<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 5, 1998
REGISTRATION STATEMENT NO. 333-51101
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
BORON, LEPORE & ASSOCIATES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
DELAWARE 7389 22-2365997
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
----------------
17-17 ROUTE 208 NORTH
FAIR LAWN, NEW JERSEY 07410
(201) 791-7272
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICE)
----------------
PATRICK G. LEPORE
CHAIRMAN, CHIEF EXECUTIVE OFFICER AND PRESIDENT
BORON, LEPORE & ASSOCIATES, INC.
17-17 ROUTE 208 NORTH
FAIR LAWN, NEW JERSEY 07410
(201) 791-7272
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
COPIES TO:
JOHN R. LECLAIRE, P.C. JAMES LEPORE, ESQ. JAMES M. DUBIN, ESQ.
JOHN B. STEELE, ESQ. LEPORE, ZIMMERER, LEPORE CARL L. REISNER, ESQ.
GOODWIN, PROCTER & HOAR LLP & LUIZZI PAUL, WEISS, RIFKIND,
EXCHANGE PLACE 1593 ROUTE 88 WEST WHARTON & GARRISON
BOSTON, MASSACHUSETTS BRICK, NEW JERSEY 08724 1285 AVENUE OF THE
02109-2881 (908) 840-0550 AMERICAS
(617) 570-1000 NEW YORK, NEW YORK 10019
(212) 373-3000
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [_] 333-
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_] 333-
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO
SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE +
+WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES +
+LAWS OF ANY SUCH JURISDICTION. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MAY 5, 1998
PROSPECTUS
[BLP LOGO APPEARS HERE]
3,900,000 SHARES
BORON, LEPORE & ASSOCIATES, INC.
COMMON STOCK
-----------
Of the 3,900,000 shares of common stock offered hereby, 1,500,000 shares are
being sold by the Company and 2,400,000 shares are being sold by the Selling
Stockholders. The Common Stock is quoted on the Nasdaq National Market under
the symbol "BLPG." On May 4, 1998, the last reported sale price of the Common
Stock was $34.75 per share.
-----------
THE COMMON STOCK OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" COMMENCING ON PAGE 6.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROCEEDS TO
PRICE TO UNDERWRITING PROCEEDS TO THE SELLING
PUBLIC DISCOUNT(1) COMPANY(2) STOCKHOLDERS(1)(2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share................. $ $ $ $
- --------------------------------------------------------------------------------
Total(3).................. $ $ $ $
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) See "Underwriting" for indemnification arrangements with the Underwriters.
(2) Before deducting expenses payable by the Company estimated at $500,000.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 585,000 additional shares of Common Stock solely to cover over-
allotments, if any. If the option is exercised in full, the Company will
sell 2,085,000 shares of Common Stock and the total Price to Public,
Underwriting Discount and Proceeds to the Company will be $ , $ and
$ , respectively. See "Underwriting."
-----------
The shares of Common Stock are offered by the several Underwriters subject to
prior sale, when, as and if accepted by the Underwriters and subject to
conditions including their right to reject orders in whole or in part. It is
expected that delivery of the shares will be made at the offices of Bear,
Stearns & Co. Inc., 245 Park Avenue, New York, New York 10167, on or about
, 1998.
-----------
BEAR, STEARNS & CO. INC. DAIN RAUSCHER WESSELS
A DIVISION OF DAIN RAUSCHER INCORPORATED
NATIONSBANC MONTGOMERY SECURITIES LLC
SALOMON SMITH BARNEY
-----------
The date of this Prospectus is , 1998
<PAGE>
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (the "Registration
Statement") under the Securities Act of 1933, as amended, with respect to the
Common Stock offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules filed thereto. Statements contained in this Prospectus as to the
contents of any contract or any other document referred to are not necessarily
complete, and in each instance reference is made to the copy of such contract
or document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference. For further
information with respect to the Company and the Common Stock offered hereby,
reference is made to the Registration Statement and the exhibits and schedules
thereto.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and, in accordance therewith, files
reports, proxy statements and other information with the Commission. A copy of
the Registration Statement as well as such reports, proxy statements and other
information may be inspected without charge at the Commission's principal
office in Washington, D.C. and copies of all or any part thereof may be
obtained from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549, the New York Regional Office located at
Seven World Trade Center, New York, New York 10048, and the Chicago Regional
Office located at Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661, upon payment of certain fees prescribed by the
Commission. The Commission maintains a World Wide Web site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission. The address of the
Commission's World Wide Web site is http://www.sec.gov.
The Company's Common Stock is quoted on the Nasdaq National Market under the
symbol BLPG. Reports, proxy statements and other information about the Company
may also be inspected at the offices of the National Association of Securities
Dealers, Inc., at 1735 K Street, N.W., Washington, D.C. 20006.
The Company will furnish holders of the Common Stock with annual reports
containing among other information, audited financial statements certified by
an independent public accounting firm and quarterly reports containing
unaudited condensed financial information for the first three quarters of each
fiscal year. The Company also intends to furnish such other reports as it may
determine or as may be required by law.
---------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVER ALLOTMENTS, STABILIZING AND SHORT-COVERING TRANSACTIONS AND THE
IMPOSITION OF PENALTY BIDS. SEE "UNDERWRITING."
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ALSO ENGAGE IN PASSIVE
MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET
IN ACCORDANCE WITH RULE 103 OF REGULATION M UNDER THE SECURITIES EXCHANGE ACT
OF 1934, AS AMENDED (THE "EXCHANGE ACT"). SEE "UNDERWRITING."
---------------
An investment in the Common Stock offered hereby involves a high degree of
risk. Prospective investors should carefully consider the risk factors and
other information contained in this Prospectus, before purchasing the Common
Stock offered hereby. This Prospectus contains forward-looking statements
within the meaning of the federal securities laws. Discussions containing such
forward-looking statements may be found in the material set forth under "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business," as well as in the Prospectus generally.
Prospective investors are cautioned that any such forward looking statements
are not guarantees of future performance and involve risks and uncertainties.
Actual events or results may differ materially from those discussed in the
forward-looking statements as a result of various factors, including, without
limitation, dependence on the pharmaceutical industry, customer concentration,
reliance on new services for continued growth, ability to manage growth,
multiple risks associated with potential acquisitions, variation in quarterly
operating results and volatility of the stock price, extensive regulation of
the healthcare industry, pending litigation, reliance on certain personnel,
need for additional financing, competition and effective control by principal
stockholders.
---------------
"BLP" and the Company's logo are trademarks of the Company and are used
throughout this document as such. All other trademarks and tradenames referred
to in this Prospectus are the property of their respective owners.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the Financial Statements of the Company and the Notes thereto
appearing elsewhere in this Prospectus. All references herein to industry
financial and statistical information are based on trade articles and industry
reports that the Company believes to be reliable, although there can be no
assurance to that effect.
THE COMPANY
Boron, LePore & Associates, Inc. ("BLP" or the "Company") provides outsourced
promotional, marketing, educational and field sales force logistics services to
the pharmaceutical industry. The Company has become a leading provider of peer-
to-peer meetings, which typically involve gatherings of 10 to 12 physicians
meeting under the chairmanship of a Company moderator to discuss a new drug or
new indication for a familiar drug. BLP recently expanded the range of its
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.
BLP has enjoyed long-standing customer relationships with many of the world's
largest pharmaceutical companies and has served a number of these customers for
more than a decade. BLP emphasizes proactive and cooperative relationships with
the product managers and senior executives of its customers, working in concert
with them to implement marketing strategies that utilize the Company's array of
service alternatives.
The Company believes that pharmaceutical companies increasingly have sought
to outsource functions such as research and development and marketing in
response to cost pressures. By outsourcing marketing services, a pharmaceutical
company shifts fixed costs to variable costs and obtains the services of
professionals who specialize in reaching targeted audiences. Based on data from
Scott-Levin, a healthcare marketing information company, pharmaceutical
companies spent approximately $1 billion in 1997 on promotional meetings and
events, including peer-to-peer meetings, symposia, third party events and
teleconferences.
BLP's growth strategy emphasizes: (i) offering a broad array of promotional,
marketing, educational and other services that are responsive to its customers'
varied outsourced marketing needs; (ii) increasing the volume and scope of
services provided to its existing customers by increasing the number of
meetings and conferences conducted for them and providing additional services
such as product marketing, teleservices, contract sales, and field sales force
logistics services; (iii) expanding BLP's customer base to include new
customers such as smaller pharmaceutical companies, foreign pharmaceutical
companies, managed care companies, drug wholesalers, biotechnology companies
and medical device manufacturers; (iv) targeting new audiences, such as
consumers, pharmacists, formulary managers and hospital groups, with existing
and new promotional, marketing and educational techniques and technologies; and
(v) pursuing strategic acquisitions as a means of expanding its business. The
Company pursues its growth strategy by emphasizing its long-standing customer
relationships and relative size in a fragmented market to obtain and expand
customer relationships. BLP uses its traditional peer-to-peer business as a
platform to expand, develop and promote other types of services such as product
marketing, teleservices, contract sales and field sales force logistics
services. BLP believes that its long-standing customer relationships,
pharmaceutical marketing expertise, highly trained employee moderators and
customer service representatives, teleservice center and its ability to provide
integrated solutions for pharmaceutical companies' marketing needs provide it
with strategic business advantages.
RECENT DEVELOPMENTS
Since the completion of BLP's initial public offering of Common Stock in
September 1997 (the "IPO"), the Company has (i) established a field sales force
logistics organization and entered into its first contract to
3
<PAGE>
provide field sales force logistics services; (ii) entered into a second
contract to provide contract sales services; (iii) acquired Strategic
Implications International, Inc., a privately held continuing medical education
company; (iv) established a sales office in Chicago, Illinois; (v) continued to
expand its teleservice center in Norfolk, Virginia including adding an
additional 200 operational terminals; (vi) continued to expand its
infrastructure, including hiring approximately 60 new employees; and (vii)
entered into an agreement, subject to the satisfaction of conditions to
closing, to acquire Medical Education Systems, Inc., a privately-held
continuing medical education and clinical sales training company.
