<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 29, 1997
REGISTRATION STATEMENT NO. 333-30573
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------
AMENDMENT NO. 2 TO
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.
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. [_]
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CALCULATION OF REGISTRATION FEE
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- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1)(2) PER SHARE(2) OFFERING PRICE(1)(2) REGISTRATION FEE(2)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value.......... 4,140,000 Shares $18.00 $74,520,000 $22,582
</TABLE>
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(1) Includes 540,000 shares of Common Stock which the Underwriters have the
option to purchase solely to cover over-allotments, if any.
(2) These figures are estimates made solely for the purpose of calculating the
registration fee in accordance with Rule 457 under the Securities Act of
1933. This amendment increases the number of shares of Common Stock to be
registered by 306,667 from those referred to in the original filing at
which time the Company paid a registration fee of $19,167 (based on an
estimated per share price of $16.50). Based on an increased estimated per
share price of $18.00, the additional fee paid herewith for adding such
306,667 shares of Common Stock is $1,673.
-------------
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.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<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 AUGUST 29, 1997
PROSPECTUS
3,600,000 SHARES
BORON, LEPORE & ASSOCIATES, INC.
COMMON STOCK
-----------
All of the 3,600,000 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 $16.00 and $18.00 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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNTS(1) COMPANY(2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share.................................... $ $ $
- --------------------------------------------------------------------------------
Total(3)..................................... $ $ $
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) See "Underwriting" for indemnification arrangements with the several
Underwriters.
(2)Before deducting expenses payable by the Company estimated at $ .
(3) The Company and the Selling Stockholders have granted to the Underwriters a
30-day option to purchase up to an aggregate of 540,000 additional shares
of Common Stock, on a 25%/75% pro rata basis, respectively, solely to cover
over-allotments, if any. If the option is exercised in full, the Company
will sell 135,000 shares of Common Stock and the Selling Shareholders will
sell 405,000 shares of Common Stock and the total Price to Public,
Underwriting Discount, Proceeds to the Company and Proceeds to the Selling
Stockholders 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); teleservices such as teledetailing,
telemarketing, sales support and fulfillment; and contract sales services. In
July 1997, the Company opened its teleservice center in Norfolk, Virginia to
support expansion of its teleservices business, and in August 1997, the Company
established its contract sales organization.
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 meetings and
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, teleservices and contract sales; (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, teleservices and contract
sales. BLP believes that its long-standing customer relationships, staff of
trained and experienced employee 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.......
3,600,000 shares
Common Stock to be outstanding after the
offering.................................. 10,612,979 shares(1)
Use of proceeds...........................
To repay existing indebtedness, in-
cluding interest and fees; to re-
deem all outstanding shares of re-
deemable preferred stock; to repur-
chase shares of Common Stock from
an officer of the Company who has
resigned; to finance capital im-
provements, new businesses and pos-
sible strategic acquisitions; and
to fund 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) 525,659 shares of
Common Stock issuable upon the exercise of outstanding stock options at a
weighted average exercise price of $10.36 per share at August 28, 1997;
(ii) 1,261,355 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"); (iii) 225,000 additional shares of Common Stock
available for future sales under the 1997 Employee Stock Purchase Plan (the
"Purchase Plan"); and (iv) 466,666 shares of Common Stock which the Company
will purchase with the proceeds of this offering from an officer of the
Company who has resigned. 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 has been
adjusted to reflect (i) a two-for-three reverse stock split of the Common Stock
to be effective in connection with and prior to the completion of this
offering, (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, and (iii) the purchase by the
Company with the proceeds of this offering of 466,666 shares of Common Stock
from an officer of the Company who has resigned. 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, $581,000 at June 30, 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>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
-------------------------- ---------------
1994 1995 1996 1996 1997
-------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues........................ $ 20,580 $ 21,775 $ 40,219 $16,146 $32,121
Cost of sales................... 12,378 12,788 26,004 10,472 22,840
-------- -------- -------- ------- -------
Gross profit.................. 8,202 8,987 14,215 5,674 9,281
-------- -------- -------- ------- -------
Officers' compensation.......... 2,003 1,336 13,351(1) 1,398 572
Other selling, general and ad-
ministrative expenses.......... 4,533 5,005 6,644(2) 2,952 4,437
-------- -------- -------- ------- -------
Total selling, general and ad-
ministrative expenses......... 6,536 6,341 19,995 4,350 5,009
-------- -------- -------- ------- -------
Operating income (loss)....... 1,666 2,646 (5,780) 1,324 4,272
Interest expense, net........... 43 86 255 104 766
Nonrecurring loss on forgiveness
of related party loan.......... -- -- 1,076 -- --
-------- -------- -------- ------- -------
Income (loss) before provision
for income taxes............. 1,623 2,560 (7,111) 1,220 3,506
Provision for income taxes(3)... 25 51 -- -- 1,200
-------- -------- -------- ------- -------
Net income (loss)............. $ 1,598 $ 2,509 $ (7,111) $ 1,220 $ 2,306
======== ======== ======== ======= =======
Net income (loss) per common
share.......................... $ (0.86) $ 0.28
======== =======
Pro forma weighted average com-
mon shares outstanding(4)...... 8,273 8,307
======== =======
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1997
-----------------------
ACTUAL AS ADJUSTED(5)
------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................... $ 2,733 $22,748
Working capital......................................... 2,797 24,682
Total assets............................................ 25,155 44,896
Long-term debt, less current maturities................. 18,000 --
Redeemable equity securities............................ 13,081 --
Total stockholders' equity (deficit).................... (27,505) 25,297
</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 benefit for income taxes would
have been ($2,905,000) and the pro forma net loss per common share would
have been ($0.51). Because the Company elected to be subject to taxation
under Subchapter C of the Code for the six months ended June 30, 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.
Pro forma weighted average common shares outstanding has been computed as
provided in Note 3 to the Financial Statements of the Company included
elsewhere in this Prospectus.
(5) Gives effect to the completion of this offering at an assumed initial
public offering price of $17.00 per share and the receipt and application
of the estimated net proceeds from this offering (including the use of such
proceeds to purchase 466,666 shares of Common Stock from an officer of the
Company who has resigned), as if such transactions had been completed on
June 30, 1997. Also reflects the anticipated write-off of unamortized loan
fees of approximately $164,000 or ($.0.02) per share as of June 30, 1997,
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, three customers each accounted for 10% or more of
the Company's revenues, and in 1995 and 1994, the same four customers in
varying order 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 52%, 44% and 45% of revenues for
the first six months of 1997 and the years 1996 and 1995, respectively. BLP is
likely to continue to experience a high degree of 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.
6
<PAGE>
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 the service of producing symposia,
and symposia accounted for revenues of $1.5 million, or 3.8% of the Company's
revenues, in 1996 and revenues of $9.9 million, or 30.8% of the Company's
revenues, for the first six months of 1997. In addition, the Company introduced
other services such as product marketing and teleservices in 1996 and contract
sales in August 1997, but such services have accounted for relatively
insignificant portions of total revenues through June 30, 1997. 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 number of the
same risks as well as additional 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 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. 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. The Company's contract sales
services are subject to a variety of risks, including the necessity of
obtaining projects for its sales force and attracting qualified sales
representatives, and there can be no assurance that BLP will establish a
significant or lasting presence in the contract sales market.
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 design
stage 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 such as the additional difficulties inherent in
complying with differing regulatory systems, assimilating differences in
foreign cultures and business practices, and overcoming language barriers. 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, completion or cancellation 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, sale 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
8
<PAGE>
significant legal costs. As a provider of promotional, marketing and
educational services to the pharmaceutical 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, teleservices and contract sales
services, the Company believes that the relative likelihood of becoming
involved in litigation regarding the information given or products sold or
distributed 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
9
<PAGE>
expected to become increasingly competitive. The provision of contract sales
services is also a relatively new and undeveloped industry in the United
States, and the Company faces significant competition in providing such
services from larger, established companies having greater resources and
access to capital. 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. 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 17.8%
of the estimated net proceeds from this offering (assuming an initial public
offering price of $17.00 per share). In August 1997, the Company accepted the
resignation of Christopher J. Sweeney, effective as of September 15, 1997, and
agreed to use a portion of the proceeds of the offering to purchase 466,666
shares of Common Stock owned by Mr. Sweeney. See "Use of Proceeds" and
"Certain Transactions."
LOSSES; ACCUMULATED DEFICIT
In 1996, the Company incurred a net loss of $7.1 million, and at June 30,
1997, the Company had an accumulated deficit of $10.7 million and a deficit in
stockholders' equity of $27.5 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 42.1%
(38.3% assuming exercise of the Underwriters' over-allotment option in full)
and 20.1%, 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 3,600,000 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 746,320 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, 384,991 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
10
<PAGE>
of all of such shares, however, have agreed 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 to the Company or pursuant to the Underwriters' over-
allotment option. 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 6,866,659 shares will
have the right to have their shares registered); holders of approximately
6,866,659 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
6,866,659 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. With the exception of
the Selling Stockholders, none of such holders are including their shares in
the registration statement filed in connection with this offering, and all of
such holders have agreed 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 to the Company or pursuant to the Underwriters' over-
allotment option. 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
11
<PAGE>
(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 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 $17.00 per share, investors in
this offering will incur dilution of $13.26 per share. See "Dilution."
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 3,600,000 shares of
Common Stock offered by the Company hereby at an assumed initial public
offering price of $17.00 per share are estimated to be $56.1 million. 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 fees and accrued and unpaid
interest; (ii) approximately $10.8 million will be used to redeem all
Redeemable Preferred Stock, including accumulated and unpaid dividends; (iii)
approximately $5.6 million will be used to purchase 466,666 shares of Common
Stock from an officer of the Company who has resigned; (iv) approximately $3
million will be used to implement a new management information system and to
enhance the Company's overall technological capabilities; (v) approximately $1
million will be used to fund additional capital expenditures for the new
teleservice center in Norfolk, Virginia; (vi) approximately $1 million will be
used to develop the new contract sales organization; and (vii) the balance of
approximately $15.1 million will be used for working capital and other general
corporate purposes. The Company routinely evaluates potential acquisitions of
businesses, products and technologies that would complement or expand the
Company's business. The Company may use a portion of the net proceeds from
this offering for one or more such transactions; however, it currently has no
commitments or agreements with respect to such transactions. 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 July
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 June 30, 1997, BLP had a pro forma net tangible book value of
approximately $(14.7) million or $(1.97) per share of Common Stock. Pro forma
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 and after giving effect to the conversion of all outstanding shares of
Convertible Participating Preferred Stock. Without taking into account any
other changes in the pro forma net tangible book value after June 30, 1997,
other than to give effect to the receipt by the Company of the net proceeds
from the sale of the 3,600,000 shares of Common Stock offered by the Company
hereby at an assumed initial public offering price of $17.00 per share, the pro
forma net tangible book value of the Company as of June 30, 1997 would have
been approximately $41.3 million or $3.74 per share. This represents an
immediate increase in pro forma net tangible book value of $5.71 per share to
existing stockholders and an immediate dilution of $13.26 per share to new
investors. The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $17.00
------
Pro forma net tangible book value per share at June 30,
1997..................................................... $(1.97)
------
Increase per share attributable to new investors.......... 5.71
------
Pro forma net tangible book value per share after the offer-
ing........................................................ 3.74
------
Pro forma net tangible book value dilution per share to new
investors.................................................. $13.26
======
</TABLE>
The following table summarizes, on a pro forma basis as of June 30, 1997
after giving effect to the conversion of all outstanding shares of Convertible
Participating Preferred Stock, 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>
SHARES PURCHASED TOTAL CONSIDERATION
------------------ ------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders.. 7,460,325 67.5% $ 3,105,740 4.8% $0.42
New investors.......... 3,600,000 32.5 $61,200,000 95.2 17.00
---------- ----- ----------- -----
Total................ 11,060,325 100.0% $64,305,740 100.0%
========== ===== =========== =====
</TABLE>
Other than as noted above, the foregoing computations assume no exercise of
any outstanding stock options after June 30, 1997 or the Underwriters' over-
allotment option and do not include the repurchase upon the consummation of
this offering of 466,666 shares of Common Stock from an officer of the Company
who has resigned. See "Use of Proceeds." As of June 30, 1997, options to
purchase 278,993 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 June
30, 1997 (i) on an actual basis and (ii) as adjusted to give effect to the
sale by the Company of the 3,600,000 shares of Common Stock offered hereby at
an assumed initial public offering price of $17.00 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>
JUNE 30, 1997
---------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Current maturities of long-term debt(1)............. $ 1,750 $ --
-------- -------
Long-term debt, net of current maturities(1)........ $ 18,000 $ --
======== =======
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...... $ 13,081 $ --
-------- -------
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; 5,739,995 shares issued and 2,006,662
outstanding; 50,000,000 shares authorized,
14,750,330 shares issued and 10,550,331 shares
outstanding as adjusted(3)....................... $ 57 $ 148
Class A Common Stock, $.01 par value, 1,333,333
shares authorized; 786,999 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 outstand-
ing; no shares authorized, issued or outstanding
as adjusted...................................... -- --
Additional paid-in capital........................ 1,969 60,452
Treasury Stock, 3,733,333 shares actual and
4,199,999 as adjusted, of Common Stock, at cost.. (18,850) (24,350)(5)
Retained earnings (deficit)....................... (10,689) (10,953)(4)(5)
-------- -------
Total stockholders' equity (deficit)............ (27,505) 25,297
-------- -------
Total capitalization............................ $ 5,326 $25,297
======== =======
</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 $581,000.
(3) Excludes: (i) 525,659 shares of Common Stock currently issuable upon
exercise of outstanding stock options, including 246,666 shares issued
subsequent to June 30, 1997; (ii) 1,261,355 additional shares of Common
Stock available for future grants under the 1996 Stock Plan; and (iii)
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
$164,000, net of the related tax effect.
(5) Reflects the purchase of 466,666 shares of Common Stock from an officer of
the Company who has resigned.
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 six months ended June 30, 1996
and 1997 and the selected balance sheet data at June 30, 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>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
---------------------------------------- ---------------
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 $16,146 $32,121
Cost of sales........... 14,059 13,820 12,378 12,788 26,004 10,472 22,840
------- ------- ------- ------- ------- ------- -------
Gross profit........... 4,722 5,519 8,202 8,987 14,215 5,674 9,281
------- ------- ------- ------- ------- ------- -------
Officers' compensation.. 1,456 1,292 2,003 1,336 13,351(1) 1,398 572
Other selling, general
and administrative ex-
penses................. 4,643 4,027 4,533 5,005 6,644(2) 2,952 4,437
------- ------- ------- ------- ------- ------- -------
Total selling, general
and administrative ex-
penses................ 6,099 5,319 6,536 6,341 19,995 4,350 5,009
------- ------- ------- ------- ------- ------- -------
Operating income
(loss)................ (1,377) 200 1,666 2,646 (5,780) 1,324 4,272
Interest expense, net... 49 49 43 86 255 104 766
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) 1,220 3,506
Provision for income
taxes(3)............... -- -- 25 51 -- -- 1,200
------- ------- ------- ------- ------- ------- -------
Net income (loss)...... $(1,426) $ 151 $ 1,598 $ 2,509 $(7,111) $ 1,220 $ 2,306
======= ======= ======= ======= ======= ======= =======
Net income (loss) per
common share........... $ (0.86) $ 0.28
======= =======
Pro forma weighted aver-
age common shares out-
standing(4)............ 8,273 8,307
======= =======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, 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 $ 2,733 $22,748
Working capital (defi-
cit)................... (1,814) (1,707) 78 3,046 2,416 2,797 24,682
Total assets............ 1,596 1,792 5,128 10,499 23,097 25,155 44,896
Long-term debt, less
current maturities..... 23 11 308 2,061 20,000 18,000 --
Redeemable equity secu-
rities................. -- -- -- -- 12,500 13,081 --
Total stockholders' eq-
uity (deficit)......... (1,604) (1,453) 145 2,505 (29,387) (27,505) 25,297
</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 benefit for income taxes would have been ($2,905,000) and the pro
forma net loss per common share would have been ($0.51). Because the
Company elected to be subject to taxation under Subchapter C of the Code
for the six months ended June 30, 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. Pro forma weighted average common shares outstanding has been
computed as provided in Note 3 to the Financial Statements of the Company
included elsewhere in this Prospectus.
(5) Gives effect to the completion of this offering at an assumed initial
public offering price of $17.00 per share and the receipt and application
of the estimated net proceeds from this offering (including the use of
such proceeds to purchase 466,666 shares of Common Stock from an officer
of the Company who has resigned) as if such transactions had been
completed on June 30, 1997. Also reflects the anticipated write-off of
unamortized loan fees of approximately $164,000 or ($0.02) per share as of
June 30, 1997, 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 six months of
1997 have increased significantly as compared to the first six months 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, teleservices
and contract sales. The Company opened its 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. Additionally, the start-up costs related to the Company's
new teleservice center and new contract sales organization will negatively
impact the Company's near-term financial performance. 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>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
---------------------------- ----------------
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 64.9 71.1
-------- -------- -------- ------- -------
Gross profit.............. 39.9 41.3 35.3 35.1 28.9
-------- -------- -------- ------- -------
Officers' compensation...... 9.7 6.1 33.2(1) 8.6 1.8
Other selling, general and
administrative expenses.... 22.1 23.0 16.5(2) 18.3 13.8
-------- -------- -------- ------- -------
Total selling, general and
administrative expenses.. 31.8 29.1 49.7 26.9 15.6
-------- -------- -------- ------- -------
Operating income (loss)... 8.1 12.2 (14.4) 8.2 13.3
Interest expense, net....... 0.2 0.4 0.6 0.6 2.4
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) 7.6 10.9
Provision for income tax-
es(3)...................... 0.1 0.3 -- -- 3.7
-------- -------- -------- ------- -------
Net income (loss)......... 7.8% 11.5% (17.7)% 7.6% 7.2%
======== ======== ======== ======= =======
</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.
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1996
Revenues increased $16.0 million, or 98.9%, from $16.1 million in the six
months ended June 30, 1996 to $32.1 million in the six months ended June 30,
1997. This increase was due to growth of the Company's conferencing services.
This growth was comprised principally of a $6.1 million, or 42.0%, increase in
revenues from peer-to-peer meetings and the addition of $9.9 million of
revenues from symposia services, which were introduced in late 1996.
Cost of sales increased $12.4 million, or 118.1%, from $10.4 million in the
six months ended June 30, 1996 to $22.8 million in the six months ended June
30, 1997. Cost of sales as a percentage of revenues increased from 64.9% in
the prior year period to 71.1% 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 increased $0.6 million, or
15.1%, from $4.4 million in the six months ended June 30, 1997 to $5.0 million
in the six months ended June 30, 1996, as the cost of personnel additions of
approximately $1.0 million and other operating expenses of $0.4 million in the
current year period was partially 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 26.9% in
the prior year period to 15.6% in the current year period primarily as a
result of increased revenues.
Operating income increased $3.0 million, or 222.6%, from $1.3 million in the
six months ended June 30, 1996 to $4.3 million in the six months ended June
30, 1997. Operating income as a percentage of revenues
17
<PAGE>
increased from 8.2% in the prior year period to 13.3% in the current year
period. The increase in 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 636.0% from $0.1 million in the six
months ended June 30, 1996 to $0.8 million in the six months ended June 30,
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 six months ended June 30, 1997 was
$1.2 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 six months ended
June 30, 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 ten 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, JUNE 30,
1995 1995 1995 1995 1996 1996 1996 1996 1997 1997
--------- -------- --------- -------- --------- -------- --------- -------- --------- --------
(IN THOUSANDS)
<S> <C> <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 $18,448
Cost of sales......... 2,797 2,316 2,269 5,406 4,496 5,976 5,949 9,583 9,737 13,103
------ ------ ------ ------- ------ ------ ------ ------- ------- -------
Gross profit........ 1,712 1,133 1,385 4,757 2,477 3,197 3,643 4,898 3,936 5,345
------ ------ ------ ------- ------ ------ ------ ------- ------- -------
Officers' compensa-
tion................. 427 324 191 394 683 715 461 11,492(1) 286 286
Other selling, general
and administrative
expenses............. 1,222 1,154 1,137 1,492 1,488 1,464 1,511 2,181(2) 1,964 2,473
------ ------ ------ ------- ------ ------ ------ ------- ------- -------
Total selling, gen-
eral and adminis-
trative
expenses........... 1,649 1,478 1,328 1,886 2,171 2,179 1,972 13,673 2,250 2,759
------ ------ ------ ------- ------ ------ ------ ------- ------- -------
Operating income
(loss)............. 63 (345) 57 2,871 306 1,018 1,671 (8,775) 1,686 2,586
Interest expense,
net.................. 5 28 30 23 55 49 24 127 409 357
Nonrecurring loss on
forgiveness of re-
lated party loan..... -- -- -- -- -- -- -- 1,076 -- --
------ ------ ------ ------- ------ ------ ------ ------- ------- -------
Income (loss) before
provision for in-
come taxes......... 58 (373) 27 2,848 251 969 1,647 (9,978) 1,277 2,229
Provision for income
taxes................ -- -- -- 51 -- -- -- -- 400 800
------ ------ ------ ------- ------ ------ ------ ------- ------- -------
Net income (loss)... $ 58 $ (373) $ 27 $ 2,797 $ 251 $ 969 $1,647 $(9,978) $ 877 $ 1,429
====== ====== ====== ======= ====== ====== ====== ======= ======= =======
<CAPTION>
PERCENTAGE OF REVENUES
---------------------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30,
1995 1995 1995 1995 1996 1996 1996 1996 1997 1997
--------- -------- --------- -------- --------- -------- --------- -------- --------- --------
<S> <C> <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% 100.0%
Cost of sales......... 62.0 67.1 62.1 53.2 64.5 65.1 62.0 66.2 71.2 71.0
------ ------ ------ ------- ------ ------ ------ ------- ------- -------
Gross profit........ 38.0 32.9 37.9 46.8 35.5 34.9 38.0 33.8 28.8 29.0
------ ------ ------ ------- ------ ------ ------ ------- ------- -------
Officers' compensa-
tion................. 9.5 9.4 5.2 3.9 9.8 7.8 4.8 79.4(1) 2.1 1.6
Other selling, general
and administrative
expenses............. 27.1 33.5 31.1 14.7 21.3 16.0 15.8 15.1(2) 14.4 13.4
------ ------ ------ ------- ------ ------ ------ ------- ------- -------
Total selling, gen-
eral and adminis-
trative
expenses........... 36.6 42.9 36.3 18.6 31.1 23.8 20.6 94.4 16.5 15.0
------ ------ ------ ------- ------ ------ ------ ------- ------- -------
Operating income
(loss)............. 1.4 (10.0) 1.6 28.2 4.4 11.1 17.4 (60.6) 12.3 14.0
Interest expense,
net.................. 0.1 0.8 0.8 0.2 0.8 0.5 0.3 0.9 3.0 1.9
Nonrecurring loss on
forgiveness of re-
lated party loan..... -- -- -- -- -- -- -- 7.4 -- --
------ ------ ------ ------- ------ ------ ------ ------- ------- -------
Income (loss) before
provision for in-
come taxes......... 1.3 (10.8) 0.7 28.0 3.6 10.6 17.2 (68.9) 9.3 12.1
Provision for income
taxes................ -- -- -- 0.5 -- -- -- -- 2.9 4.4
------ ------ ------ ------- ------ ------ ------ ------- ------- -------
Net income (loss)... 1.3% (10.8)% 0.7% 27.5% 3.6% 10.6% 17.2% (68.9)% 6.4% 7.7%
====== ====== ====== ======= ====== ====== ====== ======= ======= =======
</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, completion or cancellation 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 June 30, 1997, the Company had $2.8 million in working capital, an
increase of $0.4 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 June 30,
1997 consisted of cash and cash equivalents, accounts receivable and borrowing
availability under the revolver portion of the Credit Facility.
The Company's accounts receivable turnover averaged 95, 93 and 66 days
outstanding for the periods ended June 30, 1997, December 31, 1996 and
December 31, 1995, respectively. The allowance for doubtful accounts was
$300,000, $300,000 and $0 at June 30, 1997, December 31, 1996 and December 31,
1995, respectively. The Company periodically reviews the financial condition
of its customers and its receivable collections history relative to the
particular billing arrangements for each account. Based on this review, the
Company believes that its receivable turnover is reasonable and its allowance
for doubtful accounts is adequate for the periods ended June 30, 1997,
December 31, 1996 and December 31, 1995.
During the six months ended June 30, 1997, the Company used $1.9 million in
operating activities. This included payment of $7.5 million of officer bonuses
as part of the TA Transaction partially offset by $5.6 million of cash
provided by other operating activities. During this period, the Company used
$1.4 million in investing activities to purchase additional equipment,
primarily related to the Company's new teleservice center in Norfolk,
Virginia. Also during this period, the Company used $1.1 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 June 30, 1997, $1.0
million and $0.0 million, 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. In
July 1997, the Company amended certain Credit Facility covenants to allow for
the anticipated increase in capital expenditures related to its new
teleservice center. 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.
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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."
Primarily in connection with the Company's development of its new
teleservice center in Norfolk, Virginia and the implementation of a new
management information system, the Company anticipates capital expenditures to
increase to approximately $4.8 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 Preferred Stock. The
Redeemable Preferred Stock will be immediately redeemed for $10.0 million plus
accumulated dividends, $581,000 at June 30, 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 technological enhancements and 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 six months ending June 30, 1997 would not have
been material.
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BUSINESS
GENERAL
Boron, LePore & Associates, Inc. provides outsourced promotional, marketing
and educational services to the pharmaceutical industry. The Company 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); teleservices such as
teledetailing, telemarketing, sales support and fulfillment; and contract
sales services. In July 1997, the Company opened a teleservice center in
Norfolk, Virginia to suppport expansion of its teleservices business.
The Company's predecessor, Boron, LePore & Associates, Inc., a New Jersey
corporation, was founded in 1981. In November 1996, the Company's predecessor
reincorporated in Delaware to form the Company by merging with and into BLA
Acquisition Corp., a newly-formed Delaware corporation. BLA Acquisition Corp.,
the surviving corporation, changed its name to Boron, LePore & Associates,
Inc., upon consummation of the merger.
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 meetings and 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
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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 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. BLP introduced symposia,
product marketing, and telemarketing services in 1996 and contract sales
services in August 1997. Of these new business areas, symposia generated the
most new revenues, accounting for revenues of $9.9 million during the first
six months of 1997, or 30.8% 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, teleservices and contract sales services. 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
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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.
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; (iv) teleservices; and (v) contract sales
services.
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 and employed 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 3,922, 4,312 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 six months of 1996 and 1997, the Company
conducted 3,185 and 4,756 peer-to-peer meetings, respectively, which accounted
for revenues of $14.4 million and $20.5 million, respectively, or 89.2% and
63.7% of the Company's revenues for the respective six-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 22 symposia
through the first six months of 1997. Symposia accounted for revenues of $1.5
million, or 3.8% of the Company's revenues in 1996. For the first six months
of 1997, symposia accounted for revenues of $9.9 million, or 30.8% 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 in the United States to market Ponstel(R)
(a registered trademark of Parke-Davis), an analgesic for dysmenorrhea
manufactured by Parke-Davis, until July 1998, subject to extension by mutual
agreement for successive terms of twelve months. Under the contract, the
Company is compensated based on the increase in the sales of Ponstel(R) above
an established baseline. In August 1997, BLP entered into an additional
agreement to provide product marketing services, which agreement compensates
the Company for sale of the subject products in excess of the established
baseline. Under this new contract, BLP has the right in the United States to
market Anusol HC(R) (a registered trademark of Parke-Davis) 2.5% Cream, a
topical corticosteroid, for a one-year period ending in July 1998. The Company
is currently in negotiations to provide product marketing services for an
additional product.
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 a number of the same risks as well as
additional risks that are not present in 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.
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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.
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 opening of its new teleservice center in Norfolk, Virginia in July
1997, the Company's teleservices capability increased substantially. The
Norfolk teleservice center is 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 fully completed, will contain 250 terminals and
will be staffed by approximately 275 to 300 full and part-time employees. As
of August 1997, the Company has approximately 102 operational terminals at the
Norfolk facility. As the facility becomes fully 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 is initially being 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 a number of
the same risks as well as additional 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.
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Contract Sales Services
BLP established a contract sales organization (the "CSO") in August 1997.
The Company believes that contract sales is another attractive outsourced
service to pharmaceutical companies because it allows a customer to shift
fixed cost to variable cost by outsourcing portions of its sales function and
to respond quickly to the need for alternative and additional sales support
for its products. The Company expects that the CSO will engage in traditional
product detailing efforts, which involve providing pharmaceutical product
samples and related promotional and educational materials to physicians. In
addition, the CSO will utilize advanced information technology and interface
with the teleservices business to offer clients a fully integrated sales
approach. This approach will include unique training, development and
recruiting disciplines designed to enable the CSO to compete effectively to
service the specialized needs of the pharmaceutical industry. BLP believes it
can leverage its existing customer relationships and market reputation to
obtain projects for the CSO.
The Company currently has a one-year contract engaging its CSO to support
products manufactured by Warner-Chilcott. The customer pays a fee for each BLP
sales representative in the field, with bonuses paid per representative upon
the achievement of such representative's specified sales objectives.
In connection with the initial project for Warner-Chilcott, as of August 22,
1997, the Company has hired approximately 35 salaried representatives who have
been trained by Warner-Chilcott, and it intends to hire 65 additional sales
representatives by the fourth quarter of 1997 in connection with this project.
The Company expects that its CSO will be structured along this dedicated sales
force model, with groups of sales persons recruited by BLP to conduct sales
activities for a particular client or pharmaceutical product. The Company is
currently in negotiations to provide contract sales services for additional
customers.
BLP believes that the quality of sales representatives, speed of recruitment
and management of the CSO are the most important factors in responding to its
customers' needs for outsourced sales support. The Company believes that its
established reputation in the industry, as well as its ability to provide an
array of complementary promotional services, will assist it in expanding its
CSO.
Contract sales is a new business area for BLP involving a number of the same
risks as well as additional risks not present in its traditional business,
such as the risk of competition from larger, established companies having
greater resources and access to capital. For instance, some of the Company's
larger competitors have computerized resume tracking systems for recruiting
contract sales representatives. There can be no assurances 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. The Company's principal customers, listed
alphabetically, include:
. American Home Products
. Bristol-Myers Squibb
. Glaxo Wellcome
. Merck
. Novartis
. Parke-Davis
The Company has enjoyed long standing relationships with many of these
customers, a number of which 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.
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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 Glaxo Wellcome and Parke-Davis. 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 20% 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>
American Home Products (34%) Glaxo Wellcome (45%) Glaxo Wellcome (44%)
Parke-Davis (20%) American Home Products (20%)
</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. The provision of contract sales services is also a
relatively new and undeveloped industry in the United States, and the Company
faces significant competition in providing such services from larger,
established companies having greater resources and access to capital. For
instance, some of the Company's larger competitors have computerized resume
tracking systems for recruiting contract sales representatives.
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,
31
<PAGE>
performance record, effectiveness of service, ability to offer a range of
integrated services, ability to provide services quickly 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, sale 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,
including the practice of providing product samples to physicians. Under this
statute, the FDA asserts its authority to regulate all promotional activities
involving prescription drugs. For example, the FDA has recently issued warning
letters indicating concern about the manner in which one of the Company's
competitors conducted certain focus groups. The FDA also questioned the content
of the information provided to participants and requested delivery of remedial
information. 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, and there can be no assurance that the Company will not be subject to
increased regulatory scrutiny in the future.
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.
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
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<PAGE>
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, teleservices and contract sales services, the Company believes that
the relative likelihood of becoming involved in litigation regarding the
information given or products sold or distributed 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 commenced 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 July 31, 1997, BLP had 348 employees, including 112 full-time
employees and 236 part-time employees. Of the full-time employees, 41 were
moderators, 12 were engaged in sales, 43 were engaged in sales support and
production, 2 were engaged in business development and 14 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.
33
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Executive officers and directors and their ages as of August 25, 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
Timothy J. McIntyre............ 42 Executive Vice President and President--
Promotional Conferencing Services Division
Brian J. Smith................. 41 Executive Vice President and President--BLP
Sales Support Division
Christopher J. Sweeney(1)...... 35 Executive Vice President--Corporate
Development
Martin J. Veilleux............. 35 Executive Vice President--Finance, Chief
Financial Officer, Secretary and Treasurer
Roger Boissonneault(2)......... 49 Director
Roger B. Kafker(2)............. 35 Director
Jacqueline C. Morby(3)......... 59 Director
Joseph E. Smith................ 58 Director
John A. Staley, IV(3).......... 54 Director
</TABLE>
- --------
(1) The Company has accepted Mr. Sweeney's resignation effective as of
September 15, 1997.
(2) Member of the Audit Committee.
(3) 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.
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.
Brian J. Smith joined the Company as Executive Vice President and President--
BLP Sales Support Division in August 1997. Prior to joining the Company, he
served as Vice President of Sales and Marketing of Watson Laboratories, Inc.,
a pharmaceutical manufacturing company and a subsidiary of Watson
Pharmaceuticals, Inc., from August 1995 until joining the Company and as
Director of Marketing/Managed Care at Forest Laboratories, Inc., a
pharmaceutical manufacturing company from August 1988 to July 1995.
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<PAGE>
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. The Company has accepted Mr. Sweeney's resignation
effective as of September 15, 1997.
Martin J. Veilleux joined the Company as Controller in March 1997 and became
Executive Vice President--Finance, Chief Financial Officer, Secretary and
Treasurer in July 1997. Prior to joining the Company, he served in positions
of increasing responsibility over a ten year period at Concurrent Computer
Corporation, serving most recently as Director of Finance from November 1991
to September 1994 and as Corporate Controller until leaving Concurrent
Computer in September 1996.
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 Laboratories, Inc. in
April 1996, he was associated with Warner-Lambert Co., the former parent
company of Warner Chilcott, since 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. which
is, in turn, a wholly owned subsidiary of Federated Investors, a Delaware
business trust, 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 Advisers, 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.
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<PAGE>
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 Ms. Morby and Mr. Staley.
Non-employee directors other than Mr. Kafker and Ms. Morby (the "Independent
Directors") each purchased 6,666 shares of restricted Class A Common Stock for
$3.00 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."
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
36
<PAGE>
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 Amended and Restated 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 3,000,000 shares of Common
Stock. 1,261,355 shares of Common Stock are available for future grants under
the Plan. On and after the date the 1996 Stock Plan becomes subject to Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), options
with respect to no more than 333,333 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
37
<PAGE>
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 525,659 shares of Common Stock to
employees of the Company under the 1996 Stock Plan at a weighted average
exercise price of $10.36 per share through August 22, 1997.
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
$128,250. 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") was
adopted by the Board of Directors in August 1997 and was subsequently approved
by the Company's stockholders. Up to 225,000 shares of Common Stock may be
issued under the Purchase Plan. The Purchase Plan is administered by the
Compensation Committee.
The first offering under the Purchase Plan will begin on January 1, 1998 and
end on June 30, 1998. 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.
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<PAGE>
During each offering, an employee may purchase shares under the Purchase Plan
by authorizing payroll deductions of up to 10% of his or her cash compensation
during the offering period. The maximum number of shares which may be purchased
by any participating employee during any offering period is limited to 1,250
shares (as adjusted by the Compensation Committee from time to time). Unless
the employee has previously withdrawn from the offering, his or her 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. No Common Stock has been
issued to date under the Purchase Plan.
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 connection with Mr. Sweeney's resignation from the Company effective as of
September 15, 1997, the Company has entered into a consulting agreement under
which Mr. Sweeney will provide consulting services to the Company and will be
compensated at an annual rate of $150,000 through September 1998. The
consulting agreement also amended the non-compete provison of Mr. Sweeney's
Employment Agreement to provide that he will not compete with the Company
before September 15, 1999. In addition, the Company has agreed to use a portion
of the proceeds of this offering to purchase 466,666 shares of Common Stock
from Mr. Sweeney at the price of $12.00 per share. During the period from
September 15, 1997 until Mr. Sweeney's shares are repurchased by the Company,
Mr. Sweeney will be paid his salary in accordance with the terms of his
Employment Agreement. See "Use of Proceeds."
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
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.
In August 1997, the Company entered into an Employment Agreement with Martin
J. Veilleux. The agreement provides for (i) an annual base salary of $140,000,
(ii) an initial employment term expiring on July 2, 1999 with one-year renewals
thereafter, subject to earlier termination by either party and (iii) the
continuation of base salary payments until the later of July 2, 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 Mr. Veilleux
following a material default by the Company. Mr. Veilleux's agreement prohibits
competition with the Company until the first anniversary of the date of his
termination of employment with the Company.
In August 1997, the Company also entered into an Employment Agreement with
Brian J. Smith. The agreement provides for (i) an annual base salary of
$200,000, (ii) an employment term expiring on December 31, 1999 with potential
one-year renewals thereafter, subject to earlier termination by either party
and (iii) the
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<PAGE>
continuation of base salary and benefit payments until the later of December
31, 1999 or 270 days following termination of employment in the event the
employee's employment is terminated by the Company without cause (as defined)
or by Mr. Smith following a material default by the Company. Mr. Smith's
agreement prohibits competition with the Company until 270 days after the date
of his termination of employment with the Company.
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 Mr. Staley and Ms.
Morby. Neither of these individuals is an executive officer of the Company.
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.
40
<PAGE>
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
(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.
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<PAGE>
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.
The Company has entered into a contract with Warner-Chilcott in connection
with its teleservices and contract sales services businesses, and Mr. Roger
Boissonneault, a director of the Company, is the President of Warner-Chilcott.
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.
42
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information as to the beneficial ownership of
the Company's Common Stock as of August 25, 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(3)
- --------------------------- ------------ -------- -----------
<S> <C> <C> <C>
TA Associates Group (4)...................... 4,465,066 59.7% 42.1%
Patrick G. LePore (5)........................ 993,333 13.3% 9.4%
Gregory F. Boron (6)......................... 921,333 12.3% 8.7%
Christopher J. Sweeney (7)................... 466,666 6.2% 0%
Roger Boissonneault (8)...................... 6,666 * % * %
Roger B. Kafker (9).......................... 6,333 * % * %
Jacqueline C. Morby (10)..................... 6,930 * % * %
Joseph E. Smith (11)......................... 6,666 * % * %
John A. Staley, IV (12)...................... 193,332 2.6% 1.8%
Park Street Investors, L.P. (13)............. 400,000 5.3% 3.8%
All executive officers and directors as a
group (nine persons) (14)................... 2,601,259 34.8% 20.1%
</TABLE>
- --------
* Less than 1%.
(1) All percentages have been determined as of August 25, 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 August 25, 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 10,612,979
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) Assumes no exercise of the Underwriters' over-allotment option. If the
Underwriters' over-allotment option to purchase 405,000 shares from the
Selling Stockholders is exercised in full, the TA Associates Group will
beneficially own 4,060,066 shares, or 38.3%, and all other stockholders
will beneficially own the same share amounts as set forth above.
(4) 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 of which 248,215, 152,383 and 4,402
respectively, will be sold if the Underwriters exercise their over-
allotment option. 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" or the "Selling Stockholders." 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
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<PAGE>
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, 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 9 and 10.
(5) 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 13. Does not include 29,998 shares of
Common Stock held by siblings of Mr. LePore, as to which shares Mr.
LePore disclaims beneficial ownership.
(6) 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.
(7) 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. Upon closing of
this offering, Mr. Sweeney will sell to the Company all 466,666 shares of
Common Stock he currently holds.
(8) 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.
(9) 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 4,465,066 shares described in footnote (4) 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.
(10) 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 4,465,066 shares described in footnote (4) 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.
(11) 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.
(12) Includes 186,666 shares of Common Stock 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.
(13) Patrick G. LePore is the principal stockholder of Park Street Investors,
Inc., the general partner of Park Street Investors, L.P.
(14) Includes 466,666 shares of Common Stock to be sold by Mr. Sweeney to the
Company upon consummation of this offering. After this offering, the
group will hold 2,134,593 shares of Common Stock.
44
<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 outstanding 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 $581,000 at June 30, 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.
Upon completion of this offering, the authorized capital stock of the
Company will consist of 50,000,000 shares of Common Stock, of which 10,612,979
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
45
<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.
46
<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 State Street Bank and Trust Company 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 10,612,979
shares of Common Stock outstanding. Of these shares, the 3,600,000 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 7,012,979
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 746,320 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, 384,971 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.
47
<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 106,129 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 7,012,979
Restricted Shares upon completion of the offering) have agreed 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, sales to the Company or pursuant to the Underwriters' over-
allotment option. 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.
As of August 22, 1997, there were 525,659 outstanding options to purchase
shares of Common Stock. 3,000,000 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 6,866,659 shares will have the right
to have their shares registered); holders of approximately 6,866,659 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 6,866,659 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 have agreed 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
48
<PAGE>
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 to the Company or pursuant to the Underwriters' over-
allotment option.
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.
49
<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 and the Selling Stockholders have granted a 30-day over-
allotment option to the Underwriters to purchase up to an aggregate of 540,000
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 and the Selling Stockholders. 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 and the Selling Stockholders 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 7,012,979 shares
of Common Stock have agreed 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, sales to the Company or
pursuant to the Underwriters' over-allotment option.
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.
50
<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.
51
<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.
52
<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 June 30, 1997 (unau-
dited)................................................................... F-4
Statements of Operations for the Years Ended December 31, 1994, 1995 and
1996 and the Six Months Ended June 30, 1996 and 1997 (unaudited)......... F-5
Statements of Stockholders' Equity (Deficit) for the Years Ended December
31, 1994, 1995 and 1996 and for the Six Months Ended June 30, 1997 (unau-
dited)................................................................... F-6
Statements of Cash Flows for the Years Ended December 31, 1994, 1995 and
1996 and the Six Months Ended June 30, 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, PRO FORMA
------------------------ JUNE 30, JUNE 30,
1995 1996 1997 1997
----------- ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash
equivalents (Note 3)... $ 962,660 $ 7,175,648 $ 2,732,869
Accounts receivable, net
of allowance for
doubtful accounts of
$0, $300,000 and
$300,000 as of December
31, 1995 and 1996, and
June 30, 1997,
respectively (Note
13).................... 7,408,018 14,969,261 19,441,939
Prepaid expenses and
other current assets... 196,774 254,802 1,001,352
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 23,176,160
FURNITURE AND FIXTURES,
at cost, net of
accumulated depreciation
of $443,282, $554,232
and $619,232 as of
December 31, 1995 and
1996, and June 30, 1997,
respectively (Note 3)... 295,217 325,296 1,636,519
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 32,435
INTANGIBLES, net of
accumulated amortization
of $0, $7,733 and
$42,291 as of December
31, 1995 and 1996 and
June 30, 1997,
respectively (Note 3)... 0 344,767 310,209
----------- ------------ ------------
Total assets.......... $10,498,850 $ 23,096,940 $ 25,155,323
=========== ============ ============
LIABILITIES AND
STOCKHOLDERS' EQUITY
(DEFICIT)
CURRENT LIABILITIES:
Current maturities of
long-term debt (Note
8)..................... $ 241,000 $ 1,000,000 $ 1,750,000
Accounts payable and
accrued expenses (Note
7)..................... 2,847,097 12,775,623 9,144,411
Deferred revenue (Note
3)..................... 2,770,132 5,138,696 8,628,500
Billings in excess of
costs (Note 3)......... 0 1,069,850 856,900
----------- ------------ ------------
Total current
liabilities.......... 5,858,229 19,984,169 20,379,811
----------- ------------ ------------
LONG-TERM DEBT, less
current maturities (Note
8)...................... 904,833 19,000,000 18,000,000
----------- ------------ ------------
REVOLVING LINE OF CREDIT
(Note 8)................ 1,156,000 1,000,000 0
----------- ------------ ------------
DEFERRED INCOME TAXES
(Notes 3 and 6)......... 75,000 0 1,200,000
----------- ------------ ------------
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 June 30, 1997; none
issued and outstanding
on a pro forma basis
(Note 11)............... 0 12,500,000 13,081,000 $ 0
----------- ------------ ------------ ------------
REDEEMABLE PREFERRED
STOCK, $.01 par value,
5,600,000 shares
authorized; none issued
and outstanding;
5,600,000 issued and
outstanding on a pro
forma basis............. 0 0 0 10,581,000
----------- ------------ ------------ ------------
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
June 30, 1997;
215,053,763 shares
authorized for December
31, 1995 and 12,000,000
shares authorized at
December 31, 1996 and
June 30, 1997; 8,602,151
shares issued and
outstanding in 1995 and
5,733,328 shares issued
and 1,999,995 shares
outstanding at December
31, 1996 and 5,739,995
shares issued and
2,006,662 shares
outstanding at June 30,
1997; 11,193,658 issued
and 7,460,325
outstanding on a pro
forma basis............. 57,133 57,333 57,400 111,936
Class A common stock,
$.01 par value,
1,333,333 shares
authorized; 666,666 and
786,999 shares issued
and outstanding at
December 31, 1996 and
June 30, 1997,
respectively; none
issued and outstanding
on a pro forma basis... 0 6,667 7,870 0
Class B common stock,
$.01 par value,
4,666,666 shares
authorized; none issued
and outstanding........ 0 0 0 0
Treasury stock,
3,733,333 shares at
cost at December 31,
1996, June 30, 1997 and
on a pro forma basis... 0 (18,850,000) (18,850,000) (18,850,000)
Additional paid-in
capital................ 0 1,813,606 1,969,212 4,422,546
Retained earnings
(deficit).............. 2,447,655 (12,414,835) (10,689,972) (10,689,972)
----------- ------------ ------------ ------------
Total stockholders'
equity (deficit)..... 2,504,788 (29,387,229) (27,505,488) $(25,005,488)
----------- ------------ ------------ ------------
Total liabilities and
stockholders' equity
(deficit)............ $10,498,850 $ 23,096,940 $ 25,155,323
=========== ============ ============
</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>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
----------------------------------- -----------------------
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 $16,146,540 $32,120,894
COST OF SALES............. 12,378,250 12,788,018 26,004,405 10,472,323 22,839,524
----------- ----------- ----------- ----------- -----------
Gross profit............ 8,201,788 8,986,806 14,215,129 5,674,217 9,281,370
----------- ----------- ----------- ----------- -----------
OFFICERS' COMPENSATION.... 2,003,000 1,336,000 13,351,000 1,397,975 571,818
OTHER SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES.. 4,533,004 5,004,631 6,644,398 2,951,891 4,437,226
----------- ----------- ----------- ----------- -----------
TOTAL SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES.. 6,536,004 6,340,631 19,995,398 4,349,866 5,009,044
----------- ----------- ----------- ----------- -----------
Income (loss) from
operations............. 1,665,784 2,646,175 (5,780,269) 1,324,351 4,272,326
INTEREST EXPENSE (net of
interest income of
$9,885, $33,370, $56,561,
$19,754 and $48,827 for
the years and six month
periods ended December
31, 1994, 1995 and 1996
and June 30, 1996 and
1997, respectively)...... 43,063 85,593 254,676 104,143 766,463
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) 1,220,208 3,505,863
PROVISION FOR INCOME TAXES
(Notes 3 and 6).......... 25,000 51,000 0 0 1,200,000
----------- ----------- ----------- ----------- -----------
Net income (loss)....... $ 1,597,721 $ 2,509,582 $(7,111,363) $ 1,220,208 $ 2,305,863
=========== =========== =========== =========== ===========
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) $ 1,220,208 $ 3,505,863
PRO FORMA INCOME TAX
PROVISION (actual for
June 30, 1997) (Note
6)...................... 663,000 1,046,000 (2,905,000) 499,000 1,200,000
----------- ----------- ----------- ----------- -----------
PRO FORMA NET INCOME
(LOSS).................. $ 959,721 $ 1,514,582 $(4,206,363) $ 721,208 $ 2,305,863
=========== =========== =========== =========== ===========
PRO FORMA NET INCOME
(LOSS) PER COMMON SHARE
(Unaudited) (Note 3)..... $ (0.51) $ 0.28
=========== ===========
PRO FORMA WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING
(Note 3)................. 8,273,038 8,307,215
=========== ===========
</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............... $57,133 $ 0 $ 0 $ 0 $ 0 $ (1,509,648)
Net income............ 0 0 0 0 0 1,597,721
------- ------ --- ------------ ---------- ------------
BALANCE AS OF DECEMBER
31, 1994............... 57,133 0 0 0 0 88,073
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............... 57,133 0 0 0 0 2,447,655
Net loss.............. 0 0 0 0 0 (7,111,363)
Repurchase of minority
stockholder's
1,548,387 shares of
common stock......... 0 0 0 (643,674) 0 0
Repurchase of minority
stockholder's
1,720,430 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
3,268,817 treasury
shares of common
stock................ (3,800) 0 0 1,613,674 (451,000) (188,874)
Termination of S
Corporation.......... 0 0 0 0 7,562,253 (7,562,253)
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) 1,813,606 (12,414,835)
Net income............ 0 0 0 0 0 2,305,863
Dividends on
convertible
participating
preferred stock...... 0 0 0 0 0 (581,000)
Issuance of 120,333
shares of Class A
common stock at
prices ranging from
$.428 to $3.00 per
share................ 0 1,203 0 0 101,689 0
Issuance of 6,666
shares of Common
Stock at prices
ranging from $0.428
to $3.00 per share... 67 0 0 0 11,359 0
Non cash compensation
expense.............. 0 0 0 0 42,558 0
------- ------ --- ------------ ---------- ------------
BALANCE AS OF JUNE 30,
1997................... $57,400 $7,870 $ 0 $(18,850,000) $1,969,212 $(10,689,972)
======= ====== === ============ ========== ============
</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
SIX MONTHS ENDING
FOR THE YEARS ENDED DECEMBER 31, JUNE 30,
----------------------------------- -----------------------
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) $1,220,208 $ 2,305,863
Adjustments to
reconcile net income
(loss) to net cash
provided by operating
activities-
Depreciation and
amortization........ 78,672 93,818 112,618 50,843 109,558
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
Non cash compensation
expense............. 0 0 0 0 42,558
Deferred income
taxes............... 25,000 50,000 (75,000) 0 1,200,000
Changes in operating
assets and
liabilities-
(Increase) decrease
in accounts
receivables, net... (1,298,816) (2,636,435) (7,561,243) 2,079,129 (4,472,678)
(Increase) decrease
in prepaid expenses
and other current
assets............. (52,099) (45,024) (58,028) 24,525 (746,550)
(Increase) decrease
in security
deposits........... 1,210 1,265 636 0 (5,269)
Increase in
intangible assets.. 0 0 (352,500) 0 0
Increase in due from
affiliates......... 0 0 (140,363) (867,658) 0
(Increase) decrease
in due from
officers........... 0 (672,324) 28,651 269,035 0
(Decrease) increase
in payable to
affiliates......... 288,510 (2,218,176) 0 0 0
Increase (decrease)
in accounts payable
and accrued
expenses........... 209,615 1,381,141 9,928,526 (185,170) (3,631,260)
Increase (decrease)
in deferred revenue
and billings in
excess of costs.... (544,436) 945,751 3,438,414 (1,536,240) 3,276,904
---------- ---------- ----------- ---------- -----------
Net cash (used in)
provided by
operating
activities........ 342,962 (590,402) (713,234) 1,054,672 (1,920,874)
---------- ---------- ----------- ---------- -----------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Purchases of
furniture, fixtures
and equipment........ (269,096) (43,493) (134,965) (66,154) (1,386,223)
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) (66,154) (1,386,223)
---------- ---------- ----------- ---------- -----------
</TABLE>
F-7
<PAGE>
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS ENDING
FOR THE YEARS ENDED DECEMBER 31, JUNE 30,
---------------------------------- ------------------------
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 (250,000)
Repayments of long-term
debt and revolving
line of credit........ (25,468) (589,549) (2,301,833) (1,281,000) (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 11,426
Proceeds from the
issuance of Class A
common stock.......... 0 0 285,000 0 102,892
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 0 451,000 451,000 0
--------- ---------- ----------- ----------- -----------
Net cash provided by
(used in) financing
activities......... (87,301) 1,566,451 7,061,187 (1,473,674) (1,135,682)
--------- ---------- ----------- ----------- -----------
Net (decrease)
increase in cash... 28,600 932,556 6,212,988 (485,156) (4,442,779)
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 $ 477,504 $ 2,732,869
========= ========== =========== =========== ===========
SUPPLEMENTAL DISCLOSURES
OF CASH FLOW
INFORMATION:
Cash paid during the
period for-
Interest.............. $ 71,000 $ 145,000 $ 321,000 $ 141,000 $ 754,000
========= ========== =========== =========== ===========
Taxes................. $ 0 $ 0 $ 20,015 $ 122,220 $ 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 June 30, 1997 and for
the six months ended June 30, 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.
The Pro Forma June 30, 1997 unaudited information reflected in the
accompanying balance sheets reflect the conversion of the Convertible
Participating Preferred Stock into Redeemable Preferred Stock and Common
Stock. In addition, it also reflects the conversion of Class A Common Stock to
Common Stock. Upon completion of the proposed initial public offering (see
Note 16), the Redeemable Preferred Stock will be redeemed for $10 million plus
accumulated and unpaid dividends.
(2) INCORPORATION AND MERGER:
On November 22, 1996, BLA Acquisition Corp. was incorporated in the State of
Delaware. 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 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, which has been
retroactively reflected in the financial statements.
(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.
F-9
<PAGE>
BORON, LEPORE & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Revenue Recognition--
Revenue is recognized as services are performed. For conferencing services,
revenue is recorded upon completion of the meeting or symposia. Revenue for
multiple-meeting projects is attributed to individual meetings, based on an
average amount per meeting, and is recognized as individual meetings are
completed. Revenue for product marketing services is recognized in the period
contractual performance benchmarks are achieved and confirmed by the client.
Revenue for teleservices are recorded in the period the services are
performed, based on the specific terms of each contract.
Performance-based incentive revenue is recognized within the period in which
the related market share statistics have been measured and such statistics
indicate attainment of the applicable performance measures.
Customers are invoiced according to agreed upon billing terms. Items which
are invoiced prior to performance of the related services are recorded as
deferred revenue and are not recognized as revenue until the required service
is provided, as required by the Company's revenue recognition policy.
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 June 30, 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.
F-10
<PAGE>
BORON, LEPORE & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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 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.
In connection with the Securities and Exchange Commission rules described
above, the following unaudited table shows the calculation of pro forma
weighted average shares outstanding (using the treasury stock method for stock
options and $17.00 per share price for the conversion of the $10 million of
redeemable preferred stock and accumulated and unpaid dividends) as of
December 31, 1996 and June 30, 1997:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997
------------ ---------
<S> <C> <C>
Common Stock........................................ 2,006,662 2,006,662
Class A common stock................................ 786,999 786,999
Convertible participating preferred stock........... 4,666,664 4,666,664
Share equivalent for redeemable preferred stock..... 588,235 588,235
Share equivalent for unpaid redeemable preferred
stock dividends.................................... -- 34,177
Stock options....................................... 224,478 224,478
--------- ---------
8,273,038 8,307,215
========= =========
</TABLE>
F-11
<PAGE>
BORON, LEPORE & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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 six months ending June 30, 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.
(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.
F-12
<PAGE>
BORON, LEPORE & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(6) INCOME TAXES:
The components of the provision for income taxes are summarized as follows--
<TABLE>
<CAPTION>
FOR THE SIX
FOR THE YEARS ENDED MONTHS ENDED
DECEMBER 31, JUNE 30,
------------------------ -------------------
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 1,200,000
------- ------- -------- --- ----------
$25,000 $51,000 $ 0 $ 0 $1,200,000
======= ======= ======== === ==========
</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. During the period from January 1, 1996 to
December 3, 1996, net income was $5,114,598. For the period from December 4,
1996 to December 31, 1996, the net loss incurred was $12,225,961 which
included $10,023,993 of special officer bonuses.
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 of approximately $12,200,000 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
$4,900,000. The Company has recorded a valuation allowance of $2,500,000
against the deferred tax asset. The net remaining tax asset is offset against
the $2,400,000 deferred tax liability. All other temporary differences,
primarily operating reserves, 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, without contemplating any applicable tax laws related to the
utilization of net operating losses. No pro forma income tax provision is
presented for the six months ending June 30, 1997 as the Company was operating
as a C Corporation during that period.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, SIX MONTHS
------------------------------- ENDED
1994 1995 1996 JUNE 30, 1996
-------- ---------- ----------- -------------
<S> <C> <C> <C> <C>
Federal tax provision (benefit)
at statutory rate............. $568,000 $ 896,000 $(2,489,000) $427,000
State income taxes net of
Federal benefit............... 95,000 150,000 (416,000) 72,000
-------- ---------- ----------- --------
$663,000 $1,046,000 $(2,905,000) $499,000
======== ========== =========== ========
</TABLE>
F-13
<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, JUNE 30,
---------------------- -----------
1995 1996 1997
---------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Accounts payable......................... $1,556,462 $ 1,729,688 $3,846,153
Accrued payroll.......................... 445,495 8,170,078 1,540,720
Accrued honoraria........................ 577,156 1,860,656 2,900,341
Other accrued expenses................... 267,984 1,015,201 857,197
---------- ----------- ----------
$2,847,097 $12,775,623 $9,144,411
========== =========== ==========
</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-14
<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, $190,000 and $199,000 for the years ended December 31, 1994, 1995
and 1996 and the six month periods ended June 30, 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 1,548,387 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 1,720,430 shares of common stock from a stockholder. The agreement
also contained a Disposition Benefit Agreement. The stockholder was a former
officer of the Company and the brother of the Company's current Chief
Operating Officer. 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. The terms of the transaction were the result of arms-length
negotiations.
(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
F-15
<PAGE>
BORON, LEPORE & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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 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.
The Company has adopted the provisions of SFAS 123 "Accounting for Stock
Based Compensation." As permitted by the statement, the Company has elected to
continue to account for stock-based compensation using the intrinsic value
method. Accordingly, no compensation expense has been recognized for stock
options granted at or above market value. Had the fair value method of
accounting been applied to the Company's stock option grants, which requires
recognition of compensation cost ratably over the vesting period of the
underlying equity instruments, the impact on net income for the six months
ending June 30, 1997 would have been immaterial. This pro forma impact only
takes into account options granted since January 1, 1995 and is likely to
increase in future years as additional options are granted and amortized
ratably over the vesting period. The average fair value of options granted
during the six months ending June 30, 1997 was $0.39. The fair value was
estimated using the Black-Scholes option pricing model based on the weighted
average market price at grant date of $1.70; and a risk free interest rate of
6.5%. There were no options granted for any periods prior to December 31,
1996.
(13)MAJOR CUSTOMERS:
Revenue from three customers accounted for approximately $17,600,000 (44%),
$6,300,000 (16%) and $4,100,000 (10%) of total revenue for the year ending
December 31, 1996.
Revenue from four customers accounted for approximately $6,900,000 (34%),
$4,200,000 (20%), $3,800,000 (18%) and $2,900,000 (14%) of total revenue for
the year ending December 31, 1994 and $9,700,000
F-16
<PAGE>
BORON, LEPORE & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(45%), $4,400,000 (20%), $2,300,000 (11%) and $2,300,000 (11%) of total
revenue for the year ending December 31, 1995.
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.
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 3,600,000 shares
of Common Stock. Upon completion of such offering, the authorized stock of the
Company will increase to 50,000,000 shares of $.01 par value common stock and
2,000,000 shares of preferred stock.
Stock Split--
All share amounts have been retroactively adjusted to reflect a 2-for-3
reverse common stock split which will occur prior to the completion of the
proposed public offering.
F-17
<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............................................................... 34
Certain Transactions..................................................... 41
Principal Stockholders................................................... 43
Description of Capital Stock............................................. 45
Shares Eligible for Future Sale.......................................... 47
Underwriting............................................................. 50
Legal Matters............................................................ 51
Experts.................................................................. 52
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.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
3,600,000 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............................................. $ 20,840
NASD Filing Fee.................................................. 30,500
Nasdaq Listing Fee............................................... 45,200
Accounting Fees and Expenses..................................... 100,000
Legal Fees and Expenses.......................................... 450,000
Printing Expenses................................................ 75,000
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 and the Company granted an aggregate of 400,000 shares of the
Company's Common Stock for an aggregate purchase price of $171,000 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 262,327 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.
(11) In August 1997, pursuant to the Company's 1996 Stock Option and
Grant Plan, the Company granted options to purchase 246,666 shares of the
Company's restricted Class A Common Stock to the Chief Financial Officer of
the Company for an aggregate cash purchase price of $1,973,328 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
<TABLE>
<C> <S>
+1.1 Form of Underwriting Agreement.
Agreement and Plan of Merger by and between the Predecessor and the
*2.1 Company.
*2.2 Stock Redemption Agreement dated as of December 4, 1996 by and
among the Company and Patrick G. LePore, Gregory Boron, Christopher
Sweeney and Michael W. Foti (excluding schedules, which the Company
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 Company and the Investors named therein (excluding
schedules, which the Company 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 Company, 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(a) Amendment to Amended and Restated Certificate of Incorporation.
3.2(b) Amendment to Amended and Restated Certificate of Incorporation.
3.3 Form of Second Amended and Restated Certificate of Incorporation
(to be filed prior to the closing of the offering referred to in
the Registration Statement.)
3.4 Form of Third Amended and 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 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 Company.
*4.2 Credit Agreement with Fleet National Bank as Agent and Lender, as
amended.
+5.1 Opinion of Goodwin, Procter & Hoar LLP as to the validity of the
securities being offered.
**10.1(a) Lease between MBM Associates and the Company.
10.1(b) Sublease between Lonza, Inc. and the Company.
*10.2 Lease by and between SPENCO, Ltd. and the Company.
*10.3 Deed of Lease Agreement by and between Norfolk Commerce Center
Limited Partnership and the Company.
*10.4 Employment Agreement for Patrick G. LePore.
*10.5 Employment Agreement for Gregory F. Boron.
</TABLE>
II-3
<PAGE>
<TABLE>
<S> <C>
*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 Employment Agreement for Martin J. Veilleux.
10.12 Boron, LePore & Associates, Inc. Amended and Restated 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.
10.21 Non-qualified Stock Option Agreement for Timothy J. McIntyre.
10.22 Incentive Stock Option Agreement for Martin J. Veilleux.
10.23 Incentive Stock Option Agreement for Martin J. Veilleux.
+10.24 Incentive Stock Option Agreement for Brian J. Smith.
10.25 Employment Agreement for Brian J. Smith
+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 Power of Attorney
*27.1 Financial Data Schedule.
</TABLE>
- --------
* Previously filed.
** Updated version filed herewith.
+ To be filed by amendment to this Registration Statement.
(B) FINANCIAL STATEMENT SCHEDULES
Schedule II-Valuation and Qualifying Accounts.
All other 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
II-4
<PAGE>
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 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 AMENDMENT NO. 2 TO THE REGISTRATION STATEMENT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN FAIR
LAWN, NEW JERSEY, ON AUGUST 27, 1997.
Boron, LePore & Associates, Inc.
/s/ Patrick G. LePore
By: _________________________________
PATRICK G. LEPORE
CHAIRMAN, CHIEF EXECUTIVE OFFICER
AND PRESIDENT
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 2 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING
PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ Patrick G. LePore Chairman of the August 27, 1997
- ------------------------------------- Board, Chief
PATRICK G. LEPORE Executive Officer,
President and
Director (Principal
Executive Officer)
* Chief Operating
- ------------------------------------- Officer and August 27, 1997
GREGORY F. BORON Director
* Chief Financial August 27, 1997
- ------------------------------------- Officer, Secretary
MARTIN J. VEILLEUX and Treasurer
(Principal
Financial and
Accounting Officer)
* Director August 27, 1997
- -------------------------------------
ROGER BOISSONNEAULT
* Director August 27, 1997
- -------------------------------------
ROGER B. KAFKER
* Director August 27, 1997
- -------------------------------------
JACQUELINE C. MORBY
* Director August 27, 1997
- -------------------------------------
JOSEPH E. SMITH
* Director August 27, 1997
- -------------------------------------
JOHN A. STALEY, IV
*By: /s/ Patrick G. Lepore
---------------------------
PATRICK G. LEPORE,
ATTORNEY-IN-FACT
II-6
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Boron, LePore & Associates, Inc.:
We have audited in accordance with generally accepted auditing standards,
the 1996 financial statements of Boron, LePore & Associates, Inc. included on
pages F-4 through F-16 of this registration statement and have issued our
report thereon dated March 3, 1997. Our audit was made for the purpose of
forming an opinion on the basic financial statements taken as a whole. The
schedule listed in Item 16(b) of this registration statement is the
responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part
of the basic financial statements as of December 31, 1996 and for the year
then ended and, in our opinion, fairly states in all material respects the
financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
Arthur Andersen LLP
Roseland, New Jersey
March 3, 1997
<PAGE>
SCHEDULE II
BORON, LEPORE & ASSOCIATES, INC.
VALUATION AND QUALIFYING ACCOUNTS
ALLOWANCE FOR DOUBTFUL ACCOUNTS
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO
BEGINNING COSTS AND BALANCE AT
OF YEAR EXPENSES DEDUCTIONS END OF YEAR
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
For the year ended December 31,
1996............................ $ 0 300,000 0 300,000
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE
------- ----------- ----
<C> <S> <C>
+1.1 Form of Underwriting Agreement.
Agreement and Plan of Merger by and between the Predecessor
*2.1 and the Company.
*2.2 Stock Redemption Agreement dated as of December 4, 1996 by
and among the Company and Patrick G. LePore, Gregory Boron,
Christopher Sweeney and Michael W. Foti (excluding
schedules, which the Company 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 Company and the Investors named
therein (excluding schedules, which the Company 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 Company, 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(a) Amendment to Amended and Restated Certificate of
Incorporation.
3.2(b) Amendment to Amended and Restated Certificate of
Incorporation.
3.3 Form of Second Amended and Restated Certificate of
Incorporation (to be filed prior to the closing of the
offering referred to in the Registration Statement.)
3.4 Form of Third Amended and 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 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 Company.
*4.2 Credit Agreement with Fleet National Bank as Agent and
Lender, as amended.
+5.1 Opinion of Goodwin, Procter & Hoar LLP as to the validity of
the securities being offered.
**10.1(a) Lease between MBM Associates and the Company.
10.1(b) Sublease between Lonza, Inc. and the Company.
*10.2 Lease by and between SPENCO, Ltd. and the Company.
*10.3 Deed of Lease Agreement by and between Norfolk Commerce
Center Limited Partnership and the Company.
*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 Employment Agreement for Martin J. Veilleux.
10.12 Boron, LePore & Associates, Inc. Amended and Restated 1996
Stock Option and Grant Plan.
10.13 Boron, LePore & Associates, Inc. 1997 Employee Stock
Purchase Plan.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE
------- ----------- ----
<C> <S> <C>
*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.
10.21 Non-qualified Stock Option Agreement for Timothy J.
McIntyre.
10.22 Incentive Stock Option Agreement for Martin J. Veilleux.
10.23 Incentive Stock Option Agreement for Martin J. Veilleux.
+10.24 Incentive Stock Option Agreement for Brian J. Smith.
10.25 Employment Agreement for Brian J. Smith
+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 Power of Attorney
*27.1 Financial Data Schedule.
</TABLE>
- --------
* Previously filed.
** Updated version filed herewith.
+ To be filed by amendment to this Registration Statement.
<PAGE>
Exhibit 2.4
================================================================================
STOCKHOLDERS' AGREEMENT
By and Among
Boron, LePore & Associates, Inc.,
Patrick G. LePore,
Gregory Boron,
Christopher Sweeney
and
Michael W. Foti
and
The Investors
as defined herein and set forth
on the signature pages hereto
Dated as of December 4, 1996
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C>
ARTICLE I. DEFINITIONS.....................................................2
Section 1.1 Construction of Terms..................................2
Section 1.2 Terms Not Defined......................................2
Section 1.3 Number of Shares of Stock..............................2
Section 1.4 Defined Terms..........................................2
ARTICLE II. REPRESENTATIONS AND WARRANTIES.................................4
Section 2.1 Representations and Warranties of the Investors........4
Section 2.2 Representations and Warranties of the Founders.........4
Section 2.3 Representations and Warranties of the Company..........5
ARTICLE III. RESTRICTIONS ON TRANSFER; RIGHT OF LAST REFUSAL;
CO-SALE AND DRAG-ALONG PROVISION.......................5
Section 3.1 Restrictions on Transfer...............................5
Section 3.2 Right of Last Refusal..................................6
Section 3.3 Co-Sale Option.........................................8
Section 3.4 Drag-Along Obligations................................10
Section 3.4A Founder Co-Sale Option................................11
Section 3.5 Contemporaneous Transfers.............................12
Section 3.6 Assignment............................................13
Section 3.7 Prohibited Transfers..................................13
ARTICLE IV. RIGHTS TO PURCHASE...........................................13
Section 4.1 Right to Participate in Certain Sales of
Additional Securities.................................13
Section 4.2 Assignment of Rights..................................14
ARTICLE V. REGISTRATION RIGHTS...........................................14
Section 5.1 Piggyback Registration Rights.........................15
Section 5.2 Demand Registration Rights............................15
Section 5.3 Form S-3..............................................16
Section 5.4 Registrable Shares....................................17
Section 5.5 Further Obligations of the Company....................18
Section 5.6 Indemnification; Contribution.........................19
Section 5.7 Rule 144 Requirements.................................21
</TABLE>
(i)
<PAGE>
<TABLE>
Page
----
<S> <C> <C> <C>
Section 5.8 Market Stand-Off......................................22
Section 5.9 Transfer of Registration Rights.......................22
ARTICLE VI. ELECTION OF DIRECTORS........................................22
Section 6.1 Management Representatives............................22
Section 6.2 Committees of the Board...............................23
Section 6.3 Assignment............................................23
ARTICLE VII. MISCELLANEOUS PROVISIONS.....................................23
Section 7.1 Survival of Representations and Covenants.............23
Section 7.2 Legend on Securities..................................23
Section 7.3 Amendment and Waiver..................................24
Section 7.4 Notices...............................................24
Section 7.5 Headings..............................................25
Section 7.6 Counterparts..........................................25
Section 7.7 Dispute Resolution....................................25
Section 7.8 Remedies; Severability................................26
Section 7.9 Entire Agreement......................................26
Section 7.10 Adjustments...........................................26
Section 7.11 Law Governing.........................................26
Section 7.12 Successors and Assigns................................26
</TABLE>
Exhibit A - Form of Joinder Agreement
Exhibit B - Amended and Restated Certificate of Incorporation
(ii)
<PAGE>
STOCKHOLDERS' AGREEMENT
-----------------------
This Stockholders' Agreement is made as of this 4th day of December,
1996 by and among Boron, LePore & Associates, Inc., a Delaware corporation (the
"Company"), Patrick G. LePore, Gregory Boron, Christopher Sweeney and Michael W.
Foti (collectively, the "Founders" and individually, a "Founder"), the
investment funds and other persons identified on the signature pages hereto as
the TA Investors (the "Investors"), and any other stockholder or optionholder
who from time to time becomes party to this Agreement by execution of a Joinder
Agreement in substantially the form attached hereto as Exhibit A.
---------
W I T N E S S E T H
-------------------
WHEREAS, the Founders own shares of the Company's outstanding capital
stock;
WHEREAS, reference is made to the Preferred Stock Purchase Agreement,
dated as of the date hereof, by and between the Company and the Investors (the
"Investment Agreement"), pursuant to which the Investors have purchased
7,000,000 shares of the Company's Convertible Participating Preferred Stock, par
value $.01 per share (the "Convertible Preferred Stock"); and
WHEREAS, the effectiveness of this Agreement is a condition to the
consummation of the Investment Agreement.
NOW THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements hereinafter set forth, the parties hereto agree as
follows:
ARTICLE I. DEFINITIONS
--------- -----------
Section 1.1 Construction of Terms. As used herein, the masculine,
------------ ---------------------
feminine or neuter gender, and the singular or plural number, shall be deemed to
be or to include the other genders or number, as the case may be, whenever the
context so indicates or requires.
Section 1.2 Terms Not Defined. Capitalized terms used herein and
------------ -----------------
not otherwise defined shall have the meanings ascribed to them in the Investment
Agreement.
Section 1.3 Number of Shares of Stock. Whenever any provision of
------------ -------------------------
this Agreement calls for any calculation based on a number of shares of capital
stock held by a Founder or an Investor, the number of shares deemed to be held
by that Founder or Investor shall be the total number of shares of Common Stock
then owned by the Founder or Investor which are vested, plus the total number of
shares of Common Stock (or Class B Common Stock, as applicable) issuable upon
conversion of any Convertible Preferred Stock or other convertible securities or
<PAGE>
exercise of any vested options, warrants or subscription rights then owned by
the Founder or Investor.
Section 1.4 Defined Terms. The following capitalized terms, as used
------------ -------------
in this Agreement, shall have the meanings set forth below.
