provant and Acquisition have no present expectation or intention
of not fully performing all their respective obligations under any of the
Material Provant Contracts, and Provant and Acquisition have no knowledge of any
breach or anticipated breach by any other party to any of the Material Provant
Contracts; (C) there exists no actual or, to the knowledge of Provant and
Acquisition, threatened termination, cancellation or limitation of the business
relationship of Provant or Acquisition with any party to any Material Provant
Contract; and (D) consummation of the transactions contemplated hereby and
performance by Provant and Acquisition of their respective obligations hereunder
shall not require the consent or permission of any party to any Material Provant
Contract or permit any party to terminate, suspend or alter the terms of any
Material Provant Contract.
5.9 ADDITIONAL MERGER AGREEMENTS. The Provant Disclosure Schedule sets
forth, with respect to the Additional Merger Agreements, the material economic
terms of each such Agreement and any other material terms of each such Agreement
that differ substantially from the corresponding terms of this Agreement.
5.10 DISCLOSURE OF ALL MATERIAL MATTERS. No statement of a material fact
made by Provant or Acquisition in this Agreement (including without limitation
all information in the Provant Disclosure Schedule and the other Schedules,
Exhibits, and attachments hereto, taken as a whole) is false or misleading in
any respect, nor does this Agreement (including without limitation all
information in the Provant Disclosure Schedule and the other Schedules, Exhibits
and attachments hereto, taken as a whole) omit to state a material fact
necessary in order to make the statements made or information disclosed, in the
light of the circumstances under which they were made or disclosed, not
misleading.
5.11 BROKERS. No broker, finder, or investment banker is entitled to any
brokerage, finder's, or other fee or commission in connection with the Merger or
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of Provant or Acquisition.
6. COVENANTS
6.1 CONDUCT OF BUSINESS OF THE COMPANY.
(a) Except as contemplated by this Agreement, during the period from
the date of this Agreement to the Effective Time, the Company will conduct its
operations only in the ordinary and usual course of business and consistent with
past practice
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and will use all commercially reasonable efforts to preserve intact its present
business organization, keep available the services of its present officers and
employees, and preserve its relationships with customers, suppliers,
contractors, and others having business dealings with it to the end that its
goodwill and on-going business shall not be impaired at the Effective Time.
(b) Without limiting the generality of subsection (a) and except as
otherwise expressly provided in this Agreement, before the Effective Time, the
Company will comply with all laws applicable to the conduct of its business and
continue in effect its present insurance coverage and will not, without the
prior written consent of Provant, (i) issue, sell, or pledge, or authorize or
propose the issuance, sale, or pledge of (A) any shares of capital stock of any
class (including the Shares), or securities convertible into any such shares, or
any rights, warrants or options to acquire any such shares or other convertible
securities, excepting only pursuant to the exercise or conversion of Company
Options and other instruments or securities outstanding on the date hereof and
disclosed on the Company Disclosure Schedule which exercise or conversion and
which issuance are in accordance with the terms of such instruments or
securities as in effect on the date hereof, or (B) any other securities in
respect of, in lieu of, or in substitution for, Shares outstanding on the date
hereof; (ii) purchase or otherwise acquire, or propose to purchase or otherwise
acquire, any outstanding Shares; (iii) declare or pay any dividend or
distribution on any shares of its capital stock; (iv) authorize, recommend,
propose or announce an intention to authorize, recommend or propose, or enter
into an agreement in principle or an agreement with respect to, any change in
its capitalization, merger, consolidation or business combination (other than
the Merger), any acquisition of a material amount of assets or securities, any
disposition of a material amount of assets or securities, or any entry into a
material contract or any release or relinquishment of any material contract
rights, not in the ordinary course of business; (v) propose or adopt any
amendments to its Articles of Incorporation or By-Laws (other than as effected
by the Merger); (vi) incur, assume, or prepay any long-term debt or, except in
the ordinary course of business under existing lines of credit, incur or assume
any short term debt; (vii) make any loans, advances, or capital contributions
to, or investments in, any other person, other than travel or other advances to
employees consistent with past practice; (viii) assume, guarantee, endorse, or
otherwise become liable or responsible (whether directly, contingently, or
otherwise) for the obligations of any other person, except to endorse checks for
collection or deposit in the ordinary course of business; or (ix) agree in
writing or otherwise to take any of the foregoing actions or any action that
would make any representation or warranty in this Agreement untrue or incorrect
as of the date hereof or as of the Effective Time, as if made as of such time.
Notwithstanding the foregoing provisions of this Section 6.1(b), prior to the
Effective Time the Company may make a cash dividend to the Stockholders so long
as doing so will not prevent the Company from satisfying the Financial Condition
(with any such dividend being accounted for prior to the calculation of the
Closing Net Worth).
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6.2 NO SOLICITATION. The Company shall not, nor shall it permit any of
its officers, directors, employees, agents, or representatives (including,
without limitation, investment bankers, attorneys and accountants), directly or
indirectly to (a) initiate, contract with, solicit or encourage any inquiries or
proposals by, or (b) enter into any discussions or negotiations with, or
disclose directly or indirectly any information concerning its business and
properties to, or afford any access to its properties, books, and records to,
any corporation, partnership, person, or other entity or group in connection
with any possible proposal (an "Acquisition Proposal") regarding a sale of the
Company's capital stock or a merger, consolidation, or sale of all or a
substantial portion of the assets, or any similar transaction that is material
to the Company. The Company will notify Provant within one business day of
receipt if any discussions or negotiations are sought to be initiated, any
inquiry or proposal is made, or any such information is requested with respect
to an Acquisition Proposal or potential Acquisition Proposal or if any
Acquisition Proposal is received or indicated to be forthcoming. Such notice
shall state all substantive terms and conditions of any proposal or Acquisition
Proposal and the identity of the person making the proposal or Acquisition
Proposal or seeking to initiate discussions or negotiations or requesting
information.
6.3 ACCESS TO INFORMATION.
(a) From the date of this Agreement, the Company will give Provant and
the Underwriter and their respective representatives full access, at reasonable
times and with reasonable notice, to the offices and other facilities and to the
books and records of the Company, will permit Provant and the Underwriter and
their respective representatives to make such inspections as they may reasonably
require, and will cause its officers and representatives (including, without
limitation, its firm of certified public accountants) to furnish Provant and the
Underwriter and their respective representatives with such financial and
operating data and other information with respect to the business, operations,
assets, liabilities and prospects of the Company as Provant and the Underwriter
and their respective representatives may from time to time reasonably request.
From the date of this Agreement, Provant and Acquisition will give the Company
full access, at reasonable times, to the offices and other facilities and to the
books and records of Provant and Acquisition, will permit the Company and its
representatives to make such inspections as they may reasonably require, and
will cause their respective officers and representatives (including, without
limitation, their firm of certified public accountants) to furnish the Company
and its representatives with such financial and operating data and other
information with respect to the business, operations, assets and liabilities of
Provant, Acquisition and the Additional Companies (in the last case to the
extent such information is in the possession of Provant and the applicable
Additional Company does not object to disclosure) as the Company and its
representatives may from time to time reasonably request.
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(b) Provant and Acquisition, on the one hand, and the Company, on the
other hand, will, and will cause their respective employees and agents
(including, in the case of Provant, the Underwriter and its employees and
agents) (collectively, "Representatives") to, hold in strict confidence, unless
compelled to disclose by judicial or administrative process or, in the opinion
of its counsel, by other requirements of law, all Confidential Information (as
hereinafter defined) and will not disclose the same to any person. If this
Agreement is terminated, each party having received or created any documents
containing Confidential Information (including documents received or created by
its Representatives), will promptly return to the other party or destroy (or
cause to be returned or destroyed) all documents (including all copies thereof)
so received or created containing such Confidential Information. For purposes
hereof, "Confidential Information" shall mean all information of any kind
concerning the Company, or concerning any of Provant, Acquisition or any
Additional Company, respectively, except information (i) ascertainable or
obtained from public or published information, (ii) received from a third party
not known to Provant, Acquisition or their Representatives, or to the Company or
its Representatives, as applicable, to be under an obligation to the Company or
Provant, as applicable, to keep such information confidential, (iii) that is or
becomes known to the public (other than through a breach of this Agreement),
(iv) that was in the receiving party's possession before disclosure thereof to
it in connection with this Agreement, or (v) that is independently developed by
Provant or by the Company (including their respective Representatives), as
applicable.
6.4 REASONABLE BEST EFFORTS. Subject to the terms and conditions hereof,
each party to this Agreement agrees to fully cooperate in all reasonable
respects with the others and the others' counsel, accountants and
representatives in connection with any steps required to be taken as part of its
obligations under this Agreement and in connection with the IPO. Each of the
Company, Provant and Acquisition agrees that it will use its reasonable best
efforts to cause all conditions to its obligations under this Agreement to be
satisfied as promptly as possible, and will not undertake a course of action
inconsistent with this Agreement or which would make any of its representations,
warranties, agreements or covenants in this Agreement untrue in any material
respect or any conditions precedent to its obligations under this Agreement
unable to be satisfied at or prior to the Closing. The Provant Principals hereby
covenant and agree that, subject to the satisfaction (or, in Provant's sole
discretion, waiver) of the conditions set forth in Section 7.1, they will use
their reasonable best efforts to cause Provant to calculate the Financial
Condition in good faith and to cause Provant, Acquisition or Provant's counsel,
as applicable, to execute and/or deliver each of the items identified in
subsections 7.2(e), (h), (i) and (k) and to take the action described in
subsection 7.2(j).
6.5 CONSENTS. Each of Provant, Acquisition and the Company will use
reasonable efforts to obtain as promptly as practicable such consents of third
parties to agreements that would otherwise be violated by any provisions hereof
and to
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make such filings with governmental authorities as are necessary to consummate
the transactions contemplated by this Agreement.
6.6 PUBLIC ANNOUNCEMENTS. Except as provided in the immediately
following sentence, all public announcements, notices or other communications
regarding this Agreement and the transactions contemplated hereby to third
parties other than the parties hereto and their respective advisors and the
shareholders of the Company shall require the prior approval of Provant and of
the Company. Notwithstanding the foregoing, neither the filing of the
Registration Statement (or any other document filed with any public official in
connection with the IPO), nor the distribution of the Prospectus (whether in
preliminary or final form), nor any selling activity conducted by Provant or the
Underwriter in connection with the IPO, including without limitation those
conducted as part of the so-called road show, shall be construed to be public
announcements, notices or other communications requiring the prior approval of
the Company.
6.7 NOTIFICATION OF CERTAIN MATTERS. Each of the parties (the "Notifying
Party") shall give prompt notice to the other parties of (i) the occurrence or
non-occurrence of any event that would be likely to cause any representation or
warranty of the Notifying Party contained in this Agreement to be untrue or
inaccurate in any material respect at or prior to the Effective Time and (ii)
any material failure of the Notifying Party to comply with or satisfy any
covenant, condition, or agreement to be complied with or satisfied by it
hereunder. Without limiting the foregoing, from time to time prior to the
Closing the Company will promptly supplement or amend the Company Disclosure
Schedule both to correct any inaccuracy in the Company Disclosure Schedule when
delivered and to reflect any development which, if existing at the date of this
Agreement, would have been required to be set forth in the Company Disclosure
Schedule or which has rendered inaccurate the information contained in the
Company Disclosure Schedule (each notice furnishing such information being
called a "Company Disclosure Supplement"), and approximately six business days
prior to the Closing the Company will deliver to Provant a final Company
Disclosure Supplement consisting of a complete update of the Company Disclosure
Schedule as though all representations and warranties contained in Article 3
hereof were to be made as of the date of the Closing. In addition, the Company
shall promptly notify Provant in writing if at any time prior to a closing in
connection with the IPO it shall obtain knowledge of any facts relating to the
Company or its officers, directors or stockholders that might make it necessary
or appropriate to amend or supplement the Prospectus in order to make the
statements contained therein not misleading or comply with applicable law. The
delivery of any Company Disclosure Supplement or other notice pursuant to this
Section 6.7 shall not render correct any representation or warranty that was
incorrect when made or limit or otherwise affect the remedies available
hereunder to the party receiving such Company Disclosure Supplement or notice.
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6.8 COVENANTS OF THE STOCKHOLDERS. The Stockholders hereby covenant and
agree with Provant and Acquisition that they shall:
(a) take no action which the Company may not take pursuant to Section
6.2;
(b) take action and refrain from action to the extent required of the
Company pursuant to Section 6.4;
(c) cause the Company to provide to Provant the notifications required
of the Company under Section 6.7;
(d) execute and deliver at the Closing the Employment Contracts, the
Non-Competition and Non-Disclosure Agreements, and the Investment Letters; and
(e) subject to the other terms of this Agreement, (i) use all
commercially reasonable efforts to take whatever action may be reasonably
necessary or desirable to effect, perform or confirm of record or otherwise in
the Surviving Corporation full right, title and interest in and to the business,
properties and assets now conducted or owned by the Company, free and clear of
all restrictions, liens, encumbrances, rights, title and interests in others
(excepting only liens reflected on the Balance Sheet or otherwise disclosed on
the Disclosure Schedule) or to collect, realize upon, gain possession of, or
otherwise acquire, full right, title and interest in and to such business,
properties and assets; (ii) use their reasonable best efforts to take whatever
action may be reasonably necessary or desirable to carry out the intent and
purposes of the transactions contemplated hereby and to permit Provant to
undertake and complete the IPO;
(f) notify Provant in writing if at any time prior to a closing in
connection with the IPO they shall obtain knowledge of any facts relating to the
Company or its officers, directors or stockholders that might make it necessary
or appropriate to amend or supplement the Prospectus used in the registration
statement filed in connection with the IPO in order to make the statements
contained therein not misleading or comply with applicable law (with the
delivery of any notice pursuant to this Section 6.8(f) not limiting or otherwise
affecting the remedies available hereunder to the party receiving such notice);
(g) execute and deliver such other instruments and take such other
actions as may be reasonably required by the Company or the Underwriter in order
to carry out the intent of this Agreement and to complete and close the IPO,
subject to the other terms of this Agreement; and
(h) satisfy (or cause to be satisfied) prior to the Effective Time any
indebtedness to the Company owed by such Stockholder or by any Affiliate of such
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Stockholder, and cause to be discharged any guaranty granted by the Company in
favor of such Stockholder or in favor of any Affiliate of such Stockholder.
6.9 TAX FREE REORGANIZATION. From and after the Effective Time, neither
Provant nor the Surviving Corporation shall take or suffer to be taken any
action which will cause the Merger not to constitute a reorganization within the
meaning of Section 368(a)(2)(D) of the Code.
6.10 MONTHLY FINANCIAL INFORMATION. Within thirty days after the end of
each month ending after the date of this Agreement and prior to the Effective
Time, the Company will furnish to Provant internally prepared financial
statements comparable to the Financial Statements prepared in a manner
consistent with the Financial Statements and certified by the chief financial
officer of the Company.
6.11 PROVANT OPTION PLAN. Prior to the Effective Time, Provant shall
adopt an employee stock option plan (the "Plan") providing for the granting of
Provant Options from time to time as provided in the Plan. The Plan shall make
available for grant at or before the Closing, and the Board of Directors of
Provant shall so grant, Provant Options with respect to a number of shares of
Provant Common Stock equal to 5.0% of the shares of Provant Common Stock
outstanding as of immediately following the Closing of the Merger, the
Additional Mergers (excluding any Additional Merger that is terminated without
consummation) and the IPO, giving effect to the issuance of all shares of Merger
Stock issuable as of Closing, all shares of Provant Common Stock issuable as of
the Closing as merger consideration in each of the Additional Mergers and the
issuance of Provant Common Stock in the IPO. The Provant Options granted as of
such time shall have an exercise price equal to the IPO Price, shall by their
terms (i) become exercisable ratably over a period of three years (provided that
the holder remains employed by Provant or one of its affiliates and subject to
accelerated vesting in the event of a change in control of Provant), (ii) have a
term of seven years, and (iii) in the case of vested options, will remain
exercisable for a period of one year following any termination of employment
without cause (including termination resulting from the expiration of any
employment agreement in accordance with its terms and termination upon death or
disability) and for a period of ten business days following any termination of
employment for cause (conditioned, in the latter case, upon the terminated
employee's delivery of a general release to the Surviving Corporation, Provant
and their respective affiliates), and shall have such other terms as the Board
of Directors of Provant may determine. The Provant Options granted as of such
time shall be allocated among the employees of, respectively, the Surviving
Corporation and the surviving corporations of the Additional Mergers in
accordance with Schedule 6.11 hereto, and shall be granted to individual
employees of such corporations in accordance with directions to the Board of
Directors of Provant given by the executive officers of the Company and the
Additional Companies absent a good faith determination by the Board of Directors
of
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Provant that such a direction is manifestly contrary to the interests of the
Surviving Corporation.
7. CONDITIONS TO CONSUMMATION OF THE MERGER
7.1 CONDITIONS TO THE OBLIGATIONS OF PROVANT AND ACQUISITION. The
obligations of Provant and Acquisition to consummate the Merger are subject to
the satisfaction at the Closing, or waiver by Provant in writing, in whole or in
part, of each of the following conditions:
(a) The IPO and each of the Additional Mergers shall have been
completed at the same time.
(b) The Financial Condition shall have been satisfied, in the good
faith determination of Provant.
(c) Each of the representations, warranties, agreements and covenants
of the Company and the Stockholders (giving effect to the Disclosure Schedule,
but not to any Company Disclosure Supplement) shall be true and correct as of,
and shall not have been violated in any respect at, the Closing as though made
on and as of the Closing, except for (i) representations, warranties, agreements
and covenants which make reference to a specific date (including the date of
this Agreement), which need only be true and correct as of the specified date,
and (ii) failures of representations or warranties to be true and correct as of
the Closing solely on account of matters arising between the date hereof and the
Effective Time in the ordinary course of the Company's business, if and to the
extent such matters are consistent with past practice of the Company and are not
materially adverse to the Company, either singly or in the aggregate; the
Company and the Stockholders shall, on or before the Closing, have performed all
of their respective obligations under this Agreement which by the terms hereof
are to be performed on or before the Closing; and there shall have delivered to
Provant and Acquisition a certificate signed by the President of the Company on
behalf of and in the name of the Company and by the Stockholders dated as of the
date of the Closing to the foregoing effect.
(d) No action or proceeding by or before any court or other
governmental body shall have been instituted by any governmental body or other
person or entity or threatened in writing by any governmental body which seeks
to restrain, prohibit or invalidate the transactions contemplated by this
Agreement or which would materially adversely affect the right of the Surviving
Corporation, as a subsidiary of Provant, to conduct the business of the Company
as presently conducted by the Company or which claims damages from Provant with
respect to the transactions contemplated hereby.
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(e) Provant and Acquisition shall have received the opinion of counsel
to the Company, dated the date of the Closing and in form and substance
reasonably satisfactory to Provant and its counsel, substantially to the effect
set forth on Exhibit 7 (subject to qualifications and assumptions customary in
transactions such as the Merger), which opinion provides that it may be relied
upon by the Underwriter.
(f) All proceedings taken by the Company and all instruments executed
and delivered by the Company prior to the date of the Closing in connection with
the transactions herein contemplated shall be satisfactory in form and substance
to counsel for Provant acting reasonably.
(g) No statute, rule or regulation shall have been enacted or
promulgated which makes illegal or prohibits consummation of the transactions
contemplated hereby or which materially and adversely affects the ability of the
Surviving Corporation, as a subsidiary of Provant, to conduct the business of
the Company as presently conducted by the Company.
(h) The Stockholders shall have executed and delivered to Provant the
Employment Contracts, the Non-Competition and Non-Disclosure Agreement, and the
Investment Letters.
(i) The Company shall have delivered to Provant and Acquisition a
certificate of its Secretary certifying as to requisite corporate or other
action authorizing the transactions contemplated by this Agreement, the
incumbency of officers and directors, and the status of record ownership of the
Shares.
(j) The Company shall have delivered to Provant a duly executed and
legally enforceable Option Termination Agreement with respect to each Company
Option that, in the absence of such Option Termination Agreement, would be
outstanding as of the Effective Time (whether or not then vested).
(k) The Company shall have delivered to Provant such other
certificates, documents and consents as Provant and its counsel shall reasonably
require.
7.2 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY AND THE STOCKHOLDERS.
The obligation of the Company and the Stockholders to consummate this Agreement
is subject to the satisfaction at the Closing, or waiver by the Company in
writing, in whole or in part, of each of the following conditions:
(a) The IPO shall have been completed at the same time, and appropriate
measures shall have been adopted and shall be in place to ensure that the
Stockholders shall receive out of the proceeds of the IPO all cash to which they
will become entitled as of the Effective Time.
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(b) Each of the Additional Mergers shall have been completed at the
same time as the Merger, and there shall have occurred no event (or series of
events, whether or not related) with respect to any Additional Company that (i)
constitutes a failure of a closing condition set forth in the applicable
Additional Merger Agreement such that, in the reasonable judgment of Provant,
Provant is not contractually obligated to consummate the applicable Additional
Merger, and (ii) has resulted in a material adverse change between the date
hereof and the date of the Closing in the financial condition, assets,
liabilities, earnings, business, or business prospects of the applicable
Additional Company.
(c) Each of the representations, warranties and agreements of Provant,
Acquisition and the Provant Principals (giving effect to the Provant Disclosure
Schedule) shall be true and correct as of, and shall not have been violated in
any respect at, the Closing as though made on and as of the Closing except for
(i) representations and warranties and agreements which make reference to a
specific date (including the date of this Agreement), which need only be true
and correct as of the specified date, and (ii) failures of representations or
warranties to be true and correct as of the Closing solely on account of matters
arising between the date hereof and the Effective Time in the ordinary course of
Provant's or Acquisition's business, if and to the extent such matters are not
materially adverse to Provant (considered on a consolidated basis giving effect
to the Merger and the Additional Mergers), either singly or in the aggregate;
Provant and Acquisition shall, on or before the Closing, have performed all of
their respective obligations under this Agreement which by the terms hereof are
to be performed on or before the Closing (including without limitation the
adoption of the Plan and the grant of Provant Options to persons who will be
employees of the Surviving Corporation in accordance with Schedule 6.11); and
Provant and Acquisition shall have delivered to the Company a certificate of
their respective Presidents signed on their behalf and in their names dated as
of the date of the Closing to the foregoing effect.
(d) No action or proceeding by or before any court or other
governmental body shall have been instituted by any governmental body or other
person or entity or threatened in writing by any governmental body which seeks
to restrain, prohibit or invalidate the transactions contemplated by this
Agreement or which would materially adversely affect the right of the Company to
consummate the Merger.
(e) The Company shall have received the opinion, dated the date of the
Closing and in form and substance satisfactory to the Company and its counsel,
of Messrs. Nutter, McClennen & Fish, counsel to Provant, substantially to the
effect set forth on Exhibit 8 (subject to qualifications and assumptions
customary in transactions such as the Merger).
(f) All proceedings taken by Provant and Acquisition and all
instruments executed and delivered by Provant and Acquisition prior to the date
of the Closing in
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connection with the transactions herein contemplated, and any instruments to be
executed by the Stockholders at the request of Provant, shall be satisfactory in
form and substance to counsel for the Company, acting reasonably.
(g) No statute, rule or regulation shall have been enacted or
promulgated which makes illegal or prohibits consummation of the transactions
contemplated hereby or which materially and adversely affects the ability of the
Surviving Corporation, as a subsidiary of Provant, to conduct the business of
the Company as presently conducted by the Company.
(h) Provant and Acquisition shall have delivered to the Company a
certificate of its Secretary, certifying as to requisite corporate or other
action authorizing the transactions contemplated by this Agreement.
(i) The Surviving Corporation shall have executed and delivered each
Employment Contract to the appropriate party.
(j) The individual listed on Schedule 7.2 as the designee of the
Company shall have been elected to the Board of Directors of Provant as of
immediately following the closing of the IPO.
(k) Provant and Acquisition shall have delivered to the Company such
other certificates and documents pertaining to the Merger (including the legal
existence and good standing of Provant and Acquisition) as the Company and its
counsel shall reasonably require.
8. RESTRICTIONS ON SALE OR TRANSFER OF MERGER STOCK
8.1 RESTRICTIONS ON SALE. The shares of Merger Stock will not have been
registered under the Securities Act or the blue sky laws of any state by reason
of their contemplated issuance in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act and of such state laws.
Such shares may not be sold, transferred, or otherwise disposed of without
registration under the Securities Act and such state laws or an exemption
therefrom, or in contravention of the restrictions contained in the Investment
Letter attached hereto as Exhibit 4..
8.2 REGISTRATION ON A PARI PASSU BASIS. Provant agrees that, in the
event that at any time after the closing of the IPO it conducts a public
offering of Common Stock registered under the Act and Provant and its
underwriter determine, in their sole discretion, to permit (i) any holder of
Merger Stock, (ii) any holder of Provant Common Stock issued as merger
consideration in any of the Additional Mergers, or (iii) any Provant Principal
to sell Provant Common Stock in such offering, then Provant shall permit each
holder of Merger Stock to sell shares of such Merger Stock
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in such offering in the same proportion as the person referenced in any of
clauses (i) through (iii) above who is then being permitted to sell the highest
proportion of his or her shares of Provant Common Stock (all such proportions
being based on the respective number of shares of Provant Common Stock that each
applicable person then holds); provided, however, that the foregoing right shall
not apply to shares that are no longer subject to the two-year restriction
period under the Investment Letter and that are tradeable either without regard
to Rule 144 promulgated under the Act or tradeable within a 90 day period under
such Rule 144. For purposes of the foregoing, an agreement granting a person a
right to have shares registered in the future shall not be construed as
"permitting" such person to sell shares in an offering until such time as such
right is properly exercised under the terms of such agreement.
9. INDEMNIFICATION
9.1 AGREEMENTS TO INDEMNIFY.
(a) As used in this Article 9:
(i) "Damages" means claims, damages, liabilities,
losses, judgments, settlements, and expenses, including,
without limitation, all reasonable fees and disbursements of
counsel incident to the investigation or defense of any claim
or proceeding or threatened claim or proceeding.
(ii) "Provant Indemnified Party" means, collectively,
each of Provant, the Surviving Corporation, and their
respective affiliates.
(iii) "Company Indemnified Party" means, after the
Effective Time, the Stockholders collectively.
(iv) "Indemnified Party" means either of the Provant
Indemnified Party or the Company Indemnified Party, as
applicable under the circumstances.
(b) On the terms and subject to the limitations set forth in this
Agreement, the Company, prior to the Effective Time, shall, and, after the
Effective Time, the Stockholders shall indemnify, defend, and hold the Provant
Indemnified Party harmless from, against and in respect of any and all Damages
incurred by any Provant Indemnified Party arising from or in connection with any
of the following (collectively referred to herein as "Claims"):
(i) any breach of any representation, warranty,
covenant or agreement made by the Company or by the
Stockholders in this
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Agreement or in any exhibit, schedule, certificate or other
document delivered or to be delivered at the Closing by or on
behalf of the Company or the Stockholders pursuant to the
terms of this Agreement, or otherwise referred to or
incorporated in this Agreement including any allegation by a
third party which, if true; would constitute such a breach;
and
(II) those matters identified on Schedule 9.1.
(c) In addition to the foregoing, and solely in the event the Merger
shall be consummated, the Stockholders shall indemnify Provant as set forth in
the immediately following sentence from any failure by the Company to have a
Closing Net Worth equal to or greater than the Minimum Net Worth. In the event
the Closing Net Worth shall be less than the Minimum Net Worth (and Provant
shall have elected, in its sole discretion, to waive the failure of the closing
condition set forth in Section 7.1(b) caused thereby), the Stockholders shall
reimburse Provant at the Closing for the amount of such deficit on a dollar for
dollar basis. Such reimbursement shall be the sole remedy of Provant on account
of a failure of the Closing Net Worth to equal or exceed the Minimum Net Worth
(other than Provant's right not to terminate this Agreement), and neither the
Company nor the Stockholders shall be liable for any consequential damages on
account of any such failure. Any indemnity and reimbursement required by this
Section 9.1(c) shall not be subject to Section 9.2(c).
(d) From and after the Effective Time and solely if the Merger shall
have been consummated, on the terms and subject to the limitations set forth in
this Agreement, Provant and the Provant Principals shall indemnify, defend, and
hold the Company Indemnified Party harmless from, against and in respect of any
and all Damages incurred by any Company Indemnified Party arising from or in
connection with any actual or alleged breach of any representation, warranty,
covenant or agreement made by Provant or Acquisition in this Agreement or in any
exhibit, schedule, certificate or other document delivered or to be delivered at
the Closing by or on behalf of Provant or Acquisition pursuant to the terms of
this Agreement or otherwise referred to or incorporated in this Agreement (also
referred to herein as "Claims"); provided, however, that this provision shall
not be construed to provide to the Company Indemnified Party any indemnification
with respect to the Registration Statement and the information contained
therein, or with respect to any failure of the IPO to be consummated.
(e) Subject to Section 9.2, the Company's representations and
warranties set forth in Article 3, the Stockholders' representations and
warranties set forth in Article 4 and Provant's and Acquisition's
representations and warranties set forth in Article 5 shall, for purposes of
this Article 9, be deemed to have survived the Effective Time and the Closing of
the Merger and the other transactions contemplated hereby
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notwithstanding any contrary terms of this Agreement, and whenever such
representations, warranties, covenants and agreements are referred to in this
Article 9, the text of the same as set forth in the aforesaid Articles shall be
deemed to be set forth in their entirety herein, and the same are hereby
incorporated herein by such references. Each representation, warranty, covenant
and agreement of the Company and the Stockholders shall be deemed to have been
relied upon by the Provant Indemnified Party, and each representation, warranty,
covenant and agreement of Provant and Acquisition shall be deemed to have been
relied upon by the Company Indemnified Party, notwithstanding any investigation
or inspection made by or on behalf of any Provant Indemnified Party or the
Company Indemnified Party, as applicable, and shall not be affected in any
respect of any such investigation or inspection. No waiver of a closing
condition by an Indemnified Party shall be deemed to relieve a party that is
otherwise obligated to provide indemnification of its obligations pursuant to
this Section 9.1 on account of the matters that were the subject of such waiver.
(f) In addition to and not in limitation of the rights and remedies of
Provant under this Section 9.1, Provant may withhold from any shares of Provant
Common Stock issuable and all amounts payable under Section 2.8 the amount of
any Damages of Provant arising out of or in connection with Claims asserted
hereunder (as estimated in good faith by Provant in the event such Damages are
not yet fixed, subject to future release if appropriate upon final resolution of
the applicable Claim). For purposes of this subsection (f), shares of Provant
Common Stock otherwise issuable under Section 2.8 shall be valued at the lower
of (i) the closing price for a share of Provant Common Stock on the last trading
day immediately preceding the date Provant gives notice that it has a claim
under this Article 9 and (ii) the IPO Price adjusted as provided in Section
2.8(f).
(g) In the event the Stockholders shall indemnify the Provant
Indemnified Party for any breach of the warranties contained in Section 3.25 on
account of a failure of accounts receivable of the Company to be collected, the
Surviving Corporation shall assign to the Stockholders those accounts receivable
as to which such indemnity has been paid.
9.2 LIMITATIONS ON INDEMNITY OBLIGATIONS. The indemnity obligations of
the Company or the Stockholders, as applicable (in either case, the "Company
Indemnifying Party"), or Provant and the Provant Principals (collectively, the
"Provant Indemnifying Party") (both the Company Indemnifying Party and the
Provant Indemnifying Party being called generically the "Indemnifying Party"),
under this Agreement shall be subject to the following limitations:
(a) The indemnity obligations of the Indemnifying Party shall expire on
September 15, 1999 (the "Cut-off Date"); provided, however, that such
obligations with respect to (i) the representations and warranties contained in
Sections 3.1, 3.2, 3.10,
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and 3.22, Article 4, and Sections 5.1, 5.2, 5.3 and 5.4 of this Agreement and
the matters identified on Schedule 9.1 and in Section 9.1(c) shall continue
forever without limitation, and (ii) the representations and warranties
regarding taxes, which are contained in Section 3.15, shall remain in effect
until all claims for taxes due by or on account of the Company for any period up
to and including the Effective Time have been settled and any statute of
limitations period with respect to such taxes has expired; and provided further
that the indemnity obligations of the Indemnifying Party for Claims timely
asserted by an Indemnified Party before the expiration of the applicable
indemnity period, if any, in the manner provided in this Agreement shall
continue until such Claims are finally resolved and discharged.
(b) (i) Subject to subsection (b)(ii) below, the aggregate indemnity
obligations of each Stockholder for any Damages arising out of Claims the
operative facts of which were actually known to any Stockholder as of the date
of this Agreement ("Known Claims") shall not in any event exceed an amount equal
to the sum of (A) the cash received by all Stockholders pursuant to Section
2.7(c), plus (B) the product obtained by multiplying the number of shares of
Merger Stock received by all Stockholders by the IPO Price, minus (C) any
amounts paid pursuant to Section 9.1 by any Stockholder with respect to Claims
that are not Known Claims. Subject to subsection (b)(ii) below (and
notwithstanding Section 11.9), the aggregate indemnity obligations of Dr.
Steinmetz and the Steinmetz Childrens Trust (collectively), or of Mr. King and
the King Childrens Trust (collectively), respectively, for Damages arising out
of Claims that do not constitute Known Claims shall not in any event exceed Five
Million Dollars ($5,000,000); provided, however, that the aggregate indemnity
obligations of all Stockholders for all Claims, whether or not constituting
Known Claims, shall not exceed the sum of the amounts referenced in clauses (A)
and (B) of the immediately preceding sentence. The aggregate indemnity
obligations of the Provant Principals for any Damages shall not in any event
exceed an amount equal to (X) the aggregate number of shares of Provant Common
Stock held by the Provant Principals as of immediately following the closing of
the IPO plus the aggregate number of warrant shares covered by those certain
warrants for the purchase of Provant Common Stock issued to the Provant
Principals as of the closing of the IPO, multiplied by (Y) the IPO Price, minus
(Z) the aggregate exercise price of such warrants.
(ii) Solely in the event that both (A) the Damages to be paid
by the Stockholders pursuant to Section 9.1(b) on account of the then-asserted
Claim, in aggregation with all such Damages previously paid by all Stockholders,
equal or exceed the aggregate amount of the cash received by all Stockholders
pursuant to Section 2.7, and (B) the Average Closing Price (as defined below) of
Provant Common Stock during the ten trading days immediately following (but not
including) the date on which notice of the liquidated amount of the claimed
Damages is given to the Stockholders (which may, if applicable, be the date on
which the initial notice of the Claim is given) (in either event, the "Claim
Date") is less than the IPO Price, then any
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Stockholder may, at his or her election, satisfy such portion of the Damages as
exceeds the cash received by all Stockholders pursuant to Section 2.7 by
tendering to Provant, for cancellation, shares of Provant Common Stock equal in
value to the Damages to be so satisfied, with such shares valued at the Average
Closing Price determined under clause (B) of this sentence. Notwithstanding the
first sentence of subsection (b)(i) above, if the foregoing clauses (A) and (B)
are satisfied and the Stockholders are therefore permitted to satisfy their
obligations to pay Damages by tendering shares of Provant Common Stock, and a
Stockholder elects to so tender Provant Common Stock, such Stockholder's
obligation for Damages shall be limited to the number of shares of Provant
Common Stock received by all Stockholders pursuant to Sections 2.7 and 2.8. In
the event that Damages are to be paid by the Stockholders before the final
distribution of Provant Common Stock (if any) on account of 1998 EBIT and if
this subsection (b)(ii) shall apply, the final number of shares of Provant
Common Stock that the Stockholder shall be obligated to tender to Provant shall
be left undetermined until such time as the distribution of Provant Common Stock
(if any) is to be made under Section 2.8 As used herein, "Average Closing Price"
means the average of the closing prices of Provant Common Stock on each trading
day during the stated period, as recorded on the New York Stock Exchange or on
such other exchange or market as is then the principal exchange or market on
which Provant Common Stock is traded.
(c) Except (i) as provided in Section 9.1(c), and (ii) with respect to
Damages arising out of the matters identified on Schedule 9.1, which Damages
shall be indemnified without respect to the threshold provided in this Section
9.2(c), an Indemnified Party shall be entitled to indemnification only if the
aggregate and collective Damages incurred or suffered by it exceeds $115,000, in
which event it shall be entitled to indemnification of the full amount of such
Damages. No amounts indemnified by the Company or the Stockholders pursuant to
Section 9.1(c) or with respect to matters identified on Schedule 9.1 shall be
treated as Damages incurred and suffered by the Indemnified Party for purposes
of the immediately preceding sentence, provided only that the amounts so
indemnified have been duly paid.
(d) Notwithstanding the preambles to, respectively, Article 3 and
Article 5, the contractual liability of the Stockholders and the Provant
Principals for any breach of the representations and warranties contained in,
respectively, Article 3 and Article 5 shall be limited to such Stockholder's or
Provant Principal's liability provided in this Article 9.
9.3 Notice of Third Party Claims. An Indemnified Party shall promptly
notify the Indemnifying Party in writing of any Claim consisting of a matter
asserted by a third person that might give rise to any indemnity obligation of
the Indemnifying Party hereunder (a "Third Party Claim"), specifying in
reasonable detail the nature thereof and indicating the amount (if known, or
estimated if necessary) of the Damages that have been or may be sustained by the
Indemnified Party. Failure
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of any Indemnified Party to promptly give such notice shall not relieve the
Indemnifying Party of its or his obligation to indemnify under this Article 9,
but as a result of any such failure, the Indemnified Party shall be liable to
the Indemnifying Party for, and only for, the amount of actual damages caused by
such failure, which amount shall be an offset against the amount of Damages for
which the Indemnifying Party is liable hereunder. Together with or following
such notice, the Indemnified Party shall deliver to the Indemnifying Party
copies of all notices and documents received by the Indemnified Party relating
to the Third Party Claim (including court papers).
9.4 DEFENSE AND SETTLEMENT OF THIRD PARTY CLAIMS. The Indemnifying Party
shall have the right (without prejudice to the right of any Indemnified Party to
participate at its or his own expense through counsel of its or his own
choosing) to defend against any Third Party Claim at its or his expense and
through counsel of its or his own choosing and to control such defense if the
Indemnifying Party gives written notice of its or his intention to do so within
15 business days of its or his receipt of notice of the Third Party Claim. The
Indemnified Party shall cooperate fully in all reasonable respects in the
defense of such Third Party Claim and shall make available to the Indemnifying
Party or its or his counsel all pertinent information under their control
relating thereto. The Indemnified Party shall have the right to elect to settle
any Third Party Claim; provided, however, the Indemnifying Party shall not have
any indemnification obligation with respect to any monetary payment to any third
party required by such settlement unless the Indemnifying Party shall have
consented thereto. The Indemnifying Party shall have the right to elect to
settle any Third Party Claim subject to the consent of the Indemnified Party;
provided, however, that if the Indemnified Party fails to give such consent
within 15 business days of being requested to do so, the Indemnified Party
shall, at its expense, assume the defense of such Third Party Claim and
regardless of the outcome of such matter, the Indemnifying Party's liability
hereunder shall be limited to the amount of any such proposed settlement. The
foregoing provisions notwithstanding, in no event (a) may either Indemnifying
Party adjust, compromise or settle any Third Party Claim unless such adjustment,
compromise or settlement unconditionally releases the Indemnified Party from all
liability, (b) may the Company Indemnifying Party adjust, compromise or settle
any Third Party Claim if such adjustment, compromise or settlement affects the
absolute and sole right of Provant or the Surviving Corporation to own or use
any of the Company's assets or (c) may the Company Indemnifying Party defend any
Third Party Claim which, if adversely determined, would materially impair the
financial condition, business or prospects of Provant or the Surviving
Corporation.
9.5 NOTICE OF OTHER CLAIMS. In the event any Indemnified Party should
incur any Claim that does not involve a Third Party Claim, the Indemnified Party
shall deliver a notice of such Claim with reasonable promptness to the
Indemnifying Party. If the Indemnifying Party notifies the Indemnified Party
that it does not
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<PAGE> 50
dispute the Claim described in such notice or fails to notify the Indemnified
Party within 30 days after delivery of such notice by the Indemnified Party
whether the Indemnifying Party disputes the Claim described in such notice, the
Damages in the amount specified in the Indemnified Party's notice will be
conclusively deemed a liability of the Indemnifying Party and the Indemnifying
Party shall pay the amount of such Damages to the Indemnified Party on demand.
Failure of any Indemnified Party to promptly give such notice shall not relieve
the Indemnifying Party of its or his obligation to indemnify under this Article
9, but as a result of any such failure, the Indemnified Party shall be liable to
the Indemnifying Party for, and only for, the amount of the actual damages
caused by such failure, which amount shall be an offset against the amount of
Damages for which the Indemnifying Party is liable hereunder.
10. TERMINATION; AMENDMENTS; WAIVER
10.1 TERMINATION. This Agreement may be terminated at any time prior to
the Effective Time, notwithstanding approval thereof by the stockholders of the
Company:
(a) by mutual consent of the Board of Directors of Provant and the
Company;
(b) by any party, in its sole discretion, if the Merger and the IPO
shall not have been consummated on or before June 30, 1998, unless the failure
of the Merger to occur by such date shall be due to the failure of the party
seeking to terminate this Agreement to perform or observe the covenants and
agreements of such party set forth herein;
(c) by the Company if there has been a misrepresentation or breach on
the part of Provant or Acquisition in the representations, warranties, covenants
or obligations of Provant or Acquisition set forth herein, provided that in the
case of a breach of any such covenant or obligation, such breach has not been
cured within ten (10) business days after the Company has notified Provant and
Acquisition of such breach;
(d) by Provant if there has been a misrepresentation or breach on the
part of the Company or the Stockholders in the representations, warranties,
covenants and obligations of the Company and the Stockholders set forth herein,
provided that in the case of a breach of any such covenant or obligation, such
breach has not been cured within ten (10) business days after Provant has
notified the Company or the Stockholders of such breach; or
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<PAGE> 51
(e) by any party if any court shall have issued an order, decree or
ruling or taken any other action permanently enjoining, restraining or otherwise
prohibiting the Merger and such order, decree, ruling or other action shall have
become final and non-appealable.
The power of termination provided for by this Section 10.1 may be
exercised for Provant or the Company only by their respective Boards of
Directors in its sole discretion, and will be effective only after written
notice thereof, signed on behalf of the party for which it is given by its
Chairman of the Board, President or other duly authorized officer, shall have
been given to the other. If this Agreement is terminated in accordance with this
Section 10.1, the Merger shall be abandoned without further action by Provant or
the Company.
10.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement by any party as provided in Section 10.1, this Agreement shall
forthwith become void and have no effect, and neither Provant, nor the Company,
nor any of the officers or directors of either of them, nor the Stockholders
shall have any liability of any nature whatsoever hereunder, or in connection
with the transactions contemplated hereby, except (a) Sections 6.3(b) and 11.8
shall survive any termination of this Agreement, (b) notwithstanding anything to
the contrary contained in this Agreement, no party shall be relieved of or
released from any liabilities or damages arising out of its breach of any
provision of this Agreement; and (c) until September 30, 1998, neither the
Company nor the Stockholders shall, directly or indirectly, discuss, negotiate,
submit or respond to proposals relating to, or enter into an agreement with any
other person with respect to, a transaction with other training companies to be
accompanied or followed by a public offering.
10.3 AMENDMENT. Subject to compliance with applicable law, this
Agreement may be amended by the parties hereto, by action taken or authorized
(in the case of Provant, Acquisition and the Company) by their respective Boards
of Directors, at any time before or after approval of the matters presented in
connection with the Merger by the stockholders of the Company. This Agreement
may not be amended except by an instrument in writing signed on behalf of each
of the parties hereto.
10.4 EXTENSION; WAIVER. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized (in the case of Provant,
Acquisition and the Company) by their respective Boards of Directors, may, to
the extent legally allowed, subject to Section 10.3, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party, but such
extension or waiver or failure to insist on strict compliance with
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<PAGE> 52
an obligation, covenant, agreement or condition shall not operate as a waiver
of, or estoppel with respect to, any subsequent or other failure.
11. MISCELLANEOUS
11.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Except as provided in
Article 9 with respect to the representations and warranties contained in
Articles 3, 4 and 5 and except for the provisions of Section 10.2, the
representations and warranties made in this Agreement shall not survive beyond
the Effective Time.
11.2 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement (a) constitutes, with
the Company Disclosure Schedule, the Provant Disclosure Schedule, the other
Schedules and the Exhibits hereto, the entire agreement among the parties with
respect to the subject matter hereto and supersedes all other prior agreements
and understandings, both written and oral, among the parties or any of them with
respect to the subject matter hereof (including, without limitation, the letter
of intent between the Company and American Business Partners LLC) and (b) shall
not be assigned by operation of law or otherwise, provided that Provant or
Acquisition may assign its respective rights and obligations to any direct or
indirect subsidiary of Provant, but no such assignment shall relieve Provant of
its obligations hereunder.
11.3 VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, each of which shall remain in full force and
effect.
11.4 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person or by electronic facsimile transmission,
cable, telegram, or telex, or when mailed by registered or certified mail
(postage prepaid, return receipt requested) or delivered to a courier of
national reputation to the respective parties as follows:
If to Provant or Acquisition, to it at:
67 Batterymarch Street, Suite 500
Boston, MA 02110
Facsimile: (617) 261-1610
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with a copy to:
Nutter, McClennen & Fish, LLP
One International Place
Boston, Massachusetts 02110-2699
Attention: Constantine Alexander, Esq.
Facsimile: (617) 973-9748
If to the Company or any Stockholder, to it or him at:
11338 Moorpark Street
North Hollywood, CA 91602
Attention: John F. King
Facsimile: (818) 505-0832
with a copy to:
Wolf, Rifkin & Shapiro, LLP
11400 W. Olympic Blvd.
Suite 900
Los Angeles, CA 90064-1565
Attention: Richard S. Grant, Esq.
Facsimile: (310) 479-1422
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
11.5 GOVERNING LAW. This Agreement and all rights of the parties
arising in connection with the transactions contemplated hereby (including the
negotiation hereof, and whether or not such transactions shall be consummated)
shall be governed by and construed in accordance with the internal laws of the
State of California, regardless of the laws that might otherwise govern under
applicable principles of conflicts of laws thereof.
11.6 DESCRIPTIVE HEADINGS. The descriptive headings herein are inserted
for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
11.7 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same agreement. Copies (photostatic,
facsimile or otherwise) of signatures to this Agreement shall be deemed to be
originals and may be relied upon to the same extent as originals, and delivery
of a duly executed
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<PAGE> 54
signature page to this Agreement shall be deemed to be delivery of this
Agreement in its entirety.
11.8 EXPENSES. All costs and expenses incurred in connection with the
transactions contemplated by this Agreement shall be paid by the party incurring
such expenses, provided that (i) solely in the event the Merger is consummated,
the reasonable legal and accounting expenses of the Company, up to a maximum of
$50,000, shall be paid by (at the election of Provant) either Provant or the
Surviving Corporation, and (ii) all expenses of the Company not payable pursuant
to clause (i) shall be paid directly by the Stockholders or expensed (and not
capitalized) by the Company prior to the computation of the Company's net worth
for purposes of determining satisfaction of the Financial Condition. An account
receivable for expenses reimbursable by Provant or the Surviving Corporation
under clause (i) above may be included on the books of the Company for purposes
of calculating the Closing Net Worth, to the extent such amounts have previously
been expensed by the Company.
11.9 JOINT AND SEVERAL. The representations, warranties, agreements,
covenants and obligations of the Stockholders under this Agreement are joint and
several. The indemnity obligations of Provant and the Provant Principals under
this Agreement are joint and several.
11.10 PARTIES IN INTEREST. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Agreement.
11.11 INTERPRETATION. The Parties acknowledge and agree that each party
and its counsel reviewed and negotiated the terms and provisions of this
Agreement and has contributed to its revision and that the rule of construction
to the effect that any ambiguities are resolved against the drafting party shall
not be employed in the interpretation of this Agreement.
11.12 MOST FAVORED NATION TREATMENT. Subject to the last sentence of this
Section 11.12, Provant covenants and agrees that the Company and the
Stockholders will be accorded "most favored nation" treatment with respect to
any material amendments adopted after the date hereof with respect to any
Additional Merger Agreement or any other agreement materially altering the
rights or obligations of any Additional Company or the stockholders thereof. The
parties agree to amend this Agreement as necessary from time to time to effect
any changes required pursuant to such "most favored nation" treatment.
Notwithstanding the foregoing, such "most favored nation" treatment shall not
apply to (a) amendments of any provisions not applicable generally to this
Agreement and all (or substantially all) of the Additional Merger Agreements, or
(b) any waiver of a closing condition or an affirmative or
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<PAGE> 55
negative covenant or comparable undertaking contained in any Additional Merger
Agreement.
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<PAGE> 56
IN WITNESS WHEREOF, each of the parties has caused this Agreement and
Plan of Merger to be executed on its behalf by its officers thereunto duly
authorized, all as of the day and year first above written.
PROVANT, INC.
By:
-----------------------------------------
Name: Paul M. Verrochi
-----------------------------------------
Title: Chairman & CEO
-----------------------------------------
By
-----------------------------------------
Name: Dominic J. Puopolo
-----------------------------------------
Title: Executive Vice President & CEO
-----------------------------------------
LSS ACQUISITION CORP.
By:
-----------------------------------------
Name: Rajiv Bhatt
-----------------------------------------
Title: President
-----------------------------------------
By:
-----------------------------------------
Name: Rajiv Bhatt
-----------------------------------------
Title: Treasurer
-----------------------------------------
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<PAGE> 57
ROBERT A. STEINMETZ, PH.D.
AND ASSOCIATES, INC.
By:
-----------------------------------------
Name: Robert Steinmetz
-----------------------------------------
Title: President
-----------------------------------------
By:
---------------------------------------------------
Name: John F. King
---------------------------------------------------
Title: CEO and Secretary
---------------------------------------------------
STOCKHOLDERS:
---------------------------------------------------
John F. King
---------------------------------------------------
Robert A. Steinmetz, Ph.D.
---------------------------------------------------
EDWIN BAUCH, AS TRUSTEE OF THE STEINMETZ CHILDREN'S
TRUST U/D/T DATED , AND NOT INDIVIDUALLY
---------------------------------------------------
EDWIN BAUCH, AS TRUSTEE OF THE KING CHILDREN'S TRUST
U/D/T DATED DECEMBER 31, 1996, AND NOT INDIVIDUALLY
57
<PAGE> 58
PROVANT PRINCIPALS
---------------------------------------------------
Paul M. Verrochi
---------------------------------------------------
Dominic J. Puopolo
58
<PAGE> 1
Exhibit 2.5
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this Agreement") dated as of
February 12, 1998 is among Provant, Inc., a Delaware corporation ("Provant"),
MOHR Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of
Provant ("Acquisition"), MOHR Retail Learning Systems, Inc., a New Jersey
corporation (the "Company"), Herbert Cohen, Judith Cohen and Michael Patrick,
the sole stockholders of the Company (the "Stockholders"), and Paul M. Verrochi
and Dominic J. Puopolo (the "Provant Principals"), and provides for the merger
of the Company with and into Acquisition (the "Merger"). The Boards of Directors
of Provant, Acquisition and the Company have determined that the Merger is in
the best interests of their respective stockholders and the Merger has been
unanimously approved by the stockholders of the Company and Acquisition.
Accordingly, the parties hereto, in consideration of the mutual
representations, warranties and covenants contained herein, agree as follows:
1. CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the
respective meanings set forth below:
1.1 "Additional Companies" mean those companies identified on Schedule
1.1 hereto, with which companies Provant is entering into separate Agreements
and Plans of Merger contemporaneously with the execution and delivery of this
Agreement.
1.2 "Additional Mergers" means the acquisitions (by merger or
otherwise) of each of the Additional Companies by Provant, and "Additional
Merger Agreements" means the agreements and plans of merger or other contracts
(in each case as described in Section 5.9 of the Provant Disclosure Schedule)
pursuant to which Provant will consummate the Additional Mergers.
1.3 "Additional Shares" means the additional shares, if any, of Provant
Common Stock issuable to the Stockholders pursuant to Section 2.8.
1.4 "Balance Sheet" means the balance sheet of the Company as of June
30, 1997 included in the Financial Statements.
1.5 "Balance Sheet Date" means June 30, 1997.
1.6 "Certificate of Merger" has the meaning given to it in Section 2.2.
1.7 "Closing" means the closing of the transactions contemplated by
this Agreement as provided in Section 2.2.
<PAGE> 2
1.8 "Closing Net Worth" means the Company's pro forma net worth as of a
date selected by Provant as close as practicable to the Effective Time (but in
no event more than thirty (30) days prior to the Effective Time), determined
using the same principles and assumptions used by Provant in its preparation of
its pro forma financial statements contained in the Registration Statement.
1.9 "Code" means the Internal Revenue Code of 1986, as amended to date.
1.10 "Commission" means the Securities and Exchange Commission.
1.11 "Company Disclosure Schedule" means the Disclosure Schedule
provided by the Company and attached hereto and incorporated herein by this
reference.
1.12 "Company Option" means an option to purchase Shares, whether or not
vested or exercisable as of the applicable time.
1.13 "DGCL" means the Delaware General Corporation Law.
1.14 "1998 EBIT" means the earnings before interest and taxes of the
Company for the period beginning July 1, 1997 and ending at the Effective Time
and of the Surviving Corporation for the period beginning at the Effective Time
and ending June 30, 1998 determined in accordance with the Instructions for
Determination of EBIT attached hereto as Exhibit 1; provided, that if the
Effective Time is after June 30, 1998, then 1998 EBIT shall consist solely of
the earnings before interest and taxes of the Company (determined as set forth
above) for the period beginning July 1, 1997 and ending June 30, 1998.
1.15 "Effective Time" means such time as the Certificate of Merger is
filed with the Secretary of State of the State of New Jersey in accordance with
Section 48-21-107 of the NJBCA or with the Secretary of State of the State of
Delaware in accordance with Section 252 of the DGCL, whichever is later, unless
Acquisition and the Company agree that a later time shall be the Effective Time,
in which case such time shall be specified in the Certificate of Merger.
1.16 "Employment Contracts" mean the employment agreements in the form
attached hereto as Exhibits 2A and 2B.
1.17 "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
1.18 "Financial Condition" means that, using the same principles and
assumptions used by Provant in the preparation of its pro forma financial
statements contained in the Registration Statement, the Company's Closing Net
Worth is not less than $725,000 (the "Minimum Net Worth"), the Company's pro
forma revenues for the 12 months ended June 30, 1997 are not less than $3
million, the Company's pro forma earnings before interest and taxes for the 12
months ended June 30, 1997 are not less
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than $800,000, the Company's projected pro forma revenues (as determined in good
faith by Provant) for the 12 months ended June 30, 1998 are not less than $4.1
million and the Company's projected 1998 EBIT (as determined in good faith by
Provant) is not less than $1.2 million.
1.19 "Financial Statements" means the financial statements of the
Company attached hereto as Exhibit 3, consistent in form and substance with the
requirements of Regulation S-X of the Commission under the Securities Act,
consisting of (a) Balance Sheets at June 30, 1997 and 1996, and at September 30,
1997; (b) Statements of Income for the periods ending June 30, 1997, 1996 and
1995, and ending September 30, 1997; (c) Statements of Stockholders' Equity at
June 30, 1997, 1996, 1995 and 1994, and at September 30, 1997; (d) Statements of
Cash Flow for the periods ending June 30, 1997, 1996 and 1995, and ending
September 30, 1997; and (e) notes to the foregoing.
1.20 "First Accountants" means the firm of independent public
accountants then regularly employed by Provant.
1.21 "Fraction" means that fraction which has one as its numerator and
which has, as its denominator, the pro forma number of Shares outstanding on a
fully diluted basis as of immediately prior to the Effective Time, assuming the
exercise or conversion of all then-outstanding Company Options, warrants and
other instruments exercisable for or convertible into Shares (whether or not
then currently exercisable or convertible).
1.22 "IPO" means the initial underwritten public offering of shares of
Provant Common Stock.
1.23 "IPO Price" shall mean the price at which shares of Provant Common
Stock are sold to the public in the IPO.
1.24 "Investment Letter" means an investment letter in the form attached
hereto as Exhibit 4.
1.25 "Merger Stock" means the shares of Provant Common Stock exchanged
for Shares pursuant to Section 2 .7(c) and 2.8.
1.26 "NJBCA" means the New Jersey Business Corporation Act.
1.27 "Non-Competition and Non-Disclosure Agreement" means a
non-competition and non-disclosure agreement in the form attached hereto as
Exhibit 5.
1.28 "Prospectus" means the prospectus relating to the IPO first filed
with the Commission pursuant to Rule 424(b) and Rule 430A of the rules and
regulations of the Commission under the Securities Act or (if no such filing is
required) as included in the Registration Statement and, in the event of any
supplement or amendment to
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such prospectus after the date the Registration Statement becomes effective
under the Securities Act, such prospectus as so supplemented or amended from and
after the filing with the Commission of such supplement or the effectiveness of
such amendment.
1.29 "Provant Disclosure Schedule" means the Disclosure Schedule
prepared by Provant and attached hereto and incorporated herein by this
reference.
1.30 "Provant Common Stock" means the shares of Common Stock, $0.01 par
value, of Provant.
1.31 "Registration Statement" means the registration statement on Form
S-1, including the related preliminary prospectus, to be filed with the
Commission in connection with the IPO, including all exhibits and financial
statements, in the form in which it becomes effective under the Securities Act
and, in the event of any amendment thereto after the effective date of any such
registration statement, such registration statement as so amended from and after
the effectiveness of such amendment.
1.32 "Second Accountants" means an accounting firm of national stature,
jointly selected by Provant and the Stockholders, that is not then employed by
Provant, either Stockholder or American Business Partners LLC ("ABP") (or any of
their respective affiliates) and that was not employed by the Company or ABP
during the two-year period immediately preceding the Effective Time; provided,
however, if the parties cannot jointly agree upon the Second Accountants, the
Stockholders (collectively) and Provant shall each designate one accounting firm
(which shall be of national stature but which may be employed or have been
employed by such party or its affiliates), and the two accounting firms so
designated shall jointly select a third accounting firm, meeting the criteria
set forth in the first clause of this sentence, to serve as the Second
Accountants.
1.33 "Securities Act" means the Securities Act of 1933, as amended.
1.34 "Share" means a share of Common Stock, $.__ par value per share, of
the Company, and "Shares" means all of such shares.
1.35 "Surviving Corporation" means the corporation that survives the
Merger.
1.36 "Provant Option" means an option to purchase shares of Provant
Common Stock, granted under the Plan to be established by Provant pursuant to
Section 6.11.
1.37 "Underwriter" means, collectively, the managing underwriters of the
IPO.
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1.38 "Underwriters' Discount" means the discount at which the
Underwriter purchases the Provant Common Stock in the IPO, but in no event more
than 7.0% of the IPO Price.
2. THE MERGER
2.1 THE MERGER. The Merger shall occur at the Effective Time upon the
terms and subject to the conditions hereof and in accordance with the NJBCA and
the DGCL. Following the Merger, Acquisition shall continue as the Surviving
Corporation and be a subsidiary of Provant, and the separate corporate existence
of the Company shall cease.
2.2 EFFECTIVE TIME. As soon as practicable after satisfaction or waiver
of all conditions to the Merger, the parties (a) shall cause a duly executed
certificate of merger (the "Certificate of Merger") with respect to the Merger
to be filed and recorded in accordance with Section 14A:10-4.1 of the NJBCA to
be filed and recorded in accordance with Section 252 of the DGCL and (b) shall
take all such further actions as may be required by law to make the Merger
effective. The Merger shall be effective at the Effective Time. Before the
filing of the Certificate of Merger, a closing (the "Closing") will be held on
the date the IPO closes (or such earlier date as the parties may agree) at the
offices of Nutter, McClennen & Fish, LLP, One International Place, Boston,
Massachusetts (or such other place as the parties may agree) for the purpose of
confirming all the foregoing.
2.3 EFFECTS OF THE MERGER. The Merger shall have the effects set forth
in Section 14A:10-6 of the NJBCA and Sections 259, 260 and 261 of the DGCL.
2.4 TAX CONSEQUENCES. It is intended that the Merger shall constitute a
reorganization within the meaning of Section 368(a)(2)(D) of the Code and that
this Agreement shall constitute a "plan of reorganization" for the purposes of
Section 368 of the Code.
2.5 CERTIFICATE OF INCORPORATION AND BY-LAWS. The Certificate of
Incorporation and the By-Laws of Acquisition, in each case as in effect at the
Effective Time, shall be the Certificate of Incorporation and By-Laws of the
Surviving Corporation, except that the name of the Surviving Corporation shall
be the name of the Company or such other name as Provant may designate.
2.6 DIRECTORS AND OFFICERS. At the Effective Time, the Board of
Directors and officers of the Surviving Corporation shall be as set forth on
Exhibit 6, and each such person shall hold office until his or her respective
successor is duly elected or appointed and qualified.
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2.7 CONVERSION OF STOCK.
At the Effective Time:
(a) Each share of Acquisition that is issued and outstanding
immediately prior to the Effective Time shall remain issued and outstanding
without change.
(b) All Shares held in the treasury of the Company immediately prior to
the Effective Time shall be cancelled, without the payment of any consideration
therefor.
(c) Each other Share which is outstanding immediately prior to the
Effective Time shall be converted without any action on the part of the holder
thereof into and be exchangeable for:
(i) that number of shares of Provant Common Stock
determined by multiplying the Fraction times the number
obtained after (A) dividing $4.0 million by the IPO Price and
(B) subtracting from the quotient obtained pursuant to clause
(A) the number obtained by dividing $1.2 million by the IPO
Price net of underwriters' discount,
(ii) cash equal to the Fraction times the sum of (X)
$1.2 million, plus (Y) the excess, if any, of the Company's
Closing Net Worth over the Minimum Net Worth, and
(iii) the right to receive that number of Additional
Shares determined as provided in Section 2.8.
Provant shall not issue any fractional share of Provant Common Stock; in lieu of
issuing a fractional share, Provant shall make a cash payment in accordance with
Section 2.9. Notwithstanding the foregoing, which quantifies the merger
consideration to be received by the Stockholders in the aggregate, the
allocation of merger proceeds between the Stockholders and among the Shares
shall be as indicated on Schedule 2.7.
2.8 RIGHT TO RECEIVE ADDITIONAL SHARES.
(a) Promptly following June 30, 1998 (but in no event later than
October 15, 1998), Provant will determine 1998 EBIT.
(i) In the event 1998 EBIT is $800,000 or less, no
Additional Shares shall be issued in respect of the Shares.
(ii) In the event 1998 EBIT is greater than $800,000
but less than $1.1 million, there shall be issued in respect
of each Share that number of Additional Shares determined by
(A) multiplying $2 million by a fraction, the numerator of
which shall be the amount by which
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1998 EBIT exceeds $800,000 and the denominator of which shall
be $300,000, (B) dividing the product obtained pursuant to
clause (A) by the IPO Price, and (C) multiplying the quotient
obtained pursuant to clause (B) by the Fraction.
(iii) In the event 1998 EBIT equals or exceeds $1.1
million, there shall be issued in respect of each Share that
number of Additional Shares determined by multiplying the
Fraction times the quotient obtained by dividing $2 million by
the IPO Price.
Provant shall not issue any fractional share of Provant Common Stock; in lieu of
issuing a fractional share, Provant shall make a cash payment in accordance with
Section 2.9.
(b) No later than October 15, 1998, Provant shall deliver to each
Stockholder a statement showing in reasonable detail Provant's computation of
1998 EBIT, together with a stock certificate representing any Additional Shares
and a check in payment for any fractional Additional Share to which such
Stockholder may be entitled pursuant to subsection (a). Provant shall maintain,
and shall cause the Surviving Corporation to maintain, complete books and
records necessary for the proper computation of 1998 EBIT. The Stockholders,
acting unanimously, shall have the right at their expense, through an
independent certified public accountant reasonably acceptable to Provant, to
audit such books and records and the books and records of the Company solely for
the purpose of satisfying the accuracy of the computation of 1998 EBIT made by
Provant, and the Company and Provant shall cooperate fully in all reasonable
respects with any such audit. In no event shall the Stockholders, or either of
them, have the right to conduct more than one such audit. If the Stockholders do
not unanimously elect within 90 days of delivery of the statement of Provant
referred to in this subsection (b) to cause an audit of the books and records of
the Surviving Corporation as provided in this subsection (b), the Stockholders
shall be deemed to have agreed that such statement was correct in all respects.
