<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1999
COMMISSION FILE NUMBER: 000-23989
PROVANT, INC.
(Exact name of Registrant as Specified in its Charter)
<TABLE>
<S> <C>
DELAWARE 04-3395167
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
67 BATTERYMARCH STREET, SUITE 400 02110
BOSTON, MA (Zip Code)
(Address of Principal Executive Offices)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (617) 261-1600
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Number of shares of common stock outstanding at February 10, 2000:
20,975,985
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PROVANT, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I. -- FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, and December
31, 1999.............................................. 3
Consolidated Statements of Operations for the three and
six months ended December 31, 1998 and 1999........... 4
Consolidated Statements of Cash Flows for the six
months ended December 31, 1998 and 1999............... 5
Notes to Consolidated Financial Statements............. 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................. 8
Item 3. Quantitative and Qualitative Disclosure on Market
Risk...................................................... 11
PART II. -- OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds........... 12
Item 4. Submission of Matters to a Vote of Security
Holders................................................... 12
Item 6. Exhibits and Reports on Form 8-K.................... 13
Signature................................................... 14
</TABLE>
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PROVANT, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1999
-------- ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.............................. $ 7,616 $ 7,374
Accounts receivable, net of allowance for doubtful
accounts of $1,437 and $1,356, respectively........... 39,188 41,901
Inventory.............................................. 4,470 3,812
Deferred income taxes.................................. 2,791 3,514
Costs in excess of billings............................ 6,965 7,185
Prepaid expenses and other current assets.............. 3,561 3,780
-------- --------
Total current assets.............................. 64,591 67,566
Property and equipment, net................................. 7,588 9,095
Other assets................................................ 3,037 4,985
Goodwill, net............................................... 223,479 221,639
-------- --------
Total assets...................................... $298,695 $303,285
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable....................................... $ 8,412 $ 7,903
Accrued expenses....................................... 22,323 17,615
Accrued compensation................................... 8,332 7,016
Billings in excess of costs............................ 7,389 8,720
Deferred revenue....................................... 1,480 1,896
Income taxes payable................................... 5,592 5,221
Current portion of long term debt...................... 1,477 1,210
-------- --------
Total current liabilities......................... 55,005 49,581
Accrued contingent consideration............................ 32,863 --
Long term debt, net of current portion...................... 9,242 47,584
-------- --------
Total liabilities................................. 97,110 97,165
Stockholders' Equity:
Preferred stock, $.01 par value; none issued........... -- --
Common stock, $.01 par value; 19,325,893 and 20,969,432
shares issued and outstanding, respectively........... 193 210
Additional paid-in capital............................. 178,675 197,241
Common stock issuable as contingent consideration...... 18,881 --
Retained earnings...................................... 3,836 8,669
-------- --------
Total stockholders' equity........................ 201,585 206,120
-------- --------
Total liabilities and stockholders' equity........ $298,695 $303,285
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
PROVANT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
-------------------------- ---------------------------
1998 1999 1998 1999
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Total revenue........................ $ 37,604 $ 56,869 $ 66,998 $ 112,690
Cost of revenue...................... 15,009 22,079 26,838 44,955
----------- ----------- ----------- ------------
Gross profit.................... 22,595 34,790 40,160 67,735
Selling, general and administrative
expenses........................... 19,876 26,381 34,584 52,684
Pooling costs........................ -- 1,215 -- 1,215
Goodwill amortization................ 593 1,369 973 2,514
----------- ----------- ----------- ------------
Income from operations............... 2,126 5,825 4,603 11,322
Other income (expense)............... 954 (104) 877 248
Interest expense, net................ (178) (559) (169) (748)
----------- ----------- ----------- ------------
Income before income taxes...... 2,902 5,162 5,311 10,822
Provision for income taxes........... 1,774 2,937 3,113 5,989
----------- ----------- ----------- ------------
Net income...................... $ 1,128 $ 2,225 $ 2,198 $ 4,833
=========== =========== =========== ============
Pro forma adjustments:
Contractual reduction to salary
and bonuses................... 1,728 3,344
Pooling costs................... 1,215 1,215
Income tax provision............ (902) (1,259)
----------- ------------
Pro forma net income................. $ 4,266 $ 8,133
=========== ============
Earnings per common share:
Basic................................ $ 0.08 $ 0.11 $ 0.17 $ 0.23
Diluted.............................. $ 0.08 $ 0.10 $ 0.16 $ 0.23
Pro forma earnings per common share:
Basic................................ $ 0.20 $ 0.39
Diluted.............................. $ 0.20 $ 0.38
Weighted average common shares
outstanding:
Basic................................ 13,922,799 20,888,990 13,080,947 20,820,175
Diluted.............................. 14,683,606 22,129,998 14,090,627 21,852,046
</TABLE>
See accompanying notes to consolidated financial statements.
4
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PROVANT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31,
--------------------
1998 1999
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income.................................................. $ 2,198 $ 4,833
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization.......................... 1,810 3,985
Allowance for doubtful accounts........................ (47) (81)
Gain on sale of business............................... -- (362)
Changes in operating assets and liabilities:
Accounts receivable.................................... 4,056 (3,266)
Inventory.............................................. (476) (389)
Deferred income taxes.................................. (1,538) --
Costs in excess of billings............................ (824) (241)
Prepaid expenses and other current assets.............. (815) 6
Other assets........................................... (67) (1,958)
Accounts payable and accrued expenses.................. (5,022) (5,640)
Accrued compensation................................... (762) (1,240)
Billings in excess of costs............................ 1,986 1,331
Deferred revenue....................................... 107 416
Income taxes payable................................... (1,417) (371)
-------- --------
Total adjustments................................. (3,009) (7,810)
-------- --------
Net cash used in operating activities............. (811) (2,977)
-------- --------
Cash flows from investing activities:
Payment of acquisition related costs................... -- (789)
Proceeds from sale of business......................... -- 833
Additions to property and equipment.................... (507) (3,409)
Payment of contingent consideration.................... -- (33,342)
Acquisitions of businesses, net of cash acquired....... (25,846) --
Proceeds from sale of property and equipment........... 214 --
-------- --------
Net cash used in investing activities............. (26,139) (36,707)
-------- --------
Cash flows from financing activities:
Issuance of common stock............................... 42 1,571
Borrowings under line of credit........................ 19,645 45,000
Repayment of line of credit............................ -- (7,000)
Repayment of notes payable............................. -- (129)
-------- --------
Net cash provided by financing activities......... 19,687 39,442
-------- --------
Net decrease in cash and cash equivalents................... (7,263) (242)
Cash and cash equivalents, beginning of period.............. 7,823 7,616
-------- --------
Cash and cash equivalents, end of period.................... $ 560 $ 7,374
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest...................................... $ -- $ 630
======== ========
Cash paid for income taxes.................................. $ 4,294 $ 6,538
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
5
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PROVANT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION AND BASIS OF PRESENTATION
Organization
PROVANT, Inc., a Delaware corporation (collectively with its subsidiaries,
"PROVANT" or the "Company"), provides a broad range of performance improvement
training services and products to Fortune 1000 companies, other large and
medium-sized corporations and government entities. The Company is a leading
single source provider of high-quality performance improvement training services
and products that are distributed through multiple delivery methods.
On May 4, 1998, PROVANT completed the initial public offering (the "IPO")
of its common stock (the "Common Stock") and simultaneously acquired in separate
merger transactions (the "Combination") seven companies engaged in providing
performance improvement training services and products (collectively referred to
as the "Founding Companies"). Since the completion of the IPO, the Company
acquired in separate transactions 12 additional companies (the "Subsequent
Acquisitions") engaged in providing performance improvement training services
and products (collectively such companies are referred to with the Founding
Companies as the "Operating Companies").
Basis of Presentation
The information contained in the following notes to the accompanying
financial statements is condensed from that which would appear in the annual
audited financial statements; accordingly, the financial statements included
herein should be reviewed in conjunction with the financial statements and
related notes thereto contained in the Annual Report on Form 10-K for the year
ended June 30, 1999 filed by PROVANT with the Securities and Exchange
Commission.