An "Affiliate" of any Person means a Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by or is
under common control with the first mentioned Person. A Person shall be deemed
to control another Person if such first Person possesses directly or indirectly
the power to direct, or cause the direction of, the management and policies of
the second Person, whether through the ownership of voting securities, by
contract or otherwise.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Common Stock, par value $.01 per share, of
the Company, as the context requires, and any other common equity securities now
or hereafter issued by the Company (but not including the Preferred Stock), and
any other shares of stock issued or issuable with respect thereto (whether by
way of a stock dividend or stock split or in exchange for or upon conversion of
such shares or otherwise in connection with a combination of shares,
recapitalization, merger, consolidation or other corporate reorganization).
"Convertible Preferred Stock" means the Convertible Participating
Preferred Stock, par value $.01 per share, of the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and the rules and regulations promulgated thereunder.
"Independent Third Party" means any person who, immediately prior to
the contemplated transaction, does not own in excess of 10% of the Company's
Common Stock on a fully-diluted basis, who is not controlling, controlled by or
under common control with any such 10% owner of the Company's Common Stock and
who is not the spouse or descendent (by birth or adoption) of any such 10% owner
of the Company's Common Stock.
"Offer Notice" has the meaning specified in Section 3.2(a)
"Offeror" has the meaning specified in Section 3.2.
"Permitted Transferee" has the meaning specified in Section 3.1.
"Person" means an individual, a corporation, an association, a
partnership, an estate, a trust, and any other entity or organization,
governmental or otherwise.
2
<PAGE>
"Preferred Stock" means the Convertible Preferred Stock and the
Redeemable Preferred Stock (as hereinafter defined), each issued or to be issued
in accordance with and subject to the terms of the Amended and Restated
Certificate of Incorporation of the Company substantially in the form attached
hereto as Exhibit B (the "Charter"), together with any other shares issued or
---------
issuable with respect thereto (whether by way of a stock dividend, stock split
or in exchange for or in replacement or upon conversion of such shares or
otherwise in connection with a combination of shares, recapitalization, merger,
consolidation or other corporate reorganization).
"Qualified Public Offering" means the first underwritten public
offering pursuant to an effective registration statement under the Securities
Act, covering the offer and sale of Common Stock to the public in which the
proceeds received by the Company and any selling stockholders, net of
underwriting discounts and commissions, equal or exceed $25 million.
"Redeemable Preferred Stock" means the Company's Redeemable Preferred
Stock, par value $.01 per share.
"Sale of the Company" means the sale of the Company to an Independent
Third Party or affiliated group of Independent Third Parties pursuant to which
such party or parties acquire (i) capital stock of the Company possessing the
voting power to elect a majority of the Board of Directors of the Company
(whether by merger, consolidation or sale or transfer of the Company's capital
stock); or (ii) all or substantially all of the Company's assets determined on a
consolidated basis.
"Securities Act" means the Securities Act of 1933, as amended from
time to time, and the rules and regulations promulgated thereunder.
"Shares" means the shares of Common Stock, Preferred Stock and any
other equity securities now or hereafter issued by the Company, together with
any options thereon and any other shares of stock issued or issuable with
respect thereto (whether by way of a stock dividend, stock split or in exchange
for or upon conversion of such shares or otherwise in connection with a
combination of shares, recapitalization, merger, consolidation or other
corporate reorganization).
"Transaction Offer" has the meaning specified in Section 3.2.
"Transfer" means any direct or indirect transfer, donation, sale,
assignment, pledge, hypothecation, grant of a security interest in or other
disposal or attempted disposal of all or any portion of a security or of any
rights. "Transferred" means the accomplishment of a Transfer, and "Transferee"
means the recipient of a Transfer.
"Transferring Stockholder" has the meaning specified in Section 3.2.
3
<PAGE>
ARTICLE II. REPRESENTATIONS AND WARRANTIES
- ---------- ------------------------------
Section 2.1 Representations and Warranties of the Investors. Each
------------ -----------------------------------------------
of the Investors, individually and not jointly, hereby represents, warrants and
covenants to the Company and to the Founders as follows: (a) such Investor has
full authority and power under its charter, by-laws, governing partnership
agreement or comparable document (if applicable) to enter into this Agreement;
(b) this Agreement constitutes the valid and binding obligation of such Investor
enforceable against it in accordance with its terms; and (c) the execution,
delivery and performance by such Investor of this Agreement: (i) does not and
will not violate any laws, rules or regulations of the United States or any
state or other jurisdiction applicable to such Investor, or require such
Investor to obtain any approval, consent or waiver of, or to make any filing
with, any Person that has not been obtained or made; and (ii) does not and will
not result in a breach of, constitute a default under, accelerate any obligation
under or give rise to a right of termination of any indenture or loan or credit
agreement or any other agreement, contract, instrument, mortgage, lien, lease,
permit, authorization, order, writ, judgment, injunction, decree, determination
or arbitration award to which such Investor is a party or by which the property
of such Investor is bound or affected, or result in the creation or imposition
of any mortgage, pledge, lien, security interest or other charge or encumbrance
on any of the assets or properties of such Investor.
Section 2.2 Representations and Warranties of the Founders. Each of
------------ ----------------------------------------------
the Founders, individually and not jointly, hereby represents, warrants and
covenants to the Company and to the Investors as follows: (a) such Founder has
full authority, power and capacity to enter into this Agreement; (b) this
Agreement constitutes the valid and binding obligation of such Founder
enforceable against him in accordance with its terms; and (c) the execution,
delivery and performance by such Founder of this Agreement: (i) does not and
will not violate any laws, rules or regulations of the United States or any
state or other jurisdiction applicable to such Founder, or require such Founder
to obtain any approval, consent or waiver of, or to make any filing with, any
Person that has not been obtained or made; and (ii) does not and will not result
in a breach of, constitute a default under, accelerate any obligation under or
give rise to a right of termination of any indenture or loan or credit agreement
or any other material agreement, contract, instrument, mortgage, lien, lease,
permit, authorization, order, writ, judgment, injunction, decree, determination
or arbitration award to which such Founder is a party or by which the property
of such Founder is bound or affected, or result in the creation or imposition of
any mortgage, pledge, lien, security interest or other charge or encumbrance on
any of the assets or properties of such Founder.
Section 2.3 Representations and Warranties of the Company. The
----------- ----------------------------------------------
Company hereby represents, warrants and covenants to the Founders and to the
Investors as follows: (a) the Company has full corporate authority and power to
enter into this Agreement; (b) this Agreement constitutes the valid and binding
obligation of the Company enforceable against it in accordance with its terms;
and (c) the execution, delivery and performance by the Company of this
Agreement: (i) does not and will not violate any laws, rules or regulations of
the United States or any state or other jurisdiction applicable to the Company,
or require the Company to
4
<PAGE>
obtain any approval, consent or waiver of, or to make any filing with, any
Person that has not been obtained or made; and (ii) does not and will not result
in a breach of, constitute a default under, accelerate any obligation under or
give rise to a right of termination of any indenture or loan or credit agreement
or any other material agreement, contract, instrument, mortgage, lien, lease,
permit, authorization, order, writ, judgment, injunction, decree, determination
or arbitration award to which the Company is a party or by which the property of
the Company is bound or affected, or result in the creation or imposition of any
mortgage, pledge, lien, security interest or other charge or encumbrance on any
of the assets or properties of the Company.
ARTICLE III. RESTRICTIONS ON TRANSFER; RIGHT OF LAST REFUSAL; CO-SALE
- ----------- --------------------------------------------------------
AND DRAG-ALONG PROVISIONS
-------------------------
The following provisions of this Article III shall terminate
immediately upon, and shall not apply with respect to, the closing of a
Qualified Public Offering.
Section 3.1 Restrictions on Transfer. Each Founder agrees that it
----------- ------------------------
or he will not, without the prior written consent of two-thirds-in-interest of
the Investors, Transfer all or any portion of the Shares now owned or hereafter
acquired by it or him, except in connection with, and strictly in compliance
with the conditions of, any of the following (along with any other applicable
restrictions):
(a) Transfers effected pursuant to Sections 3.2, 3.3, 3.4
and 3.4A, in each case made in accordance with the procedures set
forth therein;
(b) Transfers by any Founder to his spouse or children or
to a trust of which he is the settlor, provided that any such trust
--------
does not require or permit distribution of such Shares during the term
of this Agreement unless the beneficiaries are bound by the terms of
this Agreement, and provided further that the Transferee shall have
-------- -------
entered into an enforceable written agreement consented to by two-
thirds-in-interest of the Investors, which consent shall not be
unreasonably withheld, providing that all Shares so Transferred shall
continue to be subject to all provisions of this Agreement as if such
Shares were still held by such Founder, except that no further
Transfer shall thereafter be permitted hereunder except in compliance
with Sections 3.2, 3.3, 3.4 and 3.4A; and
(c) Transfers upon the death of any Founder to his heirs,
executors or administrators or to a trust under his will or Transfers
between such Founder and his guardian or conservator, provided that
--------
the Transferee shall have entered into an enforceable written
agreement consented to by two-thirds-in-interest of the Investors,
which consent shall not be unreasonably withheld, providing that all
Shares so Transferred shall continue to be subject to all provisions
of this Agreement as if such
5
<PAGE>
Shares were still held by Founder, except that no further Transfer
shall thereafter be permitted hereunder except in compliance with
Sections 3.2, 3.3, 3.4 and 3.4A.
Any permitted Transferee described in the preceding clauses (b) or (c)
shall be referred to herein as a "Permitted Transferee." Anything to
the contrary in this Agreement notwithstanding, Permitted Transferees
shall take any Shares so Transferred subject to all provisions of this
Agreement as if such Shares were still held by the Transferring
Founder, whether or not they so agree with the transferor and/or the
Company. Without limitation of the foregoing, in connection with any
otherwise permitted transfer of shares of capital stock that are
restricted shares and are subject to any stock restriction agreement,
any transferee of any such shares shall agree in writing to be bound
by the terms of any such stock restriction or similar agreement,
including, without limitation, any repurchase or similar right
contained therein.
Section 3.2 Right of Last Refusal. In the event that any of the
----------- ----------------------
Founders, including any of their Permitted Transferees, receives a bona fide
offer to purchase all or any portion of the Shares held by such stockholder (a
"Transaction Offer") from a non-Affiliate (the "Offeror"), such Founder or
Permitted Transferee (a "Transferring Stockholder") may, subject to the
provisions of Section 3.3 hereof, Transfer such Shares pursuant to and in
accordance with the following provisions of this Section 3.2:
(a) Such Transferring Stockholder shall cause the
Transaction Offer and all of the terms thereof to be reduced to
writing and shall notify each Investor of his wish to accept the
Transaction Offer and otherwise comply with the provisions of this
Section 3.2 and, if applicable, Section 3.3 (such notice, the "Offer
Notice"). The Transferring Stockholder's Offer Notice shall constitute
an irrevocable offer to sell such shares to the Investors on the basis
described below at a purchase price equal to the price contained in,
and on the same terms and conditions of, the Transaction Offer. The
notice shall be accompanied by a true copy of the Transaction Offer
(which shall identify the Offeror and all relevant information in
connection therewith). In the event of any conflict between the terms
of the Transaction Offer and the offer to sell such shares to the
Investors on the basis described below, the terms described below
shall control.
(b) Each Investor shall have the right (the "Right of
Last Refusal") to offer to purchase up to that number of Shares
covered by the Transaction Offer as shall be equal to the product
obtained by multiplying (i) the total number of Shares subject to the
Transaction Offer by (ii) a fraction, the numerator of which is the
total number of shares of Common Stock owned by such Investor on the
date of the Offer Notice on an as converted basis (including for this
purpose any shares of Common Stock or Class B Common Stock, as
applicable, that may be received upon conversion of the Convertible
Preferred Stock), and the denominator of which is the total number of
shares of Common Stock or Class B Common Stock, as applicable, then
held by all Investors on the date of the Offer Notice on an as
converted basis, subject to increase as hereinafter
6
<PAGE>
provided. The number of Shares that each Investor is entitled to
purchase under this Section 3.2 shall be referred to as its "Pro Rata
Fraction". Each Investor shall have the right to transfer its right to
any Pro Rata Fraction or part thereof with respect to any proposed
Transaction Offer to any transferee. In the event an Investor does not
wish to purchase or to transfer its right to purchase its Pro Rata
Fraction, then any Investors who so elect shall have the right to
offer to purchase, on a pro rata basis with any other Investors who so
elect, any Pro Rata Fraction not purchased by an Investor or its
transferee. Each Investor shall have the right to accept the
Transaction Offer by giving notice of such acceptance to the
Transferring Stockholder as provided in Section 7.4 within thirty (30)
days after receipt of the Offer Notice, which notice shall indicate
the maximum number of Shares subject thereto which the Investor and
its transferee(s) are willing to purchase in the event fewer than all
Investors elect to purchase their Pro Rata Fractions; provided that
the Investors as a group may not exercise the Right of Last Refusal
with respect to fewer than all of the Shares which are subject to the
Transaction Offer. In the event that the price set forth in the Offer
Notice is stated in consideration other than cash or cash equivalents,
the Board of Directors of the Company with the agreement of the TA
Associates, Inc. as representative of the Investors may determine the
fair market value of such consideration, reasonably and in good faith,
and the Investors may exercise their Right of Last Refusal by payment
of such fair market value in cash or cash equivalents. The
Transferring Stockholder shall notify the Investors promptly following
any lapse of the Right of Last Refusal without acceptance thereof or
any rejection of the Right of Last Refusal.
Upon the expiration of thirty (30) days following receipt of the
Offer Notice by all Investors, the number of Shares to be purchased by
each Investor and transferee shall be determined as follows: (x) there
shall first be allocated to each Investor and transferee electing to
purchase a number of Shares equal to the lesser of (A) the number of
Shares as to which such Investor accepted the Transaction Offer or (B)
such Investor's Pro Rata Fraction, and (y) the balance, if any, not
allocated under clause (x) above, shall be allocated to those
Investors and transferees who accepted the Transaction Offer as to a
number of Shares which exceeded their respective Pro Rata Fractions,
in each case on a pro rata basis in proportion to the amount of such
excess. The closing for any purchase of Shares by the Investors and
their transferees hereunder shall take place within thirty (30) days
after the expiration of the first thirty (30) day period following the
Investors' receipt of the Offer Notice at the place and on the date
specified by a two-thirds-in-interest of the Investors.
(c) In the event that the Investors do not elect to exercise
the Right of Last Refusal with respect to all of the Shares proposed
to be sold, the Investors shall not be entitled to purchase any such
Shares and the Transferring Stockholder may sell all such Shares
proposed to be sold to the Offeror on the terms and conditions set
forth in the Offer Notice, subject to the provisions of Section 3.3.
If the Transferring Stockholder's transfer to an Offeror is not
consummated in accordance with the terms of the Transaction Offer
within the later of (i) ninety (90) days after the expiration of
7
<PAGE>
the Right of Last Refusal and the Co-Sale Option set forth in Section
3.3 below, if applicable, and (ii) the satisfaction of all
governmental approval or filing requirements, the Transaction Offer
shall be deemed to lapse, and any Transfers of Shares pursuant to such
Transaction Offer shall be deemed to be in violation of the provisions
of this Agreement unless the Investors are once again afforded the
Right of Last Refusal provided for herein with respect to such
Transaction Offer.
Section 3.3 Co-Sale Option. In the event that any Transferring
----------- ---------------
Stockholder receives a Transaction Offer from an Offeror, and the Right of Last
Refusal is not exercised, such Transferring Stockholder may Transfer such Shares
only pursuant to and in accordance with the following provisions of this Section
3.3:
(a) Each of the Investors shall have the right to participate in
the Transaction Offer by giving written notice (the "Acceptance
Notice") to the Transferring Stockholder within forty-five (45) days
after delivery to it of the Offer Notice (the "Co-Sale Option"). The
Acceptance Notice shall indicate the maximum number of Shares such
Investor wishes to sell including the number of Shares it would sell
if one or more other Investors do not elect to participate in the sale
on the terms and conditions stated in the Offer Notice. Any Investor
who holds Preferred Stock shall be permitted to sell to the relevant
purchaser in connection with any exercise of the Co-Sale Option Shares
of Common Stock (or Class B Common Stock, as applicable) acquired upon
conversion thereof or, at its election, an option to acquire such
Common Stock (or Class B Common Stock, as applicable) when it receives
the same upon such conversion at the election of such Investor or as
otherwise provided in the Company's Amended and Restated Certificate
of Incorporation (the "Charter") with the same effect as if Common
Stock were being conveyed, or, at its election, shares of Convertible
Preferred Stock provided the acquiror pays the full liquidation
preference of the shares being sold plus the relevant price per share
for the underlying Common Stock.
(b) Each of the Investors shall have the right to sell a portion
of its Shares pursuant to the Transaction Offer which is equal to or
less than the product obtained by multiplying (i) the total number of
Shares subject to the Transaction Offer by (ii) a fraction, the
numerator of which is the total number of vested shares of Common
Stock owned by such Investor on the date of the Offer Notice on an as
converted basis (including any Common Stock (or Class B Common Stock,
as applicable) issuable upon conversion of the Convertible Preferred
Stock), and the denominator of which is the total number of vested
shares of Common Stock then held by all Investors and Founders
(including any Permitted Transferees) on the date of the Offer Notice
on an as converted basis. To the extent one or more Investors elect
not to sell, or fail to exercise their right to sell, the full amount
of such Shares which they are entitled to sell pursuant to this
Section 3.3, the right of Investors who have elected to sell Shares
shall be increased proportionately based on their relative holdings
and such other Investors shall have an additional five (5) days from
the date upon which they are
8
<PAGE>
notified of such election or failure to exercise in which to increase
the number of Shares to be sold by them hereunder.
(c) Within ten (10) days after the date by which the Investors
were first required to notify the Transferring Stockholder of their
intent to participate, the Transferring Stockholder shall notify each
participating Investor of the number of Shares held by such Investor
that will be included in the sale and the date on which the
Transaction Offer will be consummated, which shall be no later than
the later of (i) thirty (30) days after the date by which the
Investors were required to notify the Transferring Stockholder of
their intent to participate and (ii) the satisfaction of any
governmental approval or filing requirements, if any.
(d) Each of participating Investors may effect its participation
in any Transaction Offer hereunder by delivery to the Offeror, or to
the Transferring Stockholder for delivery to the Offeror, of one or
more instruments or certificates, properly endorsed for transfer,
representing the Shares it elects to sell therein, provided that no
Investor shall be required to make any representations or warranties
or to provide any indemnities in connection therewith other than with
respect to title to the stock being conveyed. At the time of
consummation of the Transaction Offer, the Offeror shall remit
directly to each Investor that portion of the sale proceeds to which
each Investor is entitled by reason of its participation therein (less
any adjustments due to the conversion of any convertible securities or
the exercise of any exercisable securities). No Shares may be
purchased by a purchaser from the Transferring Stockholder or any or
his Permitted Transferees unless the purchaser simultaneously
purchases from the Investors all of the Shares that they have elected
to sell pursuant to this Section 3.3.
(e) Any shares held by a Transferring Stockholder that the
Transferring Stockholder desires to sell following compliance with
this Section 3.3 may be sold to the purchaser only during the period
specified in Section 3.3(c) and only on terms no more favorable to the
Transferring Stockholder than those contained in the Offer Notice.
Promptly after such sale, the Transferring Stockholder shall notify
the Investors of the consummation thereof and shall furnish such
evidence of the completion and time of completion of such sale and of
the terms thereof as may reasonably be requested by the Investors. So
long as the purchaser is neither a party, nor an affiliate or relative
of a party, to this Agreement, such purchaser shall take the Shares so
Transferred free and clear of any further restrictions of this Article
III. In the event that the Transaction Offer is not consummated within
the period required by this Section 3.3 or the Offeror fails timely to
remit to each Investor its portion of the sale proceeds, the
Transaction Offer shall be deemed to lapse, and any Transfers of
Shares pursuant to such Transaction Offer shall be deemed to be in
violation of the provisions of this Agreement unless the Transferring
Stockholder once again complies with the provisions of Section 3.2 and
this Section 3.3 hereof with respect to such Transaction Offer.
9
<PAGE>
Section 3.4 Drag-Along Obligations.
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(a) In the event that two-thirds-in-interest of the Investors
determine to sell or otherwise dispose of all or substantially all of the
assets of the Company or all or substantially all of the capital stock of
the Company owned by the Investors to any non-Affiliate(s) of the Company
or any of the Investors, or to cause the Company to merge with or into or
consolidate with any non-Affiliate(s) of the Company or any of the
Investors (in each case, the "Buyer") in a bona fide negotiated transaction
(a "Sale"), each of the Founders, including any of their respective
Permitted Transferees (collectively, the "Non-Investor Stockholders"),
shall be obligated to and shall upon the written request of two-thirds-in-
interest of the Investors: (i) sell, transfer and deliver, or cause to be
sold, transferred and delivered, to the Buyer, his Shares (including for
this purpose all of such Non-Investor Stockholder's Shares that presently
or as a result of any such transaction may be acquired upon the exercise of
options (following the payment of the exercise price therefor)) on
substantially the same terms applicable to the Investors (with appropriate
adjustments to reflect the conversion of convertible securities, the
redemption of redeemable securities and the exercise of exercisable
securities as well as the relative preferences and priorities of the
Preferred Stock); and (ii) execute and deliver such instruments of
conveyance and transfer and take such other action, including voting such
Shares in favor of any Sale proposed by the Investors and executing any
purchase agreements, merger agreements, indemnity agreements, escrow
agreements or related documents, as the Investors or the Buyer may
reasonably require in order to carry out the terms and provisions of this
Section 3.4.
(b) In the event of a Sale to a Buyer as contemplated in Section
3.4(a) above, each Founder, including each Founder's Permitted Transferees,
shall in the event that the Investors do not exercise their "drag-along"
rights in Section 3.4(a) above, have the right to require the Investors to
include such Founder's or Permitted Transferee's Shares in the Sale on the
same terms as the Investors' Shares (with appropriate adjustments to
reflect the conversion of convertible securities, the redemption of
redeemable securities and the exercise of exercisable securities as well as
the relative priorities and preferences of the Preferred Stock and the
terms of any options issued by the Company), which such right shall be
exercisable by the delivery of written notice to the Company and each of
the Investors at least twenty (20) days prior to the date proposed for the
closing of the Sale.
(c) Not less than thirty (30) days prior to the date proposed for
the closing of any Sale, the Investors shall give written notice to each
Non-Investor Stockholder, setting forth in reasonable detail the name or
names of the Buyer, the terms and conditions of the Sale, including the
purchase price, and the proposed closing date. In furtherance of the
provisions of this Section 3.4, each of the Non-Investor Stockholders
hereby (i) irrevocably appoints TA Associates, Inc. as its agent and
attorney-in-fact (the "Agent") (with full power of substitution) to execute
all agreements, instruments and certificates and take all actions necessary
or desirable to
10
<PAGE>
effectuate any Sale hereunder; and (ii) grants to the Agent a proxy (which
shall be deemed to be coupled with an interest and irrevocable) to vote the
Shares held by such Non-Investor Stockholder and exercise any consent
rights applicable thereto in favor of any Sale hereunder; provided,
--------
however, that the Investors shall not exercise such powers-of-attorney or
-------
proxies with respect to any Non-Investor Stockholder unless such Non-
Investor Stockholders are in breach of their obligations under this
Section 3.4.
Section 3.4A Founder Co-Sale Option. In the event that any Investor
------------ ----------------------
(a "Transferring Investor") receives a bona fide offer from an Offeror to
purchase a portion of the Shares of Common Stock held by an Investor, to which
Offer the provisions of Section 3.4 do not apply (an "Investor Transaction
Offer"), such Transferring Investor may Transfer such Shares only pursuant to
and in accordance with the following provisions of this Section 3.4A:
(a) Each of the Founders (including for purposes of this
paragraph (a) and the following paragraphs (b), (c), (d) and (e) any
Permitted Transferee) shall have the right to participate in the Investor
Transaction Offer by giving written notice (the "Founder Acceptance
Notice") to the Transferring Investor within forty-five (45) days after
delivery to it of a written notice (the "Investor Offer Notice") notifying
each Founder of the Investor's receipt of the Investor Transaction Offer
and all of the terms of such Investor Transaction Offer (the "Founder Co-
Sale Option"). The Founder Acceptance Notice shall indicate the maximum
number of Shares such Founder wishes to sell including the number of Shares
it would sell if one or more other Founders do not elect to participate in
the sale on the terms and conditions stated in the Investor Offer Notice.
(b) Each of the Founders shall have the right to sell a
portion of his Shares pursuant to the Investor Transaction Offer which is
equal to or less than the product obtained by multiplying (i) the total
number of Shares subject to the Investor Transaction Offer by (ii) a
fraction, the numerator of which is the total number of vested shares of
Common Stock owned by such Founder on the date of the Investor Offer
Notice, and the denominator of which is the total number of vested shares
of Common Stock then held by all Investors and Founders (including any
Permitted Transferees) on the date of the Investor Offer Notice on an as
converted basis. To the extent one or more Founders elect not to sell, or
fail to exercise their right to sell, the full amount of such Shares which
they are entitled to sell pursuant to this Section 3.4A, the right of
Founders who have elected to sell Shares shall be increased proportionately
based on their relative holdings and such other Founders shall have an
additional five (5) days from the date upon which they are notified of such
election or failure to exercise in which to increase the number of Shares
to be sold by them hereunder.
(c) Within ten (10) days after the date by which the Founders
were first required to notify the Transferring Investor of their intent to
participate, the Transferring Investor shall notify each participating
Founder of the number of Shares held by such Founder that will be included
in the sale and the date on which the
11
<PAGE>
Investor Transaction Offer will be consummated, which shall be no later
than the later of (i) thirty (30) days after the date by which the Founders
were required to notify the Transferring Investor of their intent to
participate and (ii) the satisfaction of any governmental approval or
filing requirements, if any.
(d) Each of the participating Founders may effect his
participation in any Investor Transaction Offer hereunder by delivery to
the Offeror, or to the Transferring Investor for delivery to the Offeror,
of one or more instruments or certificates, properly endorsed for transfer,
representing the Shares it elects to sell therein, provided that no Founder
shall be required to make any representations or warranties or to provide
any indemnities in connection therewith other than with respect to title to
the stock being conveyed. At the time of consummation of the Investor
Transaction Offer, the Offeror shall remit directly to each Founder that
portion of the sale proceeds to which each Founder is entitled by reason of
his participation therein (less any adjustments due to the conversion of
any convertible securities or the exercise of any exercisable securities).
No Shares may be purchased by a purchaser from the Transferring Investor or
any of his Permitted Transferees unless the purchaser simultaneously
purchases from the Founders all of the Shares that they have elected to
sell pursuant to this Section 3.4A.
(e) Any shares held by a Transferring Investor that the
Transferring Investor desires to sell following compliance with this
Section 3.4A may be sold to the purchaser only during the period specified
in Section 3.4A(c) and only on terms no more favorable to the Transferring
Investor than those contained in the Investor Offer Notice. Promptly after
such sale, the Transferring Investor shall notify the Founders of the
consummation thereof and shall furnish such evidence of the completion and
time of completion of such sale and of the terms thereof as may reasonably
be requested by the Founders. So long as the purchaser is neither a party,
nor an affiliate or relative of a party, to this Agreement, such purchaser
shall take the Shares so Transferred free and clear of any further
restrictions of this Article III. In the event that the Investor
Transaction Offer is not consummated within the period required by this
Section 3.4A or the Offeror fails timely to remit to each Founder his
portion of the sale proceeds, the Investor Transaction Offer shall be
deemed to lapse, and any Transfers of Shares pursuant to such Investor
Transaction Offer shall be deemed to be in violation of the provisions of
this Agreement unless the Transferring Investor once again complies with
the provisions of this Section 3.4A hereof with respect to such Investor
Transaction Offer.
(f) Notwithstanding anything to the contrary contained in
this Agreement, the provisions of this Section 3.4A shall not apply to any
Transfer by any Investor to any other Investor or to any TA Fund (as
defined in Section 3.6).
Section 3.5 Contemporaneous Transfers. If two or more Founders (or their
----------- -------------------------
Permitted Transferees) or Investors propose concurrent Transfers which are
subject to this
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<PAGE>
Article III, then the relevant provisions of Sections 3.2, 3.3 and 3.4A shall
apply separately to each such proposed Transfer.
Section 3.6 Assignment. Each Investor and each Founder shall have
----------- ----------
the right to assign its rights under this Article III in connection with any
transaction or series of related transactions involving the transfer to a
transferee or two or more transferees that are Affiliates of each other of at
least 10,000 Shares of capital stock of the Company (subject to adjustment for
stock splits, stock dividends, reclassifications, reorganizations and the like
and aggregating all contemporaneous transfers), or to any fund managed by or
associated with TA Associates, Inc. (a "TA Fund"), and upon any such transfer,
any such transferee or TA Fund thereupon shall be deemed an "Investor" or a
"Founder" in connection with its ownership of the Shares Transferred for
purposes of this Article III, without limitation of Section 3.3(e).
Section 3.7 Prohibited Transfers. If any Transfer is made or attempted
----------- --------------------
contrary to the provisions of this Agreement, such purported Transfer shall be
void ab initio; the Company and the other parties hereto shall have, in addition
-- ------
to any other legal or equitable remedies which they may have, the right to
enforce the provisions of this Agreement by actions for specific performance (to
the extent permitted by law); and the Company shall have the right to refuse to
recognize any Transferee as one of its stockholders for any purpose. Without
limitation to the foregoing, each of the Investors and Founders further agrees
that the provisions of Section 7.8 shall apply in the event of any violation or
threatened violation of this Agreement.
ARTICLE IV. RIGHTS TO PURCHASE
- ---------- ------------------
Notwithstanding anything herein to the contrary, the following provisions
of this Article IV shall terminate immediately prior to the closing of a
Qualified Public Offering and shall not apply with respect to any Qualified
Public Offering.
Section 4.1 Right to Participate in Certain Sales of Additional
---------------------------------------------------
Securities. The Company agrees that it will not sell or issue any shares of
- ----------
capital stock of the Company, or other securities convertible into or
exchangeable for capital stock of the Company, or options, warrants or rights
carrying any rights to purchase capital stock of the Company unless the Company
first submits a written offer to the Investors and the Founders (including their
Permitted Transferees) (collectively, the "Offerees") identifying the terms of
the proposed sale (including price, number or aggregate principal amount of
securities and all other material terms), and offers to each Investor and
Founder (including each Permitted Transferee) the opportunity to purchase its
Pro Rata Allotment (as hereinafter defined) of the securities (subject to
increase for over-allotment if some Investors do not fully exercise their
rights) on terms and conditions, including price, not less favorable than those
on which the Company proposes to sell such securities to a third party or
parties. Each Offeree's "Pro Rata Allotment" of such securities shall be based
on the ratio which the number of vested shares of Common Stock or Class B Common
Stock, as applicable (including shares issuable upon conversion of Preferred
13
<PAGE>
Stock), owned by it bears to the number of all the issued and outstanding vested
shares of Common Stock (including shares of Common Stock or Class B Common Stock
issuable upon conversion of Preferred Stock) calculated in each case on a fully-
diluted basis giving effect to the conversion of convertible securities and
assuming the exercise of all outstanding vested options, in each case as of the
date of such written offer. The Company's offer pursuant to this Section 4.1
shall remain open and irrevocable for a period of 30 days, and the recipients of
such offer shall elect to purchase by giving written notice thereof to the
Company within such 30-day period, including therein the maximum number of
shares or other securities which the Offeree would purchase if other Offerees do
not elect to purchase, with the rights of electing Offerees to purchase such
additional shares to be based upon the relative holdings of Common Stock
(including shares of Common Stock or Class B Common Stock issuable upon
conversion of Preferred Stock) of the electing Offerees in the case of over-
subscription. Any securities so offered which are not purchased pursuant to
such offer may be sold by the Company but only on the terms and conditions set
forth in the initial offer, at any time within 120 days following the
termination of the above-referenced 30-day period but may not be sold to any
other person or on terms and conditions, including price, that are more
favorable to the purchaser than those set forth in such offer or after such 120-
day period without renewed compliance with this Section 4.1.
Notwithstanding the foregoing, the right to purchase granted under this
Article IV shall be inapplicable with respect to any issuance or proposed
issuance by the Company of (i) securities issued in connection with the
acquisition of another corporation by the Company, whether by merger, purchase
of all or substantially all of the assets of such corporation, or otherwise,
(ii) up to 600,000 shares (or options to purchase shares) of Common Stock and
2,000,000 shares of Class A Common Stock (subject to adjustment in the event of
stock splits, stock dividends, recapitalizations and like events) issued or
granted to employees, consultants, officers, directors, advisors or independent
contractors of the Company or of any Affiliate of the Company pursuant to the
Company's 1996 Stock Option and Grant Plan, (iii) securities issued as a result
of any stock split, stock dividend, reclassification or reorganization of the
Company's stock or (iv) Common Stock, Class B Common Stock or Redeemable
Preferred Stock issued upon conversion of the Convertible Preferred Stock in
accordance with the terms of the Charter.
Section 4.2 Assignment of Rights. Each Investor and Founder (including
--------------------
each Permitted Transferee) shall have to right to assign its rights under this
Article IV in connection with any transaction or series of related transactions
involving the transfer to one or more transferees of at least 10,000 shares of
capital stock of the Company (subject to adjustment for stock splits, stock
dividends and the like and aggregating all contemporaneous transfers), or to any
TA Fund, and upon any such transfer such transferee or TA Fund shall be deemed
an Offeree for purposes of Sections 4.1 and 4.2 with the rights set forth in
such Sections.
14
<PAGE>
ARTICLE V. REGISTRATION RIGHTS
- --------- -------------------
The Company's obligation to register shares of Common Stock under this
Article V shall terminate seven (7) years following the closing by the Company
of its first underwritten public offering pursuant to a registration statement
under the Securities Act (an "IPO") or, with respect to Shares held by
particular Investors or the Founders (including Permitted Transferees), whenever
such shares are no longer Registrable Shares (as defined below).
Section 5.1 Piggyback Registration Rights. If at any time or times after
----------- -----------------------------
the date hereof, the Company shall determine to register any shares of its
Common Stock or securities convertible into or exchangeable or exercisable for
shares of Common Stock under the Securities Act (whether in connection with a
public offering of securities by the Company (a "primary offering"), a public
offering of securities by stockholders (a "secondary offering"), or both, but
not in connection with a registration effected solely to implement an employee
benefit plan or a transaction to which Rule 145 or any other similar rule of the
Commission under the Securities Act is applicable or a registration effected
pursuant to Sections 5.2 or 5.3 hereof), the Company will promptly give written
notice thereof to the Investors and the Founders (including for purpose of this
Section 5.1 each Permitted Transferee). In connection with any such
registration, if within thirty (30) days after their receipt of such notice (or
10 days in the case of a proposed registration on Form S-3) any Investor or
Founder requests in writing the inclusion in such registration of some or all of
the Registrable Shares (as hereinafter defined) owned by such Investor or
Founder, or into which any Shares held by such Investor or Founder are
convertible or exchangeable, the Company will use its best efforts to effect the
registration under the Securities Act of all Registrable Shares which such
Investors and Founders so request; provided, however, that in the case of an
-------- -------
underwritten public offering, if the underwriter determines that a limitation on
the number of shares to be underwritten is required, (i) if such registration is
the first registered offering of the Company's securities to the public, the
underwriter may exclude from such registration and underwriting some or all of
the Registrable Shares which would otherwise be underwritten pursuant to the
notice described herein, and (ii) if such registration is other than the first
registered offering of the sale of the Company's securities to the public, the
underwriter may limit the number of Registrable Shares to be included in the
registration and underwriting to not less than thirty percent (30%) of the
securities included therein (based on aggregate market values). The Company
shall advise all Investors and Founders promptly after such determination by the
underwriter, and the number of Registrable Shares that may be included in the
registration and underwriting shall be allocated among all Investors and
Founders requesting registration in proportion, as nearly as practicable, to
their respective holdings of Registrable Shares. All expenses of the
registration and offering (including the reasonable fees and expenses of one
independent counsel for the Investors as a group and the Founders as a group,
elected by a majority in interest (based on Registrable Shares proposed to be
sold) of the Investors and Founders proposing to sell), shall be borne by the
Company, except that the Investors and the Founders shall bear underwriting and
selling commissions and transfer taxes attributable to the sale of their
Registrable Shares.
15
<PAGE>
Section 5.2 Demand Registration Rights. If on any two (2) occasions
----------- --------------------------
(which occasions shall in no event be less than six months apart from each
other) after the earlier of (i) two (2) years after the date of this Agreement
or (ii) three (3) months after the closing of the Company's first public
offering pursuant to a registration statement under the Securities Act,
Investors holding a majority in interest of the Registrable Shares then held by
all of the Investors shall notify the Company in writing that it or they intend
to offer or cause to be offered for public sale all or any portion of its or
their Registrable Shares, the Company will notify all of the Investors and the
Founders (including for purposes of this Section 5.2 all Permitted Transferees)
of its receipt of such notification from such Investors. If within thirty (30)
days after their receipt of such notice any Investor or Founder requests the
inclusion of some or all of the Registrable Shares owned by such Investor or
Founder in such registration, the Company will use its best efforts to cause
such Registrable Shares so requested (including the Registrable Shares held by
the Investor(s) or Founder(s) giving the initial notice of intent to register
hereunder) to be registered under the Securities Act in accordance with the
terms of this Section 5.2; provided, however, that unless such registration
-------- -------
becomes effective, the Investors shall be entitled to require an additional
registration pursuant to this Section 5.2; and, provided further that if such
-------- -------
registration is underwritten and the underwriter determines that a limitation on
the number of shares to be underwritten is required, the first shares to be
excluded from such registration shall be any shares registered for the benefit
of the Company, and thereafter any shares which the Investors and the Founders
have requested to be registered shall be limited, to the extent necessary, based
upon the respective holdings of Registrable Shares of the Investors and Founders
proposing to sell.
All expenses of such registrations and offerings (including the reasonable
fees and expenses of one independent counsel for the Investors as a group, and
the Founders as a group, selected in the manner contemplated by Section 5.1)
shall be borne by the Company. The Company may postpone the filing of any
registration statement required hereunder for a reasonable period of time, not
to exceed 90 days during any twelve-month period, if the Company determines in
good faith that such filing would require the disclosure of a material
transaction or other matter and the Company determines reasonably and in good
faith that such disclosure would have a material adverse effect on the Company
or otherwise would not be in the best interest of the Company. The Company shall
not be required to cause a registration statement requested pursuant to this
Section 5.2 to become effective prior to 90 days following the effective date of
a Registration Statement initiated by the Company, if the request for
registration has been received by the Company subsequent to the giving of
written notice by the Company, made in good faith, to the Investors to the
effect that the Company is commencing to prepare a Company-initiated
Registration Statement (other than a registration effected solely to implement
an employee benefit plan or a transaction to which Rule 145 or any other similar
rule of the Commission under the Securities Act is applicable); provided,
however, that the Company shall use its best efforts to achieve such
effectiveness promptly following such 90-day period if the request pursuant to
this Section 5.2 has been made prior to the expiration of such 90-day period. If
so requested by any Investor or Founder in connection with a registration under
this paragraph, the Company shall take such steps as are required to register
the Investors' and the Founders' Registrable Shares for sale on a delayed or
continuous
16
<PAGE>
basis under Rule 415, and also take such steps as are required to keep any
registration effective until all of the Investors' and the Founders' Registrable
Shares registered thereunder are sold. Notwithstanding the foregoing, the
Company shall have no obligation to keep any registration pursuant to this
Section 5.2 effective more than 120 days after the initial date of effectiveness
of such registration.
Section 5.3 Form S-3. If the Company becomes eligible to use Form S-3
----------- --------
under the Securities Act or a comparable successor form, (a) the Company shall
use its best efforts to continue to qualify at all times for registration of its
capital stock on Form S-3 or such successor form, and (b) holders of Registrable
Shares anticipated to have an aggregate sale price (net of underwriting
discounts and Commission, if any) in excess of $500,000 shall have the right on
one or more occasions to request and have effected the registration of their
Shares on Form S-3 or such successor form (such requests shall be in writing and
shall state the number of Shares to be disposed of and the intended method of
disposition of such Shares by Investor(s) or Founder(s), including for purposes
of this Section 5.3 all Permitted Transferees). The Company will use its best
efforts to effect promptly the registration of all Shares on Form S-3 or such
successor form to the extent requested by such Investor(s) or Founder(s). If so
requested by such Investor(s) or Founder(s) in connection with a registration
under this Section 5.3, the Company shall take such steps as are required to
register such Investor's or Founder's Registrable Shares for sale on a delayed
or continuous basis under Rule 415, and to keep such registration effective
until all of such Investor's or Founder's Registrable Shares registered
thereunder are sold. Notwithstanding the foregoing, the Company shall have no
obligation to keep any registration effective more than 120 days after the
initial date of effectiveness of such registration. All expenses incurred in
connection with a registration requested pursuant to this Section 5.3 (including
the reasonable fees and expenses of one independent counsel for the Investors as
a group and the Founders as a group, selected in this manner contemplated as of
Section 5.1) shall be borne by the Company. The Company may postpone the filing
of any registration statement required hereunder for a reasonable period of
time, not to exceed 90 days during any twelve month period, if the Company
determines in good faith that such filing would require the disclosure of a
material transaction or other matter and the Company determines reasonably and
in good faith that such disclosure would have a material adverse effect on the
Company or otherwise would not be in the best interest of the Company. The
Company shall not be required to cause a Registration Statement requested
pursuant to this Section 5.3 to become effective prior to 90 days following the
effective date of a Registration Statement initiated by the Investors pursuant
to Section 5.2 or by the Company, if the request for registration has been
received by the Company subsequent to the giving of written notice by the
Company, made in good faith, to the Investors and the Founders to the effect
that the Company is commencing to prepare a Company-initiated Registration
Statement (other than a registration effected solely to implement an employee
benefit plan or a transaction to which Rule 145 or any other similar rule of the
Commission under the Securities Act is applicable); provided, however, that the
-------- -------
Company shall use its best efforts to achieve such effectiveness promptly
following such 90-day period if the request pursuant to this Section 5.3 has
been made prior to the expiration of such 90-day period.
17
<PAGE>
Section 5.4 Registrable Shares. For the purposes of this Article V, the
----------- ------------------
term "Registrable Shares" shall mean any shares of Common Stock held by an
Investor, Founder or Permitted Transferee or subject to acquisition by an
Investor upon conversion of Convertible Preferred Stock or Class B Common Stock,
as applicable, including any shares issued by way of a stock dividend or stock
split or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization; provided, however, that if an Investor
owns Convertible Preferred Stock or Class B Common Stock, the Investor may
exercise its registration rights hereunder by converting the shares to be sold
publicly into Common Stock as of the closing of the relevant offering and shall
not be required to cause such Convertible Preferred Stock or Class B Common
Stock to be converted to Common Stock until and unless such Closing occurs, it
being understood that the Company shall at the request of the relevant Investor
effect the reconversion of Common Stock or Class B Common Stock and any
Redeemable Preferred Stock acquired upon conversion of Convertibly Preferred
Stock to Convertible Preferred Stock if such a conversion occurs notwithstanding
the foregoing and a public offering does not close; and provided, further, that
any Common Stock that is sold in a registered sale pursuant to an effective
registration statement under the Securities Act or pursuant to Rule 144
thereunder, or that may then be sold without restriction as to volume or
otherwise pursuant to Rule 144 under the Securities Act, including by reason of
Rule 701(c) under the Securities Act or any restricted stock that is not then
vested, shall not be deemed Registrable Shares.
Section 5.5 Further Obligations of the Company. Whenever, under the
----------- ----------------------------------
provisions of Sections 5.1, 5.2 or 5.3 of this Agreement, the Company is
required to register any Registrable Shares, it agrees that it shall also do the
following:
(a) Use its best efforts to diligently prepare and file with
the Commission a registration statement and such amendments, post-effective
amendments and supplements to said registration statement and the
prospectus used in connection therewith as may be necessary to keep said
registration statement effective as contemplated herein and to comply with
the provisions of the Securities Act with respect to the sale of securities
covered by said registration statement for the period necessary to complete
the proposed public offering as provided herein;
(b) Furnish to each selling Investor or Founder (including
for purposes of this Section 5.4 each Permitted Transferee) such copies of
each preliminary and final prospectus and such other documents as such
Investor or Founder may reasonably request to facilitate the public
offering of its Registrable Shares;
(c) Enter into any reasonable underwriting agreement required
by the proposed underwriter for the selling Investors or Founders, if any
(which underwriter shall be selected by the selling Investors in connection
with any registration requested pursuant to Section 5.2); provided,
however, that no Founder or Investor shall be required to make any
representations or warranties other than with respect to its title to the
Registrable Shares and any written information provided by it to the
Company
18
<PAGE>
specifically for us in the Registration Statement, and if the underwriter
requires that representations or warranties be made and that
indemnification be provided, the Company shall make all such
representations and warranties and provide all such indemnities, including,
without limitation, in respect of the Company's business, operations and
financial information and the disclosures relating thereto in the
prospectus;
(d) Use its best efforts to register or qualify the
securities covered by said registration statement under the securities or
"blue-sky" laws of such jurisdictions as any selling Investors or Founders
may reasonably request, provided that the Company shall not be required to
register or qualify the securities in any jurisdictions which require it to
qualify to do business or subject itself to general service of process
therein;
(e) Immediately notify each selling Investor or Founder, at
any time when a prospectus relating to his Registrable Shares is required
to be delivered under the Securities Act, of the happening of any event as
a result of which such prospectus contains an untrue statement of a
material fact or omits any material fact necessary to make the statements
therein not misleading, and, at the request of any such selling Investor or
Founder, prepare a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of such Registrable Shares, such
prospectus will not contain any untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein not
misleading;
(f) Cause all such Registrable Shares to be listed on or
included in each securities exchange or quotation system on which similar
securities issued by the Company are then listed;
(g) Otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission and make generally
available to its stockholders, in each case as soon as practicable, but not
later than 30 days after the close of the period covered thereby an
earnings statement of the Company which will satisfy the provisions of
Section 11(a) of the Securities Act;
(h) Cooperate with each Investor and Founder and each
underwriter participating in the disposition of Registrable Shares and
their respective counsel in connection with any filings required to be made
with the National Association of Securities Dealers, Inc.;
(i) During the period when the prospectus is required to be
delivered under the Securities Act, promptly file all documents required to
be filed with the Commission pursuant to Sections 13(a), 13(c), 14 or 15(d)
of the Exchange Act;
19
<PAGE>
(j) Appoint a transfer agent and registrar for all
Registrable Shares covered by a Registration Statement not later than the
effective date of such Registration Statement;
(k) In connection with an underwritten offering, to the
extent reasonably requested by the managing underwriter for the offering or
the Investors or the Founders, participate in and support customary efforts
to sell the securities in the offering, including, without limitation,
participating in "road shows"; and
(l) Otherwise cooperate with the underwriter or underwriters,
the Commission and other regulatory agencies and take all actions and
execute and deliver or cause to be executed and delivered all documents
necessary to effect the registration of any Registrable Shares under this
Article V,
Section 5.6 Indemnification; Contribution.
----------- -----------------------------
(a) Incident to any registration statement referred to in
this Article V, and subject to applicable law, the Company will indemnify and
hold harmless each underwriter, each Investor or Founder (including for purposes
of this Article V each Permitted Transferee) who offers or sells any such
Registrable Shares in connection with such registration statement (including its
partners (including partners of partners and stockholders of any such partners),
and directors, officers, employees and agents of any of them (a "Selling
Stockholder"), and each person who controls any of them within the meaning of
Section 15 of the Securities Act or Section 20 of the Securities Exchange Act of
1934 (the "Exchange Act") (a "Controlling Person"), from and against any and all
losses, claims, damages, expenses and liabilities, joint or several (including
any investigation, legal and other expenses incurred in connection with, and any
amount paid in settlement of, any action, suit or proceeding or any claim
asserted), as the same are incurred to which they, or any of them, may become
subject under the Securities Act, the Exchange Act or other federal or state
statutory law or regulation, at common law or otherwise, insofar as such losses,
claims, damages or liabilities arise out of or are based on (i) any untrue
statement or alleged untrue statement of a material fact contained in such
registration statement (including any related preliminary or definitive
prospectus, or any amendment or supplement to such registration statement or
prospectus), (ii) any omission or alleged omission to state in such document a
material fact required to be stated in it or necessary to make the statements in
it not misleading, or (iii) any violation by the Company of the Securities Act,
any state securities or "blue sky" laws or any rule or regulation thereunder in
connection with such registration; provided, however, that the Company will not
be liable to the extent that such loss, claim, damage, expense or liability
arises from and is based on an untrue statement or omission or alleged untrue
statement or omission made in reliance on and in conformity with information
furnished in writing to the Company by such underwriter, Selling Stockholder or
Controlling Person expressly for use in such registration statement. With
respect to such untrue statement or omission or alleged untrue statement or
omission in the information furnished in writing to the Company by such Selling
Stockholder expressly for use in such registration statement, such Selling
Stockholder will indemnify and hold harmless
20
<PAGE>
each underwriter, the Company (including its directors, officers, employees and
agents), and each other Selling Stockholder (including its partners (including
partners of partners and stockholders of such partners) and directors, officers,
employees and agents of any of them), and each person who controls any of them
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, from and against any and all losses, claims, damages, expenses and
liabilities, joint or several, to which they, or any of them, may become subject
under the Securities Act, the Exchange Act or other federal or state statutory
law or regulation, at common law or otherwise to the same extent provided in the
immediately preceding sentence. In no event, however, shall the liability of a
Selling Stockholder for indemnification under this Section 5.6(a) in its
capacity as such exceed the lesser of (i) that proportion of the total of such
losses, claims, damages or liabilities indemnified against equal to the
proportion of the total securities sold under such registration statement which
is being sold by such Selling Stockholder or (ii) the proceeds received by such
Selling Stockholder from its sale of Registrable Shares under such registration
statement.
(b) If the indemnification provided for in Section 5.6(a)
above for any reason is held by a court of competent jurisdiction to be
unavailable to an indemnified party in respect of any losses, claims, damages,
expenses or liabilities referred to therein, then each indemnifying party under
this Section 5.6, in lieu of indemnifying such indemnified party thereunder,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, expenses or liabilities (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company, the other Selling Stockholders and the underwriters from the offering
of the Registrable Shares or (ii) if the allocation provided by clause (i) above
is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but also
the relative fault of the Company, the other Selling Stockholders and the
underwriters in connection with the statements or omissions which resulted in
such losses, claims, damages, expenses or liabilities, as well as any other
relevant equitable considerations. The relative benefits received by the
Company, the Selling Stockholders and the underwriters shall be deemed to be in
the same respective proportions that the net proceeds from the offering (before
deducting expenses) received by the Company and the Selling Stockholders and the
underwriting discount received by the underwriters, in each case as set forth in
the table on the cover page of the applicable prospectus, bear to the aggregate
public offering price of the Registrable Shares. The relative fault of the
Company, the Selling Stockholders and the underwriters shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company, the Selling Stockholders or the
underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
The Company, the Selling Stockholders, and the underwriters
agree that it would not be just and equitable if contribution pursuant to this
Section 5.6(b) were determined by pro rata or per capita allocation or by any
other method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding
21
<PAGE>
paragraph. In no event, however, shall a Selling Stockholder be required to
contribute any amount under this Section 5.6(b) in excess of the lesser of (i)
that proportion of the total of such losses, claims, damages or liabilities
indemnified against equal to the proportion of the total Registrable Shares sold
under such registration statement which are being sold by such Selling
Stockholder or (ii) the proceeds received by such Selling Stockholder from its
sale of Registrable Shares under such registration statement. No person found
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not found guilty of such fraudulent misrepresentation.
(c) The amount paid by an indemnifying party or payable to an
indemnified party as a result of the losses, claims, damages and liabilities
referred to in this Section 5.6 shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim, payable as the same are incurred. The indemnification and
contribution provided for in this Section 5.6 will remain in full force and
effect regardless of any investigation made by or on behalf of the indemnified
parties or any officer, director, employee, agent or controlling person of the
indemnified parties.
Section 5.7 Rule 144 Requirements. If the Company becomes subject to the
----------- ---------------------
reporting requirements of either Section 13 or 15(d) of the Exchange Act, the
Company will use its best efforts thereafter to file with the Commission such
information as is specified under either of said Sections for so long as any of
the Investors hold any Registrable Shares; and in such event, the Company shall
use its best efforts to take all action as may be required as a condition to the
availability of Rule 144 under the Securities Act (or any successor or similar
exemptive rules hereafter in effect). The Company shall furnish to any holder of
Registrable Shares upon request a written statement executed by the Company as
to the steps it has taken to comply with the current public information
requirement of Rule 144 or such successor rules.
Section 5.8 Market Stand-Off. Each Investor and Founder agrees, if
----------- ----------------
requested by the Company and an underwriter of Registrable Shares of the Company
in connection with the Company's initial public offering, not to sell or
otherwise transfer or dispose of any Shares (with the exception of any
Registrable Shares sold in such offering in accordance with the provisions of
Article V) held by it for such period, not to exceed 180 days following the
effective date of the relevant registration statement filed under the Securities
Act in connection with such initial public offering, as such underwriter shall
specify reasonably and in good faith.
Section 5.9 Transfer of Registration Rights. The registration rights and
----------- -------------------------------
related obligations under this Article V of the Investors and Founders with
respect to their Registrable Securities may be assigned in connection with any
transaction or series of related transactions involving the transfer to one or
more transferees of at least 10,000 shares of capital stock of the Company,
other than pursuant to an effective registration statement under the Securities
Act or pursuant to Rule 144 thereunder (subject to adjustments for stock splits,
stock dividends and the like and aggregating all contemporaneous transfers), or
to any TA Fund, and upon any
22
<PAGE>
such transfer such transferee or TA Fund shall be deemed to be included within
the definition of an "Investor" or a "Founder" as applicable, for purposes of
this Article V with the rights set forth herein.
ARTICLE VI. ELECTION OF DIRECTORS
- ---------- ---------------------
Section 6.1 Management Representatives. Each Investor and each Founder
----------- --------------------------
(including, for purposes of this Section 6.1, each Permitted Transferee) agrees
to vote all its shares of the Company's capital stock having voting power (and
any other shares over which it exercises voting control) in connection with the
election of Directors and to take such other actions as are necessary so as to
establish a Board of Directors of not more than seven (7) members and to elect
and continue in the office as directors two (2) individuals nominated by two-
thirds interest of the Founders who shall initially be Patrick G. LePore and
Gregory Boron, it being understood, however, that all Directors other than the
nominees of the Founders shall be subject to election by the holders of the
Preferred Stock and the holders of the Company's outstanding voting stock as
provided in the Company's Amended and Restated Certificate of Incorporation.
Each Investor and each Founder further agrees to vote all of its shares of the
Company's capital stock having voting power (and any other shares over which he
or it exercises voting control) for the removal of any Director designated
pursuant to this Section 6.1 upon the request of two-thirds in interest of the
Founders and for the election to the Board of Directors of a substitute
designated by such parties in accordance with the provisions this Section 6.1,
and to vote all shares of the Company's capital stock having voting power (and
any other shares over which he or it exercises voting control) in such manner as
shall be necessary or appropriate to ensure that any vacancy on the Board of
Directors of the Company occurring for any reason shall be filled only in
accordance with the provisions of this Article VI.
Section 6.2 Committees of the Board. The Company and each of Investors
----------- -----------------------
and Founders agree to use their best efforts to cause the Board of Directors to
establish a Compensation Committee (which shall be charged with exclusive
authority over all compensation and employee stock and option matters) and an
Audit Committee (which shall be charged with reviewing the Company's financial
statements and accounting practices). The Compensation Committee shall consist
of three (3) Directors, two (2) of whom shall have been designated by two-thirds
in interest of the Investors and one (1) of whom shall be the Company's Chief
Executive Officer; provided, that if the Company's 1996 Stock Option and Grant
--------
Plan must be administered solely by outside directors in order to comply with
relevant tax and securities law requirements, the Chief Executive Officer shall
be permitted to consult with the Compensation Committee without being a voting
member thereof and the Compensation Committee shall consult with the Chief
Executive Officer on such matters. The Audit Committee shall consist of such
individuals as the Board of Directors shall appoint from time to time. In
addition, should an Executive Committee be established, the Investors and
Founders agree that such Committee shall consist of two nominees of the
Investors and one nominee of the Founders.
23
<PAGE>
Section 6.3 Assignment. Each Investor and each Founder agrees, as a
----------- ----------
condition to any transfer of its Shares, to cause the transferee to agree to the
provisions of this Article VI, whereupon such transferee shall be subject to the
provisions hereof as an Investor or Founder, as applicable, in connection with
its ownership of the shares Transferred for purposes of this Article VI.
Section 6.4 Term. This Article VI shall remain in effect until the
----------- ----
closing of a Qualified Public Offering or, if sooner, the date which is 10 years
after the date hereof.
ARTICLE VII. MISCELLANEOUS PROVISIONS
- ----------- ------------------------
Section 7.1 Survival of Representations and Covenants. Each of the
----------- -----------------------------------------
parties hereto agrees that each representation, warranty, covenant and agreement
made by it in this Agreement or in any certificate, instrument or other document
delivered pursuant to this Agreement is material, shall be deemed to have been
relied upon by the other parties and shall remain operative and in full force
and effect after the date hereof regardless of any investigation. This
Agreement shall not be construed so as to confer any right or benefit upon any
Person other than the parties hereto and their respective successors and
permitted assigns to the extent contemplated herein.
Section 7.2 Legend on Securities. The Company, the Investors and the
----------- --------------------
Founders acknowledge and agree that the following legend shall be typed on each
certificate evidencing any of the securities issued hereunder held at any time
by any of the Investors, Founders or their Permitted Transferees:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD, TRANSFERRED,
HYPOTHECATED OR OTHERWISE ASSIGNED EXCEPT PURSUANT TO (1) A REGISTRATION
STATEMENT WITH RESPECT TO SUCH SECURITIES WHICH IS EFFECTIVE UNDER SUCH ACT OR
(2) AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER SUCH ACT RELATING TO THE
DISPOSITION OF SECURITIES. THESE SECURITIES ARE ALSO SUBJECT TO THE PROVISIONS
OF A CERTAIN STOCKHOLDERS' AGREEMENT, DATED AS OF DECEMBER 4, 1996, INCLUDING
CERTAIN RESTRICTIONS ON TRANSFER SET FORTH THEREIN. A COMPLETE AND CORRECT COPY
OF SUCH AGREEMENT IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF THE
COMPANY AND WILL BE FURNISHED UPON WRITTEN REQUEST AND WITHOUT CHARGE.
Section 7.3 Amendment and Waiver. Any party may waive any provision
----------- --------------------
hereof intended for its benefit in writing. No failure or delay on the part of
any party hereto in exercising any right, power or remedy hereunder shall
operate as a waiver thereof. The remedies provided for herein are cumulative
and are not exclusive of any remedies that may be available to any party hereto
at law or in equity or otherwise. This Agreement may be
24
<PAGE>
amended with the prior written consent of the Company, a two-thirds-in-interest
of the Founders (based on the Shares held by the Founders and their Permitted
Transferees as a group), and two-thirds-in-interest of the Investors (based on
the Shares held by the Investors as a group); provided, however, that any
-------- -------
amendment which directly, materially and adversely affects any right
specifically granted to a particular Investor or Founder in a manner different
than other Investors or Founders shall not be effective unless such Person has
consented to that amendment. All actions by the Company hereunder shall be
taken by or upon the direction of a majority of the members of the Company's
Board of Directors.
Section 7.4 Notices. All notices and other communications provided
------------ -------
for herein shall be in writing and shall be deemed to have been duly given,
delivered and received (a) if delivered personally or (b) if sent by telex or
facsimile, registered or certified mail (return receipt requested) postage
prepaid, or by courier guaranteeing next day delivery, in each case to the party
to whom it is directed at the following addresses (or at such other address for
any party as shall be specified by notice given in accordance with the
provisions hereof, provided that notices of a change of address shall be
effective only upon receipt thereof). Notices delivered personally shall be
effective on the day so delivered, notices sent by registered or certified mail
shall be effective three days after mailing, notices sent by telex shall be
effective when answered back, notices sent by facsimile shall be effective when
receipt is acknowledged, and notices sent by courier guaranteeing next day
delivery shall be effective on the earlier of the second business day after
timely delivery to the courier or the day of actual delivery by the courier:
(a) if to the Company:
Boron, LePore & Associates, Inc.
17-17 Route 208 North
Fair Lawn, NJ 07410
Facsimile: (201) 791-1121
Attention: Patrick G. LePore
Chief Executive Officer
(b) if to the Investors:
TA Associates, Inc.
116 Woodland Road
Pittsburgh, PA 15232
Facsimile: (412) 441-5784
Attention: Jacqueline C. Morby
25
<PAGE>
TA Associates, Inc.
High Street Tower, Suite 2500
125 High Street
Boston, MA 02110
Facsimile: (617) 574-6728
Attention: Roger B. Kafker
(c) if to the Founders:
c/o Boron, LePore & Associates, Inc.
17-17 Route 208 North
Fair Lawn, NJ 07410
Facsimile: (201) 791-1121
Attention: Patrick G. LePore, Gregory Boron, Christopher
Sweeney and Michael W. Foti
Section 7.5 Headings. The Article and Section headings used or contained
----------- --------
in this Agreement are for convenience of reference only and shall not affect the
construction of this Agreement.
Section 7.6 Counterparts. This Agreement may be executed in one or more
----------- ------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which together
shall be deemed to constitute one and the same agreement.
Section 7.7 Dispute Resolution. Except with respect to matters as to
----------- ------------------
which injunctive relief is being sought, any dispute arising out of or relating
to this Agreement that has not been settled within thirty (30) days by good
faith negotiation between the parties to this Agreement shall be submitted to
the American Arbitration Association ("AAA") for final and binding arbitration
pursuant to AAA's commercial Arbitration Rules. Any such arbitration shall be
conducted in New York, New York.
Section 7.8 Remedies; Severability. Notwithstanding Section 7.7, it is
----------- ----------------------
specifically understood and agreed that any breach of the provisions of this
Agreement by any Person subject hereto will result in irreparable injury to the
other parties hereto, that the remedy at law alone will be an inadequate remedy
for such breach, and that, in addition to any other legal or equitable remedies
which they may have, such other parties may enforce their respective rights by
actions for specific performance (to the extent permitted by law) and the
Company may refuse to recognize any unauthorized Transferee as one of its
stockholders for any purpose, including, without limitation, for purposes of
dividend and voting rights, until the relevant party or parties have complied
with all applicable provisions of this Agreement.
In the event that any one or more of the provisions contained herein, or
the application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect for any
26
<PAGE>
reason, the validity, legality and enforceability of any such provision in every
other respect and of the remaining provisions contained herein shall not be in
any way impaired thereby, it being intended that all of the rights and
privileges of the parties hereto shall be enforceable to the fullest extent
permitted by law.
Section 7.9 Entire Agreement. This Agreement, together with the
----------- ----------------
Preferred Stock Purchase Agreement and other agreements specifically
contemplated hereby and thereby, is intended by the parties as a final
expression of their agreement and intended to be complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein and therein. This Agreement and the
Preferred Stock Purchase Agreement and other agreements contemplated hereby and
thereby (including the exhibits hereto and thereto) supersede all prior
agreements and understandings between the parties with respect to such subject
matter.
Section 7.10 Adjustments. All references to share prices and amounts
------------ -----------
herein shall be equitably adjusted to reflect stock splits, stock dividends,
recapitalizations and similar changes affecting the capital stock of the
Company.
Section 7.11 Law Governing. This Agreement shall be construed and
------------ -------------
enforced in accordance with and governed by the laws of New Jersey (without
giving effect to principles of conflicts of law), except that any Delaware
corporate law matters relating to the Company shall be construed and enforced in
accordance with and governed by the Delaware General Corporation Law (without
giving effect to principles of conflicts of law). Each party also waives trial
by jury in any action relating to this Agreement.
Section 7.12 Successors and Assigns. This Agreement shall be binding
------------ ----------------------
upon and inure to the benefit of the respective successors and permitted assigns
of the parties hereto as contemplated herein, and any successor to the Company
by way of merger or otherwise shall specifically agree to be bound by the terms
hereof as a condition of such successor. This Agreement may not be assigned by
any Founder or Permitted Transferee except as contemplated by Article IV without
the prior written consent of two-thirds-in-interest of the Investors, and
without such prior written consent any attempted transfer shall be null and
void.
[Remainder of Page Intentionally Left Blank]
27
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
COMPANY:
BORON, LEPORE & ASSOCIATES, INC.
By: /s/ Patrick G. LePore
---------------------------------
President
FOUNDERS:
/s/ Patrick G. Lepore
------------------------------------
Patrick G. LePore
/s/ Gregory Boron
------------------------------------
Gregory Boron
/s/ Christopher Sweeney
------------------------------------
Christopher Sweeney
/s/ Michael W. Foti
------------------------------------
Michael W. Foti
28
<PAGE>
TA INVESTORS ADVENT VII L.P.
By: TA Associates VII L.P.,
its General Partner
By: TA Associates, Inc.,
its General Partner
*
------------------------------------
Name: Jacqueline C. Morby
Title: Managing Director
ADVENT ATLANTIC AND PACIFIC III L.P.
By: TA Associates AAP III Partners,
its General Partner
By: TA Associates, Inc.,
its General Partner
*
------------------------------------
Name: Jacqueline C. Morby
Title: Managing Director
TA VENTURE INVESTORS LIMITED
PARTNERSHIP
*
------------------------------------
Name: Jacqueline C. Morby
Title: General Partner
* /s/ Jacqueline C Morby
- -----------------------------
By: Jacqueline C Morby
29
<PAGE>
/s/ MLPFS FBO John A. Staley, IV IRRA
------------------------------------
MLPFS FBO
John A. Staley, IV IRRA
/s/ Howard A. Cubell
------------------------------------
Howard A. Cubell
/s/ John R. LeClaire
------------------------------------
John R. LeClaire
/s/ Marian A. Tse
------------------------------------
Marian A. Tse
30
<PAGE>
EXHIBIT A
---------
Form of Joinder Agreement
-------------------------
The undersigned hereby agrees, effective as of the date hereof, to become a
party to that certain Stockholders' Agreement (the "Agreement") dated as of
December 4, 1996 by and among Boron, LePore & Associates, Inc. (the "Company")
and the parties named therein and for all purposes of the Agreement, the
undersigned shall be included within the term ["Investor"] ["Founder"] (each as
defined in the Agreement). As of the date hereof the undersigned makes each of
the representations and warranties set forth in Section 2.2 of the Agreement.
The address and facsimile number to which notices may be sent to the undersigned
is as follows:
- --------------------------------------------------------------------------------
Facsimile No. :
----------------
---------------------------------
[NAME OF UNDERSIGNED]
31
<PAGE>
CONSENT AND AMENDMENT TO STOCKHOLDERS' AGREEMENT
THIS CONSENT AND AMENDMENT TO STOCKHOLDERS' AGREEMENT (the "Amendment") is
entered into as of the 7th day of March, 1997 by and between Boron, LePore &
Associates, Inc., a Delaware corporation (the "Company"), the Founders and the
Investors. All capitalized terms used herein and not otherwise defined shall
have the respective meanings set forth in the Stockholders' Agreement (the
"Agreement") dated as of December 4, 1996 by and among the Company and the
parties named therein.
WHEREAS, the Company, the Founders and the Investors are parties to the
Agreement;
WHEREAS, pursuant to Section 3.1 of the Agreement, each of the Founders
agreed not to make certain Transfers of Shares without the prior written consent
of two-thirds-in-interest of the Investors;
WHEREAS, pursuant to Section 7.3 of the Agreement, the prior written
consent of the Company, two-thirds-in-interest of the Founders and two-thirds-
in-interest of the Investors is required in order to amend the Agreement;
WHEREAS, the undersigned Investors represent at least two-thirds-in-
interest of the Investors as required by Section 3.1 to consent to a Transfer
and by Section 7.3 to amend the Agreement;
WHEREAS, the undesigned Founders represent at least two-thirds-in-interest
of the Founders required by Section 7.3 to amend the Agreement;
WHEREAS, the undersigned Investors desire to consent to a Transfer to
permit the Transfers of Shares listed on Exhibit A attached hereto (the
---------
"Transfer Transactions"); and
WHEREAS, the Company, the Founders and the Investors desire to amend the
Agreement to include the Transferees of the Shares in the Transfer Transactions
within the definition of Permitted Transferee.
NOW, THEREFORE, in consideration of the premises herein contained and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Pursuant to Section 3.1 of the Agreement, the Investors hereby consent
to the Transfer Transactions, provided each Transferee executes a Joinder
Agreement in substantially the form attached hereto as Exhibit B and with such
---------
changes thereto as the officers of the Company may deem necessary, advisable or
appropriate.
<PAGE>
2. Pursuant to Section 7.3 of the Agreement, the Agreement is hereby
amended by the Company, the Founders and the Investors to include the
Transferees of the Shares in the Transfer Transactions within the definition of
Permitted Transferee.
3. All the terms and provisions of this Amendment shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns.
4. This Amendment may be executed in any number of counterparts, and by
different parties hereto and separate counterparts with the same effect as if
all parties have signed the same document. All such counterparts shall be deemed
an original, shall be construed together and shall constitute one in the same
instrument.
<PAGE>
EXECUTED as of the date set forth above.
BORON LEPORE & ASSOCIATES, INC.
By: /s/ Patrick G. LePore
----------------------------
Name:
Title: President
THE FOUNDERS
------------
/s/
-------------------------------
Patrick G. LePore
Holder of 1,200,000 Shares of Common
Stock and 300,000 shares of Class A
Common Stock
/s/
-------------------------------
Gregory Boron
Holder of 1,200,000 Shares of Common
Stock and 300,000 shares of Class A
Common Stock
/s/
-------------------------------
Christopher Sweeney
Holder of 450,000 Shares of Common
Stock and 250,000 shares of Class A
Common Stock
/s/
-------------------------------
Michael W. Foti
Holder of the 150,000 Shares of Common
Stock and 150,000 shares of Class A
Common Stock
<PAGE>
THE INVESTORS
-------------
ADVENT VII L.P.
By: TA Associates VII L.P., its General
Partner
By: TA Associates, Inc., Its General Partner
*
-----------------------------------------------
Name: Jacqueline C. Morby
Title: Managing Director
Holder of 4,104,800 Shares of
Convertible Participating
Preferred Stock
ADVENT ATLANTIC AND
PACIFIC III L.P.
By: TA Associates AAP III Partners, its
General Partner
By: TA Associates, Inc., its General Partner
*
-----------------------------------------------
Name: Jacqueline C. Morby
Title: Managing Director
Holder of 2,520,000 Shares of
Convertible Participating
Preferred Stock
TA VENTURE INVESTORS LIMITED
PARTNERSHIP
*
-----------------------------------------------
Name: Jacqueline C. Morby
Title: General Partner
Holder of 72,800 Shares of Convertible
Participating Preferred Stock
*/s/ Jacqueline C. Morby
- ------------------------
By: Jacqueline C. Morby
<PAGE>
/s/ John A. Staley
---------------------------------
MLPFS FBO John A. Staley, IV IRRA
Holder of 280,000 Shares of Convertible
Participating Preferred Stock
/s/ Marian A. Tse
---------------------------------
Marian A. Tse
Holder of 1,120 Shares of Convertible
Participating Stock
/s/ John R. LeClaire
---------------------------------
John R. LeClaire
Holder of 7,840 Shares of Convertible
Participating Stock
/s/ Howard A. Cubell
----------------------------------
Howard A. Cubell
Holder of 13,440 Shares of Convertible
Participating Stock
<PAGE>
Exhibit A
---------
Transfers of Shares of Common Stock by Patrick G. LePore to the persons
(the "Transferees") and in the amounts specified below.
<TABLE>
<CAPTION>
Transferee Number of Shares
---------- ----------------
<S> <C>
Jacklyn Noelle LePore 200,000
Brian Patrick LePore 200,000
Kathryn Anne LePore 200,000
James LePore 4,000
Robert LePore 3,000
Joseph LePore 3,000
</TABLE>
and any subsequent Transfers of the Shares by the Transferees to a family
- ---
limited partnership substantially all the equity interests of which are held by
Patrick G. LePore, his siblings, and their descendants.
<PAGE>
Exhibit 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
BLA ACQUISITION CORP.
An original Certificate of Incorporation by BLA Acquisition Corp. (the
"Corporation") was filed with the Secretary of State on November 22, 1996. A
Certificate of Merger with respect to the merger of Boron, LePore & Associates,
Inc. with and into the Corporation was filed with the Secretary of State on
December 3, 1996. This Amended and Restated Certificate of Incorporation has
been duly adopted by the Corporation in accordance with Sections 228, 242 and
245 of the General Corporation Law of the State of Delaware.
ARTICLE I
---------
The name of the Corporation, from and after the effectiveness of this
Amended and Restated Certificate of Incorporation, shall be Boron, LePore &
Associates, Inc.
ARTICLE II
----------
The address of the Corporation's registered office in the State of Delaware
is 1209 Orange Street in the City of Wilmington, County of New Castle. The name
of its registered agent at such address is The Corporation Trust Company.
