<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 18, 1997
REGISTRATION STATEMENT NO. 333-30573
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 3
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 INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
OF INCORPORATION OR
ORGANIZATION)
---------------
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:
JAMES LEPORE, ESQ.
JOHN R. LECLAIRE, P.C. LEPORE, ZIMMERER, LEPORE JAMES M. DUBIN, ESQ.
GOODWIN, PROCTER & HOAR & LUIZZI CARL L. REISNER, ESQ.
LLP 1593 ROUTE 88 WEST PAUL, WEISS, RIFKIND,
EXCHANGE PLACE BRICK, NEW JERSEY 08724 WHARTON & GARRISON
BOSTON, MASSACHUSETTS (908) 840-0550 1285 AVENUE OF THE
02109-2881 AMERICAS
(617) 570-1000 NEW YORK, NEW YORK 10019
(212) 373-3000
---------------
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. [_]
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO
SECTION 8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE +
+WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES +
+LAWS OF ANY SUCH JURISDICTION. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED SEPTEMBER 18, 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, on or about
, 1997.
-----------
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 pur-
chase shares of Common Stock from a
former officer of the Company; to
finance capital improvements, new
businesses and possible 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) 562,325 shares of
Common Stock issuable upon the exercise of outstanding stock options at a
weighted average exercise price of $10.79 per share at September 16, 1997;
(ii) 1,224,689 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 a former officer of
the Company. See "Management--Employee Stock and Other Benefit Plans--1996
Stock Option and Incentive Plan" and "--1997 Employee Stock Purchase Plan."
Except as otherwise noted, all information in this Prospectus assumes no
exercise of the Underwriters' over-allotment option and has been adjusted to
reflect (i) a two-for-three reverse stock split of the Common Stock, (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 a former
officer of the Company. 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 a former officer
of the Company), 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 19.3% 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
10
<PAGE>
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 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
11
<PAGE>
approved by the Board of Directors (including takeovers which stockholders may
deem to be in their best interests). Such provisions include, among other
things, a classified Board of Directors serving staggered three-year terms,
the elimination of stockholder voting by consent, the removal of directors
only for cause, the vesting of exclusive authority in the Board of Directors
to determine the size of the Board of Directors and (subject to certain
limited exceptions) to fill vacancies thereon, the vesting of exclusive
authority in the Board of Directors (except as otherwise required by law) to
call special meetings of stockholders and certain advance notice requirements
for stockholder proposals and nominations for election to the Board of
Directors. These provisions, and the ability of the Board of Directors to
issue preferred stock without further action by stockholders, could 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 a former officer of the Company; (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
12
<PAGE>
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.
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
offering................................................... 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 a former officer of the
Company. 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; 5,733,328 shares issued and 1,999,995
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; 793,666 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) 562,325 shares of Common Stock currently issuable upon
exercise of outstanding stock options, including 283,332 shares issued
subsequent to June 30, 1997; (ii) 1,224,689 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 a former
officer of the Company.
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 a former
officer of the Company) 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.
21
<PAGE>
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 net proceeds will also be used to
purchase 466,666 shares of Common Stock from a former officer of the Company.
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 the Company's
conferencing services, 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 had 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 the Company's conferencing services, 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 had hired approximately 35 salaried representatives who had
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 the Company's conferencing services, 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 10% or more
of the Company's revenues in two or more of the years 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%)
Novartis (18%) Novartis (11%)
Glaxo Wellcome (14%) Parke-Davis (11%)
</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,
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<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, in connection with focus groups
conducted by one of the Company's competitors, the FDA recently issued warning
letters indicating concern about the manner in which the focus groups were
conducted, and the FDA also questioned the content of the information provided
to the focus group 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.
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<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Executive officers and directors and their ages as of September 16, 1997
were 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
Martin J. Veilleux............. 35 Executive Vice President--Finance, Chief
Financial Officer, Secretary and Treasurer
Roger Boissonneault(1)......... 49 Director
Roger B. Kafker(1)............. 35 Director
Jacqueline C. Morby(2)......... 59 Director
Joseph E. Smith................ 58 Director
John A. Staley, IV(2).......... 54 Director
</TABLE>
- --------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
Patrick G. LePore joined the Company in 1985 after six years at Hoffmann-La
Roche, a pharmaceutical company, where he worked as a product manager from
1982 to 1983 and as a product director from 1983 to 1985. He became President
and Chief Executive Officer of the Company in January 1992 and became Chairman
of the Board in December 1996.
Gregory F. Boron joined the Company in 1985 after leaving the U.S. Army as a
Major. He served as Vice President and Chief Financial Officer from January
1991 to November 1993 and as Executive Vice President, Administration and
Production from November 1993 to December 1996. Since December 1996, he has
served as Chief Operating Officer and Executive Vice President--Administration
of the Company.
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>
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.
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
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<PAGE>
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(3)................. 325,884(4) 109,400 5,702,630(1)(5)
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) Mr. Sweeney resigned from the Company, effective as of September 15, 1997.
(4) Includes $150,884 Mr. Sweeney earned in sales salaries prior to becoming
an executive officer in July 1996.
(5) Includes a car allowance of $8,400.
Option Grants, Exercises and Holdings. No options or stock appreciation
rights were granted to the Named Executive Officers in 1996.
Executive Bonuses. The Company has adopted an incentive bonus plan for its
senior executives. Under the plan, an amount equal to 10% of the Company's
annual earnings before interest, taxes, depreciation, amortization, commission
to sales personnel and payments of bonuses under the plan is reserved as a
bonus pool for plan participants. Bonuses are then awarded by the Compensation
Committee based on the recommendation of the Company's Chief Executive
Officer. The plan is administered by the Compensation Committee and will
remain in effect until the closing of the Company's first underwritten firm
commitment public offering. The Executive Bonus Plan will terminate upon
completion of this offering, except with respect to unpaid awards for the
partial year 1997 which accrued prior to the termination.
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<PAGE>
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. 1,224,689 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 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
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<PAGE>
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 562,325
shares of Common Stock to employees of the Company under the 1996 Stock Plan
at a weighted average exercise price of $10.79 per share through September 16,
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.
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
38
<PAGE>
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 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 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 purchased by the
Company, Mr. Sweeney has been and will continue to 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 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.
39
<PAGE>
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.
41
<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 has adopted 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 requires
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 September 16, 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 (eight persons) ...................... 2,134,593 28.5% 20.1%
</TABLE>
- --------
* Less than 1%.
(1) All percentages have been determined as of September 16, 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 September 16, 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
43
<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 for a price of $12.00
per share, 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.
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, 384,991 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. 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 September 16, 1997, there were 562,325 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>
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.
Arthur Andersen LLP
Roseland, New Jersey
March 3, 1997
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 at June 30,
1997; 11,193,658 issued
and 7,460,325
outstanding on a pro
forma basis............. 57,133 57,333 57,333 111,936
Class A common stock,
$.01 par value,
1,333,333 shares
authorized; 666,666 and
793,666 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 7,937 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 127,000
shares of Class A
common stock at
prices ranging from
$.428 to $3.00 per
share................ 0 1,270 0 0 113,048 0
Non cash compensation
expense.............. 0 0 0 0 42,558 0
------- ------ --- ------------ ---------- ------------
BALANCE AS OF JUNE 30,
1997................... $57,333 $7,937 $ 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 0
Proceeds from the
issuance of Class A
common stock.......... 0 0 285,000 0 114,318
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........................................ 1,999,995 1,999,995
Class A common stock................................ 793,666 793,666
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 Fed-
eral 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 was 400,000 shares of Common Stock and 1,333,333
shares of Class A Common Stock. In August 1997, the Plan was amended to
increase the shares of stock reserved for issuance under the Plan to 3,000,000
shares.
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, two officers of the Company became consultants and are being
compensated in accordance with the terms of their employment agreements, as
amended.
(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 $.01 par value preferred stock.
Stock Split--
All share amounts have been retroactively adjusted to reflect a 2-for-3
reverse common stock split which occured September 11, 1997.
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.................................................. 7,377
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......................... 5,000
Transfer Agent's Fee............................................. 5,000
Miscellaneous.................................................... 141,583
--------
Total........................................................ $850,000
========
</TABLE>
- --------
(1) The amounts set forth above, except for the SEC, NASD and Nasdaq fees, are
in each case estimated.
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 8 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 two-for-three
reverse stock split of its Common Stock and Class A Common Stock.
(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 an 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 Plan, the
Company granted an aggregate of 666,666 shares of the Company's restricted
Class A Common Stock at a price of approximately $0.43 per share for an
aggregate purchase price of $285,500 and the Company granted an aggregate
of 400,000 shares of the Company's Common Stock at a price of approximately
$0.43 per share 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 Plan, the
Company granted 96,992 shares of the Company's restricted Class A Common
Stock at a price of approximately $0.43 per share for an aggregate purchase
price of $41,468 to employees and granted 6,665 shares of the Company's
Common Stock at a price of approximately $0.43 per share 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 Plan, the
Company granted 10,000 shares of the Company's restricted Class A Common
Stock at a price of approximately $0.43 per share 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 Plan, the Company
granted options to purchase 16,666 shares of the Company's restricted Class
A Common Stock at a price of approximately $0.43 per share 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 Plan, the Company
granted 3,333 shares of the Company's Common Stock at a price of $3.00 per
share to a consultant of the Company for an aggregate purchase price of
$10,000 and granted 6,666 shares of the Company's restricted Class A Common
Stock at a price of $3.00 per share 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.
II-2
<PAGE>
(9) In May 1997, pursuant to the Company's 1996 Stock Plan, the Company
granted 6,666 shares of the Company's restricted Class A Common Stock at a
price of $3.00 per share to a director for an aggregate purchase 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 Plan, the Company
granted options to purchase 262,327 shares of the Company's restricted
Class A Common Stock at a price of approximately $9.45 per share 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 at a price of
approximately $.01 per share 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 Plan, the
Company granted options to purchase 246,666 shares of the Company's
restricted Class A Common Stock at a price of $12.00 per share to two
employees 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.
(12) In September 1997, pursuant to the Company's 1996 Stock Plan, the
Company granted an option to purchase 36,666 shares of the Company's
restricted Class A Common Stock at a price of $17.00 per share to an
employee of the Company for an aggregate cash purchase price of $623,322 in
reliance upon 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
filing of the Second Amended and Restated Certificate of
Incorporation).
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.
</TABLE>
II-3
<PAGE>
<TABLE>
<S> <C>
*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.
*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
10.26 Side Letter Agreement with Christopher J. Sweeney
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.
(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.
II-4
<PAGE>
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and 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. 3 TO THE REGISTRATION STATEMENT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN FAIR
LAWN, NEW JERSEY, ON SEPTEMBER 16, 1997.
Boron, LePore & Associates, Inc.