In the opinion of the Company, the accompanying unaudited financial
statements contain all adjustments considered necessary to present fairly the
financial position of the Company as of December 31, 1999 and the results of
operations and cash flows for the periods presented. The Company prepares its
interim financial information using the same accounting principles as it uses
for its annual financial statements.
On December 14, 1999, PROVANT acquired Senn-Delaney Leadership Consulting
Group, Inc. and Senn-Delaney Leadership Consulting U.K., Ltd. (together,
"Senn-Delaney Leadership") in an acquisition accounted for as a
pooling-of-interests. As required under the pooling-of-interests method, the
results for all periods presented include the results of Provant and
Senn-Delaney Leadership.
The pro forma adjustments give effect to (i) the compensation differential
(adjusting compensation to contractually agreed-upon levels), (ii)
pooling-related costs, and (iii) provision for income taxes using an effective
corporate tax rate of 41.5% for Senn-Delaney Leadership and 40% for PROVANT,
adjusted for non-tax deductible goodwill. The compensation differential
represents pro forma adjustments to salary, bonuses and benefits paid to certain
employee owners of Senn-Delaney Leadership to which they have contractually
agreed prospectively. The aggregate compensation differentials for the
three-month and six-month periods ended December 31, 1999 were $1.7 million and
$3.3 million, respectively.
2. CONTINGENT CONSIDERATION
During the six months ended December 31, 1999, PROVANT issued contingent
consideration consisting of cash of $33.3 million and 1,450,139 shares of Common
Stock valued at $16.3 million, of which cash of $7.5 million and 82,812 shares
of Common Stock valued at $1.2 million were issued during the three months ended
December 31, 1999.
The merger agreements between PROVANT and seven of the Subsequent
Acquisitions provide for the payment of contingent consideration of cash and/or
shares of Common Stock if certain performance criteria
6
<PAGE> 7
are met over future periods ranging from one to three years. The contingent
consideration will be paid in cash and shares of Common Stock in accordance with
a formula based on the relationship of defined earnings before interest and
taxes ("EBIT") of the acquired business to a specified baseline EBIT target and
certain other adjustments. Contingent consideration of cash and/or shares of
Common Stock up to maximum amounts of $35.9 million, $3.3 million and $15.0
million could be payable based on performance criteria associated with the two
years ended June 30, 2001 the three years ended December 31, 2001, and three
years ended June 30, 2001, respectively. For one Subsequent Acquisition,
contingent consideration of cash and/or shares of Common Stock is payable based
entirely on performance criteria over a three-year period and is not currently
determinable.
3. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per common share (dollars in thousands except per share data):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
----------------------- -----------------------
1998 1999 1998 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Numerator:
Basic net income................... $ 1,128 $ 2,225 $ 2,198 $ 4,833
Interest expense on convertible
notes payable.................... -- 57 -- 115
---------- ---------- ---------- ----------
Diluted net income................. $ 1,128 $ 2,282 $ 2,198 $ 4,948
========== ========== ========== ==========
Denominator:
Basic weighted average common
shares outstanding............... 13,922,799 20,888,990 13,080,947 20,820,175
Shares to be issued as Contingent
Consideration.................... 303,356 -- 580,120 41,410
Effect of dilutive securities:
stock options, warrants and
convertible notes payable........ 457,451 1,241,008 429,560 990,461
---------- ---------- ---------- ----------
Diluted weighted average common
shares outstanding............... 14,683,606 22,129,998 14,090,627 21,852,046
Basic earnings per common share.... $ 0.08 $ 0.11 $ 0.17 $ 0.23
========== ========== ========== ==========
Diluted earnings per common
share............................ $ 0.08 $ 0.10 $ 0.16 $ 0.23
========== ========== ========== ==========
</TABLE>
4. PURCHASE BUSINESS COMBINATIONS
The following is a reconciliation of net cash paid for acquisitions during
the six months ended December 31, 1998 (Dollars in thousands):
<TABLE>
<S> <C>
Fair value of assets acquired............................... $ 57,123
Liabilities assumed......................................... (10,752)
Fair value of Common Stock consideration issued............. (16,990)
--------
Cash paid................................................... 29,381
Less cash acquired.......................................... (3,535)
--------
Net cash paid for acquisitions......................... $ 25,846
========
</TABLE>
7
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5. POOLING OF INTERESTS
On December 14, 1999, PROVANT acquired Senn-Delaney Leadership for an
aggregate purchase price of 2,168,286 shares of the Company's Common Stock in an
acquisition accounted for as a pooling-of-interests. In connection with the
merger, the Company also assumed outstanding Senn-Delaney Leadership options
that were converted into options to purchase an aggregate of 352,212 shares of
the Company's common stock. The purchase price paid by Provant in the
acquisition was determined as the result of arm's-length negotiations between
Provant and the principals of Senn-Delaney Leadership.
Senn-Delaney Leadership, based in Long Beach, California, specializes in
creating organizational and team effectiveness at the senior executive level,
including assisting senior management in fostering the success of mergers and
acquisitions by aligning the newly merged organization.
In accordance with the pooling-of-interests method of accounting, the
results of operations previously reported by the separate enterprises and the
combined amounts presented in the accompanying consolidated financial statements
are summarized below:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------------ -------------------
1998 1999 1998 1999
------- ------- ------- --------
<S> <C> <C> <C> <C>
Revenue:
PROVANT............................... $31,740 $48,973 $55,450 $ 97,499
Senn-Delaney Leadership............... 5,864 7,896 11,548 15,191
------- ------- ------- --------
Combined.............................. $37,604 $56,869 $66,998 $112,690
======= ======= ======= ========
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------------ -------------------
1998 1999 1998 1999
------- ------- ------- --------
<S> <C> <C> <C> <C>
Net Income:
PROVANT............................... $ 1,840 $ 2,788 $ 3,239 $ 5,907
Senn-Delaney Leadership............... (712) (563) (1,041) (1,074)
------- ------- ------- --------
Combined.............................. $ 1,128 $ 2,225 $ 2,198 $ 4,833
======= ======= ======= ========
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
PROVANT is a leading provider of high-quality performance improvement
training services and products that are distributed through multiple delivery
methods. PROVANT's clients include Fortune 1000 companies, other large and
medium-sized corporations and government entities. The Company offers both
customized and standardized services and products that are designed to improve
the performance of a client's workforce. In addition, the Company offers
consulting, needs assessment and project management services.
8
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CONSOLIDATED RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED DECEMBER
31, 1998 AND 1999 (DOLLARS IN THOUSANDS):
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 31, SIX MONTHS ENDED DECEMBER 31,
---------------------------------- -----------------------------------
1998 1999 1998 1999
--------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total revenue...................... $37,604 100.0% $56,869 100.0% $66,998 100.0% $112,690 100.0%
Cost of revenue.................... 15,009 39.9 22,079 38.8 26,838 40.1 44,955 39.9
------- ----- ------- ----- ------- ----- -------- -----
Gross profit....................... 22,595 60.1 34,790 61.2 40,160 59.9 67,735 60.1
Operating expenses................. 19,876 52.9 26,381 46.4 34,584 51.6 52,684 46.8
Pooling costs...................... -- -- 1,215 2.1 -- -- 1,215 1.1
Goodwill amortization.............. 593 1.6 1,369 2.4 973 1.5 2,514 2.2
------- ----- ------- ----- ------- ----- -------- -----
Income from operations............. $ 2,126 5.7 $ 5,825 10.2 $ 4,603 6.9 $ 11,322 10.0%
Other income....................... 954 2.5 (104) (0.2) 877 1.3 248 0.2
Interest expense, net.............. (178) (0.5) (559) (1.0) (169) (0.2) (748) (0.7)
Provision for income taxes......... 1,774 4.7 2,937 5.2 3,113 4.6 5,989 5.3
------- ----- ------- ----- ------- ----- -------- -----
Net income......................... $ 1,128 3.0% $ 2,225 3.9% $ 2,198 3.3% $ 4,833 4.3%
======= ===== ======= ===== ======= ===== ======== =====
</TABLE>
RESULTS FOR THE THREE MONTHS ENDED DECEMBER 31, 1998 (THE "1999 QUARTER")
COMPARED TO THE THREE MONTHS ENDED DECEMBER 31, 1999 (THE "2000 QUARTER")
Revenue. Revenue increased $19.3 million, or 51.2%, from $37.6 million in
the 1999 Quarter to $56.9 million in the 2000 Quarter. The increase was
primarily attributable to revenues from businesses acquired during fiscal 1999
as well as increased service revenue, train-the-trainer seminars, license fees
and royalties.