ARTICLE III
-----------
The nature of the business or purposes to be conducted or promoted by the
Corporation is to engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of the State of Delaware.
ARTICLE IV
----------
The total number of shares of capital stock which the Corporation shall
have authority to issue is 39,600,000, of which (a) 12,600,000 shares shall be
preferred stock, par value $.01 per share ("Preferred Stock"), including
7,000,000 shares of Convertible Participating Preferred Stock (as hereinafter
defined) and 5,600,000 shares of Redeemable Preferred Stock (as hereinafter
defined), and (b) 27,000,000 shares shall be common stock, par value $.01 per
share, including 18,000,000 shares of Common Stock (as hereinafter defined),
2,000,000 shares of Class A
1
<PAGE>
Common Stock (as hereinafter defined) and 7,000,000 shares of Class B Common
Stock (as hereinafter defined).
As of the date and time this Amended and Restated Certificate of
Incorporation shall become effective under the laws of the State of Delaware
(the "Effective Time"), each share of Common Stock, par value $.01 per share
(the "Old Common Stock"), issued and outstanding immediately prior to the
Effective Time shall be automatically converted (without any further act) into
129,032.2580645 fully paid and nonassessable shares of Common Stock (as defined
in Section C of this Article IV). Until presented and surrendered for
cancellation, each certificate for shares of the Old Common Stock outstanding as
of the Effective Time shall be deemed to represent the number of shares of
Common Stock determined in accordance with this paragraph, and upon presentation
and surrender each holder of a certificate or certificates for such Old Common
Stock shall be entitled to receive a certificate for such number of shares of
Common Stock.
Except as otherwise restricted by this Amended and Restated Certificate of
Incorporation, the Corporation is authorized to issue, from time to time, all or
any portion of the capital stock of the Corporation which may have been
authorized but not issued, to such person or persons and for such lawful
consideration as it may deem appropriate, and generally in its absolute
discretion to determine the terms and manner of any disposition of such
authorized but unissued capital stock.
Any and all such shares issued for which the full consideration has been
paid or delivered shall be deemed fully paid shares of capital stock, and the
holder of such shares shall not be liable for any further call or assessment or
any other payment thereon.
The voting powers, designations, preferences, privileges and relative,
participating, optional or other special rights, and the qualifications,
limitations or restrictions of each class of capital stock of the Corporation,
shall be as provided in this Article IV.
A. CONVERTIBLE PARTICIPATING PREFERRED STOCK
-----------------------------------------
1. Designation. A total of 7,000,000 shares of the Corporation's
-----------
Preferred Stock shall be designated as Convertible Participating Preferred
Stock, $.01 par value per share (the "Convertible Preferred Stock").
2. Election of Directors; Voting.
-----------------------------
(a) Election of Directors. The holders of outstanding shares of
---------------------
Convertible Preferred Stock shall, voting together as a separate class, be
entitled to elect two (2) Directors. Such Directors shall be the candidates
receiving the highest number of affirmative votes (with each holder of
Convertible Preferred Stock entitled to cast one vote for or against each
candidate with respect to each share of Convertible Preferred Stock held by such
holder) of the outstanding shares of Convertible Preferred Stock (the
"Convertible Preferred Stock Director Designees"), with votes cast against such
candidates and votes withheld having no legal effect. The election of the
Convertible Preferred Stock Director
2
<PAGE>
Designees by the holders of the Convertible Preferred Stock shall occur (i) at
the annual meeting of holders of capital stock, (ii) at any special meeting of
holders of capital stock, (iii) at any special meeting of holders of Convertible
Preferred Stock called by holders of a majority of the outstanding shares of
Convertible Preferred Stock or (iv) by the unanimous written consent of holders
of the outstanding shares of Convertible Preferred Stock. If at any time when
any share of Convertible Preferred Stock is outstanding any Convertible
Preferred Stock Director Designee should cease to be a Director for any reason,
the vacancy shall only be filled by the vote or written consent of the holders
of the outstanding shares of Convertible Preferred Stock, voting together as a
separate class, in the manner and on the basis specified above. The holders of
outstanding shares of Convertible Preferred Stock shall also be entitled to vote
for all other Directors of the Corporation together with holders of all other
shares of the Corporation's outstanding capital stock entitled to vote thereon,
voting as a single class, with each outstanding share entitled to the same
number of votes specified in Section A.2(b). The holders of outstanding shares
of Convertible Preferred Stock may, in their sole discretion, determine to elect
only one Convertible Preferred Stock Director Designee from time to time, and
during any such period the Board of Directors nonetheless shall be deemed duly
constituted.
(b) Voting Generally. The holder of each share of Convertible Preferred
----------------
Stock shall be entitled to the number of votes equal to the largest number of
full Common Shares (as defined in Section A.6(a) of this Article IV) into which
each share of Convertible Preferred Stock could be converted pursuant to Section
A.6 hereof on the record date for the vote or for written consent of
stockholders, if applicable. The holder of each share of Convertible Preferred
Stock shall be entitled to notice of any stockholders' meeting in accordance
with the by-laws of the Corporation and shall vote with holders of the Common
Stock, voting together as single class, upon all matters submitted to a vote of
stockholders excluding those matters required to be submitted to a class or
series vote pursuant to the terms hereof (including without limitation Section
A.8) or by law. Fractional votes shall not, however, be permitted and any
fractional voting rights resulting from the above formula (after aggregating all
Common Shares into which shares of Convertible Preferred Stock held by each
holder could be converted) shall be rounded to the nearest whole number (with
one-half rounded upward to one).
3. Dividends. The holders of Convertible Preferred Stock shall be
---------
entitled to receive, out of funds legally available therefor, cumulative
dividends on the Convertible Preferred Stock in cash, at the rate per annum of
$.1428571429 per share of Convertible Preferred Stock (the "Convertible
Cumulative Dividend"). Such dividends will accumulate commencing as of the date
of issuance of the Convertible Preferred Stock and shall be cumulative, to the
extent unpaid, whether or not they have been declared and whether or not there
are profits, surplus or other funds of the Corporation legally available for the
payment of dividends. Convertible Cumulative Dividends shall become due and
payable with respect to any share of Convertible Preferred Stock as provided in
Sections A.4, A.5 and A.6. So long as any shares of Convertible Preferred Stock
are outstanding: (a) no dividend whatsoever shall be paid or declared, and no
distribution shall be made, on any
3
<PAGE>
capital stock of the Corporation ranking junior to the Convertible Preferred
Stock; and (b) no shares of capital stock of the Corporation ranking junior to
the Convertible Preferred Stock shall be purchased, redeemed or acquired by the
Corporation and no monies shall be paid into or set aside or made available for
a sinking fund for the purchase, redemption or acquisition thereof. All numbers
relating to the calculation of dividends pursuant to this Section A.3 shall be
subject to equitable adjustment in the event of any stock split, combination,
reorganization, recapitalization, reclassification or other similar event
involving a change in the Convertible Preferred Stock.
4. Liquidation.
-----------
(a) Liquidation Preference. Upon any liquidation, dissolution or winding
----------------------
up of the Corporation and its subsidiaries, whether voluntary or involuntary (a
"Liquidation Event"), each holder of outstanding shares of Convertible Preferred
Stock shall be entitled to be paid out of the assets of the Corporation
available for distribution to stockholders, whether such assets are capital,
surplus or earnings, and before any amount shall be paid or distributed to the
holders of Common Stock, Class A Common Stock, Class B Common Stock or of any
other stock ranking on liquidation junior to the Convertible Preferred Stock, an
amount in cash equal to (i) $1.785714286 per share (adjusted appropriately for
stock splits, stock dividends, recapitalizations and the like with respect to
the Convertible Preferred Stock) (the "Convertible Base Liquidation Preference
Amount") plus (ii) any accumulated but unpaid dividends to which such holder of
outstanding shares of Convertible Preferred Stock is then entitled pursuant to
Sections A.3 and A.5(f) hereof, plus (iii) any interest accrued pursuant to
Section A.5(e) (the "Convertible Preferred Liquidation Preference Amount");
provided, however, that if, upon any Liquidation Event, the amounts payable with
- -------- -------
respect to the Convertible Preferred Stock are not paid in full, the holders of
the Convertible Preferred Stock shall share ratably in any distribution of
assets in proportion to the full respective preferential amounts to which they
are entitled; and provided further, however, that if upon any Liquidation Event
-------- ------- -------
the holders of the outstanding shares of Convertible Preferred Stock would
receive more than the Convertible Preferred Liquidation Preference Amount in the
event their shares were converted into Redeemable Preferred Stock (as defined in
Section B of this Article IV) and Common Shares immediately prior to the record
date for distributions in connection with such Liquidation Event, then each
outstanding share of Convertible Preferred Stock shall receive, in lieu of the
Convertible Liquidation Preference Amount, (x) an amount per share equal to
$1.428571429 plus all dividends pursuant to Section A.3 or A.5(f) which are
accumulated but unpaid in respect of such share as of the date of the
Liquidation Event before any amount shall be paid or distributed to the holders
of Common Stock, Class A Common Stock, Class B Common Stock or of any other
stock ranking on liquidation junior to the Convertible Preferred Stock, and (y)
thereafter shall share ratably with the holders of Common Stock, Class A Common
Stock and any other stock ranking on liquidation junior to the Convertible
Preferred Stock in the assets available for distribution, with such
distributions to be made in cash and as if each share of Convertible Preferred
Stock had been converted into the number of shares of Redeemable Preferred Stock
and Common
4
<PAGE>
Shares issuable upon the conversion of such share of Convertible Preferred
Stock immediately prior to any such Liquidation Event. The provisions of
this Section A.4 shall not in any way limit the right of the holders of
Convertible Preferred Stock to elect to convert their shares into
Redeemable Preferred Stock and Common Shares pursuant to Section A.6 prior
to or in connection with any Liquidation Event.
(b) Notice. Prior to the occurrence of any Liquidation Event, the
------
Corporation will furnish each holder of Convertible Preferred Stock notice
in accordance with Section A.9 hereof, together with a certificate prepared
by the chief financial officer of the Corporation describing in detail the
facts of such Liquidation Event, stating in detail the amount(s) per share
of Convertible Preferred Stock each holder of Convertible Preferred Stock
would receive pursuant to the provisions of Section A.4(a) hereof and
stating in detail the facts upon which such amounts were determined.
5. Redemption.
----------
(a) Redemption Events.
-----------------
(i) On or after October 31, 2001. Upon the election of the holder
----------------------------
or holders of not less than sixty-six and two-thirds percent of the voting
power of the outstanding Convertible Preferred Stock made at any time on or
after October 31, 2001, the Corporation shall redeem all (and not less than
all, other than pursuant to Section A.5(e) below) of the outstanding shares
of Convertible Preferred Stock at the Convertible Preferred Redemption
Price specified in Section A.5(d). The foregoing election shall be made by
such holders giving the Corporation and each of the other holders of
Convertible Preferred Stock not less than fifteen (15) days prior written
notice, which notice shall set forth the date for such redemption.
(ii) Extraordinary Transactions. Upon the election of the holder
--------------------------
or holders of not less than sixty-six and two-thirds percent in voting
power of the outstanding Convertible Preferred Stock in connection with (A)
a merger or consolidation of the Corporation with or into another
corporation (with respect to which less than a majority of the outstanding
voting power of the surviving or consolidated corporation is held by
stockholders of the Corporation immediately prior to such event), (B) the
sale or transfer of all or substantially all of the properties and assets
of the Corporation and its subsidiaries, (C) any purchase by any party (or
group of affiliated parties) other than an Investor (as defined in that
certain Preferred Stock Purchase Agreement dated as of December 4, 1996) of
shares of capital stock of the Corporation (either through a negotiated
stock purchase or a tender for such shares), the effect of which is that
such party (or group of affiliated parties) that did not beneficially own a
majority of the voting power of the outstanding shares of capital stock of
the Corporation immediately prior to such purchase beneficially owns at
least a majority of such voting power immediately after such purchase, or
(D) the redemption or repurchase of shares representing a majority of the
voting power of the outstanding shares of capital stock of the Corporation
(each an
5
<PAGE>
"Extraordinary Transaction"), then, as a part of and as a condition to the
effectiveness of such Extraordinary Transaction, unless the holders of
------
Convertible Preferred Stock shall have elected to convert their shares of
Convertible Preferred Stock into Redeemable Preferred Stock and Common Shares in
accordance with the voluntary conversion provisions of Section A.6 prior to the
effective date of such Extraordinary Transaction, the Corporation shall, on the
effective date of such Extraordinary Transaction, redeem all (but not less than
all, other than as provided in Section A.5(e) below) of the outstanding shares
of Convertible Preferred Stock for an amount (subject to Section A.5(e)) equal
to the Convertible Preferred Liquidation Preference Amount; provided, however,
-------- -------
that if upon any Extraordinary Transaction the holders of the outstanding shares
of Convertible Preferred Stock would receive more than the Convertible Preferred
Liquidation Preference Amount in the event their shares were converted into
Redeemable Preferred Stock and Common Shares immediately prior to such
Extraordinary Transaction, then each outstanding share of Convertible Preferred
Stock shall receive an amount per share equal to $1.428571429 plus all dividends
pursuant to Section A.3 or A.5(f) which are accumulated but unpaid in respect of
such share as of the date of the Extraordinary Transaction before any amount
shall be paid or distributed to the holders of Common Stock, Class A Common
Stock, Class B Common Stock or any other stock ranking on liquidation junior to
the Convertible Preferred Stock, payable in cash, and thereafter shall share
ratably with the holders of the Common Stock, Class A Common Stock and any other
stock ranking on liquidation junior to the Convertible Preferred Stock in the
proceeds of such Extraordinary Transaction or, as applicable, shall receive from
the Corporation an amount equal to the amount per share that would be paid if
the Common Shares receivable upon conversion of the Convertible Preferred Stock
were being acquired in the Extraordinary Transaction at the same price per share
as is paid for Common Stock, which excess amount shall be paid in the same form
of consideration as is paid to holders of Common Stock, as if each share of
Convertible Preferred Stock had been converted into the number of shares of
Redeemable Preferred Stock and Common Shares issuable upon the conversion of
such share of Convertible Preferred Stock immediately prior to such
Extraordinary Transaction. The foregoing election shall be made by such holders
giving the Corporation and each of the other holders of Convertible Preferred
Stock not less than five (5) days prior written notice, which notice shall set
forth the date for such redemption. The provisions of this Section A.5 shall
not in any way limit the right of the holders of Convertible Preferred Stock to
elect to convert their shares into shares of Redeemable Preferred Stock and
Common Shares pursuant to Section A.6 prior to or in connection with any
Extraordinary Transaction or otherwise.
(b) Valuation of Distribution Securities. Any securities or other
------------------------------------
consideration to be delivered to the holders of the Convertible Preferred Stock
upon any Extraordinary Transaction in accordance with the terms hereof shall be
valued as follows:
(i) If traded on a nationally recognized securities exchange or inter-
dealer quotation system, the value shall be deemed to be the average of the
closing prices of the securities on such exchange or system over the 30-day
period ending three (3) business days prior to the closing;
6
<PAGE>
(ii) If traded over-the-counter, the value shall be deemed to be the
average of the closing bid prices over the 30-day period ending three (3)
business days prior to the closing; and
(iii) If there is no active public market, the value shall be the fair
market value thereof, as mutually determined by the Corporation and the holders
of not less than sixty-six and two-thirds percent in voting power of the
outstanding shares of Convertible Preferred Stock, provided that if the
Corporation and the holders of sixty-six and two-thirds percent in voting power
of the outstanding shares of Convertible Preferred Stock are unable to reach
agreement, then by independent appraisal by an investment banker hired and paid
by the Corporation, but reasonably acceptable to the holders of sixty-six and
two-thirds percent in voting power of the outstanding shares of Convertible
Preferred Stock.
(c) Notice. Prior to the occurrence of any Extraordinary Transaction, the
------
Corporation will furnish each holder of Convertible Preferred Stock notice in
accordance with Section A.9 hereof, together with a certificate prepared by the
chief financial officer of the Corporation describing in detail all material
terms of such Extraordinary Transaction, including without limitation the
consideration to be delivered in connection with such Extraordinary Transaction,
the valuation of the Corporation at the time of such Extraordinary Transaction
and the identities of the parties to the Extraordinary Transaction.
(d) Redemption Date; Redemption Price. Upon the election of the holders of
---------------------------------
not less than sixty-six and two-thirds percent of the voting power of the
outstanding Convertible Preferred Stock to cause the Corporation to redeem the
Convertible Preferred Stock pursuant to Section A.5(a)(i) or (ii), all holders
of Convertible Preferred Stock shall be deemed to have elected to cause the
Convertible Preferred Stock to be so redeemed. Any date upon which a redemption
shall occur in accordance with Section A.5(a) shall be referred to as a
"Convertible Preferred Redemption Date." The redemption price for each share of
Convertible Preferred Stock redeemed pursuant to Section A.5 shall be the sum of
(i) the Convertible Preferred Base Liquidation Preference Amount, plus (ii) any
accumulated but unpaid dividends to which such holder of outstanding shares of
Convertible Preferred Stock is entitled under Section A.3 or A.5(f), or such
greater amount as may be payable pursuant to the proviso to Section A.5(a)(ii),
if applicable (collectively, the "Convertible Preferred Redemption Price");
provided, however, that if at a Convertible Preferred Redemption Date shares of
- -------- -------
Convertible Preferred Stock are unable to be redeemed (as contemplated by
Section A.5(e) below), the holders of Convertible Preferred Stock shall also be
entitled to dividends and interest pursuant to Section A.5(e) and A.5(f). The
Convertible Preferred Redemption Price shall be payable in cash in immediately
available funds on the Convertible Preferred Redemption Date except to the
extent contemplated by the proviso to Section A.5(a)(ii) and subject to Section
A.5(e). Until the full Convertible Preferred Redemption Price has been paid for
all shares of Convertible Preferred Stock being redeemed: (A) no dividend
whatsoever shall be paid
7
<PAGE>
or declared, and no distribution shall be made, on any capital stock of the
Corporation; and (B) no shares of capital stock of the Corporation (other than
the Convertible Preferred Stock in accordance with this Section A.5) shall be
purchased, redeemed or acquired by the Corporation and no monies shall be paid
into or set aside or made available for a sinking fund for the purchase,
redemption or acquisition thereof.
(e) Redemption Prohibited. If, at a Convertible Preferred Redemption Date,
---------------------
the Corporation is prohibited under the General Corporation Law of the State of
Delaware from redeeming all shares of Convertible Preferred Stock for which
redemption is required hereunder, then it shall redeem such shares on a pro-rata
basis among the holders of Convertible Preferred Stock in proportion to the full
respective redemption amounts to which they are entitled hereunder to the extent
possible and shall redeem the remaining shares to be redeemed as soon as the
Corporation is not prohibited from redeeming some or all of such shares under
the General Corporation Law of the State of Delaware, subject to the last
paragraph of Section A.8. Any shares of Convertible Preferred Stock not
redeemed shall remain outstanding and entitled to all of the rights and
preferences provided in this Article IV. In the event that the Corporation
fails to redeem shares for which redemption is required pursuant to this Section
A.5, then during the period from the applicable Convertible Preferred Redemption
Date through the date on which such shares are redeemed, the applicable
Convertible Preferred Redemption Price of such shares plus additional dividends
that accumulate in respect of such shares under Section A.5(f) shall bear
interest at the rate of 10% per annum, which interest rate shall increase by an
additional .5% at the end of each six (6) month period thereafter until the
Convertible Preferred Redemption Price (as so increased) is paid in full,
subject to a maximum rate of 15% per annum and with such interest to be
compounded annually. In the event the Corporation fails to redeem shares for
which redemption is required pursuant to this Section A.5 within six (6) months
after the date on which redemption is required, for any reason, and such failure
thereafter continues (the period during which such failure shall continue being
referred to herein as a "Voting Period"), the number of Directors constituting
the Board of Directors shall be automatically increased by a number equal to the
number of Directors then constituting the Board of Directors, plus two, and the
holders of shares of Convertible Preferred Stock then outstanding shall be
entitled, voting as a class on a one-vote-per-share basis (to the exclusion of
the holders of all other securities and classes of capital stock of the
Corporation), to elect such additional Directors. As soon as practicable after
the commencement of the Voting Period, the Corporation shall call a special
meeting of the holders of shares of Convertible Preferred Stock by mailing a
notice of such special meeting to such holders, such meeting to be held not more
than ten (10) days after the date of mailing of such notice. If the Corporation
fails to send a notice, the meeting may be called by any such holder on like
notice. The record date for determining the holders entitled to notice of and to
vote at such special meeting shall be the close of business on the fifth
business day preceding the day on which such notice is mailed. At any such
special meeting and at each meeting of holders of shares of Convertible
Preferred Stock held during a Voting Period at which Directors are to be elected
(or with respect to any action by written consent in lieu of a meeting of
8
<PAGE>
shareholders), such holders, voting together as a class (to the exclusion of the
holders of all other securities and classes of capital stock of the
Corporation), shall be entitled to elect the number of Directors prescribed in
this Section A.5(e), and each share of Convertible Preferred Stock shall be
entitled to one (1) vote (whether voted in person by the holder thereof or by
proxy or pursuant to a shareholders' consent). The terms of office of all
persons who are Directors of the Corporation at the time of a special meeting of
the holders of Convertible Preferred Stock to elect Directors shall continue,
notwithstanding the election at such meeting of the additional Directors that
such holders are entitled to elect, and the persons so elected by such holders,
together with the remaining incumbent Directors, shall constitute the duly
elected Directors of the Corporation. Simultaneously with the termination of a
Voting Period upon the redemption of all outstanding shares of Convertible
Preferred Stock, the terms of office of the additional Directors elected by the
holders of the Convertible Preferred Stock shall terminate, the remaining
Directors shall constitute the Directors of the Corporation and the voting
rights of such holders to elect additional Directors pursuant to this Section
A.5(e) shall cease.
(f) Dividend After Convertible Preferred Redemption Date. From and after
----------------------------------------------------
a Convertible Preferred Redemption Date, no shares of Convertible Preferred
Stock subject to redemption shall be entitled to dividends as provided in
Section A.3, provided, however, that in the event that shares of Convertible
Preferred Stock are unable to be redeemed and continue to be outstanding in
accordance with Section A.5(e), such shares shall continue to be entitled to
dividends as provided in Section A.3 and interest as provided in Section A.5(e)
until the date on which such shares are actually redeemed by the Corporation.
(g) Surrender of Certificates. Upon receipt of the applicable Convertible
-------------------------
Preferred Redemption Price by certified check or wire transfer, each holder of
shares of Convertible Preferred Stock to be redeemed shall surrender the
certificate or certificates representing such shares to the Corporation, duly
assigned or endorsed for transfer (or accompanied by duly executed stock powers
relating thereto), or shall deliver an affidavit or agreement satisfactory to
the Corporation to indemnify the Corporation from any loss incurred by it in
connection therewith (an "Affidavit of Loss") with respect to such certificates
at the principal executive office of the Corporation or the office of the
transfer agent for the Convertible Preferred Stock or such office or offices in
the continental United States of an agent for redemption as may from time to
time be designated by notice to the holders of Convertible Preferred Stock, and
each surrendered certificate shall be canceled and retired.
(h) Further Restrictions on Redemption. Notwithstanding anything herein to
----------------------------------
the contrary, the Convertible Preferred Stock shall not be redeemed hereunder
unless (i) all obligations of the Corporation under the Loan Agreement dated
December 4, 1996 among the Corporation, Fleet National Bank, as agent and as a
lender, and the other lenders from time to time party thereto (collectively, the
"Lenders") shall have been or is concurrently paid in full, or (ii) the Lenders
shall have consented to such redemption. If
9
<PAGE>
the Corporation is prohibited from redeeming the Convertible Preferred
Stock hereunder, the holders of Convertible Preferred Stock shall be
entitled to the provisions of Section A.5(e) and A.5(f) hereof.
6. Conversion. The holders of the Convertible Preferred Stock shall have
----------
the following conversion rights:
(a) Voluntary Conversion. At any time the holders of shares of
--------------------
Convertible Preferred Stock shall be entitled, upon the written election of
the holder or holders of not less than sixty-six and two-thirds percent in
voting power of the outstanding shares of Convertible Preferred Stock as
provided in Section A.6(c) below, without the payment of any additional
consideration, to cause all (but not less than all) of the outstanding
shares of Convertible Preferred Stock to be converted into (i) the number
of fully paid and nonassessable shares of either (a) Class B Common Stock
(as defined below in Section C), in the event that at the effective date of
such conversion the Corporation (or any successor thereto) has not
completed an initial public offering of equity securities registered under
the Securities Act of 1933, as amended, or (b) Common Stock, in the event
the Corporation has then completed such an initial public offering (the
shares of Class B Common Stock or Common Stock issuable upon conversion
pursuant to this Section A.6 being referred to as "Common Shares") and (ii)
eight tenths (.8) of a fully paid and nonassessable share of Redeemable
Preferred Stock per share of Convertible Preferred Stock. The number of
Common Shares issuable per share of Convertible Preferred Stock shall be
determined on the basis of the ratio which results from dividing the
Conversion Price (as defined below) per share in effect for the Convertible
Preferred Stock at the time of conversion into the per share Conversion
Value (as defined below) of the Convertible Preferred Stock. Upon the
filing of this Amended and Restated Certificate of Incorporation with the
Delaware Secretary of State, the "Conversion Price" per share of
Convertible Preferred Stock shall be $1.785714286 and the per share
"Conversion Value" of Convertible Preferred Stock shall be $1.785714286.
The Conversion Price of Convertible Preferred Stock shall be subject to
adjustment from time to time as provided in Section A.7 hereof. The number
of Common Shares into which a share of a Convertible Preferred Stock is
convertible is hereinafter referred to as the "Common Stock Conversion
Rate." The number of shares of Redeemable Preferred Stock into which a
share of Convertible Preferred Stock is convertible is hereinafter referred
to as the "Redeemable Conversion Rate." If the holders of shares of
Convertible Preferred Stock elect to convert the outstanding shares of
Convertible Preferred Stock at a time when there are any accumulated but
unpaid dividends or other amounts due on or in respect of such shares, such
dividends and other amounts shall be paid in full in cash by the
Corporation upon the effective date of such conversion. Upon the election
to so convert in the manner and on the basis specified in this Section
A.6(a) all holders of the Convertible Preferred Stock shall be deemed to
have elected to voluntarily convert all outstanding shares of Convertible
Preferred Stock pursuant to this Section A.6(a).
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<PAGE>
(b) Automatic Conversion Upon QPO. Each share of Convertible Preferred
-----------------------------
Stock shall automatically be converted, without the payment of any additional
consideration, into shares of Common Stock and Redeemable Preferred Stock as of,
and in all cases subject to, the closing of the Corporation's first firm
commitment public offering pursuant to an effective registration statement under
the Securities Act of 1933, as amended, provided that (i) such registration
statement covers the offer and sale of Common Stock of which the aggregate net
proceeds attributable to sales for the account of the Corporation and selling
stockholders exceed $25,000,000, and (ii) either all outstanding shares of
Redeemable Preferred Stock are redeemed immediately upon and as of the closing
of such offering or contemporaneously with such offering cash in an amount
sufficient to redeem all outstanding shares of Redeemable Preferred Stock is
segregated and irrevocably held by the Corporation for payment to holders of
Redeemable Preferred Stock in connection with the redemption thereof pursuant to
Section B.5(a)(i) (a "QPO"); provided that if a closing of a QPO occurs, all
--------
outstanding shares of Convertible Preferred Stock shall be deemed to have been
converted into shares of Common Stock and Redeemable Preferred Stock immediately
prior to such closing. Any such conversion shall be at the Common Stock
Conversion Rate and Redeemable Conversion Rate in effect upon the closing of a
QPO, as applicable. If the holders of shares of Convertible Preferred Stock are
required to convert the outstanding shares of Convertible Preferred Stock
pursuant to this Section A.6(b) at a time when there are any accumulated but
unpaid dividends or other amounts due on or in respect of such shares, such
dividends and other amounts shall be paid in full in cash by the Corporation in
connection with such conversion.
(c) Procedure for Voluntary Conversion; Effective Date. Upon election to
--------------------------------------------------
convert pursuant to Section A.6(a), each holder of Convertible Preferred Stock
(i) shall provide written notice of conversion (the "Voluntary Conversion
Notice") to the Corporation and (ii) shall surrender the certificate or
certificates representing its Convertible Preferred Stock to be converted, duly
assigned or endorsed for transfer to the Corporation (or accompanied by duly
executed stock powers relating thereto), at the principal executive office of
the Corporation or the offices of the transfer agent for the Convertible
Preferred Stock or such office or offices in the continental United States of an
agent for conversion as may from time to time be designated by notice to the
holders of the Convertible Preferred Stock by the Corporation, or shall deliver
an Affidavit of Loss with respect to such certificates. The Voluntary
Conversion Notice shall specify (x) the number of shares of Convertible
Preferred Stock held by such holder and the number of such shares to be
converted, (y) the name or names in which such holder wishes the certificate or
certificates for the Common Shares and Redeemable Preferred Stock to be issued
upon such conversion and (z) the address to which such holder wishes delivery to
be made of such new certificates to be issued upon such conversion. The
issuance by the Corporation of Common Shares and Redeemable Preferred Stock upon
a conversion of Convertible Preferred Stock pursuant to Section A.6(a) hereof
shall be effective as of the surrender of the certificate or certificates for
the Convertible Preferred Stock to be converted, duly assigned or endorsed for
transfer to the Corporation (or accompanied by duly executed
11
<PAGE>
stock powers relating thereto), or as of the delivery of an Affidavit of Loss.
Upon surrender of a certificate representing Convertible Preferred Stock for
conversion, or delivery of an Affidavit of Loss, the Corporation shall issue and
send by hand delivery, by courier or by first class mail (postage prepaid) to
the holder thereof or to such holder's designee, at the address designated by
such holder, certificates for the number of Common Shares and Redeemable
Preferred Stock to which such holder shall be entitled upon conversion plus a
cash payment in the amount of any accumulated but unpaid dividends as
contemplated by Section A.6(a) in respect of the shares of Convertible Preferred
Stock which are converted. The issuance of certificates for Common Shares and
Redeemable Preferred Stock upon conversion of Convertible Preferred Stock will
be made without charge to the holders of such shares for any issuance tax in
respect thereof or other costs incurred by the Corporation in connection with
such conversion and the related issuance of such stock. Notwithstanding anything
to the contrary set forth in this Section A.6(c), in the event that the holders
of shares of Convertible Preferred Stock elect to convert such shares pursuant
to Section A.6(a) in connection with any Liquidation Event, Extraordinary
Transaction or public offering (not including the QPO), (i) the Voluntary
Conversion Notice shall be delivered to the Corporation no later than five (5)
days before the occurrence of such Liquidation Event or the closing of such
Extraordinary Transaction or public offering and such Voluntary Conversion
Notice shall be effective as of, and shall in all cases be subject to, the
occurrence of such Liquidation Event or closing of such Extraordinary
Transaction or public offering and (ii) if such Liquidation Event, Extraordinary
Transaction or public offering occurs, all outstanding shares of Convertible
Preferred Stock shall be deemed to have been converted into Common Shares and
Redeemable Preferred Stock immediately prior thereto, provided that the
Corporation shall make appropriate provisions (x) for the Common Shares issued
upon such conversion to be treated on the same basis as all other Common Stock
in such Liquidation Event, Extraordinary Transaction or public offering provided
that the foregoing shall not be construed to provide or require the registration
of any Common Shares for sale and (y) for the payment of the Redeemable
Liquidation Preference Amount (as defined in Section B.4) in connection with any
Liquidation Event or the redemption of the Redeemable Stock (issued upon such
conversion) upon election of such redemption in connection with any
Extraordinary Transaction or public offering, if applicable, as provided herein.
In the event of any public offering constituting a QPO, the provisions of
Section A.6(d) shall apply.
(d) Procedure for Automatic Conversion. As of, and in all cases subject
----------------------------------
to, the closing of the QPO (the "Automatic Conversion Date"), all outstanding
shares of Convertible Preferred Stock shall be converted automatically without
any further action by the holders of such shares and whether or not the
certificates representing such shares of Convertible Preferred Stock are
surrendered to the Corporation or its transfer agent; provided, however, that
-------- -------
all holders of Convertible Preferred Stock shall be given prior written notice
of the occurrence of the QPO in accordance with Section A.9 hereof. The
Corporation shall not be obligated to issue certificates evidencing the shares
of Redeemable Preferred Stock or Common Stock issuable on the Automatic
Conversion Date (or the cash
12
<PAGE>
payment for the shares of Redeemable Preferred Stock which are redeemed
immediately after such automatic conversion as provided below and in Section
B.5(a)(i)) unless certificates evidencing such shares of the Convertible
Preferred Stock being converted, or an Affidavit of Loss with respect to such
certificates, are delivered to the Corporation or its transfer agent. On the
Automatic Conversion Date, all rights with respect to the Convertible Preferred
Stock so converted shall terminate, except any of the rights of the holders
thereof upon surrender of their certificate or certificates therefor or delivery
of an Affidavit of Loss thereof to receive certificates for the number of shares
of Common Stock and Redeemable Preferred Stock into which such Convertible
Preferred Stock has been converted (or the cash payment to which such holder is
entitled as provided below and in Section B.5(a)(i)) plus all accumulated but
unpaid dividends as contemplated by Section A.6(b). If so required by the
Corporation, certificates surrendered for conversion shall be endorsed or
accompanied by written instrument or instruments of transfer, in form
satisfactory to the Corporation, duly executed by the registered holder or by
his or its attorney duly authorized in writing. Upon surrender of such
certificates or Affidavit of Loss the Corporation shall issue and deliver to
such holder, promptly (and in any event in such time as is sufficient to enable
such holder to participate in such QPO) at such office and in its name as shown
on such surrendered certificate or certificates, a certificate or certificates
for the number of shares of Common Stock and number of shares of Redeemable
Preferred Stock into which the shares of the Convertible Preferred Stock
surrendered are convertible on the Automatic Conversion Date and shall pay all
accumulated but unpaid dividends as contemplated by Section A.6(b) in respect of
the shares of Convertible Preferred Stock which are converted. Notwithstanding
anything to the contrary set forth in this Section A.6(d), the Corporation may
deliver, in lieu of certificates for Redeemable Preferred Stock, cash in an
amount determined pursuant to Section B.5(b) hereof on account of the redemption
of such Redeemable Preferred Stock, and upon payment of such cash the Redeemable
Preferred Stock into which such Convertible Preferred Stock would have been
converted shall be deemed to have been issued and redeemed by the Corporation.
(e) Reservation of Stock Issuable Upon Conversion. The Corporation shall
---------------------------------------------
at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, Class B Common Stock and Redeemable Preferred Stock,
solely for the purpose of effecting the conversion of the shares of Convertible
Preferred Stock, such number of its shares of Class B Common Stock (or Common
Stock upon or following an initial public offering) and Redeemable Preferred
Stock as shall from time to time be sufficient to effect the conversion of all
outstanding shares of Convertible Preferred Stock; and if at any time the number
of authorized but unissued shares of Common Stock, Class B Common Stock and
Redeemable Preferred Stock shall not be sufficient to effect the conversion of
all then outstanding shares of Convertible Preferred Stock, the Corporation will
take such corporate action as may be necessary to increase its authorized but
unissued shares of Common Stock, Class B Common Stock and Redeemable Preferred
Stock to such number of shares as shall be sufficient for such purpose.
13
<PAGE>
(f) No Closing of Transfer Books. The Corporation shall not close its
----------------------------
books against the transfer of shares of Convertible Preferred Stock in any
manner which would interfere with the timely conversion of any shares of
Convertible Preferred Stock.
7. Adjustments.
-----------
(a) Dividends and Stock Splits. If the number of shares of Common Stock
--------------------------
(which term for purposes of this Section A.7 shall include all common stock
of the Corporation, including Class A Common Stock and Class B Common
Stock) outstanding at any time after the date hereof is increased by a
stock dividend payable in shares of Common Stock or by a subdivision or
split-up of shares of Common Stock, then, on the date such payment is made
or such change is effective, the Conversion Price of the Convertible
Preferred Stock shall be appropriately decreased so that the number of
Common Shares issuable on conversion of any shares of Convertible Preferred
Stock shall be increased in proportion to such increase of outstanding
shares of Common Stock.
(b) Reverse Stock Splits. If the number of shares of Common Stock
--------------------
outstanding at any time after the date hereof is decreased by a combination
or reverse split of the outstanding shares of Common Stock, then, on the
effective date of such combination or reverse split, the Conversion Price
of the Convertible Preferred Stock shall be appropriately increased so that
the number of Common Shares issuable on conversion of any shares of
Convertible Preferred Stock shall be decreased in proportion to such
decrease in outstanding shares of Common Stock.
(c) Reorganization, etc. In case, at any time after the date hereof, of
-------------------
any capital reorganization, or any reclassification of the stock of the
Corporation (other than as a result of a stock dividend payable on shares
of Common Stock in the form of Common Stock or subdivision, split-up or
combination involving the Common Stock), the shares of Convertible
Preferred Stock shall, after such capital reorganization or
reclassification, be convertible into the kind and number of shares of
stock or other securities or property of the Corporation or otherwise to
which such holder would have been entitled if immediately prior to such
capital reorganization or reclassification such holder had converted its
shares of Convertible Preferred Stock into Common Shares and Redeemable
Preferred Stock. The provisions of this clause (c) shall similarly apply to
successive capital reorganizations or reclassifications.
(d) Certificate. Upon the occurrence of each adjustment or readjustment
-----------
pursuant to this Section A.7, the Corporation at its expense shall promptly
compute such adjustment or readjustment in accordance with the terms hereof
and prepare and furnish to each holder of Convertible Preferred Stock a
certificate setting forth such adjustment or readjustment and showing in
detail the facts upon which such adjustment or readjustment is based. The
Corporation shall, upon written request at any time of any holder of
Convertible Preferred Stock, furnish or cause to be furnished to such
holder a like certificate setting forth (i) such adjustments or
readjustments, (ii) the Conversion Prices
14
<PAGE>
before and after such adjustment or readjustment, and (iii) the number of
Common Shares and shares of Redeemable Preferred Stock and the amount, if
any, of other property which at the time would be received upon the
conversion of such holder's shares of Convertible Preferred Stock. All
calculations under this Section A.7 shall be made to the nearest cent or to
the nearest one hundredth (1/100) of a share, as the case may be.
8. Covenants. So long as any shares of Convertible Preferred Stock (or
---------
Redeemable Preferred Stock, as applicable) shall be outstanding, the Corporation
shall not, without first having provided the written notice of such proposed
action to each holder of outstanding shares of Convertible Preferred Stock (or
Redeemable Preferred Stock, as applicable) and having obtained the affirmative
vote or written consent of the holders of not less than sixty-six and two-thirds
percent in voting power of the outstanding shares of Convertible Preferred Stock
(or Redeemable Preferred Stock, as applicable), voting as a single class, with
each share of Convertible Preferred Stock (or Redeemable Preferred Stock, as
applicable) entitling the holder thereof to one vote per share of Convertible
Preferred Stock held by such holder:
(a) amend, alter or repeal any provision of, or add any provision to,
Article IV of this Amended and Restated Certificate of Incorporation or
otherwise amend, alter or repeal any provision of, or add any provision to,
this Amended and Restated Certificate of Incorporation or the Corporation's
by-laws if such latter action would alter or change the preferences,
rights, privileges or powers of, or the restrictions provided for the
benefit of, any of the Convertible Preferred Stock or the Redeemable
Preferred Stock;
(b) reclassify any capital stock;
(c) create, obligate itself to create, authorize or issue any new class
or classes of stock or new series of common stock or preferred stock or any
security convertible into or evidencing the right to purchase shares of any
new class or series of common stock or preferred stock or any new capital
stock of the Corporation having preference over or being on parity with the
Convertible Preferred Stock or the Redeemable Preferred Stock in any
respect;
(d) apply any of its assets to the redemption, retirement, purchase or
other acquisition, directly or indirectly, through subsidiaries or
otherwise, except for the redemption of up to 2,000,000 shares of Common
Stock and/or Class A Common Stock except from employees, officers or
Directors of, or consultants, advisors or independent contractors to, the
Corporation or any of its subsidiaries pursuant to an agreement containing
vesting and/or repurchase provisions approved by the Board of Directors of
the Corporation or a committee thereof; or
(e) effect (I) any Liquidation Event, (II) any Extraordinary
Transaction or other sale or transfer of all or any substantial portion of
the properties and assets of any subsidiary of the Corporation, (III) any
public offering, (IV) any recapitalization of the
15
<PAGE>
Corporation or (V) any other transaction or series of related transactions
in which more than 50% of the voting power of the Corporation is disposed
of.
Further, the Corporation shall not, by amendment of this Amended and
Restated Certificate of Incorporation or through any Extraordinary
Transaction or other reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities, agreement or any other
voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the Corporation
but shall at all times in good faith assist in the carrying out of all the
provisions of this Article IV and in the taking of all such action as may
be necessary or appropriate in order to protect the rights of the holders
of the Convertible Preferred Stock and the Redeemable Preferred Stock
against impairment. Without limitation of the foregoing, the Corporation
shall take such action as shall be necessary or appropriate, to the extent
reasonably within its control, to remove promptly any impediments to its
ability to redeem Convertible Preferred Stock or Redeemable Preferred Stock
under the circumstances contemplated by Section A.5(e) or B.5(c). Any
successor to the Corporation shall agree, as a condition to such
succession, to carry out and observe the obligations of the Corporation
hereunder with respect to the Convertible Preferred Stock and the
Redeemable Preferred Stock.
9. Notice
------
(a) Liquidation Events, Extraordinary Transactions, Etc. In the event
---------------------------------------------------
(i) the Corporation establishes a record date to determine the holders of
any class of securities who are entitled to receive any dividend or other
distribution or who are entitled to vote at a meeting (or by written
consent) in connection with any of the transactions identified in clause
(ii) hereof, or (ii) any Liquidation Event (as defined in Section A.4), any
Extraordinary Transaction (as defined in Section A.5) or any public
offering becomes reasonably likely to occur, the Corporation shall mail or
cause to be mailed by first class mail (postage prepaid) to each holder of
Convertible Preferred Stock (or each holder of Redeemable Preferred Stock,
as applicable) at least forty-five (45) days prior to such record date
specified therein or the expected effective date of any such transaction, a
notice specifying (A) the date of such record date for the purpose of such
dividend or distribution or meeting or consent and a description of such
dividend or distribution or the action to be taken at such meeting or by
such consent, (B) the date on which any such Liquidation Event,
Extraordinary Transaction or public offering is expected to become
effective, and (C) the date on which the books of the Corporation shall
close or a record shall be taken with respect to any such event.
(b) Waiver of Notice. The holder or holders of not less than sixty-six
----------------
and two-thirds percent in voting power of the outstanding shares of
Convertible Preferred Stock (or Redeemable Preferred Stock, as applicable)
may, at any time upon written notice to the Corporation, waive any notice
provisions specified herein for the benefit of such holders.
16
<PAGE>
(c) General. In the event that the Corporation provides any notice,
-------
report or statement to any holder of Common Stock, the Corporation shall at
the same time provide a copy of any such notice, report or statement to
each holder of outstanding shares of Convertible Preferred Stock (or
Redeemable Preferred Stock, as applicable).
10. No Reissuance of Convertible Preferred Stock. No share or shares of
--------------------------------------------
Convertible Preferred Stock acquired by the Corporation by reason of redemption,
purchase, conversion or otherwise shall be reissued, and all such shares shall
be canceled, retired and eliminated from the shares which the Corporation shall
be authorized to issue.
17
<PAGE>
B. REDEEMABLE PREFERRED STOCK
--------------------------
1. Designation; Ranking. A total of 5,600,000 shares of the Corporation's
--------------------
Preferred Stock shall be designated as Redeemable Preferred Stock, $.01 par
value per share (the "Redeemable Preferred Stock").
2. Election of Directors; Voting.
-----------------------------
(a) Election of Directors. The holders of outstanding shares of
---------------------
Redeemable Preferred Stock shall, voting together as a separate class, be
entitled to elect one (1) Director. Such Director shall be the candidate
receiving the highest number of affirmative votes (with each holder of
Redeemable Preferred Stock entitled to cast one vote for or against each
candidate with respect to each share of Redeemable Preferred Stock held by
such holder) of the outstanding shares of Redeemable Preferred Stock (the
"Redeemable Preferred Stock Director Designee"), with votes cast against
such candidate and votes withheld having no legal effect. The election of
the Redeemable Preferred Stock Director Designee by the holders of the
Redeemable Preferred Stock shall occur (i) at the annual meeting of holders
of capital stock, (ii) at any special meeting of holders of capital stock,
(iii) at any special meeting of holders of Redeemable Preferred Stock
called by holders of a majority of the outstanding shares of Redeemable
Preferred Stock or (iv) by the unanimous written consent of holders of the
outstanding shares of Redeemable Preferred Stock. Upon conversion of the
Convertible Preferred Stock, the holders of Redeemable Preferred Stock
shall designate one of the Convertible Preferred Stock Director Designees
currently serving on the Corporation's board of directors as the Redeemable
Preferred Stock Director Designee, in the manner and on the basis specified
above. If at any time when any share of Redeemable Preferred Stock is
outstanding the Redeemable Preferred Stock Director Designee should cease
to be a Director for any reason, the vacancy shall only be filled by the
vote or written consent of holders of the outstanding shares of Redeemable
Preferred Stock, voting together as a separate class, in the manner and on
the basis specified above.
(b) Voting Generally. Except as set forth above with respect to the
----------------
election of the Redeemable Preferred Stock Director Designee, the holders
of Redeemable Preferred Stock shall not be entitled to vote on any matters
except to the extent otherwise required under the General Corporation Law
of the State of Delaware.
3. Dividends. The holders of outstanding shares of Redeemable Preferred
---------
Stock shall be entitled to receive, out of any funds legally available therefor,
cumulative dividends on the Redeemable Preferred Stock in cash, at the rate per
annum of ten percent (10%) of the Redeemable Base Liquidation Amount (as defined
in Section B.4 below), or $.1785714286 per share of Redeemable Preferred Stock
("Redeemable Cumulative Dividends"). Such dividends will accumulate commencing
as of the date of issuance of the Redeemable Preferred Stock and will be
cumulative, to the extent unpaid, whether or not they have been declared and
whether or not there are profits, surplus or other funds of the Corporation
legally available for the payment of
18
<PAGE>
dividends. Redeemable Cumulative Dividends shall become due and payable with
respect to any share of Redeemable Preferred Stock as provided in Section B.4
and Section B.5. So long as any shares of Redeemable Preferred Stock are
outstanding: (i) no dividend whatsoever shall be paid or declared, and no
distribution shall be made, on any capital stock of the Corporation ranking
junior to the Redeemable Preferred Stock; and (ii) no shares of capital stock of
the Corporation ranking junior to the Redeemable Preferred Stock shall be
purchased, redeemed or acquired by the Corporation and no monies shall be paid
into or set aside or made available for a sinking fund for the purchase,
redemption or acquisition thereof. All numbers relating to the calculation of
dividends pursuant to this Section B.3 shall be subject to equitable adjustment
in the event of any stock split, combination, reorganization, recapitalization,
reclassification or other similar event involving a change in the Redeemable
Preferred Stock.
4. Liquidation. Upon any Liquidation Event, each holder of outstanding
-----------
shares of Redeemable Preferred Stock shall be entitled to be paid out of the
assets of the Corporation available for distribution to stockholders, whether
such assets are capital, surplus, or earnings as follows, and before any amount
shall be paid or distributed to the holders of Common Stock, Class A Common
Stock, Class B Common Stock or of any other stock ranking on liquidation junior
to the Redeemable Preferred Stock an amount in cash equal to the sum of (a)
$1.785714286 per share (adjusted appropriately for stock splits, stock
dividends, recapitalizations and the like with respect to the Redeemable
Preferred Stock) (the "Redeemable Base Liquidation Amount"), plus (b) any
accumulated but unpaid dividends to which such holder of outstanding shares of
Redeemable Preferred Stock is entitled pursuant to Section B.3 and B.5(d) hereof
(the sum of (a) and (b) being referred to as the "Redeemable Liquidation
Preference Amount"), plus (c) any interest accrued pursuant to Section B.5(c);
provided, however, that if, upon any Liquidation Event, the amounts payable with
- -------- -------
respect to the Redeemable Preferred Stock are not paid in full, the holders of
the Redeemable Preferred Stock shall share ratably in any distribution of assets
in proportion to the full respective preferential amounts to which they are
entitled.
5. Redemption.
----------
(a) Redemption Events.
-----------------
(i) Automatic. Immediately upon and as of, and in all cases subject
---------
to, the closing of a QPO, the Corporation shall redeem all (and not
less than all) of the outstanding shares of Redeemable Preferred Stock
at the Redemption Price specified in Section B.5(b).
(ii) On or After October 31, 2001. Upon the election of the holder
----------------------------
or holders of not less than sixty-six and two-thirds percent in voting
power of the outstanding Redeemable Preferred Stock (or the holder or
holders of not less than sixty-six and two thirds percent of the
outstanding Convertible Preferred Stock proposing to convert the same
in order to effect a redemption of the Redeemable Preferred Stock
received upon such conversion hereunder) made at any time on or after
October 31, 2001 the Corporation shall, to the extent it may do so
under
19
<PAGE>
applicable law, redeem all (and not less than all, other than pursuant
to Section B.5(c) below), of the outstanding shares of Redeemable
Preferred Stock. The foregoing election shall be made by such holders
giving the Corporation and each of the other holders of Redeemable
Preferred Stock (or Convertible Preferred Stock, as applicable) not
less than fifteen (15) days prior written notice which notice shall set
forth the date for such redemption.
(iii) Upon Occurrence of Certain Transactions. Upon the election
---------------------------------------
of the holder or holders of not less than sixty-six and two-thirds
percent in voting power of the outstanding Redeemable Preferred Stock
(or the holder or holders of not less than sixty-six and two-thirds
percent of the outstanding Convertible Preferred Stock proposing to
convert the same in order to effect a redemption of the Redeemable
Preferred Stock received upon such conversion hereunder), the
Corporation shall, to the extent it may do so under applicable law,
redeem all (and not less than all, other than pursuant to Section
B.5(c) below) of the outstanding shares of Redeemable Preferred Stock
upon the occurrence of an Extraordinary Transaction (as defined in
Section A.5) or a public offering of equity securities of the Company
which does not constitute a QPO. The foregoing election shall be made
by such holders giving the Corporation and each other holder of
Redeemable Preferred Stock (or Convertible Preferred Stock, as
applicable) not less that five (5) days prior written notice, which
notice shall set forth the date for such redemption.
(b) Redemption Date; Redemption Price. Upon the election of the holders
---------------------------------
of the outstanding Redeemable Preferred Stock to cause the Corporation to
redeem the Redeemable Preferred Stock pursuant to Section B.5(a)(ii) or
(iii), all holders of Redeemable Preferred Stock shall be deemed to have
elected to cause the Redeemable Preferred Stock subject to such election to
be so redeemed. Any date upon which a redemption shall occur in accordance
with Section B.5(a) shall be referred to as a "Redemption Date." The
redemption price for each share of Redeemable Preferred Stock redeemed
pursuant to this Section B.5 shall be the Redeemable Liquidation Preference
Amount (the "Redemption Price"), subject to the further provisions of
Section B.5(c) and B.5(d). The Redemption Price shall be payable in cash in
immediately available funds on the Redemption Date. Until the full
Redemption Price has been paid in cash for all shares of Redeemable
Preferred Stock redeemed as of the applicable Redemption Date: (A) no
dividend whatsoever shall be paid or declared, and no distribution shall be
made, on any capital stock of the Corporation; and (B) no shares of capital
stock of the Corporation (other than the Redeemable Preferred Stock in
accordance with this Section B.5) shall be purchased, redeemed or acquired
by the Corporation and no monies shall be paid into or set aside or made
available for a sinking fund for the purchase, redemption or acquisition
thereof.
(c) Redemption Prohibited. If, at a Redemption Date, the Corporation is
---------------------
prohibited under the General Corporation Law of the State of Delaware from
redeeming all shares of Redeemable Preferred Stock for which redemption is
required hereunder, then
20
<PAGE>
it shall redeem such shares on a pro-rata basis among the holders of
Redeemable Preferred Stock in proportion to the full respective redemption
amounts to which they are entitled hereunder to the extent possible and
shall redeem the remaining shares to be redeemed as soon as the Corporation
is not prohibited from redeeming some or all of such shares under the
General Corporation Law of the State of Delaware, subject to the last
paragraph of Section A.8. Any shares of Redeemable Preferred Stock not
redeemed shall remain outstanding and entitled to all of the rights and
preferences provided in this Article IV. In the event that the Corporation
fails to redeem shares for which redemption is required pursuant to Section
B.5, then during the period from the applicable Redemption Date through the
date on which such shares are redeemed, the applicable Redemption Price of
such shares plus additional dividends that accumulate in respect of such
shares under Section B.5(d) shall bear interest at the rate of 10% per
annum, which interest rate shall increase by an additional .5% at the end
of each six (6) month period thereafter until the Redemption Price (as so
increased) is paid in full, subject to a maximum rate of 15% per annum and
with such interest to be compounded annually. In the event the Corporation
fails to redeem shares for which redemption is required pursuant to Section
B.5 within six (6) months after the date on which redemption is required,
for any reason, and such failure thereafter continues (the period during
which such failure shall continue being referred to herein as a "Voting
Period"), the number of Directors constituting the Board of Directors shall
be automatically increased by a number equal to the number of Directors
then constituting the Board of Directors, plus two, and the holders of
shares of Redeemable Preferred Stock then outstanding shall be entitled,
voting as a class on a one-vote-per-share basis (to the exclusion of the
holders of all other securities and classes of capital stock of the
Corporation), to elect such additional Directors. As soon as practicable
after the commencement of the Voting Period, the Corporation shall call a
special meeting of the holders of shares of Redeemable Preferred Stock by
mailing a notice of such special meeting to such holders, such meeting to
be held not less than ten (10) nor more than thirty (30) days after the
date of mailing of such notice. If the Corporation fails to send a notice,
the meeting may be called by any such holder on like notice. The record
date for determining the holders entitled to notice of and to vote at such
special meeting shall be the close of business on the fifth business day
preceding the day on which such notice is mailed. At any such special
meeting and at each meeting of holders of shares of Redeemable Preferred
Stock held during a Voting Period at which Directors are to be elected (or
with respect to any action by written consent in lieu of a meeting of
shareholders), such holders, voting together as a class (to the exclusion
of the holders of all other securities and classes of capital stock of the
Corporation), shall be entitled to elect the number of Directors prescribed
in this Section B.5(c), and each share of Redeemable Preferred Stock shall
be entitled to one (1) vote (whether voted in person by the holder thereof
or by proxy or pursuant to a shareholders' consent). The terms of office of
all persons who are Directors of the Corporation at the time of a special
meeting of the holders of Redeemable Preferred Stock to elect Directors
shall continue, notwithstanding the election at such meeting of the
additional Directors that such holders are entitled to elect, and the
persons so elected by such holders, together with the remaining incumbent
Directors, shall constitute the duly elected Directors of the Corporation.
Simultaneously
21
<PAGE>
with the termination of a Voting Period upon the redemption of all
outstanding shares of Redeemable Preferred Stock, the terms of office of
the additional Directors elected by the holders of the Redeemable Preferred
Stock shall terminate, the remaining Directors shall constitute the
Directors of the Corporation and the voting rights of such holders to elect
additional Directors pursuant to this Section B.5(c) shall cease.
(d) Dividend After Redemption Date. From and after a Redemption Date,
------------------------------
no shares of Redeemable Preferred Stock subject to redemption shall be
entitled to any further dividends pursuant to Section B.3 hereof, provided,
however, that in the event that shares of Redeemable Preferred Stock are
unable to be redeemed and continue to be outstanding in accordance with
Section B.5(c), such shares shall continue to be entitled to dividends as
provided in Section B.3 and interest as provided in Section B.5(c) until
the date on which such shares are actually redeemed by the Corporation.
(e) Surrender of Certificates. Upon receipt of the applicable
-------------------------
Redemption Price by certified check or wire transfer, each holder of shares
of Redeemable Preferred Stock to be redeemed shall surrender the
certificate or certificates representing such shares to the Corporation,
duly assigned or endorsed for transfer (or accompanied by duly executed
stock powers relating thereto), or shall deliver an Affidavit of Loss with
respect to such certificates at the principal executive office of the
Corporation or the office of the transfer agent for the Redeemable
Preferred Stock or such office or offices in the continental United States
of an agent for redemption as may from time to time be designated by notice
to the holders of Redeemable Preferred Stock and each surrendered
certificate shall be canceled and retired.
(f) Further Restrictions on Redemption. Notwithstanding anything herein
----------------------------------
to the contrary, the Redeemable Preferred Stock shall not be redeemed
hereunder unless (i) all obligations of the Corporation under the Loan
Agreement dated December 4, 1996 among the Corporation, Fleet National
Bank, as agent and as a lender, and the other lenders from time to time
party thereto (collectively, the "Lenders") shall have been or are
concurrently paid in full, or (ii) the Lenders shall have consented to such
redemption. If the Corporation is prohibited from redeeming the Redeemable
Preferred Stock hereunder, the holders of Redeemable Preferred Stock shall
be entitled to the provisions of Section B.5(c) and B.5(d) hereof.
6. Notice. So long as any shares of Redeemable Preferred Stock shall be
------
outstanding the provisions of Section A.9 shall apply to all shares of
Redeemable Preferred Stock as if such shares were shares of Convertible
Preferred Stock.
7. No Reissuance of Redeemable Preferred Stock. No share or shares of
-------------------------------------------
Redeemable Preferred Stock acquired by the Corporation by reason of redemption,
purchase, conversion or otherwise shall be reissued, and all such shares shall
be canceled, retired and eliminated from the shares which the Corporation shall
be authorized to issue.
22
<PAGE>
8. Covenants. So long as any shares of Redeemable Preferred Stock shall
---------
be outstanding the provisions of Section A.8 shall apply to all shares of
Redeemable Preferred Stock as if such shares were shares of Convertible
Preferred Stock.
23
<PAGE>
C. COMMON STOCK, CLASS A COMMON STOCK
----------------------------------
AND CLASS B COMMON STOCK
------------------------
1. Designation; Ranking. A total of 18,000,000 shares of the
--------------------
Corporation's common stock shall be designated as Common Stock, $.01 par value
per share (the "Common Stock"), a total of 2,000,000 shares of the Corporation's
common stock shall be designated as Class A Common Stock,$.01 par value per
share (the "Class A Common Stock"), and a total of 7,000,000 shares of the
Corporation's common stock shall be designated as Class B Common Stock, $.01 par
value per share (the "Class B Common Stock"). Except as herein otherwise
expressly provided, all shares of Common Stock, Class A Common Stock and Class
B Common Stock shall be identical and shall entitle the holders thereof to the
same rights and privileges. Notwithstanding anything herein to the contrary,
shares of Class B Common Stock shall be issued only upon conversion of the
Convertible Preferred Stock under the circumstances set forth in Section A.6(a).
2. Voting.
------
(a) Election of Directors. For so long as any shares of Convertible
---------------------
Preferred Stock shall be outstanding, the holders of the Common Stock and
the Convertible Preferred Stock, voting as a single class, shall elect all
directors of the Corporation other than the Convertible Preferred Stock
Director Designees. In the event of conversion of the Convertible Preferred
Stock into Class B Common Stock and Redeemable Preferred Stock, the holders
of the Common Stock and the Class B Common Stock, voting as a single class,
shall elect all directors of the Corporation (other than the Redeemable
Preferred Stock Director Designee); provided, however, that the holders of
the Class B Common Stock shall in no event be entitled or have the power to
elect more than one-half of the members of the Board of Directors (less one
as long as any shares of Redeemable Preferred Stock are outstanding), with
all other Directors of the Corporation being subject to election by the
holders of the Common Stock and Redeemable Preferred Stock, if outstanding,
in such circumstances. In the event no shares of Convertible Preferred
Stock, Redeemable Preferred Stock or Class B Common Stock are outstanding,
the number of directors shall be fixed by and all directors shall be
elected by the holders of the Common Stock. The election of such Directors
shall occur at the annual meeting of holders of capital stock or at any
special meeting called and held in accordance with the by-laws of the
Corporation. If a person elected in accordance with the foregoing
provisions should cease to be a Director for any reason, the vacancy shall
only be filled by the vote or written consent of holders of the outstanding
shares entitled to vote for such Directors, in the manner and on the basis
specified above. If at any time fewer than the number of Directors
indicated above have been elected, the Board of Directors shall nonetheless
be deemed duly constituted.
(b) Other Voting. The voting rights of the holders of Common Stock and
------------
Class B Common Stock with respect to all matters other than the election of
Directors shall be identical and the holder of each share of Common Stock
or Class B Common Stock, as applicable, shall be entitled to one vote for
each such share as determined on the record
24
<PAGE>
date for the vote or consent of stockholders. The holders of the Common
Stock shall vote together with the holders of the Convertible Preferred
Stock or the Class B Common Stock, as applicable, as a single class upon
any items submitted to a vote of stockholders as long as any shares of
Convertible Preferred Stock or Class B Common Stock are outstanding, except
as otherwise provided herein.
(c) Class A Common Stock - Non-Voting. The holders of Class A Common
---------------------------------
Stock shall not be entitled to vote on any matters except to the extent
otherwise required under the General Corporation Law of the State of
Delaware.
3. Dividends. Apart from voting power, the shares of Common Stock,
---------
Class A Common Stock and Class B Common Stock (if outstanding) shall be deemed
to be shares of stock of the same class and shall have equal rights and
privileges (including, without limitation, in liquidation and as to dividends,
whether paid in stock or cash), except that stock dividends declared shall be
paid in shares of Common Stock, Class A Common Stock or Class B Common Stock to
the holders of Common Stock, Class A Common Stock or Class B Common Stock,
respectively. Subject to the payment in full of all preferential dividends to
which the holders of the Convertible Preferred Stock and the Redeemable
Preferred Stock are entitled hereunder, the holders of Common Stock, Class A
Common Stock or Class B Common Stock (if outstanding) shall be entitled to
receive dividends out of funds legally available therefor on a pari passu basis
---- -----
at such times and in such amounts as the Board of Directors may determine in its
sole discretion, provided that in the event any shares of Convertible Preferred
Stock are outstanding, the holders of Convertible Preferred Stock, Common Stock
and Class A Common Stock shall share equally in any such dividends as
contemplated by Section A.3.
4. Liquidation. Upon any Liquidation Event, after the payment or
-----------
provision for payment of all debts and liabilities of the Corporation and all
preferential amounts to which the holders of Convertible Preferred Stock or
Redeemable Preferred Stock, as applicable, are entitled with respect to the
distribution of assets in liquidation, the holders of Common Stock, Class A
Common Stock and (if outstanding) Class B Common Stock (or to the extent
applicable under Section A.4(a), Convertible Preferred Stock) shall be entitled
to share ratably in the remaining assets of the Corporation available for
distribution, with such stock being considered a single class for this purpose.
5. Conversion of Class A Common Stock and Class B Common Stock Upon Public
-----------------------------------------------------------------------
Offering. As of and immediately prior to the closing of the Corporation's first
- --------
public offering of equity securities registered under the Securities Act of
1933, as amended, each outstanding share of Class A Common Stock and any
outstanding shares of Class B Common Stock shall automatically be converted into
one share of Common Stock. Upon such conversion, (a) each converted share of
Class A Common Stock or Class B Common Stock shall be deemed retired and such
shares of Class A Common Stock and Class B Common Stock shall not be reissued,
and (b) the provisions of this Amended and Restated Certificate of Incorporation
regarding Class A Common Stock and Class B Common Stock shall have no further
force and effect and shall be deemed to be deleted from this Amended and
Restated Certificate of Incorporation and any other
25
<PAGE>
references to Class A Common Stock or Class B Common Stock in this Amended and
Restated Certificate of Incorporation or any other agreement to which the
Corporation is a party shall be deemed to refer to the same number of shares of
Common Stock. Until presented and surrendered for cancellation following such
conversion, each certificate for shares of Class A Common Stock or Class B
Common Stock outstanding shall be deemed to represent the number of shares of
Common Stock determined in accordance with this paragraph, and upon such
presentation and surrender each holder of a certificate or certificates for such
Class A Common Stock or Class B Common Stock shall be entitled to receive a
certificate for the appropriate number of shares of Common Stock. The
Corporation shall reserve for issuance the number of shares of Common Stock into
which all outstanding shares of Class A Common Stock and Class B Common Stock
may be converted pursuant to this Section C.5.
6. Fractional Shares; Uncertificated Shares. The Corporation may issue
----------------------------------------
fractional shares of Common Stock, Class A Common Stock and Class B Common
Stock. Fractional shares shall be entitled to dividends (on a pro rata basis),
and the holders of fractional shares shall be entitled to all rights as
stockholders of the Corporation to the extent provided herein and under
applicable law in respect of such fractional shares. Shares of Common Stock,
Class A Common Stock and Class B Common Stock, or fractions thereof, may, but
need not be represented by share certificates. Such shares, or fractions
thereof, not represented by share certificates ("Uncertificated Common Shares")
shall be registered in the stock records book of the Corporation. The
Corporation at any time at its sole option may deliver to any registered holder
of such shares share certificates to represent Uncertificated Common Shares
previously issued (or deemed issued) to such holder.
ARTICLE V
---------
In furtherance of and not in limitation of powers conferred by statute, it
is further provided:
1. Election of Directors need not be by written ballot unless the by-laws
of the Corporation so provide.
2. The Board of Directors is expressly authorized to adopt, amend or
repeal the by-laws of the Corporation to the extent specified therein.
ARTICLE VI
----------
Meetings of stockholders may be held within or without the State of
Delaware, as the by-laws may provide.
26
<PAGE>
ARTICLE VII
-----------
To the extent permitted by law, the books of the Corporation may be
kept outside the State of Delaware at such place or places as may be designated
in the by-laws of the Corporation or from time to time by its Board of
Directors.
ARTICLE VIII
------------
No person shall be personally liable to the Corporation or its
stockholders for monetary damages for breach of his or her fiduciary duty as a
Director of the Corporation, except for liability (a) for any breach of the
Director's duty of loyalty to the Corporation or its stockholders, (b) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (c) under Section 174 of the General Corporation Law
of the State of Delaware, or (d) for any transaction from which the Director
derived an improper personal benefit. If the General Corporation Law of the
State of Delaware is amended after the effective date of this Amended and
Restated Certificate of Incorporation to authorize corporate action further
eliminating or limiting the personal liability of directors, then the liability
of each past or present Director of the Corporation shall be eliminated or
limited to the fullest extent permitted by the General Corporation Law of the
State of Delaware, as so amended.
Any repeal or modification of this Article VIII by (a) the stockholders of
the Corporation or (b) an amendment to the General Corporation Law of the State
of Delaware (unless such statutory amendment specifically provides to the
contrary) shall not adversely affect any right or protection existing at the
time of such repeal or modification with respect to any acts or omissions
occurring either before or after such repeal or modification, of a person
serving as a Director prior to or at the time of such repeal or modification.
ARTICLE IX
----------
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Amended and Restated Certificate of Incorporation,
in the manner now or hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation.
27
<PAGE>
THIS AMENDED AND RESTATED CERTIFICATE OF INCORPORATION is executed as of
this 4th day of December, 1996.
BLA ACQUISITION CORP.
By: /s/ Patrick G. LePore
-----------------------------------
Name: Patrick G. LePore
Title: President
ATTEST:
/s/ Michael W. Foti
- -------------------------------------
Name: Michael W. Foti
Title: Secretary
28
<PAGE>
Exhibit 3.2(a)
CERTIFICATE OF AMENDMENT
OF
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
BORON, LEPORE & ASSOCIATES, INC.
Boron, LePore & Associates, Inc., a corporation organized and existing
under the laws of the State of Delaware (the "Corporation"), pursuant to Section
242 of the General Corporation Law of the State of Delaware (the "DGCL"), DOES
HEREBY CERTIFY:
FIRST: That the Board of Directors of the Corporation, by unanimous
written consent dated February 27, 1997, in accordance with the provisions of
Section 141(f) of the DGCL, duly adopted resolutions in accordance with Section
242 of the DGCL (i) proposing an amendment of the Amended and Restated
Certificate of Incorporation of the Corporation, (ii) declaring such amendment
to be advisable and in the best interests of the Corporation, and (iii)
directing that such amendment be submitted to and be considered by the
stockholders of the Corporation entitled to vote thereon for approval by the
affirmative vote of such stockholders. Such resolution proposed to amend the
Amended and Restated Certificate of Incorporation as follows:
(1) Section A.3 of Article IV of the Amended and Restated Certificate of
Incorporation is hereby amended and restated in its entirety to provide as
follows:
"3. Dividends. The holders of Convertible Preferred Stock shall be
---------
entitled, in preference to the holders of any and all other classes of
capital stock of the Corporation, to receive, out of funds legally
available therefor, cumulative dividends on the Convertible Preferred
Stock in cash, at the rate per annum of $.1428571429 per share of
Convertible Preferred Stock, subject to proration for partial years on
the basis of a 365-day year (the "Convertible Cumulative Preference
Dividend"). Such dividends will accumulate commencing as of the date
of issuance of the Convertible Preferred Stock and shall be
cumulative, to the extent
<PAGE>
unpaid, whether or not they have been declared and whether or not
there are profits, surplus or other funds of the Corporation legally
available for the payment of dividends. Convertible Cumulative
Preference Dividends shall become due and payable with respect to any
share of Convertible Preferred Stock as provided in Sections A.4, A.5
and A.6. Dividends paid in cash in an amount less than the total
amount of such dividends at the time accumulated and payable on all
outstanding shares of Convertible Preferred Stock, including
fractions, shall be allocated pro rata on a share-by-share basis among
all such shares at the time outstanding. At any time when shares of
Convertible Preferred Stock are outstanding and the Convertible
Cumulative Preference Dividends have not been paid in full in cash:
(a) no dividend whatsoever shall be paid or declared, and no
distribution shall be made, on any capital stock of the Corporation
ranking junior to the Convertible Preferred Stock; and (b) no shares
of capital stock of the Corporation ranking junior to the Convertible
Preferred Stock shall be purchased, redeemed or acquired by the
Corporation and no monies shall be paid into or set aside or made
available for a sinking fund for the purchase, redemption or
acquisition thereof. If and to the extent such Convertible Cumulative
Preference Dividends have been paid in full, however, subject to
Section A.8, the holders of Convertible Preferred Stock shall be
entitled to receive additional dividends out of funds legally
available therefor at such times and in such amounts as the Board of
Directors may determine in its sole discretion, provided, however,
-------- -------
that no such dividend may be declared or paid on any shares of
Convertible Preferred Stock unless at the same time a dividend is
declared or paid on all outstanding shares of Common Stock, Class A
Common Stock and Class B Common Stock and vice versa, with holders of
Convertible Preferred Stock, Common Stock, Class A Common Stock and
Class B Common Stock sharing in any such additional dividends as if
they constituted a single class of stock and with each holder of a
share of Convertible Preferred Stock entitled to receive such
dividends based on the number of shares of Common Stock or Class B
Common Stock, as the case may be, into which such shares of
Convertible Preferred Stock are then convertible hereunder, as
contemplated by Section C.3 of this Article IV.
2
<PAGE>
All numbers relating to the calculation of dividends pursuant to this
Section A.3 shall be subject to equitable adjustment in the event of
any stock split, combination, reorganization, recapitalization,
reclassification or other similar event involving a change in the
Convertible Preferred Stock."
SECOND: This Certificate of Amendment of the Amended and Restated
Certificate of Incorporation was duly adopted by the unanimous written vote of
the stockholders of the Corporation in accordance with the provisions of Section
242 of the DGCL.
3
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment of the Amended and Restated Certificate of Incorporation to be signed
and attested to by the undersigned this 28th day of February, 1997.
BORON, LePORE & ASSOCIATES, INC.
By:/s/ Patrick G. LePore
-----------------------------------
Patrick G. LePore
President
ATTEST:
By:
/s/ Michael W. Foti
---------------------------------
Michael W. Foti
Secretary
4
<PAGE>
Exhibit 3.2(b)
CERTIFICATE OF AMENDMENT
TO THE
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
BORON, LEPORE & ASSOCIATES, INC.