/s/ Gregory F. Boron
By: _________________________________
GREGORY F. BORON
CHIEF OPERATING OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 3 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING
PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
Chairman of the
* Board, Chief September 16,
- ------------------------------------- Executive Officer, 1997
PATRICK G. LEPORE President and
Director (Principal
Executive Officer)
Chief Operating
/s/ Gregory F. Boron Officer and September 16,
- ------------------------------------- Director 1997
GREGORY F. BORON
* Chief Financial
- ------------------------------------- Officer, Secretary September 16,
MARTIN J. VEILLEUX and Treasurer 1997
(Principal
Financial and
Accounting Officer)
* Director
- ------------------------------------- September 16,
ROGER BOISSONNEAULT 1997
* Director
- ------------------------------------- September 16,
ROGER B. KAFKER 1997
* Director
- ------------------------------------- September 16,
JACQUELINE C. MORBY 1997
* Director
- ------------------------------------- September 16,
JOSEPH E. SMITH 1997
* Director
- ------------------------------------- September 16,
JOHN A. STALEY, IV 1997
*By: /s/ Gregory F. Boron
---------------------------
GREGORY F. BORON, 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 filing of the Second Amended and Restated Certificate of
Incorporation).
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.
10.26 Side Letter Agreement with Christopher J. Sweeney.
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.
<PAGE>
Exhibit 1.1
DRAFT
3,600,000 Shares of Common Stock
BORON, LePORE & ASSOCIATES, INC.
UNDERWRITING AGREEMENT
----------------------
September __, 1997
BEAR, STEARNS & CO. INC.,
SMITH BARNEY INC.,
WESSELS, ARNOLD & HENDERSON, L.L.C.
as Representatives of the
several Underwriters named in
Schedule I attached hereto
c/o Bear, Stearns & Co. Inc.
245 Park Avenue
New York, N.Y. 10167
Dear Sirs:
Boron, LePore & Associates, Inc., a corporation organized and existing
under the laws of Delaware (the "Company"), proposes, subject to the terms and
conditions stated herein, to issue and sell to the several underwriters named in
Schedule I hereto (the "Underwriters") an aggregate of 3,600,000 shares (the
"Firm Shares") of its common stock, par value $.01 per share (the "Common
Stock"). In addition, for the sole purpose of covering over-allotments in
connection with the sale of the Firm Shares, at the option of the Underwriters,
the Company and certain stockholders of the Company named in Schedule II hereto
(such stockholders collectively, the "Selling Stockholders") also propose to
sell to the Underwriters an aggregate of up to an additional 540,000 shares (the
"Additional Shares") of Common Stock, of which 135,000 shares will be sold by
the Company and 405,000 shares will be sold by the Selling Stockholders. The
Firm Shares and any Additional Shares purchased by the Underwriters are referred
to herein as the "Shares." The Shares are more fully described in the
Registration Statement referred to below.
<PAGE>
2
1. Representations and Warranties of the Company. The Company
---------------------------------------------
represents and warrants to, and agrees with, the Underwriters that:
(a) The Company has filed with the Securities and Ex change
Commission (the "Commission") a registration statement, and may have filed an
amendment or amendments thereto, on Form S-1 (No. 333-30573), for the
registration of the Shares under the Securities Act of 1933, as amended (the
"Act"). Such registration statement, including the prospectus, financial state
ments and schedules, exhibits and all other documents filed as a part thereof,
as amended at the time of effectiveness of the registration statement, including
any information deemed to be a part thereof as of the time of effectiveness
pursuant to paragraph (b) of Rule 430A or Rule 434 of the Rules and Regulations
of the Commission under the Act (the "Regulations"), is herein called the
"Registration Statement" and the prospectus, in the form first filed with the
Commission pursuant to Rule 424(b) of the Regulations or filed as part of the
Registration Statement at the time of effectiveness if no Rule 424(b) or Rule
434 filing is required, is herein called the "Prospectus". The term
"preliminary prospectus" as used herein means a preliminary prospectus included
in a Registration Statement prior to the time of effectiveness of the
Registration Statement. If the Company files a registration statement to
register a portion of the Shares and relies on Rule 462(b) of the Regulations
for such registration statement to become effective upon filing with the
Commission (the "Rule 462 Registration Statement"), then any reference to the
"Registration Statement" shall be deemed to include the Rule 462 Registration
Statement, as amended from time to time.
(b) At the time of the effectiveness of the Registration
Statement or the effectiveness of any post-effective amendment to the
Registration Statement, when the Prospectus is first filed with the Commission
pursuant to Rule 424(b) or Rule 434 of the Regulations, when any supplement to
or amendment of the Prospectus is filed with the Commission and at the Closing
Date and the Additional Closing Date, if any, (as hereinafter respectively
defined), the Registration Statement and the Prospectus and any amendments
thereof and supplements thereto complied or will comply in all material respects
with the applicable provisions of the Act and the Regulations and does not or
will not contain an untrue statement of a material fact and does not or will not
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein (i) in the case of the Registration
Statement, not misleading and (ii) in the case of the Prospectus, in light of
the circumstances under which they were made, not misleading. When any related
preliminary prospectus was first filed with the Commission (whether filed as
part of the registration statement for the registration of the Shares or any
amendment thereto or pursuant to Rule 424(a) of the Regulations) and when any
amendment thereof or supplement thereto was first filed with the Commission,
such preliminary prospectus and any amendments thereof and supplements thereto
complied in all material respects with the applicable provisions of the Act and
the Regulations and did not contain
<PAGE>
3
an untrue statement of a material fact and did not omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein in light of the circumstances under which they were made not misleading.
No representation and warranty is made in this subsection (b), however, with
respect to any information contained in or omitted from the Registration
Statement or the Prospectus or any related preliminary prospectus or any
amendment thereof or supplement thereto in reliance upon and in conformity with
information furnished in writing to the Company by or on behalf of any
Underwriter through you as herein stated expressly for use in connection with
the preparation thereof. If Rule 434 is used, the Company will comply with the
requirements of Rule 434.
(c) Arthur Andersen LLP and M.R. Weiser & Co. LLP, each of whom have
certified certain financial statements and supporting schedules included in the
Registration Statement, each are independent public accountants as required by
the Act and the Regulations.
(d) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, except as set forth in
the Registration Statement and the Prospectus, there has been no material
adverse change or any development involving a prospective material adverse
change in the business, prospects, properties, operations, condition (financial
or other) or results of operations of the Company, whether or not arising from
transactions in the ordinary course of business, and since the date of the
latest balance sheet presented in the Registration Statement and the Prospectus,
except in the ordinary course of business, the Company has not incurred nor
undertaken any liabilities or obligations, direct or contingent, which are
material to the Company, except for liabilities or obligations which are
reflected in the Registration Statement and the Prospectus.
(e) This Agreement and the transactions contemplated herein have been
duly and validly authorized by the Company and this Agreement has been duly and
validly executed and delivered by the Company.
(f) The execution, delivery, and performance of this Agreement and
the consummation of the transactions contemplated hereby do not and will not (i)
conflict with or result in a breach of any of the terms and provisions of, or
constitute a default (or an event which with notice or lapse of time, or both,
would constitute a default) under, or result in the creation or imposition of
any lien, charge or encumbrance upon any property or assets of the Company
pursuant to, any material agreement, instrument, franchise, license or permit to
which the Company is a party or by which it or its properties or assets may be
bound or (ii) violate or conflict with any provision of the certificate of
incorporation or by-laws of the Company or any judgment, decree, order, statute,
rule or regulation of any court or any public, governmental or regulatory agency
or body having jurisdiction over the Company or any of its properties or assets.
<PAGE>
4
No consent, approval, authorization, order, registration, filing, qualification,
license or permit of or with any court or any public, governmental or regulatory
agency or body having jurisdiction over the Company or any of its properties or
assets is required for the execution, delivery and performance of this Agreement
or the consummation of the transactions contemplated hereby, including the
issuance, sale and delivery of the Shares to be issued, sold and delivered by
the Company hereunder, except the registration under the Act of the Shares and
such consents, approvals, authorizations, orders, registrations, filings,
qualifications, licenses and permits as may be required under state or other
securities or Blue Sky laws in connection with the purchase and distribution of
the Shares by the Underwriters.
(g) All of the outstanding shares of Common Stock have been duly and
validly authorized and issued, fully paid and nonassessable and were not issued
and are not now in violation of or subject to any preemptive rights under the
Delaware General Corporation Law. The Shares to be sold by the Company, when
issued, delivered and sold against payment therefor in accordance with this
Agreement, will be duly and validly issued, fully paid and nonassessable, and
will not have been issued in violation of or be subject to any preemptive
rights. The Company had, at June 30, 1997, an authorized and outstanding
capitalization as set forth in the Registration Statement and the Prospectus.
The Common Stock, the Firm Shares and the Additional Shares conform to the
descriptions thereof contained in the Registration Statement and the Prospectus.
(h) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware. The
Company is duly qualified and in good standing as a foreign corporation in each
jurisdiction in which the character or location of its properties (owned, leased
or licensed) or the nature or conduct of its business makes such qualification
necessary, except for those failures to be so qualified or in good standing
which will not in the aggregate have a material adverse effect on the Company.
The Company has all requisite corporate power and authority, and all necessary
consents, approvals, authorizations, orders, registrations, qualifications,
licenses and permits of and from all public, regulatory or governmental agencies
and bodies, to own, lease and operate its properties and conduct its business as
now being conducted and as described in the Registration Statement and the
Prospectus (subject to any qualifications as may be set forth therein), and no
such consent, approval, authorization, order, registration, qualification,
license or permit contains a materially burdensome restriction not adequately
disclosed in the Registration Statement and the Prospectus.
(i) Except as described in the Registration Statement and the
Prospectus, there is no litigation or governmental proceeding to which the
Company is a party or to which any property of the Company is subject or which
<PAGE>
5
is pending or, to the knowledge of the Company, threatened against the Company
which might result in any material adverse change or any development involving a
material adverse change in the business, prospects, properties, operations,
condition (financial or other) or, results of operations of the Company or which
is required to be disclosed in the Registration Statement and the Prospectus.
(j) The Company has not taken and will not take, directly or
indirectly, any action designed to cause or result in, or which constitutes or
which might reasonably be expected to constitute, the stabilization or
manipulation of the price of the shares of Common Stock to facilitate the sale
or resale of the Shares.
(k) The financial statements, including the notes thereto, and
supporting schedules included in the Registration Statement and the Prospectus
present fairly the financial position of the Company as of the dates indicated
and the results of its operations for the periods specified; except as otherwise
stated in the Registration Statement, said financial statements have been
prepared in conformity with generally accepted accounting principles applied on
a consistent basis; and the supporting schedules included in the Registration
Statement present fairly the information required to be stated therein.
(l) Except as described in the Registration Statement and the
Prospectus, no holder of securities of the Company has any rights to the
registration of securities of the Company because of the filing of the
Registration Statement or otherwise in connection with the sale of the Shares
contemplated hereby.
(m) The Company is not, and upon consummation of the transactions
contemplated hereby will not be, subject to registration as an "investment
company" under the Investment Company Act of 1940, as amended.
(n) The Shares have been approved for quotation on the Nasdaq
National Market, subject to official notice of issuance.
(o) There is no document or contract of a character required to be
described in the Registration Statement or the Prospectus or to be filed as an
exhibit to the Registration Statement which is not described or filed as
required.
(p) Any real property and buildings held under lease by the Company
are held by it under valid, subsisting and enforceable leases with such
exceptions as are not material and do not interfere with the use made and
proposed to be made of such property and buildings by the Company.