Cost of Revenue. Cost of revenue as a percentage of revenue decreased from
39.9% in the 1999 Quarter to 38.8% in the 2000 Quarter, primarily due to revenue
growth being greater than the corresponding increase in costs and increased
higher-margin license revenues during the 2000 Quarter.
Gross Profit. Gross profit increased $12.2 million, or 54%, from $22.6
million in the 1999 Quarter to $34.8 million in the 2000 Quarter, primarily due
to the growth in revenue. As a percentage of revenue, gross profit increased
from 60.1% in the 1999 Quarter to 61.2% in the 2000 Quarter primarily due to an
increase in license fees in the 2000 Quarter.
Operating Expenses. Operating expenses increased $6.5 million, or 32.7%,
from $19.9 million in the 1999 Quarter to $26.4 million in the 2000 Quarter,
primarily due to the expenses of the businesses acquired during fiscal 1999 as
well as the expansion of corporate infrastructure and commission costs
associated with increased revenue. As a percentage of revenue, selling, general
and administrative expenses decreased from 52.9% in the 1999 Quarter to 46.4% in
the 2000 Quarter primarily due to a more efficient use of resources. Included in
operating expenses for the 1999 Quarter and 2000 Quarter is $2.6 million and
$1.7 million of compensation differential. The compensation differential
represents pro forma adjustments to salary, bonuses and benefits paid to certain
employee owners of Senn-Delaney Leadership to certain levels to which they
contractually agreed prospectively.
Pooling Costs. Pooling costs consist of accounting, legal, investment
banker fees and due diligence expenses incurred in connection with the
acquisition of Senn-Delaney Leadership.
Goodwill Amortization. Goodwill amortization increased $776,000 or 130.1%,
from $593,000 in the 1999 Quarter to $1.4 million in the 2000 Quarter, due to
additional goodwill recorded in connection with acquisitions completed during
fiscal 1999 and contingent consideration recorded during fiscal 1999 and 2000.
Other Income. Other income for the 1999 Quarter consisted primarily of a
non-recurring gain of $982,000 ($581,000, net of tax) from the settlement of
litigation by Senn-Delaney Leadership. The impact on diluted earnings per share
for the 1999 Quarter was $0.04.
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Interest Expense, net. Interest expense, net increased $381,000, or 214%,
from $178,000 in the 1999 Quarter to $559,000 in the 2000 Quarter, due to
increased borrowings under the line of credit and higher interest rates during
fiscal 2000.
Income Taxes. Provision for income taxes increased $1.2 million, from $1.8
million in the 1999 Quarter to $2.9 million in the 2000 Quarter, due to
increased pre-tax income.
Net Income. Net income increased $1.1 million from $1.1 million in the
1999 Quarter to $2.2 million in the 2000 Quarter.
RESULTS FOR THE SIX MONTHS ENDED DECEMBER 31, 1998 (THE "1999 PERIOD") COMPARED
TO THE SIX MONTHS ENDED DECEMBER 31, 1999 (THE "2000 PERIOD")
Revenue. Revenue increased $45.7 million, or 68.2%, from $67.0 million in
the 1999 Period to $112.7 million in the 2000 Period. The increase was primarily
attributable to revenues from businesses acquired during fiscal 1999 as well as
increased service revenue, train-the-trainer seminars, license fees and
royalties.
Cost of Revenue. Cost of revenue as a percentage of revenue decreased from
40.1% in the 1999 Period to 39.9% in the 2000 Period, primarily due to revenue
growth being greater than the corresponding increase in costs and increased
higher-margin license revenues during fiscal 2000.
Gross Profit. Gross profit increased $27.6 million, or 68.7%, from $40.2
million in the 1999 Period to $67.7 million in the 2000 Period, primarily due to
the growth in revenue. As a percentage of revenue, gross profit increased from
59.9% in the 1999 Period to 60.1% in the 2000 Period primarily due to an
increase in license fees in the 2000 Period.
Operating Expenses. Operating expenses increased $18.1 million, or 52.3%,
from $34.6 million in the 1999 Period to $52.7 million in the 2000 Period,
primarily due to the expenses of the businesses acquired during fiscal 1999 as
well as the expansion of corporate infrastructure and commission costs
associated with increased revenue. As a percentage of revenue, selling, general
and administrative expenses decreased from 51.6% in the 1999 Period to 46.8% in
the 2000 Period primarily due to a more efficient use of resources. Included in
operating expenses for the 1999 Period and 2000 Period is $3.5 million and $3.3
million of compensation differential. The compensation differential represents
pro forma adjustments to salary, bonuses and benefits paid to certain employee
owners of Senn-Delaney Leadership to certain levels to which they contractually
agreed prospectively.
Pooling Costs. Pooling costs consist of accounting, legal, investment
banker fees, and due diligence expenses incurred in connection with the
acquisition of Senn-Delaney Leadership.
Goodwill Amortization. Goodwill amortization increased $1.5 million or
158.4%, from $973,000 in the 1999 Period to $2.5 million in the 2000 Period, due
to additional goodwill recorded in connection with acquisitions completed during
fiscal 1999 and contingent consideration recorded during fiscal 1999 and 2000.
Other Income. Other income for the 1999 Period consisted primarily of a
non-recurring gain of $982,000 ($581,000, net of tax) from the settlement of
litigation by Senn-Delaney Leadership. The impact on diluted earnings per share
for the 1999 Quarter was $0.04. Other income for the 2000 Period consisted
primarily of a $362,000 gain recorded on proceeds of $833,000 from the sale of a
business.
Interest Expense, net. Interest expense, net increased $579,000, or 343%,
from $169,000 in the 1999 Period to $748,000 in the 2000 Period, due to
increased borrowings under the line of credit and higher interest rates during
fiscal 2000.
Income Taxes. Provision for income taxes increased $2.9 million from $3.1
million in the 1999 Period to $6.0 million in the 2000 Period, due to increased
pre-tax income.
Net Income. Net income increased $2.6 million from $2.2 million in the
1999 Period to $4.8 million in the 2000 Period.
10
<PAGE> 11
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1999, the Company had cash of approximately $7.4 million
and outstanding indebtedness of $48.8 million. The Company has a $105.0 million
credit facility with related borrowings of $39.5 million at December 31, 1999.
During the quarter ended December 31, 1999, the Company increased the
availability under the credit facility from $80.0 million to $105.0 million. The
credit facility, which terminates on December 31, 2001, (i) prohibits the
payment of dividends and other distributions by the Company, (ii) generally does
not permit the Company to incur or assume other indebtedness, and (iii) requires
the Company to comply with certain financial covenants.
The Company anticipates that its cash flow from operations and availability
under the credit facility will provide cash sufficient to satisfy the Company's
working capital requirements, debt service requirements and planned capital
expenditures for the next 12 months.
The Company has two effective shelf registration statements on Form S-4.
Each registration statement relates to the issuance of up to 3,000,000 shares of
Common Stock in connection with acquisitions. Of this amount, 3,736,180 shares
have been issued through February 10, 2000 and a currently undeterminable number
of shares may become issuable as contingent consideration under the registration
statements with respect to acquisitions completed before such date.
