<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 1, 1997
REGISTRATION STATEMENT NO. 333-
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------
BORON, LEPORE & ASSOCIATES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
-------------
DELAWARE 7389 22-2365997
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION INDUSTRIAL IDENTIFICATION NO.)
OF INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
-------------
17-17 ROUTE 208 NORTH
FAIR LAWN, NEW JERSEY 07410
(201) 791-7272
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICE)
-------------
PATRICK G. LEPORE
CHAIRMAN, CHIEF EXECUTIVE OFFICER AND PRESIDENT
BORON, LEPORE & ASSOCIATES, INC.
17-17 ROUTE 208 NORTH
FAIR LAWN, NEW JERSEY 07410
(201) 791-7272
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
-------------
COPIES TO:
JOHN R. LECLAIRE, P.C. JAMES LEPORE, ESQ. JAMES M. DUBIN, ESQ.
GOODWIN, PROCTER & HOAR LEPORE, ZIMMERER, CARL L. REISNER, ESQ.
LLP LEPORE & LUIZZI PAUL, WEISS, RIFKIND,
EXCHANGE PLACE 1593 ROUTE 88 WEST WHARTON & GARRISON
BOSTON, MASSACHUSETTS BRICK, NEW JERSEY 08724 1285 AVENUE OF THE
02109-2881 (908) 840-0550 AMERICAS
(617) 570-1000 NEW YORK, NEW YORK
10019
(212) 373-3000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
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If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [_] 333-
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_] 333-
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF EACH CLASS OF AMOUNT MAXIMUM MAXIMUM AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) FEE
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par
value................. 3,833,333 Shares $16.50 $63,249,994.50 $19,167
</TABLE>
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- -------------------------------------------------------------------------------
(1) Includes 500,000 shares of Common Stock which the underwriters have the
option to purchase solely to cover over-allotments, if any.
(2) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(a) under the Securities Act of 1933.
-------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO
SECTION 8(A), MAY DETERMINE.
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- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE +
+WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES +
+LAWS OF ANY SUCH JURISDICTION. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JULY 1, 1997
PROSPECTUS
- ----------
3,333,333 SHARES
BORON, LEPORE & ASSOCIATES, INC.
COMMON STOCK
-----------
All of the 3,333,333 shares of Common Stock offered hereby are being sold by
the Company. Prior to this offering, there has been no public market for the
Common Stock of the Company. It is currently estimated that the initial public
offering price will be between $ and $ per share. See "Underwriting" for
a discussion of the factors to be considered in determining the initial public
offering price. The Company has applied to have the Common Stock approved for
quotation on the Nasdaq National Market under the symbol "BLPG."
-----------
THE COMMON STOCK OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK
SEE "RISK FACTORS" COMMENCING ON PAGE 6.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNTS(1) COMPANY(2)
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<S> <C> <C> <C>
Per Share.................................. $ $ $
- --------------------------------------------------------------------------------
Total(3)................................... $ $ $
</TABLE>
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- --------------------------------------------------------------------------------
(1) See "Underwriting" for indemnification arrangements with the several
Underwriters.
(2) Before deducting expenses payable by the Company estimated at $ .
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 500,000 additional shares of Common Stock solely to cover over-
allotments, if any. If the option is exercised in full, the total Price to
Public, Underwriting Discount and Proceeds to Company will be $ , $
and $ , respectively. See "Underwriting."
-----------
The shares of Common Stock are being offered severally by the Underwriters
subject to prior sale, when, as and if accepted by the Underwriters and subject
to conditions including their right to reject orders in whole or in part. It is
expected that delivery of the shares will be made at the offices of Bear,
Stearns & Co. Inc., 245 Park Avenue, New York, New York 10167.
-----------
BEAR, STEARNS & CO. INC.
SMITH BARNEY INC.
WESSELS, ARNOLD & HENDERSON
-----------
The date of this Prospectus is , 1997
<PAGE>
ADDITIONAL INFORMATION
A Registration Statement on Form S-1, including amendments thereto, relating
to the Common Stock offered by the Company has been filed with the Securities
and Exchange Commission (the "Commission"), Washington, D.C. 20549. This
Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules filed thereto.
Statements contained in this Prospectus as to the contents of any contract or
any other document referred to are not necessarily complete, and in each
instance reference is made to the copy of such contract or document filed as
an exhibit to the Registration Statement, each such statement being qualified
in all respects by such reference. For further information with respect to the
Company and the Common Stock offered hereby, reference is made to the
Registration Statement and the exhibits and schedules thereto. A copy of the
Registration Statement may be inspected without charge at the Commission's
principal office in Washington, D.C. and copies of all or any part thereof may
be obtained from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549, the New York Regional Office located at
Seven World Trade Center, New York, New York 10048, and the Chicago Regional
Office located at Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661, upon payment of certain fees prescribed by the
Commission. The Commission maintains a World Wide Web site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission. The address of the
Commission's World Wide Web site is http://www.sec.gov.
The Company intends to furnish its stockholders with annual reports
containing audited financial statements certified by its independent auditors.
----------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN PASSIVE MARKET
MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET IN
ACCORDANCE WITH RULE 103 OF REGULATION M UNDER THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED (THE "EXCHANGE ACT"). SEE "UNDERWRITING."
----------------
An investment in the Common Stock offered hereby involves a high degree of
risk. Prospective investors should carefully consider the risk factors and
other information contained in this Prospectus, before purchasing the Common
Stock offered hereby. This Prospectus contains forward-looking statements
within the meaning of the federal securities laws. Discussions containing such
forward-looking statements may be found in the material set forth under "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business," as well as in the Prospectus generally.
Prospective investors are cautioned that any such forward looking statements
are not guarantees of future performance and involve risks and uncertainties.
Actual events or results may differ materially from those discussed in the
forward-looking statements as a result of various factors, including, without
limitation, dependence on the pharmaceutical industry, customer concentration,
reliance on new services for continued growth, ability to manage growth,
multiple risks associated with potential acquisitions, variation in quarterly
operating results and volatility of the stock price, extensive regulation of
the healthcare industry, potential litigation, reliance on certain personnel,
need for additional financing, competition and effective control by principal
stockholders.
----------------
"BLP" and the Company's logo are trademarks of the Company and are used
throughout this document as such. All other trademarks and tradenames referred
to in this Prospectus are the property of their respective owners.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the Financial Statements of the Company and the Notes thereto
appearing elsewhere in this Prospectus. All references herein to industry
financial and statistical information are based on trade articles and industry
reports that the Company believes to be reliable, although there can be no
assurance to that effect.
THE COMPANY
Boron, LePore & Associates, Inc. ("BLP" or the "Company") provides outsourced
promotional, marketing and educational services to the pharmaceutical industry.
The Company was founded in 1981 and has become a leading provider of peer-to-
peer meetings, which typically involve gatherings of 10 to 12 physicians
meeting under the chairmanship of a Company moderator to discuss a new drug or
new indication for a familiar drug. BLP recently expanded the range of its
outsourced promotional, marketing and educational services. Newer service
offerings include coordination of other types of meetings such as symposia,
continuing education conferences and video satellite conferences; product
marketing services (which involve obtaining rights to market a pharmaceutical
product, often on a shared reward basis); and teleservices such as
teledetailing, telemarketing, sales support and fulfillment. In July 1997, the
Company expects to open a teleservice center in Norfolk, Virginia to support
expansion of its teleservices business.
BLP has enjoyed long-standing customer relationships with many of the world's
largest pharmaceutical companies and has served a number of these customers for
more than a decade. BLP emphasizes proactive and cooperative relationships with
the product managers and senior executives of its customers, working in concert
with them to implement marketing strategies that utilize the Company's array of
service alternatives.
The Company believes that pharmaceutical companies increasingly have sought
to outsource functions such as research and marketing in response to cost
pressures. By outsourcing marketing services, a pharmaceutical company shifts
fixed costs to variable costs and obtains the services of professionals who
specialize in reaching targeted audiences. Based on data from Scott-Levin, a
healthcare marketing information company, pharmaceutical companies spent
approximately $900 million in 1996 on promotional and marketing events,
including peer-to-peer meetings and symposia, primarily conducted by third
party suppliers.
BLP's growth strategy emphasizes: (i) offering a broad array of promotional,
marketing and educational services that are responsive to its customers' varied
outsourced marketing needs; (ii) expanding the volume and scope of services
provided to its existing customers by increasing the number of meetings and
conferences conducted for them and providing additional services such as
product marketing and teleservices; (iii) expanding BLP's customer base to
include new customers such as smaller pharmaceutical companies, foreign
pharmaceutical companies, managed care companies, drug wholesalers,
biotechnology companies and medical device manufacturers; (iv) targeting new
audiences, such as consumers, pharmacists, formulary managers and hospital
groups, with existing and new promotional, marketing and educational techniques
and technologies; and (v) pursuing strategic acquisitions as a means of
expanding its business. The Company pursues its growth strategy by emphasizing
its long-standing customer relationships and relative size in a fragmented
market to obtain and expand customer relationships. BLP uses its traditional
peer-to-peer business as a platform to expand, develop and promote other types
of services, such as product marketing and teleservices. BLP believes that its
long-standing customer relationships, staff of trained and experienced
moderators and customer service representatives, and new teleservice center
provide it with strategic business advantages.
The Company was incorporated under the laws of Delaware on November 22, 1996.
The Company's predecessor was incorporated under the laws of New Jersey in
1981. The Company's principal executive offices are located at 17-17 Route 208
North, Fair Lawn, New Jersey 07410, and its telephone number is (201) 791-7272.
3
<PAGE>
THE OFFERING
Common Stock offered by the Company....... 3,333,333 shares
Common Stock to be outstanding after the
offering.................................. 10,812,978 shares(1)
Use of proceeds........................... To repay existing indebtedness, to
redeem all outstanding shares of
redeemable preferred stock and for
working capital and other general
corporate purposes. See "Use of
Proceeds."
Proposed Nasdaq National Market symbol.... BLPG
- ----------
(1) Includes all outstanding stock grants and excludes: (i) 278,994 shares of
Common Stock issuable upon the exercise of outstanding stock options at a
weighted average exercise price of $8.91 per share at June 30, 1997; (ii)
241,353 additional shares of Common Stock available for future grants under
the Company's 1996 Stock Option and Incentive Plan, as amended (the "1996
Stock Plan"); and (iii) 225,000 additional shares of Common Stock available
for future sales under the 1997 Employee Stock Purchase Plan (the "Purchase
Plan"). See "Management--Employee Stock and Other Benefit Plans--1996 Stock
Option and Incentive Plan" and "--1997 Employee Stock Purchase Plan."
Except as otherwise noted, all information in this Prospectus assumes no
exercise of the Underwriters' over-allotment option and has been adjusted to
reflect (i) a two-for-three reverse stock split of the Common Stock to be
effective in connection with and subject to the completion of this offering,
and (ii) the conversion of all outstanding shares of non-voting Class A Common
Stock and Convertible Participating Preferred Stock into shares of Common Stock
upon completion of this offering. Unless the context otherwise requires, all
references to "BLP" or the "Company" mean Boron, LePore & Associates, Inc. and
its predecessor.
THE TA TRANSACTION
In December 1996, the Company completed a series of transactions involving
TA Associates, Inc., a private equity firm based in Boston, Massachusetts, and
senior officers of the Company (the "TA Transaction"). In connection with the TA
Transaction, investors principally including investment funds associated with TA
Associates, Inc. (collectively, the "TA Investors") invested $12.5 million to
acquire 7,000,000 shares of Convertible Participating Preferred Stock of the
Company, and the Company incurred $21.0 million of indebtedness under a senior
secured credit facility from a bank (the "Credit Facility"). The Company in turn
used the proceeds from these financing transactions principally to redeem common
stock from, and to pay bonuses to, senior officers of the Company. Upon
completion of this offering, the Convertible Participating Preferred Stock will
convert into 4,666,664 shares of Common Stock and 5,600,000 shares of Redeemable
Preferred Stock, and the Redeemable Preferred Stock will be immediately redeemed
for $10.0 million plus accumulated and unpaid dividends, $332,000 at March 31,
1997, using a portion of the net proceeds from the sale of Common Stock offered
hereby. See "Use of Proceeds" and "Certain Transactions."
4
<PAGE>
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
-------------------------- ----------------
1994 1995 1996 1996 1997
-------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues....................... $ 20,580 $ 21,775 $ 40,219 $ 6,973 $ 13,673
Cost of sales.................. 12,378 12,788 26,004 4,496 9,737
-------- -------- -------- ------- --------
Gross profit................. 8,202 8,987 14,215 2,477 3,936
-------- -------- -------- ------- --------
Officers' compensation......... 2,003 1,336 13,351(1) 683 286
Other selling, general and ad-
ministrative expenses......... 4,533 5,005 6,644(2) 1,488 1,964
-------- -------- -------- ------- --------
Total selling, general and ad-
ministrative expenses........ 6,536 6,341 19,995 2,171 2,250
-------- -------- -------- ------- --------
Operating income (loss)...... 1,666 2,646 (5,780) 306 1,686
Interest expense, net.......... 43 86 255 55 409
Nonrecurring loss on forgive-
ness of related party loan.... -- -- 1,076 -- --
-------- -------- -------- ------- --------
Income (loss) before provi-
sion for income taxes....... 1,623 2,560 (7,111) 251 1,277
Provision for income taxes(3).. 25 51 -- -- 400
-------- -------- -------- ------- --------
Net income (loss)............ $ 1,598 $ 2,509 $ (7,111) $ 251 $ 877
======== ======== ======== ======= ========
Net income (loss) per common
share......................... $ (0.96) $ 0.12
======== ========
Weighted average common shares
outstanding(4)................ 7,417 7,417
======== ========
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1997
-----------------------
ACTUAL AS ADJUSTED(5)
------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................... $ 750 $15,982
Working capital......................................... 2,195 19,063
Total assets............................................ 18,493 33,435
Long-term debt, less current maturities................. 18,500 --
Redeemable equity securities............................ 12,832 --
Total stockholders' equity (deficit).................... (28,806) 19,220
</TABLE>
- --------
(1) Includes $10.0 million for special officer bonuses, including $7.5 million
as part of the TA Transaction.
(2) Includes $0.6 million for fees related to the TA Transaction.
(3) The Company elected to be taxed under Subchapter S of the Internal Revenue
Code of 1986, as amended (the "Code"), until December 4, 1996, and
accordingly the provision for income taxes for all periods ending on or
prior to such date reflects only state business tax expense, if any. If the
Company had been subject to taxation under Subchapter C of the Code for the
year ending December 31, 1996, the pro forma provision for income taxes
would have been $0 and the pro forma net loss per common share would have
been $(0.96). Because the Company elected to be subject to taxation under
Subchapter C of the Code for the three months ended March 31, 1997, the
provision for income taxes and the net income per common share reflected
above for such period is presented on an actual basis.
(4) Due to the effect of the TA Transaction on the Company's capital structure,
per share data for the years ended prior to December 31, 1996 are not
comparable to subsequent periods and, therefore, have not been presented.
(5) Gives effect to the completion of this offering at an assumed initial
public offering price of $15.00 per share and the receipt and application
of the estimated net proceeds therefrom as if such transactions had been
completed on March 31, 1997. Also reflects the anticipated write-off of
unamortized loan fees of approximately $290,000, net of the related tax
effect. See "The Company," " Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Use of Proceeds" and
"Capitalization."
----------------
5
<PAGE>
RISK FACTORS
An investment in the Common Stock offered hereby involves a high degree of
risk. Prospective investors should carefully consider the following risk
factors, in addition to the other information contained in this Prospectus,
before purchasing the Common Stock offered hereby. This Prospectus contains
forward-looking statements within the meaning of the federal securities laws.
Discussions containing such forward-looking statements may be found in the
material set forth below and under "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business," as well as in
the Prospectus generally. Prospective investors are cautioned that any such
forward looking statements are not guarantees of future performance and
involve risks and uncertainties. Actual events or results may differ
materially from those discussed in the forward-looking statements as a result
of various factors, including, without limitation, the risk factors set forth
below and the matters set forth in this Prospectus generally.
DEPENDENCE ON THE PHARMACEUTICAL INDUSTRY
Substantially all of the Company's revenues to date have resulted from
promotional and marketing services provided to pharmaceutical companies. The
Company could be materially and adversely affected by adverse developments in
the pharmaceutical industry generally or any reduction in expenditures for, or
future outsourcing of, promotional and marketing activities by pharmaceutical
companies. Promotional and marketing expenditures by pharmaceutical companies
could be negatively impacted by, among other things, governmental reform or
private market initiatives intended to reduce the cost of pharmaceutical
products or by governmental, medical association or pharmaceutical industry
initiatives designed to regulate the manner in which pharmaceutical companies
promote their products.
Healthcare reform measures have been considered by Congress and other
federal and state bodies during recent years. The intent of the proposals
generally has been to reduce the growth of total healthcare expenditures and
expand healthcare coverage for the uninsured. Although comprehensive
healthcare reform has been considered, only limited proposals focusing on the
delivery of healthcare services have been enacted. Comprehensive healthcare
reform may be considered again and efforts to enact limited reform bills are
likely to continue. Implementation of government healthcare reform may
adversely affect promotional and marketing expenditures by pharmaceutical
companies, which could decrease the business opportunities available to BLP.
The Company is unable to predict the likelihood of such legislation or similar
legislation being enacted into law or the effects that any such legislation
would have on BLP.
In addition to government healthcare reform initiatives, a number of private
market initiatives to contain healthcare costs, particularly pharmaceutical
costs, have been implemented. For instance, certain large managed healthcare
providers have acted to contain such costs and have adopted the use of
formularies (lists of preferred drugs), thereby creating pressure on
pharmaceutical companies to contain costs, including promotional and marketing
expenditures. Governmental or private initiatives to further contain
pharmaceutical pricing or to regulate the sponsorship of promotional meetings
by the pharmaceutical industry could have a material adverse effect on BLP.
CUSTOMER CONCENTRATION
BLP's revenues and profitability are highly dependent on its relationships
with several large pharmaceutical companies. The Company's five largest
customers accounted for approximately 83% of its revenues in 1996,
approximately 90% of its revenues in 1995, and approximately 92% of its
revenues in 1994. In 1996, , and each accounted for 10% or
more of the Company's revenues; in 1995, , , and each
accounted for 10% or more of the Company's revenues; and in 1994, , ,
and each accounted for 10% or more of the Company's revenues (in the
cases of 1995 and 1994 after giving effect to subsequent pharmaceutical
company mergers). One customer accounted for 44% and 45% of revenues in 1996
and 1995, respectively. BLP is likely to continue to experience
6
<PAGE>
a concentration of business with its larger customers, especially given the
concentrated nature of the pharmaceutical industry. The loss or significant
reduction of business from any significant customer could have a material
adverse effect on the Company.
RELIANCE ON NEW SERVICES FOR CONTINUED GROWTH
Historically, the production of peer-to-peer meetings has generated
substantially all of BLP's revenues and profits. Although revenues from the
Company's peer-to-peer meetings business grew 62.0% from 1995 to 1996, the
Company does not anticipate that future growth of revenues from this business,
if any, will continue at such an accelerated rate. BLP believes that future
growth of its peer-to-peer meetings business may require future growth of
overall promotional spending and the addition of new customers. The growth of
the peer-to-peer meetings business may be limited as a result of BLP's high
level of business with certain customers and the fact that it generally does
not produce peer-to-peer meetings for competing products without customer
consent. Any decline in the Company's peer-to-peer meetings business or any
reduction in its growth rate could have a material adverse effect on the
Company. BLP believes that future growth of its business will depend upon its
success in diversifying its promotional, marketing and educational service
offerings. In 1996, the Company introduced other services such as the
production of symposia, product marketing services and teleservices, but such
services accounted for relatively insignificant portions of total revenues.
There can be no assurance that BLP will establish a significant or lasting
presence in the markets for these services, and the failure to achieve success
in these new markets would adversely affect the Company's future growth.
Certain of the Company's new service offerings are subject to a variety of
risks not present in its traditional peer-to-peer meetings business.
Pharmaceutical company sponsored symposia have been subject to past scrutiny
which had an adverse effect on the market for symposia services. Physician
attendance currently is subject to a number of industry and professional
association guidelines designed to prevent conflicts of interest. In the event
of changes in law, regulatory policy or applicable industry or professional
association guidelines or negative publicity concerning symposia sponsored by
the pharmaceutical industry, customers may choose to alter their guidelines in
ways that would make symposia and related consultancies less attractive to
physicians and pharmaceutical companies. In addition, restrictions on such
meetings could be imposed by governmental agencies, industry or professional
associations or the pharmaceutical companies themselves. Finally, any of the
Company's customers could be found to be in non-compliance with relevant law,
policy or guidelines in their handling of symposia. There can be no assurance
that BLP will be successful in expanding its symposia business. The Company's
product marketing services will involve obtaining rights to market a
pharmaceutical product for an agreed upon period. The Company generally will
bear most of the promotional expenses in return for the opportunity to share
incremental revenue achieved above a specified benchmark or benchmarks. There
can be no assurance that the Company will be successful in introducing product
marketing services or in selecting products to market, or that its promotional
activities will generate the agreed upon levels of sales. In addition, BLP's
new teleservice center will be subject to a variety of risks, including
competition, technological obsolescence, technical malfunction, destruction
from fire or other disasters and the likely need for ongoing capital
investments to maintain and enhance its infrastructure and computer systems.
There can be no assurance that BLP will be successful in expanding its range
of teleservice offerings.
MANAGEMENT OF GROWTH
The Company recently has experienced a period of rapid growth. This growth
has placed, and will continue to place, strains on the Company's management,
operations and systems. In order to manage its growth, BLP must continue to
improve its operating and administrative systems and to attract, hire and
train qualified management and operating personnel. The Company is in the
planning stages of implementing a new management information system and plans
to make additional investments in capital equipment to support its growth. No
assurance can be given that these systems will be successfully implemented, if
at all. Failure to implement these systems or generally to manage growth
effectively could have a material adverse effect on BLP.
7
<PAGE>
ACQUISITION RISKS
BLP has not completed any acquisitions to date. The Company's growth
strategy, however, contemplates pursuit of acquisitions in complementary and
existing business areas as a means of supporting and diversifying its service
offerings. Identifying appropriate acquisition candidates and negotiating and
consummating acquisitions can be a lengthy and costly process. There can be no
assurance that suitable acquisition candidates will be identified or that
acquisitions will be consummated on terms favorable to the Company, on a
timely basis or at all. Acquisitions involve numerous risks, including
difficulties in integrating the operations and services of an acquired
company, the expenses incurred in connection with the acquisition and
subsequent assimilation of operations and services, the diversion of
management's attention from other business concerns, the risk that acquired
businesses may be subject to unforeseen liabilities and the potential loss of
key employees of the acquired company. Acquisitions of foreign companies
involve additional risks. In the event the closing of a planned acquisition
fails to occur or is delayed, or in the event unforeseen costs or other
difficulties arise following an acquisition, BLP's quarterly financial results
may be lower than securities analysts' expectations, which likely would cause
a decline, perhaps substantial, in BLP's stock price.
VARIATION IN QUARTERLY OPERATING RESULTS; POSSIBLE VOLATILITY OF STOCK PRICE
The Company's results of operations historically have fluctuated on a
quarterly basis and can be expected to continue to be subject to quarterly
fluctuations. Quarterly results can vary as a result of a number of factors,
including timing of peer-to-peer projects and symposia, expenditure patterns
of the Company's customers, delays or costs associated with acquisitions,
commencement or completion of significant contracts, announcements by the
Company, competitors or customers, government or private market regulatory
initiatives, relative profit margins of the services provided to customers,
conditions in the healthcare industry generally, conditions in the markets for
outsourced promotional, marketing and educational services more specifically,
or other events or factors, many of which are beyond the Company's control.
BLP may not be able to foresee many of these factors and therefore may not be
able to anticipate such quarterly fluctuations. Variations in quarterly
operating results could result in reported quarterly results that are below
the expectations of securities analysts, which would likely cause a decline,
perhaps substantial, in the Company's stock price. In addition, the stock
market recently has experienced extreme price and volume fluctuations which
particularly have affected the market prices of many stocks on the Nasdaq
Stock Market, and which have often been unrelated to the operating performance
of such companies. BLP believes that quarterly comparisons of its financial
results are not necessarily meaningful and should not be relied upon as an
indication of future performance. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
REGULATION
The healthcare industry is subject to extensive regulation. Various laws,
regulations and guidelines promulgated by government, industry and
professional bodies affect, among other matters, the provision, licensing,
labeling, marketing, promotion and reimbursement of healthcare services and
products, including pharmaceutical products. Certain areas of the
telemarketing and teleservices industry also have recently become subject to
increased government regulation. It is possible that additional or changed
laws, regulations or guidelines could be adopted in the future. The failure of
BLP or its customers to comply with, or any change in, applicable regulatory
requirements or industry guidelines could, among other things, limit or
prohibit certain business activities of the Company or its customers, subject
the Company or its customers to adverse publicity, increase the costs of
regulatory compliance, or subject BLP or its customers to monetary fines or
other penalties. Such actions could have a material adverse effect on BLP. See
"Business--Government and Industry Regulation."
POTENTIAL LITIGATION EXPOSURE
In recent years, participants in the healthcare industry have become subject
to an increasing number of lawsuits alleging malpractice, product liability
and other legal theories, many of which involve large claims and significant
legal costs. As a provider of promotional, marketing and educational services
to the pharmaceutical
8
<PAGE>
industry, the Company is subject to the risk of being named as a party in such
lawsuits. As a result of its introduction of product marketing services and
teleservices, the Company believes that the relative likelihood of becoming
involved in litigation regarding the information given by its personnel has
increased, with the attendant risks of significant legal costs, substantial
damage awards and adverse publicity. Even if any such claims ultimately prove
to be without merit, defending against them can result in adverse publicity,
diversion of management's time and attention and substantial expenses, which
could have a material adverse effect on the Company.
BLP maintains insurance policies, including liability insurance, which it
believes to be adequate in amount and coverage for the current size and scope
of its operations. There can be no assurance, however, that the coverage
maintained by the Company will be sufficient to cover all future claims or
will continue to be available in adequate amounts or at a reasonable cost. The
Company expects to seek increased insurance coverage in connection with the
expansion of its service offerings and there can be no assurance that it will
be able to obtain continued or increased insurance coverage on acceptable
terms or at all. Although the Company's contracts with its customers sometimes
require the customer to indemnify the Company for the customer's negligent
conduct, the contracts do not provide for adequate indemnification against
many of the potential litigation risks facing the Company and often require
the Company to indemnify its customer for the Company's negligence. BLP,
therefore, could be held responsible for losses incurred in connection with
the performance of its services under the terms of these contracts or
otherwise and could incur substantial costs in connection with legal
proceedings associated with its services or the pharmaceutical products with
respect to which it provides services.
RELIANCE ON CERTAIN PERSONNEL
BLP's success depends to a large extent on the continued services of a
relatively limited number of members of the Company's senior management,
including Patrick G. LePore, its Chairman of the Board, Chief Executive
Officer and President. Implementation of the Company's business strategy will
require the addition of qualified management personnel. The loss of the
services of one or more members of the Company's senior management or the
failure to add qualified management personnel could have a material adverse
effect on the Company. See "Management."
NEED FOR ADDITIONAL FINANCING
Implementation of BLP's growth strategy likely will require significant
additional capital resources. Such resources may be needed for the development
of new services, for the funding of internal growth, and for acquisitions that
the Company may pursue. To finance capital requirements, the Company
anticipates that it may from time to time issue additional equity securities
and incur additional debt. The Company may not be able to obtain additional
required capital on satisfactory terms, if at all. The failure to raise the
funds necessary to finance future cash requirements could have a material
adverse effect on the Company. If BLP raises additional funds through the
issuance of equity securities, dilution to the Company's existing stockholders
may result. If the Company raises additional funds through the incurrence of
debt securities, such debt instruments may contain restrictive financial,
operating and security covenants.
COMPETITION
The business of providing promotional, marketing and educational services to
the pharmaceutical industry is competitive. The business of providing
pharmaceutical conferencing services is highly fragmented and the Company's
competitors in this area generally include smaller, regionally focused
companies that provide a limited number of promotional, marketing and
educational services, usually focused on the pharmaceutical industry. Several
of the Company's competitors in this area, however, offer services that are
somewhat wider in scope. Although BLP believes it is a leading provider of
peer-to-peer meetings, there are many larger providers of symposia and
educational conferences. As the Company seeks to expand its range of services,
it is likely to face competition from companies which already have established
a strong business presence providing similar services to other businesses. The
outsourced product marketing business is currently in its formative stage and
is expected to become increasingly competitive. A large number of companies
currently provide teleservices such as telemarketing and teledetailing to
companies in many industries including the pharmaceutical industry, and
9
<PAGE>
many of these companies have greater resources and access to capital than the
Company. Overall, BLP believes that its most significant competition is
potentially from other companies that provide outsourced promotional,
marketing and educational services and large advertising agencies which may
seek to expand their service offerings. In addition, the pharmaceutical
companies' in-house marketing departments may provide similar services to
those provided by BLP and competition could increase as a result of the
expansion of the in-house marketing capabilities by BLP's customers or in the
pharmaceutical industry generally.
MATERIAL BENEFIT TO INSIDERS
In December 1996, the Company completed the TA Transaction. In connection
with the TA Transaction, the TA Investors purchased from the Company an
aggregate of $12.5 million of Convertible Participating Preferred Stock and
the Company incurred $21.0 million of indebtedness under the Credit Facility.
The Company used the proceeds from these financing transactions principally to
redeem Common Stock from, and to pay special bonuses to, senior officers of
the Company. Upon the completion of this offering, the Convertible
Participating Preferred Stock will convert into 4,666,664 shares of Common
Stock and 5,600,000 shares of Redeemable Preferred Stock. As required by the
terms of the Redeemable Preferred Stock, the Company will immediately redeem
all of the Redeemable Preferred Stock upon its issuance for $10.0 million in
cash plus accumulated and unpaid dividends, representing approximately 23.6%
of the estimated net proceeds from this offering (assuming an initial public
offering price of $15.00 per share). See "Use of Proceeds" and "Certain
Transactions."
LOSSES; ACCUMULATED DEFICIT
In 1996, the Company incurred a net loss of $7.1 million, and at March 31,
1997, the Company had an accumulated deficit of $11.9 million and a deficit in
stockholders' equity of $28.8 million. In December 1996, as part of the TA
Transaction, the Company paid $18.9 million to redeem Common Stock, $7.5
million of special bonuses to officers, $6.2 million to satisfy obligations to
a former shareholder, and $0.6 million of fees. See "Capitalization,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Certain Transactions."
EFFECTIVE CONTROL BY PRINCIPAL STOCKHOLDERS
After giving effect to the sale of the shares of Common Stock offered
hereby, the TA Investors and employees, directors (excluding shares held by
the TA Investors) and consultants of the Company (including members of their
families and trusts and other entities beneficially owned by them and members
of their families) will beneficially own in the aggregate approximately 43.2%
and 26.0%, respectively, of the outstanding Common Stock. As a result, these
stockholders will have the ability to control, and the TA Investors will be
able to exert significant influence over, the outcome of fundamental corporate
transactions requiring stockholder approval, including, but not limited to,
mergers and sales of assets and the election of the members of BLP's Board of
Directors. See "Principal Stockholders" and "Shares Eligible for Future Sale."
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of Common Stock in the public market after this
offering could adversely affect the market price of the Common Stock. In
addition to the 3,333,333 shares of Common Stock offered hereby, up to
approximately 6,266,659 shares of Common Stock owned by current stockholders
of the Company will be eligible for sale in the public market pursuant to Rule
144 under the Securities Act of 1933, as amended (the "Securities Act"),
beginning upon the later of 90 days after the date of this Prospectus or
December 4, 1997, and up to approximately 1,212,986 shares of Common Stock
owned by current stockholders of the Company will be eligible for sale in the
public market in accordance with Rule 701 under the Securities Act beginning
90 days after the date of this Prospectus. In addition, 806,321 shares subject
to sale under Rule 701 are subject to vesting provisions and will become
eligible for sale in the public market at various times as they become vested.
Holders of all of such shares, however, will agree not to sell or offer to
sell or otherwise dispose of any shares of Common Stock currently held by
them, any right to acquire any shares of Common Stock or any securities
exercisable for or convertible into any shares of Common Stock for a period of
180 days after the date of this
10
<PAGE>
Prospectus without the prior written consent of Bear, Stearns & Co. Inc.,
other than as gifts or transfers by will or the laws of descent and
distribution. The holders of approximately 4,666,664 shares of Common Stock
have the right on two occasions (each of which must be at least six months
apart) on any date after three months after this offering to require the
Company to register their shares under the Securities Act for resale to the
public (if such right is exercised, the holders of 7,333,325 shares will have
the right to have their shares registered); holders of approximately 7,333,325
shares have the right in primary and secondary offerings, excluding offerings
relating to employee benefit plans, Rule 145 under the Securities Act, demand
registrations, or Form S-3 registrations, to include their shares in a
registration statement filed by the Company; and holders of approximately
7,333,325 shares have the right on one or more occasions to request and have
effected a registration of shares on Form S-3 if the anticipated net aggregate
sale price of such registered shares exceeds $500,000. None of such holders
are including their shares in the registration statement filed in connection
with this offering, and all of such holders will agree not to sell or offer to
sell or otherwise dispose of any shares of Common Stock currently held by
them, any right to acquire any shares of Common Stock or any securities
exercisable for or convertible into any shares of Common Stock for a period of
180 days after the date of this Prospectus without the prior written consent
of Bear, Stearns & Co. Inc., other than as gifts or transfers by will or the
laws of descent and distribution. Sales of substantial amounts of Common Stock
(including shares issued in connection with future acquisitions, which may be
issued with registration rights), or the availability of such shares for sale,
may adversely affect the prevailing market price for the Common Stock and
could impair the Company's ability to obtain additional capital through an
offering of its equity securities. See "Shares Eligible for Future Sale."
ABSENCE OF A PUBLIC TRADING MARKET; OFFERING PRICE
Prior to this offering, there has been no public market for the Common
Stock, and there can be no assurance that an active market will develop or be
sustained following the consummation of this offering. Consequently, the
offering price of the Common Stock will be determined by negotiation between
BLP and the representatives of the several Underwriters based on several
factors and does not necessarily reflect the market price of the Common Stock
after this offering or the price at which the Common Stock may be sold in the
public market after this offering. See "Underwriting" for a description of the
factors to be considered in determining the initial public offering price.
DIVIDEND POLICY
BLP has not declared or paid cash dividends on its Common Stock since it
became subject to taxation under Subchapter C of the Code in December 1996,
and the Company does not anticipate paying cash dividends on its Common Stock
in the foreseeable future. Under Delaware law, the Company is permitted to pay
dividends only out of its surplus, or, if there is no surplus, out of its net
profits. In addition, the payment of cash dividends generally is prohibited
under the terms of the Credit Facility and may be prohibited under agreements
governing debt which the Company may incur in the future. See "Dividend
Policy" and "Management's Discussion and Analysis of Financial Condition and
Results of Operation."
ANTI-TAKEOVER PROVISIONS
Certain provisions of the Company's Amended and Restated Certificate of
Incorporation (the "Certificate") and By-laws (the "By-laws"), certain
sections of the Delaware General Corporation Law, and the ability of the Board
of Directors to issue shares of preferred stock and to establish the voting
rights, preferences and other terms thereof, may be deemed to have an anti-
takeover effect and may discourage takeover attempts not first approved by the
Board of Directors (including takeovers which stockholders may deem to be in
their best interests). Such provisions include, among other things, a
classified Board of Directors serving staggered three-year terms, the
elimination of stockholder voting by consent, the removal of directors only
for cause, the vesting of exclusive authority in the Board of Directors to
determine the size of the Board of Directors and (subject to certain limited
exceptions) to fill vacancies thereon, the vesting of exclusive authority in
the Board of Directors (except as otherwise required by law) to call special
meetings of stockholders and certain advance notice requirements for
stockholder proposals and nominations for election to the Board of Directors.
These provisions, and the ability of the Board of Directors to issue preferred
stock without further action by stockholders, could
11
<PAGE>
delay or frustrate the removal of incumbent directors or the assumption of
control by stockholders, even if such removal or assumption of control would
be beneficial to stockholders, and also could discourage or make more
difficult a merger, tender offer or proxy contest, even if such events would
be beneficial to the interests of stockholders. The Company will be subject to
Section 203 of the Delaware General Corporation Law which, in general, imposes
restrictions upon certain acquirors (including their affiliates and
associates) of 15% or more of the Company's Common Stock. See "Description of
Capital Stock--Certain Provisions of Certificate and By-laws" and "--Statutory
Business Combination Provision."
IMMEDIATE AND SUBSTANTIAL DILUTION
Purchasers of the Common Stock in this offering will incur immediate and
substantial dilution in the net tangible book value per share of Common Stock.
At the assumed initial public offering price of $15.00 per share, investors in
this offering will incur dilution of $ per share. See "Dilution."
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 3,333,333 shares of
Common Stock offered by the Company hereby at an assumed initial public
offering price of $15.00 per share are estimated to be $45.7 million ($52.6
million if the Underwriters' over-allotment option is exercised in full). The
Company will use the net proceeds as follows (assuming the closing of this
offering on September 30, 1997): (i) approximately $19.6 million will be used
to repay and retire the term loan portion of the Company's outstanding
indebtedness under the Credit Facility, including accrued and unpaid interest;
(ii) approximately $10.8 million will be used to redeem all Redeemable
Preferred Stock, including accumulated and unpaid dividends; and (iii) the
balance of approximately $15.3 million will be used for working capital and
other general corporate purposes. Pending such use, the balance of the net
proceeds will be invested in short-term, investment grade, interest bearing
obligations.
The Credit Facility entered into in connection with the TA Transaction
expires on December 31, 2001. Amounts outstanding under the Credit Facility
bear interest at variable rates which are based upon either the prime rate or
LIBOR, plus in either case a margin which varies according to the ratio of
total indebtedness of the Company for the most recently completed fiscal
quarter to EBITDA for the current and three preceding fiscal quarters, each as
defined in the Credit Facility. The interest rate on such indebtedness at May
31, 1997 was 7.9% per annum. See "Capitalization" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."
DIVIDEND POLICY
The Company has not declared or paid any cash dividends on its Common Stock
since it became subject to taxation under Subchapter C of the Code in December
1996. The Company currently intends to retain its earnings for future growth
and, therefore, does not anticipate paying cash dividends in the foreseeable
future. Under Delaware law, the Company is permitted to pay dividends only out
of its surplus, or, if there is no surplus, out of its net profits. Payment of
future dividends, if any, will be at the discretion of the Company's Board of
Directors after taking into account various factors, including the Company's
financial condition, operating results and current and anticipated cash needs.
In addition, under the terms of the Credit Facility, the payment of cash
dividends generally is prohibited without the consent of the lenders.
12
<PAGE>
DILUTION
As of March 31, 1997, BLP had a net tangible book value of approximately
$(16.3) million or $(2.20) per share of Common Stock. As part of the TA
Transaction, the Company paid $18.9 million to redeem Common Stock, $7.5
million of special bonuses to officers, $6.2 million to satisfy obligations to
a former shareholder, and $0.6 million of fees. Net tangible book value
represents the amount of total tangible assets less total liabilities divided
by the number of shares of Common Stock outstanding, including all outstanding
stock grants and excluding all outstanding stock options. Without taking into
account any other changes in the net tangible book value after March 31, 1997,
other than to give effect to the receipt by the Company of the net proceeds
from the sale of the 3,333,333 shares of Common Stock offered by the Company
hereby at an assumed initial public offering price of $15.00 per share, the
pro forma net tangible book value of the Company as of March 31, 1997 would
have been approximately $ or $ per share. This represents an immediate
increase in net tangible book value of $ per share to existing stockholders
and an immediate dilution of $ per share to new investors. The following
table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.................... $
----
Net tangible book value per share before the offering............ $
----
Increase per share attributable to new investors.................
