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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the fiscal year ended December 31, 1997
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from ____________ to
______________
Commission File Number:
BORON, LEPORE & ASSOCIATES, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 22-2365997
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
17-17 Route 208 North, Fair Lawn, New Jersey 07410
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(Address of principal executive offices) (Zip Code)
(201) 791-7272
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(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THIS ACT:
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THIS ACT:
Common Stock (par value $0.01 per share)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
X Yes ____ No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or Information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
As of March 23, 1998, there were 10,885,030 shares of Common Stock outstanding.
The aggregate market value of shares of such Common Stock (based upon the last
sale price of $31.9375 per share as of March 20, 1998 on the NASDAQ National
Market System) held by non-affiliates was approximately $347,640,646.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the Registrant's Proxy Statement in connection with the
Registrant's 1998 Annual Meeting of Stockholders scheduled to be held May 28,
1998 are incorporated by reference in Part III hereof.
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STATEMENTS MADE OR INCORPORATED INTO THIS FORM 10-K INCLUDE A NUMBER OF FORWARD-
LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF
1933 AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934. FORWARD LOOKING
STATEMENTS INCLUDE, WITHOUT LIMITATION, STATEMENTS CONTAINING THE WORDS
"ANTICIPATES", "BELIEVES", "EXPECTS", "INTENDS", "FUTURE", AND WORDS OF SIMILAR
IMPORT WHICH EXPRESS MANAGEMENTS'S BELIEFS, EXPECTATIONS OR INTENTIONS REGARDING
THE COMPANY'S FUTURE PERFORMANCE. THE COMPANY'S ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE SET FORTH IN THE FORWARD-LOOKING STATEMENTS. CERTAIN
FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE ARE DISCUSSED IN THE SECTION ENTITLED
"CERTAIN FACTORS THAT MIGHT AFFECT RESULTS" ON PAGE 19 OF THIS FORM 10-K.
ITEM 1. BUSINESS
GENERAL
Boron, LePore & Associates, Inc. (the "Company " or "BLP") provides
outsourced promotional, marketing, educational and field sales force logistics
services to the pharmaceutical industry. The Company has become a leading
provider of peer-to-peer meetings. BLP recently expanded the range of its
services. Newer service offerings include coordination of other types of
meetings such as symposia, continuing education conferences and video satellite
conferences; product marketing services; teleservices such as teledetailing,
telemarketing, sales support and fulfillment; contract sales services; and field
sales force logistics services. During 1997, in connection with this expansion
of services, the Company opened a teleservice center in Norfolk, Virginia in
July and established a contract sales organization in August. In addition, in
late 1997, the Company began forming a field force logistics organization. In
March 1998, the Company acquired a continuing medical education company.
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 AND COMPANY 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'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, educational and logistical services, focused mainly on
the pharmaceutical industry. The principal elements of the Company's strategy
are to: (i) offer a broad range of promotional, marketing, educational and field
sales force logistics services; (ii) increase business with existing customers;
(iii) obtain new customers; (iv) target new audiences; and (v) pursue strategic
acquisitions.
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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; (v) contract sales services; and
(vi) field sales force logistics services.
Promotional and Other Conferencing Services
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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
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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-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 14 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
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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.
Symposia. The Company added symposia in the fourth quarter of 1996 to
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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.
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.
Additional Conferencing Services. The Company provides a range of
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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
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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.
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The CE programs, which have been conducted by a separate division of the
Company, utilize certain of the Company's core competencies in handling
conferencing logistics. Because BLP has not historically been an accredited CE
service provider, it typically provided 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 CE programs are
frequently taped or otherwise recorded for further distribution to those
individuals who are unable to attend.
In March 1998, BLP acquired substantially all of the assets of Strategic
Implications International, Inc., a privately-held company located in Vienna,
Virginia ("Strategic Implications"). Strategic Implications is a provider of
continuing medical education and other related services, and has received
accreditation by the American Council for Continuing Medical Education and the
American Council on Pharmaceutical Education to provide such services. Such
accreditations are subject to review by the applicable authorities following the
transaction. Strategic Implications will be operated as a separate subsidiary of
of BLP.
Product Marketing Services
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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.
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
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With the proliferation of multiple forms of interactive media in the 1990s,
companies in a variety of industries are increasingly using teleservices as a
means of communicating information directly to current and prospective customers
and widening the scope of their sales efforts. The Company has expanded its
teleservice capabilities, in part, because it is a cost-efficient means,
compared to in-person sales calls, to promote, market and sell pharmaceutical or
other healthcare products to the highly fragmented universe of physicians,
pharmacists and other healthcare professionals. For instance, the Company
believes that small to mid-sized pharmaceutical companies, whose detailing
forces are limited in size, may seek to expand their sales and marketing efforts
for certain products through telemarketing.
BLP believes that the use of teletechnology as a means of marketing
pharmaceutical products is in an early stage of development and that there
exists a wide range of potential future uses, particularly in relation to
consumer healthcare. The Company's strategy involves leveraging its competitive
strengths, including its
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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.
With the opening of its 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.
As of December 1997, the Company had approximately 190 operational terminals
at the Norfolk facility and anticipates expanding to approximately 310 terminals
by May 1, 1998. As a result of the new capacity at the Norfolk facility, since
September 1997 the Company has reduced the number of teleservice terminals
operational in New Jersey from 125 to approximately 25. 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 being used for telemarketing, teledetailing (i.e.,
using the telephone to speak to physicians about pharmaceutical products),
telerecruiting for its conferencing services, in connection with its field force
logistics services and for an inbound consumer help line. 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.
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.
Contract Sales Services
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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
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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.
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.
Field Sales Force Logistics Services
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The Company's customers generally provide their sales forces in the field
with budgets with which to engage in promotional and educational efforts.
Because these field sales representatives typically have been responsible for
planning, coordinating and implementing these efforts with in-house staff,
outside vendors and meeting participants, the Company believes that the
representatives have historically had to divert valuable time away from their
primary sales and education activities. BLP's field sales force logistics
organization was created to allow pharmaceutical companies to increase the
efficiency and reach of their field sales forces by providing integrated
outsource solutions for the sales forces' meeting planning, event coordination
and other logistical functions. The Company believes that field sales force
logistics represents a substantial, emerging business opportunity, and that its
historical expertise and ability to invest in technology provide it with a
strategic advantage in delivering such services to potential customers.
The Company's field sales force logistics organization is designed to
handle all logistical matters for the field sales force of a customer upon the
direction of the sales force personnel. For example, a field sales
representative could contact a dedicated resource at BLP and request the
implementation of a meeting with doctors in an indicated field to be chaired by
a specified speaker. The Company would secure the meeting site, target and
generate the appropriate audience, identify and/or contact the speaker, arrange
for attendee and speaker travel arrangements, send out invitations and post-
meeting thank you notes, assist in obtaining any necessary approvals from the
home office and handle all other logistical details. BLP would also process and
make available to the sales representative all relevant programs and data on a
virtual basis via the internet and other forms of remote access.
BLP began forming a field sales force logistics organization in late 1997.
In March 1998, the Company signed a contract with a large pharmaceutical company
to provide field sales force logistical services for up to a two-year period.
Pursuant to that contract, the Company has created an organization of
approximately 80 employees dedicated to servicing the field sales force
logistics requirements of that customer. BLP is currently in the preliminary
stages of negotiations to provide field sales force logistics services to other
customers.
Field sales force logistics is a new area of business for BLP involving a
number of the same risks as the Company's conferencing services, as well as
risks not present in its traditional business, such as the risks that it will be
unable to efficiently implement the significant planning and coordination
efforts required by this business or that this new service will not be accepted
generally by pharmaceutical companies. There can be no assurance that the
Company will establish a significant or lasting presence in the market, or that
this market will develop at all.
CUSTOMERS
BLP believes that its relationships with its customers, which include many
of the largest pharmaceutical companies, are among its most important strategic
advantages. Prior to 1996, the Company's customers principally engaged the
Company to hold peer-to-peer meetings. Commencing in 1996, several of the
relationships expanded to include other services such as symposia, product
marketing and teleservices.
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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 20 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.
Revenue from two customers accounted for approximately $35,900,000 (49%) and
$13,400,000 (18%) of total revenue for the year ending December 31, 1997.
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,
educational and field sales force logistics services and large advertising
agencies which may seek to expand their service offerings. In addition, the
pharmaceutical companies' in-house marketing departments may provide similar
services to those provided by BLP and competition could increase as a result of
the expansion of the in-house marketing capabilities by BLP's customers or in
the pharmaceutical industry generally.
BLP competes against other companies offering pharmaceutical conferencing
and other outsourced promotional, marketing and educational services on the
basis of such factors as reputation, quality, experience, performance record,
effectiveness of service, ability to offer a range of integrated services,
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,
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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 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.
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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, educational and field sales force logistics
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.
EMPLOYEES
As of December 31, 1997, BLP had 708 employees, including 430 full-time
employees and 278 part-time employees. Of the full-time employees, 63 were
moderators, 23 were engaged in sales, 219 were engaged in sales support and
production, 99 were contract sales representatives, one was engaged in business
development and 25 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.
ITEM 2. PROPERTIES
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 28,700 square feet under a lease expiring in July 2007, with
options to expand the lease space. BLP also has leased a 14,248 square foot
warehouse adjacent to the teleservice center which is intended to be used for
fulfillment functions.
ITEM 3. LEGAL PROCEEDINGS
The Company, from time to time, is involved in legal proceedings incurred in
the normal course of business. The Company believes none of these proceedings
will have a material adverse effect on the financial condition or liquidity of
the Company. Additionally, a former shareholder and officer of the Company has
sent correspondence to the Company alleging securities and common law fraud and
breach of contract by senior officers of the Company in connection with the
settlement of contractual arrangements with the former shareholder/officer in
December, 1996. The Company believes the allegations of the former
shareholder/officer are without merit and intends to contest them vigorously
should litigation be commenced against the Company, its officers or other
personnel. The Company does not believe that this matter will have a material
adverse effect on its financial condition or results of operations, although
there can be no assurance that this will be the case.
10
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
11
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
(a) Market Information
------------------
The Company's Common Stock, $.01 par value ("Common Stock") has been traded
on the NASDAQ National Market ("Nasdaq") since the Company's initial public
offering on September 23, 1997 and currently trades under the symbol "BLPG".
The following table sets forth the high and low of the closing sales prices for
the Company's Common Stock as reported by Nasdaq for the periods indicated:
<TABLE>
<CAPTION>
MARKET PRICES (1)
----------------
1997 FISCAL QUARTERS HIGH LOW
--------------------- ------- -------
<S> <C> <C>
Third (from September 23) $24.125 $22.750
Fourth $28.000 $19.625
</TABLE>
(1) The prices listed reflect inter-dealer prices without retail mark-up, mark-
down or commission and may not necessarily represent actual transactions.
Holders
-------
The number of record holders of the Company's Common Stock as of March 20,
1997 was approximately 53, although the Company believes that the number of
beneficial owners of Common Stock as of that date was substantially higher.
Dividends
---------
The Company did not pay cash dividends on its Common Stock during the years
ended December 31, 1997 and December 31, 1996. The Company does not intend to
pay cash dividends on its Common Stock in the foreseeable future.
(b) Use of Proceeds
---------------
The Company's Use of Proceeds from its initial public offering, as reported
in its Form 10-Q for the third quarter of 1997 filed with the SEC on November
13, 1997, is updated as follows:
Implementation of management information system and enhancement of overall
technological capabilities - $823,000; capital expenditures for teleservice
center in Norfolk, Virginia - $831,000.
12
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The selected statement of operations data for the years ended December 31,
1995, 1996 and 1997 and the selected balance sheet data at December 31, 1996 and
1997 have been derived from the audited Financial Statements of the Company
included elsewhere in this Report on Form 10-K. The selected statement of
income data for the years ended December 31, 1993 and 1994 and the selected
balance sheet data at December 31, 1993, 1994 and 1995 have been derived from
the unaudited financial statements of the Company not included in this Report on
Form 10-K. 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 Form 10-K.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------
1993 1994 1995 1996 1997
-------- ------- ------- ---------- --------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues................................................ $19,339 $20,580 $21,775 $ 40,219 $72,907
Cost of sales........................................... 13,820 12,378 12,788 26,004 51,580
------- ------- ------- --------- -------
Gross profit.......................................... 5,519 8,202 8,987 14,215 21,327
------- ------- ------- --------- -------
Selling, general and administrative expenses............ 5,319 6,536 6,341 19,995[1] 12,444
------- ------- ------- --------- -------
Operating income (loss)............................... 200 1,666 2,646 (5,780) 8,883
Interest expense, net................................... 49 43 86 255 1,071
Nonrecurring loss on forgiveness of related party loan.. -- -- -- 1,076 --
------- ------- ------- --------- -------
Income (loss) before provision for income taxes....... 151 1,623 2,560 (7,111) 7,812
Provision for income taxes(2)........................... -- 25 51 -- 1,700
------- ------- ------- --------- -------
Net income (loss)..................................... $ 151 $ 1,598 $ 2,509 $ (7,111) $ 6,112
======= ======= ======= ========= =======
Net income (loss) per common share - basic.............. $ (1.18) $ 1.07
======== =======
Weighted average common shares outstanding - basic...... 6,028 4,947
======== =======
Net income (loss) per common share - diluted............ $ (1.18) $ 0.72
======== =======
Weighted average common shares
outstanding - diluted (3)............................... 6,028 8,507
======== =======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------
1993 1994 1995 1996 1997
------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................... $ 2 $ 30 $ 963 $ 7,176 $24,016
Working capital (deficit)............................... (1,707) 78 3,046 2,416 29,805
Total assets............................................ 1,792 5,128 10,499 23,097 51,056
Long-term debt, less current maturities................. 11 308 2,061 20,000 --
Redeemable equity securities............................ -- -- -- 12,500 --
Total stockholders' equity (deficit).................... (1,453) 145 2,505 (29,387) 32,843
</TABLE>
_______________
(1) Includes $10.0 million for special officer bonuses, including $7.5 million
as part of the TA Transaction and $0.6 million for fees related to the TA
Transaction (as defined in Item 7).
(2) 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.
(3) 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.
Weighted average common shares outstanding has been computed as provided in
Note 3 to the Financial Statements of the Company included elsewhere in this
Report on Form 10-K.
13
<PAGE>
ITEM 7. 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 Report on
Form 10-K. This Report on Form 10-K contains forward-looking statements.
Discussions containing such forward-looking statements may be found in the
material set forth below, as well as in this Form 10-K 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.
OVERVIEW
Boron, LePore & Associates, Inc. ("BLP" or the "Company") provides
outsourced promotional, marketing, educational and field force logistics
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
promotional, marketing, educational services and field force logistics.
Following several years of relatively modest revenue growth, BLP's revenues
grew significantly from 1995 to 1996 and then again from 1996 to 1997. This
growth resulted from increased business with existing customers, the addition of
new customers and the expansion of 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, continuing to increase business with existing customers and obtaining
new customers. As part of this strategy, over the last two years, the Company
has expanded its portfolio of services to include symposia, medical education,
product marketing, teleservices, contract sales and field force logistics
services. During 1997, in connection with this expansion of services, the
Company opened a new teleservice center in Norfolk, Virginia in July and
established a contract sales organization in August. In addition, in late 1997,
the Company began forming a field force logistics organization and, in March
1998, the Company signed a contract with a large pharmaceutical company to
provide field force logistics services for up to a two-year period. Such
services will include meeting planning, event coordination and other services.
The contract provides for a management fee component and a fee-for-service
component. The management fee for the first year is fixed and will represent
substantial revenues in 1998. The management fee for the second year is subject
to future negotiation. The fee-for-service component is dependent upon the level
of services provided. The Company believes field force logistics is a
substantial, emerging business opportunity and that the Company's historical
expertise and ability to invest in technology provide it with a strategic
advantage. However, there can be no assurance that the Company will be able to
obtain additional field force logistics contracts, that the existing contract
will be extended beyond the second year or that the management fee for such
second year will be negotiated on terms acceptable to the Company (which failure
to so negotiate the management fee would result in the termination of the
contract at the end of the first year). Also in 1998, the Company acquired a
continuing medical education company which will be operated as a separate
subsidiary.
Although revenues from the Company's peer-to-peer meeting business grew from
$20.6 million in 1995 to $33.4 million in 1996 to $45.1 million in 1997, the
Company does not anticipate that future growth of revenues, if any, from this
line of business will continue at such an accelerated rate. In addition, certain
of BLP's newer services, particularly symposia and field force logistics, have
lower gross margin percentages than the Company's historical peer-to-peer
business. Furthermore, the on-going start-up costs related to the Company's new
teleservice center and new contract sales organization, as well as the continued
development and implementation costs of the Company's technology enhancement
efforts and the establishment and build-out of its field force logistics
organization, will continue to negatively impact the Company's near-term
financial performance. The Company anticipates that, due to these costs and an
anticipated increase in the proportion of field force logistics revenue,
14
<PAGE>
its operating profit as a percentage of revenues in 1998 will be less than that
achieved in 1997. The Company's objective is to maintain and enhance its
operating profit 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, the proportion of symposia
or field force logistics revenue to total revenues increases more than
anticipated, total revenues do not grow sufficiently to fully leverage operating
expenses or the costs associated with the teleservice center, contract sales
organization, field force logistics organization or technology enhancement
efforts are greater than anticipated, the Company's operating margins could be
adversely affected.
RESULTS OF OPERATIONS
The following table sets forth as a percentage of revenues certain items
reflected in the Company's Statement of Operations for the periods indicated.
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------
1997 1996 1995
-------- -------- -------
<S> <C> <C> <C>
Revenues...................................... 100.0% 100.0% 100.0%
Cost of sales................................. 70.7 64.7 58.7
----- ------ -----
Gross profit.................................. 29.3 35.3 41.3
Selling, general and administrative expenses.. 17.1 49.7 29.1
----- ------ -----
Operating income (loss)..................... 12.2 (14.4) 12.2
Interest expense, net......................... 1.5 0.6 0.4
----- ------ -----
Nonrecurring loss on forgiveness of
related party loan.......................... - 2.7 -
----- ------ -----
Income (loss) before provision for income
taxes....................................... 10.7 (17.7) 11.8
Provision for income taxes.................... 2.3 - 0.3
----- ------ -----
Net income (loss)........................... 8.4% (17.7)% 11.5%
===== ====== =====
</TABLE>
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
Revenues increased $32.7 million, or 81%, from $40.2 million in 1996 to
$72.9 million in 1997. This increase was primarily due to growth of the
Company's promotional and other conferencing services, which increased $30.9
million, or 88%. This growth resulted from the addition of $19.1 million of
revenue from symposia services, which were introduced by the Company in late
1996, and $11.8 million of incremental revenue from peer-to-peer meetings and
other conferencing services. Contract sales services, which were introduced by
the Company in August 1997, accounted for $2.2 million in revenue in 1997 and
field force logistics services, which were introduced by the Company in late
1997, accounted for $1.0 million in revenue in 1997. These revenue increases
were partially offset by a $1.3 million decrease in revenues from educational
services, teleservices and product marketing services, on a combined basis.
Cost of sales increased $25.6 million, or 98%, from $26.0 million in 1996 to
$51.6 million in 1997. Cost of sales as a percentage of revenues increased from
64.7% in 1996 to 70.7% in 1997. The increase in cost of sales as a percentage
of revenues was primarily due to the introduction of symposia services, which
have a lower average gross profit than the Company's historical business due to
the higher proportion of production costs which are passed through to the
customer with little or no markup, and a $0.9 million increase in moderator
training costs.
Selling, general and administrative expenses decreased $7.6 million, or 38%,
from $20.0 million in 1996 to $12.4 million in 1997. This decrease was due to
1996 financial results containing $10.0 million for special officer bonuses,
including $7.5 million related to the TA Transaction in December 1996, and fees
of $0.6
15
<PAGE>
million related to the TA Transaction, whereas 1997 financial results contained
no such special bonuses or fees. This decrease was partially offset by an
increase in outside services, rent, depreciation, and other operating expenses
of approximately $2.1 million incurred to support the Company's growth, and the
cost of personnel additions of approximately $0.9 million. Selling, general and
administrative expenses decreased as a percentage of revenues from 49.7% in 1996
to 17.1% in 1997 primarily due to the special officer bonuses and fees incurred
in 1996, which amounted to 26.4% of 1996 revenues, and the aforementioned
increase in revenues from 1996 to 1997.
Operating income increased $14.7 million from an operating loss of $5.8
million in 1996 to an operating income of $8.9 million in 1997. Operating
income (loss) as a percentage of revenues improved from 14.4% operating loss in
1996 to 12.2% operating income in 1997. The improvement in operating income
(loss) was primarily 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. The
decrease in selling, general and administrative expenses as a percentage of
revenues was primarily due to 1996 financial results containing expenses due to
the Company's 1996 recapitalization transaction, primarily with TA Associates,
Inc. (the "TA Transaction"), which comprised 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 from a former
affiliate. This note was purchased by certain of the Company's officers in
connection with the TA Transaction.
Interest expense net of interest income increased from $0.3 million in 1996
to $1.1 million in 1997. This increase was primarily attributable to increased
borrowings in 1997, partially offset by increased interest income. The
increased borrowings were related to the Company's $20 million term loan which
was entered into in December 1996. The increase in interest income was related
to increased cash balances, primarily resulting from the Company's 1997 initial
public offering. The increase in interest expense net of interest income was
also due to the 1997 amount including a $0.3 million write-off of unamortized
financing fees and a $31,000 charge to terminate an interest rate swap
agreement. Both of these transactions were related to the Company's early
settlement of its term loan.
The provision for income taxes for 1997 was $1.7 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 previously not recognized. Prior to December 4, 1996, the Company
had elected to be subject to taxation under Subchapter S of the Internal Revenue
Code of 1986, as amended (the "Code") and, therefore, no income tax expense was
recorded prior to such change in tax status. During the remaining portion of
1996, subsequent to the change in tax status, the Company incurred a net
operating loss. As such, the Company did not record a tax provision in 1996.
YEAR ENDED DECEMBER 31, 1996 COMPARED YEAR ENDED DECEMBER 31, 1995
Revenues increased $18.4 million, or 85%, from $21.8 million in 1995 to
$40.2 million in 1996. This increase was primarily due 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%, 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
conferences, teleservices and product marketing services increased $4.1 million,
or 354%, from $1.2 million in 1995 to $5.3 million in 1996.
Cost of sales increased $13.2 million, or 103%, 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 primarily due to: (i) higher cost related to
recruiting for and
16
<PAGE>
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 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%, from $6.3 million in 1995 to $20.0 million in 1996. This increase was
primarily due to special officer bonuses of $10.0 million paid in 1996,
including $7.5 million paid 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% of 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 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 revenues and 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, which comprised 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 from a former
affiliate. This note was purchased by certain of the Company's officers in
connection with the TA Transaction.
Interest expense net of interest income increased 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 its credit facility 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, therefore, only state business taxes were incurred in
1995.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1997, the Company had $29.8 million in net working capital,
an increase of $27.4 million from December 31, 1996. As described below,
substantially all of the Company's net working capital resulted from its initial
public offering of Common Stock which was completed in September 1997. The
Company's primary sources of liquidity as of December 31, 1997 consisted of cash
and cash equivalents, accounts receivable and borrowing availability under a
revolving credit facility.
The Company's accounts receivable turnover averaged 84 days for the period
ended December 31, 1997 and 93 days for the period ended December 31, 1996. The
allowance for doubtful accounts was $0.4 million at December 31, 1997 and $0.3
million at December 31, 1996.
During 1997, the Company used approximately $1.3 million in operating
activities. This included $7.5 million in payments of officer bonuses which
were accrued in 1996, partially offset by $6.2 million of cash
17
<PAGE>
provided by other operating activities. Also during 1997, the Company used $4.4
million in investing activities to purchase additional equipment, primarily
related to the Company's new teleservice center in Norfolk, Virginia and new
management information systems.
Financing activities in 1997 generated $22.6 million of net cash inflows.
Included in these activities was the Company's September 1997 initial public
offering of 3,735,000 shares of Common Stock at $17.50 per share resulting in
net proceeds to the Company, after underwriter commissions and offering costs,
of approximately $59.8 million (the "Offering"). Of these net proceeds, $19.5
million was used to retire outstanding debt (with an additional $0.1 million
used to pay related interest expense), $10.8 million was used to redeem all
shares of Redeemable Preferred Stock and $5.5 million was used to purchase
466,666 shares of Common Stock from a former officer of the Company (with an
additional $0.1 million used to pay related compensation expense). The impact
of the financing activities related to the Offering was a net cash inflow of
$24.0 million. Financing activities during 1997 also included the use of $1.0
million to pay-down the Company's revolving line of credit, the use of $0.5
million to meet scheduled term loan payments and the sale of stock to employees
and directors, which generated $0.1 million in cash inflows.
Primarily in connection with the Company's implementation of a new
management information system, the establishment of a field force logistics
organization and the continued development of its teleservice center in Norfolk,
Virginia, the Company anticipates capital expenditures in 1998 to be consistent
with the amount incurred in 1997.
The Company's credit facility (the "Credit Facility") provides for a $5.0
million revolving credit facility, which is secured by the Company's assets. As
of December 31, 1996 and December 31, 1997, $1.0 million and $0, respectively,
was outstanding under the revolving credit facility. Borrowings under the
revolver are due on December 31, 2001. The Credit Facility contains various
financial and reporting covenants. In July and November 1997, certain covenants
in the Credit Facility were amended to allow for the anticipated increases in
capital expenditures related to its teleservice center in Norfolk, Virginia.
In January 1998, the Company purchased certain assets from Decision Point,
Inc., an Illinois corporation. The purchase price was $800,000 in cash, subject
to adjustment upward or downward based on certain revenue and pre-tax earnings
goals in the calendar year subsequent to the date of the acquisition. The
acquisition will be accounted for using the purchase method of accounting. The
excess of purchase price over net assets acquired, estimated to be $800,000,
will be amortized over twenty years. The Company does not anticipate a material
change in cash flows from operations related to this acquired business.
In March 1998, the Company purchased substantially all of the assets and
assumed certain liabilities of Strategic Implications International, Inc.,
a Maryland corporation. The purchase price was $4,330,000 million in
cash and approximately 137,000 shares of the Company's common stock. In
addition, the Company may be required to pay certain contingent payments based
on certain revenue goals related to the calendar year subsequent to the date of
the acquisition. The acquisition will be accounted for using the purchase
method of accounting. The excess of purchase price over net assets acquired is
estimated to be approximately $8,500,000 and will be amortized over twenty
years. The Company does not anticipate a material change in cash flows from
operations related to this acquired business.
In March 1998, the Company signed a contract with a large pharmaceutical
company to provide field force logistics services for up to a two-year period.
Such services will include meeting planning, event coordination and other
services. Due to the timing of cash receipts and disbursements related to this
contract, the Company anticipates that cash flows from operations will be
negatively impacted during the first half of 1998 and positively impacted during
the second half of the year.
18
<PAGE>
YEAR 2000
In prior years, certain computer programs were written using two digits
rather than four to define the applicable year. These programs were written
without considering the impact of the upcoming change in the century and may
experience problems handling dates beyond the year 1999. The Company plans to
modify certain portions of its software so that its computer systems will
function properly with respect to dates in the year 2000 and thereafter. The
total cost of compliance and its effect on the Company's future results is
currently being determined as part of the conversion planning, however, the
Company does not believe such cost will be material. The Company anticipates
completion of the conversion process by December 31, 1998. There can be no
assurance that the timing and cost estimates related to the year 2000 conversion
will be achieved. Actual results could differ materially from those
anticipated.
NEW ACCOUNTING PRONOUNCEMENTS
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 years ending December 31,
1995 and 1996 would not have been material.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
130") and Statement of Financial Accounting Standards No. 131, "Disclosures
about Segments of an Enterprise and Related Information" ("SFAS 131"). SFAS 130
establishes standards for reporting and display of comprehensive income and its
components in a full set of general-purpose financial statements and requires
that all items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements. SFAS 130 is
required to be adopted for the Company's fiscal year ending December 31, 1998.
The adoption of this pronouncement is expected to have no impact on the
Company's financial position or results of operations. SFAS 131 establishes
standards for the way that public business enterprises report information about
operating segments in annual financial statements and requires that those
enterprises report selected information about operating segments in interim
financial reports issued to stockholders. It also establishes standards for
related disclosures about products and services, geographic areas, and major
customers. SFAS 131 is required to be adopted for the Company's 1998 year-end
financial statements. The Company is currently evaluating the impact, if any, of
the adoption of this pronouncement on the Company's existing disclosures.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
The statements contained in this report which are not historical facts are
forward-looking statements. Because such statements include risks and
uncertainties, actual results may differ materially from those expressed or
implied by such forward-looking statements. Factors that could cause actual
results to differ materially from those expressed or implied by such forward-
looking statements include, but are not limited to the Company's dependence on
the pharmaceutical industry, customer concentration, reliance on new services
for continued growth, management of growth, risks inherent in pursuing,
implementing and integrating acquisitions, variations in quarterly operating
results, government regulation, potential litigation exposure and reliance of
certain personnel, and those risks and uncertainties contained elsewhere in this
report and under the heading "Risk Factors" on page 6 of the Company's
Registration Statement on Form S-1 as filed with the Securities and Exchange
Commission on July 1, 1997, as subsequently amended.
19
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
BORON, LEPORE & ASSOCIATES, INC.
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Arthur Andersen LLP, Independent Public Accountants...................................... 21
Report of M.R. Weiser & Co. LLP, Independent Public Accountants.................................... 22
Balance Sheets as of December 31, 1997 and 1996.................................................... 23
Statements of Operations of the Years Ended December 31, 1997, 1996 and 1995....................... 24
Statements of Stockholders' Equity (Deficit) for the Years Ended December 31, 1997, 1996 and 1995.. 25
Statements of Cash Flows for the Years Ended December 31, 1997, 1996 and 1995...................... 26
Notes to Financial Statements...................................................................... 28
</TABLE>
20
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Boron, LePore & Associates, Inc.:
We have audited the accompanying balance sheets of Boron, LePore &
Associates, Inc. (a Delaware Corporation) as of December 31, 1997 and 1996, and
the related statements of operations, stockholders' equity (deficit) and cash
flows for the years 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 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, 1997 and 1996 and the results of its operations and its
cash flows for the years then ended in conformity with generally accepted
accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index to the
financial statements is presented for the purpose of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in our audits of the basic financial statements, 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
February 10, 1998
21
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders of
Boron, LePore & Associates, Inc.
We have audited the accompanying statement of operations, stockholders'
equity and cash flows of Boron, LePore & Associates, Inc. for the year ended
December 31, 1995. These financial statement are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Boron, LePore & Associates,
Inc. as of December 31, 1995, and the results of its operations and its cash
flow for the year ended December 31, 1995 in conformity with generally accepted
accounting principles.
M.R. WEISER & Co. LLP
Edison, NJ
April 10, 1996
22
<PAGE>
BORON, LEPORE & ASSOCIATES, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, December 31,
1997 1996
------------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................................... $ 24,015,554 $ 7,175,648
Accounts receivable, net of allowance for doubtful accounts of
$400,000 and $300,000 at December 31, 1997 and 1996, respectively.......... 21,764,173 14,969,261
Prepaid expenses and other current assets................................... 729,559 254,802
------------ ------------
Total current assets........................................................ 46,509,286 22,399,711
------------ ------------
Furniture, fixtures and equipment, at cost, net of accumulated
depreciation of $848,732 and $544,232 at December 31, 1997
and 1996, respectively...................................................... 4,454,023 325,296
Security deposits............................................................ 72,921 27,166
Intangible assets............................................................ 20,250 344,767
------------ ------------
Total assets............................................................... $ 51,056,480 $ 23,096,940
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term debt........................................ $ - $ 1,000,000
Accounts payable and accrued expenses....................................... 9,729,766 12,775,623
Deferred revenue............................................................ 6,245,196 5,138,696
Billings in excess of costs................................................. 729,500 1,069,850
------------ ------------
Total current liabilities................................................... 16,704,462 19,984,169
------------ ------------
Long-term debt, less current maturities...................................... - 19,000,000
------------ ------------
Revolving line of credit..................................................... - 1,000,000
------------ ------------
Deferred income taxes........................................................ 1,509,000 -
------------ ------------
Convertible participating preferred stock, $.01 par value; none authorized,
issued and outstanding at December 31, 1997; 7,000,000
shares authorized, issued and outstanding at December 31,1996............... - 12,500,000
------------ ------------
Redeemable preferred stock, $.01 par value; none authorized,
issued and outstanding at December 31, 1997; 5,600,000 shares authorized,
none issued and outstanding at December 31, 1996............................ - -
------------ ------------
Commitments and Contingencies................................................
Stockholders' equity (deficit):
Preferred stock, $.01 par value, 2,000,000 shares authorized, none
issued and outstanding at December 31, 1997; none
authorized, issued or outstanding at December 31, 1996..................... - -
Common stock, $.01 par value, 50,000,000 shares authorized,
14,947,978 issued and 10,747,979 outstanding at December 31,
1997; 12,000,000 shares authorized, 5,733,328 issued and
1,999,995 outstanding at December 31, 1996................................. 149,480 57,333
Class A common stock, $.01 par value, none authorized,
issued and outstanding at December 31, 1997; 1,333,333 authorized,
666,666 issued and outstanding at December 31, 1996........................ - 6,667
Class B common stock, $.01 par value, none authorized, issued and
outstanding at December 31, 1997, 4,666,666 shares authorized; none
issued and outstanding at December 31, 1996................................ - -
Treasury stock, at cost, 4,199,999 shares at December 31,
1997; 3,733,333 shares at December 31, 1996................................ (24,349,992) (18,850,000)
Additional paid-in capital.................................................. 64,176,975 1,813,606
Accumulated deficit......................................................... (7,133,445) (12,414,835)
------------ ------------
Total stockholders' equity (deficit)....................................... 32,843,018 (29,387,229)
------------ ------------
Total liabilities and stockholders' equity (deficit)....................... $ 51,056,480 $ 23,096,940
============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE BALANCE SHEETS.
23
<PAGE>
BORON, LEPORE & ASSOCIATES, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------
1997 1996 1995
----------- ------------ -----------
<S> <C> <C> <C>
Revenues................................... $72,907,104 $40,219,534 $21,774,824
Cost of sales.............................. 51,579,923 26,004,405 12,788,018
----------- ----------- -----------
Gross profit............................ 21,327,181 14,215,129 8,986,806
Selling, general and
administrative expenses................... 12,443,944 19,995,398 6,340,631
----------- ----------- -----------
Operating income (loss)................. 8,883,237 (5,780,269) 2,646,175
Interest expense, net of interest income
of $460,592, $55,561, and $33,370 in
1997, 1996 and 1995, respectively......... 1,071,062 254,676 85,593
Nonrecurring loss on forgiveness of
related party loan........................ - 1,076,418 -
----------- ----------- -----------
Income (loss) before provision for
income taxes.......................... 7,812,175 (7,111,363) 2,560,582
Provision for income taxes................. 1,700,000 -- 51,000
----------- ----------- -----------
Net income (loss).......................... $ 6,112,175 $(7,111,363) $ 2,509,582
=========== =========== ===========
Earnings (loss) per share - basic......... $1.07 $(1.18) $ 0.29
=========== =========== ===========
Weighted average common shares
outstanding - basic..................... 4,947,018 6,027,869 8,602,151
=========== =========== ===========
Earnings (loss) per share - diluted........ $0.72 $(1.18) $ 0.29
=========== =========== ===========
Weighted average common and
common equivalent shares
outstanding - diluted..................... 8,507,293 6,027,869 8,602,151
=========== =========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
24
<PAGE>
BORON, LEPORE & ASSOCIATES, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Retained
Class A Class B Additional Earnings
Common Common Common Treasury Paid-in (Accumulated
Stock Stock Stock Stock Capital Deficit)
---------- ---------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AS OF DECEMBER 31, 1994 $ 57,133 $ - $ - $ - $ - $ 88,073
Net Income.................... - - - - - 2,509,582
Stockholder distributions..... - - - - - (150,000)
---------- ---------- ---------- ------------ ------------ ------------
BALANCE AS OF DECEMBER 31, 1995 57,133 - - - - 2,447,655
Net Loss...................... - - - - - (7,111,363)
Repurchase of minority
stockholder's
1,548,387 shares of
common stock................ - - - (643,674) - -
Repurchase of minority
stockholder's
1,720,430 shares of
common stock................ - - - (970,000) (6,175,000) -
Capital contributions by
stockholders................. - - - - 451,000 -
Retirement of 3,268,817
treasury shares of
common stock................. (3,800) - - 1,613,674 (451,000) (188,874)
Termination of S Corporation.. - - - - 7,562,253 (7,562,253)
Repurchase of 3,733,333
shares of common stock
as treasury stock............ - - - (18,850,000) - -
Issuance of 666,666 shares
Class A common stock at
$.428 per share.............. - 6,667 - - 278,333 -
Issuance of 400,000 shares
common stock at $.428
per share.................... 4,000 - - - 167,000 -
Stock issuance costs.......... - - - - (18,980) -
---------- ---------- ---------- ------------ ------------ ------------
BALANCE AS OF DECEMBER 31, 1996 57,333 6,667 - (18,850,000) 1,813,606 (12,414,835)
Net income.................... - - - - - 6,112,175
Non cash compensation
expense...................... - - - - 42,558 -
Dividends on convertible
participating
preferred stock.............. - - - - - (830,785)
Net proceeds of initial
public offering.............. 37,350 - - - 59,749,775 -
Repurchase of minority
stockholder's 466,666
shares of common stock as
treasury stock............... - - - (5,499,992) - -
Conversion of convertible
participating preferred
stock to common stock........ 46,667 - - - 2,453,333 -
Issuance of Class A
common stock................. - 1,463 - - 117,703 -
Conversion of Class A
common stock
to common stock.............. 8,130 (8,130) - - - -
---------- ---------- ---------- ------------ ------------ ------------
BALANCE AS OF DECEMBER 31, 1997 $149,480 $ - $ - $(24,349,992) $64,176,975 $ (7,133,445)
========== ========== ========== ============ ============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
25
<PAGE>
BORON, LEPORE & ASSOCIATES, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------------------
1997 1996 1995
-------------- -------------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)..................................... $ 6,112,175 $(7,111,363) $ 2,509,582
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Depreciation and amortization...................... 359,683 112,618 93,818
Nonrecurring loss on forgiveness of related
party loan........................................ - 1,076,418 -
Write-off of unamortized deferred financing costs.. 270,834 - -
Non-cash compensation expense...................... 42,558 - -
Deferred income taxes.............................. 1,509,000 (75,000) 50,000
Changes in operating assets and liabilities:
Increase in accounts receivable, net.............. (6,794,912) (7,561,243) (2,636,435)
Increase in prepaid expenses and other
current assets.................................. (474,757) (58,028) (45,024)
(Increase) decrease in security deposits.......... (45,755) 636 1,265
Increase in intangibles........................... (1,500) (352,500) -
Increase in due from affiliates................... - (140,363) -
Decrease in payable to affiliates................. - - (2,218,176)
Decrease (increase) in due from officers.......... - 28,651 (672,324)
(Decrease) increase in accounts payable
and accrued expenses............................ (3,045,857) 9,928,526 1,381,141
Increase in deferred revenue and billings
in excess of costs................................ 766,150 3,438,414 945,751
-------------- -------------- --------------
Net cash used in operating activities.............. (1,302,381) (713,234) (590,402)
-------------- -------------- --------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchases of furniture, fixtures and equipment........ (4,433,227) (134,965) (43,493)
-------------- -------------- --------------
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------
1997 1996 1995
------------- ------------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from long-term debt........................... - $ 20,000,000 $1,250,000
Proceeds from revolving line
of credit............................................. - 1,000,000 1,156,000
Repayments of long term debt and
revolving line of credit.............................. (21,000,000) (2,301,833) (589,549)
(Redemption of) proceeds from convertible
participating preferred stock......................... (10,830,785) 12,500,000 -
Proceeds from the issuance of common
stock............................................... 59,787,125 171,000 -
Proceeds from the issuance of Class A
common stock......................................... 119,166 285,000 -
Capital contributions by stockholders.................. - 451,000 -
Repayment of stockholder loan.......................... - - (100,000)
Stockholder distributions.............................. - - (150,000)
Payment of stock issuance costs........................ - (18,980) -
Repurchase of treasury stock from stockholders......... - (18,850,000) -
Repurchase of treasury stock from former stockholders.. (5,499,992) (6,175,000) -
------------ ------------ ----------
Net cash provided by financing activities............. 22,575,514 7,061,187 1,566,451
------------ ------------ ----------
Net increase in cash.................................. 16,839,906 6,212,988 932,556
CASH AND CASH EQUIVALENTS,
beginning of period.................................... 7,175,648 962,660 30,104
------------ ------------ ----------
CASH AND CASH EQUIVALENTS, end of
period................................................. $ 24,015,554 $ 7,175,648 $ 962,660
============ ============ ==========
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid during the period for:
Interest............................................... $ 1,614,079 $ 321,000 $ 145,000
Taxes.................................................. $ 252,220 $ 20,015 $ -
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
27
<PAGE>
BORON, LEPORE & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF THE BUSINESS:
BUSINESS:
Boron, LePore & Associates, Inc. (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. The Company also provides meetings such as
symposia, continuing education conferences and video satellite conferences;
product marketing services; teleservices such as teledetailing, telemarketing,
sales support and fulfillment; contract sales services; and, field force
logistics services.
INCORPORATION AND MERGER:
On November 22, 1996, BLA Acquisition Corporation ("BLA") was incorporated
in the State of Delaware. On November 27, 1996, the stockholders of BLA and the
stockholders of Boron, LePore & Associates, Inc., all under common control,
unanimously approved the Agreement and Plan of Merger ("Merger Agreement") of
the two companies. On December 3, 1996, the merger became effective and was
accounted for comparable to a pooling of interests. The surviving corporation
was BLA, 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 common
stock.
On September 24, 1997, the Company completed the initial public offering of
3,735,000 shares (including the underwriters' over allotment of 135,000 shares)
of Common Stock at $17.50 per share resulting in net proceeds, after underwriter
commissions and offering costs, of approximately $59,800,000 (the "Offering").
Of these net proceeds, approximately $19,600,000 was used to retire outstanding
debt and pay related interest expense, approximately $10,800,000 was used to
redeem all shares of Redeemable Preferred Stock and related accumulated
dividends and approximately $5,600,000 was used to purchase 466,666 shares of
Common Stock from a former officer of the Company.
In connection with the Offering, the authorized stock of the Company was
increased on September 22, 1997 to 50,000,000 shares of $.01 par value common
stock and 2,000,000 shares of $.01 par value preferred stock. Upon completion
of the Offering, all outstanding shares of non-voting Class A Common Stock
converted into shares of Common Stock. Also upon completion of the Offering,
the Convertible Participating Preferred Stock of the Company converted into
4,666,664 shares of Common Stock and 5,600,000 shares of Redeemable Preferred
Stock which, as described above, was redeemed with a portion of the net proceeds
of the Offering.
All share amounts have been retroactively adjusted to reflect a two-for-
three reverse stock split which occurred on September 11, 1997.
2. 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.
28
<PAGE>
CASH AND CASH EQUIVALENTS:
The Company considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents.
REVENUE RECOGNITION:
Revenue is recognized as services are performed. For conferencing services,
revenue is recognized 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 and field force logistics services are recorded in the
period the services are performed, based on the specific terms of the contract.
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, in accordance with the Company's revenue recognition policy.
The Company is entitled to 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 future period
of time specified in the contract. If the contract permits 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. Performance
incentive revenues that were invoiced at December 31, 1997 and December 31, 1996
approximated $730,000 and $1,070,000, respectively, and are reflected as
billings in excess of costs in the accompanying balance sheets.
DEPRECIATION AND AMORTIZATION:
Depreciation and amortization is provided on the straight-line method over
the estimated useful lives of the related assets, generally a three to ten year
period. Expenditures for repairs and maintenance are expensed as incurred while
renewals and betterments are capitalized.
INTANGIBLE ASSETS:
Intangible assets generally represent non-compete agreements and deferred
financing costs. Such assets are amortized over the term of the related
agreement or debt instrument. During December 1996, as part of a Preferred
Stock Purchase Agreement (see Note 13), the Company incurred certain financing
costs related to the transaction. The costs were comprised primarily of
commitment fees related to long-term debt financing costs and totaled $312,500.
Such amount was being amortized over the life of the debt instrument. During
September 1997, in conjunction with the Offering and the settlement of all
outstanding bank debt (Note 4), the Company wrote-off the remaining balance of
unamortized deferred financing costs, which amounted to approximately $270,000.