During the six months ended December 31, 1999, PROVANT issued contingent
consideration consisting of cash of $33.3 million and 1,450,139 shares of Common
Stock valued at $16.3 million, of which cash of $7.5 million and 82,812 shares
of Common Stock valued at $1.2 million were issued during the three months ended
December 31, 1999.
The merger agreements between PROVANT and seven of the Subsequent
Acquisitions provide for the payment of contingent consideration of cash and/or
shares of Common Stock if certain performance criteria are met over future
periods ranging from one to three years. The contingent consideration will be
paid in cash and shares of Common Stock in accordance with a formula based on
the relationship of defined earnings before interest and taxes ("EBIT") of the
acquired business to a specified baseline EBIT target and certain other
adjustments. Contingent consideration of cash and/or shares of Common Stock up
to maximum amounts of $35.9 million, $3.3 million and $15.0 million could be
payable based on performance criteria associated with the two years ended June
30, 2001 the three years ended December 31, 2001, and three years ended June 30,
2001, respectively. For one Subsequent Acquisition, contingent consideration of
cash and/or shares of Common Stock is payable based entirely on performance
criteria over a three-year period and is not currently determinable.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" (SFAS No. 133),
which requires that all derivative instruments be recorded on the balance sheet
at their fair values. Changes in the fair value of derivatives are recorded in
current earnings or other comprehensive income, depending on whether a
derivative is designated as part of a hedge transaction and, if it is, the type
of hedge transaction. In June 1999, the Financial Accounting Standards Board
issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities" (SFAS No. 137), which amended the effective date of SFAS No. 133.
SFAS No. 133 is effective for all fiscal quarters of fiscal years beginning
after June 15, 2000. We do not believe that the adoption of SFAS No. 133 will
have a material impact on the Company's financial condition or results of
operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ON MARKET RISK
The Company invests its cash in money market instruments. These instruments
are denominated in U.S. dollars. Due to the conservative nature of these
instruments, the Company does not believe that it has a material exposure to
interest rate or market risk. The investment portfolio is used to preserve the
Company's capital until it is required to fund operations or acquisitions. None
of these instruments are held for trading purposes. The Company does not own
derivative financial instruments.
11
<PAGE> 12
The Company is exposed to interest rate risk in the ordinary course of
business. For fixed rate debt, interest rate changes affect the fair value but
do not impact earnings or cash flow. Conversely, for floating rate debt,
interest rate changes generally do not affect the fair market value, but do
impact future earnings or cash flow. A one-percentage increase in interest rates
would have an immaterial impact on the fair market value of the Company's debt
and future earnings or cash flow.
This report on form 10-Q contains statements which constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such statements can be identified by the use of
forward-looking terminology such as "believes," "expects," "may," "estimates,"
"will," "should," "plans" or "anticipates" or the negative thereof or other
variations thereon or comparable terminology, or by discussions of strategy.
Readers are cautioned that any such forward-looking statements are not
guarantees of future performance and involve significant risks and
uncertainties, and that actual results may vary materially from those in the
forward-looking statements as a result of any number of factors, many of which
are beyond the control of management. These factors include the Company's
limited combined operating history, risks of integration, risks of internal
growth, risks associated with the Company's acquisition strategy, and the
Company's ability to attract and retain key personnel, to name a few, and are
hereby incorporated by reference from the risk factors included in Company's
Registration Statement on Form S-1 (file no. 333-70119) filed with the
Securities and Exchange Commission.
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On December 14, 1999, in connection with the acquisition of Senn-Delaney
Leadership, the Company issued an aggregate of 2,168,286 shares of Common Stock.
The transaction was exempt from registration by virtue of Rule 506 of Regulation
D, as promulgated under the Securities Act of 1933, as amended.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The following matters were approved at the Company's Annual Meeting of
Stockholders, which was held on November 3, 1999:
(a) Election of the following members of the Board of Directors:
<TABLE>
<CAPTION>
FOR WITHHELD
---------- --------
<S> <C> <C>
Paul M. Verrochi 15,399,235 298,114
John H. Zenger 15,399,277 298,072
Dominic J. Puopolo 15,399,477 297,872
Herbert A. Cohen 15,399,435 297,914
Michael J. Davies 15,399,477 297,872
Bert Decker 15,399,435 297,914
Paul C. Green, Ph.D. 15,399,435 297,914
David B. Hammond 15,414,977 282,372
John R. Murphy 15,414,777 282,572
Esther T. Smith 15,414,935 282,414
A. Carl von Sternberg 15,399,477 297,872
Marc S. Wallace 15,399,435 297,914
</TABLE>
(b) Proposal to amend and restate the 1998 Equity Incentive Plan:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN BROKER NON-VOTES
- ---------- --------- ------- ----------------
<S> <C> <C> <C>
12,079,860 2,086,018 113,375 1,418,096
</TABLE>
12
<PAGE> 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits:
<TABLE>
<C> <S>
10.1 Amendment No. 6 to Revolving Credit Facility dated September
30, 1999
10.2 Amendment No. 7 to Revolving Credit Facility dated December
10, 1999
10.3 Employment Agreement between PROVANT, Inc. and Curtis M.
Uehlein dated October 8, 1999
10.4 Stock Option Agreement between PROVANT, Inc. and Curtis M.
Uehlein dated October 8, 1999
27. Financial Data Schedule
</TABLE>
B. Reports on Form 8-K:
The Company filed a Current Report on Form 8-K with the Securities and
Exchange Commission on December 29, 1999 (as amended January 21, 2000), relating
to the acquisition of Senn-Delaney Leadership.
13
<PAGE> 14
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PROVANT, INC.
By: /s/ RAJIV BHATT
------------------------------------
Rajiv Bhatt
Executive Vice President and
Chief Financial Officer
Date: February 14, 2000
14
<PAGE> 1
Exhibit 10.1
SIXTH AMENDMENT TO REVOLVING CREDIT AGREEMENT
This Sixth Amendment to Revolving Credit Agreement ("Sixth Amendment")
is made as of September 30, 1999 by and among PROVANT, Inc. (the "Borrower"), a
Delaware business corporation having its principal place of business at 67
Batterymarch Street, Suite 500, Boston, Massachusetts 02110, Fleet National
Bank, a national banking association ("Fleet"), BankBoston, N.A., a national
banking association ("BankBoston"), Norwest Bank Iowa, N.A., a national banking
association ("Norwest"), State Street Bank and Trust Company, a Massachusetts
trust company ("State Street" and, together with Fleet, BankBoston and Norwest,
the "Banks") and Fleet National Bank, as agent for itself and BankBoston (the
"Agent").
RECITALS
WHEREAS, the Borrower, the Banks and the Agent previously entered into
that certain Revolving Credit Agreement, dated as of April 8, 1998, as modified
and amended by the First, Second, Third, Fourth and Fifth Amendments thereto
(said Revolving Credit Agreement, as so amended prior to the date hereof, the
"Credit Agreement"), pursuant to which the Banks have made available to the
Borrower a revolving credit loan facility having a maximum available borrowing
amount of $75,000,000; and
WHEREAS, the parties hereto now desire to further amend or modify the
Credit Agreement in certain respects in order to (i) increase the total
Commitment thereunder from $75,000,000 to $80,000,000, and (ii) allocate the
additional Commitment amount to State Street, all as more particularly set forth
hereinbelow.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt of which is hereby acknowledged, the parties
hereto hereby agree to modify and amend certain provisions of the Credit
Agreement, as follows:
Section 1. Definitions. All capitalized terms used herein without
definition shall have the respective meanings provided therefor in the Credit
Agreement.
Section 2. Amendment of Specific Provisions. The following specific
provisions of the Credit Agreement are hereby modified and amended:
(a) In the definition of "Commitment" in Section 1.1, the
schedule of each Bank's Commitment and Commitment Percentage shall be
set forth on a new Schedule I attached hereto, which shall replace the
existing Schedule I to the Credit Agreement; and
(b) In the definition of "Total Commitment" appearing in
Section 1.1, the stated dollar amount from and after the date hereof
shall be $80,000,000 rather than $75,000,000.