====
Pro forma net tangible book value per share after the offering.....
----
Dilution per share to new investors................................ $
====
</TABLE>
The following table summarizes, on a pro forma basis as of March 31, 1997,
the differences between existing stockholders and the new investors with
respect to the number of shares of Common Stock purchased from the Company,
the total consideration paid and the average price per share paid:
<TABLE>
<CAPTION>
AVERAGE PRICE
SHARES PURCHASED TOTAL CONSIDERATION PER SHARE
------------------- ---------------------- -------------
NUMBER PERCENT AMOUNT PERCENT
-------- -------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Existing stockholders... % % $
New investors...........
-------- -------- --------- --------- ------ ------
Total................. % $ %
======== ======== ========= ========= ====== ======
</TABLE>
Other than as noted above, the foregoing computations assume no exercise of
any outstanding stock options after March 31, 1997 or the Underwriters' over-
allotment option. As of March 31, 1997, options to purchase 16,667 shares of
Common Stock were outstanding. To the extent these options or the
Underwriters' over-allotment option are exercised, there will be further
dilution to new investors. See "Underwriting" for information concerning the
Underwriters' over-allotment option.
13
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of March
31, 1997 (i) on an actual basis and (ii) as adjusted to give effect to the
sale by the Company of the 3,333,333 shares of Common Stock offered hereby at
an assumed initial public offering price of $15.00 per share and the
application of the estimated net proceeds therefrom as described in "Use of
Proceeds." This table should be read in conjunction with the Financial
Statements of the Company and the Notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1997
---------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Current maturities of long-term debt(1)............... $ 1,500 $ --
-------- --------
Long-term debt, net of current maturities(1).......... $ 18,500 $ --
======== ========
Convertible Participating Preferred Stock, $.01 par
value, 7,000,000 shares authorized; 7,000,000 shares
issued and outstanding; no shares authorized, issued
or outstanding as adjusted........................... $ 12,832 $ --
-------- --------
Redeemable Preferred Stock, $.01 par value, 5,600,000
shares authorized; no shares issued or outstanding;
no shares authorized, issued or outstanding as
adjusted(2).......................................... $ -- $ --
-------- --------
Stockholders' equity (deficit):
Common Stock, $.01 par value, 12,000,000 shares
authorized; 5,733,328 shares issued and 1,999,995
outstanding; 50,000,000 shares authorized,
14,483,663 shares issued and 10,750,330 shares
outstanding as adjusted(3)......................... $ 57 $ 145
Class A Common Stock, $.01 par value, 1,333,333
shares authorized; 750,333 shares issued and
outstanding; no shares authorized, issued or
outstanding as adjusted............................ 8 --
Class B Common Stock, $.01 par value, 4,666,666
shares authorized; no shares issued or outstanding;
no shares authorized, issued or outstanding as ad-
justed............................................. -- --
Additional paid-in capital.......................... 1,922 50,042
Treasury Stock, 3,733,333 shares of Common Stock, at
cost............................................... (18,850) (18,850)
Retained earnings (deficit)......................... (11,943) (12,117)(4)
-------- --------
Total stockholders' equity (deficit).............. (28,806) 19,220
-------- --------
Total capitalization.............................. $ 4,026 $ 19,220
======== ========
</TABLE>
- --------
(1) See Note 8 to the Financial Statements for information concerning long-
term debt obligations.
(2) Upon completion of this offering, the Convertible Participating Preferred
Stock will convert into 4,666,664 shares of Common Stock and 5,600,000
shares of Redeemable Preferred Stock, and all shares of Redeemable
Preferred Stock will be redeemed for $10.0 million in cash, plus
accumulated and unpaid dividends of $332,000.
(3) Excludes: (i) 35,329 shares of Common Stock issued subsequent to March 31,
1997; (ii) 278,994 shares of Common Stock currently issuable upon exercise
of outstanding stock options, including 262,328 shares issued subsequent
to March 31, 1997; (iii) 241,353 additional shares of Common Stock
available for future grants under the 1996 Stock Plan; and (iv) 225,000
additional shares of Common Stock available for future sales under the
Purchase Plan. See "Management--Employee Stock and Other Benefit Plans--
1996 Stock Option and Incentive Plan" and "--1997 Employee Stock Purchase
Plan." Assumes the conversion of the shares of the Company's Class A
Common Stock and Convertible Participating Preferred Stock into shares of
Common Stock effective upon consummation of the offering.
(4) Reflects anticipated write-off of unamortized loan fees of approximately
$290,000, net of the related tax effect.
14
<PAGE>
SELECTED FINANCIAL INFORMATION
The selected statement of operations data for the years ended December 31,
1994, 1995 and 1996 and the selected balance sheet data at December 31, 1995
and 1996 have been derived from the audited Financial Statements of the
Company included elsewhere in this Prospectus. The selected balance sheet data
at December 31, 1994 have been derived from the audited financial statements
of the Company not included in this Prospectus. The selected statement of
income data for the years ended December 31, 1992 and 1993 and the selected
balance sheet data at December 31, 1992 and 1993 have been derived from the
unaudited financial statements of the Company not included in this Prospectus.
The selected statement of income data for the three months ended March 31,
1996 and 1997 and the selected balance sheet data at March 31, 1997 have been
derived from the unaudited interim financial statements of the Company
included elsewhere in this Prospectus which include all adjustments
(consisting of normal and recurring adjustments) that management considers
necessary for a fair presentation of the data. The interim results are not
necessarily indicative of results of operations for the entire year. The
following selected financial data should be read in conjunction with the
Financial Statements and the Notes thereto of the Company and Management's
Discussion and Analysis of Financial Condition and Results of Operations
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
---------------------------------------- --------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- ------- ------ -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues................ $18,781 $19,339 $20,580 $21,775 $40,219 $6,973 $13,673
Cost of sales........... 14,059 13,820 12,378 12,788 26,004 4,496 9,737
------- ------- ------- ------- ------- ------ -------
Gross profit........... 4,722 5,519 8,202 8,987 14,215 2,477 3,936
------- ------- ------- ------- ------- ------ -------
Officers' compensation.. 1,456 1,292 2,003 1,336 13,351(1) 683 286
Other selling, general
and administrative ex-
penses................. 4,643 4,027 4,533 5,005 6,644(2) 1,488 1,964
------- ------- ------- ------- ------- ------ -------
Total selling, general
and administrative ex-
penses................ 6,099 5,319 6,536 6,341 19,995 2,171 2,250
------- ------- ------- ------- ------- ------ -------
Operating income
(loss)................ (1,377) 200 1,666 2,646 (5,780) 306 1,686
Interest expense, net... 49 49 43 86 255 55 409
Nonrecurring loss on
forgiveness of related
party loan............. -- -- -- -- 1,076 -- --
------- ------- ------- ------- ------- ------ -------
Income (loss) before
provision for income
taxes................. (1,426) 151 1,623 2,560 (7,111) 251 1,277
Provision for income
taxes(3)............... -- -- 25 51 -- -- 400
------- ------- ------- ------- ------- ------ -------
Net income (loss)...... $(1,426) $ 151 $ 1,598 $ 2,509 $(7,111) $ 251 $ 877
======= ======= ======= ======= ======= ====== =======
Net income (loss) per
common share........... $ (0.96) $ 0.12
======= =======
Weighted average common
shares outstanding(4).. 7,417 7,417
======= =======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31, 1997
----------------------------------------- ------------------------
1992 1993 1994 1995 1996 ACTUAL AS ADJUSTED(5)
------- ------- ------ ------- -------- -------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equiva-
lents.................. $ 12 $ 2 $ 30 $ 963 $ 7,176 $ 750 $15,982
Working capital (defi-
cit)................... (1,814) (1,707) 78 3,046 2,416 2,195 19,063
Total assets............ 1,596 1,792 5,128 10,499 23,097 18,493 33,435
Long-term debt, less
current maturities..... 23 11 308 2,061 20,000 18,500 --
Redeemable equity secu-
rities................. -- -- -- -- 12,500 12,832 --
Total stockholders' eq-
uity (deficit)......... (1,604) (1,453) 145 2,505 (29,387) (28,806) 19,220
</TABLE>
- --------
(1) Includes $10.0 million for special officer bonuses, including $7.5 million
as part of the TA Transaction.
(2) Includes $0.6 million for fees related to the TA Transaction.
(3) The Company elected to be taxed under Subchapter S of the Code until
December 4, 1996, and accordingly the provision for income taxes for all
periods ending on or prior to such date reflects only state business tax
expense, if any. If the Company had been subject to taxation under
Subchapter C of the Code for the year ending December 31, 1996, the pro
forma provision for income taxes would have been $0 and the pro forma net
loss per common share would have been ($0.96). Because the Company elected
to be subject to taxation under Subchapter C of the Code for the three
months ended March 31, 1997, the provision for income taxes and the net
income per common share reflected above for such period is presented on an
actual basis.
(4) Due to the effect of the TA Transaction on the Company's capital
structure, per share data for the years ended prior to December 31, 1996
are not comparable to subsequent periods and, therefore, have not been
presented.
(5) Gives effect to the completion of this offering at an assumed initial
public offering price of $15.00 per share and the receipt and application
of the estimated net proceeds therefrom as if such transactions had been
completed on March 31, 1997. Also reflects the anticipated write-off of
unamortized loan fees of approximately $290,000, net of the related tax
effect. See "The Company," "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Use of Proceeds" and
"Capitalization."
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the results of operations and financial
condition of the Company should be read in conjunction with the Company's
Financial Statements and the Notes thereto included elsewhere in this
Prospectus. This Prospectus contains forward-looking statements. Discussions
containing such forward-looking statements may be found in the material set
forth below and under "Business," as well as in this Prospectus generally.
Prospective investors are cautioned that any such forward looking statements
are not guarantees of future performance and involve risks and uncertainties.
Actual events or results may differ materially from those discussed in the
forward-looking statements as a result of various factors, including, without
limitation, the risk factors set forth under "Risk Factors" and the matters
set forth in this Prospectus generally.
OVERVIEW
BLP provides outsourced promotional, marketing and educational services to
the pharmaceutical industry. Substantially all of the Company's customers are
large pharmaceutical companies seeking to communicate their messages to
physicians and other healthcare professionals on a cost-effective basis. The
Company's objective is to enhance its position as a leading provider of peer-
to-peer and other meetings and to continue to expand its array of other
outsourced promotional, marketing and educational services.
Following several years of relatively modest revenue growth, BLP's revenues
grew significantly from 1995 to 1996 and revenues in the first quarter of 1997
have increased significantly as compared to the first quarter of 1996. This
growth resulted from increased business with existing customers, the addition
of new customers, and expansion of the services offered. The Company believes
that the increase in business with existing customers and the addition of new
customers reflect increased recognition of peer-to-peer meeting programs as an
effective promotional technique and increased levels of promotional, marketing
and educational spending in the pharmaceutical industry. Principal elements of
the Company's growth strategy are further enhancing and expanding its service
offerings through acquisition or internal development, continuing to increase
business with existing customers, and obtaining new customers. As part of this
strategy, the Company recently increased its focus on both symposia and
educational conferencing services and expanded its portfolio of services to
include product marketing and teleservices. The Company is scheduled to open a
new teleservice center in Norfolk, Virginia in July 1997 to support the
expansion of its teleservices capabilities.
Certain of BLP's newer services, particularly symposia, have lower gross
margins than the Company's historical business. Further, although revenues
from the Company's peer-to-peer meeting business grew from $20.6 million in
1995 to $33.4 million in 1996, the Company does not anticipate that future
growth, if any, of revenues from this business will continue at such an
accelerated rate. The Company's objective is to maintain its operating profit
margins through efficiency efforts and leveraging its operating expenses by
increasing revenues. However, if the Company's efforts to enhance the
profitability of its services are not successful or if total revenues do not
grow sufficiently to fully leverage operating expenses, the Company's
operating margins could be adversely affected.
In December 1996, the Company completed the TA Transaction. In connection
with the TA Transaction, the TA Investors invested $12.5 million to acquire
7,000,000 shares of Convertible Participating Preferred Stock of the Company.
In addition, the Company incurred $21.0 million of indebtedness under the
Credit Facility, including $20.0 million of term indebtedness. The Company
used the proceeds from these financing transactions principally to redeem
capital stock from, and to pay bonuses to, senior officers of the Company. See
"Certain Transactions." The repayment of the Credit Facility with the net
proceeds of this offering will reduce interest expense, although the Company
may incur future interest expense in connection with any future borrowings.
16
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth the percentages of revenues represented by
certain items reflected in the Company's statements of income. The information
that follows should be read in conjunction with the Financial Statements of
the Company and Notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
---------------------------- ----------------
1994 1995 1996 1996 1997
-------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Revenues.................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales............... 60.1 58.7 64.7 64.5 71.2
-------- -------- -------- ------- -------
Gross profit.............. 39.9 41.3 35.3 35.5 28.8
-------- -------- -------- ------- -------
Officers' compensation...... 9.7 6.1 33.2(1) 9.8 2.1
Other selling, general and
administrative expenses.... 22.1 23.0 16.5(2) 21.3 14.4
-------- -------- -------- ------- -------
Total selling, general and
administrative expenses.. 31.8 29.1 49.7 31.1 16.5
-------- -------- -------- ------- -------
Operating income (loss)... 8.1 12.2 (14.4) 4.4 12.3
Interest expense, net....... 0.2 0.4 0.6 0.8 3.0
Nonrecurring loss on for-
giveness of related party
loan....................... -- -- 2.7 -- --
-------- -------- -------- ------- -------
Income (loss) before pro-
vision for income taxes.. 7.9 11.8 (17.7) 3.6 9.3
Provision for income tax-
es(3)...................... 0.1 0.3 -- -- 2.9
-------- -------- -------- ------- -------
Net income (loss)......... 7.8% 11.5% (17.7)% 3.6% 6.4%
======== ======== ======== ======= =======
</TABLE>
- --------
(1) Includes $10.0 million, or 24.9% of revenues, for special officer bonuses,
including $7.5 million as part of the TA Transaction.
(2) Includes $0.6 million, or 1.5% of revenues, for fees related to the TA
Transaction.
(3) The Company elected to be taxed under Subchapter S of the Code until
December 4, 1996, and accordingly the provision for income taxes for all
periods ending on or prior to such date reflects only state business tax
expense, if any.
THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THE THREE MONTHS ENDED MARCH 31,
1996
Revenues increased $6.7 million, or 96.1%, from $7.0 million in the three
months ended March 31, 1996 to $13.7 million in the three months ended March
31, 1997. Substantially all of this increase was due to growth of the
Company's conferencing services. This growth was comprised principally of a
$1.8 million, or 28.3%, increase in revenues from peer-to-peer meetings and
the addition of $4.4 million of revenues from symposia services, which were
introduced in late 1996. The remaining increase was attributable to an
increase in revenues from educational conferencing services.
Cost of sales increased $5.2 million, or 116.5%, from $4.5 million in the
three months ended March 31, 1996 to $9.7 million in the three months ended
March 31, 1997. Cost of sales as a percentage of revenues increased from 64.5%
in the prior year period to 71.2% in the current year period. The increase in
cost of sales as a percentage of revenues was due primarily to the
introduction of symposia services, which have a lower average gross profit
than the Company's core business due to the higher proportion of production
costs which are passed through to the customer with little or no markup.
Selling, general and administrative expenses remained relatively constant at
$2.3 million in the three months ended March 31, 1997 as compared to $2.2
million in the three months ended March 31, 1996, as the cost of personnel
additions of approximately $0.5 million in the current year period was
substantially offset by reductions in officer compensation agreed upon in
connection with the TA Transaction. Selling, general and administrative
expenses decreased as a percentage of revenues from 31.1% in the prior year
period to 16.5% in the current year period primarily as a result of increased
revenues.
Operating income increased $1.4 million, or 451.0%, from $0.3 million in the
three months ended March 31, 1996 to $1.7 million in the three months ended
March 31, 1997. Operating income as a percentage of revenues increased from
4.4% in the prior year period to 12.3% in the current year period. The
increase in
17
<PAGE>
operating income as a percentage of revenues was due to the aforementioned
decrease in selling, general and administrative expenses as a percentage of
revenues, partially offset by the aforementioned increase in cost of sales as
a percentage of revenues.
Interest expense, net increased by 641.7% from $0.1 million in the three
months ended March 31, 1996 to $0.4 million in the three months ended March
31, 1997. This increase was attributable to the Company's borrowings under its
$20.0 million term loan in December 1996 and, to a lesser extent, to
borrowings under the Company's revolving credit facility, partially offset by
the repayment of borrowings made under a previous loan agreement.
The provision for income taxes in the three months ended March 31, 1997 was
$0.4 million, reflecting estimated federal and state income tax expense,
partially offset by the utilization of benefits from net deferred tax assets
recognized on the Company's December 31, 1996 balance sheet which are related
to net operating loss carryforwards. Prior to December 4, 1996, the Company
had elected to be subject to taxation under Subchapter S of the Code and,
therefore, no federal income tax expense was recorded in the three months
ended March 31, 1996.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Revenues increased $18.4 million, or 84.7%, from $21.8 million in 1995 to
$40.2 million in 1996. This increase was due primarily to growth of the
Company's promotional and other conferencing services, as well as the
expansion of its educational conferencing services and the introduction of its
teleservices and product marketing services. Revenues from promotional and
other conferencing services increased $14.2 million, or 69.2%, from 1995 to
1996. Of this increase, $12.7 million resulted from an increase in peer-to-
peer meetings and $1.5 million resulted from symposia services which the
Company introduced in late 1996. On a combined basis, revenues from
educational conferencing services, teleservices and product marketing services
increased $4.1 million, or 354.4%, from $1.2 million in 1995 to $5.3 million
in 1996.
Cost of sales increased $13.2 million, or 103.3%, from $12.8 million in 1995
to $26.0 million in 1996. Cost of sales as a percentage of revenues increased
from 58.7% in 1995 to 64.7% in 1996. The increase in cost of sales as a
percentage of revenues was due primarily to: (i) higher costs related to
recruiting for and production of peer-to-peer meetings; (ii) the expansion of
the Company's educational conferencing services, which have a lower average
gross profit than the Company's historical core business due to the Company's
use of selected third party providers for certain production efforts; (iii)
the introduction of symposia services, which have a lower average gross profit
than the Company's historical core business due to the higher proportion of
production costs which are passed through to the customer with little or no
markup; and (iv) the introduction of teleservices, which have a lower average
gross profit than the Company's historical core business due to the use of
selected third party providers and the pricing structure related to this line
of business.
Selling, general and administrative expenses increased $13.7 million, or
215.3%, from $6.3 million in 1995 to $20.0 million in 1996. This increase was
due primarily to special officer bonuses of $10.0 million, including $7.5
million as part of the TA Transaction in December 1996, and fees of $0.6
million related to the TA Transaction. The remaining expense increase was due
to increased officer compensation of $2.0 million and $1.1 million for
additional personnel, outside services and other operating expenses incurred
to support the Company's growth. Selling, general and administrative expenses
increased as a percentage of revenues from 29.1% in 1995 to 49.7% in 1996
primarily as a result of the special officer bonuses and fees, which amounted
to 26.4% revenues in 1996, partially offset by increased revenues.
Operating income (loss) decreased $8.4 million from operating income of $2.6
million in 1995 to an operating loss of $5.8 million in 1996. Operating income
(loss) as a percentage of revenues decreased from 12.2% operating income in
1995 to a 14.4% operating loss in 1996. The decrease in operating income
(loss) as a percentage of revenues was due to the aforementioned increase in
cost of sales as a percentage of revenue and
18
<PAGE>
the aforementioned increase in selling, general and administrative expenses as
a percentage of revenues. The increase in selling, general and administrative
expenses primarily reflected expenses related to the TA Transaction,
comprising 26.4% of 1996 revenues.
In December 1996, the Company incurred a nonrecurring loss of approximately
$1.1 million resulting from the write-down of a promissory note to a former
affiliate. This note was purchased by certain of the Company's officers in
connection with the TA Transaction.
Interest expense, net increased 197.5% from $0.1 million in 1995 to $0.3
million in 1996. This increase was attributable to the Company's borrowings
under the $20.0 million term loan portion of the Credit Facility in December
1996 and, to a lesser extent, to borrowings under the revolver portion of the
Company's Credit Facility, partially offset by the repayment of borrowings
made under a previous loan agreement.
There was no provision for income taxes recorded in 1996 because the Company
incurred a net operating loss during the period subsequent to becoming subject
to taxation under Subchapter C of the Code on December 4, 1996. Prior to
December 4, 1996, the Company had elected to be subject to taxation under
Subchapter S of the Code and, therefore, only state business taxes were
incurred in 1995.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Revenues increased $1.2 million, or 5.8%, from $20.6 million in 1994 to
$21.8 million in 1995. This increase was due to the introduction of the
Company's educational conferencing services, which accounted for $1.2 million
of revenues in 1995 and no revenue in 1994.
Cost of sales increased $0.4 million, or 3.3%, from $12.4 million in 1994 to
$12.8 million in 1995 due to an increase in revenues. Cost of sales as a
percentage of revenues decreased from 60.1% in 1994 to 58.7% in 1995. The
decrease in cost of sales as a percentage of revenues was primarily due to the
realization of cost efficiencies related to technological improvements in the
Company's process for recruiting attendees for peer-to-peer meetings.
Selling, general and administrative expenses decreased $0.2 million, or
2.9%, from $6.5 million in 1994 to $6.3 million in 1995. This decrease was due
primarily to a $0.7 million reduction in officer compensation partially offset
by increases in other operating expenses. Selling, general and administrative
expenses decreased as a percentage of revenues from 31.8% in 1994 to 29.1% in
1995.
Operating income increased $1.0 million, or 58.8%, from $1.7 million in 1994
to $2.7 million in 1995. Operating income as a percentage of revenues
increased from 8.1% in 1994 to 12.2% in 1995. The increase in operating income
as a percentage of revenues was due to the aforementioned decreases in cost of
sales and selling, general and administrative expenses as a percentage of
revenues.
Interest expense, net increased by 100.0% in 1995 compared to 1994 due to an
increase in borrowings under a previous loan agreement.
The Company had elected to be subject to taxation under Subchapter S of the
Code in 1994 and 1995 for Federal income tax purposes and, therefore, only
state business taxes were incurred in these years.
QUARTERLY FINANCIAL INFORMATION
The following table sets forth unaudited quarterly operating results for
each of the Company's last nine quarters as well as certain of such data
expressed as a percentage of revenues for the periods indicated. This
information has been prepared by the Company on a basis consistent with the
Company's audited financial statements and includes all adjustments
(consisting of normal and recurring adjustments) that management considers
necessary for a fair presentation of the data. These quarterly results are not
necessarily indicative of future results of operations. This information
should be read in conjunction with the Financial Statements and Notes thereto
included elsewhere in this Prospectus.
19
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31,
1995 1995 1995 1995 1996 1996 1996 1996 1997
--------- -------- --------- -------- --------- -------- --------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $4,509 $3,449 $3,654 $10,163 $6,973 $9,173 $9,592 $14,481 $13,673
Cost of sales........... 2,797 2,316 2,269 5,406 4,496 5,976 5,949 9,583 9,737
------ ------ ------ ------- ------ ------ ------ ------- -------
Gross profit.......... 1,712 1,133 1,385 4,757 2,477 3,197 3,643 4,898 3,936
------ ------ ------ ------- ------ ------ ------ ------- -------
Officers' compensation.. 427 324 191 394 683 715 461 11,492(1) 286
Other selling, general
and administrative ex-
penses................. 1,222 1,154 1,137 1,492 1,488 1,464 1,511 2,181(2) 1,964
------ ------ ------ ------- ------ ------ ------ ------- -------
Total selling, general
and administrative
expenses............. 1,649 1,478 1,328 1,886 2,171 2,179 1,972 13,673 2,250
------ ------ ------ ------- ------ ------ ------ ------- -------
Operating income
(loss)............... 63 (345) 57 2,871 306 1,018 1,671 (8,775) 1,686
Interest expense, net... 5 28 30 23 55 49 24 127 409
Nonrecurring loss on
forgiveness of related
party loan............. -- -- -- -- -- -- -- 1,076 --
------ ------ ------ ------- ------ ------ ------ ------- -------
Income (loss) before
provision for income
taxes................ 58 (373) 27 2,848 251 969 1,647 (9,978) 1,277
Provision for income
taxes.................. -- -- -- 51 -- -- -- -- 400
------ ------ ------ ------- ------ ------ ------ ------- -------
Net income (loss)..... $ 58 $ (373) $ 27 $ 2,797 $ 251 $ 969 $1,647 $(9,978) $ 877
====== ====== ====== ======= ====== ====== ====== ======= =======
<CAPTION>
PERCENTAGE OF TOTAL REVENUES
------------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31,
1995 1995 1995 1995 1996 1996 1996 1996 1997
--------- -------- --------- -------- --------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales........... 62.0 67.1 62.1 53.2 64.5 65.1 62.0 66.2 71.2
------ ------ ------ ------- ------ ------ ------ ------- -------
Gross profit.......... 38.0 32.9 37.9 46.8 35.5 34.9 38.0 33.8 28.8
------ ------ ------ ------- ------ ------ ------ ------- -------
Officers' compensation.. 9.5 9.4 5.2 3.9 9.8 7.8 4.8 79.4(1) 2.1
Other selling, general
and administrative ex-
penses................. 27.1 33.5 31.1 14.7 21.3 16.0 15.8 15.1(2) 14.4
------ ------ ------ ------- ------ ------ ------ ------- -------
Total selling, general
and administrative
expenses............. 36.6 42.9 36.3 18.6 31.1 23.8 20.6 94.4 16.5
------ ------ ------ ------- ------ ------ ------ ------- -------
Operating income
(loss)............... 1.4 (10.0) 1.6 28.2 4.4 11.1 17.4 (60.6) 12.3
Interest expense, net... 0.1 0.8 0.8 0.2 0.8 0.5 0.3 0.9 3.0
Nonrecurring loss on
forgiveness of related
party loan............. -- -- -- -- -- -- -- 7.4 --
------ ------ ------ ------- ------ ------ ------ ------- -------
Income (loss) before
provision for income
taxes................ 1.3 (10.8) 0.7 28.0 3.6 10.6 17.2 (68.9) 9.3
Provision for income
taxes.................. -- -- -- 0.5 -- -- -- -- 2.9
------ ------ ------ ------- ------ ------ ------ ------- -------
Net income (loss)..... 1.3% (10.8)% 0.7% 27.5% 3.6% 10.6% 17.2% (68.9)% 6.4%
====== ====== ====== ======= ====== ====== ====== ======= =======
</TABLE>
- -----
(1) Includes $10.0 million, or 69.1% of revenues, for special officer bonuses,
including $7.5 million as part of the TA Transaction.
(2) Includes $0.6 million, or 3.8% of revenues, for fees related to the TA
Transaction.
20
<PAGE>
BLP's results of operations historically have fluctuated on a quarterly
basis and can be expected to continue to be subject to quarterly fluctuations.
In recent years, the Company has experienced substantially higher revenues in
the fourth quarter of its fiscal year than in the preceding three quarters of
such fiscal year. The Company believes these increases were related to its
customers' budgeting processes and spending patterns. There can be no
assurances that this trend will continue. Quarterly results can vary as a
result of a number of factors, including the timing of peer-to-peer projects
and symposia, expenditure patterns of the Company's customers, delays or costs
associated with acquisitions, the commencement or completion of significant
contracts, announcements by the Company, competitors or customers, government
or private market regulatory initiatives, relative profit margins of the
services provided to customers, conditions in the healthcare industry
generally, conditions in the markets for outsourced promotional, marketing and
educational services more specifically, or other events or factors, many of
which are beyond the Company's control. See "Risk Factors--Variation in
Quarterly Operating Results; Possible Volatility of Stock Price."
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1997, the Company had $2.2 million in working capital, a
decrease of $0.2 million from December 31, 1996. At December 31, 1996, the
Company had $2.4 million in working capital, a decrease of $0.6 million from
December 31, 1995. The Company's primary sources of liquidity as of March 31,
1997 consisted of cash and cash equivalents, accounts receivable and borrowing
availability under the revolver portion of the Credit Facility.
During the three months ended March 31, 1997, the Company used $5.4 million
in operating activities. This included payment of $7.5 million of officer
bonuses as part of the TA Transaction partially offset by $2.1 million of cash
provided by other operating activities. During this period, the Company used
$0.1 million in investing activities to purchase additional equipment. Also
during this period, the Company used $1.0 million in financing activities, as
it fully paid-down the revolver portion of the Credit Facility.
During 1996, the Company used $0.7 million in operating activities and $0.1
million in investing activities relating to the purchase of additional
equipment. Also during this year, the Company provided $7.1 million in
financing activities primarily related to the TA Transaction, as discussed
below, partially offset by the repayment of $2.3 million under a prior term
loan and line of credit.
In connection with the TA Transaction on December 4, 1996, the Company
entered into the Credit Facility. The Credit Facility provides for a $5.0
million revolving credit facility and a $20.0 million term loan and is secured
by the Company's assets. As of December 31, 1996 and March 31, 1997, $1.0
million and $0.0, respectively, were outstanding under the revolver portion of
the Credit Facility. Borrowings under the revolver portion of the Credit
Facility are due on December 31, 2001. The term loan is to be repaid in
incremental annual payments on a quarterly basis over five years through
December 31, 2001. The interest rates on the loans vary and are based upon
either the prime rate or LIBOR, plus in either case a margin which varies
according to the ratio of total indebtedness of the Company for the most
recently completed fiscal quarter to EBITDA for the current and three
preceding fiscal quarters, each as defined in the Credit Facility. The Credit
Facility contains various financial, operating and reporting covenants.
Additionally, as required under the terms of the Credit Facility, the Company
entered into an interest rate swap agreement in 1997 to provide interest rate
protection on 50% of the outstanding principal balance of the term loan.
In addition to the funds provided by the debt financing described above, the
TA Investors invested $12.5 million in the Company to acquire 7,000,000 shares
of the Company's Convertible Participating Preferred Stock. The funds provided
by the debt and equity financings in the TA Transaction were used to redeem
common stock from senior officers of the Company ($18.9 million), to pay
bonuses to certain officers of the Company, all of which were accrued and paid
in the first quarter of 1997 ($7.5 million), and to satisfy obligations to a
former shareholder ($6.2 million). See "Certain Transactions."
In connection with the Company's development of its new teleservice center
in Norfolk, Virginia, which is scheduled to open in July 1997, the Company
anticipates capital expenditures to increase to approximately $2.2 million in
1997.
Upon completion of this offering, as described elsewhere in this Prospectus,
the Convertible Participating Preferred Stock will convert into 4,666,664
shares of Common Stock and 5,600,000 shares of Redeemable
21
<PAGE>
Preferred Stock. The Redeemable Preferred Stock will be immediately redeemed
for $10.0 million plus accumulated dividends, $332,000 at March 31, 1997,
using a portion of the net proceeds from the sale of Common Stock from this
offering. In addition, the net proceeds of the offering will be used to make a
mandatory prepayment of the entire balance of the term loan portion of the
Credit Facility. Such repayment of the term loan using the net proceeds of the
offering is required by the terms of the Credit Facility. The Company believes
that the remaining net proceeds from this offering, together with cash
generated from operations, will be sufficient to fund its anticipated working
capital needs and capital expenditures (other than financing necessary to
complete future acquisitions) for at least the next twelve months. The
proceeds from this offering will provide cash for additional growth and
expansion, other than future acquisitions, if any. To finance future
acquisitions the Company may need to issue additional securities and incur
additional debt. The Company may not be able to obtain additional required
capital on satisfactory terms, if at all. The failure to raise the funds
necessary to finance future cash requirements could materially and adversely
affect the Company's ability to pursue its strategy and its operating results
in future periods. See "Use of Proceeds."
NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has issued a new standard,
"Accounting for Stock-Based Compensation" ("SFAS 123"). SFAS 123 requires that
an entity account for employee stock compensation under a fair value based
method. However, SFAS 123 also allows an entity to continue to measure
compensation cost for employee stock-based compensation using the intrinsic
value based method of accounting prescribed by APB Opinion No. 25, "Accounting
for Stock Issued to Employees" ("Opinion 25"). Entities electing to remain
with the accounting under Opinion 25 are required to make pro forma
disclosures of net income and earnings per share as if the fair value based
method of accounting under SFAS 123 had been applied. The Company will
continue to account for employee stock-based compensation under Opinion 25 and
will make the pro forma disclosures required under SFAS 123.
Statement of Financial Accounting Standards No. 128, "Earnings per Share"
("SFAS 128") which becomes effective for the period ending December 31, 1997,
establishes new standards for computing and presenting earnings per share
("EPS"). The new standard requires the presentation of basic EPS and diluted
EPS. Basic EPS is calculated by dividing income available to common
shareholders by the weighted average number of shares of common stock
outstanding during the period. Diluted EPS is calculated by dividing income
available to common shareholders by the weighted average number of common
shares outstanding adjusted to reflect potentially dilutive securities.
Previously reported EPS amounts must be restated under the new standard when
it becomes effective. The impact of adopting SFAS 128 for the year ending
December 31, 1996 and for the three months ending March 31, 1997 would not
have been material.
22
<PAGE>
BUSINESS
GENERAL
Boron, LePore & Associates, Inc. provides outsourced promotional, marketing
and educational services to the pharmaceutical industry. The Company was
founded in 1981 and has become a leading provider of peer-to-peer meetings.
BLP recently expanded the range of its outsourced promotional, marketing and
educational services. Newer service offerings include coordination of other
types of meetings such as symposia, continuing education conferences and video
satellite conferences; product marketing services (which involve obtaining
rights to market a pharmaceutical product, often on a shared reward basis);
and teleservices such as teledetailing, telemarketing, sales support and
fulfillment. In July 1997, the Company expects to open a teleservice center in
Norfolk, Virginia to suppport expansion of its teleservices business.
INDUSTRY OVERVIEW
Based on data from Scott-Levin, a healthcare marketing information company,
pharmaceutical companies spent approximately $900 million in 1996 on
promotional and marketing events, including peer-to-peer meetings and
symposia, primarily conducted by third party suppliers. Pharmaceutical
companies have relied for many years on third party providers of promotional,
marketing and educational conferencing services. In recent years, changes in
the pharmaceutical industry have led to greater outsourcing of promotional,
marketing and educational functions. At the same time, pharmaceutical
companies and providers of promotional, marketing and educational services to
such companies have broadened their means of communicating with target
audiences from traditional product detailing, peer-to-peer meetings and in-
person conferences to also include teleconferences, satellite conferences and
various other forms of teleservices.
BLP believes the following factors affect promotional, marketing and
educational expenditures by pharmaceutical companies and the related use of
third party providers of promotional, marketing and educational services:
Communications with Physicians. Pharmaceutical companies have long
recognized that communicating with the physicians who prescribe drugs is
crucial to gaining market share. The Company believes that pharmaceutical
companies view peer-to-peer meetings as a highly effective means of providing
information regarding their products to physicians. The development of
sophisticated prescription tracking systems has enabled pharmaceutical
companies to measure the impact of peer-to-peer meetings on sales. These
prescription tracking systems permit pharmaceutical companies to identify
prospective peer-to-peer meeting attendees and to track the prescription
patterns of the physicians who attend. The Company believes that outsourced
promotional and marketing organizations having a demonstrated ability to reach
physicians in a cost-effective, focused manner are important to the overall
marketing efforts of pharmaceutical companies.
Consumer-Oriented Communications. BLP believes that consumers have recently
begun to play an increasingly significant role in their selection of
healthcare options and therapeutic products. Accordingly, pharmaceutical
companies have increasingly focused on communicating product information
directly to consumers. The Company believes that promotional and marketing
organizations that can effectively and efficiently communicate with consumers
directly, through services such as in-person conferences and teleservices, may
in the future play an increasingly significant role in educating consumers
about pharmaceutical products.
Product Pipelines. In 1996, the Food and Drug Administration (the "FDA")
approved for sale 131 new drugs and drug indications, including 53 new
molecular entities, representing an 89% increase in the number of new
molecular entities approved compared to 1995. This increase is partially
attributable to the FDA's expedited review and approval procedures. The
Company believes that pharmaceutical companies have found peer-to-peer
meetings to be an effective means of communicating information in connection
with new product launches and that opportunities to provide this service exist
as a result of the present pipeline of new drugs and drug indications. In
addition, the Company believes that pharmaceutical companies are examining
their existing drug
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product portfolios to identify revenue and profit enhancement opportunities
for drugs at various stages in their product life cycles. Accordingly, the
Company believes there are multiple sources of potential new business for
providers of outsourced promotional, marketing and educational services.
Cost Containment Efforts. The potential for implementation of national
healthcare reform in the early 1990s and the growing influence of managed care
and healthcare cost containment initiatives throughout the 1990s created
downward pressure on pharmaceutical prices and on the profit margins of
pharmaceutical companies. These pressures have contributed to increased
consolidation in the pharmaceutical industry which has resulted in an
increased focus on reducing operating costs to achieve economies of scale and
cost synergies. Pharmaceutical companies have employed a variety of strategies
to preserve or enhance operating margins in this environment. These include
outsourcing activities such as research and development and certain
promotional, marketing and sales activities in order to shift fixed costs to
variable costs and to promote greater operating efficiency. BLP believes that
pharmaceutical companies are increasingly receptive to outsourcing
promotional, marketing and sales activities to specialized third party service
providers, particularly those who can offer a wide array of services targeted
to specific audiences.
Consolidation of Third Party Vendor Relationships. Many pharmaceutical
companies that outsource promotional, marketing and educational services
increasingly seek relationships with firms capable of providing a range of
high quality service alternatives. Certain of these pharmaceutical companies
seek to consolidate their outsourced promotional, marketing and educational
service needs with a limited group of providers with which they have
established relationships. Consolidating providers facilitates the
implementation of an integrated marketing strategy to a variety of audiences
and provides cost and operating efficiencies to the pharmaceutical company. In
this regard, some pharmaceutical companies have established "preferred
provider" relationships with selected vendors.
GROWTH STRATEGY
BLP's objective is to enhance its position as a leading provider of peer-to-
peer and other meetings and continue to expand its array of other outsourced
promotional, marketing and educational services, focused mainly on the
pharmaceutical industry. The following are the principal elements of the
Company's strategy:
Offer a Broader Range of Promotional, Marketing and Educational
Services. BLP intends to continue to expand the types of services it offers to
meet its customers' diversified promotional, marketing and educational needs.
The Company believes pharmaceutical companies seeking to outsource marketing
functions will increasingly rely on a core group of full-service providers who
can offer an integrated array of high quality services, using varied media
targeted to reach distinct audiences. The Company believes that as a leading
provider of peer-to-peer meetings it has an established platform from which to
offer other promotional and marketing services. In 1996, BLP introduced
symposia, product marketing and telemarketing services. Of these new business
areas, symposia generated the most new revenues, accounting for revenues of
$4.4 million during the first three months of 1997, or 32.5% of total revenues
during this period.
Increase Business with Existing Customers. The Company seeks to leverage its
market reputation as a provider of peer-to-peer meetings to generate demand
for additional peer-to-peer and other meetings, as well as product marketing
services and teleservices. The demand for BLP's promotional and marketing
services has increased, in part, due to its customers' ability to monitor
prescriptions of pharmaceutical products through computerized prescription
tracking systems.