INCOME TAXES:
On December 4, 1996, the Company began operations as a Delaware corporation
and was subject to Federal and state corporate tax rates as a "C" corporation
(see Note 8). The Company has adopted the provisions of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." This standard
requires the use of the asset and liability method of accounting for income
taxes. Under this method, deferred tax assets and liabilities are determined
based on temporary differences between financial reporting and tax bases of
assets and liabilities, tax credit carryforwards and operating loss
carryforwards. A valuation allowance is established to reduce deferred tax
assets if it is more likely than not that such deferred tax assets will not be
realized. For all periods prior to December 4, 1996, the shareholders of the
Company were treated as an "S" corporation for both Federal and state income tax
purposes, and accordingly the provision for income taxes for all periods ending
on or prior to such date reflects only certain state taxes.
29
<PAGE>
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:
During 1996, the Company adopted the provisions of Statement of Financial
Accounting Standards No. 123, "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 (See Note 14).
EARNINGS PER SHARE:
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128")
which requires the presentation of basic earnings per share ("Basic EPS") and
diluted earnings per share ("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 for the period adjusted to reflect potentially
dilutive securities. The Company has implemented SFAS 128 as of December 31,
1997 (See Note 3).
30
<PAGE>
3. EARNINGS PER SHARE:
In accordance with SFAS 128, the following table reconciles income and share
amounts used to calculate basic earnings per share and diluted earnings per
share.
<TABLE>
<CAPTION>
For the Years Ended December 31,
-------------------------------------
1997 1996 1995
----------- ------------ ----------
<S> <C> <C> <C>
Numerator:
Net income (loss) - Diluted..................... $6,112,175 $(7,111,363) $2,509,582
Less dividends on preferred stock............... (830,785) - -
---------- ----------- ----------
Net income (loss) - Basic....................... $5,281,390 $(7,111,363) $2,509,582
========== =========== ==========
Denominator:
Weighted average number of common
shares outstanding - Basic.................... 4,947,018 6,027,869 8,602,151
Incremental shares from assumed conversions of
options...................................... 159,364 - -
Convertible Participating Preferred Stock.... 3,400,911 - -
---------- ----------- ----------
Weighted average common and common
equivalent shares outstanding - Diluted... 8,507,293 6,027,869 8,602,151
========== =========== ==========
Earnings (loss) per share - Basic............... $ 1.07 $ (1.18) $ 0.29
========== =========== ==========
Earnings (loss) per share - Diluted............. $ 0.72 $ (1.18) $ 0.29
========== =========== ==========
</TABLE>
4. LONG-TERM DEBT:
During 1996, the Company entered into a borrowing agreement with a bank.
The borrowing agreement provided for a $5,000,000 revolving credit facility and
a $20,000,000 term loan (the "Credit Facility"). 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. In September 1997, in conjunction with
the Offering, the Company repaid the then outstanding balance of the term loan,
$19,500,000, and the $1,000,000 revolving credit facility. In connection with
this debt repayment, the Company wrote-off the balance of unamortized deferred
financing costs related to the credit facility, resulting in a charge of
approximately $270,000. In 1997, the Company amended certain covenants to allow
for anticipated increases in capital expenditures. As of December 31, 1997,
there were no outstanding borrowings under the revolving credit facility and
$5,000,000 was available for future borrowings.
31
<PAGE>
5. FURNITURE, FIXTURES AND EQUIPMENT:
Furniture, fixtures and equipment consists of:
<TABLE>
<CAPTION>
December 31,
--------------
1997 1996
---------- -----------
<S> <C> <C>
Telephone and computer equipment...................................... $3,467,283 $ 543,444
Office equipment...................................................... 936,560 254,147
Other................................................................. 898,912 71,937
---------- -----------
5,302,755 869,528
Less: Accumulated depreciation........................................ (848,732) (544,232)
---------- -----------
Furniture, fixtures and equipment net of
accumulated depreciation............................................. $4,454,023 $ 325,296
========== ===========
</TABLE>
6. ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
Accounts payable and accrued expenses are comprised of the following:
<TABLE>
<CAPTION>
December 31,
--------------------------------------
1997 1996
------------- -----------
<S> <C> <C>
Accounts payable...................................................... $3,838,286 $ 1,729,688
Accrued payroll....................................................... 1,287,565 8,170,078
Accrued honoraria..................................................... 3,548,554 1,860,656
Other accrued expenses................................................ 1,055,361 1,015,201
---------- -----------
Accounts payable and accrued expenses................................. $9,729,766 $12,775,623
========== ===========
</TABLE>
7. COMMITMENTS AND CONTINGENCIES:
OPERATING LEASES:
The Company leases office space, automobiles, and equipment under various
operating leases expiring in 2007. Approximate annual lease commitments for the
next five years are as follows:
<TABLE>
<S> <C>
1998.......... $1,061,739
1999.......... 958,457
2000.......... 734,193
2001.......... 624,705
2002.......... 558,512
</TABLE>
Rent expense charged against operations approximated $525,000, $387,000 and
$340,000 for the years ended December 31, 1997, 1996 and 1995, respectively.
LITIGATION:
The Company, from time to time, is involved in legal proceedings incurred in
the normal course of business. The Company believes none of these proceedings
will have a material adverse effect on the financial condition or liquidity of
the Company. Additionally, a former shareholder and officer of the Company has
sent correspondence to the Company alleging securities and common law fraud and
breach of contract by senior officers of the Company in connection with the
settlement of contractual arrangements with the former shareholder/officer in
December, 1996. The Company believes the allegations of the former
shareholder/officer are without merit and intends to contest them vigorously
should litigation be commenced against the Company, its officers or other
personnel. The Company does not believe that this matter will have a material
adverse effect on its financial condition or results of operations, although
there can be no assurance that this will be the case.
32
<PAGE>
EMPLOYMENT AGREEMENTS:
The Company has entered into employment agreements with its executive
officers and certain other senior management employees, some of whom are
stockholders of the Company. The agreements specify duties, benefits,
confidentiality and miscellaneous other provisions. The employment agreements
generally have initial terms of no greater than three years, with one year
renewals after such initial term. During 1997, two officers of the Company
became consultants and their employment agreements were amended. At December
31, 1997, the maximum contingent liability related to consulting and employment
agreements is approximately $2,800,000.
8. INCOME TAXES:
The components of the provision for income taxes are summarized as follows
for the years ending December 31:
<TABLE>
<CAPTION>
1997 1996 1995
---------- --------- -------
<S> <C> <C> <C>
Current................... $ 191,000 $ 75,000 $ 1,000
Deferred.................. 1,509,000 (75,000) 50,000
---------- -------- -------
Total..................... $1,700,000 $ - $51,000
========== ======== =======
</TABLE>
As discussed in Note 2 the Company began operating as a "C" Corporation on
December 4, 1996. The following table indicates the significant elements
contributing to the difference between the Federal statutory rate and the
Company's effective tax rate-
<TABLE>
<CAPTION>
1997 1996
------- --------
<S> <C> <C>
Federal statutory rate 34.0% (34.0%)
State taxes net of Federal effect 6.0% ( 6.0%)
Utilization of net operating loss
carryforwards (38.5%) -
Valuation allowance on net
operating loss carryforwards 17.8% 40.0%
Alternative minimum tax 2.5% -
----- -----
Effective tax rate 21.8% 0.0%
===== =====
</TABLE>
33
<PAGE>
Deferred income taxes represent the tax effect of the difference between and
tax bases of assets and liabilities. The major components of deferred tax
assets and liabilities as of December 31 are as follows:
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Net operating loss carryforward $ 1,755,000 $ 4,764,000
Allowance for doubtful accounts 160,000 120,000
Other operating reserves 44,000 20,000
Tax over book depreciation (24,000) (4,000)
Cash to accrual liability (1,880,000) (2,400,000)
Alternative minimum tax credit 191,000 -
----------- -----------
Subtotal 246,000 2,500,000
Valuation allowance (1,755,000) (2,500,000)
----------- -----------
Total $(1,509,000) $ -
=========== ===========
</TABLE>
The Company has a net operating loss for book purposes in the amount of
approximately $4,400,000 which is available to offset future earnings. The
Company has recorded a valuation allowance due to the uncertainty of the
realization of this asset.
9. MAJOR CUSTOMERS:
Revenue from two customers accounted for approximately $35,900,000 (49%) and
$13,400,000 (18%) of total revenue for the year ending December 31, 1997.
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 $9,700,000 (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 $12,500,000, or 56%, and
$12,200,000, or 80%, of accounts receivable at December 31, 1997 and 1996,
respectively.
10. DUE FROM AFFILIATES:
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
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 13) in the form of bonus compensation payments of approximately $865,000
which provided the stockholders with the after-tax funds to make the repayment.
11. DUE FROM OFFICERS/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 loans,
bearing interest of 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 13) in the
form of bonus
compensation payments of approximately $761,000 which provided the officers with
the after-tax funds to make the repayment.
34
<PAGE>
12. 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 1), 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 net present value of the
promissory note. Concurrent with the Merger Agreement on December 4, 1996, the
treasury shares were 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.
Concurrent with the closing of the sale of the preferred shares and with
financing provided by a bank, the Company redeemed 3,7333,333 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.
In September 1997, the Company paid a former officer of the Company
approximately $5,600,000 to repurchase 466,666 shares of common stock and to
amend the employment agreement of such former officer. At December 31, 1997, the
shares are held in treasury at a cost of approximately $5,500,000.
13. 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 $0.01 par value Convertible Participating Preferred Stock for
$12,500,000. The Convertible Participating Preferred Stock had a minimum
liquidation value of $10,000,000 and was 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 were entitled to receive an annual cash dividend of approximately $0.1429
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.
In September 1997, upon completion of the Company's Offering (see Note 1),
the 7,000,000 shares of Convertible Participating Preferred Stock converted into
4,666,666 shares of Common Stock and 5,600,000 shares of Redeemable Preferred
Stock. The Redeemable Preferred Stock was immediately redeemed for $10,000,000
plus accumulated dividends of approximately $831,000.
14. STOCK OPTION AND GRANT PLAN AND EMPLOYEE STOCK PURCHASE PLAN:
During 1996 the Boron, LePore & Associates 1996 Stock Option and Grant Plan
(the "Plan") was established. In August, 1997, the Plan was amended to increase
the shares of stock reserved for issuance under
35
<PAGE>
the Plan to 3,000,000 shares. As of December 31, 1997 there were 731,559 options
granted under the Plan. The following summarizes stock option activity since
establishment of the Plan:
<TABLE>
<CAPTION>
Weighted
average
Shares exercise price
-------- --------------
<S> <C> <C>
December 31, 1995 - $ -
Granted - -
Canceled - -
Exercised - -
------- -------
December 31, 1996 - -
Granted 733,059 11.27
Canceled (1,500) 21.25
Exercised - -
------- -------
December 31, 1997 731,559 $ 11.26
======= =======
Shares exercisable at December 31, 1997 13,000 $9.45
======= =======
</TABLE>
On December 4, 1996, two officers of the Company exercised their rights to
purchase 400,000 shares of Common Stock under the Plan. The exercise price
established by the Company's Compensation Committee on December 4, 1996 (grant
date) was $0.428 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 Company's
Compensation Committee on December 4, 1996 (grant date) was $0.428 per share.
The Company received $285,000 in payment for the 666,666 shares on December 4,
1996. The Plan calls for certain performance levels to be attained or the
passage of a specified period of time before the shares of Class A Common Stock
vest. In September 1997, in connection with the Offering, all shares of Class A
Common Stock were converted to Common Stock.
The Company has adopted the provisions of SFAS 123. 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, net income would have been
reduced by approximately $32,000 during the year ending December 31, 1997. The
per share impact 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 year
ending December 31, 1997 was $4.38. The fair value was estimated using the
Black Scholes option pricing model based on the weighted average market price at
grant date of $10.60, volatility of 38% and a risk free interest rate of 6.5%.
There were no options granted for any periods prior to December 31, 1996.
In August 1997, the Company's 1997 Employee Stock Purchase Plan (the
"Purchase Plan") was established. The Purchase Plan allows for up to 225,000
shares of Common stock to be issued at 85% of fair market value. As of December
31, 1997, no shares were issued under the Purchase Plan.
15. 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, 1997,
1996 and 1995 approximated $0, $516,000 and $360,000, respectively. The
consulting agreement was
36
<PAGE>
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, 1997, 1996, and 1995, the Company
leased space from a stockholder of the Company. The aggregate rent expense
charged to operations for those periods approximated $24,000, $84,000 and
$82,000, respectively.
16. SUBSEQUENT EVENTS (UNAUDITED):
BUSINESS ACQUISITIONS:
In March 1998, the Company purchased substantially all of the assets and
assumed certain liabilities of Strategic Implications International, Inc.,
a Maryland corporation. The purchase price was $4,330,000 in cash and
approximately 137,000 shares of the Company's common stock. In addition, the
Company may be required to pay certain contingent payments based on revenue
goals related to the calendar year subsequent to the date of the acquisition.
The acquisition will be accounted for using the purchase method of accounting.
The excess of purchase price over net assets acquired is estimated to be
approximately $8,500,000 and will be amortized over twenty years.
In January 1998, the Company purchased certain assets from Decision Point,
Inc., an Illinois company. The purchase price was $800,000 in cash, subject to
adjustment upward or downward based on certain revenue and pre-tax earnings
goals related to the calendar year subsequent to the date of the acquisition.
The acquisition will be accounted for using the purchase method of accounting.
The excess of purchase price over net assets acquired, estimated to be $800,000,
will be amortized over twenty years.
37
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information appearing under the captions "Information Regarding
Directors" and "Executive Officers" in the registrant's definitive proxy
statement relating to the Annual Meeting of Stockholders to be held on May 28,
1998 is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information appearing under the caption "Executive Compensation" in the
registrant's definitive proxy statement relating to the Annual Meeting of
Stockholders to be held on May 28, 1998 is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information appearing under the caption "Principal and Management
Stockholders" in the registrant's definitive proxy statement relating to the
Annual Meeting of Stockholders to be held on May 28, 1998 is incorporated herein
by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information appearing under the caption "Certain Transactions" in the
registrant's definitive proxy statement relating to the Annual Meeting of
Stockholders to be held on May 28, 1998 is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) Financial Statements.
(a)(2) 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.
(a)(3) Exhibits. Exhibits 10.4 through 10.29 constitute all of the
management contracts and compensation plans and arrangements of the Company
required to be filed as exhibits to this Annual Report. The following is a
complete list of Exhibits filed or incorporated by reference as part of this
Annual Report.
2.1 Agreement and Plan of Merger by and between the Predecessor and the
Company. (2)
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. (2)
2.3 Preferred Stock Purchase Agreement dated as of December 4, 1996 by
and among the Company and the Investors named therein. (2)
38
<PAGE>
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)
2.4(a) Consent and Second Amendment to Stockholder's Agreement, dated
March 11, 1998.
2.5 Registration Rights Agreement by and among the Company, Christos S.
Efessiou and Alicia A. Angelides, dated March 18, 1998.
2.6 Asset Purchase Agreement by and among the Company, Christos S.
Efessiou, Alicia A. Angelides, Strategic Implications International,
Inc. and EFAN Holdings, dated March 18, 1998.
3.1 Third Amended and Restated Certificate of Incorporation.
3.2 Amended and Restated By-laws.
4.1 Specimen certificate for shares of Common Stock, $.01 par value, of
the Company. (4)
4.2 Credit Agreement with Fleet National Bank as Agent and Lender, as
amended. (2)
10.1(a) Lease between MBM Associates and the Company. (2)
10.1(b) Sublease between Lonza, Inc. and the Company. (2)
10.2 Lease by and between SPENCO, Ltd. and the Company. (2)
10.3 Deed of Lease Agreement by and between Norfolk Commerce Center
Limited Partnership and the Company. (2)
10.4 Employment Agreement for Patrick G. LePore. (2)
10.5 Employment Agreement for Gregory F. Boron. (2)
10.6 Employment Agreement for Christopher Sweeney. (2)
10.7 Employment Agreement for Timothy J. McIntyre. (2)
10.8 Non-Competition Agreement for Patrick G. LePore. (2)
10.9 Non-Competition Agreement for Gregory F. Boron. (2)
10.10 Non-Competition Agreement for Christopher Sweeney. (2)
10.11 Employment Agreement for Martin J. Veilleux. (3)
10.12 Boron, LePore & Associates, Inc. Amended and Restated 1996 Stock
Option and Grant Plan. (3)
10.13 Boron, LePore & Associates, Inc. 1997 Employee Stock Purchase
Plan. (3)
10.14 Form of Indemnification Agreement between the Registrant and
certain directors. (2)
10.15 Stock Purchase Agreement of Christopher Sweeney. (2)
10.16 Restricted Stock Agreement for Patrick G. LePore. (1)
10.17 Restricted Stock Agreement for Gregory F. Boron. (1)
10.18 Restricted Stock Agreement for Christopher Sweeney. (1)
39
<PAGE>
10.19 Restricted Stock Agreement for Timothy J. McIntyre. (2)
10.20 Incentive Stock Option Agreement for Timothy J. McIntyre. (1)
10.21 Non-qualified Stock Option Agreement for Timothy J. McIntyre. (3)
10.22 Incentive Stock Option Agreement for Martin J. Veilleux. (3)
10.23 Incentive Stock Option Agreement for Martin J. Veilleux. (3)
10.24 Incentive Stock Option Agreement for Brian J. Smith. (3)
10.25 Employment Agreement for Brian J. Smith.
10.26 Side Letter Agreement with Christopher J. Sweeney. (4)
10.27 Lease Agreement by and between Maurice M. Weill, Trustee, as
Landlord and BLP Group Companies, as Tenant.
10.28 Incentive Stock Option Agreement for Timothy J. McIntyre.
10.29 Incentive Stock Option Agreement for Patrick G. LePore.
16.1 Letter re: Change in Certifying Accountant. (1)
21.1 Subsidiaries of the Registrant.
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of M.R. Weiser & Co. LLP.
24.1 Power of Attorney (included on the signature page hereto).
27.1 Financial Data Schedule.
__________________
(1) Previously filed as an exhibit to the Company's Registration Statement on
Form S-1 (SEC File No. 333-30573) filed with the Commission on July 1, 1997.
(2) Previously filed as an exhibit to Amendment No. 1 to the Company's
Registration Statement on Form S-1 (SEC File No. 333-30573) filed with the
Commission on August 15, 1997.
(3) Previously filed as an exhibit to Amendment No. 2 to the Company's
Registration Statement on Form S-1 (SEC File No. 333-30573) filed with the
Commission on August 29, 1997.
(4) Previously filed as an exhibit to Amendment No. 3 to the Company's
Registration Statement on Form S-1 (SEC File No. 333-30573) filed with the
Commission on September 18, 1997.
40
<PAGE>
A COPY OF ANY EXHIBIT TO THIS ANNUAL REPORT MAY BE OBTAINED UPON PAYMENT OF A
REASONABLE FEE FOR COPYING BY WRITTEN REQUEST TO ATTENTION: MARTIN J. VEILLEUX,
BORON, LEPORE & ASSOCIATES, INC., 17-17 ROUTE 208 NORTH, FAIR LAWN, NEW JERSEY
07410.
(b) Reports on Form 8-K. The Registrant did not file any reports on Form 8-K
-------------------
during the last quarter of the period covered by this Annual Report.
41
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in Fair Lawn, New
Jersey, on March 25, 1998.
Boron, Lepore & Associates, Inc.
By: /s/ Patrick G. LePore
_____________________________
Name: Patrick G. LePore
Title: Chairman, Chief Executive Officer
and President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Patrick G. LePore Chairman of the Board, Chief March 25, 1998
- ----------------------- Executive Officer,
PATRICK G. LEPORE President and Director
(Principal Executive Officer)
/s/ Gregory F. Boron Chief Operating Officer March 25, 1998
- ----------------------- and Director
GREGORY F. BORON
/s/ Martin J. Veilleux Chief Financial Officer, March 25, 1998
- ----------------------- Secretary and Treasurer
MARTIN J. VEILLEUX (Principal Financial
and Accounting Officer)
/s/ Roger Boissonneault Director March 25, 1998
- ----------------------- --------
ROGER BOISSONNEAULT
/s/ Roger B. Kafker Director March 25, 1998
- ----------------------- --------
ROGER B. KAFKER
Director March __, 1998
- ----------------------- --------
JACQUELINE C. MORBY
/s/ Joseph E. Smith Director March 25, 1998
- ----------------------- --------
JOSEPH E. SMITH
/s/ John A. Staley, IV Director March 25, 1998
- ----------------------- --------
JOHN A. STALEY, IV
42
<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, 1997.. 300,000 100,000 0 400,000
</TABLE>
<PAGE>
Exhibit 2.4(a)
CONSENT AND SECOND AMENDMENT TO STOCKHOLDER'S AGREEMENT
All capitalized terms used herein and not otherwise defined shall have the
respective meanings set forth in the Stockholders' Agreement (the "Agreement")
dated as of December 4, 1996 by and among the Company and the parties named
therein.
WHEREAS, the Company, the Founders and the Investors are parties to the
Agreement;
WHEREAS, the Company desires to purchase substantially all of the assets of
Strategic Implications International, Inc. for, among other consideration,
shares of the Company's Common Stock to be registered in the names of Christos
S. Efessiou and Alicia A. Angelides (Efessiou and Angelides together being the
"Holders") pursuant to an Asset Purchase Agreement between, among others the
Company and Holders dated as of the date hereof (the "Asset Purchase
Agreement"), which Common Stock will be subject to a certain Registration Rights
Agreement between the Company and the Holders which will effect the registration
rights of the Founders and the Investors under the Agreement;
WHEREAS, pursuant to Section 7.3 of the Agreement, the prior written
consent of the Company, two-thirds-in-interest of the Founders and two-thirds-
in-interest of the Investors is required in order to amend the Agreement;
WHEREAS, the undersigned Investors and Founders represent at least two-
thirds-in-interest of the Investors and Founders as required by Section 7.3 to
amend the Agreement; and
WHEREAS, the Company, the Founders and the Investors desire to amend the
Agreement to permit the Company and the Holders to enter into the Registration
Rights Agreement.
NOW, THEREFORE, in consideration of the premises herein contained and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. The third sentence of Section 5.1 (Piggyback Registration Rights) is
hereby amended to read as follows: "The Company shall advise all Investors and
Founders promptly after such determination by the underwriter, and the number of
Registerable Shares that may be included in a registration and underwriting
shall be allocated among all Investors, all Founders and all Holders requesting
registration in proportion, as nearly practicable, to their respective holdings
of Registerable Shares (it being understood that for this purpose "Registrable
Shares" shall include the shares of Common Stock to be received by the Holders
pursuant to the Asset Purchase Agreement)."
<PAGE>
2. All the terms and provisions of this Amendment shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns.
3. This Amendment may be executed in any number of counterparts, and by
different parties hereto and separate counterparts with the same effect as if
all parties have signed the same document. All such counterparts shall be
deemed an original, shall be construed together and shall constitute one in the
same instrument.
<PAGE>
EXECUTED as of the date set forth above.
BORON LEPORE & ASSOCIATES, INC.
By: /s/ Patrick G. LePore
------------------------------
Name: Patrick G. LePore
Title: Chief Executive Officer and
President
THE FOUNDERS
------------
/s/ Patrick G. LePore
---------------------
Patrick G. LePore
Holder of 993,333 Shares of Common Stock
/s/ Gregory F. Boron
--------------------
Gregory Boron
Holder of 921,333 Shares of Common Stock
/s/ Michael W. Foti
-------------------
Michael W. Foti
Holder of 200,000 Shares of Common Stock
<PAGE>
THE INVESTORS
-------------
ADVENT VII L.P.
By: TA Associates VII L.P., its General Partner
By: TA Associates, Inc., its General Partner
*
----------------------------------
Name: Jacqueline C. Morby
Title: Managing Director
Holder of 2,488,318 Shares of Common Stock
ADVENT ATLANTIC AND
PACIFIC III L.P.
By: TA Associates AAP III Partners, its General
Partner
By: TA Associates, Inc., its General Partner
*
--------------------------------------
Name: Jacqueline C. Morby
Title: Managing Director
Holder of 1,527,617 Shares of Common Stock
TA VENTURE INVESTORS LIMITED PARTNERSHIP
*
-----------------------------------------
Name: Jacqueline C. Morby
Title: General Partner
Holder of 44,131 Shares of Common Stock
*/s/ Jacqueline C. Morby
- -----------------------------
By: Jacqueline C. Morby
<PAGE>
EXHIBIT 2.5
This Registration Rights Agreement (the "Agreement") is made and entered
into this 18th day of March, 1998 by and among Boron, LePore & Associates, Inc.
(the "Company"), Christos Efessiou and Alicia Angelides (each a "Holder" and
together the "Holders").
W I T N E S S E T H
-------------------
WHEREAS, Strategic Implications International, Inc., a Delaware corporation
(the "Buyer"), is purchasing substantially all of the assets of EFAN Holdings,
Inc., formerly known as Strategic Implications International, Inc. (the
"Seller"), Seller pursuant to the terms of an Asset Purchase Agreement of even
date herewith by and among the Company, the Buyer, the Seller and the Holders;
WHEREAS, part of the consideration paid by the Buyer under the Asset
Purchase Agreement is 137,052 shares of Common Stock of the Company, par value
$.01 per share (the "Restricted Stock");
WHEREAS, as an inducement for each of the parties hereto to enter into the
Asset Purchase Agreement, the Company and the Holders agree to enter into this
Agreement.
NOW THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements hereinafter set forth, the parties hereto agree as follows:
ARTICLE I. DEFINITIONS
---------- -----------
Section 1.1 Construction of Terms. As used herein, the masculine,
----------- ---------------------
feminine or neuter gender, and the singular or plural number, shall be deemed to
be or to include the other genders or number, as the case may be, whenever the
context so indicates or requires.
Section 1.2 Terms Not Defined. Capitalized terms used herein and not
----------- -----------------
otherwise defined shall have the meanings ascribed to them in the Stockholders'
Agreement by and among the Company, the Founders and the Investors, dated as of
December 4, 1996.
Section 1.3 Defined Terms. The following capitalized terms, as used in
----------- -------------
this Agreement, shall have the meanings set forth below.
An "Affiliate" of any Person means a Person that directly or indirectly,
through one or more intermediaries, controls, is controlled by or is under
common control with the first mentioned Person. A Person shall be deemed to
control another Person if such first Person possesses directly or indirectly the
power to direct, or cause the direction of, the management and policies of the
second Person, whether through the ownership of voting securities, by contract
or otherwise.
1
<PAGE>
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Common Stock, par value $.01 per share, of the
Company, as the context requires, and any other common equity securities now or
hereafter issued by the Company (but not including the Preferred Stock), and any
other shares of stock issued or issuable with respect thereto (whether by way of
a stock dividend or stock split or in exchange for or upon conversion of such
shares or otherwise in connection with a combination of shares,
recapitalization, merger, consolidation or other corporate reorganization).
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, and the rules and regulations promulgated thereunder.
"Founder" means Patrick G. LePore, Gregory F. Boron and Michael W. Foti.
"Investor" means the investment funds and other persons listed as the TA
Investors on the signature pages to the Stockholders Agreement by and among the
Company, the Founders and the Investors dated December 4, 1996, as amended to
date.
"Person" means an individual, a corporation, an association, a partnership,
an estate, a trust, and any other entity or organization, governmental or
otherwise.
"Preferred Stock" means the undesignated preferred stock issuable in
accordance with and subject to the terms of the Amended and Restated Certificate
of Incorporation of the Company in effect on this date (the "Charter"), together
with any other shares issued or issuable with respect thereto (whether by way of
a stock dividend, stock split or in exchange for or in replacement or upon
conversion of such shares or otherwise in connection with a combination of
shares, recapitalization, merger, consolidation or other corporate
reorganization).
"Securities Act" means the Securities Act of 1933, as amended from time to
time, and the rules and regulations promulgated thereunder.
"Shares" means the shares of Common Stock, Preferred Stock and any other
equity securities now or hereafter issued by the Company, including the
Restricted Stock, together with any options thereon and any other shares of
stock issued or issuable with respect thereto (whether by way of a stock
dividend, stock split or in exchange for or upon conversion of such shares or
otherwise in connection with a combination of shares, recapitalization, merger,
consolidation or other corporate reorganization).
"Transfer" means any direct or indirect transfer, donation, sale,
assignment, pledge, hypothecation, grant of a security interest in or other
disposal or attempted disposal of all or any portion of a security or of any
rights. "Transferred" means the accomplishment of a Transfer, and "Transferee"
means the recipient of a Transfer.
2
<PAGE>
ARTICLE II. REPRESENTATIONS AND WARRANTIES
---------- ------------------------------
Section 2.1 Representations and Warranties of the Holders. Each of the
----------- ---------------------------------------------
Holders, individually and not jointly, hereby represents, warrants and covenants
to the Company as follows: (a) such Holder has full authority, power and
capacity to enter into this Agreement; (b) this Agreement constitutes the valid
and binding obligation of such Holder enforceable against him or her in
accordance with its terms; and (c) the execution, delivery and performance by
such Holder of this Agreement: (i) does not and will not violate any laws, rules
or regulations of the United States or any state or other jurisdiction
applicable to such Holder, or require such Holder to obtain any approval,
consent or waiver of, or to make any filing with, any Person that has not been
obtained or made; and (ii) does not and will not result in a breach of,
constitute a default under, accelerate any obligation under or give rise to a
right of termination of any indenture or loan or credit agreement or any other
material agreement, contract, instrument, mortgage, lien, lease, permit,
authorization, order, writ, judgment, injunction, decree, determination or
arbitration award to which such Holder is a party or by which the property of
such Holder is bound or affected, or result in the creation or imposition of any
mortgage, pledge, lien, security interest or other charge or encumbrance on any
of the assets or properties of such Holder.
Section 2.2 Representations and Warranties of the Company. The Company
----------- ---------------------------------------------
hereby represents, warrants and covenants to the Holders as follows: (a) the
Company has full corporate authority and power to enter into this Agreement; (b)
this Agreement constitutes the valid and binding obligation of the Company,
enforceable against it in accordance with its terms; and (c) the execution,
delivery and performance by the Company of this Agreement: (i) does not and will
not violate any laws, rules or regulations of the United States or any state or
other jurisdiction applicable to the Company or require the Company to obtain
any approval, consent or waiver of, or to make any filing with, any Person that
has not been obtained or made; and (ii) does not and will not result in a breach
of, constitute a default under, accelerate any obligation under or give rise to
a right of termination of any indenture or loan or credit agreement or any other
material agreement, contract, instrument, mortgage, lien, lease, permit,
authorization, order, writ, judgment, injunction, decree, determination or
arbitration award to which the Company is a party or by which the property of
the Company is bound or affected, or result in the creation or imposition of any
mortgage, pledge, lien, security interest or other charge or encumbrance on any
of the assets or properties of the Company.
ARTICLE III. REGISTRATION RIGHTS
----------- -------------------
The Company's obligation to register shares of Restricted Stock under this
Article III shall remain in effect until such shares of Restricted Stock are no
longer Registrable Shares (as defined below), at which time this agreement will
terminate.
Section 3.1 Piggyback Registration Rights. If at any time or times
----------- -----------------------------
after the date which is three months after the date hereof, the Company shall
determine to register any shares of its Common Stock or securities convertible
into or exchangeable or exercisable for shares of
3
<PAGE>
Common Stock under the Securities Act (whether in connection with a public
offering of securities by the Company (a "primary offering"), a public offering
of securities by stockholders (a "secondary offering"), or both, but not in
connection with a registration effected solely to implement an employee benefit
plan or a transaction to which Rule 145 or any other similar rule of the
Commission under the Securities Act is applicable, the Company will promptly
give written notice thereof to the Holders. In connection with any such
registration, if within thirty (30) days after their receipt of such notice (or
10 days in the case of a proposed registration on Form S-3) any Holder requests
in writing the inclusion in such registration of some or all of the Registrable
Shares (as hereinafter defined) owned by such Holder, the Company will use its
best efforts to effect the registration under the Securities Act of all
Registrable Shares which such Seller or Holder so requests; provided, however,
-------- -------
that in the case of an underwritten public offering, if the underwriter
determines that a limitation on the number of shares to be underwritten is
required, the underwriter may limit the number of Registrable Shares and other
Common Stock for which the Company has granted registration rights to be
included in the registration and underwriting to not less in the aggregate than
thirty percent (30%) of the securities included therein (based on aggregate
market values). The Company shall advise each Holder promptly after such
determination by the underwriter, and the number of Registrable Shares that may
be included in the registration and underwriting shall be allocated among all
Investors, Founders, and the Holders requesting registration in proportion, as
nearly as practicable, to the respective holdings by such Persons of Registrable
Shares and other Common Stock for which the Company has granted registration
rights. All expenses of the registration and offering shall be borne by the
Company, except that the Holders shall bear underwriting and selling commissions
and transfer taxes attributable to the sale of their Registrable Shares.
Section 3.2 Registrable Shares. For the purposes of this Article III,
----------- ------------------
the term "Registrable Shares" shall mean any shares of Restricted Stock held by
a Holder including any shares issued by way of a stock dividend or stock split
or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization; provided, that any Restricted Stock that
--------
is sold in a registered sale pursuant to an effective registration statement
under the Securities Act or pursuant to Rule 144 thereunder, or that may then be
sold pursuant to Rule 144 under the Securities Act, shall not be deemed
Registrable Shares.
Section 3.2 Further Obligations of the Company. Whenever, under the
----------- ----------------------------------
provisions of Section 3.1 of this Agreement, the Company is required to register
any Registrable Shares, it agrees that it shall also do the following:
(a) Use its best efforts to diligently prepare and file with the
Commission a registration statement and such amendments, post-effective
amendments and supplements to said registration statement and the
prospectus used in connection therewith as may be necessary to keep said
registration statement effective as contemplated herein and to comply with
the provisions of the Securities Act with respect to the sale of securities
covered by said registration statement for the period necessary to complete
the proposed public offering as provided herein;
4
<PAGE>
(b) Furnish to each selling Holder such copies of each
preliminary and final prospectus, registration statement and prospectus
supplements thereto and such other documents as such Holders may reasonably
request to facilitate the public offering of its Registrable Shares;
(c) Enter into any reasonable underwriting agreement required by
the proposed underwriter for the selling Holders if any; provided, however,
that no Holder shall be required to make any representations or warranties
other than with respect to its title to the Registrable Shares and any
written information provided by such Holder to the Company specifically for
use in the Registration Statement, and if the underwriter requires that
representations or warranties be made and that indemnification be provided,
the Company shall make all such representations and warranties and provide
all such indemnities, including, without limitation, in respect of the
Company's business, operations and financial information and the
disclosures relating thereto in the prospectus;
(d) Use its best efforts to register or qualify the securities
covered by said registration statement under the securities or "blue-sky"
laws of such jurisdictions as any selling Holders may reasonably request,
provided that the Company shall not be required to register or qualify the
securities in any jurisdictions which require it to qualify to do business
or subject itself to general service of process therein;
(e) Immediately notify each selling Holder at any time when a
prospectus relating to his or her Registrable Shares is required to be
delivered under the Securities Act, of the happening of any event as a
result of which such prospectus contains an untrue statement of a material
fact or omits any material fact necessary to make the statements therein
not misleading, and, at the request of any such selling Holder, prepare a
supplement or amendment to such prospectus so that, as thereafter delivered
to the purchasers of such Registrable Shares, such prospectus will not
contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein not misleading;
(f) Cause all such Registrable Shares to be listed on or included
in each securities exchange or quotation system on which similar securities
issued by the Company are then listed;
(g) Otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission and make generally available to its
stockholders, in each case as soon as practicable, but not later than 30
days after the close of the period covered thereby an earnings statement of
the Company which will satisfy the provisions of Section 11(a) of the
Securities Act;
5
<PAGE>
(h) Cooperate with each Holder and each underwriter participating
in the disposition of Registrable Shares and their respective counsel in
connection with any filings required to be made with the National
Association of Securities Dealers, Inc.;
(i) During the period when the prospectus is required to be
delivered under the Securities Act, promptly file all documents required to
be filed with the Commission pursuant to Sections 13(a), 13(c), 14 or 15(d)
of the Exchange Act;
(j) Appoint a transfer agent and registrar for all Registrable
Shares covered by a Registration Statement not later than the effective
date of such Registration Statement;
(k) In connection with an underwritten offering, to the extent
reasonably requested by the managing underwriter for the offering, to
participate in and support customary efforts to sell the securities in the
offering, including, without limitation, participating in "road shows"; and
(l) Otherwise cooperate with the underwriter or underwriters, the
Commission and other regulatory agencies and take all actions and execute
and deliver or cause to be executed and delivered all documents necessary
to effect the registration of any Registrable Shares under this Article
III.
Section 3.4 Indemnification; Contribution.
----------- -----------------------------
(a) Incident to any registration statement referred to in this
Article III, and subject to applicable law, the Company will indemnify and
hold harmless each underwriter, and each Holder who offers or sells any
such Registrable Shares in connection with such registration statement
(including its partners (including partners of partners and stockholders of
any such partners), and directors, officers, employees and agents of any of
them (a "Selling Stockholder"), and each person who controls any of them
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act (a "Controlling Person"), from and against any and all losses,
claims, damages, expenses and liabilities, joint or several (including any
investigation, legal and other expenses incurred in connection with, and
any amount paid in settlement of, any action, suit or proceeding or any
claim asserted), as the same are incurred to which they, or any of them,
may become subject under the Securities Act, the Exchange Act or other
federal or state statutory law or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities arise out of or are
based on (i) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement (including any related
preliminary or definitive prospectus, or any amendment or supplement to
such registration statement or prospectus), (ii) any omission or alleged
omission to state in such document a material fact required to be stated in
it or necessary to make the statements in it not misleading, or (iii) any
violation by the Company of the Securities Act, any state securities or
"blue sky" laws
6
<PAGE>
or any rule or regulation thereunder in connection with such registration;
provided, however, that the Company will not be liable to the extent that
such loss, claim, damage, expense or liability arises from and is based on
an untrue statement or omission or alleged untrue statement or omission
made in reliance on and in conformity with information furnished in writing
to the Company by such underwriter or Selling Stockholder expressly for use
in such registration statement. With respect to such untrue statement or
omission or alleged untrue statement or omission in the information
furnished in writing to the Company by such Selling Stockholder expressly
for use in such registration statement, such Selling Stockholder will
indemnify and hold harmless each underwriter, the Company (including its
directors, officers, employees and agents), and each other Selling
Stockholder (including its partners (including partners of partners and
stockholders of such partners) and directors, officers, employees and
agents of any of them), and each person who controls any of them within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act, from and against any and all losses, claims, damages, expenses and
liabilities, joint or several, to which they, or any of them, may become
subject under the Securities Act, the Exchange Act or other federal or
state statutory law or regulation, at common law or otherwise to the same
extent provided in the immediately preceding sentence. In no event,
however, shall the liability of a Selling Stockholder for indemnification
under this Section 3.4(a) in its capacity as such exceed the lesser of (i)
that proportion of the total of such losses, claims, damages or liabilities
indemnified against equal to the proportion of the total securities sold
under such registration statement which is being sold by such Selling
Stockholder or (ii) the proceeds received by such Selling Stockholder from
its sale of Registrable Shares under such registration statement.
(b) If the indemnification provided for in Section 3.4(a) above
for any reason is held by a court of competent jurisdiction to be
unavailable to an indemnified party in respect of any losses, claims,
damages, expenses or liabilities referred to therein, then each
indemnifying party under this Section 3.4, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims,
damages, expenses or liabilities (i) in such proportion as is appropriate
to reflect the relative benefits received by the Company, the other Selling
Stockholders and the underwriters from the offering of the Registrable
Shares or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the Company, the other Selling Stockholders and
the underwriters in connection with the statements or omissions which
resulted in such losses, claims, damages, expenses or liabilities, as well
as any other relevant equitable considerations. The relative benefits
received by the Company, the Selling Stockholders and the underwriters
shall be deemed to be in the same respective proportions that the net
proceeds from the offering (before deducting expenses) received by the
Company and the Selling Stockholders and the underwriting discount received
by the underwriters, in each case as set forth in the table on the cover
page of the applicable prospectus, bear to the aggregate public
7
<PAGE>
offering price of the Registrable Shares. The relative fault of the
Company, the Selling Stockholders and the underwriters shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company, the Selling
Stockholders or the underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Company, the Selling Stockholders, and the underwriters agree
that it would not be just and equitable if contribution pursuant to this
Section 3.4(b) were determined by pro rata or per capita allocation or by
any other method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding paragraph. In no
event, however, shall a Selling Stockholder be required to contribute any
amount under this Section 3.4(b) in excess of the lesser of (i) that
proportion of the total of such losses, claims, damages or liabilities
indemnified against equal to the proportion of the total Registrable Shares
sold under such registration statement which are being sold by such Selling
Stockholder or (ii) the proceeds received by such Selling Stockholder from
its sale of Registrable Shares under such registration statement. No
person found guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not found guilty of such fraudulent misrepresentation.
(c) The amount paid by an indemnifying party or payable to an
indemnified party as a result of the losses, claims, damages and
liabilities referred to in this Section 3.4 shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim, payable as the same
are incurred. The indemnification and contribution provided for in this
Section 3.4 will remain in full force and effect regardless of any
investigation made by or on behalf of the indemnified parties or any
officer, director, employee, agent or controlling person of the indemnified
parties, and regardless of any transfer or sale of shares by any Holder or
any termination of Holder's rights to registration hereunder.
Section 3.5 Rule 144 Requirements. The Company shall furnish to any
----------- ---------------------
holder of Registrable Shares upon request a written statement executed by the
Company as to the steps it has taken to comply with the current public
information requirement of Rule 144 or such successor rules. The Company shall
use its best efforts to comply with the current public information requirements
of Rule 144. In connection with a sale of Restricted Stock by a Holder pursuant
to Rule 144, assuming the Holders provide standard Rule 144 representation
letters, the Company agrees that the Holders shall not be required to pay for
any legal opinion required to effect such a transfer.
8
<PAGE>
If at any time the Company is not a reporting company under Section 13 or
15(d) of the Securities and Exchange Act of 1934 or has not complied with the
requirements for the exemption from registration under the Securities and
Exchange Act of 1934 set forth in Rule 12g3-2b under such Act, the Company shall
furnish to any Holder of Registrable Shares such financial or other information
as any such Holder or any person designated by such Holder may reasonably
determine to be required to permit such Holder to comply with the requirements
of Rule 144A promulgated under the Act in connection with the resale by it of
the Registrable Shares in any such case promptly after the same is requested.
ARTICLE IV. MISCELLANEOUS PROVISIONS
----------- ------------------------
Section 4.1 Survival of Representations and Covenants. Each of the
----------- -----------------------------------------
parties hereto agrees that each representation, warranty, covenant and agreement
made by it in this Agreement or in any certificate, instrument or other document
delivered pursuant to this Agreement is material, shall be deemed to have been
relied upon by the other parties and shall remain operative and in full force
and effect after the date hereof regardless of any investigation. This Agreement
shall not be construed so as to confer any right or benefit upon any Person
other than the parties hereto and their respective successors and permitted
assigns to the extent contemplated herein.
Section 4.2 Amendment and Waiver. Any party may waive any provision
----------- --------------------
hereof intended for its benefit in writing. No failure or delay on the part of
any party hereto in exercising any right, power or remedy hereunder shall
operate as a waiver thereof. The remedies provided for herein are cumulative and
are not exclusive of any remedies that may be available to any party hereto at
law or in equity or otherwise. This Agreement may be amended with the prior
written consent of the Company, and two-thirds-in-interest of the Holders (based
on the shares of Restricted Stock then held by the Holders as a group);
provided, however, that any amendment which directly, materially and adversely
- -------- -------
affects any right specifically granted to a particular Holder in a manner
different than the other Holder shall not be effective unless such Person has
consented to that amendment. All actions by the Company hereunder shall be taken
by or upon the direction of a majority of the members of the Company's Board of
Directors.
Section 4.3 Notices. All notices and other communications provided for
----------- -------
herein shall be in writing and shall be deemed to have been duly given,
delivered and received (a) if delivered personally or (b) if sent by telex or
facsimile, registered or certified mail (return receipt requested) postage
prepaid, or by courier guaranteeing next day delivery, in each case to the party
to whom it is directed at the following addresses (or at such other address for
any party as shall be specified by notice given in accordance with the
provisions hereof, provided that notices of a change of address shall be
effective only upon receipt thereof). Notices delivered personally shall be
effective on the day so delivered, notices sent by registered or certified mail
shall be effective three days after mailing, notices sent by telex shall be
effective when answered back, notices sent by facsimile shall be effective when
receipt is
9
<PAGE>
acknowledged, and notices sent by courier guaranteeing next day delivery shall
be effective on the earlier of the second business day after timely delivery to
the courier or the day of actual delivery by the courier:
(a) if to the Company:
Boron, LePore & Associates, Inc.
17-17 Route 208 North
Fair Lawn, NJ 07410
Facsimile: (201) 791-1121
Attention: Patrick G. LePore
Chief Executive Officer
(b) if to either Holder or the Seller:
Strategic Implications
International, Inc.