(c) Any dispute as to the correct computation of 1998 EBIT shall be
referred to the First Accountants for determination. If the Stockholders do not
unanimously elect to dispute the First Accountants' determination of 1998 EBIT
within 30 days following the delivery thereof to the Stockholders, such
determination shall be final, binding and conclusive and shall not be subject to
challenge by Provant or any Stockholder, and in such event the fees and expenses
of the First Accountants shall be borne by Provant. In the event the
Stockholders do unanimously elect within such 30 day period to dispute the
determination of the First Accountants, the Stockholders shall specify the
amount (in dollars) that they contend to be the correct 1998 EBIT (the
Stockholders' "EBIT Position"), and the final calculation of 1998 EBIT shall be
referred to the Second Accountants. Absent manifest error or willful misconduct,
the determination of the Second Accountants shall be final, binding and
conclusive and shall not be subject to challenge by Provant or any Stockholder.
In the event the
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calculation of 1998 EBIT is referred to the Second Accountants, the fees and
expenses of both the First Accountants and the Second Accountants shall be borne
by that party (i.e., the Stockholders, jointly and severally, or Provant) whose
EBIT Position is furthest, in gross dollars, from the 1998 EBIT as finally
determined by the Second Accountants. For purposes of the preceding sentence,
Provant's "EBIT Position" shall be deemed to be the amount determined by the
First Accountants to be the 1998 EBIT. The parties recognize that in making such
determinations, each such firm of accountants will be performing a function
separate and distinct from their audit function, if any, and shall be entitled
to the immunities, rights and discretion of arbitrators in general. Any issuance
of Additional Shares (or cash in lieu of fractional Additional Shares) which is
finally determined to be due to the Stockholders in accordance with this
subsection (c) shall be made by Provant (i) if based on the determination of the
First Accountants, within 10 days after such determination becomes final, and
(ii) if based on the determination of the Second Accountants, within 10 days
after Provant receives notice of such determination, if Provant is responsible
for the fees and expenses of the accountants pursuant to this Section, and
within 10 days after the Stockholders have paid the fees and expenses of the
accountants, if the Stockholders are responsible for such fees and expenses
pursuant to this Section. In the event the 1998 EBIT has not been finally
determined as of the date one year following the Effective Time, or the 1998
EBIT has been finally determined and Additional Shares are due to be issued but
have not been issued to the Stockholders as of such date because the
Stockholders are obligated to pay but have not yet paid the fees and expenses of
the First and Second Accountants, then on or before such date Provant shall
issue and place into escrow, with an institutional escrow agent reasonably
selected by Provant, the number of Additional Shares that would be issued if the
Stockholders' EBIT Position were determined to be the actual 1998 EBIT (or, if
the 1998 EBIT has been finally determined, the actual number of Additional
Shares to be issued). Such shares shall be held in escrow pending final
determination of 1998 EBIT, upon which the final number of Additional Shares, if
any, shall be released from escrow to the Stockholders and any escrowed shares
not distributed as Additional Shares shall be released to the Company. The
expenses of the escrow agent will be allocated in the same manner as the
expenses of the First Accountants and Second Accountants, as set forth above.
(d) The Stockholders acknowledge and agree that Provant and the
Surviving Corporation shall be free to pursue their respective business goals
and that 1998 EBIT may be affected thereby. Notwithstanding the foregoing,
Provant agrees that it will take no action and adopt no policy (and will not
cause the Surviving Corporation to take any action or adopt any policy) during
the period from the Effective Time through June 30, 1998 that a
majority-in-interest of the Stockholders have reasonably asserted (in advance of
or contemporaneously with such action or adoption), in good faith and in
writing, can reasonably be expected to result (directly or indirectly) in a
reduction of 1998 EBIT.
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<PAGE> 9
(e) The right of the Stockholders to receive Additional Shares and/or
cash payment for fractional shares may not be transferred or assigned except by
operation of law or pursuant to the laws of descent and distribution.
(f) If, subsequent to the IPO and prior to final determination of the
number of Additional Shares, if any, issuable pursuant to this Section 2.8, the
outstanding shares of Provant Common Stock shall have been changed into a
different number of shares or a different class by reason of any
reclassification, recapitalization, split-up, combination, exchange of shares or
readjustment, or a stock dividend thereon shall be declared with a record date
within said period, the IPO Price shall be correspondingly and appropriately
adjusted.
2.9 EXCHANGE OF AND PAYMENT FOR SHARES AS OF EFFECTIVE TIME.
(a) As soon as practicable after the Effective Time and after surrender
to Provant of any certificate which prior to the Effective Time shall have
represented any Shares, subject to the provisions of paragraphs (c) and (d) of
this Section 2.9 and to the provisions of Article 8, Provant shall cause to be
distributed to the person in whose name such certificate shall have been
registered certificates registered in the name of such person representing the
shares of Provant Common Stock into which any shares previously represented by
the surrendered certificate shall have been converted at the Effective Time and
a check payable to such person representing the payment of cash due such person
by reason of the Merger including cash in lieu of fractional shares determined
in accordance with paragraph (g) of this Section 2.9. Until surrendered as
contemplated by the preceding sentence, each certificate which immediately prior
to the Effective Time shall have represented any Shares shall be deemed at and
after the Effective Time to represent only the right to receive upon such
surrender the certificates and payment contemplated by the preceding sentence
and by Section 2.8.
(b) No dividends or other distributions declared after the Effective
Time with respect to Provant Common Stock shall be paid to the holder of any
unsurrendered certificate representing Shares until the holder thereof shall
surrender such certificate in accordance with this Section 2.9. After the
surrender of such certificate in accordance with this Section 2.9, the record
holder thereof shall be entitled to receive any such dividends or other
distributions, without any interest thereon, which theretofore had become
payable with respect to shares of Provant Common Stock represented by such
certificate.
(c) No certificate representing Provant Common Stock shall be issued to
any Person, and no Person shall be treated as a holder of shares of Provant
Common Stock constituting Merger Stock for any purpose whatsoever (including
without limitation any right to vote the shares of Provant Common Stock into
which such Person's Shares are to be converted) unless and until such Person has
executed and delivered to Provant an Investment Letter.
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<PAGE> 10
(d) If any cash or certificate representing shares of Provant Common
Stock is to be paid to or issued in a name other than that in which the
certificate surrendered in exchange therefor is registered, it shall be a
condition of the payment or issuance thereof that the certificate so surrendered
shall be properly endorsed and otherwise in proper form for transfer and that
the person requesting such exchange shall pay to Provant any transfer or other
taxes required by reason of the issuance of a certificate representing shares of
Provant Common Stock in any name other than that of the registered holder of the
certificate surrendered, or otherwise required, or shall establish to the
satisfaction of Provant that such tax has been paid or is not payable.
(e) All Provant Common Stock and cash, including cash in lieu of
fractional shares, shall be deemed, when paid or issued hereunder, to have been
paid or issued, as the case may be, in full satisfaction of all rights
pertaining to the Shares.
(f) After the Effective Time, there shall be no further registration of
transfers on the stock transfer books of the Surviving Corporation of the Shares
which were outstanding immediately prior to the Effective Time. If, after the
Effective Time, certificates representing such shares are presented to the
Surviving Corporation, they shall be cancelled and exchanged for cash or
certificates representing the shares of Provant Common Stock into which they
were converted, or both, as provided herein.
(g) Notwithstanding any other provision of this Agreement, no
certificates or scrip representing fractional shares of Provant Common Stock
shall be issued upon the surrender for exchange of certificates which prior to
the Effective Time shall have represented any Shares, no dividend or
distribution of Provant shall relate to any fractional share and such fractional
share interests will not entitle the owner thereof to vote or to any rights of a
shareholder of Provant. In lieu of any fractional shares, there shall be paid to
each holder of Shares who otherwise would be entitled to receive a fractional
share of Provant Common Stock an amount of cash equal to the amount of such
fraction times the IPO Price.
(h) In the event any certificate representing Shares shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
Stockholder claiming such certificate to be lost, stolen or destroyed and, if
required by Provant or its stock transfer agent, the posting by such Stockholder
of a bond in such amount as Provant or its stock transfer agent may direct as
indemnity against any claim that may be made against it with respect to such
certificate, Provant will issue in exchange for such lost, stolen or destroyed
certificate the Merger Stock and cash deliverable in respect thereof.
2.10 RESERVED.
3. REPRESENTATIONS AND WARRANTIES OF THE
COMPANY AND THE STOCKHOLDERS
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The Company and the Stockholders represent and warrant to Provant and
Acquisition that, except as expressly provided in the Company Disclosure
Schedule by specific reference to a Section of this Article 3:
3.1 ORGANIZATION AND AUTHORITY. The Company is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
New Jersey and has all requisite corporate power and authority to conduct its
business and own its properties as now conducted and owned. The Company is duly
qualified or licensed and in good standing as a foreign corporation, and has at
all times when legally required been so qualified or licensed and in good
standing, in those states listed on the Company Disclosure Schedule, which are
the only jurisdictions in which the property owned, leased or operated by it or
the nature of the business conducted by it would cause a failure to be so
qualified or licensed to have a material adverse effect on the business of the
Company. The Company has full power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby and perform its
obligations hereunder. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby by the Company and the
performance of the Company's obligations hereunder have been duly and validly
authorized by a unanimous vote of the Board of Directors of the Company and the
Stockholders, and no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or to consummate the transactions so
contemplated or to perform the Company's obligations hereunder. This Agreement
has been duly and validly executed and delivered by the Company and constitutes
a legal, valid and binding obligation of the Company enforceable against it in
accordance with its terms, except as enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting enforcement of creditors' rights generally.
3.2 CAPITALIZATION OF THE COMPANY; NO SUBSIDIARIES. The Company has
authorized capital consisting of 2.,500 shares of Common Stock, no par value, of
which no shares are held in the Company's treasury. As of the date hereof, there
are 100 issued and outstanding Shares. As of immediately prior to the Effective
Time, the Shares issued and outstanding shall consist solely of the foregoing
number plus the number of Shares, if any, issued between the date hereof and the
Effective Time upon the exercise or conversion of Company Options and other
instruments (in each case solely if existing on the date hereof and disclosed on
the Company Disclosure Schedule pursuant to Section 3.3), which exercise or
conversion and which issuance are in accordance with the terms of such
instruments as in effect on the date hereof. All of the Shares are duly
authorized, validly issued, fully paid and non-assessable and are owned of
record and beneficially by the Stockholders in the respective amounts listed on
the Company Disclosure Schedule. The Company has no other authorized class of
capital stock other than the Common Stock. The Company does not own and has not
owned any shares of capital stock or other securities of, or any other interest
in, nor does it control or has it controlled, directly or indirectly, any other
corporation, association, joint venture, partnership, or other business
organization. The Shares have been issued and sold in full compliance with all
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applicable Federal and state securities laws. No holder of Shares has any
dissenting shareholder or appraisal rights with regard to the Merger.
3.3 NO RIGHTS TO PURCHASE OR REGISTER STOCK. No person, firm, or
corporation has any written or oral agreement, option, warrant, call,
understanding, commitment, or any right or privilege capable of becoming a
binding agreement, for either the purchase of any Shares or the acquisition of
shares of any other class of capital stock of the Company, and the Company has
not otherwise agreed to issue or sell any shares of its capital stock and has no
obligation to register any of the Shares under the Securities Act. The Company
is not obligated directly, indirectly or contingently to purchase any Shares.
3.4 NAME. The Company has not had any other name and does not conduct or
operate, and has not heretofore conducted or operated, its business under any
name other than its current name.
3.5 NO VIOLATION OF EXISTING AGREEMENTS. The execution and delivery of
this Agreement, together with all documents and instruments contemplated herein,
the consummation by the Company of the transactions contemplated hereby and
thereby, the performance by the Company of its obligations hereunder and
thereunder and compliance with the terms, conditions and provisions hereof and
thereof by the Company do not (i) contravene any provisions of the Company's
Certificate of Incorporation or By-Laws; (ii) conflict with or result in a
breach of or constitute a default (or an event that might, with the passage of
time or the giving of notice or both, constitute a default) or give rise to any
right to terminate, cancel or accelerate or to any loss of benefit under any of
the material terms, conditions, or provisions of any indenture, mortgage, loan,
or credit agreement or any other agreement or instrument to which the Company is
a party or by which it or its assets may be bound or affected; (iii) violate or
constitute a material breach of any decision, judgment, or order of any court or
arbitration board or of any governmental department, commission, board, agency,
or instrumentality, domestic or foreign, by which the Company is bound or to
which it is subject; or (iv) violate any applicable law, rule, or regulation to
which the Company or any of its property is bound.
3.6 NO CONSENTS OR APPROVALS OF GOVERNMENTAL AUTHORITIES. No consent or
approval of, or filing and expiration of a period for disapproval by, any
governmental authority is required for the Company to consummate the
transactions contemplated by this Agreement, except for filing the Certificate
of Merger pursuant to the DGCL and the NJBCA. Notwithstanding the immediately
preceding sentence, the Company and the Stockholders make no representation or
warranty regarding whether any filing is required under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, but the Company and the
Stockholders do represent and warrant that (a) the aggregate gross assets of the
Company plus those of any direct or indirect legal or beneficial holder of 50%
or more of the Shares were less than $100 million as of September 30, 1997, and
(b) the aggregate revenues of the Company plus those of any
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direct or indirect legal or beneficial holder of 50% or more of the Shares were
less than $100 million for the Company's most recently completed fiscal year.
3.7 FINANCIAL STATEMENTS.
(a) The Financial Statements fairly present the financial position of
the Company as of their respective dates, and the results of operations and cash
flows for the periods presented therein, all in conformity with generally
accepted accounting principles applied on a consistent basis, except as
otherwise noted therein.
(b) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and with
statutory accounting principles and to maintain accountability for assets; (iii)
access to assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
3.8 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth or reserved
against in the Balance Sheet, the Company (a) did not have as of the Balance
Sheet Date any material liability or obligation of any nature, whether accrued,
absolute, contingent, or otherwise and whether due or to become due, including
without limitation liabilities that may become known or arise after the date
hereof and which relate to transactions entered into or any state of facts
existing on or before the Balance Sheet Date and which would be required under
generally accepted accounting principles to be shown in such balance sheet or
referenced in the notes thereto, and (b) has not incurred since the Balance
Sheet Date any such liability or obligation except in the ordinary course of
business. Without limiting the foregoing, and except as specifically reserved
against in the Balance Sheet or in the calculation of the Closing Net Worth, the
Company has no material liability or obligation of any nature, whether accrued,
absolute, contingent, or otherwise, to any government entity for any adjustment
or reimbursement of any amount previously paid to the Company by such entity
under any agreement relating to the provision of any goods or services by the
Company.
3.9 CONDUCT OF BUSINESS SINCE THE BALANCE SHEET DATE. Since the Balance
Sheet Date, the Company has not taken (or suffered the occurrence of) any of the
following actions or events, agreed to take any of the following actions, or
taken any action that would otherwise result in any of the following (in each
case except directly in connection with this Agreement):
(a) entered into any transaction, agreement, or commitment other than
in the ordinary course of business; or
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(b) entered into any transaction, agreement, or commitment, suffered
the occurrence of any event or events, or experienced any change in financial
condition, business, results of operations, prospects, or otherwise, (i) that
has interfered or is reasonably likely to interfere with the normal and usual
operations of the Company's business or its business prospects in any material
respect or (ii) that, singly or in the aggregate, has resulted or is reasonably
likely to result in a material adverse change in the financial condition,
assets, liabilities, earnings, business, or business prospects of the Company;
or
(c) incurred any indebtedness for borrowed money, or assumed,
guaranteed, endorsed, or otherwise become responsible for the obligations of any
other individual, partnership, firm, or corporation (except to endorse checks
for collection for deposit in the ordinary course of business), or made any loan
or advance to any individual, partnership, firm, or corporation; or
(d) mortgaged, pledged, or otherwise encumbered, or, other than in the
ordinary course of business, sold, transferred, or otherwise disposed of, any of
the properties or assets of the Company, including any cancelled, released,
hypothecated, or assigned indebtedness owed to the Company, or any claims held
by the Company, except for purchase money mortgages arising in the ordinary
course of business and statutory liens arising or incurred in the ordinary
course of business with respect to which the underlying obligations are not
delinquent; or
(e) made any investment of a capital nature or entered into a
commitment for such investment either by purchase of stock or securities,
contributions to capital, property transfer, or otherwise, or by the purchase of
any property or assets of any other individual, partnership, firm, or
corporation; or
(f) declared, set aside, or paid any dividend or other distribution
(whether in cash, stock, or property or any combination thereof) in respect of
the capital stock of the Company, or redeemed or otherwise acquired, directly or
indirectly, any shares of capital stock of the Company, excepting only
dividends, distributions and redemptions that have not resulted and will not
result, directly or indirectly, in the Company not satisfying the Financial
Condition; or
(g) paid any long-term liability, otherwise than in accordance with its
terms; or
(h) paid any bonus compensation to any officer, director, shareholder,
or employee of the Company or otherwise increased the compensation paid or
payable to any of the foregoing; or
(i) sold, assigned, or transferred any trademarks, trade names, logos,
copyrights, formulae, or other intangible assets; or
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(j) contracted with or committed to any third party (i) to sell any
capital stock of the Company, (ii) to sell any material assets of the Company
other than in the ordinary course of business, (iii) to effect any merger,
consolidation, or other reorganization of the Company, or (iv) to enter into any
agreement with respect thereto; or
(k) incurred or paid any expenses or fees of counsel, accountants, or
consultants for services in preparation for or in connection with this Agreement
or the transactions contemplated hereunder.
3.10 TITLE TO ASSETS. The Company owns no real property. The Company has
good and clear record and marketable title to all properties owned by it,
including, without limitation, all property reflected in the Balance Sheet,
other than property disposed of in the ordinary course of business subsequent to
the Balance Sheet Date (none of such dispositions being materially adverse),
free and clear of any mortgage, lien, pledge, charge, claim or encumbrance, or
rights, title and interest in others, except (a) as reflected in the Balance
Sheet, or as specified in the notes thereto, (b) the lien of taxes not yet due
or payable or being contested in good faith by appropriate proceedings and as to
which appropriate reserves have been set aside in the Balance Sheet, and (c)
such imperfections of title and encumbrances, if any, as do not materially
detract from the value or interfere with the use of the properties subject
thereto or affected thereby, or otherwise materially impair business operations.
3.11 INTELLECTUAL PROPERTY.
(a) The Company Disclosure Schedule contains a correct and complete
list of all copyrights, copyright registrations and copyright applications,
trademark registrations and applications for registration, patents and patent
applications, trademarks, service marks and trade names used in the Company's
business as presently conducted or contemplated and all licenses, assignments
and releases of the intellectual property rights of others in material works
embodied in its products. There is (i) no existing or, to the Company's
knowledge, threatened infringement, misuse or misappropriation of Proprietary
Information (as hereinafter defined) by others and (ii) no pending or threatened
claim by the Company against others for infringement, misuse or misappropriation
of any patent, patent application, invention disclosure, trademark, trade name,
service mark, trade secret, technology, technique, know-how, or copyright owned
by the Company or used in its business as presently conducted or contemplated
(the "Proprietary Information"). The Proprietary Information is sufficient to
carry on the business of the Company as presently conducted or contemplated, and
the Company has the right to use, free and clear of claims or rights of others,
all Proprietary Information required for or incident to its products or services
or its business as presently conducted or contemplated. The Company is the
exclusive owner of all right, title and interest in the Proprietary Information
as purported to be owned by the Company, and such Proprietary Information is
valid and in full force and effect. Neither the present nor contemplated
business activities or products of the Company infringe, misuse or
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misappropriate any patent, trademark, trade name, service mark, trade secret,
copyright or other intellectual property right of others, and to the Company's
knowledge no one is claiming nor is it anticipated that anyone will claim any
such infringement, misuse or misappropriation. To the knowledge of the Company,
the Proprietary Information is presently valid and protectible and is not part
of the public domain or knowledge, nor, to the knowledge of the Company, has any
of it been used, divulged or appropriated for the benefit of any person other
than the Company to the detriment of the Company. The Company has not granted to
any person any license or other right to use in any manner any of the
Proprietary Information, whether or not requiring the payment of royalties. The
Company has no obligation still outstanding to compensate other persons for the
use of any Proprietary Information or for the sale of any service or product
comprising or derived from Proprietary Information. No university, government
agency (whether federal or state) or other organization which sponsored research
and development conducted by the Company has any claim of right to or ownership
of or other encumbrance upon the Proprietary Information.
(b) The Company has taken all reasonable measures to protect and
preserve the security, confidentiality and value of the Proprietary Information,
including its trade secrets and other confidential information. All present and
previous officers, employees and consultants of or to the Company have executed
and delivered to and in favor of the Company an agreement regarding the
protection of confidential and proprietary information and the assignment to the
Company of all intellectual property rights arising from the services performed
for the Company by such persons in the forms attached to the Company Disclosure
Schedule. To the Company's knowledge, no employee or consultant of the Company
has used any trade secrets or other confidential information of any other person
in the course of his or her work for the Company. To the Company's knowledge,
the Company is not making unlawful use of any confidential information or trade
secrets belonging to any past or present employees of the Company. Neither the
Company nor, to the knowledge of the Company, any of the Company's employees or
consultants have any agreements or arrangements with former employers of such
employees or consultants relating to confidential information or trade secrets
of such employers or are bound by any consulting agreement relating to
confidential information or trade secrets of another entity. The activities of
the Company's employees on behalf of the Company do not violate any agreements
or arrangements known to the Company which any such employees have with former
employers or any other entity to whom such employees may have rendered
consulting services.
3.12 OBLIGATIONS TO OR FROM AFFILIATES.
(a) All transactions between the Company and any Stockholder, officer
or director of the Company, or any Affiliate (as defined below) of any
Stockholder, officer or director of the Company, entered into on or after
January 1, 1993 have been conducted on an arm's-length basis on terms no
different than would be obtained if the transaction had been between the Company
and an unrelated party. Except for
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debts or other outstanding obligations reflected on the Balance Sheet, there are
no debts or other obligations of the Company to, or to the Company from, any
Stockholder or any officer or director, or any Affiliate of a Stockholder,
officer or director of the Company. As used herein, "Affiliate" of a
Stockholder, officer or director means any member of the immediate family of
such person or any entity in which such person or any such family member is an
officer or owner of more than five percent of beneficial interest in the
outstanding equity securities.
(b) The Company Disclosure Schedule sets forth all information that
would be required to be provided under Item 404 of Regulation S-K of the
Commission under the Securities Act if a registration statement on Form S-1 were
filed by the Company with the Commission on the date hereof.
3.13 MATERIAL CONTRACTS. The Company Disclosure Schedule lists all
material leases, contracts, instruments, agreements or commitments (whether
written or oral) relating to the conduct of the business of the Company (the
"Material Company Contracts"). The Company has delivered to Provant true and
correct copies of each written Material Company Contract and a written
description, accurate in all material respects, of each oral arrangement so
listed. Without limiting the generality of the foregoing, the aforesaid list
includes all contracts, agreements and instruments of the following types to
which the Company is a party:
(a) labor union contracts, together with a list of all labor unions
representing or, to the Company's knowledge, attempting to represent employees
of the Company;
(b) pension, retirement, deferred compensation, death benefit, profit
sharing, bonus or other employee incentive, fringe benefit, stock purchase,
stock option, hospitalization or insurance plans or arrangements (and grant
certificates or other documents issued thereunder) or vacation pay, severance
pay and other similar benefit arrangements for officers, employees or agents,
together with a list of all pensioned employees or obligations to provide any
pensions hereafter other than pursuant to the plans hereinbefore in this item
described;
(c) employment contracts or agreements, consulting agreements,
agreements providing for termination or severance benefits, non-competition
agreements, non-disclosure agreements, contracts for professional personal
services, contracts with other persons engaged in sales or distributing
activities, and advertising contracts;
(d) written or oral agreements, understandings and arrangements of any
kind with any officer, director, employee, shareholder or agent of the Company
relating to present or future compensation or other benefits available to such
person or otherwise, together with a list of the names and current annual salary
rates of all present officers and employees of the Company whose current salary
rate is $25,000 or more and any bonuses paid or payable to each such person for
the 1996 fiscal year;
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(e) indentures, loan agreements, notes, security agreements, mortgages,
conditional sales contracts, leases of real or personal property, contracts for
the purchase or sale of real or personal property, and agreements for financing;
(f) property, casualty, crime, directors and officers, and other forms
of insurance;
(g) all bank accounts and safety deposit boxes identifying all
authorized signatories, together with a list of all effective powers of attorney
granted by the Company to anyone;
(h) agreements, contracts or other arrangements to which the Company is
a guarantor, surety or endorser;
(i) contracts, agreements, commitments, arrangements or understandings
providing for the purchase or sale of all or substantially all of the Company's
requisites of a particular product from a single supplier or to a single
customer;
(j) contracts, agreements, commitments, arrangements or understandings
which limit the freedom of the Company from competing in any line of business or
with any person or entity;
(k) license agreements (as licensor or licensee);
(l) leases of real and personal property with a term of more than one
year (regardless of whether the Company is lessor or lessee); and
(m) contracts, agreements, instruments, arrangements or understandings
which have not been included in items (a) through (l) above involving payment by
or to the Company of more than $50,000 or not terminable without penalty or
otherwise materially affecting the assets, financial condition, properties or
business of the Company.
All of the Material Company Contracts are in full force and effect. Except to
the extent that a material adverse effect on the Company's financial condition,
assets, liabilities, earnings, business or prospects would not result if the
following were not true: (A) the Company and each other party to each of the
Material Company Contracts have performed all the obligations required to be
performed by them to date, have received no notice of default and are not in
default (with due notice or lapse of time or both) under any of the Material
Company Contracts; (B) the Company has no present expectation or intention of
not fully performing all of its obligations under any of the Material Company
Contracts, and the Company has no knowledge of any breach or anticipated breach
by any other party to any of the Material Company Contracts; (C) there exists no
actual or, to the knowledge of the Company, threatened termination, cancellation
or limitation of the business relationship of the Company with any party to any
Material Company Contract; and
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(D) consummation of the transactions contemplated hereby and performance by the
Company of its obligations hereunder shall not require the consent or permission
of any party to any Material Company Contract or permit any party to terminate,
suspend or alter the terms of any Material Company Contract.
3.14 LITIGATION. There are no actions, suits, causes of action, claims,
litigation, arbitration, administrative hearings, or other form of proceedings
or disputes of any kind pending or, to the best knowledge of the Company,
threatened against the Company or involving, affecting, or relating to its
capacity to complete the transactions contemplated herein, the Company, or its
officers or directors (in their capacities as such), in any court, at law or in
equity, or before any arbitration board or any governmental department,
commission, board, bureau, agency, or instrumentality; nor has the Company been,
nor is it, subject to any orders, awards, fines, judgments, decrees, or
injunctions the effect of which in the aggregate would have a material adverse
effect on the business or financial position or prospects of the Company. The
Company does not know or have grounds to know of any basis for any such action,
suits, or other form of proceeding or disputes or of any governmental
investigation relating to the Company or its business.
3.15 TAXES.
(a) (i) All Tax Returns (as defined below) of, relating to or which
include the Company which are required to have been filed have been filed on a
timely basis with the appropriate authorities and all such Tax Returns are true,
correct and complete in all respects; (ii) all Taxes (as defined below) required
to have been paid by the Company (including amounts collected or withheld from
third parties required to have been paid over to the appropriate authorities)
have been paid in full on a timely basis to the appropriate authorities; and
(iii) all Taxes or other amounts required to have been collected or withheld by
the Company have been timely and properly collected or withheld.
(b) (i) No taxing authority has asserted in writing to the Company any
adjustment, deficiency, or assessment that could result in additional Tax for
which the Company is or may be liable; (ii) there is no pending audit,
examination, investigation, dispute, proceeding or claim for which the Company
has received notice relating to any Tax for which the Company is or may be
liable; (iii) no statute of limitations with respect to any Tax for which the
Company is or may be liable has been waived or extended; (iv) the due date of
any Tax Returns that the Company is required to file has not been extended; and
(v) Company is not a party to any Tax sharing or Tax allocation agreement,
arrangement or understanding.
(c) There are no liens on any of the assets of the Company which arose
in connection with any failure or asserted failure to pay any Tax, other than
liens for current Taxes not yet due and payable.
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(d) The Company is not a party to any contract, agreement, plan or
arrangement that, individually or collectively, could give rise to any payment
that would not be deductible by reason of Section 162, 280G or 404 of the Code.
(e) The Company has not been a member of an affiliated group filing a
consolidated federal income Tax Return, and the Company is not liable for the
Taxes of any person under Treasury Regulation 1.1502-6 (or any similar provision
of state, local, or foreign law) as transferee or successor, by contract or
otherwise.
(f) Copies of (i) any Tax examinations, (ii) extensions of statutory
limitations, (iii) the federal, state and local income Tax Returns and franchise
Tax Returns of the Company, and (iv) correspondence between the Company and all
taxing authorities for its last three (3) taxable years previously have been
furnished to Provant and such Tax Returns are true, correct and complete.
(g) The provision for Taxes, if any, shown on the Balance Sheet is
adequate to cover the aggregate liability of the Company arising out of facts or
circumstances occurring on or prior to the Balance Sheet Date for all Taxes.
(h) The Company has filed federal and state, and if applicable, local
Tax Returns for each period ending on or prior to the Effective Time.
(i) For purposes of this Section 3.15:
"Tax Returns" shall mean all returns, amended returns,
declarations, reports, estimates, information returns and statements regarding
Taxes which are or were filed or required to be filed under applicable law,
whether on a consolidated, combined, unitary or individual basis.
"Taxes" shall mean any federal, state, local, foreign or other
tax, fee, levy, assessment or other governmental charge, including without
limitation any income, franchise, gross receipts, property, sales, use, hotel,
bed, services, value added, withholding, social security, estimated, accumulated
earnings, alternative or add-on minimum, transfer, license, privilege, payroll,
profits, capital stock, employment, unemployment, excise, severance, stamp,
occupancy, customs or occupation tax, and any interest, additions to tax and
penalties in connection therewith.
3.16 ABSENCE OF MATERIAL EVENTS. Since January 1, 1997 there has not
been (a) any material adverse change in the business, affairs or prospects of
the Company nor, to the best of the Company's knowledge, are any such changes
threatened, anticipated or contemplated; (b) any actual or, to the Company's
knowledge, threatened, anticipated or contemplated damage, destruction, loss,
conversion, termination, cancellation, default or taking by eminent domain or
other action by governmental authority which has materially affected or may
hereafter materially affect the properties, assets, business affairs or
prospects of the Company; (c) any material and adverse pending or, to the
Company's knowledge, threatened,
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anticipated or contemplated dispute of any kind with any material customer,
supplier, source of financing, employee, landlord, subtenant or licensee of the
Company, or any pending or, to the Company's knowledge, threatened, anticipated
or contemplated occurrence or situation of any kind, nature or description which
is reasonably likely to result in any reduction in the amount, or any change in
the terms or conditions, of business with any material customer, supplier, or
source of financing; or (d) any pending, or to the Company's knowledge,
threatened, anticipated or contemplated occurrence or situation of any kind,
nature or description materially and adversely affecting the properties, assets,
business, affairs or prospects of the Company.
3.17 ABSENCE OF IMPROPER PAYMENTS. Since January 1, 1994 the Company:
(a) has not made any contributions, payments or gifts of its property to or for
the private use of any governmental official, employee or agent where either the
payment or the purpose of such contribution, payments or gift is illegal under
the laws of the United States, any state thereof or any other jurisdiction
(foreign or domestic); (b) has not established or maintained any unrecorded fund
or asset for any purpose, or has made any false or artificial entries on its
books or records for any reason; (c) has not made any payments to any person
where the Company intended or understood that any part of such payment was to be
used for any other purpose other than that described in the documents supporting
the payment; or (d) has not made any contribution, or has reimbursed any
political gift or contribution made by any other person, to candidates for
public office, whether Federal, state or local, where such contribution would be
in violation of applicable law.
3.18 ERISA.
(a) None of the employee benefit plans maintained at any time by the
Company or the trusts (if any) forming part of such plans has engaged in a
prohibited transaction which could subject any such employee benefit plan or
trust to a material tax or penalty on prohibited transactions imposed under
Internal Revenue Code Section 4975 or ERISA.
(b) None of the employee benefit plans maintained at any time by the
Company which are employee pension benefit plans and which are subject to Title
IV of ERISA or the trusts that are part of such plans has been terminated so as
to result in a material liability of the Company under ERISA or the Code, nor
has any such employee benefit plan of the Company incurred any material
liability to the Pension Benefit Guaranty Corporation, other than for required
insurance premiums which have been paid or are not yet due and payable; neither
the Company nor any affiliate thereof has withdrawn, in either a complete or
partial withdrawal, from any multi-employer Plan resulting in any unpaid
withdrawal liability; the Company has made or provided for all contributions to
all such employee pension benefit plans which it maintains and which are
required by law or such plans as of the end of the most recent fiscal year under
each such plan; the Company has not incurred any accumulated funding deficiency
with respect to any such plan, subject to Section 412
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of the Code, whether or not waived; nor has there been any reportable event, or
other event or condition, which presents a material risk of termination of, or
liability with respect to, any such employee benefit plan by the Pension Benefit
Guaranty Corporation.
(c) The benefit liabilities under the employee pension benefit plans
which are subject to Title IV of ERISA, maintained by the Company, do not exceed
the current value of the assets of such employee benefit plans allocable to such
benefits, determined under the actuarial methods and assumptions that would
apply if such plans were terminated in accordance with ERISA and the Code.
(d) To the best of the Company's knowledge, each employee benefit plan
maintained by the Company has been administered in accordance with its terms in
all material respects and is in compliance in all material respects with all
applicable requirements of ERISA (if applicable) and other applicable laws,
regulations and rules. Each employee benefit plan maintained by the Company that
is intended to be "qualified" under Section 401(a) of the Code has received a
favorable determination letter of the Internal Revenue Service, which letter
remains in effect, and nothing has occurred since the date of such determination
that could adversely affect the qualification of such plan.
(e) As used in this Agreement, the terms "employee benefit plan",
"employee pension benefit plan", "multi-employer plan", "accumulated funding
deficiency", "reportable event", "benefit liabilities", "withdrawn" (including
its correlative forms "complete withdrawal" and "partial withdrawal") and
"accrued benefits" shall have the respective meanings assigned to them in ERISA,
and the term "prohibited transactions" shall have the meaning assigned to it in
Code Section 4975 and ERISA. Employee benefit plans "maintained by the Company"
include any such plan maintained, established or contributed to at any time by
the Company or any entity affiliated with or under common control with the
Company.
(f) The Company has no liability not disclosed on any of the Financial
Statements, contingent or otherwise, under any plan or program or the equivalent
for unfunded post-retirement benefits, including pension, medical and death
benefits, which liability would have a material adverse effect on the financial
condition of the Company.
3.19 LABOR MATTERS. A true and complete list of all of the Company's
officers, employees (the "Employees") and consultants (the "Consultants") and
their respective salaries, wages, other compensation, dates of employment, date
and amount of last salary or compensation increase, and positions has been
provided to Provant by the Company. There are no material disputes, employee
grievances, or disciplinary actions pending or, to the knowledge of the Company,
threatened by or between the Company and any of the Employees or Consultants.
With respect to the Employees and Consultants, the Company has complied in all
respects with all provisions of all laws relating to the employment of labor and
has no liability for any arrears of wages
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<PAGE> 23
or taxes or penalties for failure to comply with any such law or for any
severance or termination payments of any type. None of the Consultants are or
were (while classified by the Company as Consultants) employees of the Company
for any purpose whatsoever. No employees of the Company are or ever have been
represented by a bargaining representative with respect to the Company, and no
election or proceedings relating to the labor relations of the Company is
pending or, to the best of the Company, knowledge, threatened. The Company has
not had any material union activity or had any material labor disruption or
material dispute with its employees of any kind, nature or description at any
time heretofore. All personnel policies and manuals of the Company are listed on
the Company Disclosure Schedule and true and complete copies thereof have been
provided to Provant. No Employee or Consultant shall have the right to receive
from the Surviving Corporation or Provant a severance payment or other payment
in the nature thereof in the event his or her employment is terminated by the
Surviving Corporation following the Merger, whether such right arises as a
matter of contract, past policy or understanding, by operation of law, or
otherwise.
3.20 PERMITS: COMPLIANCE WITH LAW. The Company possesses all franchises,
permits, licenses, certificates, approvals, and other authorizations ("Permits")
necessary to own or lease and operate its properties and to conduct its business
as now conducted, except for incidental Permits that would be readily obtainable
without undue burden in the event of any lapse, termination, cancellation, or
forfeiture or that if not obtained would not materially and adversely affect the
Company's business. All such material Permits are in full force and effect, and,
to the knowledge of the Company, no suspension or cancellation of any of them is
threatened, and no material Permits will be adversely affected by the
consummation of the Merger. The Company has not failed nor is it failing to
comply with any applicable law, rule, regulation, or order, where such failure
would have a material adverse effect on the Company's business, and there are no
proceedings pending or, to the Company's knowledge, threatened, nor has the
Company received any notice, regarding any such failure.
3.21 ENVIRONMENTAL MATTERS. The Company is, and to the Company's
knowledge all real property owned or otherwise occupied by the Company are and
have been at all times when so owned or occupied, in material compliance with
all applicable existing federal, state and local laws and regulations relating
to protection of human health or the environment or imposing liability or
standards of conduct concerning any Hazardous Material (as hereinafter defined)
("Environmental Laws"), except, in each case, where such noncompliance, singly
or in the aggregate, would not have a material adverse effect on the condition,
financial or otherwise, or the earnings, business affairs or business prospects
of the Company. No Hazardous Materials are stored, utilized or otherwise present
on any property owned or otherwise occupied by the Company, excepting only (x)
cleaning supplies and similar materials customarily used by businesses in the
Company's industry in quantities consistent with such use, and (y) petroleum
products that are used for heating (including water heating) in facilities
located on such property, none of which are
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<PAGE> 24
stored in underground storage tanks, or that are present in vehicles located on
such property. There has not occurred any release of Hazardous Materials on,
under or affecting any real property during or prior to the period of the
Company's ownership, occupation or operation of such property (including its
participation in or exercise of any degree of control over the management of any
business located on such property). The term "Hazardous Material" means (a) any
"hazardous substance" as defined in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended through the date hereof, (b)
any "hazardous waste" as defined by the Resource Conservation and Recovery Act,
as amended through the date hereof, (c) any petroleum or petroleum product, (d)
any polychlorinated biphenyl and (e) any pollutant or contaminant or hazardous,
dangerous, or toxic chemical, material, waste or substance regulated under or
within the meaning of any other Environmental Law through the date hereof. For
purposes of this Section 3.21, real property owned by third parties but
"occupied" by the Company shall mean only that portion of such property as is
either leased by the Company or in fact otherwise physically occupied or
utilized by the Company. There is no alleged liability, or to the best knowledge
of the Company, potential liability (including, without limitation, alleged or
potential liability for investigatory costs, cleanup costs, governmental
response costs, natural resources damages, property damages, personal injuries
or penalties) of the Company arising out of, based on or resulting from (i) the
presence or release into the environment of any Hazardous Material at any
location, whether or not owned by the Company or (ii) any violation or alleged
violation of any Environmental Law, which alleged or potential liability, singly
or in the aggregate, would have a material and adverse effect on the condition,
financial or otherwise, or the earnings, business affairs or business prospects
of the Company.
3.22 FURTHER ASSURANCES. The Company will use all commercially
reasonable efforts to have all present officers and directors of the Company
execute whatever minutes of meetings or other instruments and take whatever
action as may be necessary or desirable to effect, perfect or confirm of record
of otherwise, in the Surviving Corporation, full right, title and interest in
and to the business, properties and assets now conducted or owned by the
Company, free and clear of all restrictions, liens, encumbrances, rights, title
and interests in others (excepting only liens reflected on the Balance Sheet),
or to collect, realize upon, gain possession of, or otherwise acquire full
right, title and interest in and to such business, properties and assets, or to
carry out the intent and purposes of the transactions contemplated hereby and
the IPO.
3.23 CORPORATE RECORDS. The corporate record books of the Company are in
all material respects in good order, complete, accurate, up to date, with all
necessary signatures, and set forth all meetings and actions taken by the
shareholders and directors, and all votes of the shareholders or directors set
forth in certificates furnished to anyone at any time heretofore.
3.24 CONDITION OF ASSETS. All premises, fixtures and equipment owned or
used by the Company and material to its business have been properly maintained
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<PAGE> 25
and are in good operating order and repair, free from known defects in
construction or design, sound and properly functioning (normal wear and tear
excepted), usable and not obsolete, and (to the Company's knowledge in the case
of leased property) in material compliance with all applicable zoning, building
and fire codes and all other applicable laws, rules, regulations and
requirements of governmental authorities and the fire insurance rating
association having jurisdiction.
3.25 ACCOUNTS RECEIVABLE. All of the accounts receivable of the Company
shown or reflected on the Balance Sheet in the Financial Statements, less the
reserve for doubtful accounts in the amount shown on the Balance Sheet, are
valid and enforceable claims and subject to no set off or counterclaim. All of
the accounts receivable of the Company shown or reflected on the Balance Sheet
and as at December 31, 1997 (as reflected on the Company's balance sheet as of
such date, when and as delivered to Provant) will be collected in full within
150 days thereafter except to the extent of the reserve for doubtful accounts
shown on the Balance Sheet or posted on the books of the Company as of such
date. The reserve for doubtful accounts as at December 31, 1997 will not be in
excess of said reserve as shown on the Balance Sheet. The Company has no
accounts or loans receivable from any of its directors, officers or employees.
3.26 CHARTER DOCUMENTS. The Company has heretofore delivered to Provant
copies of its Certificate of Incorporation, as amended to date, certified by the
appropriate governmental authority, and copies of its By-Laws, as amended to
date, and a list of the officers and directors of the Company in office, all as
certified by its Secretary.
3.27 DISCLOSURE OF ALL MATERIAL MATTERS.
(a) No statement of a material fact set forth in this Agreement
(including without limitation all information in the Financial Statements, the
Company Disclosure Schedule and the other Schedules, Exhibits and attachments
hereto, taken as a whole) with respect to the Company or the Stockholders is
false or misleading in any respect, nor does this Agreement (including, without
limitation all information in the Financial Statements, the Company Disclosure
Schedule and the other Schedules, Exhibits and attachments hereto, taken as a
whole) omit to state a material fact necessary in order to make the statements
made or information disclosed, in the light of the circumstances under which
they were made or disclosed, not misleading.
(b) Provided only that Provant has accurately incorporated any
information furnished in writing to Provant by the Company specifically for
inclusion in the Registration Statement or the Prospectus (as applicable) and
has deleted from the Registration Statement or the Prospectus (as applicable)
any information that the Company has specifically requested in writing be so
deleted, (i) at the time the Registration Statement becomes effective under the
Securities Act, it will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading and (ii) at
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the time of each closing in connection with the IPO, the Prospectus will not
include an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The representations
and warranties in this Section shall not apply to statements in or omissions
from the Registration Statement and Prospectus relating to any person or entity
other than the Company and its officers, directors and stockholders.
3.28 BROKERS. No broker, finder, or investment banker is entitled to any
brokerage, finder's, or other fee or commission in connection with the Merger or
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of the Company.
4. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
The Stockholders represent and warrant to Provant and Acquisition as
follows:
4.1 TITLE TO THE SHARES. All of the issued and outstanding Shares are
owned by the Stockholders free and clear of any claims, liens, charges,
encumbrances, security interests and rights of others whatsoever, and such
Shares are not bound by or subject to any proxy, agreement, voting trust or
other restriction regarding the voting thereof.
4.2 AUTHORITY. The Stockholders have full power, authority and capacity
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby, and no other action is necessary by the Stockholders to
consummate the transactions contemplated by the Agreement. This Agreement has
been duly and validly executed and delivered by the Stockholders and constitutes
a legal, valid and binding obligation of the Stockholders enforceable against
them in accordance with its terms, except as enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting enforcement of creditors' rights generally.
4.3 NO CONFLICTS. The execution, delivery and performance of this
Agreement by the Stockholders do not and will not violate, conflict with, result
in a breach of or constitute a default under (or an event which with due notice
or lapse of time, or both, would constitute a breach of or default under) or
result in the creation of any lien, security interest or other encumbrance under
(a) any material term of any note, agreement, contract, license, instrument,
lease or other obligation to which a Stockholder is a party or by which he is
bound, (b) any material provision of any judgment, order, decree, ruling or
injunction or (c) any statute, law, regulation or rule of any governmental
agency or authority.
5. REPRESENTATIONS AND WARRANTIES OF
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<PAGE> 27
PROVANT, ACQUISITION AND THE PROVANT PRINCIPALS
Provant, Acquisition and the Provant Principals represent and warrant
to the Company and the Stockholders that, except as expressly provided in the
Provant Disclosure Schedule by specific reference to a Section of this Article
5:
5.1 ORGANIZATION AND AUTHORITY. Each of Provant and Acquisition is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware, and each has all requisite corporate power and
authority to conduct its business and own its properties as now conducted and
owned, and is qualified and in good standing as a foreign corporation, and has
at all times when legally required been so qualified and in good standing, in
each jurisdiction where the failure to be so qualified would, in the aggregate,
have a material adverse effect on the business or financial condition of
Provant. Each of Provant and Acquisition has full power and authority to execute
and deliver this Agreement and the agreements being executed and delivered in
connection with the Additional Mergers and the IPO to which it is a party, and
to consummate the transactions contemplated hereby and thereby and to perform
its obligations hereunder and thereunder. The execution and delivery of this
Agreement and the other agreements referenced above and the consummation of the
transactions contemplated hereby and thereby, and the performance of Provant's
and its subsidiaries' (including Acquisition's) obligations hereunder and
thereunder have been duly and validly authorized by the unanimous votes of the
respective Boards of Directors of Provant and such subsidiaries (including
Acquisition) and by Provant as the sole stockholder of such subsidiaries
(including Acquisition), and no other corporate proceedings on the part of
Provant or its subsidiaries (including Acquisition) are necessary to authorize
this Agreement or the other agreements referenced above or to consummate the
transactions contemplated hereby or thereby or to perform the obligations of
Provant and its subsidiaries (including Acquisition) hereunder or thereunder.
This Agreement has been duly and validly executed and delivered by each of
Provant and Acquisition and constitutes a valid and binding agreement of each,
enforceable against each in accordance with its terms, except as enforcement may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting enforcement of creditors' rights generally.
5.2 CAPITALIZATION OF PROVANT; SUBSIDIARIES. Provant has authorized
capital consisting of 10,000 shares of Provant Common Stock, $.01 per share par
value, of which no shares are held in Provant's treasury. As of the date hereof,
there are 3,417.9 issued and outstanding shares of Provant Common Stock, all of
which are duly authorized, validly issued, fully paid and non-assessable and are
owned of record and beneficially by those persons listed on the Provant
Disclosure Schedule. Provant has no other authorized class of capital stock
other than the Provant Common Stock. As of the date hereof and at all times
prior to the Effective Time, Provant does not (and will not) own and has not
owned any shares of capital stock or other securities of, or any other interest
in, nor does (or will) it control or has it controlled, directly or indirectly,
any other corporation, association, joint venture,
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partnership, or other business organization, other than Acquisition and the
subsidiaries intended to be merged with the Additional Companies. All of the
issued and outstanding shares of capital stock of Acquisition, and of each
subsidiary that will be merged with an Additional Company, are owned of record
and beneficially by Provant. All outstanding shares of Provant Common Stock have
been issued and sold in full compliance with all applicable Federal and state
securities laws. No holder of outstanding shares of Provant Common Stock has any
dissenting shareholder or appraisal rights with regard to the Merger. Provant
does not have knowledge of any voting agreements, voting trusts or similar
agreements governing the manner in which any shares of Provant Common Stock are
voted by the holders thereof.
5.3 NO RIGHTS TO PURCHASE OR REGISTER STOCK. Excepting only (a) the
shares of Provant Common Stock to be issued as Merger Shares and as merger
consideration in the Additional Mergers, (b) the shares of Provant Common Stock
to be sold in the IPO, and (c) the shares of Provant Common Stock to be issued
pursuant to Provant Options under the Plan, no person, firm, or corporation has
any written or oral agreement, option, warrant, call, understanding, commitment,
or any right or privilege capable of becoming a binding agreement, for either
the purchase of any shares of Provant Common Stock or the acquisition of shares
of any other class of capital stock of Provant, and Provant has not otherwise
agreed to issue or sell any shares of its capital stock and has no obligation to
register any shares of Provant Common Stock under the Securities Act. Provant is
not obligated directly, indirectly or contingently to purchase any shares of
Provant Common Stock. No person, firm, or corporation has any written or oral
agreement, option, warrant, call, understanding, commitment, or any right or
privilege capable of becoming a binding agreement, for the purchase or other
acquisition of any shares of capital stock of Acquisition or of any subsidiary
of Provant that will be merged with an Additional Company, and neither
Acquisition nor any such other subsidiary has otherwise agreed to issue or sell
any shares of its capital stock or to register any shares of its capital stock
under the Securities Act.
5.4 MERGER STOCK. The Merger Stock has been duly authorized by all
necessary corporate action and, when issued and delivered by Provant pursuant to
this Agreement, will be validly issued, fully paid and non-assessable.
5.5 CONSENTS AND APPROVALS; NO VIOLATION; NO KNOWN IMPEDIMENTS. Neither
the execution and delivery of this Agreement by Provant and Acquisition nor the
consummation of the transactions contemplated hereby will (i) conflict with or
result in any breach of any provision of the respective charter documents or
By-Laws of Provant or Acquisition; (ii) subject to the last sentence of this
Section 5.5, require on the part of Provant any consent, approval,
authorization, or permit of, or filing with or notification to, any governmental
or regulatory authority, except (A) filing the Certificate of Merger pursuant to
the NJBCA and the DGCL and (B) any filings required under the Securities Act and
the securities or blue sky laws of the various states; (iii) result in a default
(or give rise to any right of termination, cancellation, or acceleration) under
any of the material terms, conditions, or provisions of any note,
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license, lease, agreement, or other instrument or obligation to which Provant or
Acquisition is a party or by which Provant or Acquisition or any of their
respective assets may be bound, other than as previously disclosed in writing to
the Company; or (iv) violate or constitute a material breach of any order, writ,
injunction, decree, statute, law, rule, or regulation applicable to Provant or
Acquisition or any of their respective assets. Assuming no material change after
the date hereof in the condition of the capital markets or in the business or
financial condition of the Company or any of the Additional Companies and
assuming the Commission declares the Registration Statement effective in due
course, Provant has no knowledge of any matter (including without limitation any
law or regulation) that should reasonably be expected to prohibit the
consummation of the transactions contemplated hereby, the Additional Mergers or
the IPO. The representation and warranty contained in clause (ii) above is, with
respect to compliance with the HSR Act, made in reliance upon, and is expressly
conditioned upon, the accuracy of the representations and warranties of the
Company and the Stockholders made in the second sentence of Section 3.6.
5.6 OPERATIONS AND FINANCIAL CONDITION; ABSENCE OF UNDISCLOSED
LIABILITIES. Neither Provant nor Acquisition has conducted any material business
operations other than in connection with the Merger, the Additional Mergers and
the IPO or in preparation for operations to be conducted after the Effective
Time. Neither Provant nor Acquisition has any material tangible assets or
material liabilities or obligations of any nature, whether accrued, absolute,
contingent, or otherwise and whether due or to become due, including without
limitation liabilities that may become known or arise after the date hereof and
which relate to transactions entered into or any state of facts existing on or
before the date hereof and which would be required under generally accepted
accounting principles to be shown in a balance sheet or referenced in the notes
thereto prepared as of the date hereof, other than those incurred in connection
with the Merger, the Additional Mergers and the IPO or in connection with
Provant's preparation for future operations. Set forth on the Provant Disclosure
Schedule are all liabilities and obligations of Provant and Acquisition (by
type) that are as of the date hereof, or are expected to be as of the Effective
Time, in excess of $10,000.
5.7 LITIGATION. There are no actions, suits, causes of action, claims,
litigation, arbitration, administrative hearings or other form of proceedings or
disputes pending, or, to the best knowledge of Provant or Acquisition,
threatened, against, involving or affecting Provant or Acquisition, in any
court, at law or in equity, or before any arbitration board or any governmental
department, commission, board, bureau, agency, or instrumentality, that either
singly or in the aggregate might prevent Provant and Acquisition from
consummating the transactions contemplated hereby, the IPO or the Additional
Mergers, or which would have a material adverse effect on the business,
operations, or financial condition of Provant and its subsidiaries taken as a
whole.
5.8 MATERIAL CONTRACTS. The Provant Disclosure Schedule lists all
material leases, contracts, instruments, agreements or commitments (whether
written or oral),
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other than the Additional Merger Agreements, relating to the conduct of the
business of Provant or its subsidiaries (including Acquisition) in effect on the
date hereof (the "Material Provant Contracts"). Without limiting the generality
of the foregoing, the aforesaid list includes all contracts, agreements and
instruments of the following types to which Provant its subsidiaries is a party
or by which any of them is bound:
(a) employment or employment-related contracts or agreements (including
pension, retirement, deferred compensation, death benefit, profit sharing, bonus
or other employee incentive, fringe benefit, stock purchase or stock option
agreements), consulting agreements, agreements providing for termination or
severance benefits, non-competition agreements, non-disclosure agreements,
contracts for professional personal services, contracts with other persons
engaged in sales or distributing activities, and advertising contracts;
(b) written or oral agreements, understandings and arrangements of any
kind with any officer, director, employee, shareholder or agent of Provant or
Acquisition relating to present or future compensation or other benefits
available to such person or otherwise;
(c) indentures, loan agreements, notes, security agreements, mortgages,
conditional sales contracts, leases of real or personal property, contracts for
the purchase of sale of real or personal property, and agreements for financing;
(d) agreements, contracts or other arrangements to which Provant or
Acquisition is a guarantor, surety or endorser;
(e) contracts, agreements, instruments, arrangements or understandings
which have not been included in items (a) through (d) above involving payment by
or to Provant or Acquisition of more than $50,000 or not terminable without
penalty or otherwise materially affecting the assets, financial condition,
properties or business of Provant or Acquisition.
All of the Material Provant Contracts are in full force and effect. Except to
the extent that a material adverse effect on Provant's financial condition,
assets, liabilities, earnings, business or prospects (each considered on a
consolidated basis giving effect to the Merger and the Additional Mergers) would
not result if the following were not true: (A) Provant, Acquisition and each
other party to each of the Material Provant Contracts have performed all the
obligations required to be performed by them to date, have received no notice of
default and are not in default (with due notice or lapse of time or both) under
any of the Material Provant Contracts; (B) Provant and Acquisition have no
present expectation or intention of not fully performing all of their respective
obligations under any of the Material Provant Contracts, and Provant and
Acquisition have no knowledge of any breach or anticipated breach by any other
party to any of the Material Provant Contracts; (C) there exists no actual or,
to the knowledge of Provant and Acquisition, threatened termination,
cancellation or limitation of the business relationship of Provant or
Acquisition with any party to any
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Material Provant Contract; and (D) consummation of the transactions contemplated
hereby and performance by Provant and Acquisition of their respective
obligations hereunder shall not require the consent or permission of any party
to any Material Provant Contract or permit any party to terminate, suspend or
alter the terms of any Material Provant Contract.
5.9 ADDITIONAL MERGER AGREEMENTS. The Provant Disclosure Schedule sets
forth, with respect to the Additional Merger Agreements, the material economic
terms of each such Agreement and any other material terms of each such Agreement
that differ substantially from the corresponding terms of this Agreement.
5.10 DISCLOSURE OF ALL MATERIAL MATTERS. No statement of a material fact
made by Provant or Acquisition in this Agreement (including without limitation
all information in the Provant Disclosure Schedule and the other Schedules,
Exhibits, and attachments hereto, taken as a whole) is false or misleading in
any respect, nor does this Agreement (including, without limitation all
information in the Provant Disclosure Schedule and the other Schedules,
Exhibits, and attachments hereto, taken as a whole) omit to state a material
fact necessary in order to make the statements made or information disclosed, in
the light of the circumstances under which they were made or disclosed, not
misleading.
5.11 BROKERS. No broker, finder, or investment banker is entitled to any
brokerage, finder's, or other fee or commission in connection with the Merger or
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of Provant or Acquisition.
6. COVENANTS
6.1 CONDUCT OF BUSINESS OF THE COMPANY.
(a) Except as contemplated by this Agreement, during the period from
the date of this Agreement to the Effective Time, the Company will conduct its
operations only in the ordinary and usual course of business and consistent with
past practice and will use all commercially reasonable efforts to preserve
intact its present business organization, keep available the services of its
present officers and employees, and preserve its relationships with customers,
suppliers, contractors, and others having business dealings with it to the end
that its goodwill and on-going business shall not be impaired at the Effective
Time.
(b) Without limiting the generality of subsection (a) and except as
otherwise expressly provided in this Agreement, before the Effective Time, the
Company will comply with all laws applicable to the conduct of its business and
continue in effect its present insurance coverage and will not, without the
prior written consent of Provant, (i) issue, sell, or pledge, or authorize or
propose the issuance, sale, or pledge of (A) any shares of capital stock of any
class (including the Shares), or securities
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convertible into any such shares, or any rights, warrants or options to acquire
any such shares or other convertible securities, excepting only pursuant to the
exercise or conversion of Company Options and other instruments or securities
outstanding on the date hereof and disclosed on the Company Disclosure Schedule
which exercise or conversion and which issuance are in accordance with the terms
of such instruments or securities as in effect on the date hereof, or (B) any
other securities in respect of, in lieu of, or in substitution for, Shares
outstanding on the date hereof; (ii) purchase or otherwise acquire, or propose
to purchase or otherwise acquire, any outstanding Shares; (iii) declare or pay
any dividend or distribution on any shares of its capital stock; (iv) authorize,
recommend, propose or announce an intention to authorize, recommend or propose,
or enter into an agreement in principle or an agreement with respect to, any
change in its capitalization, merger, consolidation or business combination
(other than the Merger), any acquisition of a material amount of assets or
securities, any disposition of a material amount of assets or securities, or any
entry into a material contract or any release or relinquishment of any material
contract rights, not in the ordinary course of business; (v) propose or adopt
any amendments to its Certificate of Incorporation or By-Laws (other than as
effected by the Merger); (vi) incur, assume, or prepay any long-term debt or,
except in the ordinary course of business under existing lines of credit, incur
or assume any short term debt; (vii) make any loans, advances, or capital
contributions to, or investments in, any other person, other than travel or
other advances to employees consistent with past practice; (viii) assume,
guarantee, endorse, or otherwise become liable or responsible (whether directly,
contingently, or otherwise) for the obligations of any other person, except to
endorse checks for collection or deposit in the ordinary course of business; or
(ix) agree in writing or otherwise to take any of the foregoing actions or any
action that would make any representation or warranty in this Agreement untrue
or incorrect as of the date hereof or as of the Effective Time, as if made as of
such time. Notwithstanding the foregoing provisions of this Section 6.1(b),
prior to the Effective Time the Company may make a cash dividend to the
Stockholders so long as doing so will not prevent the Company from satisfying
the Financial Condition (with any such dividend being accounted for prior to the
calculation of the Closing Net Worth).
6.2 NO SOLICITATION. The Company shall not, nor shall it permit any of
its officers, directors, employees, agents, or representatives (including,
without limitation, investment bankers, attorneys and accountants), directly or
indirectly to (a) initiate, contract with, solicit or encourage any inquiries or
proposals by, or (b) enter into any discussions or negotiations with, or
disclose directly or indirectly any information concerning its business and
properties to, or afford any access to its properties, books, and records to,
any corporation, partnership, person, or other entity or group in connection
with any possible proposal (an "Acquisition Proposal") regarding a sale of the
Company's capital stock or a merger, consolidation, or sale of all or a
substantial portion of the assets, or any similar transaction that is material
to the Company. The Company will notify Provant within one business day of
receipt if any discussions or negotiations are sought to be initiated, any
inquiry or proposal is made, or any such information is requested with respect
to an Acquisition Proposal or potential Acquisition Proposal or if any
Acquisition Proposal is received or indicated to be
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forthcoming. Such notice shall state all substantive terms and conditions of any
proposal or Acquisition Proposal and the identity of the person making the
proposal or Acquisition Proposal or seeking to initiate discussions or
negotiations or requesting information.
6.3 ACCESS TO INFORMATION.
(a) From the date of this Agreement, the Company will give Provant and
the Underwriter and their respective representatives full access, at reasonable
times and with reasonable notice, to the offices and other facilities and to the
books and records of the Company, will permit Provant and the Underwriter and
their respective representatives to make such inspections as they may reasonably
require, and will cause its officers and representatives (including, without
limitation, its firm of certified public accountants) to furnish Provant and the
Underwriter and their respective representatives with such financial and
operating data and other information with respect to the business, operations,
assets, liabilities and prospects of the Company as Provant and the Underwriter
and their respective representatives may from time to time reasonably request.
From the date of this Agreement, Provant and Acquisition will give the Company
full access, at reasonable times, to the offices and other facilities and to the
books and records of Provant and Acquisition, will permit the Company and its
representatives to make such inspections as they may reasonably require, and
will cause their respective officers and representatives (including, without
limitation, their firm of certified public accountants) to furnish the Company
and its representatives with such financial and operating data and other
information with respect to the business, operations, assets and liabilities of
Provant, Acquisition and the Additional Companies (in the last case to the
extent such information is in the possession of Provant and the applicable
Additional Company does not object to disclosure) as the Company and its
representatives may from time to time reasonably request.
(b) Provant and Acquisition, on the one hand, and the Company, on the
other hand, will, and will cause their respective employees and agents
(including, in the case of Provant, the Underwriter and its employees and
agents) (collectively, "Representatives") to, hold in strict confidence, unless
compelled to disclose by judicial or administrative process or, in the opinion
of its counsel, by other requirements of law, all Confidential Information (as
hereinafter defined) and will not disclose the same to any person. If this
Agreement is terminated, each party having received or created any documents
containing Confidential Information (including documents received or created by
its Representatives), will promptly return to the other party or destroy (or
cause to be returned or destroyed) all documents (including all copies thereof)
so received or created containing such Confidential Information. For purposes
hereof, "Confidential Information" shall mean all information of any kind
concerning the Company, or concerning any of Provant, Acquisition or any
Additional Company, respectively, except information (i) ascertainable or
obtained from public or published information, (ii) received from a third party
not known to Provant, Acquisition or their Representatives, or to the Company or
its
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Representatives, as applicable, to be under an obligation to the Company or
Provant, as applicable, to keep such information confidential, (iii) that is or
becomes known to the public (other than through a breach of this Agreement),
(iv) that was in the receiving party's possession before disclosure thereof to
it in connection with this Agreement, or (v) that is independently developed by
Provant or by the Company (including their respective Representatives), as
applicable.
6.4 REASONABLE BEST EFFORTS. Subject to the terms and conditions hereof,
each party to this Agreement agrees to fully cooperate in all reasonable
respects with the others and the others' counsel, accountants and
representatives in connection with any steps required to be taken as part of its
obligations under this Agreement and in connection with the IPO. Each of the
Company, Provant and Acquisition agrees that it will use its reasonable best
efforts to cause all conditions to its obligations under this Agreement to be
satisfied as promptly as possible, and will not undertake a course of action
inconsistent with this Agreement or which would make any of its representations,
warranties, agreements or covenants in this Agreement untrue in any material
respect or any conditions precedent to its obligations under this Agreement
unable to be satisfied at or prior to the Closing. The Provant Principals hereby
covenant and agree that, subject to the satisfaction (or, in Provant's sole
discretion, waiver) of the conditions set forth in Section 7.1, they will use
their reasonable best efforts to cause Provant to calculate the Financial
Condition in good faith and to cause Provant, Acquisition or Provant's counsel,
as applicable, to execute and/or deliver each of the items identified in
subsections 7.2(e), (h), (i) and (k) and to take the action described in
subsection 7.1(j).
6.5 CONSENTS. Each of Provant, Acquisition and the Company will use
reasonable efforts to obtain as promptly as practicable such consents of third
parties to agreements that would otherwise be violated by any provisions hereof
and to make such filings with governmental authorities as are necessary to
consummate the transactions contemplated by this Agreement.
6.6 PUBLIC ANNOUNCEMENTS. Except as provided in the immediately
following sentence, all public announcements, notices or other communications
regarding this Agreement and the transactions contemplated hereby to third
parties other than the parties hereto and their respective advisors and the
shareholders of the Company shall require the prior approval of Provant and of
the Company. Notwithstanding the foregoing, neither the filing of the
Registration Statement (or any other document filed with any public official in
connection with the IPO), nor the distribution of the Prospectus (whether in
preliminary or final form), nor any selling activity conducted by Provant or the
Underwriter in connection with the IPO, including without limitation those
conducted as part of the so-called road show, shall be construed to be public
announcements, notices or other communications requiring the prior approval of
the Company.