<PAGE> 2
Section 3. Confirmation of Stock Pledge Agreement. The parties hereto
agree that all references to the "Credit Agreement" contained in the Stock
Pledge Agreement and all Supplements thereto shall mean or refer to the Credit
Agreement as amended and supplemented by this Sixth Amendment and as it may be
further amended, supplemented, modified and restated and in effect from time to
time, including without limitation any such amendment, supplement, modification
or restatement which increases the amount of Indebtedness owing by the Borrower
thereunder.
Section 4. Loan Documents Ratified and Confirmed. The Credit Agreement,
the Notes and each of the other Loan Documents, as specifically supplemented or
amended by this Sixth Amendment and the other documents executed in connection
herewith, are and shall continue to be in full force and effect and are hereby
in all respects ratified and confirmed. Without limiting the generality of the
foregoing, the Security Documents and all of the collateral described therein
do, and shall continue to, secure the payment of all obligations under the Loan
Documents, in each case as amended or supplemented pursuant to this Sixth
Amendment. The waiver embodied in this Sixth Amendment is limited to the
specific matter and circumstances described herein, and no further or additional
waiver as to any other obligations under the Credit Agreement shall be granted
hereby.
Section 5. Conditions to Effectiveness. This Sixth Amendment shall
become effective only upon completion of the following actions: (i) the issuance
by the Borrower on the date hereof of a replacement Note, substantially in the
respective forms attached to Exhibit A to reflect the upward adjustment to the
Commitment of State Street as set forth in Schedule I hereto and (ii) the
execution and delivery to the Agent of an Amendment and Confirmation of
Guaranty, dated the date hereof and substantially in the form attached hereto as
Exhibit B, by each of the Borrower's Subsidiaries which is a Guarantor.
Section 6. Bringdown. The Borrower hereby confirms that all
representations and warranties with respect to the Borrower and any Subsidiaries
contained in the Credit Agreement and each of the other Loan Documents and in
any other certificate or document delivered in connection therewith are true and
correct as of the date hereof, and that no Default or Event of Default is
outstanding or would be created by the consummation of the transactions
described herein.
Section 7. Fees, Costs and Expenses.
(a) In connection with the execution of this Sixth Amendment, Borrower
shall pay a Closing Fee of $7,500 to State Street to reflect the increase in
State Street's Commitment.
(b) In addition to the foregoing closing fee, the Borrower agrees to
pay on demand all reasonable costs and expenses of the Agent and the Banks,
including without limitation all
-2-
<PAGE> 3
reasonable fees and expenses of counsel, in connection with the preparation,
execution and delivery of this Sixth Amendment and the other documents and
instruments to be delivered herewith.
Section 8. Miscellaneous. This Sixth Amendment may be executed in
several counterparts and by each party on a separate counterpart, each of which
when executed and delivered shall be an original, and all of which together
shall constitute one instrument. In proving this Sixth Amendment, it shall not
be necessary to produce or account for more than one such counterpart signed by
the party against whom enforcement is sought. This Sixth Amendment is intended
to take effect as a sealed instrument and shall for all purposes be construed in
accordance with and governed by the laws of The Commonwealth of Massachusetts,
(excluding the laws applicable to conflicts or choice of law).
******
-3-
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this Sixth Amendment
to be duly executed as an instrument under seal as of the date first above
written.
PROVANT, INC.
By: /s/ Rajiv Bhatt
--------------------------------------
Title: Executive Vice President
BANKBOSTON, N.A.
By: /s/ Pamela A. Kuong
--------------------------------------
Title: Vice President
STATE STREET BANK AND
TRUST COMPANY
By: /s/ Suzanne L. Dwyer
--------------------------------------
Title: Vice President
FLEET NATIONAL BANK
By: /s/Susan Mason
--------------------------------------
Title: Vice President
NORWEST BANK IOWA, N.A.
By: /s/ Robert S. Gagne
--------------------------------------
Title: Vice President
FLEET NATIONAL BANK, as AGENT
By: /s/ Susan Mason
--------------------------------------
Title: Vice President
-4-
<PAGE> 1
Exhibit 10.2
SEVENTH AMENDMENT TO REVOLVING CREDIT AGREEMENT
This Seventh Amendment to Revolving Credit Agreement ("Seventh
Amendment") is made as of December 10, 1999 by and among PROVANT, Inc. (the
"Borrower"), a Delaware business corporation having its principal place of
business at 67 Batterymarch Street, Suite 500, Boston, Massachusetts 02110,
Fleet National Bank, a national banking association ("Fleet"), BankBoston, N.A.,
a national banking association ("BankBoston"), Norwest Bank Iowa, N.A., a
national banking association ("Norwest"), Citizens Bank of Massachusetts, a
Massachusetts banking corporation and the successor to State Street Bank and
Trust Company ("Citizens"), KeyBank National Association, a national banking
association ("KeyBank" and, together with Fleet, BankBoston, Norwest and
Citizens, the "Banks"), and Fleet National Bank, as agent for itself and the
other Banks (the "Agent").
RECITALS
WHEREAS, the Borrower, the Banks and the Agent previously entered into
that certain Revolving Credit Agreement, dated as of April 8, 1998, as modified
and amended by the First, Second, Third, Fourth, Fifth and Sixth Amendments
thereto (said Revolving Credit Agreement, as so amended prior to the date
hereof, the "Credit Agreement"), pursuant to which the Banks have made available
to the Borrower a revolving credit loan facility having a maximum available
borrowing amount of $80,000,000; and
WHEREAS, the parties hereto now desire to further amend or modify the
Credit Agreement in certain respects in order to (i) increase the total
Commitment thereunder from $80,000,000 to $105,000,000, and (ii) allocate the
additional Commitment amount between Norwest and KeyBank (KeyBank being a new
Bank), all as more particularly set forth hereinbelow.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt of which is hereby acknowledged, the parties
hereto hereby agree to modify and amend certain provisions of the Credit
Agreement, as follows:
Section 1. Definitions. All capitalized terms used herein without
definition shall have the respective meanings provided therefor in the Credit
Agreement.
Section 2. Amendment of Specific Provisions. The following specific
provisions of the Credit Agreement are hereby modified and amended:
(a) In the definition of "Commitment" in Section 1.1, the
schedule that identifies the Banks and each Bank's
Commitment and Commitment Percentage shall be set forth on
a new Schedule I attached hereto, which shall replace the
existing Schedule I to the Credit Agreement;
(b) In the definition of "Total Commitment" appearing in
Section 1.1, the stated dollar amount from and after the
date hereof shall be $105,000,000 rather than $80,000,000;
and
(c) KeyBank shall be deemed a "Bank" for all purposes under
the Credit Agreement and the other Loan Documents.
<PAGE> 2
Section 3. Confirmation of Stock Pledge Agreement. The parties hereto
agree that all references to the "Credit Agreement" contained in the Stock
Pledge Agreement and all Supplements thereto shall mean or refer to the Credit
Agreement as amended and supplemented by this Seventh Amendment and as it may be
further amended, supplemented, modified and restated and in effect from time to
time, including without limitation any such amendment, supplement, modification
or restatement which increases the amount of Indebtedness owing by the Borrower
thereunder.
Section 4. Loan Documents Ratified and Confirmed. The Credit Agreement,
the Notes and each of the other Loan Documents, as specifically supplemented or
amended by this Seventh Amendment and the other documents executed in connection
herewith, are and shall continue to be in full force and effect and are hereby
in all respects ratified and confirmed. Without limiting the generality of the
foregoing, the Security Documents and all of the collateral described therein
do, and shall continue to, secure the payment of all obligations under the Loan
Documents, in each case as amended or supplemented pursuant to this Seventh
Amendment.