The Company was incorporated under the laws of Delaware on November 22, 1996.
The Company's predecessor was incorporated under the laws of New Jersey in
1981. The Company's principal executive offices are located at 17-17 Route 208
North, Fair Lawn, New Jersey 07410, and its telephone number is (201) 791-7272.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the
Company...................... 1,500,000 shares
Common Stock offered by the
Selling Stockholders......... 2,400,000 shares
Common Stock to be outstanding
after the offering........... 12,387,411 shares(1)
Use of proceeds............... For working capital and general corporate
purposes, including potential acquisitions. See
"Use of Proceeds."
Nasdaq National Market sym-
bol.......................... BLPG
</TABLE>
- --------
(1) Based upon the number of shares outstanding as of April 15, 1998. Excludes
(i) 929,893 shares issuable upon the exercise of options outstanding as of
April 15, 1998; (ii) 854,739 additional shares of Common Stock currently
available for future grants under the Company's 1996 Stock Option and Grant
Plan, as amended (the "1996 Stock Plan") (subject to adjustment as provided
in the 1996 Stock Plan); (iii) an additional 1,000,000 shares of Common
Stock issuable pursuant to an amendment to the 1996 Stock Plan), which
amendment was approved by the Board of Directors on April 25, 1998 and will
be voted on by the stockholders of the Company at the Company's 1998 Annual
Meeting of Stockholders; and (iv) 160,103 shares to be issued to Medical
Education Systems, Inc. upon the closing of an asset acquisition agreement.
See "Business--Potential Acquisition" and "Management--Employee Stock and
Other Benefit Plans--1996 Stock Option and Grant Plan."
Except as otherwise noted, all information in this Prospectus assumes no
exercise of the Underwriters' over-allotment option and has been adjusted to
reflect (i) a two-for-three reverse stock split of the Common Stock effected in
September 1997 and (ii) the conversion of all outstanding shares of non-voting
Class A Common Stock and Convertible Participating Preferred Stock into shares
of Common Stock upon completion of the Company's initial public offering.
Unless the context otherwise requires, all references to "BLP" or the "Company"
mean Boron, LePore & Associates, Inc. and its predecessor.
THE TA TRANSACTION
In December 1996, the Company completed a series of transactions involving TA
Associates, Inc., a private equity firm based in Boston, Massachusetts, and
senior officers of the Company (the "TA Transaction"). In connection with the
TA Transaction, investors principally including investment funds associated
with TA Associates, Inc. (collectively, the "TA Investors") invested $12.5
million to acquire 7,000,000 shares of Convertible Participating Preferred
Stock of the Company, and the Company incurred $21.0 million of indebtedness
under a senior secured credit facility from a bank (the "Credit Facility"). The
Company in turn used the proceeds from these financing transactions principally
to redeem common stock from, and to pay bonuses to, senior officers of the
Company. Upon completion of the IPO, the Convertible Participating Preferred
Stock converted into 4,666,664 shares of Common Stock and 5,600,000 shares of
Redeemable Preferred Stock, and the Redeemable Preferred Stock was redeemed for
$10.8 million using a portion of the net proceeds from the IPO. See "Certain
Transactions."
4
<PAGE>
SUMMARY FINANCIAL DATA
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
---------------------------------------- -------------------
1993 1994 1995 1996 1997 1997 1998
------- ------- ------- ------- ------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues................ $19,339 $20,580 $21,775 $40,219 $72,907 $ 13,673 $ 32,154
Cost of sales........... 13,820 12,378 12,788 26,004 51,580 9,737 23,757
------- ------- ------- ------- ------- --------- ---------
Gross profit.......... 5,519 8,202 8,987 14,215 21,327 3,936 8,397
Selling, general and
administrative
expenses(1)............ 5,319 6,536 6,341 19,995 12,444 2,250 5,780
------- ------- ------- ------- ------- --------- ---------
Operating income
(loss)............... 200 1,666 2,646 (5,780) 8,883 1,686 2,617
Interest (income)
expense, net........... 49 43 86 255 1,071 409 (308)
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 1,277 2,925
Provision for income
taxes(2)............... -- 25 51 -- 1,700 400 1,050
------- ------- ------- ------- ------- --------- ---------
Net income (loss)..... $ 151 $ 1,598 $ 2,509 $(7,111) $ 6,112 $ 877 $ 1,875
======= ======= ======= ======= ======= ========= =========
Net income (loss) per
common share--basic.... $ 0.02 $ 0.19 $ 0.29 $ (1.18) $ 1.07 $ 0.20 $ 0.17
======= ======= ======= ======= ======= ========= =========
Weighted average common
shares outstanding--
basic.................. 8,602 8,602 8,602 6,028 4,947 2,736 10,769
======= ======= ======= ======= ======= ========= =========
Net income (loss) per
common share--diluted.. $ 0.02 $ 0.19 $ 0.29 $ (1.18) $ 0.72 $ 0.12 $ 0.17
======= ======= ======= ======= ======= ========= =========
Weighted average common
shares outstanding-
diluted................ 8,602 8,602 8,602 6,028 8,507 7,403 11,174
======= ======= ======= ======= ======= ========= =========
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1998
----------------------
ACTUAL AS ADJUSTED(3)
------- --------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................ $16,632 $65,390
Working capital.......................................... 25,799 74,557
Total assets............................................. 70,771 119,529
Long-term debt, less current maturities.................. -- --
Total stockholders' equity............................... 38,866 87,624
</TABLE>
- --------
(1) The 1996 amount 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.
(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) Gives effect to the completion of this offering at an assumed offering
price of $34.75 per share and the receipt and application of the estimated
net proceeds therefrom, as if such transactions had been completed on March
31, 1998. See "Use of Proceeds," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Capitalization."
5
<PAGE>
RISK FACTORS
An investment in the Common Stock offered hereby involves a high degree of
risk. Prospective investors should carefully consider the following risk
factors, in addition to the other information contained in this Prospectus,
before purchasing the Common Stock offered hereby. This Prospectus contains
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Exchange Act. Discussions containing such
forward-looking statements may be found in the material set forth below and
under "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and "Business," as well as in the Prospectus generally.
Prospective investors are cautioned that any such forward looking statements
are not guarantees of future performance and involve risks and uncertainties.
Actual events or results may differ materially from those discussed in the
forward-looking statements as a result of various factors, including, without
limitation, the risk factors set forth below and the matters set forth in this
Prospectus generally.
DEPENDENCE ON THE PHARMACEUTICAL INDUSTRY
Substantially all of the Company's revenues to date have resulted from
promotional and marketing services provided to pharmaceutical companies. The
Company could be materially and adversely affected by adverse developments in
the pharmaceutical industry generally or any reduction in expenditures for, or
future outsourcing of, promotional and marketing activities by pharmaceutical
companies. Promotional and marketing expenditures by pharmaceutical companies
could be negatively impacted by, among other things, governmental reform or
private market initiatives intended to reduce the cost of pharmaceutical
products or by governmental, medical association or pharmaceutical industry
initiatives designed to regulate the manner in which pharmaceutical companies
promote their products.
Healthcare reform measures have been considered by Congress and other
federal and state bodies during recent years. The intent of the proposals
generally has been to reduce the growth of total healthcare expenditures and
expand healthcare coverage for the uninsured. Although comprehensive
healthcare reform has been considered, only limited proposals focusing on the
delivery of healthcare services have been enacted. Comprehensive healthcare
reform may be considered again and efforts to enact limited reform bills are
likely to continue. Implementation of government healthcare reform may
adversely affect promotional and marketing expenditures by pharmaceutical
companies, which could decrease the business opportunities available to BLP.
The Company is unable to predict the likelihood of such legislation or similar
legislation being enacted into law or the effects that any such legislation
would have on BLP.
In addition to government healthcare reform initiatives, a number of private
market initiatives to contain healthcare costs, particularly pharmaceutical
costs, have been implemented. For instance, certain large managed healthcare
providers have acted to contain such costs and have adopted the use of
formularies (lists of preferred drugs), thereby creating pressure on
pharmaceutical companies to contain costs, including promotional and marketing
expenditures. Governmental or private initiatives to further contain
pharmaceutical pricing or to regulate the sponsorship of promotional meetings
by the pharmaceutical industry could have a material adverse effect on BLP.
CUSTOMER CONCENTRATION
BLP's revenues and profitability are highly dependent on its relationships
with several large pharmaceutical companies. The Company's five largest
customers accounted for approximately 93% of its revenues in the first three
months of 1998, approximately 84% of its revenues in 1997, approximately 83%
of its revenues in 1996 and approximately 90% of its revenues in 1995. In the
first three months of 1998 and in 1997, two customers each accounted for 10%
or more of the Company's revenues, in 1996, three customers each accounted for
10% or more of the Company's revenues and in 1995 (after giving effect to
subsequent pharmaceutical company mergers) four customers each accounted for
10% or more of the Company's revenues. One customer
6
<PAGE>
accounted for 42%, 49%, 44% and 45% of revenues for the three months ended
March 31, 1998 and for the years 1997, 1996 and 1995, respectively. BLP is
likely to continue to experience a high degree of concentration of business
with its larger customers, especially given the concentrated nature of the
pharmaceutical industry. The loss or significant reduction of business from
any significant customer could have a material adverse effect on the Company.