Obtain New Customers. BLP seeks to expand its customer base by targeting
large domestic pharmaceutical companies which are not currently customers. In
addition, future customer initiatives may focus on smaller pharmaceutical
companies, foreign pharmaceutical companies and other healthcare companies
which could benefit from the Company's services. Examples of possible
customers in related healthcare industries include drug wholesalers,
biotechnology companies and medical device manufacturers. In addition, BLP
believes that its teleservices capability may be attractive to managed care
organizations seeking to communicate with and provide healthcare information
to their members.
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Target New Audiences. BLP believes that consumers of pharmaceutical products
have assumed an increasingly active role in the selection of their healthcare
options and therapeutic products. Pharmaceutical companies thus seek providers
of promotional, marketing and educational services that can effectively
communicate product information directly to consumers through both traditional
and new forms of media. In addition, other new audiences such as pharmacists,
formulary managers, and hospital groups influence demand for pharmaceutical
products. BLP believes that its broad range of service capabilities, including
its new teleservice center, will enable it to reach consumers and other new
audiences effectively on behalf of pharmaceutical companies.
Pursue Strategic Acquisitions. The Company's business strategy includes
consideration of strategic acquisitions in complementary and existing business
areas. The Company believes that acquiring outsourced marketing companies may
in some cases facilitate more effective and rapid development of a broader
array of services, or expansion of existing services, than developing these
service capabilities internally. The Company's strategy following any
acquisition would be to use its competitive strengths, including its
reputation in the industry, its long-standing customer relationships and its
range of available services, to improve the financial and market performance
of both BLP and the acquired company.
SERVICES
BLP's principal lines of business presently include: (i) promotional and
other conferencing services; (ii) educational conferencing services; (iii)
product marketing services; and (iv) teleservices.
Promotional and Other Conferencing Services
The Company conducts and produces conferences in a variety of formats and
through different forms of media. All of BLP's conferences are sponsored by
the Company's pharmaceutical company customers. The conferences are designed
to communicate the sponsoring pharmaceutical company's message to the
physicians and other healthcare professionals who attend. BLP's promotional
conference service is providing peer-to-peer meetings, which involve a small
gathering of physicians who are invited to meet in person or by teleconference
to discuss a particular drug or indication under the chairmanship of a Company
trained moderator. Other conference services include providing symposia, which
are attended by a larger number of attendees and involve a more in-depth
presentation than peer-to-peer meetings, and video satellite conferencing. The
Company's meetings are not limited to these formats, however, as the Company
will coordinate meetings in any format that can effectively convey a
customer's message.
Peer-to-Peer. Peer-to-peer meetings among physicians have been the historic
foundation of BLP's revenues and growth. Through peer-to-peer meetings,
pharmaceutical companies are able to convey information concerning their
products to physicians. Physicians who attend the meetings in turn have an
opportunity to exchange ideas, clinical experiences and opinions about current
therapies. Peer-to-peer meetings are particularly useful in connection with
new product launches and products that require an in-depth explanation of
their associated therapeutic benefits.
Peer-to-peer meetings typically involve 10 to 12 healthcare practitioners,
primarily physicians, who are identified by a pharmaceutical company and
generally invited using the Company's telerecruiting center. The attending
physicians discuss therapeutic benefits of a new drug or new indication for a
familiar drug under the chairmanship of a Company trained moderator. The
meetings take place throughout the United States, either at a local hotel or
restaurant over dinner (a clinical experience program or "CEP") or by
teleconference (a clinical experience teleconference or "CET"). CET meetings
are increasingly popular because physicians have a greater choice of meeting
times and can interact with peers from around the country. The physicians who
attend peer-
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to-peer meetings receive non-cash honoraria consistent with applicable
American Medical Association (the "AMA") and pharmaceutical industry
guidelines, which they may donate to charity or use for the purchase of items
such as medical equipment or textbooks.
BLP believes pharmaceutical companies select a peer-to-peer meeting provider
based on the ability of the provider to attract the invited physicians to
attend and the provider's performance record in communicating the customer's
message effectively. The Company's customers purchase prescription drug
tracking data from independent companies to measure the effectiveness of the
peer-to-peer meetings. The prescription drug tracking data generally has
demonstrated that physicians who attend the Company's meetings increase their
prescriptions of drugs reviewed at the meetings. The Company believes that its
reputation, which has been developed over 13 years of conducting peer-to-peer
meetings, facilitates recruiting physicians to attend its peer-to-peer
meetings.
The Company believes that its moderators have been an important factor in
the success of its peer-to-peer meetings. The Company historically has focused
on hiring individuals with industry experience as moderators. BLP has
developed training techniques to enable the moderators to lead effective peer-
to-peer meetings and communicate the therapeutic benefits of a drug.
Moderators are trained in such matters as how to best familiarize themselves
with the product, how to prepare the proper setting for a meeting, how to
deliver an effective presentation and how to coordinate the proper flow of
information between the moderator and the physicians and among the physicians.
In addition, BLP performs periodic quality reviews of its moderators and
solicits feedback from customers and physicians about each moderator.
BLP's contracts for the coordination and production of peer-to-peer meetings
generally are fee based, although some contain a performance component which
is monitored through the use of the independent prescription tracking systems.
The Company's contracts typically require it to provide a certain number of
meetings (usually 100 to 300) over a specified period of time (typically three
to six months) on behalf of a customer. The terms of each of the Company's
contracts vary based upon the complexity of the individual arrangement,
whether the meetings will be CEP or CET meetings, the duration of the
contract, the number of meetings and attendees covered by the contract and the
locations for the meetings. The volume of meetings coordinated and produced by
the Company has enabled it to obtain discount pricing and preferred scheduling
from Marriott Hotels, which has a dedicated sales representative in the
Company's office, and discount pricing from other vendors of services such as
airlines and overnight courier services.
In 1994, 1995 and 1996, BLP conducted 5,234, 5,954 and 7,749 peer-to-peer
meetings, respectively. These meetings generated revenues of approximately
$20.6 million in 1994, $20.6 million in 1995, and $33.4 million in 1996,
constituting 100.0%, 94.7% and 83.0%, respectively, of the Company's revenues
in each of these years. For the first three months of 1996 and 1997, the
Company conducted 1,308 and 1,968 peer-to-peer meetings, respectively, which
accounted for revenues of $6.5 million and $8.3 million, respectively, or
93.0% and 60.8% of the Company's revenues for the respective three-month
periods.
Symposia. The Company added symposia in the fourth quarter of 1996 to
complement its peer-to-peer meeting business. A Company organized symposium
generally involves attendance by approximately 50 to 300 physicians over a
weekend. The physicians hear presentations regarding a drug or treatment
protocol presented by a faculty of experts in the field for the purpose of
being trained to serve as consultants and spokespeople for the sponsoring
pharmaceutical company. The sponsoring company pays the faculty in the form of
fees or medical grants and reimburses faculty and attending physicians for
their travel expenses.
Symposia are organized and conducted on an in-person basis by BLP throughout
the United States. BLP actively works with its customers to identify speakers
and select locations for each conference. The Company utilizes its in-house
travel agent and its other relationships with vendors to assist in
coordinating symposia. The Company believes that the key considerations for
its customers in selecting a provider for symposia are cost and the ability to
effectively organize a large medical conference.
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Pharmaceutical company sponsored symposia have been subject to past scrutiny
which had an adverse effect on the market for symposia services. Physician
attendance currently is subject to a number of industry and professional
association guidelines designed to prevent conflicts of interest. In
particular, these guidelines regulate the circumstances under which travel and
lodging reimbursement and other payments to physicians are permissible. In
light of these concerns, the Company adheres to its customers' instructions in
conducting symposia. In the event of changes in law, regulatory policy or
applicable industry or professional association guidelines or negative
publicity concerning symposia sponsored by the pharmaceutical industry,
customers may choose to alter their guidelines in ways that would make
symposia and related consultancies less attractive to physicians and
pharmaceutical companies. In addition, restrictions on such meetings could be
imposed by governmental agencies, industry or professional associations or the
pharmaceutical companies themselves. Finally, any of the Company's customers
could be found to be in non-compliance with relevant law, policy or guidelines
in their handling of symposia. Any of these events could have a material
adverse effect on the demand for BLP's symposia services.
The Company's symposium contracts generally are fee based. The terms of each
of BLP's symposium contracts vary based upon the complexity of the individual
arrangement, the duration of the contract, the number of symposia covered by
the contract and their location. The Company conducted four symposia in 1996
(all of which occurred in the fourth quarter) and conducted seven symposia
through the first three months of 1997. Symposia accounted for revenues of
$1.5 million, or 3.8% of the Company's revenues in 1996. For the first three
months of 1997, symposia accounted for revenues of $4.4 million, or 32.5% of
the Company's total revenues.
Additional Conferencing Services. The Company provides a range of additional
conferencing services. The Company emphasizes flexibility and conducts
meetings in any format that can effectively communicate its customer's
message. Video satellite conferences are an example of one of the many
possible formats for meetings. Video satellite conferences are lectures
sponsored by pharmaceutical companies. The speakers typically are physicians
or other medical experts who are retained by the pharmaceutical company for a
fee to discuss a new drug or indication or other medical topic. The Company
broadcasts the conferences via satellite on television to various locations
throughout the United States. The video satellite conferences typically
utilize interactive media involving one-way video, two-way audio, and special
keypads for audience participation. By using new forms of technology and media
in connection with such video satellite conferences, and CET programs for
peer-to-peer meetings, the Company seeks to enable its clients to effectively
and efficiently communicate medical information to physicians so that
physicians can better understand and utilize pharmaceutical products.
Educational Conferencing Services
Physicians and other healthcare professionals must dedicate a minimum number
of hours to certified continuing education ("CE") to remain certified to
practice their respective professions in certain jurisdictions. BLP
coordinates CE conferences that are funded by pharmaceutical companies and
held for approximately 50 to 350 healthcare professionals, primarily
physicians, at various locations throughout the United States. Each CE
conference is designed, if applicable, to satisfy CE requirements in
accordance with relevant regulations or accreditation procedures. Not all of
the educational conferences conducted by the Company are intended to satisfy
certified CE requirements. As with the Company's promotional conferencing
services, some of the CE programs are conducted by teleconference.
The CE programs, which are conducted by a separate division of the Company,
utilize certain of the Company's core competencies in handling conferencing
logistics. Because BLP is not an accredited CE service provider, it typically
provides these programs in conjunction with an accredited CE entity, such as a
university, which is responsible for producing the program curriculum and
related educational materials. The participants usually do not pay to attend
or participate in the Company's CE programs. The CE programs are frequently
taped or otherwise recorded for further distribution to those individuals who
are unable to attend.
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Product Marketing Services
BLP introduced its product marketing service in 1996. The Company's
customers tend to focus their marketing efforts on their key products because
of budgetary and other constraints, and thus typically have a significant
number of products with relatively limited sales that are not heavily
marketed, if at all. The Company believes that the sales of certain of these
products could be increased if their therapeutic benefits were actively
communicated to physicians or other healthcare professionals. BLP believes it
can leverage its customer relationships and existing services to market some
of these products successfully by devising and implementing a variety of
promotional and marketing strategies.
The Company anticipates that product marketing engagements typically will
involve the grant by a pharmaceutical company of rights to market a particular
product for a specified period. The Company will generally bear most marketing
costs during this period and in return share incremental revenue if the
product achieves specified sales objectives. The Company contemplates that
some of these engagements, however, may be fee based to some extent.
The Company currently has the right to market Ponstel(TM) (a registered
trademark of ), an analgesic for dysmenorrhea manufactured by , for a
one-year period ending in July 1997, subject to extension by mutual agreement.
Under the contract, the Company is compensated based on the increase in the
sales of Ponstel(TM) above an established baseline. The Company is currently
in negotiations to provide product marketing services for several additional
pharmaceutical products for and other customers.
The Company believes that pharmaceutical companies and their product
managers may be attracted to product marketing services and the related
revenue sharing structure because it enables them to obtain incremental
revenue with minimal marketing expenses. The Company's product marketing
service enables a product manager to obtain active promotion of products in
the manager's portfolio that would not otherwise be actively promoted. The
Company's involvement in product marketing need not be limited to a particular
stage of a drug's life cycle, as the Company could obtain rights to market an
underpromoted drug at any stage of a product's life cycle or supply product
support in a vacant sales territory.
Product marketing is subject to risks that do not arise in connection with
the Company's conferencing services, including the risk that the Company will
expend resources to sell a product and not achieve the level of sales required
to realize any revenue from its efforts. BLP will seek to manage this risk by
carefully selecting the products it agrees to promote based on its assessment
of multiple criteria, including, but not limited to, the potential
responsiveness of the product to promotional activities, the capabilities of
the pharmaceutical company's sales force and information obtained from
physicians. Product marketing is a new business area for the Company, and
there can be no assurance that the Company will establish a significant or
lasting presence in this market.
Teleservices
With the proliferation of multiple forms of interactive media in the 1990s,
companies in a variety of industries are increasingly using teleservices as a
means of communicating information directly to current and prospective
customers and widening the scope of their sales efforts. The Company has
expanded its teleservice capabilities, in part, because it is a cost-efficient
means, compared to in-person sales calls, to promote, market and sell
pharmaceutical or other healthcare products to the highly fragmented universe
of physicians, pharmacists and other healthcare professionals. For instance,
the Company believes that small to mid-sized pharmaceutical companies, whose
detailing forces are limited in size, may seek to expand their sales and
marketing efforts for certain products through telemarketing.
BLP believes that the use of teletechnology as a means of marketing
pharmaceutical products is in an early stage of development and that there
exists a wide range of potential future uses, particularly in relation to
consumer healthcare. The Company's strategy involves leveraging its
competitive strengths, including its established customer relationships,
existing market position, broad range of available services and experience in
communicating with physicians and other healthcare personnel, to provide an
integrated communications strategy for its customers.
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In 1996, BLP's teleservice business accounted for revenues of approximately
$1.4 million, all of which were generated out of its offices in New Jersey.
With the anticipated opening of its new teleservice center in Norfolk,
Virginia in July 1997, the Company's teleservices capability will increase
substantially. The Norfolk teleservice center will be capable of traditional
modes of teleservice plus more advanced forms of communication, such as
internet and interactive computer capabilities, which the Company may use for
CE and other purposes. The Company chose the Norfolk location as the site for
its teleservice center based on the results of an extensive east coast site
selection study which noted, among other factors, the existence of a large
pool of available healthcare industry personnel such as nurses, and a
redundantly-wired, fiber optic cable infrastructure resulting from the
significant military presence in the area.
The Norfolk facility, when completed, will contain 250 terminals and will be
staffed by approximately 275 to 300 full and part-time employees. The Company
anticipates that it will have approximately 75 terminals operating by August
1997. As the Norfolk facility becomes operational, the Company anticipates
reducing the number of teleservice terminals currently operational in New
Jersey from 125 to approximately 75. With respect to both its New Jersey and
Norfolk teleservice facilities, the Company believes it has adequate disaster
recovery plans, including, among other protections, the ability to regularly
back-up data and to access auxiliary power when needed, although there can be
no assurance that such plans will be effective in the case of an actual
emergency.
The Norfolk facility initially will be used for telemarketing and
teledetailing, (i.e., using the telephone to speak to physicians about
pharmaceutical products). BLP contemplates broadening the activities of the
center to include other traditional marketing services targeted to the
healthcare industry, including marketing and sales support, physician
recruitment and fulfillment (i.e., the fulfillment of requests for items such
as drug samples, product information packets, product studies and other
marketing and promotional materials) from the center's adjacent warehouse of
supplies. The Company's potential teleservice businesses include: maintaining
consumer health and drug and disease information lines; handling general
health information, wellness, and triage calls; and disease state education.
BLP contemplates offering its teleservices to managed care companies as a
means of promoting proper drug use by their members. For instance, the Company
is exploring the possibility of providing information about drugs and holding
meetings about drug treatment for managed care patients who are failing to
take the medications prescribed by their physicians. The Company believes that
such a service could help reduce the costs of the managed care provider by
improving the health of its patients, while simultaneously providing
information about a pharmaceutical company's product.
The first contract for the new teleservice center's services involves
providing 40,000 outbound product detailing calls for Warner Chilcott in
support of the in-person detailing efforts of that company's field service
organization. These product detailing calls will be handled over a six month
period by former pharmaceutical sales representatives hired by the Company.
Teleservices is a new business area for the Company involving risks not
present in its traditional business, such as the risk of competition from
larger, established companies having greater resources and access to capital.
There can be no assurance that the Company will establish a significant or
lasting presence in this market.
CUSTOMERS
BLP believes that its relationships with its customers, which include many
of the largest pharmaceutical companies, are among its most important
strategic advantages. Based on BLP's 1996 revenues, the Company's principal
customers included:
.
.
.
.
.
.
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The Company has enjoyed long standing relationships with many of these
customers, a number of which relationships have lasted for more than a decade.
Prior to 1996, the Company's customers principally engaged the Company to hold
peer-to-peer meetings. In 1996, several of the relationships expanded to
include other services such as symposia, product marketing and teleservices.
The Company believes that the quality and stability of its customer list
promotes the stability of its core business and that the scope and complexity
of its customers' marketing needs present opportunities for expansion into new
areas.
BLP's customer relations strategy focuses on maintaining strong relationships
with product managers and senior management at each of its customers and
providing creative, focused and result-oriented solutions to their marketing
needs. The Company's account managers (currently 12 individuals) develop
relationships principally with the product managers at the pharmaceutical
companies and spend significant time on-site at customer facilities. The
Company's account managers work with the product managers to implement, and in
some cases assist in developing, the customer's marketing plan within a
prescribed budget. Although the Company markets competing products from time to
time, it does not market such products through the same type of promotional or
marketing service without the consent of its customers.
The Company's customer relations strategy involves obtaining preferred
provider status whenever possible. The Company has achieved preferred provider
status for its services with , and . Although preferred
provider status has different meanings with each customer, the Company believes
that such status generally provides a competitive advantage in obtaining
additional business from the customer.
The following table sets forth the customers which accounted for 10% or more
of the Company's revenues in 1994, 1995 and 1996 (after giving effect to
subsequent pharmaceutical company mergers):
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C>
</TABLE>
COMPETITION
The business of providing promotional, marketing and educational services to
the pharmaceutical industry is competitive. The business of providing
pharmaceutical conferencing services is highly fragmented and the Company's
competitors in this area generally include smaller, regionally focused
companies that provide a limited number of promotional, marketing and
educational services, usually focused on the pharmaceutical industry. Several
of the Company's competitors in this area, however, offer services that are
somewhat wider in scope. Although BLP believes it is a leading provider of
peer-to-peer meetings, there are many larger providers of symposia and
educational conferences.
As BLP seeks to expand its range of services, it is likely to face
competition from companies which already have established a strong business
presence providing similar services to other businesses. The outsourced product
marketing business is currently in its formative stage and is expected to
become increasingly competitive. In addition, the sale of a pharmaceutical
product and its related assets to a third party is a competing strategy by
which pharmaceutical companies may seek to maximize returns from products that
might otherwise be candidates for the Company's product marketing services. A
large number of companies currently provide teleservices such as telemarketing
and teledetailing to companies in many industries including the pharmaceutical
industry, and many of these companies have greater resources and access to
capital than the Company.
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Overall, BLP believes that its most significant competition is potentially
from other companies that provide outsourced promotional, marketing and
educational services and large advertising agencies which may seek to expand
their service offerings. In addition, the pharmaceutical companies' in-house
marketing departments may provide similar services to those provided by BLP
and competition could increase as a result of the expansion of the in-house
marketing capabilities by BLP's customers or in the pharmaceutical industry
generally.
BLP competes against other companies offering pharmaceutical conferencing
and other outsourced promotional, marketing and educational services on the
basis of such factors as reputation, quality, experience, performance record,
effectiveness of service, ability to offer a range of integrated services and
price. Some of the Company's distinguishing characteristics are the longevity
of its relationships with its customers, its reputation for quality service
and its ability to offer a relatively broad range of services.
GOVERNMENT AND INDUSTRY REGULATION
The healthcare industry is subject to extensive regulation. Various laws,
regulations and guidelines promulgated by government, industry and
professional bodies affect, among other matters, the provision, licensing,
labeling, marketing, promotion and reimbursement of healthcare services and
products, including pharmaceutical products. Certain areas of the
telemarketing and teleservices industry recently also have become subjected to
increasing government regulation. It is possible that additional or amended
laws, regulations or guidelines could be adopted in the future.
BLP's service offerings are affected by various guidelines promulgated by
industry and professional organizations. For example, certain ethical
guidelines promulgated by the AMA govern, among other matters, the receipt by
physicians of gifts from health-related entities. These guidelines govern the
honoraria and other items of pecuniary value which AMA-member physicians may
receive in connection with peer-to-peer meetings and symposia sponsored by the
pharmaceutical company customers of the Company. Similar regulations have been
implemented by other professional and industry organizations, such as the
Pharmaceutical Manufacturers Association, and some of the Company's customers
also have their own policies regarding such matters. The provision of CE
services is subject to compliance with guidelines promulgated by various
accreditation bodies. For instance, providers of continuing medical education
programs must comply with the rules of the Accreditation Council of Continuing
Medical Education (the "ACCME") in order for the provider of the program to
receive accreditation from the ACCME. Other professional associations and some
of the Company's customers also have their own standards for continuing
education programs.
The pharmaceutical industry is subject to extensive federal regulation and
oversight by the FDA. For instance, the Federal Food, Drug and Cosmetic Act,
as supplemented by various other statutes, regulates, among other matters, the
approval, labeling, advertising, promotion, sale and distribution of drugs.
Under this statute, the FDA asserts its authority to regulate all promotional
activities involving prescription drugs. Accordingly, the businesses of BLP
and its customers, to the extent such business involves promotion and
marketing of pharmaceutical products, are subject to the extensive regulation
governing the pharmaceutical industry.
Certain portions of the telemarketing and teleservices industry have become
subject to increased federal and state regulation in recent years. The rules
of the Federal Communications Commission (the "FCC") under the Federal
Telephone Consumer Protection Act of 1991 limit the hours during which
telemarketers may call consumers and prohibit the use of automated telephone
dialing equipment to call certain telephone numbers. The Federal Telemarketing
and Consumer Fraud and Abuse Prevention Act of 1994 (the "TCFAPA") broadly
authorizes the Federal Trade Commission (the "FTC") to issue regulations
prohibiting misrepresentation in telephone sales. In August 1995, the FTC
issued regulations under the TCFAPA which, among other things, require
telemarketers to make certain disclosures when soliciting sales. The Company
believes its operating procedures comply with the telephone solicitation rules
of the FCC and the FTC. However, there can be no assurance that additional
federal or state legislation, or changes in the regulatory environment, would
not limit the activities of the Company or its customers in the future or
significantly increase the cost of regulatory compliance.
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The failure of BLP or its customers to comply with, or any change in, the
applicable regulatory requirements or professional organization or industry
guidelines could, among other things, limit or prohibit the Company or its
customers from conducting certain business activities, subject the Company or
its customers to adverse publicity, increase the costs of regulatory
compliance or subject the Company or its customers to monetary fines or other
penalties. Any such actions could have a material adverse effect on the
Company.
LIABILITY AND INSURANCE
Participants in the healthcare industry have become subject to an increasing
number of lawsuits alleging malpractice, product liability and other legal
theories, many of which involve large claims and significant legal costs. As a
provider of promotional, marketing and educational services to the
pharmaceutical industry, BLP is subject to the risk of being named as a party
in such lawsuits. As a result of its introduction of product marketing
services and teleservices, the Company believes that the relative likelihood
of becoming involved in litigation regarding the information given by its
personnel has increased, with the attendant risks of significant legal costs,
substantial damage awards and adverse publicity. Even if any such claims
ultimately prove to be without merit, defending against them can result in
adverse publicity, diversion of management's time and attention and
substantial expenses, which could have a material adverse effect on the
Company.
BLP maintains insurance policies, including liability insurance, which it
believes to be adequate in amount and coverage for the current size and scope
of its operations. There can be no assurance, however, that the coverage
maintained by the Company will be sufficient to cover all future claims or
will continue to be available in adequate amounts or at a reasonable cost.
Although the Company has not experienced difficulty in obtaining insurance
coverage in the past, the Company expects to seek increased insurance coverage
in connection with expanding its service offerings and there can be no
assurance that it will be able to obtain continued or increased insurance
coverage on acceptable terms or at all. In addition, although the Company's
contracts with its customers sometimes require the customer to indemnify the
Company for the customer's negligent conduct, the contracts do not provide for
adequate indemnification against many of the potential litigation risks facing
the Company and often require the Company to indemnify its customer for the
Company's negligence. BLP, therefore, could be held responsible for losses
incurred in connection with the performance of its services under the terms of
these contracts or otherwise and could incur substantial costs in connection
with legal proceedings associated with its services or the pharmaceutical
products with respect to which it provides services.
LEGAL PROCEEDINGS
From time to time the Company is subject to litigation incidental to its
business. BLP is not presently a party to any material litigation.
FACILITIES AND EMPLOYEES
BLP's corporate headquarters are located in Fair Lawn, New Jersey, in
approximately 14,520 square feet of space occupied under a lease which expires
on July 31, 1999. The Company currently leases an additional 5,247 square feet
of space for a call center in Fair Lawn, New Jersey.
The Company expects to commence operations at its teleservice center in
Norfolk, Virginia, in July 1997. The space for the teleservice center
currently consists of approximately 20,511 square feet under a lease expiring
in July 2007, with options to expand the lease space. BLP also has leased a
4,660 square foot warehouse adjacent to the teleservice center which is
intended to be used for fulfillment functions.
As of May 31, 1997, BLP had 317 employees, including 100 full-time employees
and 217 part-time employees. Of the full-time employees, 35 were moderators,
12 were engaged in sales, 39 were engaged in sales support and production, 2
were engaged in business development and 12 were engaged in general and
administration. The Company is not party to a collective bargaining agreement
with a labor union and considers its relations with its employees to be good.
32
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Executive officers and directors and their ages as of June 30, 1997, are as
follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Patrick G. LePore............... 42 Chairman of the Board, Chief Executive
Officer, President and Director
Gregory F. Boron................ 44 Chief Operating Officer, Executive Vice
President--Administration and Director
Christopher J. Sweeney.......... 35 Executive Vice President--Corporate
Development
Timothy J. McIntyre............. 42 Executive Vice President and President--
Promotional Conferencing Services Division
Roger Boissonneault(1).......... 49 Director
Roger B. Kafker(1)(2)........... 35 Director
Jacqueline C. Morby(2).......... 59 Director
Joseph E. Smith(2).............. 58 Director
John A. Staley, IV.............. 54 Director
</TABLE>
- --------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
Patrick G. LePore joined the Company in 1985 after six years at Hoffmann-La
Roche, a pharmaceutical company, where he worked as a product manager from
1982 to 1983 and as a product director from 1983 to 1985. He became President
and Chief Executive Officer of the Company in January 1992 and became Chairman
of the Board in December 1996.
Gregory F. Boron joined the Company in 1985 after leaving the U.S. Army as a
Major. He served as Vice President and Chief Financial Officer from January
1991 to November 1993 and as Executive Vice President, Administration and
Production from November 1993 to December 1996. Since December 1996, he has
served as Chief Operating Officer and Executive Vice President--Administration
of the Company.
Christopher J. Sweeney joined the Company in 1988 as a sales and marketing
representative. He served as Vice President--Sales from March 1991 to
September 1993 when he became Senior Vice President--Sales, a position he held
from September 1993 to December 1994. In December 1994, he became President--
Promotional Conferencing Services Division and he served in this position from
December 1994 until December 1996 when he became Executive Vice President--
Sales and Operations. In May 1997, he became Executive Vice President--
Corporate Development.
Timothy J. McIntyre joined the Company as Executive Vice President--
Corporate Development and became Executive Vice President of the Company and
President--Promotional Conferencing Services Division in June 1997. Prior to
joining the Company, he served as President and Chief Executive Officer of
Managed Marketing LLC, a healthcare marketing intelligence company, from
October 1995 until March 1997. From June 1991 until October 1995, he was
President of Medical News Network, a subdivision of Whittle Communications LP,
a marketing communications company, and from 1987 to 1991, he was Group
President of VNU Group, a conglomerate of healthcare and consumer marketing
intelligence companies.
Roger Boissonneault has served as a director of the Company since April 1997
and is the President of Warner Chilcott Laboratories, Inc., a pharmaceutical
company. Before becoming President of Warner Chilcott in April 1996, he was
associated with Warner-Lambert Co., the former parent company of Warner
Chilcott, since
33
<PAGE>
1976, most recently as Vice President, Female Health Care from October 1991 to
January 1994 and Vice President and General Manager from January 1994 to April
1996.
Roger B. Kafker has served as a director of the Company since December 1996.
He has been associated with TA Associates, Inc. or its predecessor since 1989
and became a Principal of that firm in 1994 and a Managing Director in 1995.
Mr. Kafker is also a director of ANSYS, Inc., a computer software company,
Monarch Dental Corporation, a manager of dental group practices, and
Affiliated Managers Group, Inc., an investment management holding company.
Jacqueline C. Morby has served as a director of the Company since December
1996. She has been Managing Director or a partner of TA Associates, Inc. or
its predecessor since 1982. Ms. Morby is also a director of ANSYS, Inc., a
computer software company, Axent Technologies Inc., a computer software
company, Ontrack Data International, Inc., a data recovery and software
company, NxTrend Technologies Inc., a computer software company, and Pacific
Mutual Life Insurance Co., a life insurance company.
Joseph E. Smith has served as a director of the Company since April 1997. He
has been a corporate Vice President of Warner-Lambert Co., a pharmaceutical
company, since 1989, serving as President, Pharmaceutical Sector from August
1991 to January 1994, Vice President, External Relations from January 1994 to
December 1995 and President, Shaving Products Group from December 1995 to the
present.
John A. Staley, IV has served as a director of the Company since May 1997.
Mr. Staley was Chief Executive Officer of Federated Research Corp., an
investment management firm and a subsidiary of Federated Investors Inc., from
1984 through November 1994 when he retired. Upon his retirement, Mr. Staley
worked as a self-employed financial advisor from November 1994 to November
1996 and has been the Chief Executive Officer of Staley Capital Advisors,
Inc., an investment advisory firm, from November 1996 to present. He is also a
director of Robroy Industries, Inc., a manufacturer of conduit products.
BOARD OF DIRECTORS
The number of directors of the Company is currently fixed at seven.
Following this offering, the Company's Board of Directors will be divided into
three classes, with the members of each class of directors serving for
staggered three-year terms. The Board will consist of two Class I Directors
(Ms. Morby and Mr. Staley), three Class II Directors (Mr. Boron, Mr. Kafker
and Mr. Smith) and two Class III Directors (Mr. Boissonneault and Mr. LePore),
whose initial terms will expire at the 1998, 1999 and 2000 annual meetings of
stockholders, respectively.
The Board of Directors has established an Audit Committee (the "Audit
Committee") and a Compensation and Option Committee (the "Compensation
Committee"). The Audit Committee recommends the firm to be appointed as
independent accountants to audit financial statements and to perform services
related to the audit, reviews the scope and results of the audit with the
independent accountants, reviews with management and the independent
accountants the Company's annual operating results, considers the adequacy of
the internal accounting procedures and considers the effect of such procedures
on the accountants' independence. Following the completion of this offering,
the Audit Committee will consist of Mr. Kafker and Mr. Boissonneault, neither
of whom is an officer nor an employee of the Company. The Compensation
Committee reviews and recommends the compensation arrangements for officers
and other senior level employees, reviews general compensation levels for
other employees as a group, determines the options or stock to be granted to
eligible persons under the 1996 Stock Plan and takes such other action as may
be required in connection with the Company's compensation and incentive plans.
The Compensation Committee consists of Mr. Kafker, Ms. Morby and Mr. Smith.
Non-employee directors other than Mr. Kafker and Ms. Morby (the "Independent
Directors") each purchased 10,000 shares of restricted Class A Common Stock
for $2.00 per share upon joining the Board, and receive fees of $2,000 for
each meeting of the Board of Directors and $1,000 for each meeting of a Board
committee they attend. Further, each director is reimbursed for reasonable
travel and other expenses incurred in attending meetings. See "Management--
Employee Stock and Other Benefit Plans--Restricted Stock Grants."
34
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation. The following table sets forth information concerning
compensation for services rendered in all capacities awarded to, earned by or
paid to the Chief Executive Officer and the other two executive officers of
the Company whose aggregate annual base salary and bonus for 1996 exceeded
$100,000 (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
1996
ANNUAL
COMPENSATION
--------------------
ALL OTHER
NAME AND PRINCIPAL POSITION SALARY($) BONUS($) COMPENSATION($)
- --------------------------- --------- -------- ---------------
<S> <C> <C> <C>
Patrick G. LePore......................... 421,226 998,700 1,769,301(1)(2)
Chief Executive Officer, President and
Chairman
Gregory F. Boron.......................... 392,886 897,200 719,263(1)(2)
Chief Operating Officer and Director
Christopher J. Sweeney.................... 325,884(3) 109,400 5,702,630(1)(4)
Executive Vice President
</TABLE>
- --------
(1) Includes special bonuses, including a bonus paid as part of the TA
Transactions, totaling the following amounts: Mr. LePore $1,739,499, Mr.
Boron $696,125 and Mr. Sweeney $5,694,230.
(2) Includes premiums on life insurance paid by the Company of $29,802 on
behalf of Mr. LePore and $23,138 paid on behalf of Mr. Boron.
(3) Includes $150,884 Mr. Sweeney earned in sales salaries prior to becoming
an executive officer in July 1996.
(4) Includes a car allowance of $8,400.
Option Grants, Exercises and Holdings. No options or stock appreciation
rights were granted to the Named Executive Officers in 1996.
Executive Bonuses. The Company has adopted an incentive bonus plan for its
senior executives. Under the plan, an amount equal to 10% of the Company's
annual earnings before interest, taxes, depreciation, amortization, commission
to sales personnel and payments of bonuses under the plan is reserved as a
bonus pool for plan participants. Bonuses are then awarded by the Compensation
Committee based on the recommendation of the Company's Chief Executive
Officer. The plan is administered by the Compensation Committee and will
remain in effect until the closing of the Company's first underwritten firm
commitment public offering. The Executive Bonus Plan will terminate upon
completion of this offering, except with respect to unpaid awards for the
partial year 1997 which accrued prior to the termination.
EMPLOYEE STOCK AND OTHER BENEFIT PLANS
1996 Stock Option and Grant Plan
The Boron, LePore & Associates 1996 Stock Option and Grant Plan (the "1996
Stock Plan") was initially adopted by the Board of Directors and approved by
the Company's stockholders in December 1996. The 1996 Stock Plan permits (i)
the grant of Incentive Options, (ii) the grant of Non-Qualified Options, (iii)
the issuance or sale of Common Stock with or without vesting or other
restrictions ("Restricted Stock") or without restrictions ("Unrestricted
Stock" collectively with Restricted Stock, "Stock Grants"), (iv) the grant of
Common Stock upon the attainment of specified performance goals ("Performance
Share Awards"), (v) the grant of the right to receive cash dividends with the
holders of the Common Stock as if the recipient held a specified number of
shares of the Common Stock ("Dividend Equivalent Rights") and (vi) the grant
of the right to receive the value of the excess of the fair market value of
the Common Stock over the exercise price of the Common Stock ("Stock
Appreciation Rights" or "SARs"). These grants may be made to officers and
other employees, directors, advisors, consultants and other key persons of the
Company and its subsidiaries. The 1996 Stock Plan provides for the issuance of
up to 1,733,333 shares of Common Stock. 241,353 shares of Common Stock are
available for future grants under the Plan. On and after the date the 1996
Stock Plan becomes
35
<PAGE>
subject to Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code"), options with respect to no more than 150,000 shares of Common
Stock may be granted to any one individual in any calendar year.
The 1996 Stock Plan is administered by the Compensation Committee of the
Board of Directors. Subject to the provisions of the 1996 Stock Plan, the
Compensation Committee has full power to determine from among the persons
eligible for grants under the 1996 Stock Plan the individuals to whom grants
will be granted, the combination of grants to participants and the specific
terms of each grant, including vesting. Incentive Options may be granted only
to officers or other full-time employees of the Company or its subsidiaries,
including members of the Board of Directors who are also full-time employees
of the Company or its subsidiaries. The Compensation Committee may delegate
the power to grant options to non-executive employees to the Company's Chief
Executive Officer.
The 1996 Stock Plan also permits Stock Grants, Performance Share Awards,
grants of Dividend Equivalent Rights and SARs. Stock Grants may be made to
persons eligible under the 1996 Stock Plan, subject to such conditions and
restrictions as the Compensation Committee may determine. Prior to the vesting
of shares, recipients of Stock Grants generally will have all the rights of a
stockholder with respect to the shares, including voting and dividend rights,
subject only to the conditions and restrictions set forth in the 1996 Stock
Plan or in any agreement. The Compensation Committee may also make Stock
Grants to persons eligible under the 1996 Stock Plan in recognition of past
services or other valid consideration, or in lieu of cash compensation. In the
case of Performance Share Awards, the issuance of shares of Common Stock will
occur only after the conditions and restrictions set forth in the grant
agreement are satisfied. SARs may be granted in tandem with, or independently
of, Incentive Options or Non-Qualified Options. The Compensation Committee may
also grant Dividend Equivalent Rights in conjunction with any other grant made
pursuant to the 1996 Stock Plan or as a free standing grant. Dividend
Equivalent Rights may be paid currently or deemed to be reinvested in
additional shares of Common Stock, which may thereafter accrue further
dividends.
The Compensation Committee may, in its sole discretion, accelerate or extend
the date or dates on which all or any particular award or awards granted under
the 1996 Stock Plan may be exercised or vest. Vesting of options granted under
the 1996 Stock Plan generally does not accelerate on a dissolution,
liquidation or sale of the Company. Options held by directors and certain
employees vest in whole or part on such events. To the extent not fully vested
and exercised, options granted under the 1996 Plan terminate upon the
dissolution, liquidation or sale of the Company, except as the Compensation
Committee shall otherwise determine.
Options. The option exercise price of options granted under the 1996 Stock
Plan is determined by the Compensation Committee. In the case of Incentive
Options, the exercise price may not be less than 100% of the fair market value
of the underlying shares on the date of grant. If any employee of the Company
or any subsidiary owns (or is deemed to own) at the date of grant shares of
stock representing in excess of 10% of the combined voting power of all
classes of stock of the Company or any parent or subsidiary, the option
exercise price for Incentive Options granted to such employee may not be less
than 110% of the fair market value of the underlying shares on that date. Non-
Qualified Options may be granted at prices which are less than the fair market
value of the underlying shares on the date granted. Options typically are
subject to vesting schedules, terminate 10 years from the date of grant and
may be exercised for specified periods subsequent to the termination of the
optionee's employment or other business relationship with the Company. At the
discretion of the Compensation Committee, any option may include a "reload"
feature pursuant to which an optionee exercising an option, receives in
addition to the number of shares of Common Stock due on the exercise of such
an option, an additional option with an exercise price equal to the fair
market value of the Common Stock on the date such additional option is
granted. Upon the exercise of options, the option exercise price must be paid
in full either in cash or by certified or bank check or other instrument
acceptable to the Compensation Committee or, in the sole discretion of the
Compensation Committee, by delivery of shares of Common Stock already owned by
the optionee. The exercise price may also be delivered to the Company by a
broker pursuant to irrevocable instructions to the broker selling the
underlying shares from the optionee. Since adopting the 1996 Plan in
connection with the TA Transaction in December 1996, the Company has granted
options to purchase an aggregate of 278,994 shares of Common Stock to
employees of the Company under the 1996 Stock Plan at a weighted average
exercise price of $8.91 per share through June 30, 1997.