Section 5. Conditions to Effectiveness. This Seventh Amendment shall
become effective only upon completion of the following actions: (i) the issuance
by the Borrower on the date hereof of a Note, substantially in the form attached
as Exhibit A-1 hereto (which shall be a Revolving Credit Note for purposes of
the Credit Agreement), to reflect the new Commitment of KeyBank as set forth in
Schedule I hereto; (ii) the issuance by the Borrower on the date hereof of a
replacement Note, substantially in the form attached as Exhibit A-2 hereto, to
reflect the upward adjustment to the Commitment of Norwest as set forth in
Schedule I hereto (which shall also be a Revolving Credit Note for purposes of
the Credit Agreement), and (ii) the execution and delivery to the Agent of an
Amendment and Confirmation of Guaranty, dated the date hereof and substantially
in the form attached hereto as Exhibit B, by each of the Borrower's Subsidiaries
which is a Guarantor.
Section 6. Bringdown. The Borrower hereby confirms that all
representations and warranties with respect to the Borrower and any Subsidiaries
contained in the Credit Agreement and each of the other Loan Documents and in
any other certificate or document delivered in connection therewith are true and
correct as of the date hereof, and that no Default or Event of Default is
outstanding or would be created by the consummation of the transactions
described herein.
Section 7. Fees, Costs and Expenses.
(a) In connection with the execution of this Seventh Amendment,
the Borrower shall pay (i) a Closing Fee of $10,000 to Norwest
to reflect the increase in its Commitment, and (ii) a Closing
Fee of $40,000 to reflect KeyBank's new Commitment.
(b) In addition to the foregoing closing fees, the Borrower agrees
to pay on demand all reasonable costs and expenses of the
Agent and the Banks, including without limitation all
reasonable fees and expenses of counsel, in connection with
the preparation, execution and delivery of this Seventh
Amendment and the other documents and instruments to be
delivered herewith.
Section 8. Miscellaneous. This Seventh Amendment may be executed in
several counterparts and by each party on a separate counterpart, each of which
when executed and delivered shall be an original, and all of which together
shall constitute one instrument. In proving this Seventh Amendment, it shall not
be necessary to produce or account for more than one such counterpart signed by
the party
2
<PAGE> 3
against whom enforcement is sought. This Seventh Amendment is intended to take
effect as a sealed instrument and shall for all purposes be construed in
accordance with and governed by the laws of The Commonwealth of Massachusetts
(excluding the laws applicable to conflicts or choice of law).
******
3
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this Seventh
Amendment to be duly executed as an instrument under seal as of the date first
above written.
PROVANT, INC.
By: /s/ Rajiv Bhatt
--------------------------------------------
Title: Executive Vice President
BANKBOSTON, N.A.
By: /s/ James Lau
--------------------------------------------
Title: Vice President
CITIZENS BANK OF MASSACHUSETTS
By: /s/ Suzanne L. Dwyer
--------------------------------------------
Title: Vice President
FLEET NATIONAL BANK
By: /s/ Michael J. Bassick
--------------------------------------------
Title: Assistant Vice President
KEYBANK NATIONAL ASSOCIATION
By: Victor C. Levesque
--------------------------------------------
Title: Vice President
NORWEST BANK IOWA, N.A.
By: /s/ Robert S. Gagne
--------------------------------------------
Title: Vice President
FLEET NATIONAL BANK, as AGENT
By: /s/ Michael J. Bassick
--------------------------------------------
Title: Assistant Vice President
4
<PAGE> 1
Exhibit 10.3
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into effective as of October 8, 1999
by and between PROVANT, Inc., a Delaware corporation (including, for purposes of
Sections 5(c) and (d), 8, 9, 10 and 13(a), its direct and indirect subsidiaries,
the "Company"), and Curtis M. Uehlein, of Marietta, Georgia (the "Executive").
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 as of the date hereof (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." The Executive shall commence
providing services for the Company thirty (30) days from the date hereof or on
such earlier date as shall be mutually agreed upon by the Company and the
Executive.
3. CAPACITY AND PERFORMANCE.
(a) During the term hereof, the Executive shall serve as
President and Chief Operating Officer of the Company. In addition, and
without further compensation, the Executive shall serve as a director
of the Company and an officer and/or director of one or more of the
Company's subsidiaries if so elected or appointed from time to time.
The Company agrees to nominate the Executive for election to the Board
of Directors of the Company (the "Board") at the next regularly
scheduled meeting of the Board following the Effective Date.
(b) During the term hereof, the Executive shall be employed by
the Company on a full-time basis and shall have all powers and duties
consistent with his position as the President and Chief Operating
Officer of the Company reporting to and subject to the direction and
control of the Company's Chief Executive Officer and the Board, and
shall perform such other duties and responsibilities on behalf of the
Company and its subsidiaries as may reasonably be designated from time
to time by the Board consistent with the position of President and
Chief Operating Officer.
<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 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 Executive acknowledges and agrees that he shall be
located at the Company's principal office, currently in Boston,
Massachusetts.
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. The Company shall pay the Executive a base
salary at the rate of Five Hundred Thousand Dollars ($500,000) per
annum, payable monthly ("Base Salary").
(b) BONUS COMPENSATION. The Executive shall receive a bonus of
Two Hundred Fifty Thousand Dollars ($250,000) for the fiscal year ended
June 30, 2000. The Executive shall have the opportunity to receive an
additional bonus of Fifty Thousand Dollars ($50,000) for the year ended
June 30, 2000 and annual bonuses of up to fifty percent (50%) of Base
Salary for each subsequent fiscal year, in each case upon achievement
of goals to be agreed upon by the Executive and the Compensation
Committee of the Board. Bonus goals and objectives shall be consistent
with the bonus goals and objectives of other senior executives of the
Company. All bonuses shall be paid at such time as bonuses are
regularly paid to senior executives of the Company.
(c) STOCK OPTIONS. The Executive shall receive a non-qualified
stock option to purchase two hundred twenty-five thousand (225,000)
shares of Common Stock of the Company at an exercise price equal to the
closing price for shares of Common Stock of the Company as reported on
Nasdaq on the Effective Date, the fair market value of a share of the
Company's Common Stock on the date the Executive accepted employment.
This option shall be exercisable in equal annual installments over the
three-year period from the date of grant provided that the Executive is
in the employ of the Company on the exercise date (subject to the
provisions of Section 6 hereof) and shall otherwise contain terms and
conditions consistent with the terms and conditions of options
regularly granted to senior
-2-
<PAGE> 3
executives of the Company and the Company's 1998 Equity Incentive Plan.
The Company's Chief Executive Officer shall recommend to the
Compensation Committee of the Board that for fiscal years beginning
July 1, 2000, the Executive will receive additional stock options for
more than one hundred thousand (100,000) shares of the Company's Common
Stock based upon continued satisfactory job performance.
(d) VACATIONS. During the term hereof, the Executive shall be
entitled to four (4) 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.
(e) 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. A summary of the
Company's employee benefit plans has been provided to the Executive.
(f) 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 reasonable 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 consistent with the requirements imposed
on other senior executives of the Company.
(g) RELOCATION. The Company shall pay the relocation expenses
of the Executive and his family to relocate to the Boston,
Massachusetts area and shall introduce the Executive to real estate
brokers and other professionals to assist the Executive and his family
in obtaining home in the Boston, Massachusetts area. The Executive
shall receive such other relocation benefits as have been agreed upon
by the Executive and the Company's Chief Financial Officer as set forth
in a separate letter.
-3-
<PAGE> 4
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 hereof under the following
circumstances and under the circumstances set forth in Section 6:
(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. Upon such termination, the Executive shall be entitled
to receive severance benefits as provided in Section 5(d)
reduced by disability income benefits received by the
Executive under any disability plan provided by the Company.