<PAGE>
6
(q) Neither the Company nor any of its affiliates does business with
the government of Cuba or with any person or affiliate located in Cuba within
the meaning of Section 517.075, Florida Statutes.
(r) The Company is, and the services provided by the Company are, in
material compliance with all current statutes, rules, regulations, standards and
guidelines applicable to the Company.
(s) Except as disclosed in the Registration Statement and the
Prospectus, the Company owns or has adequate licenses or other rights to use any
trademarks, trade names, service marks, service names, copyrights, and other
proprietary intellectual property rights necessary to conduct the business of
the Company in the manner presently conducted and proposed to be conducted,
without any conflict with the rights of others, except where the failure to own
or possess such licenses or other rights would not have a material adverse
effect on the Company.
(t) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are executed in
accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(u) The Company has filed all necessary federal and state income and
franchise tax returns required to be filed through the date hereof and has paid
all taxes when due, except where the failure to file or pay such taxes, in the
aggregate, could not reasonably be expected to have a material adverse effect on
the Company and there is no tax deficiency that has been, or to the knowledge of
the Company might be, asserted against the Company, or its properties or assets,
that would have a material adverse effect on the Company's condition (financial
or other) or the results of operations of the Company.
(v) The Company has received all required approvals of any federal or
state governmental department or agency, including those of the Food and Drug
Administration, to conduct "fulfillment" functions at its leased warehouse in
Norfolk, Virginia.
(w) Any "forward-looking statement" within the meaning of the federal
securities laws contained in the Registration Statement and the Prospectus is
based on reasonable assumptions and made in good faith.
<PAGE>
7
2. Representations and Warranties of the Selling Stockholders. Each of
----------------------------------------------------------
the Selling Stockholders severally and not jointly represents and warrants to,
and agrees with, the Underwriters that:
(a) All consents, approvals, authorizations and orders necessary for the
execution and delivery by such Selling Stockholder of this Agreement, the Power
of Attorney and the Custody Agreement herein referred to, and for the sale and
delivery of the Shares to be sold by such Selling Stockholder hereunder have
been obtained; and such Selling Stockholder has full right, power and authority
to enter into this Agreement, the Power of Attorney and the Custody Agreement
and to sell, assign, transfer and deliver the Shares to be sold by such Selling
Stockholder hereunder.
(b) The sale of the Shares to be sold by such Selling Stockholder
hereunder and the compliance by such Selling Stockholder with all of the
provisions of this Agreement, the Power of Attorney and the Custody Agreement
and the consummation of the transactions herein and therein contemplated will
not conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any statute, indenture, mortgage,
deed of trust, loan agreement or other material agreement or instrument to which
such Selling Stockholder is a party or by which such Selling Stockholder is
bound, or to which any of the property or assets of such Selling Stockholder is
subject, nor will such action result in any violation of the provisions of the
Certificate of Incorporation or By-laws of such Selling Stockholder if such
Selling Stockholder is a corporation, the Partnership Agreement of such Selling
Stockholder if such Selling Stockholder is a partnership or any statute or any
order, rule or regulation of any court or governmental agency or body having
jurisdiction over such Selling Stockholder or the property of such Selling
Stockholder.
(c) Immediately prior to the Additional Closing Date (as defined in
Section 4 hereof) such Selling Stockholder will have, good and valid title to
the Shares to be sold by such Selling Stockholder hereunder, free and clear of
all liens, encumbrances, equities or claims, except those created by this
Agreement, the Power of Attorney and the Custody Agreement; and, upon delivery
of such Shares and payment therefor in accordance with this Agreement, the
Underwriters will have acquired from the Selling Stockholders good and valid
title to such Shares, free and clear of all liens, encumbrances, equities or
claims.
(d) Such Selling Stockholder has not taken and will not take, directly or
indirectly, any action designed to cause or result in, or which constitutes or
which might reasonably be expected to constitute, the stabilization or
manipulation of the price of the shares of Common Stock to facilitate the sale
or resale of the Shares.
<PAGE>
8
(e) To the extent that any statements or omissions made in the
Registration Statement, any preliminary prospectus, the Prospectus or any
amendment or supplement thereto are made in reliance upon and in conformity with
written information furnished to the Company by such Selling Stockholder
expressly for use therein, such statements contained in the preliminary
prospectus and the Registration Statement in reliance thereon did, and such
statements contained in the Prospectus and any further amendments or supplements
to the Registration Statement and the Prospectus in reliance thereon, when they
become effective or are filed with the Commission, as the case may be, will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading.
(f) In order to document the Underwriters' compliance with the reporting
and withholding provisions of the Tax Equity and Fiscal Responsibility Act of
1982 with respect to the transactions herein contemplated, such Selling
Stockholder will deliver to you prior to or at the Additional Closing Date (as
hereinafter defined) a properly completed and executed United States Treasury
Department Form W-9 (or other applicable form or statement specified by Treasury
Department regulations in lieu thereof).
(g) Certificates in negotiable form representing the shares of
Convertible Participating Preferred Stock of the Company which, upon
consummation of the transactions contemplated hereby and by the Prospectus, will
convert into all of the Shares to be sold by such Selling Stockholder hereunder
have been placed in custody under a Custody Agreement, in the form heretofore
furnished to you (the "Custody Agreement"), duly executed and delivered by such
Selling Stockholder to Patrick G. LePore, as custodian (the "Custodian"), and
such Selling Stockholder has duly executed and delivered a Power of Attorney, in
the form heretofore furnished to you (the "Power of Attorney"), appointing the
persons indicated in Schedule II hereto, and each of them, as such Selling
Stockholder's attorneys-in-fact (the "Attorneys-in-Fact") with authority to
execute and deliver this Agreement on behalf of such Selling Stockholder, to
determine the purchase price to be paid by the Underwriters to the Selling
Stockholders as provided in Section 4 hereof, to authorize the delivery of the
Shares to be sold by such Selling Stockholder hereunder and otherwise to act on
behalf of such Selling Stockholder in connection with the transactions
contemplated by this Agreement and the Custody Agreement.
(h) The Shares represented by the certificates held in custody for such
Selling Stockholder under the Custody Agreement are subject to the interests of
the Underwriters hereunder; the arrangements made by such Selling Stockholder
for such custody, and the appointment by such Selling Stockholder of the
Attorneys-in-Fact by the Power of Attorney, are to that extent irrevocable; the
obligations of the Selling Stockholders hereunder shall not be terminated by
operation of law, whether by the death or incapacity of any individual Selling
<PAGE>
9
Stockholder or, in the case of an estate or trust, by the death or incapacity of
any executor or trustee or the termination of such estate or trust, or in the
case of a partnership or corporation, by the dissolution of such partnership or
corporation, or by the occurrence of any other event; if any individual Selling
Stockholder or any such executor or trustee should die or become incapacitated,
or if any such estate or trust should be terminated, or if any such partnership
or corporation should be dissolved, or if any other such event should occur,
before the delivery of the Shares hereunder, certificates representing the
Shares shall be delivered by or on behalf of the Selling Stockholders in
accordance with the terms and conditions of this Agreement and of the Custody
Agreements; and actions taken by the Attorneys-in-Fact pursuant to the Powers of
Attorney shall be as valid as if such death, incapacity, termination,
dissolution or other event had not occurred, regardless of whether or not the
Custodian, the Attorneys-in-Fact, or any of them, shall have received notice of
such death, incapacity, termination, dissolution or other event.
3. Purchase, Sale and Delivery of the Shares.
------------------------------------------
(a) On the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company agrees to sell to the Underwriters and the Under writers,
severally and not jointly, agree to purchase from the Company, at a purchase
price per share of $_______, the number of Firm Shares set forth opposite the
respective names of the Underwriters in Schedule I hereto plus any additional
number of Shares which such Underwriter may become obligated to purchase
pursuant to the provisions of Section 10 hereof. You represent and warrant that
you have been authorized by each of the other Underwriters to enter into this
Agreement on its behalf and to act for it in the manner herein provided.
(b) Payment of the purchase price for, and delivery of certificates
for, the Shares shall be made at the office of Bear, Stearns & Co. Inc., 245
Park Avenue, New York, New York 10167, or at such other place as shall be agreed
upon by you and the Company, at 10:00 A.M. on the third or fourth business day
(as permitted under Rule 15c6-1 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (unless postponed in accordance with the
provisions of Section 10 hereof) following the date of the effectiveness of the
Registration Statement (or, if the Company has elected to rely upon Rule 430A of
the Regulations, the third or fourth business day (as permitted under Rule 15c6-
1 under the Exchange Act) after the determination of the initial public offering
price of the Shares), or such other time not later than ten business days after
such date as shall be agreed upon by you and the Company (such time and date of
payment and delivery being herein called the "Closing Date"). Payment shall be
made to the Company [by certified or official bank check or checks drawn in
federal funds or similar same day funds payable to the order of the Company
[by wire transfer in same day funds], against delivery to you for the re-
<PAGE>
10
spective accounts of the Underwriters of certificates for the Shares to be
purchased by them. Certificates for the Shares shall be registered in
such name or names and in such authorized denominations as you may request in
writing at least two full business days prior to the Closing Date. The Company
will permit you to examine and package such certificates for delivery at least
one full business day prior to the Closing Date.
(c) In addition, subject to the terms and conditions set forth
herein, the Company hereby grants to the Underwriters the option to purchase up
to 135,000 Additional Shares and the Selling Stockholders hereby grant to the
Underwriters the option to purchase up to 405,000 Additional Shares, all at the
same purchase price per share to be paid by the Underwriters to the Company for
the Firm Shares as set forth in this Section 3, for the sole purpose of covering
over-allotments in the sale of Firm Shares by the Underwriters. These options
may be exercised at any time, in whole or in part, on or before the thirtieth
day following the date of the Prospectus, by written notice by you to the
Company and to the Selling Stockholders. Any such election to purchase
Additional Shares shall be made on a 25%/75% pro rata basis between the Company
and the Selling Stockholders, respectively. Such notice shall set forth the
aggregate number of Additional Shares as to which the option is being exercised
and the date and time, as reasonably determined by you, when the Additional
Shares are to be delivered (such date and time being herein sometimes referred
to as the "Additional Closing Date"); provided, however, that the Additional
-------- -------
Closing Date shall not be earlier than the Closing Date or earlier than the
second full business day after the date on which the option shall have been
exercised nor later than the eighth full business day after the date on which
the option shall have been exercised (unless such time and date are postponed in
accordance with the provisions of Section 10 hereof). Certificates for the
Additional Shares shall be registered in such name or names and in such
authorized denominations as you may request in writing at least two full
business days prior to the Additional Closing Date. The Company will permit you
to examine and package such certificates for delivery at least one full business
day prior to the Additional Closing Date.
The number of Additional Shares to be sold to each Underwriter shall be
the number which bears the same ratio to the aggregate number of Additional
Shares being purchased as the number of Firm Shares set forth opposite the name
of such Underwriter in Schedule I hereto (or such number increased as set forth
in Section 10 hereof) bears to 3,600,000, subject, however, to such adjustments
to eliminate any fractional shares as you in your sole discretion shall make.