BORON, LEPORE & ASSOCIATES, INC., a corporation organized and existing
under the laws of the State of Delaware (the "Corporation"), pursuant to Section
242 of the General Corporation Law of the State of Delaware (the "DGCL"), DOES
HEREBY CERTIFY:
FIRST: That the Board of Directors on August 25, 1997 duly adopted a
resolution in accordance with Section 242 of the DGCL (i) proposing that the
Amended and Restated Certificate of Incorporation of the Corporation be amended,
(ii) declaring such amendment to be advisable and in the best interests of the
Corporation, and (iii) directing that such amendment be submitted to and be
considered by the stockholders of the Corporation entitled to vote thereon for
approval by the affirmative vote of such stockholders. Pursuant to such
resolution, the Amended and Restated Certificate of Incorporation shall be
amended by inserting the following paragraph between the second and third
paragraph of Article IV of the Amended and Restated Certificate of
Incorporation:
"Upon the filing date of the Certificate of Amendment to the Amended
and Restated Certificate of Incorporation (the "Effective Time"), each
outstanding share of Common Stock (as defined in Section C of Article
IV) (the "Existing Common Stock"), Class A Common Stock (as defined in
Section C of Article IV) (the "Existing Class A Common Stock"), and
the Class B Common Stock (as defined in Section C of Article IV) (the
"Existing Class B Common Stock"), shall thereupon be reclassified and
changed into two-thirds of one share of Common Stock, par value $.01
per share (the "New Common Stock"), Class A Common Stock, par value
$.01 per share (the "New Class A Common Stock"), and Class B Common
Stock, par value $.01 per share (the "New Class B
<PAGE>
Common Stock"), respectively. Upon such Effective Time, each holder of
Existing Common Stock, Existing Class A Common Stock and Existing Class B
Common Stock shall thereupon automatically be and become the holder of two-
thirds of one share of New Common Stock, New Class A Common Stock and New
Class B Common Stock for every share of Existing Common Stock, Existing
Class A Common Stock and Existing Class B Common Stock then held by such
holder. Upon such Effective Time, each certificate formerly representing a
stated number of shares of Existing Common Stock, Existing Class A Common
Stock and Existing Class B Common Stock shall thereupon be a certificate
for and shall represent two-thirds of the number of shares of New Common
Stock, New Class A Common Stock and New Class B Common Stock as is stated
in such certificate. As soon as practicable after such Effective Time,
stockholders as of the date of the reclassification will be notified
thereof and, upon their delivery of their certificates for Existing Common
Stock, Existing Class A Common Stock and Existing Class B Common Stock to
the Corporation, will be sent stock certificates representing their shares
of New Common Stock, New Class A Common Stock and New Class B Common Stock,
rounded down to the nearest whole number, together with cash representing
the fair value of such holder's fractional shares of New Common Stock, New
Class A Common Stock and New Class B Common Stock. No script or fractional
share certificates for New Common Stock, New Class A Common Stock and New
Class B Common Stock will be issued in connection with this reverse stock
split."
SECOND: That thereafter, pursuant to the resolution of its Board of
Directors certified to in the preceding paragraph, the proposed amendment as set
forth in this Certificate of Amendment to the Amended and Restated Certificate
of Incorporation was submitted to the stockholders of the Corporation entitled
to vote thereon by the Board of Directors, who recommended such amendment as
being advisable and in the best interests of the Corporation, and such amendment
was duly adopted by a stockholder consent in lieu of a meeting of the
stockholders, with the holders of a majority of the outstanding shares of the
Company's Common Stock and Class A Common Stock (voting as separate classes) and
sixty-six and two-thirds percent of the outstanding shares of the Company's
Convertible Participating Preferred Stock, in addition to the holders of a
majority of the outstanding shares of Common Stock, Class A Common Stock and
Convertible Participating Preferred Stock (on an as converted basis) voting as a
single class, consenting to the adoption of this Certificate of Amendment to the
2
<PAGE>
Amended and Restated Certificate of Incorporation in accordance with the
provisions of Sections 228 and 242 of the DGCL and the terms of the Amended and
Restated Certificate of Incorporation, such holders being all of the holders of
the Corporation's capital stock entitled to vote thereon.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to the Amended and Restated Certificate of Incorporation to be signed
by Patrick G. LePore, its President, and attested by Martin J. Veilleux, its
Secretary, this 25th day of August, 1997.
BORON, LEPORE & ASSOCIATES, INC.
By: /s/ Patrick G. LePore
---------------------------------
Patrick G. LePore
President
ATTEST:
By: /s/ Martin J. Veilleux
---------------------------------
Martin J. Veilleux
Secretary
<PAGE>
Exhibit 3.3
SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
BORON, LEPORE & ASSOCIATES, INC.
Boron, LePore & Associates, Inc., a corporation organized and existing
under the laws of the State of Delaware (the "Corporation"), hereby certifies as
follows:
1. The name of the Corporation is Boron, LePore & Associates, Inc.
The date of the filing of its original Certificate of Incorporation with the
Secretary of State of the State of Delaware was November 22, 1996.
2. This Second Amended and Restated Certificate of Incorporation
amends, restates and integrates the provisions of the Amended and Restated
Certificate of Incorporation of the Corporation filed with the Secretary of
State of the State of Delaware on December 4, 1996, as heretofore amended (the
"Restated Certificate of Incorporation"), and (i) was duly adopted by the Board
of Directors in accordance with the provisions of Section 245 of the General
Corporation Law of the State of Delaware (the "DGCL"), (ii) was declared by the
Board of Directors to be advisable and in the best interests of the Corporation
and was directed by the Board of Directors to be submitted to and be considered
by the stockholders of the Corporation entitled to vote thereon for approval by
the affirmative vote of such stockholders in accordance with Section 242 of the
DGCL and (iii) was duly adopted by a stockholder consent in lieu of a meeting of
the stockholders, with the holders of a majority of the outstanding shares of
the Company's Common Stock and Class A Common Stock (voting as separate classes)
and sixty-six and two-thirds percent of the outstanding shares of the Company's
Convertible Participating Preferred Stock, in addition to the holders of a
majority of the outstanding shares of Common Stock, Class A Common Stock and
Convertible Participating Preferred Stock (on an as converted basis) voting as a
single class, consenting to the adoption of this Second Amended and Restated
Certificate of Incorporation in accordance with the provisions of Sections 228
and 242 of the DGCL and the terms of the Amended and Restated Certificate of
Incorporation, as amended, such holders being all of the holders of the
Corporation's capital stock entitled to vote thereon.
3. The text of the Restated Certificate of Incorporation is hereby
amended and restated in its entirety to provide as herein set forth in full.
<PAGE>
ARTICLE I
NAME
----
The name of the Corporation is Boron, LePore & Associates, Inc.
ARTICLE II
REGISTERED OFFICE
-----------------
The address of the registered office of the Corporation in the State
of Delaware is 1209 Orange Street, in the City of Wilmington, County of New
Castle. The name of its registered agent at such address is The Corporation
Trust Company.
ARTICLE III
PURPOSES
--------
The nature of the business or purposes to be conducted or promoted by
the Corporation is to engage in any lawful act or activity for which
corporations may be organized under the DGCL.
ARTICLE IV
CAPITAL STOCK
-------------
The total number of shares of capital stock which the Corporation
shall have the authority to issue is Seventy-Three Million Six Hundred Thousand
(73,600,000) shares, of which (i) Seven Million (7,000,000) shares shall be
Convertible Participating Preferred Stock, par value $.01 per share (the
"Convertible Preferred Stock"), (ii) Five Million Six Hundred Thousand
(5,600,000) shares shall be Redeemable Preferred Stock, par value $.01 per share
(the "Redeemable Preferred Stock"), (iii) Fifty Million (50,000,000) shares
shall be Common Stock, par value $.01 per share (the "Common Stock"), (iv) Two
Million (2,000,000) shares shall be Class A Common Stock, par value $.01 per
share (the "Class A Common Stock"), (v) Seven Million (7,000,000) shares shall
be Class B Common Stock, par value $.01 per share (the "Class B Common Stock");
and (vi) Two Million (2,000,000) shares shall be Undesignated Preferred Stock,
par value $.01 per share (the "Undesignated Preferred Stock"). As set forth in
this Article IV, the Board of Directors or any authorized committee thereof is
authorized from time to time to establish and designate one or more series of
Undesignated
2
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Preferred Stock, to fix and determine the variations in the relative rights and
preferences as between the different series of Undesignated Preferred Stock in
the manner hereinafter set forth in this Article IV, and to fix or alter the
number of shares comprising any such series and the designation thereof to the
extent permitted by law.
The number of authorized shares of the class of Undesignated Preferred
Stock may be increased or decreased (but not below the number of shares
outstanding) by the affirmative vote of the holders of a majority of the Common
Stock, without a vote of the holders of the Undesignated Preferred Stock,
pursuant to the resolution or resolutions establishing the class of Undesignated
Preferred Stock or this Second Amended and Restated Certificate of
Incorporation, as it may be amended from time to time.
Except as otherwise restricted by this Second Amended and Restated
Certificate of Incorporation, the Corporation is authorized to issue, from time
to time, all or any portion of the capital stock of the Corporation which may
have been authorized but not issued, to such person or persons and for such
lawful consideration as it may deem appropriate, and generally in its absolute
discretion to determine the terms and manner of any disposition of such
authorized but unissued capital stock.
Any and all such shares issued for which the full consideration has
been paid or delivered shall be deemed fully paid shares of capital stock, and
the holder of such shares shall not be liable for any further call or assessment
or any other payment thereon.
The voting powers, designations, preferences, privileges and relative,
participating, optional or other special rights, and the qualifications,
limitations or restrictions of each class of capital stock of the Corporation,
shall be as provided in this Article IV.
A. CONVERTIBLE PARTICIPATING PREFERRED STOCK
-----------------------------------------
1. Designation. A total of 7,000,000 shares of the Corporation's
-----------
Preferred Stock shall be designated as Convertible Participating Preferred
Stock, $.01 par value per share (the "Convertible Preferred Stock").
2. Election of Directors; Voting.
-----------------------------
(a) Election of Directors. The holders of outstanding shares of
---------------------
Convertible Preferred Stock shall, voting together as a separate
class, be entitled to elect two (2) Directors. Such Directors shall be
the candidates receiving the highest number of affirmative votes (with
each holder of Convertible Preferred Stock entitled to cast one vote
for or against each candidate with respect to each share of
Convertible Preferred Stock held by such holder) of the outstanding
shares of Convertible Preferred Stock (the "Convertible Preferred
Stock Director Designees"), with votes cast against such
3
<PAGE>
candidates and votes withheld having no legal effect. The election of
the Convertible Preferred Stock Director Designees by the holders of
the Convertible Preferred Stock shall occur (i) at the annual meeting
of holders of capital stock, (ii) at any special meeting of holders of
capital stock, (iii) at any special meeting of holders of Convertible
Preferred Stock called by holders of a majority of the outstanding
shares of Convertible Preferred Stock or (iv) by the unanimous written
consent of holders of the outstanding shares of Convertible Preferred
Stock. If at any time when any share of Convertible Preferred Stock is
outstanding any Convertible Preferred Stock Director Designee should
cease to be a Director for any reason, the vacancy shall only be
filled by the vote or written consent of the holders of the
outstanding shares of Convertible Preferred Stock, voting together as
a separate class, in the manner and on the basis specified above. The
holders of outstanding shares of Convertible Preferred Stock shall
also be entitled to vote for all other Directors of the Corporation
together with holders of all other shares of the Corporation's
outstanding capital stock entitled to vote thereon, voting as a single
class, with each outstanding share entitled to the same number of
votes specified in Section A.2(b). The holders of outstanding shares
of Convertible Preferred Stock may, in their sole discretion,
determine to elect only one Convertible Preferred Stock Director
Designee from time to time, and during any such period the Board of
Directors nonetheless shall be deemed duly constituted.
(b) Voting Generally. The holder of each share of Convertible
----------------
Preferred Stock shall be entitled to the number of votes equal to the
largest number of full Common Shares (as defined in Section A.6(a) of
this Article IV) into which each share of Convertible Preferred Stock
could be converted pursuant to Section A.6 hereof on the record date
for the vote or for written consent of stockholders, if applicable.
The holder of each share of Convertible Preferred Stock shall be
entitled to notice of any stockholders' meeting in accordance with the
by-laws of the Corporation and shall vote with holders of the Common
Stock, voting together as single class, upon all matters submitted to
a vote of stockholders excluding those matters required to be
submitted to a class or series vote pursuant to the terms hereof
(including without limitation Section A.8) or by law. Fractional votes
shall not, however, be permitted and any fractional voting rights
resulting from the above formula (after aggregating all Common Shares
into which shares of Convertible Preferred Stock held by each holder
could be converted) shall be rounded to the nearest whole number (with
one-half rounded upward to one).
3. Dividends. The holders of Convertible Preferred Stock shall
---------
be entitled, in preference to the holders of any and all other classes
of capital stock of the Corporation, to receive, out of funds legally
available therefor, cumulative dividends on the Convertible Preferred
Stock in cash, at the rate per annum of $.1428571429 per share of
Convertible Preferred Stock, subject to proration for partial years on
the basis of a 365-day year (the "Convertible
4
<PAGE>
Cumulative Preference Dividend"). Such dividends will accumulate
commencing as of the date of issuance of the Convertible Preferred
Stock and shall be cumulative, to the extent unpaid, whether or not
they have been declared and whether or not there are profits, surplus
or other funds of the Corporation legally available for the payment of
dividends. Convertible Cumulative Preference Dividends shall become
due and payable with respect to any share of Convertible Preferred
Stock as provided in Sections A.4, A.5 and A.6. Dividends paid in cash
in an amount less than the total amount of such dividends at the time
accumulated and payable on all outstanding shares of Convertible
Preferred Stock, including fractions, shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. At
any time when shares of Convertible Preferred Stock are outstanding
and the Convertible Cumulative Preference Dividends have not been paid
in full in cash: (a) no dividend whatsoever shall be paid or declared,
and no distribution shall be made, on any capital stock of the
Corporation ranking junior to the Convertible Preferred Stock; and (b)
no shares of capital stock of the Corporation ranking junior to the
Convertible Preferred Stock shall be purchased, redeemed or acquired
by the Corporation and no monies shall be paid into or set aside or
made available for a sinking fund for the purchase, redemption or
acquisition thereof. If and to the extent such Convertible Cumulative
Preference Dividends have been paid in full, however, subject to
Section A.8, the holders of Convertible Preferred Stock shall be
entitled to receive additional dividends out of funds legally
available therefor at such times and in such amounts as the Board of
Directors may determine in its sole discretion, provided, however,
-------- -------
that no such dividend may be declared or paid on any shares of
Convertible Preferred Stock unless at the same time a dividend is
declared or paid on all outstanding shares of Common Stock, Class A
Common Stock and Class B Common Stock and vice versa, with holders of
Convertible Preferred Stock, Common Stock, Class A Common Stock and
Class B Common Stock sharing in any such additional dividends as if
they constituted a single class of stock and with each holder of a
share of Convertible Preferred Stock entitled to receive such
dividends based on the number of shares of Common Stock or Class B
Common Stock, as the case may be, into which such shares of
Convertible Preferred Stock are then convertible hereunder, as
contemplated by Section C.3 of this Article IV.
All numbers relating to the calculation of dividends pursuant to
this Section A.3 shall be subject to equitable adjustment in the event
of any stock split, combination, reorganization, recapitalization,
reclassification or other similar event involving a change in the
Convertible Preferred Stock.
5
<PAGE>
4. Liquidation.
-----------
(a) Liquidation Preference. Upon any liquidation, dissolution or winding
----------------------
up of the Corporation and its subsidiaries, whether voluntary or involuntary (a
"Liquidation Event"), each holder of outstanding shares of Convertible Preferred
Stock shall be entitled to be paid out of the assets of the Corporation
available for distribution to stockholders, whether such assets are capital,
surplus or earnings, and before any amount shall be paid or distributed to the
holders of Common Stock, Class A Common Stock, Class B Common Stock or of any
other stock ranking on liquidation junior to the Convertible Preferred Stock, an
amount in cash equal to (i) $1.785714286 per share (adjusted appropriately for
stock splits, stock dividends, recapitalizations and the like with respect to
the Convertible Preferred Stock) (the "Convertible Base Liquidation Preference
Amount") plus (ii) any accumulated but unpaid dividends to which such holder of
outstanding shares of Convertible Preferred Stock is then entitled pursuant to
Sections A.3 and A.5(f) hereof, plus (iii) any interest accrued pursuant to
Section A.5(e) (the "Convertible Preferred Liquidation Preference Amount");
provided, however, that if, upon any Liquidation Event, the amounts payable with
- -------- -------
respect to the Convertible Preferred Stock are not paid in full, the holders of
the Convertible Preferred Stock shall share ratably in any distribution of
assets in proportion to the full respective preferential amounts to which they
are entitled; and provided further, however, that if upon any Liquidation Event
-------- ------- -------
the holders of the outstanding shares of Convertible Preferred Stock would
receive more than the Convertible Preferred Liquidation Preference Amount in the
event their shares were converted into Redeemable Preferred Stock (as defined in
Section B of this Article IV) and Common Shares immediately prior to the record
date for distributions in connection with such Liquidation Event, then each
outstanding share of Convertible Preferred Stock shall receive, in lieu of the
Convertible Liquidation Preference Amount, (x) an amount per share equal to
$1.428571429 plus all dividends pursuant to Section A.3 or A.5(f) which are
accumulated but unpaid in respect of such share as of the date of the
Liquidation Event before any amount shall be paid or distributed to the holders
of Common Stock, Class A Common Stock, Class B Common Stock or of any other
stock ranking on liquidation junior to the Convertible Preferred Stock, and (y)
thereafter shall share ratably with the holders of Common Stock, Class A Common
Stock and any other stock ranking on liquidation junior to the Convertible
Preferred Stock in the assets available for distribution, with such
distributions to be made in cash and as if each share of Convertible Preferred
Stock had been converted into the number of shares of Redeemable Preferred Stock
and Common Shares issuable upon the conversion of such share of Convertible
Preferred Stock immediately prior to any such Liquidation Event. The provisions
of this Section A.4 shall not in any way limit the right of the holders of
Convertible Preferred Stock to elect to convert their shares into Redeemable
Preferred
6
<PAGE>
Stock and Common Shares pursuant to Section A.6 prior to or in connection with
any Liquidation Event.
(b) Notice. Prior to the occurrence of any Liquidation Event, the
------
Corporation will furnish each holder of Convertible Preferred Stock notice in
accordance with Section A.9 hereof, together with a certificate prepared by the
chief financial officer of the Corporation describing in detail the facts of
such Liquidation Event, stating in detail the amount(s) per share of Convertible
Preferred Stock each holder of Convertible Preferred Stock would receive
pursuant to the provisions of Section A.4(a) hereof and stating in detail the
facts upon which such amounts were determined.
5. Redemption.
----------
(a) Redemption Events.
-----------------
(i) On or after October 31, 2001. Upon the election of the holder or
----------------------------
holders of not less than sixty-six and two-thirds percent of the voting power of
the outstanding Convertible Preferred Stock made at any time on or after October
31, 2001, the Corporation shall redeem all (and not less than all, other than
pursuant to Section A.5(e) below) of the outstanding shares of Convertible
Preferred Stock at the Convertible Preferred Redemption Price specified in
Section A.5(d). The foregoing election shall be made by such holders giving the
Corporation and each of the other holders of Convertible Preferred Stock not
less than fifteen (15) days prior written notice, which notice shall set forth
the date for such redemption.
(ii) Extraordinary Transactions. Upon the election of the holder or
--------------------------
holders of not less than sixty-six and two-thirds percent in voting power of the
outstanding Convertible Preferred Stock in connection with (A) a merger or
consolidation of the Corporation with or into another corporation (with respect
to which less than a majority of the outstanding voting power of the surviving
or consolidated corporation is held by stockholders of the Corporation
immediately prior to such event), (B) the sale or transfer of all or
substantially all of the properties and assets of the Corporation and its
subsidiaries, (C) any purchase by any party (or group of affiliated parties)
other than an Investor (as defined in that certain Preferred Stock Purchase
Agreement dated as of December 4, 1996) of shares of capital stock of the
Corporation (either through a negotiated stock purchase or a tender for such
shares), the effect of which is that such party (or group of affiliated parties)
that did not beneficially own a majority of the voting power of the outstanding
shares of capital stock of the Corporation immediately prior to such purchase
beneficially owns at least a majority of such voting power immediately after
such purchase, or (D) the redemption or repurchase of shares representing a
majority of the voting power of the outstanding
7
<PAGE>
shares of capital stock of the Corporation (each an "Extraordinary
Transaction"), then, as a part of and as a condition to the effectiveness of
such Extraordinary Transaction, unless the holders of Convertible Preferred
------
Stock shall have elected to convert their shares of Convertible Preferred Stock
into Redeemable Preferred Stock and Common Shares in accordance with the
voluntary conversion provisions of Section A.6 prior to the effective date of
such Extraordinary Transaction, the Corporation shall, on the effective date of
such Extraordinary Transaction, redeem all (but not less than all, other than as
provided in Section A.5(e) below) of the outstanding shares of Convertible
Preferred Stock for an amount (subject to Section A.5(e)) equal to the
Convertible Preferred Liquidation Preference Amount; provided, however, that if
-------- -------
upon any Extraordinary Transaction the holders of the outstanding shares of
Convertible Preferred Stock would receive more than the Convertible Preferred
Liquidation Preference Amount in the event their shares were converted into
Redeemable Preferred Stock and Common Shares immediately prior to such
Extraordinary Transaction, then each outstanding share of Convertible Preferred
Stock shall receive an amount per share equal to $1.428571429 plus all dividends
pursuant to Section A.3 or A.5(f) which are accumulated but unpaid in respect of
such share as of the date of the Extraordinary Transaction before any amount
shall be paid or distributed to the holders of Common Stock, Class A Common
Stock, Class B Common Stock or any other stock ranking on liquidation junior to
the Convertible Preferred Stock, payable in cash, and thereafter shall share
ratably with the holders of the Common Stock, Class A Common Stock and any other
stock ranking on liquidation junior to the Convertible Preferred Stock in the
proceeds of such Extraordinary Transaction or, as applicable, shall receive from
the Corporation an amount equal to the amount per share that would be paid if
the Common Shares receivable upon conversion of the Convertible Preferred Stock
were being acquired in the Extraordinary Transaction at the same price per share
as is paid for Common Stock, which excess amount shall be paid in the same form
of consideration as is paid to holders of Common Stock, as if each share of
Convertible Preferred Stock had been converted into the number of shares of
Redeemable Preferred Stock and Common Shares issuable upon the conversion of
such share of Convertible Preferred Stock immediately prior to such
Extraordinary Transaction. The foregoing election shall be made by such holders
giving the Corporation and each of the other holders of Convertible Preferred
Stock not less than five (5) days prior written notice, which notice shall set
forth the date for such redemption. The provisions of this Section A.5 shall
not in any way limit the right of the holders of Convertible Preferred Stock to
elect to convert their shares into shares of Redeemable Preferred Stock and
Common Shares pursuant to Section A.6 prior to or in connection with any
Extraordinary Transaction or otherwise.
(b) Valuation of Distribution Securities. Any securities or other
------------------------------------
consideration to be delivered to the holders of the Convertible Preferred Stock
upon any
8
<PAGE>
Extraordinary Transaction in accordance with the terms hereof shall be valued as
follows:
(i) If traded on a nationally recognized securities exchange or
inter-dealer quotation system, the value shall be deemed to be the average of
the closing prices of the securities on such exchange or system over the 30-day
period ending three (3) business days prior to the closing;
(ii) If traded over-the-counter, the value shall be deemed to be the
average of the closing bid prices over the 30-day period ending three (3)
business days prior to the closing; and
(iii) If there is no active public market, the value shall be the
fair market value thereof, as mutually determined by the Corporation and the
holders of not less than sixty-six and two-thirds percent in voting power of the
outstanding shares of Convertible Preferred Stock, provided that if the
Corporation and the holders of sixty-six and two-thirds percent in voting power
of the outstanding shares of Convertible Preferred Stock are unable to reach
agreement, then by independent appraisal by an investment banker hired and paid
by the Corporation, but reasonably acceptable to the holders of sixty-six and
two-thirds percent in voting power of the outstanding shares of Convertible
Preferred Stock.
(c) Notice. Prior to the occurrence of any Extraordinary Transaction, the
------
Corporation will furnish each holder of Convertible Preferred Stock notice in
accordance with Section A.9 hereof, together with a certificate prepared by the
chief financial officer of the Corporation describing in detail all material
terms of such Extraordinary Transaction, including without limitation the
consideration to be delivered in connection with such Extraordinary Transaction,
the valuation of the Corporation at the time of such Extraordinary Transaction
and the identities of the parties to the Extraordinary Transaction.
(d) Redemption Date; Redemption Price. Upon the election of the holders of
---------------------------------
not less than sixty-six and two-thirds percent of the voting power of the
outstanding Convertible Preferred Stock to cause the Corporation to redeem the
Convertible Preferred Stock pursuant to Section A.5(a)(i) or (ii), all holders
of Convertible Preferred Stock shall be deemed to have elected to cause the
Convertible Preferred Stock to be so redeemed. Any date upon which a redemption
shall occur in accordance with Section A.5(a) shall be referred to as a
"Convertible Preferred Redemption Date." The redemption price for each share of
Convertible Preferred Stock redeemed pursuant to Section A.5 shall be the sum of
(i) the Convertible Preferred Base Liquidation Preference Amount, plus (ii) any
accumulated but unpaid dividends to which such holder of outstanding shares of
Convertible Preferred Stock is entitled under
9
<PAGE>
Section A.3 or A.5(f), or such greater amount as may be payable pursuant to the
proviso to Section A.5(a)(ii), if applicable (collectively, the "Convertible
Preferred Redemption Price"); provided, however, that if at a Convertible
-------- -------
Preferred Redemption Date shares of Convertible Preferred Stock are unable to be
redeemed (as contemplated by Section A.5(e) below), the holders of Convertible
Preferred Stock shall also be entitled to dividends and interest pursuant to
Section A.5(e) and A.5(f). The Convertible Preferred Redemption Price shall be
payable in cash in immediately available funds on the Convertible Preferred
Redemption Date except to the extent contemplated by the proviso to Section
A.5(a)(ii) and subject to Section A.5(e). Until the full Convertible Preferred
Redemption Price has been paid for all shares of Convertible Preferred Stock
being redeemed: (A) no dividend whatsoever shall be paid or declared, and no
distribution shall be made, on any capital stock of the Corporation; and (B) no
shares of capital stock of the Corporation (other than the Convertible Preferred
Stock in accordance with this Section A.5) shall be purchased, redeemed or
acquired by the Corporation and no monies shall be paid into or set aside or
made available for a sinking fund for the purchase, redemption or acquisition
thereof.
(e) Redemption Prohibited. If, at a Convertible Preferred Redemption Date,
---------------------
the Corporation is prohibited under the General Corporation Law of the State of
Delaware from redeeming all shares of Convertible Preferred Stock for which
redemption is required hereunder, then it shall redeem such shares on a pro-rata
basis among the holders of Convertible Preferred Stock in proportion to the full
respective redemption amounts to which they are entitled hereunder to the extent
possible and shall redeem the remaining shares to be redeemed as soon as the
Corporation is not prohibited from redeeming some or all of such shares under
the General Corporation Law of the State of Delaware, subject to the last
paragraph of Section A.8. Any shares of Convertible Preferred Stock not
redeemed shall remain outstanding and entitled to all of the rights and
preferences provided in this Article IV. In the event that the Corporation
fails to redeem shares for which redemption is required pursuant to this Section
A.5, then during the period from the applicable Convertible Preferred Redemption
Date through the date on which such shares are redeemed, the applicable
Convertible Preferred Redemption Price of such shares plus additional dividends
that accumulate in respect of such shares under Section A.5(f) shall bear
interest at the rate of 10% per annum, which interest rate shall increase by an
additional .5% at the end of each six (6) month period thereafter until the
Convertible Preferred Redemption Price (as so increased) is paid in full,
subject to a maximum rate of 15% per annum and with such interest to be
compounded annually. In the event the Corporation fails to redeem shares for
which redemption is required pursuant to this Section A.5 within six (6) months
after the date on which redemption is required, for any reason, and such failure
thereafter continues (the period during which such failure shall continue being
referred to herein as a "Voting Period"), the number of Directors constituting
the Board of Directors shall be automatically increased by a number equal to the
number of
10
<PAGE>
Directors then constituting the Board of Directors, plus two, and the holders of
shares of Convertible Preferred Stock then outstanding shall be entitled, voting
as a class on a one-vote-per-share basis (to the exclusion of the holders of all
other securities and classes of capital stock of the Corporation), to elect such
additional Directors. As soon as practicable after the commencement of the
Voting Period, the Corporation shall call a special meeting of the holders of
shares of Convertible Preferred Stock by mailing a notice of such special
meeting to such holders, such meeting to be held not more than ten (10) days
after the date of mailing of such notice. If the Corporation fails to send a
notice, the meeting may be called by any such holder on like notice. The record
date for determining the holders entitled to notice of and to vote at such
special meeting shall be the close of business on the fifth business day
preceding the day on which such notice is mailed. At any such special meeting
and at each meeting of holders of shares of Convertible Preferred Stock held
during a Voting Period at which Directors are to be elected (or with respect to
any action by written consent in lieu of a meeting of shareholders), such
holders, voting together as a class (to the exclusion of the holders of all
other securities and classes of capital stock of the Corporation), shall be
entitled to elect the number of Directors prescribed in this Section A.5(e), and
each share of Convertible Preferred Stock shall be entitled to one (1) vote
(whether voted in person by the holder thereof or by proxy or pursuant to a
shareholders' consent). The terms of office of all persons who are Directors of
the Corporation at the time of a special meeting of the holders of Convertible
Preferred Stock to elect Directors shall continue, notwithstanding the election
at such meeting of the additional Directors that such holders are entitled to
elect, and the persons so elected by such holders, together with the remaining
incumbent Directors, shall constitute the duly elected Directors of the
Corporation. Simultaneously with the termination of a Voting Period upon the
redemption of all outstanding shares of Convertible Preferred Stock, the terms
of office of the additional Directors elected by the holders of the Convertible
Preferred Stock shall terminate, the remaining Directors shall constitute the
Directors of the Corporation and the voting rights of such holders to elect
additional Directors pursuant to this Section A.5(e) shall cease.
(f) Dividend After Convertible Preferred Redemption Date. From and after
----------------------------------------------------
a Convertible Preferred Redemption Date, no shares of Convertible Preferred
Stock subject to redemption shall be entitled to dividends as provided in
Section A.3, provided, however, that in the event that shares of Convertible
Preferred Stock are unable to be redeemed and continue to be outstanding in
accordance with Section A.5(e), such shares shall continue to be entitled to
dividends as provided in Section A.3 and interest as provided in Section A.5(e)
until the date on which such shares are actually redeemed by the Corporation.
(g) Surrender of Certificates. Upon receipt of the applicable Convertible
-------------------------
Preferred Redemption Price by certified check or wire transfer, each holder of
shares of
11
<PAGE>
Convertible Preferred Stock to be redeemed shall surrender the certificate
or certificates representing such shares to the Corporation, duly assigned
or endorsed for transfer (or accompanied by duly executed stock powers
relating thereto), or shall deliver an affidavit or agreement satisfactory
to the Corporation to indemnify the Corporation from any loss incurred by
it in connection therewith (an "Affidavit of Loss") with respect to such
certificates at the principal executive office of the Corporation or the
office of the transfer agent for the Convertible Preferred Stock or such
office or offices in the continental United States of an agent for
redemption as may from time to time be designated by notice to the holders
of Convertible Preferred Stock, and each surrendered certificate shall be
canceled and retired.
(h) Further Restrictions on Redemption. Notwithstanding anything
----------------------------------
herein to the contrary, the Convertible Preferred Stock shall not be
redeemed hereunder unless (i) all obligations of the Corporation under the
Loan Agreement dated December 4, 1996 among the Corporation, Fleet National
Bank, as agent and as a lender, and the other lenders from time to time
party thereto (collectively, the "Lenders") shall have been or is
concurrently paid in full, or (ii) the Lenders shall have consented to such
redemption. If the Corporation is prohibited from redeeming the Convertible
Preferred Stock hereunder, the holders of Convertible Preferred Stock shall
be entitled to the provisions of Section A.5(e) and A.5(f) hereof.
6. Conversion. The holders of the Convertible Preferred Stock shall have
----------
the following conversion rights:
(a) Voluntary Conversion. At any time the holders of shares of
--------------------
Convertible Preferred Stock shall be entitled, upon the written election of
the holder or holders of not less than sixty-six and two-thirds percent in
voting power of the outstanding shares of Convertible Preferred Stock as
provided in Section A.6(c) below, without the payment of any additional
consideration, to cause all (but not less than all) of the outstanding
shares of Convertible Preferred Stock to be converted into (i) the number
of fully paid and nonassessable shares of either (a) Class B Common Stock
(as defined below in Section C), in the event that at the effective date of
such conversion the Corporation (or any successor thereto) has not
completed an initial public offering of equity securities registered under
the Securities Act of 1933, as amended, or (b) Common Stock, in the event
the Corporation has then completed such an initial public offering (the
shares of Class B Common Stock or Common Stock issuable upon conversion
pursuant to this Section A.6 being referred to as "Common Shares") and (ii)
eight tenths (.8) of a fully paid and nonassessable share of Redeemable
Preferred Stock per share of Convertible Preferred Stock. The number of
Common Shares issuable per share of Convertible Preferred Stock shall be
determined on the basis of the ratio which results from dividing the
Conversion Price (as defined below) per share in effect for the Convertible
Preferred Stock at the time of conversion into the per share
12
<PAGE>
Conversion Value (as defined below) of the Convertible Preferred Stock. Upon
the filing of this Second Amended and Restated Certificate of Incorporation with
the Delaware Secretary of State, the "Conversion Price" per share of Convertible
Preferred Stock shall be $2.678571429 and the per share "Conversion Value" of
Convertible Preferred Stock shall be $1.785714286. The Conversion Price of
Convertible Preferred Stock shall be subject to adjustment from time to time as
provided in Section A.7 hereof. The number of Common Shares into which a share
of a Convertible Preferred Stock is convertible is hereinafter referred to as
the "Common Stock Conversion Rate." The number of shares of Redeemable Preferred
Stock into which a share of Convertible Preferred Stock is convertible is
hereinafter referred to as the "Redeemable Conversion Rate." If the holders of
shares of Convertible Preferred Stock elect to convert the outstanding shares of
Convertible Preferred Stock at a time when there are any accumulated but unpaid
dividends or other amounts due on or in respect of such shares, such dividends
and other amounts shall be paid in full in cash by the Corporation upon the
effective date of such conversion. Upon the election to so convert in the
manner and on the basis specified in this Section A.6(a) all holders of the
Convertible Preferred Stock shall be deemed to have elected to voluntarily
convert all outstanding shares of Convertible Preferred Stock pursuant to this
Section A.6(a).
(b) Automatic Conversion Upon QPO. Each share of Convertible Preferred
-----------------------------
Stock shall automatically be converted, without the payment of any additional
consideration, into shares of Common Stock and Redeemable Preferred Stock as of,
and in all cases subject to, the closing of the Corporation's first firm
commitment public offering pursuant to an effective registration statement under
the Securities Act of 1933, as amended, provided that (i) such registration
statement covers the offer and sale of Common Stock of which the aggregate net
proceeds attributable to sales for the account of the Corporation and selling
stockholders exceed $25,000,000, and (ii) either all outstanding shares of
Redeemable Preferred Stock are redeemed immediately upon and as of the closing
of such offering or contemporaneously with such offering cash in an amount
sufficient to redeem all outstanding shares of Redeemable Preferred Stock is
segregated and irrevocably held by the Corporation for payment to holders of
Redeemable Preferred Stock in connection with the redemption thereof pursuant to
Section B.5(a)(i) (a "QPO"); provided that if a closing of a QPO occurs, all
--------
outstanding shares of Convertible Preferred Stock shall be deemed to have been
converted into shares of Common Stock and Redeemable Preferred Stock immediately
prior to such closing. Any such conversion shall be at the Common Stock
Conversion Rate and Redeemable Conversion Rate in effect upon the closing of a
QPO, as applicable. If the holders of shares of Convertible Preferred Stock are
required to convert the outstanding shares of Convertible Preferred Stock
pursuant to this Section A.6(b) at a time when there are any accumulated but
unpaid dividends or other amounts due on or in respect of such shares, such
dividends and other amounts shall be paid in full in cash by the Corporation in
connection with such conversion.
13
<PAGE>
(c) Procedure for Voluntary Conversion; Effective Date. Upon election to
--------------------------------------------------
convert pursuant to Section A.6(a), each holder of Convertible Preferred Stock
(i) shall provide written notice of conversion (the "Voluntary Conversion
Notice") to the Corporation and (ii) shall surrender the certificate or
certificates representing its Convertible Preferred Stock to be converted, duly
assigned or endorsed for transfer to the Corporation (or accompanied by duly
executed stock powers relating thereto), at the principal executive office of
the Corporation or the offices of the transfer agent for the Convertible
Preferred Stock or such office or offices in the continental United States of an
agent for conversion as may from time to time be designated by notice to the
holders of the Convertible Preferred Stock by the Corporation, or shall deliver
an Affidavit of Loss with respect to such certificates. The Voluntary
Conversion Notice shall specify (x) the number of shares of Convertible
Preferred Stock held by such holder and the number of such shares to be
converted, (y) the name or names in which such holder wishes the certificate or
certificates for the Common Shares and Redeemable Preferred Stock to be issued
upon such conversion and (z) the address to which such holder wishes delivery to
be made of such new certificates to be issued upon such conversion. The issuance
by the Corporation of Common Shares and Redeemable Preferred Stock upon a
conversion of Convertible Preferred Stock pursuant to Section A.6(a) hereof
shall be effective as of the surrender of the certificate or certificates for
the Convertible Preferred Stock to be converted, duly assigned or endorsed for
transfer to the Corporation (or accompanied by duly executed stock powers
relating thereto), or as of the delivery of an Affidavit of Loss. Upon
surrender of a certificate representing Convertible Preferred Stock for
conversion, or delivery of an Affidavit of Loss, the Corporation shall issue and
send by hand delivery, by courier or by first class mail (postage prepaid) to
the holder thereof or to such holder's designee, at the address designated by
such holder, certificates for the number of Common Shares and Redeemable
Preferred Stock to which such holder shall be entitled upon conversion plus a
cash payment in the amount of any accumulated but unpaid dividends as
contemplated by Section A.6(a) in respect of the shares of Convertible Preferred
Stock which are converted. The issuance of certificates for Common Shares and
Redeemable Preferred Stock upon conversion of Convertible Preferred Stock will
be made without charge to the holders of such shares for any issuance tax in
respect thereof or other costs incurred by the Corporation in connection with
such conversion and the related issuance of such stock. Notwithstanding anything
to the contrary set forth in this Section A.6(c), in the event that the holders
of shares of Convertible Preferred Stock elect to convert such shares pursuant
to Section A.6(a) in connection with any Liquidation Event, Extraordinary
Transaction or public offering (not including the QPO), (i) the Voluntary
Conversion Notice shall be delivered to the Corporation no later than five (5)
days before the occurrence of such Liquidation Event or the closing of such
Extraordinary Transaction or public offering and such Voluntary Conversion
Notice shall be effective as of, and shall in all cases be subject to, the
occurrence of such Liquidation Event or closing of such Extraordinary
Transaction or public offering
14
<PAGE>
and (ii) if such Liquidation Event, Extraordinary Transaction or public offering
occurs, all outstanding shares of Convertible Preferred Stock shall be deemed to
have been converted into Common Shares and Redeemable Preferred Stock
immediately prior thereto, provided that the Corporation shall make appropriate
provisions (x) for the Common Shares issued upon such conversion to be treated
on the same basis as all other Common Stock in such Liquidation Event,
Extraordinary Transaction or public offering provided that the foregoing shall
not be construed to provide or require the registration of any Common Shares for
sale and (y) for the payment of the Redeemable Liquidation Preference Amount (as
defined in Section B.4) in connection with any Liquidation Event or the
redemption of the Redeemable Stock (issued upon such conversion) upon election
of such redemption in connection with any Extraordinary Transaction or public
offering, if applicable, as provided herein. In the event of any public
offering constituting a QPO, the provisions of Section A.6(d) shall apply.
(d) Procedure for Automatic Conversion. As of, and in all cases subject
----------------------------------
to, the closing of the QPO (the "Automatic Conversion Date"), all outstanding
shares of Convertible Preferred Stock shall be converted automatically without
any further action by the holders of such shares and whether or not the
certificates representing such shares of Convertible Preferred Stock are
surrendered to the Corporation or its transfer agent; provided, however, that
-------- -------
all holders of Convertible Preferred Stock shall be given prior written notice
of the occurrence of the QPO in accordance with Section A.9 hereof. The
Corporation shall not be obligated to issue certificates evidencing the shares
of Redeemable Preferred Stock or Common Stock issuable on the Automatic
Conversion Date (or the cash payment for the shares of Redeemable Preferred
Stock which are redeemed immediately after such automatic conversion as provided
below and in Section B.5(a)(i)) unless certificates evidencing such shares of
the Convertible Preferred Stock being converted, or an Affidavit of Loss with
respect to such certificates, are delivered to the Corporation or its transfer
agent. On the Automatic Conversion Date, all rights with respect to the
Convertible Preferred Stock so converted shall terminate, except any of the
rights of the holders thereof upon surrender of their certificate or
certificates therefor or delivery of an Affidavit of Loss thereof to receive
certificates for the number of shares of Common Stock and Redeemable Preferred
Stock into which such Convertible Preferred Stock has been converted (or the
cash payment to which such holder is entitled as provided below and in Section
B.5(a)(i)) plus all accumulated but unpaid dividends as contemplated by Section
A.6(b). If so required by the Corporation, certificates surrendered for
conversion shall be endorsed or accompanied by written instrument or instruments
of transfer, in form satisfactory to the Corporation, duly executed by the
registered holder or by his or its attorney duly authorized in writing. Upon
surrender of such certificates or Affidavit of Loss the Corporation shall issue
and deliver to such holder, promptly (and in any event in such time as is
sufficient to enable such holder to participate in such QPO) at such office and
in its name as shown on such surrendered certificate or certificates, a
15
<PAGE>
certificate or certificates for the number of shares of Common Stock and number
of shares of Redeemable Preferred Stock into which the shares of the Convertible
Preferred Stock surrendered are convertible on the Automatic Conversion Date and
shall pay all accumulated but unpaid dividends as contemplated by Section A.6(b)
in respect of the shares of Convertible Preferred Stock which are converted.
Notwithstanding anything to the contrary set forth in this Section A.6(d), the
Corporation may deliver, in lieu of certificates for Redeemable Preferred Stock,
cash in an amount determined pursuant to Section B.5(b) hereof on account of the
redemption of such Redeemable Preferred Stock, and upon payment of such cash the
Redeemable Preferred Stock into which such Convertible Preferred Stock would
have been converted shall be deemed to have been issued and redeemed by the
Corporation.
(e) Reservation of Stock Issuable Upon Conversion. The Corporation shall
---------------------------------------------
at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, Class B Common Stock and Redeemable Preferred Stock,
solely for the purpose of effecting the conversion of the shares of Convertible
Preferred Stock, such number of its shares of Class B Common Stock (or Common
Stock upon or following an initial public offering) and Redeemable Preferred
Stock as shall from time to time be sufficient to effect the conversion of all
outstanding shares of Convertible Preferred Stock; and if at any time the number
of authorized but unissued shares of Common Stock, Class B Common Stock and
Redeemable Preferred Stock shall not be sufficient to effect the conversion of
all then outstanding shares of Convertible Preferred Stock, the Corporation will
take such corporate action as may be necessary to increase its authorized but
unissued shares of Common Stock, Class B Common Stock and Redeemable Preferred
Stock to such number of shares as shall be sufficient for such purpose.
(f) No Closing of Transfer Books. The Corporation shall not close its
----------------------------
books against the transfer of shares of Convertible Preferred Stock in any
manner which would interfere with the timely conversion of any shares of
Convertible Preferred Stock.
7. Adjustments.
-----------
(a) Dividends and Stock Splits. If the number of shares of Common Stock
--------------------------
(which term for purposes of this Section A.7 shall include all common stock of
the Corporation, including Class A Common Stock and Class B Common Stock)
outstanding at any time after the date hereof is increased by a stock dividend
payable in shares of Common Stock or by a subdivision or split-up of shares of
Common Stock, then, on the date such payment is made or such change is
effective, the Conversion Price of the Convertible Preferred Stock shall be
appropriately decreased so that the number of Common Shares issuable on
conversion of any shares of Convertible
16
<PAGE>
Preferred Stock shall be increased in proportion to such increase of
outstanding shares of Common Stock.
(b) Reverse Stock Splits. If the number of shares of Common Stock
--------------------
outstanding at any time after the date hereof is decreased by a combination
or reverse split of the outstanding shares of Common Stock, then, on the
effective date of such combination or reverse split, the Conversion Price
of the Convertible Preferred Stock shall be appropriately increased so that
the number of Common Shares issuable on conversion of any shares of
Convertible Preferred Stock shall be decreased in proportion to such
decrease in outstanding shares of Common Stock.
(c) Reorganization, etc. In case, at any time after the date hereof,
-------------------
of any capital reorganization, or any reclassification of the stock of the
Corporation (other than as a result of a stock dividend payable on shares
of Common Stock in the form of Common Stock or subdivision, split-up or
combination involving the Common Stock), the shares of Convertible
Preferred Stock shall, after such capital reorganization or
reclassification, be convertible into the kind and number of shares of
stock or other securities or property of the Corporation or otherwise to
which such holder would have been entitled if immediately prior to such
capital reorganization or reclassification such holder had converted its
shares of Convertible Preferred Stock into Common Shares and Redeemable
Preferred Stock. The provisions of this clause (c) shall similarly apply to
successive capital reorganizations or reclassifications.
(d) Certificate. Upon the occurrence of each adjustment or
-----------
readjustment pursuant to this Section A.7, the Corporation at its expense
shall promptly compute such adjustment or readjustment in accordance with
the terms hereof and prepare and furnish to each holder of Convertible
Preferred Stock a certificate setting forth such adjustment or readjustment
and showing in detail the facts upon which such adjustment or readjustment
is based. The Corporation shall, upon written request at any time of any
holder of Convertible Preferred Stock, furnish or cause to be furnished to
such holder a like certificate setting forth (i) such adjustments or
readjustments, (ii) the Conversion Prices before and after such adjustment
or readjustment, and (iii) the number of Common Shares and shares of
Redeemable Preferred Stock and the amount, if any, of other property which
at the time would be received upon the conversion of such holder's shares
of Convertible Preferred Stock. All calculations under this Section A.7
shall be made to the nearest cent or to the nearest one hundredth (1/100)
of a share, as the case may be.
8. Covenants. So long as any shares of Convertible Preferred Stock (or
---------
Redeemable Preferred Stock, as applicable) shall be outstanding, the Corporation
shall not, without first having provided the written notice of such proposed
action to each holder of outstanding shares of Convertible Preferred Stock (or
Redeemable Preferred Stock, as
17
<PAGE>
applicable) and having obtained the affirmative vote or written consent of the
holders of not less than sixty-six and two-thirds percent in voting power of the
outstanding shares of Convertible Preferred Stock (or Redeemable Preferred
Stock, as applicable), voting as a single class, with each share of Convertible
Preferred Stock (or Redeemable Preferred Stock, as applicable) entitling the
holder thereof to one vote per share of Convertible Preferred Stock held by such
holder:
(a) amend, alter or repeal any provision of, or add any provision to,
Article IV of this Second Amended and Restated Certificate of Incorporation or
otherwise amend, alter or repeal any provision of, or add any provision to, this
Second Amended and Restated Certificate of Incorporation or the Corporation's
by-laws if such latter action would alter or change the preferences, rights,
privileges or powers of, or the restrictions provided for the benefit of, any of
the Convertible Preferred Stock or the Redeemable Preferred Stock;
(b) reclassify any capital stock;
(c) create, obligate itself to create, authorize or issue any new class
or classes of stock or new series of common stock or preferred stock or any
security convertible into or evidencing the right to purchase shares of any new
class or series of common stock or preferred stock or any new capital stock of
the Corporation having preference over or being on parity with the Convertible
Preferred Stock or the Redeemable Preferred Stock in any respect;
(d) apply any of its assets to the redemption, retirement, purchase or
other acquisition, directly or indirectly, through subsidiaries or otherwise,
except for the redemption of up to 2,000,000 shares of Common Stock and/or Class
A Common Stock except from employees, officers or Directors of, or consultants,
advisors or independent contractors to, the Corporation or any of its
subsidiaries pursuant to an agreement containing vesting and/or repurchase
provisions approved by the Board of Directors of the Corporation or a committee
thereof; or
(e) effect (I) any Liquidation Event, (II) any Extraordinary Transaction
or other sale or transfer of all or any substantial portion of the properties
and assets of any subsidiary of the Corporation, (III) any public offering, (IV)
any recapitalization of the Corporation or (V) any other transaction or series
of related transactions in which more than 50% of the voting power of the
Corporation is disposed of.
Further, the Corporation shall not, by amendment of this Second Amended and
Restated Certificate of Incorporation or through any Extraordinary Transaction
or other reorganization, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities, agreement or any other voluntary action, avoid or
seek to avoid the
18
<PAGE>
observance or performance of any of the terms to be observed or performed
hereunder by the Corporation but shall at all times in good faith assist in the
carrying out of all the provisions of this Article IV and in the taking of all
such action as may be necessary or appropriate in order to protect the rights of
the holders of the Convertible Preferred Stock and the Redeemable Preferred
Stock against impairment. Without limitation of the foregoing, the Corporation
shall take such action as shall be necessary or appropriate, to the extent
reasonably within its control, to remove promptly any impediments to its ability
to redeem Convertible Preferred Stock or Redeemable Preferred Stock under the
circumstances contemplated by Section A.5(e) or B.5(c). Any successor to the
Corporation shall agree, as a condition to such succession, to carry out and
observe the obligations of the Corporation hereunder with respect to the
Convertible Preferred Stock and the Redeemable Preferred Stock.
9. Notice
------
(a) Liquidation Events, Extraordinary Transactions, Etc. In the event
---------------------------------------------------
(i) the Corporation establishes a record date to determine the holders of any
class of securities who are entitled to receive any dividend or other
distribution or who are entitled to vote at a meeting (or by written consent) in
connection with any of the transactions identified in clause (ii) hereof, or
(ii) any Liquidation Event (as defined in Section A.4), any Extraordinary
Transaction (as defined in Section A.5) or any public offering becomes
reasonably likely to occur, the Corporation shall mail or cause to be mailed by
first class mail (postage prepaid) to each holder of Convertible Preferred Stock
(or each holder of Redeemable Preferred Stock, as applicable) at least forty-
five (45) days prior to such record date specified therein or the expected
effective date of any such transaction, a notice specifying (A) the date of such
record date for the purpose of such dividend or distribution or meeting or
consent and a description of such dividend or distribution or the action to be
taken at such meeting or by such consent, (B) the date on which any such
Liquidation Event, Extraordinary Transaction or public offering is expected to
become effective, and (C) the date on which the books of the Corporation shall
close or a record shall be taken with respect to any such event.
(b) Waiver of Notice. The holder or holders of not less than sixty-six
----------------
and two-thirds percent in voting power of the outstanding shares of Convertible
Preferred Stock (or Redeemable Preferred Stock, as applicable) may, at any time
upon written notice to the Corporation, waive any notice provisions specified
herein for the benefit of such holders.
(c) General. In the event that the Corporation provides any notice,
-------
report or statement to any holder of Common Stock, the Corporation shall at the
same time provide a copy of any such notice, report or statement to each holder
of outstanding shares of Convertible Preferred Stock (or Redeemable Preferred
Stock, as applicable).
19
<PAGE>
10. No Reissuance of Convertible Preferred Stock. No share or shares of
--------------------------------------------
Convertible Preferred Stock acquired by the Corporation by reason of redemption,
purchase, conversion or otherwise shall be reissued, and all such shares shall
be canceled, retired and eliminated from the shares which the Corporation shall
be authorized to issue.
B. REDEEMABLE PREFERRED STOCK
--------------------------
1. Designation; Ranking. A total of 5,600,000 shares of the
--------------------
Corporation's Preferred Stock shall be designated as Redeemable Preferred Stock,
$.01 par value per share (the "Redeemable Preferred Stock").
2. Election of Directors; Voting.
-----------------------------
(a) Election of Directors. The holders of outstanding shares of
---------------------
Redeemable Preferred Stock shall, voting together as a separate class, be
entitled to elect one (1) Director. Such Director shall be the candidate
receiving the highest number of affirmative votes (with each holder of
Redeemable Preferred Stock entitled to cast one vote for or against each
candidate with respect to each share of Redeemable Preferred Stock held by such
holder) of the outstanding shares of Redeemable Preferred Stock (the "Redeemable
Preferred Stock Director Designee"), with votes cast against such candidate and
votes withheld having no legal effect. The election of the Redeemable Preferred
Stock Director Designee by the holders of the Redeemable Preferred Stock shall
occur (i) at the annual meeting of holders of capital stock, (ii) at any special
meeting of holders of capital stock, (iii) at any special meeting of holders of
Redeemable Preferred Stock called by holders of a majority of the outstanding
shares of Redeemable Preferred Stock or (iv) by the unanimous written consent of
holders of the outstanding shares of Redeemable Preferred Stock. Upon conversion
of the Convertible Preferred Stock, the holders of Redeemable Preferred Stock
shall designate one of the Convertible Preferred Stock Director Designees
currently serving on the Corporation's board of directors as the Redeemable
Preferred Stock Director Designee, in the manner and on the basis specified
above. If at any time when any share of Redeemable Preferred Stock is
outstanding the Redeemable Preferred Stock Director Designee should cease to be
a Director for any reason, the vacancy shall only be filled by the vote or
written consent of holders of the outstanding shares of Redeemable Preferred
Stock, voting together as a separate class, in the manner and on the basis
specified above.
(b) Voting Generally. Except as set forth above with respect to the
----------------
election of the Redeemable Preferred Stock Director Designee, the holders of
Redeemable Preferred Stock shall not be entitled to vote on any matters except
to the extent otherwise required under the General Corporation Law of the State
of Delaware.
20
<PAGE>
3. Dividends. The holders of outstanding shares of Redeemable Preferred
---------
Stock shall be entitled to receive, out of any funds legally available therefor,
cumulative dividends on the Redeemable Preferred Stock in cash, at the rate per
annum of ten percent (10%) of the Redeemable Base Liquidation Amount (as defined
in Section B.4 below), or $.1785714286 per share of Redeemable Preferred Stock
("Redeemable Cumulative Dividends"). Such dividends will accumulate commencing
as of the date of issuance of the Redeemable Preferred Stock and will be
cumulative, to the extent unpaid, whether or not they have been declared and
whether or not there are profits, surplus or other funds of the Corporation
legally available for the payment of dividends. Redeemable Cumulative Dividends
shall become due and payable with respect to any share of Redeemable Preferred
Stock as provided in Section B.4 and Section B.5. So long as any shares of
Redeemable Preferred Stock are outstanding: (i) no dividend whatsoever shall be
paid or declared, and no distribution shall be made, on any capital stock of the
Corporation ranking junior to the Redeemable Preferred Stock; and (ii) no shares
of capital stock of the Corporation ranking junior to the Redeemable Preferred
Stock shall be purchased, redeemed or acquired by the Corporation and no monies
shall be paid into or set aside or made available for a sinking fund for the
purchase, redemption or acquisition thereof. All numbers relating to the
calculation of dividends pursuant to this Section B.3 shall be subject to
equitable adjustment in the event of any stock split, combination,
reorganization, recapitalization, reclassification or other similar event
involving a change in the Redeemable Preferred Stock.
4. Liquidation. Upon any Liquidation Event, each holder of outstanding
-----------
shares of Redeemable Preferred Stock shall be entitled to be paid out of the
assets of the Corporation available for distribution to stockholders, whether
such assets are capital, surplus, or earnings as follows, and before any amount
shall be paid or distributed to the holders of Common Stock, Class A Common
Stock, Class B Common Stock or of any other stock ranking on liquidation junior
to the Redeemable Preferred Stock an amount in cash equal to the sum of (a)
$1.785714286 per share (adjusted appropriately for stock splits, stock
dividends, recapitalizations and the like with respect to the Redeemable
Preferred Stock) (the "Redeemable Base Liquidation Amount"), plus (b) any
accumulated but unpaid dividends to which such holder of outstanding shares of
Redeemable Preferred Stock is entitled pursuant to Section B.3 and B.5(d) hereof
(the sum of (a) and (b) being referred to as the "Redeemable Liquidation
Preference Amount"), plus (c) any interest accrued pursuant to Section B.5(c);
provided, however, that if, upon any Liquidation Event, the amounts payable with
- -------- -------
respect to the Redeemable Preferred Stock are not paid in full, the holders of
the Redeemable Preferred Stock shall share ratably in any distribution of assets
in proportion to the full respective preferential amounts to which they are
entitled.
21
<PAGE>
5. Redemption.
----------
(a) Redemption Events.
-----------------
(i) Automatic. Immediately upon and as of, and in all cases
---------
subject to, the closing of a QPO, the Corporation shall redeem all (and not
less than all) of the outstanding shares of Redeemable Preferred Stock at
the Redemption Price specified in Section B.5(b).
(ii) On or After October 31, 2001. Upon the election of the holder
----------------------------
or holders of not less than sixty-six and two-thirds percent in voting
power of the outstanding Redeemable Preferred Stock (or the holder or
holders of not less than sixty-six and two thirds percent of the
outstanding Convertible Preferred Stock proposing to convert the same in
order to effect a redemption of the Redeemable Preferred Stock received
upon such conversion hereunder) made at any time on or after October 31,
2001 the Corporation shall, to the extent it may do so under applicable
law, redeem all (and not less than all, other than pursuant to Section
B.5(c) below), of the outstanding shares of Redeemable Preferred Stock. The
foregoing election shall be made by such holders giving the Corporation and
each of the other holders of Redeemable Preferred Stock (or Convertible
Preferred Stock, as applicable) not less than fifteen (15) days prior
written notice which notice shall set forth the date for such redemption.
(iii) Upon Occurrence of Certain Transactions. Upon the election of
---------------------------------------
the holder or holders of not less than sixty-six and two-thirds percent in
voting power of the outstanding Redeemable Preferred Stock (or the holder
or holders of not less than sixty-six and two-thirds percent of the
outstanding Convertible Preferred Stock proposing to convert the same in
order to effect a redemption of the Redeemable Preferred Stock received
upon such conversion hereunder), the Corporation shall, to the extent it
may do so under applicable law, redeem all (and not less than all, other
than pursuant to Section B.5(c) below) of the outstanding shares of
Redeemable Preferred Stock upon the occurrence of an Extraordinary
Transaction (as defined in Section A.5) or a public offering of equity
securities of the Company which does not constitute a QPO. The foregoing
election shall be made by such holders giving the Corporation and each
other holder of Redeemable Preferred Stock (or Convertible Preferred Stock,
as applicable) not less that five (5) days prior written notice, which
notice shall set forth the date for such redemption.
(b) Redemption Date; Redemption Price. Upon the election of the holders of
---------------------------------
the outstanding Redeemable Preferred Stock to cause the Corporation to redeem
the Redeemable Preferred Stock pursuant to Section B.5(a)(ii) or (iii), all
holders of
22
<PAGE>
Redeemable Preferred Stock shall be deemed to have elected to cause the
Redeemable Preferred Stock subject to such election to be so redeemed. Any date
upon which a redemption shall occur in accordance with Section B.5(a) shall be
referred to as a "Redemption Date." The redemption price for each share of
Redeemable Preferred Stock redeemed pursuant to this Section B.5 shall be the
Redeemable Liquidation Preference Amount (the "Redemption Price"), subject to
the further provisions of Section B.5(c) and B.5(d). The Redemption Price shall
be payable in cash in immediately available funds on the Redemption Date. Until
the full Redemption Price has been paid in cash for all shares of Redeemable
Preferred Stock redeemed as of the applicable Redemption Date: (A) no dividend
whatsoever shall be paid or declared, and no distribution shall be made, on any
capital stock of the Corporation; and (B) no shares of capital stock of the
Corporation (other than the Redeemable Preferred Stock in accordance with this
Section B.5) shall be purchased, redeemed or acquired by the Corporation and no
monies shall be paid into or set aside or made available for a sinking fund for
the purchase, redemption or acquisition thereof.
(c) Redemption Prohibited. If, at a Redemption Date, the Corporation is
---------------------
prohibited under the General Corporation Law of the State of Delaware from
redeeming all shares of Redeemable Preferred Stock for which redemption is
required hereunder, then it shall redeem such shares on a pro-rata basis among
the holders of Redeemable Preferred Stock in proportion to the full respective
redemption amounts to which they are entitled hereunder to the extent possible
and shall redeem the remaining shares to be redeemed as soon as the Corporation
is not prohibited from redeeming some or all of such shares under the General
Corporation Law of the State of Delaware, subject to the last paragraph of
Section A.8. Any shares of Redeemable Preferred Stock not redeemed shall remain
outstanding and entitled to all of the rights and preferences provided in this
Article IV. In the event that the Corporation fails to redeem shares for which
redemption is required pursuant to Section B.5, then during the period from the
applicable Redemption Date through the date on which such shares are redeemed,
the applicable Redemption Price of such shares plus additional dividends that
accumulate in respect of such shares under Section B.5(d) shall bear interest at
the rate of 10% per annum, which interest rate shall increase by an additional
.5% at the end of each six (6) month period thereafter until the Redemption
Price (as so increased) is paid in full, subject to a maximum rate of 15% per
annum and with such interest to be compounded annually. In the event the
Corporation fails to redeem shares for which redemption is required pursuant to
Section B.5 within six (6) months after the date on which redemption is
required, for any reason, and such failure thereafter continues (the period
during which such failure shall continue being referred to herein as a "Voting
Period"), the number of Directors constituting the Board of Directors shall be
automatically increased by a number equal to the number of Directors then
constituting the Board of Directors, plus two, and the holders of shares of
Redeemable Preferred Stock then outstanding shall be entitled, voting as a class
on a one-vote-per-share basis (to the
23
<PAGE>
exclusion of the holders of all other securities and classes of capital stock of
the Corporation), to elect such additional Directors. As soon as practicable
after the commencement of the Voting Period, the Corporation shall call a
special meeting of the holders of shares of Redeemable Preferred Stock by
mailing a notice of such special meeting to such holders, such meeting to be
held not less than ten (10) nor more than thirty (30) days after the date of
mailing of such notice. If the Corporation fails to send a notice, the meeting
may be called by any such holder on like notice. The record date for
determining the holders entitled to notice of and to vote at such special
meeting shall be the close of business on the fifth business day preceding the
day on which such notice is mailed. At any such special meeting and at each
meeting of holders of shares of Redeemable Preferred Stock held during a Voting
Period at which Directors are to be elected (or with respect to any action by
written consent in lieu of a meeting of shareholders), such holders, voting
together as a class (to the exclusion of the holders of all other securities and
classes of capital stock of the Corporation), shall be entitled to elect the
number of Directors prescribed in this Section B.5(c), and each share of
Redeemable Preferred Stock shall be entitled to one (1) vote (whether voted in
person by the holder thereof or by proxy or pursuant to a shareholders'
consent). The terms of office of all persons who are Directors of the
Corporation at the time of a special meeting of the holders of Redeemable
Preferred Stock to elect Directors shall continue, notwithstanding the election
at such meeting of the additional Directors that such holders are entitled to
elect, and the persons so elected by such holders, together with the remaining
incumbent Directors, shall constitute the duly elected Directors of the
Corporation. Simultaneously with the termination of a Voting Period upon the
redemption of all outstanding shares of Redeemable Preferred Stock, the terms of
office of the additional Directors elected by the holders of the Redeemable
Preferred Stock shall terminate, the remaining Directors shall constitute the
Directors of the Corporation and the voting rights of such holders to elect
additional Directors pursuant to this Section B.5(c) shall cease.
(d) Dividend After Redemption Date. From and after a Redemption Date, no
------------------------------
shares of Redeemable Preferred Stock subject to redemption shall be entitled to
any further dividends pursuant to Section B.3 hereof, provided, however, that in
the event that shares of Redeemable Preferred Stock are unable to be redeemed
and continue to be outstanding in accordance with Section B.5(c), such shares
shall continue to be entitled to dividends as provided in Section B.3 and
interest as provided in Section B.5(c) until the date on which such shares are
actually redeemed by the Corporation.
(e) Surrender of Certificates. Upon receipt of the applicable Redemption
-------------------------
Price by certified check or wire transfer, each holder of shares of Redeemable
Preferred Stock to be redeemed shall surrender the certificate or certificates
representing such shares to the Corporation, duly assigned or endorsed for
transfer (or
24
<PAGE>
accompanied by duly executed stock powers relating thereto), or shall
deliver an Affidavit of Loss with respect to such certificates at the
principal executive office of the Corporation or the office of the transfer
agent for the Redeemable Preferred Stock or such office or offices in the
continental United States of an agent for redemption as may from time to
time be designated by notice to the holders of Redeemable Preferred Stock
and each surrendered certificate shall be canceled and retired.
(f) Further Restrictions on Redemption. Notwithstanding anything
----------------------------------
herein to the contrary, the Redeemable Preferred Stock shall not be
redeemed hereunder unless (i) all obligations of the Corporation under the
Loan Agreement dated December 4, 1996 among the Corporation, Fleet National
Bank, as agent and as a lender, and the other lenders from time to time
party thereto (collectively, the "Lenders") shall have been or are
concurrently paid in full, or (ii) the Lenders shall have consented to such
redemption. If the Corporation is prohibited from redeeming the Redeemable
Preferred Stock hereunder, the holders of Redeemable Preferred Stock shall
be entitled to the provisions of Section B.5(c) and B.5(d) hereof.
6. Notice. So long as any shares of Redeemable Preferred Stock shall be
------
outstanding the provisions of Section A.9 shall apply to all shares of
Redeemable Preferred Stock as if such shares were shares of Convertible
Preferred Stock.
7. No Reissuance of Redeemable Preferred Stock. No share or shares of
-------------------------------------------
Redeemable Preferred Stock acquired by the Corporation by reason of redemption,
purchase, conversion or otherwise shall be reissued, and all such shares shall
be canceled, retired and eliminated from the shares which the Corporation shall
be authorized to issue.
8. Covenants. So long as any shares of Redeemable Preferred Stock shall
---------
be outstanding the provisions of Section A.8 shall apply to all shares of
Redeemable Preferred Stock as if such shares were shares of Convertible
Preferred Stock.
C. COMMON STOCK, CLASS A COMMON STOCK
----------------------------------
AND CLASS B COMMON STOCK
------------------------
1. Designation; Ranking. A total of 50,000,000 shares of the
--------------------
Corporation's common stock shall be designated as Common Stock, $.01 par value
per share (the "Common Stock"), a total of [2,000,000] shares of the
Corporation's common stock shall be designated as Class A Common Stock,$.01 par
value per share (the "Class A Common Stock"), and a total of [7,000,000] shares
of the Corporation's common stock shall be designated as Class B Common Stock,
$.01 par value per share (the "Class B Common Stock"). Except as herein
otherwise expressly provided, all shares of Common Stock, Class A Common Stock
and Class B Common Stock shall be identical and shall entitle the holders
thereof to the same rights and privileges. Notwithstanding anything herein to
the contrary, shares of Class B Common Stock
25
<PAGE>
shall be issued only upon conversion of the Convertible Preferred Stock under
the circumstances set forth in Section A.6(a).
2. Voting.
------
(a) Election of Directors. For so long as any shares of
---------------------
Convertible Preferred Stock shall be outstanding, the holders of the Common
Stock and the Convertible Preferred Stock, voting as a single class, shall elect
all directors of the Corporation other than the Convertible Preferred Stock
Director Designees. In the event of conversion of the Convertible Preferred
Stock into Class B Common Stock and Redeemable Preferred Stock, the holders of
the Common Stock and the Class B Common Stock, voting as a single class, shall
elect all directors of the Corporation (other than the Redeemable Preferred
Stock Director Designee); provided, however, that the holders of the Class B
Common Stock shall in no event be entitled or have the power to elect more than
one-half of the members of the Board of Directors (less one as long as any
shares of Redeemable Preferred Stock are outstanding), with all other Directors
of the Corporation being subject to election by the holders of the Common Stock
and Redeemable Preferred Stock, if outstanding, in such circumstances. In the
event no shares of Convertible Preferred Stock, Redeemable Preferred Stock or
Class B Common Stock are outstanding, the number of directors shall be fixed by
and all directors shall be elected by the holders of the Common Stock. The
election of such Directors shall occur at the annual meeting of holders of
capital stock or at any special meeting called and held in accordance with the
by-laws of the Corporation. If a person elected in accordance with the foregoing
provisions should cease to be a Director for any reason, the vacancy shall only
be filled by the vote or written consent of holders of the outstanding shares
entitled to vote for such Directors, in the manner and on the basis specified
above. If at any time fewer than the number of Directors indicated above have
been elected, the Board of Directors shall nonetheless be deemed duly
constituted.
(b) Other Voting. The voting rights of the holders of Common Stock and
------------
Class B Common Stock with respect to all matters other than the election of
Directors shall be identical and the holder of each share of Common Stock or
Class B Common Stock, as applicable, shall be entitled to one vote for each such
share as determined on the record date for the vote or consent of stockholders.
The holders of the Common Stock shall vote together with the holders of the
Convertible Preferred Stock or the Class B Common Stock, as applicable, as a
single class upon any items submitted to a vote of stockholders as long as any
shares of Convertible Preferred Stock or Class B Common Stock are outstanding,
except as otherwise provided herein.
(c) Class A Common Stock - Non-Voting. The holders of Class A Common
---------------------------------
Stock shall not be entitled to vote on any matters except to the extent
otherwise required under the General Corporation Law of the State of Delaware.
26
<PAGE>
3. Dividends. Apart from voting power, the shares of Common Stock,
---------
Class A Common Stock and Class B Common Stock (if outstanding) shall be deemed
to be shares of stock of the same class and shall have equal rights and
privileges (including, without limitation, in liquidation and as to dividends,
whether paid in stock or cash), except that stock dividends declared shall be
paid in shares of Common Stock, Class A Common Stock or Class B Common Stock to
the holders of Common Stock, Class A Common Stock or Class B Common Stock,
respectively. Subject to the payment in full of all preferential dividends to
which the holders of the Convertible Preferred Stock and the Redeemable
Preferred Stock are entitled hereunder, the holders of Common Stock, Class A
Common Stock or Class B Common Stock (if outstanding) shall be entitled to
receive dividends out of funds legally available therefor on a pari passu basis
---- -----
at such times and in such amounts as the Board of Directors may determine in its
sole discretion, provided that in the event any shares of Convertible Preferred
Stock are outstanding, the holders of Convertible Preferred Stock, Common Stock
and Class A Common Stock shall share equally in any such dividends as
contemplated by Section A.3.
4. Liquidation. Upon any Liquidation Event, after the payment or
-----------
provision for payment of all debts and liabilities of the Corporation and all
preferential amounts to which the holders of Convertible Preferred Stock or
Redeemable Preferred Stock, as applicable, are entitled with respect to the
distribution of assets in liquidation, the holders of Common Stock, Class A
Common Stock and (if outstanding) Class B Common Stock (or to the extent
applicable under Section A.4(a), Convertible Preferred Stock) shall be entitled
to share ratably in the remaining assets of the Corporation available for
distribution, with such stock being considered a single class for this purpose.
5. Conversion of Class A Common Stock and Class B Common Stock Upon
----------------------------------------------------------------
Public Offering. As of and immediately prior to the closing of the
- ---------------
Corporation's first public offering of equity securities registered under the
Securities Act of 1933, as amended, each outstanding share of Class A Common
Stock and any outstanding shares of Class B Common Stock shall automatically be
converted into one share of Common Stock. Upon such conversion, (a) each
converted share of Class A Common Stock or Class B Common Stock shall be deemed
canceled, retired and eliminated from the shares which the Corporation shall be
authorized to issue and such shares of Class A Common Stock and Class B Common
Stock shall not be reissued, (b) each share of authorized but unissued Class A
Common Stock and Class B Common Stock shall be deemed eliminated from the shares
which the Corporation shall be authorized to issue and such shares of Class A
Common Stock and Class B Common Stock shall not be issued, and (c) the
provisions of this Second Amended and Restated Certificate of Incorporation
regarding Class A Common Stock and Class B Common Stock shall have no further
force and effect and shall be deemed to be deleted from this Second Amended and
Restated Certificate of Incorporation and any other references to Class A Common
Stock or Class B Common Stock in this Second Amended and Restated Certificate of
Incorporation or any other agreement to which the Corporation is a party shall
be deemed to refer to the same
27
<PAGE>
number of shares of Common Stock. Until presented and surrendered for
cancellation following such conversion, each certificate for shares of Class A
Common Stock or Class B Common Stock outstanding shall be deemed to represent
the number of shares of Common Stock determined in accordance with this
paragraph, and upon such presentation and surrender each holder of a certificate
or certificates for such Class A Common Stock or Class B Common Stock shall be
entitled to receive a certificate for the appropriate number of shares of Common
Stock. The Corporation shall reserve for issuance the number of shares of
Common Stock into which all outstanding shares of Class A Common Stock and Class
B Common Stock may be converted pursuant to this Section C.5.