RELIANCE ON NEW SERVICES FOR CONTINUED GROWTH
Historically, the production of peer-to-peer meetings has generated a
substantial portion of BLP's revenues and profits. Although revenues from the
Company's peer-to-peer meetings business grew approximately 35% from 1996 to
1997, the Company does not anticipate that future growth of revenues from this
business, if any, will continue at such an accelerated rate. BLP believes that
future growth of its peer-to-peer meetings business may require future growth
of overall promotional spending by its pharmaceutical industry customers and
the addition of new customers. The growth of the peer-to-peer meetings
business may be limited as a result of BLP's high level of business with
certain customers and the fact that it generally does not produce peer-to-peer
meetings for competing products without customer consent. Any decline in the
Company's peer-to-peer meetings business or any reduction in its growth rate
could have a material adverse effect on the Company. BLP believes that future
growth of its business will depend upon its success in diversifying its
promotional, marketing, educational and field sales force logistics service
offerings. In 1996, the Company introduced the service of producing symposia,
which accounted for revenues of $1.5 million, or 3.8% of the Company's
revenues, in 1996 and $20.7 million, or 28.3% of the Company's revenues, in
1997. In addition, the Company introduced other services such as product
marketing and teleservices in 1996 and contract sales and field sales force
logistics in 1997. Such services accounted for approximately 7.0% of total
revenues in 1997, and approximately 36.6% of total revenues in the first
quarter of 1998 (including 21.4% for field sales force logistics services and
10.6% for contract sales services). There can be no assurance that BLP will
establish a significant or lasting presence in the markets for these services,
and the failure to achieve success in these new markets would adversely affect
the Company's future growth.
Certain of the Company's new service offerings are subject to a number of
the same risks as well as additional risks not present in its traditional
peer-to-peer meetings business. Pharmaceutical company sponsored symposia have
been subject to past scrutiny which had an adverse effect on the market for
symposia services. Physician attendance currently is subject to a number of
industry and professional association guidelines designed to prevent conflicts
of interest. In the event of changes in law, regulatory policy or applicable
industry or professional association guidelines or negative publicity
concerning symposia sponsored by the pharmaceutical industry, customers may
choose to alter their guidelines in ways that would make symposia and related
consultancies less attractive to physicians and pharmaceutical companies. In
addition, restrictions on such meetings could be imposed by governmental
agencies, industry or professional associations or the pharmaceutical
companies themselves. Finally, any of the Company's customers could be found
to be in non-compliance with relevant law, policy or guidelines in their
handling of symposia. There can be no assurance that BLP will be successful in
expanding its symposia business. The Company's product marketing services
involve obtaining rights to market a pharmaceutical product for an agreed upon
period. The Company generally will bear most of the promotional expenses in
return for the opportunity to share incremental revenue achieved above a
specified benchmark or benchmarks. There can be no assurance that the Company
will be successful in introducing product marketing services or in selecting
products to market, or that its promotional activities will generate the
agreed upon levels of sales. BLP's teleservice center is subject to a variety
of risks, including competition, technological obsolescence, technical
malfunction, destruction from fire or other disasters and the likely need for
ongoing capital investments to maintain and enhance its infrastructure and
computer systems. There can be no assurance that BLP will be successful in
expanding its range of teleservice offerings. The Company's contract sales
services are subject to a variety of risks, including the necessity of
obtaining projects for its sales force and attracting qualified sales
representatives, and there can be no assurance that BLP will establish a
significant or lasting presence in the contract sales market. The Company's
new field sales force logistics services are subject to a variety of risks,
including the necessity of obtaining contracts to provide
7
<PAGE>
services and the risk that the Company's customers will not be satisfied with
the Company's services, subjecting the contracts to termination or non-
renewal. Under the Company's only field sales force logistics contract, the
Company has agreed to perform certain services for a fixed price, and
accordingly, will realize all the benefit of or detriment occasioned by
decreased or increased costs of performing these services. There can be no
assurance that a market for field sales force logistics services will develop
or that BLP will establish a significant or lasting presence in such market.
See "Management Discussion and Analysis of Financial Condition and Results of
Operations."
MANAGEMENT OF GROWTH
The Company recently has experienced a period of rapid growth. This growth
has placed, and will continue to place, strains on the Company's management,
operations and systems. In order to manage its growth, BLP must continue to
improve its operating and administrative systems and to attract, hire and
train qualified management and operating personnel. The Company is
implementing a new management information system and plans to make additional
investments in capital equipment to support its growth. No assurance can be
given that these systems will be successfully implemented. Failure to
implement these systems or generally to manage growth effectively could have a
material adverse effect on BLP. In May 1998, BLP signed an agreement, subject
to the satisfaction of conditions to closing, to acquire a continuing medical
education and clinical sales training company.
LEGAL PROCEEDINGS
Thomas S. Boron, a former stockholder and officer of the Company, filed a
complaint against the Company and certain senior officers and former officers
of the Company, alleging, among other matters, securities and common law fraud
and breach of contract in connection with the settlement of contractual
arrangements with Thomas S. Boron in December 1996. See "Certain
Transactions." The damages sought by Thomas S. Boron are not stated in the
complaint. The Company's By-laws provide for mandatory indemnification of the
Company's officers and former officers to the fullest extent authorized by the
Delaware General Corporation Law against all expenses incurred in proceedings
in which an officer or former officer is involved as a result of serving or
having served as an officer, director or employee of the Company. The Company
believes the allegations of Thomas S. Boron are without merit and intends to
contest them vigorously. The Company believes that the matter may involve
significant litigation-related expenses but that it will not have a material
adverse effect on its financial condition or results of operations; there can
be no assurance, however, that this will be the case. In addition, 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. See "Business--Legal Proceedings."
ACQUISITION RISKS
In March 1998, BLP acquired a continuing medical education business and in
January 1998, BLP acquired a sales office in Chicago, Illinois. The Company's
growth strategy contemplates pursuit of additional acquisitions in
complementary and existing business areas as a means of supporting and
diversifying its service offerings. Identifying appropriate acquisition
candidates and negotiating and consummating acquisitions can be a lengthy and
costly process. There can be no assurance that suitable acquisition candidates
will be identified or that acquisitions will be consummated on terms favorable
to the Company, on a timely basis or at all. Acquisitions involve numerous
risks, including difficulties in integrating the operations and services of an
acquired company, the expenses incurred in connection with the acquisition and
subsequent assimilation of operations and services, the diversion of
management's attention from other business concerns, the risk that acquired
businesses may be subject to unforeseen liabilities and the potential loss of
key employees of the acquired company. Acquisitions of foreign companies
involve additional risks such as the additional difficulties inherent in
complying with differing regulatory systems, assimilating differences in
foreign cultures and business practices, and overcoming language barriers.
Acquisitions may also result in additional goodwill and related amortization
expense. In the event the closing of a planned acquisition fails to occur or
is delayed, or in the event unforeseen costs or other difficulties arise
following an acquisition, BLP's quarterly financial results may be lower than
securities analysts' expectations, which would likely cause a decline, perhaps
substantial, in BLP's stock price.
8
<PAGE>
The Company regularly evaluates the potential acquisition of other
businesses and product lines and holds discussions regarding such potential
acquisitions. As a general rule, the Company will publicly announce such
acquisitions only after a definitive agreement has been signed. See "Use of
Proceeds," "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources" and "Business--Growth
Strategy."
VARIATION IN QUARTERLY OPERATING RESULTS; POSSIBLE VOLATILITY OF STOCK PRICE
The Company's results of operations historically have fluctuated on a
quarterly basis and can be expected to continue to be subject to quarterly
fluctuations. Quarterly results can vary as a result of a number of factors,
including timing of peer-to-peer projects and symposia, expenditure patterns
of the Company's customers, delays or costs associated with acquisitions,
commencement, completion or cancellation of significant contracts,
announcements by the Company, competitors or customers, government or private
market regulatory initiatives, relative profit margins of the services
provided to customers, conditions in the healthcare industry generally,
conditions in the markets for outsourced promotional, marketing, educational
and field sales force logistics services more specifically, or other events or
factors, many of which are beyond the Company's control. BLP may not be able
to foresee many of these factors and therefore may not be able to anticipate
such quarterly fluctuations. Variations in quarterly operating results could
result in reported quarterly results that are below the expectations of
securities analysts, which would likely cause a decline, perhaps substantial,
in the Company's stock price. In addition, the stock market recently has
experienced extreme price and volume fluctuations which particularly have
affected the market prices of many stocks on the Nasdaq Stock Market, and
which have often been unrelated to the operating performance of such
companies. BLP believes that quarterly comparisons of its financial results
are not necessarily meaningful and should not be relied upon as an indication
of future performance. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
REGULATION
The healthcare industry is subject to extensive regulation. Various laws,
regulations and guidelines promulgated by government, industry and
professional bodies affect, among other matters, the provision, licensing,
labeling, marketing, promotion, sale and reimbursement of healthcare services
and products, including pharmaceutical products. The Company's continuing
medical education subsidiary is currently accredited by both the Accreditation
Council for Continuing Medical Education and the American Council on
Pharmaceutical Education. These accreditations are subject to review at any
time. Loss of accreditation could have a material adverse effect on the
Company. Certain areas of the telemarketing and teleservices industry also
have recently become subject to increased government regulation. It is
possible that additional or changed laws, regulations or guidelines could be
adopted in the future. The failure of BLP or its customers to comply with, or
any change in, applicable regulatory requirements, industry guidelines or
accreditation standards could, among other things, limit or prohibit certain
business activities of the Company or its customers, subject the Company or
its customers to adverse publicity, increase the costs of regulatory
compliance, or subject BLP or its customers to monetary fines or other
penalties including civil and criminal sanctions. Such actions could have a
material adverse effect on BLP. See "Business--Government and Industry
Regulation."
LIABILITY AND INSURANCE
In recent years, participants in the healthcare industry have become subject
to an increasing number of lawsuits alleging malpractice, product liability
and other legal theories, many of which involve large claims and significant
legal costs. As a provider of promotional, marketing, educational and field
sales force logistics services to the pharmaceutical industry, the Company is
subject to the risk of being named as a party in such lawsuits. As a result of
its introduction of product marketing services, teleservices and contract
sales services, the Company believes that the relative likelihood of becoming
involved in litigation regarding the information given or products sold or
distributed by its personnel has increased, with the attendant risks of
significant legal costs, substantial damage awards and adverse publicity. Even
if any such claims ultimately prove to be without merit, defending against
them can result in adverse publicity, diversion of management's time and
attention and substantial expenses, which could have a material adverse effect
on the Company.