6.7 NOTIFICATION OF CERTAIN MATTERS. Each of the parties (the "Notifying
Party") shall give prompt notice to the other parties of (i) the occurrence or
non-
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occurrence of any event that would be likely to cause any representation or
warranty of the Notifying Party contained in this Agreement to be untrue or
inaccurate in any material respect at or prior to the Effective Time and (ii)
any material failure of the Notifying Party to comply with or satisfy any
covenant, condition, or agreement to be complied with or satisfied by it
hereunder. Without limiting the foregoing, from time to time prior to the
Closing the Company will promptly supplement or amend the Company Disclosure
Schedule both to correct any inaccuracy in the Company Disclosure Schedule when
delivered and to reflect any development which, if existing at the date of this
Agreement, would have been required to be set forth in the Company Disclosure
Schedule or which has rendered inaccurate the information contained in the
Company Disclosure Schedule (each notice furnishing such information being
called a "Company Disclosure Supplement"), and approximately six business days
prior to the Closing the Company will deliver to Provant a final Company
Disclosure Supplement consisting of a complete update of the Company Disclosure
Schedule as though all representations and warranties contained in Article 3
hereof were to be made as of the date of the Closing. In addition, the Company
shall promptly notify Provant in writing if at any time prior to a closing in
connection with the IPO it shall obtain knowledge of any facts relating to the
Company or its officers, directors or stockholders that might make it necessary
or appropriate to amend or supplement the Prospectus in order to make the
statements contained therein not misleading or comply with applicable law. The
delivery of any Company Disclosure Supplement or other notice pursuant to this
Section 6.7 shall not render correct any representation or warranty that was
incorrect when made or limit or otherwise affect the remedies available
hereunder to the party receiving such Company Disclosure Supplement or notice.
6.8 COVENANTS OF THE STOCKHOLDERS. The Stockholders hereby covenant and
agree with Provant and Acquisition that they shall:
(a) take no action which the Company may not take pursuant to Section
6.2;
(b) take action and refrain from action to the extent required of the
Company pursuant to Section 6.4;
(c) cause the Company to provide to Provant the notifications required
of the Company under Section 6.7;
(d) execute and deliver at the Closing the Employment Contracts, the
Non- Competition and Non-Disclosure Agreements, and the Investment Letters; and
(e) subject to the other terms of this Agreement, (i) use all
commercially reasonable efforts to take whatever action may be reasonably
necessary or desirable to effect, perform or confirm of record or otherwise in
the Surviving Corporation full right, title and interest in and to the business,
properties and assets now conducted or owned by the Company, free and clear of
all restrictions, liens, encumbrances, rights,
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title and interests in others (excepting only liens reflected on the Balance
Sheet, or otherwise disclosed on the Disclosure Schedule), or to collect,
realize upon, gain possession of, or otherwise acquire, full right, title and
interest in and to such business, properties and assets, and (ii) use their
reasonable best efforts to take whatever action may be reasonably necessary or
desirable to carry out the intent and purposes of the transactions contemplated
hereby and to permit Provant to undertake and complete the IPO;
(f) notify Provant in writing if at any time prior to a closing in
connection with the IPO they shall obtain knowledge of any facts relating to the
Company or its officers, directors or stockholders that might make it necessary
or appropriate to amend or supplement the Prospectus used in the registration
statement filed in connection with the IPO in order to make the statements
contained therein not misleading or comply with applicable law (with the
delivery of any notice pursuant to this Section 6.8(f) not limiting or otherwise
affecting the remedies available hereunder to the party receiving such notice);
(g) execute and deliver such other instruments and take such other
actions as may be reasonably required by the Company or the Underwriter in order
to carry out the intent of this Agreement and to complete and close the IPO,
subject to the other terms of this Agreement; and
(h) satisfy (or cause to be satisfied) prior to the Effective Time any
indebtedness to the Company owed by such Stockholder or by any Affiliate of such
Stockholder.
6.9 TAX FREE REORGANIZATION. From and after the Effective Time, neither
Provant nor the Surviving Corporation shall take or suffer to be taken any
action which will cause the Merger not to constitute a reorganization within the
meaning of Section 368(a)(2)(D) of the Code.
6.10 MONTHLY FINANCIAL INFORMATION. Within thirty days after the end of
each month ending after the date of this Agreement and prior to the Effective
Time, the Company will furnish to Provant internally prepared financial
statements comparable to the Financial Statements prepared in a manner
consistent with the Financial Statements and certified by the chief financial
officer of the Company.
6.11 PROVANT OPTION PLAN. Prior to the Effective Time, Provant shall
adopt an employee stock option plan (the "Plan") providing for the granting of
Provant Options from time to time as provided in the Plan. The Plan shall make
available for grant at or before the Closing, and the Board of Directors of
Provant shall so grant, Provant Options with respect to a number of shares of
Provant Common Stock equal to 5.0% of the shares of Provant Common Stock
outstanding as of immediately following the Closing of the Merger, the
Additional Mergers (excluding any Additional Merger that is terminated without
consummation) and the IPO, giving effect to the issuance of all shares of Merger
Stock issuable as of Closing, all shares of Provant Common Stock
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issuable as of the Closing as merger consideration in each of the Additional
Mergers, and the issuance of Provant Common Stock in the IPO. The Provant
Options granted as of such time shall have an exercise price equal to the IPO
Price, shall by their terms (i) become exercisable ratably over a period of
three years (provided that the holder remains employed by Provant or one of its
affiliates and subject to accelerated vesting in the event of a change in
control of Provant), (ii) have a term of seven years, (iii) in the case of
vested options, remain exercisable for a period of one year following any
termination of employment without cause (including termination resulting from
the expiration of any employment agreement in accordance with its terms and
termination upon death or disability) and for a period of ten business days
following any termination of employment for cause (conditioned, in the latter
case, upon the terminated employee's delivery of a general release to the
Surviving Corporation, Provant and their respective affiliates), and shall have
such other terms as the Board of Directors of Provant may determine. The Provant
Options granted as of such time shall be allocated among the employees of,
respectively, the Surviving Corporation and the surviving corporations of the
Additional Mergers in accordance with Schedule 6.11 hereto, and shall be granted
to individual employees of such corporations in accordance with directions to
the Board of Directors of Provant given by the executive officers of the Company
and the Additional Companies absent a good faith determination by the Board of
Directors of Provant that such a direction is manifestly contrary to the
interests of the Surviving Corporation.
7. CONDITIONS TO CONSUMMATION OF THE MERGER
7.1 CONDITIONS TO THE OBLIGATIONS OF PROVANT AND ACQUISITION. The
obligations of Provant and Acquisition to consummate the Merger are subject to
the satisfaction at the Closing, or waiver by Provant in writing, in whole or in
part, of each of the following conditions:
(a) The IPO and each of the Additional Mergers shall have been
completed at the same time.
(b) The Financial Condition shall have been satisfied, in the good
faith determination of Provant.
(c) Each of the representations, warranties, agreements and covenants
of the Company and the Stockholders (giving effect to the Company Disclosure
Schedule, but not to any Company Disclosure Supplement) shall be true and
correct as of, and shall not have been violated in any respect at, the Closing
as though made on and as of the Closing, except for (i) representations,
warranties, agreements and covenants which make reference to a specific date
(including the date of this Agreement), which need only be true and correct as
of the specified date, and (ii) failures of representations or warranties to be
true and correct as of the Closing solely on account of matters arising between
the date hereof and the Effective Time in the ordinary course of the Company's
business, if and to the extent such matters are
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consistent with past practice of the Company and are not materially adverse to
the Company, either singly or in the aggregate; the Company and the Stockholders
shall, on or before the Closing, have performed all of their respective
obligations under this Agreement which by the terms hereof are to be performed
on or before the Closing; and there shall have delivered to Provant and
Acquisition a certificate signed by the President of the Company on behalf of
and in the name of the Company and by the Stockholders dated as of the date of
the Closing to the foregoing effect.
(d) No action or proceeding by or before any court or other
governmental body shall have been instituted by any governmental body or other
person or entity or threatened in writing by any governmental body which seeks
to restrain, prohibit or invalidate the transactions contemplated by this
Agreement or which would materially adversely affect the right of the Surviving
Corporation, as a subsidiary of Provant, to conduct the business of the Company
as presently conducted by the Company or which claims damages from Provant with
respect to the transactions contemplated hereby.
(e) Provant and Acquisition shall have received the opinion of counsel
to the Company, dated the date of the Closing and in form and substance
reasonably satisfactory to Provant and its counsel, substantially to the effect
set forth on Exhibit 7 (subject to qualifications and assumptions customary in
transactions such as the Merger), which opinion provides that it may be relied
upon by the Underwriter.
(f) All proceedings taken by the Company and all instruments executed
and delivered by the Company prior to the date of the Closing in connection with
the transactions herein contemplated shall be satisfactory in form and substance
to counsel for Provant acting reasonably.
(g) No statute, rule or regulation shall have been enacted or
promulgated which makes illegal or prohibits consummation of the transactions
contemplated hereby or which materially and adversely affects the ability of the
Surviving Corporation, as a subsidiary of Provant, to conduct the business of
the Company as presently conducted by the Company.
(h) The Stockholders shall have executed and delivered to Provant the
Employment Contracts, the Non-Competition and Non-Disclosure Agreement, and the
Investment Letters.
(i) The Company shall have delivered to Provant and Acquisition a
certificate of its Secretary certifying as to requisite corporate or other
action authorizing the transactions contemplated by this Agreement, the
incumbency of officers and directors, and the status of record ownership of the
Shares.
(j) The Company shall have delivered to Provant such other
certificates, documents and consents as Provant and its counsel shall reasonably
require.
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7.2 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY AND THE STOCKHOLDERS.
The obligation of the Company and the Stockholders to consummate this Agreement
is subject to the satisfaction at the Closing, or waiver by the Company in
writing, in whole or in part, of each of the following conditions:
(a) The IPO shall have been completed at the same time, and appropriate
measures shall have been adopted and shall be in place to ensure that the
Stockholders shall receive out of the proceeds of the IPO all cash to which they
will become entitled as of the Effective Time.
(b) Each of the Additional Mergers shall have been completed at the
same time as the Merger, and there shall have occurred no event (or series of
events, whether or not related) with respect to any Additional Company that (i)
constitutes a failure of a closing condition set forth in the applicable
Additional Merger Agreement such that, in the reasonable judgment of Provant,
Provant is not contractually obligated to consummate the applicable Additional
Merger, and (ii) has resulted in a material adverse change between the date
hereof and the date of the Closing in the financial condition, assets,
liabilities, earnings, business, or business prospects of the applicable
Additional Company.
(c) Each of the representations, warranties and agreements of Provant,
Acquisition and the Provant Principals (giving effect to the Provant Disclosure
Schedule) shall be true and correct as of, and shall not have been violated in
any respect at, the Closing as though made on and as of the Closing except for
(i) representations and warranties and agreements which make reference to a
specific date (including the date of this Agreement), which need only be true
and correct as of the specified date, and (ii) failures of representations or
warranties to be true and correct as of the Closing solely on account of matters
arising between the date hereof and the Effective Time in the ordinary course of
Provant's or Acquisition's business, if and to the extent such matters are not
materially adverse to Provant (considered on a consolidated basis giving effect
to the Merger and the Additional Mergers), either singly or in the aggregate;
Provant and Acquisition shall, on or before the Closing, have performed all of
their respective obligations under this Agreement which by the terms hereof are
to be performed on or before the Closing (including without limitation the
adoption of the Plan and the grant of Provant Options to persons who will be
employees of the Surviving Corporation in accordance with Schedule 6.11); and
Provant and Acquisition shall have delivered to the Company a certificate of
their respective Presidents signed on their behalf and in their names dated as
of the date of the Closing to the foregoing effect.
(d) No action or proceeding by or before any court or other
governmental body shall have been instituted by any governmental body or other
person or entity or threatened in writing by any governmental body which seeks
to restrain, prohibit or invalidate the transactions contemplated by this
Agreement or which would materially adversely affect the right of the Company to
consummate the Merger.
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(e) The Company shall have received the opinion, dated the date of the
Closing and in form and substance satisfactory to the Company and its counsel,
of Messrs. Nutter, McClennen & Fish, counsel to Provant, substantially to the
effect set forth on Exhibit 8 (subject to qualifications and assumptions
customary in transactions such as the Merger).
(f) All proceedings taken by Provant and Acquisition and all
instruments executed and delivered by Provant and Acquisition prior to the date
of the Closing in connection with the transactions herein contemplated, and any
instruments to be executed by the Stockholders at the request of Provant, shall
be satisfactory in form and substance to counsel for the Company, acting
reasonably.
(g) No statute, rule or regulation shall have been enacted or
promulgated which makes illegal or prohibits consummation of the transactions
contemplated hereby or which materially and adversely affects the ability of the
Surviving Corporation, as a subsidiary of Provant, to conduct the business of
the Company as presently conducted by the Company.
(h) Provant and Acquisition shall have delivered to the Company a
certificate of its Secretary, certifying as to requisite corporate or other
action authorizing the transactions contemplated by this Agreement.
(i) The Surviving Corporation shall have executed and delivered each
Employment Contract to the appropriate party.
(j) The individual listed on Schedule 7.2 as the designee of the
Company shall have been elected to the Board of Directors of Provant as of
immediately following the closing of the IPO.
(k) Provant and Acquisition shall have delivered to the Company such
other certificates and documents pertaining to the Merger (including the legal
existence and good standing of Provant and Acquisition) as the Company and its
counsel shall reasonably require.
8. RESTRICTIONS ON SALE OR TRANSFER OF MERGER STOCK
8.1 RESTRICTIONS ON SALE. The shares of Merger Stock will not have been
registered under the Securities Act or the blue sky laws of any state by reason
of their contemplated issuance in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act and of such state laws.
Such shares may not be sold, transferred, or otherwise disposed of without
registration under the Securities Act and such state laws or an exemption
therefrom, or in contravention of the restrictions contained in the Investment
Letter attached hereto as Exhibit 4.
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8.2 REGISTRATION ON A PARI PASSU BASIS. Provant agrees that, in the
event that at any time after the closing of the IPO it conducts a public
offering of Common Stock registered under the Act and Provant and its
underwriter determine, in their sole discretion, to permit (i) any holder of
Merger Stock, (ii) any holder of Provant Common Stock issued as merger
consideration in any of the Additional Mergers, or (iii) any Provant Principal
to sell Provant Common Stock in such offering, then Provant shall permit each
holder of Merger Stock to sell shares of such Merger Stock in such offering in
the same proportion as the person referenced in any of clauses (i) through (iii)
above who is then being permitted to sell the highest proportion of his or her
shares of Provant Common Stock (all such proportions being based on the
respective number of shares of Provant Common Stock that each applicable person
then holds); provided, however, that the foregoing right shall not apply to
shares that are no longer subject to the two-year restriction period under the
Investment Letter and that are tradeable either without regard to Rule 144
promulgated under the Act or tradeable within a 90 day period under such Rule
144. For purposes of the foregoing, an agreement granting a person a right to
have shares registered in the future shall not be construed as "permitting" such
person to sell shares in an offering until such time as such right is properly
exercised under the terms of such agreement.
9. INDEMNIFICATION
9.1 AGREEMENTS TO INDEMNIFY.
(a) As used in this Article 9:
(i) "Damages" means claims, damages, liabilities,
losses, judgments, settlements, and expenses, including,
without limitation, all reasonable fees and disbursements of
counsel incident to the investigation or defense of any claim
or proceeding or threatened claim or proceeding.
(ii) "Provant Indemnified Party" means, collectively,
each of Provant, the Surviving Corporation, and their
respective affiliates.
(iii) "Company Indemnified Party" means, after the
Effective Time, the Stockholders collectively.
(iv) "Indemnified Party" means either of the Provant
Indemnified Party or the Company Indemnified Party, as
applicable under the circumstances.
(b) On the terms and subject to the limitations set forth in this
Agreement, the Company, prior to the Effective Time, shall, and, after the
Effective Time, the Stockholders shall indemnify, defend, and hold the Provant
Indemnified Party harmless from, against and in respect of any and all Damages
incurred by any
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Provant Indemnified Party arising from or in connection with any of the
following (collectively referred to herein as "Claims"):
(i) any breach of any representation, warranty,
covenant or agreement made by the Company or by the
Stockholders in this Agreement or in any exhibit, schedule,
certificate or other document delivered or to be delivered at
the Closing by or on behalf of the Company or the Stockholders
pursuant to the terms of this Agreement or otherwise referred
to or incorporated in this Agreement, including any allegation
by a third party which, if true, would constitute such a
breach; and
(ii) those matters identified on Schedule 9.1.
(c) In addition to the foregoing, and solely in the event the Merger
shall be consummated, the Stockholders shall indemnify Provant as set forth in
the immediately following sentence from any failure by the Company to have a
Closing Net Worth equal to or greater than the Minimum Net Worth. In the event
the Closing Net Worth shall be less than the Minimum Net Worth (and Provant
shall have elected, in its sole discretion, to waive the failure of the closing
condition set forth in Section 7.1(b) caused thereby), the Stockholders shall
reimburse Provant at the Closing for the amount of such deficit on a dollar for
dollar basis. Such reimbursement shall be the sole remedy of Provant on account
of a failure of the Closing Net Worth to equal or exceed the Minimum Net Worth
(other than Provant's right to terminate this Agreement), and neither the
Company nor the Stockholders shall be liable for any consequential damages on
account of any such failure. Any indemnity and reimbursement required by this
Section 9.1(c) shall not be subject to Section 9.2(c).
(d) From and after the Effective Time and solely if the Merger shall
have been consummated, on the terms and subject to the limitations set forth in
this Agreement, Provant and the Provant Principals shall indemnify, defend, and
hold the Company Indemnified Party harmless from, against and in respect of any
and all Damages incurred by any Company Indemnified Party arising from or in
connection with any actual or alleged breach of any representation, warranty,
covenant or agreement made by Provant or Acquisition in this Agreement or in any
exhibit, schedule, certificate or other document delivered or to be delivered at
the Closing by or on behalf of Provant or Acquisition pursuant to the terms of
this Agreement or otherwise referred to or incorporated in this Agreement (also
referred to herein as "Claims"); provided, however, that this provision shall
not be construed to provide to the Company Indemnified Party any indemnification
with respect to the Registration Statement and the information contained
therein, or with respect to any failure of the IPO to be consummated.
(e) Subject to Section 9.2, the Company's representations and
warranties set forth in Article 3, the Stockholders' representations and
warranties set forth in Article
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4 and Provant's and Acquisition's representations and warranties set forth in
Article 5 shall, for purposes of this Article 9, be deemed to have survived the
Effective Time and the Closing of the Merger and the other transactions
contemplated hereby notwithstanding any contrary terms of this Agreement, and
whenever such representations, warranties, covenants and agreements are referred
to in this Article 9, the text of the same as set forth in the aforesaid
Articles shall be deemed to be set forth in their entirety herein, and the same
are hereby incorporated herein by such references. Each representation,
warranty, covenant and agreement of the Company and the Stockholders shall be
deemed to have been relied upon by the Provant Indemnified Party, and each
representation, warranty, covenant and agreement of Provant and Acquisition
shall be deemed to have been relied upon by the Company Indemnified Party,
notwithstanding any investigation or inspection made by or on behalf of any
Provant Indemnified Party or the Company Indemnified Party, as applicable, and
shall not be affected in any respect of any such investigation or inspection. No
waiver of a closing condition by an Indemnified Party shall be deemed to relieve
a party that is otherwise obligated to provide indemnification of its
obligations pursuant to this Section 9.1 on account of the matters that were the
subject of such waiver.
(f) In addition to and not in limitation of the rights and remedies of
Provant under this Section 9.1, Provant may withhold from any shares of Provant
Common Stock issuable and all amounts payable under Section 2.8 the amount of
any Damages of Provant arising out of or in connection with Claims asserted
hereunder (as estimated in good faith by Provant in the event such Damages are
not yet fixed, subject to future release if appropriate upon final resolution of
the applicable Claim. For purposes of this subsection (f), shares of Provant
Common Stock otherwise issuable under Section 2.8 shall be valued at the lower
of (i) the closing price for a share of Provant Common Stock on the last trading
day immediately preceding the date Provant gives notice that it has a claim
under this Article 9 and (ii) the IPO Price adjusted as provided in Section
2.8(f).
(g) In the event the Stockholders shall indemnify the Provant
Indemnified Party for any breach of the warranties contained in Section 3.25 on
account of a failure of accounts receivable of the Company to be collected, the
Surviving Corporation shall assign to the Stockholders those accounts receivable
as to which such indemnity has been paid, but in no event shall accounts be
assigned having an outstanding balance in excess of the indemnity actually paid
to the Provant Indemnified Party.
9.2 Limitations on Indemnity Obligations and Liability for Breaches. The
indemnity obligations of the Company or the Stockholders, as applicable (in
either case, the "Company Indemnifying Party"), or Provant and the Provant
Principals (collectively, the "Provant Indemnifying Party") (both the Company
Indemnifying Party and the Provant Indemnifying Party being called generically
the "Indemnifying Party"), under this Agreement shall be subject to the
following limitations:
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(a) The indemnity obligations of the Indemnifying Party shall expire on
September 15, 1999 (the "Cut-off Date"); provided, however, that such
obligations with respect to (i) the representations and warranties contained in
Sections 3.1, 3.2, 3.10, and 3.22, Article 4, and Sections 5.1, 5.2, 5.3 and 5.4
of this Agreement and the matters identified on Schedule 9.1 and in Section
9.1(c) shall continue forever without limitation, and (ii) the representations
and warranties regarding taxes, which are contained in Section 3.15, shall
remain in effect until all claims for taxes due by or on account of the Company
for any period up to and including the Effective Time have been settled and any
statute of limitations period with respect to such taxes has expired; and
provided further that the indemnity obligations of the Indemnifying Party for
Claims asserted by an Indemnified Party before the expiration of the applicable
indemnity period, if any, in the manner provided in this Agreement shall
continue until such Claims are finally resolved and discharged.
(b) (i) Subject to subsection (b)(ii) below, the aggregate indemnity
obligations of each Stockholder for any Damages arising out of Claims the
operative facts of which were actually known to any Stockholder as of the date
of this Agreement ("Known Claims") shall not in any event exceed an amount equal
to the sum of (A) the cash received by all Stockholders pursuant to Section
2.7(c), plus (B) the product obtained by multiplying the number of shares of
Merger Stock received by all Stockholders by the IPO Price, minus (C) any
amounts paid pursuant to Section 9.1 by any Stockholder with respect to Claims
that are not Known Claims. Subject to subsection (b)(ii) below (and
notwithstanding Section 11.9), the aggregate indemnity obligations of Mr. and
Mrs. Cohen (collectively), or of Mr. Patrick, respectively, for Damages arising
out of Claims that do not constitute Known Claims shall not in any event exceed
Five Million Dollars ($5,000,000); provided, however, that the aggregate
indemnity obligations of all Stockholders for all Claims, whether or not
constituting Known Claims, shall not exceed the sum of the amounts referenced in
clauses (A) and (B) of the immediately preceding sentence. The aggregate
indemnity obligations of the Provant Principals for any Damages shall not in any
event exceed an amount equal to (X) the aggregate number of shares of Provant
Common Stock held by the Provant Principals as of immediately following the
closing of the IPO plus the aggregate number of warrant shares covered by those
certain warrants for the purchase of Provant Common Stock issued to the Provant
Principals as of the closing of the IPO, multiplied by (Y) the IPO Price, minus
(Z) the aggregate exercise price of such warrants.
(ii) Solely in the event that both (A) the Damages to be paid
by the Stockholders pursuant to Section 9.1(b) on account of the then-asserted
Claim, in aggregation with all such Damages previously paid by all Stockholders,
equal or exceed the aggregate amount of the cash received by all Stockholders
pursuant to Section 2.7, and (B) the Average Closing Price (as defined below) of
Provant Common Stock during the ten trading days immediately following (but not
including) the date on which notice of the liquidated amount of the claimed
Damages is given to the Stockholders (which may, if applicable, be the date on
which the initial notice of the Claim is given) (in either event, the "Claim
Date") is less than the IPO Price, then any
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Stockholder may, at his or her election, satisfy such portion of the Damages as
exceeds the cash received by all Stockholders pursuant to Section 2.7 by
tendering to Provant, for cancellation, shares of Provant Common Stock equal in
value to the Damages to be so satisfied, with such shares valued at the Average
Closing Price determined under clause (B) of this sentence. Notwithstanding the
first sentence of subsection (b)(i) above, if the foregoing clauses (A) and (B)
are satisfied and the Stockholders are therefore permitted to satisfy their
obligations to pay Damages by tendering shares of Provant Common Stock, and a
Stockholder elects to so tender Provant Common Stock, such Stockholder's
obligation for Damages shall be limited to the number of shares of Provant
Common Stock received by all Stockholders pursuant to Sections 2.7 and 2.8. In
the event that Damages are to be paid by the Stockholders before the final
distribution of Provant Common Stock (if any) on account of 1998 EBIT and if
this subsection (b)(ii) shall apply, the final number of shares of Provant
Common Stock that the Stockholder shall be obligated to tender to Provant shall
be left undetermined until such time as the distribution of Provant Common Stock
(if any) is to be made under Section 2.8. As used herein, "Average Closing
Price" means the average of the closing prices of Provant Common Stock on each
trading day during the stated period, as recorded on the New York Stock Exchange
or on such other exchange or market as is then the principal exchange or market
on which Provant Common Stock is traded.
(c) Except (i) as provided in Section 9.1(c), and (ii) with respect to
Damages arising out of the matters identified on Schedule 9.1, which Damages
shall be indemnified without respect to the threshold provided in this Section
9.2(c), an Indemnified Party shall be entitled to indemnification only if the
aggregate and collective Damages incurred or suffered by it exceeds $60,000, in
which event it shall be entitled to indemnification of the full amount of such
Damages. No amounts indemnified by the Company or the Stockholders pursuant to
Section 9.1(c) or with respect to matters identified on Schedule 9.1 shall be
treated as Damages incurred and suffered by the Indemnified Party for purposes
of the immediately preceding sentence, provided only that the amounts so
indemnified have been duly paid.
(d) Notwithstanding the preambles to, respectively, Article 3 and
Article 5, the contractual liability of the Stockholders and the Provant
Principals for any breach of the representations and warranties contained in,
respectively, Article 3 and Article 5 shall be limited to such Stockholder's or
Provant Principal's liability provided in this Article 9.
9.3 NOTICE OF THIRD PARTY CLAIMS. An Indemnified Party shall promptly
notify the Indemnifying Party in writing of any Claim consisting of a matter
asserted by a third person that might give rise to any indemnity obligation of
the Indemnifying Party hereunder (a "Third Party Claim"), specifying in
reasonable detail the nature thereof and indicating the amount (if known, or
estimated if necessary) of the Damages that have been or may be sustained by the
Indemnified Party. Failure of any Indemnified Party to promptly give such notice
shall not relieve the Indemnifying Party of its or his obligation to indemnify
under this Article 9, but as a
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result of any such failure, the Indemnified Party shall be liable to the
Indemnifying Party for, and only for, the amount of actual damages caused by
such failure, which amount shall be an offset against the amount of Damages for
which the Indemnifying Party is liable hereunder. Together with or following
such notice, the Indemnified Party shall deliver to the Indemnifying Party
copies of all notices and documents received by the Indemnified Party relating
to the Third Party Claim (including court papers).
9.4 DEFENSE AND SETTLEMENT OF THIRD PARTY CLAIMS. The Indemnifying Party
shall have the right (without prejudice to the right of any Indemnified Party to
participate at its or his own expense through counsel of its or his own
choosing) to defend against any Third Party Claim at its or his expense and
through counsel of its or his own choosing and to control such defense if the
Indemnifying Party gives written notice of its or his intention to do so within
15 business days of its or his receipt of notice of the Third Party Claim. The
Indemnified Party shall cooperate fully in all reasonable respects in the
defense of such Third Party Claim and shall make available to the Indemnifying
Party or its or his counsel all pertinent information under their control
relating thereto. The Indemnified Party shall have the right to elect to settle
any Third Party Claim; provided, however, the Indemnifying Party shall not have
any indemnification obligation with respect to any monetary payment to any third
party required by such settlement unless the Indemnifying Party shall have
consented thereto. The Indemnifying Party shall have the right to elect to
settle any Third Party Claim subject to the consent of the Indemnified Party;
provided, however, that if the Indemnified Party fails to give such consent
within 15 business days of being requested to do so, the Indemnified Party
shall, at its expense, assume the defense of such Third Party Claim and
regardless of the outcome of such matter, the Indemnifying Party's liability
hereunder shall be limited to the amount of any such proposed settlement. The
foregoing provisions notwithstanding, in no event (a) may either Indemnifying
Party adjust, compromise or settle any Third Party Claim unless such adjustment,
compromise or settlement unconditionally releases the Indemnified Party from all
liability, (b) may the Company Indemnifying Party adjust, compromise or settle
any Third Party Claim if such adjustment, compromise or settlement affects the
absolute and sole right of Provant or the Surviving Corporation to own or use
any of the Company's assets or (c) may the Company Indemnifying Party defend any
Third Party Claim which, if adversely determined, would materially impair the
financial condition, business or prospects of Provant or the Surviving
Corporation.
9.5 NOTICE OF OTHER CLAIMS. In the event any Indemnified Party should
incur any Claim that does not involve a Third Party Claim, the Indemnified Party
shall deliver a notice of such Claim with reasonable promptness to the
Indemnifying Party. If the Indemnifying Party notifies the Indemnified Party
that it does not dispute the Claim described in such notice or fails to notify
the Indemnified Party within 30 days after delivery of such notice by the
Indemnified Party whether the Indemnifying Party disputes the Claim described in
such notice, the Damages in the amount specified in the Indemnified Party's
notice will be conclusively deemed a
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liability of the Indemnifying Party and the Indemnifying Party shall pay the
amount of such Damages to the Indemnified Party on demand. Failure of any
Indemnified Party to promptly give such notice shall not relieve the
Indemnifying Party of its or his obligation to indemnify under this Article 9,
but as a result of any such failure, the Indemnified Party shall be liable to
the Indemnifying Party for, and only for, the amount of the actual damages
caused by such failure, which amount shall be an offset against the amount of
Damages for which the Indemnifying Party is liable hereunder.
10. TERMINATION; AMENDMENTS; WAIVER
10.1 TERMINATION. This Agreement may be terminated at any time prior to
the Effective Time, notwithstanding approval thereof by the stockholders of the
Company:
(a) by mutual consent of the Board of Directors of Provant and the
Company;
(b) by any party, in its sole discretion, if the Merger and the IPO
shall not have been consummated on or before June 30, 1998, unless the failure
of the Merger to occur by such date shall be due to the failure of the party
seeking to terminate this Agreement to perform or observe the covenants and
agreements of such party set forth herein;
(c) by the Company if there has been a misrepresentation or breach on
the part of Provant or Acquisition in the representations, warranties, covenants
or obligations of Provant or Acquisition set forth herein, provided that in the
case of a breach of any such covenant or obligation, such breach has not been
cured within ten (10) business days after the Company has notified Provant and
Acquisition of such breach;
(d) by Provant if there has been a misrepresentation or breach on the
part of the Company or the Stockholders in the representations, warranties,
covenants and obligations of the Company and the Stockholders set forth herein,
provided that in the case of a breach of any such covenant or obligation, such
breach has not been cured within ten (10) business days after Provant has
notified the Company or the Stockholders of such breach; or
(e) by any party if any court shall have issued an order, decree or
ruling or taken any other action permanently enjoining, restraining or otherwise
prohibiting the Merger and such order, decree, ruling or other action shall have
become final and non-appealable.
The power of termination provided for by this Section 10.1 may be
exercised for Provant or the Company only by their respective Boards of
Directors in its sole
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discretion and will be effective only after written notice thereof, signed on
behalf of the party for which it is given by its Chairman of the Board,
President or other duly authorized officer, shall have been given to the other.
If this Agreement is terminated in accordance with this Section 10.1, the Merger
shall be abandoned without further action by Provant or the Company.
10.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement by any party as provided in Section 10.1, this Agreement shall
forthwith become void and have no effect, and neither Provant nor the Company,
nor any of the officers or directors of either of them, nor the Stockholders
shall have any liability of any nature whatsoever hereunder, or in connection
with the transactions contemplated hereby, except (a) Sections 6.3(b) and 11.8
shall survive any termination of this Agreement, (b) notwithstanding anything to
the contrary contained in this Agreement, no party shall be relieved of or
released from any liabilities or damages arising out of its breach of any
provision of this Agreement; and (c) until September 30, 1998, neither the
Company nor the Stockholders shall, directly or indirectly, discuss, negotiate,
submit or respond to proposals relating to, or enter into an agreement with any
other person with respect to, a transaction with other training companies to be
accompanied or followed by a public offering.
10.3 AMENDMENT. Subject to compliance with applicable law, this
Agreement may be amended by the parties hereto, by action taken or authorized
(in the case of Provant, Acquisition and the Company) by their respective Boards
of Directors, at any time before or after approval of the matters presented in
connection with the Merger by the stockholders of the Company. This Agreement
may not be amended except by an instrument in writing signed on behalf of each
of the parties hereto.
10.4 EXTENSION; WAIVER. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized (in the case of Provant,
Acquisition and the Company) by their respective Boards of Directors, may, to
the extent legally allowed, subject to Section 10.3, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party, but such
extension or waiver or failure to insist on strict compliance with an
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure.
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11. MISCELLANEOUS
11.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Except as provided in
Article 9 with respect to the representations and warranties contained in
Articles 3, 4 and 5, and except for the provisions of Section 10.2, the
representations and warranties made in this Agreement shall not survive beyond
the Effective Time.
11.2 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement (a) constitutes, with
the Company Disclosure Schedule, the Provant Disclosure Schedule, the other
Schedules and the Exhibits hereto, the entire agreement among the parties with
respect to the subject matter hereto and supersedes all other prior agreements
and understandings, both written and oral, among the parties or any of them with
respect to the subject matter hereof (including, without limitation, the letter
of intent between the Company and American Business Partners LLC) and (b) shall
not be assigned by operation of law or otherwise, provided that Provant or
Acquisition may assign its respective rights and obligations to any direct or
indirect subsidiary of Provant, but no such assignment shall relieve Provant of
its obligations hereunder.
11.3 VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, each of which shall remain in full force and
effect.
11.4 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person or by electronic facsimile transmission,
cable, telegram, or telex, or when mailed by registered or certified mail
(postage prepaid, return receipt requested) or delivered to a courier of
national reputation to the respective parties as follows:
If to Provant or Acquisition, to it at:
67 Batterymarch Street, Suite 500
Boston, MA 02110
Facsimile: (617) 261-1610
with a copy to:
Nutter, McClennen & Fish, LLP
One International Place
Boston, Massachusetts 02110-2699
Attention: Constantine Alexander, Esq.
Facsimile: (617) 973-9748
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If to the Company or any Stockholder, to it or him at:
75 North Maple
Ridgewood, NJ 07450
Facsimile: (201) 670-5690
with a copy to:
McCarthy, Fingar, Donovan, Drazen & Smith, LLP
11 Martine Avenue
White Plains, NY 10606-1934
Attention: Milton R. Gleit, Esq.
Facsimile: (914) 946-0134
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
11.5 GOVERNING LAW. This Agreement and all rights of the parties arising
in connection with the transactions contemplated hereby (including the
negotiation hereof, and whether or not such transactions shall be consummated)
shall be governed by and construed in accordance with the internal laws of the
State of New Jersey, regardless of the laws that might otherwise govern under
applicable principles of conflicts of laws thereof.
11.6 DESCRIPTIVE HEADINGS. The descriptive headings herein are inserted
for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
11.7 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same agreement. Copies (photostatic,
facsimile or otherwise) of signatures to this Agreement shall be deemed to be
originals and may be relied upon to the same extent as originals, and delivery
of a duly executed signature page to this Agreement shall be deemed to be
delivery of this Agreement in its entirety.
11.8 EXPENSES. All costs and expenses incurred in connection with the
transactions contemplated by this Agreement shall be paid by the party incurring
such expenses, provided that (i) solely in the event the Merger is consummated,
the reasonable legal and accounting expenses of the Company, up to a maximum of
$50,000, shall be paid by (at the election of Provant) either Provant or the
Surviving Corporation, and (ii) all expenses of the Company not payable pursuant
to clause (i) shall be paid directly by the Stockholders or expensed (and not
capitalized) by the Company prior to the computation of the Company's net worth
for purposes of
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determining satisfaction of the Financial Condition. An account receivable for
expenses reimbursable by Provant or the Surviving Corporation under clause (i)
above may be included on the books of the Company for purposes of calculating
the Closing Net Worth, to the extent such amounts have previously been expensed
by the Company.
11.9 JOINT AND SEVERAL. The representations, warranties, agreements,
covenants and obligations of the Stockholders under this Agreement are joint and
several. The indemnity obligations of Provant and the Provant Principals under
this Agreement are joint and several.
11.10 PARTIES IN INTEREST. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Agreement.
11.11 INTERPRETATION. The Parties acknowledge and agree that each party
and its counsel reviewed and negotiated the terms and provisions of this
Agreement and has contributed to its revision and that the rule of construction
to the effect that any ambiguities are resolved against the drafting party shall
not be employed in the interpretation of this Agreement.
11.12 MOST FAVORED NATION TREATMENT. Subject to the last sentence of
this Section 11.12, Provant covenants and agrees that the Company and the
Stockholders will be accorded "most favored nation" treatment with respect to
any material amendments adopted after the date hereof with respect to any
Additional Merger Agreement or any other agreement materially altering the
rights or obligations of any Additional Company or the stockholders thereof. The
parties agree to amend this Agreement as necessary from time to time to effect
any changes required pursuant to such "most favored nation" treatment.
Notwithstanding the foregoing, such "most favored nation" treatment shall not
apply to (a) amendments of any provisions not applicable generally to this
Agreement and all (or substantially all) of the Additional Merger Agreements,
and (b) any waiver of a closing condition or an affirmative or negative covenant
or comparable undertaking contained in any Additional Merger Agreement.
[Remainder of page intentionally blank]
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IN WITNESS WHEREOF, each of the parties has caused this Agreement and
Plan of Merger to be executed on its behalf by its officers thereunto duly
authorized, all as of the day and year first above written.
PROVANT, INC.
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
MOHR ACQUISITION CORP.
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
MOHR RETAIL LEARNING SYSTEMS, INC.
By:
------------------------------------------
Name: Herbert Cohen
----------------------------------------
Title: Chairman and Chief Executive Officer
---------------------------------------
STOCKHOLDERS:
---------------------------------------------
HERBERT COHEN
---------------------------------------------
JUDITH COHEN
---------------------------------------------
MICHAEL PATRICK
PROVANT PRINCIPALS:
---------------------------------------------
PAUL M. VERROCHI
---------------------------------------------
DOMINIC J. PUOPOLO
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Exhibit 2.7
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this Agreement") dated as of
February 12, 1998 is among Provant, Inc., a Delaware corporation ("Provant"),
Novations Acquisition Corp., a Delaware corporation and a wholly-owned
subsidiary of Provant ("Acquisition"), Novations Group, Inc., a Utah corporation
(the "Company"), Joseph Folkman, Joseph Hanson, Kurt Sandholtz, Norman
Smallwood, Randy Stott and Jonathan Younger, the principal stockholders of the
Company (the "Stockholders"), and Paul M. Verrochi and Dominic J. Puopolo (the
"Provant Principals"), and provides for the merger of the Company with and into
Acquisition (the "Merger"). The Boards of Directors of Provant, Acquisition and
the Company have determined that the Merger is in the best interests of their
respective stockholders and the Merger has been approved by Provant as the sole
stockholder of Acquisition.
Accordingly, the parties hereto, in consideration of the mutual
representations, warranties and covenants contained herein, agree as follows:
1. CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the
respective meanings set forth below:
1.1 "Additional Companies" mean those companies identified on Schedule
1.1 hereto, with which companies Provant is entering into separate Agreements
and Plans of Merger contemporaneously with the execution and delivery of this
Agreement.
1.2 "Additional Mergers" means the acquisitions (by merger or otherwise)
of each of the Additional Companies by Provant, and "Additional Merger
Agreements" means the agreements and plans of merger or other contracts (in each
case as described in Section 5.9 of the Provant Disclosure Schedule) pursuant to
which Provant will consummate the Additional Mergers.
1.3 "Additional Shares" means the additional shares, if any, of Provant
Common Stock issuable to the stockholders of the Company pursuant to Section
2.8.
1.4 "Articles of Merger" has the meaning given to it in Section 2.2.
1.5 "Balance Sheet" means the balance sheet of the Company as of June
30, 1997 included in the Financial Statements.
1.6 "Balance Sheet Date" means June 30, 1997.
1.7 "Certificate of Merger" has the meaning given to it in Section 2.2.
<PAGE> 2
1.8 "Closing" means the closing of the transactions contemplated by this
Agreement as provided in Section 2.2.
1.9 "Closing Net Worth" means the Company's pro forma net worth as of a
date selected by Provant as close as practicable to the Effective Time (but in
no event more than thirty (30) days prior to the Effective Time, and in no event
earlier than April 30, 1998 utilizing, if necessary, projected income through
April 30, 1998), determined using the same principles and assumptions used by
Provant in its preparation of its pro forma financial statements contained in
the Registration Statement.
1.10 "Code" means the Internal Revenue Code of 1986, as amended to date.
1.11 "Commission" means the Securities and Exchange Commission.
1.12 "Company Disclosure Schedule" means the Disclosure Schedule
prepared by the Company and attached hereto and incorporated herein by this
reference.
1.13 "Company Option" means an option to purchase Shares, whether or not
vested or exercisable as of the applicable time.
1.14 "DGCL" means the Delaware General Corporation Law.
1.15 "Dissenting Share" means any Share the holder of which has
perfected, and not legally abandoned, dissenters rights of appraisal under Part
13 of the UBCA.
1.16 "Dissenting Share Holdback" means a dollar amount equal to the
Fraction, multiplied by the number of Shares that are Dissenting Shares,
multiplied by $18.85 million.
1.17 "1998 EBIT" means the earnings before interest and taxes of the
Company for the period beginning July 1, 1997 and ending at the Effective Time
and of the Surviving Corporation for the period beginning at the Effective Time
and ending June 30, 1998 determined in accordance with the Instructions for
Determination of EBIT attached hereto as Exhibit 1; provided, that if the
Effective Time is after June 30, 1998, then 1998 EBIT shall consist solely of
the earnings before interest and taxes of the Company (determined as set forth
above) for the period beginning July 1, 1997 and ending June 30, 1998.
1.18 "Effective Time" means such time as the Articles of Merger are
filed with the Secretary of State of the State of Utah in accordance with
Section 16-10a-1105 of the UBCA and the Certificate of Merger is filed with the
Secretary of State of the State of Delaware in accordance with Section 252 of
the DGCL, whichever is later, unless Acquisition and the Company agree that a
later time shall be the Effective Time, in which case such time shall be
specified in the Articles of Merger and the Certificate of Merger.
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1.19 "Employment Contract" means an employment agreement in the form
attached hereto as Exhibit 2.
1.20 "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
1.21 "Financial Condition" means that, using the same principles and
assumptions used by Provant in the preparation of its pro forma financial
statements contained in the Registration Statement, the Company's Closing Net
Worth is not less than $950,000 (the "Minimum Net Worth"), the Company's pro
forma revenues for the 12 months ended June 30, 1997 are not less than $10.4
million, the Company's pro forma earnings before interest and taxes for the 12
months ended June 30, 1997 are not less than $1.9 million, the Company's
projected pro forma revenues (as determined in good faith in Provant) for the 12
months ended June 30, 1998 are not less than $12.1 million and the Company's
projected 1998 EBIT (as determined in good faith by Provant) is not less than
$2.4 million.
1.22 "Financial Statements" means the financial statements of the
Company attached hereto as Exhibit 3, consistent in form and substance with the
requirements of Regulation S-X of the Commission under the Securities Act,
consisting of (a) Balance Sheets at June 30, 1997 and 1996, and at September 30,
1997; (b) Statements of Income for the periods ending June 30, 1997, 1996 and
1995, and ending September 30, 1997; (c) Statements of Stockholders' Equity at
June 30, 1997, 1996, 1995 and 1994, and at September 30, 1997; (d) Statements of
Cash Flow for the periods ending June 30, 1997, 1996 and 1995, and ending
September 30, 1997; and (e) notes to the foregoing.
1.23 "First Accountants" means the firm of independent public
accountants then regularly employed by Provant.
1.24 "Fraction" means that fraction which has one as its numerator and
which has, as its denominator, the pro forma number of Shares outstanding on a
fully diluted basis as of immediately prior to the Effective Time, assuming the
exercise or conversion of all then-outstanding Company Options, warrants and
other instruments exercisable for or convertible into Shares (whether or not
then currently exercisable or convertible).
1.25 "IPO" means the initial underwritten public offering of shares of
Provant Common Stock.
1.26 "IPO Price" shall mean the price at which shares of Provant Common
Stock are sold to the public in the IPO.
1.27 "Investment Letter" means an investment letter in the form attached
hereto as Exhibit 4.
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1.28 "Merger Stock" means the shares of Provant Common Stock exchanged
for Shares pursuant to Section 2 .7(c) and 2.8.
1.29 "Non-Competition and Non-Disclosure Agreement" means a
non-competition and non-disclosure agreement in the form attached hereto as
Exhibit 5.
1.30 "Prospectus" means the prospectus relating to the IPO first filed
with the Commission pursuant to Rule 424(b) and Rule 430A of the rules and
regulations of the Commission under the Securities Act or (if no such filing is
required) as included in the Registration Statement and, in the event of any
supplement or amendment to such prospectus after the date the Registration
Statement becomes effective under the Securities Act, such prospectus as so
supplemented or amended from and after the filing with the Commission of such
supplement or the effectiveness of such amendment.
1.31 "Provant Disclosure Schedule" means the Disclosure Schedule
prepared by Provant and attached hereto and incorporated herein by this
reference.
1.32 "Provant Common Stock" means the shares of Common Stock, $.01 par
value, of Provant.
1.33 "Provant Option" means an option to purchase shares of Provant
Common Stock, granted under the Plan to be established by Provant pursuant to
Section 6.11.
1.34 "Registration Statement" means the registration statement on Form
S-1, including the related preliminary prospectus, to be filed with the
Commission in connection with the IPO, including all exhibits and financial
statements, in the form in which it becomes effective under the Securities Act
and, in the event of any amendment thereto after the effective date of any such
registration statement, such registration statement as so amended from and after
the effectiveness of such amendment.
1.35 "Second Accountants" means an accounting firm of national stature,
jointly selected by Provant and the Stockholders, that is not then employed by
Provant, any Stockholder or American Business Partners LLC ("ABP") (or any of
their respective affiliates) and that was not employed by the Company or ABP
during the two-year period immediately preceding the Effective Time; provided,
however, if the parties cannot jointly agree upon the Second Accountants, the
Stockholders (collectively) and Provant shall each designate one accounting firm
(which shall be of national stature but which may be employed or have been
employed by such party or its affiliates), and the two accounting firms so
designated shall jointly select a third accounting firm, meeting the criteria
set forth in the first clause of this sentence, to serve as the Second
Accountants.
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1.36 "Securities Act" means the Securities Act of 1933, as amended.
1.37 "Share" means a share of Common Stock, $1.00 par value per share,
of the Company, and "Shares" means all of such shares.
1.38 "Surviving Corporation" means the corporation that survives the
Merger.
1.39 "Underwriter" means, collectively, the managing underwriters of the
IPO.
1.40 "Underwriters' Discount" means the discount at which the
Underwriter purchases the Provant Common Stock in the IPO, but in no event more
than 7.0% of the IPO Price.
1.41 "UBCA" means the Utah Business Corporation Act.
2. THE MERGER
2.1 THE MERGER. The Merger shall occur at the Effective Time upon the
terms and subject to the conditions hereof and in accordance with the UBCA and
the DGCL. Following the Merger, Acquisition shall continue as the Surviving
Corporation and be a subsidiary of Provant, and the separate corporate existence
of the Company shall cease.
2.2 EFFECTIVE TIME. As soon as practicable after satisfaction or waiver
of all conditions to the Merger, the parties (a) shall cause duly executed
Articles of Merger (the "Articles of Merger") with respect to the Merger to be
filed and recorded in accordance with Section 16-10a-1105 of the UBCA and shall
cause a duly executed certificate of merger (the "Certificate of Merger") with
respect to the Merger to be filed and recorded in accordance with Section 252 of
the DGCL and (b) shall take all such further actions as may be required by law
to make the Merger effective. The Merger shall be effective at the Effective
Time. Before the filing of the Articles of Merger and the Certificate of Merger,
a closing (the "Closing") will be held on the date the IPO closes (or such
earlier date as the parties may agree) at the offices of Nutter, McClennen &
Fish, LLP, One International Place, Boston, Massachusetts (or such other place
as the parties may agree) for the purpose of confirming all the foregoing.
2.3 EFFECTS OF THE MERGER. The Merger shall have the effects set forth
in Sections 16-10a-1106 and 16-10a-1107 of the UBCA and Sections 259, 260 and
261 of the DGCL.
2.4 TAX CONSEQUENCES. It is intended that the Merger shall constitute a
reorganization within the meaning of Section 368(a)(2)(D) of the Code and that
this Agreement shall constitute a "plan of reorganization" for the purposes of
Section 368 of the Code.
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2.5 CERTIFICATE OF INCORPORATION AND BY-LAWS. The Certificate of
Incorporation and the By-Laws of Acquisition, in each case as in effect at the
Effective Time, shall be the Certificate of Incorporation and By-Laws of the
Surviving Corporation, except that the name of the Surviving Corporation shall
be the name of the Company or such other name as Provant may designate.
2.6 DIRECTORS AND OFFICERS. At the Effective Time, the Board of
Directors and officers of the Surviving Corporation shall be as set forth on
Exhibit 6, and each such person shall hold office until his or her respective
successor is duly elected or appointed and qualified.
2.7 CONVERSION OF STOCK.
At the Effective Time:
(a) Each share of Acquisition that is issued and outstanding
immediately prior to the Effective Time shall remain issued and outstanding
without change.
(b) All Shares held in the treasury of the Company immediately prior to
the Effective Time shall be cancelled, without the payment of any consideration
therefor.
(c) Each other Share which is outstanding immediately prior to the
Effective Time (other than Dissenting Shares, if any) shall be converted without
any action on the part of the holder thereof into and be exchangeable for:
(i) that number of shares of Provant Common Stock
determined by multiplying the Fraction times the number
obtained after (A) dividing $14.25 million by the IPO Price
and (B) subtracting from the quotient obtained pursuant to
clause (A) the number obtained by dividing $4,987,500 by the
IPO Price net of underwriters' discount,
(ii) cash equal to the Fraction times the sum of (X)
$4,987,500, plus (Y) the excess, if any, of the Company's
Closing Net Worth over the Minimum Net Worth, minus (Z) the
Dissenting Share Holdback, if any, and
(iii) the right to receive that number of Additional
Shares determined as provided in Section 2.8.
Provant shall not issue any fractional share of Provant Common Stock; in lieu of
issuing a fractional share, Provant shall make a cash payment in accordance with
Section 2.9.
(d) Notwithstanding subsection 2.7(c), Dissenting Shares shall not be
converted into the right to receive cash or Provant Common Stock (including
Additional Shares, if any) pursuant to such subsection. At the Effective Time,
in lieu
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thereof, holders of Dissenting Shares shall be entitled solely to payment of the
appraised value of such Dissenting Shares in accordance with the provisions of
Part 13 of the UBCA.
2.8 RIGHT TO RECEIVE ADDITIONAL SHARES.
(a) Promptly following June 30, 1998 (but in no event later than
October 15, 1998), Provant will determine 1998 EBIT.
(i) In the event 1998 EBIT is $2.4 million or less,
no Additional Shares shall be issued in respect of the Shares.
(ii) In the event 1998 EBIT is greater than $2.4
million but less than $3.2 million, there shall be issued in
respect of each Share (other than Dissenting Shares, if any)
that number of Additional Shares determined by (A) multiplying
$4.6 million by a fraction, the numerator of which shall be
the amount by which 1998 EBIT exceeds $2.4 million and the
denominator of which shall be $800,000, (B) dividing the
product obtained pursuant to clause (A) by the IPO Price, and
(C) multiplying the quotient obtained pursuant to clause (B)
by the Fraction.
(iii) In the event 1998 EBIT equals or exceeds $3.2
million, there shall be issued in respect of each Share (other
than Dissenting Shares, if any) that number of Additional
Shares determined by multiplying the Fraction times the
quotient obtained by dividing $4.6 million by the IPO Price.
Provant shall not issue any fractional share of Provant Common Stock; in lieu of
issuing a fractional share, Provant shall make a cash payment in accordance with
Section 2.9.
(b) No later than October 15, 1998, Provant shall deliver to each
former stockholder of the Company a statement showing in reasonable detail
Provant's computation of 1998 EBIT, together with a stock certificate
representing any Additional Shares and a check in payment for any fractional
Additional Share to which such stockholder may be entitled pursuant to
subsection (a). Provant shall maintain, and shall cause the Surviving
Corporation to maintain, complete books and records necessary for the proper
computation of 1998 EBIT. The Stockholders (and only the Stockholders, acting as
representatives of all former stockholders of the Company, as provided in
subsection (g) below), acting unanimously, shall have the right at their
expense, through an independent certified public accountant reasonably
acceptable to Provant, to audit such books and records and the books and records
of the Company solely for the purpose of satisfying the accuracy of the
computation of 1998 EBIT made by Provant, and the Company and Provant shall
cooperate fully in all reasonable respects with any such audit. In no event
shall the Stockholders, or any of them, have the right to conduct more than one
such audit. If the Stockholders
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do not unanimously elect within 90 days of delivery of the statement of Provant
referred to in this subsection (b) to cause an audit of the books and records of
the Surviving Corporation as provided in this subsection (b), the Stockholders
shall be deemed to have agreed that such statement was correct in all respects.
(c) Any dispute as to the correct computation of 1998 EBIT shall be
referred to the First Accountants for determination. If the Stockholders do not
unanimously elect to dispute the First Accountants' determination of 1998 EBIT
within 30 days following the delivery thereof to the Stockholders, such
determination shall be final, binding and conclusive and shall not be subject to
challenge by Provant or either Stockholder, and in such event the fees and
expenses of the First Accountants shall be borne by Provant. In the event the
Stockholders do unanimously elect within such 30 day period to dispute the
determination of the First Accountants, the Stockholders shall specify the
amount (in dollars) that they contend to be the correct 1998 EBIT (the
Stockholders' "EBIT Position"), and the final calculation of 1998 EBIT shall be
referred to the Second Accountants. Absent manifest error or willful misconduct,
the determination of the Second Accountants shall be final, binding and
conclusive and shall not be subject to challenge by Provant or any Stockholder.
In the event the calculation of 1998 EBIT is referred to the Second Accountants,
the fees and expenses of both the First Accountants and the Second Accountants
shall be borne by that party (i.e., the Stockholders, jointly and severally, or
Provant) whose EBIT Position is furthest, in gross dollars, from the 1998 EBIT
as finally determined by the Second Accountants. For purposes of the preceding
sentence, Provant's "EBIT Position" shall be deemed to be the amount determined
by the First Accountants to be the 1998 EBIT. The parties recognize that in
making such determinations, each such firm of accountants will be performing a
function separate and distinct from their audit function, if any, and shall be
entitled to the immunities, rights and discretion of arbitrators in general. Any
issuance of Additional Shares (or cash in lieu of fractional Additional Shares)
which is finally determined to be due to the former stockholders of the Company
in accordance with this subsection (c) shall be made by Provant (i) if based on
the determination of the First Accountants, within 10 days after such
determination becomes final, and (ii) if based on the determination of the
Second Accountants, within 10 days after Provant receives notice of such
determination, if Provant is responsible for the fees and expenses of the
accountants pursuant to this Section, and within 10 days after the Stockholders
have paid the fees and expenses of the accountants, if the Stockholders are
responsible for such fees and expenses pursuant to this Section. In the event
the 1998 EBIT has not been finally determined as of the date one year following
the Effective Time, or the 1998 EBIT has been finally determined and Additional
Shares are due to be issued but have not been issued to the former stockholders
of the Company as of such date because the Stockholders are obligated to pay but
have not yet paid the fees and expenses of the First and Second Accountants,
then on or before such date Provant shall issue and place into escrow, with an
institutional escrow agent reasonably selected by Provant, the number of
Additional Shares that would be issued if the Stockholders' EBIT Position were
determined to be the actual 1998 EBIT (or, if the 1998 EBIT has been finally
determined, the actual number of Additional Shares to be issued). Such shares
shall
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be held in escrow pending final determination of 1998 EBIT, upon which the final
number of Additional Shares, if any, shall be released from escrow to the former
stockholders of the Company and any escrowed shares not distributed as
Additional Shares shall be released to the Company. The expenses of the escrow
agent will be allocated in the same manner as the expenses of the First
Accountants and Second Accountants, as set forth above.
(d) The Stockholders, on behalf of themselves and the other
stockholders of the Company, acknowledge and agree that Provant and the
Surviving Corporation shall be free to pursue their respective business goals
and that 1998 EBIT may be affected thereby. Notwithstanding the foregoing,
Provant agrees that it will take no action and adopt no policy (and will not
cause the Surviving Corporation to take any action or adopt any policy) during
the period from the Effective Time through June 30, 1998 that a
majority-in-interest of the former stockholders of the Company have reasonably
asserted (in advance of or contemporaneously with such action or adoption), in
good faith and in writing, can reasonably be expected to result (directly or
indirectly) in a reduction of 1998 EBIT.
(e) The right of the stockholders of the Company to receive Additional
Shares and/or cash payment for fractional shares may not be transferred or
assigned except by operation of law or pursuant to the laws of descent and
distribution.
(f) If, subsequent to the IPO and prior to final determination of the
number of Additional Shares, if any, issuable pursuant to this Section 2.8, the
outstanding shares of Provant Common Stock shall have been changed into a
different number of shares or a different class by reason of any
reclassification, recapitalization, split-up, combination, exchange of shares or
readjustment, or a stock dividend thereon shall be declared with a record date
within said period, the IPO Price shall be correspondingly and appropriately
adjusted.
(g) The Stockholders are hereby appointed as the representatives of all
stockholders of the Company and all holders of Company Options for purposes of
this Section 2.8. No Stockholder shall have any liability to any other holder of
Shares or Company Options, including any other Stockholder, for any action taken
or position asserted (or any failure to act or to assert any position) pursuant
to this Section 2.8, provided only that such Stockholder has acted in a manner
he believed in good faith to be in the interest of all holders of Shares and
Company Options.
2.9 EXCHANGE OF AND PAYMENT FOR SHARES AS OF THE EFFECTIVE TIME.
(a) As soon as practicable after the Effective Time and after surrender
to Provant of any certificate which prior to the Effective Time shall have
represented any Shares, subject to the provisions of paragraphs (c) and (d) of
this Section 2.9 and to the provisions of Article 8, Provant shall cause to be
distributed to the person in whose name such certificate shall have been
registered certificates registered in the name of such person representing the
shares of Provant Common Stock into which
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any shares previously represented by the surrendered certificate shall have been
converted at the Effective Time and a check payable to such person representing
the payment of cash due such person by reason of the Merger including cash in
lieu of fractional shares determined in accordance with paragraph (g) of this
Section 2.9. Until surrendered as contemplated by the preceding sentence, each
certificate which immediately prior to the Effective Time shall have represented
any Shares shall be deemed at and after the Effective Time to represent only the
right to receive upon such surrender the certificates and payment contemplated
by the preceding sentence and by Section 2.8.
(b) No dividends or other distributions declared after the Effective
Time with respect to Provant Common Stock shall be paid to the holder of any
unsurrendered certificate representing Shares until the holder thereof shall
surrender such certificate in accordance with this Section 2.9. After the
surrender of such certificate in accordance with this Section 2.9, the record
holder thereof shall be entitled to receive any such dividends or other
distributions, without any interest thereon, which theretofore had become
payable with respect to shares of Provant Common Stock represented by such
certificate.
(c) No certificate representing Merger Stock shall be issued to any
person, and no person shall be treated as a holder of shares of Provant Common
Stock constituting Merger Stock for any purpose whatsoever (including without
limitation any right to vote the shares of Provant Common Stock into which such
person's Shares are to be converted) unless and until such person has executed
and delivered to Provant an Investment Letter.
(d) If any cash or certificate representing shares of Provant Common
Stock is to be paid to or issued in a name other than that in which the
certificate surrendered in exchange therefor is registered, it shall be a
condition of the payment or issuance thereof that the certificate so surrendered
shall be properly endorsed and otherwise in proper form for transfer and that
the person requesting such exchange shall pay to Provant any transfer or other
taxes required by reason of the issuance of a certificate representing shares of
Provant Common Stock in any name other than that of the registered holder of the
certificate surrendered, or otherwise required, or shall establish to the
satisfaction of Provant that such tax has been paid or is not payable.
(e) All Provant Common Stock and cash, including cash in lieu of
fractional shares, shall be deemed, when paid or issued hereunder, to have been
paid or issued, as the case may be, in full satisfaction of all rights
pertaining to the Shares.
(f) After the Effective Time, there shall be no further registration of
transfers on the stock transfer books of the Surviving Corporation of the Shares
which were outstanding immediately prior to the Effective Time. If, after the
Effective Time, certificates representing such shares are presented to the
Surviving Corporation, they
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shall be cancelled and exchanged for cash or certificates representing the
shares of Provant Common Stock into which they were converted, or both, as
provided herein.
(g) Notwithstanding any other provision of this Agreement, no
certificates or scrip representing fractional shares of Provant Common Stock
shall be issued upon the surrender for exchange of certificates which prior to
the Effective Time shall have represented any Shares, no dividend or
distribution of Provant shall relate to any fractional share and such fractional
share interests will not entitle the owner thereof to vote or to any rights of a
shareholder of Provant. In lieu of any fractional shares, there shall be paid to
each holder of Shares who otherwise would be entitled to receive a fractional
share of Provant Common Stock an amount of cash equal to the amount of such
fraction times the IPO Price.
(h) In the event any certificate representing Shares shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
holder of such Shares claiming such certificate to be lost, stolen or destroyed
and, if required by Provant or its stock transfer agent, the posting by such
holder of a bond in such amount as Provant or its stock transfer agent may
direct as indemnity against any claim that may be made against it with respect
to such certificate, Provant will issue in exchange for such lost, stolen or
destroyed certificate the Merger Stock and cash deliverable in respect thereof.
2.10 RESERVED.
3. REPRESENTATIONS AND WARRANTIES OF THE
COMPANY AND THE STOCKHOLDERS
The Company and the Stockholders represent and warrant to Provant and
Acquisition that, except as expressly provided in the Company Disclosure
Schedule by specific reference to a Section of this Article 3:
3.1 ORGANIZATION AND AUTHORITY. The Company is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Utah and has all requisite corporate power and authority to conduct its business
and own its properties as now conducted and owned. The Company is duly qualified
or licensed and in good standing as a foreign corporation, and has at all times
when legally required been so qualified or licensed and in good standing, in
those states listed on the Company Disclosure Schedule, which are the only
jurisdictions in which the property owned, leased or operated by it or the
nature of the business conducted by it would cause a failure to be so qualified
or licensed to have a material adverse effect on the business of the Company.
The Company has full power and authority to execute and deliver this Agreement
and, subject to the approval of its stockholders under the UBCA, to consummate
the transactions contemplated hereby and perform its obligations hereunder. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby by the Company and the
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performance of the Company's obligations hereunder have been duly and validly
authorized by a unanimous vote of the Board of Directors of the Company and,
excepting only the affirmative vote of the holders of a majority of the
outstanding shares of the Company's Common Stock in accordance with the UBCA, no
other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or to consummate the transactions so contemplated or to
perform the Company's obligations hereunder. This Agreement has been duly and
validly executed and delivered by the Company and constitutes a legal, valid and
binding obligation of the Company enforceable against it in accordance with its
terms, except as enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
enforcement of creditors' rights generally.
3.2 CAPITALIZATION OF THE COMPANY; NO SUBSIDIARIES. The Company has
authorized capital consisting of 1,000,000 shares of Common Stock, $1.00 per
share par value, of which no shares are held in the Company's treasury. As of
the date hereof, there are 1,000 issued and outstanding Shares. As of
immediately prior to the Effective Time, the Shares issued and outstanding shall
consist solely of the foregoing number plus the number of Shares, if any, issued
between the date hereof and the Effective Time upon the exercise or conversion
of Company Options and other instruments (in each case solely if existing on the
date hereof and disclosed on the Company Disclosure Schedule pursuant to Section
3.3), which exercise or conversion and which issuance are in accordance with the
terms of such instruments as in effect on the date hereof. All of the Shares are
duly authorized, validly issued, fully paid and non-assessable and are owned of
record and, to the Company's knowledge, beneficially by the stockholders of the
Company in the respective amounts listed on the Company Disclosure Schedule. The
Company has no other authorized class of capital stock other than the Common
Stock. The Company does not own and has not owned any shares of capital stock or
other securities of, or any other interest in, nor does it control or has it
controlled, directly or indirectly, any other corporation, association, joint
venture, partnership, or other business organization. The Shares have been
issued and sold in full compliance with all applicable Federal and state
securities laws.