Payment for the Additional Shares shall be made [by certified or official
bank check or checks drawn in federal funds or similar same day funds, payable
to the order of the Company for the Additional Shares sold
<PAGE>
11
by it and to the order of the Custodian for the Additional Shares to be sold by
the Selling Stockholders] [by wire transfer in same day funds] at the offices of
Bear, Stearns & Co. Inc., 245 Park Avenue, New York, New York 10167, or such
other location as may be mutually acceptable, upon delivery of the certificates
for the Additional Shares to you for the respective accounts of the Under
writers.
4. Offering. The Company has been advised by you that, upon your
--------
authorization of the release of the Firm Shares, the Underwriters propose to
offer the Shares for sale to the public upon the terms set forth in the
Prospectus.
5. Covenants of the Company. The Company covenants and agrees with the
------------------------
Underwriters that:
(a) If the Registration Statement has not yet been declared
effective the Company will use its best efforts to cause the Registration
Statement and any amendments thereto to become effective as promptly as
possible, and if Rule 430A is used or the filing of the Prospectus is otherwise
required under Rule 424(b) or Rule 434, the Company will file the Prospectus
(properly completed if Rule 430A has been used) pursuant to Rule 424(b) or Rule
434 within the prescribed time period and will provide evidence satisfactory to
you of such timely filing. If the Company elects to rely on Rule 434, the
Company will prepare and file a term sheet that complies with the requirements
of Rule 434.
The Company will notify you promptly (and, if requested by you, will
confirm such notice in writing) (i) when the Registration Statement and any
amendments thereto become effective, (ii) of any request by the Commission for
any amendment of or supplement to the Registration Statement or the Prospectus
or for any additional information, (iii) of the mailing or the delivery to the
Commission for filing of any amendment of or supplement to the Registration
Statement or the Prospectus, (iv) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or any post-
effective amendment thereto or of the initiation, or the threatening, of any
proceedings therefor, (v) of the receipt of any comments regarding the
Registration Statement or any post-effective amendment from the Commission, and
(vi) of the receipt by the Company of any notification with respect to the
suspension of the qualification of the Shares for sale in any jurisdiction or
the initiation or threatening of any proceeding for that purpose. If the
Commission shall propose or enter a stop order at any time, the Company will
make every reasonable effort to prevent the issuance of any such stop order and,
if issued, to obtain the lifting of such order as soon as possible. The Company
will not file any amendment to the Registration Statement or any amendment of or
supplement to the Prospectus (including the prospectus required to be filed
pursuant to Rule 424(b)or Rule 434) after the effective date of the Registration
Statement that differs from the prospectus on file at the time of the
effectiveness of the Registration
<PAGE>
12
Statement to which you shall reasonably object in writing after being timely
furnished in advance a copy thereof.
(b) If at any time when a prospectus relating to the Shares is
required to be delivered under the Act any event shall have occurred as a result
of which the Prospectus as then amended or supplemented would, in the judgment
of the Company include an untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or if it shall be necessary at any time to amend or
supplement the Prospectus or Registration Statement to comply with the Act or
the Regulations, the Company will notify you promptly and prepare and file with
the Commission an appropriate amendment or supplement which will correct such
statement or omission and will use its best efforts to have any amendment to the
Registration Statement declared effective as soon as possible.
(c) The Company will promptly deliver to you four signed copies of
the Registration Statement, including exhibits and all amendments thereto, and
the Company will promptly deliver to each of the Underwriters such number of
copies of any preliminary prospectus, the Prospectus, the Registration
Statement, and all amendments of and supplements to such documents, if any, as
you may reasonably request.
(d) The Company will endeavor in good faith, in cooperation with
you, at or prior to the time of effectiveness of the Registration Statement, to
qualify the Shares for offering and sale under the securities laws relating to
the offering or sale of the Shares of such jurisdictions as you may designate
and to maintain such qualification in effect for so long as required for the
distribution thereof; except that in no event shall the Company be obligated in
connection therewith to qualify as a foreign corporation or to execute a general
consent to service of process.
(e) The Company will make generally available (within the meaning
of Section 11(a) of the Act) to its security holders and to you as soon as
practicable, but not later than 45 days after the end of its fiscal quarter in
which the first anniversary date of the effective date of the Registration
Statement occurs, an earning statement (in form complying with the provisions of
Rule 158 of the Regulations) covering a period of at least twelve consecutive
months beginning after the effective date of the Registration Statement.
(f) During the period of 180 days from the date of the Prospectus,
the Company will not, without your prior written consent, issue, sell, offer or
agree to sell, grant any option for the sale of, or otherwise dispose of,
directly or indirectly, any Common Stock (or any securities convertible into,
exercisable for or exchangeable for Common Stock), other than (i) the
<PAGE>
13
Company's sale of Shares hereunder, (ii) the Company's issuance of Common Stock
upon the exercise of presently outstanding stock options, (iii) grants of stock
options and other awards pursuant to the Company's 1996 Stock Option and Grant
Plan (and issuances of Common Stock upon the exercise of such awards), (iv)
sales of shares of Common Stock pursuant to the 1997 Employee Stock Purchase
Plan, (v) the Company's issuance of Common Stock upon the conversion of the
outstanding shares of Convertible Participating Preferred Stock and Class A
Common Stock in connection with the consummation of the transactions
contemplated hereby and by the Prospectus and (vi) shares to be issued in
connection with Company acquisitions, if any. In addition, the Company will
obtain the undertaking of each of its officers and directors and such of its
stockholders as have been heretofore designated by you and listed on Schedule
III attached hereto not to issue, sell, offer or agree to sell, grant any option
for the sale of, or otherwise dispose of, directly or indirectly, any Common
Stock (or any securities convertible into, exercisable for or exchangeable for
Common Stock), without your prior written consent during the period of 180 days
from the date of the Prospectus, other than (i) the sale of Additional Shares by
the Selling Stockholders hereunder, (ii) pursuant to a bona fide gift, (iii) by
will or the laws of descent and distribution or (iv) to the Company.
(g) During a period of three years from the effective date of the
Registration Statement, the Company will furnish to you copies of (i) all
reports to its stockholders; and (ii) all reports, financial statements and
proxy or information statements filed by the Company with the Commission or any
national securities exchange.
(h) The Company will apply the proceeds from the sale of the
Shares as set forth under "Use of Proceeds" in the Prospectus.
(i) The Company will use its best efforts to cause the Shares to
be approved for quotation on the Nasdaq National Market.
(j) The Company will file with the Commission such reports on Form
SR as may be required pursuant to Rule 463 of the Regulations.
(k) If the Company elects to rely upon Rule 462(b), the Company
shall file a Rule 462(b) Registration Statement with the Commission in
compliance with Rule 462(b) by 10:00 P.M., Washington, D.C. time, on the date of
this Agreement, and the Company shall at the time of filing either pay to the
Commission the filing fee for the Rule 462(b) Registration Statement or give
irrevocable instructions for the payment of such fee pursuant to Rule 111(b)
under the Act.
6. Payment of Expenses. Whether or not the transactions contemplated in
-------------------
this Agreement are consummated or this Agreement is
<PAGE>
14
terminated, the Company hereby agrees to pay all costs and expenses incident to
the performance of the obligations of the Company hereunder, including those in
connection with (i) preparing, printing, duplicating, filing and mailing the
Registration Statement, as originally filed and all amendments thereof
(including all exhibits thereto), any preliminary prospectus, the Prospectus and
any amendments or supplements thereto (including, without limitation, fees and
expenses of the Company's accountants and counsel), the underwriting documents
(including this Agreement) and all other documents related to the public
offering of the Shares (including those supplied to the Underwriters in
quantities as hereinabove stated), (ii) the issuance, transfer and delivery of
the Shares to the Underwriters, (iii) the qualification of the Shares under
state or foreign securities or Blue Sky laws, including the costs of printing
and mailing a preliminary and final "Blue Sky Survey" and the fees of counsel
for the Underwriters and such counsel's disbursements in relation thereto, (iv)
quotation of the Shares on the Nasdaq National Market, (v) filing fees of the
Commission and the National Association of Securities Dealers, Inc., (vi) the
cost of printing certificates representing the Shares and (vii) the cost and
charges of any transfer agent or registrar. Any transfer or other taxes imposed
in connection with the sale of the Shares to the Underwriters will be borne by
the Company and the Selling Stockholders pro rata. To the extent, if at all,
that any of the Selling Stockholders engage special legal counsel to represent
them in connection with this offering, the fees and expenses of such counsel
shall be borne by such Selling Stockholders.
7. Conditions of Underwriters' Obligations. The obligations of the
---------------------------------------
Underwriters to purchase and pay for the Firm Shares and the Additional Shares,
as provided herein, shall be subject to the accuracy of the representations and
warranties of the Company and the Selling Stockholders herein contained, as of
the date hereof and as of the Closing Date (for purposes of this Section 7
"Closing Date" shall refer to the Closing Date for the Firm Shares and any
Additional Closing Date, if different, for the Additional Shares), to the
performance by the Company and the Selling Stockholders of their respective
obligations hereunder, and to the following additional conditions:
(a) The Registration Statement shall have become effective not
later than 5:30 P.M., New York time, on the date of this Agreement, or at such
later time and date as shall have been consented to in writing by you; if the
Company shall have elected to rely upon Rule 430A or Rule 434 of the
Regulations, the Prospectus shall have been filed with the Commission in a
timely fashion in accordance with Section 5(a) hereof; if the Company has
elected to rely upon Rule 462(b), the Rule 462(b) Registration Statement shall
have become effective by 10:00 P.M., Washington, D.C. time, on the date of this
Agreement; and, at or prior to the Closing Date no stop order suspending the
effectiveness of the Registration Statement or any post-effective amendment
thereof shall have
<PAGE>
15
been issued and no proceedings therefor shall have been initiated or threatened
by the Commission.
(b) At the Closing Date you shall have received the opinion of
Goodwin, Procter & Hoar LLP, counsel for the Company and the Selling
Stockholders, dated the Closing Date, addressed to the Underwriters and in form
and substance satisfactory to Paul, Weiss, Rifkind, Wharton & Garrison
("Underwriters' Counsel"), to the effect that:
(i) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of
Delaware. The Company has all requisite corporate authority to own, lease and
license its properties as described in the Registration Statement and the
Prospectus.
(ii) The Company has an authorized capital stock as set
forth in the Registration Statement and the Prospectus. All of the
outstanding shares of Common Stock are duly and validly authorized and
issued, are fully paid and nonassessable and were not issued in violation
of or subject to any preemptive rights. The Shares to be delivered on the
Closing Date have been duly and validly authorized and, when delivered by
the Company in accordance with this Agreement, will be duly and validly
issued, fully paid and nonassessable and will not have been issued in
violation of or subject to any preemptive rights under the Delaware General
Corporation Law. The statements set forth in the Registration Statement
regarding the Company's capital stock under the caption "Description of
Capital Stock", insofar as they purport to constitute a summary of such
capital stock, are complete and accurate.
(iii) This Agreement has been duly and validly authorized,
executed and delivered by the Company.