36
<PAGE>
Restricted and Unrestricted Stock Grants. Since adopting the 1996 Stock Plan
in connection with the TA Transaction in December 1996, the Company has sold
an aggregate of 802,988 shares of restricted Common Stock to employees and
directors of the Company under the 1996 Stock Plan for an aggregate cash
purchase price of $390,883, including an aggregate of 566,666 shares sold to
Messrs. LePore, Boron and Sweeney for an aggregate cash purchase price of
$242,250, and an aggregate of 409,998 shares of unrestricted Common Stock to
employees and consultants for an aggregate purchase price of $183,850,
including 300,000 shares sold to Mr. Sweeney for a cash purchase price of
$85,500. Restricted Shares sold to employees and directors generally vest upon
the achievement of specified performance objectives and/or at a specified date
or dates, with unvested shares subject to repurchase at cost upon the
termination of the purchaser's employment or other relationship with the
Company, either for any reason or in some cases upon a voluntary termination
or a termination for cause. Shares of restricted Common Stock generally are
treated as fully vested in the event of a sale of the Company.
1997 Employee Stock Purchase Plan
The Company's 1997 Employee Stock Purchase Plan (the "Purchase Plan") will
be considered by the Board of Directors in July 1997 and may subsequently be
approved by the Company's stockholders. As currently written up to 225,000
shares of Common Stock are proposed to be issued under the Purchase Plan. The
Purchase Plan will be administered by the Compensation Committee.
If approved, the first offering under the Purchase Plan will begin on
October 1, 1997 and end on December 31, 1997. Subsequent offerings will
commence on each January 1 and July 1 thereafter and will have a duration of
six months. Generally, all employees who are customarily employed for more
than 20 hours per week as of the first day of the applicable offering period
will be eligible to participate in the Purchase Plan. An employee who owns or
is deemed to own shares of stock representing in excess of 5% of the combined
voting power of all classes of stock of the Company will not be able to
participate in the Purchase Plan.
During each offering, an employee will be able to purchase shares under the
Purchase Plan by authorizing payroll deductions of up to 10% of his cash
compensation during the offering period. If the Purchase Plan is approved, the
maximum number of shares which may be purchased by any participating employee
during any offering period is limited to shares (as adjusted by the
Compensation Committee from time to time). Unless the employee has previously
withdrawn from the offering, his accumulated payroll deductions will be used
to purchase Common Stock on the last business day of the period at a price
equal to 85% of the fair market value of the Common Stock on the first or last
day of the offering period, whichever is lower. Under applicable tax rules, an
employee may purchase no more than $25,000 worth of Common Stock in any
calendar year.
EMPLOYMENT AGREEMENTS
In connection with the TA Transaction, the Company entered into Employment
Agreements with Patrick G. LePore, Gregory F. Boron and Christopher J.
Sweeney, each of which contains substantially the same terms (except for
titles, duties and base salary.) The Employment Agreements provide for base
salary payments to Mr. LePore at the annual rate of $315,000, Mr. Boron at the
annual rate of $285,000 and Mr. Sweeney at the annual rate of $265,000. Each
of these agreements provides for (i) an initial employment term ending on
December 4, 1999 with one year renewals thereafter, subject to earlier
termination by either party and (ii) the continuation of base salary payments
until the later of December 4, 1999 or one year following termination of
employment in the event the employee's employment is terminated by the Company
without cause (as defined) or by such employee following a material default by
the Company. In connection with the TA Transactions, the Company also entered
into Non-Competition Agreements with Messrs. LePore, Boron and Sweeney. These
agreements provide that these employees will not compete with the Company
until December 4, 2000 or the first anniversary of termination of their
employment, if later.
In June 1997, the Company entered into an Employment Agreement with Timothy
J. McIntyre. The agreement provides for (i) an annual base salary of $200,000,
(ii) a bonus of at least $100,000 in 1997, (iii) an employment term ending on
June 9, 1999 with potential one-year renewals thereafter, subject to earlier
termination by either party, and (iv) the continuation of base salary and
benefit payments until the later of June 9, 1999 or one year following
termination of employment in the event the employee's employment is terminated
37
<PAGE>
by the Company without cause (as defined) or by Mr. McIntyre following a
material default by the Company. Mr. McIntyre's agreement prohibits
competition with the Company until June 9, 1999 or the first anniversary of
the termination of his employment, if later.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to December 1996, Patrick G. LePore made compensation decisions as
Chief Executive Officer of the Company. Since December 1996, all executive
officer compensation decisions have been made by the Compensation Committee.
The current members of the Compensation Committee are Messrs. LePore and
Kafker and Ms. Morby. The Compensation Committee reviews and makes
recommendations to the Board of Directors regarding the compensation for
senior management and key employees of the Company, including salaries and
bonuses. Upon completion of this offering the members of the Compensation
Committee will be Mr. Kafker, Ms. Morby and Mr. Smith. None of these
individuals is an executive officer of the Company.
CERTAIN TRANSACTIONS
In December 1996, the Company completed a series of transactions with TA
Associates, Inc. and the Company's senior executive officers. In connection
with these transactions:
(i) the Company, then a New Jersey corporation, was reorganized under the
laws of Delaware;
(ii) the Company incurred $21.0 million of senior secured indebtedness
under the Credit Facility;
(iii) the TA Investors, principally including investment funds associated
with TA Associates, Inc. and John A. Staley, IV, a director of the
Company, invested $12.5 million to acquire 7,000,000 shares of
Convertible Participating Preferred Stock which are convertible into
4,666,664 shares of Common Stock and 5,600,000 shares of Redeemable
Preferred Stock redeemable upon completion of this offering for an
aggregate cash payment of $10 million plus accumulated and unpaid
dividends;
(iv) the Company redeemed shares of Common Stock held by Patrick G. LePore,
Chief Executive Officer of the Company, for a cash payment of $9.4
million, paid or agreed to pay cash and in-kind bonuses to Mr. LePore
in the amount of $1,739,499 (which bonuses were fully paid by the end
of the first quarter of 1997), entered into an Employment Agreement
with Mr. LePore as described under "Management--Employment Agreements,"
and sold 200,000 shares of restricted Common Stock to Mr. LePore for an
aggregate purchase price of $85,500;
(v) the Company redeemed shares of Common Stock held by Gregory F. Boron,
Chief Operating Officer and Executive Vice President--Administration,
for a cash payment of $9.4 million, paid or agreed to pay cash and in-
kind bonuses to Mr. Boron in the amount of $696,125 (which bonuses were
fully paid by the end of the first quarter of 1997), entered into an
Employment Agreement with Mr. Boron as described under "Management--
Employment Agreements," and sold 200,000 shares of restricted Common
Stock to Mr. Boron for an aggregate purchase price of $85,500;
(vi) the Company paid or agreed to pay cash and in-kind bonuses to
Christopher J. Sweeney, Executive Vice President--Corporate
Development, in an aggregate amount of $5,694,230 (which bonuses were
fully paid by the end of the first quarter of 1997), entered into an
Employment Agreement with Mr. Sweeney as described under "Management--
Employment Agreements," and sold 166,666 shares of restricted Common
Stock to Mr. Sweeney for an aggregate purchase price of $71,250 and
300,000 shares of unrestricted Common Stock to Mr. Sweeney for an
aggregate purchase price of $128,250;
(vii) the Company paid or agreed to pay cash and in-kind bonuses to Michael
W. Foti, the former Chief Financial Officer of the Company, in an
aggregate amount of $1,894,139 (which bonuses were fully paid by the
end of the first quarter of 1997), entered into an Employment
Agreement with Mr. Foti as described below, and sold 100,000 shares
of restricted Common Stock to Mr. Foti for an aggregate purchase
price of $42,750 and 100,000 shares of unrestricted Common Stock to
Mr. Foti for an aggregate purchase price of $42,750; and
38
<PAGE>
(viii) the Company paid Thomas S. Boron, a former officer and shareholder
of the Company and the brother of Gregory F. Boron, Chief Operating
Officer and Executive Vice President--Administration, $6,175,000 in
satisfaction of obligations relating to the repurchase of Thomas
Boron's stock under a stock purchase agreement dated June 18, 1996
and a related consulting agreement, following payment by the
Company's predecessor to Mr. Boron of $549,662 in 1996 in connection
with these agreements.
See "Management--Employment Agreements," "--Employee Stock and Other Benefit
Plans--Restricted Stock Grants" and "Principal Shareholders."
In 1996, the Company entered into an Employment Agreement and a Non-
Competition Agreement with Mr. Foti, the Company's former Chief Financial
Officer, which agreement provides for base salary payments to Mr. Foti at the
annual rate of $185,000 through December 4, 1999. Mr. Foti is now a consultant
to the Company and is compensated therefor substantially in accordance with
the financial terms of the Employment Agreement.
In 1996, the Company rented a house from Mr. Thomas S. Boron for
approximately $84,000. This lease was canceled in connection with the TA
Transaction.
Mr. James LePore and Mr. Robert LePore, brothers of Patrick G. LePore, the
Company's Chief Executive Officer, are each partners of LePore, Zimmerer,
LePore & Luizzi, the Company's general counsel. During fiscal 1996, the
Company paid fees of approximately $54,885 to LePore, Zimmerer, LePore &
Luizzi for legal services rendered. The Company believes that the fees paid
for these services are at rates no less favorable to the Company than could
have been obtained from unaffiliated third parties.
Mr. Gerard LePore, brother of Patrick G. LePore, is employed as a Group
Account Supervisor for the Company. During 1996, Mr. Gerard LePore's salary
was approximately $76,000 plus a bonus of approximately $75,000.
Pursuant to a Stockholders' Agreement, as amended (the "Stockholders'
Agreement"), initially entered into in connection with the TA Transaction, to
which the Company, the TA Investors, Patrick G. LePore, Gregory Boron,
Christopher Sweeney and Michael W. Foti are parties, (i) each party received
"piggy back" registration rights, (ii) the TA Investors received demand
registration rights, (iii) each party received the right to demand one or more
registrations on Form S-3 if the Company becomes eligible to use Form S-3 and
if the anticipated net aggregate sale price of such registered shares exceeds
$500,000, (iv) each party granted to and received from the other investors
rights (the "Co-Sale Rights") to participate on a pro rata basis in certain
resales of Common Stock and agreed to restrictions on transfers of shares, (v)
each party was granted participation rights with respect to certain future
issuances of securities by the Company, and (vi) each party agreed to elect
and continue in office as Directors two individuals nominated by two-thirds
interest of the employee stockholders who are parties to the Stockholders'
Agreement. Mr. LePore and Mr. Boron have been elected as Directors of the
Company pursuant to the Stockholders' Agreement. Also in connection with the
TA Transactions, the Company agreed to indemnify the TA Investors and the
controlling persons of the TA Investors (of whom Mr. Kafker and Ms. Morby are
directors of the Company) against claims and liabilities including claims and
liabilities arising under the securities laws.
Effective upon and subject to the completion of this offering, provisions of
the Stockholders' Agreement relating to the participation rights, the Co-Sale
Rights, restrictions on transfers of shares and the election of the Board of
Directors contained in the Stockholders' Agreement will expire in accordance
with their original terms.
The Company intends to adopt a policy providing that all material
transactions between the Company and its officers, directors and other
affiliates must (i) be approved by a majority of the members of the Company's
Board of Directors and by a majority of the disinterested members of the
Company's Board of Directors and (ii) be on terms no less favorable to the
Company than could be obtained from unaffiliated third parties. In addition,
this policy will require that any loans by the Company to its officers,
directors or other affiliates be for bona fide business purposes only.
39
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information as to the beneficial ownership of
the Company's Common Stock as of June 30, 1997 and as adjusted to reflect the
sale of the shares of Common Stock offered hereby of (i) each person known by
the Company to own beneficially five percent or more of the outstanding shares
of Common Stock, (ii) each director and the Named Executive Officers of the
Company and (iii) all directors and executive officers of the Company as a
group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP(1)
----------------------------------
PERCENTAGE
NUMBER OF BENEFICIALLY OWNED
SHARES -------------------
BENEFICIALLY BEFORE AFTER
NAME OF BENEFICIAL OWNER(2) OWNED OFFERING OFFERING
- --------------------------- ------------ -------- --------
<S> <C> <C> <C>
TA Associates Group (3)................. 4,666,664 62.4% 43.2%
Patrick G. LePore (4)................... 993,333 13.3% 9.2%
Gregory F. Boron (5).................... 921,333 12.3% 8.5%
Christopher J. Sweeney (6).............. 466,666 6.2% 4.3%
Roger Boissonneault (7)................. 6,666 * % * %
Roger B. Kafker (8)..................... 6,333 * % * %
Jacqueline C. Morby (9)................. 6,930 * % * %
Joseph E. Smith (10).................... 6,666 * % * %
John A. Staley, IV (11)................. 193,332 2.6% 1.8%
Park Street Investors, L.P. (12)........ 400,000 5.3% 3.7%
All executive officers and directors as
a group (nine persons)................. 2,601,259 34.8% 24.1%
</TABLE>
- --------
* Less than 1%.
(1) All percentages have been determined as of June 30, 1997 in accordance
with Rule 13d-3 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). For purposes of this table, a person or group of
persons is deemed to have "beneficial ownership" of any shares of Common
Stock which such person has the right to acquire within 60 days after the
date of this Prospectus. For purposes of computing the percentage of
outstanding shares of Common Stock held by each person or group of
persons named above, any security which such person or persons has or
have the right to acquire within 60 days after the date of this
Prospectus is deemed to be outstanding, but is not deemed to be
outstanding for the purpose of computing the percentage ownership of any
other person. As of June 30, 1997, a total of 7,479,645 shares of Common
Stock were issued and outstanding and no options to acquire Common Stock
were exercisable within 60 days. The applicable percentage of "beneficial
ownership" after this offering is based upon 10,812,978 shares of Common
Stock outstanding. The number of shares of Common Stock set forth herein
includes shares of non-voting Class A Common Stock and Shares of Common
Stock issuable upon conversion of the Convertible Participating Preferred
Stock which will automatically convert into an equal number of shares of
Common Stock upon completion of this offering.
(2) The address of the TA Associates Group is High Street Tower, Suite 2500,
125 High Street, Boston, Massachusetts 02110-2720. The address of Mr.
Kafker and Ms. Morby is c/o TA Associates, Inc., High Street Tower, Suite
2500, 125 High Street, Boston, Massachusetts 02110-2720. The address of
all other listed stockholders is c/o Boron, LePore & Associates, Inc.,
17-17 Route 208 North, Fair Lawn, New Jersey 07410.
(3) Includes (i) 2,736,533 shares of Common Stock owned by Advent VII L.P.,
(ii) 1,680,000 shares of Common Stock owned by Advent Atlantic and
Pacific III L.P., and (iii) 48,533 shares of Common Stock owned by TA
Venture Investors Limited Partnership. Advent VII L.P., Advent Atlantic
and Pacific III L.P., and TA Venture Investors Limited Partnership are
part of an affiliated group of investment partnerships referred to,
collectively, as the "TA Associates Group." The general partner of Advent
VII L.P. is TA Associates VII L.P. The general partner of Advent Atlantic
and Pacific III L.P. is TA Associates AAP III Partners L.P. The general
partner of each of TA Associates VII L.P. and TA Associates AAP III
Partners L.P. is TA Associates, Inc. In such capacity, TA Associates,
Inc. exercises sole voting and investment power with respect to all of
the shares held of record by the named investment partnerships,
40
<PAGE>
with the exception of those shares held by TA Venture Investors Limited
Partnership; individually, no stockholder, director or officer of TA
Associates, Inc. is deemed to have or share such voting or investment
power. Principals and employees of TA Associates, Inc. (including Ms.
Morby and Mr. Kafker, directors of the Company) comprise the general
partners of TA Venture Investors Limited Partnership. In such capacity,
Ms. Morby and Mr. Kafker may each be deemed to share voting and investment
power with respect to the 48,533 shares held of record by TA Venture
Investors Limited Partnership. Ms. Morby and Mr. Kafker each disclaim
beneficial ownership of all shares, except as to 6,930 shares and 6,333
shares, respectively, held by TA Venture Investors Limited Partnership, as
to which each holds a pecuniary interest. See Notes 8 and 9.
(4) Includes 200,000 shares of restricted Common Stock held by Mr. LePore,
which shares vest on December 4, 2003 (subject to earlier vesting based
on achievement by the Company of specified performance objectives or a
sale of the Company) and which are subject to repurchase at a price of
$.43 per share upon a voluntary termination of Mr. LePore's employment or
a termination for cause prior to the relevant vesting date. Also includes
400,000 shares of Common Stock held by Park Street Investors, L.P., a
limited partnership in which Mr. LePore holds a 40% limited partnership
interest. The general partner of Park Street Investors, L.P. is Park
Street Investors, Inc., a corporation in which Mr. LePore shares voting
and investment power. See Note 12. Does not include 29,998 shares of
Common Stock held by siblings of Mr. LePore, as to which shares Mr.
LePore disclaims beneficial ownership.
(5) Includes 200,000 shares of restricted Common Stock held by Mr. Boron,
which shares vest on December 4, 2003 (subject to earlier vesting based
on achievement by the Company of specified performance objectives or a
sale of the Company) and which are subject to repurchase at a price of
$.43 per share upon a voluntary termination of Mr. Boron's employment or
a termination for cause prior to the relevant vesting date. Does not
include 78,664 shares of Common Stock held by irrevocable trusts for the
benefit of members of Mr. Boron's family of which Mr. Boron is not a
trustee, as to which shares Mr. Boron disclaims beneficial ownership.
(6) Includes 166,666 shares of restricted Common Stock held by Mr. Sweeney,
which shares vest on December 4, 2003 (subject to earlier vesting based
on achievement by the Company of specified performance objectives or a
sale of the Company) and are subject to repurchase at a price of $.43 per
share upon a voluntary termination of Mr. Sweeney's employment or a
termination for cause prior to the relevant vesting date.
(7) Includes 6,666 shares of restricted Common Stock held by Mr.
Boissonneault, which shares vest in four equal annual installments
beginning on April 10, 1998 subject to earlier vesting upon a sale of the
Company, and which are subject to repurchase at a price of $3.00 per
share upon termination of Mr. Boissonneault's service as a director prior
to the relevant vesting date.
(8) Includes 6,333 shares of Common Stock beneficially owned by Mr. Kafker
through TA Venture Investors Limited Partnership, all of which shares are
included in the 4,666,664 shares described in footnote (3) above. Does
not include any shares beneficially owned by Advent VII L.P. or Advent
Atlantic and Pacific III L.P., of which Mr. Kafker disclaims beneficial
ownership.
(9) Includes 6,930 shares of Common Stock beneficially owned by Ms. Morby
through TA Venture Investors Limited Partnership, all of which shares are
included in the 4,666,664 shares described in footnote (3) above. Does
not include any shares beneficially owned by Advent VII L.P. or Advent
Atlantic and Pacific III L.P., of which Ms. Morby disclaims beneficial
ownership.
(10) Includes 6,666 shares of restricted Common Stock held by Mr. Smith, which
shares vest in four equal annual installments beginning on April 10,
1998, subject to earlier vesting upon a sale of the Company and which are
subject to repurchase at a price of $3.00 per share upon termination of
Mr. Smith's service as a director prior to the relevant vesting date.
(11) Includes 186,666 shares held in an individual retirement rollover account
for Mr. Staley's benefit and 6,666 shares of restricted Common Stock held
by Mr. Staley, which shares vest in four equal annual installments
beginning on May 27, 1998 subject to earlier vesting upon a sale of the
Company, and which are subject to repurchase at a price of $3.00 per
share upon termination of Mr. Staley's service as a director prior to the
relevant vesting date.
(12) Patrick G. LePore is the principal stockholder of Park Street Investors,
Inc., the general partner of Park Street Investors, L.P.
41
<PAGE>
DESCRIPTION OF CAPITAL STOCK
AUTHORIZED AND OUTSTANDING CAPITAL STOCK
Prior to the completion of this offering, there are 7,000,000 shares of
Convertible Participating Preferred Stock outstanding, 812,986 shares of Class
A Common Stock (including all outstanding stock grants) and 1,999,995 shares
of Common Stock outstanding. In connection with and subject to the completion
of this offering, each share of Convertible Participating Preferred Stock will
convert into 2/3 of a share of Common Stock and eight-tenths of a share of
Redeemable Preferred Stock. Pursuant to the terms of the Redeemable Preferred
Stock, all of the outstanding shares of Redeemable Preferred Stock will be
redeemed by the Company at the time of this offering for $10.0 million plus
accumulated and unpaid dividends of $332,000 at March 31, 1997. In connection
with and subject to the completion of this offering, each share of Class A
Common Stock will automatically convert into one share of Common Stock, and
each share of Common Stock will automatically convert into 2/3 of a share of
Common Stock.
Upon completion of this offering, the authorized capital stock of the
Company will consist of 50,000,000 shares of Common Stock, of which 10,812,978
shares will be issued and outstanding and 2,000,000 shares of undesignated
preferred stock issuable in one or more series by the Board of Directors
("Preferred Stock"), of which no shares will be issued and outstanding.
Common Stock. The holders of Common Stock are entitled to one vote per share
on all matters to be voted on by stockholders and are entitled to receive such
dividends, if any, as may be declared from time to time by the Board of
Directors from funds legally available therefor. Any issuance of Preferred
Stock with a dividend preference over Common Stock could adversely affect the
dividend rights of holders of Common Stock. Holders of Common Stock are not
entitled to cumulative voting rights. Therefore, the holders of a majority of
the shares voted in the election of directors can elect all of the directors
then standing for election, subject to any voting rights of the holders of any
then outstanding Preferred Stock. The holders of Common Stock have no
preemptive or other subscription rights, and there are no conversion rights or
redemption or sinking fund provisions with respect to the Common Stock. All
outstanding shares of Common Stock, including the shares offered hereby, are,
or will be upon completion of the offering, fully paid and non-assessable.
The Company's By-laws, which will be effective upon completion of this
offering provide, subject to the rights of the holders of any Preferred Stock
then outstanding, that the number of directors shall be fixed by the
stockholders. The directors, other than those who may be elected by the
holders of any Preferred Stock, are divided into three classes, as nearly
equal in number as possible, with each class serving for a three-year term.
Subject to any rights of the holders of any Preferred Stock to elect
directors, and to remove any director whom the holders of any Preferred Stock
had the right to elect, any director of the Company may be removed from office
only with cause and by the affirmative vote of at least two-thirds of the
total votes which would be eligible to be cast by stockholders in the election
of such director.
Undesignated Preferred Stock. The Board of Directors of the Company is
authorized, without further action of the stockholders, to issue up to
2,000,000 shares of Preferred Stock in one or more series and to fix the
designations, powers, preferences and the relative, participating, optional or
other special rights of the shares of each series and any qualifications,
limitations and restrictions thereon as set forth in the Company's
Certificate. Any such Preferred Stock issued by the Company may rank prior to
the Common Stock as to dividend rights, liquidation preference or both, may
have full or limited voting rights and may be convertible into shares of
Common Stock.
The issuance of Preferred Stock could have the effect of making it more
difficult for a third party to acquire, or of discouraging a third party from
acquiring or seeking to acquire, a significant portion of the outstanding
Common Stock.
CERTAIN PROVISIONS OF CERTIFICATE AND BY-LAWS
A number of provisions of the Company's Amended and Restated Certificate of
Incorporation, as amended, and By-laws which will be effective upon completion
of this offering concern matters of corporate governance
42
<PAGE>
and the rights of stockholders. Certain of these provisions, as well as the
ability of the Board of Directors to issue shares of Preferred Stock and to
set the voting rights, preferences and other terms thereof, may be deemed to
have an anti-takeover effect and may discourage takeover attempts not first
approved by the Board of Directors, including takeovers which stockholders may
deem to be in their best interests. To the extent takeover attempts are
discouraged, temporary fluctuations in the market price of the Company's
Common Stock, which may result from actual or rumored takeover attempts, may
be inhibited. These provisions, together with the classified Board of
Directors and the ability of the Board to issue Preferred Stock without
further stockholder action, also could delay or frustrate the removal of
incumbent directors or the assumption of control by stockholders, even if such
removal or assumption would be beneficial to stockholders of Company. These
provisions also could discourage or make more difficult a merger, tender offer
or proxy contest, even if favorable to the interests of stockholders, and
could depress the market price of the Common Stock. The Board of Directors
believes that these provisions are appropriate to protect the interests of the
Company and all of its stockholders. The Board of Directors has no present
plans to adopt any other measures or devices which may be deemed to have an
"anti-takeover effect."
Meetings of Stockholders. The By-laws provide that a special meeting of
stockholders may be called only by the President or the Board of Directors
unless otherwise required by law. The By-laws provide that only those matters
set forth in the notice of the special meeting may be considered or acted upon
at that special meeting unless otherwise provided by law. In addition, the By-
laws set forth certain advance notice and informational requirements and time
limitations on any director nomination or any new proposal which a stockholder
wishes to make at an annual meeting of stockholders.
Indemnification and Limitation of Liability. The By-laws provide that
directors and officers of the Company shall be, and in the discretion of the
Board of Directors non-officer employees may be, indemnified by the Company to
the fullest extent authorized by Delaware law, as it now exists or may in the
future be amended, against all expenses and liabilities reasonably incurred in
connection with service for or on behalf of the Company. The By-laws also
provide that the right of directors and officers to indemnification shall be a
contract right and shall not be exclusive of any other right now possessed or
hereafter acquired under any by-law, agreement, vote of stockholders or
otherwise. The Certificate contains a provision permitted by Delaware law that
generally eliminates the personal liability of Directors for monetary damages
for breaches of their fiduciary duty, including breaches involving negligence
or gross negligence in business combinations, unless the director has breached
his or her duty of loyalty, failed to act in good faith, engaged in
intentional misconduct or a knowing violation of law, paid a dividend or
approved a stock repurchase in violation of the Delaware General Corporation
Law or obtained an improper personal benefit. This provision does not alter a
director's liability under the federal securities laws and does not affect the
availability of equitable remedies, such as an injunction or rescission, for
breach of fiduciary duty. The Company also entered into indemnification
agreements with each of its directors reflecting the foregoing and requiring
the advancement of expenses in proceedings involving the directors in most
circumstances.
Amendment of the Certificate. The Certificate provides that an amendment
thereof must first be approved by a majority of the Board of Directors and
(with certain exceptions) thereafter approved by a majority (or 66 2/3% in the
case of any proposed amendment to the provisions of the Certificate relating
to the composition of the Board or amendments of the Certificate) of the total
votes eligible to be cast by holders of voting stock with respect to such
amendment.
Amendment of By-laws. The Certificate provides that the By-laws may be
amended or repealed by the Board of Directors or by the stockholders. Such
action by the Board of Directors requires the affirmative vote of a majority
of the directors then in office. Such action by the stockholders requires the
affirmative vote of at least two-thirds of the total votes eligible to be cast
by holders of voting stock with respect to such amendment or repeal at an
annual meeting of stockholders or a special meeting called for such purpose
unless the Board of Directors recommends that the stockholders approve such
amendment or repeal at such meeting, in which case such amendment or repeal
shall only require the affirmative vote of a majority of the total votes
eligible to be cast by holders of voting stock with respect to such amendment
or repeal.
43
<PAGE>
Ability to Adopt Shareholder Rights Plan. The Board of Directors may in the
future resolve to issue shares of Preferred Stock or rights to acquire such
shares to implement a shareholder rights plan. A shareholder rights plan
typically creates voting or other impediments or under which shares are
distributed to a third-party investor, to a group of investors or stockholders
or to an employee stock ownership plan, to discourage persons seeking to gain
control of the Company by means of a merger, tender offer, proxy contest or
otherwise if such change in control is not in the best interest of the Company
and its stockholders. The Board of Directors has no present intention of
adopting a shareholder rights plan and is not aware of any attempt to obtain
control of the Company.
STATUTORY BUSINESS COMBINATION PROVISION
Upon completion of the offering, the Company will be subject to the
provisions of Section 203 of the Delaware General Corporation Law ("Section
203"). Section 203 provides, with certain exceptions, that a Delaware
corporation may not engage in any of a broad range of business combinations
with a person or affiliate, or associate of such person, who is an "interested
stockholder" for a period of three years from the date that such person became
an interested stockholder unless: (i) the transaction resulting in a person
becoming an interested stockholder, or the business combination, is approved
by the board of directors of the corporation before the person becomes an
interested stockholder; (ii) the interested stockholder acquired 85% or more
of the outstanding voting stock of the corporation in the same transaction
that makes it an interested stockholder (excluding shares owned by persons who
are both officers and directors of the corporation, and shares held by certain
employee stock ownership plans); or (iii) on or after the date the person
becomes an interested stockholder, the business combination is approved by the
corporation's board of directors and by the holders of at least 66% of the
corporation's outstanding voting stock at an annual or special meeting,
excluding shares owned by the interested stockholder. Under Section 203, an
"interested stockholder" is defined (with certain limited exceptions) as any
person that is (i) the owner of 15% or more of the outstanding voting stock of
the corporation or (ii) an affiliate or associate of the corporation and was
the owner of 15% or more of the outstanding voting stock of the corporation at
any time within the three-year period immediately prior to the date on which
it is sought to be determined whether such person is an interested
stockholder.
A corporation may, at its option, exclude itself from the coverage of
Section 203 by amending its certificate of incorporation or by-laws by action
of its stockholders to exempt itself from coverage, provided that such by-law
or charter amendment shall not become effective until 12 months after the date
it is adopted. Neither the Certificate nor the By-laws contains any such
exclusion.
TRANSFER AGENT AND REGISTRAR
The Company has selected as the transfer agent and registrar for the
Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the offering, the Company will have a total of 10,812,978
shares of Common Stock outstanding. Of these shares, the 3,333,333 shares of
Common Stock offered hereby will be freely tradable without restriction or
registration under the Securities Act by persons other than "affiliates" of
the Company, as defined in the Securities Act, who would be required to sell
such shares under Rule 144 under the Securities Act. The remaining 7,479,645
shares of Common Stock outstanding will be "restricted securities" as that
term is defined by Rule 144 (the "Restricted Shares"). The Restricted Shares
were issued and sold by the Company in private transactions in reliance upon
exemptions from registration under the Securities Act.
Of the Restricted Shares, 6,266,659 Restricted Shares will be eligible for
sale in the public market pursuant to Rule 144 under the Securities Act
beginning upon the later of 90 days after the date of this Prospectus or
December 4, 1997, and up to approximately 1,212,986 shares of Common Stock
will be eligible for sale in the public market in accordance with Rule 701
under the Securities Act as described below beginning 90 days after the date
of this Prospectus. In addition, 806,321 shares subject to sale under Rule 701
are subject to vesting provisions and will become eligible for sale in the
public market at various times as they become vested. All such shares are
subject to the lock-up agreements described below.
44
<PAGE>
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned restricted securities
for at least one year (including the holding period of any prior owner except
an affiliate), including persons who may be deemed "affiliates" of the
Company, would be entitled to sell within any three-month period a number of
shares that does not exceed the greater of one percent of the number of shares
of Common Stock then outstanding (approximately 108,129 shares upon completion
of the offering) or the average weekly trading volume of the Common Stock
during the four calendar weeks preceding the filing of a Form 144 with respect
to such sale. Sales under Rule 144 are also subject to certain manner of sale
provisions and notice requirements, and to the availability of current public
information about the Company. In addition, a person who is not deemed to have
been an affiliate of the Company at the time during the 90 days preceding a
sale, and who has beneficially owned the shares proposed to be sold for at
least two years (including the holding period of any prior owner except an
affiliate), would be entitled to sell such shares under Rule 144(k) without
regard to the requirements described above. Rule 144 also provides that
affiliates who are selling shares that are not Restricted Shares must
nonetheless comply with the same restrictions applicable to Restricted Shares
with the exception of the holding period requirement.
Rule 701 promulgated under the Securities Act provides that shares of Common
Stock acquired pursuant to the exercise of outstanding options or the grant of
Common Stock pursuant to written compensation plans or contracts prior to this
offering may be resold by persons other than affiliates beginning 90 days
after the date of this Prospectus, subject only to the manner of sale
provisions of Rule 144, and by affiliates, beginning 90 days after the date of
this Prospectus, subject to all provisions of Rule 144 except its one-year
minimum holding period requirement.
The stockholders of the Company (who in the aggregate will hold 7,479,645
Restricted Shares upon completion of the offering) will agree pursuant to
lock-up agreements not to sell or offer to sell or otherwise dispose of any
shares of Common Stock currently held by them, any right to acquire any shares
of Common Stock or any securities exercisable for or convertible into any
shares of Common Stock for a period of 180 days after the date of this
Prospectus without the prior written consent of Bear, Stearns & Co. Inc.,
other than as gifts or transfers by will or the laws of descent and
distribution. In addition, the Company will agree that for a period of 180
days after the date of this Prospectus it will not, without the prior written
consent of Bear, Stearns & Co. Inc., offer, sell or otherwise dispose of any
shares of Common Stock except for shares of Common Stock offered hereby,
shares issued and options granted pursuant to the 1996 Stock Plan, the
Purchase Plan and shares issued or to be issued in acquisitions, if any.
As of June 30, 1997, there were 278,994 outstanding options to purchase
shares of Common Stock. 1,733,333 and 225,000 shares of Common Stock are
reserved for issuance under the 1996 Stock Plan and the Purchase Plan,
respectively. The Company intends to file a registration statement on Form S-8
under the Securities Act to register all shares of Common Stock issuable
pursuant to the 1996 Stock Plan or the Purchase Plan. The Company expects to
file this registration statement within 90 days following the date of this
Prospectus, and such registration statement will become effective upon filing.
Shares covered by this registration statement will thereupon be eligible for
sale in the public markets, subject to Rule 144 limitations applicable to
affiliates and the lock-up agreements described above.
The holders of approximately 4,666,664 shares of Common Stock have the right
on two occasions (each of which must be at least six months apart) on any date
after three months after the closing of this offering to require the Company
to register their shares under the Securities Act for resale to the public (if
such right is exercised, the holders of 7,333,325 shares will have the right
to have their shares registered); holders of approximately 7,333,325 shares
have the right in primary and secondary offerings, excluding offerings
relating to employment plans, under Rule 145 under the Securities Act or
demand registrations, to include their shares in a registration statement
filed by the Company; and holders of approximately 7,333,325 shares have the
right on one or more occasions to request and have effected a registration of
shares on Form S-3 if the anticipated net aggregate sale price of such
registered shares exceeds $500,000. All of such holders will agree pursuant to
lock-up agreements not to sell or offer to sell or otherwise dispose of any
shares of Common Stock currently held by them, any right to acquire any shares
of Common Stock or any securities exercisable for or convertible into any
shares of Common Stock for a period of 180 days after the date of this
Prospectus without the prior written consent of Bear, Stearns & Co. Inc.,
other than as gifts or transfers by will or the laws of descent and
distribution.
45
<PAGE>
Prior to this offering, there has been no public market for the Common Stock
and no predictions can be made of the effect, if any, that the sale or
availability for sale of shares of additional Common Stock will have on the
market price of the Common Stock. Nevertheless, sales of substantial amounts
of such shares in the public market, or the perception that such sales could
occur, could materially and adversely affect the market price of the Common
Stock and could impair the Company's future ability to raise capital through
an offering of its equity securities.
46
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below, through their Representatives, Bear, Stearns & Co.
Inc., Smith Barney Inc. and Wessels, Arnold & Henderson, L.L.C. have severally
agreed to purchase from the Company the following respective number of shares
of Common Stock.
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
---- ---------
<S> <C>
Bear, Stearns & Co. Inc.........................................
Smith Barney Inc................................................
Wessels, Arnold & Henderson, L.L.C..............................
----
Total...........................................................
====
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters thereunder are subject to approval of certain legal matters by
counsel and to various other conditions. The nature of the Underwriters'
obligations is such that they are committed to purchase and pay for all of the
above shares of Common Stock if any are purchased.
The Underwriters propose to offer the shares of Common Stock directly to the
public at the public offering price set forth on the cover page of this
Prospectus, and at such price less a concession not in excess of $ per
share of Common Stock to certain other dealers who are members of the National
Association of Securities Dealers, Inc. The Underwriters may allow, and such
dealers may reallow, concessions not in excess of $ per share to certain
other dealers. After the offering, the offering price, concessions and other
selling terms may be changed by the Underwriters. The Common Stock is offered
subject to receipt and acceptance by the Underwriters and to certain other
conditions, including the right to reject orders in whole or in part.
The Company has granted a 30-day over-allotment option to the Underwriters
to purchase up to 500,000 additional shares of Common Stock of the Company
exercisable at the public offering price less the underwriting discount. If
the Underwriters exercise such over-allotment option, then each of the
Underwriters will be committed, subject to certain conditions, to purchase
such additional shares in approximately the same proportion as set forth in
the above table. All Common Stock sold to the Underwriters upon exercise of
their over-allotment option will be sold by the Company. The Underwriters may
exercise such option only to cover over-allotments made in connection with the
sale of the shares of Common Stock offered hereby. The underwriting agreement
provides that the Company will indemnify the Underwriters against certain
liabilities under the Securities Act or will contribute to payments that the
Underwriters may be required to make in respect thereof.
The Company's current stockholders holding an aggregate of 7,479,645 shares
of Common Stock have agreed that they will not sell, grant any option for the
sale of or otherwise dispose of, any shares of Common Stock or any other
equity securities of the Company (including options or warrants) for a period
of 180 days after the date hereof without the prior written consent of the
Representatives, subject to certain limited exceptions.
In addition, the Company has agreed that for a period of 180 days after the
date of this Prospectus it will not, without the prior written consent of
Bear, Stearns & Co. Inc., offer, sell or otherwise dispose of any shares of
Common Stock except for shares of Common Stock offered hereby, shares issued
and options granted pursuant to the 1996 Stock Plan, the Purchase Plan and
shares issued or to be issued in acquisitions, if any.
47
<PAGE>
Prior to the offering, there has been no public market for the Common Stock
of the Company. Consequently, the initial offering price for the Common Stock
will be determined by negotiations between the Company and the Representatives
of the Underwriters. Among the factors to be considered in such negotiations
are the results of operations of the Company in recent periods, estimates of
the prospects of the Company and the industry in which the Company competes,
an assessment of the Company's management, the general state of the securities
markets at the time of the offering and the prices of similar securities of
generally comparable companies. The Company has submitted an application for
approval of its Common Stock for quotation on the Nasdaq Stock Market's
National Market under the symbol "BLPG." There can be no assurance, however,
that an active or orderly trading market will develop for the Common Stock or
that the Common Stock will trade in the public markets subsequent to the
offering at or above the initial offering price.
In order to facilitate the offering, the Underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
Common Stock during and after the Offering. Specifically, the Underwriters may
over-allot or otherwise create a short position in the Common Stock for their
own account by selling more shares of Common Stock than have been sold to them
by the Company. The Underwriters may elect to cover any such short position by
purchasing shares of Common Stock in the open market or by exercising the
over- allotment option granted to the Underwriters. In addition, the
Underwriters may stabilize or maintain the price of the Common Stock by
bidding for or purchasing shares of Common Stock in the open market and may
impose penalty bids, under which selling concessions allowed to syndicate
members or other broker-dealers participating in the offering are reclaimed if
shares of Common Stock previously distributed in the offering are repurchased
in connection with stabilization transactions or otherwise. The effect of
these transactions may be to stabilize or maintain the market price at a level
above that which might otherwise prevail in the open market. The imposition of
a penalty bid may also affect the price of the Common Stock to the extent that
it discourages resales thereof. No representation is made as to the magnitude
or effect of any such stabilization or other transactions. Such transactions
may be effected on the NASDAQ National Market or otherwise and, if commenced,
may be discontinued at any time.