3.3 NO RIGHTS TO PURCHASE OR REGISTER STOCK. No person, firm, or
corporation has any written or oral agreement, option, warrant, call,
understanding, commitment, or any right or privilege capable of becoming a
binding agreement, for either the purchase of any Shares or the acquisition of
shares of any other class of capital stock of the Company, and the Company has
not otherwise agreed to issue or sell any shares of its capital stock and has no
obligation to register any of the Shares under the Securities Act. The Company
is not obligated directly, indirectly or contingently to purchase any Shares.
3.4 NAME. The Company has not had any other name and does not conduct or
operate, and has not heretofore conducted or operated, its business under any
name other than its current name.
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3.5 NO VIOLATION OF EXISTING AGREEMENTS. The execution and delivery of
this Agreement, together with all documents and instruments contemplated herein,
the consummation by the Company of the transactions contemplated hereby and
thereby, the performance by the Company of its obligations hereunder and
thereunder and compliance with the terms, conditions and provisions hereof and
thereof by the Company do not (i) contravene any provisions of the Company's
Articles of Incorporation or By-Laws; (ii) conflict with or result in a breach
of or constitute a default (or an event that might, with the passage of time or
the giving of notice or both, constitute a default) or give rise to any right to
terminate, cancel or accelerate or to any loss of benefit under any of the
material terms, conditions, or provisions of any indenture, mortgage, loan, or
credit agreement or any other agreement or instrument to which the Company is a
party or by which it or its assets may be bound or affected; (iii) violate or
constitute a material breach of any decision, judgment, or order of any court or
arbitration board or of any governmental department, commission, board, agency,
or instrumentality, domestic or foreign, by which the Company is bound or to
which it is subject; or (iv) violate any applicable law, rule, or regulation to
which the Company or any of its property is bound.
3.6 NO CONSENTS OR APPROVALS OF GOVERNMENTAL AUTHORITIES. No consent or
approval of, or filing and expiration of a period for disapproval by, any
governmental authority is required for the Company to consummate the
transactions contemplated by this Agreement, except for filing of the Articles
of Merger pursuant to the UBCA and for filing the Certificate of Merger pursuant
to the DGCL. Notwithstanding the immediately preceding sentence, the Company and
the Stockholders make no representation or warranty regarding whether any filing
is required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), but the Company and the Stockholders do represent and
warrant that (a) the aggregate gross assets of the Company plus those of any
direct or indirect legal or beneficial holder of 50% or more of the Shares were
less than $100 million as of September 30, 1997, and (b) the aggregate revenues
of the Company plus those of any direct or indirect legal or beneficial holder
of 50% or more of the Shares were less than $100 million for the Company's most
recently completed fiscal year.
3.7 FINANCIAL STATEMENTS.
(a) The Financial Statements fairly present the financial position of
the Company as of their respective dates, and the results of operations and cash
flows for the periods presented therein, all in conformity with generally
accepted accounting principles applied on a consistent basis, except as
otherwise noted therein.
(b) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and with
statutory accounting principles and to maintain accountability for assets; (iii)
access to assets is permitted only in
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accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
3.8 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth or reserved
against in the Balance Sheet, the Company (a) did not have as of the Balance
Sheet Date any material liability or obligation of any nature, whether accrued,
absolute, contingent, or otherwise and whether due or to become due, including
without limitation liabilities that may become known or arise after the date
hereof and which relate to transactions entered into or any state of facts
existing on or before the Balance Sheet Date and which would be required under
generally accepted accounting principles to be shown in such balance sheet or
referenced in the notes thereto, and (b) has not incurred since the Balance
Sheet Date any such liability or obligation except in the ordinary course of
business. Without limiting the foregoing, and except as specifically reserved
against in the Balance Sheet or in the calculation of the Closing Net Worth, the
Company has no material liability or obligation of any nature, whether accrued,
absolute, contingent, or otherwise, to any government entity for any adjustment
or reimbursement of any amount previously paid to the Company by such entity
under any agreement relating to the provision of any goods or services by the
Company.
3.9 CONDUCT OF BUSINESS SINCE THE BALANCE SHEET DATE. Since the Balance
Sheet Date, the Company has not taken (or suffered the occurrence of) any of the
following actions or events, agreed to take any of the following actions, or
taken any action that would otherwise result in any of the following (in each
case except directly in connection with this Agreement):
(a) entered into any transaction, agreement, or commitment other than
in the ordinary course of business; or
(b) entered into any transaction, agreement, or commitment, suffered
the occurrence of any event or events, or experienced any change in financial
condition, business, results of operations, prospects, or otherwise, (i) that
has interfered or is reasonably likely to interfere with the normal and usual
operations of the Company's business or its business prospects in any material
respect or (ii) that, singly or in the aggregate, has resulted or is reasonably
likely to result in a material adverse change in the financial condition,
assets, liabilities, earnings, business, or business prospects of the Company;
or
(c) incurred any indebtedness for borrowed money, or assumed,
guaranteed, endorsed, or otherwise become responsible for the obligations of any
other individual, partnership, firm, or corporation (except to endorse checks
for collection for deposit in the ordinary course of business), or made any loan
or advance to any individual, partnership, firm, or corporation; or
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<PAGE> 15
(d) mortgaged, pledged, or otherwise encumbered, or, other than in the
ordinary course of business, sold, transferred, or otherwise disposed of, any of
the properties or assets of the Company, including any cancelled, released,
hypothecated, or assigned indebtedness owed to the Company, or any claims held
by the Company, except for purchase money mortgages arising in the ordinary
course of business and statutory liens arising or incurred in the ordinary
course of business with respect to which the underlying obligations are not
delinquent; or
(e) made any investment of a capital nature or entered into a
commitment for such investment either by purchase of stock or securities,
contributions to capital, property transfer, or otherwise, or by the purchase of
any property or assets of any other individual, partnership, firm, or
corporation; or
(f) declared, set aside, or paid any dividend or other distribution
(whether in cash, stock, or property or any combination thereof) in respect of
the capital stock of the Company, or redeemed or otherwise acquired, directly or
indirectly, any shares of capital stock of the Company, excepting only
dividends, distributions and redemptions that have not resulted and will not
result, directly or indirectly, in the Company not satisfying the Financial
Condition; or
(g) paid any long-term liability, otherwise than in accordance with its
terms; or
(h) paid any bonus compensation to any officer, director, shareholder,
or employee of the Company or otherwise increased the compensation paid or
payable to any of the foregoing; or
(i) sold, assigned, or transferred any trademarks, trade names, logos,
copyrights, formulae, or other intangible assets; or
(j) contracted with or committed to any third party (i) to sell any
capital stock of the Company, (ii) to sell any material assets of the Company
other than in the ordinary course of business, (iii) to effect any merger,
consolidation, or other reorganization of the Company, or (iv) to enter into any
agreement with respect thereto; or
(k) incurred or paid any expenses or fees of counsel, accountants, or
consultants for services in preparation for or in connection with this Agreement
or the transactions contemplated hereunder.
3.10 TITLE TO ASSETS. The Company owns no real property. The Company has
good and clear record and marketable title to all properties owned by it,
including, without limitation, all property reflected in the Balance Sheet,
other than property disposed of in the ordinary course of business subsequent to
the Balance Sheet Date (none of such dispositions being materially adverse),
free and clear of any mortgage, lien, pledge, charge, claim or encumbrance, or
rights, title and interest in
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others, except (a) as reflected in the Balance Sheet, or as specified in the
notes thereto, (b) the lien of taxes not yet due or payable or being contested
in good faith by appropriate proceedings and as to which appropriate reserves
have been set aside in the Balance Sheet, and (c) such imperfections of title
and encumbrances, if any, as do not materially detract from the value or
interfere with the use of the properties subject thereto or affected thereby, or
otherwise materially impair business operations.
3.11 INTELLECTUAL PROPERTY.
(a) The Company Disclosure Schedule contains a correct and complete
list of all copyrights, copyright registrations and copyright applications,
trademark registrations and applications for registration, patents and patent
applications, trademarks, service marks and trade names used in the Company's
business as presently conducted or contemplated and all licenses, assignments
and releases of the intellectual property rights of others in material works
embodied in its products. There is (i) no existing or, to the Company's
knowledge, threatened infringement, misuse or misappropriation of Proprietary
Information (as hereinafter defined) by others and (ii) no pending or threatened
claim by the Company against others for infringement, misuse or misappropriation
of any patent, patent application, invention disclosure, trademark, trade name,
service mark, trade secret, technology, technique, know-how, or copyright owned
by the Company or used in its business as presently conducted or contemplated
(the "Proprietary Information"). The Proprietary Information is sufficient to
carry on the business of the Company as presently conducted or contemplated, and
the Company has the right to use, free and clear of claims or rights of others,
all Proprietary Information required for or incident to its products or services
or its business as presently conducted or contemplated. The Company is the
exclusive owner of all right, title and interest in the Proprietary Information
as purported to be owned by the Company, and such Proprietary Information is
valid and in full force and effect. Neither the present nor contemplated
business activities or products of the Company infringe, misuse or
misappropriate any patent, trademark, trade name, service mark, trade secret,
copyright or other intellectual property right of others, and to the Company's
knowledge no one is claiming nor is it anticipated that anyone will claim any
such infringement, misuse or misappropriation. To the knowledge of the Company,
the Proprietary Information is presently valid and protectible and is not part
of the public domain or knowledge, nor, to the knowledge of the Company, has any
of it been used, divulged or appropriated for the benefit of any person other
than the Company to the detriment of the Company. The Company has not granted to
any person any license or other right to use in any manner any of the
Proprietary Information, whether or not requiring the payment of royalties. The
Company has no obligation still outstanding to compensate other persons for the
use of any Proprietary Information or for the sale of any service or product
comprising or derived from Proprietary Information. No university, government
agency (whether federal or state) or other organization which sponsored research
and development conducted by the Company has any claim of right to or ownership
of or other encumbrance upon the Proprietary Information.
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<PAGE> 17
(b) The Company has taken all reasonable measures to protect and
preserve the security, confidentiality and value of the Proprietary Information,
including its trade secrets and other confidential information. All present and
previous officers, employees and consultants of or to the Company have executed
and delivered to and in favor of the Company an agreement regarding the
protection of confidential and proprietary information and the assignment to the
Company of all intellectual property rights arising from the services performed
for the Company by such persons in the forms attached to the Company Disclosure
Schedule. To the Company's knowledge, no employee or consultant of the Company
has used any trade secrets or other confidential information of any other person
in the course of his or her work for the Company. To the Company's knowledge,
the Company is not making unlawful use of any confidential information or trade
secrets belonging to any past or present employees of the Company. Neither the
Company nor, to the knowledge of the Company, any of the Company's employees or
consultants have any agreements or arrangements with former employers of such
employees or consultants relating to confidential information or trade secrets
of such employers or are bound by any consulting agreement relating to
confidential information or trade secrets of another entity. The activities of
the Company's employees on behalf of the Company do not violate any agreements
or arrangements known to the Company which any such employees have with former
employers or any other entity to whom such employees may have rendered
consulting services.
3.12 OBLIGATIONS TO OR FROM AFFILIATES.
(a) All material transactions between the Company and any stockholder,
officer or director of the Company, or any Affiliate (as defined below) of any
stockholder, officer or director of the Company, entered into on or after
January 1, 1993 have been conducted on an arm's-length basis on terms no
different than would be obtained if the transaction had been between the Company
and an unrelated party. Except for debts or other outstanding obligations
reflected on the Balance Sheet, there are no debts or other obligations of the
Company to, or to the Company from, any stockholder, officer or director of the
Company, or any Affiliate of a stockholder, officer or director of the Company.
As used herein, "Affiliate" of a stockholder, officer or director means any
member of the immediate family of such person or any entity in which such person
or any such family member is an officer or owner of more than five percent of
beneficial interest in the outstanding equity securities.
(b) The Company Disclosure Schedule sets forth all information that
would be required to be provided under Item 404 of Regulation S-K of the
Commission under the Securities Act if a registration statement on Form S-1 were
filed by the Company with the Commission on the date hereof.
3.13 MATERIAL CONTRACTS. The Company Disclosure Schedule lists all
material leases, contracts, instruments, agreements or commitments (whether
written or oral) relating to the conduct of the business of the Company (the
"Material Company
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<PAGE> 18
Contracts"). The Company has delivered to Provant true and correct copies of
each written Material Company Contract and a written description, accurate in
all material respects, of each oral arrangement so listed. Without limiting the
generality of the foregoing, the aforesaid list includes all contracts,
agreements and instruments of the following types to which the Company is a
party:
(a) labor union contracts, together with a list of all labor unions
representing or, to the Company's knowledge, attempting to represent employees
of the Company;
(b) pension, retirement, deferred compensation, death benefit, profit
sharing, bonus or other employee incentive, fringe benefit, stock purchase,
stock option, hospitalization or insurance plans or arrangements (and grant
certificates or other documents issued thereunder) or vacation pay, severance
pay and other similar benefit arrangements for officers, employees or agents,
together with a list of all pensioned employees or obligations to provide any
pensions hereafter other than pursuant to the plans hereinbefore in this item
described;
(c) employment contracts or agreements, consulting agreements,
agreements providing for termination or severance benefits, non-competition
agreements, non-disclosure agreements, contracts for professional personal
services, contracts with other persons engaged in sales or distributing
activities, and advertising contracts;
(d) written or oral agreements, understandings and arrangements of any
kind with any officer, director, employee, shareholder or agent of the Company
relating to present or future compensation or other benefits available to such
person or otherwise, together with a list of the names and current annual salary
rates of all present officers and employees of the Company whose current salary
rate is $25,000 or more and any bonuses paid or payable to each such person for
the 1996 fiscal year;
(e) indentures, loan agreements, notes, security agreements, mortgages,
conditional sales contracts, leases of real or personal property, contracts for
the purchase or sale of real or personal property, and agreements for financing;
(f) property, casualty, crime, directors and officers, and other forms
of insurance;
(g) all bank accounts and safety deposit boxes identifying all
authorized signatories, together with a list of all effective powers of attorney
granted by the Company to anyone;
(h) agreements, contracts or other arrangements to which the Company is
a guarantor, surety or endorser;
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<PAGE> 19
(i) contracts, agreements, commitments, arrangements or understandings
providing for the purchase or sale of all or substantially all of the Company's
requisites of a particular product from a single supplier or to a single
customer;
(j) contracts, agreements, commitments, arrangements or understandings
which limit the freedom of the Company from competing in any line of business or
with any person or entity;
(k) license agreements (as licensor or licensee);
(l) leases of real and personal property with a term of more than one
year (regardless of whether the Company is lessor or lessee); and
(m) contracts, agreements, instruments, arrangements or understandings
which have not been included in items (a) through (l) above involving payment by
or to the Company of more than $50,000 or not terminable without penalty or
otherwise materially affecting the assets, financial condition, properties or
business of the Company.
All of the Material Company Contracts are in full force and effect. Except to
the extent that a material adverse effect on the Company's financial condition,
assets, liabilities, earnings, business or prospects would not result if the
following were not true: (A) the Company and each other party to each of the
Material Company Contracts have performed all the obligations required to be
performed by them to date, have received no notice of default and are not in
default (with due notice or lapse of time or both) under any of the Material
Company Contracts; (B) the Company has no present expectation or intention of
not fully performing all of its obligations under any of the Material Company
Contracts, and the Company has no knowledge of any breach or anticipated breach
by any other party to any of the Material Company Contracts; (C) there exists no
actual or, to the knowledge of the Company, threatened termination, cancellation
or limitation of the business relationship of the Company with any party to any
Material Company Contract; and (D) consummation of the transactions contemplated
hereby and performance by the Company of its obligations hereunder shall not
require the consent or permission of any party to any Material Company Contract
or permit any party to terminate, suspend or alter the terms of any Material
Company Contract.
3.14 LITIGATION. There are no actions, suits, causes of action, claims,
litigation, arbitration, administrative hearings, or other form of proceedings
or disputes of any kind pending or, to the best knowledge of the Company,
threatened against the Company or involving, affecting, or relating to its
capacity to complete the transactions contemplated herein, the Company, or its
officers or directors (in their capacities as such), in any court, at law or in
equity, or before any arbitration board or any governmental department,
commission, board, bureau, agency, or instrumentality; nor has the Company been,
nor is it, subject to any orders, awards, fines, judgments, decrees, or
injunctions the effect of which in the aggregate would
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<PAGE> 20
have a material adverse effect on the business or financial position or
prospects of the Company. The Company does not know or have grounds to know of
any basis for any such action, suits, or other form of proceeding or disputes or
of any governmental investigation relating to the Company or its business.
3.15 TAXES.
(a) (i) All Tax Returns (as defined below) of, relating to or which
include the Company which are required to have been filed have been filed on a
timely basis with the appropriate authorities and all such Tax Returns are true,
correct and complete in all respects; (ii) all Taxes (as defined below) required
to have been paid by the Company (including amounts collected or withheld from
third parties required to have been paid over to the appropriate authorities)
have been paid in full on a timely basis to the appropriate authorities; and
(iii) all Taxes or other amounts required to have been collected or withheld by
the Company have been timely and properly collected or withheld.
(b) (i) No taxing authority has asserted in writing to the Company any
adjustment, deficiency, or assessment that could result in additional Tax for
which the Company is or may be liable; (ii) there is no pending audit,
examination, investigation, dispute, proceeding or claim for which the Company
has received notice relating to any Tax for which the Company is or may be
liable; (iii) no statute of limitations with respect to any Tax for which the
Company is or may be liable has been waived or extended; (iv) the due date of
any Tax Returns that the Company is required to file has not been extended; and
(v) Company is not a party to any Tax sharing or Tax allocation agreement,
arrangement or understanding.
(c) There are no liens on any of the assets of the Company which arose
in connection with any failure or asserted failure to pay any Tax, other than
liens for current Taxes not yet due and payable.
(d) The Company is not a party to any contract, agreement, plan or
arrangement that, individually or collectively, could give rise to any payment
that would not be deductible by reason of Section 162, 280G or 404 of the Code.
(e) The Company has not been a member of an affiliated group filing a
consolidated federal income Tax Return, and the Company is not liable for the
Taxes of any person under Treasury Regulation 1.1502-6 (or any similar provision
of state, local, or foreign law) as transferee or successor, by contract or
otherwise.
(f) Copies of (i) any Tax examinations, (ii) extensions of statutory
limitations, (iii) the federal, state and local income Tax Returns and franchise
Tax Returns of the Company, and (iv) correspondence between the Company and all
taxing authorities for its last three (3) taxable years previously have been
furnished to Provant and such Tax Returns are true, correct and complete.
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(g) The provision for Taxes, if any, shown on the Balance Sheet is
adequate to cover the aggregate liability of the Company arising out of facts or
circumstances occurring on or prior to the Balance Sheet Date for all Taxes.
(h) The Company has filed federal and state, and if applicable, local
Tax Returns for each period ending on or prior to the Effective Time.
(i) For purposes of this Section 3.15:
"Tax Returns" shall mean all returns, amended returns,
declarations, reports, estimates, information returns and statements regarding
Taxes which are or were filed or required to be filed under applicable law,
whether on a consolidated, combined, unitary or individual basis.
"Taxes" shall mean any federal, state, local, foreign or other
tax, fee, levy, assessment or other governmental charge, including without
limitation any income, franchise, gross receipts, property, sales, use, hotel,
bed, services, value added, withholding, social security, estimated, accumulated
earnings, alternative or add-on minimum, transfer, license, privilege, payroll,
profits, capital stock, employment, unemployment, excise, severance, stamp,
occupancy, customs or occupation tax, and any interest, additions to tax and
penalties in connection therewith.
3.16 ABSENCE OF MATERIAL EVENTS. Since January 1, 1997 there has not
been (a) any material adverse change in the business, affairs or prospects of
the Company nor, to the best of the Company's knowledge, are any such changes
threatened, anticipated or contemplated; (b) any actual or, to the Company's
knowledge, threatened, anticipated or contemplated damage, destruction, loss,
conversion, termination, cancellation, default or taking by eminent domain or
other action by governmental authority which has materially affected or may
hereafter materially affect the properties, assets, business affairs or
prospects of the Company; (c) any material and adverse pending or, to the
Company's knowledge, threatened, anticipated or contemplated dispute of any kind
with any material customer, supplier, source of financing, employee, landlord,
subtenant or licensee of the Company, or any pending or, to the Company's
knowledge, threatened, anticipated or contemplated occurrence or situation of
any kind, nature or description which is reasonably likely to result in any
reduction in the amount, or any change in the terms or conditions, of business
with any material customer, supplier, or source of financing; or (d) any
pending, or to the Company's knowledge, threatened, anticipated or contemplated
occurrence or situation of any kind, nature or description materially and
adversely affecting the properties, assets, business, affairs or prospects of
the Company.
3.17 ABSENCE OF IMPROPER PAYMENTS. Since January 1, 1994 the Company:
(a) has not made any contributions, payments or gifts of its property to or for
the private use of any governmental official, employee or agent where either the
payment or the purpose of such contribution, payments or gift is illegal under
the laws of the
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United States, any state thereof or any other jurisdiction (foreign or
domestic); (b) has not established or maintained any unrecorded fund or asset
for any purpose, or has made any false or artificial entries on its books or
records for any reason; (c) has not made any payments to any person where the
Company intended or understood that any part of such payment was to be used for
any other purpose other than that described in the documents supporting the
payment; or (d) has not made any contribution, or has reimbursed any political
gift or contribution made by any other person, to candidates for public office,
whether Federal, state or local, where such contribution would be in violation
of applicable law.
3.18 ERISA.
(a) None of the employee benefit plans maintained at any time by the
Company or the trusts (if any) forming part of such plans has engaged in a
prohibited transaction which could subject any such employee benefit plan or
trust to a material tax or penalty on prohibited transactions imposed under
Internal Revenue Code Section 4975 or ERISA.
(b) None of the employee benefit plans maintained at any time by the
Company which are employee pension benefit plans and which are subject to Title
IV of ERISA or the trusts that are part of such plans has been terminated so as
to result in a material liability of the Company under ERISA or the Code, nor
has any such employee benefit plan of the Company incurred any material
liability to the Pension Benefit Guaranty Corporation, other than for required
insurance premiums which have been paid or are not yet due and payable; neither
the Company nor any affiliate thereof has withdrawn, in either a complete or
partial withdrawal, from any multi-employer Plan resulting in any unpaid
withdrawal liability; the Company has made or provided for all contributions to
all such employee pension benefit plans which it maintains and which are
required by law or such plans as of the end of the most recent fiscal year under
each such plan; the Company has not incurred any accumulated funding deficiency
with respect to any such plan, subject to Section 412 of the Code, whether or
not waived; nor has there been any reportable event, or other event or
condition, which presents a material risk of termination of, or liability with
respect to, any such employee benefit plan by the Pension Benefit Guaranty
Corporation.
(c) The benefit liabilities under the employee pension benefit plans
which are subject to Title IV of ERISA, maintained by the Company, do not exceed
the current value of the assets of such employee benefit plans allocable to such
benefits, determined under the actuarial methods and assumptions that would
apply if such plans were terminated in accordance with ERISA and the Code.
(d) To the best of the Company's knowledge, each employee benefit plan
maintained by the Company has been administered in accordance with its terms in
all material respects and is in compliance in all material respects with all
applicable requirements of ERISA (if applicable) and other applicable laws,
regulations and rules.
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Each employee benefit plan maintained by the Company that is intended to be
"qualified" under Section 401(a) of the Code has received a favorable
determination letter of the Internal Revenue Service, which letter remains in
effect, and nothing has occurred since the date of such determination that could
adversely affect the qualification of such plan.
(e) As used in this Agreement, the terms "employee benefit plan",
"employee pension benefit plan", "multi-employer plan", "accumulated funding
deficiency", "reportable event", "benefit liabilities", "withdrawn" (including
its correlative forms "complete withdrawal" and "partial withdrawal") and
"accrued benefits" shall have the respective meanings assigned to them in ERISA,
and the term "prohibited transactions" shall have the meaning assigned to it in
Code Section 4975 and ERISA. Employee benefit plans "maintained by the Company"
include any such plan maintained, established or contributed to at any time by
the Company or any entity affiliated with or under common control with the
Company.
(f) The Company has no liability not disclosed on any of the Financial
Statements, contingent or otherwise, under any plan or program or the equivalent
for unfunded post-retirement benefits, including pension, medical and death
benefits, which liability would have a material adverse effect on the financial
condition of the Company.
3.19 LABOR MATTERS. A true and complete list of all of the Company's
officers, employees (the "Employees") and consultants (the "Consultants") and
their respective salaries, wages, other compensation, dates of employment, date
and amount of last salary or compensation increase, and positions has been
provided to Provant by the Company. There are no material disputes, employee
grievances, or disciplinary actions pending or, to the knowledge of the Company,
threatened by or between the Company and any of the Employees or Consultants.
With respect to the Employees and Consultants, the Company has complied in all
respects with all provisions of all laws relating to the employment of labor and
has no liability for any arrears of wages or taxes or penalties for failure to
comply with any such law or for any severance or termination payments of any
type. None of the Consultants are or were (while classified by the Company as
Consultants) employees of the Company for any purpose whatsoever. No employees
of the Company are or ever have been represented by a bargaining representative
with respect to the Company, and no election or proceedings relating to the
labor relations of the Company is pending or, to the best of the Company,
knowledge, threatened. The Company has not had any material union activity or
had any material labor disruption or material dispute with its employees of any
kind, nature or description at any time heretofore. All personnel policies and
manuals of the Company are listed on the Company Disclosure Schedule and true
and complete copies thereof have been provided to Provant. No Employee or
Consultant shall have the right to receive from the Surviving Corporation or
Provant a severance payment or other payment in the nature thereof in the event
his or her employment is terminated by the Surviving Corporation following the
Merger,
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whether such right arises as a matter of contract, past policy or understanding,
by operation of law, or otherwise.
3.20 PERMITS: COMPLIANCE WITH LAW. The Company possesses all franchises,
permits, licenses, certificates, approvals, and other authorizations ("Permits")
necessary to own or lease and operate its properties and to conduct its business
as now conducted, except for incidental Permits that would be readily obtainable
without undue burden in the event of any lapse, termination, cancellation, or
forfeiture or that if not obtained would not materially and adversely affect the
Company's business. All such material Permits are in full force and effect, and,
to the knowledge of the Company, no suspension or cancellation of any of them is
threatened, and no material Permits will be adversely affected by the
consummation of the Merger. The Company has not failed nor is it failing to
comply with any applicable law, rule, regulation, or order, where such failure
would have a material adverse effect on the Company's business, and there are no
proceedings pending or, to the Company's knowledge, threatened, nor has the
Company received any notice, regarding any such failure.
3.21 ENVIRONMENTAL MATTERS. The Company is, and to the Company's
knowledge all real property owned or otherwise occupied by the Company are and
have been at all times when so owned or occupied, in material compliance with
all applicable existing federal, state and local laws and regulations relating
to protection of human health or the environment or imposing liability or
standards of conduct concerning any Hazardous Material (as hereinafter defined)
("Environmental Laws"), except, in each case, where such noncompliance, singly
or in the aggregate, would not have a material adverse effect on the condition,
financial or otherwise, or the earnings, business affairs or business prospects
of the Company. No Hazardous Materials are stored, utilized or otherwise present
on any property owned or otherwise occupied by the Company, excepting only (x)
cleaning supplies and similar materials customarily used by businesses in the
Company's industry in quantities consistent with such use, and (y) petroleum
products that are used for heating (including water heating) in facilities
located on such property, none of which are stored in underground storage tanks,
or that are present in vehicles located on such property. There has not occurred
any release of Hazardous Materials on, under or affecting any real property
during or prior to the period of the Company's ownership, occupation or
operation of such property (including its participation in or exercise of any
degree of control over the management of any business located on such property).
The term "Hazardous Material" means (a) any "hazardous substance" as defined in
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended through the date hereof, (b) any "hazardous waste" as defined
by the Resource Conservation and Recovery Act, as amended through the date
hereof, (c) any petroleum or petroleum product, (d) any polychlorinated biphenyl
and (e) any pollutant or contaminant or hazardous, dangerous, or toxic chemical,
material, waste or substance regulated under or within the meaning of any other
Environmental Law as amended through the date hereof. For purposes of this
Section 3.21, real property owned by third parties but "occupied" by the Company
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<PAGE> 25
shall mean only that portion of such property as is either leased by the Company
or in fact otherwise physically occupied or utilized by the Company. There is no
alleged liability, or to the best knowledge of the Company, potential liability
(including, without limitation, alleged or potential liability for investigatory
costs, cleanup costs, governmental response costs, natural resources damages,
property damages, personal injuries or penalties) of the Company arising out of,
based on or resulting from (i) the presence or release into the environment of
any Hazardous Material at any location, whether or not owned by the Company or
(ii) any violation or alleged violation of any Environmental Law, which alleged
or potential liability, singly or in the aggregate, would have a material and
adverse effect on the condition, financial or otherwise, or the earnings,
business affairs or business prospects of the Company.
3.22 FURTHER ASSURANCES. The Company will use all commercially
reasonable efforts to have all present officers and directors of the Company
execute whatever minutes of meetings or other instruments and take whatever
action as may be necessary or desirable to effect, perfect or confirm of record
of otherwise, in the Surviving Corporation, full right, title and interest in
and to the business, properties and assets now conducted or owned by the
Company, free and clear of all restrictions, liens, encumbrances, rights, title
and interests in others (excepting only liens reflected on the Balance Sheet),
or to collect, realize upon, gain possession of, or otherwise acquire full
right, title and interest in and to such business, properties and assets, and
will otherwise use its reasonable best efforts to carry out the intent and
purposes of the transactions contemplated hereby and the IPO.
3.23 CORPORATE RECORDS. The corporate record books of the Company are in
all material respects in good order, complete, accurate, up to date, with all
necessary signatures, and set forth all meetings and actions taken by the
shareholders and directors, and all votes of the shareholders or directors set
forth in certificates furnished to anyone at any time heretofore.
3.24 CONDITION OF ASSETS. All premises, fixtures and equipment owned or
used by the Company and material to its business have been properly maintained
and are in good operating order and repair, free from known defects in
construction or design, sound and properly functioning (normal wear and tear
excepted), usable and not obsolete, and (to the Company's knowledge in the case
of leased property) in material compliance with all applicable zoning, building
and fire codes and all other applicable laws, rules, regulations and
requirements of governmental authorities and the fire insurance rating
association having jurisdiction.
3.25 ACCOUNTS RECEIVABLE. All of the accounts receivable of the Company
shown or reflected on the Balance Sheet in the Financial Statements, less the
reserve for doubtful accounts in the amount shown on the Balance Sheet, are
valid and enforceable claims and subject to no set off or counterclaim. All of
the accounts receivable of the Company shown or reflected on the Balance Sheet
and as at December 31, 1997 (as reflected on the Company's balance sheet as of
such date, when and as delivered to Provant) will be collected in full within
150 days thereafter
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except to the extent of the reserve for doubtful accounts shown on the Balance
Sheet or posted on the books of the Company as of such date. The reserve for
doubtful accounts as at December 31, 1997 will not be in excess of said reserve
as shown on the Balance Sheet. The Company has no accounts or loans receivable
from any of its directors, officers or employees.
3.26 CHARTER DOCUMENTS. The Company has heretofore delivered to Provant
copies of its Articles of Incorporation, as amended to date, certified by the
appropriate governmental authority, and copies of its by-laws, as amended to
date, and a list of the officers and directors of the Company in office, all as
certified by its Secretary.
3.27 DISCLOSURE OF ALL MATERIAL MATTERS.
(a) No statement of a material fact set forth in this Agreement
(including without limitation all information in the Financial Statements, the
Company Disclosure Schedule and the other Schedules, Exhibits and attachments
hereto, taken as a whole) with respect to the Company or the Stockholders is
false or misleading in any respect, nor does this Agreement (including, without
limitation all information in the Financial Statements, Company Disclosure
Schedule and the other Schedules, Exhibits, and attachments hereto, taken as a
whole) omit to state a material fact necessary in order to make the statements
made or information disclosed, in the light of the circumstances under which
they were made or disclosed, not misleading.
(b) Provided only that Provant has accurately incorporated any
information furnished in writing by the Company to Provant specifically for
inclusion in the Registration Statement or the Prospectus (as applicable) and
has deleted from the Registration Statement or the Prospectus (as applicable)
any statement that the Company has specifically requested in writing be so
deleted, (i) at the time the Registration Statement becomes effective under the
Securities Act, it will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading, and (ii) at the time of each closing in
connection with the IPO, the Prospectus will not include an untrue statement of
a material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. The representations and warranties in this Section shall
not apply to statements in or omissions from the Registration Statement and
Prospectus relating to any person or entity other than the Company and its
officers, directors and stockholders.
3.28 BROKERS. No broker, finder, or investment banker is entitled to any
brokerage, finder's, or other fee or commission in connection with the Merger or
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of the Company.
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4. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
The Stockholders represent and warrant to Provant and Acquisition as
follows:
4.1 TITLE TO THE SHARES. All of the issued and outstanding Shares
purported to be owned by the Stockholders as set forth on the Disclosure
Schedule pursuant to Section 3.2 are owned by the Stockholders free and clear of
any claims, liens, charges, encumbrances, security interests and rights of
others whatsoever, and such Shares are not bound by or subject to any proxy,
agreement, voting trust or other restriction regarding the voting thereof.
4.2 AUTHORITY. The Stockholders have full power, authority and capacity
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby, and no other action is necessary by the Stockholders to
consummate the transactions contemplated by the Agreement. This Agreement has
been duly and validly executed and delivered by the Stockholders and constitutes
a legal, valid and binding obligation of the Stockholders enforceable against
them in accordance with its terms, except as enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting enforcement of creditors' rights generally.
4.3 NO CONFLICTS. The execution, delivery and performance of this
Agreement by the Stockholders do not and will not violate, conflict with, result
in a breach of or constitute a default under (or an event which with due notice
or lapse of time, or both, would constitute a breach of or default under) or
result in the creation of any lien, security interest or other encumbrance under
(a) any material term of any note, agreement, contract, license, instrument,
lease or other obligation to which a Stockholder is a party or by which he is
bound or create any lien or encumbrance on any of such Stockholder's Shares, (b)
any material provision of any judgment, order, decree, ruling or injunction or
(c) any statute, law, regulation or rule of any governmental agency or
authority.
5. REPRESENTATIONS AND WARRANTIES
OF PROVANT, ACQUISITION AND THE PROVANT PRINCIPALS
Provant, Acquisition and the Provant Principals represent and warrant
to the Company and the Stockholders that, except as expressly provided in the
Provant Disclosure Schedule by specific reference to a Section of this Article
5:
5.1 ORGANIZATION AND AUTHORITY. Each of Provant and Acquisition is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware, and each has all requisite corporate power and
authority to conduct its business and own its properties as now conducted and
owned, and is qualified and in good standing as a foreign corporation, and has
at all times when legally required been so qualified and in good standing, in
each jurisdiction where
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the failure to be so qualified would, in the aggregate, have a material adverse
effect on the business or financial condition of Provant. Each of Provant and
Acquisition has full power and authority to execute and deliver this Agreement
and the agreements being executed and delivered in connection with the
Additional Mergers and the IPO to which it is a party, and to consummate the
transactions contemplated hereby and thereby and to perform its obligations
hereunder and thereunder. The execution and delivery of this Agreement and the
other agreements referenced above and the consummation of the transactions
contemplated hereby and thereby, and the performance of Provant's and its
subsidiaries' (including Acquisition's) obligations hereunder and thereunder
have been duly and validly authorized by the unanimous votes of the respective
Boards of Directors of Provant and such subsidiaries (including Acquisition) and
by Provant as the sole stockholder of such subsidiaries (including Acquisition),
and no other corporate proceedings on the part of Provant or its subsidiaries
(including Acquisition) are necessary to authorize this Agreement or the other
agreements referenced above or to consummate the transactions contemplated
hereby or thereby or to perform the obligations of Provant and its subsidiaries
(including Acquisition) hereunder or thereunder. This Agreement has been duly
and validly executed and delivered by each of Provant and Acquisition and
constitutes a valid and binding agreement of each, enforceable against each in
accordance with its terms, except as enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting enforcement of creditors' rights generally.
5.2 CAPITALIZATION OF PROVANT; SUBSIDIARIES. Provant has authorized
capital consisting of 10,000 shares of Provant Common Stock, $.01 per share par
value, of which no shares are held in Provant's treasury. As of the date hereof,
there are 3,417.9 issued and outstanding shares of Provant Common Stock, all of
which are duly authorized, validly issued, fully paid and non-assessable and are
owned of record and beneficially by those persons listed on the Provant
Disclosure Schedule. Provant has no other authorized class of capital stock
other than the Provant Common Stock. As of the date hereof and at all times
prior to the Effective Time, Provant does not (and will not) own and has not
owned any shares of capital stock or other securities of, or any other interest
in, nor does (or will) it control or has it controlled, directly or indirectly,
any other corporation, association, joint venture, partnership, or other
business organization, other than Acquisition and the subsidiaries intended to
be merged with the Additional Companies. All of the issued and outstanding
shares of capital stock of Acquisition, and of each subsidiary that will be
merged with an Additional Company, are owned of record and beneficially by
Provant. All outstanding shares of Provant Common Stock have been issued and
sold in full compliance with all applicable Federal and state securities laws.
No holder of outstanding shares of Provant Common Stock has any dissenting
shareholder or appraisal rights with regard to the Merger. Provant does not have
knowledge of any voting agreements, voting trusts or similar agreements
governing the manner in which any shares of Provant Common Stock are voted by
the holders thereof.
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5.3 NO RIGHTS TO PURCHASE OR REGISTER STOCK. Excepting only (a) the
shares of Provant Common Stock to be issued as Merger Shares and as merger
consideration in the Additional Mergers, (b) the shares of Provant Common Stock
to be sold in the IPO, and (c) the shares of Provant Common Stock to be issued
pursuant to Provant Options under the Plan, no person, firm, or corporation has
any written or oral agreement, option, warrant, call, understanding, commitment,
or any right or privilege capable of becoming a binding agreement, for either
the purchase of any shares of Provant Common Stock or the acquisition of shares
of any other class of capital stock of Provant, and Provant has not otherwise
agreed to issue or sell any shares of its capital stock and has no obligation to
register any shares of Provant Common Stock under the Securities Act. Provant is
not obligated directly, indirectly or contingently to purchase any shares of
Provant Common Stock. No person, firm, or corporation has any written or oral
agreement, option, warrant, call, understanding, commitment, or any right or
privilege capable of becoming a binding agreement, for the purchase or other
acquisition of any shares of capital stock of Acquisition or of any subsidiary
of Provant that will be merged with an Additional Company, and neither
Acquisition nor any such other subsidiary has otherwise agreed to issue or sell
any shares of its capital stock or to register any shares of its capital stock
under the Securities Act.
5.4 MERGER STOCK. The Merger Stock has been duly authorized by all
necessary corporate action and, when issued and delivered by Provant pursuant to
this Agreement, will be validly issued, fully paid and non-assessable.
5.5 CONSENTS AND APPROVALS; NO VIOLATION; NO KNOWN IMPEDIMENTS. Neither
the execution and delivery of this Agreement by Provant and Acquisition nor the
consummation of the transactions contemplated hereby will (i) conflict with or
result in any breach of any provision of the respective charter documents or
By-Laws of Provant or Acquisition; (ii) subject to the last sentence of this
Section 5.5, require on the part of Provant any consent, approval,
authorization, or permit of, or filing with or notification to, any governmental
or regulatory authority, except (A) filing the Articles of Merger pursuant to
the UBCA and the Certificate of Merger pursuant to the DGCL and (B) any filings
required under the Securities Act and the securities or blue sky laws of the
various states; (iii) result in a default (or give rise to any right of
termination, cancellation, or acceleration) under any of the material terms,
conditions, or provisions of any note, license, lease, agreement, or other
instrument or obligation to which Provant or Acquisition is a party or by which
Provant or Acquisition or any of their respective assets may be bound, other
than as previously disclosed in writing to the Company; or (iv) violate or
constitute a material breach of any order, writ, injunction, decree, statute,
law, rule, or regulation applicable to Provant or Acquisition or any of their
respective assets. Assuming no material change after the date hereof in the
condition of the capital markets or in the business or financial condition of
the Company or any of the Additional Companies and assuming the Commission
declares the Registration Statement effective in due course, Provant has no
knowledge of any matter (including without limitation any law or regulation)
that should reasonably be expected to prohibit the consummation of the
transactions
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contemplated hereby, the Additional Mergers or the IPO. The representation and
warranty contained in clause (ii) above is, with respect to compliance with the
HSR Act, made in reliance upon, and is expressly conditioned upon, the accuracy
of the representations and warranties of the Company and the Stockholders made
in the second sentence of Section 3.6.
5.6 OPERATIONS AND FINANCIAL CONDITION; ABSENCE OF UNDISCLOSED
LIABILITIES. Neither Provant nor Acquisition has conducted any material business
operations other than in connection with the Merger, the Additional Mergers and
the IPO or in preparation for operations to be conducted after the Effective
Time. Neither Provant nor Acquisition has any material tangible assets or
material liabilities or obligations of any nature, whether accrued, absolute,
contingent, or otherwise and whether due or to become due, including without
limitation liabilities that may become known or arise after the date hereof and
which relate to transactions entered into or any state of facts existing on or
before the date hereof and which would be required under generally accepted
accounting principles to be shown in a balance sheet or referenced in the notes
thereto prepared as of the date hereof, other than those incurred in connection
with the Merger, the Additional Mergers and the IPO or in connection with
Provant's preparation for future operations. Set forth on the Provant Disclosure
Schedule are all liabilities and obligations of Provant and Acquisition (by
type) that are as of the date hereof, or are expected to be as of the Effective
Time, in excess of $10,000.
5.7 LITIGATION. There are no actions, suits, causes of action, claims,
litigation, arbitration, administrative hearings or other form of proceedings or
disputes pending, or, to the best knowledge of Provant or Acquisition,
threatened, against, involving or affecting Provant or Acquisition, in any
court, at law or in equity, or before any arbitration board or any governmental
department, commission, board, bureau, agency, or instrumentality, that either
singly or in the aggregate might prevent Provant and Acquisition from
consummating the transactions contemplated hereby, the IPO or the Additional
Mergers, or which would have a material adverse effect on the business,
operations, or financial condition of Provant and its subsidiaries taken as a
whole.
5.8 MATERIAL CONTRACTS. The Provant Disclosure Schedule lists all
material leases, contracts, instruments, agreements or commitments (whether
written or oral), other than the Additional Merger Agreements, relating to the
conduct of the business of Provant or its subsidiaries (including Acquisition)
in effect on the date hereof (the "Material Provant Contracts"). Without
limiting the generality of the foregoing, the aforesaid list includes all
contracts, agreements and instruments of the following types to which Provant or
its subsidiaries is a party or by which any of them is bound:
(a) employment or employment-related contracts or agreements (including
pension, retirement, deferred compensation, death benefit, profit sharing, bonus
or other employee incentive, fringe benefit, stock purchase or stock option
agreements), consulting agreements, agreements providing for termination or
severance benefits,
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non-competition agreements, non-disclosure agreements, contracts for
professional personal services, contracts with other persons engaged in sales or
distributing activities, and advertising contracts;
(b) written or oral agreements, understandings and arrangements of any
kind with any officer, director, employee, shareholder or agent of Provant or
Acquisition relating to present or future compensation or other benefits
available to such person or otherwise;
(c) indentures, loan agreements, notes, security agreements, mortgages,
conditional sales contracts, leases of real or personal property, contracts for
the purchase or sale of real or personal property, and agreements for financing;
(d) agreements, contracts or other arrangements to which the Provant or
Acquisition is a guarantor, surety or endorser;
(e) contracts, agreements, instruments, arrangements or understandings
which have not been included in items (a) through (d) above involving payment by
or to Provant or Acquisition of more than $50,000 or not terminable without
penalty or otherwise materially affecting the assets, financial condition,
properties or business of Provant or Acquisition.
All of the Material Provant Contracts are in full force and effect. Except to
the extent that a material adverse effect on Provant's financial condition,
assets, liabilities, earnings, business or prospects (each considered on a
consolidated basis giving effect to the Merger and the Additional Mergers) would
not result if the following were not true: (A) Provant, Acquisition and each
other party to each of the Material Provant Contracts have performed all the
obligations required to be performed by them to date, have received no notice of
default and are not in default (with due notice or lapse of time or both) under
any of the Material Provant Contracts; (B) Provant and Acquisition have no
present expectation or intention of not fully performing all of their respective
obligations under any of the Material Provant Contracts, and Provant and
Acquisition have no knowledge of any breach or anticipated breach by any other
party to any of the Material Provant Contracts; (C) there exists no actual or,
to the knowledge of Provant and Acquisition, threatened termination,
cancellation or limitation of the business relationship of Provant or
Acquisition with any party to any Material Provant Contract; and (D)
consummation of the transactions contemplated hereby and performance by Provant
and Acquisition of their respective obligations hereunder shall not require the
consent or permission of any party to any Material Provant Contract or permit
any party to terminate, suspend or alter the terms of any Material Provant
Contract.
5.9 ADDITIONAL MERGER AGREEMENTS. The Provant Disclosure Schedule sets
forth, with respect to the Additional Merger Agreements, the material economic
terms of each such Agreement and any other material terms of each such Agreement
that differ substantially from the corresponding terms of this Agreement.
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5.10 DISCLOSURE OF ALL MATERIAL MATTERS. No statement of a material fact
made by Provant or Acquisition in this Agreement (including without limitation
all information in the Provant Disclosure Schedule and the other Schedules,
Exhibits, and attachments hereto, taken as a whole) is false or misleading in
any respect, nor does this Agreement (including without limitation all
information in the Provant Disclosure Schedule and the other Schedules, Exhibits
and attachments hereto, taken as a whole) omit to state a material fact
necessary in order to make the statements made or information disclosed, in the
light of the circumstances under which they were made or disclosed, not
misleading.
5.11 BROKERS. No broker, finder, or investment banker is entitled to any
brokerage, finder's, or other fee or commission in connection with the Merger or
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of Provant or Acquisition.
6. COVENANTS
6.1 CONDUCT OF BUSINESS OF THE COMPANY.
(a) Except as contemplated by this Agreement, during the period from
the date of this Agreement to the Effective Time, the Company will conduct its
operations only in the ordinary and usual course of business and consistent with
past practice and will use all commercially reasonable efforts to preserve
intact its present business organization, keep available the services of its
present officers and employees, and preserve its relationships with customers,
suppliers, contractors, and others having business dealings with it to the end
that its goodwill and on-going business shall not be impaired at the Effective
Time.
(b) Without limiting the generality of subsection (a) and except as
otherwise expressly provided in this Agreement, before the Effective Time, the
Company will comply with all laws applicable to the conduct of its business and
continue in effect its present insurance coverage and will not, without the
prior written consent of Provant, (i) issue, sell, or pledge, or authorize or
propose the issuance, sale, or pledge of (A) any shares of capital stock of any
class (including the Shares), or securities convertible into any such shares, or
any rights, warrants or options to acquire any such shares or other convertible
securities, excepting only pursuant to the exercise or conversion of Company
Options and other instruments or securities outstanding on the date hereof and
disclosed on the Company Disclosure Schedule which exercise or conversion and
which issuance are in accordance with the terms of such instruments or
securities as in effect on the date hereof, or (B) any other securities in
respect of, in lieu of, or in substitution for, Shares outstanding on the date
hereof; (ii) purchase or otherwise acquire, or propose to purchase or otherwise
acquire, any outstanding Shares; (iii) declare or pay any dividend or
distribution on any shares of its capital stock; (iv) authorize, recommend,
propose or announce an intention to authorize, recommend or propose, or enter
into an agreement in principle or an agreement with
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respect to, any change in its capitalization, merger, consolidation or business
combination (other than the Merger), any acquisition of a material amount of
assets or securities, any disposition of a material amount of assets or
securities, or any entry into a material contract or any release or
relinquishment of any material contract rights, not in the ordinary course of
business; (v) propose or adopt any amendments to its Articles of Incorporation
or By-Laws (other than as effected by the Merger); (vi) incur, assume, or prepay
any long-term debt or, except in the ordinary course of business under existing
lines of credit, incur or assume any short term debt; (vii) make any loans,
advances, or capital contributions to, or investments in, any other person,
other than travel or other advances to employees consistent with past practice;
(viii) assume, guarantee, endorse, or otherwise become liable or responsible
(whether directly, contingently, or otherwise) for the obligations of any other
person, except to endorse checks for collection or deposit in the ordinary
course of business; or (ix) agree in writing or otherwise to take any of the
foregoing actions or any action that would make any representation or warranty
in this Agreement untrue or incorrect as of the date hereof or as of the
Effective Time, as if made as of such time. Notwithstanding the foregoing
provisions of this Section 6.1(b), prior to the Effective Time the Company may
make a cash dividend to the stockholders of the Company so long as doing so will
not prevent the Company from satisfying the Financial Condition (with any such
dividend being accounted for prior to the calculation of the Closing Net Worth).
6.2 NO SOLICITATION. The Company shall not, nor shall it permit any of
its officers, directors, employees, agents, or representatives (including,
without limitation, investment bankers, attorneys and accountants), directly or
indirectly to (a) initiate, contract with, solicit or encourage any inquiries or
proposals by, or (b) enter into any discussions or negotiations with, or
disclose directly or indirectly any information concerning its business and
properties to, or afford any access to its properties, books, and records to,
any corporation, partnership, person, or other entity or group in connection
with any possible proposal (an "Acquisition Proposal") regarding a sale of the
Company's capital stock or a merger, consolidation, or sale of all or a
substantial portion of the assets, or any similar transaction that is material
to the Company. The Company will notify Provant within one business day of
receipt if any discussions or negotiations are sought to be initiated, any
inquiry or proposal is made, or any such information is requested with respect
to an Acquisition Proposal or potential Acquisition Proposal or if any
Acquisition Proposal is received or indicated to be forthcoming. Such notice
shall state all substantive terms and conditions of any proposal or Acquisition
Proposal and the identity of the person making the proposal or Acquisition
Proposal or seeking to initiate discussions or negotiations or requesting
information.
6.3 ACCESS TO INFORMATION.
(a) From the date of this Agreement, the Company will give Provant and
the Underwriter and their respective representatives full access, at reasonable
times and with reasonable notice, to the offices and other facilities and to the
books and
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records of the Company, will permit Provant and the Underwriter and their
respective representatives to make such inspections as they may reasonably
require, and will cause its officers and representatives (including, without
limitation, its firm of certified public accountants) to furnish Provant and the
Underwriter and their respective representatives with such financial and
operating data and other information with respect to the business, operations,
assets, liabilities and prospects of the Company as Provant and the Underwriter
and their respective representatives may from time to time reasonably request.
From the date of this Agreement, Provant and Acquisition will give the Company
full access, at reasonable times, to the offices and other facilities and to the
books and records of Provant and Acquisition, will permit the Company and its
representatives to make such inspections as they may reasonably require, and
will cause their respective officers and representatives (including, without
limitation, their firm of certified public accountants) to furnish the Company
and its representatives with such financial and operating data and other
information with respect to the business, operations, assets and liabilities of
Provant, Acquisition and the Additional Companies (in the last case to the
extent such information is in the possession of Provant and the applicable
Additional Company does not object to disclosure) as the Company and its
representatives may from time to time reasonably request.
(b) Provant and Acquisition, on the one hand, and the Company, on the
other hand, will, and will cause their respective employees and agents
(including, in the case of Provant, the Underwriter and its employees and
agents) (collectively, "Representatives") to, hold in strict confidence, unless
compelled to disclose by judicial or administrative process or, in the opinion
of its counsel, by other requirements of law, all Confidential Information (as
hereinafter defined) and will not disclose the same to any person. If this
Agreement is terminated, each party having received or created any documents
containing Confidential Information (including documents received or created by
its Representatives), will promptly return to the other party or destroy (or
cause to be returned or destroyed) all documents (including all copies thereof)
so received or created containing such Confidential Information. For purposes
hereof, "Confidential Information" shall mean all information of any kind
concerning the Company, or concerning any of Provant, Acquisition or any
Additional Company, respectively, except information (i) ascertainable or
obtained from public or published information, (ii) received from a third party
not known to Provant, Acquisition or their Representatives, or to the Company or
its Representatives, as applicable, to be under an obligation to the Company or
Provant, as applicable, to keep such information confidential, (iii) that is or
becomes known to the public (other than through a breach of this Agreement),
(iv) that was in the receiving party's possession before disclosure thereof to
it in connection with this Agreement, or (v) that is independently developed by
Provant or by the Company (including their respective Representatives), as
applicable.
6.4 REASONABLE BEST EFFORTS; SHAREHOLDER APPROVAL.
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(a) Subject to the terms and conditions hereof, each party to this
Agreement agrees to fully cooperate in all reasonable respects with the others
and the others' counsel, accountants and representatives in connection with any
steps required to be taken as part of its obligations under this Agreement and
in connection with the IPO. Each of the Company, Provant and Acquisition agrees
that it will use its reasonable best efforts to cause all conditions to its
obligations under this Agreement to be satisfied as promptly as possible, and
will not undertake a course of action inconsistent with this Agreement or which
would make any of its representations, warranties, agreements or covenants in
this Agreement untrue in any material respect or any conditions precedent to its
obligations under this Agreement unable to be satisfied at or prior to the
Closing. The Provant Principals hereby covenant and agree that, subject to the
satisfaction (or, in Provant's sole discretion, waiver) of the conditions set
forth in Section 7.1, they will use their reasonable best efforts to cause
Provant to calculate the Financial Condition in good faith and to cause Provant,
Acquisition or Provant's counsel, as applicable, to execute and/or deliver each
of the items identified in subsections 7.2(f), (i), (j), and (l) and to take the
action described in subsection 7.2(k).
(b) Without limiting the foregoing, the Company will promptly and duly
call (and the Stockholders will cause the Company to so call) a special meeting
of its stockholders for the purpose of voting on the Merger and this Agreement.
The Board of Directors of the Company and the Stockholders shall give their
respective unqualified recommendations to the stockholders of the Company that
such stockholders approve the Merger and this Agreement, and the Company and the
Stockholders will otherwise use their reasonable best efforts to obtain
stockholder approval.
6.5 CONSENTS. Each of Provant, Acquisition and the Company will use
reasonable efforts to obtain as promptly as practicable such consents of third
parties to agreements that would otherwise be violated by any provisions hereof
and to make such filings with governmental authorities as are necessary to
consummate the transactions contemplated by this Agreement.
6.6 PUBLIC ANNOUNCEMENTS. Except as provided in the immediately
following sentence, all public announcements, notices or other communications
regarding this Agreement and the transactions contemplated hereby to third
parties other than the parties hereto and their respective advisors and the
shareholders of the Company shall require the prior approval of Provant and of
the Company. Notwithstanding the foregoing, neither the filing of the
Registration Statement (or any other document filed with any public official in
connection with the IPO), nor the distribution of the Prospectus (whether in
preliminary or final form), nor any selling activity conducted by Provant or the
Underwriter in connection with the IPO, including without limitation those
conducted as part of the so-called road show, shall be construed to be public
announcements, notices or other communications requiring the prior approval of
the Company.
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6.7 NOTIFICATION OF CERTAIN MATTERS. Each of the parties (the "Notifying
Party") shall give prompt notice to the other parties of (i) the occurrence or
non-occurrence of any event that would be likely to cause any representation or
warranty of the Notifying Party contained in this Agreement to be untrue or
inaccurate in any material respect at or prior to the Effective Time and (ii)
any material failure of the Notifying Party to comply with or satisfy any
covenant, condition, or agreement to be complied with or satisfied by it
hereunder. Without limiting the foregoing, from time to time prior to the
Closing the Company will promptly supplement or amend the Company Disclosure
Schedule both to correct any inaccuracy in the Company Disclosure Schedule when
delivered and to reflect any development which, if existing at the date of this
Agreement, would have been required to be set forth in the Company Disclosure
Schedule or which has rendered inaccurate the information contained in the
Company Disclosure Schedule (each notice furnishing such information being
called a "Company Disclosure Supplement"), and approximately six business days
prior to the Closing the Company will deliver to Provant a final Company
Disclosure Supplement consisting of a complete update of the Company Disclosure
Schedule as though all representations and warranties contained in Article 3
hereof were to be made as of the date of the Closing. In addition, the Company
shall promptly notify Provant in writing if at any time prior to a closing in
connection with the IPO it shall obtain knowledge of any facts relating to the
Company or its officers, directors or stockholders that might make it necessary
or appropriate to amend or supplement the Prospectus in order to make the
statements contained therein not misleading or comply with applicable law. The
delivery of any Company Disclosure Supplement or other notice pursuant to this
Section 6.7 shall not render correct any representation or warranty that was
incorrect when made or limit or otherwise affect the remedies available
hereunder to the party receiving such Company Disclosure Supplement or notice.
6.8 COVENANTS OF THE STOCKHOLDERS. The Stockholders hereby covenant and
agree with Provant and Acquisition that they shall:
(a) take no action which the Company may not take pursuant to Section
6.2;
(b) take action and refrain from action to the extent required of the
Company pursuant to Section 6.4;
(c) vote, or cause to be voted, all of their respective Shares for the
approval of each aspect of this Agreement (including the Merger) requiring the
approval of the stockholders of the Company, and against the approval of any
other agreement providing for a merger, consolidation, sale of assets or other
business combination of the Company with any person or entity other than Provant
or an entity controlled by Provant;
(d) cause the Company to provide to Provant the notifications required
of the Company under Section 6.7;
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(e) execute and deliver at the Closing the Employment Contracts, the
Non- Competition and Non-Disclosure Agreements, and the Investment Letters; and
(f) subject to the other terms of this Agreement, (i) use all
commercially reasonable efforts to take whatever action may be reasonably
necessary or desirable to effect, perform or confirm of record or otherwise in
the Surviving Corporation full right, title and interest in and to the business,
properties and assets now conducted or owned by the Company, free and clear of
all restrictions, liens, encumbrances, rights, title and interests in others
(excepting only liens reflected in the Balance Sheet or otherwise disclosed on
the Disclosure Schedule), or to collect, realize upon, gain possession of, or
otherwise acquire, full right, title and interest in and to such business,
properties and assets; (ii) use their reasonable best efforts to take whatever
action may be reasonably necessary or desirable to carry out the intent and
purposes of the transactions contemplated hereby and to permit Provant to
undertake and complete the IPO;
(g) notify Provant in writing if at any time prior to a closing in
connection with the IPO they shall obtain knowledge of any facts relating to the
Company or its officers, directors or stockholders that might make it necessary
or appropriate to amend or supplement the Prospectus used in the registration
statement filed in connection with the IPO in order to make the statements
contained therein not misleading or comply with applicable law (with the
delivery of any notice pursuant to this Section 6.8(g) not limiting or otherwise
affecting the remedies available hereunder to the party receiving such notice);
(h) execute and deliver such other instruments and take such other
actions as may be reasonably required by the Company or the Underwriter in order
to carry out the intent of this Agreement and to complete and close the IPO,
subject to the other terms of this Agreement; and
(i) satisfy (or cause to be satisfied) prior to the Effective Time any
indebtedness to the Company owed by such Stockholder or by any Affiliate of such
Stockholder, and cause to be discharged any guaranty granted by the Company in
favor of such Stockholder or in favor of any Affiliate of such Stockholder.
6.9 TAX FREE REORGANIZATION. From and after the Effective Time, neither
Provant nor the Surviving Corporation shall take or suffer to be taken any
action which will cause the Merger not to constitute a reorganization within the
meaning of Section 368(a)(2)(D) of the Code.
6.10 MONTHLY FINANCIAL INFORMATION. Within thirty days after the end of
each month ending after the date of this Agreement and prior to the Effective
Time, the Company will furnish to Provant internally prepared financial
statements comparable to the Financial Statements prepared in a manner
consistent with the Financial Statements and certified by the chief financial
officer of the Company.
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6.11 PROVANT OPTION PLAN. Prior to the Effective Time, Provant shall
adopt an employee stock option plan (the "Plan") providing for the granting of
Provant Options from time to time as provided in the Plan. The Plan shall make
available for grant at or before the Closing, and the Board of Directors of
Provant shall so grant, Provant Options with respect to a number of shares of
Provant Common Stock equal to 5.0% of the shares of Provant Common Stock
outstanding as of immediately following the Closing of the Merger, the
Additional Mergers (excluding any Additional Merger that is terminated without
consummation) and the IPO, giving effect to the issuance of all shares of Merger
Stock issuable as of Closing, all shares of Provant Common Stock issuable as of
the Closing as merger consideration in each of the Additional Mergers and the
issuance of Provant Common Stock in the IPO. The Provant Options granted as of
such time shall have an exercise price equal to the IPO Price, shall by their
terms (i) become exercisable ratably over a period of three years (provided that
the holder remains employed by Provant or one of its affiliates and subject to
accelerated vesting in the event of a change in control of Provant), (ii) have a
term of seven years, and (iii) in the case of vested options, remain exercisable
for a period of one year following any termination of employment without cause
(including termination resulting from the expiration of any employment agreement
in accordance with its terms and termination upon death or disability) and for a
period of ten business days following any termination of employment for cause
(conditioned, in the latter case, upon the terminated employee's delivery of a
general release to the Surviving Corporation, Provant and their respective
affiliates), and shall have such other terms as the Board of Directors of
Provant may determine. The Provant Options granted as of such time shall be
allocated among the employees of, respectively, the Surviving Corporation and
the surviving corporations of the Additional Mergers in accordance with Schedule
6.11 hereto, and shall be granted to individual employees of such corporations
in accordance with directions to the Board of Directors of Provant given by the
executive officers of the Company and the Additional Companies absent a good
faith determination by the Board of Directors of Provant that such a direction
is manifestly contrary to the interests of the Surviving Corporation.
6.12 LEASE. The Company hereby covenants and agrees, and the
Stockholders hereby covenant and agree to cause the owner of the Company's
headquarters in Provo, Utah (the "Headquarters"), to enter into a written lease
prior to the Closing with respect to the Headquarters and certain equipment
contained therein (which equipment is described on the attached Schedule 6.12),
such lease to be on the terms set forth on such Schedule 6.12 and otherwise on
such arms-length terms as are reasonably acceptable to Provant.
7. CONDITIONS TO CONSUMMATION OF THE MERGER
7.1 CONDITIONS TO THE OBLIGATIONS OF PROVANT AND ACQUISITION. The
obligations of Provant and Acquisition to consummate the Merger are subject to
the satisfaction at the Closing, or waiver by Provant in writing, in whole or in
part, of each of the following conditions:
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(a) The IPO and each of the Additional Mergers shall have been
completed at the same time.
(b) The Financial Condition shall have been satisfied, in the good
faith determination of Provant.
(c) Each of the representations, warranties, agreements and covenants
of the Company and the Stockholders (giving effect to the Company Disclosure
Schedule, but not to any Company Disclosure Supplement) shall be true and
correct as of, and shall not have been violated in any respect at, the Closing
as though made on and as of the Closing, except for (i) representations,
warranties, agreements and covenants which make reference to a specific date
(including the date of this Agreement), which need only be true and correct as
of the specified date, and (ii) failures of representations or warranties to be
true and correct as of the Closing solely on account of matters arising between
the date hereof and the Effective Time in the ordinary course of the Company's
business, if and to the extent such matters are consistent with past practice of
the Company and are not materially adverse to the Company, either singly or in
the aggregate; the Company and the Stockholders shall, on or before the Closing,
have performed all of their respective obligations under this Agreement which by
the terms hereof are to be performed on or before the Closing; and there shall
have delivered to Provant and Acquisition a certificate signed by the President
of the Company on behalf of and in the name of the Company and by the
Stockholders dated as of the date of the Closing to the foregoing effect.
(d) The Merger and this Agreement shall have been approved by the
requisite vote of the stockholders of the Company, and not more than 5.0% of the
Shares shall constitute Dissenting Shares.
(e) No action or proceeding by or before any court or other
governmental body shall have been instituted by any governmental body or other
person or entity or threatened in writing by any governmental body which seeks
to restrain, prohibit or invalidate the transactions contemplated by this
Agreement or which would materially adversely affect the right of the Surviving
Corporation, as a subsidiary of Provant, to conduct the business of the Company
as presently conducted by the Company or which claims damages from Provant with
respect to the transactions contemplated hereby.