(iv) The execution, delivery, and performance of this
Agreement and the consummation of the transactions contemplated hereby by
the Company do not and will not (A) conflict with or result in a breach of
any of the terms and provisions of, or constitute a default (or an event
which with notice or lapse of time, or both, would constitute a default)
under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company pursuant to, any
agreement, instrument, franchise, license or permit filed as an exhibit to
the Registration Statement to which the Company is a party or by which it
or its properties or assets may be bound or (B) violate or conflict with
any provision of the certificate of incorporation or by-laws of the Company
or, to the best knowledge of such counsel, any judgment, decree, order,
statute, rule or regulation of any
<PAGE>
16
Delaware, Massachusetts or United States federal court or any Delaware,
Massachusetts or United States federal governmental or regulatory agency or
body having jurisdiction over the Company or any of its properties or
assets. No consent, approval, authorization, order, registration, filing,
qualification, license or permit of or with any Delaware, Massachusetts or
United States federal court or any public, governmental, or regulatory
agency or body having jurisdiction over the Company or any of its
properties or assets is required for the execution, delivery and
performance of this Agreement or the consummation of the transactions
contemplated hereby, except for (1) such as may be required under state or
other securities or Blue Sky laws in connection with the purchase and
distribution of the Shares by the Underwriters (as to which such counsel
need express no opinion) and (2) such as have been made or obtained under
the Act.
(v) The Registration Statement (including the Rule 462(b)
Registration Statement, if any) and the Prospectus and any amendments
thereof or supplements thereto (other than the financial statements and
schedules and other financial data included or incorporated by reference
therein, as to which no opinion need be rendered) comply as to form in all
material respects with the requirements of the Act and the Regulations.
(vi) The Registration Statement (including the Rule 462(b)
Registration Statement, if any) is effective under the Act, and, to the
best knowledge of such counsel, no stop order suspending the effectiveness
of the Registration Statement, the Rule 462(b) Registration Statement, if
any, or any post-effective amendment thereof has been issued and, to such
counsel's knowledge, no proceedings therefor have been initiated or
threatened by the Commission and all filings required by Rule 424(b) of the
Regulations have been made.
(vii) To the best of such counsels' knowledge, any
instrument, document, lease, license, contract or other agreement
(collectively, "Documents") required to be described or referred to in the
Registration Statement or the Prospectus has been properly described or
referred to therein and any Document required to be filed as an exhibit to
the Registration Statement has been filed as an exhibit thereto.
(viii) A Power of Attorney and a Custody Agreement have been
duly and validly authorized, executed and delivered by each Selling
Stockholder and constitute valid and binding agreements of such Selling
Stockholder in accordance with their terms.
(ix) This Agreement has been duly and validly authorized,
executed and delivered by or on behalf of each Selling Stockholder; and the
sale of the Additional Shares to be sold by each Selling
<PAGE>
17
Stockholder hereunder and the compliance by such Selling Stockholder with
all of the provisions of this Agreement, the Power of Attorney and the
Custody Agreement and the consummation of the transactions contemplated
herein will not result in any violation of the provisions of the
Certificate of Incorporation or By-laws of such Selling Stockholder if such
Selling Stockholder is a corporation, the Partnership Agreement of such
Selling Stockholder if such Selling Stockholder is a partnership or any
order, rule or regulation known to such counsel of any Delaware,
Massachusetts or United States federal court or governmental agency or body
having jurisdiction over such Selling Stockholder or the property of such
Selling Stockholder;
(x) No consent, approval, authorization or order of any
Delaware, Massachusetts or United States court or governmental agency or
body is required for the consummation of the transactions contemplated by
this Agreement in connection with the Shares to be sold by each Selling
Stockholder hereunder, except such as have been obtained under the Act and
such as may be required under state or other securities or Blue Sky laws in
connection with the purchase and distribution of such Shares by the
Underwriters.
(xi) Upon payment and delivery in accordance with this
Agreement, good and valid title to the Additional Shares being sold by each
Selling Stockholder free and clear of all liens, encumbrances, equities or
claims, will have been transferred to each of the several Underwriters who
purchased such Additional Shares in good faith and without notice of any
such liens, encumbrances, equities, claims or other adverse claims within
the meaning of the Uniform Commercial Code.
In addition, such opinion shall also contain a statement in such
counsels' customary form that such counsel has participated in conferences with
officers and representatives of the Company, representatives of the independent
public accountants for the Company and the Underwriters at which the contents
and the Prospectus and related matters were discussed and, no facts have come to
the attention of such counsel which would lead such counsel to believe that
either the Registration Statement at the time it became effective (including the
information deemed to be part of the Registration Statement at the time of
effectiveness pursuant to Rule 430A(b) or Rule 434, if applicable), the Rule
462(b) Registration Statement, if any, or any amendment thereof made prior to
the Closing Date as of the date of such Rule 462(b) Registration Statement or
amendment, contained an untrue statement of a material fact or omitted to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading or that the Prospectus as of its date (or any
amendment thereof or supplement thereto made prior to the Closing Date as of the
date of such amendment or supplement) and as of the Closing Date contained or
contains an untrue statement of a material fact or omitted or omits to state any
material fact required to be stated therein or necessary to make the
<PAGE>
18
statements therein, in light of the circumstances under which they were made,
not misleading (it being understood that such counsel need express no belief or
opinion with respect to the financial statements and schedules and other
financial, statistical or accounting data included or incorporated by reference
therein).
In rendering such opinion, such counsel may rely as to matters
involving the application of laws other than the laws of the United States and
jurisdictions in which they are admitted, to the extent such counsel deems
proper and to the extent specified in such opinion, if at all, upon an opinion
or opinions (in form and substance reasonably satisfactory to Underwriters'
Counsel) of other counsel reasonably acceptable to Underwriters' Counsel,
familiar with the applicable laws. The opinion of such counsel for the Company
and the Selling Stockholders shall state that the opinion of any such other
counsel is in form satisfactory to such counsel and, in their opinion, you and
they are justified in relying thereon.
(c) At the Closing Date you shall have received the opinion of
LePore, Zimmerer, LePore & Luizzi, counsel for the Company, dated the Closing
Date addressed to the Underwriters and in form and substance satisfactory to
Underwriters' Counsel, to the effect that:
(i) The Company is duly qualified and in good standing as a
foreign corporation in New Jersey, Virginia and each other jurisdiction in
which the character or location of its properties (owned, leased or
licensed) or the nature or conduct of its business makes such qualification
necessary, except for those failures to be so qualified or in good standing
which will not in the aggregate have a material adverse effect on the
Company.
(ii) The Company has all requisite corporate authority to
own, lease and license its properties and conduct its business as now being
conducted and as described in the Registration Statement and the
Prospectus.
(iii) To the best of such counsel's knowledge, there is no
litigation or governmental or other action, suit, proceeding or
investigation before any court or before or by any public, regulatory or
governmental agency or body pending or threatened against, or involving
the properties or business of, the Company, which is of a character
required to be disclosed in the Registration Statement and the Prospectus
which has not been properly disclosed therein.
(iv) The execution, delivery, and performance of this
Agreement and the consummation of the transactions contemplated hereby by
the Company do not and will not violate or conflict with, to the best of
such counsel's knowledge, any judgment, decree, order, statute, rule or
regulation of any New Jersey court or any governmental or regulatory agency
or body having jurisdiction over the Company or any of its properties or
assets. No
<PAGE>
19
consent, approval, authorization, order, registration, filing,
qualification, license or permit of or with any New Jersey court or any
public, governmental, or regulatory agency or body having jurisdiction over
the Company or any of its properties or assets is required for the
execution, delivery and performance of this Agreement or the consummation
of the transactions contemplated hereby, except for (1) such as may be
required under New Jersey state or other securities or Blue Sky laws in
connection with the purchase and distribution of the Shares by the
Underwriters (as to which such counsel need express no opinion) and (2)
such as have been made or obtained under the Act.
In rendering such opinion, such counsel may rely as to matters
involving the application of laws other than the laws of the United States and
jurisdictions in which they are admitted, to the extent such counsel deems
proper and to the extent specified in such opinion, if at all, upon an opinion
or opinions (in form and substance reasonably satisfactory to Underwriters'
Counsel) of other counsel reasonably acceptable to Underwriters' Counsel,
familiar with the applicable laws. The opinion of such counsel for the Company
shall state that the opinion of any such other counsel is in form satisfactory
to such counsel and, in their opinion, you and they are justified in relying
thereon.
(d) All documents provided to satisfy the conditions contained
herein shall be satisfactory in form and substance to you and to Underwriters'
Counsel, and the Underwriters shall have received from said Underwriters'
Counsel a favorable opinion, dated as of the Closing Date with respect to the
issuance and sale of the Shares, the Registration Statement and the Prospectus
and such other related matters as you may reasonably require, and the Company
shall have furnished to Underwriters' Counsel such documents as they reasonably
request for the purpose of enabling them to pass upon such matters.
(e) At the Closing Date you shall have received a certificate of
the Chief Executive Officer and Chief Financial Officer of the Company, dated
the Closing Date to the effect that (i) the conditions set forth in subsection
(a) of this Section 7 have been satisfied, (ii) as of the date hereof and as of
the Closing Date the representations and warranties of the Company set forth in
Section 1 hereof are accurate, (iii) as of the Closing Date the obligations of
the Company to be performed hereunder on or prior thereto have been duly
performed and (iv) subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, the Company has not
sustained any material loss or interference with its businesses or properties
from fire, flood, hurricane, accident or other calamity, whether or not covered
by insurance, or from any labor dispute or any legal or governmental proceeding,
and there has not been any material adverse change, or any development involving
a material adverse change, in the business, properties, operations, condition
(financial or otherwise), or results of operations of the
<PAGE>
20
Company, except in each case as described in or contemplated by the Registration
Statement and the Prospectus.
(f) At the time this Agreement is executed and at the Closing
Date, you shall have received a letter, from each of Arthur Andersen LLP and
M.R. Weiser & Co. LLP, independent public accountants for the Company, dated,
respectively, as of the date of this Agreement and as of the Closing Date
addressed to the Underwriters and substantially in the form heretofore approved
by you.
(g) Prior to the Closing Date the Company and the Selling
Stockholders shall have furnished to you such further information, certificates
and documents as you may reasonably request.
(h) You shall have received from each person who is a director or
officer of the Company or such stockholders as have been heretofore designated
by you and listed on Schedule II hereto an agreement to the effect that such
person will not, directly or indirectly, without your prior written consent,
offer, sell, offer or agree to sell, grant any option to purchase or otherwise
dispose (or announce any offer, sale, grant of an option to purchase or other
disposition) of any shares of Common Stock (or any securities convertible into,
exercisable for or exchangeable or exercisable for shares of Common Stock) for a
period of 180 days after the date of the Prospectus, other than (i) the sale of
Additional Shares by the Selling Stockholders hereunder, (ii) pursuant to a bona
fide gift, (iii) by will or the laws of descent and distribution or (iv) to the
Company.
(i) At the Closing Date, the Shares shall have been approved for
quotation on the Nasdaq National Market, subject to official notice of issuance.
If any of the conditions specified in this Section 7 shall not have
been fulfilled when and as required by this Agreement, or if any of the
certificates, opinions, written statements or letters furnished to you or to
Underwriters' Counsel pursuant to this Section 7 shall not be in all material
respects reasonably satisfactory in form and substance to you and to
Underwriters' Counsel, all obligations of the Underwriters hereunder may be
canceled by you at, or at any time prior to, the Closing Date and the
obligations of the Underwriters to purchase the Additional Shares may be
canceled by you at, or at any time prior to, the Additional Closing Date. Notice
of such cancellation shall be given to the Company in writing, or by telex or
telegraph or confirmed by letter via overnight mail.