9
<PAGE>
BLP maintains insurance policies, including liability insurance, which it
believes to be adequate in amount and coverage for the current size and scope
of its operations. There can be no assurance, however, that the coverage
maintained by the Company will be sufficient to cover all future claims or
will continue to be available in adequate amounts or at a reasonable cost. The
Company expects to seek increased insurance coverage in connection with the
expansion of its service offerings and there can be no assurance that it will
be able to obtain continued or increased insurance coverage on acceptable
terms or at all. Although the Company's contracts with its customers sometimes
require the customer to indemnify the Company for the customer's negligent
conduct, the contracts do not provide for adequate indemnification against
many of the potential litigation risks facing the Company and often require
the Company to indemnify its customer for the Company's negligence. BLP,
therefore, could be held responsible for losses incurred in connection with
the performance of its services under the terms of these contracts or
otherwise and could incur substantial costs in connection with legal
proceedings associated with its services or the pharmaceutical products with
respect to which it provides services.
RELIANCE ON CERTAIN PERSONNEL
BLP's success depends to a large extent on the continued services of a
relatively limited number of members of the Company's senior management,
including Patrick G. LePore, its Chairman of the Board, Chief Executive
Officer and President. Implementation of the Company's business strategy will
require the addition of qualified management personnel. The loss of the
services of one or more members of the Company's senior management or the
failure to add qualified management personnel could have a material adverse
effect on the Company. See "Management."
NEED FOR ADDITIONAL FINANCING
Implementation of BLP's growth strategy likely will require significant
additional capital resources. Such resources may be needed for the development
of new services, for the funding of internal growth, and for acquisitions that
the Company may pursue. To finance capital requirements, the Company
anticipates that it may from time to time issue additional equity securities
and incur additional debt. The Company may not be able to obtain additional
required capital on satisfactory terms, if at all. The failure to raise the
funds necessary to finance future cash requirements could have a material
adverse effect on the Company. If BLP raises additional funds through the
issuance of equity securities, dilution to the Company's existing stockholders
may result. If the Company raises additional funds through the incurrence of
debt securities, such debt instruments may contain restrictive financial,
operating and security covenants.
COMPETITION
The business of providing promotional, marketing, educational services and
other services to the pharmaceutical industry is competitive. The business of
providing pharmaceutical conferencing services is highly fragmented and the
Company's competitors in this area generally include smaller, regionally
focused companies that provide a limited number of promotional, marketing and
educational services, usually focused on the pharmaceutical industry. Several
of the Company's competitors in this area, however, offer services that are
somewhat wider in scope. Although BLP believes it is a leading provider of
peer-to-peer meetings, there are many larger providers of symposia and
educational conferences. As the Company seeks to expand its range of services,
it is likely to face competition from companies which already have established
a strong business presence providing similar services to other businesses. The
outsourced product marketing business is currently in its formative stage and
is expected to become increasingly competitive. The provision of contract
sales services is also a relatively new and undeveloped industry in the United
States, and the Company faces significant competition in providing such
services from larger, established companies having greater resources and
access to capital. A large number of companies currently provide teleservices
such as telemarketing and teledetailing to companies in many industries
including the pharmaceutical industry, and many of these companies have
greater resources and access to capital than the Company. Overall, BLP
believes that its most significant competition is potentially from other
companies that provide outsourced promotional, marketing, educational and
other services and large advertising agencies which may seek to expand their
service offerings.
10
<PAGE>
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 has
recently started providing field sales force logistics services. These
services have traditionally been handled in-house by pharmaceutical companies.
There can be no assurance that the pharmaceutical companies will continue to
outsource these services, or that other companies, such as travel agencies,
will not seek to expand their businesses by providing field sales force
logistics services.
MATERIAL BENEFIT TO INSIDERS
In December 1996, the Company completed the TA Transaction. In connection
with the TA Transaction, the TA Investors purchased from the Company an
aggregate of $12.5 million of Convertible Participating Preferred Stock and
the Company incurred $21.0 million of indebtedness under the Credit Facility.
The Company used the proceeds from these financing transactions principally to
redeem Common Stock from, and to pay special bonuses to, senior officers of
the Company. Upon the completion of the IPO, the Convertible Participating
Preferred Stock converted into 4,666,664 shares of Common Stock and 5,600,000
shares of Redeemable Preferred Stock. As required by the terms of the
Redeemable Preferred Stock, the Company immediately redeemed all of the
Redeemable Preferred Stock upon its issuance for $10.8 million in cash
representing approximately 18.1% of the net proceeds from the IPO. The TA
Investors and senior executive officers will receive an aggregate of
approximately $78.8 million in net proceeds from their sale of shares of
Common Stock offered hereby. See "Certain Transactions" and "Principal and
Selling Stockholders."
ACCUMULATED DEFICIT
At March 31, 1998, the Company had an accumulated deficit of $5.3 million.
In December 1996, as part of the TA Transaction, the Company paid $18.9
million to redeem Common Stock, $7.5 million of special bonuses to officers,
$6.2 million to satisfy obligations to a former shareholder, and $0.6 million
of fees. See "Capitalization," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Certain Transactions."
EFFECTIVE CONTROL BY PRINCIPAL STOCKHOLDERS
After giving effect to the sale of the shares of Common Stock offered
hereby, the TA Investors and employees, directors (excluding shares held by
the TA Investors) and consultants of the Company (including members of their
families and trusts and other entities beneficially owned by them and members
of their families) will beneficially own in the aggregate approximately 16.6%
(15.9% assuming exercise of the Underwriters' over-allotment option in full)
and approximately 14.7% (14.0% assuming exercise of the Underwriters' over-
allotment option in full), respectively, of the outstanding Common Stock. As a
result, these stockholders will have the ability to exert significant
influence over the outcome of fundamental corporate transactions requiring
stockholder approval, including, but not limited to, mergers and sales of
assets and the election of the members of BLP's Board of Directors. See
"Principal and Selling Stockholders" and "Shares Eligible for Future Sale."
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of Common Stock in the public market after this
offering could adversely affect the market price of the Common Stock. In
addition to the 3,900,000 shares of Common Stock offered hereby and the
4,142,382 shares of Common Stock which are otherwise freely tradeable,
4,207,977 shares owned by current stockholders of the Company are eligible for
sale in the public market pursuant to Rule 144 under the Securities Act of
1933, as amended (the "Securities Act"), and an additional 137,052 shares of
Common Stock will be eligible for sale under Rule 144 in March 1999. Holders
of 3,988,896 of such shares, however, have agreed not to sell or offer to sell
or otherwise dispose of any shares of Common Stock currently held by them, any
right to acquire any shares of Common Stock or any securities exercisable for
or convertible into any shares of Common Stock for a period of 90 days after
the date of this Prospectus without the prior written consent of
11
<PAGE>
Bear, Stearns & Co. Inc., other than as gifts or transfers by will or the laws
of descent and distribution, sales to the Company or pursuant to the
Underwriters' over-allotment option. The holders of approximately 2,253,398
shares of Common Stock have the right on two occasions (each of which must be
at least six months apart) to require the Company to register their shares
under the Securities Act for resale to the public (if such right is exercised,
the holders of 3,968,063 shares will have the right to have their shares
registered); holders of approximately 4,105,115 shares have the right in
primary and secondary offerings, excluding offerings relating to employee
benefit plans, Rule 145 under the Securities Act, demand registrations, or
Form S-3 registrations, to include their shares in a registration statement
filed by the Company; and holders of approximately 3,968,063 shares have the
right on one or more occasions to request and have effected a registration of
shares on Form S-3 if the anticipated net aggregate sale price of such
registered shares exceeds $500,000. With the exception of the Selling
Stockholders, none of such holders are including their shares in the
registration statement filed in connection with this offering, and holders of
approximately 3,968,063 of such shares have agreed not to sell or offer to
sell or otherwise dispose of any shares of Common Stock currently held by
them, any right to acquire any shares of Common Stock or any securities
exercisable for or convertible into any shares of Common Stock for a period of
90 days after the date of this Prospectus without the prior written consent of
Bear, Stearns & Co. Inc., other than as gifts or transfers by will or the laws
of descent and distribution, sales to the Company or pursuant to the
Underwriters' over-allotment option. Sales of substantial amounts of Common
Stock (including shares issued in connection with future acquisitions, which
may be issued with registration rights), or the availability of such shares
for sale, may adversely affect the prevailing market price for the Common
Stock and could impair the Company's ability to obtain additional capital
through an offering of its equity securities. See "Shares Eligible for Future
Sale."
DIVIDEND POLICY
BLP has not declared or paid cash dividends on its Common Stock since it
became subject to taxation under Subchapter C of the Code in December 1996,
and the Company does not anticipate paying cash dividends on its Common Stock
in the foreseeable future. Under Delaware law, the Company is permitted to pay
dividends only out of its surplus, or, if there is no surplus, out of its net
profits. In addition, the payment of cash dividends generally is prohibited
under the terms of the Credit Facility and may be prohibited under agreements
governing debt which the Company may incur in the future. See "Dividend
Policy" and "Management's Discussion and Analysis of Financial Condition and
Results of Operation."
ANTI-TAKEOVER PROVISIONS
Certain provisions of the Company's Amended and Restated Certificate of
Incorporation (the "Certificate") and By-laws (the "By-laws"), certain
sections of the Delaware General Corporation Law, and the ability of the Board
of Directors to issue shares of preferred stock and to establish the voting
rights, preferences and other terms thereof, may be deemed to have an anti-
takeover effect and may discourage takeover attempts not first approved by the
Board of Directors (including takeovers which stockholders may deem to be in
their best interests). Such provisions include, among other things, a
classified Board of Directors serving staggered three-year terms, the
elimination of stockholder voting by consent, the removal of directors only
for cause, the vesting of exclusive authority in the Board of Directors to
determine the size of the Board of Directors and (subject to certain limited
exceptions) to fill vacancies thereon, the vesting of exclusive authority in
the Board of Directors (except as otherwise required by law) to call special
meetings of stockholders and certain advance notice requirements for
stockholder proposals and nominations for election to the Board of Directors.