(f) Provant and Acquisition shall have received the opinion of counsel
to the Company, dated the date of the Closing and in form and substance
reasonably satisfactory to Provant and its counsel, substantially to effect set
forth on Exhibit 7 (subject to qualifications and assumptions customary in
transactions such as the Merger), which opinion provides that it may be relied
upon by the Underwriter.
(g) All proceedings taken by the Company and all instruments executed
and delivered by the Company prior to the date of the Closing in connection with
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the transactions herein contemplated shall be satisfactory in form and substance
to counsel for Provant acting reasonably.
(h) No statute, rule or regulation shall have been enacted or
promulgated which makes illegal or prohibits consummation of the transactions
contemplated hereby or which materially and adversely affects the ability of the
Surviving Corporation, as a subsidiary of Provant, to conduct the business of
the Company as presently conducted by the Company.
(i) The Stockholders shall have executed and delivered to Provant the
Employment Contracts and the Non-Competition and Non-Disclosure Agreements, and
all stockholders of the Company (other than holders of Dissenting Shares, if
any) shall have executed and delivered to Provant the Investment Letters.
(j) The Company shall have delivered to Provant and Acquisition a
certificate of its Secretary certifying as to requisite corporate or other
action authorizing the transactions contemplated by this Agreement, the
incumbency of officers and directors, and the status of record ownership of the
Shares.
(k) The Company shall have delivered to Provant such other
certificates, documents, consents and opinions as Provant and its counsel shall
reasonably require.
7.2 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY AND THE STOCKHOLDERS.
The obligation of the Company and the Stockholders to consummate this Agreement
is subject to the satisfaction at the Closing, or waiver by the Company in
writing, in whole or in part, of each of the following conditions:
(a) The IPO shall have been completed at the same time, and appropriate
measures shall have been adopted and shall be in place to ensure that the
stockholders of the Company shall receive out of the proceeds of the IPO all
cash to which they will become entitled as of the Effective Time.
(b) Each of the Additional Mergers shall have been completed at the
same time as the Merger, and there shall have occurred no event (or series of
events, whether or not related) with respect to any Additional Company that (i)
constitutes a failure of a closing condition set forth in the applicable
Additional Merger Agreement such that, in the reasonable judgment of Provant,
Provant is not contractually obligated to consummate the applicable Additional
Merger, and (ii) has resulted in a material adverse change between the date
hereof and the date of the Closing in the financial condition, assets,
liabilities, earnings, business, or business prospects of the applicable
Additional Company.
(c) Each of the representations, warranties and agreements of Provant,
Acquisition and the Provant Principals (giving effect to the Provant Disclosure
Schedule) shall be true and correct as of, and shall not have been violated in
any respect at, the Closing as though made on and as of the Closing except for
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(i) representations and warranties and agreements which make reference to a
specific date (including the date of this Agreement), which need only be true
and correct as of the specified date, and (ii) failures of representations or
warranties to be true and correct as of the Closing solely on account of matters
arising between the date hereof and the Effective Time in the ordinary course of
Provant's or Acquisition's business, if and to the extent such matters are not
materially adverse to Provant (considered on a consolidated basis giving effect
to the Merger and the Additional Mergers), either singly or in the aggregate;
Provant and Acquisition shall, on or before the Closing, have performed all of
their respective obligations under this Agreement which by the terms hereof are
to be performed on or before the Closing (including without limitation the
adoption of the Plan and the grant of Provant Options to persons who will be
employees of the Surviving Corporation in accordance with Schedule 6.11); and
Provant and Acquisition shall have delivered to the Company a certificate of
their respective Presidents signed on their behalf and in their names dated as
of the date of the Closing to the foregoing effect.
(d) The Merger and this Agreement shall have been approved by the
requisite vote of the stockholders of the Company.
(e) No action or proceeding by or before any court or other
governmental body shall have been instituted by any governmental body or other
person or entity or threatened in writing by any governmental body which seeks
to restrain, prohibit or invalidate the transactions contemplated by this
Agreement or which would materially adversely affect the right of the Company to
consummate the Merger.
(f) The Company shall have received the opinion, dated the date of the
Closing and in form and substance satisfactory to the Company and its counsel,
of Messrs. Nutter, McClennen & Fish, counsel to Provant, substantially to the
effect set forth on Exhibit 8 (subject to qualifications and assumptions
customary in transactions such as the Merger).
(g) All proceedings taken by Provant and Acquisition and all
instruments executed and delivered by Provant and Acquisition prior to the date
of the Closing in connection with the transactions herein contemplated, and any
instruments to be executed by the Stockholders at the request of Provant, shall
be satisfactory in form and substance to counsel for the Company, acting
reasonably.
(h) No statute, rule or regulation shall have been enacted or
promulgated which makes illegal or prohibits consummation of the transactions
contemplated hereby or which materially and adversely affects the ability of the
Surviving Corporation, as a subsidiary of Provant, to conduct the business of
the Company as presently conducted by the Company.
(i) Provant and Acquisition shall have delivered to the Company a
certificate of its Secretary, certifying as to requisite corporate or other
action authorizing the transactions contemplated by this Agreement.
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(j) The Surviving Corporation shall have executed and delivered each
Employment Contract to the appropriate party.
(k) The individual listed on Schedule 7.2 as the designee of the
Company shall have been elected to the Board of Directors of Provant as of
immediately following the closing of the IPO.
(l) Provant and Acquisition shall have delivered to the Company such
other certificates and documents pertaining to the Merger (including the legal
existence and good standing of Provant and Acquisition) as the Company and its
counsel shall reasonably require.
8. RESTRICTIONS ON SALE OR TRANSFER OF MERGER STOCK
8.1 RESTRICTIONS ON SALE. The shares of Merger Stock will not have been
registered under the Securities Act or the blue sky laws of any state by reason
of their contemplated issuance in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act and of such state laws.
Such shares may not be sold, transferred, or otherwise disposed of without
registration under the Securities Act and such state laws or an exemption
therefrom, or in contravention of the restrictions contained in the Investment
Letter attached hereto as Exhibit 4.
8.2 REGISTRATION ON A PARI PASSU BASIS. Provant agrees that, in the
event that at any time after the closing of the IPO it conducts a public
offering of Common Stock registered under the Act and Provant and its
underwriter determine, in their sole discretion, to permit (i) any holder of
Merger Stock, (ii) any holder of Provant Common Stock issued as merger
consideration in any of the Additional Mergers, or (iii) any Provant Principal
to sell Provant Common Stock in such offering, then Provant shall permit each
holder of Merger Stock to sell shares of such Merger Stock in such offering in
the same proportion as the person referenced in any of clauses (i) through (iii)
above who is then being permitted to sell the highest proportion of his or her
shares of Provant Common Stock (all such proportions being based on the
respective number of shares of Provant Common Stock that each applicable person
then holds); provided, however, that the foregoing right shall not apply to
shares that are no longer subject to the two-year restriction period under the
Investment Letter and that are tradeable either without regard to Rule 144
promulgated under the Act or tradeable within a 90 day period under such Rule
144. For purposes of the foregoing, an agreement granting a person a right to
have shares registered in the future shall not be construed as "permitting" such
person to sell shares in an offering until such time as such right is properly
exercised under the terms of such agreement.
9. INDEMNIFICATION
9.1 AGREEMENTS TO INDEMNIFY.
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(a) As used in this Article 9:
(i) "Damages" means claims, damages, liabilities,
losses, judgments, settlements, and expenses, including,
without limitation, all reasonable fees and disbursements of
counsel incident to the investigation or defense of any claim
or proceeding or threatened claim or proceeding.
(ii) "Provant Indemnified Party" means, collectively,
each of Provant, the Surviving Corporation, and their
respective affiliates.
(iii) "Company Indemnified Party" means, after the
Effective Time, the former stockholders of the Company
collectively.
(iv) "Indemnified Party" means either of the Provant
Indemnified Party or the Company Indemnified Party, as
applicable under the circumstances.
(b) On the terms and subject to the limitations set forth in this
Agreement, the Company, prior to the Effective Time, shall, and, after the
Effective Time, the Stockholders shall indemnify, defend, and hold the Provant
Indemnified Party harmless from, against and in respect of any and all Damages
incurred by any Provant Indemnified Party arising from or in connection with any
of the following (collectively referred to herein as "Claims"):
(i) any breach of any representation, warranty,
covenant or agreement made by the Company or by the
Stockholders in this Agreement or in any exhibit, schedule,
certificate or other document delivered or to be delivered at
the Closing by or on behalf of the Company or the Stockholders
pursuant to the terms of this Agreement or otherwise referred
to or incorporated in this Agreement, including any allegation
by a third party which, if true, would constitute such a
breach; and
(ii) those matters identified on Schedule 9.1.
(c) In addition to the foregoing, and solely in the event the Merger
shall be consummated, the Stockholders shall indemnify Provant as set forth in
the immediately following sentence from any failure by the Company to have a
Closing Net Worth equal to or greater than the Minimum Net Worth. In the event
the Closing Net Worth shall be less than the Minimum Net Worth (and Provant
shall have elected, in its sole discretion, to waive the failure of the closing
condition set forth in Section 7.1(b) caused thereby), the Stockholders shall
reimburse Provant at the Closing for the amount of such deficit on a dollar for
dollar basis. Such reimbursement shall be the sole remedy of Provant on account
of a failure of the Closing Net Worth to equal or exceed the Minimum Net Worth
(other than Provant's
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right not to terminate this Agreement), and neither the Company nor the
Stockholders shall be liable for any consequential damages on account of any
such failure. Any indemnity and reimbursement required by this Section 9.1(c)
shall not be subject to Section 9.2(c).
(d) From and after the Effective Time and solely if the Merger shall
have been consummated, on the terms and subject to the limitations set forth in
this Agreement, Provant and the Provant Principals shall indemnify, defend, and
hold the Company Indemnified Party harmless from, against and in respect of any
and all Damages incurred by any Company Indemnified Party arising from or in
connection with any actual or alleged breach of any representation, warranty,
covenant or agreement made by Provant or Acquisition in this Agreement or in any
exhibit, schedule, certificate or other document delivered or to be delivered at
the Closing by or on behalf of Provant or Acquisition pursuant to the terms of
this Agreement or otherwise referred to or incorporated in this Agreement (also
referred to herein as "Claims"); provided, however, that this provision shall
not be construed to provide to the Company Indemnified Party any indemnification
with respect to the Registration Statement and the information contained
therein, or with respect to any failure of the IPO to be consummated.
(e) Subject to Section 9.2, the Company's representations and
warranties set forth in Article 3, the Stockholders' representations and
warranties set forth in Article 4 and Provant's and Acquisition's
representations and warranties set forth in Article 5 shall, for purposes of
this Article 9, be deemed to have survived the Effective Time and the Closing of
Merger and the other transactions contemplated hereby notwithstanding any
contrary terms of this Agreement, and whenever such representations, warranties,
covenants and agreements are referred to in this Article 9, the text of the same
as set forth in the aforesaid Articles shall be deemed to be set forth in their
entirety herein, and the same are hereby incorporated herein by such references.
Each representation, warranty, covenant and agreement of the Company and the
Stockholders shall be deemed to have been relied upon by the Provant Indemnified
Party, and each representation, warranty, covenant and agreement of Provant and
Acquisition shall be deemed to have been relied upon by the Company Indemnified
Party, notwithstanding any investigation or inspection made by or on behalf of
any Provant Indemnified Party or the Company Indemnified Party, as applicable,
and shall not be affected in any respect of any such investigation or
inspection. No waiver of a closing condition by an Indemnified Party shall be
deemed to relieve a party that is otherwise obligated to provide indemnification
of its obligations pursuant to this Section 9.1 on account of the matters that
were the subject of such waiver.
(f) In addition to and not in limitation of the rights and remedies of
Provant under this Section 9.1, Provant may withhold from any shares of Provant
Common Stock issuable and all amounts payable under Section 2.8 the amount of
any Damages of Provant arising out of or in connection with Claims asserted
hereunder (as estimated in good faith by Provant in the event such Damages are
not yet fixed,
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subject to future release if appropriate upon final resolution of the applicable
Claim). For purposes of this subsection (f), shares of Provant Common Stock
otherwise issuable under Section 2.8 shall be valued at the lower of (i) the
closing price for a share of Provant Common Stock on the last trading day
immediately preceding the date Provant gives notice that it has a claim under
this Article 9 and (ii) the IPO Price adjusted as provided in Section 2.8(f).
(g) In the event the Stockholders shall indemnify the Provant
Indemnified Party for any breach of the warranties contained in Section 3.25 on
account of a failure of accounts receivable of the Company to be collected, the
Surviving Corporation shall assign to the Stockholders those accounts receivable
as to which such indemnity has been paid.
9.2 LIMITATIONS ON INDEMNITY OBLIGATIONS. The indemnity obligations of
the Company or the Stockholders, as applicable (in either case, the "Company
Indemnifying Party"), or Provant and the Provant Principals (collectively, the
"Provant Indemnifying Party") (both the Company Indemnifying Party and the
Provant Indemnifying Party being called generically the "Indemnifying Party"),
under this Agreement shall be subject to the following limitations:
(a) The indemnity obligations of the Indemnifying Party shall expire on
September 15, 1999 (the "Cut-off Date"); provided, however, that such
obligations with respect to (i) the representations and warranties contained in
Sections 3.1, 3.2, 3.10, and 3.22, Article 4, and Sections 5.1, 5.2, 5.3 and 5.4
of this Agreement and the matters identified on Schedule 9.1 and in Section
9.1(c) shall continue forever without limitation, and (ii) the representations
and warranties regarding taxes, which are contained in Section 3.15, shall
remain in effect until all claims for taxes due by or on account of the Company
for any period up to and including the Effective Time have been settled and any
statute of limitations period with respect to such taxes has expired; and
provided further that the indemnity obligations of the Indemnifying Party for
Claims asserted by an Indemnified Party before the expiration of the applicable
indemnity period, if any, in the manner provided in this Agreement shall
continue until such Claims are finally resolved and discharged.
(b) (i) Subject to the maximum aggregate amounts provided elsewhere in
this Subsection 9.2(b) with respect to a Stockholder's indemnity obligations, in
the event of any Damages for which a Stockholder is liable pursuant to Section
9.1, each Stockholder shall be liable solely for a fraction of each dollar of
Damages suffered equal to the fraction derived by dividing the number of Shares
held by all Stockholders as of the date hereof by the total number of Shares
outstanding. Subject to subsection (b)(ii) below, the aggregate indemnity
obligations of each Stockholder for Damages arising out of Claims the operative
facts of which were actually known to either Stockholder as of the date of this
Agreement ("Known Claims") shall not in any event exceed an amount equal to the
sum of (A) the cash received by all Stockholders pursuant to Section 2.7(c),
plus (B) the product obtained by multiplying the number of shares of Merger
Stock received by all Stockholders by the IPO Price,
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minus (C) any amounts paid pursuant to Section 9.1 by any Stockholder with
respect to Claims that are not Known Claims. Subject to subsection (b)(ii) below
(and notwithstanding Section 11.9), the aggregate indemnity obligations of each
Stockholder for any Damages arising out of Claims that do not constitute Known
Claims shall not in any event exceed Five Million Dollars ($5,000,000);
provided, however, that the aggregate indemnity obligations of all Stockholders
for all Claims, whether or not constituting Known Claims, shall not in any event
exceed the sum of the amounts referenced in clauses (A) and (B) of the
immediately preceding sentence. The aggregate indemnity obligations of the
Provant Principals for any Damages shall not in any event exceed an amount equal
to (X) the aggregate number of shares of Provant Common Stock held by the
Provant Principals as of immediately following the closing of the IPO plus the
aggregate number of warrant shares covered by those certain warrants for the
purchase of Provant Common Stock issued to the Provant Principals as of the
closing of the IPO, multiplied by (Y) the IPO Price, minus (Z) the aggregate
exercise price of such warrants.
(ii) Solely in the event that both (A) the Damages to be paid
by the Stockholders pursuant to Section 9.1(b) on account of the then-asserted
Claim, in aggregation with all such Damages previously paid by all Stockholders,
equal or exceed the aggregate amount of the cash received by all Stockholders
pursuant to Section 2.7, and (B) the Average Closing Price (as defined below) of
Provant Common Stock during the ten trading days immediately following (but not
including) the date on which notice of the liquidated amount of the claimed
Damages is given to the Stockholders (which may, if applicable, be the date on
which the initial notice of the Claim is given) (in either event, the "Claim
Date") is less than the IPO Price, then any Stockholder may, at his election,
satisfy such portion of the Damages as exceeds the cash received by all
Stockholders pursuant to Section 2.7 by tendering to Provant, for cancellation,
shares of Provant Common Stock equal in value to the Damages to be so satisfied,
with such shares valued at the Average Closing Price determined under clause (B)
of this sentence. Notwithstanding subsection (b)(i) above, if the foregoing
clauses (A) and (B) are satisfied and the Stockholders are therefore permitted
to satisfy their obligations to pay Damages by tendering shares of Provant
Common Stock, and a Stockholder elects to so tender Provant Common Stock, such
Stockholder's obligation for Damages shall be limited to the number of shares of
Provant Common Stock received by all Stockholders pursuant to Sections 2.7 and
2.8. In the event that Damages are to be paid by the Stockholders before the
final distribution of Provant Common Stock (if any) on account of 1998 EBIT and
if this subsection (b)(ii) shall apply, the final number of shares of Provant
Common Stock that the Stockholder shall be obligated to tender to Provant shall
be left undetermined until such time as the distribution of Provant Common Stock
(if any) is to be made under Section 2.8. As used herein, "Average Closing
Price" means the average of the closing prices of Provant Common Stock on each
trading day during the stated period, as recorded on the New York Stock Exchange
or on such other exchange or market as is then the principal exchange or market
on which Provant Common Stock is traded.
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(c) Except (i) as provided in Section 9.1(c), and (ii) with respect to
Damages arising out of the matters identified on Schedule 9.1, which Damages
shall be indemnified without respect to the threshold provided in this Section
9.2(c), an Indemnified Party shall be entitled to indemnification only if the
aggregate and collective Damages incurred or suffered by it exceeds $188,500, in
which event it shall be entitled to indemnification of the full amount of such
Damages. No amounts indemnified by the Company or the Stockholders pursuant to
Section 9.1(c) or with respect to matters identified on Schedule 9.1 shall be
treated as Damages incurred and suffered by the Indemnified Party for purposes
of the immediately preceding sentence, provided only that the amounts so
indemnified have been duly paid.
(d) Notwithstanding the preambles to, respectively, Article 3 and
Article 5, the contractual liability of the Stockholders and the Provant
Principals for any breach of the representations and warranties contained in,
respectively, Article 3 and Article 5 shall be limited to such Stockholder's or
Provant Principal's liability provided in this Article 9.
9.3 NOTICE OF THIRD PARTY CLAIMS. An Indemnified Party shall promptly
notify the Indemnifying Party in writing of any Claim consisting of a matter
asserted by a third person that might give rise to any indemnity obligation of
the Indemnifying Party hereunder (a "Third Party Claim"), specifying in
reasonable detail the nature thereof and indicating the amount (if known, or
estimated if necessary) of the Damages that have been or may be sustained by the
Indemnified Party. Failure of any Indemnified Party to promptly give such notice
shall not relieve the Indemnifying Party of its or his obligation to indemnify
under this Article 9, but as a result of any such failure, the Indemnified Party
shall be liable to the Indemnifying Party for, and only for, the amount of
actual damages caused by such failure, which amount shall be an offset against
the amount of Damages for which the Indemnifying Party is liable hereunder.
Together with or following such notice, the Indemnified Party shall deliver to
the Indemnifying Party copies of all notices and documents received by the
Indemnified Party relating to the Third Party Claim (including court papers).
9.4 DEFENSE AND SETTLEMENT OF THIRD PARTY CLAIMS. The Indemnifying Party
shall have the right (without prejudice to the right of any Indemnified Party to
participate at its or his own expense through counsel of its or his own
choosing) to defend against any Third Party Claim at its or his expense and
through counsel of its or his own choosing and to control such defense if the
Indemnifying Party gives written notice of its or his intention to do so within
15 business days of its or his receipt of notice of the Third Party Claim. The
Indemnified Party shall cooperate fully in all reasonable respects in the
defense of such Third Party Claim and shall make available to the Indemnifying
Party or its or his counsel all pertinent information under their control
relating thereto. The Indemnified Party shall have the right to elect to settle
any Third Party Claim; provided, however, the Indemnifying Party shall not have
any indemnification obligation with respect to any monetary payment to any third
party required by such settlement unless the
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<PAGE> 48
Indemnifying Party shall have consented thereto. The Indemnifying Party shall
have the right to elect to settle any Third Party Claim subject to the consent
of the Indemnified Party; provided, however, that if the Indemnified Party fails
to give such consent within 15 business days of being requested to do so, the
Indemnified Party shall, at its expense, assume the defense of such Third Party
Claim and regardless of the outcome of such matter, the Indemnifying Party's
liability hereunder shall be limited to the amount of any such proposed
settlement. The foregoing provisions notwithstanding, in no event (a) may either
Indemnifying Party adjust, compromise or settle any Third Party Claim unless
such adjustment, compromise or settlement unconditionally releases the
Indemnified Party from all liability, (b) may the Company Indemnifying Party
adjust, compromise or settle any Third Party Claim if such adjustment,
compromise or settlement affects the absolute and sole right of Provant or the
Surviving Corporation to own or use any of the Company's assets or (c) may the
Company Indemnifying Party defend any Third Party Claim which, if adversely
determined, would materially impair the financial condition, business or
prospects of Provant or the Surviving Corporation.
9.5 NOTICE OF OTHER CLAIMS. In the event any Indemnified Party should
incur any Claim that does not involve a Third Party Claim, the Indemnified Party
shall deliver a notice of such Claim with reasonable promptness to the
Indemnifying Party. If the Indemnifying Party notifies the Indemnified Party
that it does not dispute the Claim described in such notice or fails to notify
the Indemnified Party within 30 days after delivery of such notice by the
Indemnified Party whether the Indemnifying Party disputes the Claim described in
such notice, the Damages in the amount specified in the Indemnified Party's
notice will be conclusively deemed a liability of the Indemnifying Party and the
Indemnifying Party shall pay the amount of such Damages to the Indemnified Party
on demand. Failure of any Indemnified Party to promptly give such notice shall
not relieve the Indemnifying Party of its or his obligation to indemnify under
this Article 9, but as a result of any such failure, the Indemnified Party shall
be liable to the Indemnifying Party for, and only for, the amount of the actual
damages caused by such failure, which amount shall be an offset against the
amount of Damages for which the Indemnifying Party is liable hereunder.
10. TERMINATION; AMENDMENTS; WAIVER
10.1 TERMINATION. This Agreement may be terminated at any time prior to
the Effective Time, notwithstanding approval thereof by the stockholders of the
Company:
(a) by mutual consent of the Board of Directors of Provant and the
Company;
(b) by any party, in its sole discretion, if the Merger and the IPO
shall not have been consummated on or before June 30, 1998, unless the failure
of the Merger
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<PAGE> 49
to occur by such date shall be due to the failure of the party seeking to
terminate this Agreement to perform or observe the covenants and agreements of
such party set forth herein;
(c) by the Company if there has been a misrepresentation or breach on
the part of Provant or Acquisition in the representations, warranties, covenants
or obligations of Provant or Acquisition set forth herein, provided that in the
case of a breach of any such covenant or obligation, such breach has not been
cured within ten (10) business days after the Company has notified Provant and
Acquisition of such breach;
(d) by Provant if there has been a misrepresentation or breach on the
part of the Company or the Stockholders in the representations, warranties,
covenants and obligations of the Company and the Stockholders set forth herein,
provided that in the case of a breach of any such covenant or obligation, such
breach has not been cured within ten (10) business days after Provant has
notified the Company or the Stockholders of such breach; or
(e) by any party if any court shall have issued an order, decree or
ruling or taken any other action permanently enjoining, restraining or otherwise
prohibiting the Merger and such order, decree, ruling or other action shall have
become final and non-appealable.
The power of termination provided for by this Section 10.1 may be
exercised for Provant or the Company only by their respective Boards of
Directors in its sole discretion, and will be effective only after written
notice thereof, signed on behalf of the party for which it is given by its
Chairman of the Board, President or other duly authorized officer, shall have
been given to the other. If this Agreement is terminated in accordance with this
Section 10.1, the Merger shall be abandoned without further action by Provant or
the Company.
10.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement by any party as provided in Section 10.1, this Agreement shall
forthwith become void and have no effect, and neither Provant, nor the Company,
nor any of the officers or directors of either of them, nor the Stockholders
shall have any liability of any nature whatsoever hereunder, or in connection
with the transactions contemplated hereby, except (a) Sections 6.3(b) and 11.8
shall survive any termination of this Agreement, (b) notwithstanding anything to
the contrary contained in this Agreement, no party shall be relieved of or
released from any liabilities or damages arising out of its breach of any
provision of this Agreement; and (c) until September 30, 1998, neither the
Company nor the Stockholders shall, directly or indirectly, discuss, negotiate,
submit or respond to proposals relating to, or enter into an agreement with any
other person with respect to, a transaction with other training companies to be
accompanied or followed by a public offering.
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<PAGE> 50
10.3 AMENDMENT. Subject to compliance with applicable law, this
Agreement may be amended by the parties hereto, by action taken or authorized
(in the case of Provant, Acquisition and the Company) by their respective Boards
of Directors, at any time before or after approval of the matters presented in
connection with the Merger by the stockholders of the Company. This Agreement
may not be amended except by an instrument in writing signed on behalf of each
of the parties hereto.
10.4 EXTENSION; WAIVER. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized (in the case of Provant,
Acquisition and the Company) by their respective Boards of Directors, may, to
the extent legally allowed, subject to Section 10.3, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party, but such
extension or waiver or failure to insist on strict compliance with an
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure.
11. MISCELLANEOUS
11.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Except as provided in
Article 9 with respect to the representations and warranties contained in
Articles 3, 4 and 5, and except for the provisions of Section 10.2, the
representations and warranties made in this Agreement shall not survive beyond
the Effective Time.
11.2 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement (a) constitutes, with
the Company Disclosure Schedule, the Provant Disclosure Schedule, the other
Schedules and the Exhibits hereto, the entire agreement among the parties with
respect to the subject matter hereto and supersedes all other prior agreements
and understandings, both written and oral, among the parties or any of them with
respect to the subject matter hereof (including, without limitation, the letter
of intent between the Company and American Business Partners LLC) and (b) shall
not be assigned by operation of law or otherwise, provided that Provant or
Acquisition may assign its respective rights and obligations to any direct or
indirect subsidiary of Provant, but no such assignment shall relieve Provant of
its obligations hereunder.
11.3 VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, each of which shall remain in full force and
effect.
11.4 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person or by electronic facsimile transmission,
cable,
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<PAGE> 51
telegram, or telex, or when mailed by registered or certified mail (postage
prepaid, return receipt requested) or delivered to a courier of national
reputation to the respective parties as follows:
If to Provant or Acquisition, to it at:
67 Batterymarch Street, Suite 500
Boston, MA 02110
Facsimile: (617) 261-1610
with a copy to:
Nutter, McClennen & Fish, LLP
One International Place
Boston, Massachusetts 02110-2699
Attention: Constantine Alexander, Esq.
Facsimile: (617) 973-9748
If to the Company or any Stockholder, to it or him at:
5314 North 250 West
Suite 320
Provo, UT 84604
Facsimile: (801) 375-7595
with copies to:
McDermott, Will & Emery
227 West Monroe Street
Suite 4400
Chicago, IL 60606-5096
Attention: Jared Kaplan, Esq.
Facsimile: (312) 984-7700
and
McDermott, Will & Emery
600 13th Street NW
Washington, DC 20005-3096
Attention: Marsha Matthews, Esq.
Facsimile: (202) 756-8087
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
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<PAGE> 52
11.5 GOVERNING LAW. This Agreement and all rights of the parties arising
in connection with the transactions contemplated hereby (including the
negotiation hereof, and whether or not such transactions shall be consummated)
shall be governed by and construed in accordance with the internal laws of the
State of Utah, regardless of the laws that might otherwise govern under
applicable principles of conflicts of laws thereof.
11.6 DESCRIPTIVE HEADINGS. The descriptive headings herein are inserted
for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
11.7 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same agreement. Copies (photostatic,
facsimile or otherwise) of signatures to this Agreement shall be deemed to be
originals and may be relied upon to the same extent as originals, and delivery
of a duly executed signature page to this Agreement shall be deemed to be
delivery of this Agreement in its entirety.
11.8 EXPENSES. All costs and expenses incurred in connection with the
transactions contemplated by this Agreement shall be paid by the party incurring
such expenses, (i) solely in the event the Merger is consummated, the reasonable
legal and accounting expenses of the Company, up to a maximum of $50,000, shall
be paid by (at the election of Provant) either Provant or the Surviving
Corporation, and (ii) all expenses of the Company not payable pursuant to clause
(i) shall be paid directly by the Stockholders or expensed (and not capitalized)
by the Company prior to the computation of the Company's net worth for purposes
of determining satisfaction of the Financial Condition. An account receivable
for expenses reimbursable by Provant or the Surviving Corporation under clause
(i) above may be included on the books of the Company for purposes of
calculating the Closing Net Worth, to the extent such amounts have previously
been expensed by the Company.
11.9 JOINT AND SEVERAL. The representations, warranties, agreements,
covenants and obligations of the Stockholders under this Agreement are joint and
several. The indemnity obligations of Provant and the Provant Principals under
this Agreement are joint and several.
11.10 PARTIES IN INTEREST. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Agreement.
11.11 INTERPRETATION. The Parties acknowledge and agree that each party
and its counsel reviewed and negotiated the terms and provisions of this
Agreement and has contributed to its revision and that the rule of construction
to the effect that any
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<PAGE> 53
ambiguities are resolved against the drafting party shall not be employed in the
interpretation of this Agreement.
11.12 MOST FAVORED NATION TREATMENT. Subject to the last sentence of
this Section 11.12, Provant covenants and agrees that the Company and the
Stockholders will be accorded "most favored nation" treatment with respect to
any material amendments adopted after the date hereof with respect to any
Additional Merger Agreement or any other agreement materially altering the
rights or obligations of any Additional Company or the stockholders thereof. The
parties agree to amend this Agreement as necessary from time to time to effect
any changes required pursuant to such "most favored nation" treatment.
Notwithstanding the foregoing, such "most favored nation" treatment shall not
apply to (a) amendments of any provisions not applicable generally to this
Agreement and all (or substantially all) of the Additional Merger Agreements, or
(b) any waiver of a closing condition or an affirmative or negative covenant or
comparable undertaking contained in any Additional Merger Agreement.
[Remainder of page intentionally blank]
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<PAGE> 54
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
day and year first above written.
PROVANT, INC.
By:__________________________________________
Name:________________________________________
Title:_______________________________________
NOVATIONS ACQUISITION CORP.
By:__________________________________________
Name:________________________________________
Title:_______________________________________
NOVATIONS, INC.
By:__________________________________________
Name:________________________________________
Title:_______________________________________
STOCKHOLDERS:
_____________________________________________
JOSEPH FOLKMAN
_____________________________________________
JOSEPH HANSON
_____________________________________________
KURT SANDHOLTZ
_____________________________________________
NORMAN SMALLWOOD
_____________________________________________
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<PAGE> 55
RANDY STOTT
_____________________________________________
JONATHAN YOUNGER
_____________________________________________
PROVANT PRINCIPALS:
_____________________________________________
PAUL M. VERROCHI
_____________________________________________
DOMINIC J. PUOPOLO
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<PAGE> 1
Exhibit 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
PROVANT, INC.
Provant, Inc. (the "Company"), a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware (the
"GCL") filed its original Certificate of Incorporation under the name Safe Ride,
Inc. with the Delaware Secretary of State on November 18, 1996. The Certificate
of Incorporation subsequently was amended by Certificates of Amendment filed
with the Delaware Secretary of State on November 6, 1997 and January 22, 1998.
This Amended and Restated Certificate of Incorporation was duly adopted by a
majority of the stockholders of the Company on February 10, 1998 in accordance
with the provisions of Sections 242 and 245 of the GCL.
NOW THEREFORE, the certificate of incorporation of the Company, as
amended and restated herein, shall at the effective time of this Amended and
Restated Certificate of Incorporation read as follows:
FIRST: The name of the Company is Provant, Inc.
SECOND: The address of the registered office of the Company in the
State of Delaware is Company Trust Center, 1209 Orange Street, City of
Wilmington, County of New Castle. The name of its registered agent at that
address is The Corporation Trust Company.
THIRD: The purpose of the Company is to engage in any lawful act or
activity for which a company may be organized under the General Corporation Law
of the State of Delaware as set forth in Title 8 of the Delaware Code (the
"GCL").
FOURTH: The aggregate number of shares of stock which the Company shall
have authority to issue is forty-five million (45,000,000) shares, consisting of
forty million (40,000,000) shares of common stock, $.01 par value per share (the
"Common Stock"), and five million (5,000,000) shares of preferred stock, $.01
par value per share (the "Preferred Stock"). Except as otherwise provided by
law, the shares of stock of the Company, regardless of class, may be issued by
the Company from time to time in such amounts, for such consideration and for
such corporate purposes as the Board of Directors may from time to time
determine. A description of the different classes and series of the Company's
capital stock and a statement of
<PAGE> 2
the designations and the relative rights, preferences and limitations of the
shares of each class and series of capital stock are as follows:
(a) Common Stock
(i) Voting Rights. Except as otherwise provided by the GCL or
in this Article FOURTH (or in any certificate of designation
establishing a series of Preferred Stock), the holders of Common Stock
shall exclusively possess all voting power. Each holder of record of
issued and outstanding Common Stock shall be entitled to one (1) vote
on all matters for each share so held.
(ii) Dividends. Subject to the rights and preferences, if any,
of the holders of Preferred Stock, each issued and outstanding share of
Common Stock shall entitle the record holder thereof to receive an
equal portion of cash dividends and distributions out of funds legally
available therefor, when, as and if declared by the Board of Directors,
in such amounts and at such times as the Board of Directors shall
determine.
(iii) Liquidation. Upon any voluntary or involuntary
liquidation, dissolution or winding up of the Company, after there
shall have been paid to or set aside for the holders of any class of
capital stock having preference over the Common Stock in such
circumstances the full preferential amounts to which they are
respectively entitled, the holders of the Common Stock, and of any
class or series of capital stock entitled to participate in whole or in
part therewith as to the distribution of assets, shall be entitled,
after payment or provision for payment of all debts and liabilities of
the Company, to receive the remaining assets of the Company available
for distribution, in cash or in kind, in proportion to their holdings.
(b) Preferred Stock
The Board of Directors of the Company is authorized by resolution or
resolutions, from time to time adopted, to provide for the issuance of Preferred
Stock in one or more series and to fix and state the voting powers,
designations, preferences and relative participating, optional or other special
rights of the shares of each series and the qualifications, limitations and
restrictions thereof, including, but not limited to, determination of one or
more of the following:
(i) the distinctive designations of each such series and the
number of shares which shall constitute such series, which number may
be increased (except where otherwise provided by the Board of Directors
in creating such series) or decreased (but not below the number of
shares thereof then outstanding) from time to time by the Board of
Directors;
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<PAGE> 3
(ii) the annual rate or amount of dividends payable on shares
of such series, whether such dividends shall be cumulative or
non-cumulative, the conditions upon which and the dates when such
dividends shall be payable, the date from which dividends on cumulative
series shall accrue and be cumulative on all shares of such series
issued prior to the payment date for the first dividend of such series,
the relative rights of priority, if any, of payment of dividends on
shares of that series, and the participating or other special rights,
if any, with respect to such dividends;
(iii) whether such series will have any voting rights in
addition to those prescribed by law and, if so, the terms and
conditions of the exercise of such voting rights;
(iv) whether the shares of such series shall be redeemable or
callable and, if so, the price or prices at which, and the terms and
conditions on which, such shares may be redeemed or called, which price
may vary under different conditions and at different redemption or call
dates;
(v) the amount or amounts payable upon the shares of such
series in the event of voluntary or involuntary liquidation,
dissolution or winding up of the Company, and the relative rights of
priority, if any, of payment of shares of such series;
(vi) whether the shares of such series shall be entitled to
the benefit of a sinking or retirement fund to be applied to the
purchase or redemption of such shares, and if so entitled, the amount
of such fund and the manner of its application, including the price or
prices at which such shares may be redeemed or purchased through the
application of such fund;
(vii) whether the shares of such series shall be convertible
into, or exchangeable for, shares of any other class or classes or of
any other series of the same or any other class or classes of stock of
the Company, and if so convertible or exchangeable, the conversion
price or prices, or the rate or rates of exchange, and the adjustments
thereof, if any, at which such conversion or exchange may be made, and
any other terms and conditions of such conversion or exchange;
(viii) whether the shares of such series which are redeemed or
converted shall have the status of authorized but unissued shares of
Preferred Stock and whether such shares may be reissued as shares of
the same or any other series of stock;
(ix) the conditions and restrictions, if any, on the payment
of dividends or on the making of other distributions on, or the
purchase, redemption or other acquisition by
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<PAGE> 4
the Company, or any subsidiary thereof, of, the Common Stock or any other
class (or other series of the same class) ranking junior to the shares of
such series as to dividends or upon liquidation, dissolution or winding
up; and
(x) the conditions and restrictions, if any, on the creation of
indebtedness of the Company, or any subsidiary thereof, or on the issue of
any additional stock ranking on parity with or prior to the shares of such
series as to dividends or upon liquidation, dissolution or winding up.
All shares within each series of Preferred Stock shall be alike in every
particular, except with respect to the dates from which dividends, if any, shall
commence to accrue.
FIFTH: The following provisions are inserted for the management of the
business and the conduct of the affairs of the Company, and for further
definition, limitation and regulation of the powers of the Company and of its
directors and stockholders:
(i) The business and affairs of the Company shall be managed by or
under the direction of the Board of Directors. No director need be a
stockholder.
(ii) The Board of Directors shall have the power to make, alter,
amend, change, add to or repeal the By-Laws of the Company, subject to the
right of the stockholders described in the GCL to make, alter, amend,
change, add to or repeal the By-Laws.
(iii) Except as otherwise fixed pursuant to the provisions of
Article FOURTH hereof relating to the rights of the holders of any class
or series of stock having a preference over the Common Stock with respect
to the election of additional directors under specified circumstances, the
number of directors of the Company shall be as from time to time fixed by,
or in the manner provided in, the By-Laws of the Company. Election of
directors need not be by written ballot unless the By-Laws so provide.
(iv) Except as otherwise fixed pursuant to the provisions of Article
FOURTH hereof relating to the rights of the holders of any class or series
of stock having a preference over the Common Stock with respect to the
election of directors under specified circumstances, newly created
directorships resulting from any increase in the number of directors and
any vacancies on the Board of Directors resulting from death, resignation,
disqualification, removal or other cause shall be filled solely by the
affirmative vote of a majority of the remaining directors then in office,
even though less than a quorum of the Board of Directors, or by a sole
remaining director. Any director
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<PAGE> 5
elected in accordance with the preceding sentence shall hold office for
the remainder of the term of the other directors then in office and until
such director's successor shall have been elected and qualified. No
decrease in the number of directors constituting the Board of Directors
shall shorten the term of any incumbent director.
(v) No director shall be personally liable to the Company or any of
its stockholders for monetary damages for breach of fiduciary duty as a
director, except to the extent that such exemption from liability or
limitation thereof is not permitted under the GCL as the same exists or
may hereafter be amended. Any repeal or modification of this Article FIFTH
by the stockholders of the Company shall not adversely affect any right or
protection of a director of the Company existing at the time of such
repeal or modification with respect to acts or omissions occurring prior
to such repeal or modification.
(vi) The Company shall indemnify any officer or director who, as a
result of his or her acting as an officer or director of the Company, was
or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, and upon request shall pay any expense
incurred by any officer or director in connection with any such action,
suit or proceeding in advance of the final disposition of such matter, all
to the fullest extent permitted by Delaware law.
(vii) In addition to the powers and authority hereinbefore or by
statute expressly conferred upon them, the directors are hereby empowered
to exercise all such powers and do all such acts and things as may be
exercised or done by the Company, subject, nevertheless, to the provisions
of the GCL, this Certificate of Incorporation and any By-Law adopted by
the stockholders; provided, however, that no By-Laws hereafter adopted by
the stockholders shall invalidate any prior act of the directors which
would have been valid if such By-Laws had not been adopted.
(viii) Meetings of stockholders may be held within or outside the
State of Delaware, as the By-Laws may provide. The books of the Company
may be kept (subject to any provisions contained in the GCL) outside the
State of Delaware at such places as may be designated from time to time by
the Board of Directors or in the By-Laws of the Company.
(ix) If at any time the Company shall have a class of stock
registered pursuant to the provisions of the Securities Exchange Act of
1934, as amended, for so long as such class is so registered, any action
by the stockholders of such class must be
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<PAGE> 6
taken at an annual or special meeting of stockholders and may not be taken
by written consent.
SIXTH: Whenever a compromise or arrangement is proposed between the
Company and its creditors or any class of them and/or between the Company and
its stockholders or any class of them, any court of equitable jurisdiction
within the State of Delaware may, on the application in a summary way of the
Company or of any creditor or stockholder thereof or on the application of any
receiver or receivers appointed for the Company under the provisions of Section
291 of the GCL or on the application of trustees in dissolution or of any
receiver or receivers appointed for the Company under the provisions of Section
279 of the GCL, order a meeting of the creditors or class of creditors, and/or
of the stockholders or class of stockholders of the Company, as the case may be,
to be summoned in such manner as said court directs. If a majority in number
representing three-fourths in value of the creditors or class or creditors,
and/or stockholders or class of stockholders of the Company, as the case may be,
agree to any compromise or arrangement and to any reorganization of the Company
as a consequence of such compromise or arrangement, then said compromise or
arrangement and the said reorganization shall, if sanctioned by the court to
which the application has been made, be binding on all the creditors or class of
creditors, and/or on all the stockholders or class of stockholders, of the
Company, as the case may be, and also on the Company.
SEVENTH: The Company reserves the right to amend, alter, change or repeal
any of the provisions contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
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<PAGE> 7
The undersigned President of the Company, Paul M. Verrochi, whose mailing
address is Provant, Inc., 67 Batterymarch Street, Suite 500, Boston,
Massachusetts 02110, hereby executes this Amended and Restated Certificate of
Incorporation on this 12th day of February, 1998.
PROVANT, INC.
By: /s/ Paul M. Verrochi
--------------------
Paul M. Verrochi
President
<PAGE> 1
Exhibit 3.2
BY-LAWS OF
PROVANT, INC.
ARTICLE I
Offices
The registered office shall be in the City of Wilmington, County of New
Castle, State of Delaware, and the name of the resident agent in charge thereof
is The Corporation Trust Company.
The corporation may also have offices at such other places within or
outside the State of Delaware as the Board of Directors may from time to time
appoint or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION L. PLACE OF MEETINGS. All meetings of stockholders for any purpose
shall be held at such place, within or outside the State of Delaware, as shall
be designated by the Board of Directors and stated in the notice of the meeting.
SECTION 2. ANNUAL MEETING. An annual meeting of the stockholders of the
corporation, for the election of Directors to succeed those whose terms expire
and for the transaction of such other business as may properly come before the
meeting, shall be held on such date and at such time as shall be fixed from time
to time by the Board of Directors and stated in the notice of the meeting.
SECTION 3. SPECIAL MEETINGS. Special meetings of the stockholders may be
called by the Chairman of the Board, if any, the President or by order of the
Board of Directors. Business transacted at any special meeting shall be confined
to the purpose or purposes stated in the notice of such meeting.
SECTION 4. NOTICE OF MEETING. Notice of the time and place of each annual
meeting and each special meeting of stockholders shall be given by the
Secretary, not less than ten nor more than sixty days before the meeting, to
each stockholder of record entitled to vote at such meeting. Notices of all
meetings of stockholders shall state the purposes for which the meetings are
held.
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SECTION 5. LIST OF STOCKHOLDERS. At least ten days before every meeting of
stockholders a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder,
shall be prepared by the Secretary, who shall have charge of the stock ledger.
Such list shall be open for said ten days to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, either
at a place specified in the notice of the meeting (which place shall be within
the city where the meeting is to be held) or, if no such other place has been so
specified, at the place where the meeting is to be held. Such list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder present at the meeting.
SECTION 6. QUORUM. At any meeting of stockholders, the holders of issued
and outstanding shares of capital stock which represent a majority of the votes
entitled to be cast thereat, present in person or represented by proxy, shall
constitute a quorum for the transaction of business. If, however, such quorum
shall not be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have the power to adjourn the meeting from time to time until a
quorum shall be present or represented. Unless the adjournment is for more than
thirty days or a new record date is fixed for the adjourned meeting, notice of
the adjourned meeting need not be given if the time and place thereof are
announced at the meeting at which the adjournment is taken. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally called.
SECTION 7. VOTING. At any meeting of the stockholders, every
stockholder having the right to vote shall be entitled to vote in person, or by
proxy appointed by an instrument in writing subscribed by such stockholder and
bearing a date not more than eleven months prior to said meeting. When a quorum
is present at any meeting, a plurality of the votes properly cast for election
to the Board of Directors shall elect to the Board of Directors and a majority
of the votes properly cast on any question other than election to the Board of
Directors shall decide the question unless the question is one upon which by
express provision of law or of the certificate of incorporation or of these
By-laws a different vote is required, in which case such express provision shall
govern and control the decision of such question.
SECTION 8. FIXING OF RECORD DATE. (a) In order that the corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action other than stockholder action by
written consent, the Board of
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Directors may fix a record date, which shall not precede the date such record
date is fixed and shall not be more than sixty nor less than ten days before the
date of such meeting, nor more than sixty days prior to any such other action.
If no record date is fixed, the record date (i) for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given,
and (ii) for any other purpose other than stockholder action by written consent,
shall be at the close of business on the day on which the Board of Directors
adopts the resolution relating thereto. A determination of stockholders of
record entitled to notice of or to vote at a meeting of stockholders shall apply
to any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
(b) In order that the corporation may determine the stockholders entitled
to consent to corporate action in writing without a meeting, the Board of
Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which date shall not be more than 10 days after the date upon
which the resolution fixing the record date is adopted by the Board of
Directors.
SECTION 9. NOMINATION OF DIRECTORS. Nominations of persons for election to
the Board of Directors of the corporation may be made at a meeting of
stockholders (a) by or at the direction of the Board of Directors or (b) by any
stockholder of the corporation who is a stockholder of record and who is
entitled to vote for the election of directors at the meeting.
SECTION 10. NOTICE OF BUSINESS. At any meeting of the stockholders, only
such business shall be conducted as shall have been brought before the meeting
(a) by or at the direction of the Board of Directors or (b) by any stockholder
of the corporation who is a stockholder of record at the time of giving of the
notice provided for in this Section 10, who shall be entitled to vote at such
meeting and who complies with the notice procedures set forth in this Section
10. For business to be properly brought before a stockholder meeting by a
stockholder, the stockholder must have given timely notice thereof in writing to
the Secretary of the corporation. To be timely, a stockholder's notice must be
delivered to or mailed and received at the principal executive offices of the
corporation not less than 60 days nor more than 90 days prior to the meeting;
provided, however, that in the event that less than 70 days' notice or prior
public disclosure of the date of the meeting is given or made to stockholders,
notice by the stockholder to be timely must be received no later than the close
of business on the 10th day following the day on which such notice of the date
of the meeting was mailed or such public disclosure was made. A stockholder's
notice to the Secretary shall set forth as to each matter the stockholder
proposes to bring before the meeting (a) a brief description of the business
desired to be brought before the meeting and the reasons for conducting such
business at the meeting, (b) the name and address, as they appear on the
corporation's books, of the stockholder proposing
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such business, (c) the class and number of shares of the corporation which are
beneficially owned by the stockholder and (d) any material interest of the
stockholder in such business. Subject only to the last sentence of this Section
10 and notwithstanding anything else in the By-laws to the contrary, no business
shall be conducted at a stockholder meeting except in accordance with the
procedures set forth in this Section 10. The Chairman of the meeting shall, if
the facts warrant, determine and declare to the meeting that business was not
properly brought before the meeting and in accordance with the provisions of the
By-laws, and any such business not properly brought before the meeting shall not
be transacted. Notwithstanding the foregoing provisions of this Section 10, a
stockholder shall be entitled to request inclusion of proposals in the
corporation's proxy statement pursuant to Rule 14a-8 under the Securities
Exchange Act of 1934, as amended, and any proposals so included shall be acted
upon at the stockholder meeting.
ARTICLE III
DIRECTORS
SECTION 1. NUMBER. The corporation shall have one or more Directors, the
number of Directors to be determined from time to time by vote of a majority of
the Directors then in office. Except in connection with the election of
Directors at the annual meeting of stockholders, the number of Directors may be
decreased only to eliminate vacancies by reason of death, resignation or removal
of one or more Directors. No Director need be a stockholder.
SECTION 2. POWERS OF DIRECTORS. The affairs, property and business of the
corporation shall be managed by the Board of Directors which may exercise all
such powers of the corporation and do all such lawful acts and things as are not
by law or by the certificate of incorporation or these By-laws directed or
required to be exercised or done by the stockholders.
SECTION 3. VACANCIES. Vacancies and any newly created Directorships
resulting from any increase in the number of Directors may be filled by vote of
the holders of the particular class or series of stock entitled to elect such
Director at a meeting called for the purpose, or by a majority of the Directors
then in office, although less than a quorum, or by a sole Director, in each case
elected by the particular class or series of stock entitled to elect such
Directors. When one or more Directors shall resign from the Board, effective at
a future date, a majority of the Directors then in office, including those who
have resigned, who were elected by the particular class or series of stock
entitled to elect such resigning Director or Directors shall have the power to
fill such vacancy or vacancies, the vote or action by writing thereon to take
effect when such resignation or resignations shall become effective. The
Directors shall have and may exercise all their powers notwithstanding the
existence of one or more
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vacancies in their number, subject to any requirements of law or of the
certificate of incorporation or of these By-Laws as to the number of Directors
required for a quorum or for any vote or other action.
SECTION 4. ANNUAL MEETING OF DIRECTORS. The first meeting of each newly
elected Board of Directors may be held without notice immediately after an
annual meeting of stockholders (or a special meeting of stockholders held in
lieu of an annual meeting) at the same place as that at which such meeting of
stockholders was held; or such first meeting may be held at such place (within
or outside the State of Delaware) and time as shall be fixed by the consent in
writing of all the Directors, or may be called in the manner hereinafter
provided with respect to the call of special meetings.
SECTION 5. REGULAR MEETINGS OF DIRECTORS. Regular meetings of the Board of
Directors may be held at such times and at such place or places (within or
outside the State of Delaware) as the Board of Directors may from time to time
prescribe. No notice need be given of any regular meeting and a notice, if
given, need not specify the purposes thereof.
SECTION 6. SPECIAL MEETINGS OF DIRECTORS. Special meetings of the Board of
Directors may be called at any time by or under the authority of the Chairman of
the Board, if any, or the President and shall be called by him or her or by the
Secretary on written request of any two Directors or, if the Secretary fails to
do so, by two Directors in the name of the Secretary, to be held in each
instance at such place (within or outside the State of Delaware) as the person
calling the meeting may designate in the call thereof. Notice of each special
meeting of the Board of Directors, stating the time and place thereof, shall be
given to each Director by the Secretary not less than twenty-four hours before
the meeting. Such notice need not specify the purposes of the meeting.
SECTION 7. QUORUM; VOTING. At any meeting of the Board of Directors a
majority of the Directors then in office shall constitute a quorum for the
transaction of business, but if a quorum shall not be present at any meeting of
Directors, the Directors present thereat may adjourn the meeting from time to
time without notice other than announcement at the meeting, until a quorum shall
be present. Except as otherwise provided by law or by the certificate of
incorporation or by the By-laws, the affirmative vote of at least a majority of
the Directors present at a meeting at which there is a quorum shall be the act
of the Board of Directors.
SECTION 8. MEETINGS BY TELEPHONE. Members of the Board of Directors or of
any committee thereof may participate in meetings of the Board of Directors or
of such committee by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation shall constitute presence in person at such
meeting.
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SECTION 9. ACTION WITHOUT MEETING. Unless otherwise restricted by the
certificate of incorporation, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting if all members of the Board of Directors or of such committee,
as the case may be, consent thereto in writing and the writing or writings are
filed with the minutes of proceedings of the Board of Directors or of such
committee.
SECTION 10. COMPENSATION. By resolution of the Board of Directors, the
Directors, as such, may receive stated salaries for their services, and may be
allowed a fixed sum and expenses of attendance, if any, for attendance at each
regular or special meeting of the Board. Members of committees may also be
allowed a fixed sum and expenses of attendance, if any, for attending committee
meetings. Nothing herein contained shall preclude any Director from serving the
corporation in any other capacity and receiving compensation for such services.
ARTICLE IV
EXECUTIVE AND OTHER COMMITTEES
The Board of Directors may, by vote of a majority of the whole Board: (a)
designate, change the membership of or terminate the existence of any committee
or committees, each committee to consist of one or more Directors; (b) designate
one or more Directors as alternate members of any such committee who may replace
any absent or disqualified member at any meeting of the committee; and (c)
determine the extent to which each such committee shall have and may exercise
the powers of the Board of Directors in the management of the business and
affairs of the corporation, including the power to authorize the seal of the
corporation to be affixed to all papers which require it and the power and
authority to declare dividends or to authorize the issuance of stock; excepting,
however, such powers which by law, by the certificate of incorporation or by
these By-laws they are prohibited from so delegating. In the absence or
disqualification of any member of such committee and his or her alternative, if
any, the member or members thereof present at any meeting and not disqualified
from voting, whether or not constituting a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member. Except as the Board of Directors may
otherwise determine, any committee may make rules for the conduct of its
business, but unless otherwise provided by the Board or such rules, its business
shall be conducted as nearly as may be in the same manner as is provided by
these By-laws for the conduct of business by the Board of Directors. Each
committee shall keep regular minutes of its meetings and report the same to the
Board of Directors upon request.
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ARTICLE V
OFFICERS
SECTION 1. OFFICERS AND THEIR ELECTION, TERM OF OFFICE AND VACANCIES. The
officers of the corporation shall be a Chairman of the Board, if any, a
President, a Secretary, a Treasurer and such Executive Vice Presidents, Vice
Presidents, Assistant Secretaries, Assistant Treasurers and other officers as
the Board of Directors may from time to time determine and elect or appoint. All
officers shall be elected annually by the Board of Directors at their first
meeting following the annual meeting of stockholders or any special meeting held
in lieu thereof and shall hold office until their successors are duly elected
and qualified. The Chairman of the Board, if there is one, must be a Director.
Any other officer may, but need not be, a member of the Board of Directors. Two
or more offices may be held by the same person. Any officer elected by the Board
of Directors may be removed at any time by the Board of Directors. If any
vacancy shall occur among the officers, it shall be filled by the Board of
Directors.
SECTION 2. CHAIRMAN OF THE BOARD OF DIRECTORS AND PRESIDENT. The Chairman
of the Board, if any, shall have such duties and powers as shall be designated
from time to time by the Board of Directors. Unless the Board of Directors
otherwise specifies, the Chairman of the Board, or if there is none, the
President, shall preside, or designate the person who shall preside, at all
meetings of the stockholders and of the Board of Directors.
Unless the Board of Directors otherwise specifies, the President shall be
the chief executive officer and shall have direct charge of all business
operations of the corporation and, subject to the control of the Directors,
shall have general charge and supervision of the business of the corporation.
SECTION 3. VICE PRESIDENTS. In the absence or disability of the President,
his or her powers and duties shall be performed by the Executive Vice President,
if only one, or, if more than one, by the one designated for the purpose by the
Board. Each Vice President shall have such other powers and perform such other
duties as the Board shall from time to time designate.
SECTION 4. TREASURER. The Treasurer shall keep full and accurate accounts
of receipts and disbursements in books belonging to the corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the corporation in such depositaries as shall be designated by the Board or in
the absence of such designation in such depositaries as he or she shall from
time to time deem proper. He or she shall disburse the funds of the corporation
as shall be ordered by the Board, taking proper vouchers for such disbursements.
He or she shall promptly render to the Chief Executive Officer and to the Board
such statements of his or her
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transactions and accounts as the Chief Executive Officer and Board respectively
may from time to time require. The Treasurer shall perform such duties and have
such powers additional to the foregoing as the Board may designate.
SECTION 5. ASSISTANT TREASURERS. In the absence or disability of the
Treasurer, his or her powers and duties shall be performed by the Assistant
Treasurer, if only one, or if more than one, by the one designated for the
purpose by the Board. Each Assistant Treasurer shall have such other powers and
perform such other duties as the Board shall from time to time designate.
SECTION 6. SECRETARY. The Secretary shall issue notices of all meetings of
stockholders and Directors and of the other committees where notices of such
meetings are required by law or these By-laws. He or she shall keep the minutes
of meetings of stockholders and of the Board of Directors and of the other
committees, respectively, unless such committees appoint their own respective
secretaries and be responsible for the custody thereof. Unless the Board shall
appoint a transfer agent and/or registrar, the Secretary shall be charged with
the duty of keeping, or causing to be kept, accurate records of all stock
outstanding, stock certificates issued and stock transfers. He or she shall sign
such instruments as require his or her signature and shall perform such other
duties and shall have such powers as the Board of Directors shall designate from
time to time, in all cases subject to the control of the Board of Directors. The
Secretary shall have custody of the corporate seal, and shall affix and attest
such seal on all documents whose execution under seal is duly authorized. In his
or her absence at any meeting, an Assistant Secretary or the Secretary pro
tempore shall perform his or her duties thereat.
SECTION 7. ASSISTANT SECRETARIES. In the absence or disability of the
Secretary, his or her powers and duties shall be performed by the Assistant
Secretary, if only one, or, if more than one, by the one designated for the
purpose by the Board. Each Assistant Secretary shall have such powers and
perform such other duties as the Board shall from time to time designate.
SECTION 8. SALARIES. The salaries of officers, agents and employees shall
be fixed from time to time by or under authority from the Board of Directors.
ARTICLE VI
RESIGNATIONS AND REMOVALS
SECTION 1. OFFICERS, AGENTS, EMPLOYEES AND MEMBERS OF COMMITTEES. Any
officer, agent or employee of the corporation may resign at any time by giving
written notice to the Board of Directors, the Chairman of the Board, if any, the
President or the Secretary of the corporation; and any member of any committee
may
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resign by giving written notice either as aforesaid or to the committee of which
he or she is a member or to the chairman thereof. Any such resignation shall
take effect at the time specified therein, or if the time be not specified, upon
receipt thereof, and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective. The Board of Directors
may at any time, with or without cause, remove from office or discharge or
terminate the employment of any officer, agent, employee or member of any
committee.
SECTION 2. DIRECTORS. Any Director of the corporation may resign at any
time by giving written notice to the Board of Directors, the Chairman of the
Board, if any, the President or the Secretary of the corporation. Any such
resignation shall take effect at the time specified therein or, if the time be
not specified, upon receipt thereof; and unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective. When
one or more Directors shall resign from the Board of Directors, effective at a
future date, a majority of the Directors then in office, including those who
have so resigned, shall have power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective, and each Director so chosen shall hold office as provided in these
By-laws. The stockholders of the corporation entitled to vote upon the election
of Directors may, at any time, remove from office any one or more Directors only
with cause, and his or her successor or their successors shall be elected by the
remaining Directors as provided in these By-laws with respect to the filling of
other vacancies. A Director may be removed for cause only after reasonable
notice and opportunity to be heard before the body proposing to remove him or
her.
ARTICLE VII
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHERS
SECTION 1. The corporation shall indemnify, to the fullest extent
permitted by the General Corporation Law of the State of Delaware as presently
in effect or as hereafter amended:
(a) Any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative and whether
external or internal to the corporation (other than an action by or in the
right of the corporation) by reason of the fact that he or she is or was a
Director or officer of the corporation, or is or was serving at the
request of the corporation as a director or officer of another
corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him or her in
connection with such suit, action or proceeding if he or she acted in
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good faith and in a manner which he or she reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe that
his or her conduct was unlawful; provided, however, that the foregoing
shall not require this corporation to indemnify or advance expenses to any
person in connection with any action, suit, proceeding, claim or
counterclaim initiated by or on behalf of such person. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction,
or upon a plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith and in a
manner which he or she reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal
action or proceeding, that the person had no reasonable cause to believe
that his or her conduct was lawful.
(b) Any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the
right of the corporation to procure a judgment in its favor by reason of
the fact that he or she is or was a Director or officer of the
corporation, or is or was serving at the request of the corporation as a
director or officer of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys' fees)
and amounts paid in settlement actually and reasonably incurred by him or
her in connection with the defense or settlement of such action or suit if
he or she acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of the corporation
and except that no indemnification shall be made in respect of any claim,
issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery of the State of Delaware or the court in which such action or
suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem
proper.
SECTION 2. The Board of Directors, in its discretion, may authorize the
corporation to indemnify, to the fullest extent permitted by the General
Corporation Law of the State of Delaware as presently in effect or as hereafter
amended:
(a) Any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an
action by or in the right of the corporation) by reason of the fact that
he or she is or was an employee or agent of the corporation, or is or was
serving at the request of the corporation as an employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys'
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fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or her in connection with such suit, action or
proceeding if he or she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interest of the
corporation, and, with respect to any criminal action or proceeding, had
no reasonable cause to believe his or her conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he or she reasonably believed
to be in or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, that the person had no
reasonable cause to believe that his or her conduct was lawful.
(b) Any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the
right of the corporation to procure a judgment in its favor by reason of
the fact that he or she is or was an employee or agent of the corporation,
or is or was serving at the request of the corporation as an employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees) and amounts paid
in settlement actually and reasonably incurred by him or her in connection
with the defense or settlement of such action or suit if he or she acted
in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as
to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of Chancery of
the State of Delaware or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the
Court of Chancery or such other court shall deem proper.
SECTION 3. Any indemnification under this Article VII (unless required by
law or ordered by a court) shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the Director,
officer, employee or agent is proper in the circumstances because he or she has
met the applicable standard of conduct set forth in Sections l and 2 of this
Article VII. Such determination shall be made (i) by a majority vote of the
Directors who are not parties to such action, suit or proceeding, even though
less than a quorum, (ii) if there are no such Directors, or if such Directors so
direct, by independent legal counsel in a written opinion, or (iii) by the
stockholders of the corporation.
SECTION 4. Expenses incurred by a Director or officer in defending a civil
or criminal action, suit or proceeding shall be paid by the corporation in
advance of the
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final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of the Director or officer to repay such amount if
it shall ultimately be determined that he or she is not entitled to be
indemnified by the corporation as authorized in this Article VII. Any advance
under this Section 4 shall be made promptly, and in any event within ninety
days, upon the written request of the person seeking the advance.
SECTION 5. The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article VII shall not be deemed exclusive of any other
rights to which any person, whether or not entitled to be indemnified under this
Article VII, may be entitled under any statute, by-law, agreement, vote of
stockholders or disinterested Directors or otherwise, both as to action in his
or her official capacity and as to action in another capacity while holding such
office. Each person who is or becomes a Director or officer as described in
Section 1 shall be deemed to have served or to have continued to serve in such
capacity in reliance upon the indemnity provided for in this Article VII. All
rights to indemnification under this Article VII shall be deemed to be provided
by a contract between the corporation and the person who serves as a Director or
officer of the corporation at any time while these By-laws and other relevant
provisions of the General Corporation Law of the State of Delaware and other
applicable law, if any, are in effect. Any repeal or modification thereof shall
not affect any rights or obligations then existing.
SECTION 6. The Board of Directors may at any time and from time to time
cause the corporation to purchase and maintain insurance on behalf of any person
who is or was a Director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against any liability asserted against him or her and incurred
by him or her in any such capacity, or arising out of his or her status as such,
whether or not the corporation would have the power to indemnify him or her
against such liability under the provisions of the General Corporation Law of
the State of Delaware (as presently in effect or hereafter amended), the
Certificate of Incorporation of the corporation or these By-laws.
SECTION 7. The corporation's indemnification under Sections 1 and 2 of
this Article VII of any person who is or was a Director, officer, employee or
agent of the corporation, or is or was serving, at the request of the
corporation, as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall be reduced by any
amounts such person receives as indemnification (i) under any policy of
insurance purchased and maintained on his or her behalf by the corporation, (ii)
from such other corporation, partnership, joint venture, trust or other
enterprise, or (iii) under any other applicable indemnification provision.