1921 Gallows Road, Suite 360
Vienna, VA 22182
Attn: Christos S. Efessiou and Alicia A. Angelides
Facsimile: (703) 821-8412
Section 4.4 Headings. The Article and Section headings used or
----------- --------
contained in this Agreement are for convenience of reference only and shall not
affect the construction of this Agreement.
Section 4.5 Counterparts. This Agreement may be executed in one or more
----------- ------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which together
shall be deemed to constitute one and the same agreement.
Section 4.6 Dispute Resolution. Except with respect to matters as to
----------- ------------------
which injunctive relief is being sought, in the event of a dispute between the
parties concerning their respective rights and obligations under this Agreement
that the parties are unable to resolve amicably between themselves within sixty
(60) days of proper notice from one party to another, such dispute shall be
settled by arbitration in the State of New Jersey in an expedited manner in
accordance with the Commercial Rules of the American Arbitration Association by
a duly registered arbitrator to be selected jointly by the parties. The decision
of the arbitrator shall be final and binding upon the parties.
Section 4.7 Remedies; Severability. Notwithstanding Section 4.6, it is
----------- ----------------------
specifically understood and agreed that any breach of the provisions of this
Agreement by any Person subject hereto will result in irreparable injury to the
other parties hereto, that the remedy at law alone will be an inadequate remedy
for such breach, and that, in addition to any other legal
10
<PAGE>
or equitable remedies which they may have, such other parties may enforce their
respective rights by actions for specific performance (to the extent permitted
by law).
In the event that any one or more of the provisions contained herein, or
the application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be in any way impaired thereby, it being
intended that all of the rights and privileges of the parties hereto shall be
enforceable to the fullest extent permitted by law.
Section 4.8 Entire Agreement. This Agreement, is intended by the
----------- ----------------
parties as a final expression of their agreement and intended to be complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein and therein. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
Section 4.9 Adjustments. All references to share prices and amounts
----------- -----------
herein shall be equitably adjusted to reflect stock splits, stock dividends,
recapitalizations and similar changes affecting the capital stock of the
Company.
Section 4.10 Law Governing. This Agreement shall be construed and
------------ -------------
enforced in accordance with and governed by the laws of New Jersey (without
giving effect to principles of conflicts of law), except that any Delaware
corporate law matters relating to the Company shall be construed and enforced in
accordance with and governed by the Delaware General Corporation Law (without
giving effect to principles of conflicts of law).
Section 4.11 Successors and Assigns. This Agreement shall be binding
------------ ----------------------
upon and inure to the benefit of the respective successors and permitted assigns
of the parties hereto as contemplated herein, and any successor to the Company
by way of merger or otherwise shall specifically agree to be bound by the terms
hereof as a condition of such successor. This Agreement may not be assigned by
any Holders except to a member of a Holder's immediate family, to a trust or
other entity controlled by a Holder, or to the estate or heirs of a Holder
without the prior written consent of the Company.
[Remainder of Page Intentionally Left Blank]
11
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
COMPANY:
-------
BORON, LEPORE & ASSOCIATES, INC.
By: /s/ Patrick G. LePore
---------------------------------
Patrick G. LePore
President
HOLDERS:
By: /s/ Christos S. Efessiou
---------------------------------
Christos S. Efessiou, individually
By: /s/ Alicia A. Angelides
---------------------------------
Alicia A. Angelides, individually
12
<PAGE>
EXHIBIT 2.6
ASSET PURCHASE AGREEMENT
BY AND AMONG
STRATEGIC IMPLICATIONS INTERNATIONAL, INC.
A DELAWARE CORPORATION.
AS BUYER
BORON, LEPORE & ASSOCIATES, INC.
AS PARENT
EFAN HOLDINGS, INC.
A MARYLAND CORPORATION
(FORMERLY STRATEGIC IMPLICATIONS INTERNATIONAL, INC., A MARYLAND CORPORATION)
AS SELLER
AND
CHRISTOS S. EFESSIOU
AND
ALICIA A. ANGELIDES
AS STOCKHOLDERS
MARCH 18, 1998
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TABLE OF CONTENTS
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<TABLE>
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PAGE
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<S> <C>
SECTION 1. PURCHASE AND SALE OF ASSETS....................... 1
1.1 Sale of Assets....................................... 1
1.2 Liabilities.......................................... 2
1.3 Purchase Price and Payment........................... 3
1.4 Place of Closing; Closing Date....................... 3
1.5 Transfer of Subject Assets........................... 4
1.6 Delivery of Records and Contracts.................... 4
1.7 Further Assurances................................... 4
1.8 Allocation of Purchase Price......................... 5
1.9 Procedures for Assets not Transferable............... 5
1.10 Employees, Wages and Benefits........................ 5
SECTION 2. REPRESENTATIONS AND WARRANTIES OF SELLER AND
STOCKHOLDERS....................................... 6
2.1 Making of Representations and Warranties............. 6
2.2 Organization and Qualification; Capital Stock........ 6
2.3 Authority............................................ 7
2.4 Title to Properties; Liens; Condition of Properties.. 8
2.5 Location of Subject Assets........................... 8
2.6 Financial Statements; Undisclosed Liabilities........ 8
2.7 Tax Matters.......................................... 9
2.8 Collectibility of Accounts Receivable................ 10
2.9 Intellectual Property Rights; Employee Restrictions.. 10
2.10 Business; Compliance with Laws....................... 11
2.11 Insurance............................................ 11
2.12 Transactions with Affiliates......................... 11
2.13 Employee Benefit Plans............................... 12
2.14 Hazardous Waste, Etc. ............................... 12
2.15 List of Certain Employees and Suppliers.............. 13
2.16 Employees; Labor Matters............................. 14
2.17 Customers, Distributors, Panel Members,
Salespersons......................................... 14
2.18 Litigation........................................... 14
2.19 Finder's Fee......................................... 15
2.20 Material Adverse Change.............................. 15
2.21 Contracts............................................ 15
2.22 Banking Relations.................................... 16
2.23 Disclosure........................................... 16
2.24 Securities Law Matters............................... 17
2.25 Millennium Compliance................................ 18
SECTION 3. COVENANTS OF STOCKHOLDERS AND SELLER.............. 18
3.1 Making of Covenants and Agreements.................... 18
</TABLE>
(i)
<PAGE>
<TABLE>
<S> <C>
3.2 Non-Use of Trade Names, etc.......................... 18
3.3 Non-Disclosure and Non-Competition................... 18
3.4 Payment of Obligations............................... 19
3.5 Collection of Assets................................. 19
3.6 Securities Filings................................... 20
3.7 Payment of Constructive Trust........................ 20
3.8 Assist in Accreditation.............................. 20
3.9 Transfer of Bank Accounts............................ 20
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER
AND PARENT........................................ 20
4.1 Making of Representations and Warranties............. 20
4.2 Organization of Buyer................................ 20
4.3 Authority of Buyer................................... 20
4.4 Finder's Fees........................................ 21
4.5 SEC Reports.......................................... 21
4.6 Material Adverse Change.............................. 22
SECTION 5. COVENANTS OF BUYER AND PARENT..................... 22
5.1. Distribution of Income.............................. 22
SECTION 6. SURVIVAL OF WARRANTIES............................ 22
SECTION 7. INDEMNIFICATION................................... 23
7.1 Indemnification by Stockholders...................... 23
7.2 Indemnification by Buyer and Parent.................. 25
7.3 Notice; Defense of Claims............................ 27
7.4 Sole Remedy.......................................... 28
7.5 Satisfaction of Indemnification Obligations.......... 28
7.6 Insurance Proceeds................................... 28
SECTION 8. MISCELLANEOUS..................................... 29
8.1 Law Governing....................................... 29
8.2 Notices............................................. 29
8.3 Prior Agreements Superseded......................... 30
8.4 Assignability....................................... 30
8.5 Captions and Gender................................. 30
8.6 Certain Definitions................................. 30
8.7 Execution in Counterparts........................... 31
8.8 Amendments; Waivers................................. 31
8.9 Severability........................................ 31
8.10 Publicity and Disclosures........................... 31
8.11 Consent to Jurisdiction and Service................. 31
8.12 Expenses............................................ 32
</TABLE>
(ii)
<PAGE>
SCHEDULES
<TABLE>
<S> <C>
Schedule 1.1(a)(i) - Intellectual Property Rights
Schedule 1.1(a)(ii) - Receivables
Schedule 1.1(a)(iv) - Assumed Contracts
Schedule 1.1(a)(v) - Certificates
Schedule 1.1(a)(vi) - Inventory
Schedule 1.1(a)(vii) - Equipment
Schedule 1.2 - Contract Liabilities
Schedule 1.3(b) - Project Information
Schedule 1.8 - Allocation of Purchase Price
Schedule 1.10 - Vacation
Schedule 2.2 - Capitalization
Schedule 2.3 - Liens
Schedule 2.4 - Title to Properties
Schedule 2.6 - Undisclosed Liabilities
Schedule 2.8 - Accounts Receivable
Schedule 2.9 - Intellectual Property Rights
Schedule 2.10 - Compliance with Laws
Schedule 2.11 - Insurance
Schedule 2.12 - Transactions with Affiliates
Schedule 2.13 - Employee Benefit Plans
Schedule 2.14 - Hazardous Waste, Etc.
Schedule 2.15 - Employees and Suppliers
Schedule 2.17 - Suppliers, Customers Distributors, Etc.
Schedule 2.18 - Litigation
Schedule 2.20 - Material Adverse Changes
Schedule 2.21 - Contracts
Schedule 2.22 - Banking Relations
Schedule 4.6 - Material Adverse Changes
</TABLE>
(iii)
<PAGE>
EXHIBITS
Exhibit A Contingent Payment
Exhibit B Form of Employment Agreement
Exhibit C Form of Non-Competition Agreement
Exhibit D Registration Rights Agreement
(iv)
<PAGE>
ASSET PURCHASE AGREEMENT dated as of March 18, 1998 by and among Boron,
LePore & Associates, Inc., a Delaware corporation ("Parent"), Strategic
Implications International, Inc., a newly formed Delaware corporation ("Buyer"),
EFAN Holdings, Inc., a Maryland corporation formerly named Strategic
Implications International, Inc.("Seller"), and Christos S. Efessiou and Alicia
A. Angelides (individually a "Stockholder" and collectively the "Stockholders").
WHEREAS, subject to the terms and conditions set forth herein, Buyer
desires to purchase from Seller, and Seller desires to sell, transfer and assign
to Buyer, substantially all of the properties and assets of Seller. The
business and operations of Seller which include the properties and assets to be
transferred to Buyer under this Agreement are referred to herein as the
"Business."
NOW, THEREFORE, in order to consummate said purchase and sale and in
consideration of the mutual agreements set forth herein, the parties hereto
agree as follows:
SECTION 1. PURCHASE AND SALE OF ASSETS.
---------------------------
1.1 Sale of Assets.
--------------
(a) Subject to the provisions of this Agreement, at the Closing (as
defined in Section 1.4 hereof) Seller shall sell, transfer and assign to Buyer
and Buyer shall acquire all right, title and interest in and to (1) the names
"Strategic Implications International," "Cogent" and "Design Power" and all
related and associated logos and trademarks and all licenses to or from third
parties with respect thereto (2) all of the goodwill of the Business and (3) all
of the properties, assets and business of Seller used or held for use in the
Business (except as hereinafter provided in Section 1.1(b)) of every kind and
description, tangible and intangible, real, personal or mixed, and wherever
located, including without limitation, the following:
(i) all goodwill and intellectual property rights, including
trade secrets, proprietary information, designs, styles, technologies,
inventions, know-how, formulae, processes, procedures, research records,
test information, software and software documentation, source and object
code, algorithms, promotional materials, customer lists, supplier and
dealer lists, market surveys, marketing know-how and manufacturing,
research and technical information, trade names, copyrights and copyright
registrations, service marks and trademarks (including applications and
registrations therefor), patents and patent applications (including without
limitation the trade names, copyrights and copyright registrations, service
mark and trademark registrations and applications and patents and patent
applications described in Schedule 1.1(a)(i) attached hereto), and all
------------------
licenses to or from third parties with respect to the foregoing or rights
related thereto, in each case which is used or held for use in the
Business, and all documentation and media constituting, describing or
relating to the foregoing, including without limitation, manuals, memoranda
and records (collectively, the "Intellectual Property Rights");
<PAGE>
(ii) all accounts receivable of the Business, all of which are
listed on Schedule 1.1(a)(ii) attached hereto (the "Receivables");
-------------------
(iii) all cash and bank deposits of Seller;
(iv) all of Seller's rights and interests in and to the orders,
commitments, contracts and agreements of the Business, all of which are
listed on Schedule 1.1(a)(iv) attached hereto (the "Contracts");
-------------------
(v) all of Seller's right, title and interest in and to all
franchises, licenses, permits, certifications, approvals and authorizations
(each to the extent assignable) relating to the Business all of which are
listed on Schedule 1.1(a)(v) attached hereto (the "Certificates");
------------------
(vi) all of Seller's inventory, stock in trade, work-in-progress,
finished goods and raw materials listed on Schedule 1.1(a)(vi)
-------------------
(collectively, the "Inventory");
(vii) all of Seller's equipment, tools, spare parts, fixtures
and other tangible assets related to or used in connection with the
Business, all of which are listed on Schedule 1.1(a)(vii) attached hereto
--------------------
(collectively, the "Equipment");
(viii) all other assets and properties of every nature
whatsoever tangible and intangible, and wherever located, used or held for
use in connection with the Business, including without limitation, rights
under contracts or agreements with representatives marketing and selling
the products and services of the Business, copies of customer lists,
customer records and histories, customer invoices, lists of suppliers and
vendors and all records relating thereto, market research information,
advertising matter, catalogues, photographs, sales materials, purchasing
materials, files, data, media materials and all records with respect to the
Business.
The assets, property and business of Seller being sold to and purchased by
Buyer under this Section 1.1(a) are hereinafter sometimes referred to as
"Subject Assets."
(b) Notwithstanding the foregoing, there shall be excluded from such
purchase and sale, Seller's corporate franchise, stock record books, and
corporate record books containing minutes of meetings of directors and
stockholders (collectively, the "Corporate Records" or the "Excluded Assets").
1.2 Liabilities. Except for the Contract Liabilities (as defined below),
-----------
Buyer shall not assume or be bound by any obligations or liabilities of Seller
or any affiliate of Seller of any kind or nature, known, unknown, accrued,
absolute, contingent or otherwise, whether now existing or hereafter arising
whatsoever (the "Excluded Liabilities"). Seller shall be
2
<PAGE>
responsible for and pay any and all losses, damages, obligations, liens,
assessments, judgments, fines, disposal and other costs and expenses,
liabilities and claims, including, without limitation, interest, penalties and
reasonable fees of counsel, engineers and experts, as the same are incurred, of
every kind or nature whatsoever (all the foregoing being a "Claim" or the
"Claims"), made by or owed to any person to the extent any of the foregoing
relates to (a) the Excluded Assets, (b) the Excluded Liabilities or (c) the
operations or assets of the Business and arises in connection with or on the
basis of events, acts, omissions, conditions or any other state of facts
occurring or existing prior to or on the Closing Date (including, in each case,
without limitation, any Claim relating to or associated with tax matters,
pension and benefits matters, any failure to comply with applicable laws and/or
permitting or licensing requirements, environmental and worker health and safety
matters).
Upon the sale and purchase of the Subject Assets, Buyer agrees to perform
in accordance with their terms (i) the obligations of Seller arising under the
Contracts from and after the Closing, and (ii) those liabilities specified in
Schedule 1.2 (collectively, the "Contract Liabilities"). The assumption of the
- ------------
Contract Liabilities by Buyer hereunder shall not enlarge any rights of third
parties under contracts or arrangements with Buyer or Seller or any of their
respective affiliates or subsidiaries. No parties other than the Buyer, the
Parent and Seller shall have any rights under this Agreement. Notwithstanding
anything contained in this Section 1.2 to the contrary, the only liabilities and
obligations of Seller existing on or prior to the Closing Date (including,
without limitation, contractual liabilities and obligations) to be assumed by
Buyer under this Agreement are the Contract Liabilities.
1.3 Purchase Price and Payment.
--------------------------
(a) In consideration of the sale by Seller to Buyer of the Subject
Assets, subject to the assumption by Buyer of the Contract Liabilities, Buyer
shall pay to Seller on the Closing Date (i) by federal funds wire transfer in
immediately available funds to an account designated by Seller, the sum of four
million, three hundred and thirty thousand dollars ($4,330,000); and (ii)
137,052 shares of common stock of the Parent, par value $.01 per share ("Parent
Stock").
(b) Upon the achievement of the performance goals listed in Exhibit A
---------
hereto, with reference to Schedule 1.3(b), and subject to the terms and
---------------
conditions contained therein, Buyer shall deliver to Seller an aggregate payment
of one million three hundred and forty thousand dollars ($1,340,000) (the
"Contingent Payment") by check or wire transfer of immediately available funds.
(c) As of the Closing, Seller shall be deemed to pay to Buyer an
amount equal to the amount of deferred revenue reflected on the balance sheet of
Seller as of the Closing, as determined by the auditors of Buyer in accordance
with GAAP, in consideration for Buyer assuming Seller's obligation to perform to
the extent necessary to earn such amount of deferred revenue.
3
<PAGE>
1.4 Place of Closing; Closing Date. The closing of the purchase and sale
------------------------------
provided for in this Agreement (the "Closing") shall be held at the offices of
Goodwin, Procter & Hoar LLP, Boston, MA, at 10:00 a.m. (local time) on March 18,
1998, or at such other place or earlier or later date as may be fixed by mutual
agreement of Buyer and Seller (the "Closing Date").
1.5 Transfer of Subject Assets. At the Closing, (a) Seller shall deliver
--------------------------
or cause to be delivered to Buyer (i) good and sufficient instruments of
transfer transferring to Buyer title to all of the Subject Assets and such
instruments of transfer (w) shall be in the form which is usual and customary
for transferring the type of property involved under the laws of the
jurisdictions applicable to such transfers, (x) shall be in form and substance
satisfactory to Buyer and its counsel, (y) shall effectively vest in Buyer good
title to all of the Subject Assets free and clear of all mortgages, pledges,
security interests, charges, liens, restrictions and encumbrances of any kind,
except for liens for taxes not yet due and payable (collectively, "Liens"), and
(z) where applicable, shall be accompanied by evidence of the discharge of all
liens and encumbrances against the Subject Assets; (ii) employment agreements in
the form of Exhibit B, executed by each Stockholder (collectively, the
---------
"Employment Agreements"); (iii) non-competition agreements in the form of
Exhibit C, executed by each Stockholder (collectively, the "Non-Competition
- ---------
Agreements"); (iv) a registration rights agreement in the form of Exhibit D,
---------
executed by Seller and each Stockholder (the "Registration Rights Agreement");
and (v) such other documentation as may be reasonably agreed to by Buyer and
Seller in connection with the consummation of the transactions contemplated by
this Agreement; and (b) Buyer shall deliver to Seller and the Stockholders (i)
the amounts of cash and Parent Stock set forth in Section 1.3; (ii) the
Employment Agreements executed by Buyer and Parent; (iii) the Registration
Rights Agreement executed by each of Buyer and Parent; and (iv) such other
documentation as may be reasonably agreed to by Buyer and Seller in connection
with the consummation of the transactions contemplated by this Agreement.
1.6 Delivery of Records and Contracts. At the Closing, Seller shall
---------------------------------
deliver or cause to be delivered to Buyer all of the Contracts. Seller shall
also deliver to Buyer at the Closing, all of Seller's business records, books
and other data relating to the assets, business and operations of the Business,
to the extent the same constitute part of the Subject Assets. For five years
after the Closing Date, Buyer shall not destroy any business records, books or
data delivered to it by Seller in accordance with this Section 1.6 without first
giving notice to Seller of the intention to destroy such records, books or data.
Seller at the Closing shall also provide Buyer with copies of the Corporate
Records. Seller may keep copies of the Seller's records to the extent necessary
to comply with Seller's or either Stockholder's tax reporting obligations.
1.7 Further Assurances.
------------------
(a) Seller from time to time after the Closing at the request of Buyer
and without further consideration shall (i) execute and deliver further
instruments of transfer and assignment (in addition to those delivered under
Section 1.5) and take such other actions as
4
<PAGE>
Buyer may reasonably require to more effectively transfer and assign to,
including assignments in such forms as are acceptable to the United States
Patent and Trademark Office, and vest in, Buyer each of the Subject Assets and
(ii) cooperate with and provide assistance to Buyer in taking possession of the
Subject Assets.
(b) Buyer and Parent from time to time after the Closing at the
request of Seller and without further consideration shall (i) execute and
deliver further instruments and take such other actions as Seller may reasonably
require to more effectively transfer and assign to, and vest in, Seller the
consideration paid pursuant to this Agreement and (ii) cooperate with and
provide assistance to Seller in taking possession of such consideration.
1.8 Allocation of Purchase Price. The purchase price payable by Buyer
----------------------------
pursuant to Section 1.3 and the amount of the Contract Liabilities assumed by
Buyer shall represent payment for the Subject Assets and the Non-Competition
Agreements in the amounts set forth on Schedule 1.8 hereto. The amounts
------------
reflected in said Schedule shall represent the fair market values of the Subject
Assets at the Closing, to the best of the knowledge and belief of the parties
hereto. At or as soon as practicable after the Closing, Buyer and Seller shall
execute an IRS Form 8594 in accordance with the allocation set forth in said
Schedule and in compliance with Section 1060 of the Internal Revenue Code of
1986, as amended, and the rules and regulations thereunder. All tax returns and
reports filed by Buyer and Seller with respect to the transactions contemplated
by this Agreement shall be consistent with such Schedule.
1.9 Procedures for Assets not Transferable. If any of the contracts or
--------------------------------------
agreements or any other property or rights included in the Subject Assets is not
assignable or transferable either by virtue of the provisions thereof or under
applicable law without the consent of some party or parties and any such consent
is not obtained prior to the Closing, this Agreement and the related instruments
of transfer shall not constitute an assignment or transfer thereof and, unless
otherwise agreed between Buyer and Seller with respect to such contract, Buyer
shall assume Seller's economic obligations with respect thereto, and Seller
shall use all commercially reasonable efforts to obtain any such consent as soon
as possible after the Closing or otherwise obtain for Buyer the practical and
economic benefit of such property or rights and Buyer shall use all commercially
reasonable efforts to assist in that endeavor.
1.10 Employees, Wages and Benefits.
-----------------------------
(a) Seller shall terminate all employees of the Business and shall be
responsible for making all severance payments to such employees in respect of
such terminations. Buyer shall not assume or have any obligations or
liabilities with respect to such terminations.
(b) Buyer currently intends to offer employment to each of Seller's
employees. Such offer of employment, when and if extended, will include terms
providing for paid vacation and salary for each employee, each as set forth on
Schedule 1.10. Buyer
- -------------
5
<PAGE>
specifically reserves to itself the right to employ or reject any of Seller's
employees or other applicants in its sole and absolute discretion. Seller
acknowledges and agrees that Buyer may interview and discuss employment terms
and issues with employees. Nothing in this Agreement shall be construed as a
commitment or obligation of Buyer to accept for employment, or otherwise
continue the employment of, any of Seller's employees.
(c) Seller shall pay all wages, salaries, commissions, and the cost of
all fringe benefits provided to each employee of the Business which shall have
become due for work performed as of and through the day on which such employee
is terminated, and Seller shall collect and pay all taxes in respect of such
wages, salaries, commissions and benefits.
(d) Seller acknowledges and agrees that Buyer is not assuming and
shall not have any obligations or liabilities of under, any benefit plan
maintained by, or for the benefit of employees of, the Business, including
without limitation obligations for severance, provided, however, that Buyer will
assume Seller's obligation for vacation accrued but not taken as of the Closing
Date to the extent set forth on Schedule 1.10.
-------------
SECTION 2. REPRESENTATIONS AND WARRANTIES OF SELLER AND STOCKHOLDERS.
---------- ---------------------------------------------------------
2.1 Making of Representations and Warranties. As a material inducement to
----------------------------------------
Buyer and Parent to enter into this Agreement and consummate the transactions
contemplated hereby, Seller and each of the Stockholders jointly and severally
hereby make the representations and warranties contained in this Section 2.
2.2 Organization and Qualification; Capital Stock. Seller is a
---------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Maryland with full power and authority to own or lease its
properties and to conduct its business in the manner and in the places where
such properties are owned or leased or such business is conducted by it. Seller
is qualified to do business as a foreign corporation in Virginia, it being the
only jurisdiction in which such qualification is necessary, except where the
failure to be so qualified would not have a material adverse effect on Seller or
the Business. All of the issued and outstanding capital stock of the Seller is
owned beneficially and of record as set forth in Schedule 2.2, free and clear of
------------
any lien, restrictions or encumbrances, and there are no outstanding options,
warrants, rights, commitments, pre-emptive rights (except as provided by law) or
agreements of any kind for the issuance or sale of, or outstanding securities
convertible into, any additional shares of capital stock of any class of the
Seller.
Seller does not have any subsidiaries or own any securities issued by any
other business organization or governmental authority or any direct or indirect
interest in or control over any corporation, partnership, joint venture or
entity of any kind relating to the business conducted by Seller. Prior to the
Closing Date, Seller has amended its Articles of Incorporation to
6
<PAGE>
change its corporate name to a name which does not include the name "Strategic
Implications International" or any related name.
2.3 Authority.
---------
(a) The Seller has full corporate power and authority to execute,
deliver and perform this Agreement and each other agreement or instrument
contemplated hereby and the execution and delivery of this Agreement and each
other agreement or instrument contemplated hereby and the performance of all
obligations hereunder and thereunder have been duly authorized by all necessary
action of Seller. This Agreement and each other agreement, document and
instrument executed by Seller pursuant to or in connection with this Agreement
constitutes, or when executed and delivered will constitute, the valid and
binding obligation of Seller, enforceable in accordance with its terms, subject
to applicable bankruptcy, reorganization, insolvency, moratorium and other
rights affecting creditors' rights generally, and general equitable principles.
Except as disclosed on Schedule 2.3, the execution, delivery and performance by
------------
the Seller of this Agreement and each other agreement, document and instrument
contemplated hereby:
(i) do not and will not violate any provision of the Articles of
Incorporation or By-laws of Seller, each as amended or restated to date;
(ii) do not and will not violate any laws of the United States or any
state or other jurisdiction applicable to Seller or require Seller to
obtain any approval, authorization, declaration, consent or waiver of, or
make any filing with or give notice to, any person, entity or public or
governmental authority that has not been obtained, made or given; and
(iii) do not and will not result in a breach of, constitute a default
under, accelerate any obligation under, require a consent under or give
rise to a right of termination of any indenture or loan or credit agreement
or any other agreement, contract, instrument, mortgage, lien, lease,
permit, license, authorization, order, writ, judgment, injunction, decree,
determination or arbitration award to which Seller is a party or by which
Seller or its property is bound or affected, or result in the creation or
imposition of any Lien on any of the Subject Assets.
(b) Each Stockholder has full right, authority, power and capacity to enter
into this Agreement and each agreement, document and instrument to be executed
and delivered by or on behalf of him or her pursuant to or contemplated by this
Agreement and to carry out the transactions contemplated hereby and thereby.
This Agreement and each agreement, document and instrument executed and
delivered by each Stockholder pursuant to or contemplated by this Agreement
constitute, or when executed and delivered will constitute, valid and binding
obligations of each Stockholder enforceable in accordance with their respective
terms, except as the same may be limited by bankruptcy, insolvency or
reorganization laws, or other
7
<PAGE>
laws relating to or affecting the availability of the remedy of specific
performance or equitable principles of general application. The execution,
delivery and performance by each Stockholder of this Agreement and each such
agreement, document and instrument:
(i) do not and will not violate any laws of the United States or any
state or other jurisdiction applicable to either Stockholder or require
either Stockholder to obtain any approval, consent or waiver of, or make
any filing with, any person or entity (governmental or otherwise) that has
not been obtained or made, except that no representation is made with
respect to the HSR Act; and
(ii) do not and will not result in a breach of, constitute a default
under, accelerate any obligation under or give rise to a right of
termination of any indenture or loan or credit agreement or any other
agreement, contract, instrument, mortgage, lien, lease, permit,
authorization, order, writ, judgment, injunction, decree, determination or
arbitration award to which either Stockholder is a party or by which the
property of either Stockholder is bound or affected, or result in the
creation or imposition of any mortgage, pledge, lien, security interest or
other charge or encumbrance on any of the Subject Assets.
2.4 Title to Properties; Liens; Condition of Properties.
---------------------------------------------------
(a) The Subject Assets do not include any real property. Schedule 2.4
------------
sets forth the addresses and uses of all real property that the Seller leases.
Seller owns all of the Subject Assets and Seller has and is conveying to Buyer
hereunder good title to all of its personal property, tangible and intangible
(to the extent Seller owns rights in such intangible property), included in the
Subject Assets. None of such property or assets of Seller, tangible or
intangible, is subject to any Lien. Except as set forth on Schedule 2.4, no
------------
financing statement under the Uniform Commercial Code with respect to any of the
Subject Assets is active in any jurisdiction, and Seller has not signed any such
active financing statement or any security agreement authorizing any secured
party thereunder to file any such financing statement. The Subject Assets are
all of the material assets used in the operation of the Business as the same has
been operated prior to the date hereof. The Subject Assets (i) are in working
order (reasonable wear and tear excepted), (ii) have been and shall through the
Closing be maintained in a manner consistent with the past maintenance practices
of Seller, and (iii) to the best knowledge of Seller, conform with all
applicable state and federal statutes, ordinances, regulations and laws.
(b) Upon delivery to Buyer of the instruments of transfer referred to
in Section 1.5 hereof, Buyer will receive good and valid title to all of the
Subject Assets, free and clear of all Liens.
2.5 Location of Subject Assets. The material tangible Subject Assets are
--------------------------
located at Seller's facility at 1921 Gallows Road, Suite 360, Vienna, Virginia
22182 (the "Facility").
8
<PAGE>
The remainder of the tangible assets are computers in the possession of Seller's
employees, as indicated in the records of the Seller provided by Seller to Buyer
at Closing.
2.6 Financial Statements; Undisclosed Liabilities.
---------------------------------------------
(a) Seller has previously furnished to Buyer and Parent copies of its
unaudited financial statements for the fiscal years ended December 31, 1995,
1996 and 1997 and the interim period ending February 28, 1998, which financial
statements for 1997 and part year 1998 are set forth in Schedule 2.6(a) .
---------------
Except as described in Schedule 2.6(a), such financial statements referred to in
---------------
this Section 2.6(a) were prepared in conformity with generally accepted
accounting principles applied on a consistent basis, and fairly and accurately
present the financial position of Seller as of the dates thereof and the results
of operations and cash flows of Seller for the periods shown therein (subject to
the absence of footnotes that would be required by generally accepted accounting
principles), and to the best of Seller's knowledge, are complete, correct and
consistent in all material respects with the books and records of Seller.
(b) The projections set forth on Schedule 2.6(b) represent good faith
---------------
estimates of Seller's performance for 1998 which were in good faith believed to
be reasonable when made and continue to be reasonable as of the date hereof.
Notwithstanding the foregoing, no representation is made that the projections
will be achieved.
(c) Except as and to the extent reflected or reserved against in the
audited balance sheet of Seller at December 31, 1997 contained in the financial
statements referred to in Section 2.6(a) (the "Base Balance Sheet") or as listed
on Schedule 2.6(c), the Seller does not have and is not subject to any material
---------------
liability or obligation of any nature, whether accrued, absolute or otherwise,
of a kind that would be required to be disclosed in such financial statements
or, to its knowledge, any other material liability or obligation.
2.7 Tax Matters. Seller has timely and properly filed all federal, state,
-----------
local and foreign income, excise and franchise tax returns, real estate and
personal property tax returns, sales and use tax returns and other tax returns
required to be filed by it and has paid all Taxes (as defined below) owing by it
(whether or not shown on any Tax Return), except Taxes which have not yet
accrued or otherwise become due, for which adequate provision has been made in
the pertinent financial statements referred to in Section 2.6 above. The
provision for taxes on the Base Balance Sheet is sufficient as of its date for
the payment of all material accrued and unpaid federal, state, county and local
taxes of any nature of Seller, and any applicable taxes owing to any foreign
jurisdiction (collectively, "Taxes"), whether or not assessed or disputed. All
Taxes and other assessments and levies which Seller is required to withhold or
collect have been withheld and collected and have been paid over to the proper
governmental authorities. Seller has never received notice of any audit or of
any proposed deficiencies from the Internal Revenue Service or any other
taxation authority. Neither the Internal Revenue Service nor any other taxing
authority is now asserting or, to the best knowledge of Seller, threatening to
assert
9
<PAGE>
against the Seller any deficiency or claim for additional Taxes or interest
thereon or penalties in connection therewith. The Seller is and has been since
January 1, 1993 an "S Corporation" within the meaning of Section 1361(a)(1) of
the Internal Revenue Code of 1986, as amended, and the applicable laws of the
State of Virginia.
2.8 Collectibility of Accounts Receivable. All of the accounts receivable
-------------------------------------
of the Seller arise from services actually provided in the ordinary course of
business and are to the best of Seller's knowledge, valid and enforceable claims
not subject to set-off or counterclaim. To the best of Seller's and each
Stockholder's knowledge, all of the accounts receivable of Seller are
collectible in the ordinary course of business (less reserve for bad debts set
forth on the Base Balance Sheet). Notwithstanding the preceding sentence, Seller
does not guarantee collectibility of such receivables. Seller does not have any
accounts receivable or loans receivable from any person, firm or corporation
which is affiliated with Seller or from any stockholder, director, officer or
employee of Seller or any affiliate thereof. Schedule 2.8 lists the accounts
------------
receivable of the Seller as of February 28, 1998.
2.9 Intellectual Property Rights; Employee Restrictions. Except as set
---------------------------------------------------
forth in Schedule 2.9:
------------
(a) Seller has exclusive ownership of, with the right to use, sell,
license, dispose of, and bring actions for infringement of, all patent,
copyright, trade secret, trademark or other proprietary rights ("Intellectual
Property Rights") material to the conduct of its business, as presently
conducted or currently contemplated to be conducted (the "Seller Rights"), which
rights are set forth on Schedule 2.9(a), provided that no representation is made
---------------
with respect to "off the shelf" software used by Seller that is generally
commercially available.
(b) The business of Seller as presently conducted does not violate any
agreements which Seller has with any third party or, to the best of Seller's or
either Stockholder's knowledge, infringe any patent, trademark, copyright or
trade secret or, to the best knowledge of Seller, any other Intellectual
Property Rights of any third party.
(c) No claim is pending or, to the best knowledge of the Seller,
threatened against the Seller nor has Seller received any notice or claim from
any person asserting that any of the Seller's present or contemplated activities
infringe or may infringe any Intellectual Property Rights of such person, and
Seller is not aware of any infringement by any other person of any rights of
Seller under any Intellectual Property Rights.
(d) Each current and former contract employee of the Seller involved
in development of any of the Seller Rights, has executed an agreement regarding
confidentiality and proprietary information, and, to the best knowledge of
Seller, none of such employees, consultants or independent contractors is in
violation of any agreement or in breach of any agreement or arrangement with
former or present employers relating to proprietary information.
10
<PAGE>
All of the registered patents, trademarks and copyrights constituting
Intellectual Property Rights have been duly registered in, filed in or issued by
the United States Patent and Trademark Office, the United States Register of
Copyrights or the corresponding offices of other countries identified on
Schedule 2.9, and have been properly maintained and renewed in accordance with
- ------------
all applicable provisions of law and administrative regulations in the United
States and each such country.
2.10 Business; Compliance with Laws. Seller has all material
------------------------------
franchises, permits, licenses and other material rights and privileges
reasonably necessary to permit it to own its property and to conduct its
business as it is presently or currently contemplated to be conducted. Seller
is currently and has heretofore been in compliance in all material respects with
all applicable federal, state, local and foreign laws, regulations and
guidelines, including without limitation all laws, regulations and guidelines of
the Food and Drug Administration, the Federal Trade Commission, the Federal
Communications Commission, the American Medical Association and the
Pharmaceutical Marketing Association, in each case to the extent applicable.
Schedule 2.10 contains a complete and accurate description of the status of
- -------------
Seller's accreditation status with the Accreditation Council for Continuing
Medical Education (the "ACCME") and the American Council on Pharmaceutical
Education (the "ACPE") and each additional action required to be taken by
Seller, the ACCME of the ACPE in order for Seller to obtain full accreditation
from each of the ACCME and the ACPE. No other consent of either the ACCME or
the ACPE is required in order for Seller's accreditation status to remain in
full force and effect following the transactions contemplated by this Agreement.
Seller has no knowledge that the current director of the Strategic Institute or
any person who was "accredited" by the ACCME or the ACPE does not plan to accept
employment with Buyer after the Closing. Neither Seller or either Stockholder
has been: (a) convicted in a criminal proceeding or named as a subject of a
pending criminal proceeding (excluding traffic violations and other minor
offenses); (b) subject to any order, judgment, or decree (not subsequently
reversed, suspended or vacated) of any court of competent jurisdiction
permanently or temporarily enjoining it or him from, or otherwise imposing
limits or conditions on its or his engaging in any securities, investment
advisory, banking, insurance or other type of business or acting as an officer
or director of a public company; or (c) found by a court of competent
jurisdiction in a civil action or by the Securities and Exchange Commission or
the Commodity Futures Trading Commission to have violated any federal or state
commodities, securities or unfair trade practices law, which such judgment or
finding has not been subsequently reversed, suspended, or vacated. Seller is
not subject to or bound by any agreement, judgment, decree or order which may
materially and adversely affect any of the Subject Assets or the business,
prospects or condition (financial or otherwise) of the Business.
2.11 Insurance. Schedule 2.11 sets forth all insurance policies
--------- -------------
currently held by Seller and the limits applicable thereto.
2.12 Transactions with Affiliates. There are no loans, leases,
----------------------------
contracts or other transactions between Seller and any officer, director or
stockholder of Seller or any family
11
<PAGE>
member or affiliate of the foregoing persons and there have been no such
transactions within the past two (2) years except as set forth in Schedule 2.12.
-------------
Schedule 2.12 sets forth the distributions made to Seller's stockholders for the
- -------------
purpose of satisfying their obligations for 1997, and an estimate of each
stockholder's obligations for the portion of 1998 prior to the Closing, arising
out of Seller's status as a subchapter S corporation, and such distributions are
good faith estimates of stockholders' actual obligations.
2.13 Employee Benefit Plans. Seller does not maintain or contribute
----------------------
to any employee benefit plan, stock option, bonus or incentive plan, severance
pay policy or agreement, deferred compensation agreement, or any similar plan or
agreement (an "Employee Benefit Plan") other than the Employee Benefit Plans
identified in Schedule 2.13. To the best of Seller's or either Stockholder's
-------------
knowledge, the operation of each Employee Benefit Plan comply in all material
respects with all applicable laws and regulations relating to such Employee
Benefit Plans. There are no unfunded obligations of Seller under any
retirement, pension, profit-sharing, deferred compensation plan or similar
program, except as reflected on the financial statement of December 31, 1997
attached as Schedule 2.6. Seller is not required to make any payments or
-------------
contributions to any Employee Benefit Plan pursuant to any collective bargaining
agreement or, to the knowledge of Seller, any applicable labor relations law,
and all Employee Benefit Plans are terminable at the discretion of Seller
without liability to the Seller upon or following such termination. Seller has
never maintained or contributed to any Employee Benefit Plan providing or
promising any health or other nonpension benefits to terminated employees except
with respect to the continuation of group health plan benefits to the extent
authorized by and consistent with 29 U.S.C. (S) 1161 et seq. (commonly known as
"COBRA").
2.14 Hazardous Waste, Etc.
---------------------
(a) Except as set forth in Schedule 2.14 hereto, (i) Seller has never
-------------
generated, transported, used, stored, treated, disposed of, or managed any
Hazardous Waste (as defined below); (ii) to the best of Seller's knowledge, no
Hazardous Material (as defined below) has ever been or is threatened to be
spilled, released, or disposed of at any site presently or formerly owned, or to
the best of Seller's and each Stockholder's knowledge, operated, leased, or used
by Seller, or has ever been located in the soil or groundwater at any such site;
(iii) to the best of Seller's knowledge, no Hazardous Material has ever been
transported from any site presently or formerly owned, or to the best of
Seller's and each Stockholder's knowledge, operated, leased, or used by Seller
for treatment, storage, or disposal at any other place; (iv) to the best of
Seller's knowledge, Seller does not presently own, operate, lease, or use, nor
has it previously owned, nor to the best of Seller's and each Stockholder's
knowledge, has it previously operated, leased, or used any site on which
underground storage tanks are or were located; and (v) no lien has ever been
imposed by any governmental agency on any property, facility, machinery, or
equipment owned, or to the best of Seller's and each Stockholder's knowledge,
operated, leased, or used by Seller in connection with the presence of any
Hazardous Material.
12
<PAGE>
(b) Except as set forth in Schedule 2.14 hereto, (i) Seller does not
-------------
have any material liability under, nor has it ever violated, any Environmental
Law (as defined below); (ii) Seller, any property owned, operated, leased, or
used by Seller, and any facilities and operations thereon, and to the best of
Seller's and either Stockholder's knowledge are presently in compliance with all
applicable Environmental Laws; (iii) Seller has never entered into or been
subject to any judgment, consent decree, compliance order, or administrative
order with respect to any environmental or health and safety matter or received
any request for information, notice, demand letter, administrative inquiry, or
formal or informal complaint or claim with respect to any environmental or
health and safety matter or the enforcement of any Environmental Law; and (iv)
Seller has no reason to believe that any of the items enumerated in clause (iii)
of this subsection will be forthcoming.
(c) Except as set forth in Schedule 2.14 hereto, no site owned, or to
-------------
the best of Seller's or either Stockholder's knowledge, operated, leased, or
used by Seller or any of its subsidiaries contains any asbestos or asbestos-
containing material, any polychlorinated biphenyls (PCBs) or equipment
containing PCBs, or any urea formaldehyde foam insulation.
(d) Seller has provided to Buyer copies of all documents, records, and
information in the possession and control of Seller or any of its subsidiaries
concerning any environmental or health and safety matter relevant to Seller or
any of its subsidiaries, whether generated by the Seller, its subsidiaries, or
others, including without limitation, environmental audits, environmental risk
assessments, site assessments, documentation regarding off-site disposal of
Hazardous Materials, spill control plans, and reports, correspondence, permits,
licenses, approvals, consents, and other authorizations related to environmental
or health and safety matters issued by any governmental agency.
(e) For purposes of this Section 2.14, (i) "Hazardous Material" shall
------------
mean and include any hazardous waste, hazardous material, hazardous substance,
petroleum product, oil, toxic substance, pollutant, contaminant, or other
substance which may pose a threat to the environment or to human health or
safety, as defined or regulated under any Environmental Law; (ii) "Hazardous
Waste" shall mean and include any hazardous waste as defined or regulated under
any Environmental Law; (iii) "Environmental Law" shall mean any environmental or
health and safety-related law, regulation, rule, ordinance, or by-law at the
foreign, federal, state, or local level, whether existing as of the date hereof,
previously enforced, or subsequently enacted; and (iv) "Seller" shall mean and
include Seller, each of its subsidiaries and all other entities for whose
conduct the Seller or any of its subsidiaries is or may be held responsible
under any Environmental Law.
2.15 List of Certain Employees and Suppliers. Schedule 2.15 contains
--------------------------------------- -------------
a list of all managers, employees and consultants and independent contractors of
Seller who, individually, have received or are scheduled to receive compensation
or payments for the fiscal year ended December 31, 1997 in excess of $35,000.
In each case such Schedule includes the current job title and aggregate annual
compensation of each such individual. Schedule 2.15 sets forth a list
-------------
13
<PAGE>
of all suppliers to whom Seller made payments aggregating $35,000 or more during
the fiscal year ended December 31, 1997 showing, with respect to each, the name,
address and dollar volume involved. No supplier has terminated or reduced its
business with Seller or materially and adversely modified its relationship
therewith.
2.16 Employees; Labor Matters. Seller employs approximately 26 full-
------------------------
time employees and 2 part-time employees, has 3 contracts with independent
contractors and has no notice of any information that would commonly be
considered the type that would impede or indicate a lack of a good employer-
employee relationship. Seller is not delinquent in payments to any of its
employees or independent contractors for any wages, salaries, commissions,
bonuses or other direct compensation for any services performed for it to the
date hereof or amounts required to be reimbursed to such employees or
independent contractors. Upon termination of the employment of any of said
employees or independent contractors who is not under a written contract
disclosed in Schedule 2.21, no severance or other payments will become due.