8. Indemnification.
---------------
(a) The Company agrees and each of the Selling Stockholders
severally and not jointly agrees to indemnify and hold harmless each Underwriter
and each person, if any, who controls any Underwriter within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act, against any and all
losses, liabilities,
<PAGE>
21
claims, damages and expenses as incurred (including but limited to attorneys'
fees and any and all expenses whatsoever incurred in investigating, preparing or
defending against any litigation, commenced or threatened, or any claim, and any
and all amounts paid in settlement of any claim or litigation), joint or
several, to which they or any of them may become subject under the Act, the
Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages
or expenses (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement for the registration of the Shares, as originally
filed or any amendment thereof, or any related preliminary prospectus or the
Prospectus, or in any supplement thereto or amendment thereof, or arise out of
or are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading; provided, however, that the Company will not be liable in any
-------- -------
such case to the extent but only to the extent that any such loss, liability,
claim, damage or expense arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made
therein in reliance upon and in conformity with written information furnished to
the Company by or on behalf of any Underwriter through you expressly for use
therein; and provided, further, that each Selling Stockholder will be liable in
-------- -------
any such case to the extent but only to the extent that any such loss,
liability, claim, damage or expense arises out of or is based upon any such
untrue statement or alleged untrue statement or omission or alleged omission
made therein in reliance upon and in conformity with written information
furnished to the Company by or on behalf of any such Selling Stockholder
expressly for use therein. In no case shall any Selling Stockholder be liable
or responsible for any amount in excess of the gross proceeds received by such
Selling Stockholder with respect to the Shares sold by such Selling Stockholder.
The indemnity contained in this subsection (a) with respect to any preliminary
prospectus shall not inure to the benefit of any Underwriter from whom the
person asserting any such losses, liabilities, claims, damages and expenses
purchased the Shares which are the subject thereof (or to the benefit of any
person controlling such Underwriter) if at or prior to the written confirmation
of the sale of such Shares a copy of the Prospectus (or the Prospectus as
amended or supplemented) was not sent or delivered to such person and the untrue
statement or omission of a material fact contained in such preliminary
prospectus was corrected in the Prospectus (or the prospectus as amended or
supplemented). This indemnity agreement will be in addition to any liability
which the Company or the Selling Stockholders may otherwise have including under
this Agreement.
(b) Each Underwriter severally, and not jointly, agrees to
indemnify and hold harmless the Company, the Selling Stockholders, each of the
directors of the Company, each of the officers of the Company who shall have
signed the Registration Statement, and each other person, if any, who controls
the Company or the Selling Stockholders within the meaning of Section 15 of the
Act or Section 20(a) of the Exchange Act, against any losses, liabilities,
claims, damages and expenses as incurred (including but not limited to
attorneys' fees and any and all
<PAGE>
22
expenses incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim, and any and all amounts paid
in settlement of any claim or litigation), jointly or several, to which they or
any of them may become subject under the Act, the Exchange Act or otherwise,
insofar as such losses, liabilities, claims, damages or expenses (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement for
the registration of the Shares, as originally filed or any amendment thereof, or
any related preliminary prospectus or the Prospectus, or in any amendment
thereof or supplement thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that any such loss, liability, claim, damage or
expense arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made therein in reliance upon
and in conformity with written information furnished to the Company by or on
behalf of any Underwriter through you expressly for use therein; provided,
--------
however, that in no case shall any Underwriter be liable or responsible for any
- -------
amount in excess of the underwriting discount applicable to the Shares purchased
by such Underwriter hereunder. This indemnity will be in addition to any
liability which any Underwriter may otherwise have including under this
Agreement. The Company acknowledges that the statements set forth in the last
paragraph of the cover page and in the ______ paragraphs under the caption
"Underwriting" in the Prospectus and the legend concerning passive market making
on the second page of the Prospectus constitute the only information furnished
in writing by or on behalf of any Underwriter expressly for use in the
registration statement relating to the Shares as originally filed or in any
amendment thereof, any related preliminary prospectus or the Prospectus or in
any amendment thereof or supplement thereto, as the case may be.
(c) Promptly after receipt by an indemnified party under subsection
(a) or (b) above of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify each party against whom
indemnification is to be sought in writing of the commencement thereof (but the
failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 8), except that no
indemnification provided for in this Section 8 shall be available to any party
who shall fail to give notice as provided for in this subsection (c) if the
party to whom notice was not given was unaware of the action, suit,
investigation inquiry or proceedings to which the notice would have related and
was prejudiced by the failure to give notice. In case any such action is
brought against any indemnified party, and it notifies an indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
therein, and to the extent it may elect by written notice delivered to the
indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof with counsel satisfactory to
such indemnified party. Notwithstanding the foregoing, the indemnified party or
parties shall have the right to
<PAGE>
23
employ its or their own counsel in any such case, but the fees and expenses of
such counsel shall be at the expense of such indemnified party or parties unless
(i) the employment of such counsel shall have been authorized in writing by one
of the indemnifying parties in connection with the defense of such action, (ii)
the indemnifying parties shall not have employed counsel to have charge of the
defense of such action within a reasonable time after notice of commencement of
the action, or (iii) such indemnified party or parties shall have reasonably
concluded that there may be defenses available to it or them which are different
from or additional to those available to one or all of the indemnifying parties
and that the use of separate counsel is necessary in order to protect the
interests of the indemnified party (in which case the indemnifying parties shall
not have the right to direct the defense of such action on behalf of the
indemnified party or parties but shall have a right to participate in such
defense), in any of which events such fees and expenses shall be borne by the
indemnifying parties. Anything in this subsection to the contrary
notwithstanding, an indemnifying party shall not be liable for any settlement of
any claim or action effected without its written consent; provided, however,
-------- -------
that such consent was not unreasonably withheld.
9. Contribution. In order to provide for contribution in circumstances
------------
in which the indemnification provided for in Section 8 hereof is for any reason
held to be unavailable from any indemnifying party or is insufficient to hold
harmless a party indemnified thereunder, each indemnifying party shall
contribute to the aggregate losses, claims, damages, liabilities and expenses of
the nature contemplated by such indemnification provision (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 claims
asserted) as incurred to which an indemnified party may be subject, in such
proportions as is appropriate to reflect the relative benefits received by the
Company and the Selling Stockholders on the one hand and the Underwriters on the
other from the offering of the Shares or, if such allocation is not permitted by
applicable law or indemnification is not available as a result of the
indemnifying party not having received notice as provided in Section 8 hereof,
in such proportion as is appropriate to reflect not only the relative benefits
referred to above but also the relative fault of the Company and the Selling
Stockholders on the one hand and the Underwriters on the other in connection
with the statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company and the Selling Stockholders on
the one hand and the Underwriters on the other shall be deemed to be in the same
proportion as (x) the total proceeds from the offering (net of underwriting
discounts and commissions but before deducting expenses) received by the Company
and the Selling Stockholders bear to (y) the underwriting discounts and
commissions received by the Underwriters, in each case as set forth in the table
on the cover page of the Prospectus. The relative fault 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 or the Selling Stockholders on
the one hand or
<PAGE>
24
the Underwriters on the other 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 9
were determined by pro rata allocation (even if the Underwriters were treated as
one entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to above. Notwithstanding
the provisions of this Section 9, (i) in no case shall any Underwriter be
required to contribute an amount in excess of the underwriting discount
applicable to the Shares purchased by such Underwriter hereunder, (ii) in no
case shall any Selling Stockholder be required to contribute an amount in excess
of the gross proceeds received by such Selling Stockholder with respect to the
Shares sold by such Selling Stockholder and (iii) no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. Notwithstanding the provisions of this Section 9 and the
preceding sentence, no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Shares underwritten
by it and distributed to the public were offered to the public exceeds the
amount of any damages that such Underwriter has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission. For purposes of this Section 9, each person, if any, who controls an
Underwriter within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act shall have the same rights to contribution as such Underwriter, and
each person, if any, who controls the Company or the Selling Stockholders within
the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, each
officer of the Company who shall have signed the Registration Statement and each
director of the Company shall have the same rights to contribution as the
Company and the Selling Stockholders, subject in each case to clauses (i) and
(ii) of this Section 9. Any party entitled to contribution will, promptly after
receipt of notice of commencement of any action, suit or proceeding against such
party in respect of which a claim for contribution may be made against another
party or parties, notify each party or parties from whom contribution may be
sought, but the omission to so notify such party or parties shall not relieve
the party or parties from whom contribution may be sought from any obligation it
or they may have under this Section 9 or otherwise, except as otherwise
specifically provided in Section 8(c). No party shall be liable for contribution
with respect to any action or claim settled without its consent; provided,
--------
however, that such consent was not unreasonably withheld.
- -------
10. Default by an Underwriter.
-------------------------
(a) If any Underwriter or Underwriters shall default in its or
their obligation to purchase Firm Shares or Additional Shares hereunder, and if
the Firm Shares or Additional Shares with respect to which such default relates
do not (after giving effect to arrangements, if any, made by you pursuant to
subsection (b) below) exceed in the aggregate 10% of the number of Firm Shares
or Additional
<PAGE>
25
Shares, the Firm Shares or the Additional Shares to which the default relates
shall be purchased by the non-defaulting Underwriters in proportion to the
respective proportions which the numbers of Firm Shares set forth opposite their
respective names in Schedule I hereto bear to the aggregate number of Firm
Shares set forth opposite the names of the non-defaulting Underwriters.
(b) In the event that such default relates to more than 10% of
the Firm Shares or Additional Shares, as the case may be, or the Underwriters
fail to purchase the Firm Shares or Additional Shares as required by Section
10(a), you may in your discretion arrange for yourself or for another party or
parties (including any non-defaulting Underwriter or Underwriters who so agree)
to purchase such Firm Shares or Additional Shares, as the case may be, to which
such default relates on the terms contained herein. If within 24 hours after
such default by any Underwriter, you do not arrange for the purchase of the Firm
Shares or the Additional Shares, as the case may be, then the Company and the
Selling Stockholders shall be entitled to a further period of 24 hours within
which to arrange for another party or parties satisfactory to you to purchase
such Firm Shares or Additional Shares on such terms. In the event that within
two aforementioned 24-hour periods after such a default you do not arrange for
the purchase of the Firm Shares or Additional Shares, as the case may be, to
which such default relates as provided in this Section 10, this Agreement or, in
the case of a default with respect to the Additional Shares, the obligations of
the Underwriters to purchase and of the Company and of the Selling Stockholders
to sell the Additional Shares shall thereupon terminate, without liability on
the part of the Company or the Selling Stockholders with respect thereto (except
in each case as provided in Section 6, 8(a) and 9 hereof) or the Underwriters,
but nothing in this Agreement shall relieve a defaulting Underwriter or
Underwriters of its or their liability, if any, to the other Underwriters and
the Company and the Selling Stockholders for damages occasioned by its or their
default hereunder.