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SECTION 8. In the discretion of the Board of Directors of the corporation,
for the purposes of this Article VII, references to "the corporation" may also
include any constituent corporation (including any constituent of a constituent)
absorbed in a consolidation or merger which, if its separate existence had
continued, would have had power and authority to indemnify its Directors or
officers, so that any person who is or was a Director or officer of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise, would stand in the same position under the
provisions of this Article VII with respect to the resulting or surviving
corporation as he or she would have with respect to such other constituent
corporation if its separate existence had continued.
SECTION 9. In addition to and without limiting the foregoing provisions of
this Article VII and except to the extent otherwise required by law, any person
seeking indemnification under or pursuant to Section 1 of this Article VII shall
be deemed and presumed to have met the applicable standard of conduct set forth
in Section 1 unless the contrary shall be established.
SECTION 10. For purposes of this Article VII, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to any employee
benefit plan; and references to "serving at the request of the corporation"
shall include any service by a Director or officer of the corporation which
imposes duties on, or involves services by, such person with respect to any
employee benefit plan, its participants, or beneficiaries; and a person who
acted in good faith and in a manner he or she reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan shall
be deemed to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this Article VII.
SECTION 11. To the extent that a Director, officer, agent or employee of
the corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Section 1 or in Section 2, or in
defense of any claim, issue or matter therein, he or she shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
him or her in connection therewith.
SECTION 12. The indemnification and advancement of expenses provided by,
or granted pursuant to, this Article VII shall continue as to a person who has
ceased to be a Director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such a person.
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ARTICLE VIII
CAPITAL STOCK
SECTION L. STOCK CERTIFICATES. Each stockholder shall be entitled to a
certificate or certificates representing in the aggregate the shares owned by
him or her and certifying the number and class thereof, which shall be in such
form as this Board shall adopt. Each certificate of stock shall be signed by the
Chairman of the Board, if any, or the President or a Vice President, and by the
Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary.
Any of or all the signatures on the certificate may be a facsimile. In case any
officer, transfer agent or registrar who has signed or whose facsimile signature
has been placed upon a certificate has ceased to be such officer, transfer agent
or registrar before the certificate is issued, such certificate may nevertheless
be issued by the corporation with the same effect as if he or she were such
officer, transfer agent or registrar at the date of issue.
SECTION 2. TRANSFER OF STOCK. Shares of stock shall be transferable on the
books of the corporation pursuant to applicable law and such rules and
regulations as the Board of Directors shall from time to time prescribe.
SECTION 3. HOLDERS OF RECORD. Prior to due presentment for registration of
transfer the corporation may treat the holder of record of a share of its stock
as the complete owner thereof exclusively entitled to vote, to receive
notifications and otherwise entitled to all the rights and powers of a complete
owner thereof, notwithstanding notice to the contrary.
SECTION 4. TRANSFER AGENT AND REGISTRAR. The Board of Directors may at any
time appoint a transfer agent or agents and/or registrar or registrars for the
transfer and/or registration of shares of stock.
SECTION 5. LOST, STOLEN, DESTROYED OR MUTILATED STOCK CERTIFICATES. The
Board of Directors may direct a new stock certificate or certificates to be
issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen, destroyed or mutilated, upon the
making of an affidavit of that fact by the person claiming the certificate of
stock to be lost, stolen, destroyed or mutilated. When authorizing such issue of
a new certificate or certificates, the Board of Directors may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost, stolen, destroyed or mutilated certificate or certificates, or his or her
legal representative, to (a) advertise the same in such manner as it shall
require and/or (b) give the corporation a bond in such sum as it may direct as
indemnity against any claim that may be made against the corporation with
respect to the certificate alleged to have been lost, stolen, destroyed or
mutilated and/or (c) comply with any other reasonable requirements prescribed by
the Board.
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ARTICLE IX
SECURITIES OF OTHER CORPORATIONS
Subject to any limitations that may be imposed by the Board of Directors,
the Chairman of the Board, if any, the President, or any person or persons
authorized by the Board may in the name and on behalf of the corporation (i) act
or appoint any other person or persons (with or without powers of substitution)
to act in the name and on behalf of the corporation (as proxy or otherwise), at
any meeting of the holders of stock or other securities of any corporation or
other organization, securities of which shall be held by this corporation, or
(ii) express consent or dissent, as a holder of such securities, to corporate or
other action by such other corporation or organization.
ARTICLE X
CHECKS, NOTES, DRAFTS AND OTHER INSTRUMENTS
Checks, notes, drafts and other instruments for the payment of money drawn
or endorsed in the name of the corporation may be signed by any officer or
officers or person or persons authorized by the Board of Directors to sign the
same. No officer or person shall sign any such instrument as aforesaid unless
authorized by the Board to do so.
ARTICLE XI
DIVIDENDS AND RESERVES
SECTION L. DIVIDENDS. Dividends upon the capital stock of the corporation
may, subject to any provisions of the certificate of incorporation, be declared
pursuant to law by the Board of Directors. Dividends may be paid in cash, in
property or in shares of the capital stock.
SECTION 2. RESERVES. Before payment of any dividend there may be set aside
out of any funds of the corporation available for dividends such sum or sums as
the Board of Directors from time to time, in its absolute discretion, thinks
proper as a reserve fund to meet contingencies, or for equalizing dividends, or
for repairing or maintaining any property of the corporation, or for such other
purpose as the Directors shall think conducive to the interest of the
corporation, and the Directors may modify or abolish any such reserve in the
manner in which it was created.
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ARTICLE XII
CORPORATE SEAL
The corporate seal shall be in such form as the Board of Directors may
from time to time prescribe and the same may be used by causing it or a
facsimile thereof to be impressed or affixed or in any other manner reproduced.
ARTICLE XIII
FISCAL YEAR
The fiscal year of the corporation shall end on the 30th day of June of
each year.
ARTICLE XIV
BOOKS AND RECORDS
The books, accounts and records of the corporation, except as may be
otherwise required by the laws of the State of Delaware, may be kept outside of
the State of Delaware, at such place or places as the Board of Directors may
from time to time appoint. Except as may otherwise be provided by law, the Board
of Directors shall determine whether and to what extent the books, accounts,
records and documents of the corporation, or any of them, shall be open to the
inspection of the stockholders, and no stockholder shall have any right to
inspect any book, account, record or document of the corporation, except as
conferred by law or by resolution of the stockholders or Board of Directors.
ARTICLE XV
NOTICES
Whenever notice is required by law, the certificate of incorporation, the
By-laws, or otherwise, a written waiver thereof, signed by the person entitled
to notice, shall be deemed equivalent to notice, whether signed before or after
the time required for such notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting except when the person attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the
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stockholders, Directors or members of a committee of Directors need be specified
in any written waiver of notice.
ARTICLE XVI
SEVERABILITY
If any term or provision of the By-laws, or the application thereof to
any person or circumstance or period of time, shall to any extent be invalid or
unenforceable, the remainder of the By-laws, or the application of such term or
provision to persons or circumstances or periods of time other than those as to
which it is invalid or unenforceable, shall not be affected thereby, and each
term and provision of the By-laws shall be valid and enforced to the fullest
extent permitted by law.
ARTICLE XVII
AMENDMENTS
The Board of Directors and the stockholders shall each have the power
to adopt, alter, amend and repeal these By-laws; and any By-laws adopted by the
Directors or the stockholders under the powers conferred hereby may be altered,
amended or repealed by the Directors or by the stockholders
17
<PAGE> 1
EXHIBIT 5
NUTTER, McCLENNEN & FISH, LLP
ATTORNEYS AT LAW
ONE INTERNATIONAL PLACE
BOSTON, MASSACHUSETTS 02110-2699
March 9, 1998
100230-2
Provant, Inc.
67 Batterymarch Street, Suite 500
Boston, MA 02110
Ladies/Gentlemen:
Reference is made to the Registration Statement on Form S-1 (File No.
333-46157) (the "Registration Statement"), and the Prospectus constituting Part
I thereof (the "Prospectus"), which Provant, Inc., a Delaware corporation (the
"Company"), has filed with the Securities and Exchange Commission under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to
2,990,000 shares of the Company's common stock, $.01 par value (the "Common
Stock"), consisting of (i) 2,600,000 shares of Common Stock to be sold by the
Company and (ii) 390,000 shares to be sold by the Company if NationsBanc
Montgomery Securities LLC, Salomon Smith Barney and Piper Jaffray Inc., as
Representatives of the Underwriters, exercise in full an over-allotment option
granted to such underwriters.
We have acted as counsel for the Company in connection with the
Registration Statement. We have examined original or certified copies of the
Certificate of Incorporation of the Company and all amendments thereto, the
Company's By-laws, the corporate records of the Company to the date hereof,
certificates of public officials and such other documents, records and materials
as we have deemed necessary in connection with this opinion letter.
Based upon the foregoing and in reliance upon information from time to
time furnished to us by the officers, directors and agents of the Company, we
are of the opinion that the shares of Common Stock, when issued and sold by the
Company upon the terms described in the Registration Statement, will be duly and
validly issued, fully paid and non-assessable.
We understand that this opinion letter is to be used in connection with
the Registration Statement, as finally amended, and hereby consent to the filing
of this opinion letter with and as a part of the Registration Statement as so
amended, and to the reference to our firm in the Prospectus under the heading
"Legal Matters." It is understood that this opinion letter is to be used in
connection with the offer and sale of the aforesaid shares only while said
Registration Statement is effective as so amended and as it may be amended from
time to time as contemplated by Section 10(a)(3) of the Securities Act.
Very truly yours,
/s/ Nutter, McClennen & Fish, LLP
NUTTER, McCLENNEN & FISH, LLP
<PAGE> 1
Exhibit 10.1
PROVANT, INC.
1998 EQUITY INCENTIVE PLAN
SECTION 1 PURPOSE AND DURATION
1.1 Purposes. The purposes of the Plan are to attract, retain and
motivate employees and consultants of the Company, its Parent (if any), and any
present or future Subsidiaries and to enable them to participate in the growth
of the Company by providing for or increasing the proprietary interests of such
persons in the Company.
1.2 Effective Date. The Plan is effective as of the date of its
adoption by the Board.
1.3 Expiration Date. The Plan shall expire one day less than ten years
from the date of the adoption of the Plan by the Board. In no event shall any
Awards be made under the Plan after such expiration date, but Awards previously
granted may extend beyond such date.
SECTION 2 DEFINITIONS
As used in the Plan, the following capitalized words shall have the
meanings indicated below:
"1933 Act" means the Securities Act of 1933, as amended.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"Award" means, individually or collectively, a grant under the Plan of
Options, SARs, Performance Shares, Restricted Stock or Stock Units.
"Award Agreement" means the written agreement setting forth the terms
and provisions applicable to an Award granted under the Plan.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the committee of the Board appointed by the Board to
administer the Plan in accordance with Section 3.1.
<PAGE> 2
"Company" means Provant, Inc., a Delaware corporation, or any successor
thereto.
"Director" means any individual who is a member of the Board.
"Fair Market Value" means, with respect to a Share, the fair market
value thereof as of the relevant date of determination, as determined in
accordance with a valuation methodology approved by the Board in good faith but
in no event less than, in the case of newly issued stock, the par value per
Share; provided that if the Board does not adopt or employ any such valuation
methodology and Shares are traded on an exchange or quoted on The Nasdaq
National Market, Fair Market Value shall mean, on the relevant date of
determination, the closing price of a Share traded on the principal exchange for
the Shares or, if the Shares are so traded, the closing or last price quoted on
The Nasdaq National Market.
"Grant Date" means the effective date of an Award as specified by the
Board and set forth in the applicable Award Agreement.
"Incentive Stock Option" or "ISO" means an option to purchase Shares
awarded to a Participant under Section 6 of the Plan that is intended to meet
the requirements of Section 422 of the Code.
"Non-Employee Director" means a "non-employee director" as that term is
defined in Rule 16b-3 promulgated under the 1934 Act.
"Nonqualified Stock Option" or "NQO" means an option to purchase Shares
awarded to a Participant under Section 6 of the Plan that is not intended to be
an ISO.
"Option" means an ISO or an NQO.
"Parent" means a "parent corporation" as that term is defined in
Section 424 of the Code.
"Participant" means an individual who has been selected by the Board to
receive an Award under the Plan.
"Performance Cycle" means the period of time selected by the Board
during which performance is measured for the purpose of determining the extent
to which an Award of Performance Shares has been earned. More than one
Performance Cycle may be in progress at any one time and the duration of
Performance Cycles may differ.
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"Performance Share" means a Share awarded to a Participant under
Section 8 of the Plan that entitles the Participant to acquire Shares upon the
attainment of specified performance goals.
"Plan" means the 1998 Equity Incentive Plan set forth in this document
and as hereafter amended from time to time in accordance with Section 13.
"Restricted Period" means the period of time selected by the Board
during which Shares of Restricted Stock are subject to forfeiture and/or
restrictions on transferability.
"Restricted Stock" means Shares awarded to a Participant under Section
9 of the Plan pursuant to an Award that entitles the Participant to acquire
Shares for a purchase price (which may be zero), subject to such conditions,
including a Company right during a specified period or periods to repurchase the
Shares at their original purchase price (or to require forfeiture of the Shares
if the purchase price was zero) upon the termination of the Participant's
employment.
"SAR" or "Stock Appreciation Right" means an Award that is designated
as an SAR pursuant to Section 7 of the Plan, granted alone or in connection with
a related Award, entitling a Participant to receive an amount in cash or Shares
or a combination thereof having a value equal to (or if the Board shall so
determine at time of grant, less than) the excess of the Fair Market Value of a
Share on the date of exercise over the Fair Market Value of a Share on the Grant
Date (or over the Option exercise price, if the Stock Appreciation Right was
granted in tandem with an Option) multiplied by the number of Shares with
respect to which the Stock Appreciation Right is exercised.
"Shares" means shares of the Company's common stock, par value $0.01
per share.
"Stock Unit" means an Award of a Share or a unit valued in whole or in
part by reference to, or otherwise based on, the value of a Share, granted to a
Participant under Section 10 of the Plan.
"Subsidiary" means a "subsidiary corporation" as that term is defined
in Section 424 of the Code.
SECTION 3 ADMINISTRATION OF THE PLAN
3.1 The Board. The Plan shall be administered by the Board. The Board
may, in its discretion, delegate some or all of its powers with respect to the
Plan to the Committee, in which event all references in the Plan to the Board
(except references in
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Section 13.1) shall be deemed to refer to the Committee. The Committee, if one
is appointed, shall consist of at least two Non-Employee Directors.
3.2 Authority of the Board. The Board shall have the authority to
adopt, alter and repeal such administrative rules, guidelines and practices
governing the operation of the Plan as it shall consider advisable from time to
time, to interpret the provisions of the Plan and any Award, and to decide all
disputes arising in connection with the Plan. The Board's decisions and
interpretations shall be final and binding.
SECTION 4 ELIGIBILITY OF PARTICIPANTS
The persons eligible to receive Awards under the Plan shall be all
executive officers of the Company, its Parent (if any), and any Subsidiaries and
other employees, consultants and advisers who, in the opinion of the Board, are
in a position to make a significant contribution to the success of the Company,
its Parent (if any), and any Subsidiaries. Directors, including directors who
are not employees of the Company, its Parent (if any) or any Subsidiaries, shall
be eligible to receive Awards under the Plan.
SECTION 5 STOCK AVAILABLE FOR AWARDS
5.1 Number of Shares. Awards may be made under the Plan for up to
________________ (__________) Shares. Shares issued under the Plan may consist
in whole or in part of authorized but unissued Shares or treasury Shares.
5.2 Lapsed, Forfeited or Expired Awards. If any Award in respect of
Shares expires or is terminated before exercise or is forfeited for any reason,
the Shares subject to such Award, to the extent of such expiration, termination,
or forfeiture, shall again be available for award under the Plan.
5.3 Maximum Number of Shares to a Single Participant in any Calendar
Year. In no event shall any Participant receive in any calendar year Awards
under the Plan and any other grants for more than [Two Hundred Thousand
(200,000)] Shares.
SECTION 6 STOCK OPTIONS
6.1 Grant of Options. Subject to the terms and provisions of the Plan,
the Board may award Options and determine the number of Shares to be covered by
each Option, the exercise price therefor, the term of the Option, and any other
conditions
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and limitations applicable to the exercise of the Option. The Board may grant
ISOs, NQOs or a combination thereof.
6.2 Exercise Price. Subject to the provisions of this Section 6, the
exercise price for each Option shall be determined by the Board in its sole
discretion.
6.3 Restrictions on Option Transferability and Exercisability. No
Option shall be transferable by the Participant other than by will or the laws
of descent and distribution, and all Options shall be exercisable during the
Participant's lifetime only by the Participant; provided, however, that the
Board may provide that an Option is transferable by the Participant and
exercisable by persons other than the Participant upon such terms and conditions
as the Board shall determine.
6.4 Certain Additional Provisions for Incentive Stock Options
6.4.1 Exercise Price. In the case of an ISO, the exercise price shall
be not less than one hundred percent (100%) of the Fair Market Value on the
Grant Date of the Shares subject to the Option; provided, however, that if on
the Grant Date the Participant (together with persons whose stock ownership is
attributed to the Participant pursuant to Section 424(d) of the Code) owns stock
possessing more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company, its Parent (if any) or any Subsidiaries, the
exercise price shall be not less than one hundred and ten percent (110%) of the
Fair Market Value on the Grant Date of the Shares subject to the Option.
6.4.2 Exercisability. Subject to Sections 12.3 and 12.4, the aggregate
Fair Market Value (determined on the Grant Date(s)) of the Shares with respect
to which ISOs are exercisable for the first time by any Participant during any
calendar year (under all plans of the Company, its Parent (if any) and any
Subsidiaries) shall not exceed $100,000.
6.4.3 Eligibility. ISOs may be granted only to persons who are
employees of the Company, its Parent (if any) or any Subsidiaries on the Grant
Date.
6.4.4 Expiration. No ISO may be exercised later than ten (10) years
from the Grant Date; provided, however, that if the Option is granted to a
Participant who, together with persons whose stock ownership is attributed to
the Participant pursuant to Section 424(d) of the Code, owns stock possessing
more than ten percent (10%) of the total combined voting power of all classes of
stock of the Company, its Parent (if any) or any Subsidiaries, the ISO may not
be exercised later than five (5) years from the Grant Date.
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6.4.5 Compliance with Section 422 of the Code. The terms and conditions
of ISOs shall be subject to and comply with Section 422 of the Code or any
successor provision.
6.4.6 Notice to Company of Disqualifying Disposition. Each Participant
who receives an ISO agrees to notify the Company in writing immediately after
the Participant makes a Disqualifying Disposition of any Shares received
pursuant to the exercise of an ISO. The term "Disqualifying Disposition" means
any disposition (including any sale) of Shares before the later of (a) two years
after the Participant was granted the ISO under which the Participant acquired
such Shares, or (b) one year after the Participant acquired the Shares by
exercising the ISO.
6.4.7 Substitute Options. Notwithstanding the provisions of Section
6.4.1, in the event that the Company, its Parent (if any) or any Subsidiary
consummates a transaction described in Section 424(a) of the Code (relating to
the acquisition of property or stock from an unrelated corporation), individuals
who become employees or consultants of the Company, its Parent (if any) or any
Subsidiary on account of such transaction may be granted ISOs in substitution
for options granted by their former employer. The Board, in its sole discretion
and consistent with Section 424(a) of the Code, shall determine the exercise
price of such substitute Options.
6.5 NQO Presumption. Options granted pursuant to the Plan shall be
presumed to be NQOs unless expressly designated ISOs in the Award Agreement.
SECTION 7 GRANT OF STOCK APPRECIATION RIGHTS
Subject to the terms and provisions of the Plan, the Board may award
SARs in tandem with another Award (at or after the Grant Date of the other
Award), or alone and unrelated to another Award, and may determine the terms and
conditions applicable thereto, including the form of payment.
SECTION 8 PERFORMANCE SHARES
8.1 Grant of Performance Shares. The Board may award Performance
Shares to Participants and determine the performance goals applicable to each
such Award, the number of Shares for each Performance Cycle, the duration of
each Performance Cycle and all other limitations and conditions applicable to
the awarded Performance Shares. The payment value of each Performance Share
shall be equal to the Fair Market Value of one Share on the date the Performance
Share is earned or, in the discretion of the Board, on the date the Board
determines that the Performance Share has been earned.
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8.2 Adjustment of Performance Goals. Except as provided in an Award,
during any Performance Cycle, the Board may adjust the performance goals for the
Performance Cycle as it deems equitable in recognition of unusual or
non-recurring events affecting the Company or its Shares, changes in applicable
tax laws or accounting principles, or such other factors as the Board shall
determine.
8.3 Written Certification. As soon as practical after the end of a
Performance Cycle, the Board shall certify in writing the extent to which the
performance goals applicable to each Participant for the Performance Cycle were
achieved or exceeded and the number of Performance Shares which have been earned
on the basis of performance in relation to the established performance goals.
SECTION 9 RESTRICTED STOCK
9.1 Grant of Restricted Stock. The Board may award Shares of
Restricted Stock and determine the purchase price, if any, therefor, the
duration of the Restricted Period, the conditions under which the Shares may be
forfeited to or repurchased by the Company and any other terms and conditions of
the Awards. The Board may modify or waive any restrictions, terms and conditions
with respect to any Restricted Stock. Shares of Restricted Stock may be issued
for whatever consideration is determined by the Board, subject to applicable
law.
9.2 Transferability. Shares of Restricted Stock may not be sold,
assigned, transferred, pledged or otherwise encumbered, except as permitted by
the Board, during the Restricted Period.
9.3 Evidence of Award. Shares of Restricted Stock shall be evidenced
in such manner as the Board may determine. Any certificates issued in respect of
Shares of Restricted Stock shall be registered in the name of the Participant
and unless otherwise determined by the Board, deposited by the Participant,
together with a stock power endorsed in blank, with the Company. At the
expiration of the Restricted Period, the Company shall deliver the certificates
and stock power to the Participant.
9.4 Shareholder Rights. A Participant shall have all the rights of a
shareholder with respect to Restricted Stock awarded, including voting and
dividend rights, unless otherwise provided in the Award Agreement.
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SECTION 10 STOCK UNITS
10.1 Grant of Stock Units. Subject to the terms and provisions of the
Plan, the Board may award Stock Units subject to such terms, restrictions,
conditions, performance criteria, vesting requirements and payment rules as the
Board shall determine.
10.2 Consideration. Shares awarded in connection with a Stock Unit
shall be issued for whatever consideration is determined by the Board, subject
to applicable law.
SECTION 11 OTHER AWARDS
The Board shall have the authority to specify the terms and provisions
of other forms of equity-based or equity-related Awards not described above
which the Board determines to be consistent with the purposes of the Plan and
the interests of the Company, which Awards may provide for cash payments based
in whole or in part on the value or future value of Shares, for the acquisition
or future acquisition of Shares, or any combination thereof. Other Awards may
also include cash payments (including the cash payment of dividend equivalents)
under the Plan which may be based on one or more criteria determined by the
Board that are unrelated to the value of the Shares and that may be granted in
tandem with, or independent of, other Awards under the Plan.
SECTION 12 GENERAL PROVISIONS APPLICABLE TO AWARDS
12.1 Legal and Regulatory Matters. The delivery of Shares shall be
subject to compliance with (i) applicable federal and state laws and
regulations, (ii) if the outstanding Shares are listed at the time on any stock
exchange or automated quotation system, the listing requirements of such
exchange or system, and (iii) the Company's counsel's approval of all other
legal matters in connection with the issuance and delivery of the Shares. If the
sale of the Shares has not been registered under the 1933 Act, the Company may
require, as a condition to delivery of the Shares, such representations or
agreements as counsel for the Company may consider appropriate to avoid
violation of the 1933 Act and may require that the certificates evidencing the
Shares bear an appropriate legend restricting transfer.
12.2 Award Agreement. The terms and provisions of an Award shall be set
forth in an Award Agreement approved by the Board and delivered or made
available to the Participant as soon as practicable following the Grant Date.
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<PAGE> 9
12.3 Determination of Restrictions on the Award. The vesting,
exercisability, payment and other restrictions applicable to an Award (which may
include, without limitation, restrictions on transferability or provision for
mandatory resale to the Company) shall be determined by the Board and set forth
in the applicable Award Agreement. Notwithstanding the foregoing, the Board may
accelerate (i) the vesting or payment of any Award (including an ISO), (ii) the
lapse of restrictions on any Award (including an Award of Restricted Stock) and
(iii) the date on which any Option or SAR first becomes exercisable.
12.4 Mergers, etc. Notwithstanding any other provision of the Plan, in
the event of a consolidation or merger in which the Company is not the surviving
corporation or which results in the acquisition of substantially all the
Company's outstanding shares by a single person or entity or by a group of
persons and/or entities acting in concert, or in the event of the sale or
transfer of substantially all the Company's assets, then if the Board so
determines, all outstanding Awards shall terminate, provided that at least
twenty (20) days prior to the effective date of any such merger, consolidation
or sale of assets, the Board shall either (i) make all outstanding Awards
exercisable immediately prior to the consummation of such merger, consolidation
or sale of assets or (ii) if there is a surviving or acquiring corporation,
arrange, subject to consummation of the merger, consolidation or sale of assets,
to have that corporation or an affiliate of that corporation grant to
Participants replacement Awards, which Awards in the case of ISOs shall satisfy,
in the discretion of the Board, the requirements of section 424(a) of the Code.
12.5 Termination of Employment. For purposes of the Plan, the following
events shall not be deemed a termination of employment of a Participant: (i) a
transfer to the employment of the Company from its Parent (if any) or from a
Subsidiary, or from the Company to its Parent (if any) or to a Subsidiary, or
from one Subsidiary to another, or from the Company's Parent (if any) to a
Subsidiary, or from a Subsidiary to the Company's Parent (if any); or (ii) an
approved leave of absence for military service or sickness, or for any other
purpose approved by the Company, if the Participant's right to employment is
guaranteed either by a statute or by contract or under the policy pursuant to
which the leave of absence was granted or if the Board otherwise so provides in
writing. For purposes of the Plan, employees of a Subsidiary or Parent (if any)
shall be deemed to have terminated their employment on the date on which such
Subsidiary or Parent ceases to be a Subsidiary or Parent of the Company, as the
case may be.
12.6 Date of and Effect of Termination of Employment. The date of a
Participant's termination of employment for any reason shall be determined in
the sole discretion of the Board. The Board shall have full authority to
determine and specify in the applicable Award Agreement the effect, if any, that
a Participant's termination of employment for any reason will have on the
vesting, exercisability, payment or lapse of restrictions applicable to an
outstanding Award.
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12.7 Grant of Awards. Each Award may be made alone, in addition to or
in relation to any other Award. The terms of each Award need not be identical,
and the Board need not treat Participants uniformly.
12.8 Settlement of Awards. No Shares shall be delivered pursuant to
any exercise of an Award until payment in full of the price therefor, if any, is
received by the Company. Such payment may be made in whole or in part in cash or
by certified or bank check or, to the extent permitted by the Board at or after
the Grant Date, by delivery of a note or Shares, including Restricted Stock,
valued at their Fair Market Value on the date of delivery, or by having the
Company hold back from the Shares to be delivered upon exercise Shares having a
Fair Market Value on the last business day preceding the date of exercise equal
to the purchase price, or by delivery of an unconditional and irrevocable
undertaking by a broker to deliver promptly to the Company sufficient funds to
pay the exercise price, or by any combination of the permissible forms of
payment, or by such other lawful consideration as the Board shall determine.
12.9 Withholding Requirements and Arrangements. The Participant shall
pay to the Company or make provision satisfactory to the Board for payment of
any taxes required by law to be withheld in respect of Awards under the Plan no
later than the date of the event creating the tax liability. In the Board's
discretion, such tax obligations may be paid in whole or in part in Shares,
including Shares obtained in connection with the Award creating the tax
obligation, valued at their Fair Market Value on the date of delivery. The
Company may, to the extent permitted by law, deduct any such tax obligations
from any payment of any kind otherwise due to the Participant.
12.10 No Effect on Employment. The Plan shall not give rise to any
right on the part of any Participant to continue in the employ of the Company,
its Parent (if any) or any Subsidiary. The loss of existing or potential profit
in Awards granted under the Plan shall not constitute an element of damages in
the event of termination of the relationship of a Participant even if the
termination is in violation of an obligation of the Company to the Participant
by contract or otherwise.
12.11 No Rights as Shareholder. Subject to the provisions of the Plan
and the applicable Award Agreement, no Participant shall have any rights as a
shareholder with respect to any Shares to be distributed under the Plan until he
or she becomes the holder thereof.
12.12 Adjustments. Upon the happening of any of the following described
events, a Participant's rights with respect to Awards granted hereunder shall be
adjusted as hereinafter provided, unless otherwise specifically provided in the
Award Agreement.
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12.12.1 Stock Splits and Recapitalizations. In the event the Company
issues any of its Shares as a stock dividend upon or with respect to the Shares,
or in the event Shares shall be subdivided or combined into a greater or smaller
number of Shares, or if, upon a merger or consolidation (except those described
in Section 12.4), reorganization, split-up, liquidation, combination,
recapitalization or the like of the Company, Shares shall be exchanged for other
securities of the Company, securities of another entity, cash or other property,
each Participant upon exercising an Award (for the aggregate purchase price to
be paid under the Award) shall be entitled to purchase such number of Shares,
other securities of the Company, securities of such other entity, cash or other
property as the Participant would have received if the Participant had been the
holder of the Shares with respect to which the Award is exercised at all times
between the Grant Date of the Award and the date of its exercise, and
appropriate adjustments shall be made in the purchase price per Share.
12.12.2 Restricted Stock. If any person owning Restricted Stock
receives new or additional or different shares or securities ("New Securities")
in connection with a corporate transaction described in Section 12.12.1 as a
result of owning such Restricted Stock, the New Securities shall be subject to
all of the conditions and restrictions applicable to the Restricted Stock with
respect to which such New Securities were issued.
12.12.3 Board Determination. Notwithstanding any provision to the
contrary, no adjustments shall be made pursuant to this Section 12.12 with
respect to ISOs unless (i) the Board, after consulting with counsel for the
Company, determines that such adjustments would not constitute a "modification,"
"extension" or "renewal" of such ISOs as such terms are defined in Section 424
of the Code, (ii) would cause any adverse tax consequences for the holders of
such ISOs or (iii) the holders of such ISOs consent to the adjustment. No
adjustments to ISOs shall be made for dividends paid in cash or in property
other than securities of the Company.
12.12.4 Fractional Shares. No fractional Shares shall be issued under
the Plan. Any fractional Shares which, but for this Section, would have been
issued shall be deemed to have been issued and immediately sold to the Company
for their Fair Market Value, and promptly after such deemed issuance and sale
the Participant shall receive from the Company cash in lieu of such fractional
Shares.
12.12.5 Other Distributions. The Board may adjust the number of Shares
subject to outstanding Awards and the exercise price and the terms of
outstanding Awards to take into consideration material changes in accounting
practices or principles, extraordinary dividends, acquisitions or dispositions
of stock or property, or any other event if it is determined by the Board that
such adjustment is appropriate to avoid distortion in the operation of the Plan.
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12.12.6 Further Adjustment. Upon the happening of any of the events
described in Sections 12.12.1 or 12.12.5, the class and aggregate number of
Shares set forth in Sections 5.1 and 5.3 hereof that are subject to Awards which
previously have been or subsequently may be granted under the Plan shall be
appropriately adjusted to reflect the events described in such Sections. The
Board shall determine the specific adjustments to be made under this Section
12.12.6.
SECTION 13 AMENDMENT AND TERMINATION
13.1 Amendment, Suspension or Termination of the Plan. The Board may
modify, amend, suspend or terminate the Plan in whole or in part at any time;
provided, however, that no modification, amendment, suspension or termination of
the Plan shall be made without shareholder approval if such approval is
necessary to comply with any applicable tax or regulatory requirement; and
provided, further, that such modification, amendment, suspension or termination
shall not, without a Participant's consent, affect adversely the rights of such
Participant with respect to any Award previously made.
13.2 Amendment, Suspension or Termination of an Award. The Board may
modify, amend or terminate any outstanding Award, including, without limitation,
substituting therefor another Award of the same or a different type, changing
the date of exercise or realization and converting an ISO to a NQO; provided,
however, that the Participant's consent to such action shall be required unless
the Board determines that the action, taking into account any related action,
would not materially and adversely affect the Participant.
SECTION 14 LEGAL CONSTRUCTION
14.1 Captions. The captions provided herein are included solely for
convenience of reference and shall not affect the meaning of any of the
provisions of the Plan or serve as a basis for interpretation or construction of
the Plan.
14.2 Severability. In the event any provision of the Plan is held
invalid or illegal for any reason, the illegality or invalidity shall not affect
the remaining provisions of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.
14.3 Governing Law. The Plan and all rights under the Plan shall be
construed in accordance with and governed by the internal laws of the
Commonwealth of Massachusetts.
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Exhibit 10.2
PROVANT, INC.
STOCK PLAN FOR NON-EMPLOYEE DIRECTORS
1. PURPOSE
The purpose of this Stock Plan for Non-Employee Directors (the "Plan")
is to advance the interests of Provant, Inc. (the "Company") by enhancing the
ability of the Company to attract and retain non-employee directors who are in a
position to make significant contributions to the success of the Company and to
reward directors for such contributions through ownership of shares of the
Company's common stock (the "Stock").
2. ADMINISTRATION
The Plan shall be administered by a committee (the "Committee") of the
Board of Directors (the "Board") of the Company designated by the Board for that
purpose. Unless and until a Committee is appointed the Plan shall be
administered by the entire Board, and references in the Plan to the "Committee"
shall be deemed references to the Board. The Committee shall have authority, not
inconsistent with the express provisions of the Plan, (a) to grant options in
accordance with the Plan to such directors as are eligible to receive options;
(b) to prescribe the form or forms of instruments evidencing options and any
other instruments required under the Plan and to change such forms from time to
time; (c) to adopt, amend and rescind rules and regulations for the
administration of the Plan; and (d) to interpret the Plan and to decide any
questions and settle all controversies and disputes that may arise in connection
with the Plan. Such determinations of the Committee shall be conclusive and
shall bind all parties.
3. EFFECTIVE DATE AND TERM OF PLAN
The Plan shall become effective on the date on which the Plan is
approved by the Board of Directors of the Company. No option shall be granted
under the Plan after the completion of ten years from the date on which the Plan
was adopted by the Board, but options previously granted may extend beyond that
date.
4. SHARES SUBJECT TO THE PLAN
(a) Number of Shares. Subject to adjustment as provided in section
4(c), the aggregate number of shares of Stock that may be delivered upon the
exercise of options granted under the Plan shall be One Hundred Thousand
(100,000). If any option granted under the Plan terminates without having been
exercised in full, the number of shares of Stock as to which such option was not
exercised shall be available for future grants within the limits set forth in
this Section 4(a).
<PAGE> 2
(b) Shares to be Delivered. Shares delivered under the Plan shall be
authorized but unissued Stock or, if the Board so decides in its sole
discretion, previously issued Stock acquired by the Company and held in
treasury. No fractional shares of Stock shall be delivered under the Plan.
(c) Changes in Stock. In the event of a stock dividend, stock split or
combination of shares, recapitalization or other change in the Company's capital
stock after the date of the closing of the Company's initial public offering
(the "IPO") of Stock (the "Closing"), the number and kind of shares of stock or
securities of the Company subject to options then outstanding or subsequently
granted under the Plan, the maximum number of shares or securities that may be
delivered under the Plan, the exercise price and other relevant provisions shall
be appropriately adjusted by the Committee, whose determination shall be binding
on all persons.
5. ELIGIBILITY FOR OPTIONS
Directors eligible to receive options under the Plan (including
director nominees with respect to options to be granted on the date of the final
Prospectus used in connection with the IPO) ("Eligible Directors") shall be
those directors who are not employees of the Company or of any subsidiary of the
Company and were not stockholders of the Company as of the date of such final
Prospectus.
6. TERMS AND CONDITIONS OF OPTIONS
(a) Number of Options. On the date of the final Prospectus used in
connection with the IPO, each Eligible Director shall be awarded an option
covering 7,500 shares of Stock. On the date of each subsequent annual meeting of
the Company's stockholders, each newly elected Eligible Director also shall be
awarded an option covering 7,500 shares of Stock. For purposes of this
paragraph, each Eligible Director initially elected to office at a special
meeting of stockholders or by the Board since the then last annual meeting (or
since the Closing Date) shall be treated as a newly elected Director, and shall
receive the aforementioned option as of the date of his or her election.
(b) Exercise Price. The exercise price of each option shall be 100% of
the Fair Market Value per share of the Stock at the time the option is granted,
except that options to be granted on the date of the final Prospectus used in
connection with the IPO shall have a per share exercise price equal to the IPO
price. In no event, however, shall the exercise price be less, in the case of an
original issue of authorized stock, than par value per share. For purposes of
this paragraph, (A) the "Fair Market Value" of a share of Stock on any date
shall be the Closing Price on such day or, if there was no Closing Price on such
day, the latest day prior thereto on which there was a Closing Price; and (B)
the "Closing Price" of the Stock on any business day will be the last sale price
as reported on the principal market or automated quotation system on which the
Stock is traded or, if no last sale is reported, then the mean between the
highest bid and lowest asked prices on that day.
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<PAGE> 3
(c) Duration of Options. The latest date on which an option may be
exercised (the "Final Exercise Date") shall be the date which is ten years from
the date the option was granted.
(d) Exercise of Options.
(1) Except as otherwise provided in this Section 6, each option
shall become exercisable with respect to all of the shares of
Stock issuable thereunder on the date that is six months
following the date of grant.
(2) Any exercise of an option shall be in writing, signed by the
proper person and delivered or mailed to the Company,
accompanied by (i) any documentation required by the Committee
and (ii) payment in full for the number of shares for which
the option is exercised.
(3) The Committee shall have the right to require that the
individual exercising the option remit to the Company an
amount sufficient to satisfy any federal, state, or local
withholding tax requirements (or make other arrangements
satisfactory to the Company with regard to such taxes) prior
to the delivery of any Stock pursuant to the exercise of the
option. If permitted by the Committee the individual
exercising the option may elect, at such time and in such
manner as the Committee may prescribe, to have the Company
hold back from the transfer Stock having a value calculated to
satisfy such withholding obligation. In the case of an
individual subject to Section 16(b) of the Exchange Act, no
such election shall be effective unless made in compliance
with the applicable requirements of Rule 16b-3 or any
successor Rule then in effect under the Exchange Act.
(4) If an option is exercised by the executor or administrator of
a deceased director, or by the person or persons to whom the
option has been transferred by the director's will or the
applicable laws of descent and distribution, the Company shall
be under no obligation to deliver Stock pursuant to such
exercise until the Company is satisfied as to the authority of
the person or persons exercising the option.
(e) Payment for and Delivery of Stock. Stock purchased under the
Plan shall be paid for as follows: (i) in cash or by check (acceptable to the
Company in accordance with guidelines established for this purpose), bank draft
or money order payable to the order of the Company or (ii) if so permitted by
the original terms of the option or by the Committee after grant of the option,
(A) through the delivery of shares of Stock (in compliance with all relevant
provisions under Section 16 of the Exchange Act) having a Fair Market Value on
the last business day preceding the date of exercise equal to the purchase price
or (B) by having the Company hold back from the shares transferred upon exercise
Stock having a Fair Market Value on the last business day preceding the date of
exercise equal to the purchase
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<PAGE> 4
price or (C) by delivery of a promissory note of the option holder to the
Company, such note to be payable on such terms as are specified and approved in
advance by the Company or (D) by delivery of an unconditional and irrevocable
undertaking by a broker to deliver promptly to the Company sufficient funds to
pay the exercise price or (E) by any combination of the permissible forms of
payment.
An option holder shall not have the rights of a shareholder with regard
to awards under the Plan except as to Stock actually received by him or her
under the Plan.
The Company shall not be obligated to deliver any shares of Stock (a)
until, in the opinion of the Company's counsel, all applicable federal and state
laws and regulations have been complied with, and (b) if the outstanding Stock
is at the time listed on any stock exchange or automated quotation system, until
the shares to be delivered have been listed or authorized to be listed on such
exchange or system upon official notice of issuance, and (c) until all other
legal matters in connection with the issuance and delivery of such shares have
been approved by the Company's counsel. If the sale of Stock has not been
registered under the Securities Act of 1933, as amended (the "Act"), the Company
may require, as a condition to exercise of the option, such representations or
agreements as counsel for the Company may consider appropriate to avoid
violation of such Act and may require that the certificates evidencing such
Stock bear an appropriate legend restricting transfer.
(f) Nontransferability of Options. Except to the extent the Committee
otherwise approves, no option may be transferred other than by will or by the
laws of descent and distribution, and during an Eligible Director's lifetime an
option may be exercised only by him or her.
(g) Death. Upon the death of any Eligible Director granted options
under this Plan, all options not then exercisable shall terminate. All options
held by the director that are exercisable immediately prior to death may be
exercised by his or her executor or administrator, or by the person or persons
to whom the option is transferred by will or the applicable laws of descent and
distribution, at any time within one year after the director's death (subject,
however, to the limitations of Section 6(c) regarding the maximum exercise
period for such option). After completion of such one-year period, such options
shall terminate to the extent not previously exercised.
(h) Other Termination of Status of Director. If a director's service
with the Company terminates for any reason other than death, all options held by
the director that are not then exercisable shall terminate. Options that are
exercisable on the date of termination shall continue to be exercisable for a
period of three months (subject to Section 6(c)). After completion of such
three-month period, such options shall terminate to the extent not previously
exercised, expired or terminated.
(i) Mergers, etc. In the event of a consolidation or merger in which
the Company is not the surviving corporation or which results in the acquisition
of substantially
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<PAGE> 5
all the Company's outstanding Stock by a single person or entity or by a group
of persons and/or entities acting in concert, or in the event of a sale or
transfer of substantially all of the Company's assets or a dissolution or
liquidation of the Company, all options hereunder will terminate upon the
effective date of such merger, consolidation, sale, dissolution or liquidation
(the "Effective Date"); provided, that 20 days prior to the Effective Date, all
options outstanding hereunder that are not otherwise exercisable shall become
immediately exercisable.
7. EFFECT, DISCONTINUANCE, CANCELLATION, AMENDMENT,
TERMINATION AND EFFECTIVENESS
Neither adoption of the Plan nor the grant of options to a director
shall affect the Company's right to grant to such director options that are not
subject to the Plan, to issue to such director Stock as a bonus or otherwise, or
to adopt other plans or arrangements under which Stock may be issued to
directors.
The Committee may at any time terminate the Plan as to any further
grants of options. The Committee may at any time or times, but in no event
(except to comply with the provisions of the Internal Revenue Code, the Employee
Retirement Income Security Act or the rules thereunder) more than once in any
six-month period, amend the Plan for any purpose which may at the time be
permitted by law.
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EXHIBIT 10.7
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into effective as of
________________ by and among MOHR Acquisition Corp., a Delaware corporation
(subject to Section 12(b) below, the "Company"), and Herb Cohen of (the
"Executive"), and, with respect to Section 23 hereof, Provant, Inc., a Delaware
corporation ("Provant").
In consideration of the mutual promises, terms, provisions and
conditions set forth in this Agreement, the parties hereby agree as follows:
1. Employment. Subject to the terms and conditions set forth in
this Agreement, the Company hereby offers and the Executive hereby accepts
employment.
2. Term. Subject to earlier termination as hereafter provided,
the Executive's employment hereunder shall be for a term of three (3) years,
commencing effective [the Effective Time] (the "Effective Date"). The term of
this Agreement, as from time to time extended or renewed, is hereafter referred
to as "the term of this Agreement" or "the term hereof."
3. Capacity and Performance.
(a) During the term hereof, the Executive shall serve as the
____________ of the Company. In addition, and without further
compensation, the Executive shall serve as a director and/or officer of
the Company and/or one or more of the Company's Affiliates if so
elected or appointed from time to time.
(b) During the term hereof, the Executive shall be employed by
the Company on a full-time basis, shall have all powers and duties
consistent with his position and as one of the two most senior
executive officers of the Company (including without limitation the
power to conduct and direct the day-to-day operations of the Company,
the power to hire and dismiss personnel, and those other powers
customarily exercised by the senior-most executive officer of a
publicly-held business), subject to the direction and control of the
Company's Board of Directors (the "Board") and the Chief Executive
Officer of Provant or its or his designees, and shall perform such
other duties and responsibilities on behalf of the Company and its
Affiliates as may reasonably be designated from time to time by the
Company's Board of Directors (the "Board") and the Chief Executive
Officer of Provant or its or his designees consistent with the
Executive's office as set forth above.
(c) During the term hereof, the Executive shall devote
substantially all of his full business time and his best efforts,
business judgment, skill and
<PAGE> 2
knowledge to the advancement of the business and interests of the
Company and to the discharge of his duties and responsibilities
hereunder. The Executive shall not engage in any other business
activity or serve in any industry, trade, professional, governmental or
academic position during the term of this Agreement, except as may be
expressly approved in advance by the Board in writing or to the extent
that any such activity or service does not materially and adversely
affect the discharge of his duties and responsibilities hereunder.
(d) The Company shall not require the Executive to relocate or
reassign the Executive to any location beyond a fifty (50) mile radius
of the location of the Company's headquarters as of the date hereof,
nor shall the Executive's duties hereunder be materially changed,
without the Executive's prior written consent.
4. COMPENSATION AND BENEFITS. As compensation for all services
performed by the Executive under and during the term hereof and subject to
performance of the Executive's duties and obligations, pursuant to this
Agreement or otherwise:
(a) BASE SALARY. During the term hereof, the Company shall pay
the Executive a base salary at the rate of One Hundred Seventy Five
Thousand Dollars ($175,000) per annum, payable in accordance with the
payroll practices of the Company for its executives and subject to
increase from time to time by the Board or a compensation committee of
the Board in its sole discretion. Such base salary, as from time to
time increased, is hereafter referred to as the "Base Salary".
(b) BONUS COMPENSATION. Executive shall be entitled to
participate in such bonus plan as the Company provides to its
executives generally, in accordance with the terms of that plan, as
amended by the Company from time to time pursuant to which Executive
may receive a bonus of up to forty percent (40%) of his then Base
Salary. Such plan shall provide, with respect to the Executive, that
beginning with the 1999 fiscal year the Executive shall receive the
maximum bonus (i.e., 40% of Base Salary) if (i) he is employed
hereunder as of the last day of the Company's fiscal year (or if the
Executive's employment is terminated by the Company without cause
during such fiscal year other than on account of the expiration of the
term hereof, provided that the foregoing shall not be construed to give
the Company a contractual right to so terminate the Executive's
employment prior to the expiration of the term) and (ii) the Company
achieves or exceeds a targeted level of earnings before interest and
taxes (after accounting for all bonuses) ("EBIT") fixed in good faith
by the Board at or before the beginning of such year. The foregoing
determination shall be made after the end of each fiscal year during
the term hereof and the bonus, if any, with respect to such fiscal year
shall be paid within ninety (90) days following the end of such fiscal
year. Notwithstanding the foregoing, if this Agreement shall expire
prior to the end of the then-current fiscal year or the Executive's
employment hereunder shall be terminated on account of his death or
disability prior to the end of the then-
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<PAGE> 3
current fiscal year, the Executive shall be entitled to receive a pro
rata portion of the bonus, if any, he would have received based on the
Company's EBIT for the full fiscal year had he been employed hereunder
as of the last day of such year (based on the fraction of the year that
he was employed hereunder), determined and paid following the end of
such fiscal year.
(c) VACATIONS. During the term hereof, the Executive shall be
entitled to _____ weeks of vacation per annum, to be taken at such
times and intervals as shall be determined by the Executive, subject to
the reasonable business needs of the Company. Vacation time shall not
cumulate from year to year.
(d) OTHER BENEFITS. During the term hereof and subject to any
contribution therefor generally required of employees of the Company,
the Executive shall be entitled to participate in any and all employee
benefit plans from time to time in effect for employees of the Company
generally, except to the extent such plans are in a category of benefit
(including without limitation bonus compensation and severance
compensation) otherwise provided to the Executive. Such participation
shall be subject to (i) the terms of the applicable plan documents,
(ii) generally applicable Company policies and (iii) the discretion of
the Board or any administrative or other committee provided for in or
contemplated by such plan. The Company may alter, modify, add to or
delete any of the employee benefit plans maintained for its employees
generally at any time as it, in its sole judgment, determines to be
appropriate, without recourse by the Executive.
(e) BUSINESS EXPENSES. The Company shall pay or reimburse the
Executive for all reasonable and necessary business expenses incurred
or paid by the Executive in the performance of his duties and
responsibilities hereunder, subject to any maximum annual limit and
other restrictions on such expenses set by the Board and to such
reasonable substantiation and documentation as may be specified by the
Company from time to time.
5. TERMINATION OF EMPLOYMENT AND SEVERANCE BENEFITS.
Notwithstanding the provisions of Section 2 hereof, the Executive's employment
hereunder shall terminate prior to the expiration of the term under the
following circumstances:
(a) DEATH. In the event of the Executive's death during the
term hereof, the Executive's employment hereunder shall immediately and
automatically terminate. In that event, the Company shall pay to the
Executive's designated beneficiary or, if no beneficiary has been
designated by the Executive, to his estate, any earned and unpaid Base
Salary, prorated through the date of his death.
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<PAGE> 4
(b) DISABILITY.
(i) The Company may terminate the Executive's
employment hereunder, upon notice to the Executive, in the
event that the Executive becomes disabled during his
employment hereunder through any illness, injury, accident or
condition of either a physical or psychological nature and, as
a result, is unable to perform substantially all of his duties
and responsibilities hereunder for ninety (90) days during any
period of three hundred sixty-five (365) consecutive calendar
days.
(ii) The Board may designate another employee to act
in the Executive's place during any period of the Executive's
disability. Notwithstanding any such designation, the
Executive shall continue to receive the Base Salary in
accordance with Section 4(a) and his other benefits pursuant
to Section 4(d), to the extent permitted by the then-current
terms of the applicable benefit plans, until the Executive
becomes eligible for disability income benefits under any
disability income plan provided by the Company or until the
termination of his employment, whichever shall first occur.
(iii) If any question shall arise as to whether,
during any period, the Executive is disabled through any
illness, injury, accident or condition of either a physical or
psychological nature such that he is unable to perform
substantially all of his duties and responsibilities
hereunder, the Executive may, and at the request of the
Company shall, submit to a medical examination by a physician
selected by the Company to whom the Executive or his duly
appointed guardian, if any, has no reasonable objection to
determine whether the Executive is so disabled and such
determination shall for the purposes of this Agreement be
conclusive of the issue. If such question shall arise and the
Executive shall fail to submit to such medical examination,
the Company's determination of the issue shall be binding on
the Executive.
(c) BY THE COMPANY FOR CAUSE. The Company may terminate the
Executive's employment hereunder for Cause at any time upon notice to
the Executive setting forth in reasonable detail the nature of such
Cause. The following, as determined by the Board in its reasonable and
good faith judgment, shall constitute Cause for termination: (i)
conviction in a court of law of any felony (other than a felony arising
out of the operation of a motor vehicle) or a plea of nolo contendere
to such an offense, (ii) commission of any act involving theft,
embezzlement, fraud, dishonesty or moral turpitude which act relates to
or otherwise has an adverse effect (including through publicity) on the
Company or its Affiliates, (iii) material breach of any of the material
provisions of this Agreement (other than breaches of the nature
described in clause (iv) below) or of any other material agreement
between the Executive and the Company, or (iv) repeated and consistent
willful misconduct or
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<PAGE> 5
dereliction of duty in the performance of his duties under this
Agreement, or repeated and consistent failure to be present at work,
which conduct or failure continues for more than thirty (30) days after
notice given to the Executive, such notice to set forth in reasonable
detail the nature of such conduct or failure. Upon the giving of notice
of termination of the Executive's employment hereunder for Cause, the
Company shall not have any further obligation or liability to the
Executive, other than for Base Salary earned and unpaid, accrued
vacation time and unreimbursed business expenses outstanding at the
date of termination.
(d) SEVERANCE PAYMENTS UPON EXPIRATION. If the Executive shall
cease to be employed by the Company (or any of its Affiliates) upon the
expiration of this Agreement, the Executive shall be entitled, subject
to the immediately following sentence, to receive as a severance
benefit periodic payments in an amount equal to his Base Salary in
effect at the date of such expiration divided by the number of payroll
periods per year then applicable to executives of the Company
(hereinafter, "Severance Payments"), for a period of six months from
and after the date of such expiration. The Executive's rights to
receive Severance Payments hereunder is conditioned upon (X) the
Executive's prior execution and delivery to the Company of a general
release of any and all claims and causes of action of the Executive
against the Company, Provant and their respective officers, directors
and Affiliates, excepting only (i) the right to any Base Salary and/or
reimbursable expenses then accrued and unpaid under Section 4 of this
Agreement, and (ii) the right to receive any Additional Shares to which
the Executive then is entitled or may thereafter be entitled under that
certain Agreement and Plan of Merger among Provant, the corporate
predecessor of the Company, the Executive and certain other Persons,
and (Y) the Executive's continued performance of those obligations
hereunder that continue by their express terms after the termination of
his employment, including without limitation those set forth in
Sections 7 and 8. Any Severance Payments to be paid hereunder shall be
payable in accordance with the payroll practices of the Company for its
executive generally as in effect from time to time, and subject to all
required withholding of taxes.
6. EFFECT OF TERMINATION. Upon termination of this Agreement, all
obligations and provisions of this Agreement shall terminate except with respect
to any accrued and unpaid monetary obligations and except for the provisions of
Section 7 through (and inclusive of) 23 hereof.
7. COVENANT NOT TO COMPETE. Provided only that the Company is not then
in default on its payment obligations under this Agreement, for a period of five
(5) years from the Effective Date the Executive will not engage or become
interested, directly or indirectly, as an owner, employee, director, partner,
consultant, through stock ownership, investment of capital, lending of money or
property, rendering of services, or otherwise, either alone or in association
with others, in the operation, management or supervision of any type of business
or enterprise in any way similar
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<PAGE> 6
to or competitive with the business of the Company. In addition, during such
period the Executive will not, directly or indirectly, whether on his behalf or
on behalf of anyone else, (i) solicit or accept orders from any present or past
customer of the Company for a product or service offered or sold by, or
competitive with a product or service offered or sold by, the Company; (ii)
induce or attempt to induce any such customer to reduce such customer's
purchases from the Company; (iii) use for the benefit of the Executive or
disclose the name and/or requirements of any such customer to any other person
or persons, natural or corporate; or (iv) solicit any of the Company's employees
or consultants to leave the employ of the Company or hire anyone who was an
employee of the Company or a consultant to the Company at any time within one
year from the date the Executive's employment with the Company terminated. The
foregoing restrictions shall not prevent the Executive from hiring or otherwise
engaging any professional firm.
8. CONFIDENTIAL INFORMATION.
(a) The Executive acknowledges that the Company and its
Affiliates will continually develop Confidential Information, that the
Executive may develop Confidential Information for the Company or its
Affiliates and that the Executive may learn of Confidential Information
during the course of employment. The Executive agrees that, except as
required for the proper performance of his duties for the Company, he
will not, directly or indirectly, use or disclose any Confidential
Information, as defined below. The Executive understands and agrees
that this restriction will continue to apply after his employment
terminates, regardless of the reason for termination.
(b) The Executive agrees that all Confidential Information
which he creates or to which he has access as a result of his
employment is and shall remain the sole and exclusive property of the
Company. Except as required for the proper performance of his duties,
the Executive will not copy any documents, tapes or other media
containing Confidential Information ("Documents") or remove any
Documents, or copies, from Company premises. The Executive will return
to the Company immediately after his employment terminates, and at such
other times as may be specified by the Company, all Documents and
copies and all other property of the Company then in his possession or
control.
9. ENFORCEMENT OF COVENANTS. The Executive acknowledges that he
has carefully read and considered all the terms and conditions of this
Agreement, including the restraints imposed upon him pursuant to Sections 7 and
8 hereof. The Executive further agrees that all goodwill of the Company and its
Affiliates is their exclusive property. The Executive further acknowledges and
agrees that, were he to breach any of the covenants contained in Sections 7 and
8 hereof, the damage would be irreparable. The Executive therefore agrees that
the Company or any of its Affiliates, as the case may be, in addition to any
other remedies available to it, shall be entitled to preliminary and permanent
injunctive relief against any breach or
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<PAGE> 7
threatened breach by the Executive of any of said covenants, without having to
post bond, provided the Company has made a prima facie showing of such a breach
or threatened breach.
10. INDEMNIFICATION. Subject to the second sentence of this
Section 10, the Company agrees to indemnify Executive against all liabilities
and expenses, including amounts paid in satisfaction of judgments, in compromise
or as fines and penalties, together with counsel fees, in each case reasonably
incurred by him in connection with the defense or disposition of any action,
suit or other proceeding, whether civil or criminal, in which he may be involved
or with which he may be threatened during the term of this Agreement or
thereafter, in each case to the extent incurred by reason of his serving or
having served (a) as an executive officer or director of the Company, or (b) at
its request as a director or executive officer of any organization in which the
Company directly or indirectly owns shares or of which it is directly or
indirectly a creditor, or (c) at its request in any capacity with respect to any
employee plan. Notwithstanding the immediately preceding sentence, the Company
shall not indemnify the Executive if the Executive (i) did not act in good faith
and in a manner the Executive reasonably believed to be in or not opposed to the
best interests of the Company, and (ii) with respect to any criminal action or
proceeding, had reasonable cause to believe that the Executive's conduct was
unlawful. Provant shall purchase and maintain in force directors' and officers'
liability insurance having policy limits and other terms reasonably determined
by the Provant Board of Directors.
11. CONFLICTING AGREEMENTS. The Executive hereby represents and
warrants that the execution of this Agreement and the performance of his
obligations hereunder will not breach or be in conflict with any other agreement
to which the Executive is a party or is bound and that the Executive is not
subject to any covenants against competition or similar covenants that would
affect the performance of his obligations hereunder. The Executive will not
disclose or use any proprietary information of a third party without such
party's consent.
12. DEFINITIONS. Words or phrases which are initially capitalized
or are within quotation marks shall have the meanings provided in this Section
12 and as provided elsewhere herein. For purposes of this Agreement, the
following definitions apply:
(a) "Affiliates" means all persons and entities directly or
indirectly controlling, controlled by or under common control with the
Company, where control may be by either management authority or equity
interest , including without limitation Provant.
(b) "Company" means, for purposes of Sections 7, 8, and 12(c)
only, the Company or any of its Affiliates; and means the corporation
named in the preamble for purposes of all other Sections.
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<PAGE> 8
(c) "Confidential Information" means any and all information,
inventions, discoveries, ideas, research, engineering methods,
practices, processes, systems, formulae, designs, concepts, products,
projects, improvements and developments that are not generally known by
others, developed by or known to the Executive prior to or during the
term of this Agreement and relating in any material respect to the
Company or its Affiliates, including their respective businesses,
products or services (or learned by the Executive after the term hereof
from a source known to the Executive to be violating an obligation to
the Company or an Affiliate not to disclose the same), including but
not limited to (i) products and services, technical data, methods and
processes, (ii) marketing activities and strategic plans, (iii) costs
and sources of supply, (iv) the identity and special needs of customers
and prospective customers and vendors and prospective vendors, and (v)
the people and organizations with whom the Company has or plans to have
business relationships and those relationships. Confidential
Information also includes such information that the Company may receive
or has received belonging to customers or others who do business with
the Company and any publication or literary creation of the Executive,
developed in whole or in significant part during the term hereof, in
whatever form published, whose content in whole or in part is
competitive in any material respect with the products or services
offered by the Company (including as such products or services could
reasonably be expected to evolve or be extended in the foreseeable
future).
(c) "PERSON" means an individual, a corporation, an
association, a partnership, an estate, a trust and any other entity or
organization.
13. WITHHOLDING. All payments made under this Agreement shall be
reduced by any tax or other amounts required to be withheld under applicable
law.
14. ASSIGNMENT. Neither the Company nor the Executive may make any
assignment of this Agreement or any interest herein, by operation of law or
otherwise, without the prior written consent of the other; provided, however,
that the Company may assign its rights and obligations under this Agreement
without the consent of the Executive in the event that the Company shall
hereafter effect a reorganization, consolidate with, or merge into, any other
Person or transfer all or substantially all of its properties or assets to any
other Person unless the Executive shall object in writing to such assignment
within 60 days following the effective date thereof, in which event the
Executive's sole remedy shall be to terminate this Agreement, which termination
shall have the effect set forth in Section 6 hereof. This Agreement shall inure
to the benefit of and be binding upon the Company and the Executive, their
respective successors, executors, administrators, heirs and permitted assigns.
15. SEVERABILITY. If any portion or provision of this Agreement
shall to any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then
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<PAGE> 9
the remainder of this Agreement, or the application of such portion or provision
in circumstances other than those as to which it is so declared illegal or
unenforceable, shall not be affected thereby, and each portion and provision of
this Agreement shall be valid and enforceable to the fullest extent permitted by
law.
16. WAIVER. No waiver of any provision hereof shall be effective unless
made in writing and signed by the waiving party. The failure of either party to
require the performance of any term or obligation of this Agreement, or the
waiver by either party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
17. NOTICES. Any and all notices, requests, demands and other
communications provided for by this Agreement shall be in writing and shall be
effective when delivered in person or deposited in the United States mail,
postage prepaid, registered or certified, and addressed to the Executive at his
last known address on the books of the Company or, in the case of the Company,
at Provant's principal place of business, to the attention of Chief Executive
Officer, or to such other address as either party may specify by notice to the
other actually received.
18. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties and supersedes all prior communications, agreements and
understandings, written or oral, with respect to the terms and conditions of the
Executive's employment, including without limitation any agreements relating to
employment between the Executive and any corporate predecessor of the Company,
any such agreement being hereby terminated by the mutual agreement of the
parties without liability to either party.
19. AMENDMENT. This Agreement may be amended or modified only by a
written instrument signed by the Executive and by an expressly authorized
representative of the Company.
20. HEADINGS. The headings and captions in this Agreement are for
convenience only and in no way define or describe the scope or content of any
provision of this Agreement.
21. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be an original and all of which together shall
constitute one and the same instrument.
22. GOVERNING LAW. This Agreement shall be construed and enforced under
and be governed in all respects by the laws of the State of New Jersey, without
regard to the conflict of laws principles thereof.
23. GUARANTY BY PROVANT. Provant hereby unconditionally and irrevocably
guarantees all of the Company's obligations to the Executive provided in this
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<PAGE> 10
Agreement. Provant's guaranty is of the full payment and performance of all of
the Company's covenants, agreements, duties and obligations under this
Agreement, and not a guaranty of collection. This is a continuing guaranty for
all future amounts. Provant waives all rights of subrogation it may have against
the Company until all amounts due or to become due hereunder have been paid to
the Executive, and Provant waives all other defenses and remedies available to
guarantors at law or in equity with respect to the guaranty hereby provided.
IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument by the Executive and by the Company and Provant. by their respective
duly authorized representatives, as of the date first above written.
Executive: MOHR ACQUISITION CORP.
_______________________________ By:_____________________________
Name:
Title:
As to paragraph 23:
PROVANT, INC.
By:_____________________________
Name:
Title:
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<PAGE> 1
EXHIBIT 10.8
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into effective as of
________________ by and among Decker Acquisition Corp., a Delaware corporation
(subject to Section 12(b) below, the "Company"), and Bert Decker of
____________, California (the "Executive"), and, with respect to Section 23
hereof, Provant, Inc., a Delaware corporation ("Provant").
In consideration of the mutual promises, terms, provisions and
conditions set forth in this Agreement, the parties hereby agree as follows:
1. EMPLOYMENT. Subject to the terms and conditions set forth in
this Agreement, the Company hereby offers and the Executive hereby accepts
employment.
2. TERM. Subject to earlier termination as hereafter provided,
the Executive's employment hereunder shall be for a term of three (3) years,
commencing effective [the Effective Time] (the "Effective Date"). The term of
this Agreement, as from time to time extended or renewed, is hereafter referred
to as "the term of this Agreement" or "the term hereof."
3. CAPACITY AND PERFORMANCE.
(a) During the term hereof, the Executive shall serve as the
Chairman and Chief Executive Officer of the Company. In addition, and
without further compensation, the Executive shall serve as a director
and/or officer of the Company and/or one or more of the Company's
Affiliates if so elected or appointed from time to time.
(b) During the term hereof, the Executive shall be employed by
the Company on a full-time basis except as set forth on Schedule 1
hereto, shall have all powers and duties consistent with his position
as the senior-most executive officer of the Company (including without
limitation the power to conduct and direct the day-to-day operations of
the Company, the power to hire and dismiss personnel, and those other
powers customarily exercised by the senior-most executive officer of a
publicly-held business), subject to the direction and control of the
Company's Board of Directors (the "Board") and the Chief Executive
Officer of Provant or its or his designees, and shall perform such
other duties and responsibilities on behalf of the Company and its
Affiliates as may reasonably be designated from time to time by the
Board and the Chief Executive Officer of Provant or its or his designee
consistent with the Executive's office as set forth above.