6. Fractional Shares; Uncertificated Shares. The Corporation may issue
----------------------------------------
fractional shares of Common Stock, Class A Common Stock and Class B Common
Stock. Fractional shares shall be entitled to dividends (on a pro rata basis),
and the holders of fractional shares shall be entitled to all rights as
stockholders of the Corporation to the extent provided herein and under
applicable law in respect of such fractional shares. Shares of Common Stock,
Class A Common Stock and Class B Common Stock, or fractions thereof, may, but
need not be represented by share certificates. Such shares, or fractions
thereof, not represented by share certificates ("Uncertificated Common Shares")
shall be registered in the stock records book of the Corporation. The
Corporation at any time at its sole option may deliver to any registered holder
of such shares share certificates to represent Uncertificated Common Shares
previously issued (or deemed issued) to such holder.
D. UNDESIGNATED PREFERRED STOCK
----------------------------
1. Authority to Issue. Subject to any limitations prescribed by law,
------------------
the Board of Directors or any authorized committee thereof is expressly
authorized to provide for the issuance of the shares of Undesignated Preferred
Stock in one or more series of such stock, and by filing a certificate pursuant
to applicable law of the State of Delaware, to establish or change from time to
time the number of shares to be included in each such 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 thereof. Any action by the Board of Directors or
any authorized committee thereof under this Article IV.D shall require the
affirmative vote of a majority of the Directors then in office or a majority of
the members of such committee.
2. Powers, Preferences, Rights, Qualifications, Limitations, and
-------------------------------------------------------------
Restrictions of Each Series of Undesignated Preferred Stock. The Board of
- -----------------------------------------------------------
Directors or any authorized committee thereof shall have the right to determine
or fix one or more of the following with respect to each series of Undesignated
Preferred Stock to the extent permitted by law:
(a) The distinctive serial designation and the number of shares
constituting such series;
28
<PAGE>
(b) The dividend rates or the amount of dividends to be paid on
the shares of such series, whether dividends shall be cumulative and, if so,
from which date or dates, the payment date or dates for dividends, and the
participating and other rights, if any, with respect to dividends;
(c) The voting powers, full or limited, if any, of the shares of
such series;
(d) Whether the shares of such series shall be redeemable and, if
so, the price or prices at which, and the terms and conditions on which, such
shares may be redeemed;
(e) The amount or amounts payable upon the shares of such series
and any preferences applicable thereto in the event of voluntary or involuntary
liquidation, dissolution or winding up of the Corporation;
(f) Whether the shares of such series shall be entitled to the
benefit of a sinking or retirement fund to be applied to the purchase or
redemption of such shares, and if so entitled, the amount of such fund and the
manner of its application, including the price or prices at which such shares
may be redeemed or purchased through the application of such fund;
(g) Whether the shares of such series shall be convertible into,
or exchangeable for, shares of any other class or classes or of any other series
of the same or any other class or classes of stock of the Corporation and, if so
convertible or exchangeable, the conversion price or prices, or the rate or
rates of exchange, and the adjustments thereof, if any, at which such conversion
or exchange may be made, and any other terms and conditions of such conversion
or exchange;
(h) The price or other consideration for which the shares of such
series shall be issued;
(i) Whether the shares of such series which are redeemed or
converted shall have the status of authorized but unissued shares of
Undesignated Preferred Stock (or series thereof) and whether such shares may be
reissued as shares of the same or any other class or series of stock; and
(j) Such other powers, preferences, rights, qualifications,
limitations and restrictions thereof as the Board of Directors or any authorized
committee thereof may deem advisable.
29
<PAGE>
ARTICLE V
STOCKHOLDER ACTION
------------------
Any action required or permitted to be taken by the stockholders of
the Corporation at any annual or special meeting of stockholders of the
Corporation must be effected at a duly called annual or special meeting of
stockholders and may not be taken or effected by a written consent of
stockholders in lieu thereof.
ARTICLE VI
DIRECTORS
---------
1. General.
-------
The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors except as otherwise provided
herein or required by law.
2. Election of Directors.
---------------------
Election of Directors need not be by written ballot unless the By-
laws of the Corporation shall so provide.
3. Terms of Directors.
------------------
The number of Directors of the Corporation shall be fixed by
resolution duly adopted from time to time by the Board of Directors. The
Directors, other than those who may be elected by the holders of any series of
Undesignated Preferred Stock of the Corporation, shall be classified, with
respect to the term for which they severally hold office, into three classes, as
nearly equal in number as possible. The initial Class I Directors of the
Corporation shall be Jacqueline C. Morby and John A. Staley, IV; the initial
Class II Directors of the Corporation shall be Gregory F. Boron, Joseph E. Smith
and Roger B. Kafker; and the initial Class III Directors of the Corporation
shall be Roger Boissoneault and Patrick G. LePore. The initial Class I Directors
shall serve for a term expiring at the annual meeting of stockholders to be held
in 1998, the initial Class II Directors shall serve for a term expiring at the
annual meeting of stockholders to be held in 1999, and the initial Class III
Directors shall serve for a term expiring at the annual meeting of stockholders
to be held in 2000. At each annual meeting of stockholders, the successor or
successors of the class of Directors whose term expires at that meeting shall be
elected by a plurality of the votes cast at such meeting and shall hold office
for a term expiring at the annual meeting of stockholders held in the third year
following the
30
<PAGE>
year of their election. The Directors elected to each class shall hold office
until their successors are duly elected and qualified or until their earlier
resignation or removal.
Notwithstanding the foregoing, whenever, pursuant to the provisions
of Article IV of this Second Amended and Restated Certificate of Incorporation,
the holders of any one or more series of Undesignated Preferred Stock shall have
the right, voting separately as a series or together with holders of other such
series, to elect Directors at an annual or special meeting of stockholders, the
election, term of office, filling of vacancies and other features of such
directorships shall be governed by the terms of this Second Amended and Restated
Certificate of Incorporation and any certificate of designations applicable
thereto, and such Directors so elected shall not be divided into classes
pursuant to this Article V.3.
During any period when the holders of any series of Undesignated
Preferred Stock have the right to elect additional Directors as provided for or
fixed pursuant to the provisions of Article IV hereof, then upon commencement
and for the duration of the period during which such right continues: (i) the
then otherwise total authorized number of Directors of the Corporation shall
automatically be increased by such specified number of Directors, and the
holders of such Undesignated Preferred Stock shall be entitled to elect the
additional Directors so provided for or fixed pursuant to said provisions, and
(ii) each such additional Director shall serve until such Director's successor
shall have been duly elected and qualified, or until such Director's right to
hold such office terminates pursuant to said provisions, whichever occurs
earlier, subject to such Director's earlier death, disqualification, resignation
or removal. Except as otherwise provided by the Board in the resolution or
resolutions establishing such series, whenever the holders of any series of
Undesignated Preferred Stock having such right to elect additional Directors are
divested of such right pursuant to the provisions of such stock, the terms of
office of all such additional Directors elected by the holders of such stock, or
elected to fill any vacancies resulting from the death, resignation,
disqualification or removal of such additional Directors, shall forthwith
terminate and the total and authorized number of Directors of the Corporation
shall be reduced accordingly.
4. Vacancies.
---------
Subject to the rights, if any, of the holders of any series of
Undesignated Preferred Stock, Convertible Preferred Stock or Redeemable
Preferred Stock to elect Directors and to fill vacancies in the Board of
Directors relating thereto, any and all vacancies in the Board of Directors,
however occurring, including, without limitation, by reason of an increase in
size of the Board of Directors, or the death, resignation, disqualification or
removal of a Director, shall be filled solely by the affirmative vote of a
majority of the remaining Directors then in office, even if less than a quorum
of the Board of Directors. Any Director appointed in accordance with the
preceding sentence shall hold office for the remainder of the full term of the
class of Directors in which the new directorship was created or the vacancy
occurred and until such Director's successor shall have been duly elected and
qualified or until his or her
31
<PAGE>
earlier resignation or removal. Subject to the rights, if any, of the holders
of any series of Undesignated Preferred Stock, Convertible Preferred Stock or
Redeemable Preferred Stock to elect Directors, when the number of Directors is
increased or decreased, the Board of Directors shall determine the class or
classes to which the increased or decreased number of Directors shall be
apportioned; provided, however, that no decrease in the number of Directors
shall shorten the term of any incumbent Director. In the event of a vacancy in
the Board of Directors, the remaining Directors, except as otherwise provided by
law, may exercise the powers of the full Board of Directors until the vacancy is
filled.
5. Removal.
-------
Subject to the rights, if any, of any series of Undesignated
Preferred Stock, Convertible Preferred Stock or Redeemable Preferred Stock to
elect Directors and to remove any Director whom the holders of any such stock
have the right to elect, any Director (including persons elected by Directors to
fill vacancies in the Board of Directors) may be removed from office (i) only
with cause and (ii) only 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. At least 30 days prior to any meeting of stockholders at which
it is proposed that any Director be removed from office, written notice of such
proposed removal shall be sent to the Director whose removal will be considered
at the meeting. For purposes of this Second Amended and Restated Certificate of
Incorporation, "cause," with respect to the removal of any Director shall mean
only (i) conviction of a felony, (ii) declaration of unsound mind by order of
court, (iii) gross dereliction of duty, (iv) commission of any action involving
moral turpitude, or (v) commission of an action which constitutes intentional
misconduct or a knowing violation of law if such action in either event results
both in an improper substantial personal benefit and a material injury to the
Corporation.
ARTICLE VII
LIMITATION OF LIABILITY
-----------------------
A Director of the Corporation shall not be personally liable to the
Corporation 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 Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the DGCL or (iv) for any
transaction from which the Director derived an improper personal benefit. If
the DGCL is amended after the effective date of this Second Amended and Restated
Certificate of Incorporation to authorize corporate action further eliminating
or limiting the personal liability of Directors, then the liability of a
Director of the Corporation shall be eliminated or limited to the fullest extent
permitted by the DGCL, as so amended.
32
<PAGE>
Any repeal or modification of this Article VII by either of (i) the
stockholders of the Corporation or (ii) an amendment to the DGCL, shall not
adversely affect any right or protection existing at the time of such repeal or
modification with respect to any acts or omissions occurring before such repeal
or modification of a person serving as a Director at the time of such repeal or
modification.
ARTICLE VIII
AMENDMENT OF BY-LAWS
--------------------
1. Amendment by Directors.
----------------------
Except as otherwise provided by law, the By-laws of the Corporation
may be amended or repealed by the Board of Directors.
2. Amendment by Stockholders.
-------------------------
The By-laws of the Corporation may be amended or repealed at any
annual meeting of stockholders, or special meeting of stockholders called for
such purpose, by the affirmative vote of at least two-thirds of the total votes
eligible to be cast on such amendment or repeal by holders of voting stock,
voting together as a single class; provided, however, that if the Board of
Directors recommends that stockholders approve such amendment or repeal at such
meeting of stockholders, such amendment or repeal shall only require the
affirmative vote of a majority of the total votes eligible to be cast on such
amendment or repeal by holders of voting stock, voting together as a single
class.
ARTICLE IX
AMENDMENT OF CERTIFICATE OF INCORPORATION
-----------------------------------------
The Corporation reserves the right to amend or repeal this Second
Amended and Restated Certificate of Incorporation in the manner now or hereafter
prescribed by statute and this Second Amended and Restated Certificate of
Incorporation, and all rights conferred upon stockholders herein are granted
subject to this reservation. No amendment or repeal of this Second Amended and
Restated Certificate of Incorporation shall be made unless the same is first
approved by the Board of Directors pursuant to a resolution adopted by the Board
of Directors in accordance with Section 242 of the DGCL, and, except as
otherwise provided by law, thereafter approved by the stockholders. Whenever
any vote of the holders of voting stock is required, and in addition to any
other vote of holders of voting stock that is required by this Second Amended
and Restated Certificate of Incorporation or by law, the affirmative
33
<PAGE>
vote of a majority of the total votes eligible to be cast by holders of voting
stock with respect to such amendment or repeal, voting together as a single
class, at a duly constituted meeting of stockholders called expressly for such
purpose shall be required to amend or repeal any provisions of this Second
Amended and Restated Certificate of Incorporation; provided, however, that the
affirmative vote of not less than two-thirds of the total votes eligible to be
cast by holders of voting stock, voting together as a single class, shall be
required to amend or repeal any of the provisions of Article VI or Article IX of
this Second Amended and Restated Certificate of Incorporation.
34
<PAGE>
I, Patrick G. LePore, President of the Corporation, for the purpose
of amending and restating the Corporation's Amended and Restated Certificate of
Incorporation pursuant to the General Corporation Law of the State of Delaware,
do make this certificate, hereby declaring and certifying that this is my act
and deed on behalf of the Corporation this ____ day of August, 1997.
----------------------------------
Patrick G. LePore, President
35
<PAGE>
Exhibit 3.4
THIRD AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
BORON, LEPORE & ASSOCIATES, INC.
Boron, LePore & Associates, Inc., a corporation organized and existing
under the laws of the State of Delaware (the "Corporation"), hereby certifies as
follows:
1. The name of the Corporation is Boron, LePore & Associates, Inc. The
date of the filing of its original Certificate of Incorporation with the
Secretary of State of the State of Delaware was November 22, 1996.
2. This Third Amended and Restated Certificate of Incorporation amends,
restates and integrates the provisions of the Second Amended and Restated
Certificate of Incorporation of the Corporation filed with the Secretary of
State of the State of Delaware on September __, 1997, as heretofore amended (the
"Restated Certificate of Incorporation"), and (i) was duly adopted by the Board
of Directors in accordance with the provisions of Section 245 of the General
Corporation Law of the State of Delaware (the "DGCL"), (ii) was declared by the
Board of Directors to be advisable and in the best interests of the Corporation
and was directed by the Board of Directors to be submitted to and be considered
by the stockholders of the Corporation entitled to vote thereon for approval by
the affirmative vote of such stockholders in accordance with Section 242 of the
DGCL and (iii) was duly adopted by a stockholder consent in lieu of a meeting of
the stockholders, with the holders of a majority of the outstanding shares of
the Company's Common Stock and Class A Common Stock (voting as separate classes)
and sixty-six and two-thirds percent of the outstanding shares of the Company's
Convertible Participating Preferred Stock, in addition to the holders of a
majority of the outstanding shares of Common Stock, Class A Common Stock and
Convertible Participating Preferred Stock (on an as converted basis) voting as a
single class, consenting to the adoption of this Third Amended and Restated
Certificate of Incorporation in accordance with the provisions of Sections 228
and 242 of the DGCL and the terms of the Second Amended and Restated Certificate
of Incorporation, such holders being all of the holders of the Corporation's
capital stock entitled to vote thereon.
3. The text of the Restated Certificate of Incorporation is hereby amended
and restated in its entirety to provide as herein set forth in full.
<PAGE>
ARTICLE I
NAME
----
The name of the Corporation is Boron, LePore & Associates, Inc.
ARTICLE II
REGISTERED OFFICE
-----------------
The address of the registered office of the Corporation in the State of
Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle.
The name of its registered agent at such address is The Corporation Trust
Company.
ARTICLE III
PURPOSES
--------
The nature of the business or purposes to be conducted or promoted by the
Corporation is to engage in any lawful act or activity for which corporations
may be organized under the DGCL.
ARTICLE IV
CAPITAL STOCK
-------------
Section 1. Number of Shares.
---------------------------
The total number of shares of capital stock which the Corporation shall
have the authority to issue is Fifty-Two Million (52,000,000) shares, of which
(i) Fifty Million (50,000,000) shares shall be Common Stock, par value $.01 per
share (the "Common Stock") and (ii) Two Million (2,000,000) shares shall be
Undesignated Preferred Stock, par value $.01 per share (the "Undesignated
Preferred Stock"). As set forth in this Article IV, the Board of Directors or
any authorized committee thereof is authorized from time to time to establish
and designate one or more series of Undesignated Preferred Stock, to fix and
determine the variations in the relative rights and preferences as between the
different series of Undesignated Preferred Stock in the manner hereinafter set
forth in this Article IV, and to fix or alter the number of shares comprising
any such series and the designation thereof to the extent permitted by law.
2
<PAGE>
The number of authorized shares of the class of Undesignated Preferred
Stock may be increased or decreased (but not below the number of shares
outstanding) by the affirmative vote of the holders of a majority of the Common
Stock, without a vote of the holders of the Undesignated Preferred Stock,
pursuant to the resolution or resolutions establishing the class of Undesignated
Preferred Stock or this Restated Certificate of Incorporation, as it may be
amended from time to time.
Section 2. General.
------------------
The designations, powers, preferences and rights of, and the
qualifications, limitations and restrictions upon, each class or series of stock
shall be determined in accordance with, or as set forth below in, Sections 3 and
4 of this Article IV.
Section 3. Common Stock.
-----------------------
Subject to all of the rights, powers and preferences of the Undesignated
Preferred Stock, and except as provided by law or in this Article IV (or in any
certificate of designation of any series of Undesignated Preferred Stock) or by
the Board of Directors or any authorized committee thereof pursuant to this
Article IV:
(a) the holders of the Common Stock shall have the exclusive right to
vote for the election of Directors and on all other matters requiring
stockholder action, each share being entitled to one vote;
(b) dividends may be declared and paid or set apart for payment upon
the Common Stock out of any assets or funds of the Corporation legally available
for the payment of dividends, but only when and as declared by the Board of
Directors or any authorized committee thereof; and
(c) upon the voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, the net assets of the Corporation shall be
distributed pro rata to the holders of the Common Stock in accordance with their
respective rights and interests.
Section 4. Undesignated Preferred Stock.
---------------------------------------
Subject to any limitations prescribed by law, the Board of Directors or any
authorized committee thereof is expressly authorized to provide for the issuance
of the shares of Undesignated Preferred Stock in one or more series of such
stock, and by filing a certificate pursuant to applicable law of the State of
Delaware, to establish or change from time to time the number of shares to be
included in each such 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 thereof.
Any action by the Board of Directors or any authorized committee thereof under
this Article IV.5 shall require the
3
<PAGE>
affirmative vote of a majority of the Directors then in office or a majority of
the members of such committee. The Board of Directors or any authorized
committee thereof shall have the right to determine or fix one or more of the
following with respect to each series of Undesignated Preferred Stock to the
extent permitted by law:
(a) The distinctive serial designation and the number of shares
constituting such series;
(b) The dividend rates or the amount of dividends to be paid on the
shares of such series, whether dividends shall be cumulative and, if so, from
which date or dates, the payment date or dates for dividends, and the
participating and other rights, if any, with respect to dividends;
(c) The voting powers, full or limited, if any, of the shares of such
series;
(d) Whether the shares of such series shall be redeemable and, if so,
the price or prices at which, and the terms and conditions on which, such shares
may be redeemed;
(e) The amount or amounts payable upon the shares of such series and
any preferences applicable thereto in the event of voluntary or involuntary
liquidation, dissolution or winding up of the Corporation;
(f) Whether the shares of such series shall be entitled to the benefit
of a sinking or retirement fund to be applied to the purchase or redemption of
such shares, and if so entitled, the amount of such fund and the manner of its
application, including the price or prices at which such shares may be redeemed
or purchased through the application of such fund;
(g) Whether the shares of such series shall be convertible into, or
exchangeable for, shares of any other class or classes or of any other series of
the same or any other class or classes of stock of the Corporation and, if so
convertible or exchangeable, the conversion price or prices, or the rate or
rates of exchange, and the adjustments thereof, if any, at which such conversion
or exchange may be made, and any other terms and conditions of such conversion
or exchange;
(h) The price or other consideration for which the shares of such
series shall be issued;
(i) Whether the shares of such series which are redeemed or converted
shall have the status of authorized but unissued shares of Undesignated
Preferred Stock (or series thereof) and whether such shares may be reissued as
shares of the same or any other class or series of stock; and
4
<PAGE>
(j) Such other powers, preferences, rights, qualifications,
limitations and restrictions thereof as the Board of Directors or any authorized
committee thereof may deem advisable.
5
<PAGE>
ARTICLE V
STOCKHOLDER ACTION
------------------
Any action required or permitted to be taken by the stockholders of the
Corporation at any annual or special meeting of stockholders of the Corporation
must be effected at a duly called annual or special meeting of stockholders and
may not be taken or effected by a written consent of stockholders in lieu
thereof.
ARTICLE VI
DIRECTORS
---------
Section 1. General.
-------------------
The business and affairs of the Corporation shall be managed by or under
the direction of the Board of Directors except as otherwise provided herein or
required by law.
Section 2. Election of Directors.
---------------------------------
Election of Directors need not be by written ballot unless the By-laws of
the Corporation shall so provide.
Section 3. Terms of Directors.
------------------------------
The number of Directors of the Corporation shall be fixed by resolution
duly adopted from time to time by the Board of Directors. The Directors, other
than those who may be elected by the holders of any series of Undesignated
Preferred Stock of the Corporation, shall be classified, with respect to the
term for which they severally hold office, into three classes, as nearly equal
in number as possible. The initial Class I Directors of the Corporation shall
be Jacqueline C. Morby and John A. Staley, IV; the initial Class II Directors of
the Corporation shall be Gregory F. Boron, Joseph E. Smith, and Roger B. Kafker;
and the initial Class III Directors of the Corporation shall be Roger
Boissoneault and Patrick G. LePore. The initial Class I Directors shall serve
for a term expiring at the annual meeting of stockholders to be held in 1998,
the initial Class II Directors shall serve for a term expiring at the annual
meeting of stockholders to be held in 1999, and the initial Class III Directors
shall serve for a term expiring at the annual meeting of stockholders to be held
in 2000. At each annual meeting of stockholders, the successor or successors of
the class of Directors whose term expires at that meeting shall be elected by a
plurality of the votes cast at such meeting and shall hold office for a term
expiring at the annual meeting of stockholders held in the third year following
the year of their election. The Directors elected to each class shall hold
office until their successors are duly elected and qualified or until their
earlier resignation or removal.
6
<PAGE>
Notwithstanding the foregoing, whenever, pursuant to the provisions of
Article IV of this Restated Certificate of Incorporation, the holders of any one
or more series of Undesignated Preferred Stock shall have the right, voting
separately as a series or together with holders of other such series, to elect
Directors at an annual or special meeting of stockholders, the election, term of
office, filling of vacancies and other features of such directorships shall be
governed by the terms of this Restated Certificate of Incorporation and any
certificate of designations applicable thereto, and such Directors so elected
shall not be divided into classes pursuant to this Article V.3.
During any period when the holders of any series of Undesignated Preferred
Stock have the right to elect additional Directors as provided for or fixed
pursuant to the provisions of Article IV hereof, then upon commencement and for
the duration of the period during which such right continues: (i) the then
otherwise total authorized number of Directors of the Corporation shall
automatically be increased by such specified number of Directors, and the
holders of such Undesignated Preferred Stock shall be entitled to elect the
additional Directors so provided for or fixed pursuant to said provisions, and
(ii) each such additional Director shall serve until such Director's successor
shall have been duly elected and qualified, or until such Director's right to
hold such office terminates pursuant to said provisions, whichever occurs
earlier, subject to such Director's earlier death, disqualification, resignation
or removal. Except as otherwise provided by the Board in the resolution or
resolutions establishing such series, whenever the holders of any series of
Undesignated Preferred Stock having such right to elect additional Directors are
divested of such right pursuant to the provisions of such stock, the terms of
office of all such additional Directors elected by the holders of such stock, or
elected to fill any vacancies resulting from the death, resignation,
disqualification or removal of such additional Directors, shall forthwith
terminate and the total and authorized number of Directors of the Corporation
shall be reduced accordingly.
Section 4. Vacancies.
--------------------
Subject to the rights, if any, of the holders of any series of Undesignated
Preferred Stock to elect Directors and to fill vacancies in the Board of
Directors relating thereto, any and all vacancies in the Board of Directors,
however occurring, including, without limitation, by reason of an increase in
size of the Board of Directors, or the death, resignation, disqualification or
removal of a Director, shall be filled solely by the affirmative vote of a
majority of the remaining Directors then in office, even if less than a quorum
of the Board of Directors. Any Director appointed in accordance with the
preceding sentence shall hold office for the remainder of the full term of the
class of Directors in which the new directorship was created or the vacancy
occurred and until such Director's successor shall have been duly elected and
qualified or until his or her earlier resignation or removal. Subject to the
rights, if any, of the holders of any series of Undesignated Preferred Stock to
elect Directors, when the number of Directors is increased or decreased, the
Board of Directors shall determine the class or classes to which the increased
or decreased number of Directors shall be apportioned; provided, however, that
no decrease in the number of Directors shall shorten the term of any
7
<PAGE>
incumbent Director. In the event of a vacancy in the Board of Directors, the
remaining Directors, except as otherwise provided by law, may exercise the
powers of the full Board of Directors until the vacancy is filled.
Section 5. Removal.
------------------
Subject to the rights, if any, of any series of Undesignated Preferred
Stock to elect Directors and to remove any Director whom the holders of any such
stock have the right to elect, any Director (including persons elected by
Directors to fill vacancies in the Board of Directors) may be removed from
office (i) only with cause and (ii) only 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. At least 30 days prior to any meeting of
stockholders at which it is proposed that any Director be removed from office,
written notice of such proposed removal shall be sent to the Director whose
removal will be considered at the meeting. For purposes of this Restated
Certificate of Incorporation, "cause," with respect to the removal of any
Director shall mean only (i) conviction of a felony, (ii) declaration of unsound
mind by order of court, (iii) gross dereliction of duty, (iv) commission of any
action involving moral turpitude, or (v) commission of an action which
constitutes intentional misconduct or a knowing violation of law if such action
in either event results both in an improper substantial personal benefit and a
material injury to the Corporation.
ARTICLE VII
LIMITATION OF LIABILITY
-----------------------
A Director of the Corporation shall not be personally liable to the
Corporation 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 Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the DGCL or (iv) for any
transaction from which the Director derived an improper personal benefit. If
the DGCL is amended after the effective date of this Restated Certificate of
Incorporation to authorize corporate action further eliminating or limiting the
personal liability of Directors, then the liability of a Director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the DGCL, as so amended.
Any repeal or modification of this Article VII by either of (i) the
stockholders of the Corporation or (ii) an amendment to the DGCL, shall not
adversely affect any right or protection existing at the time of such repeal or
modification with respect to any acts or omissions occurring before such repeal
or modification of a person serving as a Director at the time of such repeal or
modification.
8
<PAGE>
ARTICLE VIII
AMENDMENT OF BY-LAWS
--------------------
Section 1. Amendment by Directors
---------------------------------
Except as otherwise provided by law, the By-laws of the Corporation may be
amended or repealed by the Board of Directors.
Section 2. Amendment by Stockholders
------------------------------------
The By-laws of the Corporation may be amended or repealed at any annual
meeting of stockholders, or special meeting of stockholders called for such
purpose, by the affirmative vote of at least two-thirds of the total votes
eligible to be cast on such amendment or repeal by holders of voting stock,
voting together as a single class; provided, however, that if the Board of
Directors recommends that stockholders approve such amendment or repeal at such
meeting of stockholders, such amendment or repeal shall only require the
affirmative vote of a majority of the total votes eligible to be cast on such
amendment or repeal by holders of voting stock, voting together as a single
class.
ARTICLE IX
AMENDMENT OF CERTIFICATE OF INCORPORATION
-----------------------------------------
The Corporation reserves the right to amend or repeal this Restated
Certificate of Incorporation in the manner now or hereafter prescribed by
statute and this Restated Certificate of Incorporation, and all rights conferred
upon stockholders herein are granted subject to this reservation. No amendment
or repeal of this Restated Certificate of Incorporation shall be made unless the
same is first approved by the Board of Directors pursuant to a resolution
adopted by the Board of Directors in accordance with Section 242 of the DGCL,
and, except as otherwise provided by law, thereafter approved by the
stockholders. Whenever any vote of the holders of voting stock is required, and
in addition to any other vote of holders of voting stock that is required by
this Restated Certificate of Incorporation or by law, 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, voting together as a single class, at a
duly constituted meeting of stockholders called expressly for such purpose shall
be required to amend or repeal any provisions of this Restated Certificate of
Incorporation; provided, however, that the affirmative vote of not less than
two-thirds of the total votes eligible to be cast by holders of voting stock,
voting together as a single class, shall be required to amend or repeal any of
the provisions of Article VI or Article IX of this Restated Certificate of
Incorporation.
9
<PAGE>
I, Patrick G. LePore, President of the Corporation, for the purpose of
amending and restating the Corporation's Second Amended and Restated Certificate
of Incorporation pursuant to the General Corporation Law of the State of
Delaware, do make this certificate, hereby declaring and certifying that this is
my act and deed on behalf of the Corporation this ____ day of August, 1997.
____________________________
Patrick G. LePore, President
10
<PAGE>
Exhibit 3.5
BY-LAWS
of
BORON, LePORE & ASSOCIATES, INC.
(previously named BLA ACQUISITION CORP.)
ARTICLE I
---------
Stockholders
------------
1. Annual Meeting. The annual meeting of stockholders shall be held on
--------------
such date during April, May or June of each year commencing in 1997 as may be
specified by the Board of Directors or the President, at the principal office of
the corporation at ten o'clock, a.m. unless a different hour or place within or
without the State of Delaware is fixed by the Board of Directors or the
President. The purposes for which the annual meeting is to be held, in addition
to those prescribed by law, by the Amended and Restated Certificate of
Incorporation (the "Certificate of Incorporation") or by these Amended and
Restated By-laws (the "By-Laws"), may be specified by the Board of Directors or
the President. If no annual meeting has been held on the date fixed above, a
special meeting in lieu thereof may be held or there may be action by written
consent of stockholders, and such special meeting or written consent shall have
for the purposes of these By-Laws or otherwise all the force and effect of an
annual meeting.
2. Special Meetings. Special meetings of stockholders may be called by
----------------
the President or by the Board of Directors, provided that special meetings of
stockholders holding particular classes or series of stock may be held as
contemplated by the Certificate of Incorporation. Special meetings shall be
called by the Secretary, or in case of death, absence, incapacity or refusal of
the Secretary, by any other officer, upon written application of one or more
stockholders who hold at least twenty-five percent in interest of the capital
stock entitled to vote at such meeting. The call for the meeting may be oral or
written and shall state the place, date, hour and purposes of the meeting.
3. Notice of Meetings. A written notice stating the place, date and hour
------------------
of all meetings of stockholders, and in the case of special meetings, the
purposes of the meeting shall be given by the Secretary (or other person
authorized by these By-Laws or by law) not less than ten nor more than sixty
days before the meeting to each stockholder entitled to vote thereat and to each
stockholder who, under the Certificate of Incorporation or under these By-laws
is entitled to such notice, by delivering such notice to him or by mailing it,
postage prepaid, and addressed to such stockholder at his address as it appears
in the records of the corporation. Notice need not be given to a stockholder if
a written waiver of notice is executed before or after the meeting by such
stockholder, if communication with such stockholder is unlawful, or if such
stockholder attends the meeting in question, unless such
<PAGE>
attendance was for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting was not lawfully
called or convened. If a meeting is adjourned to another time or place, notice
need not be given of the adjourned meeting if the time and place are announced
at the meeting at which the adjournment is taken, except that if the adjournment
is for more than thirty days, or if after the adjournment a new record date is
fixed for the adjourned meeting, notice of the adjourned meeting shall be given
to each stockholder of record entitled to vote at the meeting.
4. Quorum. The holders of a majority in interest of all stock issued,
------
outstanding and entitled to vote at a meeting (whether comprising the
stockholders entitled to vote generally or stockholders of a particular class or
series, as contemplated by the Certificate of Incorporation) shall constitute a
quorum. Any meeting may be adjourned from time to time by a majority of the
votes properly cast upon the question, whether or not a quorum is present.
5. Voting and Proxies. Stockholders shall have one vote for each share of
------------------
stock entitled to vote owned by them of record according to the books of the
corporation unless otherwise provided by law or by the Certificate of
Incorporation. Stockholders may vote either in person or by written proxy, but
no proxy shall be voted or acted upon after three years from its date, unless
the proxy provides for a longer period. Proxies shall be filed with the
Secretary of the meeting, or of any adjournment thereof. Except as otherwise
limited therein, proxies shall entitle the persons authorized thereby to vote at
any adjournment of such meeting. A proxy purporting to be executed by or on
behalf of a stockholder shall be deemed valid unless challenged at or prior to
its exercise and the burden of proving invalidity shall rest on the challenger.
6. Action at Meeting. When a quorum is present, any matter before the
-----------------
meeting shall be decided by vote of the holders of a majority of the shares of
stock voting on such matter except where a larger or different vote is required
by law, by the Certificate of Incorporation or by these By-laws. Any election
by stockholders shall be determined by a plurality of the votes cast, except
where a larger or different vote is required by law, by the Certificate of
Incorporation or by these By-laws. No ballot shall be required for any election
unless requested by a stockholder entitled to vote in the election. The
corporation shall not directly or indirectly vote any share of its own stock;
provided, however, that the corporation may vote shares which it holds in a
fiduciary capacity to the extent permitted by law.
7. Action without a Meeting. Any action required or permitted by law to
------------------------
be taken at any annual or special meeting of stockholders, may be taken without
a meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken, shall be signed by the holders of outstanding
stock having not less than the number of votes specified in the Certificate of
Incorporation. Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent, if and to the extent action by
less than unanimous written consent is authorized under the Certificate of
Incorporation, shall be given to those stockholders who have not consented in
writing.
2
<PAGE>
8. Stockholder Lists. The Secretary (or other person authorized by these
-----------------
By-laws or by law) shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
ARTICLE II
----------
Directors
---------
1. Powers. The business of the corporation shall be managed by a Board of
------
Directors who may exercise all the powers of the corporation except as otherwise
provided by law, by the Certificate of Incorporation or by these By-laws. In
the event of a vacancy in the Board of Directors, the remaining Directors,
except as otherwise provided by law, may exercise the powers of the full Board
until the vacancy is filled.
2. Election and Qualification. Subject to the provisions of the
--------------------------
Certificate of Incorporation relating to the election of Directors, at each
annual meeting the stockholders shall fix the number of Directors (which shall
not be less than three or the number of stockholders if fewer than three) and
shall elect not more than the number of Directors so designated. No Director
need be a stockholder.
3. Vacancies; Reduction of Board. Subject to the provisions of the
-----------------------------
Certificate of Incorporation relating to the election of Directors, any vacancy
in the Board of Directors however occurring including a vacancy resulting from
the enlargement of the Board of Directors may be filled by the stockholders or
by the Directors then in office or by a sole remaining Director, provided that
in lieu of filling any such vacancy the stockholders or Board of Directors may
reduce the number of Directors but not to a number fewer than three or the
number of stockholders if fewer than three. When one or more Directors shall
resign from the Board of Directors, effective at a future date, a majority of
the Directors then in office, including those who so resigned, shall have power
to fill such vacancy or vacancies, the vote thereon to take effect when such
resignation or resignations shall become effective, subject to the provisions of
the Certificate of Incorporation relating to the election of Directors.
3
<PAGE>
4. Enlargement of the Board. Subject to the provisions of the
------------------------
Certificate of Incorporation relating to the election of Directors, the Board of
Directors may be enlarged by the stockholders at any meeting or by vote of a
majority of the Directors then in office.
5. Tenure. Except as otherwise provided by law, by the
------
Certificate of Incorporation or by these By-laws, Directors shall hold office
until their successors are elected and qualified or until their earlier
resignation or removal. Any Director may resign by delivering his written
resignation to the corporation. Such resignation shall be effective upon
receipt unless it is specified to be effective at some other time or upon the
happening of some other event.
6. Removal. Subject to the provisions of the Certificate of
-------
Incorporation relating to the election of Directors, a Director may be removed
from office (a) with or without cause by vote of the holders of a majority of
the shares of stock entitled to vote in the election of Directors, or (b) for
cause by vote of a majority of the Directors then in office. A Director may be
removed for cause only after reasonable notice and opportunity to be heard
before the body proposing to remove him.
7. Meetings. Regular meetings of the Board of Directors may be
--------
held without notice at such time, date and place as the Board of Directors may
from time to time determine. Special meetings of the Board of Directors may be
called, orally or in writing, by the President, Treasurer or two or more
Directors, designating the time, date and place thereof. Directors may
participate in meetings of the Board of Directors by means of conference
telephone or similar communications equipment by means of which all Directors
participating in the meeting can hear each other, and participation in a meeting
in accordance herewith shall constitute presence in person at such meeting.
8. Notice of Meetings. Notice of the time, date and place of all
------------------
special meetings of the Board of Directors shall be given to each Director by
the Secretary, or Assistant Secretary, or in case of the death, absence,
incapacity or refusal of such persons, by the officer or one of the Directors
calling the meeting. Notice shall be given to each Director in person or by
telephone or by telecopy sent to his business or home address at least twenty-
four hours in advance of the meeting, or by written notice mailed to his
business or home address at least forty-eight hours in advance of the meeting.
Notice need not be given to any Director if a written waiver of notice is
executed by him before or after the meeting, or if communication with such
Director is unlawful. A notice or waiver of notice of a meeting of the Board of
Directors need not specify the purposes of the meeting.
9. Quorum. At any meeting of the Board of Directors, a majority
------
of the Directors then in office shall constitute a quorum. Less than a quorum
may adjourn any meeting from time to time and the meeting may be held as
adjourned without further notice.
4
<PAGE>
10. Action at Meeting. At any meeting of the Board of Directors at
-----------------
which a quorum is present, a majority of the Directors present may take any
action on behalf of the Board of Directors, unless a larger number is required
by law, by the Certificate of Incorporation or by these By-laws.
11. Action by Consent. Any action required or permitted to be taken
-----------------
at any meeting of the Board of Directors may be taken without a meeting if a
written consent thereto is signed by all the Directors and filed with the
records of the meetings of the Board of Directors. Such consent shall be treated
as a vote of the Board of Directors for all purposes.
12. Committees. The Board of Directors, by vote of a majority of the
----------
Directors then in office, may establish one or more committees, each committee
to consist of one or more Directors, and may delegate thereto some or all of its
powers except those which by law, by the Certificate of Incorporation, or by
these By-laws may not be delegated. Except as the Board of Directors may
otherwise determine, any such committee may make rules for the conduct of its
business, but in the absence of such rules its business shall be conducted so
far as possible in the same manner as is provided in these By-laws for the Board
of Directors. All members of such committees shall hold their committee offices
at the pleasure of the Board of Directors, and the Board may abolish any
committee at any time. Each such committee shall report its action to the Board
of Directors who shall have power to rescind any action of any committee without
retroactive effect.
ARTICLE III
-----------
Officers
--------
1. Enumeration. The officers of the corporation shall consist of a
-----------
President, a Treasurer, a Secretary, and such other officers, including a
Chairman and one or more Vice Presidents, Assistant Treasurers and Assistant
Secretaries, as the Board of Directors may determine.
2. Election. The President, Treasurer and Secretary shall be
--------
elected annually by the Board of Directors at their first meeting following the
annual meeting of stockholders. Other officers may be chosen by the Board of
Directors at such meeting or at any other meeting.
3. Qualification. No officer need be a stockholder or Director. Any
-------------
two or more offices may be held by the same person. Any officer may be required
by the Board of Directors to give bond for the faithful performance of his
duties in such amount and with such sureties as the Board of Directors may
determine.
5
<PAGE>
4. Tenure. Except as otherwise provided by the Certificate of
------
Incorporation or by these By-laws, each of the officers of the corporation shall
hold his office until his successor is elected and qualified or until his
earlier resignation or removal. Any officer may resign by delivering his
written resignation to the corporation, and such resignation shall be effective
upon receipt unless it is specified to be effective at some other time or upon
the happening of some other event.
5. Removal. The Board of Directors may remove any officer with or
-------
without cause by a vote of a majority of the entire number of Directors then in
office; provided, that an officer may be removed for cause only after reasonable
notice and opportunity to be heard by the Board of Directors.
6. Vacancies. Any vacancy in any office may be filled for the
---------
unexpired portion of the term by the Board of Directors.
7. President, Chairman and Vice Presidents. The President shall be
---------------------------------------
the chief executive officer of the corporation and shall, subject to the
direction of the Board of Directors, have general supervision and control of its
business. Unless otherwise provided by the Board of Directors he shall preside,
when present, at all meetings of stockholders and of the Board of Directors.
The Chairman (if any, and who may also be the President) and any Vice
President shall have such powers and shall perform such duties as the Board of
Directors may from time to time designate.
8. Treasurer and Assistant Treasurers. The Treasurer shall, subject
----------------------------------
to the direction of the Chief Executive Officer and the Board of Directors, have
general charge of the financial affairs of the corporation and shall cause to be
kept accurate books of account. He shall have custody of all funds, securities,
and valuable documents of the corporation, except as the Board of Directors may
otherwise provide.
Any Assistant Treasurer shall have such powers and perform such duties
as the Board of Directors may from time to time designate.
9. Secretary and Assistant Secretaries. The Secretary shall record
-----------------------------------
all the proceedings of the meetings of the stockholders and the Board of
Directors (including committees of the Board) in books kept for that purpose. In
his absence from any such meeting or at the request of the Board of Directors,
an Assistant Secretary, or if there be none or he is absent, a temporary
secretary chosen at the meeting, shall record the proceedings thereof.
6
<PAGE>
The Secretary shall have charge of the stock ledger (which may, however, be
kept by any transfer or other agent of the corporation) and shall have such
other duties and powers as may be designated from time to time by the Board of
Directors or the President.
Any Assistant Secretary shall have such powers and perform such duties as
the Board of Directors may from time to time designate.
10. Other Powers and Duties. Subject to these By-laws, each officer of
-----------------------
the corporation shall have in addition to the duties and powers specifically set
forth in these By-laws, such duties and powers as are customarily incident to
his office, and such duties and powers as may be designated from time to time by
the Board of Directors.
ARTICLE IV
----------
Capital Stock
-------------
1. Certificates of Stock. Each stockholder shall be entitled to a
---------------------
certificate of the capital stock of the corporation in such form as may from
time to time be prescribed by the Board of Directors. Such certificate shall be
signed by the President or a Vice President and by the Treasurer or an Assistant
Treasurer or the Secretary or an Assistant Secretary. Such signatures may be
facsimile if the certificate is signed by a transfer agent or registrar, other
than the corporation or its employee. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed on such
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the corporation with the
same effect as if he were such officer, transfer agent or registrar at the time
of its issue. Every certificate for shares of stock which are subject to any
restriction on transfer and every certificate issued when the corporation is
authorized to issue more than one class or series of stock shall contain such
legend with respect thereto as is required by law.
2. Transfers. Subject to any restrictions on transfer shares of stock
---------
may be transferred on the books of the corporation by the surrender to the
corporation or its transfer agent of the certificate therefor properly endorsed
or accompanied by a written assignment or power of attorney properly executed,
with transfer stamps (if necessary) affixed, and with such proof of the
authenticity of signature as the corporation or its transfer agent may
reasonably require.
3. Record Holders. Except as may otherwise be required by law, by the
--------------
Certificate of Incorporation or by these By-laws, the corporation shall be
entitled to treat the record holder of stock as shown on its books as the owner
of such stock for all purposes, including the payment of dividends and the right
to vote with respect thereto, regardless of any transfer, pledge or other
disposition of such stock, until the shares have been transferred on the books
of the corporation in accordance with the requirements of these By-laws.
7
<PAGE>
It shall be the duty of each stockholder to notify the corporation of
his post office address.
4. Record Date. In order that the corporation may determine the
-----------
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty nor fewer than ten days before the date of
such meeting, nor more than sixty days prior to any other action. In such case
only stockholders of record on such record date shall be so entitled
notwithstanding any transfer of stock on the books of the corporation after the
record date.
If no record date is fixed, (a) the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held, (b) the record date for
determining stockholders entitled to express consent to corporate action in
writing without a meeting, when no prior action by the Board of Directors is
necessary, shall be the day on which the first written consent is expressed, and
(c) the record date for determining stockholders for any other purpose shall be
at the close of business on the day on which the Board of Directors adopts the
resolution relating thereto.
5. Replacement of Certificates. In case of the alleged loss,
---------------------------
destruction or mutilation of a certificate of stock, a duplicate certificate may
be issued in place thereof, upon such terms as the Board of Directors may
prescribe.
ARTICLE V
---------
Indemnification of Directors, Officers and Others
-------------------------------------------------
1. Indemnification of Directors and Officers. The corporation
-----------------------------------------
shall indemnify, to the fullest extent permitted by the General Corporation Law
of the State of Delaware, as the same exists or may hereafter be amended (but,
in the case of any such amendment, only to the extent that such amendment
permits the corporation to provide broader indemnification rights than said law
permitted the corporation to provide prior to such amendment):
(a) Any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
or suit by or in the right of the corporation) by reason of the fact that he is
or was a Director or officer of the corporation or
8
<PAGE>
any of its subsidiaries, or is or was serving at the request of the corporation
as a director or officer of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such suit, action or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
---- ----------
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
Notwithstanding the foregoing, the corporation shall indemnify any such person
seeking indemnification in connection with an action, suit or proceeding
initiated by such person only if the initiation and continued prosecution of
such action, suit or proceeding was authorized by the Board of Directors of the
corporation.
(b) Any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the right
of the corporation to procure a judgment in its favor by reason of the fact that
he is or was a Director or officer of the corporation, or is or was serving at
the request of the corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable for negligence or misconduct in the performance of
his duty to the corporation unless, and only to the extent that, the Court of
Chancery of the State of Delaware or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
(c) To the extent that a Director or officer of the corporation has
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in paragraphs (a) or (b), or in defense of any claim,
issue or matter therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith.
2. Indemnification of Employees and Agents. The Board of Directors,
---------------------------------------
in its discretion, may authorize the corporation to indemnify:
(a) Any person who was or is a party or is threatened to be made a
party to any threatened pending or completed action, suit or proceeding, whether
civil, criminal,
9
<PAGE>
administrative or investigative by reason of the fact that he is or was an
employee or agent of the corporation, or is or was serving at the request of the
corporation as an employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
---- ----------
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) Any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the right
of the corporation to procure a judgment in its favor by reason of the fact that
he is or was an employee or agent of the corporation, or is or was serving at
the request of the corporation as an employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable for negligence or misconduct in the performance of
his duty to the corporation unless, and only to the extent that, the Court of
Chancery of the State of Delaware or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnify for such expenses which the Court of
Chancery or such other court shall deem proper.
3. Determination of Entitlement. Any indemnification hereunder
----------------------------
(unless required by law or ordered by a court) shall be made by the corporation
only as authorized in the specific case upon a determination that
indemnification of the Director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth in
paragraphs 1 or 2. The determination shall be made by (i) a majority vote of
those Directors who are not involved in such Proceeding (the "Disinterested
Directors"); (ii) by the stockholders of the corporation; or (iii) if directed
by a majority of Disinterested Directors, by independent legal counsel in a
written opinion. However, if fewer than a majority of the Directors are
Disinterested Directors, the determination shall be made by (i) a majority vote
of a committee of one or more disinterested Director(s) chosen by the
Disinterested Director(s) at a regular or special meeting; (ii) by the
stockholders of the corporation; or (iii) by independent legal counsel in a
written opinion.
10
<PAGE>
4. Advance Payments. Expenses incurred in defending a civil or criminal
----------------
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding, only as authorized by the
Board of Directors in the specific case (including by one or more Directors who
may be parties to such action, suit or proceeding), upon receipt of an
undertaking by or on behalf of the Director, officer, employee or agent to repay
such amount unless it shall ultimately be determined that he is entitled to be
indemnified by the corporation as authorized in this Article V.
5. Non-Exclusive Nature of Indemnification. The indemnification provided
---------------------------------------
herein shall not be deemed exclusive of any other rights to which any person,
whether or not entitled to be indemnified hereunder, may be entitled under any
statute, by-law, agreement, vote of stockholders or Directors or otherwise, both
as to action in his or her official capacity and as to action in another
capacity while holding such office, including rights which are broader than
those set forth herein, and shall continue as to a person who has ceased to be a
Director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person. Each person who is or
becomes a Director or officer as aforesaid shall be deemed to have served or to
have continued to serve in such capacity in reliance upon the indemnity provided
for in this Article V.
6. Insurance. The corporation may purchase and maintain insurance on
---------
behalf of any person who is or was a Director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under the provisions of the General Corporation Law of the State
of Delaware (as presently in effect or hereafter amended), the Certificate of
Incorporation of the corporation or these By-laws.
7. No Duplicate Payments. The corporation's indemnification under
---------------------
paragraphs 1 and 2 of this Article V of any person who is or was a Director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall be
reduced by any amounts such person receives as indemnification (i) under any
policy of insurance purchased and maintained on his behalf by the corporation,
(ii) from such other corporation, partnership, joint venture, trust or other
enterprise, or (iii) under any other applicable indemnification provision.
8. Limitation. Notwithstanding anything herein to the contrary, the
----------
corporation shall not be required to indemnify any person hereunder as to any
matter with respect to which such person or his or its affiliates are obligated
to indemnify the corporation or any of its affiliates pursuant to any agreement
with the corporation or any of its affiliates.
11
<PAGE>
9. Amendment. This Article V may be amended only so as to have a
---------
prospective effect. Any amendment to this Article V which would result in any
person having a more limited entitlement to indemnification may be approved only
by the stockholders.
ARTICLE VI
----------
Miscellaneous Provisions
------------------------
1. Fiscal Year. Except as otherwise determined by the Board of Directors,
-----------
the fiscal year of the corporation shall end on December 31 of each year.
2. Execution of Instruments. All deeds, leases, transfers, contracts,
------------------------
bonds, notes and other obligations authorized to be executed by an officer of
the corporation in its behalf shall be signed by the President or the Treasurer
except as the Board of Directors may generally or in particular cases otherwise
determine.
3. Voting of Securities. Unless otherwise provided by the Board of
--------------------
Directors, the President or Treasurer may waive notice of and act on behalf of
this corporation, or appoint another person or persons to act as proxy or
attorney in fact for this corporation with or without discretionary power and/or
power of substitution, at any meeting of stockholders or stockholders of any
other corporation or organization, any of whose securities are held by this
corporation.
4. Resident Agent. The Board of Directors may appoint a resident agent
--------------
upon whom legal process may be served in any action or proceeding against the
corporation.
5. Corporate Records. The original or attested copies of the Certificate
-----------------
of Incorporation, By-laws and records of all meetings of the incorporators,
stockholders and the Board of Directors and the stock and transfer records,
which shall contain the names of all stockholders, their record addresses and
the amount of stock held by each, shall be kept at the principal office of the
corporation, at the office of its counsel, or at an office of its transfer
agent.
6. Certificate of Incorporation. All references in these By-laws to the
----------------------------
Certificate of Incorporation shall be deemed to refer to the Certificate of
Incorporation of the corporation, as amended and in effect from time to time.
7. Amendments. These By-laws may be amended or repealed or additional By-
----------
laws adopted by the stockholders or by the Board of Directors except as provided
in Article V, Section 8; provided, that (a) the Board of Directors may not amend
or repeal this Section 7 or any provision of these By-laws which by law, by the
Certificate of Incorporation or by these By-laws requires action by the
stockholders, (b) any amendment or repeal of these
12
<PAGE>
By-laws by the Board of Directors and any By-law adopted by the Board of
Directors may be amended or repealed by the stockholders.
Adopted and Effective
as of November 22, 1996.
13
<PAGE>
Exhibit 3.6
AMENDED AND RESTATED
BY-LAWS
OF
BORON, LEPORE & ASSOCIATES, INC.
(the "Corporation")
ARTICLE I
---------
Stockholders
------------
SECTION 1. Annual Meeting. The annual meeting of stockholders shall be
--------------
held at the hour, date and place within or without the United States which is
fixed by the majority of the Board of Directors, the Chairman of the Board, if
one is elected, or the President, which time, date and place may subsequently be
changed at any time by vote of the Board of Directors. If no annual meeting has
been held for a period of thirteen months after the Corporation's last annual
meeting of stockholders, a special meeting in lieu thereof may be held, and such
special meeting shall have, for the purposes of these By-laws or otherwise, all
the force and effect of an annual meeting. Any and all references hereafter in
these By-laws to an annual meeting or annual meetings also shall be deemed to
refer to any special meeting(s) in lieu thereof.
SECTION 2. Matters to be Considered at Annual Meetings. At any annual
-------------------------------------------
meeting of stockholders or any special meeting in lieu of annual meeting of
stockholders (the "Annual Meeting"), only such business shall be conducted, and
only such proposals shall be acted upon, as shall have been properly brought
before such Annual Meeting. To be considered as properly brought before an
Annual Meeting, business must be: (a) specified in the notice of meeting, (b)
otherwise properly brought before the meeting by, or at the direction of, the
Board of Directors, or (c) otherwise properly brought before the meeting by any
holder of record (both as of the time notice of such proposal is given by the
stockholder as set forth below and as of the record date for the Annual Meeting
in question) of any shares of capital stock of the Corporation entitled to vote
at such Annual Meeting who complies with the requirements set forth in this
Section 2.
In addition to any other applicable requirements, for business to be
properly brought before an Annual Meeting by a stockholder of record of any
shares of capital stock entitled to vote at such Annual Meeting, such
stockholder shall: (a) give timely notice as required by this Section 2 to the
Secretary of the Corporation and (b) be present at such meeting, either in
person or by a representative. For the first Annual Meeting following the
initial public
<PAGE>
offering of common stock of the Corporation, a stockholder's notice shall be
timely if delivered to, or mailed to and received by, the Corporation at its
principal executive office not later than the close of business on the later of
(a) the 75th day prior to the scheduled date of such Annual Meeting or (b) the
15th day following the day on which public announcement of the date of such
Annual Meeting is first made or sent by the Corporation. For all subsequent
Annual Meetings, a stockholder's notice shall be timely if delivered to, or
mailed to and received by, the Corporation at its principal executive office not
less than 75 days nor more than 120 days prior to the anniversary date of the
immediately preceding Annual Meeting (the "Anniversary Date"); provided,
however, that in the event the Annual Meeting is scheduled to be held on a date
more than 30 days before the Anniversary Date or more than 60 days after the
Anniversary Date, a stockholder's notice shall be timely if delivered to, or
mailed to and received by, the Corporation at its principal executive office not
later than the close of business on the later of (a) the 75th day prior to the
scheduled date of such Annual Meeting or (b) the 15th day following the day on
which public announcement of the date of such Annual Meeting is first made by
the Corporation.
For purposes of these By-laws, "public announcement" shall mean: (a)
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service, (b) a report or other document filed
publicly with the Securities and Exchange Commission (including, without
limitation, a Form 8-K), or (c) a letter or report sent to stockholders of
record of the Corporation at the time of the mailing of such letter or report.
A stockholder's notice to the Secretary shall set forth as to each matter
proposed to be brought before an Annual Meeting: (a) a brief description of the
business the stockholder desires to bring before such Annual Meeting and the
reasons for conducting such business at such Annual Meeting, (b) the name and
address, as they appear on the Corporation's stock transfer books, of the
stockholder proposing such business, (c) the class and number of shares of the
Corporation's capital stock beneficially owned by the stockholder proposing such
business, (d) the names and addresses of the beneficial owners, if any, of any
capital stock of the Corporation registered in such stockholder's name on such
books, and the class and number of shares of the Corporation's capital stock
beneficially owned by such beneficial owners, (e) the names and addresses of
other stockholders known by the stockholder proposing such business to support
such proposal, and the class and number of shares of the Corporation's capital
stock beneficially owned by such other stockholders, and (f) any material
interest of the stockholder proposing to bring such business before such meeting
(or any other stockholders known to be supporting such proposal) in such
proposal.
If the Board of Directors or a designated committee thereof determines that
any stockholder proposal was not made in a timely fashion in accordance with the
provisions of this Section 2 or that the information provided in a stockholder's
notice does not satisfy the information requirements of this Section 2 in any
material respect, such proposal shall not be
2
<PAGE>
presented for action at the Annual Meeting in question. If neither the Board of
Directors nor such committee makes a determination as to the validity of any
stockholder proposal in the manner set forth above, the presiding officer of the
Annual Meeting shall determine whether the stockholder proposal was made in
accordance with the terms of this Section 2. If the presiding officer determines
that any stockholder proposal was not made in a timely fashion in accordance
with the provisions of this Section 2 or that the information provided in a
stockholder's notice does not satisfy the information requirements of this
Section 2 in any material respect, such proposal shall not be presented for
action at the Annual Meeting in question. If the Board of Directors, a
designated committee thereof or the presiding officer determines that a
stockholder proposal was made in accordance with the requirements of this
Section 2, the presiding officer shall so declare at the Annual Meeting and
ballots shall be provided for use at the meeting with respect to such proposal.
Notwithstanding the foregoing provisions of this By-Law, a stockholder
shall also comply with all applicable requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and the rules and regulations
thereunder with respect to the matters set forth in this Section 2, and nothing
in this Section 2 shall be deemed to affect any rights of stockholders to
request inclusion of proposals in the Corporation's proxy statement pursuant to
Rule 14a-8 under the Exchange Act.
SECTION 3. Special Meetings. Except as otherwise required by law and
----------------
subject to the rights, if any, of the holders of any series of preferred stock,
special meetings of the stockholders of the Corporation may be called only by
the Board of Directors pursuant to a resolution approved by the affirmative vote
of a majority of the directors then in office.
SECTION 4. Matters to be Considered at Special Meetings. Only those
--------------------------------------------
matters set forth in the notice of the special meeting may be considered or
acted upon at a special meeting of stockholders of the Corporation, unless
otherwise provided by law.
SECTION 5. Notice of Meetings; Adjournments. A written notice of each
--------------------------------
Annual Meeting stating the hour, date and place of such Annual Meeting shall be
given by the Secretary or an Assistant Secretary (or other person authorized by
these By-laws or by law) not less than 10 days nor more than 60 days before the
Annual Meeting, to each stockholder entitled to vote thereat and to each
stockholder who, by law or under the Restated Certificate of Incorporation of
the Corporation (as the same may hereafter be amended and/or restated, the
"Certificate") or under these By-laws, is entitled to such notice, by delivering
such notice to him or by mailing it, postage prepaid, addressed to such
stockholder at the address of such stockholder as it appears on the
Corporation's stock transfer books. Such notice shall be deemed to be delivered
when hand delivered to such address or deposited in the mail so addressed, with
postage prepaid.
3
<PAGE>
Notice of all special meetings of stockholders shall be given in the same
manner as provided for Annual Meetings, except that the written notice of all
special meetings shall state the purpose or purposes for which the meeting has
been called.
Notice of an Annual Meeting or special meeting of stockholders need not be
given to a stockholder if a written waiver of notice is signed before or after
such meeting by such stockholder or if such stockholder attends such meeting,
unless such attendance was for the express purpose of objecting at the beginning
of the meeting to the transaction of any business because the meeting was not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any Annual Meeting or special meeting of stockholders need be
specified in any written waiver of notice.
The Board of Directors may postpone and reschedule any previously scheduled
Annual Meeting or special meeting of stockholders and any record date with
respect thereto, regardless of whether any notice or public disclosure with
respect to any such meeting has been sent or made pursuant to Section 2 of this
Article I or Section 3 of Article II hereof or otherwise. In no event shall
the public announcement of an adjournment, postponement or rescheduling of any
previously scheduled meeting of stockholders commence a new time period for the
giving of a stockholder's notice under Section 2 of Article I and Section 3 of
Article II of these By-laws.
When any meeting is convened, the presiding officer may adjourn the meeting
if (a) no quorum is present for the transaction of business, (b) the Board of
Directors determines that adjournment is necessary or appropriate to enable the
stockholders to consider fully information which the Board of Directors
determines has not been made sufficiently or timely available to stockholders,
or (c) the Board of Directors determines that adjournment is otherwise in the
best interests of the Corporation. When any Annual Meeting or special meeting
of stockholders is adjourned to another hour, date or place, notice need not be
given of the adjourned meeting other than an announcement at the meeting at
which the adjournment is taken of the hour, date and place to which the meeting
is adjourned; provided, however, that if the adjournment is for more than 30
days, or if after the adjournment a new record date is fixed for the adjourned
meeting, notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote thereat and each stockholder who, by law or under the
Certificate or these By-laws, is entitled to such notice.
SECTION 6. Quorum. The holders of shares of voting stock representing a
------
majority of the voting power of the outstanding shares of voting stock issued,
outstanding and entitled to vote at a meeting of stockholders, represented in
person or by proxy at such meeting, shall constitute a quorum; but if less than
a quorum is present at a meeting, the holders of voting stock representing a
majority of the voting power present at the meeting or the presiding officer may
adjourn the meeting from time to time, and the meeting may be held as adjourned
without further notice, except as provided in Section 5 of this Article I. At
such adjourned
4
<PAGE>
meeting at which a quorum is present, any business may be transacted which might
have been transacted at the meeting as originally noticed. The stockholders
present at a duly constituted meeting may continue to transact business until
adjournment, notwithstanding the withdrawal of enough stockholders to leave less
than a quorum.
SECTION 7. Voting and Proxies. Stockholders shall have one vote for each
------------------
share of stock entitled to vote owned by them of record according to the books
of the Corporation, unless otherwise provided by law or by the Certificate.
Stockholders may vote either in person or by written proxy, but no proxy shall
be voted or acted upon after three years from its date, unless the proxy
provides for a longer period. Proxies shall be filed with the Secretary of the
meeting before being voted. Except as otherwise limited therein or as otherwise
provided by law, proxies shall entitle the persons authorized thereby to vote at
any adjournment of such meeting, but they shall not be valid after final
adjournment of such meeting. A proxy with respect to stock held in the name of
two or more persons shall be valid if executed by or on behalf of any one of
them unless at or prior to the exercise of the proxy the Corporation receives a
specific written notice to the contrary from any one of them. A proxy
purporting to be executed by or on behalf of a stockholder shall be deemed
valid, and the burden of proving invalidity shall rest on the challenger.
SECTION 8. Action at Meeting. When a quorum is present, any matter before
-----------------
any meeting of stockholders shall be decided by the vote of a majority of the
voting power of shares of voting stock, present in person or represented by
proxy at such meeting and entitled to vote on such matter, except where a larger
vote is required by law, by the Certificate or by these By-laws. Any election
by stockholders shall be determined by a plurality of the votes cast, except
where a larger vote is required by law, by the Certificate or by these By-laws.
The Corporation shall not directly or indirectly vote any shares of its own
stock; provided, however, that the Corporation may vote shares which it holds in
a fiduciary capacity to the extent permitted by law.
SECTION 9. Stockholder Lists. The Secretary or an Assistant Secretary (or
-----------------
the Corporation's transfer agent or other person authorized by these By-laws or
by law) shall prepare and make, at least 10 days before every Annual Meeting or
special meeting of stockholders, a complete list of the stockholders entitled to
vote at the meeting, arranged in alphabetical order, and showing the address of
each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder, for
any purpose germane to the meeting, during ordinary business hours, for a period
of at least 10 days prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified in the notice of
the meeting, or, if not so specified, at the place where the meeting is to be
held. The list shall also be produced and kept at the hour, date and place of
the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
5
<PAGE>
SECTION 10. Presiding Officer. The Chairman of the Board, if one is
-----------------
elected, or if not elected or in his or her absence, the President, shall
preside at all Annual Meetings or special meetings of stockholders and shall
have the power, among other things, to adjourn such meeting at any time and from
time to time, subject to Sections 5 and 6 of this Article I. The order of
business and all other matters of procedure at any meeting of the stockholders
shall be determined by the presiding officer.
SECTION 11. Voting Procedures and Inspectors of Elections. The
---------------------------------------------
Corporation shall, in advance of any meeting of stockholders, appoint one or
more inspectors to act at the meeting and make a written report thereof. The
Corporation may designate one or more persons as alternate inspectors to replace
any inspector who fails to act. If no inspector or alternate is able to act at
a meeting of stockholders, the presiding officer shall appoint one or more
inspectors to act at the meeting. Any inspector may, but need not, be an
officer, employee or agent of the Corporation. Each inspector, before entering
upon the discharge of his or her duties, shall take and sign an oath faithfully
to execute the duties of inspector with strict impartiality and according to the
best of his or her ability. The inspectors shall perform such duties as are
required by the General Corporation Law of the State of Delaware, as amended
from time to time (the "DGCL"), including the counting of all votes and ballots.
The inspectors may appoint or retain other persons or entities to assist the
inspectors in the performance of the duties of the inspectors. The presiding
officer may review all determinations made by the inspectors, and in so doing
the presiding officer shall be entitled to exercise his or her sole judgment and
discretion and he or she shall not be bound by any determinations made by the
inspectors. All determinations by the inspectors and, if applicable, the
presiding officer, shall be subject to further review by any court of competent
jurisdiction.
ARTICLE II
----------
Directors
---------
SECTION 1. Powers. The business and affairs of the Corporation shall be
------
managed by or under the direction of the Board of Directors except as otherwise
provided by the Certificate or required by law.
SECTION 2. Number and Terms. The number of directors of the Corporation
----------------
shall be fixed by resolution duly adopted from time to time by the Board of
Directors. The directors shall hold office in the manner provided in the
Certificate.
SECTION 3. Director Nominations. Nominations of candidates for election
--------------------
as directors of the Corporation at any Annual Meeting may be made only (a) by,
or at the direction of, a majority of the Board of Directors or (b) by any
holder of record (both as of the time notice of such nomination is given by the
stockholder as set forth below and as of the
6
<PAGE>
record date for the Annual Meeting in question) of any shares of the capital
stock of the Corporation entitled to vote at such Annual Meeting who complies
with the timing, informational and other requirements set forth in this Section
3. Any stockholder who has complied with the timing, informational and other
requirements set forth in this Section 3 and who seeks to make such a
nomination, or his, her or its representative, must be present in person at the
Annual Meeting. Only persons nominated in accordance with the procedures set
forth in this Section 3 shall be eligible for election as directors at an Annual
Meeting.
Nominations, other than those made by, or at the direction of, the Board of
Directors, shall be made pursuant to timely notice in writing to the Secretary
of the Corporation as set forth in this Section 3. For the first Annual Meeting
following the initial public offering of common stock of the Corporation, a
stockholder's notice shall be timely if delivered to, or mailed to and received
by, the Corporation at its principal executive office not later than the close
of business on the later of (a) the 75th day prior to the scheduled date of such
Annual Meeting or (b) the 15th day following the day on which public
announcement of the date of such Annual Meeting is first made or sent by the
Corporation. For all subsequent Annual Meetings, a stockholder's notice shall
be timely if delivered to, or mailed to and received by, the Corporation at its
principal executive office not less than 75 days nor more than 120 days prior to
the Anniversary Date; provided, however, that in the event the Annual Meeting is
scheduled to be held on a date more than 30 days before the Anniversary Date or
more than 60 days after the Anniversary Date, a stockholder's notice shall be
timely if delivered to, or mailed and received by, the Corporation at its
principal executive office not later than the close of business on the later of
(a) the 75th day prior to the scheduled date of such Annual Meeting or (b) the
15th day following the day on which public announcement of the date of such
Annual Meeting is first made by the Corporation.
A stockholder's notice to the Secretary shall set forth as to each person
whom the stockholder proposes to nominate for election or re-election as a
director: (a) the name, age, business address and residence address of such
person, (b) the principal occupation or employment of such person, (c) the class
and number of shares of the Corporation's capital stock which are beneficially
owned by such person on the date of such stockholder notice, and (d) the consent
of each nominee to serve as a director if elected. A stockholder's notice to
the Secretary shall further set forth as to the stockholder giving such notice:
(a) the name and address, as they appear on the Corporation's stock transfer
books, of such stockholder and of the beneficial owners (if any) of the
Corporation's capital stock registered in such stockholder's name and the name
and address of other stockholders known by such stockholder to be supporting
such nominee(s), (b) the class and number of shares of the Corporation's capital
stock which are held of record, beneficially owned or represented by proxy by
such stockholder and by any other stockholders known by such stockholder to be
supporting such nominee(s) on the record date for the Annual Meeting in question
(if such date shall then have been made publicly available) and on the date of
such stockholder's notice, and (c) a description of all arrangements or
understandings between such stockholder and each nominee
7
<PAGE>
and any other person or persons (naming such person or persons) pursuant to
which the nomination or nominations are to be made by such stockholder.
If the Board of Directors or a designated committee thereof determines that
any stockholder nomination was not made in accordance with the terms of this
Section 3 or that the information provided in a stockholder's notice does not
satisfy the informational requirements of this Section 3 in any material
respect, then such nomination shall not be considered at the Annual Meeting in
question. If neither the Board of Directors nor such committee makes a
determination as to whether a nomination was made in accordance with the
provisions of this Section 3, the presiding officer of the Annual Meeting shall
determine whether a nomination was made in accordance with such provisions. If
the presiding officer determines that any stockholder nomination was not made in
a timely fashion in accordance with the terms of this Section 3 or that the
information provided in a stockholder's notice does not satisfy the
informational requirements of this Section 3 in any material respect, then such
nomination shall not be considered at the Annual Meeting in question. If the
Board of Directors, a designated committee thereof or the presiding officer
determines that a nomination was made in accordance with the terms of this
Section 3, the presiding officer shall so declare at the Annual Meeting and
ballots shall be provided for use at the meeting with respect to such nominee.
Notwithstanding anything to the contrary in the second sentence of the
second paragraph of this Section 3, in the event that the number of directors to
be elected to the Board of Directors of the Corporation is increased and there
is no public announcement by the Corporation naming all of the nominees for
director or specifying the size of the increased Board of Directors at least 75
days prior to the Anniversary Date, a stockholder's notice required by this
Section 3 shall also be considered timely, but only with respect to nominees for
any new positions created by such increase, if such notice shall be delivered
to, or mailed to and received by, the Corporation at its principal executive
office not later than the close of business on the 15th day following the day on
which such public announcement is first made by the Corporation.
No person shall be elected by the stockholders as a director of the
Corporation unless nominated in accordance with the procedures set forth in this
Section. Election of directors at an Annual Meeting need not be by written
ballot, unless otherwise provided by the Board of Directors or presiding officer
at such Annual Meeting. If written ballots are to be used, ballots bearing the
names of all the persons who have been nominated for election as directors at
the Annual Meeting in accordance with the procedures set forth in this Section
shall be provided for use at the Annual Meeting.
SECTION 4. Qualification. No director need be a stockholder of the
-------------
Corporation.
SECTION 5. Vacancies. Subject to the rights, if any, of the holders of
---------
any series of preferred stock to elect directors and to fill vacancies in the
Board of Directors relating
8
<PAGE>
thereto, any and all vacancies in the Board of Directors, however occurring,
including, without limitation, by reason of an increase in size of the Board of
Directors, or the death, resignation, disqualification or removal of a director,
shall be filled solely by the affirmative vote of a majority of the remaining
directors then in office, even if less than a quorum of the Board of Directors.
Any director appointed in accordance with the preceding sentence shall hold
office for the remainder of the full term of the class of directors in which the
new directorship was created or the vacancy occurred and until such director's
successor shall have been duly elected and qualified or until his or her earlier
resignation or removal. Subject to the rights, if any, of the holders of any
series of preferred stock to elect directors, when the number of directors is
increased or decreased, the Board of Directors shall determine the class or
classes to which the increased or decreased number of directors shall be
apportioned; provided, however, that no decrease in the number of directors
shall shorten the term of any incumbent director. In the event of a vacancy in
the Board of Directors, the remaining directors, except as otherwise provided by
law, may exercise the powers of the full Board of Directors until the vacancy is
filled.
SECTION 6. Removal. Directors may be removed from office in the manner
-------
provided in the Certificate.
SECTION 7. Resignation. A director may resign at any time by giving
-----------
written notice to the Chairman of the Board, if one is elected, the President or
the Secretary. A resignation shall be effective upon receipt, unless the
resignation otherwise provides.
SECTION 8. Regular Meetings. The regular annual meeting of the Board of
----------------
Directors shall be held, without notice other than this Section 8, on the same
date and at the same place as the Annual Meeting following the close of such
meeting of stockholders. Other regular meetings of the Board of Directors may
be held at such hour, date and place as the Board of Directors may by resolution
from time to time determine without notice other than such resolution.
SECTION 9. Special Meetings. Special meetings of the Board of Directors
----------------
may be called, orally or in writing, by or at the request of a majority of the
directors, the Chairman of the Board, if one is elected, or the President. The
person calling any such special meeting of the Board of Directors may fix the
hour, date and place thereof.
SECTION 10. Notice of Meetings. Notice of the hour, date and place of all
------------------
special meetings of the Board of Directors shall be given to each director by
the Secretary or an Assistant Secretary, or in case of the death, absence,
incapacity or refusal of such persons, by the Chairman of the Board, if one is
elected, or the President or such other officer designated by the Chairman of
the Board, if one is elected, or the President. Notice of any special meeting
of the Board of Directors shall be given to each director in person, by
telephone, or by facsimile, telex, telecopy, telegram, or other written form of
electronic communication, sent to
9
<PAGE>
his or her business or home address, at least 24 hours in advance of the
meeting, or by written notice mailed to his or her business or home address, at
least 48 hours in advance of the meeting. Such notice shall be deemed to be
delivered when hand delivered to such address, read to such director by
telephone, deposited in the mail so addressed, with postage thereon prepaid if
mailed, dispatched or transmitted if faxed, telexed or telecopied, or when
delivered to the telegraph company if sent by telegram.