Seller has no policy, practice, plan or program of paying severance pay or any
form of severance compensation in connection with the termination of employment
or services. To the best of Seller's or either Stockholder's knowledge, Seller
is in compliance in all material respects with all applicable laws and
regulations respecting labor, employment, fair employment practices, terms and
conditions of employment, and wages and hours. There are no changes pending, or
of which Seller has knowledge threatened with respect to (including, without
limitation, resignation of) the senior management or key supervisory personnel
or independent contractors of Seller nor has Seller received any notice or
information concerning any prospective change with respect to such senior
management or key supervisory personnel.
2.17 Customers, Distributors, Panel Members, Salespersons. Schedule
---------------------------------------------------- --------
2.17 sets forth each representative, distributor and independent contractor of
- ----
Seller at the date hereof, any panel member who participated as a panel member
in more than five (5) meetings in fiscal 1997 and each customer, salesperson
and/or broker of Seller who accounted for more than 5% of the sales of Seller
for the twelve (12) months ended December 31, 1997 (collectively, the
"Customers, Distributors and Brokers"). Seller has received no notice from its
Customers, Distributors, and Brokers of any information that would commonly be
considered the type that would impede or indicate a lack of good commercial
working relationships. Except as set forth on Schedule 2.17, no Customer,
-------------
Distributor or Broker of Seller has canceled or otherwise terminated its
relationship with Seller, or has during the last twelve months decreased
materially its services, supplies or materials to Seller or its usage or
purchases of the services or products of Seller. No Customer, Distributor or
Broker has, to the best knowledge of the Seller, any plan or intention to
terminate, to cancel or otherwise materially and adversely modify its
relationship with Seller or to decrease materially or limit its services,
supplies or materials to Seller or its usage, purchase or distribution of the
services or products of Seller.
2.18 Litigation. Except as set forth on Schedule 2.18, there is no
---------- -------------
litigation, claim or governmental, arbitration or other proceeding,
investigation, order or decree pending or in
14
<PAGE>
effect or, to the best knowledge of Seller, threatened against Seller or either
Stockholder relating to or affecting any of the Subject Assets or the Business.
2.19 Finder's Fee. Seller has not incurred or become liable for any
------------
broker's commission or finder's fee relating to or in connection with the
transactions contemplated by this Agreement.
2.20 Material Adverse Change. Except as specifically disclosed on
-----------------------
Schedule 2.20 to this Agreement, since December 31, 1997:
- -------------
(a) there has not been any material adverse change in the business,
results of operations, condition (financial or otherwise), properties,
assets, liabilities or obligations of the Business of the kind that would
be required to be disclosed in financial statements prepared in accordance
with GAAP;
(b) there has not been any damage, destruction or loss (whether or not
covered by insurance), materially and adversely affecting the business,
prospects, results of operations, condition (financial or otherwise),
assets or properties of the Business;
(c) there has not been any change in the relationships of Seller with
respect to its suppliers, distributors, licensees, licensors, customers or
others with whom it has business relationships which would have a material
adverse effect on the Business, and Seller does not have knowledge of any
fact or contemplated event which may cause any such material adverse
change;
(d) the business conducted by the Business has been conducted and
carried on only in the ordinary and regular course consistent with past
practice;
(e) since January 15, 1998, there has not been any payment made by
Seller to either Stockholder of any affiliate thereof, including without
limitation, any payment by means of a dividend, distribution, redemption of
capital stock or similar payment; and
(f) there has not been any alteration or change in the methods of
operation employed by the Business.
2.21 Contracts. Except for Contracts and Certificates listed in
---------
Schedule 1.1(a)(iv) and Schedule 1.1(a)(v) (true and complete copies (or, in the
- -------------------- ------------------
case of material verbal agreements, written descriptions) of which have been
delivered to Buyer), neither Seller nor either Stockholder is a party to or
subject to any of the following contracts or agreements, in each case which
relates to, or is necessary in connection with the operation of, the Business:
15
<PAGE>
(a) any contract or agreement which by its terms does not terminate or
is not terminable without penalty by Seller or any successor or assign
within one year after the date hereof;
(b) any contract or agreement for the sale or lease of its products or
services, except orders in the ordinary course of the Business;
(c) any contract with any sales agent or distributor of products or
services of Seller;
(d) any contract containing covenants limiting the freedom of Seller
to compete in any line of business or with any person or entity;
(e) any license agreement (as licensor or licensee);
(f) any indenture, mortgage, promissory note, loan agreement, guaranty
or other agreement or commitment for the borrowing of money and any related
security agreement;
(g) any contract or agreement with any officer, employee, director or
stockholder of Seller or with any persons or organizations controlled by or
affiliated with any of them; or
(h) any material verbal contract, agreement, arrangement or
understanding with the suppliers or customers of the Business.
All of the Contracts are valid and are in full force and effect and
constitute legal, valid and binding obligations of Seller enforceable in
accordance with their respective terms, subject to applicable bankruptcy,
reorganization, insolvency, moratorium and other rights affecting creditors'
rights generally, and general equitable principles. To the best knowledge of
Seller, each Contract constitutes the legal, valid and binding obligation of
each party thereto other than Seller enforceable in accordance with its terms,
subject to applicable bankruptcy, reorganization, insolvency, moratorium and
other rights affecting creditors' rights generally, and general equitable
principles. Except as set forth on Schedule 2.21, to the best knowledge of
-------------
either Stockholder or Seller, neither Seller nor any other party to any Contract
is in material default in complying with any provisions thereof, and no
condition or event or facts exist which, with notice, lapse of time or both
would constitute a material default thereof on the part of Seller or, to the
best knowledge of Seller, on the part of any other party thereto.
2.22 Banking Relations. All of the arrangements which the Seller has
-----------------
with any banking or similar institution are completely and accurately described
in Schedule 2.22 attached hereto, indicating with respect to each of such
-------------
arrangements
16
<PAGE>
the type of arrangement maintained (such as checking account, borrowing
arrangements, safe deposit box, etc.) and the person or persons authorized in
respect thereof.
2.23 Disclosure. The representations, warranties and statements made
----------
or contained in this Agreement, in the documents, certificates, filings,
Schedules and Exhibits given or delivered by Seller and either Stockholder in
connection with and pursuant to this Agreement do not, either individually or
when taken together, contain any untrue statement of a material fact, and do not
omit to state a material fact required to be stated therein or necessary in
order to make such representations, warranties and statements not materially
misleading in light of the circumstances in which they were made or delivered.
2.24 Securities Law Matters. Seller hereby represents and warrants to
----------------------
the Buyer and Parent that with respect to Seller's receipt of Parent Stock
hereunder:
(a) Seller is acquiring the Parent Stock for its own account, for
investment, and not with a view to any "distribution" thereof within the
meaning of the Securities Act. Seller is an "accredited investor" as
defined in the Securities Act and is knowledgeable and experienced in the
making of investments of the type involved in the acquisition of the Parent
Stock pursuant to the Agreement, is able to bear the economic risk of loss
of its investment in the Parent, has been granted the opportunity to
investigate the affairs of the Buyer and Parent and to ask questions of
their officers and employees, and has availed itself of such opportunity
either directly or through its authorized representative; and
(b) Seller understands that because the shares of Parent Stock have
not been registered under the Securities Act or securities or "blue sky"
laws of any jurisdiction, it cannot dispose of any or all of the shares of
the Parent Stock unless such shares of Parent Stock are subsequently
registered under the Securities Act or exemptions from such registration
are available. Seller acknowledges and understands it has no right to
require Parent to register the Parent Stock except as set forth in the
attached Registration Rights Agreement. Seller further understands that
the Parent may, as a condition to the transfer of any of the Parent Stock,
require that the request for transfer be accompanied by an opinion of
counsel as described below. Seller understands that each certificate
representing the Parent Stock will bear a legend in substantially the form
provided below (in addition to any legend required under applicable state
securities laws).
THE SHARES REPRESENTED HEREBY HAVE BEEN ACQUIRED BY THE HOLDER NAMED
HEREON FOR HIS OWN ACCOUNT FOR INVESTMENT; AND SUCH SECURITIES MAY NOT
BE PLEDGED, SOLD OR IN ANY OTHER WAY TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR SUCH
17
<PAGE>
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS IN EFFECT AT THAT
TIME, OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT.
2.25 Millennium Compliance. All computer software products, except
---------------------
for commercially available software, that are owned by Seller, exclusively
licensed to Seller, licensed, sold or otherwise distributed to others by Seller
or are otherwise required for the conduct of the Business ("Software") are
Millennium Compliant. As used herein, "Millennium Compliant" shall mean the
ability of the Software to provide the following date related functions:
(i) consistently handle date information before, during and after
January 1, 2000, including but not limited to accepting date input,
providing date output and performing calculations on dates or portions of
dates;
(ii) function accurately in accordance with the documentation
relating to the applicable Software and without interruption before, during
and after January 1, 2000, without any change in operations associated with
the advent of the new century;
(iii) respond to two-digit date input in a way that resolves any
ambiguity as to the century in a disclosed, defined and predetermined
manner; and
(iv) store and provide output of date information in ways that
are unambiguous as to century.
SECTION 3. COVENANTS OF STOCKHOLDERS AND SELLER.
------------------------------------
3.1 Making of Covenants and Agreements. Seller and Stockholders hereby
----------------------------------
covenant and agree as set forth in this Section 3.
3.2 Non-Use of Trade Names, etc. After the Closing Date, neither Seller,
---------------------------
nor any person controlling, controlled by or under common control with Seller or
the Stockholders will for any reason, directly or indirectly, for itself or any
other person, (a) use any Intellectual Property Rights transferred pursuant to
this Agreement (including the names "Strategic Implications International,"
"Cogent" or "DesignPower"), or (b) use or disclose any Intellectual Property
Rights or any trade secrets, confidential information, know-how, proprietary
information or other intellectual property described in Section 1.1(a)(i) hereof
and transferred pursuant to this Agreement or otherwise arising in connection
with the operation of the Business, except that Seller may disclose such
information to Buyer and Parent in connection with the operation of the Business
by Buyer and Parent after the Closing Date.
18
<PAGE>
3.3 Non-Disclosure and Non-Competition. Each Stockholder and Seller, in
----------------------------------
order to induce Buyer and Parent to enter into this Agreement, expressly
covenants and agrees that neither Seller nor either Stockholder, nor any of
their affiliates will, directly or indirectly, (a) for a period of ten (10)
years following the Closing Date, disclose or furnish to any person, other than
Buyer or Parent, any proprietary information of, or confidential information
concerning, the Business, Buyer or Parent or any affiliate of Buyer or Parent
except as required by law; and (b) for a period of three (3) years following the
Closing Date, without the express written consent of the Buyer, directly or
indirectly, anywhere in the United States, engage in any activity which is, or
participate or invest in, or provide or facilitate the provision of financing
to, or assist (whether as owner, part-owner, shareholder, partner, director,
officer, trustee, employee, agent or consultant, or in any other capacity), any
business, organization or person other than the Buyer or Parent (or any
affiliate of the Buyer or Parent, including Cogent Interactive Communications,
Inc. and DesignPower, Inc.) whose business, activities, products or services are
competitive with any of the business, activities, products or services conducted
or offered by the Buyer or Parent and their subsidiaries during any period in
which the Stockholder serves as an officer or employee of the Buyer or Parent or
any of its subsidiaries, which business, activities, products and services shall
include in any event the provision of marketing services to and related
marketing activities involving pharmaceutical companies, providing accredited or
unaccredited training and education programs to the health care industry,
healthcare telemarketing and Internet marketing of pharmaceuticals, or providing
other services currently provided by Seller or currently contemplated to be
provided by Seller in such general areas of service. In addition, neither
Stockholder will disparage the Buyer or Parent, the Business or the products or
services conducted or offered by the Buyer or Parent and their subsidiaries
during any period in which the Stockholder served as an officer or employee of
the Buyer or Parent or any of their subsidiaries. Without implied limitation,
the forgoing covenant shall include hiring or engaging or attempting to hire or
engage for or on behalf of himself or herself or any such competitor any officer
or employee of the Buyer or Parent or any of their direct and/or indirect
subsidiaries, encouraging for or on behalf of himself or herself or any such
competitor any such officer or employee to terminate his or her relationship or
employment with the Buyer or the Parent or any of their direct or indirect
subsidiaries, soliciting for or on behalf of himself or herself or any such
competitor any client of the Buyer or Parent or any of their direct or indirect
subsidiaries and diverting to any person (as hereinafter defined) any client or
business opportunity of the Buyer, the Parent or any of any of their direct or
indirect subsidiaries.
3.4 Payment of Obligations. Subsequent to the Closing, Seller and its
----------------------
affiliates shall pay all of the Excluded Liabilities in the ordinary course of
business as they become due. Seller and Stockholders agree that Seller shall
maintain sufficient net worth and liquidity after the Closing in order to
satisfy such Excluded Liabilities, if any, known to Seller as of the Closing.
3.5 Collection of Assets. Subsequent to the Closing, Buyer and its
--------------------
assignees shall have the right and authority to collect all receivables and
other items transferred and assigned
19
<PAGE>
by Seller hereunder and to endorse with the name of Seller or any of its
affiliates any checks received on account of such receivables or other items,
and Seller and each Stockholder agree that they will promptly transfer or
deliver to Buyer and its assignees from time to time, any cash or other property
that it may receive on or after the Closing with respect to any claims,
contracts, licenses, leases, commitments, sales orders, purchase orders,
receivables of any character or any other items included in the assets
transferred to Buyer pursuant to this Agreement.
3.6 Securities Filings. Seller and each Stockholder shall reasonably
------------------
cooperate with Buyer and Parent to permit the Buyer, Parent and their
subsidiaries in accordance with applicable law to promptly prepare and file on
or before the due date or any extension thereof all filings required to be made
by Buyer or Parent with the NASDAQ Stock Market and the Securities and Exchange
Commission (the "SEC"), including without limitation, the 8-K (and related
financial statements) required to be filed with the SEC in connection with the
transactions contemplated by this Agreement. All such filings shall be at
Buyer's or Parent's sole cost and expense, and Buyer shall reimburse Seller for
any costs incurred by Seller in connection with this Section 3.6.
3.7 Payment of Constructive Trust. Efessiou shall ensure that the
-----------------------------
consideration paid to Seller hereunder and distributed to him, including the
Parent Stock and the Contingent Payment are distributed in accordance with the
intent and terms of the constructive trust on 10% of Efessiou's interest in the
business of Seller established in favor of Athena Efessiou.
3.8 Assist in Accreditation. Seller and each Stockholder shall each use
-----------------------
their reasonable best efforts to assist Buyer in transferring the accreditation
status of Seller to Buyer.
3.9 Transfer of Bank Accounts. At the Closing, Seller shall transfer to
-------------------------
Buyer all deposits held in any of Seller's bank accounts and any other cash of
Seller.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT.
--------------------------------------------------
4.1 Making of Representations and Warranties. As a material inducement to
----------------------------------------
Seller and each Stockholder to enter into this Agreement and consummate the
transactions contemplated hereby, Buyer and Parent hereby makes the
representations and warranties to Seller and each Stockholder contained in this
Section 4.
4.2 Organization of Buyer. Each of Buyer and Parent is a corporation duly
---------------------
organized, validly existing and in good standing under the laws of Delaware with
full corporate power and authority to own or lease its properties and to conduct
its business in the manner and in the places where such properties are owned or
leased or such business is conducted by it. Buyer and Parent are qualified to
do business as a foreign corporation in each jurisdiction
20
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in which such qualification is necessary, except where the failure to be so
qualified would not have a material adverse effect on Buyer and Parent as a
whole.
4.3 Authority of Buyer. Buyer and Parent have full corporate power and
------------------
authority to enter into this Agreement and each agreement, document and
instrument to be executed and delivered by Buyer and Parent pursuant to this
Agreement and to carry out the transactions contemplated hereby and thereby.
The execution, delivery and performance by Buyer and Parent of this Agreement
and each such other agreement, document and instrument have been duly authorized
by all necessary action of Buyer and Parent and no other action on the part of
Buyer or Parent is required in connection therewith. This Agreement and each
other agreement, document and instrument executed and delivered by Buyer and
Parent pursuant to this Agreement constitutes, or when executed and delivered
will constitute, the valid and binding obligation of Buyer and Parent
enforceable in accordance with its terms. The execution, delivery and
performance by Buyer and Parent of this Agreement and each agreement, document
and instrument contemplated hereby:
(i) do not and will not violate any provision of the certificate of
incorporation or by-laws of Buyer or Parent;
(ii) do not and will not violate any laws of the United States, or any
state or other jurisdiction applicable to Buyer or Parent or require Buyer
or Parent to obtain any approval, consent or waiver of, or make any filing
with, any person or entity (governmental or otherwise) that has not been
obtained or made; and
(iii) do not and will not result in a breach of, constitute a default
under, accelerate any obligation under, or give rise to a right of
termination of any indenture or loan or credit agreement or any other
agreement, contract, instrument, mortgage, lien, lease, permit,
authorization, order, writ, judgment, injunction, decree, determination or
arbitration award, whether written or oral, to which Buyer or Parent is
bound or affected.
4.4 Finder's Fees. Buyer and Parent have not incurred or become liable
-------------
for any broker's commission or finder's fee relating to or in connection with
the transactions contemplated by this Agreement.
4.5 SEC Reports. Parent's prospectus dated September 23, 1997 included in
-----------
its registration statement filed with the SEC and all other forms, reports and
documents filed with the SEC since September 23, 1997 (collectively, the "SEC
Reports") have been prepared in accordance with the applicable requirements of
the Securities Act and the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and accurately state all material facts with respect to
finances, operation and management of Parent. The balance sheets (including the
related notes) included in the SEC Reports are complete and correct in all
material respects and fairly present the financial position of Parent as of the
respective dates thereof, and the other
21
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related statements (including the related notes) included therein are complete
and correct in all material respects and fairly present the results of
operations and cash flows of Parent for the respective fiscal periods set forth
therein in accordance with generally accepted accounting principles applied on a
consistent basis, except in the case of interim financial statements for normal
recurring and certain non-recurring audit adjustments necessary for a fair
presentation of the financial position and operating results of Parent for the
interim periods which will not be materially adverse and for the omission of
footnotes to said interim financial statements that would be required by
generally accepted accounting principles. Parent will promptly prepare and file
on or before the due date or any extension thereof all filings required to be
made by Parent with the NASDAQ Stock Market and the Securities and Exchange
Commission (the "SEC"), including without limitation, the 8-K (and related
financial statements) required to be filed with the SEC in connection with the
transactions contemplated by this Agreement.
4.6 Material Adverse Change. Except as set forth on Schedule 4.6, since
----------------------- ------------
September 30, 1997, (a) there has not been a material adverse change in the
business, results of operations, condition (financial or otherwise), properties,
assets, liabilities or obligations of Parent that would be required to be
disclosed in financial statements prepared in accordance with GAAP; and (b)
there is no material litigation pending or, to the best knowledge of Buyer or
Parent, threatened against Buyer or Parent.
SECTION 5. COVENANTS OF BUYER AND PARENT.
-----------------------------
5.1. Distribution of Income. Following the Closing, the Stockholders
----------------------
shall notify Parent of their taxable income in respect of income of Seller for
the period from January 1, 1998 through the date prior to the date of the
Closing and the aggregate amount of their unpaid income tax due or to become due
thereon (after adjustments for any credits, losses or deductions) and supply
reasonable supporting documentation for such income and income tax due. Parent
shall thereafter distribute to each of Efessiou and Angelides cash, net of
taxes, in the amount of such unpaid income tax obligations. Each of Efessiou
and Angelides shall thereafter, in accordance with applicable law, timely and
properly prepare and file, or cause to be prepared and filed, on or before the
due date or any extension thereof, all federal, state and local tax returns
required to be filed by such person with respect to taxable periods ending on or
before the Closing and to pay or cause to be paid all taxes due with respect
thereto.
SECTION 6. SURVIVAL OF WARRANTIES.
----------------------
6.1 Survival of Warranties. All representations, warranties, agreements,
----------------------
covenants and obligations herein or in any Schedule or Exhibit to this Agreement
or any certificate or other document specifically required to be delivered under
this Agreement by any party incident to the transactions contemplated hereby are
material, shall be deemed to have been relied upon by the parties receiving the
same and shall survive the Closing for a period of two (2) years (subject to the
provisions of Sections 7.1 and 7.2 hereof) regardless of any
22
<PAGE>
investigation and shall not merge into the performance of any obligation by any
party hereto; provided, however, that the representations and warranties shall
expire on the same dates and to the extent that the rights to indemnification
with respect thereto under Section 7 shall expire.
SECTION 7. INDEMNIFICATION.
---------------
7.1 Indemnification by Stockholders.
-------------------------------
(a) Each Stockholder, jointly and severally (subject to subsection (b)
of this Section 7.1), agree to defend, indemnify and hold Buyer, Parent and
their respective subsidiaries and affiliates and persons serving as officers,
directors, partners or employees thereof and any person who controls any of them
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act (individually a "Buyer Indemnified Party" and collectively the
"Buyer Indemnified Parties") harmless from and against any and all Claims (as
defined in Section 1.2 hereof), and any diminution in value of the Subject
Assets or the Business (it being understood that the consideration paid for the
Subject Assets hereunder shall not be presumed to be the value of the Business),
whether or not arising out of third-party claims and including all reasonable
amounts paid in investigation, defense or settlement of the foregoing, which may
be sustained or suffered by any of them based upon, arising out of, by reason of
or otherwise in respect of or in connection with:
(i) any inaccuracy in or breach of any representation or warranty
made by Seller or either Stockholder in this Agreement, or in any Schedule
or exhibit to this Agreement or any certificate or other document delivered
in connection with the consummation of the transactions contemplated by
this Agreement (collectively, "Buyer Representation and Warranty Claims");
(ii) any breach of any covenant or agreement made by Seller or
either Stockholder in this Agreement or in any Schedule or exhibit to this
Agreement or any certificate or other document delivered in connection with
the consummation of the transactions contemplated by this Agreement;
(iii) any Claim relating to the business or operations of Seller
other than the Business;
(iv) any Claim (other than the Contract Liabilities) relating to
the operations and assets of the Business which arises in connection with
or on the basis of events, acts, omissions, conditions or any other state
of facts occurring or existing on or prior to the Closing Date (including,
in each case, without limitation, any Claim relating to or associated with
the products or services of the Business sold or provided on or prior to
the Closing Date, tax matters, pension and benefits matters, any failure to
comply with applicable laws and/or permitting or licensing requirements,
any matters
23
<PAGE>
involving Athena Efessiou and environmental and worker health and safety
matters (provided that Efessiou and not Angelides agrees to indemnify Buyer
and Parent for any Claim related to matters involving Athena Efessiou); and
(v) any liability of Seller other than the Contract Liabilities.
The rights of Buyer Indemnified Parties to recover indemnification in
respect of any Claim arising under clause (ii), (iii), (iv), or (v) of this
Section 7.1(a) shall not be limited by the fact that such Claim may also
constitute a Buyer Representation and Warranty Claim, it being understood that
the preceding clause shall not be interpreted so as to allow two separate
remedies.
(b) The rights of Buyer Indemnified Parties to recover indemnification
under this Section 7.1 shall be subject to the following limitations:
(i) No indemnification shall be payable by Seller or a
Stockholder with respect to Buyer Representation and Warranty Claims or
Claims arising under Sections 7.1(a)(ii) unless the total of all amounts
payable pursuant to this Section 7.1 shall exceed $25,000 in the aggregate,
whereupon the total amount of such Claims shall be recoverable in
accordance with the terms thereof; provided, however, that such $25,000
limitation shall not apply with respect to Claims involving fraud or
intentional misrepresentation and provided further that any claim brought
under Sections 7.1(a)(iii) or 7.1(a)(iv) above shall not be subject to such
limitation if they are also Buyer Representation and Warranty Claims; and;
(ii) All rights to indemnification with respect to Buyer
Representation and Warranty Claims shall expire on the third anniversary of
the Closing Date, except that Buyer Representation and Warranty Claims
relating to or involving fraud or tax matters shall survive until and shall
expire on the date three months after the termination of the applicable
statute of limitations relating thereto. Notwithstanding the preceding
sentence, if on or prior to the third anniversary of the Closing Date a
specific state of facts shall have become known which may give rise to a
claim for indemnification under Section 7.1(a)(i) and a Buyer Indemnified
Party shall have given written notice of such facts known by such Buyer
Indemnified Party at such time to Seller and Stockholder, then the right to
indemnification with respect thereto shall remain in effect without regard
to when such matter shall be finally determined and disposed of. All
rights to indemnification under this Section 7.1 with respect to claims
arising under Section 7.1(a)(ii), 7.1(a)(iii), 7.1(a)(iv) and 7.1(a)(v)
shall, except as they may otherwise be extended, survive until and shall
expire on the date three months after the termination of the applicable
statute of limitations relating thereto. The limitations herein with
respect to Buyer Representation and Warranty Claims and claims arising
under Sections 7.1(a)(ii), 7.1(a)(iii) and 7.1(a)(iv) shall not limit the
rights of any Buyer Indemnified Party with respect to any other claims
under this Section 7.1; and
24
<PAGE>
(iii) Notwithstanding anything contained in this Section 7.1 to
the contrary, Seller and Stockholder shall not be required to indemnify
Buyer Indemnified Parties with respect to Buyer Representation and Warranty
Claims or Claims arising under Section 7.1(a)(ii) in an aggregate amount in
excess of $8,660,000 plus any Contingent Payment actually made (together,
the "Indemnity Cap"), except with respect to claims relating to or
involving fraud or tax matters, as to which no such limit shall apply.
Until the first anniversary of the Closing, each Stockholder may satisfy
his or her indemnification obligations to Buyer Indemnified Parties by
delivery of shares of Parent Stock to the relevant Buyer Indemnified Party
having a value equal to such indemnification obligations, such value per
share to be determined by taking the average of the closing price on the
NASDAQ National Market System for the Parent's stock for the thirty (30)
trading days immediately prior to the receipt of such stock by the Buyer
Indemnified Party.
7.2 Indemnification by Buyer and Parent.
-----------------------------------
(a) Buyer and Parent (subject to subsection (b) of this Section 7.2)
agrees to defend, indemnify and hold Seller and each Stockholder and Seller's
subsidiaries and affiliates and persons serving as officers, directors, partners
or employees thereof (individually a "Seller Indemnified Party" and collectively
the "Seller Indemnified Parties") harmless from and against any and all Claims
(as defined in Section 1.2 hereof), whether or not arising out of third-party
claims and including all reasonable amounts paid in investigation, defense or
settlement of the foregoing, which may be sustained or suffered by any of them
based upon, arising out of, by reason of or otherwise in respect of or in
connection with:
(i) any inaccuracy in or breach of any representation or
warranty made by Buyer or Parent in this Agreement or in any Schedule or
exhibit to this Agreement or any certificate or other document delivered in
connection with the consummation of the transactions contemplated by this
Agreement (collectively, "Seller Representation and Warranty Claims");
(ii) any breach of any covenant or agreement made by Buyer or
Parent in this Agreement or in any Schedule or exhibit to this Agreement or
any certificate or other document delivered in connection with the
consummation of the transactions contemplated by this Agreement;
(iii) any Claim relating to the operation by Buyer of the
Subject Assets after the Closing Date which arises in connection with or on
the basis of events, acts, omissions, conditions or any other state of
facts occurring or existing after the Closing Date (including, in each
case, without limitation, any Claim relating to or associated with the
products or services sold or provided by Buyer after the Closing Date,
product liability matters, warranty claims, tax matters, pension and
benefit matters, any failure to comply with applicable laws and/or
permitting or licensing requirements, personal injury and property damage
matters and environmental and worker health and safety matters); and
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<PAGE>
(iv) the non-performance of the Contract Liabilities to the
extent assumed by Buyer hereunder as they become due, in accordance with
their respective terms.
The rights of Seller Indemnified Parties to recover indemnification in
respect of any Claim arising under clause (ii), (iii) or (iv) of this Section
7.2(a) shall not be limited by the fact that such Claim may also constitute a
Seller Representation and Warranty Claim, it being understood that nothing in
the preceding clause shall not be interpreted so as to allow two separate
remedies.
(b) The rights of Seller Indemnified Parties to recover
indemnification under this Section 7.2 shall be subject to the following
limitations:
(i) No indemnification shall be payable by Buyer or Parent with
respect to Seller Representation and Warranty Claims or Claims arising
under Section 7.2(a)(i) unless the total of all amounts payable by Buyer
and Parent taken as a whole pursuant to this Section 7.2 shall exceed
$25,000 in the aggregate, whereupon the total amount of such Claims shall
be recoverable in accordance with the terms thereof; provided, however,
that such $25,000 limitation shall not apply with respect to Claims
involving fraud (it being understood that any claim brought under Sections
7.1(a)(iii) or 7.1(a)(iv) above shall not be subject to such limitation if
they are also Seller Representation and Warranty Claims).
(ii) All rights to indemnification with respect to Seller
Representation and Warranty Claims shall expire on the third anniversary of
the Closing Date, except that Seller Representation and Warranty Claims
relating to or involving fraud, or product liability matters shall survive
until and shall expire on the date three months after the termination of
the applicable statute of limitations relating thereto. Notwithstanding the
preceding sentence, if on or prior to the third anniversary of the Closing
Date a specific state of facts shall have become known which may give rise
to a claim for indemnification under Section 7.2(a)(i) and a Seller
Indemnified Party shall have given written notice of such facts known by
such Seller Indemnified Party at such time to Buyer, then the right to
indemnification with respect thereto shall remain in effect without regard
to when such matter shall be finally determined and disposed of. All rights
to indemnification under this Section 7.2 with respect to Claims arising
under Section 7.2(a)(ii), 7.2(a)(iii) and 7.2(a)(iv), except as they may
otherwise be extended, survive until and shall expire on the date three
months after the termination of the applicable statute of limitations
relating thereto. The limitations herein with respect to Seller
Representation and Warranty Claims and Claims arising under Section
7.2(a)(ii), 7.2(a)(iii) and 7.2(a)(iv) shall not limit the rights of any
Seller Indemnified Party with respect to any other claims under this
Section 7.2; and
26
<PAGE>
(iii) Notwithstanding anything contained in this Section 7.2 to
the contrary, Buyer and Parent shall not be required to indemnify Seller
Indemnified Parties with respect to Seller Representation and Warranty
Claims or Claims arising under Section 7.2(a)(ii) in an aggregate amount in
excess of the Indemnity Cap, except with respect to claims relating to or
involving fraud or product liability matters, as to which no such limit
shall apply.
7.3 Notice; Defense of Claims.
-------------------------
(a) Notice of Claims. Promptly after receipt by an indemnified party
----------------
of notice of any claim, liability or expense to which the indemnification
obligations hereunder would apply, the indemnified party shall give notice
thereof in writing to the indemnifying party, but the omission to so notify the
indemnifying party promptly will not relieve the indemnifying party from any
liability except to the extent that the indemnifying party shall have been
prejudiced as a result of the failure or delay in giving such notice. Such
notice shall state the information then available regarding the amount and
nature of such claim, liability or expense and shall specify the provision or
provisions of this Agreement under which the liability or obligation is
asserted.
(b) Third Party Claims. With respect to third party claims, if within
------------------
20 days after receiving the notice described in clause (a) above the
indemnifying party gives (i) written notice to the indemnified party stating
that (A) it would be liable under the provisions hereof for indemnity in the
amount of such claim if such claim were successful and (B) that it disputes and
intends to defend against such claim, liability or expense at its own cost and
expense and (ii) provides reasonable assurance to the indemnified party that
such claim will be promptly paid in full if required, then counsel for the
defense shall be selected by the indemnifying party (subject to the consent of
the indemnified party which consent shall not be unreasonably withheld) and the
indemnifying party shall not be required to make any payment with respect to
such claim, liability or expense as long as the indemnifying party is conducting
a good faith and diligent defense at its own expense or the payment is required
in accordance with any settlement or adjudication in accordance with the
provisions of this Section 7.3; provided, however, that the assumption of
defense of any such matters by the indemnifying party shall relate solely to the
claim, liability or expense that is subject or potentially subject to
indemnification. The indemnifying party shall have the right, with the consent
of the indemnified party, which consent shall not be unreasonably withheld, to
settle all indemnifiable matters related to claims by third parties which are
susceptible to being settled provided the indemnifying parties' obligation to
indemnify the indemnified party therefor will be fully satisfied and such
settlement does not involve the establishment of any obligations or limitations
applicable to the indemnified party. The indemnifying party shall keep the
indemnified party apprised of the status of the claim, liability or expense and
any resulting suit,
27
<PAGE>
proceeding or enforcement action, shall furnish the indemnified party with all
documents and information that the indemnified party shall reasonably request
and shall consult with the indemnified party prior to acting on major matters,
including settlement discussions. Notwithstanding anything herein stated, the
indemnified party shall at all times have the right to fully participate in such
defense at its own expense directly or through counsel; provided, however, if
the named parties to the action or proceeding include both the indemnifying
party and the indemnified party and representation of both parties by the same
counsel would be inappropriate under applicable standards of professional
conduct, the expense of separate counsel for the indemnified party shall be paid
by the indemnifying party. Subject to the indemnifying party agreeing to defend
the indemnified party, assuming and pursuing the defense of the claim, and
otherwise satisfying its obligations hereunder, the indemnified party shall not
unduly interfere in the indemnifying parties defense of such suit or raise
material objections to such defense. If no such notice of intent to dispute and
defend is given by the indemnifying party, or if such diligent good faith
defense is not being or ceases to be conducted, the indemnified party shall, at
the expense of the indemnifying party, undertake the defense of (with counsel
selected by the indemnified party), and shall have the right to compromise or
settle (exercising reasonable business judgment), such claim, liability or
expense. If such claim, liability or expense is one that by its nature cannot be
defended solely by the indemnifying party, then the indemnified party shall make
available all information and assistance that the indemnifying party may
reasonably request and shall cooperate with the indemnifying party in such
defense.
(c) Non-Third Party Claims. With respect to non-third party claims,
----------------------
if within 20 days after receiving the notice described in clause (a) above the
indemnifying party does not give written notice to the indemnified party that it
contests such indemnity, the amount of indemnity payable for such claim shall be
as set forth in the indemnified party's notice. If the indemnifying party
provides written notice to the indemnified party within such 20-day period that
it contests such indemnity, the matter shall be resolved by arbitration in
accordance with Section 8.11 hereof.
7.4 Sole Remedy. The parties agree that the rights to indemnification
-----------
under this Section 7 shall be exclusive of all rights of indemnification or
other remedies that any Seller Indemnified Party or Buyer Indemnified Party
would otherwise have in connection with the transactions contemplated by this
Agreement, except for Claims relating to or involving fraud, intentional
misrepresentation or the breach of Section 3.2 or Section 3.3 hereof.
7.5 Satisfaction of Indemnification Obligations. In order to satisfy the
-------------------------------------------
indemnification obligations set forth in Section 7.1 above, a Buyer Indemnified
Party shall have the right (in addition to collecting directly from the Seller
and/or Stockholders) to set off its indemnification claims against any and all
amounts under the Contingent Payment (whether or not then due and payable) and
the amounts payable pursuant to Section 5.1.
28
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7.6 Insurance Proceeds. The amount of any Claim for which indemnification
------------------
may be sought under this Section 7 shall be reduced by the amount of any
insurance proceeds received in respect of such Claim by the party seeking
indemnification.
SECTION 8. MISCELLANEOUS.
-------------
8.1 Law Governing. This Agreement shall be construed under and governed
-------------
by the laws of the State of New Jersey without regard to the conflicts of laws
provisions thereof.
8.2 Notices. All communications, notices and consents provided for herein
-------
shall be in writing and be given in person, by facsimile (with request for
assurance of receipt in a manner typical with respect to such communications) or
by mail, and shall become effective (x) on delivery if given in person, (y) on
the date of transmission if sent by facsimile, or (z) four business days after
being deposited in the United States mails, with proper postage, for first-class
registered or certified mail, prepaid.
Notices shall be addressed as follows:
If to Buyer, to:
---------------
Boron, LePore & Associates, Inc.
17-17 Route 208 North
Fair Lawn, NJ 07410
Attn: President
Facsimile Number: (201) 791-1121
With a copy to:
--------------
Goodwin, Procter & Hoar
Exchange Place
Boston, MA 02109
Attn: John R. LeClaire, P.C.
Facsimile Number: 617-523-1231
If to Seller or Stockholders:
----------------------------
Strategic Implications International, Inc.
1921 Gallows Road, Suite 360
Vienna, VA 22182
Attn: Christos S. Efessiou and Alicia A. Angelides
Facsimile Number: (703) 821-8412
29
<PAGE>
With a copy to:
--------------
Law Offices of Arthur F. Lafionatis, P.C.
8300 Boone Boulevard
Suite 500
Vienna, VA 22182
Attn: Arthur F. Lafionatis, P.C.
Facsimile Number: (703) 761-6721
provided, however, that if any party shall have designated a different address
by notice to the others in accordance with this Section 8.2, then to the last
address so designated.
8.3 Prior Agreements Superseded. This Agreement supersedes all prior
---------------------------
understandings and agreements among the parties relating to the subject matter
hereof, including without limitation the letter of intent dated December 30,
1997 among Parent, Seller and the Stockholders.
8.4 Assignability. This Agreement shall not be assignable by any party,
-------------
except by Buyer and Parent to an affiliate of Parent (which assignment shall not
relieve Buyer or Parent of any of their obligations hereunder), without the
prior written consent of the other parties hereto. This Agreement (including
without limitation the provisions of Section 8) shall be binding upon and
enforceable by, and shall inure to the benefit of, the parties hereto and their
respective successors, heirs, executors, administrators and permitted assigns.
8.5 Captions and Gender. The captions in this Agreement are for
-------------------
convenience only and shall not affect the construction or interpretation of any
term or provision hereof. The use in this Agreement of the masculine pronoun in
reference to a party hereto shall be deemed to include the feminine or neuter
pronoun, as the context may require.
8.6 Certain Definitions. For purposes of this Agreement, the term:
-------------------
(a) "affiliate" of a person shall mean a person that directly or
indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, the first mentioned person;
(b) "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the
management policies of a person, whether through the ownership of stock, as
trustee, partner or executor, by contract or credit arrangement or
otherwise;
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(c) "knowledge" or "to best of a person's knowledge" means, after due
inquiry, actual knowledge; the conscious awareness of facts or other
information of such person.
(d) "person" means an individual, corporation, partnership,
association, trust or any unincorporated organization; and
(e) "subsidiary" of a person means any corporation more than 50
percent of whose outstanding voting securities, or any partnership, joint
venture or other entity more than 50 percent of whose total equity
interest, is directly or indirectly owned by such person.
8.7 Execution in Counterparts. For the convenience of the parties and to
-------------------------
facilitate execution, this Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same document.
8.8 Amendments; Waivers. This Agreement may not be amended or modified
-------------------
except by a writing duly and validly executed by each party hereto. Compliance
with any condition or covenant set forth herein may not be waived except by a
writing duly and validly executed by the party or parties to be bound. No delay
on the part of any party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof, nor shall any waiver on the part of any party
of any such right, power or privilege, or any single or partial exercise of any
such right, power or privilege, preclude any further exercise thereof or the
exercise of any other such right, power or privilege.
8.9 Severability. Each of the provisions contained in this Agreement
------------
shall be severable and the unenforceability of one shall not affect the
enforceability of any other provision or the remainder of this Agreement.
8.10 Publicity and Disclosures. Except as required by law or the
-------------------------
rules and regulations of the SEC or any State securities commission, or
applicable NASDAQ listing requirements, neither Buyer or Parent on the one hand,
or Seller and/or the Stockholders, on the other hand, shall make any public
disclosure regarding the proposed transaction without the prior written consent
of Seller or the Buyer, respectively, which consent shall not be unreasonably
withheld.
8.11 Consent to Jurisdiction and Service. Except with respect to
-----------------------------------
matters as to which injunctive relief is being sought, in the event of a dispute
between the parties concerning their respective rights and obligations under
this Agreement that the parties are unable to resolve amicably between
themselves within sixty (60) days of proper notice from one party to another,
such dispute shall be settled by arbitration in the State of New Jersey in an
expedited manner in accordance with the Commercial Rules of the American
Arbitration Association by a duly
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registered arbitrator to be selected jointly by the parties. The decision of the
arbitrator shall be final and binding upon the parties.
8.12 Expenses. Buyer, Seller and each Stockholder shall each bear its
--------
own expenses in connection with the transactions contemplated hereby. In
particular, all expenses of each Stockholder in connection with the negotiation
and performance of their Employment Agreements and their Non-competition
Agreements shall be borne by the Stockholders and not the Seller. Buyer shall
pay up to $25,000 of expenses actually incurred by Seller in connection with the
negotiation and performance of this Agreement and the transactions contemplated
hereby, including all transfer, excise or other taxes payable by any party to
this Agreement to any jurisdiction by reason of the sale and transfer of the
Subject Assets pursuant to this Agreement, if any (excluding any such taxes
arising solely from the identity or location of Buyer or any affiliate of
Buyer). All expenses in excess of this amount shall be paid by Seller out of
the proceeds of this Agreement.
32
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first set forth above by their duly authorized
representatives.
BUYER:
-----
STRATEGIC IMPLICATIONS INTERNATIONAL, INC.
By: /s/ Martin J. Veilleux
---------------------------------
Martin J. Veilleux
Treasurer
PARENT:
------
BORON, LEPORE & ASSOCIATES, INC.
By: /s/ Patrick G. LePore
---------------------------------
Patrick G. LePore
President
SELLER:
------
EFAN HOLDINGS, INC.
By: /s/ Christos S. Efessiou
---------------------------------
Christos S. Efessiou
President
33
<PAGE>
STOCKHOLDERS:
------------
/s/ Christos S. Efessiou
---------------------------------
Christos S. Efessiou, individually
/s/ Alicia A. Angelides
---------------------------------
Alicia A. Angelides, individually
34
<PAGE>
Exhibit A
---------
The Contingent Payment described in 1.3(b) of the attached Asset Purchase
Agreement shall be made by Buyer to Seller upon the achievement by Buyer of a
minimum of Eight Million Dollars ($8,000,000) in revenues in calendar year 1998
from those projects set forth on Schedule 1.3(b) to the Asset Purchase
---------------
Agreement. Schedule 1.3(b) sets forth the maximum amount of Revenue (as defined
below) that can be recognized by Buyer in relation to any individual project.
If the aggregate Revenue recognized for such projects is less than Eight Million
Dollars ($8,000,000), no Contingent Payment shall be due. If the aggregate
Revenue related to such projects is more than Eight Million Dollars
($8,000,000), than the entire Contingent Payment shall be due and payable as set
forth below. No Revenue from any projects not listed on Schedule 1.3(b) shall
count in any way toward the Eight Million Dollar target set forth above.
Determination of the Revenue achieved by the Buyer shall be made by Buyer
based upon Buyers' and Sellers' good faith review of the audited financial
statements for calendar year 1998 and supporting financial and other information
for the Buyer following preparation thereof. Revenue shall mean revenue that
has been achieved and properly recognized by Buyer in its financial statements
in accordance with Buyer's revenue recognition policy and generally accepted
accounting principles as applied by Buyer consistent with past practice.
35
<PAGE>
Exhibit 3.1
THIRD AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
BORON, LEPORE & ASSOCIATES, INC.
Boron, LePore & Associates, Inc., a corporation organized and existing
under the laws of the State of Delaware (the "Corporation"), hereby certifies as
follows:
1. The name of the Corporation is Boron, LePore & Associates, Inc. The
date of the filing of its original Certificate of Incorporation with the
Secretary of State of the State of Delaware was November 22, 1996, under the
name BLA Acquisition Corp., which name was changed to Boron, LePore &
Associates, Inc. pursuant to Article I of the original Certificate of
---------
Incorporation.
2. This Third Amended and Restated Certificate of Incorporation amends,
restates and integrates the provisions of the Second Amended and Restated
Certificate of Incorporation of the Corporation filed with the Secretary of
State of the State of Delaware on September 22, 1997, as heretofore amended (the
"Restated Certificate of Incorporation"), and (i) was duly adopted by the Board
of Directors in accordance with the provisions of Section 245 of the General
Corporation Law of the State of Delaware (the "DGCL"), (ii) was declared by the
Board of Directors to be advisable and in the best interests of the Corporation
and was directed by the Board of Directors to be submitted to and be considered
by the stockholders of the Corporation entitled to vote thereon for approval by
the affirmative vote of such stockholders in accordance with Section 242 of the
DGCL and (iii) was duly adopted by a stockholder consent in lieu of a meeting of
the stockholders, with the holders of a majority of the outstanding shares of
the Company's Common Stock and Class A Common Stock (voting as separate classes)
and sixty-six and two-thirds percent of the outstanding shares of the Company's
Convertible Participating Preferred Stock, in addition to the holders of a
majority of the outstanding shares of Common Stock, Class A Common Stock and
Convertible Participating Preferred Stock (on an as converted basis) voting as a
single class, consenting to the adoption of this Third Amended and Restated
Certificate of Incorporation in accordance with the provisions of Sections 228
and 242 of the DGCL and the terms of the Second Amended and Restated Certificate
of Incorporation, such holders being all of the holders of the Corporation's
capital stock entitled to vote thereon.