Certain persons participating in this offering may engage in passive market
making transactions in the Common Stock on the Nasdaq National Market in
accordance with Rule 103 of Regulation M under the Exchange Act. Rule 103
permits, upon the satisfaction of certain conditions, underwriting and selling
group members participating in a distribution that are also registered Nasdaq
market makers in the security being distributed (or a related security) to
engage in limited passive market making transactions during the period when
Regulation M would otherwise prohibit such activity. In general, a passive
market maker may not bid for or purchase a security at a price that exceeds
the highest independent bid for those securities by a person that is not
participating in the distribution and must identify its passive market making
bids on the Nasdaq electronic inter-dealer reporting system. In addition, the
net daily purchases made by a passive market maker generally may not exceed
30% of such market maker's average daily trading volume in the security for
the two full consecutive calendar months (or any 60 consecutive days ending
within 10 days) immediately preceding the date of filing of the Registration
Statement of which this Prospectus forms a part.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed upon
for the Company by Goodwin, Procter & Hoar LLP, Boston, Massachusetts. Certain
legal matters related to this offering will be passed upon for the
Underwriters by Paul, Weiss, Rifkind, Wharton & Garrison, New York, New York.
As of the date of this Prospectus, a total of 22,400 shares of Convertible
Participating Preferred Stock were beneficially owned by partners of Goodwin,
Procter & Hoar LLP. Such shares will be convertible into an aggregate of
14,932 shares of Common Stock and 17,920 shares of Redeemable Preferred Stock
upon completion of this offering.
48
<PAGE>
EXPERTS
The financial statements of the Company as of December 31, 1996 included in
this prospectus and elsewhere in the registration statement have been audited
by Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports. The financial
statements of the Company as of December 31, 1995 and for the years ended
December 31, 1995 and December 31, 1994 have been audited by M.R. Weiser & Co.
LLP, independent certified public accountants, as indicated in their report
with respect thereto, and are included herein in reliance upon the authority
of said firm as experts in accounting and auditing.
The Company retained Arthur Andersen LLP as its independent public
accountants and replaced M.R. Weiser & Co. LLP in February 1997. The report of
M.R. Weiser & Co. LLP on the financial statements of the Company as of
December 31, 1995 and 1994 contained no adverse opinion or disclaimer of
opinion and was not qualified or modified as to uncertainty, audit scope or
application of accounting principles. During the years ended December 31, 1995
and 1994 and through the date of replacement, there were no disagreements with
M.R. Weiser & Co. LLP on any matter of accounting principles or practices,
financial statements disclosure, or auditing scope or procedure. The change in
independent public accountants was approved by the Board of Directors.
49
<PAGE>
INDEX TO FINANCIAL STATEMENTS
BORON, LEPORE & ASSOCIATES, INC.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Arthur Andersen LLP, Independent Public Accountants............. F-2
Report of M.R. Weiser & Co. LLP, Independent Public Accountants........... F-3
Balance Sheets as of December 31, 1995 and 1996 and March 31, 1997 (unau-
dited)................................................................... F-4
Statements of Operations for the Years Ended December 31, 1994, 1995 and
1996 and the Three Months Ended March 31, 1996 and 1997 (unaudited)...... F-5
Statements of Stockholders' Equity (Deficit) for the Years Ended December
31, 1994, 1995 and 1996 and for the Three Months Ended March 31, 1997
(unaudited).............................................................. F-6
Statements of Cash Flows for the Years Ended December 31, 1994, 1995 and
1996 and the three months ended March 31, 1996 and 1997 (unaudited)...... F-7
Notes to Financial Statements............................................. F-9
</TABLE>
F-1
<PAGE>
The financial statements included herein have been adjusted to give effect
to the reverse common stock split and the anticipated increase in the
authorized common stock of the Company to 50,000,000 shares of $.01 par value
common stock as described in Note 16 to the financial statements. We expect to
be in a position to render the following audit report upon the effectiveness
of such events assuming that from March 3, 1997 to the effective date of such
events, no other events will have occurred that would affect the financial
statements or notes thereto.
Arthur Andersen LLP
Roseland, New Jersey
March 3, 1997
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Boron, LePore & Associates, Inc.:
We have audited the accompanying balance sheet of Boron, LePore &
Associates, Inc. (a Delaware Corporation) as of December 31, 1996, and the
related statements of operations, stockholders' equity (deficit), and cash
flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those statements require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Boron, LePore &
Associates, Inc. as of December 31, 1996 and the results of its operations and
its cash flows for the year then ended in conformity with generally accepted
accounting principles.
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders of
Boron, LePore & Associates, Inc.
We have audited the accompanying balance sheet of Boron, LePore &
Associates, Inc. as of December 31, 1995, and the related statements of
operations, stockholders' equity, and cash flows for the years ended December
31, 1994 and 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Boron, LePore &
Associates, Inc. as of December 31, 1995, and the results of its operations
and its cash flows for the years ended December 31, 1994 and 1995 in
conformity with generally accepted accounting principles.
M. R. Weiser & Co. LLP
Edison, NJ
April 10, 1996
F-3
<PAGE>
BORON, LEPORE & ASSOCIATES, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ MARCH 31,
1995 1996 1997
----------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents (Note 3)... $ 962,660 $ 7,175,648 $ 749,593
Accounts receivable, net of allowance
for doubtful accounts of $0,
$300,000 and $300,000 as of December
31, 1995 and 1996, and March 31,
1997, respectively (Note 13)........ 7,408,018 14,969,261 16,678,203
Prepaid expenses and other current
assets.............................. 196,774 254,802 333,544
Due from affiliates (Note 4)......... 221,960 0 0
Due from officers (Note 5)........... 114,602 0 0
----------- ------------ ------------
Total current assets............... 8,904,014 22,399,711 17,761,340
FURNITURE AND FIXTURES, at cost, net
of accumulated depreciation of
$443,282, $554,232 and $581,732 as of
December 31, 1995 and 1996, and March
31, 1997, respectively (Note 3)...... 295,217 325,296 374,460
DUE FROM OFFICERS, long-term portion
(Note 5)............................. 557,722 0 0
DUE FROM AFFILIATES, long-term portion
(Note 4)............................. 714,095 0 0
SECURITY DEPOSITS..................... 27,802 27,166 28,557
INTANGIBLES, net of accumulated
amortization of $0, $7,733 and
$24,167 as of December 31, 1995 and
1996 and March 31, 1997, respectively
(Note 3)............................. 0 344,767 328,333
----------- ------------ ------------
Total assets....................... $10,498,850 $ 23,096,940 $ 18,492,690
=========== ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
CURRENT LIABILITIES:
Current maturities of long-term debt
(Note 8)............................ $ 241,000 $ 1,000,000 $ 1,500,000
Accounts payable and accrued expenses
(Note 7)............................ 2,847,097 12,775,623 6,729,589
Deferred revenue (Note 3)............ 2,770,132 5,138,696 6,480,164
Billings in excess of costs (Note
3).................................. 0 1,069,850 856,900
----------- ------------ ------------
Total current liabilities.......... 5,858,229 19,984,169 15,566,653
----------- ------------ ------------
LONG-TERM DEBT, less current
maturities (Note 8).................. 904,833 19,000,000 18,500,000
----------- ------------ ------------
REVOLVING LINE OF CREDIT (Note 8)..... 1,156,000 1,000,000 0
----------- ------------ ------------
DEFERRED INCOME TAXES (Notes 3 and
6)................................... 75,000 0 400,000
----------- ------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 9)
CONVERTIBLE PARTICIPATING PREFERRED
STOCK, $.01 par value, 7,000,000
shares authorized, issued and
outstanding as of December 31, 1996
and March 31, 1997 (Note 11)......... 0 12,500,000 12,832,000
----------- ------------ ------------
REDEEMABLE PREFERRED STOCK, $.01 par
value, 5,600,000 shares authorized;
none issued and outstanding.......... 0 0 0
----------- ------------ ------------
STOCKHOLDER'S EQUITY (DEFICIT) (Notes
4, 5, 10, 11 and 12): Common Stock,
no par value at December 31, 1995 and
$.01 par value at December 31, 1996
and March 31, 1997; 2,500 shares
authorized for December 31, 1995 and
12,000,000 shares authorized at
December 31, 1996 and March 31, 1997;
100 shares issued and outstanding in
1995 and 5,733,328 shares issued and
1,999,995 shares outstanding at
December 31, 1996 and March 31,
1997................................. 10,000 57,333 57,333
Class A common stock, $.01 par value,
1,333,333 shares authorized; 666,666
and 750,333 shares issued and
outstanding at December 31, 1996 and
March 31, 1997, respectively........ 0 6,667 7,504
Class B common stock, $.01 par value,
4,666,666 shares authorized; none
issued and outstanding.............. 0 0 0
Treasury stock, 3,733,333 shares at
cost at December 31, 1996 and March
31, 1997............................ 0 (18,850,000) (18,850,000)
Additional paid-in capital........... 0 1,887,406 1,922,337
Retained earnings (deficit).......... 2,494,788 (12,488,635) (11,943,137)
----------- ------------ ------------
Total stockholders' equity
(deficit)......................... 2,504,788 (29,387,229) (28,805,963)
----------- ------------ ------------
Total liabilities and stockholders'
equity (deficit).................. $10,498,850 $ 23,096,940 $ 18,492,690
=========== ============ ============
</TABLE>
The accompanying notes to financial statements are an integral part of these
balance sheets.
F- 4
<PAGE>
BORON, LEPORE & ASSOCIATES, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
----------------------------------- ----------------------
1994 1995 1996 1996 1997
----------- ----------- ----------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES (Notes 3 and
13).................... $20,580,038 $21,774,824 $40,219,534 $6,973,795 $13,672,863
COST OF SALES........... 12,378,250 12,788,018 26,004,405 4,496,394 9,736,739
----------- ----------- ----------- ---------- -----------
Gross profit.......... 8,201,788 8,986,806 14,215,129 2,477,401 3,936,124
----------- ----------- ----------- ---------- -----------
OFFICERS' COMPENSATION.. 2,003,000 1,336,000 13,351,000 683,000 286,000
OTHER SELLING, GENERAL
AND ADMINISTRATIVE
EXPENSES............... 4,533,004 5,004,631 6,644,398 1,487,989 1,963,522
----------- ----------- ----------- ---------- -----------
TOTAL SELLING, GENERAL
AND ADMINISTRATIVE
EXPENSES............... 6,536,004 6,340,631 19,995,398 2,170,989 2,249,522
----------- ----------- ----------- ---------- -----------
Income (loss) from
operations........... 1,665,784 2,646,175 (5,780,269) 306,412 1,686,602
INTEREST EXPENSE (net of
interest income of
$9,885, $33,370,
$56,561, $11,813 and
$18,257 for the years
and three month periods
ended December 31,
1994, 1995 and 1996 and
March 31, 1996 and
1997, respectively).... 43,063 85,593 254,676 55,158 409,104
NONRECURRING LOSS ON
FORGIVENESS OF RELATED
PARTY LOAN (Note 4).... 0 0 1,076,418 0 0
----------- ----------- ----------- ---------- -----------
Income (loss) before
provision for income
taxes................ 1,622,721 2,560,582 (7,111,363) 251,254 1,277,498
PROVISION FOR INCOME
TAXES (Notes 3 and 6).. 25,000 51,000 0 0 400,000
----------- ----------- ----------- ---------- -----------
Net income (loss)..... $ 1,597,721 $ 2,509,582 $(7,111,363) $ 251,254 $ 877,498
=========== =========== =========== ========== ===========
PRO FORMA NET INCOME
(LOSS) DATA (Unaudited)
(Notes 3 and 6):
INCOME (LOSS) BEFORE
PROVISION FOR INCOME
TAXES................. $ 1,622,721 $ 2,560,582 $(7,111,363) $ 421,254 $ 1,277,498
PRO FORMA INCOME TAX
PROVISION (actual for
March 31, 1997) (Note
6).................... 0 0 0 0 400,000
----------- ----------- ----------- ---------- -----------
PRO FORMA NET INCOME
(LOSS)................ $ 1,622,721 $ 2,560,582 $(7,111,363) $ 421,254 $ 877,498
=========== =========== =========== ========== ===========
PRO FORMA NET INCOME
(LOSS) PER COMMON SHARE
(Unaudited) (Note 3)... $ (0.96) $ 0.12
=========== ===========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING
(Note 3)............... 7,416,997 7,416,997
=========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-5
<PAGE>
BORON, LEPORE & ASSOCIATES, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
CLASS A CLASS B ADDITIONAL RETAINED
COMMON COMMON COMMON TREASURY PAID-IN EARNINGS
STOCK STOCK STOCK STOCK CAPITAL (DEFICIT)
------- ------- ------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AS OF DECEMBER
31, 1993............... $10,000 $ 0 $ 0 $ 0 $ 0 $ (1,462,515)
Net income............ 0 0 0 0 0 1,597,721
------- ------ --- ------------ ---------- ------------
BALANCE AS OF DECEMBER
31, 1994............... 10,000 0 0 0 0 135,206
Net income............ 0 0 0 0 0 2,509,582
Stockholder
distributions........ 0 0 0 0 0 (150,000)
------- ------ --- ------------ ---------- ------------
BALANCE AS OF DECEMBER
31, 1995............... 10,000 0 0 0 0 2,494,788
Net loss.............. 0 0 0 0 0 (7,111,363)
Repurchase of minority
stockholder's 18
shares of common
stock................ 0 0 0 (643,674) 0 0
Repurchase of minority
stockholder's 20
shares of common
stock................ 0 0 0 (970,000) (6,175,000) 0
Capital contribution
by stockholders...... 0 0 0 0 451,000 0
Retirement of 38
treasury shares of
common stock......... (3,800) 0 0 1,613,674 (451,000) (188,874)
Termination of S
Corporation.......... 0 0 0 0 7,609,386 (7,609,386)
Conversion of 62
outstanding shares of
common stock at
129,032.2580645 per
share................ 73,800 0 0 0 0 (73,800)
Effect of two-for-
three reverse stock
split................ (26,667) 0 0 0 26,667 0
Repurchase of
3,733,333 shares of
common stock as
treasury stock....... 0 0 0 (18,850,000) 0 0
Issuance of 666,666
shares Class A common
stock at $.428 per
share................ 0 6,667 0 0 278,333 0
Issuance of 400,000
shares common stock
at $.428 per share... 4,000 0 0 0 167,000 0
Stock issuance costs.. 0 0 0 0 (18,980) 0
------- ------ --- ------------ ---------- ------------
BALANCE AS OF DECEMBER
31, 1996............... 57,333 6,667 0 (18,850,000) 1,887,406 (12,488,635)
Net income............ 0 0 0 0 0 877,498
Dividends on
convertible
participating
preferred stock...... 0 0 0 0 0 (332,000)
Issuance of 83,667
shares of Class A
common stock at $.428
per share............ 0 837 0 0 34,931 0
------- ------ --- ------------ ---------- ------------
BALANCE AS OF MARCH 31,
1997................... $57,333 $7,504 $ 0 $(18,850,000) $1,922,338 $(11,943,137)
======= ====== === ============ ========== ============
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-6
<PAGE>
BORON, LEPORE & ASSOCIATES, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE
THREE MONTHS ENDING
FOR THE YEARS ENDED DECEMBER 31, MARCH 31,
----------------------------------- ---------------------
1994 1995 1996 1996 1997
---------- ---------- ----------- --------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income (loss)..... $1,597,721 $2,509,582 $(7,111,363) $ 421,254 $ 877,498
Adjustments to
reconcile net income
(loss) to net cash
provided by operating
activities-
Depreciation and
amortization........ 78,672 93,818 112,618 24,523 53,934
Loss on sale of fixed
assets.............. 37,585 0 0 0 0
Nonrecurring loss on
forgiveness of
related party loan.. 0 0 1,076,418 0 0
Deferred income
taxes............... 25,000 50,000 (75,000) 0 400,000
Changes in operating
assets and
liabilities-
(Increase) decrease
in accounts
receivables, net... (1,298,816) (2,636,435) (7,561,243) 1,487,531 (1,708,942)
Increase in prepaid
expenses and other
current assets..... (52,099) (45,024) (58,028) (37,651) (78,742)
(Increase) decrease
in security
deposits........... 1,210 1,265 636 0 (1,391)
Increase in
intangible assets.. 0 0 (352,500) 0 0
Increase in due from
affiliates......... 0 0 (140,363) 0 0
(Increase) decrease
in due from
officers........... 0 (672,324) 28,651 186,167 0
(Decrease) increase
in payable to
affiliates......... 288,510 (2,218,176) 0 (613,307) 0
Increase (decrease)
in accounts payable
and accrued
expenses........... 209,615 1,381,141 9,928,526 (307,356) (6,046,034)
Increase (decrease)
in deferred revenue
and billings in
excess of costs.... (544,436) 945,751 3,438,414 (188,152) 1,128,518
---------- ---------- ----------- --------- ----------
Net cash (used in)
provided by
operating
activities........ 342,962 (590,402) (713,234) 973,009 (5,375,159)
---------- ---------- ----------- --------- ----------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Purchases of
furniture, fixtures
and equipment........ (269,096) (43,493) (134,965) (29,553) (86,664)
Proceeds from sale of
furniture, fixtures
and equipment........ 42,035 0 0 0 0
---------- ---------- ----------- --------- ----------
Net cash used in
investing
activities........ (227,061) (43,493) (134,965) (29,553) (86,664)
---------- ---------- ----------- --------- ----------
</TABLE>
F-7
<PAGE>
<TABLE>
<CAPTION>
FOR THE
THREE MONTHS ENDING
FOR THE YEARS ENDED DECEMBER 31, MARCH 31,
---------------------------------- ------------------------
1994 1995 1996 1996 1997
--------- ---------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM
FINANCING ACTIVITIES:
(Repayment of) proceeds
from stockholder
loan.................. 100,000 (100,000) 0 0 0
Stockholder
distributions......... 0 (150,000) 0 0 0
Proceeds from revolving
line of credit........ 0 1,156,000 1,000,000 0 0
(Repayment of) proceeds
from long-term debt... (161,833) 1,250,000 20,000,000 0 0
Repayments of long-term
debt and revolving
line of credit........ (25,468) (589,549) (2,301,833) (1,218,500) (1,000,000)
Proceeds from the
issuance of
convertible
participating
preferred stock....... 0 0 12,500,000 0 0
Proceeds from the
issuance of common
stock................. 0 0 171,000 0 0
Proceeds from the
issuance of Class A
common stock.......... 0 0 285,000 0 35,768
Repurchase of treasury
stock from
stockholders.......... 0 0 (18,850,000) 0 0
Repurchase of treasury
stock from former
stockholder........... 0 0 (6,175,000) (643,674) 0
Payment of stock
issuance costs........ 0 0 (18,980) 0 0
Capital contribution by
stockholders.......... 0 0 451,000 341,000 0
--------- ---------- ----------- ----------- -----------
Net cash provided by
(used in) financing
activities......... (87,301) 1,566,451 7,061,187 (1,521,174) (964,232)
--------- ---------- ----------- ----------- -----------
Net (decrease)
increase in cash... 28,600 932,556 6,212,988 (577,718) (6,426,055)
CASH AND CASH
EQUIVALENTS, beginning
of period.............. 1,504 30,104 962,660 962,660 7,175,648
--------- ---------- ----------- ----------- -----------
CASH AND CASH
EQUIVALENTS, end of
period................. $ 30,104 $ 962,660 $ 7,175,648 $ 384,942 $ 749,593
========= ========== =========== =========== ===========
SUPPLEMENTAL DISCLOSURES
OF CASH FLOW
INFORMATION:
Cash paid during the
period for-
Interest.............. $ 71,000 $ 145,000 $ 321,000 $ 77,000 $ 402,000
========= ========== =========== =========== ===========
Taxes................. $ 0 $ 0 $ 20,015 $ 20,015 $ 0
========= ========== =========== =========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-8
<PAGE>
BORON, LEPORE & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS
(1) DESCRIPTION OF THE BUSINESS:
Boron, LePore & Associates, Inc. was originally incorporated under the laws
of the State of New Jersey in July 1981 (see Note 2) and provides marketing
services to large national and international pharmaceutical companies.
The accompanying unaudited financial statements as of March 31, 1997 and for
the three months ended March 31, 1997 and 1996 have been prepared by the
Company pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, certain information and note disclosures normally
included in financial statements prepared in conformity with generally
accepted accounting principles have been condensed or omitted. In the opinion
of the Company, all adjustments, consisting of only normal recurring
adjustments, necessary to present fairly the financial position, results of
operations and changes in cash flows for the periods presented have been made.
(2) INCORPORATION AND MERGER:
On November 22, 1996, BLA Acquisition Corp. was incorporated in the State of
Delaware with 100 shares of $1 par value authorized common stock and 20 shares
issued. On November 27, 1996, the stockholders of BLA Acquisition Corp. and
the stockholders of Boron LePore & Associates, Inc., all under common control,
unanimously approved the Agreement and Plan of Merger ("Merger Agreement"). On
December 3, 1996, the merger became effective and was accounted for comparable
to a pooling of interests. The surviving corporation was BLA Acquisition
Corp., which subsequently changed its name to Boron, LePore & Associates Inc.
(the "Company"). On December 3, 1996, the shares of both the corporations were
canceled and 100 shares of common stock were authorized for the Company, of
which 62 shares were issued.
On December 4, 1996, the Company amended and restated its certificate of
incorporation to include the authority to issue 26,400,000 shares of stock
(See Note 16). The different classes of stock each contain various rights and
privileges.
Effective with the signing of the amended and restated certificate of
incorporation on December 4, 1996, each share of outstanding common stock was
converted into 129,032.2580645 shares of common stock. The original 62 shares
of common stock were converted into 5,333,333 shares of newly authorized
common stock.
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Use of Estimates--
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents--
For purposes of the statement of cash flows, the Company considers all
highly liquid investments purchased with a maturity of three months or less to
be cash equivalents.
Revenue Recognition--
Customers are invoiced according to the contract terms. Revenue is
recognized as services are performed based on the completion of certain events
specified in the contract.
F-9
<PAGE>
BORON, LEPORE & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The Company is entitled to additional revenues (performance incentives)
under certain contracts. The additional revenues are computed based on a
formula specified in each contract and are primarily dependent upon increases
in market share for a client's product. The market share statistics are
measured over a period of time in the future specified in the contract terms.
If contract terms permit invoicing for portions of the performance incentives
prior to the calculation of actual market share results, the revenues are
deferred at the time of invoicing. All performance based incentive revenues
that were invoiced at December 31, 1996 and March 31, 1997 approximated
$1,070,000 and $857,000, respectively, and are reflected as billings in excess
of costs in the accompanying balance sheets.
Depreciation and Amortization--
Depreciation and amortization is provided principally on the straight-line
method over the estimated useful lives of the related assets as follows--
<TABLE>
<S> <C>
Furniture, fixtures and equipment.............................. 5-7 years
</TABLE>
Expenditures for repairs and maintenance are expensed as incurred while
renewals and betterments are capitalized.
Intangibles--
During 1996, as part of a Preferred Stock Purchase Agreement (see Note 11),
the Company incurred certain financing costs related to the transaction. The
costs are comprised primarily of commitment fees related to long term debt
financing costs (see Note 8) and totaled $312,500. The Company is amortizing
these costs over 5 years.
Income Taxes--
The stockholders of the Company have elected to be treated as an "S"
Corporation for both Federal and state income tax purposes for all periods
through to December 4, 1996. The net income (loss) of the business for that
period will be included in the individual income tax returns of the
stockholders. Prior to December 4, 1996, the Company was subject to the State
of New Jersey "S" Corporation tax which is computed based on the difference
between corporate and personal income tax rates. On December 4, 1996, the
Company's S Corporation status was terminated and the Company, under the
Merger Agreement, began operations as a Delaware corporation and was subject
to Federal and state corporate tax rates as a "C" corporation.
The Company uses the asset and liability method to calculate deferred tax
assets and liabilities. Deferred taxes are recognized based on the differences
between the financial reporting and income tax bases of assets and liabilities
using enacted income tax rates.
Long-Lived Assets--
During 1996, the Company adopted the provisions of Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets" ("SFAS 121"). SFAS 121 requires, among other things, that an entity
review its long-lived assets and certain related intangibles for impairment
whenever changes in circumstances indicate that the carrying amount of an
asset may not be fully recoverable. As a result of its review, the Company
does not believe that any impairment currently exists related to its long-
lived assets.
Stock Based Compensation--
The Financial Accounting Standards Board has issued a new standard,
"Accounting for Stock-Based Compensation" ("SFAS 123"). SFAS 123 requires that
an entity account for employee stock compensation
F-10
<PAGE>
BORON, LEPORE & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
under a fair value based method. However, SFAS 123 also allows an entity to
continue to measure compensation cost for employee stock-based compensation
using the intrinsic value based method of accounting prescribed by APB Opinion
No. 25, "Accounting for Stock Issued to Employees" ("Opinion 25"). Entities
electing to remain with the accounting under Opinion 25 are required to make
pro forma disclosures of net income and earnings per share as if the fair
value based method of accounting under SFAS 123 had been applied. The Company
will continue to account for employee stock-based compensation under Opinion
25 and will make the pro forma disclosures required under SFAS 123.
Pro Forma Net Income (Loss) Per Common Share--
Pro forma net income (loss) per common shares has been computed by dividing
pro forma net income (loss) by the pro forma number of common shares
outstanding, as adjusted. As required by the Securities and Exchange
Commission rules, all warrants, options and shares issued within one year of
the public offering at less than the public offering price are assumed to be
outstanding for each period presented for purposes of the per share
calculation.
Statement of Financial Accounting Standards No. 128, "Earnings per Share"
("SFAS 128") which becomes effective for the period ending December 31, 1997,
establishes new standards for computing and presenting earnings per share
(EPS). The new standard requires the presentation of basic EPS and diluted
EPS. Basic EPS is calculated by dividing income available to common
shareholders by the weighted average number of shares of common stock
outstanding during the period. Diluted EPS is calculated by dividing income
available to common shareholders by the weighted average number of common
shares outstanding adjusted to reflect potentially dilutive securities.
Previously reported EPS amounts must be restated under the new standard when
it becomes effective. The impact of adopting SFAS 128 for the year ending
December 31, 1996 and for the three months ending March 31, 1997 would not
have been material.
Reclassifications--
Certain December 31, 1995 amounts have been reclassified in order to conform
to the December 31, 1996 presentation.
(4)DUE FROM AFFILIATES:
During 1996 and 1995, the Company advanced monies to two companies
affiliated through common ownership. These advances were noninterest bearing
and were payable on demand. Pursuant to the terms contained in the Preferred
Stock Purchase Agreement (see Note 11), one of the receivables in the amount
of $150,044 was distributed to four officers/stockholders of the Company in
the form of bonus compensation payments of approximately $162,000, which
provided them with the after-tax funds to make the repayment. The remaining
receivable was paid in cash pursuant to the terms contained in the Preferred
Stock Purchase Agreement.
In January 1996, the amounts due at December 31, 1995 from a former
affiliate were converted into a $1,000,000 promissory note bearing interest at
8.1% per annum payable in quarterly installments over six years. During 1996,
additional liabilities were satisfied by the Company on behalf of the former
affiliate and payments were received according to terms. On December 4, 1996,
the Company agreed to sell the amounts due from the former affiliate,
approximately $1,560,000 plus interest, to certain officers/stockholders of
the Company for $500,000. The balance of the amount was recorded as a
nonrecurring loss on forgiveness of related party loan in the accompanying
statement of operations. The $500,000 was received by the Company from the
stockholders, pursuant to the terms contained in the Preferred Stock Purchase
Agreement (see Note 11) in the form of bonus compensation payments of
approximately $865,000 which provided the stockholders with the after-tax
funds to make the repayment.
F-11
<PAGE>
BORON, LEPORE & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(5) DUE FROM OFFICER/STOCKHOLDERS:
On June 30, 1995, the Company loaned three officers/stockholders amounts
aggregating approximately $672,000. In January 1996, the Company forgave a
portion of the loan and accrued interest of approximately $194,000 due from a
stockholder as part of a stock repurchase agreement. The remaining officer
loans, bearing interest at 8% per annum, were payable in five equal
installments due on June 30 of each year. The total amount due from officers
of approximately $435,000, including accrued interest of $14,000, was repaid
pursuant to the terms contained in the Preferred Stock Purchase Agreement (see
Note 11) in the form of bonus compensation payments of approximately $761,000
which provided the officers with the after-tax funds to make the repayment.
(6) INCOME TAXES:
The components of the provision for income taxes are summarized as follows--
<TABLE>
<CAPTION>
FOR THE THREE
FOR THE YEARS ENDED MONTHS ENDED
DECEMBER 31, MARCH 31,
------------------------- --------------
1994 1995 1996 1996 1997
-------- -------- -------- ---- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Current.......................... $ 0 $ 1,000 $ 75,000 $ 0 $ 0
Deferred......................... 25,000 50,000 (75,000) 0 400,000
------- ------- -------- --- --------
$25,000 $51,000 $ 0 $ 0 $400,000
======= ======= ======== === ========
</TABLE>
On December 4, 1996, pursuant to a Preferred Stock Purchase Agreement (see
Note 11), the Company converted from a cash basis to accrual basis taxpayer.
In addition, the Company's S Corporation status was terminated and the Company
began operations as a C Corporation. Accordingly, the Company became subject
to Federal and state income taxes and the retained earnings of the Company
were transferred to paid-in capital.
The Company has also adopted the provisions of Statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes" (SFAS 109) which
requires the use of the asset and liability method to calculate deferred tax
assets and liabilities for temporary differences between financial reporting
and income tax bases.
The conversion from cash basis to accrual basis required the recognition of
a deferred tax liability of approximately $2,400,000. In addition, the Company
generated a net operating loss for the period from December 4, 1996 to
December 31, 1996. The net operating loss expires in 2012 and resulted in the
recognition of a deferred tax asset of approximately $4,700,000. The Company
has recorded a valuation allowance of $2,300,000 against the deferred tax
asset. The net remaining tax asset is offset against the $2,400,000 deferred
tax liability. All other temporary differences have been deemed immaterial.
As described above, the Company began operations as a C Corporation on
December 4, 1996. The following unaudited pro forma income tax information has
been determined as if the Company operated as a C Corporation from its
inception. The Company would not have had a Federal and state income tax
provision in the periods presented below because of net operating loss
carryforwards and carrybacks. No pro forma income tax provision is presented
for the three months ending March 31, 1997 as the Company was operating as a C
Corporation during that period.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, THREE MONTHS
----------------------------------- ENDED
1994 1995 1996 MARCH 31, 1996
--------- ----------- ----------- --------------
<S> <C> <C> <C> <C>
Federal tax provision
(benefit) at statutory
rate..................... $ 568,000 $ 896,000 $(2,489,000) $ 88,000
State income taxes net of
Federal benefit.......... 95,000 150,000 (416,000) 15,000
Operating loss
carryforwards............ (663,000) (1,046,000) 2,905,000 (103,000)
--------- ----------- ----------- ---------
$ 0 $ 0 $ 0 $ 0
========= =========== =========== =========
</TABLE>
F-12
<PAGE>
BORON, LEPORE & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(7) ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
Accounts payable and accrued expenses are comprised of the following--
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
---------------------- -----------
1995 1996 1997
---------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Accounts payable......................... $1,556,462 $ 1,729,688 $2,405,383
Accrued payroll.......................... 445,495 8,170,078 1,007,174
Accrued honoraria........................ 577,156 1,860,656 2,265,838
Other accrued expenses................... 267,984 1,015,201 1,051,194
---------- ----------- ----------
$2,847,097 $12,775,623 $6,729,589
========== =========== ==========
</TABLE>
(8) LONG-TERM DEBT:
During 1995, the Company entered into a term loan in the amount of
$1,250,000. The term loan was due in monthly installments of $20,833 plus
interest at 1% above the bank's prime lending rate (9.5% at December 31,
1995).
In addition, the Company entered into a line of credit agreement with a bank
which had available borrowings under the agreement of up to the lesser of
$1,500,000 or 100% of eligible accounts receivable. The amounts outstanding
bore interest at .75% above the bank's prime lending rate (9.25% at
December 31, 1995). Interest was payable and the principal portion was due on
July 1, 1997. During 1996, the Company repaid the term loan and the borrowings
under the line of credit agreement and terminated the agreement.
On December 4, 1996, the Company entered into an agreement with a bank. The
agreement provides for a $5,000,000 revolving credit facility and a
$20,000,000 term loan. On December 4, 1996, the Company received the
$20,000,000 term loan. As of December 31, 1996, $1,000,000 was outstanding
under the revolving credit facility. Borrowings under the revolving credit
facility are due on December 31, 2001. The interest rates on the loans vary
and are a function of the stated LIBOR rate and the effective prime rate as
defined in the agreement. The term loan is to be repaid in incremental annual
payments on a quarterly basis over five years. The agreement contains various
financial and reporting covenants beginning in 1997. Additionally, the Company
entered into an interest rate swap agreement in 1997 to provide interest rate
protection on 50% of the outstanding principal balance of the term loan.
The following are the maturities of long-term debt as of December 31, 1996
for the next five years--
<TABLE>
<S> <C>
1997........................................................ $ 1,000,000
1998........................................................ 2,000,000
1999........................................................ 3,000,000
2000........................................................ 4,000,000
2001........................................................ 10,000,000
</TABLE>
F-13
<PAGE>
BORON, LEPORE & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(9) COMMITMENTS AND CONTINGENCIES:
Operating Leases--
The Company leases office space, automobiles, and equipment under various
operating leases expiring in 2001. Approximate annual lease commitments for
the next five years are as follows--
<TABLE>
<S> <C>
1997............................................................ $444,000
1998............................................................ 433,000
1999............................................................ 305,000
2000............................................................ 111,000
2001............................................................ 10,000
</TABLE>
Rent expense charged against operations approximated $350,000, $340,000,
$387,000, $95,000 and $95,000 for the years ended December 31, 1994, 1995 and
1996 and the three month periods ended March 31, 1996 and 1997, respectively.
Litigation--
The Company is involved in legal proceedings incurred in the normal course
of business. In the opinion of management and its counsel, none of these
proceedings would have a material effect on the financial position or results
of operations of the Company.
(10) PURCHASE OF TREASURY STOCK:
In January 1996, the Company paid a minority stockholder $450,000 and
forgave the stockholder's loan receivable and accrued interest of
approximately $194,000 in exchange for the stockholder's 18 shares of common
stock. The shares were held in treasury at a cost of $643,674. Additionally,
in January 1996, the remaining stockholders of the Company sold their shares
of common stock in an affiliated company. Subsequent to these transactions
there was no longer a common ownership relationship between the two companies.
Concurrent with the Merger Agreement (see Note 11) the stock held in treasury
was retired on December 4, 1996 and the $643,674 cost was transferred to
retained earnings on that date.
On June 18, 1996, the Company entered into a Stock Purchase Agreement to
repurchase 20 shares of common stock from a stockholder. The agreement also
contained a Disposition Benefit Agreement. The Disposition Benefit Agreement
would only become effective if there was a sale of a controlling interest of
the outstanding stock within a certain period of time. The stock was purchased
with a promissory note payable over five years with monthly payments of
principal and interest of $10,417 and annual payments of $125,000, including
interest, commencing on January 1, 1997. The shares were held in treasury at a
cost of $970,000, the present value of the promissory note. Concurrently with
the Merger Agreement on December 4, 1996, the treasury shares were canceled,
the promissory note payable was canceled, the Disposition Benefit Agreement
was canceled, the cost of the shares was transferred to paid-in capital and
retained earnings and the former stockholder received a payment of $6,175,000
on that date.
(11) PREFERRED STOCK PURCHASE AGREEMENT AND STOCK REDEMPTION:
On December 4, 1996, a Preferred Stock Purchase Agreement was entered into,
between the Company and certain investment partnerships and individuals
(collectively the "Investors"). The Company sold 7,000,000 shares of its
authorized $.01 par value Convertible Participating Preferred Stock for
$12,500,000. The Convertible Participating Preferred Stock has a minimum
liquidation value of $10 million and is convertible to common stock and
redeemable preferred stock at various rates based on the occurrence of certain
events. In addition, the holders of the Convertible Participating Preferred
Stock are entitled to receive an annual cash
F-14
<PAGE>
BORON, LEPORE & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
dividend of approximately $.1429 per share. The convertible participating
preferred shares have voting rights similar to common stock and are subject to
certain liquidating and redemption features, as defined, at the option of the
holder.
Concurrently with the closing of the sale of the preferred shares and with
financing provided by a bank, the Company redeemed 3,733,333 shares of common
stock from two individual shareholders for payments aggregating $18,850,000
pursuant to the terms contained in the Preferred Stock Purchase Agreement.
(12)STOCK OPTION AND GRANT PLAN:
During 1996 the Boron, LePore & Associates 1996 Stock Option and Grant Plan
(the "Plan") was established. The maximum number of shares of stock reserved
and available for issuance under the Plan was 400,000 shares of Common Stock
and 1,333,333 shares of Class A Common Stock.
On December 4, 1996, two officers of the Company exercised their rights to
purchase 400,000 shares of Common Stock under the terms contained in the Plan.
The exercise price established by the Company's Compensation Committee on
December 4, 1996 (grant date) was $.428 per share. The Company received
$171,000 in payment for the 400,000 shares on December 4, 1996. The Company
paid bonus compensation to the two officers on December 4, 1996 of
approximately $301,000 which provided them with the after-tax funds to make
the purchase.
On December 4, 1996, four officers of the Company exercised their rights to
purchase collectively, 666,666 shares of Class A Common Stock under the terms
and conditions in the Plan. The exercise price established by the Company's
Compensation Committee on December 4, 1996 (grant date) was $.428 per share.
The Company received $285,000 on December 4, 1996 in payment for the 666,666
shares. The Plan calls for certain performance levels to be attained or the
passage of a specified period of time before the officers are 100% vested in
the 666,666 shares of Class A Common Stock.
In 1997, the Company granted rights to purchase 83,667 shares of Class A
Common Stock at an exercise price of $.428 to certain key employees and
outside consultants.
(13)MAJOR CUSTOMERS:
Revenue from three customers accounted for approximately $28,000,000 or 70%
of total revenue for the year ending December 31, 1996.
Revenue from four customers accounted for approximately $17,400,000 or 82%
and $15,475,000 or 75% of total revenue for the years ended December 31, 1995
and 1994, respectively.
Major customers accounted for approximately $12,199,000 or 80% and
$5,936,000 or 80% of accounts receivable at December 31, 1996 and 1995,
respectively.
(14)RELATED PARTY TRANSACTIONS:
The Company entered into a consulting agreement on December 23, 1991 with a
stockholder of the Company. The agreement provided, among other things for the
payment of monthly consulting fees through December 31, 2001. The total
consulting fees charged to operations during the years ended December 31,
1996, 1995 and 1994 approximated $516,000, $360,000 and $295,000,
respectively. The consulting agreement was terminated pursuant to the terms
contained in the Preferred Stock Purchase Agreement and the Company received
and executed a general release from the former stockholder in consideration
for the payment made.
F-15
<PAGE>
BORON, LEPORE & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
During the years ending December 31, 1994, 1995 and 1996, the Company leased
space from a stockholder of the Company. The aggregate rent expense charged to
operations for those periods approximated $82,000, $82,000 and $84,000,
respectively.
(15)EMPLOYMENT AND NONCOMPETE AGREEMENTS:
Four officers/stockholders/consultants of the Company signed employment
agreements on December 4, 1996 at various compensation levels for a three year
term. The agreements specify duties, benefits, confidentiality provisions and
miscellaneous other provisions. Additionally, the same individuals signed
Noncompete Agreements on December 4, 1996. The agreements are in effect for a
maximum of four years and each individual received $10,000 in consideration.