These provisions, and the ability of the Board of Directors to issue preferred
stock without further action by stockholders, could delay or frustrate the
removal of incumbent directors or the assumption of control by stockholders,
even if such removal or assumption of control would be beneficial to
stockholders, and also could discourage or make more difficult a merger,
tender offer or proxy contest, even if such events would be beneficial to the
interests of stockholders. The Company is subject to Section 203 of the
Delaware General Corporation Law which, in general, imposes restrictions upon
certain acquirors (including their affiliates and associates) of 15% or more
of the Company's Common Stock. See "Description of Capital Stock--Certain
Provisions of Certificate and By-laws" and "--Statutory Business Combination
Provision."
12
<PAGE>
YEAR 2000 RISK
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 are currently being determined as part of the conversion
planning, although 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.
13
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 1,500,000 shares of
Common Stock offered by the Company hereby at an assumed public offering of
$34.75 per share are estimated to be approximately $48.8 million. The Company
will not receive any of the proceeds from the sale of shares of Common Stock
by the Selling Stockholders. See "Principal and Selling Stockholders." The
Company will use the net proceeds for working capital and other general
corporate purposes. The Company routinely evaluates potential acquisitions of
businesses, products and technologies that would complement or expand the
Company's business. The Company may use a portion of the net proceeds from
this offering for one or more such transactions; however, it currently has no
commitments or agreements with respect to any material pending transactions
other than with Medical Education Systems, Inc. Pending such use, the balance
of the net proceeds will be invested in short-term, investment grade, interest
bearing obligations.
MARKET PRICE OF COMMON STOCK AND DIVIDEND POLICY
The Common Stock has been traded on the NASDAQ National Market since the
Company's initial public offering on September 23, 1997 and trades under the
symbol "BLPG." The following table sets forth the high and low bids for the
Common Stock as reported by Nasdaq for the periods indicated:
<TABLE>
<CAPTION>
MARKET PRICES (1)
-----------------
FISCAL QUARTERS ENDED HIGH LOW
--------------------- -----------------
<S> <C> <C>
September 30, 1997 (from September 23).................... $ 24.125 $ 22.750
December 31, 1997......................................... $ 28.000 $ 19.625
March 31, 1998............................................ $ 36.750 $ 23.875
June 30, 1998 (through May 4)............................. $ 37.500 $ 27.500
</TABLE>
- --------
(1) The prices listed reflect inter-dealer prices without retail mark-up,
mark-down or commission and may not necessarily represent actual
transactions.
On May 4, 1998, the high and low bid for the Common Stock as reported by
Nasdaq were $36.375 and $33.500
The number of record holders of the Company's Common Stock as of April 15,
1998 was approximately 52, although the Company believes that the number of
beneficial owners of Common Stock as of that date was substantially greater.
The Company has not declared or paid any cash dividends on its Common Stock
since it became subject to taxation under Subchapter C of the Code in December
1996. The Company currently intends to retain its earnings for future growth
and, therefore, does not anticipate paying cash dividends in the foreseeable
future. Under Delaware law, the Company is permitted to pay dividends only out
of its surplus, or, if there is no surplus, out of its net profits. Payment of
future dividends, if any, will be at the discretion of the Company's Board of
Directors after taking into account various factors, including the Company's
financial condition, operating results and current and anticipated cash needs.
In addition, under the terms of the Credit Facility, the payment of cash
dividends generally is prohibited without the consent of the lenders.
14
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of March
31, 1998 (i) on an actual basis and (ii) as adjusted to give effect to the
sale of the 1,500,000 shares of Common Stock offered by the Company hereby at
an assumed public offering price of $34.75 per share and the application of
the estimated net proceeds therefrom as described in "Use of Proceeds." This
table should be read in conjunction with the Financial Statements of the
Company and the Notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1998
-------------------------
ACTUAL AS ADJUSTED (1)
-------- ---------------
(IN THOUSANDS)
<S> <C> <C>
Current maturities of long-term debt(2).............. $ -- $ --
Long-term debt, net of current maturities(2)......... $ -- $ --
======== ========
Stockholders' equity:
Preferred stock, $.01 par value, 2,000,000 shares
authorized,
none issued and outstanding at March 31, 1998
actual;
none authorized, issued or outstanding as
adjusted.......................................... $ -- $ --
Common Stock, $.01 par value, 50,000,000 shares
authorized,
15,087,410 issued and 10,887,411 outstanding at
March 31, 1998 actual; 50,000,000 shares
authorized, 16,587,410 shares issued and
12,387,411 shares outstanding as adjusted(3)...... 151 166
Additional paid-in capital......................... 68,324 117,066
Treasury Stock, 4,199,999 shares of Common Stock at
March 31, 1998 actual and as adjusted at cost..... (24,350) (24,350)
Accumulated deficit................................ (5,258) (5,258)
-------- --------
Total stockholders' equity....................... 38,867 87,624
-------- --------
Total capitalization............................. $ 38,867 $ 87,624
======== ========
</TABLE>
- --------
(1) Gives effect to the completion of this offering at an assumed offering
price of $34.75 per share and the receipt and application of the estimated
net proceeds from this offering, as if such transactions had been
completed on March 31, 1998. See "The Company," "Management's Discussion
and Analysis of Financial Condition and Results of Operations," "Use of
Proceeds" and "Capitalization."
(2) See Note 4 to the Financial Statements for information concerning long-
term debt obligations.
(3) Excludes: (i) 929,893 shares issuable upon the exercise of options
outstanding as of April 15, 1998; (ii) 854,739 additional shares of Common
Stock currently available for future grants under the Company's 1996 Stock
Plan (subject to adjustment as provided in the 1996 Stock Plan); (iii) an
additional 1,000,000 shares of Common Stock issuable pursuant to an
amendment to the 1996 Stock Plan, which amendment was approved by the
Board of Directors on April 25, 1998 and will be voted on by the
stockholders of the Company at the Company's 1998 Annual Meeting of
Stockholders; and (iv) 160,103 shares to be issued to Medical Education
Systems, Inc. upon the closing of an asset acquisition agreement. See
"Business--Potential Acquisitions" and "Management--Employee Stock and
Other Benefit Plans--1996 Stock Option and Grant Plan."
15
<PAGE>
SELECTED FINANCIAL INFORMATION
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 Prospectus. The selected balance sheet data
at December 31, 1994 and 1995 and the selected statement of operations data
for the year ended December 31, 1994 have been derived from the audited
financial statements of the Company not included in this Prospectus. The
selected statement of operations data for the year ended December 31, 1993 and
the selected balance sheet data at December 31, 1993 have been derived from
the unaudited financial statements of the Company not included in this
Prospectus. The selected statement of operations data for the three months
ended March 31, 1997 and 1998 and the selected balance sheet data at March 31,
1998 have been derived from the unaudited interim financial statements of the
Company included elsewhere in this Prospectus which include all adjustments
(consisting of normal and recurring adjustments) that management considers
necessary for a fair presentation of the data. The interim results are not
necessarily indicative of results of operations for the entire year. The
following selected financial data should be read in conjunction with the
Financial Statements and the Notes thereto of the Company and Management's
Discussion and Analysis of Financial Condition and Results of Operations
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
---------------------------------------- ---------------
1993 1994 1995 1996 1997 1997 1998
------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues................ $19,339 $20,580 $21,775 $40,219 $72,907 $13,673 $32,154
Cost of sales........... 13,820 12,378 12,788 26,004 51,580 9,737 23,757
------- ------- ------- ------- ------- ------- -------
Gross profit.......... 5,519 8,202 8,987 14,215 21,327 3,936 8,397
Selling, general and
administrative
expenses(1)............ 5,319 6,536 6,341 19,995 12,444 2,250 5,780
------- ------- ------- ------- ------- ------- -------
Operating income
(loss)............... 200 1,666 2,646 (5,780) 8,883 1,686 2,617
Interest expense, net... 49 43 86 255 1,071 409 (308)
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 1,277 2,925
Provision for income
taxes(2)............... -- 25 51 -- 1,700 400 1,050
------- ------- ------- ------- ------- ------- -------
Net income (loss)..... $ 151 $ 1,598 $ 2,509 $(7,111) $ 6,112 $ 877 $ 1,875
======= ======= ======= ======= ======= ======= =======
Net income (loss) per
common share--basic.... $ 0.02 $ 0.19 $ 0.29 $ (1.18) $ 1.07 $ 0.20 $ 0.17
======= ======= ======= ======= ======= ======= =======
Weighted average common
shares outstanding--
basic.................. 8,602 8,602 8,602 6,028 4,947 2,736 10,769
======= ======= ======= ======= ======= ======= =======
Net income (loss) per
common share--diluted.. $ 0.02 $ 0.19 $ 0.29 $ (1.18) $ 0.72 $ 0.12 $ 0.17
======= ======= ======= ======= ======= ======= =======
Weighted average common
shares outstanding--
diluted................ 8,602 8,602 8,602 6,028 8,507 7,403 11,174
======= ======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF MARCH 31, 1998
---------------------------------------- -----------------------
AS
1993 1994 1995 1996 1997 ACTUAL ADJUSTED(3)
------- ------ ------- ------- ------- ---------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equiva-
lents.................. $ 2 $ 30 $ 963 $ 7,176 $24,016 $ 16,632 $ 65,390
Working capital (defi-
cit)................... (1,707) 78 3,046 2,416 29,805 25,799 74,557
Total assets............ 1,792 5,128 10,499 23,097 51,056 70,771 119,529
Long-term debt, less
current maturities..... 11 308 2,061 20,000 -- -- --
Redeemable equity secu-
rities................. -- -- -- 12,500 -- -- --
Total stockholders' eq-
uity (deficit)......... (1,453) 145 2,505 (29,387) 32,843 38,866 87,624
</TABLE>
- --------
(1) The 1996 amount 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.
(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) Gives effect to the completion of this offering at an assumed public
offering price of $34.75 per share and the receipt and application of the
estimated net proceeds therefrom as if such transactions had been
completed on March 31, 1998. See "Use of Proceeds," "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and "Capitalization."
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the results of operations and financial
condition of the Company should be read in conjunction with the Company's
Financial Statements and the Notes thereto included elsewhere in this
Prospectus. This Prospectus contains forward-looking statements. Discussions
containing such forward-looking statements may be found in the material set
forth below and under "Business," as well as in this Prospectus generally.