(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(e), 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
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<PAGE> 5
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, (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
dereliction of duty in the performance of his duties under this
Agreement, or repeated and consistent failure to be present at work
(other than by reason of illness or disability), 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. Before the Executive is terminated for
Cause, he shall be given reasonable notice and an opportunity to be
heard. 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. If the Executive's employment is
terminated by the Company other than for Cause, 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 equal to the period of his covenant not to compete as set forth in
Section 8. In addition, he shall be deemed to have remained in the employ of the
Company for a period of twelve (12) months following the date of such
termination for purposes of the stock option granted to him pursuant to Section
4(c) in order to determine the number of shares of Common Stock of the Company
as to which such stock option is exercisable. The Executive's rights to receive
Severance Payments and additional employment credit for purposes of his stock
option hereunder is conditioned upon (i) 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 and the Company's and its
subsidiaries' officers and directors, excepting only the right to any Base
Salary and/or reimbursable expenses then accrued and unpaid under Section 4 of
this Agreement, and (ii) the Executive's continued performance of those
obligations hereunder
-5-
<PAGE> 6
that continue by their express terms after the termination of his employment,
including without limitation those set forth in Sections 8 and 9. Any Severance
Payments to be paid hereunder shall be payable in accordance with the payroll
practices of the Company for its executives generally as in effect from time to
time, and subject to all required withholding of taxes.
6. CHANGE OF CONTROL.
(a) RIGHT TO CHANGE OF CONTROL BENEFITS. The Company agrees
that the Executive shall have the right to terminate this Agreement and
receive the severance benefits set forth in subsection (c) below in the
event of a Change in Control (as defined in subsection (b) below) under
the circumstances described in this Section 6. No right to terminate or
benefits shall be applicable or payable under subsection (c) below
unless there shall have been a Change in Control.
(b) CHANGE IN CONTROL. For purposes of this Agreement, a
"Change in Control" shall mean a change in control of the Company of a
nature that would be required to be reported in response to Item 6(e)
of Schedule 14A of Regulation 14A promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), whether or not
the Company is in fact required to comply therewith; provided, that,
without limitation, such a change in control shall be deemed to have
occurred if:
(i) any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act), other than the Company,
any trustee or other fiduciary holding securities under an
employee benefit plan of the Company or a corporation owned,
directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock
of the Company, is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 50.01%
or more of the combined voting power of the Company's then
outstanding securities;
(ii) during the period of twenty-four (24) consecutive
months (not including any period prior to the date of this
Agreement), individuals who at the beginning of such period
constitute the Board and any new director whose election by
the Board or nomination for election by the Board or by the
stockholders of the Company was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of such period or whose
election or nomination for election was previously so
approved, cease for any reason to constitute a majority
thereof;
-6-
<PAGE> 7
(iii) the Company shall have consummated a merger or
consolidation with any other corporation, other than a merger
or consolidation which results in the voting securities of the
Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at
least 50% of the combined voting securities of the Company or
such surviving entity outstanding immediately after such
merger or consolidation; or
(iv) the Company shall have liquidated or sold all or
substantially all of the Company's assets.
(c) BENEFIT. In the event that (i) within six months of a
Change of Control the Executive dies or his employment is terminated by
reason of disability pursuant to Section 5(b) or the Executive
terminates his employment with the Company for Good Reason (as
hereinafter defined), (ii) within twelve months after a Change of
Control the Executive's employment with the Company is terminated by
the Company for any reason other than for Cause as defined in Section
5(c), or (iii) within the period beginning on the sixth monthly
anniversary of the Change of Control and ending on the twelfth monthly
anniversary of the Change of Control the Executive terminates his
employment with the Company for any reason (including, without
limitation, death or disability), the Executive shall receive a lump
sum compensation, payable within five days after termination of his
employment, equal to two times his Base Salary immediately prior to the
Change of Control. In addition, (i) the Company shall maintain in full
force and effect, for the continued benefit of the Employee and/or his
family for two years after the date his employment terminates or, if
earlier, the date the Executive receives comparable coverage from a new
employer, all medical and dental insurance plans in which he was
entitled to participate immediately prior to the Change of Control,
provided that his continued participation is possible under the general
terms and provisions of such plans (in the event that his participation
in any such plan is barred, the Company shall arrange to provide the
Executive with benefits substantially similar to those which he is
entitled to receive under such plans), and (ii) all outstanding stock
options which the Executive holds shall vest and become exercisable
immediately upon a Change of Control.
(d) GOOD REASON. For purposes of this Agreement, "Good Reason"
means:
(i) the assignment to the Executive of any duties
inconsistent in any respect with his position (including
status, offices, titles and reporting requirements),
authority, duties or responsibilities as in effect on the date
of the Change of Control, or any other action by the Company
which results in a diminution in such position, authority,
duties or responsibilities, excluding
-7-
<PAGE> 8
for this purpose an isolated, insubstantial and inadvertent
action not taken in bad faith and which is remedied by the
Company promptly after receipt of notice from the Executive;
(ii) any reduction of the Executive's Base Salary or
the failure by the Company to provide him with incentive
compensation, welfare benefits, retirement benefits and other
benefits which in the aggregate are no less favorable than the
benefits to which he was entitled prior to the Change of
Control;
(iii) the Company's requiring the Executive to be based
at any office or location other than the office and location
at which he is employed on the date of the Change of Control,
except for travel reasonably required in the performance of
his responsibilities; or
(iv) any action taken or suffered by the Company as of
or following the Change of Control (such as, without
limitation, transfer or encumbrance of assets or incurring of
indebtedness) which materially impairs the ability of the
Company to make any payments due or which may become due to
the Executive under this Agreement.
7. 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 8 through (and inclusive of) 23 hereof.
8. 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
three (3) years from the date the Executive's employment with the Company
terminates, whether during the term hereof or thereafter and regardless of the
reason therefor, 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, (a) 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;
(b) induce or attempt to induce any such customer to reduce such customer's
purchases from the Company; (c) 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 (d) solicit any of the Company's employees or
consultants to leave the employ
-8-
<PAGE> 9
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 prior to 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.
9. 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.
10. 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 8 and 9 hereof.
The Executive further agrees that all goodwill of the Company is its exclusive
property. The Executive further acknowledges and agrees that, were he to breach
any of the covenants contained in Section 8 or 9 hereof, the damage would be
irreparable. The Executive therefore agrees that the Company, 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.
-9-
<PAGE> 10
11. INDEMNIFICATION. Subject to the second sentence of this Section 11,
the Company agrees to indemnify the 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, or (ii) with respect to any
criminal action or proceeding, had reasonable cause to believe that the
Executive's conduct was unlawful. The Company shall purchase and maintain in
force directors' and officers' liability insurance having policy limits and
other terms reasonably determined by the Company's Board of Directors.
12. 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.
13. 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) "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 its business, 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) 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, 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
-10-
<PAGE> 11
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).
(b) "Person" means an individual, a corporation, an
association, a partnership, an estate, a trust and any other entity or
organization.
14. WITHHOLDING. All payments made under this Agreement shall be
reduced by any tax or other amounts required to be withheld under applicable
law.
15. 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 sixty (60) days following the effective date thereof, in which event,
subject always to the provisions of Section 6, the Executive's sole remedy shall
be to terminate this Agreement, which termination shall have the effect set
forth in Section 7 hereof. This Agreement shall inure to the benefit of and be
binding upon the Company and the Executive, and their respective successors,
executors, administrators, heirs and permitted assigns.
16. 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.
17. 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.
-11-
<PAGE> 12
18. 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 the Company's principal place of business, to the attention of the Secretary,
or to such other address as either party may specify by notice to the other
actually received.
19. 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 or promoter of
the Company, any such agreement being hereby terminated by the mutual agreement
of the parties without liability to either party.
20. 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.
21. 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.
22. 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.
23. 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.
IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument by the Executive and by the Company by its duly authorized
representative, as of the date first above written.
Executive: PROVANT, INC.
/s/ Curtis M. Uehlein By: Dominic J. Puopolo
- ----------------------------- --------------------------------------
Curtis M. Uehlein Name: Dominic J. Puopolo
Title: Executive Vice President
and Chief Financial Officer
-12-
<PAGE> 1
Exhibit 10.4
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT between PROVANT, Inc., a Delaware
corporation (the "Company"), and Curtis M. Uehlein (the "Grantee") dated
effective as of October 8, 1999 (the "Date of Grant").