During 1997, an officer of the Company became a consultant and is being
compensated in accordance with the terms of the employment agreement.
(16)SUBSEQUENT EVENT (UNAUDITED)
Proposed Public Offering
The Company is contemplating a proposed public offering of 3,333,333 shares
of Common Stock. Upon completion of such offering, the authorized common stock
of the Company will increase to 50,000,000 shares of $.01 par value common
stock.
Stock Split--
All share amounts have been retroactively adjusted to reflect a 2-for-3
reverse common stock split.
F-16
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALES PERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION WOULD BE UNLAWFUL OR TO ANY PERSON TO WHOM IT IS UNLAW-
FUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE MADE HERE-
UNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 6
Use of Proceeds.......................................................... 12
Dividend Policy.......................................................... 12
Dilution................................................................. 13
Capitalization........................................................... 14
Selected Financial Information........................................... 15
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 16
Business................................................................. 23
Management............................................................... 33
Certain Transactions..................................................... 38
Principal Stockholders................................................... 40
Description of Capital Stock............................................. 42
Shares Eligible for Future Sale.......................................... 44
Underwriting............................................................. 47
Legal Matters............................................................ 48
Experts.................................................................. 49
Index to Financial Statements............................................ F-1
</TABLE>
---------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EF-
FECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY REQUIRE-
MENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
3,333,333 SHARES
BORON, LEPORE & ASSOCIATES, INC.
COMMON STOCK
---------------
PROSPECTUS
---------------
BEAR, STEARNS & CO. INC.
SMITH BARNEY INC.
WESSELS, ARNOLD & HENDERSON
, 1997
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION (1)
The following table sets forth the estimated expenses payable by the Company
in connection with this offering (excluding underwriting discounts and
commissions):
<TABLE>
<CAPTION>
NATURE OF EXPENSE AMOUNT
----------------- -------
<S> <C>
SEC Registration Fee.............................................. $19,167
NASD Filing Fee................................................... 30,500
Nasdaq Listing Fee................................................ *
Accounting Fees and Expenses...................................... *
Legal Fees and Expenses........................................... *
Printing Expenses................................................. *
Blue Sky Qualification Fees and Expenses.......................... *
Transfer Agent's Fee.............................................. *
Miscellaneous..................................................... *
-------
Total......................................................... $ *
=======
</TABLE>
- --------
(1) The amounts set forth above, except for the SEC, NASD and Nasdaq fees, are
in each case estimated.
*To be completed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
In accordance with Section 145 of the General Corporation Law of the State
of Delaware, Article VIII of the Company's Amended and Restated Certificate of
Incorporation (the "Certificate") provides that no director of the Company
shall be personally liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability (i)
for any breach of the director's duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) in respect of
certain unlawful dividend payments or stock redemptions or repurchases, or
(iv) for any transaction from which the director derived an improper personal
benefit. In addition, the Certificate provides that if the Delaware General
Corporation Law is amended to authorize the further elimination or limitation
of the liability of directors, then the liability of a director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the Delaware General Corporation Law, as so amended.
Article V of the Company's Amended and Restated By-laws provides for
indemnification by the Company of its officers and certain non-officer
employees under certain circumstances against expenses (including attorneys
fees, judgments, fines and amounts paid in settlement) reasonably incurred in
connection with the defense or settlement of any threatened, pending or
completed legal proceeding in which any such person is involved by reason of
the fact that such person is or was an officer or employee of the Company if
such person acted in good faith and in a manner he or she reasonably believed
to be in or not opposed to the best interests of the Company, and, with
respect to criminal actions or proceedings, if such person had no reasonable
cause to believe his or her conduct was unlawful.
The Stockholder's Agreement, filed as Exhibit 2.4 hereto, provides for
indemnification by the Company of certain of its existing principal
stockholders and the controlling persons of such stockholders (two of whom are
directors of the Company) against claims and liabilities, including claims and
liabilities arising under the securities laws.
The Company has entered into indemnification agreements with certain of its
directors reflecting the foregoing provisions of its By-laws and requiring the
advancement of expenses in proceedings involving such directors in most
circumstances.
II-1
<PAGE>
Under Section 7 of the Underwriting Agreement filed as Exhibit 1.1 hereto,
the Underwriters have agreed to indemnify, under certain conditions, the
Company, its directors, certain officers and persons who control the Company
within the meaning of the Securities Act of 1933 against certain liabilities.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Set forth in chronological order below is information regarding the number
of share of capital stock issued by the Registrant since its incorporation in
1996. Further included is the consideration, if any, received by the
Registrant for such shares, and information relating to the section of the
Securities Act of 1933, as amended (the "Securities Act"), or rule of the
Securities and Exchange Commission under which exemption from registration was
claimed. The following transactions give effect to the Company's three-for-two
reverse stock split of its Common Stock and Class A Common Stock, which will
become effective on 1997.
(1) In November 1996, the Company sold 3 shares of the Company's Common
Stock for an aggregate purchase price of $10.00 to Patrick G. LePore, and 3
shares of the Company's Common Stock for an aggregate purchase price of
$10.00 to Gregory F. Boron in reliance upon the exemption from registration
under section 4(2) of the Securities Act.
(2) In November 1996, the Company issued 6 shares of the Company's Common
Stock to Patrick G. LePore in exchange for 14 shares of common stock of the
predecessor held by Mr. LePore pursuant to a merger agreement, and the
Company issued 6 shares of the Company's Common Stock to Gregory F. Boron
in exchange for 14 shares of common stock of the predecessor held by Mr.
Boron pursuant to a merger agreement and in reliance upon the exemption
from registration under section 4(2) of the Securities Act.
(3) In December 1996, pursuant to a Preferred Stock Purchase Agreement,
the Company sold an aggregate of 4,666,664 shares of the Company's
Convertible Participating Preferred Stock for a aggregate purchase price of
$12,500,000 to Advent VII L.P., Advent Atlantic and Pacific III L.P., TA
Venture Investors Limited Partnership and four other accredited investors,
in reliance upon the exemption from registration under Regulation D of the
Securities Act.
(4) In December 1996, pursuant to the Company's 1996 Stock Option and
Grant Plan, the Company granted an aggregate of 666,666 shares of the
Company's restricted Class A Common Stock for an aggregate purchase price
of $285,500 to four employees in reliance upon the exemption from
registration under Rule 701 promulgated under the Securities Act.
(5) In January 1997, pursuant to the Company's 1996 Stock Option and
Grant Plan, the Company granted 96,992 shares of the Company's restricted
Class A Common Stock for an aggregate purchase price of $42,608 to
employees and granted 6,665 shares of the Company's Common Stock for an
aggregate purchase price of $2,850 to consultants of the Company in
reliance upon the exemption from registration under Rule 701 promulgated
under the Securities Act.
(6) In February 1997, pursuant to the Company's 1996 Stock Option and
Grant Plan, the Company granted 10,000 shares of the Company's restricted
Class A Common Stock for an aggregate purchase price of $4,275 to an
employee in reliance upon the exemption from registration under Rule 701
promulgated under the Securities Act.
(7) In March 1997, pursuant to the Company's 1996 Stock Option and Grant
Plan, the Company granted options to purchase 16,666 shares of the
Company's restricted Class A Common Stock for an aggregate exercise price
of $7,125 to an employee in reliance upon the exemption from registration
under Rule 701 promulgated under the Securities Act.
(8) In April 1997, pursuant to the Company's 1996 Stock Option and Grant
Plan, the Company granted 3,333 shares of the Company's Common Stock to a
consultant of the Company for an aggregate purchase price of $1,425 and
granted 6,666 shares of the Company's restricted Class A Common Stock to
each of two directors of the Company, for an aggregate purchase price of
$20,000 each in reliance upon the exemption from registration under Rule
701 promulgated under the Securities Act.
(9) In May 1997, pursuant to the Company's 1996 Stock Option and Grant
Plan, the Company granted 6,666 shares of the Company's restricted Class A
Common Stock to a director for an aggregate purchase
II-2
<PAGE>
price of $20,000 in reliance upon the exemption from registration under
Rule 701 promulgated under the Securities Act.
(10) In June 1997, pursuant to the Company's 1996 Stock Option and Grant
Plan, the Company granted options to purchase 262,328 shares of the
Company's restricted Class A Common Stock for an aggregate purchase price
of $2,479,050 to employees of the Company and granted 9,332 shares of the
Company's Class A Common Stock to employees of the Company for an aggregate
cash purchase price of $93 in reliance upon the exemption from registration
under Rule 701 promulgated under the Securities Act and the exemption from
registration under Section 4(2) of the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
*1.1 Form of Underwriting Agreement.
*2.1 Agreement and Plan of Merger by and between the Predecessor and the
Registrant.
*2.2 Stock Redemption Agreement dated as of December 4, 1996 by and among the
Registrant and Patrick G. LePore, Gregory Boron, Christopher Sweeney and
Michael W. Foti (excluding schedules, which the Registrant agrees to
furnish supplementally to the Commission upon request).
*2.3 Preferred Stock Purchase Agreement dated as of December 4, 1996 by and
among the Registrant and the Investors named therein (excluding
schedules, which the Registrant agrees to furnish supplementally to the
Commission upon request).
*2.4 Stockholders' Agreement dated as of December 4, 1996, as amended, by and
among the Registrant, the Investors (as defined), Patrick G. LePore,
Gregory Boron, Christopher Sweeney and Michael W. Foti.
*3.1 Amended and Restated Certificate of Incorporation.
*3.2 Amendment to Amended and Restated Certificate of Incorporation.
*3.3 Second Amendment to Amended and Restated Certificate of Incorporation.
*3.4 Form of Restated Certificate of Incorporation (to be filed upon the
closing of the Offering referred to in the Registration Statement).
*3.5 By-Laws.
*3.6 Form of Second Amended and Restated By-laws (to be effective upon the
closing of the Offering referred to in the Registration Statement).
*4.1 Specimen certificate for shares of Common Stock, $.01 par value, of the
Registrant.
*4.2 Credit Agreement with Fleet National Bank as Agent and Lender.
*5.1 Opinion of Goodwin, Procter & Hoar LLP as to the validity of the
securities being offered.
*10.1 Lease between MBM Associates and Boron, LePore & Associates, Inc.
*10.2 Lease by and between SPENCO, Ltd. and Boron, LePore & Associates, Inc.
*10.3 Deed of Lease Agreement by and between Norfolk Commerce Center Limited
Partnership and Boron, LePore & Associates, Inc.
*10.4 Employment Agreement for Patrick G. LePore.
*10.5 Employment Agreement for Gregory F. Boron.
*10.6 Employment Agreement for Christopher Sweeney.
*10.7 Employment Agreement for Timothy J. McIntyre.
*10.8 Non-Competition Agreement for Patrick G. LePore.
*10.9 Non-Competition Agreement for Gregory F. Boron.
II-3
<PAGE>
*10.10 Non-Competition Agreement for Christopher Sweeney.
*10.11 Non-Competition Agreement for Timothy J. McIntyre.
*10.12 Boron, LePore & Associates, Inc. 1996 Stock Option and Grant Plan.
*10.13 Boron, LePore & Associates, Inc. 1997 Employee Stock Purchase Plan.
*10.14 Form of Indemnification Agreement between the Registrant and certain
directors.
*10.15 Stock Purchase Agreement of Christopher Sweeney.
+10.16 Restricted Stock Agreement for Patrick G. LePore.
+10.17 Restricted Stock Agreement for Gregory F. Boron.
+10.18 Restricted Stock Agreement for Christopher Sweeney.
*10.19 Restricted Stock Agreement for Timothy J. McIntyre.
+10.20 Incentive Stock Option Agreement for Timothy J. McIntyre.
*11.1 Computation of income per common share.
16.1 Letter re: Change in Certifying Accountant.
*23.1 Consent of Goodwin, Procter & Hoar LLP (included in Exhibit 5.1 hereto).
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of M.R. Weiser & Co. LLP.
24.1 Powers of Attorney (included on pages II-6).
27.1 Financial Data Schedule.
- --------
* To be filed by amendment to this Registration Statement.
+ Confidential treatment requested as to these Exhibits.
(B) FINANCIAL STATEMENT SCHEDULES
All schedules have been omitted because they are not required or because the
required information is given in the Financial Statements or Notes thereto.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and
II-4
<PAGE>
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this Registration Statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN FAIR LAWN, NEW JERSEY, ON JUNE 30,
1997.
Boron, LePore & Associates, Inc.
By: /s/ Patrick G. LePore
----------------------------------
PATRICK G. LEPORE
CHAIRMAN, CHIEF EXECUTIVE OFFICER
AND PRESIDENT
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS that each individual whose signature appears
below constitutes and appoints each of Patrick G. LePore and Gregory F. Boron
such person's true and lawful attorney-in-fact and agent with full power of
substitution and resubstitution, for such person and in such person's name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement (or to
any other registration statement for the same offering that is to be effective
upon filing pursuant to Rule 462(b) under the Securities Act), and to file the
same, with all exhibits thereto, and all documents in connection therewith,
with the Securities and Exchange Commission, granting unto each said attorney-
in-fact and agent full power and authority to do and perform each and every
act and thing requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as such person might or could do in person,
hereby ratifying and confirming all that any said attorney-in-fact and agent,
or any substitute or substitutes of any of them, may lawfully do or cause to
be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Patrick G. LePore Chairman of the June 30, 1997
- ------------------------------------- Board, Chief
PATRICK G. LEPORE Executive Officer,
President and
Director (Principal
Executive Officer,
Acting Principal
Financial and
Accounting Officer)
/s/ Gregory F. Boron Chief Operating June 30, 1997
- ------------------------------------- Officer and
GREGORY F. BORON Director
/s/ Roger Boissonneault Director June 30, 1997
- -------------------------------------
ROGER BOISSONNEAULT
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Roger B. Kafker Director June 30, 1997
- -------------------------------------
ROGER B. KAFKER
/s/ Jacqueline C. Morby Director June 30, 1997
- -------------------------------------
JACQUELINE C. MORBY
/s/ Joseph E. Smith Director June 30, 1997
- -------------------------------------
JOSEPH E. SMITH
/s/ John A. Staley, IV Director June 30, 1997
- -------------------------------------
JOHN A. STALEY, IV
</TABLE>
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
- ----------- ----------- ----
<C> <S> <C>
*1.1 Form of Underwriting Agreement.
*2.1 Agreement and Plan of Merger by and between the Predecessor and
the Registrant.
*2.2 Stock Redemption Agreement dated as of December 4, 1996 by and
among the Registrant and Patrick G. LePore, Gregory Boron,
Christopher Sweeney and Michael W. Foti (excluding schedules,
which the Registrant agrees to furnish supplementally to the
Commission upon request).
*2.3 Preferred Stock Purchase Agreement dated as of December 4, 1996
by and among the Registrant and the Investors named therein
(excluding schedules, which the Registrant agrees to furnish
supplementally to the Commission upon request).
*2.4 Stockholders' Agreement dated as of December 4, 1996, as
amended, by and among the Registrant, the Investors (as
defined), Patrick G. LePore, Gregory Boron, Christopher Sweeney
and Michael W. Foti.
*3.1 Amended and Restated Certificate of Incorporation.
*3.2 Amendment to Amended and Restated Certificate of Incorporation.
*3.3 Second Amendment to Amended and Restated Certificate of
Incorporation.
*3.4 Form of Restated Certificate of Incorporation (to be filed upon
the closing of the Offering referred to in the Registration
Statement).
*3.5 By-Laws.
*3.6 Form of Second Amended and Restated By-laws (to be effective
upon the closing of the Offering referred to in the
Registration Statement).
*4.1 Specimen certificate for shares of Common Stock, $.01 par
value, of the Registrant.
*4.2 Credit Agreement with Fleet National Bank as Agent and Lender.
*5.1 Opinion of Goodwin, Procter & Hoar LLP as to the validity of
the securities being offered.
*10.1 Lease between MBM Associates and Boron, LePore & Associates,
Inc.
*10.2 Lease by and between SPENCO, Ltd. and Boron, LePore &
Associates, Inc.
*10.3 Deed of Lease Agreement by and between Norfolk Commerce Center
Limited Partnership and Boron, LePore & Associates, Inc.
*10.4 Employment Agreement for Patrick G. LePore.
*10.5 Employment Agreement for Gregory F. Boron.
*10.6 Employment Agreement for Christopher Sweeney.
*10.7 Employment Agreement for Timothy J. McIntyre.
*10.8 Non-Competition Agreement for Patrick G. LePore.
*10.9 Non-Competition Agreement for Gregory F. Boron.
*10.10 Non-Competition Agreement for Christopher Sweeney.
*10.11 Non-Competition Agreement for Timothy J. McIntyre.
*10.12 Boron, LePore & Associates, Inc. 1996 Stock Option and Grant
Plan.
*10.13 Boron, LePore & Associates, Inc. 1997 Employee Stock Purchase
Plan.
*10.14 Form of Indemnification Agreement between the Registrant and
certain directors.
*10.15 Stock Purchase Agreement of Christopher Sweeney.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
----------- ----------- ----
<C> <S> <C>
+10.16 Restricted Stock Agreement for Patrick G. LePore.
+10.17 Restricted Stock Agreement for Gregory F. Boron.
+10.18 Restricted Stock Agreement for Christopher Sweeney.
*10.19 Restricted Stock Agreement for Timothy J. McIntyre.
+10.20 Incentive Stock Option Agreement for Timothy J. McIntyre.
*11.1 Computation of income per common share.
16.1 Letter re: Change in Certifying Accountant.
*23.1 Consent of Goodwin, Procter & Hoar LLP (included in Exhibit 5.1
hereto).
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of M.R. Weiser & Co. LLP.
24.1 Powers of Attorney (included on pages II-6).
27.1 Financial Data Schedule.
</TABLE>
- --------
* To be filed by amendment to this Registration Statement.
+ Confidential treatment requested as to these Exhibits.
<PAGE>
Exhibit 10.16
Confidential Treatment Requested
RESTRICTED STOCK AGREEMENT
UNDER THE BORON, LEPORE & ASSOCIATES, INC.
1996 STOCK OPTION AND GRANT PLAN
NAME OF GRANTEE: Patrick G. LePore
CLASS OF SHARES: Class A Common Stock
NO. OF SHARES: 300,000 GRANT DATE: December 4, 1996
PER SHARE PURCHASE PRICE: $.285
The Company has heretofore completed a recapitalization and refinancing
transaction. Pursuant to the Boron, LePore & Associates, Inc. 1996 Stock Option
and Grant Plan (the "Plan"), Boron, LePore & Associates, Inc., a Delaware
corporation (together with its successors, the "Company"), hereby grants, sells
and issues to the person named above (the "Grantee"), who is an officer or full-
time employee of the Company or any of the Subsidiaries (as defined below) of
the Company, the number of shares of Class A Common Stock, par value $0.01 per
share ("Common Stock"), of the Company indicated above (subject to the
provisions below, the "Shares"), for the per share purchase price specified
above, subject to the terms and conditions set forth herein and in the Plan.
The Grantee agrees to the provisions set forth herein and acknowledges that each
such provision is a material condition of the Company's agreement to issue and
sell the Shares to him. The Company hereby acknowledges receipt of $85,500 in
full payment for the Shares. All references to share prices and amounts herein
shall be equitably adjusted to reflect stock splits, stock dividends,
recapitalizations, mergers, reorganizations and similar changes affecting the
capital stock of the Company, and any shares of capital stock of the Company
received on or in respect of Shares in connection with any such event (including
any shares of capital stock or any right, option or warrant to receive the same
or any security convertible into or exchangeable for any such shares or received
upon conversion of any such shares) shall be subject to this Agreement on the
same basis and extent at the relevant time as the Shares in respect of which
they were issued, and shall be deemed Shares as if and to the same extent they
were issued at the date hereof.
Section 1. Definitions. For the purposes of this Agreement, the following
--------- -----------
terms shall have the following respective meanings:
"Act" shall mean the Securities Act of 1933, as amended, and the rules and
---
regulations thereunder.
<PAGE>
"Bankruptcy" means (i) the filing of a voluntary petition under any
----------
bankruptcy or insolvency law, or a petition for the appointment of a receiver or
the making of an assignment for the benefit of creditors, with respect to the
Grantee or any Permitted Transferee, or (ii) the Grantee or any Permitted
Transferee being subjected involuntarily to such a petition or assignment or to
an attachment or other legal or equitable interest with respect to his assets,
which involuntary petition or assignment or attachment is not discharged within
60 days after its date, and (iii) the Grantee or any Permitted Transferee being
subject to a transfer of Restricted Shares by operation of law, except by reason
of death.
"Common Stock" shall mean the Company's Class A Common Stock, par value
------------
$0.01 per share, together with any shares into which such stock may be converted
or exchanged.
"Initial Public Offering" shall mean the consummation of the first fully
-----------------------
underwritten, firm commitment public offering pursuant to an effective
registration statement under the Act, other than on Forms S-4, S-8, S-14 or S-15
or their then equivalents, covering the offer and sale by the Company of its
equity securities, or such other event as a result of or following which the
Common Stock shall be publicly held.
"Permitted Transferees" shall mean any of the following to whom the Grantee
---------------------
may transfer Restricted Shares hereunder: the Grantee's spouse, parents,
children (natural or adopted), stepchildren or grandchildren or a trust for
their principal benefit of which the Grantor is the settlor; provided, however,
-------- -------
that any such trust does not require or permit distribution of any Shares during
the term of this Agreement unless subject to its terms.
"Restricted Shares" shall mean all of the Shares that are not Vested
-----------------
Shares.
"Sale Event" shall mean any of the following transactions: (a) the
----------
dissolution or liquidation of the Company; (b) the sale of all or substantially
all of the assets of the Company and its Subsidiaries to another person or
entity; (c) a merger, reorganization or consolidation in which the holders of
the Company's outstanding voting power immediately prior to such transaction do
not own a majority of the outstanding voting power of the surviving or resulting
entity immediately upon completion of such transaction; (d) the sale of the
outstanding stock of the Company to an unrelated person or entity; or (e) any
other transaction or series of transactions where the owners of the Company's
outstanding voting power prior to such transaction do not own at least a
majority of the outstanding voting power of the relevant entity after the
transaction, in each case in which the Investors (as such term is defined in the
certain Stockholders' Agreement dated as of December 4, 1996, to which the
Grantee is a party) receive cash or other assets having a value upon Closing or
effectiveness thereof in excess of $37.5 million plus all accumulated and unpaid
dividends in respect of the shares acquired by them from the Company on December
4, 1996.
"Shares" shall mean the number of shares of Common Stock being purchased by
------
2
<PAGE>
the Grantee on the date hereof and any additional shares of Common Stock or
other securities received as a dividend on, or otherwise on account of, the
Shares, as contemplated by the first paragraph of this Agreement.
"Subsidiary" shall mean any corporation or partnership of which stock or
----------
other equity interests possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock or other equity interests is owned
directly or indirectly by the Company.
"Termination Event" shall mean the termination of the Grantee's employment
-----------------
with the Company and its subsidiaries as a result of his resignation or other
voluntary retirement at any time or termination at any time for cause (as such
term is defined in Section 7(b) of the Employment Agreement dated as of
December 4, 1996 between the Company and the Grantee).
"Vested Shares" shall mean all of the Shares that have vested in
---------------
accordance with the vesting schedule attached as Exhibit A hereto.
Section 2. Purchase and Sale of Shares; Investment Representations.
--------- -------------------------------------------------------
2.1. Purchase and Sale. On the date hereof, the Company hereby sells to
-----------------
the Grantee, and the Grantee hereby purchases from the Company, the number of
Shares set forth above for the purchase price per share set forth above.
2.2. Investment Representations. In connection with the purchase and sale
--------------------------
of the Shares contemplated by Section 2.1 above, the Grantee hereby represents
and warrants to the Company as follows:
(a) The Grantee is purchasing the Shares for his own account for
investment only, and not for resale or with a view to the distribution thereof.
(b) The Grantee has had such an opportunity as he has deemed adequate
to obtain from the Company such information as is necessary to permit him to
evaluate the merits and risks of his investment in the Company and has consulted
with his own advisers with respect to his investment in the Company.
(c) The Grantee has sufficient experience in business, financial and
investment matters to be able to evaluate the risks involved in the purchase of
the Shares and to make an informed investment decision with respect to such
purchase.
(d) The Grantee is an "accredited investor" as that term is defined
in Rule 501 promulgated under the Act.
(e) The Grantee can afford a complete loss of the value of the Shares
and is
3
<PAGE>
able to bear the economic risk of holding such Shares for an indefinite period.
(f) The Grantee understands that the Shares are not registered under
the Act (it being understood that the Shares are being issued and sold in
reliance on the exemption provided in Rule 701 thereunder) or any applicable
state securities or "blue sky" laws and may not be sold or otherwise transferred
or disposed of in the absence of an effective registration statement under the
Act and under any applicable state securities or "blue sky" laws (or exemptions
from the registration requirements thereof). The Grantee further acknowledges
that certificates representing the Shares will bear restrictive legends
reflecting the foregoing.
Section 3. Repurchase of Restricted Shares.
--------- -------------------------------
3.1. Repurchase. Upon the occurrence of a Termination Event or the
----------
Bankruptcy of the Grantee, the Company or its assigns shall repurchase and the
Grantee and each Permitted Transferee shall sell to it or them all of the
Restricted Shares held by the Grantee or any Permitted Transferee as of the date
of such Termination Event or Bankruptcy at the per share purchase price set
forth above, subject to adjustment as provided above. In addition, upon the
Bankruptcy of any of the Grantee's Permitted Transferees, the Company or its
assigns shall purchase and each such Permitted Transferee shall sell to it or
them all of the Restricted Shares held by such Permitted Transferee as of the
date of such Bankruptcy at a price equal to the per share purchase price set
forth above, also subject to such adjustment. The purchase and sale
arrangements contemplated by the preceding sentences of this Section 3.1 are
referred to herein as the "Repurchase."
3.2. Closing Procedure. The Company or its assigns shall effect the
-----------------
Repurchase by delivering or mailing to the Grantee (and/or, if applicable, his
Permitted Transferees) written notice within six (6) months after the
Termination Event or Bankruptcy, specifying a date within such six-month period
in which the Repurchase shall be effected. Upon such notification, the Grantee
and his Permitted Transferees shall promptly surrender to the Company any
certificates representing the Restricted Shares being purchased, together with a
duly executed stock power for the transfer of such Restricted Shares to the
Company or the Company's assignee or assignees (as contemplated by Section 6, if
applicable). Upon the Company's or its assignee's receipt of the certificates
from the Grantee or his Permitted Transferees, the Company or its assignee or
assignees shall deliver to him, her or them a check for the purchase price of
the Restricted Shares being purchased, provided, however, that the Company may
pay the purchase price for such shares by offsetting and canceling any
indebtedness then owed by the Grantee to the Company. At such time, the Grantee
and/or any holder of the Restricted Shares shall deliver to the Company the
certificate or certificates representing the Restricted Shares so repurchased,
duly endorsed for transfer, free and clear of any liens or encumbrances. The
Repurchase obligation specified herein shall survive and remain in effect as to
Restricted Shares following and notwithstanding any public offering by or merger
or other transaction involving the Company and certificates representing such
Restricted Shares shall bear legends to such effect.
4
<PAGE>
3.3. Remedy. Without limitation of any other provision of this Agreement
------
or other rights, in the event that the Grantee, his or her Permitted Transferees
or any other person or entity is required to sell his or her Restricted Shares
pursuant to the provisions of this Section 3 and in the further event that he or
she refuses or for any reason fails to deliver to the designated purchaser of
such Restricted Shares the certificate or certificates evidencing such
Restricted Shares together with a related stock power, such designated purchaser
may deposit the purchase price for such Restricted Shares with any bank doing
business within fifty (50) miles of the Company's principal office, or with the
Company's independent public accounting firm, as agent or trustee, or in escrow,
for the Grantee, his or her Permitted Transferees or other person or entity, to
be held by such bank or accounting firm for the benefit of and for delivery to
him, them or it, and/or, in its discretion, pay such purchase price by
offsetting any indebtedness then owed by the Grantee as provided above. Upon
any such deposit and/or offset by the designated purchaser of such amount and
upon notice to the person or entity who was required to sell the Restricted
Shares to be sold pursuant to the provisions of this Section 3, such Restricted
Shares shall at such time be deemed to have been sold, assigned, transferred and
conveyed to such purchaser, the holder thereof shall have no further rights
thereto (other than the right to withdraw the payment thereof held in escrow, if
applicable), and the Company shall record such transfer in its stock transfer
book or in any appropriate manner.
Section 4. Restrictions on Transfer of Shares.
--------- ----------------------------------
(a) General. None of the Shares now owned or hereafter acquired shall be
-------
sold, assigned, transferred, pledged, hypothecated, given away or in any other
manner disposed of or encumbered, whether voluntarily or by operation of law,
unless such transfer is in compliance with all applicable securities laws
(including, without limitation, the Act), and such disposition is in accordance
with the terms and conditions of this Section 4. In connection with any
transfer of Shares, the Company may require the transferor to provide at his or
her own expense an opinion of counsel to the transferor, satisfactory to the
Company, that such transfer is in compliance with all foreign, federal and state
securities laws (including, without limitation, the Act). Any attempted
disposition of Shares not in accordance with the terms and conditions of this
Section 4 shall be null and void, and the Company shall not reflect on its
records any change in record ownership of any Shares as a result of any such
disposition, shall otherwise refuse to recognize any such disposition and shall
not in any way give effect to any such disposition of any Shares. Subject to
the foregoing general provisions, Shares may be transferred pursuant to the
following specific terms and conditions:
(b) Transfers to Permitted Transferees. The Grantee may sell, assign,
----------------------------------
transfer or give away any or all of the Shares to Permitted Transferees;
provided, however, that such Permitted Transferee(s) shall, as a condition to
- -------- -------
any such transfer, agree to be subject to the provisions of this Agreement
(including, without limitation, the provisions of Section 3 and this Section 4)
and shall have delivered a written acknowledgment to that effect to the Company.
5
<PAGE>
(c) Transfers Upon Death. Upon the death of the Grantee or any Permitted
--------------------
Transferee the Shares may be transferred by operation of law to the estate,
legal representatives, executors and administrators of the Grantee or any such
Permitted Transferee. Any Shares which are Restricted Shares at the time at such
death shall be subject to the Repurchase and all other Shares shall be and
remain subject to Section 4(d), if applicable, and the Grantee's and any
Permitted Transferee's estate, executors, administrators, personal
representatives, heirs, legatees and distributees shall be obligated to convey
such Shares to the Company or its assigns if and to the extent contemplated
hereby.
(d) Other Transfers; Notice; Right of First Refusal. In the event that the
-----------------------------------------------
Grantee (or any transferee holding Shares subject to this Section 4(d)) desires
to sell or otherwise transfer all or any part of the Vested Shares (but in no
event Restricted Shares, which shall not be sold or transferred except as
contemplated by Section 3.1, Section 4(b) or (c) or Exhibit A), the Grantee
shall first comply with the provisions of the Stockholders' Agreement dated as
of December 4, 1996 to which the Grantee is a party and thereafter shall give
written notice to the Company of his intention to make such transfer. Such
notice shall state the number of Vested Shares which the Grantee proposes to
sell (the "Offered Shares"), the price and the terms at which the proposed sale
is to be made and the name and address of the proposed transferee. At any time
within 10 days after the receipt of such notice by the Company, the Company or
its assigns may elect to purchase all or any portion of the Offered Shares at
the price and on the terms offered by the proposed transferee and specified in
the notice. The Company or its assigns shall exercise this right by mailing or
delivering written notice to the Grantee within the foregoing 10-day period. If
the Company or its assigns elect to exercise its purchase rights of this Section
4(d), the closing for such purchase shall, in any event, take place within 30
days after the receipt by the Company of the initial notice from the Grantee.
In the event that the Company or its assigns do not elect to exercise such
purchase right, or in the event that the Company or its assigns do not pay the
full purchase price within such 30-day period, the Grantee may, within 60 days
thereafter, sell the Offered Shares to the proposed transferee and at the same
price and on the same terms as specified in his notice. Any Shares purchased by
such proposed transferee shall no longer be subject to the terms of this
Agreement. The provisions of this Section 4(d) shall terminate upon the closing
of an Initial Public Offering.
Section 5. Legend. Any certificate(s) representing the Shares shall carry
------
substantially the following legends:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the restrictions, terms and
conditions (including repurchase and restrictions against transfers)
contained in a certain Restricted Stock Agreement dated December 4,
1996 between the Company and the holder of this certificate (a copy of
which is available at the offices of the Company for examination)."
6
<PAGE>
"The shares represented by this certificate have not been
registered under the Securities Act of 1933 or the securities laws of
any state. The shares may not be sold or transferred in the absence of
such registration or an exemption from registration."
Section 6. Escrow. In order to carry out the provisions of Sections 3 and
--------- ------
4 of this Agreement more effectively, the Company shall hold the Shares in
escrow together with separate stock powers executed by the Grantee in blank for
transfer, and any Permitted Transferee shall, as an additional condition to any
transfer of Shares, execute a like stock power as to such Shares. The Company
shall not dispose of the Shares except as otherwise provided in this Agreement.
In the event of any Repurchase, the Company is hereby authorized by the Grantee
and each Permitted Transferee, as the Grantee's and each such Permitted
Transferee's attorney-in-fact, to date and complete the stock powers necessary
for the transfer of the Shares being purchased and to transfer such Shares in
accordance with the terms hereof. At such time as any Shares are no longer
Restricted Shares, the Company shall, at the written request of the Grantee,
deliver to the Grantee (or the relevant Permitted Transferee) a certificate
representing such Shares with the balance of the Shares to be held in escrow
pursuant to this Section 6.
Section 7. Assignment. At the discretion of the Board of Directors of the
--------- ----------
Company, the Company shall have the right to assign the right to exercise its
obligation and rights with respect to the Repurchase or pursuant to Section 4(d)
to any person or persons, in whole or in part in any particular instance, upon
the same terms and conditions applicable to the exercise thereof by the Company,
and such assignee or assignees of the Company shall then take and hold any
Shares so acquired subject to such terms as may be specified by the Company in
connection with any such assignment.
Section 8. Miscellaneous Provisions.
--------- ------------------------
8.1. Termination. The restrictions on transfer of Vested Shares under
-----------
Section 4(d) shall terminate on the closing of an Initial Public Offering;
provided, however, that all other provisions shall remain in effect following
the same until all of the Shares have become Vested Shares.
8.2. Record Owner; Dividends. The Grantee and any Permitted Transferees,
-----------------------
during the duration of this Agreement, shall be considered the record owners of
and shall be entitled to vote the Shares. The Grantee and any Permitted
Transferees shall be entitled to receive all dividends and any other
distributions declared on the Shares; provided, however, that the Company is
under no duty to declare any such dividends or to make any such distribution.
8.3. Equitable Relief. The parties hereto agree and declare that legal
----------------
remedies are inadequate to enforce the provisions of this Agreement and that
equitable relief, including specific performance and injunctive relief, may be
used to enforce the provisions of this
7
<PAGE>
Agreement.
8.4. Change and Modifications. This Agreement may not be orally changed,
------------------------
modified or terminated, nor shall any oral waiver of any of its terms be
effective. This Agreement may be changed, modified or terminated only by an
agreement in writing signed by the Company and the Grantee.
8.5. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Delaware.
8.6. Headings. The headings are intended only for convenience in finding
--------
the subject matter and do not constitute part of the text of this Agreement and
shall not be considered in the interpretation of this Agreement.
8.7. Saving Clause. If any provision(s) of this Agreement shall be
-------------
determined to be illegal or unenforceable, such determination shall in no manner
affect the legality or enforceability of any other provision hereof.
8.8. Notices. All notices, requests, consents and other communications
-------
shall be in writing and be deemed given when delivered personally, by telex or
facsimile transmission or when received if mailed by first class registered or
certified mail, postage prepaid. Notices to the Company or the Grantee shall be
addressed as set forth underneath their signatures below, or to such other
address or addresses as may have been furnished by such party in writing to the
other. Notices to any holder of the Shares other than the Grantee shall be
addressed to the address furnished by such holder to the Company.
8.9. Benefit and Binding Effect. This Agreement shall be binding upon and
--------------------------
shall inure to the benefit of the parties hereto, their respective successors,
assigns, and legal representatives. The Company has the right to assign this
Agreement, and such assignee shall become entitled to all the rights of the
Company hereunder to the extent of such assignment.
8.10. Counterparts. For the convenience of the parties and to facilitate
------------
execution, this Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which shall constitute one and the
same document.
8
<PAGE>
IN WITNESS WHEREOF, the Company and the Grantee have executed this
Agreement as of the date first above written.
BORON, LePORE & ASSOCIATES, INC.
By: /s/ Gregory Boron
-----------------------------
Name: Gregory Boron
Title: Chief Operating Officer
GRANTEE
/s/ Patrick G. LePore
----------------------------------
Patrick G. LePore
c/o Boron, LePore & Associates, Inc.
17-17 Route 208 North
Fair Lawn, NJ 07410
9
<PAGE>
EXHIBIT A
Vesting Schedule
----------------
1. Time-Based Vesting. The Shares shall vest and become Vested Shares
------------------
to the extent not previously vested or repurchased, on December 4, 2003.
2. Vesting Events. Notwithstanding the foregoing, Shares shall
--------------
vest and become Vested Shares upon attainment of one or more specified
Performance Objectives as set forth below.
For purposes of vesting the Shares shall be deemed divided into five
equal tranches of 60,000 shares each (subject to adjustment for stock splits and
the like as provided in the attached Restricted Stock Agreement). An
incremental tranche of Shares will vest each time an incremental Performance
Objective set forth below is achieved (i.e., if only two Performance Objectives
are achieved only two tranches (or 40%) of shares will vest whereas all five
tranches will vest if five Performance Objectives are achieved). Vesting shall
be deemed effective as of the closing of the transaction (in the case of the
first Performance Objective) or as of the last day of the calendar year to which
the Performance Objective relates (in the case of Performance Objectives 2
through 6). Determination of whether a Performance Objective has been met will
be based (in the case of Performance Objectives 2 through 6) conclusively on the
Company's audited financial statements for the relevant year following
preparation thereof.
The "Performance Objectives" are:
1. Redemption prior to December 3, 1998 of the Company's Redeemable
Preferred Stock (or Convertible Preferred Stock) for a cash
payment in the amount of not less than $10 million plus all
accumulated and unpaid dividends.
2. Achievement of both revenues of $ * or more and earnings before
interest, taxes and depreciation but after giving effect to
amortization, and provided that EBITD shall not reflect the
transactions described in Schedule 4.1 to that certain Preferred
Stock Purchase Agreement dated as of December 4, 1996 ("EBITD") of
$ * or more in any calendar year.
3. Achievement of both revenues of $ * or more and EBITD of $ * or
more in any calendar year.
- -----------------------------------
* Confidential treatment requested.
10
<PAGE>
4. Achievement of both revenues of $ * or more and EBITD of $ * or
more in any calendar year.
5. Achievement of both revenues of $ * or more and EBITD of $ * or
more in any calendar year.
6. Achievement of both revenues of $ * or more and EBITD of $ * or
more in any calendar year.
For purposes of the foregoing:
* A maximum of five performance objectives may be achieved.
Thus, Performance Objective number 6 can be relevant only if
Performance Objective number 1 is not attained by December
3, 1998; if Performance Objective number 1 is attained by
then, attainment of Performance Objective number 6 cannot
result in additional vesting.
* More than one Performance Objective may be achieved (and
accordingly more than one tranche of Shares may become
Vested Shares) in any year. For example, if in 1997 revenues
were $ * EBITD was $ * and the Redeemable Preferred Stock
was redeemed in full, three tranches of shares (60%) would
vest, with one tranche vesting as of the redemption date and
two tranches vesting as of December 31, 1997.