Prospective investors are cautioned that any such forward looking statements
are not guarantees of future performance and involve risks and uncertainties.
Actual events or results may differ materially from those discussed in the
forward-looking statements as a result of various factors, including, without
limitation, the risk factors set forth under "Risk Factors" and the matters
set forth below and in this Prospectus generally.
OVERVIEW
Boron, LePore & Associates, Inc. ("BLP" or the "Company") provides
outsourced promotional, marketing, educational and field sales 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 and field sales force
logistics services.
Following several years of relatively modest revenue growth, BLP's revenues
grew significantly from 1995 to 1996 and then again from 1996 to 1997.
Revenues also grew significantly in the first quarter of 1998 as compared to
the first quarter of 1997. This growth has 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 sales 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 sales force logistics
organization and, in March 1998, the Company signed a contract with a large
pharmaceutical company to provide field sales 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 revenue 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 sales 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 sales 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 the first quarter of 1998, the Company acquired a
continuing medical education company which will be operated as a separate
division and also entered into its second contract to provide contract sales
services. In addition, in May 1998, the Company entered into an agreement to
acquire a medical education and sales training company. Such acquisition is
anticipated to close by the end of the second quarter of 1998.
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
17
<PAGE>
services, particularly symposia and field sales force logistics, have lower
gross margin percentages than the Company's historical peer-to-peer business.
Furthermore, the initial 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 sales force logistics organization,
will continue to negatively impact the Company's near-term financial
performance. The Company anticipates that, due to those costs and an
anticipated increase in the proportion of symposia and field sales force
logistics revenue, 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, the
Company's operating margins could be adversely affected if its efforts to
enhance the profitability of its services are not successful, the proportion
of symposia or field sales 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 sales force logistics organization
or technology enhancement efforts are greater than anticipated. See "Risk
Factors--Reliance on New Services for Continued Growth," "--Management of
Growth," "--Acquisition Risks" and "Capitalization."
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>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
----------------------------- ----------------
1995 1996 1997 1997 1998
-------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
REVENUES...................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales................. 58.7 64.7 70.7 71.2 73.9
------- -------- ------- ------- -------
Gross profit.................. 41.3 35.3 29.3 28.8 26.1
Selling, general and
administrative expenses...... 29.1 49.7(1) 17.1 16.5 18.0
------- -------- ------- ------- -------
Operating income (loss)..... 12.2 (14.4) 12.2 12.3 8.1
Nonrecurring loss on
forgiveness of related party
loan......................... -- 2.7 -- -- --
Interest (income) expense,
net.......................... 0.4 0.6 1.5 3.0 (1.0)
------- -------- ------- ------- -------
Income (loss) before provision
for income taxes............. 11.8 (17.7) 10.7 9.3 9.1
Provision for income
taxes(2)..................... 0.3 -- 2.3 2.9 3.3
------- -------- ------- ------- -------
Net income (loss)........... 11.5% (17.7)% 8.4% 6.4% 5.8%
======= ======== ======= ======= =======
</TABLE>
- --------
(1) Includes $10.0 million, or 24.9% of revenues, for special officer bonuses,
including $7.5 million as part of the TA Transaction, and $0.6 million, or
1.5% of revenues, for fees related to the TA Transaction.
(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.
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31,
1997
Revenues increased $18.5 million, or 135%, from $13.7 million in the three
month period ended March 31, 1997 to $32.2 million in the three month period
ended March 31, 1998. This growth primarily resulted from a $7.2 million, or
56%, increase in conferencing services revenue, the addition of $6.9 million
of revenue from field sales force logistics services and the addition of $3.4
million of revenue from contract sales services. The increase in the Company's
conferencing services revenue was comprised of a $7.9 million increase in
symposia services revenue partially offset by a $0.7 million decrease in
revenue from peer-to-peer meetings and other conferencing services. Such
decrease in peer-to-peer and other conferencing services revenue was primarily
18
<PAGE>
related to the Company's relocation of its main telerecruiting function from
Fair Lawn, New Jersey to Norfolk, Virginia during the first quarter of 1998.
The field sales force logistics revenue was comprised of a $3.9 million fee-
for-service component, a $2.0 million management fee component and a $1.0
million development fee component. In addition, revenues from teleservices,
educational services and product marketing services increased $1.0 million, on
a combined basis, in the three month period ended March 31, 1998 as compared
to the three month period ended March 31, 1997.
Cost of sales increased $14.0 million, or 144%, from $9.7 million in the
three month period ended March 31, 1998 to $23.8 million in the three month
period ended March 31, 1997. Cost of sales as a percentage of revenues
increased from 71.2% in the prior year period to 73.9% in the current year
period. The increase in cost of sales as a percentage of revenues was
primarily due to the increased proportion of symposia services revenue to
total revenues and the introduction of field sales force logistics services,
both of which have a lower average gross profit than the Company's historical
business due to their higher proportion of production costs which are passed
through to the customer with little or no markup.
Selling, general and administrative expenses increased $3.5 million, or
157%, from $2.3 million in the three month period ended March 31, 1997 to $5.8
million in three month period ended March 31, 1998. This increase was due to
the cost of personnel additions of approximately $1.8 million and an increase
in outside services, rent, depreciation and other operating costs of
approximately $1.7 million incurred to support the Company's growth. Selling,
general and administrative expenses increased as a percentage of revenues from
16.5% in the prior year period to 18.0% in the current year period as the
increase in selling, general and administrative expenses was partially offset
by the increase of revenues.
Operating income increased $0.9 million, or 55%, from $1.7 million in the
three month period ended March 31, 1997 to $2.6 million in the three month
period ended March 31, 1998. Operating income as a percentage of revenues
decreased from 12.3% in the prior year period to 8.1% in the current year
period. The decrease in operating income as a percentage of revenues was due
to the aforementioned increases in cost of sales and selling, general and
administrative expenses as a percentage of revenues.
Interest expense, net of interest income, was $0.4 million in the three
month period ended March 31, 1997 compared to $0.3 million of interest income,
net of interest expense, in the three month period ended March 31, 1998. This
change was due to (i) a decrease in interest expense in the current year
period as compared to the prior year period related to the Company's full
repayment of its bank debt subsequent to the period ended March 31, 1997 and
(ii) an increase in interest income in the current year period as compared to
the prior year period related to the Company's higher average cash balance in
the current year period as compared to the prior year period.
The provision for income taxes for the three month periods ended March 31,
1998 and March 31, 1997 reflect estimated Federal and state income tax
expenses partially offset by the utilization of benefits from net operating
losses previously not recognized.
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 sales 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
19
<PAGE>
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 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 primarily related to the inclusion in 1996 of expenses relating 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 $0.3 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,
20
<PAGE>
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 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 a 14.4% operating loss in 1996. The decrease in operating income
(loss) as a percentage of revenues was due to the aforementioned increase in
cost of sales as a percentage of 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.
21
<PAGE>
QUARTERLY FINANCIAL INFORMATION
The following table sets forth unaudited quarterly operating results for
each of the Company's last eight quarters as well as certain of such data
expressed as a percentage of revenues for the periods indicated. This
information has been prepared by the Company on a basis consistent with the
Company's audited financial statements and includes all adjustments
(consisting of normal and recurring adjustments) that management considers
necessary for a fair presentation of the data. These quarterly results are not
necessarily indicative of future results of operations. This information
should be read in conjunction with the Financial Statements and Notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------------------------------------------
JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31,
1996 1996 1996 1997 1997 1997 1997 1998
-------- --------- -------- --------- -------- --------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $9,173 $9,592 $14,481 $13,673 $18,448 $17,500 $23,286 $32,154
Cost of sales........... 5,976 5,949 9,583 9,737 13,103 12,408 16,332 23,757
------ ------ ------- ------- ------- ------- ------- -------
Gross profit.......... 3,197 3,643 4,898 3,936 5,345 5,092 6,954 8,397
Selling, general and
administrative
expenses............... 2,179 1,972 13,673(1) 2,250 2,759 3,060 4,375 5,780
------ ------ ------- ------- ------- ------- ------- -------
Operating income
(loss)............... 1,018 1,671 (8,775) 1,686 2,586 2,032 2,579 2,617
Interest expense (in-
come), net............. 49 24 127 409 357 658 (353) (308)
Nonrecurring loss on
forgiveness of related
party loan............. -- -- 1,076 -- -- -- -- --
------ ------ ------- ------- ------- ------- ------- -------
Income (loss) before
provision for income
taxes................ 969 1,647 (9,978) 1,277 2,229 1,374 2,932 2,925
Provision for income
taxes.................. -- -- -- 400 800 300 200 1,050
------ ------ ------- ------- ------- ------- ------- -------
Net income (loss)..... $ 969 $1,647 $(9,978) $ 877 $ 1,429 $ 1,074 $ 2,732 $ 1,875
====== ====== ======= ======= ======= ======= ======= =======
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------------------------------------------
JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31,
1996 1996 1996 1997 1997 1997 1997 1998
-------- --------- -------- --------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales........... 65.1 62.0 66.2 71.2 71.0 70.9 70.1 73.9
------ ------ ------- ------- ------- ------- ------- -------
Gross profit.......... 34.9 38.0 33.8 28.8 29.0 29.1 29.9 26.1
Selling, general and
administrative
expenses............... 23.8 20.6 94.4(1) 16.5 15.0 17.5 18.8 18.0
------ ------ ------- ------- ------- ------- ------- -------
Operating income
(loss)............... 11.1 17.4 (60.6) 12.3 14.0 11.6 11.1 8.1
Interest expense
(income), net.......... 0.5 0.3 0.9 3.0 1.9 3.8 (1.5) (1.0)
Nonrecurring loss on
forgiveness of related
party loan............. -- -- 7.4 -- -- -- -- --
------ ------ ------- ------- ------- ------- ------- -------
Income (loss) before
provision for income
taxes................ 10.6 17.2 (68.9) 9.3 12.1 7.8 12.6 9.1
Provision for income
taxes.................. -- -- -- 2.9 4.4 1.7 0.9 3.3
------ ------ ------- ------- ------- ------- ------- -------
Net income (loss)..... 10.6% 17.2% (68.9)% 6.4% 7.7% 6.1% 11.7% 5.8%
====== ====== ======= ======= ======= ======= ======= =======
</TABLE>
- --------
(1) Includes $10.0 million, or 69.1% of revenues, for special officer bonuses,
including $7.5 million as part of the TA Transaction and $0.6 million, or
3.8% of revenues, for fees related to the TA Transaction.