<PAGE> 2
(c) During the term hereof, the Executive shall devote
substantially all of his full business time and his best efforts,
business judgment, skill and knowledge to the advancement of the
business and interests of the Company and to the discharge of his
duties and responsibilities hereunder. The Executive shall not engage
in any other business activity or serve in any industry, trade,
professional, governmental or academic position during the term of this
Agreement, except (i) as set forth on Schedule 1 hereto, or (ii) as may
be expressly approved in advance by the Board in writing or to the
extent that any such activity or service does not materially and
adversely affect the discharge of his duties and responsibilities
hereunder. Without limiting the foregoing, the activities listed on the
attached Schedule 1 are hereby approved by the Company.
(d) The Company shall not require the Executive to relocate or
reassign the Executive to any location beyond a fifty (50) mile radius
of the location of the Company's headquarters as of the date hereof,
nor shall the Executive's duties hereunder be materially changed,
without the Executive's prior written consent.
4. Compensation and Benefits. As compensation for all services
performed by the Executive under and during the term hereof and subject to
performance of the Executive's duties and obligations, pursuant to this
Agreement or otherwise:
(a) BASE SALARY. During the term hereof, the Company shall pay
the Executive a base salary at the rate of One Hundred Twenty-Five
Thousand Dollars ($125,000) per annum, payable in accordance with the
payroll practices of the Company for its executives and subject to
increase from time to time by the Board or a compensation committee of
the Board in its sole discretion. Such base salary, as from time to
time increased, is hereafter referred to as the "Base Salary".
(b) BONUS COMPENSATION. Executive shall be entitled to
participate in such bonus plan as the Company provides to its
executives generally, in accordance with the terms of that plan, as
amended by the Company from time to time. The total Base Salary and
bonus compensation for the Executive, when combined with that of Mr.
Kenneth Taylor, shall not exceed $325,000 for any year.
(c) VACATIONS. During the term hereof, the Executive shall be
entitled to four weeks of vacation per annum, to be taken at such times
and intervals as shall be determined by the Executive, subject to the
reasonable business needs of the Company. Vacation time shall not
cumulate from year to year.
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<PAGE> 3
(d) OTHER BENEFITS. During the term hereof and subject to any
contribution therefor generally required of employees of the Company,
the Executive shall be entitled to participate in any and all employee
benefit plans from time to time in effect for employees of the Company
generally, except to the extent such plans are in a category of benefit
(including without limitation bonus compensation and severance
compensation) otherwise provided to the Executive. Such participation
shall be subject to (i) the terms of the applicable plan documents,
(ii) generally applicable Company policies and (iii) the discretion of
the Board or any administrative or other committee provided for in or
contemplated by such plan. The Company may alter, modify, add to or
delete any of the employee benefit plans maintained for its employees
generally at any time as it, in its sole judgment, determines to be
appropriate, without recourse by the Executive.
(e) BUSINESS EXPENSES. The Company shall pay or reimburse the
Executive for all reasonable and necessary business expenses incurred
or paid by the Executive in the performance of his duties and
responsibilities hereunder, subject to any maximum annual limit and
other restrictions on such expenses set by the Board and to such
reasonable substantiation and documentation as may be specified by the
Company from time to time.
5. TERMINATION OF EMPLOYMENT AND SEVERANCE BENEFITS.
Notwithstanding the provisions of Section 2 hereof, the Executive's employment
hereunder shall terminate prior to the expiration of the term under the
following circumstances:
(a) DEATH. In the event of the Executive's death during the
term hereof, the Executive's employment hereunder shall immediately and
automatically terminate. In that event, the Company shall pay to the
Executive's designated beneficiary or, if no beneficiary has been
designated by the Executive, to his estate, any earned and unpaid Base
Salary, prorated through the date of his death.
(b) DISABILITY.
(i) The Company may terminate the Executive's employment
hereunder, upon notice to the Executive, in the event that the
Executive becomes disabled during his employment hereunder
through any illness, injury, accident or condition of either a
physical or psychological nature and, as a result, is unable
to perform substantially all of his duties and
responsibilities hereunder for ninety (90) days during any
period of three hundred sixty-five (365) consecutive calendar
days.
(ii) The Board may designate another employee to act in
the Executive's place during any period of the Executive's
disability.
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<PAGE> 4
Notwithstanding any such designation, the Executive shall
continue to receive the Base Salary in accordance with Section
4(a) and his other benefits pursuant to Section 4(d), to the
extent permitted by the then-current terms of the applicable
benefit plans, until the Executive becomes eligible for
disability income benefits under any disability income plan
provided by the Company or until the termination of his
employment, whichever shall first occur.
(iii) If any question shall arise as to whether, during
any period, the Executive is disabled through any illness,
injury, accident or condition of either a physical or
psychological nature such that he is unable to perform
substantially all of his duties and responsibilities
hereunder, the Executive may, and at the request of the
Company shall, submit to a medical examination by a physician
selected by the Company to whom the Executive or his duly
appointed guardian, if any, has no reasonable objection to
determine whether the Executive is so disabled and such
determination shall for the purposes of this Agreement be
conclusive of the issue. If such question shall arise and the
Executive shall fail to submit to such medical examination,
the Company's determination of the issue shall be binding on
the Executive.
(c) BY THE COMPANY FOR CAUSE. The Company may terminate the
Executive's employment hereunder for Cause at any time upon notice to
the Executive setting forth in reasonable detail the nature of such
Cause. The following, as determined by the Board in its reasonable and
good faith judgment, shall constitute Cause for termination: (i)
conviction in a court of law of any felony (other than a felony arising
out of the operation of a motor vehicle) or a plea of nolo contendere
to such an offense, (ii) commission of any act involving theft,
embezzlement, fraud, dishonesty or moral turpitude which act relates to
or otherwise has an adverse effect (including through publicity) on the
Company or its Affiliates, (iii) material breach of any of the material
provisions of this Agreement (other than breaches of the nature
described in clause (iv) below) or of any other material agreement
between the Executive and the Company or any of its Affiliates, or (iv)
repeated and consistent willful misconduct or dereliction of duty in
the performance of his duties under this Agreement, or repeated and
consistent failure to be present at work, which conduct or failure
continues for more than thirty (30) days after notice given to the
Executive, such notice to set forth in reasonable detail the nature of
such conduct or failure. Upon the giving of notice of termination of
the Executive's employment hereunder for Cause, the Company shall not
have any further obligation or liability to the Executive, other than
for Base Salary earned and unpaid, accrued vacation time and
unreimbursed business expenses outstanding at the date of termination.
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<PAGE> 5
(d) SEVERANCE PAYMENTS UPON EXPIRATION. If the Executive shall
cease to be employed by the Company (or any of its Affiliates) upon the
expiration of this Agreement, the Executive shall be entitled, subject
to the immediately following sentence, to receive as a severance
benefit periodic payments in an amount equal to his Base Salary in
effect at the date of such expiration divided by the number of payroll
periods per year then applicable to executives of the Company
(hereinafter, "Severance Payments"), for a period of six months from
and after the date of such expiration. The Executive's rights to
receive Severance Payments hereunder is conditioned upon (X) the
Executive's prior execution and delivery to the Company of a general
release of any and all claims and causes of action of the Executive
against the Company, Provant and their respective officers, directors
and Affiliates, excepting only (i) the right to any Base Salary and/or
reimbursable expenses then accrued and unpaid under Section 4 of this
Agreement, and (ii) the right to receive any Additional Shares to which
the Executive then is entitled or may thereafter be entitled under that
certain Agreement and Plan of Merger among Provant, the corporate
predecessor of the Company, the Executive and certain other Persons,
and (Y) the Executive's continued performance of those obligations
hereunder that continue by their express terms after the termination of
his employment, including without limitation those set forth in
Sections 7 and 8. Any Severance Payments to be paid hereunder shall be
payable in accordance with the payroll practices of the Company for its
executive generally as in effect from time to time, and subject to all
required withholding of taxes.
6. EFFECT OF TERMINATION. Upon termination of this Agreement, all
obligations and provisions of this Agreement shall terminate except with respect
to any accrued and unpaid monetary obligations and except for the provisions of
Section 7 through (and inclusive of) 23 hereof.
7. COVENANT NOT TO COMPETE.
(a) The Executive acknowledges that this Agreement is being
entered into contemporaneously with, and in connection with, Provant's
acquisition of the Company's corporate predecessor, of which the
Executive was a principal stockholder, and that the goodwill thereby
acquired by Provant and the Company is of significant value. The
Executive further acknowledges that the Company's and its predecessor's
business operations are and were of broad geographic scope, and that
the Company's and its predecessor's products are by their nature not
subject to geographic boundaries, both of which factors cause such
goodwill to extend without geographic limitation.
(b) Having due regard for the matters acknowledged in
subsection (a) above, and provided only that the Company is not then in
default on its payment obligations under this Agreement, for a period
of five (5) years from
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<PAGE> 6
the Effective Date the Executive will not engage or become interested,
directly or indirectly, as an owner, employee, director, partner,
consultant, through stock ownership, investment of capital, lending of
money or property, rendering of services, or otherwise, either alone or
in association with others, in the operation, management or supervision
of any type of business or enterprise in any way similar to or
competitive with the business of the Company. In addition, during such
period the Executive will not, directly or indirectly, whether on his
behalf or on behalf of anyone else, (i) solicit or accept orders from
any present or past customer of the Company for a product or service
offered or sold by, or competitive with a product or service offered or
sold by, the Company; (ii) induce or attempt to induce any such
customer to reduce such customer's purchases from the Company; (iii)
use for the benefit of the Executive or disclose the name and/or
requirements of any such customer to any other person or persons,
natural or corporate; or (iv) solicit any of the Company's employees or
consultants to leave the employ of the Company or hire anyone who was
an employee of the Company or a consultant to the Company at any time
within one year from the date the Executive's employment with the
Company terminated. The foregoing restrictions shall not prevent the
Executive from hiring or otherwise engaging any professional firm.
8. CONFIDENTIAL INFORMATION.
(a) The Executive acknowledges that the Company will
continually develop Confidential Information, that the Executive may
develop Confidential Information for the Company and that the Executive
may learn of Confidential Information during the course of employment.
The Executive agrees that, except as required for the proper
performance of his duties for the Company, he will not, directly or
indirectly, use or disclose any Confidential Information, as defined
below. The Executive understands and agrees that this restriction will
continue to apply after his employment terminates, regardless of the
reason for termination.
(b) The Executive agrees that all Confidential Information
which he creates or to which he has access as a result of his
employment is and shall remain the sole and exclusive property of the
Company. Except as required for the proper performance of his duties,
the Executive will not copy any documents, tapes or other media
containing Confidential Information ("Documents") or remove any
Documents, or copies, from Company premises. The Executive will return
to the Company immediately after his employment terminates, and at such
other times as may be specified by the Company, all Documents and
copies and all other property of the Company then in his possession or
control.
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<PAGE> 7
9. ENFORCEMENT OF COVENANTS. The Executive acknowledges that he has
carefully read and considered all the terms and conditions of this Agreement,
including the restraints imposed upon him pursuant to Sections 7 and 8 hereof.
The Executive further agrees that all goodwill of the Company and its Affiliates
is their exclusive property. The Executive further acknowledges and agrees that,
were he to breach any of the covenants contained in Section 7 or 8 hereof, the
damage would be irreparable. The Executive therefore agrees that the Company or
any of its Affiliates, as the case may be, in addition to any other remedies
available to it, shall be entitled to preliminary and permanent injunctive
relief against any breach or threatened breach by the Executive of any of said
covenants, without having to post bond, provided the Company has made a prima
facie showing of such a breach or threatened breach.
10. INDEMNIFICATION. Subject to the second sentence of this Section 10,
the Company agrees to indemnify Executive against all liabilities and expenses,
including amounts paid in satisfaction of judgments, in compromise or as fines
and penalties, together with counsel fees, in each case reasonably incurred by
him in connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, in which he may be involved or with which
he may be threatened during the term of this Agreement or thereafter, in each
case to the extent incurred by reason of his serving or having served (a) as an
executive officer or director of the Company, or (b) at its request as a
director or executive officer of any organization in which the Company directly
or indirectly owns shares or of which it is directly or indirectly a creditor,
or (c) at its request in any capacity with respect to any employee benefit plan.
Notwithstanding the immediately preceding sentence, the Company shall not
indemnify the Executive if the Executive (i) did not act in good faith and in a
manner the Executive reasonably believed to be in or not opposed to the best
interests of the Company, and (ii) with respect to any criminal action or
proceeding, had reasonable cause to believe that the Executive's conduct was
unlawful. Provant shall purchase and maintain in force directors' and officers'
liability insurance having policy limits and other terms reasonably determined
by the Provant Board of Directors.
11. CONFLICTING AGREEMENTS. The Executive hereby represents and warrants
that the execution of this Agreement and the performance of his obligations
hereunder will not breach or be in conflict with any other agreement to which
the Executive is a party or is bound and that the Executive is not subject to
any covenants against competition or similar covenants that would affect the
performance of his obligations hereunder. The Executive will not disclose or use
any proprietary information of a third party without such party's consent.
12. DEFINITIONS. Words or phrases which are initially capitalized or
are within quotation marks shall have the meanings provided in this Section 12
and as provided elsewhere herein. For purposes of this Agreement, the following
definitions apply:
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(a) "Affiliates" means all persons and entities directly or
indirectly controlling, controlled by or under common control with the
Company, where control may be by either management authority or equity
interest , including without limitation Provant.
(b) "Company" means, for purposes of Sections 7, 8, and 12(c)
only, the Company or any of its Affiliates; and means the corporation
named in the preamble for purposes of all other Sections.
(c) "Confidential Information" means any and all information,
inventions, discoveries, ideas, research, engineering methods,
practices, processes, systems, formulae, designs, concepts, products,
projects, improvements and developments that are not generally known by
others, developed by or known to the Executive prior to or during the
term of this Agreement and relating in any material respect to the
Company, including their respective businesses, products or services
(or learned by the Executive after the term hereof from a source known
to the Executive to be violating an obligation to the Company not to
disclose the same), including but not limited to (i) products and
services, technical data, methods and processes, (ii) marketing
activities and strategic plans, (iii) costs and sources of supply, (iv)
the identity and special needs of customers and prospective customers
and vendors and prospective vendors, and (v) the people and
organizations with whom the Company has or plans to have business
relationships and those relationships. Confidential Information also
includes such information that the Company may receive or has received
belonging to customers or others who do business with the Company and
any publication or literary creation of the Executive, developed in
whole or in significant part during the term hereof, in whatever form
published, whose content in whole or in part is competitive in any
material respect with the products or services offered by the Company
(including as such products or services could reasonably be expected to
evolve or be extended in the foreseeable future).
(d) "Person" means an individual, a corporation, an
association, a partnership, an estate, a trust and any other entity or
organization.
13. WITHHOLDING. All payments made under this Agreement shall be
reduced by any tax or other amounts required to be withheld under applicable
law.
14. ASSIGNMENT. Neither the Company nor the Executive may make any
assignment of this Agreement or any interest herein, by operation of law or
otherwise, without the prior written consent of the other; provided, however,
that the Company may assign its rights and obligations under this Agreement
without the consent of the Executive in the event that the Company shall
hereafter effect a reorganization, consolidate with, or merge into, any other
Person or transfer all or
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<PAGE> 9
substantially all of its properties or assets to any other Person unless the
Executive shall object in writing to such assignment within 60 days following
the effective date thereof, in which event the Executive's sole remedy shall be
to terminate this Agreement, which termination shall have the effect set forth
in Section 6 hereof. This Agreement shall inure to the benefit of and be binding
upon the Company and the Executive, their respective successors, executors,
administrators, heirs and permitted assigns.
15. SEVERABILITY. If any portion or provision of this Agreement shall to
any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law. Without limiting the foregoing, in the event
that the temporal or geographic scope of Section 7 shall be determined by a
court of competent jurisdiction to exceed the maximum scope permissible by law,
the applicable provisions of this Agreement shall be deemed modified to the
minimum extent necessary to render such provisions enforceable.
16. WAIVER. No waiver of any provision hereof shall be effective unless
made in writing and signed by the waiving party. The failure of either party to
require the performance of any term or obligation of this Agreement, or the
waiver by either party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
17. NOTICES. Any and all notices, requests, demands and other
communications provided for by this Agreement shall be in writing and shall be
effective when delivered in person or deposited in the United States mail,
postage prepaid, registered or certified, and addressed to the Executive at his
last known address on the books of the Company or, in the case of the Company,
at Provant's principal place of business, to the attention of Chief Executive
Officer, or to such other address as either party may specify by notice to the
other actually received.
18. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties and supersedes all prior communications, agreements and
understandings, written or oral, with respect to the terms and conditions of the
Executive's employment, including without limitation any agreements relating to
employment between the Executive and any corporate predecessor of the Company,
any such agreement being hereby terminated by the mutual agreement of the
parties without liability to either party.
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<PAGE> 10
19. AMENDMENT. This Agreement may be amended or modified only by a
written instrument signed by the Executive and by an expressly authorized
representative of the Company.
20. HEADINGS. The headings and captions in this Agreement are for
convenience only and in no way define or describe the scope or content of any
provision of this Agreement.
21. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be an original and all of which together shall
constitute one and the same instrument.
22. GOVERNING LAW. This Agreement shall be construed and enforced under
and be governed in all respects by the laws of the State of California, without
regard to the conflict of laws principles thereof.
23. GUARANTY BY PROVANT. Provant hereby unconditionally and irrevocably
guarantees all of the Company's obligations to the Executive provided in this
Agreement. Provant's guaranty is of the full payment and performance of all of
the Company's covenants, agreements, duties and obligations under this
Agreement, and not a guaranty of collection. This is a continuing guaranty for
all future amounts. Provant waives all rights of subrogation it may have against
the Company until all amounts due or to become due hereunder have been paid to
the Executive, and Provant waives all other defenses and remedies available to
guarantors at law or in equity with respect to the guaranty hereby provided.
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<PAGE> 11
IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument by the Executive and by the Company and Provant, by their respective
duly authorized representatives, as of the date first above written.
Executive: DECKER ACQUISITION CORP.
_______________________________ By:_____________________________
Bert Decker Name:
Title:
As to paragraph 23:
PROVANT, INC.
By:_____________________________
Name:
Title:
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<PAGE> 12
SCHEDULE 1
TO EMPLOYMENT AGREEMENT OF BERT DECKER
DATED __________, 1998
The parties acknowledge that Bert Decker has been actively involved in
several organizations, Churches and Boards over the past several years,
including Westmont College, Christian Businessmen's Committee, National Speakers
Association, Bold Assurances Ministries, City Church of San Francisco and United
Way. It is agreed that Mr. Decker may continue in these, or similar, activities
at no greater level of
participation.
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<PAGE> 1
EXHIBIT 10.10
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into effective as of
________________ by and among Behavioral Acquisition Corp., a Delaware
corporation (the "Company"), and Paul C. Green, Ph.D. of Memphis, Tennessee (the
"Executive"), and, with respect to Section 23 hereof, Provant, Inc., a Delaware
corporation ("Provant").
In consideration of the mutual promises, terms, provisions and
conditions set forth in this Agreement, the parties hereby agree as follows:
1. EMPLOYMENT. Subject to the terms and conditions set forth in
this Agreement, the Company hereby offers and the Executive hereby accepts
employment.
2. TERM. Subject to earlier termination as hereafter provided,
the Executive's employment hereunder shall be for a term of three (3) years,
commencing effective [the Effective Time] (the "Effective Date"). The term of
this Agreement, as from time to time extended or renewed, is hereafter referred
to as "the term of this Agreement" or "the term hereof."
3. CAPACITY AND PERFORMANCE.
(a) During the term hereof, the Executive shall serve as
the Chairman and Chief Executive Officer of the Company. In addition,
and without further compensation, the Executive shall serve as a
director and/or officer of the Company and/or one or more of the
Company's Affiliates if so elected or appointed from time to time.
(b) During the term hereof, the Executive shall be
employed by the Company on a full-time basis except with respect to the
activities set forth on Schedule 1 hereto, shall have all powers and
duties consistent with his position as the senior-most executive
officer of the Company (including without limitation the power to
conduct and direct the day-to-day operations of the Company, the power
to hire and dismiss personnel, and those other powers customarily
exercised by the senior-most executive officer of a publicly-held
business), subject to the direction and control of the Company's Board
of Directors (the "Board") and the Chief Executive Officer of Provant
or its or his designees consistent with the Executive's office as set
forth above, and shall perform such other duties and responsibilities
on behalf of the Company and its Affiliates as may reasonably be
designated from time to time by the Company's Board of Directors (the
"Board") and the Chief Executive Officer of Provant or its or his
designees consistent with the Executive's office as set forth above.
(c) During the term hereof, the Executive shall devote
substantially all of his full business time and his best efforts,
business judgment, skill and
<PAGE> 2
knowledge to the advancement of the business and interests of the
Company and to the discharge of his duties and responsibilities
hereunder. The Executive shall not engage in any other business
activity or serve in any industry, trade, professional, governmental or
academic position during the term of this Agreement, except (i) as set
forth on Schedule 1 hereto, and (ii) as may be expressly approved in
advance by the Board in writing or to the extent that any such activity
or service does not materially and adversely affect the discharge of
his duties and responsibilities hereunder.
(d) The Company shall not require the Executive to
relocate or reassign the Executive to any location beyond a fifty (50)
mile radius of the location of the Company's headquarters as of the
date hereof, nor shall the Executive's duties hereunder be materially
changed, without the Executive's prior written consent.
4. COMPENSATION AND BENEFITS. As compensation for all services
performed by the Executive under and during the term hereof and subject to
performance of the Executive's duties and obligations, pursuant to this
Agreement or otherwise:
(a) BASE SALARY. During the term hereof, the Company
shall pay the Executive a base salary at the rate of One Hundred
Seventy Five Thousand Dollars ($175,000) per annum, payable in
accordance with the payroll practices of the Company for its executives
and subject to increase from time to time by the Board or a
compensation committee of the Board in its sole discretion. Such base
salary, as from time to time increased, is hereafter referred to as the
"Base Salary".
(b) BONUS COMPENSATION. Executive shall be entitled to
participate in such bonus plan as the Company provides to its
executives generally, in accordance with the terms of that plan, as
amended by the Company from time to time pursuant to which Executive
may receive a bonus of up to forty percent (40%) of his then Base
Salary. Such plan shall provide, with respect to the Executive, that
beginning with the 1999 fiscal year the Executive shall receive the
maximum bonus (i.e., 40% of Base Salary) if (i) he is employed
hereunder as of the last day of the Company's fiscal year (or if the
Executive's employment is terminated by the Company without cause
during such fiscal year other than on account of the expiration of the
term hereof, provided that the foregoing shall not be construed to give
the Company a contractual right to so terminate the Executive's
employment prior to the expiration of the term) and (ii) the Company
achieves or exceeds a targeted level of earnings before interest and
taxes (after accounting for all bonuses) ("EBIT") fixed in good faith
by the Board at or before the beginning of such year. The foregoing
determination shall be made after the end of each fiscal year during
the term hereof and the bonus, if any, with respect to such fiscal year
shall be paid within ninety (90) days following the end of such fiscal
year. Notwithstanding the foregoing, if this Agreement shall expire
prior to the end of the then-
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<PAGE> 3
current fiscal year or the Executive's employment hereunder shall be
terminated on account of his death or disability prior to the end of
the then-current fiscal year, the Executive shall be entitled to
receive a pro rata portion of the bonus, if any, he would have received
based on the Company's EBIT for the full fiscal year had he been
employed hereunder as of the last day of such year (based on the
fraction of the year that he was employed hereunder), determined and
paid following the end of such fiscal year.
(c) VACATIONS. During the term hereof, the Executive
shall be entitled to four weeks of vacation per annum, to be taken at
such times and intervals as shall be determined by the Executive,
subject to the reasonable business needs of the Company. Vacation time
shall not cumulate from year to year.
(d) OTHER BENEFITS. During the term hereof and subject to
any contribution therefor generally required of employees of the
Company, the Executive shall be entitled to participate in any and all
employee benefit plans from time to time in effect for employees of the
Company generally, except to the extent such plans are in a category of
benefit (including without limitation bonus compensation and severance
compensation) otherwise provided to the Executive. Such participation
shall be subject to (i) the terms of the applicable plan documents,
(ii) generally applicable Company policies and (iii) the discretion of
the Board or any administrative or other committee provided for in or
contemplated by such plan. The Company may alter, modify, add to or
delete any of the employee benefit plans maintained for its employees
generally at any time as it, in its sole judgment, determines to be
appropriate, without recourse by the Executive.
(e) BUSINESS EXPENSES. The Company shall pay or reimburse
the Executive for all reasonable and necessary business expenses
incurred or paid by the Executive in the performance of his duties and
responsibilities hereunder, subject to any maximum annual limit and
other restrictions on such expenses set by the Board and to such
reasonable substantiation and documentation as may be specified by the
Company from time to time.
5. TERMINATION OF EMPLOYMENT AND SEVERANCE BENEFITS.
Notwithstanding the provisions of Section 2 hereof, the Executive's employment
hereunder shall terminate prior to the expiration of the term under the
following circumstances:
(a) DEATH. In the event of the Executive's death during
the term hereof, the Executive's employment hereunder shall immediately
and automatically terminate. In that event, the Company shall pay to
the Executive's designated beneficiary or, if no beneficiary has been
designated by the Executive, to his estate, any earned and unpaid Base
Salary, prorated through the date of his death.
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<PAGE> 4
(b) DISABILITY.
(i) The Company may terminate the Executive's
employment hereunder, upon notice to the Executive, in the
event that the Executive becomes disabled during his
employment hereunder through any illness, injury, accident or
condition of either a physical or psychological nature and, as
a result, is unable to perform substantially all of his duties
and responsibilities hereunder for ninety (90) days during any
period of three hundred sixty-five (365) consecutive calendar
days.
(ii) The Board may designate another employee to
act in the Executive's place during any period of the
Executive's disability. Notwithstanding any such designation,
the Executive shall continue to receive the Base Salary in
accordance with Section 4(a) and his other benefits pursuant
to Section 4(d), to the extent permitted by the then-current
terms of the applicable benefit plans, until the Executive
becomes eligible for disability income benefits under any
disability income plan provided by the Company or until the
termination of his employment, whichever shall first occur.
(iii) If any question shall arise as to whether,
during any period, the Executive is disabled through any
illness, injury, accident or condition of either a physical or
psychological nature such that he is unable to perform
substantially all of his duties and responsibilities
hereunder, the Executive may, and at the request of the
Company shall, submit to a medical examination by a physician
selected by the Company to whom the Executive or his duly
appointed guardian, if any, has no reasonable objection to
determine whether the Executive is so disabled and such
determination shall for the purposes of this Agreement be
conclusive of the issue. If such question shall arise and the
Executive shall fail to submit to such medical examination,
the Company's determination of the issue shall be binding on
the Executive.
(c) BY THE COMPANY FOR CAUSE. The Company may terminate
the Executive's employment hereunder for Cause at any time upon notice
to the Executive setting forth in reasonable detail the nature of such
Cause. The following, as determined by the Board in its reasonable and
good faith judgment, shall constitute Cause for termination: (i)
conviction in a court of law of any felony or a plea of nolo contendere
to such an offense, (ii) commission of any act involving theft,
embezzlement, fraud, dishonesty or moral turpitude which act relates to
or otherwise has an adverse effect (including through publicity) on the
Company or its Affiliates, (iii) material breach of any of the material
provisions of this Agreement (other than breaches of the nature
described in clause (iv) below) or of any other material agreement
between the Executive and the Company or any of its Affiliates, or (iv)
repeated and consistent willful misconduct or dereliction of duty in
the
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<PAGE> 5
performance of his duties under this Agreement, or repeated and
consistent failure to be present at work, which conduct or failure
continues for more than thirty (30) days after notice given to the
Executive, such notice to set forth in reasonable detail the nature of
such conduct or failure. Upon the giving of notice of termination of
the Executive's employment hereunder for Cause, the Company shall not
have any further obligation or liability to the Executive, other than
for Base Salary earned and unpaid, accrued vacation time and
unreimbursed business expenses outstanding at the date of termination.
(d) SEVERANCE PAYMENTS UPON EXPIRATION. If the Executive
shall cease to be employed by the Company (or any of its Affiliates)
upon the expiration of this Agreement, the Executive shall be entitled,
subject to the immediately following sentence, to receive as a
severance benefit periodic payments in an amount equal to his Base
Salary in effect at the date of such expiration divided by the number
of payroll periods per year then applicable to executives of the
Company (hereinafter, "Severance Payments"), for a period of six months
from and after the date of such expiration. The Executive's rights to
receive Severance Payments hereunder is conditioned upon (X) the
Executive's prior execution and delivery to the Company of a general
release of any and all claims and causes of action of the Executive
against the Company, Provant and their respective officers, directors
and Affiliates, excepting only (i) the right to any Base Salary and/or
reimbursable expenses then accrued and unpaid under Section 4 of this
Agreement, and (ii) the right to receive any Additional Shares to which
the Executive then is entitled or may thereafter be entitled under that
certain Agreement and Plan of Merger among Provant, the corporate
predecessor of the Company, the Executive and certain other Persons,
and (Y) the Executive's continued performance of those obligations
hereunder that continue by their express terms after the termination of
his employment, including without limitation those set forth in
Sections 7 and 8. Any Severance Payments to be paid hereunder shall be
payable in accordance with the payroll practices of the Company for its
executive generally as in effect from time to time, and subject to all
required withholding of taxes.
6. EFFECT OF TERMINATION. Upon termination of this Agreement, all
obligations and provisions of this Agreement shall terminate except with respect
to any accrued and unpaid monetary obligations and except for the provisions of
Section 7 through (and inclusive of) 23 hereof.
7. COVENANT NOT TO COMPETE. Provided only that the Company is not
then in default on its payment obligations under this Agreement, for a period of
five (5) years from the Effective Date the Executive will not engage or become
interested, directly or indirectly, as an owner, employee, director, partner,
consultant, through stock ownership, investment of capital, lending of money or
property, rendering of services, or otherwise, either alone or in association
with others, in the operation, management or supervision of any type of business
or enterprise in any way similar to or competitive with the business of the
Company. In addition, during such period
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<PAGE> 6
the Executive will not, directly or indirectly, whether on his behalf or on
behalf of anyone else, (i) solicit or accept orders from any present or past
customer of the Company for a product or service offered or sold by, or
competitive with a product or service offered or sold by, the Company; (ii)
induce or attempt to induce any such customer to reduce such customer's
purchases from the Company; (iii) use for the benefit of the Executive or
disclose the name and/or requirements of any such customer to any other person
or persons, natural or corporate; or (iv) solicit any of the Company's employees
or consultants to leave the employ of the Company or hire anyone who was an
employee of the Company or a consultant to the Company at any time within one
year from the date the Executive's employment with the Company terminated. The
foregoing restrictions shall not prevent the Executive from hiring or otherwise
engaging any professional firm.
8. CONFIDENTIAL INFORMATION.
(a) The Executive acknowledges that the Company and its
Affiliates will continually develop Confidential Information, that the
Executive may develop Confidential Information for the Company or its
Affiliates and that the Executive may learn of Confidential Information
during the course of employment. The Executive agrees that, except as
required for the proper performance of his duties for the Company, he
will not, directly or indirectly, use or disclose any Confidential
Information, as defined below. The Executive understands and agrees
that this restriction will continue to apply after his employment
terminates, regardless of the reason for termination.
(b) The Executive agrees that all Confidential
Information which he creates or to which he has access as a result of
his employment is and shall remain the sole and exclusive property of
the Company. Except as required for the proper performance of his
duties, the Executive will not copy any documents, tapes or other media
containing Confidential Information ("Documents") or remove any
Documents, or copies, from Company premises. The Executive will return
to the Company immediately after his employment terminates, and at such
other times as may be specified by the Company, all Documents and
copies and all other property of the Company then in his possession or
control.
9. ENFORCEMENT OF COVENANTS. The Executive acknowledges that he
has carefully read and considered all the terms and conditions of this
Agreement, including the restraints imposed upon him pursuant to Sections 7 and
8 hereof. The Executive further agrees that all goodwill of the Company and its
Affiliates is their exclusive property. The Executive further acknowledges and
agrees that, were he to breach any of the covenants contained in Sections 7 or 8
hereof, the damage would be irreparable. The Executive therefore agrees that the
Company or any of its Affiliates, as the case may be, in addition to any other
remedies available to it, shall be entitled to preliminary and permanent
injunctive relief against any breach or threatened breach by the Executive of
any of said covenants, without having to post
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<PAGE> 7
bond, provided the Company has made a prima facie showing of such a breach or
threatened breach.
10. INDEMNIFICATION. Subject to the second sentence of this
Section 10, the Company agrees to indemnify Executive against all liabilities
and expenses, including amounts paid in satisfaction of judgments, in compromise
or as fines and penalties, together with counsel fees, in each case reasonably
incurred by him in connection with the defense or disposition of any action,
suit or other proceeding, whether civil or criminal, in which he may be involved
or with which he may be threatened during the term of this Agreement or
thereafter, in each case to the extent incurred by reason of his serving or
having served (a) as an executive officer or director of the Company, or (b) at
its request as a director or executive officer of any organization in which the
Company directly or indirectly owns shares or of which it is directly or
indirectly a creditor, or (c) at its request in any capacity with respect to any
employee benefit plan. Notwithstanding the immediately preceding sentence, the
Company shall not indemnify the Executive if the Executive (i) did not act in
good faith and in a manner the Executive reasonably believed to be in or not
opposed to the best interests of the Company, and (ii) with respect to any
criminal action or proceeding, had reasonable cause to believe that the
Executive's conduct was unlawful. Provant shall purchase and maintain in force
directors' and officers' liability insurance having policy limits and other
terms reasonably determined by the Provant Board of Directors.
11. CONFLICTING AGREEMENTS. The Executive hereby represents and
warrants that the execution of this Agreement and the performance of his
obligations hereunder will not breach or be in conflict with any other agreement
to which the Executive is a party or is bound and that the Executive is not
subject to any covenants against competition or similar covenants that would
affect the performance of his obligations hereunder. The Executive will not
disclose or use any proprietary information of a third party without such
party's consent.
12. DEFINITIONS. Words or phrases which are initially capitalized
or are within quotation marks shall have the meanings provided in this Section
12 and as provided elsewhere herein. For purposes of this Agreement, the
following definitions apply:
(a) "Affiliates" means all persons and entities directly
or indirectly controlling, controlled by or under common control with
the Company, where control may be by either management authority or
equity interest, including without limitation Provant.
(b) "Confidential Information" means any and all
information, inventions, discoveries, ideas, research, engineering
methods, practices, processes, systems, formulae, designs, concepts,
products, projects, improvements and developments that are not
generally known by others, developed by or known to the Executive prior
to or during the term of this Agreement and relating in any material
respect to the Company or its
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<PAGE> 8
Affiliates, including their respective businesses, products or services
(or learned by the Executive after the term hereof from a source known
to the Executive to be violating an obligation to the Company or an
Affiliate not to disclose the same) relating in any material respect to
the Company or its Affiliates (including their respective business,
products or services) or that are developed by the Executive during the
Term of this Agreement and that have applicability to the business,
products or services of the Company or its Affiliates, including but
not limited to (i) products and services, technical data, methods and
processes, (ii) marketing activities and strategic plans, (iii) costs
and sources of supply, (iv) the identity and special needs of customers
and prospective customers and vendors and prospective vendors, and (v)
the people and organizations with whom the Company or any Affiliate has
or plans to have business relationships and those relationships.
Confidential Information also includes such information that the
Company or any Affiliate may receive or has received belonging to
customers or others who do business with the Company or any Affiliate
and any publication or literary creation of the Executive, developed in
whole or in significant part during the term hereof, in whatever form
published, whose content in whole or in part is competitive in any
material respect with the products or services offered by the Company
or any Affiliate (including as such products or services could
reasonably be expected to evolve or be extended in the foreseeable
future).
(c) "Person" means an individual, a corporation, an
association, a partnership, an estate, a trust and any other entity or
organization.
13. WITHHOLDING. All payments made under this Agreement shall be
reduced by any tax or other amounts required to be withheld under applicable
law.
14. ASSIGNMENT. Neither the Company nor the Executive may make any
assignment of this Agreement or any interest herein, by operation of law or
otherwise, without the prior written consent of the other; provided, however,
that the Company may assign its rights and obligations under this Agreement
without the consent of the Executive in the event that the Company shall
hereafter effect a reorganization, consolidate with, or merge into, any other
Person or transfer all or substantially all of its properties or assets to any
other Person unless the Executive shall object in writing to such assignment
within 60 days following the effective date thereof, in which event the
Executive's sole remedy shall be to terminate this Agreement, which termination
shall have the effect set forth in Section 6 hereof. This Agreement shall inure
to the benefit of and be binding upon the Company and the Executive, their
respective successors, executors, administrators, heirs and permitted assigns.
15. SEVERABILITY. If any portion or provision of this Agreement
shall to any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable,
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<PAGE> 9
shall not be affected thereby, and each portion and provision of this Agreement
shall be valid and enforceable to the fullest extent permitted by law.
16. WAIVER. No waiver of any provision hereof shall be effective
unless made in writing and signed by the waiving party. The failure of either
party to require the performance of any term or obligation of this Agreement, or
the waiver by either party of any breach of this Agreement, shall not prevent
any subsequent enforcement of such term or obligation or be deemed a waiver of
any subsequent breach.
17. NOTICES. Any and all notices, requests, demands and other
communications provided for by this Agreement shall be in writing and shall be
effective when delivered in person or deposited in the United States mail,
postage prepaid, registered or certified, and addressed to the Executive at his
last known address on the books of the Company or, in the case of the Company,
at Provant's principal place of business, to the attention of Chief Executive
Officer, or to such other address as either party may specify by notice to the
other actually received.
18. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties and supersedes all prior communications,
agreements and understandings, written or oral, with respect to the terms and
conditions of the Executive's employment, including without limitation any
agreements relating to employment between the Executive and any corporate
predecessor of the Company, any such agreement being hereby terminated by the
mutual agreement of the parties without liability to either party.
19. AMENDMENT. This Agreement may be amended or modified only by a
written instrument signed by the Executive and by an expressly authorized
representative of the Company.
20. HEADINGS. The headings and captions in this Agreement are for
convenience only and in no way define or describe the scope or content of any
provision of this Agreement.
21. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be an original and all of which together shall
constitute one and the same instrument.
22. GOVERNING LAW. This Agreement shall be construed and enforced
under and be governed in all respects by the laws of the State of Tennessee,
without regard to the conflict of laws principles thereof.
23. GUARANTY BY PROVANT. Provant hereby unconditionally and
irrevocably guarantees all of the Company's obligations to the Executive
provided in this Agreement. Provant's guaranty is of the full payment and
performance of all of the Company's covenants, agreements, duties and
obligations under this Agreement, and
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not a guaranty of collection. This is a continuing guaranty for all future
amounts. Provant waives all rights of subrogation it may have against the
Company until all amounts due or to become due hereunder have been paid to the
Executive, and Provant waives all other defenses and remedies available to
guarantors at law or in equity with respect to the guaranty hereby provided.
IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument by the Executive and by the Company and Provant, by their respective
duly authorized representatives, as of the date first above written.
Executive: BEHAVIORAL ACQUISITION CORP.
_______________________________ By:_____________________________
Paul C. Green, Ph.D. Name:
Title:
PROVANT, INC.
By:_____________________________
Name:
Title:
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EXHIBIT 10.11
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into effective as of
________________ by and among Novations Acquisition Corp., a Delaware
corporation (subject to Section 12(b) below, the "Company"), and Mr. Joe Hanson
of ________________ (the "Executive"), and, with respect to Section 23 hereof,
Provant, Inc., a Delaware corporation ("Provant").
In consideration of the mutual promises, terms, provisions and
conditions set forth in this Agreement, the parties hereby agree as follows:
1. EMPLOYMENT. Subject to the terms and conditions set forth in this
Agreement, the Company hereby offers and the Executive hereby accepts
employment.
2. TERM. Subject to earlier termination as hereafter provided, the
Executive's employment hereunder shall be for a term of three (3) years,
commencing effective [the Effective Time] (the "Effective Date"). The term of
this Agreement, as from time to time extended or renewed, is hereafter referred
to as "the term of this Agreement" or "the term hereof."
3. CAPACITY AND PERFORMANCE.
(a) During the term hereof, the Executive shall serve as the
Managing Director of the Company. In addition, and without further
compensation, the Executive shall serve as a director and/or officer of
the Company and/or one or more of the Company's Affiliates if so
elected or appointed from time to time.
(b) During the term hereof, the Executive shall be employed by the
Company on a full-time basis, shall have all powers and duties
consistent with his position as an executive officer of the Company,
subject to the direction and control of the Company's Board of
Directors (the "Board") and the Chief Executive Officer of Provant or
its or his designees, and shall perform such other duties and
responsibilities on behalf of the Company and its Affiliates as may
reasonably be designated from time to time by the Board and the Chief
Executive Officer of Provant or its or his designees consistent with
the Executive's office as set forth above.
(c) During the term hereof, the Executive shall devote substantially
all of his full business time and his best efforts, business judgment,
skill and knowledge to the advancement of the business and interests of
the Company and to the discharge of his duties and responsibilities
hereunder. The Executive shall not engage in any other business
activity or serve in any industry, trade, professional, governmental or
academic position during the term of this Agreement, except as may be
expressly approved in advance by
<PAGE> 2
the Board in writing or to the extent that any such activity or service
does not materially and adversely affect the discharge of his duties
and responsibilities hereunder.
(d) The Company shall not require the Executive to relocate or
reassign the Executive to any location outside of Provo, Utah unless
such location is within a twenty (20) mile radius of the location of
the Executive's home as of the date hereof, nor shall the Executive's
duties hereunder be materially changed, without the Executive's prior
written consent.
4. COMPENSATION AND BENEFITS. As compensation for all services
performed by the Executive under and during the term hereof and subject to
performance of the Executive's duties and obligations, pursuant to this
Agreement or otherwise:
(a) BASE SALARY. During the term hereof, the Company shall pay
the Executive a base salary at the rate of One Hundred Seventy-Five
Thousand ($175,000) per annum, payable in accordance with the payroll
practices of the Company for its executives and subject to increase
from time to time by the Board or a compensation committee of the Board
in its sole discretion. Such base salary, as from time to time
increased, is hereafter referred to as the "Base Salary".
(b) BONUS COMPENSATION. Executive shall be entitled to
participate in such bonus plan as the Company provides to its
executives generally, in accordance with the terms of that plan, as
amended by the Company from time to time pursuant to which Executive
may receive a bonus of up to forty percent (40%) of his then Base
Salary. Such plan shall provide, with respect to the Executive, that
beginning with the 1999 fiscal year the Executive shall receive the
maximum bonus (i.e., 40% of Base Salary) if (i) he is employed
hereunder as of the last day of the Company's fiscal year (or if the
Executive's employment is terminated by the Company without cause
during such fiscal year other than on account of the expiration of the
term hereof, provided that the foregoing shall not be construed to give
the Company a contractual right to so terminate the Executive's
employment prior to the expiration of the term) and (ii) the Company
achieves or exceeds a targeted level of earnings before interest and
taxes (after accounting for all bonuses) ("EBIT") fixed in good faith
by the Board at or before the beginning of such year. The foregoing
determination shall be made after the end of each fiscal year during
the term hereof and the bonus, if any, with respect to such fiscal year
shall be paid within ninety (90) days following the end of such fiscal
year. Notwithstanding the foregoing, if this Agreement shall expire
prior to the end of the then-current fiscal year or the Executive's
employment hereunder shall be terminated on account of his death or
disability prior to the end of the then-current fiscal year, the
Executive shall be entitled to receive a pro rata portion of the bonus,
if any, he would have received based on the Company's EBIT for the full
fiscal year had he been employed hereunder as of the last day of such
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year (based on the fraction of the year that he was employed
hereunder), determined and paid following the end of such fiscal year.
(c) VACATIONS. During the term hereof, the Executive shall be
entitled to four weeks of vacation per annum, to be taken at such times
and intervals as shall be determined by the Executive, subject to the
reasonable business needs of the Company. Vacation time shall not
cumulate from year to year.
(d) OTHER BENEFITS. During the term hereof and subject to any
contribution therefor generally required of employees of the Company,
the Company shall provide to the Executive, for his participation,
employee benefits of the same or substantially equivalent nature to
those employee benefits available to the Executive while employed by
the Predecessor Corporation (as defined in Section 7(a)) during the
period July 1, 1997 through December 31, 1997, and Executive shall be
entitled to participate in any and all other employee benefit plans
from time to time in effect for employees of the Company generally,
except to the extent such plans are in a category of benefit (including
without limitation bonus compensation and severance compensation)
otherwise provided to the Executive. Provided that the Company does not
delete (without substitution of a substantially equivalent plan), or
prohibit the Executive's participation in, a plan of a type available
to the Executive while employed by the Predecessor Corporation during
the period July 1, 1997 through December 31, 1997, such participation
shall be subject to (i) the terms of the applicable plan documents,
(ii) generally applicable Company policies and (iii) the discretion of
the Board or any administrative or other committee provided for in or
contemplated by such plan, and (Y) the Company may alter, modify, add
to or delete any of the employee benefit plans maintained for its
employees generally at any time as it, in its sole judgment, determines
to be appropriate, without recourse by the Executive.
(e) BUSINESS EXPENSES. The Company shall pay or reimburse the
Executive for all reasonable and necessary business expenses incurred
or paid by the Executive in the performance of his duties and
responsibilities hereunder, subject to any maximum annual limit and
other restrictions on such expenses set by the Board and to such
reasonable substantiation and documentation as may be specified by the
Company from time to time. In addition to the foregoing (to the extent
inconsistent therewith), the Company shall permit the Executive to
continue to incur, and shall pay or reimburse, the expenses associated
with the items described on Section 3.13(d) of the Company Disclosure
Schedule attached to that certain Agreement and Plan of Merger among
Provant, the Predecessor Corporation, the Executive and certain other
persons (the "Merger Agreement"), including replacements thereof that
are of a comparable nature and no more than comparable cost, and shall
permit the Executive to incur, or shall pay on the Executive's behalf,
expenses comparable to those described on such Schedule if the
Predecessor Corporation
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has not previously paid such expenses or the Executive has not
previously incurred the same.
5. TERMINATION OF EMPLOYMENT AND SEVERANCE BENEFITS. Notwithstanding
the provisions of Section 2 hereof, the Executive's employment hereunder shall
terminate prior to the expiration of the term under the following circumstances:
(a) DEATH. In the event of the Executive's death during the
term hereof, the Executive's employment hereunder shall immediately and
automatically terminate. In that event, the Company shall pay to the
Executive's designated beneficiary or, if no beneficiary has been
designated by the Executive, to his estate, any earned and unpaid Base
Salary, prorated through the date of his death.
(b) DISABILITY.
(i) The Company may terminate the Executive's
employment hereunder, upon notice to the Executive, in the
event that the Executive becomes disabled during his
employment hereunder through any illness, injury, accident or
condition of either a physical or psychological nature and, as
a result, is unable to perform substantially all of his duties
and responsibilities hereunder for ninety (90) days during any
period of three hundred sixty-five (365) consecutive calendar
days.
(ii) The Board may designate another employee to act
in the Executive's place during any period of the Executive's
disability. Notwithstanding any such designation, the
Executive shall continue to receive the Base Salary in
accordance with Section 4(a) and his other benefits pursuant
to Section 4(d), to the extent permitted by the then-current
terms of the applicable benefit plans, until the Executive
becomes eligible for disability income benefits under any
disability income plan provided by the Company or until the
end of the term of this Agreement, whichever shall first
occur.
(iii) If any question shall arise as to whether, during
any period, the Executive is disabled through any illness,
injury, accident or condition of either a physical or
psychological nature such that he is unable to perform
substantially all of his duties and responsibilities
hereunder, the Executive may, and at the request of the
Company shall, submit to a medical examination by a physician
selected by the Company to whom the Executive or his duly
appointed guardian, if any, has no reasonable objection to
determine whether the Executive is so disabled and such
determination shall for the purposes of this Agreement be
conclusive of the issue. If such question shall arise and the
Executive shall fail to submit to such medical examination,
the Company's determination of the issue shall be binding on
the Executive.
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<PAGE> 5
(c) BY THE COMPANY FOR CAUSE. The Company may terminate the
Executive's employment hereunder for Cause at any time upon notice to
the Executive setting forth in reasonable detail the nature of such
Cause. The following, as determined by the Board in its reasonable and
good faith judgment, shall constitute Cause for termination: (i)
conviction in a court of law of any felony (other than a felony arising
out of the operation of a motor vehicle) or a plea of nolo contendere
to such an offense, (ii) commission of any act involving theft,
embezzlement, fraud, dishonesty or moral turpitude which act relates to
or otherwise has an adverse effect (including through publicity) on the
Company or its Affiliates, (iii) material breach of any of the material
provisions of this Agreement (other than breaches of the nature
described in clause (iv) below) or of any other material agreement
between the Executive and the Company or any of its Affiliates, or (iv)
repeated and consistent willful misconduct or dereliction of duty in
the performance of his duties under this Agreement, or repeated and
consistent failure to be present at work, which conduct or failure
continues for more than thirty (30) days after notice given to the
Executive, such notice to set forth in reasonable detail the nature of
such conduct or failure. Upon the giving of notice of termination of
the Executive's employment hereunder for Cause, the Company shall not
have any further obligation or liability to the Executive, other than
for Base Salary earned and unpaid, accrued vacation time and
unreimbursed business expenses outstanding at the date of termination.
(d) SEVERANCE PAYMENTS UPON EXPIRATION. If the Executive shall
cease to be employed by the Company (or any of its Affiliates) upon the
expiration of this Agreement, the Executive shall be entitled, subject
to the immediately following sentence, to receive as a severance
benefit periodic payments in an amount equal to his Base Salary in
effect at the date of such expiration divided by the number of payroll
periods per year then applicable to executives of the Company
(hereinafter, "Severance Payments"), for a period of six months from
and after the date of such expiration. The Executive's rights to
receive Severance Payments hereunder is conditioned upon (X) the
Executive's prior execution and delivery to the Company of a general
release of any and all claims and causes of action of the Executive
against the Company, Provant and their respective officers, directors
and Affiliates, excepting only (i) the right to any Base Salary and/or
reimbursable expenses then accrued and unpaid under Section 4 of this
Agreement, and (ii) the right to receive any Additional Shares to which
the Executive then is entitled or may thereafter be entitled under that
certain Agreement and Plan of Merger among Provant, the corporate
predecessor of the Company, the Executive and certain other Persons,
and (Y) the Executive's continued performance of those obligations
hereunder that continue by their express terms after the termination of
his employment, including without limitation those set forth in
Sections 7 and 8. Any Severance Payments to be paid hereunder shall be
payable in accordance with the payroll practices of the Company for its
executive generally as in effect from time to time, and subject to all
required withholding of taxes.
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6. EFFECT OF TERMINATION. Upon termination of this Agreement, all
obligations and provisions of this Agreement shall terminate except with respect
to any accrued and unpaid monetary obligations and except for the provisions of
Section 7 through (and inclusive of) 23 hereof.
7. COVENANT NOT TO COMPETE.
(a) Having due regard for the matters acknowledged in
subsection (d) below, and provided only that the Company is not then in
default on its payment obligations under this Agreement or on its
obligations to provide the employee benefits referred to in subection
4(d) above, for a period of three (3) years from the Effective Date and
thereafter for so long as the Executive remains employed by the Company
under this Agreement, the Executive will not engage or become
interested, directly or indirectly, as an owner, employee, director,
partner, consultant, through stock ownership, investment of capital,
lending of money or property, rendering of services, or otherwise,
either alone or in association with others, in the operation,
management or supervision of any type of business or enterprise in any
way competitive with the business of the Company. In addition, during
such period the Executive will not, directly or indirectly, whether on
his behalf or on behalf of anyone else, (i) solicit or accept orders
from any then-existing or past customer of the Company or any
prospective customer of the Company with whom representatives of the
Company have had personal contact, in either case for a product or
service offered or sold by, or competitive with a product or service
offered or sold by, the Company; (ii) induce or attempt to induce any
such customer to reduce such customer's purchases from the Company;
(iii) use for the benefit of the Executive or disclose the name and/or
requirements of any such customer to any other person or persons,
natural or corporate; or (iv) solicit any of the Company's employees or
consultants to leave the employ of the Company or hire anyone who was
an employee of the Company or a consultant to the Company at any time
within one year from the date the Executive's employment with the
Company terminated. The foregoing restrictions shall not prevent the
Executive from hiring or otherwise engaging any professional firm.
(b) Having due regard for the matters acknowledged in
subsection (d) below, and provided only that the Company is not then in
default on its payment obligations under this Agreement or on its
obligations to provide the employee benefits referred to in subection
4(d) above, for the period from and after the third anniversary of the
Effective Date through the fifth (5th) anniversary of the Effective
Date (and solely if subsection 7(a) is inapplicable because the
Executive is no longer employed by the Company under this Agreement),
the Executive will not, directly or indirectly, whether on his behalf
or on behalf of anyone else, (i) solicit or accept orders from any
Active Customer (as defined below) for a product or service offered or
sold by, or competitive with a product or service offered or sold by,
the Company;
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(ii) solicit or accept orders from any Active Prospect (as defined
below) for a product or service that is substantially the same as, or
that is competitive with, the product or service that is the subject of
the Company's solicitation; (iii) induce or attempt to induce any
customer of the Company to reduce such customer's purchases from the
Company; (iv) use for the benefit of the Executive or disclose the name
and/or requirements of any such customer to any other person or
persons, natural or corporate; (v) solicit any of the Company's
employees or consultants to leave the employ of the Company or hire
anyone who was an employee of the Company or a consultant to the
Company at any time within one year from the date the Executive's
employment with the Company terminated; or (vi) hire, become a partner
or stockholder with, together become employees of any entity with, or
otherwise go into business with any person who was a stockholder of
Novations Group, Inc. (the "Predecessor Corporation") either as of the
date of the Agreement and Plan of Merger between the Predecessor
Corporation and the Company or as of immediately prior to the merger of
the Predecessor Corporation and the Company, if such business is
competitive with the business of the Company. As used herein, "Active
Customer" means a person or entity that was a customer of the Company
at the date of the cessation of the Executive's employment hereunder,
or at any time during the one-year period immediately preceding the
later of such dates, and "Active Prospect" means a prospective customer
with whom representatives of the Company have had personal contact
within the one year period immediately prior to the date of the
cessation of the Executive's employment hereunder. For purposes of this
subsection 7(b) only, in the case of customers or prospective customers
having more than one operating division or similar business unit, the
customer shall be deemed to consist only of the division that has
engaged or that has been solicited by the Company (including all other
divisions for which the first such division ordinarily controls
decisions regarding engagement of outside advisors), and any other
division with which the Company has had substantial contact in the
course of such engagement or solicitation process. The foregoing
restrictions shall not prevent the Executive from hiring or otherwise
engaging any professional firm.
(c) Subsection 7(b) shall terminate immediately in the event
that, prior to or during the effectiveness of such subsection, (i) more
than 50% of the outstanding voting securities of Provant shall become
owned by any single person or entity, other than a direct or indirect
parent of Provant the equity of which is owned by the same or
substantially the same persons, and in substantially the same
proportions, as owned the equity of Provant as of immediately prior to
such entity's direct or indirect acquisition of Provant; or (ii) more
than 50% of the outstanding voting securities of the Company shall
become owned by any entity other than (x) Provant, (y) a direct or
indirect subsidiary of Provant, or (z) a direct or indirect parent of
Provant the equity of which is owned by the same or substantially the
same persons, and in
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<PAGE> 8
substantially the same proportions, as owned the equity of Provant as
of immediately prior to such entity's direct or indirect acquisition of
Provant.
(d) The Executive acknowledges that this Agreement is being
entered into contemporaneously with, and in connection with, Provant's
acquisition of the Predecessor Corporation, of which the Executive was
a principal stockholder, and that the goodwill thereby acquired by
Provant and the Company is of significant value. The Executive further
acknowledges that the Company's and the Predecessor Corporation's
business operations are and were of broad geographic scope, and that
the Company's and the Predecessor Corporation's products are by their
nature not subject to geographic boundaries, both of which factors
cause such goodwill to extend without geographic limitation.
8. CONFIDENTIAL AND PROPRIETARY INFORMATION.
(a) The Executive acknowledges that the Company will
continually develop Confidential Information and Proprietary
Information (each as defined below), that the Executive may develop
Confidential Information and Proprietary Information for the Company,
and that the Executive may learn of Confidential Information and
Proprietary Information during the course of employment. The Executive
agrees that, except as required for the proper performance of his
duties for the Company, he will not, directly or indirectly, use or
disclose any Confidential Information or Proprietary Information.
Without limiting the foregoing, the Executive agrees that he may not,
whether during or after the Term, utilize or disclose any Confidential
Information or Proprietary Information in connection with any other
business or employment, on his own behalf or on behalf of any other
person, whether or not such activity is then otherwise permitted
pursuant to Section 7. The Executive understands and agrees that this
restriction will continue to apply after his employment terminates,
regardless of the reason for termination.
(b) The Executive agrees that all Confidential Information and
Proprietary Information which he creates or to which he has access as a
result of his employment is and shall remain the sole and exclusive
property of the Company. Except as required for the proper performance
of his duties, the Executive will not copy any documents, tapes or
other media containing Confidential Information or Proprietary
Information ("Documents") or remove any Documents, or copies thereof,
from Company premises. The Executive will return to the Company
immediately after his employment terminates, and at such other times as
may be specified by the Company, all Documents and copies thereof and
all other property of the Company then in his possession or control.
9. ENFORCEMENT OF COVENANTS. The Executive acknowledges that he has
carefully read and considered all the terms and conditions of this Agreement,
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<PAGE> 9
including the restraints imposed upon him pursuant to Sections 7 and 8 hereof.
The Executive further agrees that all goodwill of the Company and its Affiliates
is their exclusive property. The Executive further acknowledges and agrees that,
were he to breach any of the covenants contained in Sections 7 or 8 hereof, the
damage would be irreparable. The Executive therefore agrees that the Company or
any of its Affiliates, as the case may be, in addition to any other remedies
available to it, shall be entitled to preliminary and permanent injunctive
relief against any breach or threatened breach by the Executive of any of said
covenants, without having to post bond, provided the Company has made a prima
facie showing of such a breach or threatened breach.
10. INDEMNIFICATION. Subject to the second sentence of this Section 10,
the Company agrees to indemnify Executive against all liabilities and expenses,
including amounts paid in satisfaction of judgments, in compromise or as fines
and penalties, together with counsel fees, in each case reasonably incurred by
him in connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, in which he may be involved or with which
he may be threatened during the term of this Agreement or thereafter, in each
case to the extent incurred by reason of his serving or having served (a) as an
executive officer or director of the Company, or (b) at its request as a
director or executive officer of any organization in which the Company directly
or indirectly owns shares or of which it is directly or indirectly a creditor,
or (c) at its request in any capacity with respect to any employee benefit plan.
Notwithstanding the immediately preceding sentence, the Company shall not
indemnify the Executive if the Executive (i) did not act in good faith and in a
manner the Executive reasonably believed to be in or not opposed to the best
interests of the Company, and (ii) with respect to any criminal action or
proceeding, had reasonable cause to believe that the Executive's conduct was
unlawful. Provant shall purchase and maintain in force directors' and officers'
liability insurance having policy limits and other terms reasonably determined
by the Provant Board of Directors.
11. CONFLICTING AGREEMENTS. The Executive hereby represents and
warrants that the execution of this Agreement and the performance of his
obligations hereunder will not breach or be in conflict with any other agreement
to which the Executive is a party or is bound and that the Executive is not
subject to any covenants against competition or similar covenants that would
affect the performance of his obligations hereunder. The Executive will not
disclose or use any proprietary information of a third party without such
party's consent.
12. DEFINITIONS. Words or phrases which are initially capitalized or
are within quotation marks shall have the meanings provided in this Section 12
and as provided elsewhere herein. For purposes of this Agreement, the following
definitions apply:
(a) "Affiliates" means all persons and entities directly or
indirectly controlling, controlled by or under common control with the
Company, where
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control may be by either management authority or equity interest ,
including without limitation Provant.
(b) "Company" means, for purposes of Sections 7, 8, 12(c) and
12(e) only, the Company or any of its Affiliates which are engaged in
the same or similar businesses to the Company or any of the Company's
current Affiliates; and means the corporation named in the preamble for
purposes of all other Sections.
(c) "Confidential Information" means any and all information,
including but not limited to inventions, discoveries, ideas, research,
engineering methods, practices, processes, systems, formulae, designs,
concepts, products, projects, improvements and developments, that is
not generally known by others and gives a commercial advantage to those
who know it, developed by or known to the Executive prior to or during
the term of this Agreement (or learned by the Executive after the term
hereof from a source known to the Executive to be violating an
obligation to the Company not to disclose the same) and relating in any
material respect to the Company, including its businesses, products or
services, including but not limited to information with respect to (i)
products and services, technical data, methods and processes, (ii)
marketing activities and strategic plans, (iii) costs and sources of
supply, (iv) the identity and special needs of customers and
prospective customers and vendors and prospective vendors, and (v) the
people and organizations with whom the Company has or is actively
seeking to have business relationships and those relationships
themselves. Confidential Information does not include such information
that (i) falls into the public domain through no breach of the
Executive's obligations to the Company, (ii) was provided to the
Executive by a third party not subject to any confidentiality
obligations with respect thereto, or (iii) was independently authored
by a third party.
(d) "Person" means an individual, a corporation, an
association, a partnership, an estate, a trust and any other entity or
organization.
(e) "Proprietary Information" means any and all inventions,
discoveries, methods, practices, processes, systems, formulae, designs,
concepts, products, services, projects and literary creations, or any
improvements and developments thereon, whether or not confidential,
that (i) are not in the public domain, (ii) are not generally used by
others in competition with the Company and (iii) have been developed,
purchased or otherwise acquired by or on behalf of the Company
(including its predecessors) or that are otherwise proprietary to the
Company, determined as of the applicable time or, if earlier, as of the
last day of the Executive's employment by the Company. In the case of
information or materials that are otherwise Proprietary Information and
that are developed, in whole or in part, by the Executive personally,
Proprietary Information shall include only information and materials
which relate to the scope of the Executive's employment hereunder.
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13. WITHHOLDING. All payments made under this Agreement shall be
reduced by any tax or other amounts required to be withheld under applicable
law.
14. ASSIGNMENT. Neither the Company nor the Executive may make any
assignment of this Agreement or any interest herein, by operation of law or
otherwise, without the prior written consent of the other; provided, however,
that the Company may assign its rights and obligations under this Agreement
without the consent of the Executive in the event that the Company shall
hereafter effect a reorganization, consolidate with, or merge into, any other
Person or transfer all or substantially all of its properties or assets to any
other Person unless the Executive shall object in writing to such assignment
within 60 days following the effective date thereof, in which event the
Executive's sole remedy shall be to terminate this Agreement, which termination
shall have the effect set forth in Section 6 hereof. This Agreement shall inure
to the benefit of and be binding upon the Company and the Executive, their
respective successors, executors, administrators, heirs and permitted assigns.
15. SEVERABILITY. If any portion or provision of this Agreement shall to
any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
16. WAIVER. No waiver of any provision hereof shall be effective unless
made in writing and signed by the waiving party. The failure of either party to
require the performance of any term or obligation of this Agreement, or the
waiver by either party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
17. NOTICES. Any and all notices, requests, demands and other
communications provided for by this Agreement shall be in writing and shall be
effective when delivered in person or deposited in the United States mail,
postage prepaid, registered or certified, and addressed to the Executive at his
last known address on the books of the Company or, in the case of the Company,
at Provant's principal place of business, to the attention of Chief Executive
Officer, or to such other address as either party may specify by notice to the
other actually received.
18. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties and supersedes all prior communications, agreements and
understandings, written or oral, with respect to the terms and conditions of the
Executive's employment, including without limitation any agreements relating to
employment between the Executive and any corporate predecessor of the Company,
any such agreement being hereby terminated by the mutual agreement of the
parties without liability to either party.
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19. AMENDMENT. This Agreement may be amended or modified only by a
written instrument signed by the Executive and by an expressly authorized
representative of the Company.
20. HEADINGS. The headings and captions in this Agreement are for
convenience only and in no way define or describe the scope or content of any
provision of this Agreement.
21. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be an original and all of which together shall
constitute one and the same instrument.
22. GOVERNING LAW. This Agreement shall be construed and enforced under
and be governed in all respects by the laws of the State of Utah, without regard
to the conflict of laws principles thereof.