* Vesting may be "caught up." For example, if revenues were $
* and EBITD was $ * in 1997, and revenues were $ * and EBITD
was $ * million in 1998, no tranches would vest in 1997 but
two would vest as of December 31, 1998.
* The revenues and EBITD tests are conjunctive (i.e., if a
revenues objective is met in a given year but the related
EBITD test is not met, vesting of a tranche will not occur;
vesting could occur if both tests were met in a subsequent
year).
* Once a Performance Objective has been achieved, resulting in
the vesting of a tranche, an additional tranche can vest
only if the revenues and EBITD move to the next level of
Performance Objective (or upon redemption the preferred
stock within two years). For example, if
- ----------------------------------
* Confidential treatment requested.
11
<PAGE>
revenues were $ * and EBITD was $ * for 1997 one tranche
would vest, and if revenues and EBITD were the same in the
following year no additional tranches would vest. The next
tranche would only vest when revenues and EBITD for a
succeeding year reached the levels specified for Performance
Objectives 3, 4, 5 or 6.
* Revenues and EBITD will reflect revenues and expenses of or
relating to acquired companies (including amortization), as
well as the effect of divestitures, if any.
* Should the Grantee's employment terminate due to death,
disability or termination without cause, all Vested and
Restricted Shares then held by him will continue to be held
by him or his estate, heirs, etc. subject to the terms of the
attached Restricted Stock Agreement, including inability to
sell Restricted Shares before they vest due to the Company's
performance or passage of time.
3. Sale Events. In the event of a Sale Event, as defined in the
-----------
attached Restricted Stock Agreement, any unvested tranches of Shares will be
deemed Vested Shares as of the closing of such transaction (and the Repurchase
and Section 4 of the attached Agreement shall no longer apply to such Shares).
However, the vesting provisions set forth herein will not change upon an Initial
Public Offering (as defined in the attached Restricted Stock Agreement) and the
Repurchase under Section 3 of the attached Restricted Stock Agreement will
remain in effect following any such event.
4. Termination of Vesting. Notwithstanding the foregoing
----------------------
paragraphs of this Exhibit A or any provision of the Restricted Stock Agreement,
no Restricted Shares shall vest after a Termination Event or Bankruptcy and all
Restricted Shares as of the date of any Termination Event or Bankruptcy shall
remain subject to the Repurchase.
5. Adjustment of Target Prices in Certain Events. The numbers of
---------------------------------------------
Shares set forth above will be subject to adjustment in the case of a merger,
consolidation, reorganization, recapitalization, reclassification, stock
dividend, stock split, combination of shares, exchange of shares, change in
corporate structure or the like, in which case appropriate and proportionate
adjustments shall be made as provided in the attached Restricted Stock
Agreement, subject to Section 3 of this Exhibit A.
- ----------------------------------
* Confidential treatment requested.
12
<PAGE>
Exhibit 10.17
Confidential Treatment Requested
RESTRICTED STOCK AGREEMENT
UNDER THE BORON, LEPORE & ASSOCIATES, INC.
1996 STOCK OPTION AND GRANT PLAN
NAME OF GRANTEE: Gregory Boron
CLASS OF SHARES: Class A Common Stock
NO. OF SHARES: 300,000 GRANT DATE: December 4, 1996
PER SHARE PURCHASE PRICE: $.285
The Company has heretofore completed a recapitalization and refinancing
transaction. Pursuant to the Boron, LePore & Associates, Inc. 1996 Stock Option
and Grant Plan (the "Plan"), Boron, LePore & Associates, Inc., a Delaware
corporation (together with its successors, the "Company"), hereby grants, sells
and issues to the person named above (the "Grantee"), who is an officer or full-
time employee of the Company or any of the Subsidiaries (as defined below) of
the Company, the number of shares of Class A Common Stock, par value $0.01 per
share ("Common Stock"), of the Company indicated above (subject to the
provisions below, the "Shares"), for the per share purchase price specified
above, subject to the terms and conditions set forth herein and in the Plan.
The Grantee agrees to the provisions set forth herein and acknowledges that each
such provision is a material condition of the Company's agreement to issue and
sell the Shares to him. The Company hereby acknowledges receipt of $85,500 in
full payment for the Shares. All references to share prices and amounts herein
shall be equitably adjusted to reflect stock splits, stock dividends,
recapitalizations, mergers, reorganizations and similar changes affecting the
capital stock of the Company, and any shares of capital stock of the Company
received on or in respect of Shares in connection with any such event (including
any shares of capital stock or any right, option or warrant to receive the same
or any security convertible into or exchangeable for any such shares or received
upon conversion of any such shares) shall be subject to this Agreement on the
same basis and extent at the relevant time as the Shares in respect of which
they were issued, and shall be deemed Shares as if and to the same extent they
were issued at the date hereof.
Section 1. Definitions. For the purposes of this Agreement, the following
--------- -----------
terms shall have the following respective meanings:
"Act" shall mean the Securities Act of 1933, as amended, and the rules and
---
regulations thereunder.
<PAGE>
"Bankruptcy" means (i) the filing of a voluntary petition under any
----------
bankruptcy or insolvency law, or a petition for the appointment of a receiver or
the making of an assignment for the benefit of creditors, with respect to the
Grantee or any Permitted Transferee, or (ii) the Grantee or any Permitted
Transferee being subjected involuntarily to such a petition or assignment or to
an attachment or other legal or equitable interest with respect to his assets,
which involuntary petition or assignment or attachment is not discharged within
60 days after its date, and (iii) the Grantee or any Permitted Transferee being
subject to a transfer of Restricted Shares by operation of law, except by reason
of death.
"Common Stock" shall mean the Company's Class A Common Stock, par value
------------
$0.01 per share, together with any shares into which such stock may be converted
or exchanged.
"Initial Public Offering" shall mean the consummation of the first fully
-----------------------
underwritten, firm commitment public offering pursuant to an effective
registration statement under the Act, other than on Forms S-4, S-8, S-14 or S-15
or their then equivalents, covering the offer and sale by the Company of its
equity securities, or such other event as a result of or following which the
Common Stock shall be publicly held.
"Permitted Transferees" shall mean any of the following to whom the Grantee
---------------------
may transfer Restricted Shares hereunder: the Grantee's spouse, parents,
children (natural or adopted), stepchildren or grandchildren or a trust for
their principal benefit of which the Grantor is the settlor; provided, however,
-------- -------
that any such trust does not require or permit distribution of any Shares during
the term of this Agreement unless subject to its terms.
"Restricted Shares" shall mean all of the Shares that are not Vested
-----------------
Shares.
"Sale Event" shall mean any of the following transactions: (a) the
----------
dissolution or liquidation of the Company; (b) the sale of all or substantially
all of the assets of the Company and its Subsidiaries to another person or
entity; (c) a merger, reorganization or consolidation in which the holders of
the Company's outstanding voting power immediately prior to such transaction do
not own a majority of the outstanding voting power of the surviving or resulting
entity immediately upon completion of such transaction; (d) the sale of the
outstanding stock of the Company to an unrelated person or entity; or (e) any
other transaction or series of transactions where the owners of the Company's
outstanding voting power prior to such transaction do not own at least a
majority of the outstanding voting power of the relevant entity after the
transaction, in each case in which the Investors (as such term is defined in the
certain Stockholders' Agreement dated as of December 4, 1996, to which the
Grantee is a party) receive cash or other assets having a value upon Closing or
effectiveness thereof in excess of $37.5 million plus all accumulated and unpaid
dividends in respect of the shares acquired by them from the Company on December
4, 1996.
"Shares" shall mean the number of shares of Common Stock being purchased by
------
2
<PAGE>
the Grantee on the date hereof and any additional shares of Common Stock or
other securities received as a dividend on, or otherwise on account of, the
Shares, as contemplated by the first paragraph of this Agreement.
"Subsidiary" shall mean any corporation or partnership of which stock or
----------
other equity interests possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock or other equity interests is owned
directly or indirectly by the Company.
"Termination Event" shall mean the termination of the Grantee's employment
-----------------
with the Company and its subsidiaries as a result of his resignation or other
voluntary retirement at any time or termination at any time for cause (as such
term is defined in Section 7(b) of the Employment Agreement dated as of
December 4, 1996 between the Company and the Grantee).
"Vested Shares" shall mean all of the Shares that have vested in
--------------
accordance with the vesting schedule attached as Exhibit A hereto.
Section 2. Purchase and Sale of Shares; Investment Representations.
--------- -------------------------------------------------------
2.1. Purchase and Sale. On the date hereof, the Company hereby sells to
-----------------
the Grantee, and the Grantee hereby purchases from the Company, the number of
Shares set forth above for the purchase price per share set forth above.
2.2. Investment Representations. In connection with the purchase and sale
--------------------------
of the Shares contemplated by Section 2.1 above, the Grantee hereby represents
and warrants to the Company as follows:
(a) The Grantee is purchasing the Shares for his own account for
investment only, and not for resale or with a view to the distribution thereof.
(b) The Grantee has had such an opportunity as he has deemed
adequate to obtain from the Company such information as is necessary to permit
him to evaluate the merits and risks of his investment in the Company and has
consulted with his own advisers with respect to his investment in the Company.
(c) The Grantee has sufficient experience in business, financial
and investment matters to be able to evaluate the risks involved in the purchase
of the Shares and to make an informed investment decision with respect to such
purchase.
(d) The Grantee is an "accredited investor" as that term is defined
in Rule 501 promulgated under the Act.
(e) The Grantee can afford a complete loss of the value of the
Shares and is
3
<PAGE>
able to bear the economic risk of holding such Shares for an indefinite period.
(f) The Grantee understands that the Shares are not registered
under the Act (it being understood that the Shares are being issued and sold in
reliance on the exemption provided in Rule 701 thereunder) or any applicable
state securities or "blue sky" laws and may not be sold or otherwise transferred
or disposed of in the absence of an effective registration statement under the
Act and under any applicable state securities or "blue sky" laws (or exemptions
from the registration requirements thereof). The Grantee further acknowledges
that certificates representing the Shares will bear restrictive legends
reflecting the foregoing.
Section 3. Repurchase of Restricted Shares.
--------- -------------------------------
3.1. Repurchase. Upon the occurrence of a Termination Event or the
----------
Bankruptcy of the Grantee, the Company or its assigns shall repurchase and the
Grantee and each Permitted Transferee shall sell to it or them all of the
Restricted Shares held by the Grantee or any Permitted Transferee as of the date
of such Termination Event or Bankruptcy at the per share purchase price set
forth above, subject to adjustment as provided above. In addition, upon the
Bankruptcy of any of the Grantee's Permitted Transferees, the Company or its
assigns shall purchase and each such Permitted Transferee shall sell to it or
them all of the Restricted Shares held by such Permitted Transferee as of the
date of such Bankruptcy at a price equal to the per share purchase price set
forth above, also subject to such adjustment. The purchase and sale
arrangements contemplated by the preceding sentences of this Section 3.1 are
referred to herein as the "Repurchase."
3.2. Closing Procedure. The Company or its assigns shall effect the
-----------------
Repurchase by delivering or mailing to the Grantee (and/or, if applicable, his
Permitted Transferees) written notice within six (6) months after the
Termination Event or Bankruptcy, specifying a date within such six-month period
in which the Repurchase shall be effected. Upon such notification, the Grantee
and his Permitted Transferees shall promptly surrender to the Company any
certificates representing the Restricted Shares being purchased, together with a
duly executed stock power for the transfer of such Restricted Shares to the
Company or the Company's assignee or assignees (as contemplated by Section 6, if
applicable). Upon the Company's or its assignee's receipt of the certificates
from the Grantee or his Permitted Transferees, the Company or its assignee or
assignees shall deliver to him, her or them a check for the purchase price of
the Restricted Shares being purchased, provided, however, that the Company may
pay the purchase price for such shares by offsetting and canceling any
indebtedness then owed by the Grantee to the Company. At such time, the Grantee
and/or any holder of the Restricted Shares shall deliver to the Company the
certificate or certificates representing the Restricted Shares so repurchased,
duly endorsed for transfer, free and clear of any liens or encumbrances. The
Repurchase obligation specified herein shall survive and remain in effect as to
Restricted Shares following and notwithstanding any public offering by or merger
or other transaction involving the Company and certificates representing such
Restricted Shares shall bear legends to such effect.
4
<PAGE>
3.3. Remedy. Without limitation of any other provision of this Agreement
------
or other rights, in the event that the Grantee, his or her Permitted Transferees
or any other person or entity is required to sell his or her Restricted Shares
pursuant to the provisions of this Section 3 and in the further event that he or
she refuses or for any reason fails to deliver to the designated purchaser of
such Restricted Shares the certificate or certificates evidencing such
Restricted Shares together with a related stock power, such designated purchaser
may deposit the purchase price for such Restricted Shares with any bank doing
business within fifty (50) miles of the Company's principal office, or with the
Company's independent public accounting firm, as agent or trustee, or in escrow,
for the Grantee, his or her Permitted Transferees or other person or entity, to
be held by such bank or accounting firm for the benefit of and for delivery to
him, them or it, and/or, in its discretion, pay such purchase price by
offsetting any indebtedness then owed by the Grantee as provided above. Upon
any such deposit and/or offset by the designated purchaser of such amount and
upon notice to the person or entity who was required to sell the Restricted
Shares to be sold pursuant to the provisions of this Section 3, such Restricted
Shares shall at such time be deemed to have been sold, assigned, transferred and
conveyed to such purchaser, the holder thereof shall have no further rights
thereto (other than the right to withdraw the payment thereof held in escrow, if
applicable), and the Company shall record such transfer in its stock transfer
book or in any appropriate manner.
Section 4. Restrictions on Transfer of Shares.
--------- ----------------------------------
(a) General. None of the Shares now owned or hereafter acquired
-------
shall be sold, assigned, transferred, pledged, hypothecated, given away or in
any other manner disposed of or encumbered, whether voluntarily or by operation
of law, unless such transfer is in compliance with all applicable securities
laws (including, without limitation, the Act), and such disposition is in
accordance with the terms and conditions of this Section 4. In connection with
any transfer of Shares, the Company may require the transferor to provide at his
or her own expense an opinion of counsel to the transferor, satisfactory to the
Company, that such transfer is in compliance with all foreign, federal and state
securities laws (including, without limitation, the Act). Any attempted
disposition of Shares not in accordance with the terms and conditions of this
Section 4 shall be null and void, and the Company shall not reflect on its
records any change in record ownership of any Shares as a result of any such
disposition, shall otherwise refuse to recognize any such disposition and shall
not in any way give effect to any such disposition of any Shares. Subject to the
foregoing general provisions, Shares may be transferred pursuant to the
following specific terms and conditions:
(b) Transfers to Permitted Transferees. The Grantee may
----------------------------------
sell, assign, transfer or give away any or all of the Shares to Permitted
Transferees; provided, however, that such Permitted Transferee(s) shall,
-------- -------
as a condition to any such transfer, agree to be subject to the provisions of
this Agreement (including, without limitation, the provisions of Section 3 and
this Section 4) and shall have delivered a written acknowledgment to that effect
to the Company.
5
<PAGE>
(c) Transfers Upon Death. Upon the death of the Grantee or any
--------------------
Permitted Transferee the Shares may be transferred by operation of law to the
estate, legal representatives, executors and administrators of the Grantee or
any such Permitted Transferee. Any Shares which are Restricted Shares at the
time at such death shall be subject to the Repurchase and all other Shares shall
be and remain subject to Section 4(d), if applicable, and the Grantee's and any
Permitted Transferee's estate, executors, administrators, personal
representatives, heirs, legatees and distributees shall be obligated to convey
such Shares to the Company or its assigns if and to the extent contemplated
hereby.
(d) Other Transfers; Notice; Right of First Refusal. In the
-----------------------------------------------
event that the Grantee (or any transferee holding Shares subject to this Section
4(d)) desires to sell or otherwise transfer all or any part of the Vested Shares
(but in no event Restricted Shares, which shall not be sold or transferred
except as contemplated by Section 3.1, Section 4(b) or (c) or Exhibit A), the
Grantee shall first comply with the provisions of the Stockholders' Agreement
dated as of December 4, 1996 to which the Grantee is a party and thereafter
shall give written notice to the Company of his intention to make such transfer.
Such notice shall state the number of Vested Shares which the Grantee proposes
to sell (the "Offered Shares"), the price and the terms at which the proposed
sale is to be made and the name and address of the proposed transferee. At any
time within 10 days after the receipt of such notice by the Company, the Company
or its assigns may elect to purchase all or any portion of the Offered Shares at
the price and on the terms offered by the proposed transferee and specified in
the notice. The Company or its assigns shall exercise this right by mailing or
delivering written notice to the Grantee within the foregoing 10-day period. If
the Company or its assigns elect to exercise its purchase rights of this Section
4(d), the closing for such purchase shall, in any event, take place within 30
days after the receipt by the Company of the initial notice from the Grantee. In
the event that the Company or its assigns do not elect to exercise such purchase
right, or in the event that the Company or its assigns do not pay the full
purchase price within such 30-day period, the Grantee may, within 60 days
thereafter, sell the Offered Shares to the proposed transferee and at the same
price and on the same terms as specified in his notice. Any Shares purchased by
such proposed transferee shall no longer be subject to the terms of this
Agreement. The provisions of this Section 4(d) shall terminate upon the closing
of an Initial Public Offering.
Section 5. Legend. Any certificate(s) representing the Shares shall carry
------
substantially the following legends:
"The transferability of this certificate and the shares of
stock represented hereby are subject to the restrictions, terms and
conditions (including repurchase and restrictions against transfers)
contained in a certain Restricted Stock Agreement dated December 4,
1996 between the Company and the holder of this certificate (a copy
of which is available at the offices of the Company for
examination)."
6
<PAGE>
"The shares represented by this certificate have not been
registered under the Securities Act of 1933 or the securities laws of
any state. The shares may not be sold or transferred in the absence
of such registration or an exemption from registration."
Section 6. Escrow. In order to carry out the provisions of Sections 3 and
--------- ------
4 of this Agreement more effectively, the Company shall hold the Shares in
escrow together with separate stock powers executed by the Grantee in blank for
transfer, and any Permitted Transferee shall, as an additional condition to any
transfer of Shares, execute a like stock power as to such Shares. The Company
shall not dispose of the Shares except as otherwise provided in this Agreement.
In the event of any Repurchase, the Company is hereby authorized by the Grantee
and each Permitted Transferee, as the Grantee's and each such Permitted
Transferee's attorney-in-fact, to date and complete the stock powers necessary
for the transfer of the Shares being purchased and to transfer such Shares in
accordance with the terms hereof. At such time as any Shares are no longer
Restricted Shares, the Company shall, at the written request of the Grantee,
deliver to the Grantee (or the relevant Permitted Transferee) a certificate
representing such Shares with the balance of the Shares to be held in escrow
pursuant to this Section 6.
Section 7. Assignment. At the discretion of the Board of Directors of the
--------- ----------
Company, the Company shall have the right to assign the right to exercise its
obligation and rights with respect to the Repurchase or pursuant to Section 4(d)
to any person or persons, in whole or in part in any particular instance, upon
the same terms and conditions applicable to the exercise thereof by the Company,
and such assignee or assignees of the Company shall then take and hold any
Shares so acquired subject to such terms as may be specified by the Company in
connection with any such assignment.
Section 8. Miscellaneous Provisions.
--------- ------------------------
8.1. Termination. The restrictions on transfer of Vested Shares under
-----------
Section 4(d) shall terminate on the closing of an Initial Public Offering;
provided, however, that all other provisions shall remain in effect following
the same until all of the Shares have become Vested Shares.
8.2. Record Owner; Dividends. The Grantee and any Permitted Transferees,
-----------------------
during the duration of this Agreement, shall be considered the record owners of
and shall be entitled to vote the Shares. The Grantee and any Permitted
Transferees shall be entitled to receive all dividends and any other
distributions declared on the Shares; provided, however, that the Company is
under no duty to declare any such dividends or to make any such distribution.
8.3. Equitable Relief. The parties hereto agree and declare that legal
----------------
remedies are inadequate to enforce the provisions of this Agreement and that
equitable relief, including specific performance and injunctive relief, may be
used to enforce the provisions of this
7
<PAGE>
Agreement.
8.4. Change and Modifications. This Agreement may not be orally changed,
------------------------
modified or terminated, nor shall any oral waiver of any of its terms be
effective. This Agreement may be changed, modified or terminated only by an
agreement in writing signed by the Company and the Grantee.
8.5. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Delaware.
8.6. Headings. The headings are intended only for convenience in finding
--------
the subject matter and do not constitute part of the text of this Agreement and
shall not be considered in the interpretation of this Agreement.
8.7. Saving Clause. If any provision(s) of this Agreement shall be
-------------
determined to be illegal or unenforceable, such determination shall in no manner
affect the legality or enforceability of any other provision hereof.
8.8. Notices. All notices, requests, consents and other communications
-------
shall be in writing and be deemed given when delivered personally, by telex or
facsimile transmission or when received if mailed by first class registered or
certified mail, postage prepaid. Notices to the Company or the Grantee shall be
addressed as set forth underneath their signatures below, or to such other
address or addresses as may have been furnished by such party in writing to the
other. Notices to any holder of the Shares other than the Grantee shall be
addressed to the address furnished by such holder to the Company.
8.9. Benefit and Binding Effect. This Agreement shall be binding upon and
--------------------------
shall inure to the benefit of the parties hereto, their respective successors,
assigns, and legal representatives. The Company has the right to assign this
Agreement, and such assignee shall become entitled to all the rights of the
Company hereunder to the extent of such assignment.
8.10. Counterparts. For the convenience of the parties and to facilitate
------------
execution, this Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which shall constitute one and the
same document.
8
<PAGE>
IN WITNESS WHEREOF, the Company and the Grantee have executed this
Agreement as of the date first above written.
BORON, LePORE & ASSOCIATES, INC.
By: /s/ Patrick G. LePore
-----------------------------
Name: Patrick G. LePore
Title: President
GRANTEE
/s/ Gregory Boron
----------------------------------
Gregory Boron
c/o Boron, LePore & Associates, Inc.
17-17 Route 208 North
Fair Lawn, NJ 07410
9
<PAGE>
EXHIBIT A
Vesting Schedule
----------------
1. Time-Based Vesting. The Shares shall vest and become Vested
------------------
Shares, to the extent not previously vested or repurchased, on December 4, 2003.
2. Vesting Events. Notwithstanding the foregoing, Shares shall vest
--------------
and become Vested Shares upon attainment of one or more specified Performance
Objectives as set forth below.
For purposes of vesting the Shares shall be deemed divided into five
equal tranches of 60,000 shares each (subject to adjustment for stock splits and
the like as provided in the attached Restricted Stock Agreement). An
incremental tranche of Shares will vest each time an incremental Performance
Objective set forth below is achieved (i.e., if only two Performance Objectives
are achieved only two tranches (or 40%) of shares will vest whereas all five
tranches will vest if five Performance Objectives are achieved). Vesting shall
be deemed effective as of the closing of the transaction (in the case of the
first Performance Objective) or as of the last day of the calendar year to which
the Performance Objective relates (in the case of Performance Objectives 2
through 6). Determination of whether a Performance Objective has been met will
be based (in the case of Performance Objectives 2 through 6) conclusively on the
Company's audited financial statements for the relevant year following
preparation thereof.
The "Performance Objectives" are:
1. Redemption prior to December 3, 1998 of the Company's Redeemable
Preferred Stock (or Convertible Preferred Stock) for a cash
payment in the amount of not less than $10 million plus all
accumulated and unpaid dividends.
2. Achievement of both revenues of $ * or more and earnings before
interest, taxes and depreciation but after giving effect to
amortization, and provided that EBITD shall not reflect the
transactions described in Schedule 4.1 to that certain Preferred
Stock Purchase Agreement dated as of December 4, 1996 ("EBITD")
of $ * or more in any calendar year.
3. Achievement of both revenues of $ * or more and EBITD of $ * or
more in any calendar year.
- -----------------------------------
* Confidential treatment requested.
10
<PAGE>
4. Achievement of both revenues of $ * or more and EBITD of $ * or
more in any calendar year.
5. Achievement of both revenues of $ * or more and EBITD of $ * or
more in any calendar year.
6. Achievement of both revenues of $ * or more and EBITD of $ * or
more in any calendar year.
For purposes of the foregoing:
* A maximum of five performance objectives may be achieved.
Thus, Performance Objective number 6 can be relevant only if
Performance Objective number 1 is not attained by December
3, 1998; if Performance Objective number 1 is attained by
then, attainment of Performance Objective number 6 cannot
result in additional vesting.
* More than one Performance Objective may be achieved (and
accordingly more than one tranche of Shares may become
Vested Shares) in any year. For example, if in 1997 revenues
were $ * EBITD was $ * and the Redeemable Preferred Stock
was redeemed in full, three tranches of shares (60%) would
vest, with one tranche vesting as of the redemption date and
two tranches vesting as of December 31, 1997.
* Vesting may be "caught up." For example, if revenues were $
* and EBITD was $ * in 1997, and revenues were $ * and EBITD
was $ * million in 1998, no tranches would vest in 1997 but
two would vest as of December 31, 1998.
* The revenues and EBITD tests are conjunctive (i.e., if a
revenues objective is met in a given year but the related
EBITD test is not met, vesting of a tranche will not occur;
vesting could occur if both tests were met in a subsequent
year).
* Once a Performance Objective has been achieved, resulting in
the vesting of a tranche, an additional tranche can vest
only if the revenues and
- ----------------------------------
* Confidential treatment requested.
11
<PAGE>
EBITD move to the next level of Performance Objective (or
upon redemption the preferred stock within two years). For
example, if revenues were $ * and EBITD was $ * for 1997 one
tranche would vest, and if revenues and EBITD were the same
in the following year no additional tranches would vest. The
next tranche would only vest when revenues and EBITD for a
succeeding year reached the levels specified for Performance
Objectives 3, 4, 5 or 6.
* Revenues and EBITD will reflect revenues and expenses of or
relating to acquired companies (including amortization), as
well as the effect of divestitures, if any.
* Should the Grantee's employment terminate due to death,
disability or termination without cause, all Vested and
Restricted Shares then held by him will continue to be held
by him or his estate, heirs, etc. subject to the terms of
the attached Restricted Stock Agreement, including inability
to sell Restricted Shares before they vest due to the
Company's performance or passage of time.
3. Sale Events. In the event of a Sale Event, as defined in the
-----------
attached Restricted Stock Agreement, any unvested tranches of Shares will be
deemed Vested Shares as of the closing of such transaction (and the Repurchase
and Section 4 of the attached Agreement shall no longer apply to such Shares).
However, the vesting provisions set forth herein will not change upon an Initial
Public Offering (as defined in the attached Restricted Stock Agreement) and the
Repurchase under Section 3 of the attached Restricted Stock Agreement will
remain in effect following any such event.
4. Termination of Vesting. Notwithstanding the foregoing paragraphs
----------------------
of this Exhibit A or any provision of the Restricted Stock Agreement, no
Restricted Shares shall vest after a Termination Event or Bankruptcy and all
Restricted Shares as of the date of any Termination Event or Bankruptcy shall
remain subject to the Repurchase.
5. Adjustment of Target Prices in Certain Events. The numbers of
---------------------------------------------
Shares set forth above will be subject to adjustment in the case of a merger,
consolidation, reorganization, recapitalization, reclassification, stock
dividend, stock split, combination of shares, exchange of shares, change in
corporate structure or the like, in which case appropriate and proportionate
adjustments shall be made as provided in the attached Restricted Stock
Agreement, subject to Section 3 of this Exhibit A.
- ----------------------------------
* Confidential treatment requested.
12
<PAGE>
Exhibit 10.18
Confidential Treatment Requested
RESTRICTED STOCK AGREEMENT
UNDER THE BORON, LEPORE & ASSOCIATES, INC.
1996 STOCK OPTION AND GRANT PLAN
NAME OF GRANTEE: Christopher Sweeney
CLASS OF SHARES: Class A Common Stock
NO. OF SHARES: 250,000 GRANT DATE: December 4, 1996
PER SHARE PURCHASE PRICE: $.285
The Company has heretofore completed a recapitalization and refinancing
transaction. Pursuant to the Boron, LePore & Associates, Inc. 1996 Stock Option
and Grant Plan (the "Plan"), Boron, LePore & Associates, Inc., a Delaware
corporation (together with its successors, the "Company"), hereby grants, sells
and issues to the person named above (the "Grantee"), who is an officer or full-
time employee of the Company or any of the Subsidiaries (as defined below) of
the Company, the number of shares of Class A Common Stock, par value $0.01 per
share ("Common Stock"), of the Company indicated above (subject to the
provisions below, the "Shares"), for the per share purchase price specified
above, subject to the terms and conditions set forth herein and in the Plan.
The Grantee agrees to the provisions set forth herein and acknowledges that each
such provision is a material condition of the Company's agreement to issue and
sell the Shares to him. The Company hereby acknowledges receipt of $71,250 in
full payment for the Shares. All references to share prices and amounts herein
shall be equitably adjusted to reflect stock splits, stock dividends,
recapitalizations, mergers, reorganizations and similar changes affecting the
capital stock of the Company, and any shares of capital stock of the Company
received on or in respect of Shares in connection with any such event (including
any shares of capital stock or any right, option or warrant to receive the same
or any security convertible into or exchangeable for any such shares or received
upon conversion of any such shares) shall be subject to this Agreement on the
same basis and extent at the relevant time as the Shares in respect of which
they were issued, and shall be deemed Shares as if and to the same extent they
were issued at the date hereof.
Section 1. Definitions. For the purposes of this Agreement, the following
--------- -----------
terms shall have the following respective meanings:
"Act" shall mean the Securities Act of 1933, as amended, and the
---
rules and regulations thereunder.
<PAGE>
"Bankruptcy" means (i) the filing of a voluntary petition under any
----------
bankruptcy or insolvency law, or a petition for the appointment of a receiver or
the making of an assignment for the benefit of creditors, with respect to the
Grantee or any Permitted Transferee, or (ii) the Grantee or any Permitted
Transferee being subjected involuntarily to such a petition or assignment or to
an attachment or other legal or equitable interest with respect to his assets,
which involuntary petition or assignment or attachment is not discharged within
60 days after its date, and (iii) the Grantee or any Permitted Transferee being
subject to a transfer of Restricted Shares by operation of law, except by reason
of death.
"Common Stock" shall mean the Company's Class A Common Stock,
------------
par value $0.01 per share, together with any shares into which such stock may be
converted or exchanged.
"Initial Public Offering" shall mean the consummation of the
-----------------------
underwritten, firm commitment public offering pursuant to an effective
registration statement under the Act, other than on Forms S-4, S-8, S-14 or S-15
or their then equivalents, covering the offer and sale by the Company of its
equity securities, or such other event as a result of or following which the
Common Stock shall be publicly held.
"Permitted Transferees" shall mean any of the following to whom
---------------------
the Grantee may transfer Restricted Shares hereunder: the Grantee's spouse,
parents, children (natural or adopted), stepchildren or grandchildren or a trust
for their principal benefit of which the Grantor is the settlor; provided,
--------
however, that any such trust does not require or permit distribution of any
- -------
Shares during the term of this Agreement unless subject to its terms.
"Restricted Shares" shall mean all of the Shares that are not
-----------------
Vested Shares.
"Sale Event" shall mean any of the following transactions: (a) the
----------
dissolution or liquidation of the Company; (b) the sale of all or substantially
all of the assets of the Company and its Subsidiaries to another person or
entity; (c) a merger, reorganization or consolidation in which the holders of
the Company's outstanding voting power immediately prior to such transaction do
not own a majority of the outstanding voting power of the surviving or resulting
entity immediately upon completion of such transaction; (d) the sale of the
outstanding stock of the Company to an unrelated person or entity; or (e) any
other transaction or series of transactions where the owners of the Company's
outstanding voting power prior to such transaction do not own at least a
majority of the outstanding voting power of the relevant entity after the
transaction, in each case in which the Investors (as such term is defined in the
certain Stockholders' Agreement dated as of December 4, 1996, to which the
Grantee is a party) receive cash or other assets having a value upon Closing or
effectiveness thereof in excess of $37.5 million plus all accumulated and unpaid
dividends in respect of the shares acquired by them from the Company on December
4, 1996.
"Shares" shall mean the number of shares of Common Stock being
------
purchased by
2
<PAGE>
the Grantee on the date hereof and any additional shares of Common Stock or
other securities received as a dividend on, or otherwise on account of, the
Shares, as contemplated by the first paragraph of this Agreement.
"Subsidiary" shall mean any corporation or partnership of which
----------
stock or other equity interests possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock or other equity interests is
owned directly or indirectly by the Company.
"Termination Event" shall mean the termination of the Grantee's
-----------------
employment with the Company and its subsidiaries as a result of his resignation
or other voluntary retirement at any time or termination at any time for cause
(as such term is defined in Section 7(b) of the Employment Agreement dated as of
December 4, 1996 between the Company and the Grantee).
"Vested Shares" shall mean all of the Shares that have vested in
---------------
accordance with the vesting schedule attached as Exhibit A hereto.
Section 2. Purchase and Sale of Shares; Investment Representations.
--------- -------------------------------------------------------
2.1. Purchase and Sale. On the date hereof, the Company hereby sells to
-----------------
the Grantee, and the Grantee hereby purchases from the Company, the number of
Shares set forth above for the purchase price per share set forth above.
2.2. Investment Representations. In connection with the purchase and sale
--------------------------
of the Shares contemplated by Section 2.1 above, the Grantee hereby represents
and warrants to the Company as follows:
(a) The Grantee is purchasing the Shares for his own account for
investment only, and not for resale or with a view to the distribution thereof.
(b) The Grantee has had such an opportunity as he has deemed
adequate to obtain from the Company such information as is necessary to permit
him to evaluate the merits and risks of his investment in the Company and has
consulted with his own advisers with respect to his investment in the Company.
(c) The Grantee has sufficient experience in business, financial
and investment matters to be able to evaluate the risks involved in the purchase
of the Shares and to make an informed investment decision with respect to such
purchase.
(d) The Grantee is an "accredited investor" as that term is defined
in Rule 501 promulgated under the Act.
(e) The Grantee can afford a complete loss of the value of the
Shares and is
3
<PAGE>
able to bear the economic risk of holding such Shares for an indefinite period.
(f) The Grantee understands that the Shares are not registered
under the Act (it being understood that the Shares are being issued and sold in
reliance on the exemption provided in Rule 701 thereunder) or any applicable
state securities or "blue sky" laws and may not be sold or otherwise transferred
or disposed of in the absence of an effective registration statement under the
Act and under any applicable state securities or "blue sky" laws (or exemptions
from the registration requirements thereof). The Grantee further acknowledges
that certificates representing the Shares will bear restrictive legends
reflecting the foregoing.
Section 3. Repurchase of Restricted Shares.
--------- -------------------------------
3.1. Repurchase. Upon the occurrence of a Termination Event or the
----------
Bankruptcy of the Grantee, the Company or its assigns shall repurchase and the
Grantee and each Permitted Transferee shall sell to it or them all of the
Restricted Shares held by the Grantee or any Permitted Transferee as of the date
of such Termination Event or Bankruptcy at the per share purchase price set
forth above, subject to adjustment as provided above. In addition, upon the
Bankruptcy of any of the Grantee's Permitted Transferees, the Company or its
assigns shall purchase and each such Permitted Transferee shall sell to it or
them all of the Restricted Shares held by such Permitted Transferee as of the
date of such Bankruptcy at a price equal to the per share purchase price set
forth above, also subject to such adjustment. The purchase and sale
arrangements contemplated by the preceding sentences of this Section 3.1 are
referred to herein as the "Repurchase."
3.2. Closing Procedure. The Company or its assigns shall effect the
-----------------
Repurchase by delivering or mailing to the Grantee (and/or, if applicable, his
Permitted Transferees) written notice within six (6) months after the
Termination Event or Bankruptcy, specifying a date within such six-month period
in which the Repurchase shall be effected. Upon such notification, the Grantee
and his Permitted Transferees shall promptly surrender to the Company any
certificates representing the Restricted Shares being purchased, together with a
duly executed stock power for the transfer of such Restricted Shares to the
Company or the Company's assignee or assignees (as contemplated by Section 6, if
applicable). Upon the Company's or its assignee's receipt of the certificates
from the Grantee or his Permitted Transferees, the Company or its assignee or
assignees shall deliver to him, her or them a check for the purchase price of
the Restricted Shares being purchased, provided, however, that the Company may
pay the purchase price for such shares by offsetting and canceling any
indebtedness then owed by the Grantee to the Company. At such time, the Grantee
and/or any holder of the Restricted Shares shall deliver to the Company the
certificate or certificates representing the Restricted Shares so repurchased,
duly endorsed for transfer, free and clear of any liens or encumbrances. The
Repurchase obligation specified herein shall survive and remain in effect as to
Restricted Shares following and notwithstanding any public offering by or merger
or other transaction involving the Company and certificates representing such
Restricted Shares shall bear legends to such effect.
4
<PAGE>
3.3. Remedy. Without limitation of any other provision of this Agreement
------
or other rights, in the event that the Grantee, his or her Permitted Transferees
or any other person or entity is required to sell his or her Restricted Shares
pursuant to the provisions of this Section 3 and in the further event that he or
she refuses or for any reason fails to deliver to the designated purchaser of
such Restricted Shares the certificate or certificates evidencing such
Restricted Shares together with a related stock power, such designated purchaser
may deposit the purchase price for such Restricted Shares with any bank doing
business within fifty (50) miles of the Company's principal office, or with the
Company's independent public accounting firm, as agent or trustee, or in escrow,
for the Grantee, his or her Permitted Transferees or other person or entity, to
be held by such bank or accounting firm for the benefit of and for delivery to
him, them or it, and/or, in its discretion, pay such purchase price by
offsetting any indebtedness then owed by the Grantee as provided above. Upon
any such deposit and/or offset by the designated purchaser of such amount and
upon notice to the person or entity who was required to sell the Restricted
Shares to be sold pursuant to the provisions of this Section 3, such Restricted
Shares shall at such time be deemed to have been sold, assigned, transferred and
conveyed to such purchaser, the holder thereof shall have no further rights
thereto (other than the right to withdraw the payment thereof held in escrow, if
applicable), and the Company shall record such transfer in its stock transfer
book or in any appropriate manner.
Section 4. Restrictions on Transfer of Shares.
--------- ----------------------------------
(a) General. None of the Shares now owned or hereafter acquired
-------
shall be sold, assigned, transferred, pledged, hypothecated, given away or in
any other manner disposed of or encumbered, whether voluntarily or by operation
of law, unless such transfer is in compliance with all applicable securities
laws (including, without limitation, the Act), and such disposition is in
accordance with the terms and conditions of this Section 4. In connection with
any transfer of Shares, the Company may require the transferor to provide at his
or her own expense an opinion of counsel to the transferor, satisfactory to the
Company, that such transfer is in compliance with all foreign, federal and state
securities laws (including, without limitation, the Act). Any attempted
disposition of Shares not in accordance with the terms and conditions of this
Section 4 shall be null and void, and the Company shall not reflect on its
records any change in record ownership of any Shares as a result of any such
disposition, shall otherwise refuse to recognize any such disposition and shall
not in any way give effect to any such disposition of any Shares. Subject to the
foregoing general provisions, Shares may be transferred pursuant to the
following specific terms and conditions:
(b) Transfers to Permitted Transferees. The Grantee may sell,
----------------------------------
assign, transfer or give away any or all of the Shares to Permitted Transferees;
provided, however, that such Permitted Transferee(s) shall, as a condition to
- -------- -------
any such transfer, agree to be subject to the provisions of this Agreement
(including, without limitation, the provisions of Section 3 and this Section 4)
and shall have delivered a written acknowledgment to that effect to the Company.