3. The text of the Restated Certificate of Incorporation is hereby
amended and restated in its entirety to provide as herein set forth in full.
<PAGE>
ARTICLE I
NAME
----
The name of the Corporation is Boron, LePore & Associates, Inc.
ARTICLE II
REGISTERED OFFICE
-----------------
The address of the registered office of the Corporation in the State of
Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle.
The name of its registered agent at such address is The Corporation Trust
Company.
ARTICLE III
PURPOSES
--------
The nature of the business or purposes to be conducted or promoted by the
Corporation is to engage in any lawful act or activity for which corporations
may be organized under the DGCL.
ARTICLE IV
CAPITAL STOCK
-------------
Section 1. Number of Shares.
---------------------------
The total number of shares of capital stock which the Corporation shall
have the authority to issue is Fifty-Two Million (52,000,000) shares, of which
(i) Fifty Million (50,000,000) shares shall be Common Stock, par value $.01 per
share (the "Common Stock") and (ii) Two Million (2,000,000) shares shall be
Undesignated Preferred Stock, par value $.01 per share (the "Undesignated
Preferred Stock"). As set forth in this Article IV, the Board of Directors or
any authorized committee thereof is authorized from time to time to establish
and designate one or more series of Undesignated Preferred Stock, to fix and
determine the variations in the relative rights and preferences as between the
different series of Undesignated Preferred Stock in the manner hereinafter set
forth in this Article IV, and to fix or alter the number of shares comprising
any such series and the designation thereof to the extent permitted by law.
2
<PAGE>
The number of authorized shares of the class of Undesignated Preferred
Stock may be increased or decreased (but not below the number of shares
outstanding) by the affirmative vote of the holders of a majority of the Common
Stock, without a vote of the holders of the Undesignated Preferred Stock,
pursuant to the resolution or resolutions establishing the class of Undesignated
Preferred Stock or this Restated Certificate of Incorporation, as it may be
amended from time to time.
Section 2. General.
------------------
The designations, powers, preferences and rights of, and the
qualifications, limitations and restrictions upon, each class or series of stock
shall be determined in accordance with, or as set forth below in, Sections 3 and
4 of this Article IV.
Section 3. Common Stock.
-----------------------
Subject to all of the rights, powers and preferences of the Undesignated
Preferred Stock, and except as provided by law or in this Article IV (or in any
certificate of designation of any series of Undesignated Preferred Stock) or by
the Board of Directors or any authorized committee thereof pursuant to this
Article IV:
(a) the holders of the Common Stock shall have the exclusive right to
vote for the election of Directors and on all other matters requiring
stockholder action, each share being entitled to one vote;
(b) dividends may be declared and paid or set apart for payment upon
the Common Stock out of any assets or funds of the Corporation legally available
for the payment of dividends, but only when and as declared by the Board of
Directors or any authorized committee thereof; and
(c) upon the voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, the net assets of the Corporation shall be
distributed pro rata to the holders of the Common Stock in accordance with their
respective rights and interests.
Section 4. Undesignated Preferred Stock.
---------------------------------------
Subject to any limitations prescribed by law, the Board of Directors or any
authorized committee thereof is expressly authorized to provide for the issuance
of the shares of Undesignated Preferred Stock in one or more series of such
stock, and by filing a certificate pursuant to applicable law of the State of
Delaware, to establish or change from time to time the number of shares to be
included in each such series, and to fix the designations, powers, preferences
and the relative, participating, optional or other special rights of the shares
of each series and any qualifications, limitations and restrictions thereof.
Any action by the Board of Directors or any authorized committee thereof under
this Article IV.4 shall require the
3
<PAGE>
affirmative vote of a majority of the Directors then in office or a majority of
the members of such committee. The Board of Directors or any authorized
committee thereof shall have the right to determine or fix one or more of the
following with respect to each series of Undesignated Preferred Stock to the
extent permitted by law:
(a) The distinctive serial designation and the number of shares
constituting such series;
(b) The dividend rates or the amount of dividends to be paid on the
shares of such series, whether dividends shall be cumulative and, if so, from
which date or dates, the payment date or dates for dividends, and the
participating and other rights, if any, with respect to dividends;
(c) The voting powers, full or limited, if any, of the shares of such
series;
(d) Whether the shares of such series shall be redeemable and, if so,
the price or prices at which, and the terms and conditions on which, such shares
may be redeemed;
(e) The amount or amounts payable upon the shares of such series and
any preferences applicable thereto in the event of voluntary or involuntary
liquidation, dissolution or winding up of the Corporation;
(f) Whether the shares of such series shall be entitled to the benefit
of a sinking or retirement fund to be applied to the purchase or redemption of
such shares, and if so entitled, the amount of such fund and the manner of its
application, including the price or prices at which such shares may be redeemed
or purchased through the application of such fund;
(g) Whether the shares of such series shall be convertible into, or
exchangeable for, shares of any other class or classes or of any other series of
the same or any other class or classes of stock of the Corporation and, if so
convertible or exchangeable, the conversion price or prices, or the rate or
rates of exchange, and the adjustments thereof, if any, at which such conversion
or exchange may be made, and any other terms and conditions of such conversion
or exchange;
(h) The price or other consideration for which the shares of such
series shall be issued;
(i) Whether the shares of such series which are redeemed or converted
shall have the status of authorized but unissued shares of Undesignated
Preferred Stock (or series thereof) and whether such shares may be reissued as
shares of the same or any other class or series of stock; and
(j) Such other powers, preferences, rights, qualifications,
limitations and restrictions thereof as the Board of Directors or any authorized
committee thereof may deem advisable.
4
<PAGE>
ARTICLE V
STOCKHOLDER ACTION
------------------
Any action required or permitted to be taken by the stockholders of the
Corporation at any annual or special meeting of stockholders of the Corporation
must be effected at a duly called annual or special meeting of stockholders and
may not be taken or effected by a written consent of stockholders in lieu
thereof.
ARTICLE VI
DIRECTORS
---------
Section 1. General.
-------------------
The business and affairs of the Corporation shall be managed by or under
the direction of the Board of Directors except as otherwise provided herein or
required by law.
Section 2. Election of Directors.
---------------------------------
Election of Directors need not be by written ballot unless the By-laws of
the Corporation shall so provide.
Section 3. Terms of Directors.
------------------------------
The number of Directors of the Corporation shall be fixed by resolution
duly adopted from time to time by the Board of Directors. The Directors, other
than those who may be elected by the holders of any series of Undesignated
Preferred Stock of the Corporation, shall be classified, with respect to the
term for which they severally hold office, into three classes, as nearly equal
in number as possible. The initial Class I Directors of the Corporation shall
be Jacqueline C. Morby and John A. Staley, IV; the initial Class II Directors of
the Corporation shall be Gregory F. Boron, Joseph E. Smith, and Roger B. Kafker;
and the initial Class III Directors of the Corporation shall be Roger
Boissoneault and Patrick G. LePore. The initial Class I Directors shall serve
for a term expiring at the annual meeting of stockholders to be held in 1998,
the initial Class II Directors shall serve for a term expiring at the annual
meeting of stockholders to be held in 1999, and the initial Class III Directors
shall serve for a term expiring at the annual meeting of stockholders to be held
in 2000. At each annual meeting of stockholders, the successor or successors of
the class of Directors whose term expires at that meeting shall be elected by a
plurality of the votes cast at such meeting and shall hold office for a term
expiring at the annual meeting of stockholders held in the third year following
the year of their election. The Directors elected to each class shall hold
office until their successors are duly elected and qualified or until their
earlier resignation or removal.
5
<PAGE>
Notwithstanding the foregoing, whenever, pursuant to the provisions of
Article IV of this Restated Certificate of Incorporation, the holders of any one
or more series of Undesignated Preferred Stock shall have the right, voting
separately as a series or together with holders of other such series, to elect
Directors at an annual or special meeting of stockholders, the election, term of
office, filling of vacancies and other features of such directorships shall be
governed by the terms of this Restated Certificate of Incorporation and any
certificate of designations applicable thereto, and such Directors so elected
shall not be divided into classes pursuant to this Article V.3.
During any period when the holders of any series of Undesignated Preferred
Stock have the right to elect additional Directors as provided for or fixed
pursuant to the provisions of Article IV hereof, then upon commencement and for
the duration of the period during which such right continues: (i) the then
otherwise total authorized number of Directors of the Corporation shall
automatically be increased by such specified number of Directors, and the
holders of such Undesignated Preferred Stock shall be entitled to elect the
additional Directors so provided for or fixed pursuant to said provisions, and
(ii) each such additional Director shall serve until such Director's successor
shall have been duly elected and qualified, or until such Director's right to
hold such office terminates pursuant to said provisions, whichever occurs
earlier, subject to such Director's earlier death, disqualification, resignation
or removal. Except as otherwise provided by the Board in the resolution or
resolutions establishing such series, whenever the holders of any series of
Undesignated Preferred Stock having such right to elect additional Directors are
divested of such right pursuant to the provisions of such stock, the terms of
office of all such additional Directors elected by the holders of such stock, or
elected to fill any vacancies resulting from the death, resignation,
disqualification or removal of such additional Directors, shall forthwith
terminate and the total and authorized number of Directors of the Corporation
shall be reduced accordingly.
Section 4. Vacancies.
--------------------
Subject to the rights, if any, of the holders of any series of Undesignated
Preferred Stock to elect Directors and to fill vacancies in the Board of
Directors relating thereto, any and all vacancies in the Board of Directors,
however occurring, including, without limitation, by reason of an increase in
size of the Board of Directors, or the death, resignation, disqualification or
removal of a Director, shall be filled solely by the affirmative vote of a
majority of the remaining Directors then in office, even if less than a quorum
of the Board of Directors. Any Director appointed in accordance with the
preceding sentence shall hold office for the remainder of the full term of the
class of Directors in which the new directorship was created or the vacancy
occurred and until such Director's successor shall have been duly elected and
qualified or until his or her earlier resignation or removal. Subject to the
rights, if any, of the holders of any series of Undesignated Preferred Stock to
elect Directors, when the number of Directors is increased or decreased, the
Board of Directors shall determine the class or classes to which the increased
or decreased number of Directors shall be apportioned; provided, however, that
no decrease in the number of Directors shall shorten the term of any
6
<PAGE>
incumbent Director. In the event of a vacancy in the Board of Directors, the
remaining Directors, except as otherwise provided by law, may exercise the
powers of the full Board of Directors until the vacancy is filled.
Section 5. Removal.
------------------
Subject to the rights, if any, of any series of Undesignated Preferred
Stock to elect Directors and to remove any Director whom the holders of any such
stock have the right to elect, any Director (including persons elected by
Directors to fill vacancies in the Board of Directors) may be removed from
office (i) only with cause and (ii) only by the affirmative vote of at least
two-thirds of the total votes which would be eligible to be cast by stockholders
in the election of such Director. At least 30 days prior to any meeting of
stockholders at which it is proposed that any Director be removed from office,
written notice of such proposed removal shall be sent to the Director whose
removal will be considered at the meeting. For purposes of this Restated
Certificate of Incorporation, "cause," with respect to the removal of any
Director shall mean only (i) conviction of a felony, (ii) declaration of unsound
mind by order of court, (iii) gross dereliction of duty, (iv) commission of any
action involving moral turpitude, or (v) commission of an action which
constitutes intentional misconduct or a knowing violation of law if such action
in either event results both in an improper substantial personal benefit and a
material injury to the Corporation.
ARTICLE VII
LIMITATION OF LIABILITY
-----------------------
A Director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a Director, except for liability (i) for any breach of the Director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the DGCL or (iv) for any
transaction from which the Director derived an improper personal benefit. If
the DGCL is amended after the effective date of this Restated Certificate of
Incorporation to authorize corporate action further eliminating or limiting the
personal liability of Directors, then the liability of a Director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the DGCL, as so amended.
Any repeal or modification of this Article VII by either of (i) the
stockholders of the Corporation or (ii) an amendment to the DGCL, shall not
adversely affect any right or protection existing at the time of such repeal or
modification with respect to any acts or omissions occurring before such repeal
or modification of a person serving as a Director at the time of such repeal or
modification.
7
<PAGE>
ARTICLE VIII
AMENDMENT OF BY-LAWS
--------------------
Section 1. Amendment by Directors
---------------------------------
Except as otherwise provided by law, the By-laws of the Corporation may be
amended or repealed by the Board of Directors.
Section 2. Amendment by Stockholders
------------------------------------
The By-laws of the Corporation may be amended or repealed at any annual
meeting of stockholders, or special meeting of stockholders called for such
purpose, by the affirmative vote of at least two-thirds of the total votes
eligible to be cast on such amendment or repeal by holders of voting stock,
voting together as a single class; provided, however, that if the Board of
Directors recommends that stockholders approve such amendment or repeal at such
meeting of stockholders, such amendment or repeal shall only require the
affirmative vote of a majority of the total votes eligible to be cast on such
amendment or repeal by holders of voting stock, voting together as a single
class.
ARTICLE IX
AMENDMENT OF CERTIFICATE OF INCORPORATION
-----------------------------------------
The Corporation reserves the right to amend or repeal this Restated
Certificate of Incorporation in the manner now or hereafter prescribed by
statute and this Restated Certificate of Incorporation, and all rights conferred
upon stockholders herein are granted subject to this reservation. No amendment
or repeal of this Restated Certificate of Incorporation shall be made unless the
same is first approved by the Board of Directors pursuant to a resolution
adopted by the Board of Directors in accordance with Section 242 of the DGCL,
and, except as otherwise provided by law, thereafter approved by the
stockholders. Whenever any vote of the holders of voting stock is required, and
in addition to any other vote of holders of voting stock that is required by
this Restated Certificate of Incorporation or by law, the affirmative vote of a
majority of the total votes eligible to be cast by holders of voting stock with
respect to such amendment or repeal, voting together as a single class, at a
duly constituted meeting of stockholders called expressly for such purpose shall
be required to amend or repeal any provisions of this Restated Certificate of
Incorporation; provided, however, that the affirmative vote of not less than
two-thirds of the total votes eligible to be cast by holders of voting stock,
voting together as a single class, shall be required to amend or repeal any of
the provisions of Article VI or Article IX of this Restated Certificate of
Incorporation.
8
<PAGE>
I, Patrick G. LePore, President of the Corporation, for the purpose of
amending and restating the Corporation's Second Amended and Restated Certificate
of Incorporation pursuant to the General Corporation Law of the State of
Delaware, do make this certificate, hereby declaring and certifying that this is
my act and deed on behalf of the Corporation this 22nd day of September, 1997.
/s/ Patrick G. LePore
---------------------------------------
Patrick G. LePore, President
9
<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED
BY-LAWS
OF
BORON, LEPORE & ASSOCIATES, INC.
(the "Corporation")
ARTICLE I
---------
Stockholders
------------
SECTION 1. Annual Meeting. The annual meeting of stockholders shall be
--------------
held at the hour, date and place within or without the United States which is
fixed by the majority of the Board of Directors, the Chairman of the Board, if
one is elected, or the President, which time, date and place may subsequently be
changed at any time by vote of the Board of Directors. If no annual meeting has
been held for a period of thirteen months after the Corporation's last annual
meeting of stockholders, a special meeting in lieu thereof may be held, and such
special meeting shall have, for the purposes of these By-laws or otherwise, all
the force and effect of an annual meeting. Any and all references hereafter in
these By-laws to an annual meeting or annual meetings also shall be deemed to
refer to any special meeting(s) in lieu thereof.
SECTION 2. Matters to be Considered at Annual Meetings. At any annual
-------------------------------------------
meeting of stockholders or any special meeting in lieu of annual meeting of
stockholders (the "Annual Meeting"), only such business shall be conducted, and
only such proposals shall be acted upon, as shall have been properly brought
before such Annual Meeting. To be considered as properly brought before an
Annual Meeting, business must be: (a) specified in the notice of meeting, (b)
otherwise properly brought before the meeting by, or at the direction of, the
Board of Directors, or (c) otherwise properly brought before the meeting by any
holder of record (both as of the time notice of such proposal is given by the
stockholder as set forth below and as of the record date for the Annual Meeting
in question) of any shares of capital stock of the Corporation entitled to vote
at such Annual Meeting who complies with the requirements set forth in this
Section 2.
In addition to any other applicable requirements, for business to be
properly brought before an Annual Meeting by a stockholder of record of any
shares of capital stock entitled to vote at such Annual Meeting, such
stockholder shall: (a) give timely notice as required by this Section 2 to the
Secretary of the Corporation and (b) be present at such meeting, either in
person or by a representative. For the first Annual Meeting following the
initial public
<PAGE>
offering of common stock of the Corporation, a stockholder's notice shall be
timely if delivered to, or mailed to and received by, the Corporation at its
principal executive office not later than the close of business on the later of
(a) the 75th day prior to the scheduled date of such Annual Meeting or (b) the
15th day following the day on which public announcement of the date of such
Annual Meeting is first made or sent by the Corporation. For all subsequent
Annual Meetings, a stockholder's notice shall be timely if delivered to, or
mailed to and received by, the Corporation at its principal executive office not
less than 75 days nor more than 120 days prior to the anniversary date of the
immediately preceding Annual Meeting (the "Anniversary Date"); provided,
however, that in the event the Annual Meeting is scheduled to be held on a date
more than 30 days before the Anniversary Date or more than 60 days after the
Anniversary Date, a stockholder's notice shall be timely if delivered to, or
mailed to and received by, the Corporation at its principal executive office not
later than the close of business on the later of (a) the 75th day prior to the
scheduled date of such Annual Meeting or (b) the 15th day following the day on
which public announcement of the date of such Annual Meeting is first made by
the Corporation.
For purposes of these By-laws, "public announcement" shall mean: (a)
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service, (b) a report or other document filed
publicly with the Securities and Exchange Commission (including, without
limitation, a Form 8-K), or (c) a letter or report sent to stockholders of
record of the Corporation at the time of the mailing of such letter or report.
A stockholder's notice to the Secretary shall set forth as to each matter
proposed to be brought before an Annual Meeting: (a) a brief description of the
business the stockholder desires to bring before such Annual Meeting and the
reasons for conducting such business at such Annual Meeting, (b) the name and
address, as they appear on the Corporation's stock transfer books, of the
stockholder proposing such business, (c) the class and number of shares of the
Corporation's capital stock beneficially owned by the stockholder proposing such
business, (d) the names and addresses of the beneficial owners, if any, of any
capital stock of the Corporation registered in such stockholder's name on such
books, and the class and number of shares of the Corporation's capital stock
beneficially owned by such beneficial owners, (e) the names and addresses of
other stockholders known by the stockholder proposing such business to support
such proposal, and the class and number of shares of the Corporation's capital
stock beneficially owned by such other stockholders, and (f) any material
interest of the stockholder proposing to bring such business before such meeting
(or any other stockholders known to be supporting such proposal) in such
proposal.
If the Board of Directors or a designated committee thereof determines that
any stockholder proposal was not made in a timely fashion in accordance with the
provisions of this Section 2 or that the information provided in a stockholder's
notice does not satisfy the information requirements of this Section 2 in any
material respect, such proposal shall not be
2
<PAGE>
presented for action at the Annual Meeting in question. If neither the Board of
Directors nor such committee makes a determination as to the validity of any
stockholder proposal in the manner set forth above, the presiding officer of the
Annual Meeting shall determine whether the stockholder proposal was made in
accordance with the terms of this Section 2. If the presiding officer determines
that any stockholder proposal was not made in a timely fashion in accordance
with the provisions of this Section 2 or that the information provided in a
stockholder's notice does not satisfy the information requirements of this
Section 2 in any material respect, such proposal shall not be presented for
action at the Annual Meeting in question. If the Board of Directors, a
designated committee thereof or the presiding officer determines that a
stockholder proposal was made in accordance with the requirements of this
Section 2, the presiding officer shall so declare at the Annual Meeting and
ballots shall be provided for use at the meeting with respect to such proposal.
Notwithstanding the foregoing provisions of this By-Law, a stockholder
shall also comply with all applicable requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and the rules and regulations
thereunder with respect to the matters set forth in this Section 2, and nothing
in this Section 2 shall be deemed to affect any rights of stockholders to
request inclusion of proposals in the Corporation's proxy statement pursuant to
Rule 14a-8 under the Exchange Act.
SECTION 3. Special Meetings. Except as otherwise required by law and
----------------
subject to the rights, if any, of the holders of any series of preferred stock,
special meetings of the stockholders of the Corporation may be called only by
the Board of Directors pursuant to a resolution approved by the affirmative vote
of a majority of the directors then in office.
SECTION 4. Matters to be Considered at Special Meetings. Only those
--------------------------------------------
matters set forth in the notice of the special meeting may be considered or
acted upon at a special meeting of stockholders of the Corporation, unless
otherwise provided by law.
SECTION 5. Notice of Meetings; Adjournments. A written notice of each
--------------------------------
Annual Meeting stating the hour, date and place of such Annual Meeting shall be
given by the Secretary or an Assistant Secretary (or other person authorized by
these By-laws or by law) not less than 10 days nor more than 60 days before the
Annual Meeting, to each stockholder entitled to vote thereat and to each
stockholder who, by law or under the Restated Certificate of Incorporation of
the Corporation (as the same may hereafter be amended and/or restated, the
"Certificate") or under these By-laws, is entitled to such notice, by delivering
such notice to him or by mailing it, postage prepaid, addressed to such
stockholder at the address of such stockholder as it appears on the
Corporation's stock transfer books. Such notice shall be deemed to be delivered
when hand delivered to such address or deposited in the mail so addressed, with
postage prepaid.
3
<PAGE>
Notice of all special meetings of stockholders shall be given in the same
manner as provided for Annual Meetings, except that the written notice of all
special meetings shall state the purpose or purposes for which the meeting has
been called.
Notice of an Annual Meeting or special meeting of stockholders need not be
given to a stockholder if a written waiver of notice is signed before or after
such meeting by such stockholder or if such stockholder attends such meeting,
unless such attendance was for the express purpose of objecting at the beginning
of the meeting to the transaction of any business because the meeting was not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any Annual Meeting or special meeting of stockholders need be
specified in any written waiver of notice.
The Board of Directors may postpone and reschedule any previously scheduled
Annual Meeting or special meeting of stockholders and any record date with
respect thereto, regardless of whether any notice or public disclosure with
respect to any such meeting has been sent or made pursuant to Section 2 of this
Article I or Section 3 of Article II hereof or otherwise. In no event shall
the public announcement of an adjournment, postponement or rescheduling of any
previously scheduled meeting of stockholders commence a new time period for the
giving of a stockholder's notice under Section 2 of Article I and Section 3 of
Article II of these By-laws.
When any meeting is convened, the presiding officer may adjourn the meeting
if (a) no quorum is present for the transaction of business, (b) the Board of
Directors determines that adjournment is necessary or appropriate to enable the
stockholders to consider fully information which the Board of Directors
determines has not been made sufficiently or timely available to stockholders,
or (c) the Board of Directors determines that adjournment is otherwise in the
best interests of the Corporation. When any Annual Meeting or special meeting
of stockholders is adjourned to another hour, date or place, notice need not be
given of the adjourned meeting other than an announcement at the meeting at
which the adjournment is taken of the hour, date and place to which the meeting
is adjourned; provided, however, that if the adjournment is for more than 30
days, or if after the adjournment a new record date is fixed for the adjourned
meeting, notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote thereat and each stockholder who, by law or under the
Certificate or these By-laws, is entitled to such notice.
SECTION 6. Quorum. The holders of shares of voting stock representing a
------
majority of the voting power of the outstanding shares of voting stock issued,
outstanding and entitled to vote at a meeting of stockholders, represented in
person or by proxy at such meeting, shall constitute a quorum; but if less than
a quorum is present at a meeting, the holders of voting stock representing a
majority of the voting power present at the meeting or the presiding officer may
adjourn the meeting from time to time, and the meeting may be held as adjourned
without further notice, except as provided in Section 5 of this Article I. At
such adjourned
4
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meeting at which a quorum is present, any business may be transacted which might
have been transacted at the meeting as originally noticed. The stockholders
present at a duly constituted meeting may continue to transact business until
adjournment, notwithstanding the withdrawal of enough stockholders to leave less
than a quorum.
SECTION 7. Voting and Proxies. Stockholders shall have one vote for each
------------------
share of stock entitled to vote owned by them of record according to the books
of the Corporation, unless otherwise provided by law or by the Certificate.
Stockholders may vote either in person or by written proxy, but no proxy shall
be voted or acted upon after three years from its date, unless the proxy
provides for a longer period. Proxies shall be filed with the Secretary of the
meeting before being voted. Except as otherwise limited therein or as otherwise
provided by law, proxies shall entitle the persons authorized thereby to vote at
any adjournment of such meeting, but they shall not be valid after final
adjournment of such meeting. A proxy with respect to stock held in the name of
two or more persons shall be valid if executed by or on behalf of any one of
them unless at or prior to the exercise of the proxy the Corporation receives a
specific written notice to the contrary from any one of them. A proxy
purporting to be executed by or on behalf of a stockholder shall be deemed
valid, and the burden of proving invalidity shall rest on the challenger.
SECTION 8. Action at Meeting. When a quorum is present, any matter before
-----------------
any meeting of stockholders shall be decided by the vote of a majority of the
voting power of shares of voting stock, present in person or represented by
proxy at such meeting and entitled to vote on such matter, except where a larger
vote is required by law, by the Certificate or by these By-laws. Any election
by stockholders shall be determined by a plurality of the votes cast, except
where a larger vote is required by law, by the Certificate or by these By-laws.
The Corporation shall not directly or indirectly vote any shares of its own
stock; provided, however, that the Corporation may vote shares which it holds in
a fiduciary capacity to the extent permitted by law.
SECTION 9. Stockholder Lists. The Secretary or an Assistant Secretary (or
-----------------
the Corporation's transfer agent or other person authorized by these By-laws or
by law) shall prepare and make, at least 10 days before every Annual Meeting or
special meeting of stockholders, a complete list of the stockholders entitled to
vote at the meeting, arranged in alphabetical order, and showing the address of
each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder, for
any purpose germane to the meeting, during ordinary business hours, for a period
of at least 10 days prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified in the notice of
the meeting, or, if not so specified, at the place where the meeting is to be
held. The list shall also be produced and kept at the hour, date and place of
the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
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SECTION 10. Presiding Officer. The Chairman of the Board, if one is
-----------------
elected, or if not elected or in his or her absence, the President, shall
preside at all Annual Meetings or special meetings of stockholders and shall
have the power, among other things, to adjourn such meeting at any time and from
time to time, subject to Sections 5 and 6 of this Article I. The order of
business and all other matters of procedure at any meeting of the stockholders
shall be determined by the presiding officer.
SECTION 11. Voting Procedures and Inspectors of Elections. The
---------------------------------------------
Corporation shall, in advance of any meeting of stockholders, appoint one or
more inspectors to act at the meeting and make a written report thereof. The
Corporation may designate one or more persons as alternate inspectors to replace
any inspector who fails to act. If no inspector or alternate is able to act at
a meeting of stockholders, the presiding officer shall appoint one or more
inspectors to act at the meeting. Any inspector may, but need not, be an
officer, employee or agent of the Corporation. Each inspector, before entering
upon the discharge of his or her duties, shall take and sign an oath faithfully
to execute the duties of inspector with strict impartiality and according to the
best of his or her ability. The inspectors shall perform such duties as are
required by the General Corporation Law of the State of Delaware, as amended
from time to time (the "DGCL"), including the counting of all votes and ballots.
The inspectors may appoint or retain other persons or entities to assist the
inspectors in the performance of the duties of the inspectors. The presiding
officer may review all determinations made by the inspectors, and in so doing
the presiding officer shall be entitled to exercise his or her sole judgment and
discretion and he or she shall not be bound by any determinations made by the
inspectors. All determinations by the inspectors and, if applicable, the
presiding officer, shall be subject to further review by any court of competent
jurisdiction.
ARTICLE II
----------
Directors
---------
SECTION 1. Powers. The business and affairs of the Corporation shall be
------
managed by or under the direction of the Board of Directors except as otherwise
provided by the Certificate or required by law.
SECTION 2. Number and Terms. The number of directors of the Corporation
----------------
shall be fixed by resolution duly adopted from time to time by the Board of
Directors. The directors shall hold office in the manner provided in the
Certificate.
SECTION 3. Director Nominations. Nominations of candidates for election
--------------------
as directors of the Corporation at any Annual Meeting may be made only (a) by,
or at the direction of, a majority of the Board of Directors or (b) by any
holder of record (both as of the time notice of such nomination is given by the
stockholder as set forth below and as of the
6
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record date for the Annual Meeting in question) of any shares of the capital
stock of the Corporation entitled to vote at such Annual Meeting who complies
with the timing, informational and other requirements set forth in this Section
3. Any stockholder who has complied with the timing, informational and other
requirements set forth in this Section 3 and who seeks to make such a
nomination, or his, her or its representative, must be present in person at the
Annual Meeting. Only persons nominated in accordance with the procedures set
forth in this Section 3 shall be eligible for election as directors at an Annual
Meeting.
Nominations, other than those made by, or at the direction of, the Board of
Directors, shall be made pursuant to timely notice in writing to the Secretary
of the Corporation as set forth in this Section 3. For the first Annual Meeting
following the initial public offering of common stock of the Corporation, a
stockholder's notice shall be timely if delivered to, or mailed to and received
by, the Corporation at its principal executive office not later than the close
of business on the later of (a) the 75th day prior to the scheduled date of such
Annual Meeting or (b) the 15th day following the day on which public
announcement of the date of such Annual Meeting is first made or sent by the
Corporation. For all subsequent Annual Meetings, a stockholder's notice shall
be timely if delivered to, or mailed to and received by, the Corporation at its
principal executive office not less than 75 days nor more than 120 days prior to
the Anniversary Date; provided, however, that in the event the Annual Meeting is
scheduled to be held on a date more than 30 days before the Anniversary Date or
more than 60 days after the Anniversary Date, a stockholder's notice shall be
timely if delivered to, or mailed and received by, the Corporation at its
principal executive office not later than the close of business on the later of
(a) the 75th day prior to the scheduled date of such Annual Meeting or (b) the
15th day following the day on which public announcement of the date of such
Annual Meeting is first made by the Corporation.
A stockholder's notice to the Secretary shall set forth as to each person
whom the stockholder proposes to nominate for election or re-election as a
director: (a) the name, age, business address and residence address of such
person, (b) the principal occupation or employment of such person, (c) the class
and number of shares of the Corporation's capital stock which are beneficially
owned by such person on the date of such stockholder notice, and (d) the consent
of each nominee to serve as a director if elected. A stockholder's notice to
the Secretary shall further set forth as to the stockholder giving such notice:
(a) the name and address, as they appear on the Corporation's stock transfer
books, of such stockholder and of the beneficial owners (if any) of the
Corporation's capital stock registered in such stockholder's name and the name
and address of other stockholders known by such stockholder to be supporting
such nominee(s), (b) the class and number of shares of the Corporation's capital
stock which are held of record, beneficially owned or represented by proxy by
such stockholder and by any other stockholders known by such stockholder to be
supporting such nominee(s) on the record date for the Annual Meeting in question
(if such date shall then have been made publicly available) and on the date of
such stockholder's notice, and (c) a description of all arrangements or
understandings between such stockholder and each nominee
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and any other person or persons (naming such person or persons) pursuant to
which the nomination or nominations are to be made by such stockholder.
If the Board of Directors or a designated committee thereof determines that
any stockholder nomination was not made in accordance with the terms of this
Section 3 or that the information provided in a stockholder's notice does not
satisfy the informational requirements of this Section 3 in any material
respect, then such nomination shall not be considered at the Annual Meeting in
question. If neither the Board of Directors nor such committee makes a
determination as to whether a nomination was made in accordance with the
provisions of this Section 3, the presiding officer of the Annual Meeting shall
determine whether a nomination was made in accordance with such provisions. If
the presiding officer determines that any stockholder nomination was not made in
a timely fashion in accordance with the terms of this Section 3 or that the
information provided in a stockholder's notice does not satisfy the
informational requirements of this Section 3 in any material respect, then such
nomination shall not be considered at the Annual Meeting in question. If the
Board of Directors, a designated committee thereof or the presiding officer
determines that a nomination was made in accordance with the terms of this
Section 3, the presiding officer shall so declare at the Annual Meeting and
ballots shall be provided for use at the meeting with respect to such nominee.
Notwithstanding anything to the contrary in the second sentence of the
second paragraph of this Section 3, in the event that the number of directors to
be elected to the Board of Directors of the Corporation is increased and there
is no public announcement by the Corporation naming all of the nominees for
director or specifying the size of the increased Board of Directors at least 75
days prior to the Anniversary Date, a stockholder's notice required by this
Section 3 shall also be considered timely, but only with respect to nominees for
any new positions created by such increase, if such notice shall be delivered
to, or mailed to and received by, the Corporation at its principal executive
office not later than the close of business on the 15th day following the day on
which such public announcement is first made by the Corporation.
No person shall be elected by the stockholders as a director of the
Corporation unless nominated in accordance with the procedures set forth in this
Section. Election of directors at an Annual Meeting need not be by written
ballot, unless otherwise provided by the Board of Directors or presiding officer
at such Annual Meeting. If written ballots are to be used, ballots bearing the
names of all the persons who have been nominated for election as directors at
the Annual Meeting in accordance with the procedures set forth in this Section
shall be provided for use at the Annual Meeting.
SECTION 4. Qualification. No director need be a stockholder of the
-------------
Corporation.
SECTION 5. Vacancies. Subject to the rights, if any, of the holders of
---------
any series of preferred stock to elect directors and to fill vacancies in the
Board of Directors relating
8
<PAGE>
thereto, any and all vacancies in the Board of Directors, however occurring,
including, without limitation, by reason of an increase in size of the Board of
Directors, or the death, resignation, disqualification or removal of a director,
shall be filled solely by the affirmative vote of a majority of the remaining
directors then in office, even if less than a quorum of the Board of Directors.
Any director appointed in accordance with the preceding sentence shall hold
office for the remainder of the full term of the class of directors in which the
new directorship was created or the vacancy occurred and until such director's
successor shall have been duly elected and qualified or until his or her earlier
resignation or removal. Subject to the rights, if any, of the holders of any
series of preferred stock to elect directors, when the number of directors is
increased or decreased, the Board of Directors shall determine the class or
classes to which the increased or decreased number of directors shall be
apportioned; provided, however, that no decrease in the number of directors
shall shorten the term of any incumbent director. In the event of a vacancy in
the Board of Directors, the remaining directors, except as otherwise provided by
law, may exercise the powers of the full Board of Directors until the vacancy is
filled.
SECTION 6. Removal. Directors may be removed from office in the manner
-------
provided in the Certificate.
SECTION 7. Resignation. A director may resign at any time by giving
-----------
written notice to the Chairman of the Board, if one is elected, the President or
the Secretary. A resignation shall be effective upon receipt, unless the
resignation otherwise provides.
SECTION 8. Regular Meetings. The regular annual meeting of the Board of
----------------
Directors shall be held, without notice other than this Section 8, on the same
date and at the same place as the Annual Meeting following the close of such
meeting of stockholders. Other regular meetings of the Board of Directors may
be held at such hour, date and place as the Board of Directors may by resolution
from time to time determine without notice other than such resolution.
SECTION 9. Special Meetings. Special meetings of the Board of Directors
----------------
may be called, orally or in writing, by or at the request of a majority of the
directors, the Chairman of the Board, if one is elected, or the President. The
person calling any such special meeting of the Board of Directors may fix the
hour, date and place thereof.
SECTION 10. Notice of Meetings. Notice of the hour, date and place of all
------------------
special meetings of the Board of Directors shall be given to each director by
the Secretary or an Assistant Secretary, or in case of the death, absence,
incapacity or refusal of such persons, by the Chairman of the Board, if one is
elected, or the President or such other officer designated by the Chairman of
the Board, if one is elected, or the President. Notice of any special meeting
of the Board of Directors shall be given to each director in person, by
telephone, or by facsimile, telex, telecopy, telegram, or other written form of
electronic communication, sent to
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his or her business or home address, at least 24 hours in advance of the
meeting, or by written notice mailed to his or her business or home address, at
least 48 hours in advance of the meeting. Such notice shall be deemed to be
delivered when hand delivered to such address, read to such director by
telephone, deposited in the mail so addressed, with postage thereon prepaid if
mailed, dispatched or transmitted if faxed, telexed or telecopied, or when
delivered to the telegraph company if sent by telegram.
When any Board of Directors meeting, either regular or special, is
adjourned for 30 days or more, notice of the adjourned meeting shall be given as
in the case of an original meeting. It shall not be necessary to give any
notice of the hour, date or place of any meeting adjourned for less than 30 days
or of the business to be transacted thereat, other than an announcement at the
meeting at which such adjournment is taken of the hour, date and place to which
the meeting is adjourned.
A written waiver of notice signed before or after a meeting by a director
and filed with the records of the meeting shall be deemed to be equivalent to
notice of the meeting. The attendance of a director at a meeting shall
constitute a waiver of notice of such meeting, except where a director attends a
meeting for the express purpose of objecting at the beginning of the meeting to
the transaction of any business because such meeting is not lawfully called or
convened. Except as otherwise required by law, by the Certificate or by these
By-laws, neither the business to be transacted at, nor the purpose of, any
meeting of the Board of Directors need be specified in the notice or waiver of
notice of such meeting.
SECTION 11. Quorum. At any meeting of the Board of Directors, a majority
------
of the directors then in office shall constitute a quorum for the transaction of
business, but if less than a quorum is present at a meeting, a majority of the
directors present may adjourn the meeting from time to time, and the meeting may
be held as adjourned without further notice, except as provided in Section 10 of
this Article II. Any business which might have been transacted at the meeting
as originally noticed may be transacted at such adjourned meeting at which a
quorum is present.
SECTION 12. Action at Meeting. At any meeting of the Board of Directors
-----------------
at which a quorum is present, a majority of the directors present may take any
action on behalf of the Board of Directors, unless otherwise required by law, by
the Certificate or by these By-laws.
SECTION 13. Action by Consent. Any action required or permitted to be
-----------------
taken at any meeting of the Board of Directors may be taken without a meeting if
all members of the Board of Directors consent thereto in writing. Such written
consent shall be filed with the records of the meetings of the Board of
Directors and shall be treated for all purposes as a vote at a meeting of the
Board of Directors.
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SECTION 14. Manner of Participation. Directors may participate in
-----------------------
meetings of the Board of Directors by means of conference telephone or similar
communications equipment by means of which all directors participating in the
meeting can hear each other, and participation in a meeting in accordance
herewith shall constitute presence in person at such meeting for purposes of
these By-laws.
SECTION 15. Committees. The Board of Directors, by vote of a majority of
----------
the directors then in office, may elect from its number one or more committees,
including, without limitation, an Executive Committee, a Compensation and Option
Committee and an Audit Committee, and may delegate thereto some or all of its
powers except those which by law, by the Certificate or by these By-laws may not
be delegated. Except as the Board of Directors may otherwise determine, any
such committee may make rules for the conduct of its business, but unless
otherwise provided by the Board of Directors or in such rules, its business
shall be conducted so far as possible in the same manner as is provided by these
By-laws for the Board of Directors. All members of such committees shall hold
such offices at the pleasure of the Board of Directors. The Board of Directors
may abolish any such committee at any time. Any committee to which the Board of
Directors delegates any of its powers or duties shall keep records of its
meetings and shall report its action to the Board of Directors. The Board of
Directors shall have power to rescind any action of any committee, to the extent
permitted by law, but no such rescission shall have retroactive effect.
SECTION 16. Compensation of Directors. Directors shall receive such
-------------------------
compensation for their services as shall be determined by a majority of the
Board of Directors provided that directors who are serving the Corporation as
employees and who receive compensation for their services as such, shall not
receive any salary or other compensation for their services as directors of the
Corporation.
ARTICLE III
-----------
Officers
--------
SECTION 1. Enumeration. The officers of the Corporation shall consist of
-----------
a President, a Treasurer, a Secretary and such other officers, including,
without limitation, a Chairman of the Board, a Chief Executive Officer and one
or more Vice Presidents (including Executive Vice Presidents or Senior Vice
Presidents), Assistant Vice Presidents, Assistant Treasurers and Assistant
Secretaries, as the Board of Directors may determine.
SECTION 2. Election. At the regular annual meeting of the Board following
--------
the Annual Meeting of stockholders, the Board of Directors shall elect the
President, the Treasurer and the Secretary. Other officers may be elected by
the Board of Directors at such regular annual meeting of the Board of Directors
or at any other regular or special meeting.
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SECTION 3. Qualification. No officer need be a stockholder or a director.
-------------
Any person may occupy more than one office of the Corporation at any time. Any
officer may be required by the Board of Directors to give bond for the faithful
performance of his or her duties in such amount and with such sureties as the
Board of Directors may determine.
SECTION 4. Tenure. Except as otherwise provided by the Certificate or by
------
these By-laws, each of the officers of the Corporation shall hold office until
the regular annual meeting of the Board of Directors following the next Annual
Meeting of stockholders and until his or her successor is elected and qualified
or until his or her earlier resignation or removal.
SECTION 5. Resignation. Any officer may resign by delivering his or her
-----------
written resignation to the Corporation addressed to the President or the
Secretary, and such resignation shall be effective upon receipt unless it is
specified to be effective at some other time or upon the happening of some other
event.
SECTION 6. Removal. Except as otherwise provided by law, the Board of
-------
Directors may remove any officer with or without cause by the affirmative vote
of a majority of the directors then in office.
SECTION 7. Absence or Disability. In the event of the absence or
---------------------
disability of any officer, the Board of Directors may designate another officer
to act temporarily in place of such absent or disabled officer.
SECTION 8. Vacancies. Any vacancy in any office may be filled for the
---------
unexpired portion of the term by the Board of Directors.
SECTION 9. Chairman of the Board. The Chairman of the Board, if one is
---------------------
elected, shall preside, when present, at all meetings of the stockholders and of
the Board of Directors. The Chairman of the Board shall have such other powers
and shall perform such other duties as the Board of Directors may from time to
time designate.
SECTION 10. Chief Executive Officer. The Chief Executive Officer, if one
-----------------------
is elected, shall, subject to the direction of the Board of Directors, have
general supervision and control of the Corporation's business. If there is no
Chairman of the Board or if he or she is absent, the Chief Executive Officer
shall preside, when present, at all meetings of stockholders and of the Board of
Directors. The Chief Executive Officer shall have such other powers and perform
such other duties as the Board of Directors may from time to time designate.
SECTION 11. President. The President shall generally have such powers and
---------
shall perform such duties as the Board of Directors may from time to time
designate. However, if no Chief Executive Officer is elected, the President
shall have general supervision and control of the Corporation's business. If
there is neither a Chairman of the Board nor a Chief
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Executive Officer or if both such officers are absent, the President shall
preside, when present, at all meetings of stockholders and of the Board of
Directors.
SECTION 12. Vice Presidents and Assistant Vice Presidents. Any Vice
---------------------------------------------
President (including any Executive Vice President or Senior Vice President) and
any Assistant Vice President shall have such powers and shall perform such
duties as the Board of Directors or the Chief Executive Officer may from time to
time designate.
SECTION 13. Treasurer and Assistant Treasurers. The Treasurer shall,
----------------------------------
subject to the direction of the Board of Directors and except as the Board of
Directors or the Chief Executive Officer may otherwise provide, have general
charge of the financial affairs of the Corporation and shall cause to be kept
accurate books of account. The Treasurer shall have custody of all funds,
securities, and valuable documents of the Corporation. He or she shall have
such other duties and powers as may be designated from time to time by the Board
of Directors or the Chief Executive Officer.
Any Assistant Treasurer shall have such powers and perform such duties as
the Board of Directors or the Chief Executive Officer may from time to time
designate.
SECTION 14. Secretary and Assistant Secretaries. The Secretary shall
-----------------------------------
record all the proceedings of the meetings of the stockholders and the Board of
Directors (including committees of the Board) in books kept for that purpose.
In his or her absence from any such meeting, a temporary secretary chosen at the
meeting shall record the proceedings thereof. The Secretary shall have charge of
the stock ledger (which may, however, be kept by any transfer or other agent of
the Corporation). The Secretary shall have custody of the seal of the
Corporation, and the Secretary, or an Assistant Secretary, shall have authority
to affix it to any instrument requiring it, and, when so affixed, the seal may
be attested by his or her signature or that of an Assistant Secretary. The
Secretary shall have such other duties and powers as may be designated from time
to time by the Board of Directors or the Chief Executive Officer. In the absence
of the Secretary, any Assistant Secretary may perform his or her duties and
responsibilities.
Any Assistant Secretary shall have such powers and perform such duties as
the Board of Directors or the Chief Executive Officer may from time to time
designate.