(c) In the event that the Firm Shares or Additional Shares to
which the default relates are to be purchased by the non-defaulting
Underwriters, or are to be purchased by another party or parties as aforesaid,
you or the Company and the Selling Stockholders shall have the right to postpone
the Closing Date or Additional Closing Date, as the case may be, for a period,
not exceeding five business days, in order to effect whatever changes may
thereby be made necessary in the Registration Statement or the Prospectus or in
any other documents and arrangements, and the Company agrees to file promptly
any amendment or supplement to the Registration Statement or the Prospectus
which, in the reasonable opinion of Underwriters' Counsel, may thereby be made
necessary or advisable. The term "Underwriter" as used in this Agreement shall
include any party substituted under this Section 10 with like effect as if it
had originally been a party to this Agreement with respect to such Firm Shares
and Additional Shares.
11. Survival of Representations and Agreements. All representations and
------------------------------------------
warranties, covenants and agreements of the Underwriters, the Company and the
<PAGE>
26
Selling Stockholders contained in this Agreement, including the agreements
contained in Section 6, the indemnity agreements contained in Section 8 and the
contribution agreements contained in Section 9, shall remain operative and in
full force and effect regardless of any investigation made by or on behalf of
any Underwriter or any controlling person thereof or by or on behalf of the
Company, any of its officers and directors or any controlling person thereof, or
on behalf of the Selling Stockholders or any controlling person thereof, and
shall survive delivery of and payment for the Shares to and by the Underwriters.
The representations contained in Section 1 and the agreements contained in
Sections 6, 8, 9 and 12(d) hereof shall survive the termination of this
Agreement, including termination pursuant to Section 10 or 12 hereof.
12. Effective Date of Agreement; Termination.
----------------------------------------
(a) This Agreement shall become effective, upon the later of when
(i) the Commission shall have provided notification of the effectiveness of the
Registration Statement or (ii) the execution of this Agreement. If either the
initial public offering price or the purchase price per Share has not been
agreed upon prior to 5:00 P.M., New York time, on the fifth full business day
after the Registration Statement shall have become effective, this Agreement
shall thereupon terminate without liability to the Company or the Underwriters
except as herein expressly provided. Until this Agreement becomes effective as
aforesaid, it may be terminated by the Company by notifying you or by you
notifying the Company and the Selling Stockholders. Notwithstanding the
foregoing, the provisions of this Section 12 and of Sections 1, 6, 8 and 9
hereof shall at all times be in full force and effect.
(b) You shall have the right to terminate this Agreement at any
time prior to the Closing Date or the obligations of the Underwriters to
purchase the Additional Shares at any time prior to the Additional Closing Date,
as the case may be, if (A) any domestic or international event or act or
occurrence has materially disrupted, or in your opinion will in the immediate
future materially disrupt, the market for the Company's securities or securities
in general; or (B) if trading on the New York or American Stock Exchanges shall
have been suspended, or minimum or maximum prices for trading shall have been
fixed, or maximum ranges for prices for securities shall have been required, on
the New York or American Stock Exchanges by the New York or American Stock
Exchanges or by order of the Commission or any other governmental authority
having jurisdiction; or (C) if a banking moratorium has been declared by a state
or federal authority or if any new restriction materially adversely affecting
the distribution of the Firm Shares or the Additional Shares, as the case may
be, shall have become effective; or (D) (i) if the United States becomes engaged
in hostilities or there is an escalation of hostilities involving the United
States or there is a declaration of a national emergency or war by the United
States or (ii) if there shall have been such change in political, financial or
economic conditions if the effect of any such event in (i) or (ii) as in your
judgment makes it impracticable or
<PAGE>
27
inadvisable to proceed with the offering, sale and delivery of the Firm Shares
or the Additional Shares, as the case may be, on the terms contemplated by the
Prospectus.
(c) Any notice of termination pursuant to this Section 12 shall
be by telephone, telex, or telegraph, confirmed in writing by letter.
(d) If this Agreement shall be terminated pursuant to any of the
provisions hereof (otherwise than pursuant to (i) notification by you as
provided in Section 12(a) hereof or (ii) Section 10(b) or 12(b) hereof), or if
the sale of the Shares provided for herein is not consummated because any
condition to the obligations of the Underwriters set forth herein is not
satisfied or because of any refusal, inability or failure on the part of the
Company or the Selling Stockholders to perform any agreement herein or comply
with any provision hereof, the Company or the Selling Stockholders (pro rata to
the extent of their refusal, inability or failure to perform) will, subject to
demand by you, reimburse the Underwriters for all out-of-pocket expenses
(including the fees and expenses of their counsel), incurred by the Underwriters
in connection herewith.
12. Notices. All communications hereunder, except as may be otherwise
-------
specifically provided herein, shall be in writing and , if sent to any
Underwriter, shall be mailed, delivered, or telexed or telegraphed and confirmed
in writing, to such Underwriter c/o Bear, Stearns & Co. Inc., 245 Park Avenue,
New York, New York 10167, Attention:_____________; if sent to the Company, shall
be mailed, delivered, or telegraphed and confirmed in writing to the Company,
17-17 Route 208 North, Fair Lawn, New Jersey 07410, Attention: Patrick G.
LePore, with a copy to John R. LeClaire, P.C., Goodwin, Procter & Hoar LLP,
Exchange Place, Boston, Massachusetts 02109-2881; if sent to the Selling
Stockholders, shall be mailed, delivered or telegraphed and confirmed in writing
to ___________________.
13. Parties. This Agreement shall insure solely to the benefit of, and
-------
shall be binding upon, the Underwriters, the Company, the Selling Stockholders
and the controlling persons, directors, officers, employees and agents referred
to in Section 8 and 9, and their respective personal representatives, successors
and assigns, and no other person shall have or be construed to have any legal or
equitable right, remedy or claim under or in respect of or by virtue of this
Agreement or any provision herein contained. The term "successors and assigns"
shall not include a purchaser, in its capacity as such, of Shares from any of
the Underwriters.
14. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of New York, but without regard to
principles of conflicts of law.
<PAGE>
28
If the foregoing correctly sets forth the understanding between you and
the Company, please so indicate in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement among us.
Very truly yours,
BORON, LePORE & ASSOCIATES, INC.
By:
---------------------------------
SELLING STOCKHOLDERS
By:
---------------------------------
Attorney-in-Fact
Accepted as of the date first above written
BEAR, STEARNS & CO. INC.
SMITH BARNEY INC.
WESSELS, ARNOLD & HENDERSON, L.L.C.
By:
---------------------------------
On behalf of themselves and the other
Underwriters named in Schedule I hereto.
<PAGE>
29
SCHEDULE I
Number of Firm
Name of Underwriter Shares to be Purchased
- ------------------- ----------------------
Bear, Stearns & Co. Inc
Smith Barney Inc.
Wessels, Arnold & Henderson, L.L.C.
Total. . . . . . . . . .
----------
----------
<PAGE>
30
SCHEDULE II
Selling Stockholders
--------------------
[To come.]
<PAGE>
31
SCHEDULE III
Stockholders Subject to the Lock-up Provision
[To come]
<PAGE>
EXHIBIT 4.1
NUMBER SHARES
BLP
THIS CERTIFICATE IS TRANSFERABLE IN BOSTON, MA OR NEW YORK, NY
COMMON STOCK
SEE REVERSE FOR CERTAIN DEFINITIONS, STATEMENTS RELATING TO RIGHTS, PREFERENCES,
PRIVILEGES AND RESTRICTIONS, IF ANY
CUSIP 10001P 10 2
BLP GROUP COMPANIES
...dedicated to healthcare communications
BORON, LEPORE & ASSOCIATES, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK,
$.01 PAR VALUE PER SHARE, OF
BORON, LEPORE & ASSOCIATES, INC.
(hereinafter called the "Corporation") transferable on the books of the
Corporation by the holder hereof in person or by duly authorized attorney upon
surrender of this certificate properly endorsed. This certificate and the shares
represented hereby are issued and shall be held subject to the provisions of the
Amended and Restated Certificate of Incorporation and the Amended and Restated
Bylaws of the Corporation as amended from time to time (copies of which are on
file with the Corporation), to which the holder by acceptance hereof assents.
This certificate is not valid unless countersigned and registered by the
Transfer Agent and Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
Dated:
COUNTERSIGNED AND REGISTERED:
STATE STREET BANK AND TRUST COMPANY
(Boston)
TRANSFER AGENT AND REGISTRAR
BY
AUTHORIZED SIGNATURE
BORON, LEPORE & ASSOCIATES, INC.
1996
DELAWARE
/s/ Patrick G. LePore
CHIEF EXECUTIVE OFFICER AND PRESIDENT
/s/ Martin J. Veilleux
CHIEF FINANCIAL OFFICER AND TREASURER
<PAGE>
BORON, LEPORE & ASSOCIATES, INC.
THE CORPORATION IS AUTHORIZED TO ISSUE MORE THAN ONE CLASS AND SERIES OF
STOCK. THE CORPORATION WILL FURNISH TO THE HOLDER UPON WRITTEN REQUEST WITHOUT
CHARGE A STATEMENT OF THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES
THEREOF AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES
AND/OR RIGHTS.
The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -- as tenants in common
TEN ENT -- as tenants by the entireties
JT TEN -- as joint tenants with right of survivorship and not as tenants in
common
UNIF GIFT MIN ACT -- Custodian
-----------------------------
(Cust) (Minor)
under Uniform Gifts to Minors
Act
---------------------------
(State)
Additional abbreviations may also be used though not in the above list.
For value received, hereby sell, assign and transfer unto
------------------------
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
[ ]
-------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE OF ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares
- ------------------------------------------------------------------------
of the common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
Attorney
- -----------------------------------------------------------------------
to transfer the said stock on the books of the within named Company with full
power of substitution in the premises.
Dated
--------------------------------------
- --------------------------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND
WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE
IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR
ANY CHANGE WHATEVER.
SIGNATURE(S) GUARANTEED:
- ---------------------------------------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO
S.E.C. RULE 17Ad-15.
<PAGE>
EXHIBIT 5.1
September __, 1997
Boron, LePore & Associates, Inc.
17-17 Route 208 North
Fair Lawn, NJ 07410
Re: REGISTRATION STATEMENT ON FORM S-1
Ladies and Gentlemen:
This opinion is delivered in our capacity as special counsel to Boron,
LePore & Associates, Inc. (the "Company") in connection with the preparation and
filing with the Securities and Exchange Commission under the Securities Act of
1933, as amended, of a Registration Statement on Form S-1 (the "Registration
Statement") relating to 4,140,000 shares of Common Stock, par value $.01 per
share (the "Registered Shares"), including 540,000 shares which the underwriters
have an option to purchase solely for the purpose of covering over-allotments.
All of the Registered Shares are to be sold by the Company to the several
underwriters (the "Underwriters") of which Bear, Stearns & Co. Inc., Smith
Barney Inc. and Wessels, Arnold & Henderson, L.L.C. are the representatives (the
"Representatives") pursuant to an Underwriting Agreement (the "Underwriting
Agreement") to be entered into between the Company and the Representatives of
the Underwriters.
As counsel for the company, we have examined the form of the proposed
Underwriting Agreement being filed as an exhibit to the Registration Statement,
the Company's Amended and Restated Certificate of Incorporation, as amended, and
the Company's Amended and Restated By-laws, each as presently in effect, and
such records, certificates and other documents of the Company as we have deemed
necessary or appropriate for the purposes of this opinion.