5
<PAGE>
(c) Transfers Upon Death. Upon the death of the Grantee or any
--------------------
Permitted Transferee the Shares may be transferred by operation of law to the
estate, legal representatives, executors and administrators of the Grantee or
any such Permitted Transferee. Any Shares which are Restricted Shares at the
time at such death shall be subject to the Repurchase and all other Shares shall
be and remain subject to Section 4(d), if applicable, and the Grantee's and any
Permitted Transferee's estate, executors, administrators, personal
representatives, heirs, legatees and distributees shall be obligated to convey
such Shares to the Company or its assigns if and to the extent contemplated
hereby.
(d) Other Transfers; Notice; Right of First Refusal. In the
-----------------------------------------------
event that the Grantee (or any transferee holding Shares subject to this Section
4(d)) desires to sell or otherwise transfer all or any part of the Vested Shares
(but in no event Restricted Shares, which shall not be sold or transferred
except as contemplated by Section 3.1, Section 4(b) or (c) or Exhibit A), the
Grantee shall first comply with the provisions of the Stockholders' Agreement
dated as of December 4, 1996 to which the Grantee is a party and thereafter
shall give written notice to the Company of his intention to make such transfer.
Such notice shall state the number of Vested Shares which the Grantee proposes
to sell (the "Offered Shares"), the price and the terms at which the proposed
sale is to be made and the name and address of the proposed transferee. At any
time within 10 days after the receipt of such notice by the Company, the Company
or its assigns may elect to purchase all or any portion of the Offered Shares at
the price and on the terms offered by the proposed transferee and specified in
the notice. The Company or its assigns shall exercise this right by mailing or
delivering written notice to the Grantee within the foregoing 10-day period. If
the Company or its assigns elect to exercise its purchase rights of this Section
4(d), the closing for such purchase shall, in any event, take place within 30
days after the receipt by the Company of the initial notice from the Grantee. In
the event that the Company or its assigns do not elect to exercise such purchase
right, or in the event that the Company or its assigns do not pay the full
purchase price within such 30-day period, the Grantee may, within 60 days
thereafter, sell the Offered Shares to the proposed transferee and at the same
price and on the same terms as specified in his notice. Any Shares purchased by
such proposed transferee shall no longer be subject to the terms of this
Agreement. The provisions of this Section 4(d) shall terminate upon the closing
of an Initial Public Offering.
Section 5. Legend. Any certificate(s) representing the Shares shall carry
------
substantially the following legends:
"The transferability of this certificate and the shares of
stock represented hereby are subject to the restrictions, terms and
conditions (including repurchase and restrictions against
transfers) contained in a certain Restricted Stock Agreement dated
December 4, 1996 between the Company and the holder of this
certificate (a copy of which is available at the offices of the
Company for examination)."
6
<PAGE>
"The shares represented by this certificate have not been
registered under the Securities Act of 1933 or the securities laws
of any state. The shares may not be sold or transferred in the
absence of such registration or an exemption from registration."
Section 6. Escrow. In order to carry out the provisions of Sections 3 and
--------- ------
4 of this Agreement more effectively, the Company shall hold the Shares in
escrow together with separate stock powers executed by the Grantee in blank for
transfer, and any Permitted Transferee shall, as an additional condition to any
transfer of Shares, execute a like stock power as to such Shares. The Company
shall not dispose of the Shares except as otherwise provided in this Agreement.
In the event of any Repurchase, the Company is hereby authorized by the Grantee
and each Permitted Transferee, as the Grantee's and each such Permitted
Transferee's attorney-in-fact, to date and complete the stock powers necessary
for the transfer of the Shares being purchased and to transfer such Shares in
accordance with the terms hereof. At such time as any Shares are no longer
Restricted Shares, the Company shall, at the written request of the Grantee,
deliver to the Grantee (or the relevant Permitted Transferee) a certificate
representing such Shares with the balance of the Shares to be held in escrow
pursuant to this Section 6.
Section 7. Assignment. At the discretion of the Board of Directors of the
--------- ----------
Company, the Company shall have the right to assign the right to exercise its
obligation and rights with respect to the Repurchase or pursuant to Section 4(d)
to any person or persons, in whole or in part in any particular instance, upon
the same terms and conditions applicable to the exercise thereof by the Company,
and such assignee or assignees of the Company shall then take and hold any
Shares so acquired subject to such terms as may be specified by the Company in
connection with any such assignment.
Section 8. Miscellaneous Provisions.
--------- ------------------------
8.1. Termination. The restrictions on transfer of Vested Shares under
-----------
Section 4(d) shall terminate on the closing of an Initial Public Offering;
provided, however, that all other provisions shall remain in effect following
the same until all of the Shares have become Vested Shares.
8.2. Record Owner; Dividends. The Grantee and any Permitted Transferees,
-----------------------
during the duration of this Agreement, shall be considered the record owners of
and shall be entitled to vote the Shares. The Grantee and any Permitted
Transferees shall be entitled to receive all dividends and any other
distributions declared on the Shares; provided, however, that the Company is
under no duty to declare any such dividends or to make any such distribution.
8.3. Equitable Relief. The parties hereto agree and declare that legal
----------------
remedies are inadequate to enforce the provisions of this Agreement and that
equitable relief, including specific performance and injunctive relief, may be
used to enforce the provisions of this
7
<PAGE>
Agreement.
8.4. Change and Modifications. This Agreement may not be orally changed,
------------------------
modified or terminated, nor shall any oral waiver of any of its terms be
effective. This Agreement may be changed, modified or terminated only by an
agreement in writing signed by the Company and the Grantee.
8.5. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Delaware.
8.6. Headings. The headings are intended only for convenience in finding
--------
the subject matter and do not constitute part of the text of this Agreement and
shall not be considered in the interpretation of this Agreement.
8.7. Saving Clause. If any provision(s) of this Agreement shall be
-------------
determined to be illegal or unenforceable, such determination shall in no manner
affect the legality or enforceability of any other provision hereof.
8.8. Notices. All notices, requests, consents and other communications
-------
shall be in writing and be deemed given when delivered personally, by telex or
facsimile transmission or when received if mailed by first class registered or
certified mail, postage prepaid. Notices to the Company or the Grantee shall be
addressed as set forth underneath their signatures below, or to such other
address or addresses as may have been furnished by such party in writing to the
other. Notices to any holder of the Shares other than the Grantee shall be
addressed to the address furnished by such holder to the Company.
8.9. Benefit and Binding Effect. This Agreement shall be binding upon and
--------------------------
shall inure to the benefit of the parties hereto, their respective successors,
assigns, and legal representatives. The Company has the right to assign this
Agreement, and such assignee shall become entitled to all the rights of the
Company hereunder to the extent of such assignment.
8.10. Counterparts. For the convenience of the parties and to facilitate
------------
execution, this Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which shall constitute one and the
same document.
8
<PAGE>
IN WITNESS WHEREOF, the Company and the Grantee have executed this
Agreement as of the date first above written.
BORON, LePORE & ASSOCIATES, INC.
By: /s/ Patrick G. LePore
------------------------------
Name: Patrick G. LePore
Title: President
GRANTEE
/s/ Christopher Sweeney
----------------------------------
Christopher Sweeney
c/o Boron, LePore & Associates, Inc.
17-17 Route 208 North
Fair Lawn, NJ 07410
9
<PAGE>
EXHIBIT A
Vesting Schedule
----------------
1. Time-Based Vesting. The Shares shall vest and become Vested
------------------
Shares, to the extent not previously vested or repurchased, on December 4, 2003.
2. Vesting Events. Notwithstanding the foregoing, Shares shall vest
--------------
and become Vested Shares upon attainment of one or more specified Performance
Objectives as set forth below.
For purposes of vesting the Shares shall be deemed divided into five
equal tranches of 60,000 shares each (subject to adjustment for stock splits and
the like as provided in the attached Restricted Stock Agreement). An
incremental tranche of Shares will vest each time an incremental Performance
Objective set forth below is achieved (i.e., if only two Performance Objectives
are achieved only two tranches (or 40%) of shares will vest whereas all five
tranches will vest if five Performance Objectives are achieved). Vesting shall
be deemed effective as of the closing of the transaction (in the case of the
first Performance Objective) or as of the last day of the calendar year to which
the Performance Objective relates (in the case of Performance Objectives 2
through 6). Determination of whether a Performance Objective has been met will
be based (in the case of Performance Objectives 2 through 6) conclusively on the
Company's audited financial statements for the relevant year following
preparation thereof.
The "Performance Objectives" are:
1. Redemption prior to December 3, 1998 of the Company's Redeemable
Preferred Stock (or Convertible Preferred Stock) for a cash
payment in the amount of not less than $10 million plus all
accumulated and unpaid dividends.
2. Achievement of both revenues of $ * or more and earnings before
interest, taxes and depreciation but after giving effect to
amortization, and provided that EBITD shall not reflect the
transactions described in Schedule 4.1 to that certain Preferred
Stock Purchase Agreement dated as of December 4, 1996 ("EBITD")
of $ * or more in any calendar year.
3. Achievement of both revenues of $ * or more and EBITD of $ * or
more in any calendar year.
- ----------------------------------
* Confidential treatment requested.
10
<PAGE>
4. Achievement of both revenues of $ * or more and EBITD of $ * or
more in any calendar year.
5. Achievement of both revenues of $ * or more and EBITD of $ * or
more in any calendar year.
6. Achievement of both revenues of $ * or more and EBITD of $ * or
more in any calendar year.
For purposes of the foregoing:
* A maximum of five performance objectives may be achieved.
Thus, Performance Objective number 6 can be relevant only if
Performance Objective number 1 is not attained by December 3,
1998; if Performance Objective number 1 is attained by then,
attainment of Performance Objective number 6 cannot result in
additional vesting.
* More than one Performance Objective may be achieved (and
accordingly more than one tranche of Shares may become Vested
Shares) in any year. For example, if in 1997 revenues were $
* EBITD was $ * and the Redeemable Preferred Stock was
redeemed in full, three tranches of shares (60%) would vest,
with one tranche vesting as of the redemption date and two
tranches vesting as of December 31, 1997.
* Vesting may be "caught up." For example, if revenues were $ *
and EBITD was $ * in 1997, and revenues were $ * and EBITD
was $ * million in 1998, no tranches would vest in 1997 but
two would vest as of December 31, 1998.
* The revenues and EBITD tests are conjunctive (i.e., if a
revenues objective is met in a given year but the related
EBITD test is not met, vesting of a tranche will not occur;
vesting could occur if both tests were met in a subsequent
year).
* Once a Performance Objective has been achieved, resulting in
the vesting of a tranche, an additional tranche can vest only
if the revenues and EBITD move to the next level of
Performance Objective (or upon redemption the preferred stock
within two years). For example, if
- ----------------------------------
* Confidential treatment requested.
11
<PAGE>
revenues were $ * and EBITD was $ * for 1997 one tranche
would vest, and if revenues and EBITD were the same in the
following year no additional tranches would vest. The next
tranche would only vest when revenues and EBITD for a
succeeding year reached the levels specified for Performance
Objectives 3, 4, 5 or 6.
* Revenues and EBITD will reflect revenues and expenses of or
relating to acquired companies (including amortization), as
well as the effect of divestitures, if any.
* Should the Grantee's employment terminate due to death,
disability or termination without cause, all Vested and
Restricted Shares then held by him will continue to be held
by him or his estate, heirs, etc. subject to the terms of the
attached Restricted Stock Agreement, including inability to
sell Restricted Shares before they vest due to the Company's
performance or passage of time.
3. Sale Events. In the event of a Sale Event, as defined in the
-----------
attached Restricted Stock Agreement, any unvested tranches of Shares will be
deemed Vested Shares as of the closing of such transaction (and the Repurchase
and Section 4 of the attached Agreement shall no longer apply to such Shares).
However, the vesting provisions set forth herein will not change upon an Initial
Public Offering (as defined in the attached Restricted Stock Agreement) and the
Repurchase under Section 3 of the attached Restricted Stock Agreement will
remain in effect following any such event.
4. Termination of Vesting. Notwithstanding the foregoing
----------------------
paragraphs of this Exhibit A or any provision of the Restricted Stock Agreement,
no Restricted Shares shall vest after a Termination Event or Bankruptcy and all
Restricted Shares as of the date of any Termination Event or Bankruptcy shall
remain subject to the Repurchase.
5. Adjustment of Target Prices in Certain Events. The numbers of
---------------------------------------------
Shares set forth above will be subject to adjustment in the case of a merger,
consolidation, reorganization, recapitalization, reclassification, stock
dividend, stock split, combination of shares, exchange of shares, change in
corporate structure or the like, in which case appropriate and proportionate
adjustments shall be made as provided in the attached Restricted Stock
Agreement, subject to Section 3 of this Exhibit A.
- ----------------------------------
* Confidential treatment requested.
12
<PAGE>
Exhibit 10.20
Confidential Treatment Requested
--------------------------------
Incentive Stock Option Agreement
under the Boron, LePore & Associates, Inc.
1996 Stock Option and Grant Plan
Name of Optionee: Timothy J. McIntyre
No./Class of Option Shares: 300,000 Shares of Class A Common Stock
Grant Date: June 9, 1997
Expiration Date: June 9, 2007
Option Exercise Price/Share: $6.30
Pursuant to the Boron, LePore & Associates, Inc. 1996 Stock Option and
Grant Plan (the "Plan"), Boron, LePore & Associates, Inc., a Delaware
corporation (the "Company"), hereby grants to the person named above (the
"Optionee"), who is an officer or full-time employee of the Company or any of
its subsidiaries, an option (the "Stock Option") to purchase on or prior to the
expiration date specified above (the "Expiration Date") all or any part of the
number of shares of Class A Common Stock, par value $0.01 per share ("Common
Stock"), of the Company indicated above (the "Option Shares"), at the per share
option exercise price specified above, subject to the terms and conditions set
forth in this Incentive Stock Option Agreement (the "Agreement") and in the
Plan. This Stock Option is intended to qualify as an "incentive stock option"
as defined in Section 422(b) of the Internal Revenue Code of 1986, as amended
from time to time (the "Code"). To the extent that any portion of the Stock
Option does not so qualify (e.g. upon vesting of more than $100,000 of options
in any year based on exercise price or in the event of a disqualifying
disposition), it shall be deemed a non-qualified stock option. All capitalized
terms used herein and not otherwise
<PAGE>
defined shall have the respective meanings set forth in the Plan.
1. Vesting and Exercisability.
--------------------------
(a) No portion of this Stock Option may be exercised until such
portion shall have vested.
(b) Except as set forth below and in Section 6, and subject to the
determination of the Compensation Committee of the Board of Directors of the
Company or the Board of Directors of the Company, as applicable (the
"Committee"), in its sole discretion to accelerate the vesting schedule
hereunder, this Stock Option shall be vested and exercisable as provided in
Schedule A hereto.
- ----------
(c) In the event that the Optionee's Service Relationship (as
hereinafter defined) with the Company and its subsidiaries terminates for any
reason or under any circumstances, including the Optionee's resignation,
retirement or termination by the Company, upon the Optionee's death or
disability, or for any other reason, regardless of the circumstances thereof, or
in the event that as of October 1, 1997, the Optionee has failed to permanently
relocate to the greater New York Metropolitan area, this Stock Option shall no
longer vest or become exercisable with respect to any Option Shares not vested
as of the date of such termination from and after the date of such termination,
except as provided in Section 1(d) and Section 5 of Schedule A hereto, and this
----------
Stock Option may thereafter be exercised, to the extent it was vested and
exercisable on such date of such termination or as of October 1, 1997, if
applicable, until the Expiration Date contemplated by Section 1(d). Except as
the Committee may otherwise determine, after either such event this Stock Option
shall be null and void as to any Option Shares not then vested. For purposes
hereof, a "Service Relationship"
2
<PAGE>
shall mean any relationship as an employee, part-time employee or consultant of
the Company or any subsidiary of the Company such that, for example, a Service
Relationship shall be deemed to continue without interruption in the event the
Optionee's status changes from full-time employee to part-time employee or
consultant.
(d) Once any portion of this Stock Option becomes vested and
exercisable, it shall continue to be exercisable by the Optionee or his
successors as contemplated herein at any time or times prior to the earlier of
(i) the date which is 12 months following the date on which the Optionee's
Service Relationship with the Company and its subsidiaries terminates due to
death or disability or for three months following the date on which the
Optionee's Service Relationship with the Company and its subsidiaries terminates
if the termination is due to any other reason, except as provided in Section 5
of Schedule A, or (ii) June 9, 2007, subject to the provisions hereof,
----------
including, without limitation, Section 7 hereof which provides for the
termination of unexercised options upon completion of certain transactions as
described therein (the "Expiration Date").
(e) It is understood and intended that this Stock Option shall qualify
as an "incentive stock option" as defined in Section 422 of the Code.
Accordingly, the Optionee understands that in order to obtain the benefits of an
incentive stock option under Section 422 of the Code, no sale or other
disposition may be made of any Option Shares within the one-year period
beginning on the day after the day of the transfer of such Option Shares to him,
nor within the two-year period beginning on the day after the grant of this
Stock Option, and that exercise of this Stock Option must occur while Optionee
is an employee of the Company or within three months after he ceases to be an
employee of the Company (or twelve months in
3
<PAGE>
the case of death or disability). If the Optionee disposes (whether by sale,
gift, transfer or otherwise) of any such Option Shares within either of these
holding periods, he will notify the Company within thirty (30) days after such
disposition. The Optionee also agrees to provide the Company with any
information concerning any such dispositions required by the Company for tax
purposes.
2. Exercise of Stock Option.
------------------------
(a) The Optionee may exercise only vested portions of this Stock
Option and only in the following manner: Prior to the Expiration Date (subject
to Section 7 and Schedule A ), the Optionee may deliver a Stock Option Exercise
----------
Notice (an "Exercise Notice") in the form of Appendix A hereto indicating his
----------
election to purchase some or all of the Option Shares with respect to which this
Stock Option has vested at the time of such notice. Such notice shall specify
the number of Option Shares to be purchased.
Payment of the purchase price for the Option Shares may be made by one or
more (if applicable) of the following methods: (a) in cash, by certified or
bank check or other instrument acceptable to the Option Committee; or (b) if the
closing of the first underwritten public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended, covering
the offer and sale of Common Stock of the Company to the public has occurred,
then (i) in the form of shares of Common Stock that are not then subject to
restrictions under any Company plan and that have been held by the Optionee for
at least six months, if permitted by the Committee in its discretion; (ii) by
the Optionee delivering to the Company a properly executed Exercise Notice
together with irrevocable instructions to a broker to promptly deliver to the
Company cash or a check payable and acceptable to the
4
<PAGE>
Company to pay the option purchase price, provided that in the event the
Optionee chooses to pay the option purchase price as so provided, the Optionee
and the broker shall comply with such procedures and enter into such agreements
of indemnity and other agreements as the Option Committee shall prescribe as a
condition of such payment procedure, or (c) a combination of (a), (b)(i) and
(b)(ii) above. Payment instruments will be received subject to collection.
(b) Certificates for the Option Shares so purchased will be issued and
delivered to the Optionee upon compliance to the satisfaction of the Option
Committee with all requirements under applicable laws or regulations in
connection with such issuance. Until the Optionee shall have complied with the
requirements hereof and of the Plan, the Company shall be under no obligation to
issue the Option Shares subject to this Stock Option, and the determination of
the Option Committee as to such compliance shall be final and binding on the
Optionee. The Optionee shall not be deemed to be the holder of, or to have any
of the rights of a holder with respect to, any shares of stock subject to this
Stock Option unless and until this Stock Option shall have been exercised
pursuant to the terms hereof, the Company shall have issued and delivered the
Option Shares to the Optionee, and the Optionee's name shall have been entered
as a stockholder of record on the books of the Company. Thereupon, the Optionee
shall have full dividend and other ownership rights with respect to such Option
Shares, subject to the terms of this Agreement.
(c) Notwithstanding any other provision hereof or of the Plan, no
portion of this Stock Option shall be exercisable after the Expiration Date,
including such date as is contemplated by Section 7 hereof.
5
<PAGE>
3. Incorporation of Plan. Notwithstanding anything herein to the
---------------------
contrary, this Stock Option shall be subject to and governed by all the terms
and conditions of the Plan, provided that in the event of any inconsistency in
the specific terms, this Stock Option shall be given effect.
4. Transferability. This Agreement is personal to the Optionee and is
---------------
not transferable by the Optionee in any manner other than by will or by the laws
of descent and distribution. This Stock Option may be exercised during the
Optionee's lifetime only by the Optionee. The Optionee may elect to designate a
beneficiary by providing written notice of the name of such beneficiary to the
Company, and may revoke or change such designation at any time by filing written
notice of revocation or change with the Company; such beneficiary may exercise
the Optionee's Stock Option in the event of the Optionee's death to the extent
provided herein. If the Optionee does not designate a beneficiary, or if the
designated beneficiary predeceases the Optionee, the personal representative of
the Optionee may exercise this Stock Option to the extent provided herein in the
event of the Optionee's death.
5. Adjustment Upon Changes in Capitalization. The shares of stock
-----------------------------------------
covered by this Stock Option are shares of Class A Common Stock of the Company.
Subject to Section 6 hereof, if the shares of Class A Common Stock as a whole
are increased, decreased, changed or converted into or exchanged for a different
number or kind of shares or securities of the Company, whether through merger or
consolidation, reorganization, recapitalization, reclassification, stock
dividend, stock split, combination of shares, exchange of shares, change in
corporate structure or the like, an appropriate and proportionate adjustment
shall be made in
6
<PAGE>
the number and kind of shares and in the per share exercise price of shares
subject to any unexercised portion of this Stock Option. In the event of any
such adjustment in this Stock Option, the Optionee thereafter shall have the
right to purchase the number of shares under this Stock Option at the per share
price, as so adjusted, which the Optionee could purchase at the total purchase
price applicable to this Stock Option immediately prior to such adjustment.
Adjustments under this Section 5 shall be determined by the Option Committee of
the Company, whose determination as to what adjustment shall be made, and the
extent thereof, shall be conclusive. No fractional shares of Common Stock shall
be issued under the Plan resulting from any such adjustment, but the Company in
its discretion may make a cash payment in lieu of fractional shares.
6. Effect of Certain Transactions. In the case of (a) the dissolution
------------------------------
or liquidation of the Company; (b) the sale of all or substantially all of the
assets of the Company and its Subsidiaries to another person or entity; (c) a
merger, reorganization or consolidation in which the holders of the Company's
outstanding voting power immediately prior to such transaction do not own a
majority of the outstanding voting power of the surviving or resulting entity
immediately upon completion of such transaction; (d) the sale of the outstanding
stock of the Company to an unrelated person or entity; or (e) any other
transaction or series of transactions effectively constituting a sale of the
Company in which the owners of the Company's outstanding voting power
immediately prior to such transaction do not own a majority of the outstanding
voting power of the surviving or resulting entity immediately upon completion of
such transaction (a "Sale Event"), this Stock Option (i) shall be deemed fully
vested and exercisable (to the extent not previously vested) immediately prior
to the effective
7
<PAGE>
date of (or, if relevant, the record date for determining stockholders entitled
to participate in) such transaction to the extent, but only to the extent,
provided in Schedule A hereto, provided that such acceleration and any notice
----------
of exercise of options that become vested as a result thereof shall in all cases
be subject to and contingent upon the closing or consummation of such
transaction, and (ii) shall no longer vest as to any Option Shares not then
vested or which do not vest as a result of such transaction except as the
Committee otherwise may determine in its sole discretion. In any case, this
Stock Option (with respect to both vested and unvested Stock Options) shall
terminate on the effective date of (or, if relevant, the record date for
determining stockholders entitled to participate in) such transaction or event;
provided, however, that if (and only if) the Optionee agrees, provision may be
made in such transaction in the sole discretion of the parties thereto for the
assumption of this Stock Option or the substitution for this Stock Option of a
new stock option of the successor person or entity or a parent or subsidiary
thereof, with such adjustment as to the number and kind of shares and the per
share exercise price as such parties shall agree to, and, in the case of an
assumption, with references to the Company being deemed to refer to such
successor entity. In the event of any transaction which will result in such
termination, the Company shall give to the Optionee written notice thereof at
least fifteen (15) days prior to the effective date of such transaction or the
record date on which stockholders of the Company entitled to participate in such
transaction shall be determined, whichever comes first. Until the earlier to
occur of such effective date or record date, the Optionee may exercise any
vested portion of this Stock
8
<PAGE>
Option, but after such effective date or record date, as the case may be, the
Optionee may not exercise this Stock Option unless it is assumed or substituted
by the successor as provided above.
7. Withholding Taxes. The Optionee shall, not later than the date as of
-----------------
which the exercise of this Stock Option becomes a taxable event for federal
income tax purposes, pay to the Company or make arrangements satisfactory to the
Committee for payment of any federal, state and local taxes required by law to
be withheld on account of such taxable event. Subject to approval by the
Committee, the Optionee may elect to have such tax withholding obligation
satisfied, in whole or in part, by authorizing the Company to withhold from
shares of Common Stock to be issued or transferring to the Company, a number of
shares of Common Stock with an aggregate Fair Market Value that would satisfy
the withholding amount due. For purposes of this Section 7 "Fair Market Value"
on any given date means the last reported sale price at which Common Stock is
traded on such date or, if no Common Stock is traded on such date, the next
preceding date on which Common Stock was traded, as reflected on the principal
stock exchange or, if applicable, any other national stock exchange on which the
Common Stock is traded or admitted to trading. The Optionee acknowledges and
agrees that the Company or any subsidiary of the Company has the right to deduct
from payments of any kind otherwise due to the Optionee, or from the Option
Shares to be issued in respect of an exercise of this Stock Option, any federal,
state or local taxes of any kind required by law to be withheld with respect to
the issuance of Option Shares to the Optionee.
9
<PAGE>
8. Miscellaneous Provisions.
------------------------
(a) Equitable Relief. The parties hereto agree and declare that legal
----------------
remedies may be inadequate to enforce the provisions of this Agreement and that
equitable relief, including specific performance and injunctive relief, may be
used to enforce the provisions of this Agreement.
(b) Change and Modifications. This Agreement may not be orally
------------------------
changed, modified or terminated, nor shall any oral waiver of any of its terms
be effective. This Agreement may be changed, modified or terminated only by an
agreement in writing signed by the Company and the Optionee.
(c) Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of Delaware.
(d) Headings. The headings are intended only for convenience in
--------
finding the subject matter and do not constitute part of the text of this
Agreement and shall not be considered in the interpretation of this Agreement.
(e) Saving Clause. If any provision(s) of this Agreement shall be
-------------
determined to be illegal or unenforceable, such determination shall in no manner
affect the legality or enforceability of any other provision hereof.
(f) Notices. All notices, requests, consents and other communications
-------
shall be in writing and be deemed given when delivered personally, by telex or
facsimile transmission or when received if mailed by first class registered or
certified mail, postage
10
<PAGE>
prepaid. Notices to the Company or the Optionee shall be addressed as set forth
underneath their signatures below, or to such other address or addresses as may
have been furnished by such party in writing to the other.
(g) Benefit and Binding Effect. This Agreement shall be binding upon
--------------------------
and shall inure to the benefit of the parties hereto, their respective
successors, permitted assigns, and legal representatives. The Company has the
right to assign this Agreement, and such assignee shall become entitled to all
the rights of the Company hereunder to the extent of such assignment.
(h) Counterparts. For the convenience of the parties and to facilitate
------------
execution, this Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which shall constitute one and the
same document.
11
<PAGE>
The foregoing Agreement is hereby accepted and the terms and conditions
thereof hereby agreed to by the undersigned.
BORON, LEPORE & ASSOCIATES, INC.
By:
----------------------------------
Title:
-------------------------------
Address: BORON, LEPORE & ASSOCIATES, INC.
Attention: President
17-17 Route 208 North
Fair Lawn, New Jersey 07410
OPTIONEE:
--------------------------------------
Timothy J. McIntyre
Optionee's Address:
------------------------------
------------------------------
DESIGNATED BENEFICIARY:
------------------------------
Beneficiary's Address:
------------------------------
------------------------------
12
<PAGE>
Schedule A
----------
Vesting Schedule
----------------
1. Defined Terms. All capitalized terms used herein and not defined
-------------
shall have the respective meanings provided in the attached Agreement.
2. Time-Based Vesting. Subject to Section 1(c) of the attached
------------------
Agreement, this Stock Option and the Option Shares subject thereto shall vest
and become exercisable to the extent not previously vested, on June 9, 2004.
3. Performance Vesting Events. Notwithstanding anything hereunder to the
--------------------------
contrary and as contemplated by Section 6 of the attached Agreement, the
following numbers of Option Shares shall vest upon attainment of the performance
objectives set forth below for 1997, 1998 and 1999, respectively, subject,
however, in each case to the rights of the Committee in its sole discretion to
grant whole or partial vesting of one or more tranches of Option Shares
notwithstanding failure to attain the specified performance objectives:
<TABLE>
<CAPTION>
Incremental
No. of Shares
Tranche Performance Objective Vesting Date Vested/1/
- ------- --------------------- ------------ -------------
<S> <C> <C> <C>
A. 1997
----
1. Execution prior to December 31, 1997 of Date of Execution of * 25,000
definitive "corporate contract" agreement with Contract
* (the "*" Contract") (provided that no
vesting of this tranche of Option Shares
shall occur pursuant to this Schedule A if
execution occurs after that date).
2. Execution prior to December 31, 1997 of new Date of Execution of contract 25,000
contracts by the Company and customers relating pursuant to which * revenue
to consumer meetings programs providing target achieved
aggregate revenue of at least * for the
Company (provided that no vesting of the
Tranche of Option Shares shall occur pursuant
to this Schedule A if such contracts are not
executed in 1997).
</TABLE>
/1/ Subject to stock splits, stock dividends and the like as indicted in the
attached Agreement.
- -------------------------------------
* Confidential Treatment Requested.
A-1
<PAGE>
<TABLE>
<CAPTION>
Incremental
No. of Shares
Tranche Performance Objective Vesting Date Vested/1/
- ------- --------------------- ------------ -------------
<S> <C> <C> <C>
B. 1998
----
3. Initial execution prior to December 31, 1998 Date of initial execution or 25,000
of the * contract, or renewal of such contract 1998 renewal
on substantially the same terms in 1998
(provided that no vesting of this Tranche of
Option Shares shall occur pursuant to this
Schedule A if such initial execution or renewal
does not occur in 1998).
</TABLE>
/1/ Subject to stock splits, stock dividends and the like as indicated in the
attached Agreement.
# Subject to pro ration as provided under "Vesting Date."
- ------------------------------------
* Confidential Treatment Requested.
A-2
<PAGE>
<TABLE>
<CAPTION>
Incremental
No. of Shares
Tranche Performance Objective Vesting Date Vested/1/
- ------- --------------------- ------------ -------------
<S> <C> <C> <C>
4. Attainment by the Company's BLA Division (or As of December 31, 1998 provided the 100,000#
any successor thereto conducting its provided the Optionee has a
promotional meetings business as Service Relationship as of
determined in good faith by the Company) such date even if such Service
of the financial and strategic Relationship terminates
objectives set forth in the 1998 business thereafter, based on the
plan which is recommended by the CEO of Company's review of its 1998
the Company based upon his good faith assessment financial results; provided,
of the business of the BLA Division and --------
approved by the Board of Directors of however, that if the Service
the Company prior to or shortly following -------
the commencement of the 1998 fiscal year, Relationship is terminated
but no later than January 31, (provided pursuant to Section 6(c), 6(e)
that no vesting of this Tranche of Option Shares or 6(f) of the Employment
shall occur pursuant to this Schedule A if Agreement between the Optionee
such objectives are not obtained.) and the Company dated June 9,
1997, and the performance
objective is obtained, a pro
rata percentage of the 100,000
Option Shares shall vest as of
December 31, 1998, such
percentage to be equal to the
percentage of 1998 which has
transpired (measured in full
months) prior to the
termination of such Service
Relationship.
</TABLE>
C. 1999
----
/1/ Subject to stock splits, stock dividends and the like as indicated in the
attached Agreement.
# Subject to pro ration as provided under "Vesting Date."
A-3
<PAGE>
<TABLE>
<CAPTION>
Incremental
No. of Shares
Tranche Performance Objective Vesting Date Vested/1/
- ------- --------------------- ------------ -------------
<S> <C> <C> <C>
5. Initial execution prior to December 31, 1999 of Date of initial execution or 25,000
the * Contract, or renewal of such contract 1999 renewal
on substantially the same terms in 1999 (provided
that no vesting of this Tranche of Option Shares
shall occur pursuant to this Schedule A if such
initial execution or renewal does not occur in
1999).
6. Attainment by the Company's BLA Division (or As of December 31, 1999 100,000/#/
any successor thereto conducting its provided the Optionee has a
promotional meetings business as Service Relationship as of
verified in good faith by the Company) of such date even if such Service
the financial and strategic objectives set Relationship terminates
forth in the 1999 business plan which thereafter, based on the
is recommended by the CEO of Company's review of its 1999
the Company based upon his good faith financial results; provided,
assessment of the business of the BLA however that if the Service
Division and approved by the Board Relationship is terminated
of Directors of the Company prior to or pursuant to Section 6(c), 6(e)
shortly following the commencement of or 6(f) of the Employment
the 1999 fiscal year, but no later Agreement between the Optionee
than January 31 (provided that no vesting and the Company dated June 9,
of this Tranche of Option Shares 1997, and the performance
shall occur pursuant to this Schedule A objective is obtained, a pro
if such objectives are not obtained). rata percentage of the 100,000
Option Shares shall vest as of
December 31, 1999, such
percentage to be equal to the
percentage of 1999 which has
transpired (measured in full
months) prior to the
termination of such Service
Relationship.
</TABLE>
4. Acceleration of Vesting on Certain Sale Events. As of the effective date
----------------------------------------------
(or, as applicable, the record date) of any Sale Event (as defined in Section 6
of the attached Agreement), to the extent not previously vested, (i) if such
Sale Event occurs before December 31, 1997, than all unvested Tranches shall
automatically vest , and (ii) if such Sale Event occurs after December 31, 1997,
then to the extent not previously vested, Tranches 4 and 6 shall thereupon vest,
Tranches 3 and 5 shall automatically vest if (and only if) Tranche 1 has
# Subject to pro ration as provided under "Vesting Date."
---------------------------------
* Confidential Treatment Requested.
A-4
<PAGE>
<TABLE>
<CAPTION>
Incremental
No. of Shares
Tranche Performance Objective Vesting Date Vested/1/
- ------- --------------------- ------------ -------------
<S> <C> <C> <C>
</TABLE>
theretofore vested, and Tranche 5 shall automatically vest if (and only if)
Tranche 3 has theretofore vested, and thereupon vesting shall otherwise cease
and this Stock Option shall terminate as provided in Section 6 of the attached
Agreement.
5. Certain Employment-Related Terminations. Notwithstanding anything herein
---------------------------------------
to the contrary, in the event Tranche 1 has vested in accordance with its terms
as provided above and thereafter the employment of the Grantee terminates as a
result of (i) a termination by the Company without cause, or (ii) resignation or
a termination by the Employee due to an uncured, material default by the Company
pursuant to or under the circumstances contemplated by Sections 6(e) and 6(f) of
the Employment Agreement between the Company and the Grantee dated as of June 9,
1997, then the Stock Option as to Tranches 3 and 5, respectively, shall
nonetheless remain in effect (as a non-qualified option, if applicable), until
such time in 1998 or 1999, respectively, if ever, as the renewal specified above
occurs, whereupon the relevant tranche shall vest as of the date of the renewal
and be exercisable for three months after the Company gives the Optionee notice
thereof, but if such event fails to occur in 1998 or 1999, respectively, then
the Stock Option or the relevant tranche shall lapse and terminate as of
December 31 of the relevant year. In any case this Stock Option shall terminate
as contemplated by Section 6 of the attached Agreement or on the Expiration
Date.
A-5
<PAGE>
Appendix A
STOCK OPTION EXERCISE NOTICE
Boron, LePore & Associates, Inc.
Attention: Chief Financial Officer
17-17 Route 208 North
Fair Lawn, New Jersey 07410
Dear Sirs:
Pursuant to the terms of my stock option agreement dated ____________
(the "Agreement") under the Boron, LePore & Associates, Inc 1996 Stock Option
and Grant Plan, I, [Insert Name] ___________________, hereby [Circle One]
partially/fully exercise such option by including herein payment in the amount
of $_______ representing the purchase price for [Fill in number of Option
Shares] __________ option shares. I have chosen the following form(s) of
payment:
[_] 1. Cash
[_] 2. Certified or Bank Check payable to Boron, LePore & Associates, Inc.
[_] 3. Other (as described in the Agreement (please describe)) __________.
Sincerely yours,
--------------------------------------------
Please Print Name
--------------------------------------------
Signature
A-6
<PAGE>
[LETTERHEAD OF M.R. WEISER & CO. LLP APPEARS HERE]
Exhibit 16.1
Securities and Exchange Commission
450 5th Street, N.W.
Washington, D.C. 20549
Gentleman:
We have read and agree with the wording contained in the Experts' Section of
Form S-1 of Boron LePore & Associates, Inc. dated June 30, 1997.
/a/ M.R. Weiser & Co. LLP
-------------------------
M.R. WEISER & CO. LLP
Edison, NJ
June 30, 1997
<PAGE>
[LETTERHEAD OF ARTHUR ANDERSEN LLP APPEARS HERE]
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Boron, LePore & Associates, Inc.
As independent public accountants, we hereby consent to the use of our report
and to all references to our Firm included in or made part of this registration
statement.
/s/ Arthur Andersen LLP
-----------------------
Arthur Andersen LLP
Roseland, New Jersey
June 30, 1997
<PAGE>
[LETTERHEAD OF M.R. WEISER & CO. LLP APPEARS HERE]
EXHIBIT 23.3
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the use in this registration statement on Form S-1 of our
report dated April 10, 1996, on our audit of the financial statements of
Boron, LePore & Associates, Inc. as of December 31, 1995 and for the years
ended December 31, 1994 and 1995. We also consent to the reference to our firm
under the caption "Experts."
/s/ M.R. Weiser & Co. LLP
-------------------------
M.R. Weiser & Co. LLP
Edison, NJ
June 30, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-31-1996 MAR-31-1997
<CASH> 7,175,648 749,593
<SECURITIES> 0 0
<RECEIVABLES> 15,269,261 16,978,203
<ALLOWANCES> 300,000 300,000
<INVENTORY> 0 0
<CURRENT-ASSETS> 22,399,711 17,761,340
<PP&E> 879,528 956,192
<DEPRECIATION> 554,232 581,732
<TOTAL-ASSETS> 23,096,940 18,492,690
<CURRENT-LIABILITIES> 19,984,169 15,566,653
<BONDS> 20,000,000 18,500,000
0 0
12,500,000 12,832,000
<COMMON> 96,000 97,255
<OTHER-SE> (10,633,230) (10,053,218)
<TOTAL-LIABILITY-AND-EQUITY> 23,096,940 18,492,690
<SALES> 40,219,534 13,672,863
<TOTAL-REVENUES> 40,219,534 13,672,863
<CGS> 26,004,405 9,736,739
<TOTAL-COSTS> 26,004,405 9,736,739
<OTHER-EXPENSES> 19,995,398 2,249,522
<LOSS-PROVISION> 300,000 0
<INTEREST-EXPENSE> 311,237 427,361
<INCOME-PRETAX> (7,111,363) 1,277,498
<INCOME-TAX> 0 400,000
<INCOME-CONTINUING> (7,111,363) 877,498
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (7,111,363) 877,498
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