SECTION 15. Other Powers and Duties. Subject to these By-laws and to such
-----------------------
limitations as the Board of Directors may from time to time prescribe, the
officers of the Corporation shall each have such powers and duties as generally
pertain to their respective offices, as well as such powers and duties as from
time to time may be conferred by the Board of Directors or the Chief Executive
Officer.
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ARTICLE IV
----------
Capital Stock
-------------
SECTION 1. Certificates of Stock. Each stockholder shall be entitled to a
---------------------
certificate of the capital stock of the Corporation in such form as may from
time to time be prescribed by the Board of Directors. Such certificate shall be
signed by the Chairman of the Board of Directors, the President or a Vice
President and by the Treasurer or an Assistant Treasurer, or the Secretary or an
Assistant Secretary. The Corporation seal and the signatures by the
Corporation's officers, the transfer agent or the registrar may be facsimiles.
In case any officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed on such certificate shall have ceased to be
such officer, transfer agent or registrar before such certificate is issued, it
may be issued by the Corporation with the same effect as if he or she were such
officer, transfer agent or registrar at the time of its issue. Every
certificate for shares of stock which are subject to any restriction on transfer
and every certificate issued when the Corporation is authorized to issue more
than one class or series of stock shall contain such legend with respect thereto
as is required by law.
SECTION 2. Transfers. Subject to any restrictions on transfer and unless
---------
otherwise provided by the Board of Directors, shares of stock may be transferred
only on the books of the Corporation by the surrender to the Corporation or its
transfer agent of the certificate theretofore properly endorsed or accompanied
by a written assignment or power of attorney properly executed, with transfer
stamps (if necessary) affixed, and with such proof of the authenticity of
signature as the Corporation or its transfer agent may reasonably require.
SECTION 3. Record Holders. Except as may otherwise be required by law, by
--------------
the Certificate or by these By-laws, the Corporation shall be entitled to treat
the record holder of stock as shown on its books as the owner of such stock for
all purposes, including the payment of dividends and the right to vote with
respect thereto, regardless of any transfer, pledge or other disposition of such
stock, until the shares have been transferred on the books of the Corporation in
accordance with the requirements of these By-laws.
It shall be the duty of each stockholder to notify the Corporation of his
or her post office address and any changes thereto.
SECTION 4. Record Date. In order that the Corporation may determine
-----------
the stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may fix a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which record
date: (a) in the case of
14
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determination of stockholders entitled to vote at any meeting of stockholders,
shall, unless otherwise required by law, not be more than sixty nor less than
ten days before the date of such meeting and (b) in the case of any other
action, shall not be more than sixty days prior to such other action. If no
record date is fixed: (a) the record date for determining stockholders entitled
to notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held and (b) the record date for determining stockholders
for any other purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto.
SECTION 5. Replacement of Certificates. In case of the alleged loss,
---------------------------
destruction or mutilation of a certificate of stock, a duplicate certificate may
be issued in place thereof, upon such terms as the Board of Directors may
prescribe.
ARTICLE V
---------
Indemnification
---------------
SECTION 1. Definitions. For purposes of this Article: (a) "Officer"
-----------
means any person who serves or has served as a director or officer of the
Corporation or in any other office filled by election or appointment by the
stockholders or the Board of Directors of the Corporation and any heirs,
executors, administrators or personal representatives of such person; (b) "Non-
Officer Employee" means any person who serves or has served as an employee of
the Corporation, but who is not or was not an Officer, and any heirs, executors,
administrators or personal representatives of such person; (c) "Proceeding"
means any threatened, pending, or completed action, suit or proceeding (or part
thereof), whether civil, criminal, administrative, arbitrative or investigative,
any appeal of such an action, suit or proceeding, and any inquiry or
investigation which could lead to such an action, suit, or proceeding; and (d)
"Expenses" means any liability fixed by a judgment, order, decree or award in a
Proceeding, any amount reasonably paid in settlement of a Proceeding and any
professional fees and other expenses and disbursements reasonably incurred in a
Proceeding or in settlement of a Proceeding, including fines, taxes and
penalties relating thereto.
SECTION 2. Officers. Except as provided in Section 4 of this Article V,
--------
each Officer of the Corporation shall be indemnified and held harmless by the
Corporation to the fullest extent authorized by the DGCL, as the same exists or
may hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Corporation to provide broader rights
than said law permitted the Corporation to provide prior to such amendment)
against any and all Expenses incurred by such Officer in connection with any
Proceeding in which such Officer is involved as a result of serving or having
served (a) as an Officer or employee of the Corporation, (b) as a director,
officer or employee of any
15
<PAGE>
subsidiary of the Corporation, or (c) in any capacity with any other
corporation, organization, partnership, joint venture, trust or other entity at
the written request or direction of the Corporation, including service with
respect to employee or other benefit plans, and shall continue as to an Officer
after he or she has ceased to be an Officer and shall inure to the benefit of
his or her heirs, executors, administrators and personal representatives;
provided, however, that the Corporation shall indemnify any such Officer seeking
indemnification in connection with a Proceeding initiated by such Officer only
if such Proceeding was authorized by the Board of Directors of the Corporation.
SECTION 3. Non-Officer Employees. Except as provided in Section 4 of this
---------------------
Article V, each Non-Officer Employee of the Corporation may, in the discretion
of the Board of Directors, be indemnified by the Corporation to the fullest
extent authorized by the DGCL, as the same exists or may hereafter be amended
(but, in the case of any such amendment, only to the extent that such amendment
permits the Corporation to provide broader rights than said law permitted the
Corporation to provide prior to such amendment) against any or all Expenses
incurred by such Non-Officer Employee in connection with any Proceeding in which
such Non-Officer Employee is involved as a result of serving or having served
(a) as a Non-Officer Employee of the Corporation, (b) as a director, officer or
employee of any subsidiary of the Corporation, or (c) in any capacity with any
other corporation, organization, partnership, joint venture, trust or other
entity at the request or direction of the Corporation, including service with
respect to employee or other benefit plans, and shall continue as to a Non-
Officer Employee after he or she has ceased to be a Non-Officer Employee and
shall inure to the benefit of his or her heirs, personal representatives,
executors and administrators; provided, however, that the Corporation may
indemnify any such Non-Officer Employee seeking indemnification in connection
with a Proceeding initiated by such Non-Officer Employee only if such Proceeding
was authorized by the Board of Directors of the Corporation.
SECTION 4. Good Faith. No indemnification shall be provided pursuant to
----------
this Article V to an Officer or to a Non-Officer Employee with respect to a
matter as to which such person shall have been finally adjudicated in any
Proceeding (a) not to have acted in good faith and in a manner he or she
reasonably believed to be in, or not opposed to, the best interests of the
Corporation, and (b) with respect to any criminal Proceeding, to have had
reasonable cause to believe his or her conduct was unlawful. In the event that
a Proceeding is compromised or settled prior to final adjudication so as to
impose any liability or obligation upon an Officer or Non-Officer Employee, no
indemnification shall be provided pursuant to this Article V to said Officer or
Non-Officer Employee with respect to a matter if there be a determination that
with respect to such matter such person did not act in good faith and in a
manner he or she reasonably believed to be in, or not opposed to, the best
interests of the Corporation, and, with respect to any criminal Proceeding, had
no reasonable cause to believe his or her conduct was unlawful. The
determination contemplated by the preceding sentence shall be made by (a) a
majority vote of those directors who are not involved in such Proceeding (the
"Disinterested Directors"); (b) by the stockholders; or (c) if directed by a
majority of Disinterested Directors,
16
<PAGE>
by independent legal counsel in a written opinion. However, if more than half of
the directors are not Disinterested Directors, the determination shall be made
by (a) a majority vote of a committee of one or more disinterested director(s)
chosen by the Disinterested Director(s) at a regular or special meeting; (b) by
the stockholders; or (c) by independent legal counsel chosen by the Board of
Directors in a written opinion.
SECTION 5. Prior to Final Disposition. Unless otherwise determined by (a)
--------------------------
the Board of Directors, (b) if more than half of the directors are involved in a
Proceeding by a majority vote of a committee of one or more Disinterested
Director(s) chosen in accordance with the procedures specified in Section 4 of
this Article or (c) if directed by the Board of Directors, by independent legal
counsel in a written opinion, any indemnification extended to an Officer or Non-
Officer Employee pursuant to this Article V shall include payment by the
Corporation or a subsidiary of the Corporation of Expenses as the same are
incurred in defending a Proceeding in advance of the final disposition of such
Proceeding upon receipt of an undertaking by such Officer or Non-Officer
Employee seeking indemnification to repay such payment if such Officer or Non-
Officer Employee shall be adjudicated or determined not to be entitled to
indemnification under this Article V.
SECTION 6. Contractual Nature of Rights. The foregoing provisions of this
----------------------------
Article V shall be deemed to be a contract between the Corporation and each
Officer and Non-Officer Employee who serves in such capacity at any time while
this Article V is in effect, and any repeal or modification thereof shall not
affect any rights or obligations then existing with respect to any state of
facts then or theretofore existing or any Proceeding theretofore or thereafter
brought based in whole or in part upon any such state of facts. If a claim for
indemnification or advancement of expenses hereunder by an Officer or Non-
Officer Employee is not paid in full by the Corporation within 60 days after a
written claim for indemnification or documentation of expenses has been received
by the Corporation, such Officer or Non-Officer Employee may at any time
thereafter bring suit against the Corporation to recover the unpaid amount of
the claim, and if successful in whole or in part, such Officer or Non-Officer
Employee shall also be entitled to be paid the expenses of prosecuting such
claim. The failure of the Corporation (including its Board of Directors or any
committee thereof, independent legal counsel, or stockholders) to make a
determination concerning the permissibility of such indemnification or
advancement of expenses under this Article V shall not be a defense to the
action and shall not create a presumption that such indemnification or
advancement is not permissible
SECTION 7. Non-Exclusivity of Rights. The provisions in respect of
-------------------------
indemnification and the payment of expenses incurred in defending a Proceeding
in advance of its final disposition set forth in this Article V shall not be
exclusive of any right which any person may have or hereafter acquire under any
statute, provision of the Certificate or these By-laws, agreement, vote of
stockholders or disinterested directors or otherwise; provided, however, that in
-------- -------
the event the provisions of this Article V in any respect conflict with the
terms of any
17
<PAGE>
agreement between the Corporation or any of its subsidiaries and any person
entitled to indemnification under this Article V, then, notwithstanding anything
contained herein to the contrary, the provision which is more favorable to the
relevant individual shall govern.
SECTION 8. Insurance. The Corporation may maintain insurance, at its
---------
expense, to protect itself and any Officer or Non-Officer Employee against any
liability of any character asserted against or incurred by the Corporation or
any such Officer or Non-Officer Employee, or arising out of any such status,
whether or not the Corporation would have the power to indemnify such person
against such liability under the DGCL or the provisions of this Article V.
ARTICLE VI
----------
Miscellaneous Provisions
------------------------
SECTION 1. Fiscal Year. Except as otherwise determined by the Board of
-----------
Directors, the fiscal year of the Corporation shall end on the last day of
December of each year.
SECTION 2. Seal. The Board of Directors shall have power to adopt and
----
alter the seal of the Corporation.
SECTION 3. Execution of Instruments. All deeds, leases, transfers,
------------------------
contracts, bonds, notes and other obligations to be entered into by the
Corporation in the ordinary course of its business without director action may
be executed on behalf of the Corporation by the Chairman of the Board, if one is
elected, the President or the Treasurer or any other officer, employee or agent
of the Corporation as the Board of Directors or Executive Committee may
authorize.
SECTION 4. Voting of Securities. Unless the Board of Directors otherwise
--------------------
provides, the Chairman of the Board, if one is elected, the President or the
Treasurer may waive notice of and act on behalf of this Corporation, or appoint
another person or persons to act as proxy or attorney in fact for this
Corporation with or without discretionary power and/or power of substitution, at
any meeting of stockholders or shareholders of any other corporation or
organization, any of whose securities are held by this Corporation.
SECTION 5. Resident Agent. The Board of Directors may appoint a resident
--------------
agent upon whom legal process may be served in any action or proceeding against
the Corporation.
SECTION 6. Corporate Records. The original or attested copies of the
-----------------
Certificate, By-laws and records of all meetings of the incorporators,
stockholders and the Board of Directors and the stock transfer books, which
shall contain the names of all stockholders, their record addresses and the
amount of stock held by each, may be kept outside the State of
18
<PAGE>
Delaware and shall be kept at the principal office of the Corporation, at the
office of its counsel or at an office of its transfer agent or at such other
place or places as may be designated from time to time by the Board of
Directors.
SECTION 7. Certificate. All references in these By-laws to the
-----------
Certificate shall be deemed to refer to the Restated Certificate of
Incorporation of the Corporation, as amended and in effect from time to time.
SECTION 8. Amendment of By-laws.
--------------------
(a) Amendment by Directors. Except as provided otherwise by law, these
--- ----------------------
By-laws may be amended or repealed by the Board of Directors.
(b) Amendment by Stockholders. These By-laws may be amended or repealed
--- --------------------------
at any Annual Meeting of stockholders, or special meeting of stockholders called
for such purpose, by the affirmative vote of at least two-thirds of the total
votes eligible to be cast on such amendment or repeal by holders of voting
stock, voting together as a single class; provided, however, that if the Board
of Directors recommends that stockholders approve such amendment or repeal at
such meeting of stockholders, such amendment or repeal shall only require the
affirmative vote of a majority of the total votes eligible to be cast on such
amendment or repeal by holders of voting stock, voting together as a single
class.
Adopted August 25, 1997 and effective as of September 22, 1997.
19
<PAGE>
EXHIBIT 10.25
EMPLOYMENT AGREEMENT
--------------------
Employment Agreement, dated the 18th day of August, 1997 by and between
Brian Smith (the "Employee") and Boron, LePore & Associates, Inc., a Delaware
corporation (the "Company"). In consideration of the mutual promises and
covenants herein contained, the parties hereto agree as follows:
1. Employment.
----------
Subject to the provisions of Section 6, the Company hereby employs the
Employee and the Employee accepts such employment upon the terms and conditions
hereinafter set forth.
2. Terms of Employment.
-------------------
Subject to the provisions of Section 6, the term of the Employee's
employment pursuant to this Agreement shall commence on and as of the date
hereof (the "Effective Date") and shall terminate on December 31, 1999.
Thereafter, this Agreement shall be extended automatically for successive one-
year periods ending on the relevant anniversary of December 31, 1999, unless
either party gives the other notice no later than 90 days prior to the scheduled
termination date (i.e., December 31, 1999 or any later anniversary of December
31) of his or its determination not to extend this Agreement, whereupon it shall
terminate as of such anniversary date. The period during which the Employee
serves as an employee of the Company in accordance with and subject to the
provisions of this Agreement is referred to in this Agreement as the "Term of
Employment."
3. Duties.
------
During the Term of Employment, the Employee (a) shall serve as an
employee of the Company with the titles of President - BLP Group Sales Support
Division and Executive Vice President - BLP Group Companies, reporting to the
Chief Executive Officer of the Company, and shall perform such duties and have
such responsibilities and shall have such additional or alternative duties and
responsibilities as may be reasonably determined by the Chief Executive Officer
of the Company, consistent with the general area of the Employee's experience
and skills, (b) upon the request of the Chief Executive Officer of the Company,
shall serve as an officer and/or director of any of the Company's subsidiaries,
and (c) shall render all services reasonably incident to the foregoing. The
Employee hereby accepts such employment, agrees to serve the Company in the
capacities indicated, and agrees to use his best efforts in, and shall devote
his full working time, attention, skill and energies to, the advancement of the
interests of the Company and its subsidiaries and the performance of his duties
and responsibilities hereunder.
<PAGE>
4. Salary and Bonus.
----------------
(a) During the Term of Employment, the Company shall pay the Employee
a salary at the annual rate of $200,000 per annum, subject to annual review and
potential increase (but not decrease) by the Compensation Committee of the Board
of Directors (the "Base Salary"). Such Base Salary shall be subject to
withholding under applicable law, shall be pro rated for partial years and shall
be payable in periodic installments not less frequently than monthly in
accordance with the Company's usual practice for executives of the Company as in
effect from time to time.
(b) During the Term of Employment, the Employee shall be entitled to
participate in such executive bonus program as may be established by the Company
and then in effect, subject to and in accordance with the terms thereof.
(c) For the year ended December 31, 1997, the Employee shall be
entitled to receive a cash bonus of at least $40,000; provided, however, that in
-------- -------
the event the Employee's employment is terminated prior to December 31, 1997
pursuant to Section 6(a), 6(b) or 6(d), no such bonus shall be due or paid, and
in the event the Employee's employment is terminated pursuant to Section 6(c),
the bonus shall be appropriately pro rated to reflect the period of time the
Employee was employed by the Company between August 18, 1997 and December 31,
1997.
5. Benefits.
--------
(a) During the Term of Employment, the Employee shall be entitled to
participate in any and all medical, pension, profit sharing and dental insurance
plans and disability income plans, stock incentive plans, retirement
arrangements and other employment benefits as in effect from time to time for
executive officers of the Company generally. Such participation shall be
subject to (i) the terms of the applicable plan documents (including, as
applicable, provisions granting discretion to the Board of Directors of the
Company or any administrative or other committee provided for therein or
contemplated thereby), and (ii) generally applicable policies of the Company.
(b) Notwithstanding the foregoing, during the Term of Employment the
Company shall provide the Employee with or reimburse the Employee for a Company
automobile and club dues in accordance with the Company's practices for
executive officers, as in effect from time to time.
(c) The Company shall promptly reimburse the Employee for all
reasonable business expenses incurred by the Employee during the Term of
Employment in accordance with the Company's practices for executive officers of
the Company with a similar level of responsibility, as in effect from time to
time.
2
<PAGE>
(d) During the Term of Employment, the Employee shall receive paid
vacation annually in accordance with the Company's practices for executive
officers, as in effect from time to time, but in any event not less than four
(4) weeks per calendar year.
(e) The Company will purchase on behalf of the Employee a term life
insurance policy providing a death benefit of $1,000,000 in the event of the
Employee's death and naming such person or persons as the Employee may designate
as loss payee or payees. The obligation to purchase and the maintenance of such
life insurance policy during the Term of Employment, however, shall be
contingent upon (i) the Employee's satisfactory completion of all requirements
in connection therewith including, without limitation, a physical examination,
and (ii) the annual premium payments for such policy not exceeding $5,000;
provided, however, that if such amount is not adequate to cover a policy with a
- -------- -------
death benefit of $1,000,000, the Company shall purchase a term life insurance
policy providing for the maximum death benefit payable for a premium of $5,000.
(f) Compliance with the provisions of this Section 5 shall in no way
create or be deemed to create any obligation, express or implied, on the part of
the Company or any of its affiliates with respect to the continuation of any
particular benefit or other plan or arrangement maintained by them or their
subsidiaries as of or prior to the date hereof or the creation and maintenance
of any particular benefit or other plan or arrangement at any time after the
date hereof, except as provided in Sections 5(b), 5(c), 5(d) and 5(e).
6. Termination of Employment of the Employee.
-----------------------------------------
Prior to the expiration of the Term of Employment as provided in
Section 2 hereof, this Agreement may or shall (as applicable) be terminated as
follows:
(a) At any time by the mutual consent of the Employee and the Company.
(b) At any time for "cause" by the Company upon written notice to the
Employee. For purposes of this Agreement, a termination shall be for "cause"
if:
(i) the Employee shall commit an act of fraud, embezzlement,
misappropriation or breach of fiduciary duty against the Company or
any of its subsidiaries, or shall be convicted by a court of competent
jurisdiction of, or shall plead guilty or nolo contendere to, any
felony or any crime involving moral turpitude; or
(ii) the Employee shall commit a breach of any of the covenants,
terms or provisions hereof, which breach has not been remedied within
thirty (30) days after delivery to the Employee by the Company of
written notice of the facts constituting the breach; or
3
<PAGE>
(iii) the Employee shall have failed to comply with written
instructions from the Company's Chief Executive Officer, which are
reasonable and consistent with Section 3, or shall have substantially
failed to perform the Employee's duties hereunder for a period of
thirty (30) days after written notice from the Company.
Upon termination for cause as provided in this Section 6(b), (A) all
obligations of the Company under this Agreement shall thereupon immediately
terminate other than any obligation of the Company with respect to earned but
unpaid Base Salary and benefits contemplated hereby to the extent then accrued
or vested, it being understood that upon any such termination the Employee shall
not be entitled to receive (1) any bonus or portion thereof from the Company or
any of its affiliates not then paid whether pursuant to Section 4 or otherwise,
or (2) any continuation of benefits except as may be required by law, and (B)
the Company shall have any and all rights and remedies under this Agreement and
applicable law.
(c) Upon the death of the Employee or upon the permanent disability
(as defined below) of the Employee continuing for a period in excess of one
hundred eighty (180) consecutive days. Upon any such termination of the
Employee's employment as provided in this Section 6(c), all obligations of the
Company under this Agreement shall thereupon immediately terminate other than
(i) any obligation of the Company with respect to earned but unpaid Base Salary
and benefits contemplated hereby to the extent accrued or vested through the
date of termination, and (ii) the obligation of the Company to pay the Employee
or his estate any cash bonus earned pursuant to Section 4(b). As used herein,
the terms "permanent disability" or "permanently disabled" shall mean the
inability of the Employee, by reason of injury, illness or other similar cause,
to perform a major part of his duties and responsibilities in connection with
the conduct of the business and affairs of the Company, as determined reasonably
and in good faith by the Company.
(d) At any time by the Employee on at least 45 days' prior written
notice to the Company. Upon termination by the Employee as provided in this
Section 6(d), all obligations of the Company under this Agreement thereupon
immediately shall terminate other than any obligation of the Company with
respect to earned but unpaid Base Salary and benefits contemplated hereby to the
extent accrued or vested through the date of termination, it being understood
that in the event of such a termination the Employee shall not be entitled to
receive any bonus from the Company or any of its affiliates not then paid
whether pursuant to Section 4 or otherwise with respect to any period during or
after the Term of Employment or any continuation of benefits except to the
extent required by law.
(e) At any time without "cause" (as defined in Section 6(b)) by the
Company upon written notice to the Employee. In the event of termination of the
Employee by the Company pursuant to this Section 6(e) the Company shall (i)
continue to make Base Salary payments to the Employee in the manner contemplated
by Section 4(a) from the date of termination through the later of (x) December
31, 1999 and (y) the first anniversary of the date
4
<PAGE>
on which such a termination occurs if such termination occurs during any
extension year of the Term of Employment hereunder, and (ii) remain eligible to
receive any bonus contemplated by Section 4(b), if, when and as such bonus
otherwise would have been paid, with such amounts agreed by the parties hereto
to be in full satisfaction, compromise and release of any claims arising out of
any termination of the Employee's employment pursuant to this Section 6(e) or
Section 6(f), and in either case with such amounts to be contingent upon the
Employee's delivery of a general release upon termination of employment in a
form reasonably satisfactory to the Company, it being understood that no
severance benefits shall be provided unless and until the Employee determines to
execute and deliver such release and that such release shall not cover any stock
options which are still in effect (which shall be governed by their respective
terms) and, in the case of a termination pursuant to Section 6(f), such release
shall not cover the matter which is the subject of the material default giving
rise to such termination.
(f) The Employee shall have the right to terminate his employment
hereunder in the event of a material default by the Company in the performance
of its obligations hereunder, after the Employee has given written notice to the
Company specifying such default by the Company and giving the Company a
reasonable time, not less than 30 days, to conform its performance to its
obligations hereunder. The rights and obligations of the parties shall be as
set forth in Section 6(e) in the event of any such termination.
(g) In the event either party gives a notice of non-renewal to be
effective as of any anniversary hereof as contemplated by Section 2, then all
obligations of the parties hereunder shall terminate as of the end of the Term
of Employment except as contemplated by Sections 7 and 8 hereof.
7. Confidentiality; Proprietary Rights.
-----------------------------------
(a) In the course of performing services hereunder, on behalf of the
Company (for purposes of this Section 7 including all predecessors of the
Company) and its affiliates, the Employee has had and from time to time will
have access to confidential records, data, customer lists, trade secrets and
other confidential information owned or used in the course of business by the
Company and its affiliates (the "Confidential Information"). The Employee
agrees (i) to hold the Confidential Information in strict confidence, (ii) not
to disclose the Confidential Information to any person (other than in the
regular business of the Company or its affiliates), and (iii) not to use,
directly or indirectly, any of the Confidential Information for any competitive
or commercial purpose other than on behalf of the Company and its affiliates;
provided, however, that the limitations set forth above shall not apply to any
Confidential Information which (i) is then generally known to the public, (ii)
became or becomes generally known to the public through no fault of the
Employee, or (iii) is disclosed in accordance with an order of a court of
competent jurisdiction or applicable law. Upon the termination of the
Employee's employment with the Company for any reason, all Confidential
Information (including, without limitation, all data, memoranda, customer lists,
notes, programs and other papers and items, and reproductions thereof relating
to the foregoing
5
<PAGE>
matters) in the Employee's possession or control, shall be immediately returned
to the Company or the applicable affiliate and remain in its or their
possession.
(b) The Employee recognizes that the Company and its affiliates
possess a proprietary interest in all of the information described in Section
7(a), subject to the provisions and limitations thereof, and have the exclusive
right and privilege to use, protect by copyright, patent or trademark, or
otherwise exploit the processes, ideas and concepts described therein to the
exclusion of the Employee, except as otherwise agreed between the Company and
the Employee in writing. The Employee expressly agrees that any products,
inventions, discoveries or improvements made by the Employee or his agents or
affiliates in the course of the Employee's employment, including any of the
foregoing which is based on or arises out of the information described in
Section 7(a), shall be the property of and inure to the exclusive benefit of the
Company. The Employee further agrees that any and all products, inventions,
discoveries or improvements developed by the Employee (whether or not able to be
protected by copyright, patent or trademark) during the course of his
employment, or involving the use of the time, materials or other resources of
the Company or any of its affiliates, shall be promptly disclosed to the Company
and shall become the exclusive property of the Company, and the Employee shall
execute and deliver any and all documents necessary or appropriate to implement
the foregoing.
(c) The Employee agrees, while he is employed by the Company, to offer
or otherwise make known or available to it, as directed by the Chief Executive
Officer of the Company and without additional compensation or consideration, any
business prospects, contracts or other business opportunities that he may
discover, find, develop or otherwise have available to him in any field in which
the Company or its affiliates are engaged, and further agrees that any such
prospects, contacts or other business opportunities shall be the property of the
Company.
8. Non-Competition.
---------------
In view of the fact that any activity of the Employee in violation of
the terms hereof would deprive the Company and its subsidiaries, if any, of the
benefits of their bargain under this Agreement, as a material inducement to and
a condition precedent of the Company's payment obligations hereunder and the
other covenants set forth herein, and to preserve the goodwill associated with
the Boron, LePore business, the Employee hereby agrees that during the Term of
Employment and thereafter (a) for a period of one year following the termination
of the Employee's employment with the Company in the event such termination
occurs by or under the circumstances contemplated by Sections 6(e) or 6(f), or
(b) for a period ending on the later of the second anniversary of the Effective
Date or the date which is one year following the termination of the Employee's
employment with the Company for any other reason, regardless of the
circumstances of termination, he will not, without the express written consent
of the Company, directly or indirectly, anywhere in the areas of the United
States where the Company and its subsidiaries, if any, conduct business, engage
in any activity which
6
<PAGE>
is, or participate or invest in, or provide or facilitate the provision of
financing to, or assist (whether as owner, part-owner, shareholder, partner,
director, officer, trustee, employee, agent or consultant, or in any other
capacity), any business, organization or person other than the Company (or any
affiliate of the Company), whose business, activities, products or services are
competitive with any of the business, activities, products or services conducted
or offered by the Company and its subsidiaries at the time of the termination of
Employee's employment with the Company, which business, activities, products and
services shall include in any event peer influence meetings, telemarketing
activities, contract sales and outsource marketing involving pharmaceutical and
healthcare companies. Without implied limitation, the foregoing covenant shall
include hiring or engaging or attempting to hire or engage for or on behalf of
himself or any such competitor, any officer or employee of the Company or any of
its direct and/or indirect subsidiaries, encouraging for or on behalf of himself
or any such competitor, any such officer or employee to terminate his or her
relationship or employment with the Company or any of its direct or indirect
subsidiaries, soliciting for or on behalf of himself or any such competitor any
client of the Company or any of its direct or indirect subsidiaries and
diverting to any person (as defined in Section 11) any client or business
opportunity of the Company or any of any of its direct or indirect subsidiaries.
Notwithstanding anything herein to the contrary, the Employee may make
passive investments in any enterprise the shares of which are publicly traded if
such investment constitutes less than five (5%) percent of the equity of such
enterprise.
The Employee acknowledges that neither the Employee nor any business entity
controlled by him is a party to any contract, commitment, arrangement or
agreement which could, following the date hereof, restrain or restrict the
Company or any subsidiary or affiliate of the Company from carrying on its
business or restrain or restrict the Employee from performing his obligations
under this Agreement and as of the date of this Agreement the Employee has no
business interests in or relating to the pharmaceutical industry whatsoever
other than his interest in the Company, other than interests in public companies
of less than five (5%) percent.
9. Specific Performance; Severability.
----------------------------------
It is specifically understood and agreed that any breach of the
provisions of Sections 7 or 8 hereof by the Employee is likely to result in
irreparable injury to the Company and/or its affiliates, that the remedy at law
alone will be an inadequate remedy for such breach and that, in addition to any
other remedy it may have, the Company shall be entitled to enforce the specific
performance of this Agreement by the Employee and to seek both temporary and
permanent injunctive relief (to the extent permitted by law), without the
necessity of posting a bond or proving actual damages. In case any of the
provisions contained in this Agreement shall for any reason be held to be
invalid, illegal or unenforceable in any respect, any such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement, but this Agreement shall be construed as if such invalid, illegal or
unenforceable provision had
7
<PAGE>
been limited or modified (consistent with its general intent) to the extent
necessary to make it valid, legal and enforceable, or if it shall not be
possible to so limit or modify such invalid, illegal or unenforceable provision
or part of a provision, this Agreement shall be construed as if such invalid,
illegal or unenforceable provision or part of a provision had never been
contained in this Agreement.
10. Notices.
-------
All notices, requests, demands and other communications hereunder
shall be in writing and shall be deemed to have been duly given if faxed (with
transmission acknowledgment received), delivered personally or mailed by
certified or registered mail (return receipt requested) as follows:
To the Company: Boron, LePore & Associates, Inc.
17-17 Route 208 North
Fair Lawn, New Jersey 07410
Attention: Patrick G. LePore, President and CEO
To the Employee: Brian Smith
271 Corona Avenue
Pelham, New York 10803
or to such other address or fax number of which any party may notify the other
parties as provided above. Notices shall be effective as of the date of such
delivery, mailing or fax.
11. Miscellaneous.
-------------
This Agreement shall be governed by and construed under the laws of
the State of New Jersey, and shall not be amended, modified or discharged in
whole or in part except by an agreement in writing signed by both of the parties
hereto. The failure of either of the parties to require the performance of a
term or obligation or to exercise any right under this Agreement or the waiver
of any breach hereunder shall not prevent subsequent enforcement of such term or
obligation or exercise of such right or the enforcement at any time of any other
right hereunder or be deemed a waiver of any subsequent breach of the provision
so breached, or of any other breach hereunder. This Agreement shall inure to
the benefit of, and be binding upon and assignable to, successors of the Company
by way of merger, consolidation or sale and may not be assigned by the Employee.
This Agreement, together with concurrently executed stock option agreements,
supersedes, terminates and in all respects replaces all prior understandings and
agreements, written or oral, between the parties relating to the subject matter
hereof. For purposes of this Agreement, the term "person" means an individual,
corporation, partnership, association, trust or any unincorporated organization;
a "subsidiary" of a person means any corporation more than 50 percent of whose
outstanding voting securities, or any partnership, joint venture or other entity
more than 50 percent of whose total
8
<PAGE>
equity interest, is directly or indirectly owned by such person; and an
"affiliate" of a person shall mean, with respect to a person or entity, any
person or entity which directly or indirectly controls, is controlled by, or is
under common control with such person or entity.
IN WITNESS WHEREOF, the parties have executed this Agreement under seal as
of the date first set forth above.
BORON, LePORE & ASSOCIATES, INC.
By:/s/ Patrick G. LePore
--------------------------------------------
Patrick G. LePore, President
/s/ Brian Smith
--------------------------------------------
BRIAN SMITH
9
<PAGE>
EXHIBIT 10.27
L E A S E A G R E E M E N T
- - - - - - - - - - - - - -
BY AND BETWEEN:
MAURICE M. WEILL, TRUSTEE UNDER
TRUST INDENTURE DATED NOVEMBER 1, 1975,
as "Landlord"
-and-
BLP GROUP COMPANIES,
a Delaware corporation,
as "Tenant"
PREMISES: 275 Old New Brunswick Road
Piscataway, New Jersey
DATED: December 1, 1997
PREPARED BY: ROBERT K. BROWN, ESQ.
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
1. LEASED PREMISES.................................................. 5
2. TERM OF LEASE.................................................... 6
3. RENT............................................................. 7
4. USE.............................................................. 8
5. REPAIRS AND MAINTENANCE.......................................... 8
6. UTILITIES AND SERVICE............................................ 8
7. INSURANCE........................................................ 10
8. LANDLORD'S ACCESS FOR FUTURE CONSTRUCTION........................ 10
9. FIXTURES......................................................... 11
10. GLASS............................................................ 11
11. ASSIGNMENT AND SUBLETTING........................................ 11
12. FIRE............................................................. 12
13. COMPLIANCE WITH LOCAL RULES AND REGULATIONS...................... 12
14. DEFAULT BY TENANT................................................ 13
15. LIABILITY OF TENANT FOR DEFICIENCY............................... 16
16. NOTICES.......................................................... 16
17. NON-WAIVER....................................................... 16
18. RIGHT OF TENANT TO MAKE ALTERATIONS AND IMPROVEMENTS............. 16
19. NON-LIABILITY OF LANDLORD........................................ 17
20. CONDEMNATION..................................................... 17
21. INCREASE OF INSURANCE RATES...................................... 18
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
22. TENANT'S FIRE INSURANCE......................................... 18
23. WAIVER OF SUBROGATION RIGHTS.................................... 18
24. REPAIR OF DAMAGES............................................... 18
25. MORTGAGE PRIORITY............................................... 18
26. OPERATING COST AND TAX ESCALATIONS.............................. 19
27. QUIET ENJOYMENT................................................. 22
28. SIGNS........................................................... 23
29. LEASE CONSTRUCTION.............................................. 23
30. BINDING EFFECT.................................................. 23
31. DEFINITIONS..................................................... 23
32. PARAGRAPH HEADING............................................... 23
33. ENTIRE AGREEMENT................................................ 23
34. BROKERAGE....................................................... 23
35. STATEMENT OF ACCEPTANCE......................................... 24
36. DEFINITION OF TERM OF "LANDLORD"................................ 24
37. FORCE MAJEURE................................................... 24
38. SURVIVAL OF OBLIGATION.......................................... 24
39. SURRENDER OF LEASED PREMISES.................................... 25
40. SECURITY........................................................ 25
41. LOSS OF OPTION RIGHTS........................................... 26
42. INDEMNITY....................................................... 26
43. INTENTIONALLY OMITTED........................................... 27
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
44. INSPECTION BY LANDLORD........................................ 27
45. LIMIT OF LANDLORD'S LIABILITY................................. 27
46. EXECUTION AND DELIVERY........................................ 27
47. OPTION TO RENEW............................................... 27
</TABLE>
LIST OF SCHEDULES
-----------------
<TABLE>
<S> <C>
Schedule "A" Metes and Bounds Description
Schedule "B" Tenant's Plan
Schedule "C" Janitorial Schedule
Schedule "D" Building Services
Schedule "E" Holiday Schedule
</TABLE>
4
<PAGE>
THIS LEASE AGREEMENT, made this 1st day of December, 1997, between MAURICE
M. WEILL, TRUSTEE UNDER TRUST INDENTURE DATED NOVEMBER 1, 1975, having an office
at 51 Commerce Street, Springfield, New Jersey (hereinafter called the
"Landlord"); and BLP GROUP COMPANIES, a Delaware corporation, about to have an
office at 275 Old New Brunswick Road, Piscataway, New Jersey (hereinafter called
the "Tenant").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Landlord owns certain lands and premises in the Township of
Piscataway, County of Middlesex and State of New Jersey, (hereinafter referred
to as the "Property") which said lands and premises are commonly known as 275
Old New Brunswick Road and are particularly described on Schedule "A" annexed
hereto and made a part hereof; and
WHEREAS, the Landlord has erected an office building containing
approximately 55,625 square feet on the Property of which the Tenant shall
occupy a portion of the second (2nd) floor containing 8,790 square feet of
office space (which space shall (hereinafter be referred to as the "Leased
Premises"), all in accordance with the terms and conditions hereinafter
mentioned and the considerations herein expressed.
NOW, THEREFORE, in consideration of the covenants and conditions
hereinafter set forth and for other good and valuable considerations, the
Landlord does demise, lease and let unto the Tenant, and the Tenant does rent
and take from the Landlord the Leased Premises, and the Landlord and Tenant
mutually covenant and agree as follows:
1. LEASED PREMISES
---------------
1.1 The Leased Premises consist of a portion of the second (2nd)
floor of the Building containing approximately 8,790 square feet of office
space, based on outside dimensions to center line of common wall, together with
a factor for common area space as hereinafter referred to in Article 1.2. For
the purposes of this Lease, the Leased Premises shall constitute 16% of the
total rentable area of the Building (hereinafter referred to as "Tenant's
Percentage"), which Tenant's Percentage shall be applicable to all of Tenant's
pro rata costs to be paid as additional rent as hereinafter in this Lease
provided. Tenant's Percentage shall be revised in the event of any increase or
decrease in the total rentable area of the Building effective as of the date of
any such change.
1.2 The Leased Premises also includes the right, in common with other
tenants of the Building, to use the common entranceways, foyers, lavatories,
stairways and parking areas. The Landlord covenants and agrees with Tenant that
it will provide forty four (44) striped but unmarked parking spaces for Tenant's
vehicles, to be used by Tenant's employees, agents or invitees, on a non-
exclusive basis with the other tenants of the Building.
1.3 The Landlord shall deliver the Leased Premises, and the Tenant
shall accept the same in an "as is" condition, except that (a) Landlord shall
deliver all mechanical systems located therein in good working order and
operating condition and (b) Landlord shall
5
<PAGE>
perform such work as shall be set forth on a plan to be prepared by Tenant (the
"Plan"), which Plan shall be mutually approved by Landlord and Tenant hereunder
and attached to the lease as Schedule "B". The Plan shall be finalized by
Landlord and Tenant within two (2) weeks following the date of execution hereof.
Notwithstanding the above, Landlord agrees that it shall first complete such
work as is set forth on the schedule of work annexed hereto and made a part
hereof as Schedule "B-1", promptly following execution of the within Lease
Agreement. Landlord shall then obtain a continuing use certificate of occupancy
so as to permit the use and occupancy of the Leased Premises by the Tenant.
Landlord hereby agrees to use its best efforts to obtain such continuing use
certificate of occupancy and to deliver the Leased Premises to the Tenant on or
about December 12, 1997. Thereafter, Landlord shall obtain a building permit for
the balance of the work set forth on the Plan and shall diligently prosecute the
completion of such work. All of such work shall be performed in a good and
workmanlike manner and in accordance with all applicable building codes, rules
and regulations. Landlord shall complete such work as soon as is reasonably
possible following the issuance of a building permit therefor.
1.4 The Tenant shall obtain Landlord's prior written approval of any
proposed installation by Tenant of blinds, curtains or drapes to insure that the
proposed installation meets the general decor of the Building, as established in
the sole discretion of the Landlord.
1.5 The Landlord reserves the right to adopt and promulgate from time
to time, reasonable rules and regulations (and to amend and supplement the same)
applicable to the use and occupancy of the Property. Notice of such rules,
regulations and amendments and supplements thereto, if any, shall be given to
the Tenant, in writing, and shall be applicable to all tenants of the Property.
Such rules and regulations shall not deny to Tenant access to the Leased
Premises in excess of the regular work week hours defined in Article 6.1
hereinafter set forth.
2. TERM OF LEASE
-------------
2.1 The Landlord leases unto the Tenant, and the Tenant hires the
Leased Premises for the term of five (5) years to commence on the lst day of
January, 1998, subject to the provisions of Article 2.2 hereof.
2.2 In the event the Leased Premises are delivered to the Tenant,
together with a continuing use certificate of occupancy, as hereinabove set
forth in Article 1.3, after January 1, 1998, the Lease term of five (5) years
shall commence on the first day of the next succeeding month following delivery
of possession to the Tenant (the "Commencement Date") and shall continue for a
term of five (5) years thereafter. The Tenant shall, however, Pay to the
Landlord a sun equal to the pro rata share of one (1) month's Base Rent for that
portion of the month prior to the Commencement Date. During said period of
partial monthly occupancy, if any, all other terms and conditions of this Lease,
including the obligation to pay additional rent, shall be applicable to the
occupancy of the Leased Premises by the Tenant. Notwithstanding the above, the
Tenant shall not be responsible for the payment of any Base Rent applicable to
the period prior to January 1, 1998.
6
<PAGE>
3. RENT
----
3.1 The Tenant shall pay the rent (hereinafter referred to as the
"Base Rent") for the entire term in the sum of ONE HUNDRED FORTY TWO THOUSAND
EIGHT HUNDRED THIRTY SEVEN AND 50/100 ($142,837.50) DOLLARS per annum, without
demand and without offset or deduction, payable in equal installments in advance
in the sum of ELEVEN THOUSAND NINE HUNDRED THREE AND 13/100 ($11,903.13) DOLLARS
per month, on the first day of each and every month during the term of this
Lease, together with such additional rent or charges required to be paid by the
Tenant as hereinafter provided.
3.2 Any installment of Base Rent or additional rent accruing
hereunder, and any other sum payable hereunder by Tenant to Landlord which is
not paid prior to the fifth (5th) business day of any Lease month, shall bear a
late charge of ten (10%) per cent of such Base Rent or additional rent, to be
paid therewith, and the failure to pay such charge shall be a default. Such late
charge shall be deemed to be additional rent hereunder. It is expressly
understood and agreed that the foregoing late charge is not a penalty, but
agreed upon compensation to the Landlord for administrative costs incurred by
Landlord in connection with any such late payment. Notwithstanding the above,
the aforementioned late charge shall not be imposed in connection with the first
episode of late payment occurring the during the term of this Lease, provided
that said late payment is nonetheless made by the tenth (10th) day of the month
in which it is due. In addition, any payment of Base Rent or additional rent,
which is not paid within thirty (30) days of the date upon which it is due shall
require the payment of interest at the rate of one and one-half (1 1/2%) percent
per month, calculated from the date that such payment was due through the date
that any such payment is actually made.
3.3 If the term of this Lease shall begin on a day other than the
first day of a calendar month, the Base Rent for such partial month and other
additional rent payments required of Tenant hereunder shall be prorated and
shall be paid by Tenant to Landlord on the Commencement Date.
3.4 Tenant covenants and agrees that in the event of any material
dispute with respect to the within Lease, its obligation to pay the rent shall
continue without abatement notwithstanding any such dispute, and the Tenant
agrees that it shall seek such remedies as the law may allow by way of plenary
proceedings with respect to such issues in dispute.
3.5 Receipt and acceptance by Landlord of any Base Rent, additional
rent and any other charge with knowledge of Tenant's default in any covenant or
condition of this Lease shall not be deemed a waiver of such default.
3.6 The word "rent" as used herein shall mean the Base Rent and all
additional rent and other Lease charges payable by Tenant pursuant to the terms
of this Lease.
3.7 Simultaneously with the execution hereof, the Tenant has
delivered to the Landlord the first monthly installment of Base Rent payable
hereunder, together with the security deposit referred to herein.
7
<PAGE>
4. USE
---
4.1 The Tenant covenants and agrees to use and occupy the Leased
Premises for general and executive office purposes only, subject to all
applicable laws, ordinances, rules and regulations of any governmental boards or
bodies having jurisdiction thereof.
4.2 The Tenant covenants and agrees that it will not use the Leased
Premises for any use which creates an extra hazard of fire or other danger or
casualty, or which will increase the rate which Landlord or other tenants must
pay to secure fire or liability insurance or which will render the Building or
its improvements uninsurable.
5. REPAIRS AND MAINTENANCE
-----------------------
5.1 During the term of this Lease, the Landlord shall keep in good
order, safe condition and repair, the structural parts of the Building including
the walls, roof, floor, foundation load bearing members, trusses and joists, as
well as all plumbing, utilities and facilities serving the Leased Premises,
except for repairs or maintenance occasioned by the negligence or deliberate act
of Tenant, or its agents, servants, employees and invitees which shall be then
repaired at the sole cost and expense of the Tenant.