Based on the foregoing, we are of the opinion that when the Underwriting
Agreement is completed (including the insertion therein of pricing terms) and
executed by the Company and on behalf of the Underwriters, and the Registered
Shares are sold to the Underwriters and paid for pursuant to the terms of the
Underwriting Agreement, the Registered Shares will be duly authorized, legally
issued, fully paid and non-assessable by the Company under the General
Corporation Law of the State of Delaware.
<PAGE>
We hereby consent to being named as counsel to the Company in the
Registration Statement, to the references therein to our firm under the caption
"Legal Matters," and to the inclusion of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Goodwin, Procter & Hoar LLP
GOODWIN, PROCTER & HOAR LLP
<PAGE>
EXHIBIT 10.24
INCENTIVE STOCK OPTION AGREEMENT
UNDER THE BORON, LEPORE & ASSOCIATES, INC.
1996 STOCK OPTION AND GRANT PLAN
NAME OF OPTIONEE: Brian Smith
NO./CLASS OF OPTION SHARES: 300,000 Shares of Class A Common Stock
GRANT DATE: August 18, 1997
FINAL EXPIRATION DATE: August 18, 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 (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
<PAGE>
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.
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,
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, 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
2
<PAGE>
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) August 18, 2007, subject to the provisions hereof (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 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
3
<PAGE>
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 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 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
4
<PAGE>
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.
(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.
5
<PAGE>
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 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.
6
<PAGE>
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 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, 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. 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
7
<PAGE>
date for determining stockholders entitled to participate in) such transaction
or event, 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 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 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
8
<PAGE>
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.
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.
9
<PAGE>
(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 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.
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/ Brian Smith
------------------------------
Brian Smith
Optionee's Address:
------------------------------
------------------------------
DESIGNATED BENEFICIARY:
------------------------------
Beneficiary's Address:
------------------------------
------------------------------
11
<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, (i) 100,000 of the Option Shares subject to this Stock Option shall
vest and become exercisable on the first anniversary of the consummation of an
initial public offering of stock by the Company and, if not previously vested,
on August 18, 2004 (the "IPO Shares"), and (ii) the remaining 200,000 Option
Shares subject to this Stock Option shall vest and become exercisable, to the
extent not previously vested, 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. 40,000 August 18, 2000
2. 40,000 (80,000) August 18, 2001
3. 40,000 (120,000) August 18, 2002
4. 40,000 (160,000) August 18, 2003
5. 40,000 (200,000) August 18, 2004
</TABLE>
3. Performance Vesting Events. Notwithstanding anything hereunder to the
--------------------------
contrary (but subject to Section 1(c) and Section 6 of the attached Agreement),
200,000 of the Option Shares shall vest upon attainment of the Performance
Objectives as specified below for 1998 and 1999, 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. For purposes of vesting, the
Option Shares shall be divided into two equal tranches ("Tranches") of 100,000
shares each (subject to adjustment for stock splits and the like as provided in
the attached Incentive Stock Option Agreement). A tranche of up to 100,000
Option Shares will be eligible for vesting in each of 1998 and 1999. Vesting
shall be deemed effective as of the last day of the calendar year to which the
Performance Objective relates. Determination of whether a Performance Objective
has been met will be made conclusively by the Company based on its good faith
review of its audited financial statements for the relevant year following
preparation thereof. The Performance Objectives will be based upon the Gross
Margin Dollars of the Market Connections Company ("MCC") and Contract Sales
Organization ("CSO") divisions of the Company, with a subtranche of a maximum of
50,000 per division eligible for vesting annually in 1998 and 1999.
12
<PAGE>
For purposes of the "Performance Objectives":
. A maximum of 100,000 Option Shares may vest for each of 1998 and 1999.
Of such 100,000 Option Shares available for vesting annually in 1998
and 1999, a maximum of 50,000 Option Shares may vest for each of MCC
and CSO.
. After the achievement of the maximum Gross Margin Dollars target
specified in 1998 or 1999 for either MCC or CSO, excess Gross Margin
Dollars may be applied to the Gross Margin Dollars target in the other
division.
. Gross Margin Dollars equals revenues minus cost of sales properly
attributable to the related operations as determined by the Company in
good faith.
. The Gross Margin Dollars targets for each of MCC and CSO which shall
constitute the Performance Goals for 1998 and 1999 shall be based upon
the financial and strategic objectives set forth in the 1998 and 1999
business plan, as applicable, which is recommended by the CEO of the
Company based upon his good faith assessment of the business of MCC and
CSO and approved by the Board of Directors of the Company prior to or
following the commencement of the applicable fiscal year.
4. Adjustment of Target Prices in Certain Events. The numbers of Option
---------------------------------------------
Shares set forth above will be subject to adjustment in the case of a merger,
consolidation, reorganization, recapitalization, reclassification, stock
dividend, stock split, combination of shares, exchange of shares, change in
corporate structure or the like, in which case appropriate and proportionate
adjustments shall be made as provided in the attached Incentive Stock Option
Agreement, subject to the other terms of such Agreement.
5. Certain Employment Related Terminations. Notwithstanding anything herein
---------------------------------------
to the contrary, in the event the employment of the Optionee terminates as a
result of (i) a termination by the Company without "cause," or (ii) resignation
or termination by the Employee due to an uncured, material default by the
Company, pursuant to or under the circumstances contemplated by Section 6(f) of
the Employment Agreement between the Company and the Optionee dated as of August
18, 1997, then (i) the IPO Shares shall, to the extent not then vested, vest and
be exercisable for three months after the termination of employment, and (ii)
the 100,000 Option Shares subject to accelerated vesting upon achievement of
Performance Goals, as to the Tranches which could have vested in the year in
which the termination of employment occurs, shall nonetheless remain in effect
(as a non-qualified option, if applicable) until such time as the Company
determines whether any portion of the applicable Performance Goal for such year
had been obtained, whereupon any applicable
13
<PAGE>
portion of the Tranche shall vest and be exercisable for three months after the
Company gives the Optionee notice thereof, and the remainder of such Tranche and
all other Option Shares which are not then vested shall lapse and terminate. In
any case this Stock Option shall terminate as contemplated by Section 6 of the
attached Agreement or on the Expiration Date.
14
<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
15
<PAGE>
EXHIBIT 10.26
August 28, 1997
Mr. Christopher Sweeney
c/o Boron, LePore & Associates, Inc.
17-17 Route 208 North
Fair Lawn, NJ 07410
Re: Employment Agreement (the "Agreement") dated December 4, 1996 by and
between Christopher Sweeney ("Sweeney") and Boron, LePore &
Associates, (the "Company"); Non-Competition Agreements dated December
4, 1996 between Sweeney and the Company (the "Non-Competition
Agreement"); and Restricted Stock Agreement dated December 4, 1996
between Sweeney and the Company (the "Restricted Stock Agreement")
---------------------------------------------------------------------
Dear Chris:
Reference is made to the Agreement, the Non-Competition Agreement and the
Restricted Stock Agreement. Capitalized terms used herein and not otherwise
defined shall have the respective meanings set forth in the Agreement.
Effective as of September 15, 1997, you have ceased to be an employee of
the Company and you hereby confirm your resignation as an officer of the
Company, including as Executive Vice President Sales and Operations. In
connection therewith, you and the Company agree that you will be entitled to
compensation in accordance with and as if your employment terminated under
Section 6(d) of the Agreement. From and after September 15, 1997 until
September 15, 1998, you will serve as a consultant to the Company. In such
capacity, you shall provide such advisory, consultative and appropriate special
services in connection with the business of the Company as may be reasonably
requested by the Chief Executive Officer of the Company (the "CEO"), including
assisting the Company in (i) pursuing merger and acquisition activities,
including identifying potential acquisition candidates, and (ii) maintaining its
client relationship with clients specified by the CEO. You agree to provide
such services during normal business hours and at such times and places as are
reasonably acceptable to both parties. The Company will not exercise
supervision over you in the performance of any such services, nor will the
Company require compliance with
<PAGE>
orders or instructions as to how such services are to be performed. In your
capacity as a consultant, you will be an independent contractor and will have no
authority, executive or otherwise, in the affairs of the Company. The term of
your engagement as a consultant to the Company may be extended by the mutual
consent of you and the Company.
You will be paid $150,000 per annum (in periodic installments in accordance
with the Company's usual practice for its executive officers) for your services
as a consultant to the Company, and you will be reimbursed for all reasonable
business expenses incurred by you in connection with your service as a
consultant to the Company. Notwithstanding the prior sentence, you will be paid
at a rate of $265,000 per annum until the closing of the Stock Redemption (as
hereinafter defined). Your medical and dental coverage will continue until
September 15, 1998, at which time you will have the opportunity to complete the
necessary forms for COBRA coverage. Other than as set forth above, you will
receive no compensation from the Company for your services as a consultant or
under the Agreement.
The term of the non-competition proscriptions contained in Section 1 of the
Non-Competition Agreement shall be amended to be through the period ended
September 15, 1999.
Upon the earlier to occur of (i) December 15, 1997 or (ii) the consummation
of the Company's initial public offering of stock (the "IPO"), you agree to
promptly sell to the Company and the Company agrees to promptly purchase from
you, at a purchase price of $8.00 per share (subject to appropriate adjustment
to reflect any stock split, stock dividend or similar event), the 450,000 shares
of Common Stock and 250,000 shares of Class A Common Stock of the Company
currently owned by you ($12.00 per share for 466,666 shares after the
consummation of the contemplated two-for-three reverse stock split) (the "Stock
Redemption"). The purchase price shall be paid in full in immediately available
funds at the closing of the Stock Redemption.
Except as amended by this letter, all other provisions of the Agreement,
the Non-Competition Agreement and the Restricted Stock Agreement shall remain in
full force and effect and be unmodified by this letter, with all provisions
being applied as nearly as possible to you in your new capacity as consultant to
the Company.
<PAGE>
If you are in agreement with the foregoing, please execute one copy of this
letter on the "Agreed and Acknowledged" line below and return it to me.
Very truly yours,
BORON, LEPORE & ASSOCIATES, INC.
/s/ Patrick G. LePore
--------------------------------
Patrick G. LePore
President and Chief Executive Officer
Agreed and Acknowledged:
/s/ Christopher J. Sweeney
- --------------------------
Christopher Sweeney
<PAGE>
Exhibit 11.1
Boron, LePore & Associates, Inc.
Statement Regarding Computation of Earnings Per Share
For the Year Ended December 31, 1996 and the Six Months
Ended June 30, 1997
(in thousands except per share data)
Six Months Ended
December 31, June 30,
1996 1997
---- ----
Net Income (loss) $(7,111) $2,306
------- ------
Common Stock 2,000 2,000
Class A Common Stock 794 794
Convertible Participating
Preferred Stock 4,667 4,667
Share equivalent for Redeemable
Preferred Stock 588 588
Share equivalent for unpaid
Redeemable Preferred Stock
Dividends - 34
Stock Options 224 224
------ ------
Pro forma weighted average
Common shares outstanding 8,273 8,307
------ ------
Net income (loss) per share $(0.86) $0.28
------ ------
<PAGE>
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
September 17, 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
September 17, 1997