23. GUARANTY BY PROVANT. Provant hereby unconditionally and irrevocably
guarantees all of the Company's obligations to the Executive provided in this
Agreement. Provant's guaranty is of the full payment and performance of all of
the Company's covenants, agreements, duties and obligations under this
Agreement, and not a guaranty of collection. This is a continuing guaranty for
all future amounts. Provant waives all rights of subrogation it may have against
the Company until all amounts due or to become due hereunder have been paid to
the Executive, and Provant waives all other defenses and remedies available to
guarantors at law or in equity with respect to the guaranty hereby provided.
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<PAGE> 13
IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument by the Executive and by the Company and Provant, by their respective
duly authorized representatives, as of the date first above written.
Executive: NOVATIONS ACQUISITION CORP.
_______________________________ By:_____________________________
Name:
Title:
PROVANT, INC.
By:_____________________________
Name:
Title:
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EXHIBIT 10.12
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into effective as of
________________ by and among LSS Acquisition Corp., a Delaware corporation
(subject to Section 12(b) below, the "Company"), John F. King of
________________ (the "Executive"), and, with respect to Section 23 hereof,
Provant, Inc., a Delaware corporation ("Provant").
In consideration of the mutual promises, terms, provisions and
conditions set forth in this Agreement, the parties hereby agree as follows:
1. EMPLOYMENT. Subject to the terms and conditions set forth in this
Agreement, the Company hereby offers and the Executive hereby accepts
employment.
2. TERM. Subject to earlier termination as hereafter provided, the
Executive's employment hereunder shall be for a term of three (3) years,
commencing effective [the Effective Time] (the "Effective Date"). The term of
this Agreement, as from time to time extended or renewed, is hereafter referred
to as "the term of this Agreement" or "the term hereof."
3. CAPACITY AND PERFORMANCE.
(a) During the term hereof, the Executive shall serve as the of the
Company. In addition, and without further compensation, the Executive
shall serve as a director and/or officer of the Company and/or one or
more of the Company's Affiliates if so elected or appointed from time
to time.
(b) During the term hereof, the Executive shall be employed by the
Company on a full-time basis, shall have all powers and duties
consistent with his position as the [senior-most] [second most senior]
executive officer of the Company ([senior officer only: including
without limitation the power to conduct and direct the day-to-day
operations of the Company, the power to hire and dismiss personnel, and
those other powers customarily exercised by the senior-most executive
officer of a publicly-held business]), subject to the direction and
control of the Company's Board of Directors (the "Board") and the Chief
Executive Officer of Provant or its or his designees, and shall perform
such other duties and responsibilities on behalf of the Company and its
Affiliates as may reasonably be designated from time to time by the
Board and the Chief Executive Officer of Provant or its or his
designees consistent with the Executive's office as set forth above.
(c) During the term hereof, the Executive shall devote substantially
all of his full business time and his best efforts, business judgment,
skill and
<PAGE> 2
knowledge to the advancement of the business and interests of the
Company and to the discharge of his duties and responsibilities
hereunder. The Executive shall not engage in any other business
activity or serve in any industry, trade, professional, governmental or
academic position during the term of this Agreement, except as may be
expressly approved in advance by the Board in writing or to the extent
that any such activity or service does not materially and adversely
affect the discharge of his duties and responsibilities hereunder.
(d) The Company shall not require the Executive to relocate or
reassign the Executive to any location beyond a twenty (20) mile radius
of the location of the Company's headquarters as of the date hereof,
nor shall the Executive's duties hereunder be materially changed,
without the Executive's prior written consent.
4. COMPENSATION AND BENEFITS. As compensation for all services
performed by the Executive under and during the term hereof and subject to
performance of the Executive's duties and obligations, pursuant to this
Agreement or otherwise:
(a) BASE SALARY. During the term hereof, the Company shall pay
the Executive a base salary at the rate of One Hundred Seventy Five
Thousand Dollars ($175,000) per annum, payable in accordance with the
payroll practices of the Company for its executives and subject to
increase from time to time by the Board or a compensation committee of
the Board in its sole discretion. Such base salary, as from time to
time increased, is hereafter referred to as the "Base Salary".
(b) BONUS COMPENSATION. Executive shall be entitled to
participate in such bonus plan as the Company provides to its
executives generally, in accordance with the terms of that plan, as
amended by the Company from time to time pursuant to which Executive
may receive a bonus of up to forty percent (40%) of his then Base
Salary. Such plan shall provide, with respect to the Executive, that
beginning with the 1999 fiscal year the Executive shall receive the
maximum bonus (i.e., 40% of Base Salary) if (i) he is employed
hereunder as of the last day of the Company's fiscal year (or if the
Executive's employment is terminated by the Company without cause
during such fiscal year other than on account of the expiration of the
term hereof, provided that the foregoing shall not be construed to give
the Company a contractual right to so terminate the Executive's
employment prior to the expiration of the term) and (ii) the Company
achieves or exceeds a targeted level of earnings before interest and
taxes (after accounting for all bonuses) ("EBIT") fixed in good faith
by the Board at or before the beginning of such year. The foregoing
determination shall be made after the end of each fiscal year during
the term hereof and the bonus, if any, with respect to such fiscal year
shall be paid
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<PAGE> 3
within ninety (90) days following the end of such fiscal year.
Notwithstanding the foregoing, if this Agreement shall expire prior to
the end of the then-current fiscal year or the Executive's employment
hereunder shall be terminated on account of his death or disability
prior to the end of the then-current fiscal year, the Executive shall
be entitled to receive a pro rata portion of the bonus, if any, he
would have received based on the Company's EBIT for the full fiscal
year had he been employed hereunder as of the last day of such year
(based on the fraction of the year that he was employed hereunder),
determined and paid following the end of such fiscal year.
(c) VACATIONS. During the term hereof, the Executive shall be
entitled to four weeks of vacation per annum, to be taken at such times
and intervals as shall be determined by the Executive, subject to the
reasonable business needs of the Company. Vacation time shall not
cumulate from year to year.
(d) OTHER BENEFITS. During the term hereof and subject to any
contribution therefor generally required of employees of the Company,
the Executive shall be entitled to participate in any and all employee
benefit plans from time to time in effect for employees of the Company
generally, except to the extent such plans are in a category of benefit
(including without limitation bonus compensation and severance
compensation) otherwise provided to the Executive. Such participation
shall be subject to (i) the terms of the applicable plan documents,
(ii) generally applicable Company policies and (iii) the discretion of
the Board or any administrative or other committee provided for in or
contemplated by such plan. The Company may alter, modify, add to or
delete any of the employee benefit plans maintained for its employees
generally at any time as it, in its sole judgment, determines to be
appropriate, without recourse by the Executive.
(e) BUSINESS EXPENSES. The Company shall pay or reimburse the
Executive for all reasonable and necessary business expenses incurred
or paid by the Executive in the performance of his duties and
responsibilities hereunder, subject to any maximum annual limit and
other restrictions on such expenses set by the Board and to such
reasonable substantiation and documentation as may be specified by the
Company from time to time.
5. TERMINATION OF EMPLOYMENT AND SEVERANCE BENEFITS. Notwithstanding
the provisions of Section 2 hereof, the Executive's employment hereunder shall
terminate prior to the expiration of the term under the following circumstances:
(a) DEATH. In the event of the Executive's death during the
term hereof, the Executive's employment hereunder shall immediately and
automatically terminate. In that event, the Company shall pay to the
Executive's designated beneficiary or, if no beneficiary has been
designated by
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<PAGE> 4
the Executive, to his estate, any earned and unpaid Base Salary, prorated
through the date of his death.
(b) DISABILITY.
(i) The Company may terminate the Executive's
employment hereunder, upon notice to the Executive, in the
event that the Executive becomes disabled during his
employment hereunder through any illness, injury, accident or
condition of either a physical or psychological nature and, as
a result, is unable to perform substantially all of his duties
and responsibilities hereunder for ninety (90) days during any
period of three hundred sixty-five (365) consecutive calendar
days.
(ii) The Board may designate another employee to act
in the Executive's place during any period of the Executive's
disability. Notwithstanding any such designation, the
Executive shall continue to receive the Base Salary in
accordance with Section 4(a) and his other benefits pursuant
to Section 4(d), to the extent permitted by the then-current
terms of the applicable benefit plans, until the Executive
becomes eligible for disability income benefits under any
disability income plan provided by the Company or until the
termination of his employment, whichever shall first occur.
(iii) If any question shall arise as to whether, during
any period, the Executive is disabled through any illness,
injury, accident or condition of either a physical or
psychological nature such that he is unable to perform
substantially all of his duties and responsibilities
hereunder, the Executive may, and at the request of the
Company shall, submit to a medical examination by a physician
selected by the Company to whom the Executive or his duly
appointed guardian, if any, has no reasonable objection to
determine whether the Executive is so disabled and such
determination shall for the purposes of this Agreement be
conclusive of the issue. If such question shall arise and the
Executive shall fail to submit to such medical examination,
the Company's determination of the issue shall be binding on
the Executive.
(c) BY THE COMPANY FOR CAUSE. The Company may terminate the
Executive's employment hereunder for Cause at any time upon notice to
the Executive setting forth in reasonable detail the nature of such
Cause. The following, as determined by the Board in its reasonable and
good faith judgment, shall constitute Cause for termination: (i)
conviction in a court of law of any felony (other than a felony arising
out of the operation of a motor vehicle) or a plea of nolo contendere
to such an offense, (ii) comission of any act involving theft,
embezzlement, fraud, dishonesty or moral turpitude which
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<PAGE> 5
act relates to or otherwise has an adverse effect (including through
publicity) on the Company or its Affiliates, (iii) material breach of
any of the material provisions of this Agreement (other than breaches
of the nature described in clause (iv) below) or of any other material
agreement between the Executive and the Company or any of its
Affiliates, or (iv) repeated and consistent willful misconduct or
dereliction of duty in the performance of his duties under this
Agreement, or repeated and consistent failure to be present at work,
which conduct or failure continues for more than thirty (30) days after
notice given to the Executive, such notice to set forth in reasonable
detail the nature of such conduct or failure. Upon the giving of notice
of termination of the Executive's employment hereunder for Cause, the
Company shall not have any further obligation or liability to the
Executive, other than for Base Salary earned and unpaid, accrued
vacation time and unreimbursed business expenses outstanding at the
date of termination.
(d) SEVERANCE PAYMENTS UPON TERMINATION. If the Executive
shall cease to be employed by the Company (or any of its Affiliates)
upon the expiration of this Agreement, the Executive shall be entitled,
subject to the immediately following sentence, to receive as a
severance benefit periodic payments in an amount equal to his Base
Salary in effect at the date of such expiration divided by the number
of payroll periods per year then applicable to executives of the
Company (hereinafter, "Severance Payments"), for a period of six months
from and after the date of such expiration. The Executive's rights to
receive Severance Payments hereunder is conditioned upon (X) the
Executive's prior execution and delivery to the Company of a general
release of any and all claims and causes of action of the Executive
against the Company, Provant and their respective officers, directors
and Affiliates, excepting only (i) the right to any Base Salary and/or
reimbursable expenses then accrued and unpaid under Section 4 of this
Agreement, and (ii) the right to receive any Additional Shares to which
the Executive then is entitled or may thereafter be entitled under that
certain Agreement and Plan of Merger among Provant, the corporate
predecessor of the Company, the Executive and certain other Persons,
and (Y) the Executive's continued performance of those obligations
hereunder that continue by their express terms after the termination of
his employment, including without limitation those set forth in
Sections 7 and 8. Any Severance Payments to be paid hereunder shall be
payable in accordance with the payroll practices of the Company for its
executive generally as in effect from time to time, and subject to all
required withholding of taxes.
6. EFFECT OF TERMINATION. Upon termination of this Agreement, all
obligations and provisions of this Agreement shall terminate except with respect
to any accrued and unpaid monetary obligations and except for the provisions of
Section 7 through (and inclusive of) 23 hereof.
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<PAGE> 6
7. COVENANT NOT TO COMPETE.
(a) The Executive acknowledges that this Agreement is being
entered into contemporaneously with, and in connection with, Provant's
acquisition of the Company's corporate predecessor, of which the
Executive was a principal stockholder, and that the goodwill thereby
acquired by Provant and the Company is of significant value. The
Executive further acknowledges that the Company's and its predecessor's
business operations are and were of broad geographic scope, and that
the Company's and its predecessor's products are by their nature not
subject to geographic boundaries, both of which factors cause such
goodwill to extend without geographic limitation.
(b) Having due regard for the matters acknowledged in
subsection (a) above, and provided only that the Company is not then in
default on its payment obligations under this Agreement, for a period
of five (5) years from the Effective Date the Executive will not engage
or become interested, directly or indirectly, as an owner, employee,
director, partner, consultant, through stock ownership, investment of
capital, lending of money or property, rendering of services, or
otherwise, either alone or in association with others, in the
operation, management or supervision of any type of business or
enterprise in any way similar to or competitive with the business of
the Company. In addition, during such period the Executive will not,
directly or indirectly, whether on his behalf or on behalf of anyone
else, (i) solicit or accept orders from any present or past customer of
the Company for a product or service offered or sold by, or competitive
with a product or service offered or sold by, the Company; (ii) induce
or attempt to induce any such customer to reduce such customer's
purchases from the Company; (iii) use for the benefit of the Executive
or disclose the name and/or requirements of any such customer to any
other person or persons, natural or corporate; or (iv) solicit any of
the Company's employees or consultants to leave the employ of the
Company or hire anyone who was an employee of the Company or a
consultant to the Company at any time within one year from the date the
Executive's employment with the Company terminated. The foregoing
restrictions shall not prevent the Executive from hiring or otherwise
engaging any professional firm.
8. CONFIDENTIAL INFORMATION.
(a) The Executive acknowledges that the Company will
continually develop Confidential Information, that the Executive may
develop Confidential Information for the Company and that the Executive
may learn of Confidential Information during the course of employment.
The Executive agrees that, except as required for the proper
performance of his duties for the Company, he will not, directly or
indirectly, use or disclose any Confidential Information,
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<PAGE> 7
as defined below. The Executive understands and agrees that this
restriction will continue to apply after his employment terminates,
regardless of the reason for termination.
(b) The Executive agrees that all Confidential Information
which he creates or to which he has access as a result of his
employment is and shall remain the sole and exclusive property of the
Company. Except as required for the proper performance of his duties,
the Executive will not copy any documents, tapes or other media
containing Confidential Information ("Documents") or remove any
Documents, or copies, from Company premises. The Executive will return
to the Company immediately after his employment terminates, and at such
other times as may be specified by the Company, all Documents and
copies and all other property of the Company then in his possession or
control.
9. ENFORCEMENT OF COVENANTS. The Executive acknowledges that he has
carefully read and considered all the terms and conditions of this Agreement,
including the restraints imposed upon him pursuant to Sections 7 and 8 hereof.
The Executive further agrees that all goodwill of the Company and its Affiliates
is their exclusive property. The Executive further acknowledges and agrees that,
were he to breach any of the covenants contained in Section 7 or 8 hereof, the
damage would be irreparable. The Executive therefore agrees that the Company or
any of its Affiliates, as the case may be, in addition to any other remedies
available to it, shall be entitled to preliminary and permanent injunctive
relief against any breach or threatened breach by the Executive of any of said
covenants, without having to post bond, provided the Company has made a prima
facie showing of such a breach or threatened breach.
10. INDEMNIFICATION. Subject to the second sentence of this Section 10,
the Company agrees to indemnify Executive against all liabilities and expenses,
including amounts paid in satisfaction of judgments, in compromise or as fines
and penalties, together with counsel fees, in each case reasonably incurred by
him in connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, in which he may be involved or with which
he may be threatened during the term of this Agreement or thereafter, in each
case to the extent incurred by reason of his serving or having served (a) as an
executive officer or director of the Company, or (b) at its request as a
director or executive officer of any organization in which the Company directly
or indirectly owns shares or of which it is directly or indirectly a creditor,
or (c) at its request in any capacity with respect to any employee benefit plan.
Notwithstanding the immediately preceding sentence, the Company shall not
indemnify the Executive if the Executive (i) did not act in good faith and in a
manner the Executive reasonably believed to be in or not opposed to the best
interests of the Company, and (ii) with respect to any criminal action or
proceeding, had reasonable cause to believe that the Executive's conduct was
unlawful. Provant shall purchase
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<PAGE> 8
and maintain in force directors' and officers' liability insurance having policy
limits and other terms reasonably determined by the Provant Board of Directors.
11. CONFLICTING AGREEMENTS. The Executive hereby represents and
warrants that the execution of this Agreement and the performance of his
obligations hereunder will not breach or be in conflict with any other agreement
to which the Executive is a party or is bound and that the Executive is not
subject to any covenants against competition or similar covenants that would
affect the performance of his obligations hereunder. The Executive will not
disclose or use any proprietary information of a third party without such
party's consent.
12. DEFINITIONS. Words or phrases which are initially capitalized or
are within quotation marks shall have the meanings provided in this Section 12
and as provided elsewhere herein. For purposes of this Agreement, the following
definitions apply:
(a) "Affiliates" means all persons and entities directly or
indirectly controlling, controlled by or under common control with the
Company, where control may be by either management authority or equity
interest , including without limitation Provant.
(b) "Company" means, for purposes of Sections 7, 8, and 12(c)
only, the Company or any of its Affiliates; and means the Company for
purposes of all other Sections.
(c) "Confidential Information" means any and all information,
inventions, discoveries, ideas, research, engineering methods,
practices, processes, systems, formulae, designs, concepts, products,
projects, improvements and developments that are not generally known by
others, developed by or known to the Executive prior to or during the
term of this Agreement and relating in any material respect to the
Company, including their respective businesses, products or services
(or learned by the Executive after the term hereof from a source known
to the Executive to be violating an obligation to the Company not to
disclose the same), including but not limited to (i) products and
services, technical data, methods and processes, (ii) marketing
activities and strategic plans, (iii) costs and sources of supply, (iv)
the identity and special needs of customers and prospective customers
and vendors and prospective vendors, and (v) the people and
organizations with whom the Company has or plans to have business
relationships and those relationships. Confidential Information also
includes such information that the Company may receive or has received
belonging to customers or others who do business with the Company and
any publication or literary creation of the Executive, developed in
whole or in significant part during the term hereof, in whatever form
published, whose content in whole or in part is competitive in
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<PAGE> 9
any material respect with the products or services offered by the
Company (including as such products or services could reasonably be
expected to evolve or be extended in the foreseeable future).
(d) "Person" means an individual, a corporation, an
association, a partnership, an estate, a trust and any other entity or
organization.
13. WITHHOLDING. All payments made under this Agreement shall be
reduced by any tax or other amounts required to be withheld under applicable
law.
14. ASSIGNMENT. Neither the Company nor the Executive may make any
assignment of this Agreement or any interest herein, by operation of law or
otherwise, without the prior written consent of the other; provided, however,
that the Company may assign its rights and obligations under this Agreement
without the consent of the Executive in the event that the Company shall
hereafter effect a reorganization, consolidate with, or merge into, any other
Person or transfer all or substantially all of its properties or assets to any
other Person unless the Executive shall object in writing to such assignment
within 60 days following the effective date thereof, in which event the
Executive's sole remedy shall be to terminate this Agreement, which termination
shall have the effect set forth in Section 6 hereof. This Agreement shall inure
to the benefit of and be binding upon the Company and the Executive, their
respective successors, executors, administrators, heirs and permitted assigns.
15. SEVERABILITY. If any portion or provision of this Agreement shall
to any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law. Without limiting the foregoing, in the event
that the temporal or geographic scope of Section 7 shall be determined by a
court of competent jurisdiction to exceed the maximum scope permissible by law,
the applicable provisions of this Agreement shall be deemed modified to the
minimum extent necessary to render such provisions enforceable.
16. WAIVER. No waiver of any provision hereof shall be effective unless
made in writing and signed by the waiving party. The failure of either party to
require the performance of any term or obligation of this Agreement, or the
waiver by either party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
17. NOTICES. Any and all notices, requests, demands and other
communications provided for by this Agreement shall be in writing and shall be
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<PAGE> 10
effective when delivered in person or deposited in the United States mail,
postage prepaid, registered or certified, and addressed to the Executive at his
last known address on the books of the Company or, in the case of the Company,
at Provant's principal place of business, to the attention of Chief Executive
Officer, or to such other address as either party may specify by notice to the
other actually received.
18. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties and supersedes all prior communications, agreements and
understandings, written or oral, with respect to the terms and conditions of the
Executive's employment, including without limitation any agreements relating to
employment between the Executive and any corporate predecessor of the Company,
any such agreement being hereby terminated by the mutual agreement of the
parties without liability to either party.
19. AMENDMENT. This Agreement may be amended or modified only by a
written instrument signed by the Executive and by an expressly authorized
representative of the Company.
20. HEADINGS. The headings and captions in this Agreement are for
convenience only and in no way define or describe the scope or content of any
provision of this Agreement.
21. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be an original and all of which together shall
constitute one and the same instrument.
22. GOVERNING LAW. This Agreement shall be construed and enforced under
and be governed in all respects by the laws of the State of California, without
regard to the conflict of laws principles thereof.
23. GUARANTY BY PROVANT. Provant hereby unconditionally and irrevocably
guarantees all of the Company's obligations to the Executive provided in this
Agreement. Provant's guaranty is of the full payment and performance of all of
the Company's covenants, agreements, duties and obligations under this
Agreement, and not a guaranty of collection. This is a continuing guaranty for
all future amounts. Provant waives all rights of subrogation it may have against
the Company until all amounts due or to become due hereunder have been paid to
the Executive, and Provant waives all other defenses and remedies available to
guarantors at law or in equity with respect to the guaranty hereby provided.
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<PAGE> 11
IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument by the Executive and by the Company and Provant, by their respective
duly authorized representatives, as of the date first above written.
Executive: [COMPANY]
_______________________________ By:_____________________________
Name:
Title:
As to paragraph 23:
PROVANT, INC.
By:______________________________
Name:
Title:
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<PAGE> 1
EXHIBIT 10.14
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into effective as of
by and among Star Acquisition Corp., a Delaware corporation (subject to Section
12(b) below, the "Company"), A. Carl von Sternberg of (the
"Executive"), and, with respect to Section 23 hereof, Provant, Inc., a Delaware
corporation ("Provant").
In consideration of the mutual promises, terms, provisions and conditions
set forth in this Agreement, the parties hereby agree as follows:
1. EMPLOYMENT. Subject to the terms and conditions set forth in this
Agreement, the Company hereby offers and the Executive hereby accepts
employment.
2. TERM. Subject to earlier termination as hereafter provided, the
Executive's employment hereunder shall be for a term of three (3) years,
commencing effective [the Effective Time] (the "Effective Date"). The term of
this Agreement, as from time to time extended or renewed, is hereafter referred
to as "the term of this Agreement" or "the term hereof."
3. CAPACITY AND PERFORMANCE.
(a) During the term hereof, the Executive shall serve as the
President and Chief Executive Officer of the Company. In addition, and
without further compensation, the Executive shall serve as a director
and/or officer of the Company and/or one or more of the Company's
Affiliates if so elected or appointed from time to time.
(b) During the term hereof, the Executive shall be employed by the
Company on a full-time basis, shall have all powers and duties consistent
with his position as the senior-most executive officer of the Company
(including without limitation the power to conduct and direct the
day-to-day operations of the Company, the power to hire and dismiss
personnel, and those other powers customarily exercised by the senior-most
executive officer of a publicly-held business), subject to the direction
and control of the Company's Board of Directors (the "Board") and the
Chief Executive Officer of Provant or its or his designees, and shall
perform such other duties and responsibilities on behalf of the Company
and its Affiliates as may reasonably be designated from time to time by
the Board and the Chief Executive Officer of Provant or its or his
designees consistent with the Executive's office as set forth above.
(c) During the term hereof, the Executive shall devote substantially
all of his full business time and his best efforts, business judgment,
skill and knowledge to the advancement of the business and interests of
the Company and to the discharge of his duties and responsibilities
hereunder. The
<PAGE> 2
Executive shall not engage in any other business activity or serve in any
industry, trade, professional, governmental or academic position during
the term of this Agreement, except (i) as set forth on Schedule 1 hereto,
or (ii) as may be expressly approved in advance by the Board in writing or
to the extent that any such activity or service does not materially and
adversely affect the discharge of his duties and responsibilities
hereunder.
(d) The Company shall not require the Executive to relocate or
reassign the Executive to any location beyond a twenty (20) mile radius of
the location of the Company's headquarters as of the date hereof, nor
shall the Executive's duties hereunder be materially changed, without the
Executive's prior written consent.
4. Compensation and Benefits. As compensation for all services performed
by the Executive under and during the term hereof and subject to performance of
the Executive's duties and obligations, pursuant to this Agreement or otherwise:
(a) BASE SALARY. During the term hereof, the Company shall pay the
Executive a base salary at the rate of One Hundred Seventy Five Thousand
Dollars ($175,000) per annum, payable in accordance with the payroll
practices of the Company for its executives and subject to increase from
time to time by the Board or a compensation committee of the Board in its
sole discretion. Such base salary, as from time to time increased, is
hereafter referred to as the "Base Salary".
(b) BONUS COMPENSATION. Executive shall be entitled to participate
in such bonus plan as the Company provides to its executives generally, in
accordance with the terms of that plan, as amended by the Company from
time to time pursuant to which Executive may receive a bonus of up to
forty percent (40%) of his then Base Salary. Such plan shall provide, with
respect to the Executive, that beginning with the 1999 fiscal year the
Executive shall receive the maximum bonus (i.e., 40% of Base Salary) if
(i) he is employed hereunder as of the last day of the Company's fiscal
year (or if the Executive's employment is terminated by the Company
without cause during such fiscal year other than on account of the
expiration of the term hereof, provided that the foregoing shall not be
construed to give the Company a contractual right to so terminate the
Executive's employment prior to the expiration of the term) and (ii) the
Company achieves or exceeds a targeted level of earnings before interest
and taxes (after accounting for all bonuses) ("EBIT") fixed in good faith
by the Board at or before the beginning of such year. The foregoing
determination shall be made after the end of each fiscal year during the
term hereof and the bonus, if any, with respect to such fiscal year shall
be paid within ninety (90) days following the end of such fiscal year.
Notwithstanding the foregoing, if this Agreement shall expire prior to the
end of the then-
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current fiscal year or the Executive's employment hereunder shall be
terminated on account of his death or disability prior to the end of the
then-current fiscal year, the Executive shall be entitled to receive a pro
rata portion of the bonus, if any, he would have received based on the
Company's EBIT for the full fiscal year had he been employed hereunder as
of the last day of such year (based on the fraction of the year that he
was employed hereunder), determined and paid following the end of such
fiscal year.
(c) VACATIONS. During the term hereof, the Executive shall be
entitled to four weeks of vacation per annum, to be taken at such times
and intervals as shall be determined by the Executive, subject to the
reasonable business needs of the Company. Vacation time shall not cumulate
from year to year.
(d) OTHER BENEFITS. The Executive shall be entitled to retain the
benefits set forth on Schedule 2 hereto during the term of this Agreement.
In addition to the foregoing, during the term hereof and subject to any
contribution therefor generally required of employees of the Company, the
Executive shall be entitled to participate in any and all employee benefit
plans from time to time in effect for employees of the Company generally,
except to the extent such plans are in a category of benefit (including
without limitation bonus compensation and severance compensation)
otherwise provided to the Executive. Except with respect to the benefits
set forth on Schedule 2, such participation shall be subject to (i) the
terms of the applicable plan documents, (ii) generally applicable Company
policies and (iii) the discretion of the Board or any administrative or
other committee provided for in or contemplated by such plan. The Company
may alter, modify, add to or delete any of the employee benefit plans
maintained for its employees generally at any time as it, in its sole
judgment, determines to be appropriate, without recourse by the Executive.
(e) BUSINESS EXPENSES. The Company shall pay or reimburse the
Executive for all reasonable and necessary business expenses incurred or
paid by the Executive in the performance of his duties and
responsibilities hereunder, subject to any maximum annual limit and other
restrictions on such expenses set by the Board and to such reasonable
substantiation and documentation as may be specified by the Company from
time to time. In addition (whether or not consistent with the foregoing),
the Company shall permit the Executive to incur, and shall pay or
reimburse, expenses in connection with those items set forth in Section
3.13(d) of the Company Disclosure Schedule attached to the Agreement and
Plan of Merger between Provant, the Company, the Company's corporate
predecessor and certain other persons, in amounts consistent with the
amounts so incurred by such corporate predecessor of the Company.
5. TERMINATION OF EMPLOYMENT AND SEVERANCE BENEFITS. Notwithstanding the
provisions of Section 2 hereof, the Executive's employment hereunder shall
terminate prior to the expiration of the term under the following circumstances:
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(a) DEATH. In the event of the Executive's death during the term
hereof, the Executive's employment hereunder shall immediately and
automatically terminate. In that event, the Company shall pay to the
Executive's designated beneficiary or, if no beneficiary has been
designated by the Executive, to his estate, any earned and unpaid Base
Salary, prorated through the date of his death.
(b) DISABILITY.
(i) The Company may terminate the Executive's employment
hereunder, upon notice to the Executive, in the event that the
Executive becomes disabled during his employment hereunder through
any illness, injury, accident or condition of either a physical or
psychological nature and, as a result, is unable to perform
substantially all of his duties and responsibilities hereunder for
ninety (90) days during any period of three hundred sixty-five (365)
consecutive calendar days.
(ii) The Board may designate another employee to act in the
Executive's place during any period of the Executive's disability.
Notwithstanding any such designation, the Executive shall continue
to receive the Base Salary in accordance with Section 4(a) and his
other benefits pursuant to Section 4(d), to the extent permitted by
the then-current terms of the applicable benefit plans, until the
Executive becomes eligible for disability income benefits under any
disability income plan provided by the Company or until the
termination of his employment, whichever shall first occur.
(iii) If any question shall arise as to whether, during any
period, the Executive is disabled through any illness, injury,
accident or condition of either a physical or psychological nature
such that he is unable to perform substantially all of his duties
and responsibilities hereunder, the Executive may, and at the
request of the Company shall, submit to a medical examination by a
physician selected by the Company to whom the Executive or his duly
appointed guardian, if any, has no reasonable objection to determine
whether the Executive is so disabled and such determination shall
for the purposes of this Agreement be conclusive of the issue. If
such question shall arise and the Executive shall fail to submit to
such medical examination, the Company's determination of the issue
shall be binding on the Executive.
(c) BY THE COMPANY FOR CAUSE. The Company may terminate the
Executive's employment hereunder for Cause at any time upon notice to the
Executive setting forth in reasonable detail the nature of such Cause. The
following, as determined by the Board in its reasonable and good faith
judgment, shall constitute Cause for termination: (i) conviction in a
court of law of any felony (other than a felony arising out of the
operation of a motor
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<PAGE> 5
vehicle) or a plea of nolo contendere to such an offense, (ii) commission
of any act involving theft, embezzlement, fraud, dishonesty or moral
turpitude which act relates to or otherwise has an adverse effect
(including through publicity) on the Company or its Affiliates, (iii)
material breach of any of the material provisions of this Agreement (other
than breaches of the nature described in clause (iv) below) or of any
other material agreement between the Executive and the Company or any of
its Affiliates, or (iv) repeated and consistent willful misconduct or
dereliction of duty in the performance of his duties under this Agreement,
or repeated and consistent failure to be present at work, which conduct or
failure continues for more than thirty (30) days after notice given to the
Executive, such notice to set forth in reasonable detail the nature of
such conduct or failure. Upon the giving of notice of termination of the
Executive's employment hereunder for Cause, the Company shall not have any
further obligation or liability to the Executive, other than for Base
Salary earned and unpaid, accrued vacation time and unreimbursed business
expenses outstanding at the date of termination.
(d) SEVERANCE PAYMENTS UPON EXPIRATION. If the Executive shall cease
to be employed by the Company (or any of its Affiliates) upon the
expiration of this Agreement, the Executive shall be entitled, subject to
the immediately following sentence, to receive as a severance benefit
periodic payments in an amount equal to his Base Salary in effect at the
date of such expiration divided by the number of payroll periods per year
then applicable to executives of the Company (hereinafter, "Severance
Payments"), for a period of six months from and after the date of such
expiration. The Executive's rights to receive Severance Payments hereunder
is conditioned upon (X) the Executive's prior execution and delivery to
the Company of a general release of any and all claims and causes of
action of the Executive against the Company, Provant and their respective
officers, directors and Affiliates, excepting only (i) the right to any
Base Salary and/or reimbursable expenses then accrued and unpaid under
Section 4 of this Agreement, and (ii) the right to receive any Additional
Shares to which the Executive then is entitled or may thereafter be
entitled under that certain Agreement and Plan of Merger among Provant,
the corporate predecessor of the Company, the Executive and certain other
Persons, and (Y) the Executive's continued performance of those
obligations hereunder that continue by their express terms after the
termination of his employment, including without limitation those set
forth in Sections 7 and 8. Any Severance Payments to be paid hereunder
shall be payable in accordance with the payroll practices of the Company
for its executive generally as in effect from time to time, and subject to
all required withholding of taxes.
6. EFFECT OF TERMINATION. Upon termination of this Agreement, all
obligations and provisions of this Agreement shall terminate except with respect
to any accrued and unpaid monetary obligations and except for the provisions of
Section 7 through (and inclusive of) 23 hereof.
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<PAGE> 6
7. COVENANT NOT TO COMPETE. Provided only that the Company is not then in
default on its payment obligations under this Agreement, for a period of five
(5) years from the Effective Date the Executive will not engage or become
interested, directly or indirectly, as an owner, employee, director, partner,
consultant, through stock ownership, investment of capital, lending of money or
property, rendering of services, or otherwise, either alone or in association
with others, in the operation, management or supervision of any type of business
or enterprise in any way similar to or competitive with the business of the
Company. In addition, during such period the Executive will not, directly or
indirectly, whether on his behalf or on behalf of anyone else, (i) solicit or
accept orders from any present or past customer of the Company for a product or
service offered or sold by, or competitive with a product or service offered or
sold by, the Company; (ii) induce or attempt to induce any such customer to
reduce such customer's purchases from the Company; (iii) use for the benefit of
the Executive or disclose the name and/or requirements of any such customer to
any other person or persons, natural or corporate; or (iv) solicit any of the
Company's employees or consultants to leave the employ of the Company or hire
anyone who was an employee of the Company or a consultant to the Company at any
time within one year from the date the Executive's employment with the Company
terminated. The foregoing restrictions shall not prevent the Executive from
hiring or otherwise engaging any professional firm. Further, notwithstanding the
foregoing, the Executive may own and manage Allen Corporation (or any corporate
successor thereto) [define parameters of non-competitive activity]
8. CONFIDENTIAL INFORMATION.
(a) The Executive acknowledges that the Company will continually
develop Confidential Information, that the Executive may develop
Confidential Information for the Company and that the Executive may learn
of Confidential Information during the course of employment. The Executive
agrees that, except as required for the proper performance of his duties
for the Company, he will not, directly or indirectly, use or disclose any
Confidential Information, as defined below. The Executive understands and
agrees that this restriction will continue to apply after his employment
terminates, regardless of the reason for termination.
(b) The Executive agrees that all Confidential Information which he
creates or to which he has access as a result of his employment is and
shall remain the sole and exclusive property of the Company. Except as
required for the proper performance of his duties, the Executive will not
copy any documents, tapes or other media containing Confidential
Information ("Documents") or remove any Documents, or copies, from Company
premises. The Executive will return to the Company immediately after his
employment terminates, and at such other times as may be specified by the
Company, all Documents and copies and all other property of the Company
then in his possession or control.
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<PAGE> 7
9. ENFORCEMENT OF COVENANTS. The Executive acknowledges that he has
carefully read and considered all the terms and conditions of this Agreement,
including the restraints imposed upon him pursuant to Sections 7 and 8 hereof.
The Executive further agrees that all goodwill of the Company and its Affiliates
is their exclusive property. The Executive further acknowledges and agrees that,
were he to breach any of the covenants contained in Section 7 or 8 hereof, the
damage would be irreparable. The Executive therefore agrees that the Company or
any of its Affiliates, as the case may be, in addition to any other remedies
available to it, shall be entitled to preliminary and permanent injunctive
relief against any breach or threatened breach by the Executive of any of said
covenants, without having to post bond, provided the Company has made a prima
facie showing of such a breach or threatened breach.
10. INDEMNIFICATION. Subject to the second sentence of this Section 10,
the Company agrees to indemnify Executive against all liabilities and expenses,
including amounts paid in satisfaction of judgments, in compromise or as fines
and penalties, together with counsel fees, in each case reasonably incurred by
him in connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, in which he may be involved or with which
he may be threatened during the term of this Agreement or thereafter, in each
case to the extent incurred by reason of his serving or having served (a) as an
executive officer or director of the Company, or (b) at its request as a
director or executive officer of any organization in which the Company directly
or indirectly owns shares or of which it is directly or indirectly a creditor,
or (c) at its request in any capacity with respect to any employee benefit plan.
Notwithstanding the immediately preceding sentence, the Company shall not
indemnify the Executive if the Executive (i) did not act in good faith and in a
manner the Executive reasonably believed to be in or not opposed to the best
interests of the Company, and (ii) with respect to any criminal action or
proceeding, had reasonable cause to believe that the Executive's conduct was
unlawful. Provant shall purchase and maintain in force directors' and officers'
liability insurance having policy limits and other terms reasonably determined
by the Provant Board of Directors.
11. CONFLICTING AGREEMENTS. The Executive hereby represents and warrants
that the execution of this Agreement and the performance of his obligations
hereunder will not breach or be in conflict with any other agreement to which
the Executive is a party or is bound and that the Executive is not subject to
any covenants against competition or similar covenants that would affect the
performance of his obligations hereunder. The Executive will not disclose or use
any proprietary information of a third party without such party's consent.
12. DEFINITIONS. Words or phrases which are initially capitalized or are
within quotation marks shall have the meanings provided in this Section 12 and
as provided elsewhere herein. For purposes of this Agreement, the following
definitions apply:
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<PAGE> 8
(a) "Affiliates" means all persons and entities directly or
indirectly controlling, controlled by or under common control with the
Company, where control may be by either management authority or equity
interest , including without limitation Provant.
(b) "Company" means, for purposes of Sections 7, 8, and 12(c) only,
the Company or any of its Affiliates; and means the corporation named in
the preamble for purposes of all other Sections.
(c) "Confidential Information" means any and all information,
inventions, discoveries, ideas, research, engineering methods, practices,
processes, systems, formulae, designs, concepts, products, projects,
improvements and developments that are not generally known by others,
developed by or known to the Executive prior to or during the term of this
Agreement and relating in any material respect to the Company, including
their respective businesses, products or services (or learned by the
Executive after the term hereof from a source known to the Executive to be
violating an obligation to the Company or an Affiliate not to disclose the
same), including but not limited to (i) products and services, technical
data, methods and processes, (ii) marketing activities and strategic
plans, (iii) costs and sources of supply, (iv) the identity and special
needs of customers and prospective customers and vendors and prospective
vendors, and (v) the people and organizations with whom the Company or any
Affiliate has or plans to have business relationships and those
relationships. Confidential Information also includes such information
that the Company or any Affiliate may receive or has received belonging to
customers or others who do business with the Company or any Affiliate and
any publication or literary creation of the Executive, developed in whole
or in significant part during the term hereof, in whatever form published,
whose content in whole or in part is competitive in any material respect
with the products or services offered by the Company or any Affiliate
(including as such products or services could reasonably be expected to
evolve or be extended in the foreseeable future).
(c) "Person" means an individual, a corporation, an association, a
partnership, an estate, a trust and any other entity or organization.
13. WITHHOLDING. All payments made under this Agreement shall be reduced
by any tax or other amounts required to be withheld under applicable law.
14. ASSIGNMENT. Neither the Company nor the Executive may make any
assignment of this Agreement or any interest herein, by operation of law or
otherwise, without the prior written consent of the other; provided, however,
that the Company may assign its rights and obligations under this Agreement
without the consent of the Executive in the event that the Company shall
hereafter effect a reorganization, consolidate with, or merge into, any other
Person or transfer all or substantially all of its properties or assets to any
other Person unless the Executive
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<PAGE> 9
shall object in writing to such assignment within 60 days following the
effective date thereof, in which event the Executive's sole remedy shall be to
terminate this Agreement, which termination shall have the effect set forth in
Section 6 hereof. This Agreement shall inure to the benefit of and be binding
upon the Company and the Executive, their respective successors, executors,
administrators, heirs and permitted assigns.
15. SEVERABILITY. If any portion or provision of this Agreement shall to
any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
16. WAIVER. No waiver of any provision hereof shall be effective unless
made in writing and signed by the waiving party. The failure of either party to
require the performance of any term or obligation of this Agreement, or the
waiver by either party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
17. NOTICES. Any and all notices, requests, demands and other
communications provided for by this Agreement shall be in writing and shall be
effective when delivered in person or deposited in the United States mail,
postage prepaid, registered or certified, and addressed to the Executive at his
last known address on the books of the Company or, in the case of the Company,
at Provant's principal place of business, to the attention of Chief Executive
Officer, or to such other address as either party may specify by notice to the
other actually received.
18. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties and supersedes all prior communications, agreements and
understandings, written or oral, with respect to the terms and conditions of the
Executive's employment, including without limitation any agreements relating to
employment between the Executive and any corporate predecessor of the Company,
any such agreement being hereby terminated by the mutual agreement of the
parties without liability to either party.
19. AMENDMENT. This Agreement may be amended or modified only by a written
instrument signed by the Executive and by an expressly authorized representative
of the Company.
20. HEADINGS. The headings and captions in this Agreement are for
convenience only and in no way define or describe the scope or content of any
provision of this Agreement.
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21. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be an original and all of which together shall
constitute one and the same instrument.
22. GOVERNING LAW. This Agreement shall be construed and enforced under
and be governed in all respects by the laws of the State of Virginia, without
regard to the conflict of laws principles thereof.
23. GUARANTY BY PROVANT. Provant hereby unconditionally and irrevocably
guarantees all of the Company's obligations to the Executive provided in this
Agreement. Provant's guaranty is of the full payment and performance of all of
the Company's covenants, agreements, duties and obligations under this
Agreement, and not a guaranty of collection. This is a continuing guaranty for
all future amounts. Provant waives all rights of subrogation it may have against
the Company until all amounts due or to become due hereunder have been paid to
the Executive, and Provant waives all other defenses and remedies available to
guarantors at law or in equity with respect to the guaranty hereby provided.
IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument by the Executive and by the Company and Provant, by their respective
duly authorized representatives, as of the date first above written.
Executive: STAR ACQUISITION CORP.
By:
- -------------------------------- ----------------------------------
A. CARL VON STERNBERG Name:
Title:
As to paragraph 23:
PROVANT, INC.
By:
----------------------------------
Name:
Title:
<PAGE> 11
SCHEDULE 2
TO
EMPLOYMENT AGREEMENT OF
A. CARL VON STERNBERG
1. Life insurance policies:
CIGNA Policy # 5076706 (approx. annual premium: $15,000)
Prudential Policy # 77691 (approx. annual premium: $4,000)
Hartford Policy # VL9203381 (approx. annual premium: $50,000)
2. Company car (approx. annual cost: $8,400)
3. Deferred Compensation Plan (approx. annual accrual: $19,000)
4. Hunting expenses of up to approximately $25,000 annually
<PAGE> 1
EXHIBIT 10.16
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into effective as of
by and among Howard Acquisition Corp., a Delaware corporation (the "Company"),
Marc S. Wallace of 303 Mattison Drive, Concord, MA 01742 (the "Executive"), and,
with respect to Section 23 hereof, Provant, Inc., a Delaware corporation
("Provant").
In consideration of the mutual promises, terms, provisions and conditions
set forth in this Agreement, the parties hereby agree as follows:
1. EMPLOYMENT. Subject to the terms and conditions set forth in this
Agreement, the Company hereby offers and the Executive hereby accepts
employment.
2. TERM. Subject to earlier termination as hereafter provided, the
Executive's employment hereunder shall be for a term of three (3) years,
commencing effective [the Effective Time] (the "Effective Date"). The term of
this Agreement, as from time to time extended or renewed, is hereafter referred
to as "the term of this Agreement" or "the term hereof."
3. CAPACITY AND PERFORMANCE.
(a) During the term hereof, the Executive shall serve as the
President and Chief Operating Officer of the Company. In addition, and
without further compensation, the Executive shall serve as a director
and/or officer of the Company and/or one or more of the Company's
Affiliates if so elected or appointed from time to time.
(b) During the term hereof, the Executive shall be employed by the
Company on a full-time basis, shall have all powers and duties consistent
with his position as the second most senior executive officer of the
Company, subject to the direction and control of the Company's Board of
Directors (the "Board") and the Chief Executive Officer of Provant or its
or his designees, and shall perform such other duties and responsibilities
on behalf of the Company and its Affiliates as may reasonably be
designated from time to time by the Board and the Chief Executive Officer
of Provant or its or his designees consistent with the Executive's office
as set forth above.
(c) During the term hereof, the Executive shall devote substantially
all of his full business time and his best efforts, business judgment,
skill and knowledge to the advancement of the business and interests of
the Company and to the discharge of his duties and responsibilities
hereunder. The Executive shall not engage in any other business activity
or serve in any industry, trade, professional, governmental or academic
position during the term of this Agreement, except (i) as set forth on
Schedule I hereto, or (ii) as may be expressly approved in advance by the
Board in writing or to the extent
<PAGE> 2
that any such activity or service does not materially and adversely affect
the discharge of his duties and responsibilities hereunder.
(d) The Company shall not require the Executive to relocate or
reassign the Executive to any location beyond a fifty (50) mile radius of
the location of the Company's headquarters as of the date hereof, nor
shall the Executive's duties hereunder be materially changed, without the
Executive's prior written consent.
4. COMPENSATION AND BENEFITS. As compensation for all services performed
by the Executive under and during the term hereof and subject to performance of
the Executive's duties and obligations, pursuant to this Agreement or otherwise:
(a) BASE SALARY. During the term hereof, the Company shall pay the
Executive a base salary at the rate of One Hundred Seventy Five Thousand
Dollars ($175,000) per annum, payable in accordance with the payroll
practices of the Company for its executives and subject to increase from
time to time by the Board or a compensation committee of the Board in its
sole discretion. Such base salary, as from time to time increased, is
hereafter referred to as the "Base Salary".
(b) BONUS COMPENSATION. Executive shall be entitled to participate
in such bonus plan as the Company provides to its executives generally, in
accordance with the terms of that plan, as amended by the Company from
time to time pursuant to which Executive may receive a bonus of up to
forty percent (40%) of his then Base Salary. Such plan shall provide, with
respect to the Executive, that beginning with the 1999 fiscal year the
Executive shall receive the maximum bonus (i.e., 40% of Base Salary) if
(i) he is employed hereunder as of the last day of the Company's fiscal
year (or if the Executive's employment is terminated by the Company
without cause during such fiscal year other than on account of the
expiration of the term hereof, provided that the foregoing shall not be
construed to give the Company a contractual right to so terminate the
Executive's employment prior to the expiration of the term) and (ii) the
Company achieves or exceeds a targeted level of earnings before interest
and taxes (after accounting for all bonuses) ("EBIT") fixed in good faith
by the Board at or before the beginning of such year. The foregoing
determination shall be made after the end of each fiscal year during the
term hereof and the bonus, if any, with respect to such fiscal year shall
be paid within ninety (90) days following the end of such fiscal year.
Notwithstanding the foregoing, if this Agreement shall expire prior to the
end of the then-current fiscal year or the Executive's employment
hereunder shall be terminated on account of his death or disability prior
to the end of the then-current fiscal year, the Executive shall be
entitled to receive a pro rata portion of the bonus, if any, he would have
received based on the Company's EBIT for the full fiscal year had he been
employed hereunder as of the last day of such
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year (based on the fraction of the year that he was employed hereunder),
determined and paid following the end of such fiscal year.
(c) VACATIONS. During the term hereof, the Executive shall be
entitled to four weeks of vacation per annum, to be taken at such times
and intervals as shall be determined by the Executive, subject to the
reasonable business needs of the Company. Vacation time shall not cumulate
from year to year.
(d) OTHER BENEFITS. During the term hereof and subject to any
contribution therefor generally required of employees of the Company, the
Executive shall be entitled to participate in any and all employee benefit
plans from time to time in effect for employees of the Company generally,
except to the extent such plans are in a category of benefit (including
without limitation bonus compensation and severance compensation)
otherwise provided to the Executive. Such participation shall be subject
to (i) the terms of the applicable plan documents, (ii) generally
applicable Company policies and (iii) the discretion of the Board or any
administrative or other committee provided for in or contemplated by such
plan. The Company may alter, modify, add to or delete any of the employee
benefit plans maintained for its employees generally at any time as it, in
its sole judgment, determines to be appropriate, without recourse by the
Executive.
(e) BUSINESS EXPENSES. The Company shall pay or reimburse the
Executive for all reasonable and necessary business expenses incurred or
paid by the Executive in the performance of his duties and
responsibilities hereunder, subject to any maximum annual limit and other
restrictions on such expenses set by the Board and to such reasonable
substantiation and documentation as may be specified by the Company from
time to time.
5. TERMINATION OF EMPLOYMENT AND SEVERANCE BENEFITS. Notwithstanding the
provisions of Section 2 hereof, the Executive's employment hereunder shall
terminate prior to the expiration of the term under the following circumstances:
(a) DEATH. In the event of the Executive's death during the term
hereof, the Executive's employment hereunder shall immediately and
automatically terminate. In that event, the Company shall pay to the
Executive's designated beneficiary or, if no beneficiary has been
designated by the Executive, to his estate, any earned and unpaid Base
Salary, prorated through the date of his death.
(b) DISABILITY.
(i) The Company may terminate the Executive's employment
hereunder, upon notice to the Executive, in the event that the
Executive becomes disabled during his employment hereunder through
any illness, injury, accident or condition of either a physical or
psychological nature
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<PAGE> 4
and, as a result, is unable to perform substantially all of his
duties and responsibilities hereunder for ninety (90) days during
any period of three hundred sixty-five (365) consecutive calendar
days.
(ii) The Board may designate another employee to act in the
Executive's place during any period of the Executive's disability.
Notwithstanding any such designation, the Executive shall continue
to receive the Base Salary in accordance with Section 4(a) and his
other benefits pursuant to Section 4(c), to the extent permitted by
the then-current terms of the applicable benefit plans, until the
Executive becomes eligible for disability income benefits under any
disability income plan provided by the Company or until the
termination of his employment, whichever shall first occur.
(iii) If any question shall arise as to whether, during any
period, the Executive is disabled through any illness, injury,
accident or condition of either a physical or psychological nature
such that he is unable to perform substantially all of his duties
and responsibilities hereunder, the Executive may, and at the
request of the Company shall, submit to a medical examination by a
physician selected by the Company to whom the Executive or his duly
appointed guardian, if any, has no reasonable objection to determine
whether the Executive is so disabled and such determination shall
for the purposes of this Agreement be conclusive of the issue. If
such question shall arise and the Executive shall fail to submit to
such medical examination, the Company's determination of the issue
shall be binding on the Executive.
(c) BY THE COMPANY FOR CAUSE. The Company may terminate the
Executive's employment hereunder for Cause at any time upon notice to the
Executive setting forth in reasonable detail the nature of such Cause. The
following, as determined by the Board in its reasonable and good faith
judgment, shall constitute Cause for termination: (i) conviction in a
court of law of any felony (other than a felony arising out of the
operation of a motor vehicle) a plea of nolo contendere to such an
offense, (ii) commission of any act involving theft, embezzlement, fraud,
dishonesty or moral turpitude which act relates to or otherwise has an
adverse effect (including through publicity) on the Company or its
Affiliates, (iii) material breach of any of the material provisions of
this Agreement (other than breaches of the nature described in clause (iv)
below) or of any other material agreement between the Executive and the
Company or any of its Affiliates, or (iv) repeated and consistent willful
misconduct or dereliction of duty in the performance of his duties under
this Agreement, or repeated and consistent failure to be present at work,
which conduct or failure continues for more than thirty (30) days after
notice given to the Executive, such notice to set forth in reasonable
detail the nature of such conduct or failure. Upon the giving of notice of
termination of the Executive's employment hereunder for Cause, the Company
shall not have any further
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obligation or liability to the Executive, other than for Base Salary
earned and unpaid, accrued vacation time and unreimbursed business
expenses outstanding at the date of termination.
(d) SEVERANCE PAYMENTS UPON EXPIRATION. If the Executive shall cease
to be employed by the Company (or any of its Affiliates) upon the
expiration of this Agreement, the Executive shall be entitled, subject to
the immediately following sentence, to receive as a severance benefit
periodic payments in an amount equal to his Base Salary in effect at the
date of such expiration divided by the number of payroll periods per year
then applicable to executives of the Company (hereinafter, "Severance
Payments"), for a period of six months from and after the date of such
expiration. The Executive's rights to receive Severance Payments hereunder
is conditioned upon (X) the Executive's prior execution and delivery to
the Company of a general release of any and all claims and causes of
action of the Executive against the Company, Provant and their respective
officers, directors and Affiliates, excepting only (i) the right to any
Base Salary and/or reimbursable expenses then accrued and unpaid under
Section 4 of this Agreement, and (ii) the right to receive any Additional
Shares to which the Executive then is entitled or may thereafter be
entitled under that certain Agreement and Plan of Merger among Provant,
the corporate predecessor of the Company, the Executive and certain other
Persons, and (Y) the Executive's continued performance of those
obligations hereunder that continue by their express terms after the
termination of his employment, including without limitation those set
forth in Sections 7 and 8. Any Severance Payments to be paid hereunder
shall be payable in accordance with the payroll practices of the Company
for its executive generally as in effect from time to time, and subject to
all required withholding of taxes.
6. EFFECT OF TERMINATION. Upon termination of this Agreement, all
obligations and provisions of this Agreement shall terminate except with respect
to any accrued and unpaid monetary obligations and except for the provisions of
Section 7 through (and inclusive of) 23 hereof.
7. COVENANT NOT TO COMPETE. Provided only that the Company is not then in
default on its payment obligations under this Agreement, for a period of five
(5) years from the Effective Date, the Executive will not engage or become
interested, directly or indirectly, as an owner, employee, director, partner,
consultant, through stock ownership, investment of capital, lending of money or
property, rendering of services, or otherwise, either alone or in association
with others, in the operation, management or supervision of any type of business
or enterprise in any way similar to or competitive with the business of the
Company. In addition, during such period the Executive will not, directly or
indirectly, whether on his behalf or on behalf of anyone else, (i) solicit or
accept orders from any present or past customer of the Company for a product or
service offered or sold by, or competitive with a product or service offered or
sold by, the Company; (ii) induce or attempt to induce any such customer to
reduce such customer's purchases from the Company; (iii) use for the
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<PAGE> 6
benefit of the Executive or disclose the name and/or requirements of any such
customer to any other person or persons, natural or corporate; or (iv) solicit
any of the Company's employees or consultants to leave the employ of the Company
or hire anyone who was an employee of the Company or a consultant to the Company
at any time within one year from the date the Executive's employment with the
Company terminated. The foregoing restrictions shall not prevent the Executive
from (A) acting as a director and officer of, or advisor to, Efficacy Institute,
Inc. ("Efficacy"), to the extent set forth on Schedule 1 hereto, provided that
Efficacy (x) maintains its status as an exempt entity under Section 501(c)(3) of
the Internal Revenue Code (or any successor provision thereto), (y) continues to
service only the educational, governmental and/or non-profit markets, and (z)
does not provide products or services of the nature then provided by Provant or
any of its Affiliates unless Efficacy is providing such products or services as
of the Effective Date, or (B) hiring or otherwise engaging any professional
firm.
8. CONFIDENTIAL INFORMATION.
(a) The Executive acknowledges that the Company and its Affiliates
will continually develop Confidential Information, that the Executive may
develop Confidential Information for the Company or its Affiliates and
that the Executive may learn of Confidential Information during the course
of employment. The Executive agrees that, except as required for the
proper performance of his duties for the Company or as provided on
Schedule I, he will not, directly or indirectly, use or disclose any
Confidential Information, as defined below. The Executive understands and
agrees that this restriction will continue to apply after his employment
terminates, regardless of the reason for termination.
(b) The Executive agrees that all Confidential Information which he
creates or to which he has access as a result of his employment is and
shall remain the sole and exclusive property of the Company. Except as
required for the proper performance of his duties or as provided on
Schedule I, the Executive will not copy any documents, tapes or other
media containing Confidential Information ("Documents") or remove any
Documents, or copies, from Company premises. The Executive will return to
the Company immediately after his employment terminates, and at such other
times as may be specified by the Company, all Documents and copies and all
other property of the Company then in his possession or control.
9. ENFORCEMENT OF COVENANTS. The Executive acknowledges that he has
carefully read and considered all the terms and conditions of this Agreement,
including the restraints imposed upon him pursuant to Sections 7 and 8 hereof.
The Executive further agrees that all goodwill of the Company and its Affiliates
is their exclusive property. The Executive further acknowledges and agrees that,
were he to breach any of the covenants contained in Section 7 or 8 hereof, the
damage would be irreparable. The Executive therefore agrees that the Company or
any of its Affiliates,
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<PAGE> 7
as the case may be, in addition to any other remedies available to it, shall be
entitled to preliminary and permanent injunctive relief against any breach or
threatened breach by the Executive of any of said covenants, without having to
post bond, provided the Company has made a prima facie showing of such a breach
or threatened breach.
10. INDEMNIFICATION. Subject to the second sentence of this Section 10,
the Company agrees to indemnify Executive against all liabilities and expenses,
including amounts paid in satisfaction of judgments, in compromise or as fines
and penalties, together with counsel fees, in each case reasonably incurred by
him in connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, in which he may be involved or with which
he may be threatened during the term of this Agreement or thereafter, in each
case to the extent incurred by reason of his serving or having served (a) as an
executive officer or director of the Company, or (b) at its request as a
director or executive officer of any organization in which the Company directly
or indirectly owns shares or of which it is directly or indirectly a creditor,
or (c) at its request in any capacity with respect to any employee benefit plan.
Notwithstanding the immediately preceding sentence, the Company shall not
indemnify the Executive if the Executive (i) did not act in good faith and in a
manner the Executive reasonably believed to be in or not opposed to the best
interests of the Company, and (ii) with respect to any criminal action or
proceeding, had reasonable cause to believe that the Executive's conduct was
unlawful. Provant shall purchase and maintain in force directors' and officers'
liability insurance having policy limits and other terms reasonably determined
by the Provant Board of Directors.
11. CONFLICTING AGREEMENTS. The Executive hereby represents and warrants
that the execution of this Agreement and the performance of his obligations
hereunder will not breach or be in conflict with any other agreement to which
the Executive is a party or is bound and that the Executive is not subject to
any covenants against competition or similar covenants that would affect the
performance of his obligations hereunder. The Executive will not disclose to or
use any proprietary information of a third party without such party's consent.
12. DEFINITIONS. Words or phrases which are initially capitalized or are
within quotation marks shall have the meanings provided in this Section 12 and
as provided elsewhere herein. For purposes of this Agreement, the following
definitions apply:
(a) "Affiliates" means all persons and entities directly or
indirectly controlling, controlled by or under common control with the
Company, where control may be by either management authority or equity
interest , including without limitation Provant.
(b) "Confidential Information" means any and all information,
inventions, discoveries, ideas, research, engineering methods, practices,
processes, systems, formulae, designs, concepts, products, projects,
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<PAGE> 8
improvements and developments that are not generally known by others,
developed by or known to the Executive prior to or during the term of this
Agreement and relating in any material respect to the Company or its
Affiliates, including their respective businesses, products or services
(or learned by the Executive after the term hereof from a source known to
the Executive to be violating an obligation to the Company or an Affiliate
not to disclose the same), including but not limited to (i) products and
services, technical data, methods and processes, (ii) marketing activities
and strategic plans, (iii) costs and sources of supply, (iv) the identity
and special needs of customers and prospective customers and vendors and
prospective vendors, and (v) the people and organizations with whom the
Company or any Affiliate has or plans to have business relationships and
those relationships. Confidential Information also includes such
information that the Company or any Affiliate may receive or has received
belonging to customers or others who do business with the Company or any
Affiliate and any publication or literary creation of the Executive,
developed in whole or in significant part during the term hereof, in
whatever form published, whose content in whole or in part is competitive
in any material respect with the products or services offered by the
Company or any Affiliate (including as such products or services could
reasonably be expected to evolve or be extended in the foreseeable
future).
(c) "Person" means an individual, a corporation, an association, a
partnership, an estate, a trust and any other entity or organization.
13. WITHHOLDING. All payments made under this Agreement shall be reduced
by any tax or other amounts required to be withheld under applicable law.
14. ASSIGNMENT. Neither the Company nor the Executive may make any
assignment of this Agreement or any interest herein, by operation of law or
otherwise, without the prior written consent of the other; provided, however,
that the Company may assign its rights and obligations under this Agreement
without the consent of the Executive in the event that the Company shall
hereafter effect a reorganization, consolidate with, or merge into, any other
Person or transfer all or substantially all of its properties or assets to any
other Person unless the Executive shall object in writing to such assignment
within 60 days following the effective date thereof, in which event the
Executive's sole remedy shall be to terminate this Agreement, which termination
shall have the effect set forth in Section 6 hereof. This Agreement shall inure
to the benefit of and be binding upon the Company and the Executive, their
respective successors, executors, administrators, heirs and permitted assigns.
15. SEVERABILITY. If any portion or provision of this Agreement shall to
any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable,
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<PAGE> 9
shall not be affected thereby, and each portion and provision of this Agreement
shall be valid and enforceable to the fullest extent permitted by law.
16. WAIVER. No waiver of any provision hereof shall be effective unless
made in writing and signed by the waiving party. The failure of either party to
require the performance of any term or obligation of this Agreement, or the
waiver by either party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
17. NOTICES. Any and all notices, requests, demands and other
communications provided for by this Agreement shall be in writing and shall be
effective when delivered in person or deposited in the United States mail,
postage prepaid, registered or certified, and addressed to the Executive at his
last known address on the books of the Company or, in the case of the Company,
at Provant's principal place of business, to the attention of Chief Executive
Officer, or to such other address as either party may specify by notice to the
other actually received.
18. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties and supersedes all prior communications, agreements and
understandings, written or oral, with respect to the terms and conditions of the
Executive's employment, including without limitation any agreements relating to
employment between the Executive and any corporate predecessor of the Company,
any such agreement being hereby terminated by the mutual agreement of the
parties without liability to either party.
19. AMENDMENT. This Agreement may be amended or modified only by a written
instrument signed by the Executive and by an expressly authorized representative
of the Company.
20. HEADINGS. The headings and captions in this Agreement are for
convenience only and in no way define or describe the scope or content of any
provision of this Agreement.
21. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be an original and all of which together shall
constitute one and the same instrument.
22. GOVERNING LAW. This Agreement shall be construed and enforced under
and be governed in all respects by the laws of the Commonwealth of
Massachusetts, without regard to the conflict of laws principles thereof.
23. GUARANTY BY PROVANT. Provant hereby unconditionally and irrevocably
guarantees all of the Company's obligations to the Executive provided in this
Agreement. Provant's guaranty is of the full payment and performance of all of
the Company's covenants, agreements, duties and obligations under this
Agreement, and
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<PAGE> 10
not a guaranty of collection. This is a continuing guaranty for all future
amounts. Provant waives all rights of subrogation it may have against the
Company until all amounts due or to become due hereunder have been paid to the
Executive, and Provant waives all other defenses and remedies available to
guarantors at law or in equity with respect to the guaranty hereby provided.
IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument by the Executive and by the Company and Provant, by their respective
duly authorized representatives, as of the date first above written.
Executive: HOWARD ACQUISITION CORP.
By:
- -------------------------------- --------------------------------------
MARC S. WALLACE Name:
Title:
As to paragraph 23:
PROVANT, INC.
By:
--------------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 23.1
Accountants' Consent
The Board of Directors
Provant, Inc.:
We consent to the use of our reports included herein and to the reference to
our firm under the heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
Boston, Massachusetts
March 9, 1998
<PAGE> 1
EXHIBIT 23.2
Consent of Independent Accountants
The Board of Directors
Star Mountain, Inc.
We consent to the reference to our firm under the heading "Experts" and to the
use of our report, dated December 5, 1997, on the financial statements of Star
Mountain, Inc. and subsidiaries as of December 31, 1995 and 1996, and June 30,
1997, and for each of the years in the three year period ended December 31,
1996, and for the six month period ended June 30, 1997, in Amendment #1 to the
Registration Statement on Form S-1 and the related Prospectus of Provant, Inc.
for the registration of its Common Stock.
Friedman & Fuller, P.C.
/s/ Friedman & Fuller, P.C.
Rockville, Maryland
March 9, 1998