When any Board of Directors meeting, either regular or special, is
adjourned for 30 days or more, notice of the adjourned meeting shall be given as
in the case of an original meeting. It shall not be necessary to give any
notice of the hour, date or place of any meeting adjourned for less than 30 days
or of the business to be transacted thereat, other than an announcement at the
meeting at which such adjournment is taken of the hour, date and place to which
the meeting is adjourned.
A written waiver of notice signed before or after a meeting by a director
and filed with the records of the meeting shall be deemed to be equivalent to
notice of the meeting. The attendance of a director at a meeting shall
constitute a waiver of notice of such meeting, except where a director attends a
meeting for the express purpose of objecting at the beginning of the meeting to
the transaction of any business because such meeting is not lawfully called or
convened. Except as otherwise required by law, by the Certificate or by these
By-laws, neither the business to be transacted at, nor the purpose of, any
meeting of the Board of Directors need be specified in the notice or waiver of
notice of such meeting.
SECTION 11. Quorum. At any meeting of the Board of Directors, a majority
------
of the directors then in office shall constitute a quorum for the transaction of
business, but if less than a quorum is present at a meeting, a majority of the
directors present may adjourn the meeting from time to time, and the meeting may
be held as adjourned without further notice, except as provided in Section 10 of
this Article II. Any business which might have been transacted at the meeting
as originally noticed may be transacted at such adjourned meeting at which a
quorum is present.
SECTION 12. Action at Meeting. At any meeting of the Board of Directors
-----------------
at which a quorum is present, a majority of the directors present may take any
action on behalf of the Board of Directors, unless otherwise required by law, by
the Certificate or by these By-laws.
SECTION 13. Action by Consent. Any action required or permitted to be
-----------------
taken at any meeting of the Board of Directors may be taken without a meeting if
all members of the Board of Directors consent thereto in writing. Such written
consent shall be filed with the records of the meetings of the Board of
Directors and shall be treated for all purposes as a vote at a meeting of the
Board of Directors.
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<PAGE>
SECTION 14. Manner of Participation. Directors may participate in
-----------------------
meetings of the Board of Directors by means of conference telephone or similar
communications equipment by means of which all directors participating in the
meeting can hear each other, and participation in a meeting in accordance
herewith shall constitute presence in person at such meeting for purposes of
these By-laws.
SECTION 15. Committees. The Board of Directors, by vote of a majority of
----------
the directors then in office, may elect from its number one or more committees,
including, without limitation, an Executive Committee, a Compensation and Option
Committee and an Audit Committee, and may delegate thereto some or all of its
powers except those which by law, by the Certificate or by these By-laws may not
be delegated. Except as the Board of Directors may otherwise determine, any
such committee may make rules for the conduct of its business, but unless
otherwise provided by the Board of Directors or in such rules, its business
shall be conducted so far as possible in the same manner as is provided by these
By-laws for the Board of Directors. All members of such committees shall hold
such offices at the pleasure of the Board of Directors. The Board of Directors
may abolish any such committee at any time. Any committee to which the Board of
Directors delegates any of its powers or duties shall keep records of its
meetings and shall report its action to the Board of Directors. The Board of
Directors shall have power to rescind any action of any committee, to the extent
permitted by law, but no such rescission shall have retroactive effect.
SECTION 16. Compensation of Directors. Directors shall receive such
-------------------------
compensation for their services as shall be determined by a majority of the
Board of Directors provided that directors who are serving the Corporation as
employees and who receive compensation for their services as such, shall not
receive any salary or other compensation for their services as directors of the
Corporation.
ARTICLE III
-----------
Officers
--------
SECTION 1. Enumeration. The officers of the Corporation shall consist of
-----------
a President, a Treasurer, a Secretary and such other officers, including,
without limitation, a Chairman of the Board, a Chief Executive Officer and one
or more Vice Presidents (including Executive Vice Presidents or Senior Vice
Presidents), Assistant Vice Presidents, Assistant Treasurers and Assistant
Secretaries, as the Board of Directors may determine.
SECTION 2. Election. At the regular annual meeting of the Board following
--------
the Annual Meeting of stockholders, the Board of Directors shall elect the
President, the Treasurer and the Secretary. Other officers may be elected by
the Board of Directors at such regular annual meeting of the Board of Directors
or at any other regular or special meeting.
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<PAGE>
SECTION 3. Qualification. No officer need be a stockholder or a director.
-------------
Any person may occupy more than one office of the Corporation at any time. Any
officer may be required by the Board of Directors to give bond for the faithful
performance of his or her duties in such amount and with such sureties as the
Board of Directors may determine.
SECTION 4. Tenure. Except as otherwise provided by the Certificate or by
------
these By-laws, each of the officers of the Corporation shall hold office until
the regular annual meeting of the Board of Directors following the next Annual
Meeting of stockholders and until his or her successor is elected and qualified
or until his or her earlier resignation or removal.
SECTION 5. Resignation. Any officer may resign by delivering his or her
-----------
written resignation to the Corporation addressed to the President or the
Secretary, and such resignation shall be effective upon receipt unless it is
specified to be effective at some other time or upon the happening of some other
event.
SECTION 6. Removal. Except as otherwise provided by law, the Board of
-------
Directors may remove any officer with or without cause by the affirmative vote
of a majority of the directors then in office.
SECTION 7. Absence or Disability. In the event of the absence or
---------------------
disability of any officer, the Board of Directors may designate another officer
to act temporarily in place of such absent or disabled officer.
SECTION 8. Vacancies. Any vacancy in any office may be filled for the
---------
unexpired portion of the term by the Board of Directors.
SECTION 9. Chairman of the Board. The Chairman of the Board, if one is
---------------------
elected, shall preside, when present, at all meetings of the stockholders and of
the Board of Directors. The Chairman of the Board shall have such other powers
and shall perform such other duties as the Board of Directors may from time to
time designate.
SECTION 10. Chief Executive Officer. The Chief Executive Officer, if one
-----------------------
is elected, shall, subject to the direction of the Board of Directors, have
general supervision and control of the Corporation's business. If there is no
Chairman of the Board or if he or she is absent, the Chief Executive Officer
shall preside, when present, at all meetings of stockholders and of the Board of
Directors. The Chief Executive Officer shall have such other powers and perform
such other duties as the Board of Directors may from time to time designate.
SECTION 11. President. The President shall generally have such powers and
---------
shall perform such duties as the Board of Directors may from time to time
designate. However, if no Chief Executive Officer is elected, the President
shall have general supervision and control of the Corporation's business. If
there is neither a Chairman of the Board nor a Chief
12
<PAGE>
Executive Officer or if both such officers are absent, the President shall
preside, when present, at all meetings of stockholders and of the Board of
Directors.
SECTION 12. Vice Presidents and Assistant Vice Presidents. Any Vice
---------------------------------------------
President (including any Executive Vice President or Senior Vice President) and
any Assistant Vice President shall have such powers and shall perform such
duties as the Board of Directors or the Chief Executive Officer may from time to
time designate.
SECTION 13. Treasurer and Assistant Treasurers. The Treasurer shall,
----------------------------------
subject to the direction of the Board of Directors and except as the Board of
Directors or the Chief Executive Officer may otherwise provide, have general
charge of the financial affairs of the Corporation and shall cause to be kept
accurate books of account. The Treasurer shall have custody of all funds,
securities, and valuable documents of the Corporation. He or she shall have
such other duties and powers as may be designated from time to time by the Board
of Directors or the Chief Executive Officer.
Any Assistant Treasurer shall have such powers and perform such duties as
the Board of Directors or the Chief Executive Officer may from time to time
designate.
SECTION 14. Secretary and Assistant Secretaries. The Secretary shall
-----------------------------------
record all the proceedings of the meetings of the stockholders and the Board of
Directors (including committees of the Board) in books kept for that purpose.
In his or her absence from any such meeting, a temporary secretary chosen at the
meeting shall record the proceedings thereof. The Secretary shall have charge of
the stock ledger (which may, however, be kept by any transfer or other agent of
the Corporation). The Secretary shall have custody of the seal of the
Corporation, and the Secretary, or an Assistant Secretary, shall have authority
to affix it to any instrument requiring it, and, when so affixed, the seal may
be attested by his or her signature or that of an Assistant Secretary. The
Secretary shall have such other duties and powers as may be designated from time
to time by the Board of Directors or the Chief Executive Officer. In the absence
of the Secretary, any Assistant Secretary may perform his or her duties and
responsibilities.
Any Assistant Secretary shall have such powers and perform such duties as
the Board of Directors or the Chief Executive Officer may from time to time
designate.
SECTION 15. Other Powers and Duties. Subject to these By-laws and to such
-----------------------
limitations as the Board of Directors may from time to time prescribe, the
officers of the Corporation shall each have such powers and duties as generally
pertain to their respective offices, as well as such powers and duties as from
time to time may be conferred by the Board of Directors or the Chief Executive
Officer.
13
<PAGE>
ARTICLE IV
----------
Capital Stock
-------------
SECTION 1. Certificates of Stock. Each stockholder shall be entitled
---------------------
to a certificate of the capital stock of the Corporation in such form as may
from time to time be prescribed by the Board of Directors. Such certificate
shall be signed by the Chairman of the Board of Directors, the President or a
Vice President and by the Treasurer or an Assistant Treasurer, or the Secretary
or an Assistant Secretary. The Corporation seal and the signatures by the
Corporation's officers, the transfer agent or the registrar may be facsimiles.
In case any officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed on such certificate shall have ceased to be
such officer, transfer agent or registrar before such certificate is issued, it
may be issued by the Corporation with the same effect as if he or she were such
officer, transfer agent or registrar at the time of its issue. Every
certificate for shares of stock which are subject to any restriction on transfer
and every certificate issued when the Corporation is authorized to issue more
than one class or series of stock shall contain such legend with respect thereto
as is required by law.
SECTION 2. Transfers. Subject to any restrictions on transfer and
---------
unless otherwise provided by the Board of Directors, shares of stock may be
transferred only on the books of the Corporation by the surrender to the
Corporation or its transfer agent of the certificate theretofore properly
endorsed or accompanied by a written assignment or power of attorney properly
executed, with transfer stamps (if necessary) affixed, and with such proof of
the authenticity of signature as the Corporation or its transfer agent may
reasonably require.
SECTION 3. Record Holders. Except as may otherwise be required by
--------------
law, by the Certificate or by these By-laws, the Corporation shall be entitled
to treat the record holder of stock as shown on its books as the owner of such
stock for all purposes, including the payment of dividends and the right to vote
with respect thereto, regardless of any transfer, pledge or other disposition of
such stock, until the shares have been transferred on the books of the
Corporation in accordance with the requirements of these By-laws.
It shall be the duty of each stockholder to notify the Corporation of
his or her post office address and any changes thereto.
SECTION 4. Record Date. In order that the Corporation may determine
-----------
the stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may fix a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which record
date: (a) in the case of
14
<PAGE>
determination of stockholders entitled to vote at any meeting of stockholders,
shall, unless otherwise required by law, not be more than sixty nor less than
ten days before the date of such meeting and (b) in the case of any other
action, shall not be more than sixty days prior to such other action. If no
record date is fixed: (a) the record date for determining stockholders entitled
to notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held and (b) the record date for determining stockholders
for any other purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto.
SECTION 5. Replacement of Certificates. In case of the alleged loss,
---------------------------
destruction or mutilation of a certificate of stock, a duplicate certificate may
be issued in place thereof, upon such terms as the Board of Directors may
prescribe.
ARTICLE V
---------
Indemnification
---------------
SECTION 1. Definitions. For purposes of this Article: (a) "Officer"
-----------
means any person who serves or has served as a director or officer of the
Corporation or in any other office filled by election or appointment by the
stockholders or the Board of Directors of the Corporation and any heirs,
executors, administrators or personal representatives of such person; (b) "Non-
Officer Employee" means any person who serves or has served as an employee of
the Corporation, but who is not or was not an Officer, and any heirs, executors,
administrators or personal representatives of such person; (c) "Proceeding"
means any threatened, pending, or completed action, suit or proceeding (or part
thereof), whether civil, criminal, administrative, arbitrative or investigative,
any appeal of such an action, suit or proceeding, and any inquiry or
investigation which could lead to such an action, suit, or proceeding; and (d)
"Expenses" means any liability fixed by a judgment, order, decree or award in a
Proceeding, any amount reasonably paid in settlement of a Proceeding and any
professional fees and other expenses and disbursements reasonably incurred in a
Proceeding or in settlement of a Proceeding, including fines, taxes and
penalties relating thereto.
SECTION 2. Officers. Except as provided in Section 4 of this Article
--------
V, each Officer of the Corporation shall be indemnified and held harmless by the
Corporation to the fullest extent authorized by the DGCL, as the same exists or
may hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Corporation to provide broader rights
than said law permitted the Corporation to provide prior to such amendment)
against any and all Expenses incurred by such Officer in connection with any
Proceeding in which such Officer is involved as a result of serving or having
served (a) as an Officer or employee of the Corporation, (b) as a director,
officer or employee of any
15
<PAGE>
subsidiary of the Corporation, or (c) in any capacity with any other
corporation, organization, partnership, joint venture, trust or other entity at
the written request or direction of the Corporation, including service with
respect to employee or other benefit plans, and shall continue as to an Officer
after he or she has ceased to be an Officer and shall inure to the benefit of
his or her heirs, executors, administrators and personal representatives;
provided, however, that the Corporation shall indemnify any such Officer seeking
indemnification in connection with a Proceeding initiated by such Officer only
if such Proceeding was authorized by the Board of Directors of the Corporation.
SECTION 3. Non-Officer Employees. Except as provided in Section 4 of
---------------------
this Article V, each Non-Officer Employee of the Corporation may, in the
discretion of the Board of Directors, be indemnified by the Corporation to the
fullest extent authorized by the DGCL, as the same exists or may hereafter be
amended (but, in the case of any such amendment, only to the extent that such
amendment permits the Corporation to provide broader rights than said law
permitted the Corporation to provide prior to such amendment) against any or all
Expenses incurred by such Non-Officer Employee in connection with any Proceeding
in which such Non-Officer Employee is involved as a result of serving or having
served (a) as a Non-Officer Employee of the Corporation, (b) as a director,
officer or employee of any subsidiary of the Corporation, or (c) in any capacity
with any other corporation, organization, partnership, joint venture, trust or
other entity at the request or direction of the Corporation, including service
with respect to employee or other benefit plans, and shall continue as to a Non-
Officer Employee after he or she has ceased to be a Non-Officer Employee and
shall inure to the benefit of his or her heirs, personal representatives,
executors and administrators; provided, however, that the Corporation may
indemnify any such Non-Officer Employee seeking indemnification in connection
with a Proceeding initiated by such Non-Officer Employee only if such Proceeding
was authorized by the Board of Directors of the Corporation.
SECTION 4. Good Faith. No indemnification shall be provided pursuant
----------
to this Article V to an Officer or to a Non-Officer Employee with respect to a
matter as to which such person shall have been finally adjudicated in any
Proceeding (a) not to have acted in good faith and in a manner he or she
reasonably believed to be in, or not opposed to, the best interests of the
Corporation, and (b) with respect to any criminal Proceeding, to have had
reasonable cause to believe his or her conduct was unlawful. In the event that
a Proceeding is compromised or settled prior to final adjudication so as to
impose any liability or obligation upon an Officer or Non-Officer Employee, no
indemnification shall be provided pursuant to this Article V to said Officer or
Non-Officer Employee with respect to a matter if there be a determination that
with respect to such matter such person did not act in good faith and in a
manner he or she reasonably believed to be in, or not opposed to, the best
interests of the Corporation, and, with respect to any criminal Proceeding, had
no reasonable cause to believe his or her conduct was unlawful. The
determination contemplated by the preceding sentence shall be made by (a) a
majority vote of those directors who are not involved in such Proceeding (the
"Disinterested Directors"); (b) by the stockholders; or (c) if directed by a
majority of Disinterested Directors,
16
<PAGE>
by independent legal counsel in a written opinion. However, if more than half
of the directors are not Disinterested Directors, the determination shall be
made by (a) a majority vote of a committee of one or more disinterested
director(s) chosen by the Disinterested Director(s) at a regular or special
meeting; (b) by the stockholders; or (c) by independent legal counsel chosen by
the Board of Directors in a written opinion.
SECTION 5. Prior to Final Disposition. Unless otherwise determined
--------------------------
by (a) the Board of Directors, (b) if more than half of the directors are
involved in a Proceeding by a majority vote of a committee of one or more
Disinterested Director(s) chosen in accordance with the procedures specified in
Section 4 of this Article or (c) if directed by the Board of Directors, by
independent legal counsel in a written opinion, any indemnification extended to
an Officer or Non-Officer Employee pursuant to this Article V shall include
payment by the Corporation or a subsidiary of the Corporation of Expenses as the
same are incurred in defending a Proceeding in advance of the final disposition
of such Proceeding upon receipt of an undertaking by such Officer or Non-Officer
Employee seeking indemnification to repay such payment if such Officer or Non-
Officer Employee shall be adjudicated or determined not to be entitled to
indemnification under this Article V.
SECTION 6. Contractual Nature of Rights. The foregoing provisions of
----------------------------
this Article V shall be deemed to be a contract between the Corporation and each
Officer and Non-Officer Employee who serves in such capacity at any time while
this Article V is in effect, and any repeal or modification thereof shall not
affect any rights or obligations then existing with respect to any state of
facts then or theretofore existing or any Proceeding theretofore or thereafter
brought based in whole or in part upon any such state of facts. If a claim for
indemnification or advancement of expenses hereunder by an Officer or Non-
Officer Employee is not paid in full by the Corporation within 60 days after a
written claim for indemnification or documentation of expenses has been received
by the Corporation, such Officer or Non-Officer Employee may at any time
thereafter bring suit against the Corporation to recover the unpaid amount of
the claim, and if successful in whole or in part, such Officer or Non-Officer
Employee shall also be entitled to be paid the expenses of prosecuting such
claim. The failure of the Corporation (including its Board of Directors or any
committee thereof, independent legal counsel, or stockholders) to make a
determination concerning the permissibility of such indemnification or
advancement of expenses under this Article V shall not be a defense to the
action and shall not create a presumption that such indemnification or
advancement is not permissible.
SECTION 7. Non-Exclusivity of Rights. The provisions in respect of
-------------------------
indemnification and the payment of expenses incurred in defending a Proceeding
in advance of its final disposition set forth in this Article V shall not be
exclusive of any right which any person may have or hereafter acquire under any
statute, provision of the Certificate or these By-laws, agreement, vote of
stockholders or disinterested directors or otherwise; provided, however, that in
-------- -------
the event the provisions of this Article V in any respect conflict with the
terms of any
17
<PAGE>
agreement between the Corporation or any of its subsidiaries and any person
entitled to indemnification under this Article V, then, notwithstanding anything
contained herein to the contrary, the provision which is more favorable to the
relevant individual shall govern.
SECTION 8. Insurance. The Corporation may maintain insurance, at its
---------
expense, to protect itself and any Officer or Non-Officer Employee against any
liability of any character asserted against or incurred by the Corporation or
any such Officer or Non-Officer Employee, or arising out of any such status,
whether or not the Corporation would have the power to indemnify such person
against such liability under the DGCL or the provisions of this Article V.
ARTICLE VI
----------
Miscellaneous Provisions
------------------------
SECTION 1. Fiscal Year. Except as otherwise determined by the Board
-----------
of Directors, the fiscal year of the Corporation shall end on the last day of
December of each year.
SECTION 2. Seal. The Board of Directors shall have power to adopt
----
and alter the seal of the Corporation.
SECTION 3. Execution of Instruments. All deeds, leases, transfers,
------------------------
contracts, bonds, notes and other obligations to be entered into by the
Corporation in the ordinary course of its business without director action may
be executed on behalf of the Corporation by the Chairman of the Board, if one is
elected, the President or the Treasurer or any other officer, employee or agent
of the Corporation as the Board of Directors or Executive Committee may
authorize.
SECTION 4. Voting of Securities. Unless the Board of Directors
--------------------
otherwise provides, the Chairman of the Board, if one is elected, the President
or the Treasurer may waive notice of and act on behalf of this Corporation, or
appoint another person or persons to act as proxy or attorney in fact for this
Corporation with or without discretionary power and/or power of substitution, at
any meeting of stockholders or shareholders of any other corporation or
organization, any of whose securities are held by this Corporation.
SECTION 5. Resident Agent. The Board of Directors may appoint a
--------------
resident agent upon whom legal process may be served in any action or proceeding
against the Corporation.
SECTION 6. Corporate Records. The original or attested copies of the
-----------------
Certificate, By-laws and records of all meetings of the incorporators,
stockholders and the Board of Directors and the stock transfer books, which
shall contain the names of all stockholders, their record addresses and the
amount of stock held by each, may be kept outside the State of
18
<PAGE>
Delaware and shall be kept at the principal office of the Corporation, at the
office of its counsel or at an office of its transfer agent or at such other
place or places as may be designated from time to time by the Board of
Directors.
SECTION 7. Certificate. All references in these By-laws to the
-----------
Certificate shall be deemed to refer to the Restated Certificate of
Incorporation of the Corporation, as amended and in effect from time to time.
SECTION 8. Amendment of By-laws.
--------------------
(a) Amendment by Directors. Except as provided otherwise by law,
----------------------
these By-laws may be amended or repealed by the Board of Directors.
(b) Amendment by Stockholders. These By-laws may be amended or
--------------------------
repealed at any Annual Meeting of stockholders, or special meeting of
stockholders called for such purpose, by the affirmative vote of at least two-
thirds of the total votes eligible to be cast on such amendment or repeal by
holders of voting stock, voting together as a single class; provided, however,
that if the Board of Directors recommends that stockholders approve such
amendment or repeal at such meeting of stockholders, such amendment or repeal
shall only require the affirmative vote of a majority of the total votes
eligible to be cast on such amendment or repeal by holders of voting stock,
voting together as a single class.
Adopted ___________, 1997 and effective as of ________ ___, 1997.
19
<PAGE>
Exhibit 10.1(a)
---------------
LEASE RENEWAL AGREEMENT
-----------------------
This Agreement made the 8th day of September, 1993 between MBM Associates,
a joint venture, (hereinafter referred to as "Landlord"), having an office at
808 High Mountain Road, Franklin Lakes, New Jersey, and Boron-Lepore Associates,
Inc. located at 17-17 Route 208 North, Fair Lawn, New Jersey, (hereinafter
referred to as "Tenant").
W I T N E S S E T H
Whereas Landlord and Tenant entered into the lease outlined below in
Landlord's building located at 17-17 Route 208 North, Fair Lawn, New Jersey,
(hereinafter referred to as "Premises"), and ...
LEASE
LEASE DATE FLOOR UNIT SIZE EXPIRATION DATE
---------- ----- --------- ---------------
06/22/88 2nd Floor 12,225 SF 07/31/94
Whereas the lease referenced above currently remains in full force and
effect, and ...
Whereas both Landlord and Tenant now wish to modify some terms of that
agreement in accordance with the conditions set forth herein.
Now, therefore, in consideration of the mutual covenants and conditions set
forth herein, Landlord and Tenant do hereby agree as follows:
1. Lease Term - Landlord hereby grants Tenant, and Tenant hereby
----------
accepts from Landlord a lease renewal of five (5) years for the lease referenced
above. Said five (5) year renewal shall commence on August 1, 1994, and expire
on July 31, 1999.
2. Conditions/Rentals - Said five (5) year lease renewal shall be on
------------------
the same terms and conditions as the original lease, including the original base
year and operating cost provisions except that the Basic Rent shall be reduced
to $16.50 per square foot gross plus tenant electric.
3. Landlord and Tenant agree that Landlord shall not be responsible
to complete any tenant improvements to the unit as a result of this renewal
agreement and tenant agrees the space in an "as is" condition.
4. Tenant agrees to provide Landlord with an up-to-date financial
statement on tenant's organization within two weeks of the execution date of
this agreement. Landlord
<PAGE>
reserves the right to void this Lease Renewal Agreement for a period of two
weeks of receipt of said financial statements if they are not satisfactory to
Landlord.
This document shall be attached to the original lease and deemed
a part thereof.
In witness whereof, the undersigned, who have due authority to enter
into this agreement, have set their hands as of the date first above written.
MBM ASSOCIATES BORON, LEPORE & ASSOCIATES INC.
/S/ W. Peter McBride /S/ Gregory F. Boron
- -------------------- --------------------
Authorized Signature Authorized Signature
/S/ Malvern C. Burroughs
- ------------------------
Malvern C. Burroughs
/S/ Stanley H. Marcus
- ---------------------
Stanley H. Marcus
<PAGE>
THIS LEASE, made the 22nd day of June, 1988, by and between MBM ASSOCIATES,
A Joint Venture, having an office at 808 High Mountain Road, Franklin Lakes, New
Jersey (hereinafter called the "Landlord") and THOMAS S. BORON, INC., with
offices at 139 Harristown Road, Glen Rock, New Jersey 07452 (hereinafter called
the "Tenant").
W I T N E S S E T H:
1. PREMISES
--------
The Landlord and Tenant, in consideration of the mutual covenants and
conditions set forth herein do hereby agree as follows:
The Landlord hereby leases to the Tenant and the Tenant hereby hires from
the Landlord, subject to the terms and conditions of this Lease, the following
space: Approximately 12,225 square feet of space in the office building owned by
the Landlord located at 17-17 Route 208 (Lot 2 Block 4801), Fair Lawn, New
Jersey (hereinafter referred to as the "Land") and known as the Fair Lawn
Executive Centre, which space is located on the second floor thereof and more
particularly described and outlined in red upon the plan attached hereto as
Exhibit "A" and made a part hereof (hereinafter called the "Leased Premises" or
"Premises"), together with the right to use in common with other Tenants of the
Building, their invitees, customers and employees, those areas of the common
facilities as hereinafter defined and together with the right to use those
parking spaces as described in paragraph 3(d) herein.
2. TERM
----
The term of this Lease (hereinafter referred to as the "Term") shall
be for six (6) years commencing on August 1, 1988 and ending at 12:00 midnight
on July 31, 1994.
3. USE AND PARKING
---------------
(a) The Leased Premises, or any part thereof, shall not be used by
anyone except the Tenant, its invitees, customers and employees and shall be
used or permitted to be used for no use other than the following: general
offices and uses incidental and related thereto which are in accordance with
local governmental codes and regulations.
(b) Tenant acknowledges and agrees with Landlord that the Building
should be maintained and preserved as a prestigious and first class office
building and that its special character arising from its location should be
specifically protected and preserved. (Landlord represents to Tenant that
Landlord shall not store nor permit any other Tenants in the building to store
any substances or materials which would be considered hazardous to the general
public's health.) Tenant therefore represents that it is not leasing the
Premises, and it will not use such Premises, for any purpose other than that
provided in this Lease. Tenant further
<PAGE>
agrees that Landlord may refuse to consent to the assignment of this Lease or
the subletting of the Premises for any of the following prohibited uses: an
educational facility of any type including correspondence schools; employment
agencies, model agencies; spas; health, physical fitness or exercise salon;
small loan offices; real estate brokers, residential land development offices;
doctors, dentists or other professions or businesses that by their nature tend
to generate excess customer traffic or any other use which Landlord in good
faith determines will or is likely to demean the character of the Building or
its environment, and such refusal shall not be considered unreasonable. An
"educational facility" as referenced above shall not preclude Tenant from using
its demised premises for its regularly scheduled lecture series consisting of
approximately 12 to 15 people on an approximate monthly basis.
Moreover, Tenant specifically agrees that Landlord's leasing of any
portion of the building of which the Premises are a part for any of the
foregoing prohibited uses shall not constitute or be deemed to constitute a
waiver of Landlord's right to prohibit Tenant from assigning or subletting the
Leased Premises or any part thereof for any such prohibited use.
(c) The Tenant will not, without the prior written consent of the
Landlord, permit the preparation, dispensing or serving of any beverages and/or
foods within the Leased Premises, except that this shall not prohibit the
preparation and consumption of hot and hold beverages or the consumption of
sandwiches.
(d) Parking. Landlord assigns to Tenant a number of parking spaces
-------
equal to four (4) spaces for each 1,000 square feet of usable space rented which
number will be rounded to the nearest lower whole number. Tenant shall receive
a portion of its parking spaces within the garage area ("Garage Area"), said
number of spaces being determined by multiplying Tenant's proportionate share
("Tenant's Proportionate Share"), against all of the spaces in the Garage Area.
All Garage Area spaces assigned to the Tenant shall be specifically assigned for
Tenant's exclusive use. Tenant agrees that it will not permit its employees to
park in any other spaces in the Garage Area than those assigned by Landlord to
it and that Tenant shall take such action at the request of Landlord as may be
necessary to insure that Tenant and its employees do not park in spaces assigned
to other tenants or reserved to the Landlord. The remaining spaces that Tenant
is entitled to shall be located in Landlord's outside parking lot, (the "Outside
Parking Area"). These spaces will not be specifically designated for the
Exclusive use of the Tenant, however, but rather shall be available to all
tenants of the Building. The use of parking spaces assigned to Tenant shall be
subject to such rules and regulations as may be established by Landlord,
including all signs and notices posted by Landlord in the Outside Parking Area,
Garage Parking Area or roadways leading thereto. Landlord reserves the right to
utilize a card-operated gate-controlled or similar system as a method of
limiting the use of the Garage Area to those assigned therein. (Total Spaces
Provided 48; Covered Spaces Included 11.
4. OCCUPANCY
---------
2
<PAGE>
(a) The Leased Premises shall be deemed ready for occupancy on the
earliest date on which all of the following conditions have been met:
(i) Landlord's Work, and so much of Tenant's Finish Work as
Landlord shall have undertaken pursuant to the Tenant's Work Letter
described in Paragraph 24 hereof and attached hereto as Exhibit "C" and
made a part hereof in the Leased Premises have been substantially
completed; and they shall be so deemed notwithstanding the fact that minor
or insubstantial details of construction, mechanical adjustment, or
decoration remain to be performed, the non-completion of which does not
interfere with Tenant's use of the Leased Premises; and
(ii) Reasonable means of access and facilities necessary to
Tenant's use and occupancy of the Leased Premises, including corridors,
elevators and stairways and heating, ventilating, air conditioning,
sanitary, water and electrical facilities, have been installed and are in
reasonably good operating order and available to Tenant. Landlord shall
give Tenant a preliminary notice estimating when the conditions listed in
subsections (i) and (ii) above will be met, on a date which shall be at
least 10 days prior to the estimated date set forth in such preliminary
notice. Any variance between the date so estimated and the date such
conditions are met shall be of not consequence, except as herein modified.
(b) If any of the conditions listed in Paragraph 4(a) shall be
delayed due to any act or omission of Tenant or any of its employees, agents or
contractors or of any failure (not due to any act or omission of Landlord or any
of its employees, agents or contractors) to plan or complete Tenant's Finish
Work diligently and expeditiously, which shall continue after Landlord shall
have given Tenant reasonable notice that such act, omission or failure would
result in delay, and such delay shall have been unavoidable by landlord in the
exercise of reasonable diligence and prudence, the Leased Premises shall be
deemed ready for occupancy on the date when they would have been ready but for
such delay.
(c) If and when Tenant shall take actual possession of the Leased
Premises, it shall be conclusively presumed that the same were in satisfactory
condition (except for latent defects) as of the date of such taking of
possession. Tenant shall take actual possession of the Leased Premises on the
date Landlord advises that same have been completed notwithstanding the fact
that minor items remain to be completed to long as the items to be completed
shall not interfere with Tenant's use of the Leased Premises. In such event,
Tenant shall provide Landlord with a punch list of items remaining to be
completed which items shall be completed within thirty (30) business days.
Except to the extent specifically provided in the punch list, Tenant's
occupation of the Leased Premises shall be conclusively presumed to operate to
terminate all of Landlord's obligation under the Work Letter. Tenant shall
provide Landlord with a letter accepting the Leased Premises, in form and
substance satisfactory to comply with any requirements for same contained in any
mortgage constituting a lien on the premises of which the leased Premises are a
part.
3
<PAGE>
(d) In the event that the Leased Premises are not ready for
Tenant's occupancy at the time of the commencement of the term fixed by this
Lease, this Lease shall not be affected thereby, but in such event no rent shall
be due hereunder until Landlord shall have given notice to the Tenant pursuant
to Paragraph 4(a) hereof or Tenant shall have in fact occupied the Leased
Premises unless the reason for the Premises not being ready are due to acts of
Tenant, in which case rent shall be due as called for under the terms of the
Lease, provided, however, that in the event Landlord for any reason shall be
unable to give Tenant notice that the Leased Premises will be ready for Tenant's
occupancy no later than two (2) months after the commencement date set forth in
Paragraph 2 hereof, then Tenant's sole right shall be to notify Landlord of its
election to terminate this agreement.
5. BASIC RENT AND ADDITIONAL RENT
------------------------------
(a) Starting on the first day of the thirteenth month from the
Commencement Date and continuing through the fifth year following said date,
Tenant shall pay as basic rent ("Basic Rent") the annual sum of TWO HUNDRED
SIXTY-TWO THOUSAND EIGHT HUNDRED THIRTY-SEVEN AND 50/100 ($262,837.50) DOLLARS
or $21.50 per square foot of rental space in equal monthly installments of
TWENTY-ONE THOUSAND NINE HUNDRED THREE AND 13/100 DOLLARS ($21,903.13) on or
before the first date of each month, in advance, to Landlord at the address of
the Landlord above designated or such other place as shall be designated by
Landlord. Landlord agrees to waive basic rental payments (with the exception of
tenant electric) for the initial twelve (12) months of the lease term.
(b) As additional consideration to the Tenant for the Tenant's
entry into this lease transaction, and upon the condition that the Tenant is not
in default of this Agreement of Lease, the Landlord shall pay to the Tenant the
sum of $8,000. on August 1, 1988 and a similar sum on September 1, 1988, but
such payment shall not be required at any other times.
(c) Tenant shall also pay as Additional Rent any and all such other
sums of money as shall become due to the Landlord pursuant to the terms and
provisions hereof including but not limited to Tenant improvements authorized by
and to be paid by Tenant, without demand therefor and without any abatement,
counterclaim, deduction or setoff whatsoever except as provided herein. Basic
Rent and Additional Rent is sometimes hereinafter collectively referred to as
"Rent".
(d) If Tenant shall fail to pay the Basic Rent and Additional Rent
within ten (10) business days following the due date of any such payment, and if
Landlord agrees to accept any such late payment, then in the event of such late
payment, the Tenant agrees to pay to Landlord interest on any such sums at the
rate of 5% of any such late installment of Rent or Additional Rent, as
Additional Rent, or if said rate under the circumstances then prevailing shall
not be lawful, then at the maximum lawful rate permitted. The foregoing shall
be in addition to any other right or remedy which may be available to Landlord
in the event of default by Tenant.
4
<PAGE>
(e) The Tenant agrees to deposit with the Landlord upon the
execution date of this Lease the sum of $21,903.13 as security for the payment
of Rent and/or Additional Rent hereunder and the full and faithful performance
by the Tenant of the covenants and conditions on the part of the Tenant to be
performed. Said sum shall be returned to the Tenant, without interest after the
expiration of the term hereof, provided that the Tenant has fully and faithfully
performed all such covenants and conditions and is not in arrears in Basic Rent
and/or Additional Rent. During the term hereof the Landlord may, if the Landlord
so elects, have recourse to such security, to make good any default by the
Tenant, in which event the Tenant shall, on demand, promptly restore said
security to its original amount. Liability to repay said security to the Tenant
shall run with the reversion and title to the Leased Premises, whether any
change in ownership thereof be by voluntary alienation or as the result of
judicial sale, foreclosure or other proceedings, or the exercise of a right of
taking or entry by any mortgages. The Landlord shall assign or transfer said
security, for the benefit of the Tenant, to any subsequent owner or holder of
the reversion of title to the Leased Premises, in which case the assignee shall
become liable for the repayment thereof as herein provided, and the assignor
shall be deemed to be released by the Tenant from all liability to return such
security. This provision shall be applicable to every alienation or change in
title and shall in no wise be deemed to permit the Landlord to retain the
security after termination of the Landlord's ownership of the reversion or
title. The Tenant shall not mortgage, encumber or assign said security without
the written consent of the Landlord.
6. SERVICES TO BE RENDERED BY LANDLORD-LANDLORD IS
EXCULPATION
------------------------------------------------
(a) Landlord, at its expense, shall provide public elevator
service, passenger and service, by elevators serving the floor on which the
Leased Premises are situated during regular hours of business days and shall
have at least one passenger elevator subject to call at all other times.
(b) Landlord will furnish heating, ventilating and air conditioning
to Leased Premises when necessary during regular hours of business days to an
inside temperature of 78 degrees F. dry bulb and 50% relative humidity when
outside temperatures are 95 degrees F. dry bulb and 75 degrees F. wet bulb and
70 degrees F. inside when outside temperatures are 0 degrees F. with a wind
velocity of 15 M.P.H. provided however that Landlord may reduce the temperature
if necessary to comply with any federal, state or municipal law, ordinance rule,
regulation or executive order.
(c) The Landlord agrees to furnish air conditioning and to maintain
the Leased Premises for the comfortable occupancy and use of the Leased Premises
during regular hours of business days. The Tenant agrees to keep all windows in
the Leased Premises closed at all times during which the air-conditioning system
is in operation and otherwise to cooperate with the Landlord and to abide by all
regulations or requirements which the Landlord may reasonably prescribe for the
proper functioning and protection of the air conditioning system.
5
<PAGE>
(d) Landlord, at its expense, shall furnish adequate hot and cold
water to the building for drinking, lavatory and cleaning purposes. If Tenant
uses water for any other purpose Landlord, at Tenant's expense, shall install
meters to measure Tenant's consumption of cold water and/or hot water for such
other purposes as the case may be. Tenant shall pay for the quantities of cold
water and hot water shown on such meters, at Landlord's cost thereof, on the
rendition of Landlord's bills therefor.
(e) Landlord, at its expense, and on Tenant's request, shall
maintain a listing on the building directory of the Tenant's name as set forth
in the recital of this Lease.
(f) While Tenant is not in default under any of the terms of this
Lease, the Landlord will provide office cleaning and maintenance to the Premises
as set forth in Exhibit "D" attached hereto and made a part hereof. Except as
set forth in Exhibit "D", the Tenant shall pay the cost of all other cleaning
services required by the Tenant.
(g) It is understood that no deduction whatsoever shall be made
from the amount of rent payable hereunder, should any heating, lighting,
elevator service, air conditioning, or janitor's services not be used by the
Tenant, nor shall the Landlord be liable to the Tenant for any interruption of
heating, lighting, elevator service, air conditioning or janitor service caused
by strike, break downs, inability to secure fuel or other required power or by
any other cause not due to negligence on the part of the Landlord. The Tenant
shall not be liable, under any circumstances, for loss of or injury to property,
however, occurring, through or in connection with or incidental to the
furnishing of or failure to furnish any of the services required by said Exhibit
"D", or for any interruption to the Tenant's business, however occurring.
(h) As used in this Paragraph 6, the term "regular hours of
business days" shall mean, unless otherwise indicated, the hours of 8:00 a.m. to
6:00 p.m. on weekdays and 8:00 a.m. to 1:00 p.m. on Saturdays, excluding all
Sundays and the following holidays:
(a) New Years Day;
(b) Washington's Birthday;
(c) Memorial Day;
(d) Independence Day;
(e) Labor Day;
(f) Thanksgiving Day;
(g) Christmas Day;
6
<PAGE>
However, the Landlord agrees that Tenant may use the Leased Premises after
6:00 p.m. weekdays and after 1:00 p.m. on Saturdays, and on Sundays and legal
holidays without additional charge for said use, but Landlord shall not be
required to furnish any heat, ventilation or air conditioning beyond that
normally furnished for those hours. In the event Tenant requires heat,
ventilation or air conditioning after the hours of 6:00 p.m. weekdays, after
1:00 p.m. on Saturdays, or on Sundays or legal holidays, Landlord will supply
same at an hourly rate which will be established by Landlord to be paid by
Tenant as billed. Tenant shall give Landlord twenty-four (24) hours notice when
it shall require such after hour, Sunday or other holiday heat, ventilation or
air conditioning.
7. REPAIRS AND MAINTENANCE
-----------------------
(a) The Landlord agrees that the Leased Premises shall be delivered
to the Tenant at the beginning of the term in clean and first class condition
and completed in accordance with the Tenant's Work Letter.
(b) The Tenant shall take good care of the Leased Premises and any
and all fixtures therein, and shall be responsible for any injury, damage, or
breakage done by the Tenant or the Tenant's agents and servants and at the end
of the term or earlier termination of the Lease shall quit and surrender said
premises in as good condition as reasonable use thereof will permit.
(c) The Tenant shall make no alterations, changes, additions or
improvements in the Leased Premises without the written consent of the Landlord,
which consent shall not be unreasonably withheld. Notwithstanding the foregoing,
Tenant shall have no right to make any alterations, changes, additions or
improvements to the electrical and Heating, Ventilating and Air Conditioning
systems in the Leased Premises. Any such required alterations, changes,
additions or improvements to the electrical or HVAC systems shall be made
exclusively by Landlord's contractors based on plans and specifications prepared
by Tenant and approved by Landlord's engineers at Tenants' cost and expense.
(d) All alterations, additions and improvements made by either
party upon the Leased Premises shall become the property of the Landlord and
shall remain upon and be surrendered with the Leased Premises as part thereof,
at the expiration or termination of the Lease; except that at such expiration or
termination, Tenant shall have the right to remove and retain as Tenant's own
property any additions or improvements made by the Tenant or at Tenant's sole
expense, except for carpeting, provided that Tenant shall repair any damage
caused by such removal and shall restore the Leased Premises to the same or as
good condition as existed immediately before such additions or improvements were
made. Tenant shall, if requested by Landlord, remove any such interior changes,
alterations, additions and improvements at the expiration of the term herein
provided and restore the Leased Premises to the condition they were in at the
beginning of the term.
7
<PAGE>
(e) Tenant shall, before making any alterations, additions,
installations, or improvements, at its expense, obtain all permits, approvals
and certificates required by any governmental or quasi-governmental bodies and
(upon completion) certificates of final approval thereof and shall deliver
promptly duplicates of all such permits, approvals and certificates to Landlord,
and Tenant agrees to carry and will cause Tenant's contractors and sub-
contractors to carry such Workmen's Compensation, general liability, personal
and property damage insurance as Landlord may require. Tenant agrees that any
alterations, additions or installations shall be undertaken exclusively by
contractors whose employees are members of appropriate unions. Tenant agrees to
obtain and deliver to Landlord written and unconditional waivers of mechanic's
liens upon the real property in which the Leased Premises are located, for all
work, labor and services to be performed and materials to be furnished in
connection with such work, signed by all contractors, subcontractors,
materialmen and laborers to become involved in such work. Notwithstanding the
foregoing, if any mechanic's lien is filed against the Leased Premises, or the
building of which the same forms a part, for work claimed to have been done for,
or materials furnished to, Tenant, whether or not done pursuant to this
Paragraph the same shall be discharged by Tenant within ten (10) days
thereafter, at Tenant's expense by filing the bond required by law, or in such
other manner satisfactory to Landlord.
8. ELECTRICITY
-----------
(a) Tenant agrees to pay to Landlord, as Additional Rent, the cost
of all tenant electric energy it consumes, it being understood that for this
purpose the charge to Tenant shall be Tenant's proportionate share of the cost
of electric energy for the entire building of which the Leased Premises are a
part (which will vary with the percentage of occupancy of said entire building).
In the event that Tenant installs any computer equipment or other high
electrical usage equipment, Landlord reserves the right to place an electrical
meter on said equipment as well as any other equipment used in conjunction
therewith at Tenant's sole cost and expense. The charges for electrical energy
consumed by such equipment shall be paid by Tenant in addition to all other sums
due under this agreement, the cost thereof to be at the established rate charged
by the utility company supplying electrical service to the Leased Premises. Said
payments shall be made within ten (10) days of the presentment of the bill
therefor which shall be monthly.
(b) Tenant's use of electric energy in the leased Premises shall
not at any time exceed the capacity of any of the electrical conductors and
equipment in or otherwise serving the Leased Premises. In order to insure that
such capacity is not exceeded and to avert possible adverse effect upon the
building electric service, Tenant shall not, without Landlord's prior written
consent in each instance (which shall not be unreasonably withheld), connect any
additional fixtures, appliances or equipment to the building electric
distribution system or make any alteration or addition to the electric system of
the Leased Premises existing on the date of the commencement of this Lease.
Should Landlord grant such consent, all additional risers or
8
<PAGE>
other equipment required therefor shall be provided by Landlord and the cost
thereof shall be paid by Tenant upon Landlord's demand.
9. TAX AND OPERATING EXPENSES ADJUSTMENT
-------------------------------------
(a) Commencing with the beginning of the second Lease Year and
continuing thereafter throughout the Term of this Lease, Tenant agrees to pay as
Additional Rent, its Proportionate Share, as hereinafter defined, of any
increase in Real Estate Taxes assessed against the Land and Building plus any
increase in Operating Expenses. As used herein:
(i) "Increase" shall mean the difference between the Real
Estate Taxes and/or operating Expenses for any Subsequent Lease Year and
the Base Real Estate Taxes and/or the Base Operating Expenses;
(ii) "Operating Expenses," shall mean the total of the amount
of all normal and customary expenses paid or incurred by Landlord in
operating the Land and Building and shall include, by way of illustration
and not of limitation, management fees (not to exceed that percentage,
which is standard in the industry and which percentage as management fee
shall not be increased once initially established), labor, including all
wages and salaries, social security taxes and other taxes which may be
levied against the Landlord upon such wages and salaries for the Building
personnel not above custodial grade, supplies, repairs and maintenance,
maintenance and service contracts, painting wall and window washing,
laundry and towel service, tools and equipment, fire and other insurance,
trash removal, lawn care, snow removal, common area utilities and all other
items properly constituting direct operating costs according to standard-
accounting practices whether or not the same shall be enumerated as part of
the services or obligations of the Landlord hereunder, but not including
legal and accounting fees, tenant fix-up, brokerage fees, advertising
costs, services not provided on a regular basis to tenants of the Building
or to the extent said services are disproportionate to those normally
provided to all tenants of the Building, depreciation of Building or
equipment, interest income or excess profit taxes, costs of maintaining the
Landlord's business identity, restoration and repair costs covered by
insurance proceeds, capital improvements unless such improvements ate for
the purpose of' reducing operating Expenses within the Building (in which
event the costs thereof shall be included but only to the extent of the
cost saving), or are required under any governmental law, ordinance or
regulation, in which event the costs thereof shall be included. All such
capital items which pursuant to the previous sentence, are authorized to be
included in Operating Expenses shall only be included on an amortized basis
with said item being amortized over its useful life as determined by the
Internal Revenue Code of 1986 and the regulations applicable thereto, or if
no guidelines are available in said code, in accordance with generally
accepted accounting principles and the portion so determined for the
appropriate Lease Year together with interest at two
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(2%) percent over the prime lending rate announced from time to time by
Chase Manhattan Bank, N.A. to its most creditworthy borrowers on the
unamortized amount shall, subject to the cap as to Operating Expenses
reduction, be the maximum included in any Lease Year. Additionally, to the
extent that any item of Operating Expenses in a year subsequent to the Base
Operating Expense Year was not included in the Base Operating Expenses,
then the cost of said item shall be added to the Base Operating Expenses
for purposes of comparison. For example, if Base Operating Expenses are
$1,000.00 but no repairs were included in the Base Operating Expense Year
(i.e. the first Lease Year) then the first Lease Year in which repairs
occur shall result in the cost of said repairs during said Lease Year being
added to the Base Operating Expenses. So, if hypothetically, the first
Lease Year for repairs is the third Lease Year and repairs cost $25.00 and
all Operating Expenses for the Building including repairs for said year
were $1,075.00 the comparison would be as follows:
<TABLE>
<S> <C>
Third Lease Year operating Expenses $1,075.00
Minus Base Operating Expenses
($1,000.00) plus initial repair
of $25.00 $1,025.00
---------
Difference to which Tenant
Proportionate Share is applied $ 50.00
</TABLE>
Base Operating Expenses shall be those expenses subject to, adjustment
as above and pursuant to Subparagraph (C) hereof incurred on an accrual basis
during the first Lease Year which Lease Year shall be the Base Operating Expense
Year.
Notwithstanding anything contained herein to the contrary, Base Operating
Expenses shall not include any costs related to the maintenance and repair of
the roof, the same being assumed by Landlord.
(iii) "Real Estate Taxes" shall in addition to municipal real
property taxes (or any other tax hereafter enacted as a substitute or
replacement therefor or any part thereof) also include sewer rents and any
special, ordinary or extraordinary assessments and governmental levies
against the Land and Building. Landlord shall pay any special assessments
over the longest period allowed by law and only include in Real Estate
Taxes those installments on a pro rata basis attributable to the
corresponding period of the Lease.
(iv) "Lease Year" as used in this Lease shall mean the twelve
(12) month period commencing when possession is delivered, and each twelve
(12) month period thereafter. Once the Base Real Estate Taxes and Base
Operating Expenses are
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<PAGE>
established, in the event any Lease period is less than twelve (12) months,
then said Base Real Estate Taxes and Base Operating Expenses shall be
adjusted to equal the proportion that said period bears to twelve (12)
months (herein the "Adjusted Base"), and Tenant shall pay to Landlord as
Additional Rent for such period, an amount equal to Tenant's Proportionate
Share, as set forth in Section 9(d) below, of the excess for said period
over the Adjusted Base with respect to each of the aforesaid.
(v) "Base Real Estate Taxes" shall mean those Real Estate
Taxes determined by multiplying the tax rate in effect for the calendar
year 1988, times the assessment for the Land and Building as fully
completed and 95% occupied.
(vi) "Real Estate Taxes" shall mean the property taxes and
assessments imposed upon the Land and Building, or upon the rent, as such,
payable to the Landlord, including, but not limited to, real estate,
borough, county, school and transit taxes or taxes, assessments or charges
levied, imposed or assessed against the Land and Building by any other
taxing authority, whether general or specific, ordinary or extraordinary,
foreseen or unforeseen. If, due to a future change in the method of
taxation, any franchise, income or profit tax shall be levied against
Landlord in substitution for, or in lieu of, or in addition to, any tax
which would otherwise constitute a Real Estate Tax, such franchise, income
or profit tax shall be deemed to be a Real Estate Tax for the purposes
hereof; conversely, any additional real estate tax hereafter imposed in
substitution for, or in lieu of, any franchise income or profit tax (which
is not in substitution for, or in lieu of, or in addition to, a Real Estate
Tax hereinbefore provided) shall not be deemed a Real Estate Tax for the
purposes hereof. Real Estate Taxes shall exclude any income or profit taxes
(unless measured by the Building income), in which event same shall be
included as a Real Estate Tax, as if said Building were Landlord's only
asset unless as a result of combining said asset with Landlord's other
assets a reduced tax due to tax bracket reduction results.
(b) Additional Rent, if any, due to Landlord under Paragraph 9(a)
hereof shall be paid within 30 days after submission of a statement to Tenant
showing the computation of the amount due to Landlord, unless the statement
effects a change in the amount of Additional Rent paid during the previous month
by Tenant in which event said payment may be made within sixty (60) days.
Landlord shall make available its records and reasonable detail supporting the
items referred to in such statement for at least twelve (12) months after
submission thereof for examination at reasonable times by Tenant and its
authorized representative.
(c) If, with respect to the establishment of Base Operating
Expense, as established in Subparagraph (a)(ii) hereof, the Building is not
eighty-five (85%) percent occupied during the GLOBAL establishment of the Base
Operating Expenses then the Base operating Expenses shall be adjusted so as to
reflect eighty-five (85%) percent occupancy. The
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<PAGE>
aforesaid adjustment shall only be made with respect to those items that are in
fact affected by variations in occupancy levels.
(d) Tenant's Proportionate Share, wherever that phrase is used,
shall be (8.544 %), which the parties agree reflects and will be continually
adjusted to reflect the ratio of the gross square feet of the area rented to
Tenant as compared with the total number of gross square feet of the entire
Building measured outside wall to outside wall. However, if any service provided
for in Paragraph 9(a)(ii) is separately billed within the Building, then the
square footage so billed shall be subtracted from the denominator (the
Building's total number of gross square feet), and Tenant's Proportionate Share
for such service and/or utility shall be separately computed and the Base
Operating Expenses for such item shall not include any charges attributable to
said square footage.
10. ASSIGNMENT AND SUBLETTING
-------------------------
Tenant may assign or sublet this Lease to any party subject to the
following:
(a) Tenant shall give Landlord written notice of its intention to
assign this Lease or sublet all or any portion of the Leased Premises. Such
notice shall be given to the Landlord by Registered or Certified mail addressed
to the Landlord at its place of business set forth in the recital of this Lease.
Landlord shall have thirty (30) days after receipt of notice from the Tenant of
its intention to sublet or assign all or any portion of the leased Premises to
elect, to release Tenant from this Lease or from such portion of the Tenant's
obligation under this Lease, or so much of the Leased Premises, as the case may
be, affected by the proposed assignment or subletting. In the event that
Landlord exercises its election to release Tenant from this Lease or from such
portion of the Tenant's obligation under this Lease or so much of the Leased
Premises, as the case may be, Tenant shall thereafter be released from any
further obligation under this agreement of lease as to the interest or space so
affected except for the payment of any monies due as of the effective date of
such release.
(b) In the event that the Landlord does not elect to recapture this
Lease or any portion thereof as hereinabove provided, the Tenant may
nevertheless assign this Lease or sublet the whole or any portion of the Leased
Premises, subject to obtaining Landlord's prior written consent, which consent
shall not be unreasonably withheld, on the basis of and subject to the following
terms and conditions:
(i) The Tenant shall provide to the Landlord the name and
address of the assignee or sublessee:
(ii) At the time of such assignment or subletting, this Lease
must be in full force and effect without any breach or default thereunder
on the part of Tenant;
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<PAGE>
(iii) The assignee or sublessee shall assume, by written
instrument, all of the obligations of this Lease, and a copy of such
assumption agreement shall be furnished to the Landlord within ten (10)
days of its execution;
(iv) The Tenant and each assignee or sublessee shall be and
remain liable for the observance of all the covenants, and provisions of
this Lease, including, but not limited, the payment of the Rent and
Additional Rent reserved herein through the entire term of this Lease;
(c) Notwithstanding anything herein contained to the contrary and
notwithstanding any prior consent by Landlord, no assignee or subtenant shall
further assign or sublease the Leased Premises without Landlord's prior consent
in each such instance and without compliance with the provisions of this
Paragraph.
(d) Any and all payments agreed to be made to Tenant by any
assignee or sublessee shall accrue to and be paid over to Landlord, it being
understood and agreed that said assignee or sublessee shall pay the Rent,
Additional Rent and all other monies and charges directly to the Landlord. If
there are any additional monies, however, in excess of the Rent and Additional
Rent and all other charges to be paid to Landlord hereunder for a corresponding
period, Tenant shall be entitled to reimbursement from said monies of any real
estate commissions it has had to pay to assign or sublet the Leased Premises and
other incidental costs relative to the assigning or subletting such as
advertising, legal, etc. Moreover, once the Tenant has been so reimbursed, the
Landlord shall share equally with the Tenant any further monies received for
said corresponding period.
(e) Notwithstanding the foregoing provisions of this Paragraph,
Tenant shall have the right, without the necessity of obtaining Landlord's
consent, but subject to all other provisions of this Paragraph 10 to:
(i) Sublet all or part of the Leased Premises to any parent
or affiliate of Tenant;
(ii) Assign this Lease to any parent or affiliate of Tenant;
or
(iii) Assign this Lease to a corporation which succeeds to all
or substantially all of the assets and business of Tenant or into which
Tenant is merged, if the net worth of such corporation, following such
assignment, equals or exceeds the net worth of Tenant at the date hereof or
immediately prior to such assignment, whichever is greater; provided,
however, that Tenant, at all times shall be and remain primarily, jointly
and severally liable under this Lease despite any such assignment.
(f) For the purposes of Subparagraph (e) above, the term
"affiliate" shall mean any company of which Tenant or Tenant's parent now or
hereafter owns and controls,
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<PAGE>
directly or indirectly, fifty (50%) percent or more of the stock having the
right to vote for directors thereof. For the purpose of this definition, the
stock so owned or controlled shall be deemed to include all stock owned or
controlled directly or indirectly by any other company of which the Tenant or
Tenant's parent owns or controls, directly or indirectly, fifty (50%) percent or
more of the stock having the right to vote for directors thereof.
(g) Subject to the provisions of Paragraph 16, in addition to the
right of the Landlord to declare this Lease to be in default, the failure of the
Tenant or its assignee or sublessee to comply with any of the provisions and
conditions of this Paragraph, shall, at Landlord's option, render such purported
assignment or subletting null and void and of no force and effect.
11. REQUIREMENTS OF PLAN AND FIRE UNDERWRITERS
------------------------------------------
(a) Tenant shall give prompt notice to Landlord of any notice it
receives of the violation of any law or requirement of public authority or from
the Board of Fire Underwriters.
(b) The Tenant, at its own cost and expense, shall promptly execute
and comply with any statutes, ordinances, rules, orders, regulations and
requirements of the Federal, State, or municipal government, and of any of their
departments or bureaus, which may be applicable to the Leased Premises by reason
of any act or conduct on the part of the Tenant, or by reason of the character
of its occupancy of Leased Premises; and the Tenant shall promptly correct and
abate any such violation caused by its acts, at its own cost and expense. The
Tenant shall also promptly comply with and execute all rules, orders, or
regulations of the Board of Fire Underwriters for the prevention of fires or the
risk thereof, on Landlord's building where such rules, orders, or regulations
are made applicable by any act or conduct of the Tenant, or by the character of
its occupancy of the Leased Premises.
(c) In the event that the Tenant shall fail or neglect to do or
perform any of the matters required by this Paragraph, then the Landlord or its
agents after notice to the Tenant as prescribed in Paragraph 16 of this Lease,
and after Tenant's failing to remedy such failure or neglect within the time
periods set forth in Paragraph 16 hereof, may enter the Leased Premises, and
comply with any and all of said statutes, ordinances, rules, orders, regulations
or requirements at the cost and expense of the Tenant, and in case of the
Tenant's failure to pay therefor, the cost and expense thereof shall be added to
the next month's rent and be due and payable as such, or the Landlord may deduct
the same from the balance of any sum remaining in the Landlord's hands, in
addition to any other remedy the Landlord may have hereunder by reason of such
default on the part of the Tenant.
(d) Tenant shall not do or suffer anything to be done on the Leased
Premises which will increase the rate of fire insurance on the Building.
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<PAGE>
(e) Notwithstanding anything contained herein to the contrary, in the
event capital improvements are required to be made to the Leased Premises
because of a change in any law of a public authority or a change of any
regulation of the Board of Fire Underwriters and not because of Tenant's use of
the Leased Premises, Landlord will complete said required alterations or
improvements and Tenant shall be required to pay toward the costs of same only
to the extent the depreciable useful life corresponds to the Lease Term. In
other words, Tenant will pay its share of the costs of said alteration or
improvement determined by the fraction the numerator of which is the number of
months remaining on the Lease after completion over the denominator which is the
useful life of said alteration or improvement as determined by the Internal
Revenue Code of 1986 and the regulations applicable thereto, or if no guidelines
are available in said code, in accordance with generally accepted accounting
principles, said share payable in equal monthly installments over the life of
the Lease as Additional Rent. Should the Tenant renew the Lease, recalculation
shall occur with respect to the numerator to continue said repayment as
appropriate during the renewal term.
12. NON-LIABILITY AND INDEMNIFICATION
---------------------------------
(a) Neither the Landlord nor its agents shall be liable for any
damage to property of the Tenant entrusted to employees of the Building, nor to
any property, goods, or things contained in the Leased Premises or stored in the
Garage or any other part of the Building, or in the Outside or Garage Parking
Areas. Except to the extent of any proceeds of any insurance policy carried
either by the Landlord or the Tenant, compensates the Tenant, the Landlord shall
not be liable for any injury or damage to Tenant or property on the Land or in
the Building or to the business of the Tenant, or any interruption thereof,
resulting from theft, burglary, explosion, wind or accident, falling plaster,
steam, gas, electricity, water, rain or snow, leakage from any part of the
Building or from pipes, appliances, or plumbing works in the Building or from
the street or sub-surface thereof or from any other source, or from dampness, or
from damage occasioned by workmen engaged in making repairs or alterations in or
upon the Building or the Land, or from damage by other Tenants or persons in the
Building or on the Land, or for interference with the light or other incorporeal
hereditaments, or caused by operations in the construction of any public or
quasi-public work, or for any other cause of whatsoever nature. With respect to
any loss, damage or injury of any nature whatsoever to property or persons for
which Tenant is insured, Tenant shall obtain from its insurance carrier and will
deliver to Landlord, waivers of the subrogation rights under the respective
policies. Landlord agrees to always maintain all risk insurance on the Building
and improvements for full replacement value covering any loss, damage or injury
arising out of fire or other casualty, including but not limited to, insurance
for damage to property arising from intentional acts of the Landlord, and
Landlord agrees to obtain from its insurance carrier and will deliver to Tenant,
waivers of the subrogation rights against the Tenant under any such insurance
policies and Landlord waives all claims against Tenant for any loss resulting
from any act or omission by Tenant, its agents, servants, invitees, contractors
or employees.
15
<PAGE>
Additionally, in the event of any loss or damage to the Building the
Premises and/or any contents each party waives all claims against the other for
any such loss or damage and each party shall look only to any insurance which it
has obtained to protect against such loss and each party shall obtain, for each
policy of such insurance, provisions waiving any claims against the other party
for loss or damage within the scope of such insurance.
(b) Except as otherwise expressly provided in this Lease, this Lease
and the obligations of Tenant hereunder shall be in no way affected, impaired or
excused because Landlord is unable to fulfill, or is delayed in fulfilling, any
of its obligations under this Lease by reason of strike, other labor trouble,
governmental pre-emption or priorities or other controls in connection with a
national or other public emergency or shortages of fuel, supply or labor
resulting therefrom, or other like cause beyond Landlord's control. In no event
shall Tenant be entitled to a claim of constructive eviction from the Leased
Premises unless Tenant shall first have notified Landlord, in writing, of the
condition or conditions giving rise thereto, and, if the complaints be
justified, unless Landlord shall have failed within a reasonable time, after
receipt of such written notice, to remedy, or commence and proceed with due
diligence to remedy, such condition or conditions.
(c) Except to the extent of the proceeds of any fire or other
casualty insurance policy of the Landlord, The Tenant shall indemnify and save
harmless the Landlord from, and shall reimburse the Landlord as Additional Rent
for all expenses damages, or fines incurred or suffered by the Landlord by
reason of any third party claims arising as a result of any breach, violation,
or non-performance by the Tenant, or the Tenant's servants, employees or agents,
of any covenant or provision of this Lease, or by reason of damage or injury to
persons or property other than Landlord's or that under Landlord's care, custody
and control caused by the Tenant's moving property in or out of the Building, or
by the installation or removal of furniture or other property of the Tenant, or
arising out of the occupancy or use by the Tenant of the Leased Premises, or the
Building of which they form a part or the Land, or of the Outside or Garage
Parking Areas, or any part thereof, or from any other cause due to the
carelessness, negligence or improper conduct of the Tenant or the Tenant's
servants or agents.
(d) The Tenant shall give immediate notice to the Landlord in case of
fire or accident occurring on the Leased Premises, and of any defect or
condition of disrepair in the Leased Premises, or in any fixtures or equipment
forming a part thereof.
(e) In support of its obligations hereunder the Tenant, at Tenant's
own cost and expense, shall obtain or provide and keep in full force for the
benefit of the Tenant and the Landlord, during the term hereof, general public
liability insurance, naming Landlord as an additional named insured against any
and all liability or claims of liability arising out of, occasioned by or
resulting from any accident or otherwise in or about the Leased Premises, for
injuries to any person or persons for limits of not less than $1,000,000.00 for
injuries to one person and $3,000,000.00 for injuries to more than one person,
in any one accident or
16
<PAGE>
occurrence, and for loss or damage to the property of any person or persons, for
not less than $1,000,000.00. The policy or policies of insurance shall be of a
company or companies authorized to do business in the State of New Jersey and
Certificates of Insurance showing Landlord's interest shall be delivered to the
Landlord, together with evidence of the payment of the premiums therefor, not
less than fifteen days prior to the commencement of the Term hereof or of the
date when the Tenant shall enter into possession, whichever occurs sooner. At
least fifteen days prior to the expiration or termination date of any policy,
the Tenant shall deliver a renewal or replacement Certificate of Insurance
showing Landlord's interest with proof of the payment of the premium therefor.
13. DAMAGE BY FIRE OR OTHER CASUALTY
--------------------------------
In case of fire or other casualty, Tenant shall give immediate notice to
Landlord. In the event the Building shall be damaged by fire, the elements or
other casualty to such an extent that the cost of restoration will equal or
exceed fifty (50%) percent of the replacement value of the Building (exclusive
of foundations) just prior to the occurrence of the damage, then either the
Landlord or the Tenant may, no later than the sixtieth (60th) day following the
damage, give the other notice of its election to terminate this Lease, in which
event the Tenant shall vacate the Leased Premises within sixty (60) days
thereafter and the Rent shall be paid up to the date of such vacation and
thenceforth this Lease shall come to an end. If the damage is such that the cost
of restoration does not equal or exceed fifty (50%) percent of the replacement
value of the Building (exclusive of foundations) or neither the Landlord nor the
Tenant elect to terminate the Lease, then the Landlord shall repair the same as
speedily as practicable to the scope of Landlord's work in the original
construction of the Building to include that Tenant work Landlord originally
performed and, of any portion of the Building shall be rendered unusable for its
intended purpose, then the Tenant's obligation to pay Rent hereunder shall abate
with respect to the square footage of the portion rendered unusable pursuant to
the applicable rates set forth in Paragraph 5(a) or (b) if during the initial
term of this lease or at rates established pursuant to Paragraph 25 if during an
option period, from the date of casualty until such time as the Landlord shall
have repaired the Building and Leased Premises and Certificate of occupancy
shall have issued. If the Landlord shall not have completed the repairs within
one hundred eighty (180) days after the occurrence of such damage to the
Building and, if at the end of such period the state of the Building or Leased
Premises shall be such as to deny to the Tenant the beneficial use of the Leased
Premises, then, and in such event, Tenant, upon ten (10) days' written notice
delivered to the Landlord at any time on or after the expiration of such one
hundred eighty (180) day period may terminate this lease and vacate the Premises
within ninety (90) days unless, before actual vacation, Tenant determines that
Landlord shall have completed repair of the Building. In the event of such
termination and vacation, Tenant's obligation to pay the Rent herein reserved
shall terminate on the date of vacation of the Leased Premises. Notwithstanding
anything contained in this Paragraph 13 to the contrary, the Landlord shall be
under no obligation to rebuild and may terminate this Lease on ninety (90) days
written notice delivered to the Tenant if the Building shall be damaged during
the last year of the lease Term as extended, if extended. Completion
17
<PAGE>
of the repairs and the re-commencement of Tenant's obligations shall require
that the same criteria as in Paragraph 4(a), as for the Premises being deemed
ready for occupancy, shall have been met.
14. QUIET ENJOYMENT
---------------
The Landlord covenants and agrees that the Tenant upon payment of the Basic
Rent and Additional Rent reserved herein and upon observing and keeping the
covenants, agreements and stipulations of this Lease on its part to be kept,
shall lawfully, peaceably and quietly hold, occupy and enjoy the Leased Premises
during the term of this Lease and any extension or extensions thereof, without
hindrance, ejection or molestation by Landlord or any person or persons claiming
under Landlord or claiming by a title superior to that of Landlord.
15. EVENTS OF DEFAULT
-----------------
Each of the following elements shall constitute a default hereunder:
(a) If the Basic Rent or any part thereof or the Additional Rent or
any part thereof due hereunder shall be unpaid when due.
(b) If the Leased Premises shall be vacated, deserted, or abandoned
during the term hereof for a period of three (3) consecutive months.
(c) If the Tenant, contrary to the provisions of this Lease, shall
sell, assign or mortgage this Lease, or let or underlet the Leased Premises or
any part thereof, or use or permit the same to be used for any purpose other
than herein permitted.
(d) If the Tenant shall make an agreement of composition or an
assignment for the benefit of creditors, or if a Receiver is applied for or
appointed for the Tenant, or if there be filed a petition in bankruptcy or
insolvency or for an arrangement or reorganization by or against the Tenant, or
consented to by the Tenant, or if the Tenant is adjudicated a bankrupt or is
adjudged to be insolvent, or if the Tenant is advertised to be sold out by any
dale under process of law, or if the assets or property of the Tenant in the
Leased Premises shall be attached or levied upon, or if this Lease or the estate
of Tenant shall pass to another by virtue of any court proceedings, writ of
execution or operation of law.
(e) If the Tenant fails to comply with any other provision of this
Lease which imposes an obligation upon the Tenant, or if the Tenant otherwise
violates any provision or condition of this Lease.
16. REMEDIES UPON DEFAULT
---------------------
18
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(a) In the event Tenant shall (i) default in the payment of Basic
Rent or Additional Rent; or (ii) default in the observance of any of the other
terms, covenants and conditions of this Lease, which continues for thirty (30)
days following the delivery of written notice thereof to the Tenant, provided,
however, that this thirty (30) day time period may be reasonably extended if the
default cannot be cured within said period and Tenant has commenced in good
faith to cure such default within said thirty (30) day period and shall continue
the curing thereof diligently thereafter, then the Landlord may, upon ten (10)
days written notice to the Tenant, cancel and terminate this Lease. In such
event, the Landlord, in addition to all other rights and remedies provided by or
permitted by law, or elsewhere conferred in this lease, shall have the remedies
provided in this Paragraph 16.
(b) Upon such default, after the expiration of the applicable notice
period without the default being cured, the Term herein and all rights of the
Tenant hereunder and all rights of the Tenant to the continued occupation of the
Leased Premises shall cease and terminate at the option of the Landlord.
(c) The Landlord may, at its option and upon an additional ten (10)
days written notice beyond that given in Paragraph 16(a) and (b) above to the
Tenant, re-enter the Leased Premises and dispossess the Tenant and any legal
representative or successor of the Tenant, or other occupant of the Leased
Premises either with, or without summary proceedings or appropriate suit, action
or proceedings, and remove the Tenant's property, assets and effects from the
Leased Premises and hold the Leased Premises as if this Lease had not been made.
(d) In any case where Landlord has recovered possession of the
Premises by reason of Tenant's default, as provided herein, Landlord may, at the
Landlord's option, occupy the Leased Premises or cause the Leased Premises to be
redecorated, altered, divided, consolidated with adjoining premises, or
otherwise changed or prepared for reletting, and may relet the Leased Premises,
or any part thereof, as agent of the Tenant or otherwise, for a term or terms to
expire prior to, at the same time as or subsequent to, the original expiration
date of this lease, at the Landlord's option, and receive the rent therefor.
(e) Notwithstanding such re-entry, default, expiration, or
dispossession by summary proceedings or otherwise, Tenant shall continue liable
for the full period which would otherwise have constituted the balance of the
Term hereof and shall pay as liquidated damages at the same time as the Basic
Rent, and Additional Rent, and other charges become payable under the terms
hereof and in lieu thereof, a sum equivalent to the Basic Rent, Additional Rent,
and other charges reserved herein, less only the net avails of reletting of the
leased Premises; and the Landlord without having any obligation to do so may
rent the Leased Premises either in tile name of the Landlord, or otherwise, for
such time and at such rent as it may determine, applying the proceeds thereof
first to the reasonable expense of (i) resuming or obtaining possession, (ii) to
restoring tile Leased Premises to a rentable condition, and (iii) to the payment
of Basic Rent, Additional Rent and other charges including, without limitation,
reasonable brokers' commissions and reasonable attorneys' fees incurred by
Landlord due and
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<PAGE>
to become due to the Landlord hereunder, any surplus to be paid to Tenant, which
shall be and remain liable for any deficiencies. Should Landlord occupy the
Leased Premises, Tenant shall be credited with the greater of said Leased
Premises fair rental value or the Basic and Additional Rent reserved hereunder.
(f) Landlord may, in addition to other remedies available to it
hereunder or by law, have the right of injunction against any violation or
continued violation of this Lease.
(g) Tenant hereby expressly waives any and all rights of redemption
granted by or under any present or future laws in the event of Tenant being
evicted or dispossessed for any cause, or in the event of Landlord obtaining
possession of the Leased Premises by reason of the violation by Tenant of any of
the terms, covenants, conditions or agreements of this Lease.
(h) Failure of the Landlord to insist upon the strict performance of
any of the covenants or conditions of this lease, or to exercise any option or
election herein conferred in any one or more instances, or the adoption of any
one or more but less than all of the remedies available to it hereunder or by
law in the event of default by the Tenant, shall not be construed as a waiver or
relinquishment for the future of any such covenants, conditions or options, or
of any remedy available to it, but the same shall be and remain in full force
and effect notwithstanding.
(i) If after any default, or upon the expiration of the Lease, the
Tenant moves out or is dispossessed, and fails to remove any furniture, fixtures
or other property from the Leased Premises, the same shall be deemed abandoned
by the Tenant and shall become the property of the Landlord or at Landlord's
option may be disposed of and the reasonable costs thereof shall be borne by
Tenant.