5.2 The Landlord shall take good care of and maintain and repair the
lawns, shrubbery, driveway, sidewalks, curbs and parking area on the Property,
and the Landlord shall provide snow removal.
5.3 Tenant covenants and agrees that it shall not cause or permit any
waste or damage to the Leased Premises, or any overloading of the floors of the
Building. Tenant shall, at the expiration of the Lease term, deliver up the
Leased Premises in good order and condition, ordinary wear and tear excepted.
6. UTILITIES AND SERVICE
---------------------
6.1 The Landlord agrees, at its cost and expense, subject to payment
of pro rata escalations to be paid by Tenant as hereinafter provided in Article
26, to furnish to the Tenant the Building services as hereinafter provided:
(1) Landlord shall supply the services as in this Lease provided
during the work week. The work week is hereby defined to be that period from
8:00 A.M. to 6:00 P.M. on Mondays through Fridays, and 9:00 A.M. to 1:00 P.M. on
Saturdays. The work week shall not include Sundays and the holidays excepted as
set forth on Schedule "E".
(2) The Building services to be furnished to the Leased Premises and
the common core areas of the Building and improvements include water for
sanitary purposes, heating, air-conditioning, power, sewer, standby sprinkler
service, elevator service (self-service), and all other common Building
services, including electrical service for Building operation of the common
areas in order to operate the Building as a first-class office Building, which
shall
8
<PAGE>
include the items referred to on Schedule "D" hereinafter provided. Excepted
from the foregoing is the cost of Tenant's electrical service for lighting and
office equipment, machinery and fixtures, which electrical service shall be paid
for by Tenant at Tenant's cost and expense an hereinafter provided.
(3) Landlord shall furnish janitorial service Monday through Friday
only, with a description of janitorial services to be supplied attached hereto
as Schedule "C". Tenant shall reimburse to Landlord the cost of removal from the
Leased Premises of any refuse and rubbish of Tenant in excess of normal waste.
Tenant shall pay such additional charge within ten (10) days of written demand.
6.2 Landlord shall furnish to Tenant electrical service for operation
of lighting and non-high-energy fixtures and equipment in the nature of electric
typewriters, personal computers, normal office-type photocopying equipment or
equipment of equivalent immaterial consumption of electric energy. Tenant
shall pay to Landlord monthly its pro rata share of such electrical service for
Tenant's electric, which said sum shall be in arrears with the following month's
rent to be paid in accordance with Article 3 based on monthly statements to be
rendered by Landlord to Tenant. In the event there is any dispute as to
Tenant's electric charge, such dispute shall be determined by an independent
electrical rating service, payment for whose services shall be the sole
obligation of the Tenant. Such independent electrical rating service shall
establish the cost of electrical service to all of the offices in the Building
in connection with the electrical services hereinabove referred to. Landlord
shall, at Tenant's request, furnish to Tenant a written breakdown of the basis
upon which Tenant's pro rata electrical cost charges are based and computed.
6.3 Tenant's use of electrical energy in the Leased Premises for
high-energy machinery or equipment is expressly subject to Tenant obtaining from
Landlord written consent to the installation of such machinery in the nature of
mainframe computers, duplicating machinery in excess of normal office-type
photocopying equipment and the like, in order to insure that the electrical
capacity of the Building is not exceeded, and to avert possible adverse effect
upon the Building electric service. Tenant agrees that in addition to the above
it will not permit any additional electrical risers or service connections to be
installed without the express written consent of the Landlord with respect
thereto. Subject to the foregoing, in the event of any permitted installation
of high-energy using electrical machinery or fixtures, Tenant shall pay to the
Landlord the full cost of such additional electric service, which shall be based
on the determination of an independent electrical rating service of the annual
cost attributable to such use. Said sum shall be paid monthly by Tenant to
Landlord upon establishment of the amount thereof in the same manner as
hereinabove provided in Article 6.2, subject to adjustment and increase or
decrease in electrical energy charges as may be applicable from time to time.
6.4 If Tenant uses the Leased Premises beyond the regular work week,
the Tenant shall be responsible for the cost of heating, ventilating and air-
conditioning services actually furnished at the rate of $50.00 per hour,
exclusive of Tenant's electric. Tenant agrees that it will cooperate with
Landlord in metering Tenants use in accordance with any energy or other use
measuring systems which Landlord may install in the Leased Premises.
9
<PAGE>
Notwithstanding the above, it is understood and agreed that the foregoing hourly
charge shall not be imposed upon Tenant in connection with the first twenty five
(25) hours of overtime HVAC usage during each year of the lease term.
6.5 Landlord shall not be liable for full or partial interruption of
any of the above services or utilities from conditions beyond Landlord's
control, but Landlord shall use due diligence to restore the services and
utilities. The rent shall not abate, in whole or in part, during any such
interruption.
7. INSURANCE
---------
7.1 The Landlord will, subject to the payment of escalations in
accordance with the provisions of Article 26 hereof, obtain for the benefit of
the Landlord, wherein the Landlord shall be the named insured, fire insurance
with full extended coverage, including flood insurance if required by Landlord
insuring the Property, in an amount and value equivalent to the full replacement
value of all the insurable improvements located on the Property, without any
deductible clause, which policy of insurance shall include broad form boiler and
machinery coverage (inclusive of air-conditioning system, if any), together with
insurance coverage against sprinkler damage to the Building and its
improvements. Said insurance, in any event, shall not be less than the amount
of any first mortgage which may be placed on the Property by the Landlord and
shall be in such form as any such bona fide mortgagee may reasonably require.
The Landlord shall have the right from time to time to determine the full
replacement value as may be required to comply with full replacement insurance
requirements. The insurance to be obtained by Landlord shall include casualty
rent insurance payable to and insuring the interest of the Landlord as to the
value of the rental obligation hereunder to the extent of one (1) year's gross
rental value, (inclusive of real estate taxes and applicable insurance
premiums).
7.2 The Tenant covenants and agrees that it will, at its sole cost
and expense, carry liability insurance covering the Leased Premises in the
minimum amount of THREE MILLION ($3,000,000.00) DOLLARS. Said policy shall be a
single limit policy. Notwithstanding the above, the foregoing coverage may be
provided by way of a ONE MILLION ($1,000,000.00) DOLLAR general liability
insurance policy, together with an "umbrella" policy in the amount of TWO
MILLION ($2,000,000.00) DOLLARS. The Tenant further covenants and agrees that
it will add as a party insured by such policies the interest of the Landlord and
will furnish Landlord with certificates of said liability insurance prior to the
commencement of the term of this Lease. The Tenant agrees that such insurance
coverage will be maintained in full force and effect during the term of the
Lease.
8. LANDLORD'S ACCESS FOR FUTURE CONSTRUCTION
-----------------------------------------
The Landlord reserves the right to enter the Leased Premises in connection
with the construction and erection of any additions or improvements to the
Building and Property provided that in the use of such right the Landlord shall
give the Tenant reasonable advance notice of such proposed entry, and provided
further that the Landlord shall not unreasonably interfere with the use of the
parking areas and driveways or the conduct of Tenant's business.
10
<PAGE>
9. FIXTURES
--------
9.1 The Tenant may install and remove property, equipment and
fixtures in the Leased Premises during the term of the Lease. If the Tenant
moves out or is dispossessed, and fails to remove any such property, equipment
and fixtures, then the said property, equipment and fixtures shall be deemed at
the option of the Landlord to be abandoned, or in lieu thereof, at the
Landlord's option, the Landlord may remove such property and charge the
reasonable cost and expense of removal, storage and disposal of the same to the
Tenant.
9.2 Tenant shall repair or pay the cost of repairing any damage to
the Leased Premises or the Building resulting from the removal of its property,
equipment and fixtures.
9.3 Subject to the terms of Article 9.1, the property, equipment and
fixtures shall remain the personal property of the Tenant.
9.4 All installation and removal of Tenant's fixtures, property and
equipment shall be done in accordance with all applicable laws and ordinances
and the rules and regulations of all governmental boards and bodies having
jurisdiction.
10. GLASS
-----
The Tenant agrees to replace, at its expense, any broken glass in the
windows or other apertures or the Leased Premises, provided such damage or
casualty is caused by the negligence or act of the Tenant, its agents, servants,
employees, or invitees.
11. ASSIGNMENT AND SUBLETTING
-------------------------
11.1 The Tenant may not assign this Lease or sublet the Leased
Premises or any part thereof, unless it shall first advise the Landlord in
writing by certified mail, return receipt requested, of its intention to assign
or sublease. In such event the Landlord shall have ninety (90) days from
receipt of such notice to elect to recapture the Leased Premises and terminate
the within Lease or to consent to the assignment of the Lease or the sublease of
the Leased Premises, which consent shall not be unreasonably withheld, providing
the proposed assignee or subtenant is financially responsible and shall assume
in writing the terms and conditions of the within Lease on the part of the
Tenant to be performed. In connection with any permitted assignment or
subletting, the Tenant shall pay to the Landlord one-half ( 1/2) of any
increment in Base Rent, or other consideration in lieu of Base Rent, received by
Tenant over the Base Rent per square foot per annum in effect from time to time.
11.2 The Landlord's consent shall not be required and the terms and
conditions of Article 11.1 shall not apply as to Landlord's right of first
refusal to recapture if the Tenant assigns or subleases the Leased Premises to a
parent, subsidiary, affiliate or a company into which Tenant is merged or with
which Tenant is consolidated, or to the purchaser of all or substantially all of
the assets of Tenant.
11
<PAGE>
11.3 In the event of any assignment or subletting permitted by the
Landlord, the Tenant shall remain and be directly and primarily responsible for
payment and performance of the within Lease obligations, and the Landlord
reserves the right, at all times, to require and demand that the Tenant pay and
perform the terms and conditions of this Lease. No such assignment or
subletting shall be made to any Tenant who shall occupy the Leased Premises for
any use other than that which is permitted to the Tenant, or for any use which
may be deemed disreputable or extra hazardous, or which would in any way violate
applicable laws, ordinances or rules and regulations of governmental boards and
bodies having jurisdiction thereof.
12. FIRE
----
12.1 In case of any damage to the Building on the Property by fire or
other casualty occurring during the term of this Lease, or previous thereto,
which renders the Leased Premises wholly untenantable so that the same cannot be
repaired within one hundred eighty (180) days from the happening of such damage,
then the term hereby created shall, at the option of the Landlord, terminate
from the date of such damage. Landlord shall advise Tenant in writing within
thirty (30) days of such fire or casualty whether or not the Leased Premises can
be restored within the one hundred eighty (180) day period hereinabove referred
to.
12.2 In the event the Landlord elects not to terminate the Lease and
rebuild the Leased Premises within said one hundred eighty (180) day period,
Landlord shall notify the Tenant of said fact within thirty (30) days of the
happening of the fire or casualty. Landlord shall diligently proceed with the
repair and reconstruction and during such period of repair and reconstruction,
Tenant's obligation to pay rent shall abate, but such obligation shall
recommence upon restoration of the Leased Premises and delivery of the same by
the Landlord to the Tenant.
12.3 In the event the Leased Premises shall not be substantially
repaired by the Landlord within one hundred eighty (180) days, then and in that
event the Tenant shall have the option to terminate the same upon written notice
upon the expiration of the one hundred eighty (180) day period, and in such
event the Landlord and Tenant shall be relieved of liability one to the other
based upon such termination and the within Lease shall be deemed null and void.
12.4 The Tenant shall immediately notify the Landlord in case of fire
or other damage to the Leased Premises. In determining what constitutes
reasonable promptness, consideration shall be given to delays caused by acts of
God, strikes, and other causes of Force Majeure beyond the Landlord's control.
13. COMPLIANCE WITH LOCAL RULES AND REGULATIONS
-------------------------------------------
13.1 Landlord covenants and agrees with Tenant that upon acceptance
and occupancy of the Leased Premises the same will comply with all statutes,
ordinances, rules, orders, regulations and requirements of the Federal State and
City Government and of any and all their departments and bureaus and to the
requirements of the Board of Fire Underwriters or their equivalent in the State
of New Jersey.
12
<PAGE>
13.2 The Tenant covenants and agrees that upon and after acceptance
and occupancy of the Leased Premises, it will promptly execute and comply with
all statutes, ordinances, rules, orders, regulations and requirements of the
Federal, State and City Government and of any and all their departments and
bureaus (provided same are applicable to Tenant's occupancy or use of the Leased
Premises) or to the reasonable rules promulgated by the Landlord in writing, for
the correction, prevention and abatement of nuisances, violations or other
grievances, in, upon or connected with said Leased Premises during said term and
arising from the operations of the Tenant therein, at the Tenant's cost and
expense, subject to the right of the Tenant to contest the decision by any such
department or bureau, as hereinafter mentioned. In the event the Tenant
contests any such governmental decision, it shall indemnify, defend and save the
Landlord harmless from any fine, penalty, costs and liability imposed upon the
Landlord as a result of Tenant's failure so to comply. The Tenant covenants and
agrees, at its own cost and expense, to comply with such regulations or requests
as may be required by the fire or liability insurance carriers providing
insurance for the Leased Premises, and will further comply with such other
requirements that may be promulgated by the Board of Fire Underwriters, or its
equivalent in connection with the use and occupancy of the Leased Premises by
the Tenant in the conduct of its business. Anything hereinabove to the contrary
notwithstanding, it is expressly understood and agreed that the Tenant shall not
be required to make structural changes in the Building, if the same are required
by governmental regulation as the same may be applicable as a matter of general
application to the Building, provided that the Tenant shall be required to make
structural changes that may be required by governmental regulation if directly
attributable and resulting from Tenant's occupancy and use of the Leased
Premises in the conduct of its business.
13.3 If the Tenant shall fail or neglect to comply with the aforesaid
statutes, ordinances, rules, orders, regulations and requirements or any of
them, failure of the Tenant to comply with the requirements of Article 13.1
above shall be deemed an item of default for which the Landlord shall have
recourse by termination of this class or exercise of any other rights reserved
to the Landlord hereunder, in accordance with the terms and conditions of this
Lease.
14. DEFAULT BY TENANT
-----------------
14.1 Each of the following shall be deemed a default by Tenant and
breach of this Lease:
(1) (i) filing of a petition by the Tenant for adjudication as
a bankrupt, or for reorganization, or for an arrangement under any federal
or state statute;
(ii) dissolution or liquidation of the Tenant;
(iii) appointment of a permanent receiver or a permanent
trustee of all or substantially all the property of the Tenant;
(iv) taking possession of the property of the Tenant by a
governmental officer or agency pursuant to statutory authority for
dissolution, rehabilitation, reorganization or liquidation of the Tenant;
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(v) making by the Tenant of an assignment for the benefit
of creditors;
(vi) abandonment, desertion or vacation of the Leased
Premises by the Tenant.
If any event mentioned in this subdivision (1) shall occur, Landlord
may thereupon or at any tine thereafter elect to cancel this Lease by ten
(10) days' notice to the Tenant, and this Lease shall terminate on the day
in such notice specified with the same force and effect as if that date
were the date herein fixed for the expiration of the term of the Lease.
(2) (i) Default in the payment of the Base Rent or additional
rent herein reserved or any part thereof for a period of ten (10) days
after the same is due and payable as in this Lease required.
(ii) A default in the performance of any other covenant or
condition of this Lease on the part of the Tenant to be performed for a
period of thirty (30) days after notice. For purposes of this subdivision
(2) (ii) hereof, no default on the part of Tenant in performance of work
required to be performed or acts to be done or conditions to be modified
shall be deemed to exist if steps shall have been commenced by Tenant
diligently after notice to rectify the same and shall be prosecuted to
completion with reasonable diligence, subject, however, to unavoidable
delays.
14.2 In case of any such default under Article 14.1(2) and at any time
thereafter following the expiration of the respective grace periods above
mentioned, or in the event that Tenant is consistently late in the punctual
payment of Base Rent and/or additional rent required to be paid under this Lease
as shall be evidenced by late payments made during any period of four (4) months
during any twelve (12) month period measured from the date of the first late
payment, Landlord may serve a notice upon the Tenant electing to terminate this
Lease upon a specified date not less than seven (7) days after the date of
serving such notice and this Lease shall then expire on the date so specified as
if that date has been originally fixed as the expiration date of the term herein
granted; however, a default under Article 14.1(2) hereof shall be deemed waived
if such default is made good before the date specified for termination in the
notice of termination served on Tenant.
14.3 In case this Lease shall be terminated as hereinbefore provided,
or by summary proceedings or otherwise, Landlord or its agents may, immediately
or any time thereafter, re-enter and resume possession of the Leased Premises or
such part thereof, and remove all persons and property therefrom, either by
summary proceedings or by a suitable action or proceeding at law without being
liable for any damages, provided any entry pursuant to the foregoing shall be in
accordance with law. No re-entry by Landlord shall be deemed an acceptance of a
surrender of this Lease.
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14.4 In case this Lease shall be terminated as hereinafter provided,
or by summary proceedings or otherwise, Landlord may, in its own name and in its
own behalf, relet the whole or any portion of the Leased Premises, for any
period equal to or greater or less than the remainder of the then current term,
for any sum which it may deem reasonable, to any tenant which it may deem
suitable and satisfactory, and for any use and purpose which it may deem
appropriate, and in connection with any such Lease Landlord may make such
changes in the character of the improvements on the Leased Premises as Landlord
may determine to be appropriate or helpful in effecting such Lease and may grant
concessions or free rent. Landlord agrees that it will take reasonable steps to
mitigate Tenant's damages. Landlord shall not in any event be required to pay
Tenant any surplus of any sums received by Landlord on a reletting of the Leased
Premises in excess of the rent reserved in this Lease.
14.5 (1) In case this Lease be terminated by summary proceedings, or
otherwise, as provided in this Article 14, and whether or not the Leased
Premises be relet, Landlord shall be entitled to recover from the Tenant, the
following:
(i) a sum equal to all expenses, if any, including reasonable
counsel fees, incurred by Landlord in recovering possession of the Leased
Premises, and all reasonable costs and charges for the care of said Leased
Premises while vacant, which damages shall be due and payable by Tenant to
Landlord at such time or times as such expenses shall have been incurred by
Landlord; and
(ii) A sum equal to all damages set forth in this Article 14 and
in Article 15 hereinafter referred to.
(2) Without any previous notice or demand, separate actions may be
maintained by Landlord against Tenant from time to time to recover any damages
which, at the commencement of any such action, have then or theretofore become
due and payable to the Landlord under this Article 14 and subsections hereof
without waiting until the end of the then current term.
(3) All sums which Tenant has agreed to pay by way of taxes, sever
charges, water rents or water meter charges, insurance premiums and other
similar items becoming due from tine to time under the terms of this Lease,
shall be deemed additional rent reserved in this Lease within the meaning of
this Article 14 and subsections hereof.
14.6 Tenant agrees that it shall reimburse Landlord for Landlord's
reasonable attorney's fees incurred in enforcing the terms and conditions of
this lease on the part of the Tenant to be performed. Tenant further agrees to
reimburse Landlord for Landlord's attorney's fees incurred in connection with
the review by Landlord of any Landlord's waiver, assignment or sublet agreement
or any other documentation reviewed by Landlord at Tenant's request.
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15. LIABILITY OF TENANT FOR DEFICIENCY
----------------------------------
In the event that the relation of Landlord and Tenant may cease or
terminate by reason of the default by Tenant and the re-entry of Landlord as
permitted by the terms and conditions contained in this Lease or by the
ejectment of Tenant by summary proceedings or other judicial proceedings, or
after the abandonment of the Leased Premises by Tenant, it is hereby agreed that
Tenant shall remain liable to pay in monthly payments the rent which shall
accrue subsequent to the re-entry by Landlord, and Tenant expressly agrees to
pay as damages for the breach of the covenants herein contained the difference
between the rent reserved and the rent collected and received, if any, by
Landlord, during the remainder of the unexpired term, as the amount of such
difference or deficiency shall from time to time be ascertained.
16. NOTICES
-------
All notices required or permitted to be given to the Landlord shall be
given by certified mail, return receipt requested, at the address hereinbefore
set forth on the first page of this Lease, and/or such other place as the
Landlord may designate in writing.
All notices required or permitted to be given to the Tenant shall be given
by certified mail, return receipt requested, at the address hereinbefore set
forth on the first page of this Lease and/or such other place as the Tenant
shall designate in writing.
17. NON-WAIVER
----------
The failure of the Landlord to insist upon strict performance of any of the
covenants or conditions of this Lease or to exercise any option herein conferred
in any one or more instances, shall not be construed as a waiver or
relinquishment of any such covenants, conditions or options, but the same shall
be and remain in full force and effect. If the Landlord pursues any remedy
granted by the terms of this lease or the terms of applicable law, it shall not
be construed as a waiver or relinquishment of any other remedy afforded thereby.
18. RIGHT OF TENANT TO MAKE ALTERATIONS AND IMPROVEMENTS
----------------------------------------------------
18.1 The Tenant may make alterations, additions or improvements to the
Leased Premises only with the prior written consent of the Landlord, which
consent shall not be unreasonably withheld, provided such alterations, additions
or improvements do not require structural changes in the Leased Premises, or do
not lessen the value of the Leased Premises. Any consent which Landlord may give
shall be conditioned upon Tenant furnishing to Landlord, detailed plans and
specifications with respect to any such changes, to be approved by Landlord in
writing. As a condition of such consent, Landlord reserves the right to require
Tenant to remove, at Tenant's sole cost and expense, any such alterations or
additions prior to the expiration of the Lease term. If Landlord does not
require such removal, any such alterations or additions shall be deemed to be
part of the realty upon installation. All such alterations, additions or
improvements shall be only in conformity with applicable governmental and
insurance company requirements and regulations applicable to the Leased
Premises. Tenant shall
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hold and save Landlord harmless and indemnify Landlord against any claim for
damage or injury in connection with any of the foregoing work which Tenant may
make as hereinabove provided.
18.2 Nothing herein contained shall be construed as a consent on the
part of the Landlord to subject the estate of the Landlord to liability under
the Construction Lien Law of the State of New Jersey, it being expressly
understood that the Landlord's estate shall not be subject to such liability.
18.3 It is expressly understood and agreed that in the event
alterations or improvements required by Tenant are performed by Landlord's
designated contractor, Tenant shall make payments to said contractor strictly in
accordance with the agreement entered into between said parties. Default in
payment by Tenant under said construction contract shall be deemed to be a
default under this Lease for which Landlord shall have the right of termination
as hereinbefore set forth in Article 14.
19. NON-LIABILITY OF LANDLORD
-------------------------
19.1 It is understood and agreed that Landlord, in its capacity as
Landlord and, if applicable, as builder or general contractor of the Building in
which the Leased Premises are located, shall not be liable to Tenant, Tenant's
agents, employees, contractors, invitees or any other occupant of the Leased
Premises for any damage to property or for any inconvenience or annoyance to
Tenant or any other occupant of the Leased Premises or interruption of Tenant's
or such other occupant's business, arising out of or attributable to (1) the
design and construction of the Leased Premises and the Building; (ii) any
maintenance, repairs, replacements, additions, alterations, substitutions and
installations made to the Leased Premises and the Building; and (iii) any cause
or happening whatsoever, except for the negligence of Landlord and Landlord's
agents, servants and employees with respect to any of the events or occurrences
referred to in subdivisions (i) through (iii), or otherwise. The foregoing
covenant is an express inducement to Landlord to enter into the within Lease and
the Tenant acknowledges that it understands the scope and consequence of
Landlord's exculpation as herein provided.
19.2 Anything hereinabove contained to the contrary notwithstanding,
the Tenant shall assume all risk of damage or loss to its property, equipment
and fixtures occurring in or about the Leased Premises, whatever the cause of
such damage or loss, including Landlord's negligence.
20. CONDEMNATION
------------
If the whole or part of the Leased Premises shall be acquired by Eminent
Domain for any public or quasi public use or purpose so that the Leased Premises
cannot be used for its intended leased purposes, or if the parking areas shall
be taken by Eminent Domain and the Landlord shall not substantially replace such
parking areas, then and in that event, the term of this Lease shall cease and
terminate from the date that title shall vest in the condemning authority, in
the Eminent Domain proceeding or as the result of an agreement in lieu thereof.
The Tenant shall have no claim against the Landlord for the value of any
unexpired term of said lease. No part of any
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award made to the Landlord shall belong to the Tenant, nor shall the Tenant make
any claim against the condemning authority for the value of its leasehold.
Anything hereinabove contained to the contrary notwithstanding, it is expressly
understood and agreed that, without affecting Landlord's award as hereinabove
referred to, the Tenant may make such independent claim as the law may allow
with respect to Tenant's leasehold improvements, if any, trade fixtures, moving
expenses and equipment.
21. INCREASE OF INSURANCE RATES
---------------------------
If the rate which the Landlord must pay to secure fire insurance shall be
increased because of any change in occupancy or use of the Leased Premises by
the Tenant, or because of the Tenant's non-compliance with the rules,
regulations or requests of the fire insurance carrier, then such increase shall
be paid by the Tenant to the Landlord as additional rent.
22. TENANT'S FIRE INSURANCE
-----------------------
The Tenant, at its own cost and expense, shall insure its own fixtures,
equipment and contents, it being expressly understood and agreed that the same
is not the responsibility of the Landlord nor shall it be liable therefor.
23. WAIVER OF SUBROGATION RIGHTS
----------------------------
The Landlord and Tenant mutually waive all right of recovery against each
other, their agents, servants or employees, for any loss, damage or injury of
any nature whatsoever to property or person for which either party is insured.
Each party shall obtain from its insurance carrier waivers of subrogation rights
under their respective policies which shall be included within the terms of the
policies and will furnish evidence of such waiver upon request.
24. REPAIR OF DAMAGES
-----------------
In case of any waste or damages to the Leased Premises caused by the
negligence or willful act of the Tenant or the Tenant's agents, servants,
employees, or invitees, the Tenant shall repair the said waste or damage as
speedily as possible at the Tenant's own cost and expense.
25. MORTGAGE PRIORITY
-----------------
This Lease shall not be a lien against the Property in respect to any
mortgages that are now or may hereafter be placed upon said Property. The
recording of such mortgage or mortgages shall have preference and precedence and
be superior and prior in lien to this Lease, irrespective of the date of
recording, and the Tenant agrees to execute any instruments, without costs,
which may be deemed necessary or desirable, to further effect the subordination
of this Lease to any such mortgage or mortgages. A refusal by the Tenant to
execute such instruments shall entitle the Landlord to the option of canceling
this Lease, and the term hereof is hereby expressly limited accordingly.
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26. OPERATING COST AND TAX ESCALATIONS
----------------------------------
26.1 It is understood and agreed that the Tenant shall be responsible
to pay to the Landlord Tenant's Percentage of increases in the cost of
operational services (hereinafter called "Operational Expenses") as the same may
exceed the cost of said Operational Expenses for the calendar year 1998
(hereinafter referred to as the "Base Year") . The cost of Operational Expenses
and any increase thereof for which the Tenant shall be obligated to pay Tenant's
Percentage shall be based and calculated upon the assumption and projection of
one hundred (100%) per cent occupancy of the entire Building (even though the
Building may not be 100% occupied) for the Base Year and for each subsequent
calendar year of the term of this Lease. If, upon determination at the
expiration of any subsequent calendar year, the total Operational Expenses
exceeds those for the Base Year, Tenant shall pay to landlord Tenant's
Percentage of any excess differential of certified cost of Operational Expenses
as hereinafter provided in Article 26.2.
26.2 At the commencement of the second calendar year of the term,
Tenant shall pay to Landlord, monthly, one-twelfth of Landlord's estimate of the
increase in the cost of Operational Expenses for such calendar year, which
estimate shall not exceed, on a percentage basis, the increase between the
calendar year prior to the Base Year and the Base Year. At the expiration of
the second calendar year of the term, the certified cost of Operational Expenses
as hereinabove referred to shall be compared with the certified cost of
Operational Expenses during the Base Year. Landlord shall furnish to Tenant a
certified computation and breakdown of Tenant's Percentage of cost escalation as
herein required. Tenant shall be credited with or shall pay to Landlord any
differential in Tenant's Percentage of cost escalation applicable to the prior
calendar year, which payment shall be paid to Landlord or credited to Tenant, as
applicable, within thirty (30) days after Landlord's certification. The
foregoing procedure shall be followed during each calendar year of the Lease
term, except that the estimate of projected cost escalation of Operational
Expenses shall be increased during each succeeding calendar year, based upon the
percentage increase between the prior calendar year and the calendar year in
question.
26.3 For the purpose of this Article 26, Operational Expenses are
hereby defined to be those expenses paid or incurred by Landlord for
maintaining, operating and repairing the Building and Property, and shall
include, without limitation, the following: the cost of electricity attributable
to mechanical equipment operation for Tenant's Leased Premises, and for common
areas attributable to the Building operation, core area electricity usage,
exterior lighting and in general all other utility usage mutually enjoyed by
tenants, (based upon the electricity rates to be adjusted for summer and winter,
as applicable, and inclusive of demand charge, energy charge and energy
adjustment charge in effect as of the Commencement Date) reduced by amounts due
from tenants for special electrical usage not separately metered and actually
paid to Landlord pursuant to Article 6 hereunder, as said Article pertains to
electrical usage only; water, heating, ventilating and air-conditioning, window
cleaning, janitorial service, insurance, including but not limited to fire
insurance, with full extended coverage (all risk), casualty rent insurance,
public liability insurance, umbrella liability insurance, workmen's compensation
insurance, elevator insurance, or any other insurance carried in good faith by
the Landlord and applicable to the Property; painting and decorating of common
areas, garbage
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disposal service, snow removal, security services, landscaping, customary
management fees, supplies, sundries, sales or use taxes on supplies or services,
cost of wages and salaries of all persons engaged in the operation, maintenance
and repair of the Property, and so-called fringe benefits, including social
security taxes, unemployment insurance taxes, cost for providing coverage for
disability benefits, cost of any pensions, hospitalization, welfare or
retirement plans or any other similar or like expenses incurred under the
provisions of any collective bargaining agreement, or any other cost or expense
which Landlord pays or incurs to provide benefits for employees so engaged in
the operation, maintenance and repair of the Property, the charges of any
independent contractor who, under contract with Landlord or its representatives,
does any of the work of operating, maintaining or repairing of the Property,
legal and accounting expenses, or any other expense or charge whether or not
hereinbefore mentioned, which in accordance with generally accepted accounting
and management principles would be considered as an expense of maintaining,
operating or repairing the Property, inclusive of replacement costs, which
replacement costs are not those which are properly capitalized in accordance
with sound accounting practice and principles. All utility charges shall be
based on the actual utility costs as charged by the respective utility
companies. In addition to the foregoing, operational Expenses shall also include
all costs and expenses for improvements required by any governmental law or
regulation not applicable to the Building when constructed, and all other costs
and expenses, dissimilar or similar, necessarily or reasonably incurred by
Landlord in the proper operation and maintenance of a first class office
building.
26.4 There shall not be included as an Operational Expense for the
maintenance, operation or repair of the Building and Property, water furnished
to other tenants for purposes other than lavatory and drinking use, cost of
capital improvements and replacements which are to be capitalized pursuant to
sound accounting practice and principles, the cost for which Landlord shall be
compensated by insurance (or cost arising out of casualties for which insurance
would normally be carried), any work or service which Landlord performs
specifically for any tenant in the Building and for which Landlord is
reimbursed, any work or service performed for or by any tenant in the Building
and paid for by such tenant, any costs in connection with renovating of space
for new tenants, brokerage commissions paid to brokers for obtaining tenants,
legal expenses in enforcing the terms of the Lease, costs assumed or required to
be paid by any other tenant, debt servicing on Landlord's financing, income,
profit or franchise taxes, or other such taxes imposed on or measured by the
income of the Landlord from the Property, depreciation or amortization costs.
26.5 Tenant or its representatives shall have the right to examine
Landlord's books and records with respect to the items in the foregoing
statement of Operational Expenses during normal business hours at any time
within one (1) year following the delivery by Landlord to Tenant of such
statement. Tenant shall have the one (1) year period aforesaid to file any
written exception to any item of expense, however, nothing herein shall be
deemed to afford Tenant any right to withhold any payment due from Tenant to
Landlord. Each expense for which Landlord shall bill Tenant as set forth
hereinabove shall be necessary and reasonable for the operation of the Building
and Property and shall be delineated by Landlord in detail to Tenant.
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26.6 If the last year of the term of this Lease ends on any day other
than the last day of a calendar year, any payment due to landlord or to Tenant
by reason of any increase or decrease in Operational Expenses shall be prorated
and Tenant shall pay any amount due to Landlord, within thirty (30) days after
being billed therefor. This covenant shall survive the expiration or earlier
termination of this Lease.
26.7 In addition to the operating cost escalations hereinabove
referred to, Tenant shall be responsible to pay its proportionate share of any
increment in real estate taxes and assessments in the Manner and as hereinafter
provided as follows:
(a) In the event that the amount of real estate taxes, assessments,
sewer rents, rates and charges, state and local taxes, transit taxes or any
other governmental charge, general, special, ordinary or extraordinary,
hereinafter collectively called "taxes" (but not including income or franchise
taxes or any other taxes imposed upon or measured by the Landlord's income or
profits, except if in substitution for real estate taxes as hereinafter
provided) which may now or hereafter be levied or assessed against the lands
allocated to the Building and upon the Building (hereinafter collectively called
the "Real Property") attributable to any tax year shall be greater than the
amount of taxes on the Real Property attributable to the Base Year, then the
Tenant shall pay to the Landlord as additional rent an amount equal to Tenant's
Percentage thereof. The Landlord shall take the benefit of the provisions or
any statute or ordinance permitting any assessment to be paid over a period of
time, and Tenant shall be obliged to pay Tenant's Percentage of the installments
of any such assessment applicable to the term of this lease or any renewal
hereof.
(b) "Base Year" for purposes of this Article 26.7 shall mean the
calendar year 1998. Within thirty (30) days after the expiration of the second
calendar year of the Lease term, any amount due to the Landlord under the
Provisions of this Article 26.7(b) shall be paid within fifteen (15) days after
the Landlord shall have submitted a statement to Tenant showing in detail the
computation of the amount due to Landlord. Thereafter, and commencing with the
third calendar year of the Lease term, Tenant shall pay, in addition to the rent
required to be paid pursuant to Article 3 hereof, one-twelfth (1/12th) of
Tenant's Percentage of real estate tax escalations determined for the prior
calendar year. Landlord shall advise Tenant in writing of such monthly
requirement for each applicable calendar year, and in the event there is any
deficiency in the aggregate monthly tax payment made by Tenant in the prior
calendar year, or in the event Tenant shall have overpaid Tenant' s Percentage
of tax escalation for any prior calendar year, Tenant shall either pay to or be
credited by Landlord with any such deficiency or excess in monthly tax payments
which payment or credit shall be made within thirty (30) days after written
demand and certification by Landlord.
(c) The amount of taxes for the Base Year against which Tenant's
liability for additional rent in subsequent years is determined shall be the
amount thereof finally determined to be legally payable by legal proceedings or
otherwise. In the event the amount of taxes for the Base Year has not been
finally determined by legal proceedings or otherwise at the time of payment of
taxes for any subsequent year, the actual amount of taxes paid by Landlord for
the Base Year shall be used in the statement provided by Landlord as the basis
for Tenant's
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<PAGE>
liability hereunder with respect to such subsequent year. Upon final
determination of the amount of taxes for the Base Year by legal proceedings or
otherwise, Landlord shall deliver to Tenant a statement, together with copies of
applicable tax bills, setting forth the amount of taxes for the Base Year as
finally determined and showing in reasonable detail the computation of any
adjustment due to Landlord by reason thereof. Any payment due to Landlord by
reason of such adjustment shall be paid as hereinbefore provided.
(d) If Landlord shall receive any tax refund or rebate in respect of
any calendar year following the Base Year, Landlord may deduct from such tax
refund any reasonable expenses incurred in obtaining such tax refund, and out of
the remaining balance of such tax refund Landlord shall pay to Tenant's
Percentage of such refund or rebate, provided that Tenant shall have paid the
Landlord any portion of the taxes being refunded.
(e) If the tax year for real estate taxes shall be changed then an
appropriate adjustment shall be made in the computation of the additional tax
due to Landlord or any amount due to Tenant. The computation shall be made in
accordance with generally accepted accounting principles applied on a consistent
basis.
(f) If the last year of the term of this Lease ends on any day other
than the last day of a Lease year, any Payment due to Landlord or to Tenant by
reason of any increase or decrease in taxes shall be prorated and Tenant shall
pay any amount due to Landlord within thirty (30) days after being billed
therefor, and Landlord shall pay any amount due to Tenant. This covenant shall
survive the expiration or termination of this Lease.
(g) If at any time during the term of this Lease the method or scope
of taxation prevailing at the commencement of the Lease term shall be altered,
modified or enlarged so as to cause the method of taxation to be changed, in
whole or in part, so that in substitution for the real estate taxes now assessed
there may be, in whole or in part, a capital levy or other imposition based on
the value of the Real Property, or the rents received therefrom, or some other
form of assessment based in whole or in part on some other valuation of the Real
Property, as if such Real Property were the only property owned by the Landlord,
then and in such event such substituted tax or imposition shall be payable and
discharged pro rata, as applicable, in accordance with the obligations set forth
in this Article 26, computed on the basis of such law promulgated which shall
authorize such change in the scope of taxation, and as required by the terms and
conditions of the within Lease.
26.8 Tenant's Percentage of applicable Operational Expenses and Tax
escalations shall be deemed additional rent and such sum shall be paid promptly
in the same manner as rent pursuant to Article 3, and Landlord shall have all
remedies as provided in this Lease in the event of Tenant's default with respect
to the making of any such payments.
27. QUIET ENJOYMENT
---------------
The Landlord covenants and represents that the Landlord is the owner of the
Leased Premises herein leased and has the right and authority to enter into,
execute and deliver this
22
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Lease, and does further covenant that the Tenant on paying the rent and
performing the conditions and covenants herein contained, shall and may
peaceably and quietly have, hold and enjoy the Leased Premises for the term
aforementioned.
28. SIGNS
-----
The Tenant shall secure the Prior written approval of the landlord for
any identifying sign on its Office doors and in the areas designated in the
foyer of the Building. The Tenant shall not have the right to put any
identifying signs on the exterior of the Building or roof thereof.
29. LEASE CONSTRUCTION
------------------
The Lease shall be construed pursuant to the laws of the State Of New
Jersey.
30. BINDING EFFECT
--------------
The terms, covenants and conditions of the within Lease shall be binding
upon and inure to the benefit of each of the parties hereto, and their
respective heirs,, successors, executors, administrators and assigns.
31. DEFINITIONS
-----------
The neuter gender, when used herein and in the acknowledgment hereafter set
forth, shall include all persons, firms and corporations, and words used in the
singular shall include words in the plural were the text of the instrument so
requires.
32. PARAGRAPH HEADING
-----------------
The paragraph headings herein are inserted only as a matter of convenience
and for reference, and in no way to define, limit or describe the scope of this
Lease nor the intent of any provision hereof.
33. ENTIRE AGREEMENT
----------------
This Lease contains the entire agreement between the parties and no
modifications shall be effective unless set forth in an instrument in writing
executed by both Parties hereto.
34. BROKERAGE
---------
The parties mutually represent to each other that INSIGNIA/EDWARD S. GORDON
Co., INC., having an office at Park 80 West Plaza i, Saddle Brook, New Jersey
07665, is the sole broker who negotiated and consummated the within transaction,
and that neither party dealt with any other broker in connection with the within
Lease, it being understood and agreed that the Landlord shall be responsible, at
its sole cost and expense, to pay the real estate brokerage in connection with
this Lease transaction. Landlord agrees to indemnify, defend and save harmless
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Tenant in connection with the claims of any other real estate brokers claiming
commissions in connection with the within transaction and claiming authority
from Landlord. Tenant agrees to indemnify, defend and save harmless Landlord in
connection with the claims of any other real estate brokers claiming commissions
in connection with the within transaction and claiming authority from Tenant.
35. STATEMENT OF ACCEPTANCE
-----------------------
Upon the Tenant's accepting the Leased Premises and entering possession,
pursuant to the terms and conditions hereof, the Tenant covenants and agrees
that it will furnish to the Landlord a statement that it accepts the Leased
Premises and agrees to pay rent from the date of acceptance, subject to the
terms and conditions of the Lease as herein contained, which statement may be in
recordable form if required by Landlord. Tenant shall also supply to Landlord a
list of exceptions specifying those items which are incomplete, defective or
damaged, and Landlord shall rectify such exceptions, or, if the Landlord shall
fail to so rectify such exceptions, they shall stand, and shall be considered at
the end of the Lease or any extensions thereof with regard to the condition or
the Leased Premises when surrendered.
36. DEFINITION OF TERM OF "LANDLORD"
--------------------------------
When the term "Landlord" is used in this Lease it shall be construed to
mean and include only the Landlord as lessee of the ground Lease of the Leased
Premises. Upon the transfer by the Landlord of its interest in the ground Lease
hereunder, the Landlord shall advise the Tenant in writing by certified mail,
return receipt requested, or the name of the Landlord's transferee. In such
event, the then Landlord shall be automatically agreed and relieved from an
after the date of such transfer of title of all personal liability with respect
to the performance of any of the covenants and obligations on the part of the
Landlord herein contained to be performed, provided any such transfer and
conveyance by the Landlord is expressly subject to the assumption by the grantee
or transferee of the obligations of the Landlord to be performed pursuant to the
terms and conditions of the within Lease.
37. FORCE MAJEURE
-------------
Except for the obligation of the Tenant to pay rent and other charges as in
this Lease provided, the period of time during which the Landlord or Tenant is
prevented from performing any act required to be performed under this Lease by
reason of fire, catastrophe, strikes, lockouts, civil commotion, acts of God or
the public enemy, government prohibitions or preemptions, embargoes, inability
to obtain material or labor by reason of governmental regulations or
prohibitions, the act or default of the other party, or other events beyond the
reasonable control of Landlord or Tenant, as the case may be, shall be added to
the time for performance of such act.
38. SURVIVAL OF OBLIGATION
----------------------
It is expressly understood and agreed that in the event there are any
obligations of Tenant with respect to payment or performance as required under
the terms and conditions of this Lease
24
<PAGE>
that shall have not been performed prior to the expiration or termination of the
Lease in accordance with its terms, such obligation, including the obligation to
make rent adjustments and other Lease adjustments, shall survive the expiration
or termination of the lease term and surrender of the Leased Premises by the
Tenant to the Landlord.
39. SURRENDER OF LEASED PREMISES
----------------------------
On the last day, or earlier permitted termination of the Lease term, Tenant
shall quit and surrender the Leased Premises in good and orderly condition and
repair (reasonable wear and tear, and damage by fire or other casualty excepted)
and shall deliver and surrender the Leased Premises to the Landlord peaceably,
together with all alterations, additions and improvements in, to or on the
Leased Premises made by Tenant as permitted under the Lease. The landlord
reserves the right, however, to require the Tenant at its cost and expense to
remove any alterations or improvements installed by the Tenant and not permitted
or consented to by the Landlord pursuant to the terms and conditions of the
Lease, which covenant shall survive the surrender and the delivery or the Leased
Premises as provided hereunder. Prior to the expiration of the Lease term the
Tenant shall remove all of its property, fixtures, equipment and trade fixtures
from the Leased Premises. All property not removed by Tenant shall be deemed
abandoned by Tenant, and Landlord reserves the right to charge the reasonable
cost of such removal to the Tenant, which obligations shall survive the Lease
termination and surrender hereinabove provided. If the Leased Premises not be
surrendered at the end of the Lease term, Tenant shall be responsible to pay
Landlord, monthly, an amount equal to twice the monthly installment of Base Rent
payable by Tenant prior to the expiration or earlier termination of this Lease
for each month or part thereof that Tenant holds over in the Leased Premises.
40. SECURITY
--------
Upon execution of the within lease, the Tenant shall deposit with the
Landlord a security deposit which shall be held during the lease term to
guarantee the faithful performance by Tenant of Tenant's lease obligations as
herein provided, in the amount of ELEVEN THOUSAND NINE HUNDRED THREE AND 13/100
($11,903.13) DOLLARS to be deposited in cash or by an irrevocable and
unconditional letter of credit from a recognized banking institution located
within the State of New Jersey or the City of New York. If the security deposit
is in the form of a letter of credit, the same shall be payable upon sight
draft, together with a certification of Landlord that Tenant is in default
uncured pursuant to the terms and conditions of the lease. The Tenant shall be
obligated to renew and furnish to Landlord evidence of the renewal of the letter
of credit at least thirty (30) days prior to the effective expiration thereof.