22
<PAGE>
BLP's results of operations historically have fluctuated on a quarterly
basis and can be expected to continue to be subject to quarterly fluctuations.
In recent years, the Company has experienced substantially higher revenues in
the fourth quarter of its fiscal year than in the preceding three quarters of
such fiscal year. The Company believes these increases were related to it
customers' budgeting processes and spending patterns. There can be no
assurances that this trend will continue. Quarterly results can vary as a
result of a number of factors, including the timing of peer-to-peer projects
and symposia, expenditure patterns of the Company's customers, delays or costs
associated with acquisitions, the commencement, completion or cancellation of
significant contracts, announcements by the Company, competitors or customers,
government or private market regulatory initiatives, relative profit margins
of the services provided to customers, conditions in the healthcare industry
generally, conditions in the markets for outsourced promotional, marketing,
educational and field sales force logistics services more specifically, or
other events or factors, many of which are beyond the Company's control. See
"Risk Factors--Variation in Quarterly Operating Results; Possible Volatility
of Stock Price."
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1998, the Company had $25.8 million in net working capital, a
decrease of $4.0 million from December 31, 1997. The Company's primary sources
of liquidity as of March 31, 1998 consisted of cash and cash equivalents,
accounts receivable and borrowing availability under a revolving credit
facility.
The Company's accounts receivable turnover averaged 99, 84 and 93 days for
the periods ended March 31, 1998, December 31, 1997 and December 31, 1996. The
allowance for doubtful accounts was $0.4 million at March 31, 1998 and
December 31, 1997 and $0.3 million at December 31, 1996.
During the three months ended March 31, 1998, the Company used $0.3 million
in operating activities and $7.1 million in investing activities. The $7.1
million of cash used in investing activities was comprised of $5.1 used for
business acquisitions and $2.0 used to purchase computer, telephone and office
equipment.
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 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 sales force
logistics organization and the continued development of its teleservice center
in Norfolk, Virginia, the Company anticipates capital expenditures in 1998 to
amount to approximately $5.0 million.
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, December 31, 1997 and March 31, 1998, $1.0 million,
$0 and $0, respectively, was outstanding under the Credit Facility. The Credit
Facility contains
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various financial and reporting covenants. In July and November 1997 and May
1998, 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 $0.8 million 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 has been accounted for using the purchase method of
accounting. The excess of purchase price over net assets acquired, estimated
to be $0.8 million, 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 $4.3 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 has been accounted for using the purchase method
of accounting. The excess of purchase price over net assets acquired is
estimated to be approximately $8.3 million 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.
In May 1998, the Company entered into an agreement to purchase substantially
all of the assets and assume certain liabilities of Medical Education Systems,
Inc., a Pennsylvania corporation. The purchase price is $10 million in cash
and 160,103 shares of common stock in the Company. In addition, the Company
may be required to pay up to $10 million in contingent cash payments based on
certain operating income goals of the acquired business during the twelve-
month period subsequent to the acquisition date. The acquisition is expected
to close during the second quarter of 1998. The acquisition will be accounted
for using the purchase method of accounting with the resulting goodwill
amortized over twenty years.
Funds from this Offering will provide the Company with additional
flexibility and reduce its potential need to incur debt in the future as the
Company pursues future acquisitions while it also meets the ancicipated cash
flow requirements associated with growing its existing lines of business.
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, although, the
Company does not believe such cost will be
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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
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. The adoption of this pronouncement had no
impact on the Company's financial position or results of operations as of
March 31, 1998. 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.
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BUSINESS
GENERAL
Boron, LePore & Associates, Inc. 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 (which involve obtaining rights to market a pharmaceutical product,
often on a shared reward basis); teleservices such as teledetailing,
telemarketing, sales support and fulfillment; contract sales services and
field sales force logistics services. During 1997, in connection with the
expansion of its 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 sales force
logistics organization. In March 1998, the Company acquired a continuing
medical education company, and in May 1998, the Company signed an agreement,
subject to conditions to closing, to purchase a continuing medical education
and clinical sales training 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 OVERVIEW
Based on data from Scott-Levin, a healthcare marketing information company,
pharmaceutical companies spent approximately $1 billion in 1997 on promotional
meetings and events, including peer-to-peer meetings, symposia, third party
events and teleconferences. Pharmaceutical companies have relied for many
years on third party providers of promotional, marketing and educational
conferencing services. In recent years, changes in the pharmaceutical industry
have led to greater outsourcing of promotional, marketing and educational
functions. At the same time, pharmaceutical companies and providers of
promotional, marketing and educational services to such companies have
broadened their means of communicating with target audiences from traditional
product detailing, peer-to-peer meetings and in-person conferences to also
include teleconferences, satellite conferences and various other forms of
teleservices.
BLP believes the following factors affect promotional, marketing and
educational expenditures by pharmaceutical companies and the related use of
third party providers of promotional, marketing, educational and field sales
force logistics services:
Communications with Physicians. Pharmaceutical companies have long
recognized that communicating with the physicians who prescribe drugs is
crucial to gaining market share. The Company believes that pharmaceutical
companies view peer-to-peer meetings as a highly effective means of providing
information regarding their products to physicians. The development of
sophisticated prescription tracking systems has enabled pharmaceutical
companies to measure the impact of peer-to-peer meetings on sales. These
prescription tracking systems permit pharmaceutical companies to identify
prospective peer-to-peer meeting attendees and to track the prescription
patterns of the physicians who attend. The Company believes that outsourced
promotional and marketing organizations having a demonstrated ability to reach
physicians in a cost-effective, focused manner are important to the overall
marketing efforts of pharmaceutical companies.
Consumer-Oriented Communications. BLP believes that consumers have recently
begun to play an increasingly significant role in the selection of healthcare
options and therapeutic products. Accordingly, pharmaceutical companies have
increasingly focused on communicating product information directly to
consumers. The Company believes that promotional and marketing organizations
that can effectively and efficiently communicate with consumers directly,
through services such as in-person conferences and teleservices, may in the
future play an increasingly significant role in educating consumers about
pharmaceutical products.
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Product Pipelines. In 1997, the Food and Drug Administration (the "FDA")
approved for sale 160 new drugs and drug indications, including 27 new
molecular entities. The Company believes that pharmaceutical companies have
found peer-to-peer meetings to be an effective means of communicating
information in connection with new product launches and that opportunities to
provide this service exist as a result of the present pipeline of new drugs
and drug indications. In addition, the Company believes that pharmaceutical
companies are examining their existing drug product portfolios to identify
revenue and profit enhancement opportunities for drugs at various stages in
their product life cycles. Accordingly, the Company believes there are
multiple sources of potential new business for providers of outsourced
promotional, marketing and educational services.
Cost Containment Efforts. The potential for implementation of national
healthcare reform in the early 1990s and the growing influence of managed care
and healthcare cost containment initiatives throughout the 1990s created
downward pressure on pharmaceutical prices and on the profit margins of
pharmaceutical companies. These pressures have contributed to increased
consolidation in the pharmaceutical industry which has resulted in an
increased focus on reducing operating costs to achieve economies of scale and
cost synergies. Pharmaceutical companies have employed a variety of strategies
to preserve or enhance operating margins in this environment. These include
outsourcing activities such as research and development and certain
promotional, marketing and sales activities in order to shift fixed costs to
variable costs and to promote greater operating efficiency. BLP believes that
pharmaceutical companies are increasingly receptive to outsourcing
promotional, marketing and sales activities to specialized third party service
providers, particularly those who can offer a wide array of services targeted
to specific audiences.
Consolidation of Third Party Vendor Relationships. Many pharmaceutical
companies that outsource promotional, marketing and educational services
increasingly seek relationships with firms capable of providing a range of
high quality service alternatives. Certain of these pharmaceutical companies
seek to consolidate their outsourced promotional, marketing and educational
service needs with a limited group of providers with which they have
established relationships. Consolidating providers facilitates the
implementation of an integrated marketing strategy to a variety of audiences
and provides cost and operating efficiencies to the pharmaceutical company. In
this regard, some pharmaceutical companies have established "preferred
provider" relationships with selected vendors.
GROWTH STRATEGY
BLP's objective is to enhance its position as a leading provider of peer-to-
peer and other meetings and continue to expand its array of other outsourced
promotional, marketing, educational and field sales force logistics services,
focused mainly on the pharmaceutical industry. The following are the principal
elements of the Company's strategy:
Offer a Broad Range of Promotional, Marketing, Educational and Field Sales
Force Logistics Services. BLP intends to continue to expand the types of
services it offers to meet its customers' diversified promotional, marketing,
educational and field sales force logistics needs. The Company believes
pharmaceutical companies seeking to outsource marketing functions will
increasingly rely on a core group of full-service providers who can offer an
integrated array of high quality services, using varied media targeted to
reach distinct audiences. The Company believes that as a leading provider of
peer-to-peer meetings it has an established platform from which to offer other
promotional and marketing services. BLP introduced symposia, product
marketing, and telemarketing services in 1996 and contract sales services and
field sales force logistics services in 1997. Of these new business areas,
symposia have generated the most new revenues, accounting for revenues of
$20.7 million during 1997, or 28.3% of total revenues for the year, and $12.3
million, or 38.3%, of total revenues for the first three months of 1998. Field
sales force logistics services generated $6.9 million, or 21.4%, of total
revenues for the first three months of 1998.
Increase Business with Existing Customers. The Company seeks to leverage its
market reputation as a leading provider of peer-to-peer meetings to generate
demand for additional peer-to-peer and other meetings, as well as product
marketing services, teleservices, contract sales, educational and field sales
force logistics
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services. The Company has been able to expand the array of its services
provided to certain customers and the Company expects to provide a broader
range of services to other customers in the future. The demand for BLP's
promotional and marketing services has increased, in part, due to its
customers' ability to monitor prescriptions of pharmaceutical products through
computerized prescription tracking systems.