(j) Notwithstanding anything contained herein to the contrary, if
Tenant breaches any covenant or condition of this Lease, Landlord may, on
reasonable notice to Tenant (except that no notice need be given in case of
emergency), cure such breach at the expense of Tenant and a reasonable amount of
all expenses, including attorneys' fees, incurred by Landlord in so doing
(whether paid by Landlord or not) shall be deemed Additional Rent payable within
sixty (60) days of demand. Failure of Tenant to make such payment to Landlord
shall constitute an event of default.
17. SUBORDINATION
-------------
This Lease shall be subject and subordinate at all times to the lien of any
mortgages now or hereafter placed on the land and buildings of which the Leased
Premises form a part. The Tenant covenants and agrees to execute and deliver
upon demand such further instrument or instruments subordinating this Lease to
the lien of any such mortgage or mortgages as shall be desired by any mortgagee
or proposed mortgagee. Tenant further acknowledges that
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Landlord may be required by any mortgagee or proposed mortgagee to assign this
Lease as additional security for any mortgage or proposed mortgages, and Tenant
agrees that it will upon demand join with Landlord in the execution of any such
assignment or agreement, which may be in form for recording, as any such
mortgagee or proposed mortgagee may reasonably require. Tenant's failure to
comply on demand with the provisions hereof shall constitute a default under
this Lease. Notwithstanding anything contained in this Paragraph to the
contrary, Tenant's subordination herein is conditioned upon Tenant being able to
remain as a Tenant under the terms and conditions of this Lease regardless of
any default by the Landlord under any mortgage or foreclosure thereon, provided
the Tenant continues to pay the Basic Rent and Additional Rent due herein and
otherwise conforms to all of the terms and conditions of this Lease.
18. CONDEMNATION
------------
(a) If the whole of the Leased Premises shall be taken under the
exercise of the power of condemnation or eminent domain, then this Lease shall
automatically terminate on the date that title or possession is taken by the
condemnor, whichever occurs first, and the rent shall be apportioned as of said
date. If any part of the Leased Premises be so taken so as to materially
restrict, limit or adversely affect the use, occupancy or enjoyment of Tenant,
then Tenant shall have the option to terminate this Lease by thirty (30) days
written notice to the Landlord, which notice must be given within ninety (90)
days after possession or title on the partial taking is obtained by condemnor,
and the rent shall be apportioned on the effective date of termination of the
Lease by Tenant. Notwithstanding the foregoing, if parking space only is taken,
Tenant may not terminate this Lease if Landlord furnishes to Tenant an
equivalent number of parking spaces situated in reasonable distance of the
property lines of the real property on which the Leased Premises are situated.
(b) If any part of the Leased Premises shall be so taken and this
Lease shall not terminate or be terminated under the provisions of Paragraph
18(a) hereof then the rental shall be equitably apportioned according to the
space so taken, and the Landlord shall, at its own cost and expense, restore the
remaining portion of the Leased Premises to the extent necessary to render it
reasonably suitable for the purposes for which it was leased, shall provide
sufficient parking facilities equivalent to those originally furnished to
Tenant, and shall make all repairs to the building in which the Leased Premises
is located to the extent necessary to constitute the building a complete
architectural unit, provided, however, that if the amount of the award received
by Landlord is not adequate to cover the cost of such restoration or repairing,
Landlord may elect by written notice to Tenant to that effect to terminate this
Lease.
(c) All compensation awarded or paid upon such a total or partial
taking of the Leased Premises shall belong to and be the property of the
Landlord without any participation by the Tenant; provided, however, that
nothing contained herein shall be construed to preclude the Tenant, as permitted
by law, from prosecuting any claim directly against the condemning authority in
such condemnation proceedings for loss of business,
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relocation costs or depreciation to, damage to, or cost of removal of, or for
the value of stock, trade fixtures, furniture, and other personal property
belonging to Tenant.
19. ACCESS
------
The Landlord or Landlord's agent shall have the right, upon request to
enter/or pass through the Leased Premises or any part thereof, at reasonable
times during reasonable working hours, (a) to examine the Leased Premises and to
show them to the owners, lessors of superior leases, holders of superior
mortgages or prospective purchasers, mortgagees or lessees of the building, or
the Leased Premises, and (b) for the purpose of making such repairs or changes
or doing such repainting in or to the Leased Premises or in or to the building
or to facilities as may be provided for by this Lease or as may be mutually
agreed upon by the parties or as Landlord may be required to make by law or in
order to prepare and maintain the building or its fixtures or facilities or in
order to satisfy any obligation imposed on Landlord to any other tenant
occupying or about to occupy part of the Landlord's building. Landlord shall be
allowed to take all material into and from the Leased Premises that may be
required for such repairs, changes, repainting or maintenance, without liability
to Tenant.
20. TENANT'S ESTOPPEL
-----------------
Tenant shall, from time to time, on not less than thirty (30) days prior
written request by Landlord, execute, acknowledge and deliver to Landlord a
written statement certifying that this Lease is unmodified and in full force and
effect, or that the Lease is in full force and effect as modified and listing
the instruments of modification; the dates to which the rents and charges have
been paid; and, whether or not to the best of Tenant's knowledge Landlord is in
default hereunder, and if so, specifying the nature of the default. It is
intended that any such statement delivered pursuant to this Paragraph 20 may be
relied on by a prospective purchaser of Landlord's interest or mortgagee of
Landlord's interest or assignee of any mortgage of Landlord's interest.
21. HOLD OVER TENANCY
-----------------
If Tenant holds possession of the Premises after the term of this Lease,
Tenant shall become a tenant from month to month under the provisions herein
provided, but at a monthly Basic Rent of Two Hundred (200%) percent of the Basic
Rent for the last month of the term or any renewal term, payable in advance on
the first day of each month, and such tenancy shall continue until terminated by
Landlord, or until Tenant shall have given to Landlord a written notice at least
ninety (90) days prior to the intended date of termination, of intent to
terminate such tenancy.
22. WAIVER OF TRIAL BY JURY
-----------------------
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To the extent such waiver is permitted by law, the parties waive trial by
jury in any action or proceeding brought in connection with this Lease or the
Leased Premises.
23. PERSONAL LIABILITY
------------------
Notwithstanding anything to the contrary provided in this Lease, it is
specifically understood and agreed, such agreement being a primary consideration
for the execution of this Lease by Landlord, that there shall be absolutely no
personal liability on the part of Landlord, its successors, assigns or any
mortgagee in possession (for the purposes of this Paragraph, collectively
referred to as "Landlord"), with respect to any of the terms, covenants and
conditions of this Lease, and that Tenant shall look solely to the equity of
Landlord in the building for the satisfaction of each and every remedy of tenant
in the event of any breach by Landlord of any of the terms, covenants and
conditions of this Lease to be performed by Landlord, such exculpation of
liability to be absolute and without any exceptions whatsoever.
24. TENANT WORK LETTER
------------------
The Landlord agrees to perform all the work described in the Tenant's Work
Letter and complete such work so as to make the Lease Premises ready for
occupancy by Tenant August 1, 1988 (subject, however to the provisions of
Paragraph 4 hereof), for which the Tenant agrees to pay to the Landlord the cost
thereof, if any.
25. OPTION TO EXTEND
----------------
(a) Provided that Tenant shall not be in default of any terms,
provisions, conditions or covenants herein at the time of the exercise of the
option set forth in this Paragraph 25 or at the time said option shall take
effect, Tenant shall have the right to extend the term of this Lease for one (1)
additional period of five (5) years, commencing on the date following the
termination of the initial Term. Said option to extend the Term shall be on the
same terms, conditions, provisions and covenants as are set forth herein, with
the following exceptions:
(i) The Basic Rent during the option period shall be at the
rate of $25.00 per square foot of rental space.
(ii) Nothing contained herein shall be construed to permit or
grant any options or extensions of the Term beyond the option period set
forth herein.
(b) The option herein granted to extend the Term shall be exercised
by Tenant by the delivery of written notice thereof to Landlord, not less than
one (1) year's prior to the expiration of the initial Term. In the event that
the Tenant shall fail to deliver said notice within such time, it shall be
conclusively deemed to mean that the Tenant has elected not
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to exercise said option, whereupon said option shall cease and terminate and be
of no further force and effect.
26. REAL ESTATE BROKER
------------------
Landlord and Tenant each represent to the other that it has dealt with no
real estate broker other than McBride Corporate Real Estate in connection with
this Lease. Landlord agrees that if any claims should be made for commissions by
any broker by reason of any acts of Tenant or its representatives, Landlord will
indemnify and save harmless the Tenant from any and all claims, demands, losses,
liabilities, judgments, costs, expenses, attorneys' fees or other damages
resulting from arising out of, or in connection therewith. Landlord agrees to
pay the brokerage commission due in connection with this Lease to the aforesaid
broker in accordance with the terms and conditions of a separate agreement
entered into or to be entered into between the Landlord and said broker.
27. MISCELLANEOUS
-------------
(a) The Tenant shall not erect, make or maintain on or attach or
affix to any part of the Leased Premises or the building in which the same is
located, including the windows and doors of said building, but excluding
interior walls within the Leased Premises except those visible from the
exterior, any sign, fixture, other representation, advertisement, notice of any
kind or any other matter which is visible from any location outside of such
building or the Leased Premises, or visible from the lobby of such building,
without the express written consent of the Landlord obtained in advance. In the
event that such restriction is violated, the Landlord shall have the right to
remove same on 24 hours notice or to proceed against the Tenant by way of
seeking an injunction or such other remedy as may be available to it at law or
in equity, including but not by way of limitation, the right to declare a
default in the Lease.
(b) Any lettering, "logo" or design or artwork placed upon the
entrance doors to Tenant's premises shall be subject to the reasonable approval
of the Landlord.
(c) No loud speaker or any other form of sound or audio transmission
or apparatus shall, be used in or at the Leased Premises by the Tenant, its
agents or employees, for advertising or promotional purposes or any other
purpose if the volume is such as to be audible outside of the Leased Premises.
In the event of a violation of such restriction Landlord shall have the right to
proceed against Tenant by way of seeking injunctive relief, or such other remedy
as may be available to it at law or in equity, including but not by way of
limitation, the right to declare a default in the Lease. This shall not
prohibit the use of tape recorders transcribing machines, telephone voice
amplification, or the use of any business machine or device customarily used in
a business or professional office.
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(d) The Tenant agrees to pay for the cost of all telephone equipment
and installation including telephone outlets throughout the Leased Premises
unless a telephone system communications company agrees to pay for same.
(e) It is understood that at all times the office personnel and
invitees of the Tenant shall have access to and use of the washroom in the
common areas on the floor an which the Leased Premises are situated.
(f) Any reasonable rules and regulations with regard to the use and
occupancy of the Leased Premises and the building of which they are a part by
the Tenant as attached hereto or as adopted at any time during the term of this
Lease and of which the Tenant is notified, shall in all things be observed and
performed by the Tenant, its servants, agents, and invitees, provided that such
rule shall not be inconsistent with the Tenant's rights or the Landlord's
obligations as herein expressed.
(g) All notice required to be given to the Landlord or Tenant may be
given by Registered or Certified mail addressed to the Tenant at the Leased
Premises and to Landlord, at the address first set forth herein (unless and
until notified by either party to send same to a different person or entity) and
such notices shall be considered delivered to the Landlord or Tenant as of the
time they are so mailed.
(h) The headings of the articles and the numbers of the items in this
Lease are inserted as a matter of convenience to the parties and shall not
affect the construction of this Lease.
(i) This Lease contains the entire contract between the parties. No
representative, agent or employee of the Landlord has been authorized to make
any representations or promises with reference to the within letting or to vary,
alter or modify the terms hereof. No additions, changes or modifications,
renewals or extensions hereof, shall be binding unless reduced to writing and
signed by the Landlord and the Tenant.
(j) The terms, conditions, covenants and provisions of this Lease
shall be deemed to be severable. If any clause or provision herein contained
shall be adjudged to be invalid or unenforceable by a court of competent
jurisdiction or by operation of any applicable law, it shall not affect the
validity of any other clause or provision herein, but such other clauses or
provisions shall remain in full force and effect. In addition, the Landlord may
pursue the relief or remedy sought in any invalid clause, by conforming the said
clause with the provisions of the statutes or the regulations of any
governmental agency in such case made and provided as if the particular
provisions of the applicable statutes or regulations were set forth herein at
length.
(k) This Lease shall be interpreted, governed by, and enforced in
accordance with the laws of the State of New Jersey.
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(l) In all references herein to any parties, persons, entities or
corporations the use of any particular gender or the plural or singular number
is intended to include the appropriate gender or number as the text of the
within instrument may require. All the terms, covenants and conditions herein
contained shall be for and shall inure to the benefit of and shall bind the
respective parties hereto, and their heirs, executors, administrators, personal
or legal representatives, successors and assigns.
(m) Common facilities for purposes of this Lease shall mean the non-
assigned parking areas, lobby, elevators,, fire stairs, public hallways, public
lavatories, and all other general building facilities that service all building
tenants; air conditioning room, fan room, janitor's closet, electrical closet,
telephone closet, elevator shafts and machine room, flues, stacks, pipe shafts
and vertical ducts with their enclosing walls.
(n) Force majeure for purposes of this Lease, shall mean and include
those situations beyond Landlord's control including by way of example and not
by way of limitation, acts of God, accidents, strikes, shortages of labor,
supplies or materials, inclement weather, or where applicable, the passage of
time while waiting for an adjustment on insurance proceeds.
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SECOND AMENDMENT TO LEASE
-------------------------
1. PARTIES
-------
1.1 THIS AGREEMENT made the __________ day of _______________, 1996 between
17-17 REALTY ASSOCIATES, L.P. ("Landlord") whose address is c/o Cali
Realty Corporation, 11 Commerce Drive, Cranford, New Jersey 07016 and
BORON-LEPORE ASSOCIATES, INC. ("Tenant"), whose address is 17-17 Route
208 North, Fair Lawn, New Jersey 07410.
2. STATEMENT OF FACTS
------------------
2.1 MBM Associates, Landlord's predecessor in interest, and Tenant have
previously entered into a Lease dated June 22, 1988 and a Lease Renewal
Agreement dated September 8, 1993 (collectively the "Lease"),
applicable to approximately 12,225 gross rentable square feet of office
space on the second (2nd) floor ("Premises") at 17-17 Route 208 North,
Fair Lawn, New Jersey ("Building"); and
2.2 On March 2, 1995, 17-17 Realty Associates, L.P. succeeded to the
interest of MBM Associates; and
2.3 Tenant desires to expand the Premises and lease approximately 2,295
gross rentable square feet (the "Expansion Premises") on the first
(1st) floor of the Building; and
2.4 The parties desire to amend certain other terms of the Lease.
3. AGREEMENT
---------
NOW, THEREFORE, in consideration of the Premises and the covenants
hereinafter set forth, Landlord and Tenant agree as follows:
3.1 The above recitals are incorporated herein by reference.
3.2 Landlord, at its expense, shall perform the improvement work to the
Expansion Premises in accordance with Exhibit B attached hereto.
3.3 The Effective Date of this Agreement shall be the day Landlord
substantially completes the improvements to the Expansion Premises. The
Effective Date is estimated to be November 1, 1996.
3.4 From and after the Effective Date, the Premises shall be defined as
approximately 14,520 gross rentable square feet on the first (1st) and
second (2nd) floors of the Building and Paragraph 1 of the Lease shall
be deemed amended accordingly.
<PAGE>
3.5 From and after the Effective Date, Landlord hereby leases to Tenant and
Tenant hereby hires from Landlord the Expansion Premises as shown on
Exhibit A attached hereto.
3.6 In addition to the Basic Rent and Additional Rent applicable to the
Original Premises, from and after the Effective Date, Tenant shall pay
Landlord Basic Rent applicable to the Expansion Premises in the amount
of ONE HUNDRED THIRTY-SEVEN THOUSAND TWO HUNDRED SIXTY-NINE AND 77/100
DOLLARS ($137,269.77) accruing at the Yearly Rate of FORTY-NINE
THOUSAND NINE HUNDRED SIXTEEN AND 28/100 DOLLARS ($49,916.28) which
shall be payable in advance on the first day of each calendar month in
Monthly Installments of FOUR THOUSAND ONE HUNDRED FIFTY-NINE AND 69/100
DOLLARS ($4,159.69) and Paragraph 5 of the Lease shall be deemed
amended accordingly. If the Effective Date falls on a day other than
November 1, 1996, the Fixed Basic Rent for the Term shall be adjusted
on a pro rata basis.
3.7 From and after the Effective Date, Tenant's Proportionate Share
applicable to the Expansion Premises shall be 1.60% and Paragraph 9(d)
of the Lease shall be deemed amended accordingly.
3.8 From and after the Effective Date, Tenant shall be entitled to forty-
six (46) unassigned parking spaces and eleven (11) assigned spaces and
Paragraph 11 of the Preamble to the Lease shall be deemed amended
accordingly.
3.9 Paragraph 8 of the Lease shall be deleted in its entirety and replaced
with the following:
BUILDING STANDARD OFFICE ELECTRICAL SERVICE: The cost of electric
-------------------------------------------
current which is supplied by the Landlord for use by the Tenant in the
Premises, other than for heating or air conditioning purposes, shall be
reimbursed to the Landlord at terms, classification and rates normally
charged by the public utilities corporation serving that part of the
municipality where the subject Premises are located.
(a) Tenant agrees that an independent electrical engineering
consultant shall make a survey of electric power demand of the
electric lighting fixtures and the electric equipment of Tenant
used in the Premises to determine the average monthly electric
consumption thereof, and the costs of said survey shall be borne
by Tenant. The findings of said consultant as to the average
monthly electric consumption of Tenant shall, unless objected to
by Tenant within forty-five (45) days, be conclusive and binding
on Landlord and Tenant. After Landlord's consultant has submitted
its report, Tenant shall pay to Landlord, within ten (10) days
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<PAGE>
after demand therefor by Landlord, the amount (based on the
monthly consumption found by such consultant) as owing from the
Effective Date, and the then expired months, to include the then
current month and thereafter, on the first day of every month, in
advance, the amount set forth as the monthly consumption in said
report. Said amounts shall be treated as Additional Rent due
hereunder. Proportionate sums shall be payable for periods of less
than a full month if the Term commences or ends on any other than
the first or last day of the month. If Tenant objects to said
findings, Tenant shall nevertheless pay and continue to pay the
amount determined by Landlord's consultant until the issue is
finally resolved, but Tenant may, at its expense, seek the
services of an independent electrical consultant who shall make a
survey as provided above. If Landlord's and Tenant's consultant
cannot agree as to Tenant's consumption within thirty (30) days of
Tenant's consultant's findings either Landlord or Tenant may
request the American Arbitration Association in Somerset, New
Jersey to appoint an electrical engineering consultant whose
decision shall be final and binding on Landlord and Tenant, and
whose cost shall be shared equally. Upon the issue being finally
resolved, any overpayment made by Tenant shall be promptly
refunded.
(b) In the event that there shall be an increase or decrease in the
rate schedule (including surcharges or demand adjustments), of the
public utility for the supply of Building Standard Office
Electrical Service, or the imposition of any tax with respect to
such service or increase in any such tax following the Lease
Term's commencement, the Additional Rent payable hereunder shall
be adjusted equitably to reflect the increase or decrease in rate
or imposition or increase in the aforesaid tax. All computations
shall be made on the basis of Tenant's surveyed usage as if a
meter exclusively measuring such usage to the Premises was in
place.
(c) Tenant covenants that it shall notify Landlord immediately upon
the introduction of any office equipment or lighting different
from that on the Premises as of Landlord's electrical survey or in
addition to the aforesaid equipment or lighting on the Premises as
of said survey. The introduction of any new or different equipment
or lighting shall be cause for, at Landlord's election, a
resurveying of the Premises at Tenant's expense. Landlord reserves
the right to inspect the Premises to insure compliance with this
provision.
(d) Landlord shall not be liable in any way to Tenant for any loss,
damage or expense which Tenant may sustain or incur as a result of
any failure, defect or change in the quantity or character of
electrical energy available for redistribution to the Premises
pursuant to this paragraph nor
3
<PAGE>
for any interruption in the supply, and Tenant agrees that such
supply may be interrupted for inspection, repairs and replacement
and in emergencies. In any event, the full measure of Landlord's
liability for any interruption in the supply due to Landlord's
acts or omissions shall be an abatement of Basic Rent and
Additional Rent, unless Landlord fails to take such measures as
may be reasonable under the circumstances to restore such service
without undue delay. In no event shall Landlord be liable for any
business interruption suffered by Tenant.
(e) Landlord, at Tenant's expense, shall furnish and install all
replacement lighting tubes, lamps, ballasts and bulbs required in
the Premises. Tenant, however, shall have the right to furnish
and/or install any or all of the items mentioned in this
subparagraph (e).
(f) Tenant's use of electrical service as contemplated herein shall he
during Building Hours, and any use in excess of said Building
Hours shall result in an adjustment as set forth in subparagraph
(a) hereof to reflect such additional consumption.
3.10 Tenant represents that it has dealt with no real estate broker in
connection with this agreement. Tenant agrees to indemnify and hold
Landlord harmless from any and all claims from any real estate broker
arising out of or in connection with the negotiations of or entering
into of this Agreement for the Expansion Premises by Tenant and
Landlord.
EXCEPT AS EXPRESSLY AMENDED HEREIN, the Lease dated June 22, 1988, as
amended, shall remain in full force and effect as if the same had been set forth
in full herein, and Landlord and Tenant hereby ratify and confirm all of the
terms and conditions thereof.
THIS AGREEMENT shall be binding upon and inure to the benefit of the parties
hereto and their respective legal representatives, successors and permitted
assigns.
EACH PARTY AGREES that it will not raise or assert as a defense to any
obligation under the Lease or this Agreement or make any claim that the Lease or
this Agreement is invalid or unenforceable due to any failure of this document
to comply with ministerial requirements including, but not limited to,
requirements for corporate seals, attestations, witnesses, notarizations, or
other similar requirements, and each party hereby waives the right to assert any
such defense or make any claim of invalidity or unenforceability due to any of
the foregoing.
4
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have hereunto set their hands the
date and year first above written, and acknowledge one to the other that they
possess the requisite authority to enter into this transaction and to sign this
Agreement.
17-17 REALTY ASSOCIATES, L.P., BORON-LEPORE ASSOCIATES, INC.,
LANDLORD TENANT
By: Cali Sub V, Inc.,
Managing General Partner
By: By: /s/ Gregory F. Boron
------------------------------ -----------------------------
James G. Nugent, Name: Gregory F. Boron
Vice President - Leasing Title: Vice-Chairman
5
<PAGE>
SUBLEASE EXHIBIT 10.1(b)
THIS SUBLEASE is entered into between LONZA INC., having its principal
offices at 17-17 Route 208, Fair Lawn, New Jersey 07410 ("Sublessor"); and
BORON, LEPORE AND ASSOCIATES, INC., having its principal offices at 17-17 Route
208, Fair Lawn, New Jersey 07410 ("Sublessee").
1. DESCRIPTION. Sublessor hereby leases to Sublessee and Sublessee hereby
hires from Sublessor, the following space: Approximately 5,247 rentable square
feet (hereinafter the "Subleased Premises") "AS IS" (subject to "Sublessor's
Work" as marked Exhibit A, attached hereto and made a part hereof, which plan or
plans have been initialed by the parties in the Building located at 17-17 Route
208, Fair Lawn, New Jersey (hereinafter the "Building"), together with the right
to use in common with the Sublessor, its invitees, customers and employees, the
stairways, and all other general common facilities contained in the Building.
Said Subleased Premises are a part of Premises leased by Sublessor from MBM
Associates, as Lessor, by lease dated April 29, 1987, as amended by First
Amendment to Indenture of Lease dated February 14, 1989, as the same may be
further amended (collectively herein the "Main Lease").
2. TERM. The Subleased Premises are leased for a term beginning on the
Commencement Date, as defined in Section 35(c) herein, and ending at 11:59 p.m.
on July 31, 1999 unless sooner terminated in accordance with the provisions
hereof. If Sublessor, for any reason whatsoever, cannot deliver possession of
the Subleased Premises to Sublessee at the commencement of the agreed term, this
Sublease shall not be void or voidable, nor shall Sublessor be liable to
Sublessee for any loss or damage resulting therefrom, but in that event, there
shall be a proportionate reduction of basic rent covering the period between the
commencement of the term and the time when Sublessor can deliver possession.
3. BASIC RENT. The Sublessee shall pay to the Sublessor basic rent
(herein "rent" or "basic rent"), payable in such coin or currency of the United
States of America as at the time of payment shall be legal tender for the
payment of public and private debts, at the yearly rate of Eighty-Three Thousand
Nine Hundred Fifty-Two and 00/100 ($83,952.00) Dollars and shall be payable in
advance on the first day of each calendar month during the term in installments
of Six Thousand Nine Hundred Ninety-Six and 00/100 ($6,996.00) Dollars each,
except that a proportionately lesser sum may be paid for the first and last
months of the term of this Sublease if the term commences on a date other than
the first day of the month as and in accordance with the provisions of this
Sublease hereinabove set forth. The basic rent shall be payable at the office
of the Sublessor at the address set forth above, or as may otherwise be directed
by notice from Sublessor to Sublessee. Sublessor acknowledges receipt from
Sublessee of the sum of Six Thousand Nine Hundred Ninety-Six and 00/100
($6,996.00) Dollars by check, subject to collection, for basic rent for the
first month of the term.
4. SUBLESSOR TO COMPLY WITH MAIN LEASE. Sublessor agrees to pay the rent
reserved in the Main Lease and to perform and observe the Lessee's covenants and
stipulations contained therein so far as they ought to be performed and observed
by Lessee.
<PAGE>
5. QUIET ENJOYMENT. If Sublessee performs all of the terms of this
Sublease, Sublessor warrants that Sublessor shall do nothing to affect
Sublessee's right to peaceably and quietly have, hold and enjoy Subleased
Premises for the term herein mentioned, subject to the provisions of this
Sublease.
6. USE AND OCCUPANCY. Sublessee shall use and occupy the Subleased
Premises for any purpose permitted by Section 3(a) of the Main Lease and subject
to the conditions and provisions as more particularly set forth therein, and
shall be entitled to the benefits and burdens thereof to the extent not modified
hereby and permitted thereunder. Said Main Lease is attached hereto as Exhibit
B hereof.
7. SUBLESSEE TO COMPLY WITH MAIN LEASE TERMS: INDEMNIFY SUBLESSOR.
Sublessee agrees to perform and observe the covenants, conditions and terms of
the Main Lease on the part of the Lessee therein to be performed, as if the
Sublessee were the Lessee under the Main Lease, except the covenant for the
payment of basic rent reserved in said Main Lease and except to the extent said
Main Lease shall have been specifically superseded by this Sublease. The
assumption of certain of said covenants, conditions or terms pursuant to certain
express provisions in this Sublease shall not be construed to limit the
generality of the foregoing. Wherever in said Main Lease Lessor's consent is
required, Sublessee shall be required to obtain Sublessor's consent. Sublessee
shall indemnify Sublessor against all claims, damages and expenses arising out
of the nonperformance or nonobservance of Sublessee's obligations with respect
to said Main Lease as assumed hereby.
8. SERVICES. Sublessee shall be entitled to receive from Lessor, as part
of the rental consideration, and for so long as no default exists hereunder, the
services set forth in Section 6 of the Main Lease.
9. HOLDOVER. Any holdover at the expiration of this Sublease is not with
Sublessor's consent and may be terminated as provided by the laws of the State
of New Jersey and Sublessee shall indemnify Sublessor for any liability
resulting therefrom.
10. NO WASTE, NUISANCE OR ILLEGAL USE. Sublessee shall not commit waste
on the Subleased Premises leased herein, nor maintain, commit, or permit the
maintenance or commission of a nuisance thereon, or use such premises for an
unlawful purpose. Sublessee shall conform to all applicable laws and ordinances
respecting the use and occupancy of the Subleased Premises relating to matters
not covered elsewhere herein.
11. ALTERATIONS, ADDITIONS AND IMPROVEMENTS. Sublessee shall not make
alterations, additions or improvements on the Subleased Premises without first
obtaining the written consent of Sublessor, which consent will not unreasonably
be withheld, provided Lessor shall also consent. All alterations, additions and
improvements that shall be made shall be at Sublessee's expense, shall become
Sublessor's property, and shall remain on and be surrendered with the Subleased
Premises as a part thereof at the termination of this Sublease without
disturbance, molestation or injury. Subject to the foregoing Sublessee shall
comply in all respects with said Section 7(d) of the Main Lease.
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12. LIENS. Sublessee shall keep the Subleased Premises free and clear of
Construction Lien Claims arising out of any work performed, materials furnished,
or obligations incurred by Sublessee.
13. ACCESS FOR INSPECTION AND REPAIRS. Sublessee shall allow Lessor and
Sublessor and their agents free access at all reasonable times to the Subleased
Premises for the purpose of inspecting or of making repairs, additions, or
alterations to the Subleased Premises or any property owned by or under the
control of Lessor or Sublessor.
14. REPAIRS AND MAINTENANCE. Sublessor's obligations under Section 7(b)
of the Main Lease with respect to repairs and maintenance are hereby assumed by
Sublessee with respect to the Subleased Premises.
15. INSURANCE. Sublessee shall at all times maintain in full force and
effect an All Risk Fire and Casualty Insurance policy covering the full
replacement cost of all fixtures, improvements, trade equipment, inventory and
personal property of any party whatsoever which from time to time may be in or
upon the Subleased Premises. Sublessee shall comply with Section 12(e) of the
Main Lease and shall furnish, prior to the commencement of the Term hereof,
Certificates of Insurance naming Sublessor and Sublessee as additional insureds.
16. DAMAGE BY FIRE, EXPLOSION, THE ELEMENTS OR OTHERWISE. Sublessee shall
be bound by the provisions of Section 13 of the Main Lease. Should the Main
Lease be terminated pursuant to said Section 13, this Sublease shall so
terminate. In the event the Premises leased pursuant to the Main Lease are
repairable within the period provided by said Section 13, or the Main Lease is
not terminated, or the damage is so slight so that the Premises leased pursuant
to the Main Lease are not rendered untenantable and unfit for occupancy, any
equitable abatement provided for in said Section 13 shall inure to Sublessee
only to the extent the Subleased Premises are affected thereby. Sublessee shall
immediately notify Sublessor in case of fire or other damage to the Subleased
Premises.
17. EMINENT DOMAIN: CONDEMNATION. Subject to Lessor's and Lessee's
rights under Section 18 of the Main Lease to effect a termination of the Main
Lease, and consequently of this Sublease, if the whole of the Subleased Premises
are so taken or if more than fifty (50%) percent of the Subleased Premises are
so taken, this Sublease, at Sublessee's election, to be made within ten (10)
days after notice to Sublessee from Sublessor of the taking, may be canceled.
Sublessee shall have no claim or interest in or to any award or damages for such
taking. If this Sublease is not canceled as provided for herein, Sublessee
shall be entitled to an apportionment and abatement of the annual basic rent to
the extent and for the period for which the Subleased Premises so taken are not
reasonably usable for the purposes for which they are leased hereunder.
18. WAIVER OF ONE BREACH NOT WAIVER OF OTHERS. Waiver of one breach of a
term, condition or covenant of this Sublease by either party hereto shall be
limited to the particular instance and shall not be deemed to waive future
breaches of the same or other terms, conditions or covenants.
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<PAGE>
19. INSOLVENCY OF SUBLESSEE. Either (a) the appointment of a receiver to
take possession of all or substantially all of the assets of Sublessee, or (b) a
general assignment by Sublessee for the benefit of creditors, or (c) any action
taken or suffered by Sublessee under any insolvency or bankruptcy act shall
constitute a default of this Sublease by Sublessee, unless the same shall be
dismissed of record or stayed within thirty (30) days of its filing, and, if not
dismissed or stayed, Sublessor may terminate this Sublease forthwith and upon
notice of such termination, Sublessee's right to possession of the Subleased
Premises shall cease, and Sublessee shall then quit and surrender the Subleased
Premises to Sublessor, but Sublessee shall remain liable as hereinafter provided
in Section 21.
20. SUBLESSOR'S REMEDIES ON DEFAULT. If Sublessee defaults in the payment
of rent, or any additional rent, or defaults in the performance of any of the
other covenants or conditions hereof, or any covenant or condition of the Main
Lease by it to be complied with, Sublessor may give Sublessee notice of such
default, and if Sublessee does not cure any rent, or additional rent, default
within five (5) days, or other default within fifteen (15) days after giving of
such notice (or if such other default is of such nature that it cannot be
completely cured within such period, if Sublessee does not commence such curing
within fifteen (15) days and thereafter proceed with reasonable diligence and in
good faith to cure such default), then Sublessor may terminate this Sublease,
and Sublessee's right to possession of the Subleased Premises shall cease and
Sublessee shall then quit and surrender the Subleased Premises to Sublessor but
Sublessee shall remain liable as hereinafter provided. If this Sublease shall
have been so terminated by Sublessor, Sublessor may, at any time thereafter,
resume possession of the Subleased Premises by any lawful means and remove
Sublessee or other occupants and their effects.
21. DEFICIENCY. In any case where Sublessor has recovered possession of
the Subleased Premises by reason of Sublessee's default, Sublessor may, at
Sublessor's option, occupy the Subleased Premises or cause the Subleased
Premises to be redecorated, altered, divided, consolidated with other adjoining
Premises, or otherwise changed or prepared for reletting, and may relet the
Subleased Premises or any part thereof as agent of Sublessee or otherwise, for a
term or terms to expire prior to or at the same time as the original expiration
date of this Sublease, at Sublessor's option, and receive the rent therefor.
Rent so received, or in the event that Sublessor occupies the Subleased
Premises, the reasonable value of the rental of the Subleased Premises (not to
exceed the rent reserved herein), shall be applied first to the payment of such
expenses as Sublessor may have incurred in connection with the recovery of
possession, redecorating, altering, dividing, consolidating with other adjoining
premises, or otherwise changing or preparing for reletting, and the reletting,
including brokerage and reasonable attorney's fees, and then to the payment of
damages in amounts equal to the rent hereunder and to the cost and expenses of
performance of the other covenants of Sublessee as
herein provided. However, should Sublessor occupy the Premises, Sublessor shall
not be entitled to recover from Sublessee any expenses in connection with
Redecorating, altering, dividing or consolidating the Premises for Sublessor's
occupancy. Sublessee agrees, in any such case, whether or not Sublessor has
relet, to pay to Sublessor damages equal to the basic and additional rent and
other sums herein agreed to be paid by Sublessee, less the net proceeds of the
reletting, if any, as ascertained from time to time, and the same shall be
payable by Sublessee on the several rent
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<PAGE>
days above specified. In reletting the Subleased Premises as aforesaid,
Sublessor may not grant rent concessions. Sublessor shall have no affirmative
duty to affect any reletting. No such reletting shall constitute a surrender and
acceptance or be deemed evidence thereof.
Alternatively, in any case where Sublessor has recovered possession of the
Subleased Premises by reason of Sublessee's default, Sublessor may, at
Sublessor's option, and at any time thereafter, and without notice or other
action by Sublessor, and without prejudice to any other rights or remedies it
may have hereunder or at law or equity, become entitled to recover from
Sublessee, as damages for such breach, in addition to such other sums herein
agreed to be paid by Sublessee, to the date of re-entry, expiration and/or
dispossess an amount equal to the difference between the rent and additional
rent reserved in this Sublease from the date of such default to the date of
expiration of the original term demised and the then fair and reasonable rental
value of the Subleased Premises for the same period; provided said fair and
reasonable rental is less than the rent and additional rent reserved herein.
Said damages shall become due and payable to Sublessor immediately upon such
breach of this Sublease and without regard to whether this Sublease be
terminated or not, and if this Sublease be terminated, without regard to the
manner in which it is terminated. In the computation of such damages, the
difference between any installments of rent (basic and additional) thereafter
becoming due and the fair and reasonable rental value, as hereinbefore defined,
of the Subleased Premises for the period for which such installment was payable
shall be discounted to the date of such default at the rate of not more than
four (4%) percent per annum.
Sublessee hereby waives all right of redemption to which Sublessee or any
person claiming under Sublessee might be entitled by any law nor or hereafter in
force.
Sublessor's remedies hereunder are in addition to any remedy allowed by
law.
Sublessee agrees to pay, as additional rent, all attorney's fees and other
expenses incurred by the Sublessor in enforcing any of the obligations under
this Sublease, this covenant to survive the expiration or sooner termination of
this Sublease.
22. REMOVAL OF PROPERTY BY SUBLESSOR. If Sublessor re-enters the
Subleased Premises or takes possession of them before normal expiration of this
Sublease, in accordance with the terms hereof, Sublessor shall have the right,
but not the obligation, to remove from the Subleased Premises all personal
property located therein and may place it in storage in a public warehouse at
Sublessee's expense and risk.
23. ADDITIONAL RENT. It is expressly agreed that Sublessee will pay, in
addition to the basic rent as in Section 3 above, an additional rental to cover
Sublessee's proportionate share of increased costs to Sublessor for each of the
categories enumerated herein, over the "Base Costs" (as hereinafter defined) for
said categories.
(A) Municipal Taxes and Assessments. If during the Sublease term the
annual Real Estate Taxes as defined in Section 9(a)(iii) of the Main Lease
for any calendar year or proportionate part thereof if the Sublease term
expires prior to the
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<PAGE>
expiration of a calendar year (herein the "Comparison Period") shall be
greater than the Base Costs for Real Estate Taxes (adjusted proportionately
if the Comparison Period is less than a full calendar year), then, in
addition to the basic rent in Section 3, Sublessee agrees to pay its
proportionate share of such excess which payment shall be paid in as many
equal installments as there are months remaining in the calendar year in
which said taxes exceed the taxes for the base year, on the first day of
each month in advance as additional rent, during the remaining months of
that year.
(B) Building Operating Costs. If during the Sublease term, the
Operating Expenses as defined in Section 9(a)(ii) of the Main Lease for any
Comparison Period shall be greater than the base building operating costs
(adjusted proportionately if the Comparison Period is less than a full
calendar year), then, in addition to the basic rent in Section 3, Sublessee
agrees to pay its proportionate share of such excess as additional rent
which sum shall be paid in as many equal installments as there are months
remaining in the calendar year in which said building operating costs
exceed the base building operating costs on the first day of each month in
advance, during the remaining months of that year.
(C) Base Costs.
(i) The base costs for Real Estate Taxes shall be those costs
for the aforesaid paid to Lessor under the Main Lease from October 1,
1993 through September 30, 1994;
(ii) Base building operating costs shall be those costs for the
aforesaid paid to Lessor under the Main Lease from October 1, 1993
through September 30, 1994.
(iii) Sublessee's Proportionate Share. Sublessee's proportionate
share of the additional rent shall be 5.87(%) percent thereof, which
proportionate share reflects and will continually be adjusted to
reflect the sum arrived at by dividing the gross square feet of the
area rented to Sublessee [the numerator], plus any additional gross
square footage subleased from time to time pursuant to this Sublease,
by the total number of gross square feet of the premises demised to
Sublessor under the Main Lease.
24. NOTICES. Except where otherwise required by statute, all notices
given pursuant to the provisions of this Sublease shall be in writing, addressed
to the party to whom notice is given and sent registered or certified mail,
return receipt requested, in a postpaid envelope as follows:
To Sublessee: BORON, LEPORE AND ASSOCIATES, INC.
17-17 Route 208
Fair Lawn, New Jersey 07410
To Sublessor: LONZA INC.
6
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17-17 Route 208
Fair Lawn, New Jersey 07410
Attn: Peter Sage
With Copy To: DOLLINGER & DOLLINGER, P.A.
365 West Passaic Street
Rochelle Park, New Jersey 07662
Attn: Martin E. Dollinger, Esq.
It is understood and agreed that unless specifically modified by this Sublease,
Sublessor shall be entitled to the length of notice required to be given Lessor
under the Main Lease plus five (5) days and shall be entitled to give Sublessee
the amount of notice required to be given Lessee under the Main Lease less five
(5) days.
25. SECURITY. In the event any security is required to be deposited
pursuant to the terms of this Sublease and in the event Sublessor uses any of
said security deposit to cure Sublessee's default(s) or meet any of Sublessee's
obligations, sublessee covenants to upon demand replace the amount so utilized.
In the event of a bona fide sale , subject to this Sublease, Sublessor shall
have the right to transfer the security to the vendee for the benefit of
Sublessee, and Sublessor shall be considered released by Sublessee from all
liability for the return of such security; and Sublessee agrees to look solely
to the new lessor for the return of the said security, and it is agreed that
this shall apply to every transfer or assignment made of the security to a new
lessor. The security deposited as provided for herein shall not be mortgaged,
assigned or encumbered by Sublessee without the written consent of Sublessor.
In the event, of the insolvency of Sublessee, or in the event of the entry
of a judgment in bankruptcy in any court against Sublessee which is not
discharged within thirty (30) days after entry, or in the event a petition is
filed by or against Sublessee under any chapter of the bankruptcy laws of the
State of New Jersey or the United States of America, then in such event,
Sublessor may require the Sublessee to deposit security in an amount specified
to adequately assure Sublessee's performance of all of its obligations under
this Sublease including all payments subsequently accruing. Failure of Sublessee
to deposit the security required by this Section within ten (10) days after
Sublessor's written demand shall constitute a material breach of this Sublease
by Sublessee.
26. SUBLEASE APPLICABLE TO HEIRS, SUCCESSORS AND ASSIGNS. The terms,
conditions and covenants of this Sublease shall inure to and be binding on the
heirs, successors, administrators, executors and assigns of the parties hereto,
except as otherwise herein provided.
27. ASSIGNMENT OR SECOND SUBLEASE WITHOUT CONSENT. Sublessee shall
not sell or assign this Sublease or any part thereof, or any interest therein,
or re-sublet the Subleased Premises in whole or in part without first obtaining
the written consent of Sublessor and Lessor. This Sublease shall not be
assigned by operation of law. If Sublessor and Lessor give consent to
assignment of this Sublease or of any interest therein,
7
<PAGE>
they shall not thereby be barred from afterwards refusing to consent to any
further assignment. Any attempt to sell, assign, or re-sublease without written
consent of Sublessor and Lessor shall be deemed a default and shall entitle
Sublessor to proceed pursuant to Sections 20 and 21 of this Sublease if
Sublessor so elects.
28. SUBLEASE CONDITION. This Sublease is expressly conditioned upon
Sublessee receiving from Lessor on or before the Commencement Date, the Lessor's
written consent to this Sublease.
29. PARKING. Sublessee shall not have the right to use any assigned
parking spaces.
30. INTERRUPTION OF SERVICES OF USE. Interruption or curtailment of any
service maintained in the Building shall not entitle Sublessee to claim
constructive eviction or any other cause of action against Sublessor unless
Sublessor shall be responsible therefor, but Sublessee shall join with and have
those rights and remedies sublessor may have against Lessor as a result of said
interruption. Sublessee shall, under no circumstances, have any claim against
Sublessor for interruption to Sublessee's business, however occurring.
31. SUBLESSOR'S LIABILITY FOR LOSS OF PROPERTY. Sublessor shall not be
liable for any loss of property from any cause whatsoever, including but not
limited to theft or burglary from the Subleased Premises, and Sublessee agrees
to make no such claim for any such loss at any time.
32. WAIVER OF SUBROGATION. Each insurance policy carried by Sublessee and
insuring the Subleased Premises and its fixtures and contents against loss by
fire, water and causes covered by standard extended coverage, shall be written
in a manner so as to provide that the insurance company waives all right of
recovery by way of subrogation against Sublessor and Lessor in connection with
any loss or damage covered by such policies. Neither Sublessor nor Sublessee
shall be liable to Sublessee for any loss or damage caused by fire, water or any
of the risks enumerated in standard extended coverage insurance, provided such
insurance was obtainable at the time of such loss or damage.
Notwithstanding anything contained herein to the contrary, Sublessee
covenants and agrees to hold Sublessor harmless against any and all claims,
damages, suits or causes of action (including attorneys' fees and costs) for
damages arising after the Commencement Date of this Sublease resulting from or
alleged to result from the acts or omissions of Sublessee, its agents, servants,
invitees, visitors or employees which cause any injury to person or property or
loss of life sustained in or about the Subleased Premises.
33. BROKER. Sublessee warrants and represents to Sublessor, and Sublessor
warrants and represents to Sublessee, that Cushman & Wakefield of New Jersey,
Inc. is the sole broker with whom each has negotiated in bringing about this
Sublease, and each agrees to indemnify and hold the other harmless from any and
all claims of other brokers arising out of or in connection with the negotiation
of or the entering into this Sublease by Sublessor and Sublessee, but only to
the extent that such claim is based upon acts inconsistent with this
8
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representation by the party sought to be charged. It is understood that
Sublessee shall have no obligation with respect to payment of said commission
except as aforesaid.
34. ELECTRICITY. Sublessee agrees that an independent electrical
engineering consultant shall make survey of the electric power demand of the
electric lighting fixtures and the electric equipment of Sublessee used in the
Subleased Premises to determine the average monthly electric consumption
thereof. Once the consultant has submitted its report, Sublessee shall pay to
Sublessor, within ten (10) days thereafter, the amount determined by said
consultant as owing from the Commencement Date of this Sublease to the then
current month, and thereafter, on the first day of every month, in advance, the
Sublessee shall pay the amount set forth as the monthly consumption in said
report. Proportionate sums shall be payable for periods of less than a full
month if the Commencement Date commences on any day other than the first of the
month.
Notwithstanding the above, should Sublessee dispute the determination made
by Sublessor's independent electrical engineering consultant, then the Sublessee
shall be free to, at the Sublessee's sole cost and expense, employ the services
of a qualified independent electrical engineering consultant who shall conduct a
survey of Sublessee's electric lighting fixtures and electrical equipment to
determine the average monthly electric consumption utilized by Sublessee. If the
Sublessor's consultant and the Sublessee's consultant cannot agree on the
Sublessee's average monthly electric consumption, a mutually agreeable
electrical engineering consultant shall be selected by Sublessor and Sublessee
within thirty (30) days thereafter, or, if they cannot- so agree on an
independent electrical engineering consultant acceptable to both whose decision
shall be final and binding, then either party may request the American
Arbitration Association in Somerset, New Jersey to appoint such independent
electrical engineering consultant whose decision shall be final and binding upon
the parties. The parties shall share equally in the cost of any such consultant.
In the event that there shall he an increase or decrease in the rate
schedule (including surcharges or demand adjustments) of the public utility for
the supply of electricity to the Subleased Premises, or the imposition of any
tax with respect to such service or increase in any such tax following the
Commencement Date of this Sublease, the rate shall be adjusted equitably to
reflect the increase or decrease in rate or imposition or increase in the
aforesaid tax. All computations shall be made on the basis of Sublessee's
surveyed usage as if a meter measuring such usage to the Subleased Premises
exclusively was in place.
35. SUBLESSOR'S WORK - SUBLESSEE'S DRAWINGS.
(A) Sublessor agrees that, at Sublessor's expense, prior to the
Commencement Date of this Sublease, it will do substantially all of the
work in the Subleased Premises in accordance with Exhibit C attached hereto
and made a part hereof. All of said Exhibit C work, whether paid for in
whole or in part by Sublessee, is and shall remain the Sublessor's
Property.
(B) Sublessee will supply such drawings and information to Sublessor
as and when required as set forth in Exhibit C. Any delay occasioned by
Sublessee's
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failure to supply such drawings and information on or before the dates set
forth in Exhibit C shall not delay the Commencement Date of this Sublease.
(C) The Commencement Date is defined as that date when Sublessor has
done substantially all of the work to be done by Sublessor in accordance
with Exhibit C unless Sublessor has been precluded from completing said
work as a result of Sublessee's acts or omissions including but not limited
to its failure to comply with Subsection 35(B) above. Occupancy by
Sublessee or the delivery of a Certificate of Occupancy (temporary or
permanent) by Sublessor (if required pursuant to local law) shall be prima
facie evidence that Sublessor has done substantially all of the work.
36. RECAPTURE. Sublessor may, for its own use or the use of any of
Sublessor's Affiliates, recapture the Subleased Premises upon six (6) months'
written notice to Sublessee. As used herein Affiliate shall mean any corporation
related to successor as a parent, subsidiary or brother-sister corporation so
that such corporation shall constitute a controlled group as determined under
Section 1563 of the Internal Revenue Code of 1986, as amended, and as elaborated
by the Treasury Regulations promulgated thereunder. In the event that Sublessor
exercises such right of recapture, Sublessor shall reimburse Sublessee for the
unamortized portion of the cost of Sublessee's installation (including labor
costs) of equipment, computer and telephone wiring within the Subleased Premises
over the term hereof, not to exceed the sum of Thirteen Thousand and 00/100
($13,000.00) Dollars.
37. RENT CONCESSION. Provided Sublessee is not in default under any
of the terms and provisions of this Sublease and notwithstanding anything
contained herein to the contrary, Sublessee shall be entitled to a basic rent
abatement in the amount of Two Thousand Five Hundred Nine and 33/100 ($2,509.33)
Dollars per month, or a proportionate part thereof for a period less than a full
calendar month, up to an aggregate total amount of Thirty-two Thousand Six
Hundred Twenty-one and 29/100 ($32,621.29) Dollars, said monthly concession to
be applied against the payments of Monthly Minimum Rent due pursuant to this
Lease for the first (1st) through the thirteenth (13th) months (herein
"Concession Period"). The entire basic rent otherwise due and payable during the
Concession Period shall become immediately due and payable to the Lessor upon
the occurrence of a default under this Sublease.
38. SECTION HEADINGS. The Section headings in this Sublease and position
of its provisions are intended for convenience only and shall not be taken into
consideration in any construction or interpretation of this Sublease or any of
its provisions.
ATTEST: LONZA INC., Sublessor
/s/ By:/s/
- -------------------------------- ---------------------------------
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ATTEST: BORON, LEPORE AND ASSOCIATES,
INC., Sublessee
/s/ Patrick G. LePore /s/ Gregory Boron
- -------------------------------- ---------------------------------
<PAGE>
CONSENT OF LANDLORD
The undersigned hereby consents to the Sublease dated October 27, 1994
between LONZA INC., as Sublessor, and BORON, LEPORE AND ASSOCIATES, INC., a
Sublessee, for approximately 5,427 rentable square feet of space in the building
known as Fair Lawn Executive Center located at 17-17 Route 28, Fair Lawn, New
Jersey.
MBM ASSOCIATES
BY: FAIR LAWN-McBRIDE ASSOCIATES IV
BY: /s/
-------------------------------------
MARCUS-BORROUGHS ASSOCIATES
BY: /s/
-------------------------------------
BY: /s/
-------------------------------------
<PAGE>
Exhibit 10.11
EMPLOYMENT AGREEMENT
--------------------
Employment Agreement, dated the 12th day of August, 1997 by and between
Martin J. Veilleux (the "Employee") and Boron, LePore & Associates, Inc., a
Delaware corporation (the "Company").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Employee is a senior officer of the Company; and
WHEREAS, the parties hereto desire to assure that the Employee's knowledge
and experience will continue to be available to the Company.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, the parties hereto agree as follows:
1. Employment. Subject to the provisions of Section 6, the Company hereby
----------
employs the Employee and the Employee accepts such employment upon the terms and
conditions hereinafter set forth.
2. Term of Employment. Subject to the provisions of Section 6, the term
------------------
of the Employee's employment pursuant to this Agreement shall commence on and as
of July 2, 1997 (the "Effective Date") and shall terminate on the second
anniversary of the Effective Date; provided, however, that this Agreement shall
be extended automatically for successive one-year periods ending on the relevant
anniversary of Effective Date unless either party gives the other notice not
less than 90 days prior to the scheduled termination date (i.e., the second
anniversary of the Effective Date or any later anniversary) of his or its
determination not to extend this Agreement, whereupon it shall terminate as of
such anniversary date. The period during which the Employee serves as an
employee of the Company in accordance with and subject to the provisions of this
Agreement is referred to in this Agreement as the "Term of Employment."
3. Duties.
------
During the Term of Employment, the Employee (a) shall serve as an employee
of the Company with the title and position of Executive Vice President--Finance
and Chief Financial Officer, reporting to the Chief Executive Officer of the
Company, or such other or additional titles and positions involving the
management of the financial affairs of the Company, or such alternative or
additional duties, as shall be specified by the Chief Executive Officer of the
Company, (b) shall perform such duties and responsibilities on behalf of the
Company and its subsidiaries (as defined in Section 10) as may be reasonably
determined by
<PAGE>
the Chief Executive Officer of the Company, consistent with the general area of
the Employee's experience and skills, (c) upon the request of the Board of
Directors of the Company, shall serve as an officer and/or director of any of
the Company's subsidiaries, and (d) shall render all services reasonably
incident to the foregoing. The Employee hereby accepts such employment, agrees
to serve the Company in the capacities indicated, and agrees to use his best
efforts in, and shall devote his full working time, attention, skill and
energies to, the advancement of the interests of the Company and its
subsidiaries and the performance of his duties and responsibilities hereunder.
4. Salary and Bonus.
----------------
(a) During the Term of Employment, the Company shall pay the Employee a
salary at the annual rate of $140,000 per annum (the "Base Salary"). Such Base
Salary shall be subject to withholding under applicable law, shall be pro rated
for partial years and shall be payable in periodic installments not less
frequently than monthly in accordance with the Company's usual practice for
executive officers of the Company as in effect from time to time.
(b) For each calendar year or portion thereof during the Term of
Employment (including any extensions thereof), the Employee shall be eligible to
receive a bonus if and to the extent determined by and in the discretion of the
Compensation Committee of the Board of Directors of the Company, or the Board of
Directors of the Company if a Compensation Committee is not then appointed, in
its discretion, based upon its evaluation of the Employee's performance during
such year or portion thereof.
5. Benefits.
--------
(a) During the Term of Employment, the Employee shall be entitled to
participate in any and all medical, pension, profit sharing, dental and life
insurance plans and disability income plans, retirement arrangements and other
employment benefits as in effect from time to time for executive officers of the
Company generally. Such participation shall be subject to (i) the terms of the
applicable plan documents (including, as applicable, provisions granting
discretion to the Board of Directors of the Company or any administrative or
other committee provided for therein or contemplated thereby) and (ii) generally
applicable policies of the Company.
(b) The Company shall promptly reimburse the Employee for all
reasonable business expenses incurred by the Employee during the Term of
Employment in accordance with the Company's practices for executive officers of
the Company with a similar level of responsibility, as in effect from time to
time.
(c) During the Term of Employment, the Employee shall receive paid
vacation annually in accordance with the Company's practices for executive
officers, as in effect from time to time, but in any event not less than four
(4) weeks per calendar year.
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(d) Compliance with the provisions of this Section 5 shall in no way
create or be deemed to create any obligation, express or implied, on the part of
the Company or any of its affiliates with respect to the continuation of any
particular benefit or other plan or arrangement maintained by them or their
subsidiaries as of or prior to the date hereof or the creation and maintenance
of any particular benefit or other plan or arrangement at any time after the
date hereof, except as contemplated by Sections 5(b) and 5(c).
6. Termination of Employment of the Employee. Prior to the expiration of
-----------------------------------------
the Term of Employment as provided in Section 2 hereof, this Agreement may or
shall (as applicable) be terminated as follows:
(a) At any time by the mutual consent of the Employee and the Company.
(b) At any time for "cause" by the Company upon written notice to the
Employee. For purposes of this Agreement, a termination shall be for "cause"
if:
(i) the Employee shall commit an act of fraud, embezzlement,
misappropriation or breach of fiduciary duty against the Company or any
of its subsidiaries, or shall be convicted by a court of competent
jurisdiction of, or shall plead guilty or nolo contendere to, any
felony or any crime involving moral turpitude; or
(ii) the Employee shall commit a breach of any of the covenants,
terms or provisions hereof, which breach has not been remedied within
thirty (30) days after delivery to the Employee by the Board of
Directors of the Company of written notice of the facts constituting
the breach; or
(iii) the Employee shall have failed to comply with written
instructions from the Company's Chief Executive Officer, which are
reasonable and consistent with Section 3, or shall have substantially
failed to perform the Employee's duties hereunder for a period of
thirty (30) days after written notice from the Company.
Upon termination for cause as provided in this Section 6(b), (A) all
obligations of the Company under this Agreement shall thereupon immediately
terminate other than any obligation of the Company with respect to earned but
unpaid Base Salary and benefits contemplated hereby to the extent then accrued
or vested, it being understood that upon any such termination the Employee shall
not be entitled to receive (1) any bonus or portion thereof from the Company or
any of its affiliates with respect to any period during or after the Term of
Employment or (2) any continuation of benefits except as may be required by law,
and (B) the Company shall have any and all rights and remedies under this
Agreement and applicable law.
3
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(c) Upon the death or upon the permanent disability (as defined below)
of the Employee continuing for a period in excess of one hundred eighty
(180) consecutive days. Upon any such termination of the Employee's
employment as provided in this Section 6(c), all obligations of the Company
under this Agreement shall thereupon immediately terminate other than (i)
any obligation of the Company with respect to earned but unpaid Base Salary
and benefits contemplated hereby to the extent accrued or vested through
the date of termination or (ii) any continuation of benefits required by
law. As used herein, the terms "permanent disability" or "permanently
disabled" shall mean the inability of the Employee, by reason of injury,
illness or other similar cause, to perform a major part of his duties and
responsibilities in connection with the conduct of the business and affairs
of the Company, as determined reasonably and in good faith by the Company.
(d) At any time by the Employee upon forty-five (45) days' prior
written notice to the Company. Upon termination by the Employee as provided
in this Section 6(d), all obligations of the Company under this Agreement
thereupon immediately shall terminate other than any obligation of the
Company with respect to earned but unpaid Base Salary and benefits
contemplated hereby to the extent accrued or vested through the date of
termination, it being understood that in the event of such a termination
the Employee shall not be entitled to receive (i) any bonus not then paid
from the Company or any of its affiliates with respect to any period during
or after the Term of Employment or (ii) any continuation of benefits except
to the extent required by law.
(e) At any time without "cause" (as defined in Section 6(b)) by the
Company upon written notice to the Employee. In the event of termination of
the Employee by the Company pursuant to this Section 6(e), the Company
shall (i) continue to make Base Salary payments to the Employee from the
date of termination through the first anniversary of the date on which such
a termination occurs, in any such case in the manner contemplated by
Section 4(a), and (ii) continue the benefit arrangements applicable to the
Employee for as long as Base Salary payments continue, with such amounts
agreed by the parties hereto to be in full satisfaction, compromise and
release of any claims arising out of any termination of the Employee's
employment pursuant to this Section 6(e) or Section 6(f), and in either
case with such amounts to be contingent upon the Employee's delivery of a
general release of any and all claims (other than those arising under this
Agreement and any stock options then in effect in accordance with their
terms) upon termination of employment in a form reasonably satisfactory to
the Company, it being understood that no severance benefits shall be
provided unless and until the Employee determines to execute and deliver
such release.
(f) By the Employee in the event of a material default by the Company
in the performance of its obligations hereunder, after the Employee has
given written notice to the Company specifying such default by the Company
and giving the Company a reasonable time, not less than 30 days, to conform
its performance to its
4
<PAGE>
obligations hereunder. The rights and obligations of the parties shall be
as set forth in Section 6(e) in the event of any such termination.
(g) In the event either party gives a notice of non-renewal to be
effective as of the second anniversary of the Effective Date or any
subsequent anniversary thereof, then all obligations of the parties
hereunder shall terminate as of the end of the Term of Employment except as
contemplated by Section 7 hereof.
(h) Notwithstanding termination of this Agreement as provided in this
Section 6 or any other termination of the Employee's employment with the
Company, the Employee's obligations under Section 7 hereof shall survive
any termination of the Employee's employment with the Company at any time
and for any reason.
7. Confidentiality; Proprietary Rights; Non-Competition.
----------------------------------------------------
(a) In the course of performing services hereunder, on behalf of the
Company (for purposes of this Section 7 including all predecessors of the
Company) and its affiliates, the Employee has had and from time to time
will have access to confidential records, data, customer lists, trade
secrets and other confidential information owned or used in the course of
business by the Company and its affiliates (the "Confidential
Information"). The Employee agrees (a) to hold the Confidential Information
in strict confidence, (b) not to disclose the Confidential Information to
any person (other than in the regular business of the Company or its
affiliates), and (c) not to use, directly or indirectly, any of the
Confidential Information for any competitive or commercial purpose other
than on behalf of the Company and its affiliates; provided, however, that
-------- -------
the limitations set forth above shall not apply to any Confidential
Information which (i) is then generally known to the public; (ii) became or
becomes generally known to the public through no fault of the Employee; or
(iii) is disclosed in accordance with an order of a court of competent
jurisdiction or applicable law. Upon the termination of the Employee's
employment with the Company for any reason, all Confidential Information
(including, without limitation, all data, memoranda, customer lists, notes,
programs and other papers and items, and reproductions thereof relating to
the foregoing matters) in the Employee's possession or control, shall be
immediately returned to the Company or the applicable affiliate and remain
in its or their possession.
(b) The Employee recognizes that the Company and its affiliates possess
a proprietary interest in all of the information described in Section 7(a)
and have the exclusive right and privilege to use, protect by copyright,
patent or trademark, or otherwise exploit the processes, ideas and concepts
described therein to the exclusion of the Employee, except as otherwise
agreed between the Company and the Employee in writing. The Employee
expressly agrees that any products, inventions, discoveries or improvements
made by the Employee or his agents or affiliates in the course of the
Employee's employment, including any of the foregoing which is based on or
arises out of the information described in Section 7(a), shall be the
property of and inure to the
5
<PAGE>
exclusive benefit of the Company. The Employee further agrees that any and
all products, inventions, discoveries or improvements developed by the
Employee (whether or not able to be protected by copyright, patent or
trademark) during the course of his employment, or involving the use of the
time, materials or other resources of the Company or any of its affiliates,
shall be promptly disclosed to the Company and shall become the exclusive
property of the Company, and the Employee shall execute and deliver any and
all documents necessary or appropriate to implement the foregoing.
(c) The Employee agrees, while he is employed by the Company, to offer
or otherwise make known or available to it, as directed by the Board of
Directors of the Company and without additional compensation or
consideration, any business prospects, contracts or other business
opportunities that he may discover, find, develop or otherwise have
available to him in the business of providing marketing services to and
performing related activities for pharmaceutical companies and healthcare
telemarketing, and further agrees that any such prospects, contacts or
other business opportunities shall be the property of the Company.
(d) As a material inducement to and a condition precedent of the
Company's payment obligations hereunder, in consideration of the payment of
the consideration to be paid by the Company pursuant to Section 7(d)(ii)
below and the other covenants set forth herein, and to preserve the
goodwill associated with the Boron, LePore business, the Employee hereby
agrees to the following restrictions on his activities:
(i) Non-Competition Agreement. The Employee hereby agrees that
-------------------------
during the period commencing on the date hereof and ending on the date
which is the first anniversary of the date on which the Employee's
employment with the Company and its subsidiaries terminates for any
reason, he will not, without the express written consent of the
Company, directly or indirectly, anywhere in the United States, engage
in any activity which is, or participate or invest in, or provide or
facilitate the provision of financing to, or assist (whether as owner,
part-owner, shareholder, partner, director, officer, trustee, employee,
agent or consultant, or in any other capacity), any business,
organization or person other than the Company (or any affiliate of the
Company), or any such business, organization or person involving, or
which is, a family member of the Employee, whose business, activities,
products or services are competitive with any of the business,
activities, products or services conducted or offered by the Company
and its subsidiaries during any period in which the Employee serves as
an officer or employee of the Company or any of its subsidiaries, which
business, activities, products and services shall include in any event
the provision of marketing services to and related marketing activities
involving pharmaceutical companies, as well as healthcare
telemarketing. Without implied limitation, the forgoing covenant shall
include hiring or engaging or attempting to hire or engage for or on
behalf of himself or any such competitor any officer or employee of the
Company or any of its direct and/or indirect
6
<PAGE>
subsidiaries, encouraging for or on behalf of himself or any such
competitor any such officer or employee to terminate his or her
relationship or employment with the Company or any of its direct or
indirect subsidiaries, soliciting for or on behalf of himself or any
such competitor any client of the Company or any of its direct or
indirect subsidiaries and diverting to any person (as hereinafter
defined) any client or business opportunity of the Company or any of
any of its direct or indirect subsidiaries. Notwithstanding anything
herein to the contrary, the Employee may make passive investments in
any enterprise the shares of which are publicly traded if such
investment constitutes less than five (5) percent of the equity of such
enterprise. Neither the Employee nor any business entity controlled by
him is a party to any contract, commitment, arrangement or agreement
which could, following the date hereof, restrain or restrict the
Company or any subsidiary or affiliate of the Company from carrying on
its business or restrain or restrict the Employee from performing his
obligations under this Employment Agreement, and as of the date of this
Agreement the Employee has no business interests in or relating to the
pharmaceutical industry whatsoever other than his interest in the
Company, other than interests in public companies of less than five (5)
percent. For purposes of this Agreement, any reference to the
subsidiaries of the Company shall be deemed to include all entities
directly or indirectly controlled by it through an ownership of more
than fifty percent (50%) of the voting interests, and the term "person"
shall mean an individual, a corporation, an association, a partnership,
an estate, a trust, and any other entity or organization.
(ii) Non-Competition Payment. In consideration of the execution
-----------------------
and delivery by the Employee of this Agreement, on the date hereof the
Company shall make a cash payment to the Employee in the amount of
$1,500.
The parties acknowledge that the time, scope, geographic area and other
provisions of Section 7(d) of this Agreement have been specifically negotiated
by sophisticated commercial parties and agree that (x) all such provisions are
reasonable under the circumstances and are given as an integral part of such
employment arrangements between the Company and the Employee and (y) but for the
covenants of the Employee contained in this Section 7(d), the Company would not
have entered into such employment arrangements. The Employee has independently
consulted with his counsel and has been advised in all respects concerning the
reasonableness and propriety of the covenants contained herein, with specific
regard to the business to be conducted by Company and its subsidiaries.
8. Specific Performance; Severability. It is specifically understood and
----------------------------------
agreed that any breach of the provisions of Section 7 hereof by the Employee is
likely to result in irreparable injury to the Company and/or its affiliates,
that the remedy at law alone will be an inadequate remedy for such breach and
that, in addition to any other remedy it may have, the Company shall be entitled
to enforce the specific performance of this Agreement by the Employee and to
seek both temporary and permanent injunctive relief (to the extent permitted
7
<PAGE>
by law), without the necessity of posting a bond or proving actual damages, but
without limitation of their right to damages and all other remedies available to
them, it being understood that injunctive relief is in addition to, and not in
lieu of, such other remedies. In case any of the provisions contained in this
Agreement shall for any reason be held to be invalid, illegal or unenforceable
in any respect, any such invalidity, illegality or unenforceability shall not
affect any other provision of this Agreement, but this Agreement shall be
construed as if such invalid, illegal or unenforceable provision had been
limited or modified (consistent with its general intent) to the extent necessary
to make it valid, legal and enforceable. In the event that any covenant
contained in Section 7(d) of this Agreement shall be determined by any court of
competent jurisdiction to be unenforceable by reason of its extending for too
great a period of time or over too great a geographical area or by reason of its
being too extensive in any other respect, it shall be interpreted to extend only
over the maximum period of time for which it may be enforceable and/or over the
maximum geographical area as to which it may be enforceable and/or to the
maximum extent in all other respects as to which it may be enforceable, all as
determined by such court in such action. If it shall not be possible to so
limit or modify any invalid, illegal or unenforceable provision or part of a
provision of this Agreement, this Agreement shall be construed as if such
invalid, illegal or unenforceable provision or part of a provision had never
been contained in this Agreement. The existence of any claim or cause of action
which the Employee may have against the Company or any of its subsidiaries or
affiliates shall not constitute a defense or bar to the enforcement of any of
the provisions of this Agreement.
9. Notices. All notices, requests, demands and other communications
-------
hereunder shall be in writing and shall be deemed to have been duly given if
faxed (with transmission acknowledgment received), delivered personally or
mailed by certified or registered mail (return receipt requested) as follows:
To the Company: Boron, LePore & Associates, Inc.
17-17 Route 208 North
Fair Lawn, NJ 07410
To the Employee: Martin J. Veilleux
c/o Boron, LePore & Associates, Inc.
17-17 Route 208 North
Fair Lawn, NJ 07410
or to such other address or fax number of which any party may notify the other
parties as provided above. Notices shall be effective as of the date of such
delivery, mailing or fax.
10. Miscellaneous. This Agreement shall be governed by and construed
-------------
under the laws of the State of New Jersey, and shall not be amended, modified or
discharged in whole or in part except by an agreement in writing signed by both
of the parties hereto. The failure of either of the parties to require the
performance of a term or obligation or to exercise any right under this
Agreement or the waiver of any breach hereunder shall not prevent subsequent
8
<PAGE>
enforcement of such term or obligation or exercise of such right or the
enforcement at any time of any other right hereunder or be deemed a waiver of
any subsequent breach of the provision so breached, or of any other breach
hereunder. This Agreement shall inure to the benefit of, and be binding upon
and assignable to, successors of the Company by way of merger, consolidation or
sale and may not be assigned by the Employee. This Agreement supersedes and
terminates all prior understandings and agreements between the parties (or their
predecessors) relating to the subject matter hereof. For purposes of this
Agreement, the term "person" means an individual, corporation, partnership,
association, trust or any unincorporated organization; a "subsidiary" of a
person means any corporation more than 50 percent of whose outstanding voting
securities, or any partnership, joint venture or other entity more than 50
percent of whose total equity interest, is directly or indirectly owned by such
person; and an "affiliate" of a person shall mean, with respect to a person or
entity, any person or entity which directly or indirectly controls, is
controlled by, or is under common control with such person or entity.
9
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement under seal as
of the date first set forth above.
BORON, LEPORE & ASSOCIATES, INC.
By:/s/ Patrick G. LePore
---------------------
Name: Patrick G. LePore
Title: President
/s/ Martin J. Veilleux
----------------------
Martin J. Veilleux
10
<PAGE>
Exhibit 10.12
BORON, LEPORE & ASSOCIATES, INC.
AMENDED AND RESTATED
1996 STOCK OPTION AND GRANT PLAN
SECTION 1. GENERAL PURPOSE OF THE PLAN; DEFINITIONS
----------------------------------------
The name of the plan is the Amended and Restated Boron, LePore &
Associates, Inc. 1996 Stock Option and Grant Plan (the "Plan"). The purpose of
the Plan is to encourage and enable the officers, employees, directors,
consultants, advisors and other key persons of Boron, LePore & Associates, Inc.
(the "Company") and its Subsidiaries (as defined below) upon whose judgment,
initiative and efforts the Company largely depends for the successful conduct of
its business to acquire a proprietary interest in the Company. It is
anticipated that providing such persons with a direct stake in the Company's
welfare will assure a closer identification of their interests with those of the
Company, thereby stimulating their efforts on the Company's behalf and
strengthening their desire to remain with the Company.
The following terms shall be defined as set forth below:
"Act" means the Securities Exchange Act of 1934, as amended.
"Award" or "Awards," except where referring to a particular category of
grant under the Plan, shall include Incentive Stock Options, Non-Qualified Stock
Options, Stock Appreciation Rights, Restricted Stock Awards, Unrestricted Stock
Awards, Performance Share Awards and Dividend Equivalent Rights.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor Code, and related rules, regulations and interpretations.
"Committee" has the meaning specified in Section 2.
"Dividend Equivalent Right" means Awards granted pursuant to Section 10.
"Effective Date" means the date on which the Plan is approved by
stockholders as set forth in Section 16.
"Fair Market Value" of the Stock on any given date means (i) if the Stock
is admitted to quotation on the National Association of Securities Dealers
Automated Quotation System ("NASDAQ"), the Fair Market Value on any given date
shall not be less than the average of the highest bid and lowest asked prices of
the Stock reported for such date or, if no bid and asked prices were reported
for such date, for the last day preceding such date for which such
<PAGE>
prices were reported; or (ii) if the Stock is admitted to trading on a national
securities exchange or the NASDAQ National Market System, then clause (i) shall
not apply and the Fair Market Value on any date shall not be less than the
closing price reported for the Stock on such exchange or system for such date
or, if no sales were reported for such date, for the last date preceding such
date for which a sale was reported; or (iii) if the Stock is not publicly traded
on a securities exchange or traded in the over-the-counter market or, if traded
or quoted, there are no transactions or quotations within the last ten trading
days or trading has been halted for extraordinary reasons, the Fair Market Value
on any given date shall be determined in good faith by the Committee with
reference to the rules and principles of valuation set forth in Section 20.2031-
2 of the Treasury Regulations; and (iv) notwithstanding the foregoing, the Fair
Market Value of the Stock on the effective date of the Initial Public Offering
shall be the offering price to the public of the Stock on such date.
"Incentive Stock Option" means any Stock Option designated and qualified as
an "incentive stock option" as defined in Section 422 of the Code.
"Independent Director" means a member of the Board who is neither an
employee or officer of the Company or any Subsidiary.