For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto act and agree as follows:
Section 1. The Plan
The option granted pursuant to this Agreement is not granted pursuant
to the Company's 1998 Equity Incentive Plan (the "Plan"). This Agreement shall
nevertheless be subject to the terms of the Plan, a copy of which is attached
hereto as Exhibit A and is incorporated herein in its entirety, except to the
extent this Agreement and the Plan or any agreement between the Company and the
Grantee are in conflict, in which case this Agreement or such other agreement
shall control. Capitalized terms used herein and not otherwise defined shall
have the meanings ascribed to them in the Plan.
Section 2. Grant of Option
The Company hereby grants to the Grantee, as of the Date of Grant, an
option (the "Option") to purchase up to 225,000 shares of Common Stock, par
value $.01 per share, of the Company (the "Option Shares") at a price per share
of $16.375, both the price and the number of shares being subject to adjustment
only as provided herein and in the Plan.
Section 3. Terms of Option
Subject to such further limitations as are provided herein, the Option
shall be exercisable in three (3) installments, with the Grantee having the
right hereunder to purchase from the Company the following number of Option
Shares upon exercise of the Option, on and after the following dates, in
cumulative fashion:
(a) on and after the first anniversary of the Date of Grant,
up to one-third (ignoring fractional shares) of the total number of
Option Shares;
(b) on and after the second anniversary of the Date of Grant,
up to an additional one-third (ignoring fractional shares) of
the total number of Option Shares; and
(c) on and after the third anniversary of the Date of Grant,
the remaining Option Shares.
<PAGE> 2
Section 4. Termination of the Option
The Option and all rights hereunder with respect thereto, to the extent
such rights shall not have been exercised, shall terminate and become null and
void after the close of business on the day that is seven (7) years from the
Date of Grant (the "Option Term").
Section 5. Cessation of Grantee's Employment
(a) If the Grantee ceases to be employed by the Company by reason of
the Grantee's death during the Option Term, the Option shall be exercisable, to
the extent the Option was exercisable on the date of the Grantee's death, either
by the Grantee's executor or administrator or, if not so exercised, by the
legatees or distributees of the Grantee's estate, only during the twelve (12)
months immediately following the Grantee's death, after which time the Option
shall terminate.
(b) If the Grantee ceases to be employed by the Company during the
Option Term for any other reason, the Option (i) to the extent that it is not
then exercisable by the Grantee shall terminate on the date the Grantee's
employment with the Company ceased, and (ii) to the extent that it was
exercisable on the date the Grantee's employment with the Company ceased shall
continue to be exercisable during the thirty (30) days immediately following
such cessation, after which time the Option shall terminate.
(c) Notwithstanding any other provisions set forth herein or in the
Plan, in no event shall the Option be exercised after the expiration of the
Option Term.
(d) Notwithstanding any other provisions set forth herein or in the
Plan, the Option shall terminate automatically and without notice to the Grantee
on the date the Grantee's employment is terminated for "cause". For the purposes
hereof, "cause" shall mean any conduct that the Board of Directors of the
Company determines in good faith impairs the reputation, goodwill or business of
the Company or any of its subsidiaries or is inimical to the best interests of
the Company or any of its subsidiaries. A termination for "cause" will include
any resignation in anticipation of discharge for "cause" or accepted by the
Company in lieu of a formal discharge for "cause".
Section 6. Exercise of Option
(a) The Grantee may exercise the Option with respect to all or any part
of the number of Option Shares then exercisable hereunder by giving written
notice of election to the Company, attention: Treasurer. Such notice shall
specify the number of Option Shares with respect to which the Option is to be
exercised.
(b) At the time the Option is exercised, the Grantee shall make full
payment for the Option Shares purchased, in cash, certified check or bank
cashier's check, or, with the prior
-2-
<PAGE> 3
written consent of the Company, in whole or in part through the surrender of
shares of Common Stock having a fair market value equal to the exercise price,
through delivery of a note or pursuant to any cashless exercise program that the
Company may adopt. The Grantee also shall pay to the Company or make provision
satisfactory to the Company for the payment of any taxes required by law to be
withheld by the Company at the time of the exercise of the Option or the sale of
the Option Shares acquired upon such exercise. For purposes of this Section 6(b)
and Section 6(c) below, "fair market value" shall be determined based on the
last sale price of the Common Stock as reported by the principal national
securities exchange or automated quotation system on which the Common Stock is
listed on the date of exercise.
(c) In the event exercise of the Option otherwise would require the
Company to issue a fractional share of Common Stock of the Company, except as
otherwise provided below, such fraction shall be disregarded and the purchase
price payable in connection with such exercise shall be appropriately reduced.
Any such fractional share shall be carried forward and added to any shares
covered by future exercise(s) of the Option.
(d) Notwithstanding anything to the contrary contained herein, the
Option shall not be exercisable unless either (a) a registration statement under
the Securities Act of 1933, as amended, with respect to the Option Shares shall
have become, and continues to be, effective, or (b) the Grantee (i) shall have
represented, warranted and agreed, in form and substance satisfactory to the
Company, at the time of exercising the Option, that the Grantee is acquiring the
Option Shares for the Grantee's own account, for investment and not with a view
to or in connection with any distribution, (ii) shall have agreed to
restrictions on transfer in form and substance satisfactory to the Company, and
(iii) shall have agreed to an endorsement which makes appropriate reference to
such representations, warranties, agreements and restrictions on the
certificate(s) representing the Option Shares.
Section 7. No Rights of a Stockholder
Neither the Grantee nor any personal representative shall be, or shall
have any of the rights and privileges of, a stockholder of the Company with
respect to any Option Shares, in whole or in part, prior to the date of exercise
of the Option.
Section 8. Nontransferability of Option
During the Grantee's lifetime, unless otherwise allowed by the Board of
Directors of the Company pursuant to Section 6.4 of the Plan, the Option shall
be exercisable only by the Grantee, and the Option shall not in any event be
transferable except, in case of the death of the Grantee, by will or the laws of
descent and distribution.
-3-
<PAGE> 4
Section 9. Employment Not Affected
Neither the granting of the Option nor its exercise shall be construed
as granting to the Grantee any right with respect to the Grantee's continued
employment by the Company. Except as may otherwise be limited by a written
agreement between the Company and the Grantee, the right of the Company to
terminate at will the Grantee's employment at any time (whether by dismissal,
discharge, retirement or otherwise) is specifically reserved by the Company.
Section 10. Amendment of Option
The Option may be amended or modified at any time by the Company;
provided, however, that the Grantee's consent to such amendment or modification
shall be required unless the Board of Directors or Compensation Committee (if
any) of the Company determines that the amendment or modification, taking into
account any related action, would not materially and adversely affect the
Grantee.
Section 11. Notice
(a) Any notices required or permitted hereunder shall be addressed to
the Company at 67 Batterymarch Street, Suite 400, Boston, Massachusetts 02110,
Attention: Treasurer, or to the Grantee at the most current address of the
Grantee appearing in the records of the Company, as the case may be.
(b) Either the Company or the Grantee may, by notice to the other given
in the manner provided in Section 11(a), change the designated address for
future notice.
Section 12. Governing Law
The validity, construction, interpretation and effect of this
instrument shall be governed by and determined in accordance with the law of the
Commonwealth of Massachusetts, without regard to conflicts of law principles.
-4-
<PAGE> 5
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed by its officer thereunto duly authorized and the Grantee has hereunto
set his hand all as of the 8th day of October 1999.
PROVANT, INC.
By: /s/ Rajiv Bhatt
-------------------------------------------
Its: Executive Vice President
ACCEPTED:
/s/ Curtis M. Uehlein
-------------------------------------------
Curtis M. Uehlein, Grantee
-5-
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<PERIOD-START> JUL-01-1999
<PERIOD-END> DEC-31-1999
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