If such renewal is not furnished by Tenant to Landlord within thirty (30) days
of the expiration date of the letter of credit, Landlord shall have the
unrestricted right to cash the letter of credit and to retain the proceeds as
security hereunder in accordance with the terms and conditions as herein
provided. Upon termination of this lease, and provided the Tenant is not in
default hereunder and has performed all of its obligations under this lease, the
Landlord shall return the security held by it hereunder to the Tenant. Anything
herein contained to the contrary notwithstanding, it is expressly understood and
agreed that the said security deposit shall not bear interest. Tenant covenants
and agrees that it will not assign, pledge, hypothecate, mortgage or otherwise
25
<PAGE>
encumber the aforementioned security during the term of this lease. It is
expressly understood and agreed that the Landlord shall have the right to co-
mingle the security funds with its general funds, and said security shall not be
required to be segregated.
41. LOSS OF OPTION RIGHTS
---------------------
Anything in this Lease to the contrary notwithstanding, it is expressly
understood and agreed that the option to Renew as provided in Article 47 shall
be deemed null and void and of no further force and effect upon notice by
Landlord to Tenant in the event (i) Landlord is obligated to institute
litigation to enforce payment and performance as required under this Lease, or
(ii) Tenant is consistently late in the punctual payment of annual Base Rent
and/or additional rent required to be paid under this Lease as shall be
evidenced by late payments made during any period of four (4) months during any
twelve (12) month period measured from the date of the first late payment.
42. INDEMNITY
---------
Anything in this Lease to the contrary notwithstanding, and without
limiting the Tenant's obligation to provide insurance pursuant to Article 7
hereunder, the Tenant covenants and agrees that it will indemnify, defend and
save harmless the Landlord against and from all liabilities, obligations,
damages, penalties, claims, costs, charges and expenses, including without
limitation reasonable attorneys' fees, which may be imposed upon or incurred by
Landlord by reason of any of the following occurring during the tern of this
Lease:
(i) Any matter, cause or thing arising out of use, occupancy,
control or management of the Leased Premises and any part thereof;
(ii) Any negligence on the part of the Tenant or any of its
agents, contractors, servants, employees, licensees or invitees;
(iii) Any accident, injury, damage to any person or property
occurring in, or about the Leased Premises;
(iv) Any failure on the part of Tenant to perform or comply with
any of the covenants, agreements, terms or conditions contained in this
Lease on its part to be performed or complied with.
(v) Subject to the exception set forth in Article 19.2, the
foregoing shall not require indemnity by Tenant in the event of damage or
injury occasioned by the negligence or acts of commission or omission of
the Landlord, its agents, servants or employees.
Landlord shall promptly notify Tenant of any such claim asserted against it
and shall promptly send to Tenant copies of all papers or legal process served
upon it in connection with any action or proceeding brought against Landlord by
reason of any such claim.
26
<PAGE>
43. INTENTIONALLY OMITTED
---------------------
44. INSPECTION BY LANDLORD
----------------------
The Tenant agrees that the Landlord' s agents, and other representatives,
shall have the right to enter into and upon the Leased Premises, or any part
thereof, at all reasonable hours, upon reasonable notice, without unduly
disturbing the operations of the Tenant for the purpose of examining the same or
for making such repairs or alterations therein as may be necessary for the
safety and preservation thereof.
45. LIMIT OF LANDLORD'S LIABILITY
-----------------------------
Tenant shall look solely to Landlord's property in the Building and
Property for the enforce estate and judgment or decree requiring the payment of
money to Tenant by reason of any default or breach by Landlord under the Lease.
In no event shall there be any personal liability on the part of Landlord beyond
its interest in the Building and Property and no other assets of Landlord, its
Partners or beneficiaries shall be subject to levy, execution, attachment or any
other legal process.
46. EXECUTION AND DELIVERY
----------------------
The submission of the within Lease by Landlord to Tenant for review and
approval shall not be deemed an option to Lease, an offer to lease, or a
reservation of the Leased Premises in favor of Tenant, it being intended that no
rights or obligations shall be created by Landlord or Tenant until the execution
and delivery of the within Lease by Landlord and Tenant, one to the other.
47. OPTION TO RENEW
---------------
Provided the Tenant is not in default pursuant to the terms and conditions
of this lease, the Tenant is hereby given the right and privilege to renew the
within lease, for one (1) five (5) year period, to commence at the end of the
initial term of this lease, which renewal shall be upon the gains terms and
conditions as in this lease contained, except as follows:
(1) Tenant shall pay during the five (5) year renewal term annual Base
Rent based upon the fair market value per square foot applicable to the Leased
Premises. The fair market value shall be determined as follows: After Tenant
has given written notice to the Landlord, as hereinafter provided, of its
exercise of the within option, the Landlord shall deliver to Tenant a Written
notice stating the fair market value to be paid for the Leased Premises during
the five (5) year renewal term. In the event that the Tenant objects to the
fair market value quoted by Landlord, the issue of fair market value shall be
open to negotiation between Landlord and Tenant. In the event the parties
cannot agree within thirty (30) days after Landlord's notice of the then fair
market rental value, the parties shall agree on the appointment of a real estate
appraiser (the "Appraiser") having the M.A.I. designation, the cost of which
shall be shared equally by Landlord and Tenant, which Appraiser shall be
knowledgeable in the Middlesex
27
<PAGE>
County, New Jersey market rental area, who shall make a fair market rental
determination. If the parties cannot agree within thirty (30) days subsequent to
the appointment of the Appraiser, then the matter shall be submitted to binding
arbitration pursuant to the rules for commercial arbitration of the American
Arbitration Association, at the equal administrative cost of Landlord and
Tenant. It is expressly understood and agreed that in any event the renewal Base
Rent for the five (5) year renewal term shall not be less than the annual Base
Rent of ONE HUNDRED FORTY TWO THOUSAND EIGHT HUNDRED THIRTY SEVEN AND 50/100
($142,837.50) DOLLARS, in the event fair market rent shall be determined to be
less than said sum as such determination shall be made in the manner hereinabove
provided.
(2) The right, option, and privilege of the Tenant to renew this lease
as hereinabove set forth is expressly conditioned upon the Tenant delivering to
the Landlord, in writing, by certified mail, return receipt requested, nine (9)
months' prior notice of its intention to renew, which notice shall be given to
the Landlord by the Tenant no later than nine (9) months prior to the date fixed
for termination of the original term of this lease.
(3) In addition to the Base Rent as above set forth, Tenant shall be
responsible for all additional rent and charges required by the terms and
condition s of the within Lease.
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals or
caused these presents to be signed by its proper corporate officers and caused
its proper corporate seal to be hereunto affixed, the day and year first above
written.
WITNESS:
/s/ /s/
- ------------------------------------ ----------------------------------
MAURICE M. WEILL, TRUSTEE UNDER
TRUST INDENTURE DATED NOVEMBER 1,
1975
ATTEST: BLP GROUP COMPANIES
/s/ BY:/s/
- ------------------------------------ ----------------------------------
28
<PAGE>
STATE OF NEW JERSEY )
) SS.:
COUNTY OF UNION )
BE IT REMEMBERED, that on this 1st day of December, 1997, before me, the
subscriber, a Notary Public personally appeared MAURICE M. WEILL, TRUSTEE UNDER
TRUST INDENTURE DATED NOVEMBER 1, 1975, the Landlord mentioned in the within
Instrument, and thereupon he acknowledged that he signed, sealed and delivered
the same as the act and deed of the Partnership, for the uses and purposes
therein expressed.
/s/
------------------------------------
Notary Public of New Jersey
My Commission Expires:
STATE OF NEW JERSEY )
) SS.:
COUNTY OF MIDDLESEX )
BE IT REMEMBERED, that on this 26th day of November, 1998, before me, the
subscriber, ____________ personally appeared _____________________________ who,
I am satisfied, is the person who signed the within Instrument as
____________________ of BORON LEPORE, INC., a Delaware corporation, the Tenant
named therein, and he thereupon acknowledged that the said instrument made by
the corporation and sealed with its corporate seal, was signed, sealed with the
corporate seal and delivered by him as such officer and is the voluntary act and
deed of the corporation, made by virtue of authority from its Board of
Directors.
/s/
----------------------------------------
Notary Public of New Jersey
My Commission Expires:
29
<PAGE>
SCHEDULE "A"
------------
ALL THAT CERTAIN tract or parcel of land lying, situate and being in the
Township of Piscataway, County of Middlesex and State of New Jersey.
BEGINNING at a point of curve, in the northerly side of Centennial Avenue
where the same curves westerly and northerly into the present easterly side of
Old New Brunswick Road;
thence (1) along said side of Centennial Avenue South 84 degrees 09
minutes East 279.63 feet;
thence (2) North 21 degrees 14 minutes 07 seconds East 410.99 feet;
thence (3) North 27 degrees 13 minutes 37 seconds East 138.88 feet;
thence (4) North 82 degrees 34 minutes 26 seconds West 429.33 feet to a
point in the present easterly side of Old New Brunswick Road;
thence (5) Along said side of Old New Brunswick Road southerly on the
arc of a curve, curving to the left with a radius of 5487.90 feet
for a distance of 429.97 feet to a point of compound curve in the
same;
thence (6) Still along the same southerly and easterly on the arc of a
curve, curving to the left with a radius of 100.00 feet for a
distance of 178.52 feet to the point of ______ in the northerly
side of Centennial Avenue and the point or place of BEGINNING.
BEING Lot #l, Block #460-A as shown on the Map of Centennial Industrial Park,
Section 91, Piscataway, New Jersey, Filed in the Register's Office of Middlesex
County, July 2, 1969 as Map #3275, File #956, and as shown on Exhibit "A" to
this Schedule "A".
30
<PAGE>
SCHEDULE "C"
------------
SPECIFICATIONS OF JANITORIAL SERVICES
TO BE PERFORMED AT THE LEASED PREMISES
--------------------------------------
1. DAILY:
-----
(a) Sweep all resilient tile floors using chemically treated sweeping
tools.
(b) Wash front entrance door.
(c) Hand dust window sills.
(d) Hand dust all furniture, equipment, etc.
(e) Empty and clean ash trays and screen sand urns.
(f) Empty and clean all waste receptacles, insert plastic liners (if
furnished) and remove trash to designated area.
(g) Vacuum clean rugs.
(h) Clean entrance floor mats.
(i) Turn of all lights; check doors and windows before leaving premises.
(j) Cleaning of chalk boards when indicated.
(k) Mop all lavatory floors using approved disinfectant, clean all
mirrors, bright work and enameled surfaces; Scour, wash and disinfect
all basins, bowls and urinals; wash all toilet seats, hand dust and
wash wherever necessary, partitions and receptacles; refill toilet
tissue, hand soap and towel containers (supplies furnished by
Landlord).
2. ONCE PER WEEK:
-------------
(a) Wash tile walls and partitions in lavatories.
(b) Remove smudge marks from door jambs and around light switches.
(c) Dust baseboards, moldings, chair rails and rungs.
3. ONCE PER MONTH:
--------------
(a) Hand dust or vacuum clean venetian blinds.
4. BI-MONTHLY:
----------
(a) Wash resilient tile floors.
(b) Wash windows inside.
5. (a) Wash windows outside.
31
<PAGE>
SCHEDULE "D"
------------
BUILDING SERVICES
-----------------
(1) Fuel or other energy for heating the building and operating the air-
conditioning system, and for electricity or other power required, water charges
and sewer rents, if any, used and required in connection with the operation of
the building.
(2) Wages, salaries, or other compensation for the following classes of
employees or agents of Landlord performing services rendered solely in
connection with the operation of the building (but not including leasing
commissions paid to agents of Landlord):
(i) Janitorial services;
(ii) Maintenance service of air-conditioning, ventilating, plumbing,
electrical and elevator systems of the building.
(iii) Repairs to and physical maintenance of the building and the
cost of supplies and equipment used in connection therewith.
(3) Industrial trash and garbage disposal.
(4) Snow removal, lawn maintenance and parking lot maintenance.
(5) Fire insurance with full extended coverage in broad form. The coverage
shall be at full replacement value and shall include coverage for rent
insurance, all of which insurance shall be applicable only to the lands and
premises which are the subject of this lease.
(6) Public liability insurance in the minimum amount of ONE MILLION
($1,000,000.00) DOLLARS per accident per person, including the amount of ONE
HUNDRED THOUSAND ($100,000.00) DOLLARS for property damage applicable to the
Leased Premises.
32
<PAGE>
SCHEDULE "E"
------------
Christmas Day
New Years Day
President's Birthday
Memorial Day
Fourth of July
Labor Day
Thanksgiving
33
<PAGE>
LEASE AGREEMENT
BY AND BETWEEN:
MAURICE M. WEILL, TRUSTEE UNDER
TRUST INDENTURE DATED NOVEMBER 1, 1975,
"Landlord"
-and-
BLP GROUP COMPANIES,
a Delaware corporation,
"Tenant"
- -----------------------------------------
DATED: December 1, 1997
- -----------------------------------------
LAW OFFICES
EPSTEIN, EPSTEIN, BROWN & BOSEK
A Professional Corporation
245 Green Village Road
P.O. Box 901
Chatham Township, NJ 07928-0901
(973) 593-4900
Fax (973) 593-4966
34
<PAGE>
FIRST AMENDMENT TO LEASE
BY AND BETWEEN:
MAURICE M. WEILL, TRUSTEE UNDER
TRUST INDENTURE DATED NOVEMBER 1, 1975,
as "Landlord"
-and-
BORON LEPORE, INC.,
a Delaware corporation
(d/b/a BLP Group Companies),
as "Tenant"
--------------------------------------------------------
DATED: January 21, 1998
--------------------------------------------------------
LAW OFFICES
EPSTEIN, EPSTEIN, BROWN & BOSEK
A Professional Corporation
245 Green Village Road
P.O. Box 901
Chatham Township, NJ 07928-0901
(973) 593-4900
Fax (973) 593-4966
U:\USERS\GC\MCC.98\30005628.IAM
January 14, 1998
35
<PAGE>
FIRST AMENDMENT TO LEASE, made this 21st day of January, 1998, by and
between MAURICE M. WEILL, TRUSTEE UNDER TRUST INDENTURE DATED NOVEMBER 1, 1975,
having an office at 51 Commerce Street, Springfield, New Jersey 07081
(hereinafter called the "Landlord"); and BORON LEPORE, INC., a Delaware
corporation (d/b/a BLP Group Companies), having an office at 275 Old New
Brunswick Road, Piscataway, New Jersey (hereinafter called the "Tenant").
W I T N E S S E T H:
-------------------
WHEREAS, the Landlord owns certain lands and premises in the Township of
Piscataway, County of Middlesex, and State of New Jersey, which lands and
premises are known as 275 Old New Brunswick Road, upon which there has been
erected a office building containing approximately 55,625 square feet
(hereinafter called the "building"); and
WHEREAS, the Landlord and Tenant (under the name of BLP Group Companies)
have heretofore entered into a certain lease agreement dated December 1, 1997
(hereinafter called the "Lease"), pursuant to which Tenant has leased a portion
of the second (2nd) floor of the building containing 8,790 square feet of space
(hereinafter called the "Original Leased Premises"), all in accordance with the
terms and conditions of the Lease; and
WHEREAS, the Landlord has agreed to provide and lease to Tenant additional
office space containing 2,375 square feet, outside outside dimensions to center
line of common wall (hereinafter called the "Additional Leased Premises") as
said Additional Leased Premises shall be completed by Landlord for Tenant in the
building hereinabove referred to in accordance with the terms and conditions
hereinafter provided; and
WHEREAS, the Landlord and Tenant have agreed to extend the Lease for
a further period as hereinafter provided; and
36
<PAGE>
WHEREAS, the Landlord and Tenant by this First Amendment to Lease wish to
modify, supplement and amend the terms and conditions of the Lease to provide
for additional rent and other Lease obligations as the same shall be required
and attributable to the Additional Leased Promises.
NOW, THEREFORE, in consideration of the sun of ONE ($1.00) DOLLAR and other
good and valuable consideration, the parties hereto covenant and agree as
follows:
1. The Leased Premises shall consist of the Original Leased Premises
containing 8,790 square feet, together with the Additional Leased Premises
containing 2,375 square feet, to be constructed by Landlord for Tenant, which
total leased space shall comprise 11,165 square feet, hereinafter called the
"Revised Leased Premises" and Article 1.1 of the Lease is hereby modified
accordingly.
2. The Lease term under the Lease as to the Additional Leased Premises
shall commence on or about March 1, 1998, and shall continue as to the Revised
Leased Premises for a term of five (5) years thereafter, subject to the
following terms and conditions:
In the event the Additional Leased Premises are delivered to the Tenant
prior to or after March 1, 1998, the revised Lease term of five (5) years shall
commence on the first day of the next succeeding month following delivery of
possession of the Additional Leased Premises to the Tenant (hereinafter called
the "Additional Commencement Date") and shall continue as to the Revised Leased
Premises for a term of five (5) years thereafter. The Tenant shall, however,
pay to the Landlord a sum equal to the pro rata share of one (1) month's rent,
as hereinafter revised, for that portion of the month from the date of delivery
of the Additional Leased Premises through the Additional Commencement Date.
During said period of partial monthly occupancy, it any,
37
<PAGE>
all other terms and conditions of the Lease shall be applicable to the occupancy
of the Revised Leased Premises by the Tenant.
3. Commencing with Additional Commencement Date, Tenant shall pay Base
Rent in the amount of ONE HUNDRED EIGHTY-ONE THOUSAND FOUR HUNDRED THIRTY-ONE
AND 25/100 ($181,431.25) DOLLARS per annum, in equal installments in the sun of
FIFTEEN THOUSAND ONE HUNDRED NINETEEN AND 27/100 ($15,119.27) DOLLARS per month
in the same manner as provided in Article 3 of the Lease which Article 3 is
hereby revised accordingly. Tenant shall pay, in addition to the Base Rent
hereinabove provided, all other charges as in the Lease required and as may be
attributable to the Revised Leased Premises.
4. Landlord shall complete the Additional Leased Premises for Tenant in
the same manner as provided in Article 1.3 of the Lease except that Landlord
shall complete its work within the Additional Leased Premises and thereafter
deliver the Additional Leased Premises to the Tenant, which date of delivery is
estimated to be on or about March 1, 1998.
5. Effective as of the Additional Commencement Date, Tenant's Percentage
for additional rent and other charges provided in the Lease as applicable to
taxes, repairs, insurance and other Lease obligations shall be revised from 16%
to 20% wherever applicable, which revision and readjustment is attributable to
the incorporation of the Additional Leased Premises in and to the Original
Leased Premises as herein referred to.
6. Article 1.2 of the Lease is hereby modified, supplemented and amended
to provided that Tenant shall be entitled to use fifty-five (55) striped but
unmarked parking spaces.
7. Upon execution of the within First Amendment to Lease, the Tenant
shall deliver the sum of THREE THOUSAND TWO HUNDRED SIXTEEN AND 14/100
($3,216.14)
38
<PAGE>
DOLLARS to the Landlord as additional security to be held by Landlord in
accordance with the provisions of Article 40 of the Lease. Accordingly, the
Landlord shall be holding a total security deposit in the amount of FIFTEEN
THOUSAND ONE HUNDRED NINETEEN AND 27/100 ($15,119.27) DOLLARS.
8. Article 47 entitled "Option to Renew" is hereby modified, supplemented
and amended to provided that the renewal Base Rent for the five (5) year renewal
term shall not be less than the annual Base Rent of ONE HUNDRED EIGHTY-ONE
THOUSAND FOUR HUNDRED THIRTY-ONE AND 25/100 ($181,431.25) DOLLARS.
9. Except as in this First Amendment to Lease provided, all other terms
and conditions of the Lease shall remain in full force and effect and shall be
applicable to the Additional Leased Premises upon the Additional Commencement
Date.
10. This Agreement shall be binding on the parties hereto, their heirs,
successors and assigns.
11. The submission of the within First Amendment to Lease by Landlord to
Tenant for review and approval shall not be deemed an option to lease, an offer
to lease, or a reservation of the Additional Leased Premises in favor of Tenant,
it being intended that no rights or obligations shall be created by Landlord or
Tenant until the execution and delivery of the within First Amendment to Lease
by Landlord and Tenant, one to the other.
39
<PAGE>
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals or
cause these presents to be signed by its proper corporate officers and caused
its proper corporate seal to be hereunto affixed, the day and year first above
written.
WITNESS:
/s/ /s/
- ------------------------------ ---------------------------------------
MAURICE M. WEILL, TRUSTEE UNDER TRUST
INDENTURE DATED NOVEMBER 1, 1975
ATTEST: BORON LEPORE, INC.
/s/ By:/s/
- ------------------ ----------------
40
<PAGE>
STATE OF NEW JERSEY )
) SS.:
COUNTY OF UNION )
BE IT REMEMBERED, that on this 21st day of January, 1998, before me, the
subscriber, A Notary Public personally appeared MAURICE M. WEILL; TRUSTEE UNDER
TRUST INDENTURE DATED NOVEMBER 1, 1975, the Landlord mentioned in the within
Instrument, and thereupon he acknowledged that he signed, sealed and delivered
the same as the act and deed of the Partnership, for the uses and purposes
therein expressed.
/s/
----------------------------------------
Notary Public of New Jersey
My Commission Expires:
STATE OF NEW JERSEY )
) SS.:
COUNTY OF BERGEN )
BE IT REMEMBERED, that on this 16th day of January, 1998, before me, the
subscriber, _______________ personally appeared _____________________________
who, I am satisfied, is the person who signed the within Instrument as
____________________ of BORON LEPORE, INC., a Delaware corporation, the Tenant
named therein, and he thereupon acknowledged that the said instrument made by
the corporation and sealed with its corporate seal, was signed, sealed with the
corporate seal and delivered by him as such officer and is the voluntary act and
deed of the corporation, made by virtue of authority from its Board of
Directors.
/s/
----------------------------------------
Notary Public of New Jersey
My Commisison Expires:
PREPARED BY: ROBERT K. BROWN, ESQ.
41
<PAGE>
EXHIBIT 10.28
-------------
INCENTIVE STOCK OPTION AGREEMENT
UNDER THE BORON, LEPORE & ASSOCIATES, INC.
AMENDED AND RESTATED
1996 STOCK OPTION AND GRANT PLAN
NAME OF OPTIONEE: Timothy J. McIntyre
NO. OF OPTION SHARES: 50,000 Shares of Common Stock
GRANT DATE: November 10, 1997
FINAL EXPIRATION DATE: November 10, 2007
OPTION EXERCISE PRICE/SHARE: $22.00
Pursuant to the Boron, LePore & Associates, Inc. Amended and Restated 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 Common Stock, par value $0.01 per share ("Common
Stock"), of the Company indicated above (the "Option Shares"), at the per share
option exercise price specified above, subject to the terms and conditions set
forth in this Incentive Stock Option Agreement (the "Agreement") and in the
Plan. This Stock Option is intended to qualify as an "incentive stock option"
as defined in Section 422(b) of the Internal Revenue Code of 1986, as amended
from time to time (the "Code"). To the extent that any portion of the Stock
Option does not so qualify, it shall be deemed a non-qualified stock
<PAGE>
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 with respect to the
following number of Option Shares on the date indicated:
Incremental (Aggregate Number)
Of Option Shares Exercisable* Vesting Date
---------------------------- ------------
1. 12,500 shares (12,500) November 10, 1998
2. 12,500 shares (25,000) November 10, 1999
3. 12,500 shares (37,500) November 10, 2000
4. 12,500 shares (50,000) November 10, 2001
(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
_________________________
* Subject to Section 5.
2
<PAGE>
respect to any Option Shares not vested as of the date of such termination from
and after the date of such termination, and this Stock Option may thereafter be
exercised, to the extent it was vested and exercisable on such date of such
termination, until the Expiration Date contemplated by Section 1(d), except as
the Committee may otherwise determine. For purposes hereof, a "Service
Relationship" shall mean any relationship as an employee, part-time employee or
consultant of the Company or any subsidiary of the Company such that, for
example, a Service Relationship shall be deemed to continue without interruption
in the event the Optionee's status changes from full-time employee to part-time
employee or consultant.
(d) Once any portion of this Stock Option becomes vested and
exercisable, it shall continue to be exercisable by the Optionee or his or her
successors as contemplated herein at any time or times prior to the earlier of
(i) the date which is 12 months following the date on which the Optionee's
Service Relationship with the Company and its subsidiaries terminates due to
death or disability or for three months following the date on which the
Optionee's Service Relationship with the Company terminates if the termination
is due to any other reason or (ii) the date which is ten years after the Grant
Date first above written, subject to the provisions hereof, including, without
limitation, Section 6 hereof which provides for the termination of unexercised
options upon completion of certain transactions as described therein (the
"Expiration Date").
(e) It is understood and intended that this Stock Option shall qualify
as an "incentive stock option" as defined in Section 422 of the Code.
Accordingly, the Optionee understands that in order to obtain the benefits of an
incentive stock option under Section 422
3
<PAGE>
of the Code, no sale or other disposition may be made of any Option Shares
within the one-year period beginning on the day after the day of the transfer of
such Option Shares to him or her, nor within the two-year period beginning on
the day after the grant of this Stock Option. If the Optionee disposes (whether
by sale, gift, transfer or otherwise) of any such Option Shares within either of
these periods, he or she will notify the Company within thirty (30) days after
such disposition. The Optionee also agrees to provide the Company with any
information concerning any such dispositions required by the Company for tax
purposes.
2. EXERCISE OF STOCK OPTION.
---------------------------
(a) The Optionee may exercise only vested portions of this Stock
Option and only in the following manner: Prior to the Expiration Date (subject
to Section 6), the Optionee may deliver a Stock Option Exercise Notice (an
"Exercise Notice") in the form of Appendix A hereto indicating his or her
----------
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 of the following methods: (a) in cash, by certified or bank check or other
instrument acceptable to the Option Committee; or (b) either (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; or (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
4
<PAGE>
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 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 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
Committee as to such compliance shall be final and binding on the Optionee. The
Optionee shall not be deemed to be the holder of, or to have any of the rights
of a holder with respect to, any shares of stock subject to this Stock Option
unless and until this Stock Option shall have been exercised pursuant to the
terms hereof, the Company shall have issued and delivered the Option Shares to
the Optionee, and the Optionee's name shall have been entered as a stockholder
of record on the books of the Company. Thereupon, the Optionee shall have full
dividend and other ownership rights with respect to such Option Shares, subject
to the terms of this Agreement.
(c) Notwithstanding any other provision hereof or of the Plan, no
portion of this Stock Option shall be exercisable after the Expiration Date,
including or after such date as is contemplated by Section 6 hereof.
3. INCORPORATION OF PLAN. Notwithstanding anything herein to the
---------------------
contrary, this
5
<PAGE>
Stock Option shall be subject to and governed by all the terms and conditions of
the Plan.
4. TRANSFERABILITY. This Agreement is personal to the Optionee and is
---------------
not transferable by the Optionee in any manner other than by will or by the laws
of descent and distribution. This Stock Option may be exercised during the
Optionee's lifetime only by the Optionee. The Optionee may elect to designate a
beneficiary by providing written notice of the name of such beneficiary to the
Company, and may revoke or change such designation at any time by filing written
notice of revocation or change with the Company; such beneficiary may exercise
the Optionee's Stock Option in the event of the Optionee's death to the extent
provided herein. If the Optionee does not designate a beneficiary, or if the
designated beneficiary predeceases the Optionee, the personal representative of
the Optionee may exercise this Stock Option to the extent provided herein in the
event of the Optionee's death.
5. ADJUSTMENT UPON CHANGES IN CAPITALIZATION. The shares of stock
-----------------------------------------
covered by this Stock Option are shares of Common Stock of the Company. Subject
to Section 6 hereof, if the shares of 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
6
<PAGE>
applicable to this Stock Option immediately prior to such adjustment.
Adjustments under this Section 5 shall be determined by the Committee of the
Company, whose determination as to what adjustment shall be made, and the extent
thereof, shall be conclusive. No fractional shares of Common Stock shall be
issued under the Plan resulting from any such adjustment, but the Company in its
discretion may make a cash payment in lieu of fractional shares.
6. EFFECT OF CERTAIN TRANSACTIONS. In the case of (a) the dissolution or
------------------------------
liquidation of the Company; (b) the sale of all or substantially all of the
assets of the Company and its subsidiaries to another person or entity; (c) a
merger, reorganization or consolidation in which the holders of the Company's
outstanding voting power immediately prior to such transaction do not own a
majority of the outstanding voting power of the surviving or resulting entity
immediately upon completion of such transaction; (d) the sale of the outstanding
stock of the Company to an unrelated person or entity; or (e) any other
transaction or series of transactions where the owners of the Company's
outstanding voting power immediately prior to such transaction do not own a
majority of the outstanding voting power of the surviving or resulting entity
immediately upon completion of such transaction, this Stock Option shall no
longer vest except as the Committee may determine in its sole discretion and in
any case this Stock Option (with respect to both vested and unvested Stock
Options) shall terminate on the effective date of (or, if relevant, the record
date for determining stockholders entitled to participate in) such transaction,
unless provision is made in such transaction in the sole discretion of the
parties thereto for the assumption of this Stock Option or the substitution for
this Stock Option of a 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
7
<PAGE>
shall agree to, and (in the case of an assumption) with references to the
Company deemed to refer to such successor entity. In the event of any
transaction which will result in such termination, the Company shall give to the
Optionee written notice thereof at least fifteen (15) days prior to the
effective date of such transaction or the record date on which stockholders of
the Company entitled to participate in such transaction shall be determined,
whichever comes first. Until the earlier to occur of such effective date or
record date, the Optionee may exercise any vested portion of this Stock Option,
but after such effective date or record date, as the case may be, the Optionee
may not exercise this Stock Option unless it is assumed or substituted by the
successor as provided above.
7. WITHHOLDING TAXES. The Optionee shall, not later than the date as of
-----------------
which the exercise of this Stock Option becomes a taxable event for federal
income tax purposes, pay to the Company or make arrangements satisfactory to the
Committee for payment of any federal, state and local taxes required by law to
be withheld on account of such taxable event. Subject to approval by the
Committee, the Optionee may elect to have such tax withholding obligation
satisfied, in whole or in part, by authorizing the Company to withhold from
shares of Common Stock to be issued or transferring to the Company, a number of
shares of Common Stock with an aggregate Fair Market Value that would satisfy
the withholding amount due. For purposes of this Section 7 "Fair Market Value"
on any given date means the last reported sale price at which Common Stock is
traded on such date or, if no Common Stock is traded on such date, the next
preceding date on which Common Stock was traded, as reflected on the principal
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
8
<PAGE>
Company or any subsidiary of the Company has the right to deduct from payments
of any kind otherwise due to the Optionee, or from the Option Shares to be
issued in respect of an exercise of this Stock Option, any federal, state or
local taxes of any kind required by law to be withheld with respect to the
issuance of Option Shares to the Optionee.
8. MISCELLANEOUS PROVISIONS.
------------------------
(A) EQUITABLE RELIEF. The parties hereto agree and declare that legal
----------------
remedies may be inadequate to enforce the provisions of this Agreement and that
equitable relief, including specific performance and injunctive relief, may be
used to enforce the provisions of this Agreement.
(B) CHANGE AND MODIFICATIONS. This Agreement may not be orally
------------------------
changed, modified or terminated, nor shall any oral waiver of any of its terms
be effective. This Agreement may be changed, modified or terminated only by an
agreement in writing signed by the Company and the Optionee.
(C) GOVERNING LAW. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of Delaware.
(D) HEADINGS. The headings are intended only for convenience in
--------
finding the subject matter and do not constitute part of the text of this
Agreement and shall not be considered in the interpretation of this Agreement.
(E) SAVING CLAUSE. If any provision(s) of this Agreement shall be
-------------
determined to be illegal or unenforceable, such determination shall in no manner
affect the legality or enforceability of any other provision hereof.
(F) NOTICES. All notices, requests, consents and other communications
-------
shall
9
<PAGE>
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.
[Remainder of Page Intentionally Left Blank]
10
<PAGE>
The foregoing Agreement is hereby accepted and the terms and conditions
thereof hereby agreed to by the undersigned as of the date first above written.
BORON, LePORE & ASSOCIATES, INC.
By: /s/ Gregory F. Boron
--------------------------------------
Title: Chief Operating Officer
-----------------------------------
Address: BORON, LePORE & ASSOCIATES, INC.
Attention: President
17-17 Route 208 North
Fair Lawn, New Jersey 07410
OPTIONEE:
/s/ Timothy J. McIntyre
-------------------------------------------
Optionee's Address:
___________________
___________________
DESIGNATED BENEFICIARY:
___________________________________________
Beneficiary's Address:
___________________
___________________
11
<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. Amended and Restated
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
12
<PAGE>
EXHIBIT 10.29
-------------
INCENTIVE STOCK OPTION AGREEMENT
UNDER THE BORON, LEPORE & ASSOCIATES, INC.
AMENDED AND RESTATED
1996 STOCK OPTION AND GRANT PLAN
NAME OF OPTIONEE: Patrick G. LePore
NO. OF OPTION SHARES: 100,000 Shares of Common Stock
GRANT DATE: November 10, 1997
FINAL EXPIRATION DATE: November 10, 2007
OPTION EXERCISE PRICE/SHARE: $22.00
Pursuant to the Boron, LePore & Associates, Inc. Amended and Restated 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 Common Stock, par value $0.01 per share ("Common
Stock"), of the Company indicated above (the "Option Shares"), at the per share
option exercise price specified above, subject to the terms and conditions set
forth in this Incentive Stock Option Agreement (the "Agreement") and in the
Plan. This Stock Option is intended to qualify as an "incentive stock option"
as defined in Section 422(b) of the Internal Revenue Code of 1986, as amended
from time to time (the "Code"). To the extent that any portion of the Stock
Option does not so qualify, it shall be deemed a non-qualified stock
<PAGE>
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 with respect to the
following number of Option Shares on the date indicated:
Incremental (Aggregate Number)
Of Option Shares Exercisable* Vesting Date
---------------------------- ------------
1. 25,000 shares (25,000) November 10, 1998
2. 25,000 shares (50,000) November 10, 1999
3. 25,000 shares (75,000) November 10, 2000
4. 25,000 shares (100,000) November 10, 2001
(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
___________________________
* Subject to Section 5.
2
<PAGE>
respect to any Option Shares not vested as of the date of such termination from
and after the date of such termination, and this Stock Option may thereafter be
exercised, to the extent it was vested and exercisable on such date of such
termination, until the Expiration Date contemplated by Section 1(d), except as
the Committee may otherwise determine. For purposes hereof, a "Service
Relationship" shall mean any relationship as an employee, part-time employee or
consultant of the Company or any subsidiary of the Company such that, for
example, a Service Relationship shall be deemed to continue without interruption
in the event the Optionee's status changes from full-time employee to part-time
employee or consultant.
(d) Once any portion of this Stock Option becomes vested and
exercisable, it shall continue to be exercisable by the Optionee or his or her
successors as contemplated herein at any time or times prior to the earlier of
(i) the date which is 12 months following the date on which the Optionee's
Service Relationship with the Company and its subsidiaries terminates due to
death or disability or for three months following the date on which the
Optionee's Service Relationship with the Company terminates if the termination
is due to any other reason or (ii) the date which is ten years after the Grant
Date first above written, subject to the provisions hereof, including, without
limitation, Section 6 hereof which provides for the termination of unexercised
options upon completion of certain transactions as described therein (the
"Expiration Date").
(e) It is understood and intended that this Stock Option shall qualify
as an "incentive stock option" as defined in Section 422 of the Code.
Accordingly, the Optionee understands that in order to obtain the benefits of an
incentive stock option under Section 422
3
<PAGE>
of the Code, no sale or other disposition may be made of any Option Shares
within the one-year period beginning on the day after the day of the transfer of
such Option Shares to him or her, nor within the two-year period beginning on
the day after the grant of this Stock Option. If the Optionee disposes (whether
by sale, gift, transfer or otherwise) of any such Option Shares within either of
these periods, he or she will notify the Company within thirty (30) days after
such disposition. The Optionee also agrees to provide the Company with any
information concerning any such dispositions required by the Company for tax
purposes.
2. EXERCISE OF STOCK OPTION.
------------------------
(a) The Optionee may exercise only vested portions of this Stock
Option and only in the following manner: Prior to the Expiration Date (subject
to Section 6), the Optionee may deliver a Stock Option Exercise Notice (an
"Exercise Notice") in the form of Appendix A hereto indicating his or her
----------
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 of the following methods: (a) in cash, by certified or bank check or other
instrument acceptable to the Option Committee; or (b) either (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; or (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
4
<PAGE>
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 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 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
Committee as to such compliance shall be final and binding on the Optionee. The
Optionee shall not be deemed to be the holder of, or to have any of the rights
of a holder with respect to, any shares of stock subject to this Stock Option
unless and until this Stock Option shall have been exercised pursuant to the
terms hereof, the Company shall have issued and delivered the Option Shares to
the Optionee, and the Optionee's name shall have been entered as a stockholder
of record on the books of the Company. Thereupon, the Optionee shall have full
dividend and other ownership rights with respect to such Option Shares, subject
to the terms of this Agreement.
(c) Notwithstanding any other provision hereof or of the Plan, no
portion of this Stock Option shall be exercisable after the Expiration Date,
including or after such date as is contemplated by Section 6 hereof.
3. INCORPORATION OF PLAN. Notwithstanding anything herein to the
---------------------
contrary, this
5
<PAGE>
Stock Option shall be subject to and governed by all the terms and conditions of
the Plan.
4. TRANSFERABILITY. This Agreement is personal to the Optionee and is
---------------
not transferable by the Optionee in any manner other than by will or by the laws
of descent and distribution. This Stock Option may be exercised during the
Optionee's lifetime only by the Optionee. The Optionee may elect to designate a
beneficiary by providing written notice of the name of such beneficiary to the
Company, and may revoke or change such designation at any time by filing written
notice of revocation or change with the Company; such beneficiary may exercise
the Optionee's Stock Option in the event of the Optionee's death to the extent
provided herein. If the Optionee does not designate a beneficiary, or if the
designated beneficiary predeceases the Optionee, the personal representative of
the Optionee may exercise this Stock Option to the extent provided herein in the
event of the Optionee's death.
5. ADJUSTMENT UPON CHANGES IN CAPITALIZATION. The shares of stock
-----------------------------------------
covered by this Stock Option are shares of Common Stock of the Company. Subject
to Section 6 hereof, if the shares of 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
6
<PAGE>
applicable to this Stock Option immediately prior to such adjustment.
Adjustments under this Section 5 shall be determined by the Committee of the
Company, whose determination as to what adjustment shall be made, and the extent
thereof, shall be conclusive. No fractional shares of Common Stock shall be
issued under the Plan resulting from any such adjustment, but the Company in its
discretion may make a cash payment in lieu of fractional shares.
6. EFFECT OF CERTAIN TRANSACTIONS. In the case of (a) the dissolution or
------------------------------
liquidation of the Company; (b) the sale of all or substantially all of the
assets of the Company and its subsidiaries to another person or entity; (c) a
merger, reorganization or consolidation in which the holders of the Company's
outstanding voting power immediately prior to such transaction do not own a
majority of the outstanding voting power of the surviving or resulting entity
immediately upon completion of such transaction; (d) the sale of the outstanding
stock of the Company to an unrelated person or entity; or (e) any other
transaction or series of transactions where the owners of the Company's
outstanding voting power immediately prior to such transaction do not own a
majority of the outstanding voting power of the surviving or resulting entity
immediately upon completion of such transaction, this Stock Option shall no
longer vest except as the Committee may determine in its sole discretion and in
any case this Stock Option (with respect to both vested and unvested Stock
Options) shall terminate on the effective date of (or, if relevant, the record
date for determining stockholders entitled to participate in) such transaction,
unless provision is made in such transaction in the sole discretion of the
parties thereto for the assumption of this Stock Option or the substitution for
this Stock Option of a 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
7
<PAGE>
shall agree to, and (in the case of an assumption) with references to the
Company deemed to refer to such successor entity. In the event of any
transaction which will result in such termination, the Company shall give to the
Optionee written notice thereof at least fifteen (15) days prior to the
effective date of such transaction or the record date on which stockholders of
the Company entitled to participate in such transaction shall be determined,
whichever comes first. Until the earlier to occur of such effective date or
record date, the Optionee may exercise any vested portion of this Stock Option,
but after such effective date or record date, as the case may be, the Optionee
may not exercise this Stock Option unless it is assumed or substituted by the
successor as provided above.
7. WITHHOLDING TAXES. The Optionee shall, not later than the date as of
-----------------
which the exercise of this Stock Option becomes a taxable event for federal
income tax purposes, pay to the Company or make arrangements satisfactory to the
Committee for payment of any federal, state and local taxes required by law to
be withheld on account of such taxable event. Subject to approval by the
Committee, the Optionee may elect to have such tax withholding obligation
satisfied, in whole or in part, by authorizing the Company to withhold from
shares of Common Stock to be issued or transferring to the Company, a number of
shares of Common Stock with an aggregate Fair Market Value that would satisfy
the withholding amount due. For purposes of this Section 7 "Fair Market Value"
on any given date means the last reported sale price at which Common Stock is
traded on such date or, if no Common Stock is traded on such date, the next
preceding date on which Common Stock was traded, as reflected on the principal
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
8
<PAGE>
Company or any subsidiary of the Company has the right to deduct from payments
of any kind otherwise due to the Optionee, or from the Option Shares to be
issued in respect of an exercise of this Stock Option, any federal, state or
local taxes of any kind required by law to be withheld with respect to the
issuance of Option Shares to the Optionee.
8. MISCELLANEOUS PROVISIONS.
------------------------
(A) EQUITABLE RELIEF. The parties hereto agree and declare that legal
----------------
remedies may be inadequate to enforce the provisions of this Agreement and that
equitable relief, including specific performance and injunctive relief, may be
used to enforce the provisions of this Agreement.
(B) CHANGE AND MODIFICATIONS. This Agreement may not be orally
------------------------
changed, modified or terminated, nor shall any oral waiver of any of its terms
be effective. This Agreement may be changed, modified or terminated only by an
agreement in writing signed by the Company and the Optionee.
(C) GOVERNING LAW. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of Delaware.
(D) HEADINGS. The headings are intended only for convenience in
--------
finding the subject matter and do not constitute part of the text of this
Agreement and shall not be considered in the interpretation of this Agreement.
(E) SAVING CLAUSE. If any provision(s) of this Agreement shall be
-------------
determined to be illegal or unenforceable, such determination shall in no manner
affect the legality or enforceability of any other provision hereof.
(F) NOTICES. All notices, requests, consents and other communications
-------
shall
9
<PAGE>
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.
[Remainder of Page Intentionally Left Blank]
10
<PAGE>
The foregoing Agreement is hereby accepted and the terms and conditions
thereof hereby agreed to by the undersigned as of the date first above written.
BORON, LePORE & ASSOCIATES, INC.
By: /s/ Gregory F. Boron
------------------------------------
Title: Chief Operating Officer
---------------------------------
Address: BORON, LePORE & ASSOCIATES, INC.
Attention: President
17-17 Route 208 North
Fair Lawn, New Jersey 07410
OPTIONEE:
/s/ Patrick G. LePore
-----------------------------------------
Optionee's Address:
_____________________
_____________________
DESIGNATED BENEFICIARY:
_________________________________________
Beneficiary's Address:
_____________________
_____________________
11
<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. Amended and Restated
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
12
<PAGE>
Exhibit 21.1
SUBSIDIARIES OF THE REGISTRANT
1. Strategic Implications International, Inc., a Delaware corporation.
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation
of our report included in this Form 10-K, into the Company's previously filed
Registration Statement File No. 333-37337.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
March 30, 1998
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
To Boron, LePore & Associates, Inc.
We consent to the incorporation by reference in the registration statement
of Boron, LePore & Associates, Inc. on Form S-8 (File No. 333-37337) of our
report dated April 10, 1996, on our audit of the financial statements of Boron,
LePore & Associates, Inc. for the year ended December 31, 1995, which report is
included in the Annual Report on Form 10-K for the year ended December 31, 1997.
M.R. WEISER & Co. LLP
New York, N.Y.
March 30, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 24,015,554
<SECURITIES> 0
<RECEIVABLES> 22,164,173
<ALLOWANCES> 400,000
<INVENTORY> 0
<CURRENT-ASSETS> 46,509,286
<PP&E> 5,302,755
<DEPRECIATION> 848,732
<TOTAL-ASSETS> 51,056,480
<CURRENT-LIABILITIES> 16,704,462
<BONDS> 0
0
0
<COMMON> 149,480
<OTHER-SE> 32,693,538
<TOTAL-LIABILITY-AND-EQUITY> 51,056,480
<SALES> 0
<TOTAL-REVENUES> 72,907,104
<CGS> 0
<TOTAL-COSTS> 51,579,923
<OTHER-EXPENSES> 12,443,944
<LOSS-PROVISION> 100,000
<INTEREST-EXPENSE> 1,071,062
<INCOME-PRETAX> 7,812,175
<INCOME-TAX> 1,700,000
<INCOME-CONTINUING> 6,112,175
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,112,175
<EPS-PRIMARY> 1.07
<EPS-DILUTED> .71
</TABLE>