"Initial Public Offering" means 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 Stock to the public.
"Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
"Option" or "Stock Option" means any option to purchase shares of Stock
granted pursuant to Section 5.
"Performance Share Award" means any Award granted pursuant to Section 9.
"Restricted Stock Award" means any Award granted pursuant to Section 7.
"Stock" means the Common Stock, par value $.01 per share, of the Company,
subject to adjustments pursuant to Section 3.
"Stock Appreciation Rights" means any Award granted pursuant to Section 6.
"Subsidiary" means any corporation or other entity (other than the Company)
in any unbroken chain of corporations or other entities, beginning with the
Company, if each of the corporations or entities (other than the last
corporation or entity in the unbroken chain) owns stock or other interests
possessing 50% or more of the economic interest or the total combined voting
power of all classes of stock or other interests in one of the other
corporations or
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entities in the chain.
"Unrestricted Stock Award" means any Award granted pursuant to Section 8.
SECTION 2. ADMINISTRATION OF PLAN; COMMITTEE AUTHORITY TO SELECT PARTICIPANTS
------------------------------------------------------------------
AND DETERMINE AWARDS
--------------------
(a) Committee. The Plan shall be administered by the Board of Directors of
---------
the Company, or at the discretion of the Board, by a committee of the Board
consisting of not less than two Independent Directors. On and after the date
the Company becomes subject to the Act, each member of the Committee shall be a
"Non-Employee Director" within the meaning of Rule 16b-3(a)(3). On and after
the date the Plan becomes subject to Section 162(m) of the Code, each member of
the Committee shall be an "Outside Director" within the meaning of Section
162(m) of the Code and the regulations promulgated thereunder. All references
herein to the Committee shall be deemed to refer to the entity then responsible
for administration of the Plan at the relevant time (i.e., either the Board of
Directors or a committee of the Board, as applicable).
(b) Powers of Committee. The Committee shall have the power and authority
-------------------
to grant Awards consistent with the terms of the Plan, including the power and
authority:
(i) to select the officers, employees, Independent Directors,
consultants, advisers and key persons of the Company and its Subsidiaries
to whom Awards may from time to time be granted;
(ii) to determine the time or times of grant, and the extent, if any,
of Incentive Stock Options, Non-Qualified Stock Options, Stock Appreciation
Rights, Restricted Stock Awards, Unrestricted Stock Awards, Performance
Share Awards and Dividend Equivalent Rights, or any combination of the
foregoing, granted to any one or more participants;
(iii) to determine the number of shares of Stock to be covered by any
Award;
(iv) to determine and modify from time to time the terms and
conditions, including restrictions, not inconsistent with the terms of the
Plan, of any Award, which terms and conditions may differ among individual
Awards and participants, and to approve the form of written instruments
evidencing the Awards;
(v) to accelerate at any time the exercisability or vesting of all or
any portion of any Award and/or to include provisions in Awards providing
for such acceleration;
(vi) to impose any limitations on Awards granted under the Plan,
including limitations on transfers, repurchase provisions and the like and
to
3
<PAGE>
exercise repurchase rights or obligations;
(vii) subject to the provisions of Section 5(a)(iii), to extend at any
time the period in which Stock Options may be exercised;
(viii) to determine at any time whether, to what extent, and under what
circumstances Stock and other amounts payable with respect to an Award
shall be deferred either automatically or at the election of the
participant and whether and to what extent the Company shall pay or credit
amounts constituting interest (at rates determined by the Committee) or
dividends or deemed dividends on such deferrals; and
(ix) at any time to adopt, alter and repeal such rules, guidelines and
practices for administration of the Plan and for its own acts and
proceedings as it shall deem advisable; to interpret the terms and
provisions of the Plan and any Award (including related written
instruments); to make all determinations it deems advisable for the
administration of the Plan; to decide all disputes arising in connection
with the Plan; and to otherwise supervise the administration of the Plan.
All decisions and interpretations of the Committee shall be binding on all
persons, including the Company and Plan participants.
(c) Delegation of Authority to Grant Awards. The Committee, in its
---------------------------------------
discretion, may delegate to the Chief Executive Officer of the Company all or
part of the Committee's authority and duties with respect to Awards, including
the granting thereof, to individuals who are not subject to the reporting and
other provisions of Section 16 of the Act or "covered employees" within the
meaning of Section 162(m) of the Code. Any such delegation by the Committee
shall include a limitation as to the amount of Awards that may be granted during
the period of delegation and shall contain guidelines as to the determination of
the exercise price of any Option or Stock Appreciation Right, the price of other
Awards and the vesting criteria. The Committee may revoke or amend the terms of
a delegation at any time but such action shall not invalidate any prior actions
of the Committee's delegate or delegates that were consistent with the terms of
the Plan.
SECTION 3. STOCK ISSUABLE UNDER THE PLAN; MERGERS; SUBSTITUTION
----------------------------------------------------
(a) Stock Issuable. The maximum number of shares of Stock reserved and
--------------
available for issuance under the Plan shall be such aggregate number of shares
of Stock as does not exceed the sum of (i) 4,500,000 shares; plus (ii) as of
each June 30 and December 31 after December 31, 1997, an additional positive
number equal to five percent (5%) of the shares of Stock issued by the Company
during that six month period; provided, however, that the maximum number of
shares of Stock for which Incentive Stock Options may be granted under the Plan
shall not exceed 4,500,000 shares, and the maximum number of shares of stock
which may be the subject of outright grants shall not exceed 1,125,000 shares.
For purposes of the
4
<PAGE>
foregoing limitations, the shares of Stock underlying any Awards which are
forfeited, canceled, reacquired by the Company, satisfied without the issuance
of Stock or otherwise terminated (other than by exercise) shall be added back to
the shares of Stock available for issuance under the Plan. Subject to such
overall limitation, shares of Stock may be issued up to such maximum number
pursuant to any type or types of Award; provided, however, that from and after
the date the Plan is subject to Section 162(m) of the Code, Stock Options or
Stock Appreciation Rights with respect to no more than 500,000 shares of stock
may be granted to any one individual participant during any one calendar year
period. The shares available for issuance under the Plan may be authorized but
unissued shares of Stock or shares of Stock reacquired by the Company.
(b) Recapitalizations. If, through or as a result of any merger,
-----------------
consolidation, sale of all or substantially all of the assets of the Company,
reorganization, recapitalization, reclassification, stock dividend, stock split,
reverse stock split or other similar transaction, the outstanding shares of
Stock are increased or decreased or are exchanged for a different number or kind
of shares or other securities of the Company or any successor company, or
additional shares or new or different shares or other securities of the Company
or other non-cash assets are distributed with respect to such shares of Stock or
other securities, the Committee shall make an appropriate or proportionate
adjustment in (i) the maximum number of shares reserved for issuance under the
Plan, (ii) the number of Stock Options, Stock Appreciation Rights or other
Awards that can be granted to any one individual participant, (iii) the number
and kind of shares or other securities subject to any then outstanding Awards
under the Plan, and (iv) the price for each share subject to any then
outstanding Stock Options, Stock Appreciation Rights or other Awards under the
Plan, without changing the aggregate exercise price (i.e., the exercise price
multiplied by the number of shares) as to which such Stock Options and Stock
Appreciation Rights remain exercisable and the repurchase price for shares
subject to repurchase. The adjustment by the Committee shall be final, binding
and conclusive. No fractional shares of Stock shall be issued under the Plan
resulting from any such adjustment, but the Committee in its discretion may make
a cash payment in lieu of fractional shares.
(c) Mergers and Other Transactions. In the case of (i) the dissolution or
------------------------------
liquidation of the Company, (ii) a merger, reorganization or consolidation in
which the Company is acquired by another person or entity (other than a holding
company formed by the Company), (iii) the sale of all or substantially all of
the assets of the Company to an unrelated person or entity, or (iv) the sale of
all of the Stock of the Company to an unrelated person or entity (in each case,
a "Transaction"), all outstanding Options and Stock Appreciation Rights held by
participants, to the extent not fully vested and exercisable, shall not become
fully vested and exercisable, except as the Committee otherwise determines.
Upon the effectiveness of the Transaction, the Plan and all Options, Stock
Appreciation Rights, Dividend Equivalent Rights and Performance Share Awards
("Options/Contractual Awards") granted hereunder shall terminate, unless
provision is made in connection with the Transaction for the assumption of
Contractual Awards heretofore granted, or the substitution of such Contractual
Awards of new
5
<PAGE>
Contractual Awards of the successor entity or parent thereof, with appropriate
adjustment as to the number and kind of shares and, if appropriate, the per
share exercise prices, as provided in Section 3(b) above. In the event of such
termination, each optionee shall be permitted to exercise for a period of at
least 15 days prior to the date of such termination all outstanding Options and
Stock Appreciation Rights held by such optionee which are then exercisable. The
treatment of Restricted Stock Awards and Unrestricted Stock Awards in connection
with any such transaction shall be as specified in the relevant agreement
relating to such Award.
(d) Substitute Awards. The Committee may grant Awards under the Plan in
-----------------
substitution for stock and stock based awards held by employees of another
corporation who become employees of the Company or a Subsidiary as the result of
a merger or consolidation of the employing corporation with the Company or a
Subsidiary or the acquisition by the Company or a Subsidiary of property or
stock of the employing corporation. The Committee may direct that the
substitute awards be granted on such terms and conditions as the Committee
considers appropriate in the circumstances.
SECTION 4. ELIGIBILITY
-----------
Participants in the Plan will be such officers and other employees,
Independent Directors, consultants, advisors and other key persons of the
Company and its Subsidiaries who are responsible for or contribute to the
management, growth or profitability of the Company and its Subsidiaries as are
selected from time to time by the Committee, in its sole discretion.
SECTION 5. STOCK OPTIONS
-------------
Any Stock Option granted under the Plan shall be pursuant to a stock option
agreement which shall be in such form as the Committee may from time to time
approve. Option agreements need not be identical.
Stock Options granted under the Plan may be either Incentive Stock Options
or Non-Qualified Stock Options. Incentive Stock Options may be granted only to
employees of the Company or any Subsidiary that is a "subsidiary corporation"
within the meaning of Section 424(f) of the Code. Non-Qualified Stock Options
may be granted to officers, employees, Independent Directors, advisors,
consultants and other key persons of the Company and its Subsidiaries. To the
extent that any Option does not qualify as an Incentive Stock Option, it shall
be deemed a Non-Qualified Stock Option.
No Incentive Stock Option shall be granted under the Plan after August 17,
2007.
(a) Terms of Stock Options. Stock Options granted under the Plan shall be
----------------------
subject to the following terms and conditions and shall contain such additional
terms and conditions, not inconsistent with the terms of the Plan, as the
Committee shall deem desirable:
6
<PAGE>
(i) Exercise Price. The exercise price per share for the Stock
--------------
covered by a Stock Option shall be determined by the Committee at the time
of grant but shall not be less than 100% of the Fair Market Value in the
case of Incentive Stock Options. If an employee owns or is deemed to own
(by reason of the attribution rules applicable under Section 424(d) of the
Code) more than 10% of the combined voting power of all classes of stock of
the Company or any parent or subsidiary corporation and an Incentive Stock
Option is granted to such employee, the option price of such Incentive
Stock Option shall be not less than 110% of the Fair Market Value on the
grant date.
(ii) Grant of Discount Options in Lieu of Cash Compensation. Upon the
------------------------------------------------------
request of a participant and with the consent of the Committee, such
participant may elect each calendar year to receive a Non-Qualified Stock
Option in lieu of any cash bonus or other compensation to which he may
become entitled during the following calendar year, but only if such
participant makes an irrevocable election to waive receipt of all or a
portion of such cash compensation. Such election shall be made on or before
the date set by the Committee which date shall be no later than 15 days (or
such shorter period permitted by the Committee) preceding January 1 of the
calendar year for which the cash compensation would otherwise be paid. A
Non-Qualified Stock Option shall be granted to each participant who made
such an irrevocable election on the date the waived cash compensation would
otherwise be paid. The exercise price per share shall be determined by the
Committee. The number of shares of Stock subject to the Stock Option shall
be determined by dividing the amount of the waived cash compensation by the
difference between the Fair Market Value of the Stock on the date the Stock
Option is granted and the exercise price per share of the Stock Option. The
Stock Option shall be granted for a whole number of shares so determined;
the value of any fractional share shall be paid in cash.
(iii) Option Term. The term of each Stock Option shall be fixed by the
-----------
Committee, but no Incentive Stock Option shall be exercisable more than ten
years after the date the option is granted. If an employee owns or is
deemed to own (by reason of the attribution rules of Section 424(d) of the
Code) more than 10% of the combined voting power of all classes of stock of
the Company or any parent or subsidiary corporation and an Incentive Stock
Option is granted to such employee, the term of such option shall be no
more than five years from the date of grant.
(iv) Exercisability; Rights of a Stockholder. Stock Options shall
---------------------------------------
become vested and exercisable at such time or times, whether or not in
installments, as shall be determined by the Committee at or after the grant
date; provided, however, that Stock Options granted in lieu of cash
compensation shall be exercisable in full as of the grant date. The
Committee may at any time accelerate the exercisability of all or any
portion of any Stock Option. An optionee shall have the rights of a
stockholder only as to shares acquired upon the exercise of a Stock Option
and not as to unexercised Stock Options.
7
<PAGE>
(v) Method of Exercise. Stock Options may be exercised in whole or in
------------------
part, by giving written notice of exercise to the Company, specifying the
number of shares to be purchased. Payment of the purchase price may be made
by one or more of the following methods; provided, however, that the
methods set forth in subsections (B) and (C) below shall become available
only after the closing of the Initial Public Offering:
(A) In cash, by certified or bank check or other instrument
acceptable to the Committee;
(B) In the form of shares of Stock that are not then subject to
restrictions under any Company plan and that have been held by the
optionee free of such restrictions for at least six months, if
permitted by the Committee in its discretion. Such surrendered shares
shall be valued at Fair Market Value on the exercise date;
(C) 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 Company to pay the purchase price; provided that in the event
the optionee chooses to pay the 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 Committee
shall prescribe as a condition of such payment procedure; or
(D) By the optionee delivering to the Company a promissory note if
the Board has authorized the loan of funds to the optionee for the
purpose of enabling or assisting the optionee to effect the exercise of
his Stock Option; provided that at least so much of the exercise price
as represents the par value of the Stock shall be paid other than with
a promissory note.
Payment instruments will be received subject to collection. The delivery of
certificates representing the shares of Stock to be purchased pursuant to the
exercise of a Stock Option will be contingent upon receipt from the optionee (or
a purchaser acting in his stead in accordance with the provisions of the Stock
Option) by the Company of the full purchase price for such shares and the
fulfillment of any other requirements contained in the Stock Option or
applicable provisions of laws.
(vi) Termination. Unless otherwise provided in the option agreement or
-----------
determined by the Committee, upon the optionee's termination of employment
(or other business relationship) with the Company and its Subsidiaries, the
optionee's rights in his Stock Options shall automatically terminate.
8
<PAGE>
(vii) Annual Limit on Incentive Stock Options. To the extent
---------------------------------------
required for "incentive stock option" treatment under Section 422 of the
Code, the aggregate Fair Market Value (determined as of the time of grant)
of the shares of Stock with respect to which Incentive Stock Options
granted under this Plan and any other plan of the Company or its parent and
subsidiary corporations become exercisable for the first time by an
optionee during any calendar year shall not exceed $100,000. To the extent
that any Stock Option exceeds this limit, it shall constitute a Non-
Qualified Stock Option.
(b) Reload Options. At the discretion of the Committee, Options granted
--------------
under the Plan may include a "reload" feature pursuant to which an optionee
exercising an option by the delivery of a number of shares of Stock in
accordance with Section 5(a)(v)(B) hereof would automatically be granted an
additional Option (with an exercise price equal to the Fair Market Value of the
Stock on the date the additional Option is granted and with the same expiration
date as the original Option being exercised, and with such other terms as the
Committee may provide) to purchase that number of shares of Stock equal to the
number delivered to exercise the original Option.
(c) Non-transferability of Options. No Stock Option shall be transferable
------------------------------
by the optionee otherwise than by will or by the laws of descent and
distribution and all Stock Options shall be exercisable, during the optionee's
lifetime, only by the optionee. Notwithstanding the foregoing, the Committee
may provide in an option agreement that the optionee may transfer, without
consideration for the transfer, his Non-Qualified Stock Options to members of
his immediate family, to trusts for the benefit of such family members, to
partnerships in which such family members are the only partners; or to
charitable organizations; provided, however, that the transferee agrees in
writing to be bound by the terms and conditions of this Plan and the applicable
Option Agreement.
SECTION 6. STOCK APPRECIATION RIGHTS.
-------------------------
(a) Nature of Stock Appreciation Rights. A Stock Appreciation Right is an
-----------------------------------
Award entitling the recipient to receive an amount in cash or shares of Stock or
a combination thereof having a value equal to the excess of the Fair Market
Value of the Stock on the date of exercise over the exercise price per Stock
Appreciation Right set by the Committee at the time of grant, which price shall
determined by the Committee in its sole discretion (or over the option exercise
price per share, if the Stock Appreciation Right was granted in tandem with a
Stock Option) multiplied by the number of shares of Stock with respect to which
the Stock Appreciation Right shall have been exercised, with the Committee
having the right to determine the form of payment.
(b) Grant and Exercise of Stock Appreciation Rights. Stock Appreciation
-----------------------------------------------
Rights may be granted by the Committee in tandem with, or independently of, any
Stock Option granted pursuant to Section 5 of the Plan. In the case of a Stock
Appreciation Right granted in tandem with a Non-Qualified Stock Option, such
Stock Appreciation Right may be granted
9
<PAGE>
either at or after the time of the grant of such Option. In the case of a Stock
Appreciation Right granted in tandem with an Incentive Stock Option, such Stock
Appreciation Right may be granted only at the time of the grant of the Option.
A Stock Appreciation Right or applicable portion thereof granted in tandem
with a Stock Option shall terminate and no longer be exercisable upon the
termination or exercise of the related Option.
(c) Terms and Conditions of Stock Appreciation Rights. Stock Appreciation
-------------------------------------------------
Rights shall be subject to such terms and conditions as shall be determined from
time to time by the Committee, subject to the following:
(i) Stock Appreciation Rights granted in tandem with Options shall be
exercisable at such time or times and to the extent that the related Stock
Options shall be exercisable.
(ii) Upon exercise of a Stock Appreciation Right, the applicable
portion of any related Option shall be surrendered.
SECTION 7. RESTRICTED STOCK AWARDS
-----------------------
(a) Nature of Restricted Stock Awards. A Restricted Stock Award is an
---------------------------------
Award entitling the recipient to acquire, at par value or such other purchase
price determined by the Committee, shares of Stock subject to such restrictions
and conditions as the Committee may determine at the time of grant ("Restricted
Stock"). Conditions may be based on continuing employment (or other business
relationship) and/or achievement of pre-established performance goals and
objectives.
(b) Rights as a Stockholder. Upon execution of a written instrument
-----------------------
setting forth the Restricted Stock Award and paying any applicable purchase
price, a participant shall have the rights of a stockholder with respect to the
voting of the Restricted Stock, subject to such conditions contained in the
written instrument evidencing the Restricted Stock Award. Unless the Committee
shall otherwise determine, certificates evidencing the Restricted Stock shall
remain in the possession of the Company until such Restricted Stock is vested as
provided in Section 7(d) below.
(c) Restrictions. Restricted Stock may not be sold, assigned,
------------
transferred, pledged or otherwise encumbered or disposed of except as
specifically provided herein or in the written instrument evidencing the
Restricted Stock Award. If a participant's employment (or other business
relationship) with the Company and its Subsidiaries terminates under the
conditions specified in the relevant instrument relating to the Award, or upon
such other event or events as may be stated in the instrument evidencing the
Award, the Company or its assigns shall
10
<PAGE>
have the right or shall agree, as may be specified in the relevant instrument,
to repurchase some or all of the shares of Stock subject to the Award at such
purchase price as is set forth in such instrument.
(d) Vesting of Restricted Stock. The Committee at the time of grant shall
---------------------------
specify the date or dates and/or the attainment of pre-established performance
goals, objectives and other conditions on which Restricted Stock shall become
vested, subject to such further rights of the Company or its assigns as may be
specified in the instrument evidencing the Restricted Stock Award.
(e) Waiver, Deferral and Reinvestment of Dividends. The written
----------------------------------------------
instrument evidencing the Restricted Stock Award may require or permit the
immediate payment, waiver, deferral or investment of dividends paid on the
Restricted Stock.
SECTION 8. UNRESTRICTED STOCK AWARDS
-------------------------
(a) Grant or Sale of Unrestricted Stock. The Committee may, in its sole
-----------------------------------
discretion, grant (or sell at a purchase price determined by the Committee) an
Unrestricted Stock Award to any participant, pursuant to which such participant
may receive shares of Stock free of any vesting restrictions ("Unrestricted
Stock") under the Plan. Unrestricted Stock Awards may be granted or sold as
described in the preceding sentence in respect of past services or other valid
consideration, or in lieu of any cash compensation due to such individual.
(b) Elections to Receive Unrestricted Stock In Lieu of Compensation. Upon
---------------------------------------------------------------
the request of a participant and with the consent of the Committee, each such
participant may, pursuant to an advance written election delivered to the
Company no later than the date specified by the Committee, receive a portion of
the cash compensation otherwise due to such participant in the form of shares of
Unrestricted Stock either currently or on a deferred basis.
(c) Restrictions on Transfers. The right to receive shares of
-------------------------
Unrestricted Stock on a deferred basis may not be sold, assigned, transferred,
pledged or otherwise encumbered, other than by will or the laws of descent and
distribution.
SECTION 9. PERFORMANCE SHARE AWARDS
------------------------
(a) Nature of Performance Share Awards. A Performance Share Award is an
----------------------------------
Award entitling the recipient to acquire shares of Stock upon the attainment of
specified performance goals. The Committee may make Performance Share Awards
independent of or in connection with the granting of any other Award under the
Plan. The Committee in its sole discretion shall determine whether and to whom
Performance Share Awards shall be made, the performance goals applicable under
each such Award, the periods during which performance is to be measured, and all
other limitations and conditions applicable to the awarded Performance Shares;
provided, however, that the Committee may rely on the performance goals and
other
11
<PAGE>
standards applicable to other performance unit plans of the Company in setting
the standards for Performance Share Awards under the Plan.
(b) Restrictions on Transfer. Performance Share Awards and all rights with
------------------------
respect to such Awards may not be sold, assigned, transferred, pledged or
otherwise encumbered.
(c) Rights as a Shareholder. A participant receiving a Performance Share
-----------------------
Award shall have the rights of a shareholder only as to shares actually received
by the participant under the Plan and not with respect to shares subject to the
Award but not actually received by the participant. A participant shall be
entitled to receive a stock certificate evidencing the acquisition of shares of
Stock under a Performance Share Award only upon satisfaction of all conditions
specified in the written instrument evidencing the Performance Share Award (or
in a performance plan adopted by the Committee).
(d) Termination. Except as may otherwise be provided by the Committee at
-----------
any time, a participant's rights in all Performance Share Awards shall
automatically terminate upon the participant's termination of employment (or
business relationship) with the Company and its Subsidiaries for any reason.
(e) Acceleration, Waiver, Etc. At any time prior to the participant's
-------------------------
termination of employment (or other business relationship) by the Company and
its Subsidiaries, the Committee may in its sole discretion accelerate, waive or,
subject to Section 13, amend any or all of the goals, restrictions or conditions
imposed under any Performance Share Award.
SECTION 10. DIVIDEND EQUIVALENT RIGHTS
--------------------------
(a) Dividend Equivalent Rights. A Dividend Equivalent Right is an Award
--------------------------
entitling the recipient to receive credits based on cash dividends that would be
paid on the shares of Stock specified in the Dividend Equivalent Right (or other
award to which it relates) if such shares were held by the recipient. A
Dividend Equivalent Right may be granted as a component of another Award or as a
freestanding award. The terms and conditions of Dividend Equivalent Rights
shall be specified in the grant. Dividend equivalents credited to the holder of
a Dividend Equivalent Right may be paid currently or may be deemed to be
reinvested in additional shares of Stock, which may thereafter accrue additional
equivalents. Any such reinvestment shall be at Fair Market Value on the date of
reinvestment or such other price as may then apply under a dividend reinvestment
plan sponsored by the Company, if any. Dividend Equivalent Rights may be settled
in cash or shares of Stock or a combination thereof, in a single installment or
installments. A Dividend Equivalent Right granted as a component of another
Award may provide that such Dividend Equivalent Right shall be settled upon
exercise, settlement, or payment of, or lapse of restrictions on, such other
award, and that such Dividend Equivalent Right shall expire or be forfeited or
annulled under the same conditions as such other award. A Dividend Equivalent
Right granted as a component of another Award may also contain terms and
conditions different from such other award.
12
<PAGE>
(b) Interest Equivalents. Any Award under this Plan that is settled in
--------------------
whole or in part in cash on a deferred basis may provide in the grant for
interest equivalents to be credited with respect to such cash payment. Interest
equivalents may be compounded and shall be paid upon such terms and conditions
as may be specified by the grant.
SECTION 11. TAX WITHHOLDING
---------------
(a) Payment by Participant. Each participant shall, no later than the date
----------------------
as of which the value of an Award or of any Stock or other amounts received
thereunder first becomes includable in the gross income of the participant for
Federal income tax purposes, pay to the Company, or make arrangements
satisfactory to the Committee regarding payment of, any federal, state, or local
taxes of any kind required by law to be withheld with respect to such income.
The Company and its Subsidiaries shall, to the extent permitted by law, have the
right to deduct any such taxes from any payment of any kind otherwise due to the
participant.
(b) Payment in Stock. Subject to approval by the Committee, a participant
----------------
may elect to have such tax withholding obligation satisfied, in whole or in
part, by (i) authorizing the Company to withhold from shares of Stock to be
issued pursuant to any Award a number of shares with an aggregate Fair Market
Value (as of the date the withholding is effected) that would satisfy the
withholding amount due, or (ii) transferring to the Company shares of Stock
owned by the participant with an aggregate Fair Market Value (as of the date the
withholding is effected) that would satisfy the withholding amount due.
SECTION 12. TRANSFER, LEAVE OF ABSENCE, ETC.
--------------------------------
For purposes of the Plan, the following events shall not be deemed a
termination of employment:
(a) a transfer to the employment of the Company from a Subsidiary or from
the Company to a Subsidiary, or from one Subsidiary to another; or
(b) an approved leave of absence for military service or sickness, or for
any other purpose approved by the Company, if the employee's right to re-
employment is guaranteed either by a statute or by contract or under the policy
pursuant to which the leave of absence was granted or if the Committee otherwise
so provides in writing.
SECTION 13. AMENDMENTS AND TERMINATION
--------------------------
The Board may, at any time, amend or discontinue the Plan and the Committee
may, at any time, amend or cancel any outstanding Award (or provide substitute
Awards at the same or reduced exercise or purchase price or with no exercise or
purchase price in a manner not inconsistent with the terms of the Plan), but
such price, if any, must satisfy the requirements
13
<PAGE>
which would apply to the substitute or amended Award if it were then initially
granted under this Plan for the purpose of satisfying changes in law or for any
other lawful purpose, but no such action shall adversely affect rights under any
outstanding Award without the holder's consent. If and to the extent determined
by the Committee to be required by the Act to ensure that Incentive Stock
Options granted under the Plan are qualified under Section 422 of the Code, Plan
amendments shall be subject to approval by the Company stockholders who are
eligible to vote at a meeting of stockholders.
SECTION 14. STATUS OF PLAN
--------------
With respect to the portion of any Award which has not been exercised and
any payments in cash, Stock or other consideration not received by a
participant, a participant shall have no rights greater than those of a general
creditor of the Company unless the Committee shall otherwise expressly determine
in connection with any Award or Awards. In its sole discretion, the Committee
may authorize the creation of trusts or other arrangements to meet the Company's
obligations to deliver Stock or make payments with respect to Awards hereunder,
provided that the existence of such trusts or other arrangements is consistent
with the foregoing sentence.
SECTION 15. GENERAL PROVISIONS
------------------
(a) No Distribution; Compliance with Legal Requirements. The Committee may
---------------------------------------------------
require each person acquiring Stock pursuant to an Award to represent to and
agree with the Company in writing that such person is acquiring the shares
without a view to distribution thereof.
No shares of Stock shall be issued pursuant to an Award until all
applicable securities law and other legal and stock exchange or similar
requirements have been satisfied. The Committee may require the placing of such
stop-orders and restrictive legends on certificates for Stock and Awards as it
deems appropriate.
(b) Other Compensation Arrangements; No Employment Rights. Nothing
-----------------------------------------------------
contained in this Plan shall prevent the Board from adopting other or additional
compensation arrangements, including trusts, and such arrangements may be either
generally applicable or applicable only in specific cases. The adoption of this
Plan and the grant of Awards do not confer upon any employee any right to
continued employment with the Company or any Subsidiary.
SECTION 16. EFFECTIVE DATE OF PLAN
----------------------
This Plan shall become effective upon approval by the holders of a majority
of the shares of Stock of the Company present or represented and entitled to
vote at a meeting of stockholders. Subject to such approval by the stockholders
and to the requirement that no
14
<PAGE>
Stock may be issued hereunder prior to such approval, Stock Options and other
Awards may be granted hereunder on and after adoption of this Plan by the Board.
SECTION 17. GOVERNING LAW
-------------
This Plan shall be governed by Delaware law except to the extent such law
is preempted by federal law.
Adopted and Effective: August 18, 1997
15
<PAGE>
Exhibit 10.13
BORON, LEPORE & ASSOCIATES, INC.
EMPLOYEE STOCK PURCHASE PLAN
The purpose of the Boron, LePore & Associates, Inc. Employee Stock Purchase
Plan ("the Plan") is to provide eligible employees of Boron, LePore &
Associates, Inc. (the "Company") and its subsidiaries with opportunities to
purchase shares of the Company's common stock, par value $.01 per share (the
"Common Stock"). Two hundred twenty-five thousand (225,000) shares of Common
Stock in the aggregate have been approved and reserved for this purpose. The
Plan is intended to constitute an "employee stock purchase plan" within the
meaning of Section 423(b) of the Internal Revenue Code of 1986, as amended (the
"Code"), and shall be interpreted in accordance with that intent.
1. Administration. The Plan will be administered by the Company's Board
--------------
of Directors (the "Board") or by a committee appointed by the Board for such
purpose (the "Committee"). The Board or the Committee has authority to make
rules and regulations for the administration of the Plan, and its
interpretations and decisions with regard thereto shall be final and conclusive.
No member of the Board or the Committee shall be liable for any action or
determination with respect to the Plan or any option granted hereunder.
2. Offerings. The Company will make one or more offerings to eligible
---------
employees to purchase the Common Stock under the Plan ("Offerings"). The
initial Offering will begin on January 1, 1998 and will end on June 30, 1998.
Thereafter, an Offering will begin on the first business day occurring on or
after each January 1 and July 1 and will end on the last business day occurring
on or before the following June 30 and December 31, respectively.
<PAGE>
The Committee may, in its discretion, choose an Offering period of six months or
less for each of the Offerings and choose a different Offering period for each
Offering.
3. Eligibility. All employees of the Company (including employees who are
-----------
also directors of the Company) and all employees of each Designated Subsidiary
(as defined in Section 11) are eligible to participate in any one or more of the
Offerings under the Plan, provided that as of the first day of the applicable
Offering (the "Offering Date") they are customarily employed by the Company or a
Designated Subsidiary for more than twenty (20) hours a week.
4. Participation. An employee eligible on any Offering Date may
-------------
participate in such Offering by submitting an enrollment form to his or her
appropriate payroll location at least fifteen (15) business days before the
Offering Date (or by such other deadline as shall be established for the
Offering). The form will (a) state a whole percentage to be deducted from such
employee's Compensation (as defined in Section 11) per pay period, (b) authorize
the purchase of Common Stock for such employee in each Offering in accordance
with the terms of the Plan and (c) specify the exact name or names in which
shares of Common Stock purchased for such employee are to be issued pursuant to
Section 10. An employee who does not enroll in accordance with these procedures
will be deemed to have waived the right to participate. Unless an employee
files a new enrollment form or withdraws from the Plan, such employee's
deductions and purchases will continue at the same percentage of Compensation
for future Offerings, provided such employee remains eligible. Notwithstanding
the foregoing, participation in the Plan will neither be permitted nor be denied
contrary to the requirements of the Code.
2
<PAGE>
5. Employee Contributions. Each eligible employee may authorize payroll
----------------------
deductions at a minimum of one percent (1%) up to a maximum of ten percent (10%)
of his or her Compensation for each pay period. The Company will maintain book
accounts showing the amount of payroll deductions made by each participating
employee for each Offering. No interest will accrue or be paid on payroll
deductions.
6. Deduction Changes. An employee may not increase his or her payroll
-----------------
deduction during any Offering, but may decrease his or her payroll deduction for
the remainder of the Offering. An employee may also terminate his or her
payroll deduction for the remainder of the Offering, either with or without
withdrawing from the Offering under Section 7. To reduce or terminate his or
her payroll deduction (without withdrawing from the Offering), an employee must
submit a new enrollment form at least fifteen (15) business days (or such
shorter period as shall be established) before the payroll date on which the
change becomes effective. Subject to the requirements of Sections 4 and 5, an
employee may either increase or decrease his or her payroll deduction with
respect to the next Offering by filing a new enrollment form at least fifteen
(15) business days before the next Offering Date (or by such other deadline as
shall be established for the Offering).
7. Withdrawal. An employee may withdraw from participation in the Plan by
----------
delivering a written notice of withdrawal to his or her appropriate payroll
location. The employee's withdrawal will be effective as of the next business
day. Following an employee's withdrawal, the Company will promptly refund such
employee's entire account balance under the Plan (after payment for any Common
Stock purchased before the effective date of withdrawal). Partial withdrawals
are not permitted. The employee may not begin participation
3
<PAGE>
again during the remainder of the Offering, but may enroll in a subsequent
Offering in accordance with Section 4.
8. Grant of Options. On each Offering Date, the Company will grant to
----------------
each eligible employee who is then a participant in the Plan an option
("Option") to purchase on the last day of such Offering (the "Exercise Date"),
at the Option Price hereinafter provided for, a maximum of one thousand two-
hundred fifty (1,250) shares of Common Stock reserved for the purposes of the
Plan, or such other maximum number of shares as shall have been established by
the Board or the Committee in advance of the offering. The purchase price for
each share purchased under such Option (the "Option Price") will be 85% of the
Fair Market Value of the Common Stock on the Offering Date or the Exercise Date,
whichever is less.
Notwithstanding the foregoing, no employee may be granted an option
hereunder if such employee, immediately after the option was granted, would be
treated as owning stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of stock of the Company or any
Parent or Subsidiary (as defined in Section 11). For purposes of the preceding
sentence, the attribution rules of Section 424(d) of the Code shall apply in
determining the stock ownership of an employee, and all stock which the employee
has a contractual right to purchase shall be treated as stock owned by the
employee. In addition, no employee may be granted an Option which permits his
or her rights to purchase stock under the Plan, and any other employee stock
purchase plan of the Company and its Parents and Subsidiaries, to accrue at a
rate which exceeds $25,000 of the fair market value of such stock (determined on
the option grant date or dates) for each calendar year in which the Option is
4
<PAGE>
outstanding at any time. The purpose of the limitation in the preceding
sentence is to comply with Section 423(b)(8) of the Code.
9. Exercise of Option and Purchase of Shares. Each employee who continues
-----------------------------------------
to be a participant in the Plan on the Exercise Date shall be deemed to have
exercised his or her Option on such date and shall acquire from the Company such
number of whole shares of Common Stock reserved for the purpose of the Plan as
his or her accumulated payroll deductions on such date will purchase at the
Option Price, subject to any other limitations contained in the Plan. Any
amount remaining in an employee's account at the end of an Offering solely by
reason of the inability to purchase a fractional share will be carried forward
to the next Offering; any other balance remaining in an employee's account at
the end of an Offering will be refunded to the employee promptly.
10. Issuance of Certificates. Certificates representing shares of Common
------------------------
Stock purchased under the Plan may be issued only in the name of the employee,
in the name of the employee and another person of legal age as joint tenants
with rights of survivorship, or in the name of a broker authorized by the
employee to be his or her nominee for such purpose.
11. Definitions.
-----------
The term "Compensation" means the amount of total cash compensation, prior
to salary reduction pursuant to either Section 125 or 401(k) of the Code,
including base pay, overtime, commissions and bonuses, but excluding allowances
and reimbursements for expenses such as relocation allowances or travel
expenses, income or gains on the exercise of Company stock options, and similar
items.
5
<PAGE>
The term "Designated Subsidiary" means any present or future Subsidiary (as
defined below) that has been designated by the Board or the Committee to
participate in the Plan. The Board or the Committee may so designate any
Subsidiary, or revoke any such designation, at any time and from time to time,
either before or after the Plan is approved by the stockholders.
The term "Fair Market Value of the Common Stock" means (i) if the Common
Stock is admitted to trading on a national securities exchange or the National
Association of Securities Dealers National Market System, the closing price
reported for the Common Stock on such exchange or system for such date or, if no
sales were reported for such date, for the last date preceding such date for
which a sale was reported, or (ii) if clause (i) does not apply but the Common
Stock is admitted to quotation on the National Association of Securities Dealers
Automated Quotation System ("NASDAQ"), the average of the highest bid and lowest
asked prices of the Common Stock reported on NASDAQ for such date or, if no bid
and asked prices were reported for such date, for the last day preceding such
date for which such prices were reported.
The term "Parent" means a "parent corporation" with respect to the Company,
as defined in Section 424(e) of the Code.
The term "Subsidiary" means a "subsidiary corporation" with respect to the
Company, as defined in Section 424(f) of the Code.
12. Rights on Termination of Employment. If a participating employee's
-----------------------------------
employment terminates for any reason before the Exercise Date for any Offering,
no payroll deduction will be taken from any pay due and owing to such employee
and the balance in such employee's account will be paid to such employee or, in
the case of death, to such employee's
6
<PAGE>
designated beneficiary as if such employee had withdrawn from the Plan under
Section 7. An employee will be deemed to have terminated employment, for this
purpose, if the corporation that employs such employee, having been a Designated
Subsidiary, ceases to be a Subsidiary, or if such employee is transferred to any
corporation other than the Company or a Designated Subsidiary.
13. Special Rules. Notwithstanding anything herein to the contrary, the
-------------
Board or the Committee may adopt special rules applicable to the employees of a
particular Designated Subsidiary, whenever the Board or the Committee determines
that such rules are necessary or appropriate for the implementation of the Plan
in a jurisdiction where such Designated Subsidiary has employees; provided that
such rules are consistent with the requirements of Section 423(b) of the Code.
Such special rules may include (by way of example, but not by way of limitation)
the establishment of a method for employees of a given Designated Subsidiary to
fund the purchase of shares other than by payroll deduction, if the payroll
deduction method is prohibited by local law or is otherwise impracticable. Any
special rules established pursuant to this Section 13 shall, to the extent
possible, result in the employees subject to such rules having substantially the
same rights as other participants in the Plan.
14. Optionees Not Stockholders. Neither the granting of an Option to an
--------------------------
employee nor the deductions from his or her pay shall constitute such employee a
holder of the shares of Common Stock covered by an Option under the Plan until
such shares have been purchased by and issued to such employee.
7
<PAGE>
15. Rights Not Transferable. Rights under the Plan are not transferable
-----------------------
by a participating employee other than by will or the laws of descent and
distribution, and are exercisable during the employee's lifetime only by the
employee.
16. Application of Funds. All funds received or held by the Company under
--------------------
the Plan may be combined with other corporate funds and may be used for any
corporate purpose.
17. Adjustment in Case of Changes Affecting Common Stock. In the event of
----------------------------------------------------
a subdivision of outstanding shares of Common Stock, or the payment of a
dividend in Common Stock, the number of shares approved for the Plan, and the
share limitation set forth in Section 8, shall be increased proportionately, and
such other adjustment shall be made as may be deemed equitable by the Board or
the Committee. In the event of any other change affecting the Common Stock,
such adjustment shall be made as may be deemed equitable by the Board or the
Committee to give proper effect to such event.
18. Amendment of the Plan. The Board or the Committee may at any time,
---------------------
and from time to time, amend the Plan in any respect, except that without the
approval, within twelve (12) months of such Board or Committee action, by the
holders of a majority of the shares of stock of the Company present or
represented and entitled to vote at a meeting of stockholders, no amendment
shall be made increasing the number of shares approved for the Plan or making
any other change that would require stockholder approval in order for the Plan,
as amended, to qualify as an "employee stock purchase plan" under Section 423(b)
of the Code.
19. Insufficient Shares. If the total number of shares of Common Stock
-------------------
that would otherwise be purchased on any Exercise Date plus the number of shares
purchased under
8
<PAGE>
previous Offerings under the Plan exceeds the maximum number of shares issuable
under the Plan, the shares then available shall be apportioned among
participants in proportion to the amount of payroll deductions accumulated on
behalf of each participant that would otherwise be used to purchase Common Stock
on such Exercise Date.
20. Termination of the Plan. The Plan may be terminated at any time by
-----------------------
the Board or the Committee. Upon termination of the Plan, all amounts in the
accounts of participating employees shall be promptly refunded.
21. Governmental Regulations. The Company's obligation to sell and
------------------------
deliver Common Stock under the Plan is subject to obtaining all governmental
approvals required in connection with the authorization, issuance, or sale of
such stock.
The Plan shall be governed by Delaware law except to the extent that such
law is preempted by federal law.
22. Issuance of Shares. Shares may be issued upon exercise of an Option
------------------
from authorized but unissued Common Stock, from shares held in the treasury of
the Company, or from any other proper source.
23. Tax Withholding. Participation in the Plan is subject to any required
---------------
tax withholding on income of the participant in connection with the Plan. Each
employee agrees, by entering the Plan, that the Company and its Subsidiaries
shall have the right to deduct any such taxes from any payment of any kind
otherwise due to the employee, including shares issuable under the Plan.
9
<PAGE>
24. Notification Upon Sale of Shares. Each employee agrees, by entering
--------------------------------
the Plan, to give the Company prompt notice of any disposition of shares
purchased under the Plan where such disposition occurs within two years after
the date of grant of the Option pursuant to which such shares were purchased.
25. Effective Date and Approval of Shareholders. The Plan shall take
-------------------------------------------
effect on the first day of the Company's initial public offering, subject to
approval by the holders of a majority of the shares of stock of the Company
present or represented and entitled to vote at a meeting of stockholders, which
approval must occur within twelve (12) months of the adoption of the Plan by the
Board.
10
<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: 200,000 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: /s/ Patrick G. LePore
----------------------------------
Title: President
-------------------------------
Address: BORON, LEPORE & ASSOCIATES, INC.
Attention: President
17-17 Route 208 North
Fair Lawn, New Jersey 07410
OPTIONEE:
/s/ Timothy J. McIntyre
--------------------------------------
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 * 16,666
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 16,667
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.
- -------------------------------------
* Omitted pursuant to a request for confidential treatment. The omitted
material has been separately filed with the Securities and Exchange
Commission.
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 16,667
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."
- ------------------------------------
* Omitted pursuant to a request for confidential treatment. The omitted
material has been separately filed with the Securities and Exchange
Commission.
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 66,666#
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 16,667
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 66,667/#/
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."
---------------------------------
* Omitted pursuant to a request for confidential treatment. The omitted
material has been separately filed with the Securities and Exchange
Commission.
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>
Exhibit 10.21
Non-Qualified 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: 100,000 Shares of Class A Common Stock
Grant Date: June 30, 1997
Expiration Date: June 30, 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 not 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"). All capitalized terms used herein and
not otherwise defined shall have the respective meanings set forth in the Plan.
<PAGE>
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" shall mean any relationship as an employee,
part-time employee or consultant of the Company
2
<PAGE>
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 30, 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").
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
3
<PAGE>
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 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
4
<PAGE>
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.
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
<PAGE>
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 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
6
<PAGE>
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 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
7
<PAGE>
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 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
8
<PAGE>
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.
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
9
<PAGE>
transmission or when received if mailed by first class registered or certified
mail, postage 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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
10
<PAGE>
The foregoing Agreement is hereby accepted and the terms and conditions
thereof hereby agreed to by the undersigned.
BORON, LEPORE & ASSOCIATES, INC.
By: /s/ Patrick G. LePore
-------------------------------
Title: President
---------------------------
Address: BORON, LEPORE & ASSOCIATES, INC.
Attention: President
17-17 Route 208 North
Fair Lawn, New Jersey 07410
OPTIONEE:
/s/ Timothy J. McIntyre
-----------------------------------
Timothy J. McIntyre
Optionee's Address:
c/o Boron LePore & Associates, Inc.
-----------------------------------
17-17 Route 208 North
-----------------------------------
Fair Lawn, New Jersey 07410
-----------------------------------
DESIGNATED BENEFICIARY:
-----------------------------------
Beneficiary's Address:
-----------------------------------
-----------------------------------
11
<PAGE>
Schedule A
----------
Vesting Schedule
----------------
This Stock Option vesting schedule shall in all respects be the same
as the vesting schedule attached as Schedule A to the Incentive Stock Option
Agreement between Boron, LePore & Associates, Inc. and Timothy J. McIntyre dated
June 9, 1997 (the "Prior Agreement"), with the following exceptions:
A. Paragraph 2 shall read "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 30, 2004."
B. The Incremental No. of Shares Vested for achievement of Tranche 1 shall
equal 8,334.
C. The Incremental No. of Shares Vested for achievement of Tranche 2 shall
equal 8,333.
D. The Incremental No. of Shares Vested for achievement of Tranche 3 shall
equal 8,333.
E. The Incremental No. of Shares Vested for achievement of Tranche 4 shall
equal 33,334 and that the number "66,666" contained in the column "Vesting Date"
for Tranche 4 in the Prior Agreement shall be changed to 33,334.
F. The Incremental No. of Shares Vested for achievement of Tranche 5 shall
equal 8,333.
G. The Incremental No. of Shares Vested for achievement of Tranche 6 shall
equal 33,333 and that the number "66,667" contained in the column "Vesting Date"
for Tranche 6 in the Prior Agreement shall be changed to 33,333.
All section references in the attached agreement shall refer to sections of
Schedule A of the Prior Agreement, as amended by this Schedule A.
A-1
<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:
<TABLE>
<CAPTION>
<S> <C>
[ ] 1. Cash
[ ] 2. Certified or Bank Check payable to Boron, LePore & Associates, Inc.
[ ] 3. Other (as described in the Agreement (please describe))
______________.
</TABLE>
Sincerely yours,
---------------------------------
Please Print Name
---------------------------------
Signature
A-2
<PAGE>
EXHIBIT 10.22
Incentive Stock Option Agreement
under the Boron, LePore & Associates, Inc.
1996 Stock Option and Grant Plan
Name of Optionee: Martin J. Veilleux
No./Class of Option Shares: 20,000 Shares of Class A Common Stock
Grant Date: June 9, 1997
Final 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, it shall be deemed a non-qualified stock option.
All capitalized terms used herein and not otherwise defined shall have the
respective meanings set
<PAGE>
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 with respect to the
following number of Option Shares on the date indicated:
<TABLE>
<CAPTION>
Incremental (Aggregate Number)
Of Option Shares Exercisable/*/ Vesting Date
------------------------------- ------------
<S> <C>
1. 5,000 June 9, 1998
2. 5,000 (10,000) June 9, 1999
3. 5,000 (15,000) June 9, 2000
4. 5,000 (20,000) June 9, 2001
</TABLE>
(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,
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
- ------------------------------
/*/ Subject to Section 5.
2
<PAGE>
date of such termination, and this Stock Option may thereafter be exercised, to
the extent it was vested and exercisable on such date of such termination, until
the Expiration Date contemplated by Section 1(d), except as the Committee may
otherwise determine. For purposes hereof, a "Service Relationship" 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 or her
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 terminates if the termination
is due to any other reason or (ii) June 9, 2007, subject to the provisions
hereof, including, without limitation, Section 6 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
3
<PAGE>
or her, nor within the two-year period beginning on the day after the grant of
this Stock Option. If the Optionee disposes (whether by sale, gift, transfer or
otherwise) of any such Option Shares within either of these periods, he or she
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 6), 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 6 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.
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 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
6
<PAGE>
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 where 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, this Stock Option shall no
longer vest except as the Committee may determine in its sole discretion and 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,
unless provision is 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
7
<PAGE>
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 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 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
8
<PAGE>
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.
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
9
<PAGE>
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 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.
10
<PAGE>
The foregoing Agreement is hereby accepted and the terms and conditions
thereof hereby agreed to by the undersigned.
Dated as of June 9, 1997
BORON, LePORE & ASSOCIATES, INC.
By: /s/ Patrick G. LePore
--------------------------------------
Title: President
-----------------------------------
Address: BORON, LePORE & ASSOCIATES, INC.
Attention: President
17-17 Route 208 North
Fair Lawn, New Jersey 07410
OPTIONEE:
/s/ Martin J. Veilleux
-------------------------------------
Optionee's Address:
c/o Boron, LePore & Associates, Inc.
------------------------------------
17-17 Route 208 North
---------------------
Fair Lawn, NJ 07410
--------------------
DESIGNATED BENEFICIARY:
-------------------------------------
Beneficiary's Address:
-----------------------------
11
<PAGE>
-----------------------------
12
<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-1
<PAGE>
Exhibit 10.23
Incentive Stock Option Agreement
under the Boron, LePore & Associates, Inc.
1996 Stock Option and Grant Plan
Name of Optionee: Martin J. Veilleux
No./Class of Option Shares: 70,000 Shares of Class A Common Stock
Grant Date: August 6, 1997
Final Expiration Date: August 6, 2007
Option Exercise Price/Share: $8.00
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, it shall be deemed a non-qualified stock option.
All capitalized terms used herein and not otherwise defined shall have the
respective meanings set forth in the Plan.
<PAGE>
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 with respect to the
following number of Option Shares on the date indicated:
<TABLE>
<CAPTION>
Incremental (Aggregate Number)
Of Option Shares Exercisable Vesting Date
---------------------------- ------------
<S> <C>
1. 17,500 August 6, 1998
2. 17,500 August 6, 1999
3. 17,500 August 6, 2000
4. 17,500 August 6, 2001
</TABLE>
Further, subject to the provisions of Section 6 hereof, this Stock
Option shall be deemed vested and exercisable in full upon the date on which the
Optionee's employment with the Company and its Subsidiaries terminates if such
termination occurs in the year following a Change of Control (as hereinafter
defined) of the Company and either (i) such termination occurs pursuant to or
under the circumstances contemplated by Section 6(e) or Section 6(f) of the
Employment Agreement dated August 12, 1997, between the Company and the Optionee
(the "Employment Agreement") (i.e., without cause termination by the Company or
- -------------------------
* Subject to Section 5.
2
<PAGE>
termination by the Optionee following a material and uncured default by the
Company) or (ii) without limitation of clause (i) above, such termination is
preceded during such year by any material elimination or adverse modification in
the duties, responsibilities, principal employment location or compensation of
the Optionee without his written consent (provided that it shall not be deemed a
material elimination or adverse modification in duties or responsibilities of
the Optionee if the Employee continues to be the financial officer principally
responsible for the business of the Company immediately prior to the Change of
Control (e.g., if the Employee is the financial officer principally responsible
for the Boron, LePore division of another company following a Change of Control
involving an acquisition by another company)).
For purposes hereof, a "Change of Control" shall mean any of the
following events occurring after the date hereof: (i) the direct or indirect
beneficial ownership (within the meaning of Section 13(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and Regulation 13D-G
thereunder) of a majority of the outstanding Common Stock of the Company is
acquired or becomes held by any person or group of persons (within the meaning
of Section 13(d)(3) of the Exchange Act) (a "Group"), other than holders of the
Company's equity securities on the date hereof or their respective affiliates,
(ii) the sale, mortgage, lease or other transfer to any person or Group in one
or more transactions not in the ordinary course of business of all or
substantially all of the assets on a consolidated basis the Company and the
Company's Subsidiaries (taken as a whole), (iii) a change of stock ownership of
the Company of a nature that would be required to be reported in response to
Item 6(e) of Schedule 14A promulgated under the Exchange Act and any successor
Item of a similar nature;
3
<PAGE>
or (iv) the acquisition of beneficial ownership, directly or indirectly, by any
person (as such term is used in Section 13(d) and 14(d)(2) of the Exchange Act)
of securities of the Company representing 25% or more of the combined voting
power of the Company's then outstanding securities, other than an acquisition of
such beneficial ownership by holders of the Company's equity securities on the
date hereof or their respective affiliates; or (E) a change during any period of
two consecutive years of a majority of the members of the Board of Directors of
the Company for any reason.
(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 other than those described in Section 1(b)
above, 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, 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, and this
Stock Option may thereafter be exercised, to the extent it was vested and
exercisable on such date of such termination, until the Expiration Date
contemplated by Section 1(d), except as the Committee may otherwise determine.
Upon a termination of employment following a Change of Control under the
circumstances contemplated by Section 1(b), vesting shall occur as contemplated
by such Section. For purposes hereof, a "Service Relationship" 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
4
<PAGE>
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 or her
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 terminates if the termination
is due to any other reason or (ii) August 6, 2007, subject to the provisions
hereof, including, without limitation, Section 6 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
or her, nor within the two-year period beginning on the day after the grant of
this Stock Option. If the Optionee disposes (whether by sale, gift, transfer or
otherwise) of any such Option Shares within either of these periods, he or she
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.
5
<PAGE>
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 6), 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 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
6
<PAGE>
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 6 hereof.
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.
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
7
<PAGE>
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 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,
8
<PAGE>
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 where 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, this Stock Option shall no
longer vest except as the Committee may determine in its sole discretion and 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,
unless provision is 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 deemed to refer to
such successor entity. In the event of any transaction which will result in
such
9
<PAGE>
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 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
10
<PAGE>
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.
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
11
<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.
12
<PAGE>
The foregoing Agreement is hereby accepted and the terms and
conditions thereof hereby agreed to by the undersigned.
Dated as of_____________, 1997
BORON, LePORE & ASSOCIATES, INC.
By: /s/ Patrick G. LePore
---------------------------------------
Title: President
-------------------------------
Address: BORON, LePORE & ASSOCIATES, INC.
Attention: President
17-17 Route 208 North
Fair Lawn, New Jersey 07410
OPTIONEE:
/s/ Martin J. Veilleux
----------------------
Optionee's Address:
c/o Boron LePore & Associates, Inc.
-----------------------------------
17-17 Route 208 North
---------------------
Fair Lawn, NJ 07410
-------------------
DESIGNATED BENEFICIARY:
---------------------------------------
Beneficiary's Address:
--------------------------
--------------------------
13
<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:
<TABLE>
<S> <C>
[ ] 1. Cash
[ ] 2. Certified or Bank Check payable to Boron,
LePore & Associates, Inc.
[ ] 3. Other (as described in the Agreement (please
describe)) ______________.
</TABLE>
Sincerely yours,
------------------------------------------
Please Print Name
------------------------------------------
Signature
A-1
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EXHIBIT 10.25
EMPLOYMENT AGREEMENT
--------------------
Employment Agreement, dated the 18th day of August, 1997 by and between
Brian Smith (the "Employee") and Boron, LePore & Associates, Inc., a Delaware
corporation (the "Company"). In consideration of the mutual promises and
covenants herein contained, the parties hereto agree as follows:
1. Employment.
----------
Subject to the provisions of Section 6, the Company hereby employs the
Employee and the Employee accepts such employment upon the terms and conditions
hereinafter set forth.
2. Terms of Employment.
-------------------
Subject to the provisions of Section 6, the term of the Employee's
employment pursuant to this Agreement shall commence on and as of the date
hereof (the "Effective Date") and shall terminate on December 31, 1999;
provided, however, that this Agreement shall be extended automatically for
successive one-year periods ending on the relevant anniversary of December 31,
unless either party gives the other notice no later than 90 days prior to the
scheduled termination date (i.e., December 31, 1999 or any later anniversary of
December 31) of his or its determination not to extend this Agreement, whereupon
it shall terminate as of such anniversary date. The period during which the
Employee serves as an employee of the Company in accordance with and subject to
the provisions of this Agreement is referred to in this Agreement as the "Term
of Employment."
3. Duties.
------
During the Term of Employment, the Employee (a) shall serve as an
employee of the Company with the titles of President - BLP Group Sales Support
Division and Executive Vice President - BLP Group Companies, reporting to the
Chief Executive Officer of the Company, and shall perform such duties and have
such responsibilities and shall have such additional or alternative duties and
responsibilities as may be reasonably determined by the Chief Executive Officer
of the Company, consistent with the general area of the Employee's experience
and skills, (b) upon the request of the Chief Executive Officer of the Company,
shall serve as an officer and/or director of the Company's subsidiaries, and (c)
shall render all services reasonably incident to the foregoing. The Employee
hereby accepts such employment, agrees to serve the Company in the capacities
indicated, and agrees to use his best efforts in, and shall devote his full
working time, attention, skill and energies to, the advancement of the interests
of the Company and its subsidiaries and the performance of his duties and
responsibilities hereunder.
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4. Salary and Bonus.
----------------
(a) During the Term of Employment, the Company shall pay the Employee
a salary at the annual rate of $200,000 per annum (the "Base Salary"). Such Base
Salary shall be subject to withholding under applicable law, shall be pro rated
for partial years and shall be payable in periodic installments not less
frequently than monthly in accordance with the Company's usual practice for
executives of the Company as in effect from time to time.
(b) During the Term of Employment, the Employee may be entitled to
participate in such executive bonus program as may be established by the Company
and then in effect, subject to and in accordance with the terms thereof.
5. Benefits.
--------
(a) During the Term of Employment, the Employee shall be entitled to
participate in any and all medical, pension, and dental insurance plans and
disability income plans, stock incentive plans, retirement arrangements and
other employment benefits as in effect from time to time for executive officers
of the Company generally. Such participation shall be subject to (i) the terms
of the applicable plan documents (including, as applicable, provisions granting
discretion to the Board of Directors of the Company or any administrative or
other committee provided for therein or contemplated thereby), and (ii)
generally applicable policies of the Company.
(b) Notwithstanding the foregoing, during the Term of Employment the
Company shall provide the Employee with or reimburse the Employee for a Company
automobile and club dues in accordance with the Company's practices for
executive officers, as in effect from time to time.
(c) The Company shall promptly reimburse the Employee for all
reasonable business expenses incurred by the Employee during the Term of
Employment in accordance with the Company's practices for executive officers of
the Company with a similar level of responsibility, as in effect from time to
time.
(d) During the Term of Employment, the Employee shall receive paid
vacation annually in accordance with the Company's practices for executive
officers, as in effect from time to time, but in any event not less than four
(4) weeks per calendar year.
(e) The Company will purchase on behalf of the Employee a term life
insurance policy providing a death benefit of $1,000,000 in the event of the
Employee's death and naming such person or persons as the Employee may designate
as loss payee or payees. The obligation to purchase and the maintenance of such
life insurance policy during the Term of Employment, however, shall be
contingent upon (i) the Employee's satisfactory completion of all requirements
in connection therewith including, without limitation, a physical
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examination, and (ii) the annual premium payments for such policy not exceeding
$_____.
(f) Compliance with the provisions of this Section 5 shall in no way
create or be deemed to create any obligation, express or implied, on the part of
the Company or any of its affiliates with respect to the continuation of any
particular benefit or other plan or arrangement maintained by them or their
subsidiaries as of or prior to the date hereof or the creation and maintenance
of any particular benefit or other plan or arrangement at any time after the
date hereof, except as provided in Section 5(e).
6. Termination of Employment of the Employee.
-----------------------------------------
Prior to the expiration of the Term of Employment as provided in
Section 2 hereof, this Agreement may or shall (as applicable) be terminated as
follows:
(a) At any time by the mutual consent of the Employee and the
Company.
(b) At any time for "cause" by the Company upon written notice to the
Employee. For purposes of this Agreement, a termination shall be for "cause"
if:
(i) the Employee shall commit an act of fraud, embezzlement,
misappropriation or breach of fiduciary duty against the Company or any
of its subsidiaries, or shall be convicted by a court of competent
jurisdiction of, or shall plead guilty or nolo contendere to, any
felony or any crime involving moral turpitude; or
(ii) the Employee shall commit a breach of any of the covenants,
terms or provisions hereof, which breach has not been remedied within
thirty (30) days after delivery to the Employee by the Company of
written notice of the facts constituting the breach; or
(iii) the Employee shall have failed to comply with written
instructions from the Company's Chief Executive Officer, which are
reasonable and consistent with Section 3, or shall have substantially
failed to perform the Employee's duties hereunder for a period of
thirty (30) days after written notice from the Company.
Upon termination for cause as provided in this Section 6(b), (A) all
obligations of the Company under this Agreement shall thereupon immediately
terminate other than any obligation of the Company with respect to earned but
unpaid Base Salary and benefits contemplated hereby to the extent then accrued
or vested, it being understood that upon any such termination the Employee shall
not be entitled to receive (1) any bonus or portion thereof from the Company or
any of its affiliates not then paid whether pursuant to Section 4 or otherwise,
or (2) any continuation of benefits except as may be required by law, and (B)
the
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Company shall have any and all rights and remedies under this Agreement and
applicable law.
(c) Upon the death of the Employee or upon the permanent disability
(as defined below) of the Employee continuing for a period in excess of one
hundred eighty (180) consecutive days. Upon any such termination of the
Employee's employment as provided in this Section 6(c), all obligations of the
Company under this Agreement shall thereupon immediately terminate other than
(i) any obligation of the Company with respect to earned but unpaid Base Salary
and benefits contemplated hereby to the extent accrued or vested through the
date of termination, and (ii) the obligation of the Company to pay the Employee
or his estate any cash bonus earned pursuant to Section 4(b). As used herein,
the terms "permanent disability" or "permanently disabled" shall mean the
inability of the Employee, by reason of injury, illness or other similar cause,
to perform a major part of his duties and responsibilities in connection with
the conduct of the business and affairs of the Company, as determined reasonably
and in good faith by the Company.
(d) By the Employee on such at least 60 day prior written notice to
the Company. Upon termination by the Employee as provided in this Section 6(d),
all obligations of the Company under this Agreement thereupon immediately shall
terminate other than any obligation of the Company with respect to earned but
unpaid Base Salary and benefits contemplated hereby to the extent accrued or
vested through the date of termination, it being understood that in the event of
such a termination the Employee shall not be entitled to receive any bonus from
the Company or any of its affiliates not then paid whether pursuant to Section 4
or otherwise with respect to any period during or after the Term of Employment
or any continuation of benefits except to the extent required by law.
(e) At any time without "cause" (as defined in Section 6(b)) by the
Company upon written notice to the Employee. In the event of termination of the
Employee by the Company pursuant to this Section 6(e) the Company shall (i)
continue to make Base Salary payments and benefits to the Employee in the manner
contemplated by Section 4(a) from the date of termination through the 270th day
following the date on which such termination occurs, and (ii) remain eligible to
receive any bonus contemplated by Section 4(b), if, when and as such bonus
otherwise would have been paid, with such amounts agreed by the parties hereto
to be in full satisfaction, compromise and release of any claims arising out of
any termination of the Employee's employment pursuant to this Section 6(e) or
Section 6(f), and in either case with such amounts to be contingent upon the
Employee's delivery of a general release upon termination of employment in a
form reasonably satisfactory to the Company, it being understood that no
severance benefits shall be provided unless and until the Employee determines to
execute and deliver such release and that, in the case of a termination pursuant
to Section 6(f), such release shall not cover the matter which is the subject of
the material default giving rise to such termination or any stock options which
are still in effect in accordance with their respective terms.
(f) The Employee shall have the right to terminate his employment
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hereunder in the event of a material default by the Company in the performance
of its obligations hereunder, after the Employee has given written notice to the
Company specifying such default by the Company and giving the Company a
reasonable time, not less than 30 days, to conform its performance to its
obligations hereunder. The rights and obligations of the parties shall be as
set forth in Section 6(e) in the event of any such termination.
(g) In the event either party gives a notice of non-renewal to be
effective as of any anniversary hereof as contemplated by Section 2, then all
obligations of the parties hereunder shall terminate as of the end of the Term
of Employment except as contemplated by Sections 7 and 8 hereof.
7. Confidentiality; Proprietary Rights.
-----------------------------------
(a) In the course of performing services hereunder, on behalf of the
Company (for purposes of this Section 7 including all predecessors of the
Company) and its affiliates, the Employee has had and from time to time will
have access to confidential records, data, customer lists, trade secrets and
other confidential information owned or used in the course of business by the
Company and its affiliates (the "Confidential Information"). The Employee
agrees (i) to hold the Confidential Information in strict confidence, (ii) not
to disclose the Confidential Information to any person (other than in the
regular business of the Company or its affiliates), and (iii) not to use,
directly or indirectly, any of the Confidential Information for any competitive
or commercial purpose other than on behalf of the Company and its affiliates;
provided, however, that the limitations set forth above shall not apply to any
Confidential Information which (i) is then generally known to the public, (ii)
became or becomes generally known to the public through no fault of the
Employee, or (iii) is disclosed in accordance with an order of a court of
competent jurisdiction or applicable law. Upon the termination of the
Employee's employment with the Company for any reason, all Confidential
Information (including, without limitation, all data, memoranda, customer lists,
notes, programs and other papers and items, and reproductions thereof relating
to the foregoing matters) in the Employee's possession or control, shall be
immediately returned to the Company or the applicable affiliate and remain in
its or their possession.
(b) The Employee recognizes that the Company and its affiliates
possess a proprietary interest in all of the information described in Section
7(a), subject to the provisions and limitations thereof, and have the exclusive
right and privilege to use, protect by copyright, patent or trademark, or
otherwise exploit the processes, ideas and concepts described therein to the
exclusion of the Employee, except as otherwise agreed between the Company and
the Employee in writing. The Employee expressly agrees that any products,
inventions, discoveries or improvements made by the Employee or his agents or
affiliates in the course of the Employee's employment, including any of the
foregoing which is based on or arises out of the information described in
Section 7(a), shall be the property of and inure to the exclusive benefit of the
Company. The Employee further agrees that any and all products, inventions,
discoveries or improvements developed by the Employee (whether or not able to be
protected
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by copyright, patent or trademark) during the course of his employment, or
involving the use of the time, materials or other resources of the Company or
any of its affiliates, shall be promptly disclosed to the Company and shall
become the exclusive property of the Company, and the Employee shall execute and
deliver any and all documents necessary or appropriate to implement the
foregoing.
(c) The Employee agrees, while he is employed by the Company, to
offer or otherwise make known or available to it, as directed by the Chief
Executive Officer of the Company and without additional compensation or
consideration, any business prospects, contracts or other business opportunities
that he may discover, find, develop or otherwise have available to him in any
field in which the Company or its affiliates are engaged, and further agrees
that any such prospects, contacts or other business opportunities shall be the
property of the Company.
8. Non-Competition.
---------------
In view of the fact that any activity of the Employee in violation of
the terms hereof would deprive the Company and its subsidiaries, if any, of the
benefits of their bargain under this Agreement, as a material inducement to and
a condition precedent of the Company's payment obligations hereunder and the
other covenants set forth herein, and to preserve the goodwill associated with
the Boron, LePore business, the Employee hereby agrees that during the Term of
Employment and thereafter (a) for a period of 270 days following the termination
of the Employee's employment with the Company in the event such termination
occurs by or under the circumstances contemplated by Sections 6(e) or 6(f), or
(b) for a period ending on the later of the second anniversary of the Effective
Date or the date which is one year following the termination of the Employee's
employment with the Company for any other reason, regardless of the
circumstances of termination, he will not, without the express written consent
of the Company, directly or indirectly, anywhere in the areas of the United
States where the Company and its subsidiaries, if any, conduct business, engage
in any activity which is, or participate or invest in, or provide or facilitate
the provision of financing to, or assist (whether as owner, part-owner,
shareholder, partner, director, officer, trustee, employee, agent or consultant,
or in any other capacity), any business, organization or person other than the
Company (or any affiliate of the Company), whose business, activities, products
or services are competitive with any of the business, activities, products or
services conducted or offered by the Company and its subsidiaries at the time of
the termination of Employee's employment with the Company, which business,
activities, products and services shall include in any event peer influence
meetings, telemarketing activities, contract sales and outsource marketing
involving pharmaceutical and healthcare companies. Without implied limitation,
the foregoing covenant shall include hiring or engaging or attempting to hire or
engage for or on behalf of himself or any such competitor, any officer or
employee of the Company or any of its direct and/or indirect subsidiaries,
encouraging for or on behalf of himself or any such competitor, any such officer
or employee to terminate his or her relationship or employment with the Company
or any of its direct or indirect subsidiaries, soliciting for or on behalf of
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himself or any such competitor any client of the Company or any of its direct or
indirect subsidiaries and diverting to any person (as defined in Section 11) any
client or business opportunity of the Company or any of any of its direct or
indirect subsidiaries.
Notwithstanding anything herein to the contrary, the Employee may make
passive investments in any enterprise the shares of which are publicly traded if
such investment constitutes less than five (5%) percent of the equity of such
enterprise.
The Employee acknowledges that neither the Employee nor any business entity
controlled by him is a party to any contract, commitment, arrangement or
agreement which could, following the date hereof, restrain or restrict the
Company or any subsidiary or affiliate of the Company from carrying on its
business or restrain or restrict the Employee from performing his obligations
under this Agreement and as of the date of this Agreement the Employee has no
business interests in or relating to the pharmaceutical industry whatsoever
other than his interest in the Company, other than interests in public companies
of less than five (5%) percent.
9. Specific Performance; Severability.
----------------------------------
It is specifically understood and agreed that any breach of the
provisions of Sections 7 or 8 hereof by the Employee is likely to result in
irreparable injury to the Company and/or its affiliates, that the remedy at law
alone will be an inadequate remedy for such breach and that, in addition to any
other remedy it may have, the Company shall be entitled to enforce the specific
performance of this Agreement by the Employee and to seek both temporary and
permanent injunctive relief (to the extent permitted by law), without the
necessity of posting a bond or proving actual damages. In case any of the
provisions contained in this Agreement shall for any reason be held to be
invalid, illegal or unenforceable in any respect, any such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement, but this Agreement shall be construed as if such invalid, illegal or
unenforceable provision had been limited or modified (consistent with its
general intent) to the extent necessary to make it valid, legal and enforceable,
or if it shall not be possible to so limit or modify such invalid, illegal or
unenforceable provision or part of a provision, this Agreement shall be
construed as if such invalid, illegal or unenforceable provision or part of a
provision had never been contained in this Agreement.
10. Notices.
-------
All notices, requests, demands and other communications hereunder shall
be in writing and shall be deemed to have been duly given if faxed (with
transmission acknowledgment received), delivered personally or mailed by
certified or registered mail (return receipt requested) as follows:
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To the Company: Boron, LePore & Associates, Inc.
17-17 Route 208 North
Fair Lawn, New Jersey 07410
Attention: Patrick G. LePore, President and CEO
To the Employee: Brian Smith
c/o Boron, LePore & Associates, Inc.
17-17 Route 208 North
Fair Lawn, New Jersey 07410
or to such other address or fax number of which any party may notify the other
parties as provided above. Notices shall be effective as of the date of such
delivery, mailing or fax.
11. Miscellaneous.
-------------
This Agreement shall be governed by and construed under the laws of the
State of New Jersey, and shall not be amended, modified or discharged in whole
or in part except by an agreement in writing signed by both of the parties
hereto. The failure of either of the parties to require the performance of a
term or obligation or to exercise any right under this Agreement or the waiver
of any breach hereunder shall not prevent subsequent enforcement of such term or
obligation or exercise of such right or the enforcement at any time of any other
right hereunder or be deemed a waiver of any subsequent breach of the provision
so breached, or of any other breach hereunder. This Agreement shall inure to
the benefit of, and be binding upon and assignable to, successors of the Company
by way of merger, consolidation or sale and may not be assigned by the Employee.
This Agreement, together with concurrently executed stock option agreements,
supersedes, terminates and in all respects replaces all prior understandings and
agreements, written or oral, between the parties relating to the subject matter
hereof. For purposes of this Agreement, the term "person" means an individual,
corporation, partnership, association, trust or any unincorporated organization;
a "subsidiary" of a person means any corporation more than 50 percent of whose
outstanding voting securities, or any partnership, joint venture or other entity
more than 50 percent of whose total equity interest, is directly or indirectly
owned by such person; and an "affiliate" of a person shall mean, with respect to
a person or entity, any person or entity which directly or indirectly controls,
is controlled by, or is under common control with such person or entity.
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IN WITNESS WHEREOF, the parties have executed this Agreement under seal as
of the date first set forth above.
BORON, LePORE & ASSOCIATES, INC.
By:/s/ Patrick G. LePore
-----------------------------------
Patrick G. LePore, President
/s/ Brian Smith
-----------------------------------
BRIAN SMITH
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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.
Arthur Andersen LLP
Roseland, New Jersey
August 27, 1997
<PAGE>
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."
M.R. Weiser & Co. llp
Edison, NJ
August 28, 1997