Obtain New Customers. BLP seeks to expand its customer base by targeting
large domestic pharmaceutical companies which are not currently customers. In
addition, future customer initiatives may focus on smaller pharmaceutical
companies, foreign pharmaceutical companies and other healthcare companies
which could benefit from the Company's services. Examples of possible
customers in related healthcare industries include drug wholesalers,
biotechnology companies and medical device manufacturers. In addition, BLP
believes that its teleservices capability may be attractive to managed care
organizations seeking to communicate with and provide healthcare information
to their members.
Target New Audiences. BLP believes that consumers of pharmaceutical products
have assumed an increasingly active role in the selection of their healthcare
options and therapeutic products. Pharmaceutical companies thus seek providers
of promotional, marketing and educational services that can effectively
communicate product information directly to consumers through both traditional
and new forms of media. In addition, other new audiences such as pharmacists,
formulary managers, and hospital groups influence demand for pharmaceutical
products. BLP believes that its broad range of service capabilities, including
its teleservice center, will enable it to reach consumers and other new
audiences effectively on behalf of pharmaceutical companies.
Pursue Strategic Acquisitions. The Company's business strategy includes
consideration of strategic acquisitions in complementary and existing business
areas. The Company believes that acquiring outsourced marketing companies may
in some cases facilitate more effective and rapid development of a broader
array of services, or expansion of existing services, than developing these
service capabilities internally. The Company's strategy following any
acquisition focuses on the use of its competitive strengths, including its
reputation in the industry, its long-standing customer relationships and its
range of available services, to improve the financial and market performance
of both BLP and the acquired company.
SERVICES
BLP's principal lines of business presently include: (i) promotional and
other conferencing services; (ii) educational conferencing services; (iii)
product marketing services; (iv) teleservices; (v) contract sales services;
and (vi) field sales force logistics services.
Promotional and Other Conferencing Services
The Company conducts and produces conferences in a variety of formats and
through different forms of media. All of BLP's conferences are sponsored by
the Company's pharmaceutical company customers. The conferences are designed
to communicate the sponsoring pharmaceutical company's message to the
physicians and other healthcare professionals who attend. BLP's promotional
conference service is providing peer-to-peer meetings, which involve a small
gathering of physicians who are invited to meet in person or by teleconference
to discuss a particular drug or indication under the chairmanship of a Company
trained and employed moderator. Other conference services include providing
symposia, which are attended by a larger number of attendees and involve a
more in-depth presentation than peer-to-peer meetings, and video satellite
conferencing. The Company's meetings are not limited to these formats,
however, as the Company will coordinate meetings in any format that can
effectively convey a customer's message.
Peer-to-Peer. Peer-to-peer meetings among physicians have been the historic
foundation of BLP's revenues and growth. Through peer-to-peer meetings,
pharmaceutical companies are able to convey information concerning their
products to physicians. Physicians who attend the meetings in turn have an
opportunity to exchange ideas, clinical experiences and opinions about current
therapies. Peer-to-peer meetings are particularly
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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 physicians and among the physicians.
In addition, BLP performs periodic quality reviews of its moderators and
solicits feedback from customers and physicians about each moderator.
BLP's contracts for the coordination and production of peer-to-peer meetings
generally are fee based, although some contain a performance component which
is monitored through the use of the independent prescription tracking systems.
The Company's contracts typically require it to provide a certain number of
meetings (usually 100 to 300) over a specified period of time (typically three
to six months) on behalf of a customer. The terms of each of the Company's
contracts vary based upon the complexity of the individual arrangement,
whether the meetings will be CEP or CET meetings, the duration of the
contract, the number of meetings and attendees covered by the contract and the
locations for the meetings. The volume of meetings coordinated and produced by
the Company has enabled it to obtain discount pricing and preferred scheduling
from Marriott Hotels, which has a dedicated sales representative in the
Company's office, and discount pricing from other vendors of services such as
airlines and overnight courier services.
In 1995, 1996 and 1997, BLP conducted 4,312, 7,749 and 10,398 peer-to-peer
meetings, respectively. These meetings generated revenues of approximately
$20.6 million in 1995, $33.4 million in 1996 and $45.1 million in 1997,
constituting 94.7%, 83.0% and 61.9%, respectively, of the Company's revenues
in each of these years. For the first three months of 1997 and 1998, the
Company conducted 1,968 and 1,555 peer-to-peer meetings, respectively, which
accounted for revenues of $8.3 million and $7.6 million, respectively, or
60.9% and 23.7% of the Company's revenues for the respective three-month
periods.
Symposia. The Company added symposia in the fourth quarter of 1996 to
complement its peer-to-peer meeting business. A Company organized symposium
generally involves attendance by approximately 50 to 300 physicians over a
weekend. The physicians hear presentations regarding a drug or treatment
protocol presented by a faculty of experts in the field for the purpose of
being trained to serve as consultants and spokespeople for
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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.
The Company's symposium contracts generally are fee based. The terms of each
of BLP's symposium contracts vary based upon the complexity of the individual
arrangement, the duration of the contract, the number of symposia covered by
the contract and their location. The Company conducted four symposia in 1996
(all of which occurred in the fourth quarter) and conducted 48 symposia in
1997. Symposia accounted for revenues of $1.5 million, or 3.8% of the
Company's revenues in 1996. In 1997, symposia accounted for revenues of $20.7
million, or 28.3% of the Company's total revenues, and for the three months
ended March 31, 1997 and 1998, symposia accounted for $4.4 million and $12.3
million, or 32.5% and 38.3% of revenue, respectively.
Additional Conferencing Services. The Company provides a range of additional
conferencing services. The Company emphasizes flexibility and conducts
meetings in any format that can effectively communicate its customer's
message. Video satellite conferences are an example of one of the many
possible formats for meetings. Video satellite conferences are lectures
sponsored by pharmaceutical companies. The speakers typically are physicians
or other medical experts who are retained by the pharmaceutical company for a
fee to discuss a new drug or indication or other medical topic. The Company
broadcasts the conferences via satellite on television to various locations
throughout the United States. The video satellite conferences typically
utilize interactive media involving one-way video, two-way audio, and special
keypads for audience participation. By using new forms of technology and media
in connection with such video satellite conferences, and CET programs for
peer-to-peer meetings, the Company seeks to enable its clients to effectively
and efficiently communicate medical information to physicians so that
physicians can better understand and utilize pharmaceutical products.
Educational Conferencing Services
Physicians and other healthcare professionals must dedicate a minimum number
of hours to certified continuing education ("CE") to remain certified to
practice their respective professions in certain jurisdictions. BLP
coordinates CE conferences that are funded by pharmaceutical companies and
held for approximately 50 to 350 healthcare professionals, primarily
physicians, at various locations throughout the United States. Each CE
conference is designed, if applicable, to satisfy CE requirements in
accordance with relevant regulations or accreditation procedures. Not all of
the educational conferences conducted by the Company are intended to satisfy
certified CE requirements. As with the Company's promotional conferencing
services, some of the CE programs are conducted by teleconference.
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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 was 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. ("Strategic Implications"), a privately-held
company located in Vienna, Virginia. 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 BLP. BLP is actively considering additional acquisitions in the
educational services market.
Product Marketing Services
BLP introduced its product marketing service in 1996. The Company's
customers tend to focus their marketing efforts on their key products because
of budgetary and other constraints, and thus typically have a significant
number of products with relatively limited sales that are not heavily
marketed, if at all. The Company believes that the sales of certain of these
products could be increased if their therapeutic benefits were actively
communicated to physicians or other healthcare professionals. BLP believes it
can leverage its customer relationships and existing services to market some
of these products successfully by devising and implementing a variety of
promotional and marketing strategies.
The Company anticipates that product marketing engagements typically will
involve the grant by a pharmaceutical company of rights to market a particular
product for a specified period. The Company will generally bear most marketing
costs during this period and in return share incremental revenue if the
product achieves specified sales objectives. The Company contemplates that
some of these engagements, however, may be fee based to some extent.
The Company currently has the right in the United States to market
Ponstel(R) (a registered trademark of Parke-Davis), an analgesic for
dysmenorrhea manufactured by Parke-Davis, until July 1998, subject to
extension by mutual agreement for successive terms of twelve months. Under the
contract, the Company is compensated based on the increase in the sales of
Ponstel(R) above an established baseline.
The Company believes that pharmaceutical companies and their product
managers may be attracted to product marketing services and the related
revenue sharing structure because it enables them to obtain incremental
revenue with minimal marketing expenses. The Company's product marketing
service enables a product manager to obtain active promotion of products in
the manager's portfolio that would not otherwise be actively promoted. The
Company's involvement in product marketing need not be limited to a particular
stage of a drug's life cycle, as the Company could obtain rights to market an
underpromoted drug at any stage of a product's life cycle or supply product
support in a vacant sales territory.
Product marketing is subject to a number of the same risks as the Company's
conferencing services, as well as additional risks that are not present in the
Company's conferencing services, including the risk that the Company will
expend resources to sell a product and not achieve the level of sales required
to realize any revenue from its efforts. BLP will seek to manage this risk by
carefully selecting the products it agrees to promote based on its assessment
of multiple criteria, including, but not limited to, the potential
responsiveness of the product to promotional activities, the capabilities of
the pharmaceutical company's sales force and information obtained from
physicians. Product marketing is a new business area for the Company, and
there can be no assurance that the Company will establish a significant or
lasting presence in this market.
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Teleservices
With the proliferation of multiple forms of interactive media in the 1990s,
companies in a variety of industries are increasingly using teleservices as a
means of communicating information directly to current and prospective
customers and widening the scope of their sales efforts. The Company has
expanded its teleservice capabilities, in part, because it is a cost-efficient
means, compared to in-person sales calls, to promote, market and sell
pharmaceutical or other healthcare products to the highly fragmented universe
of physicians, pharmacists and other healthcare professionals. For instance,
the Company believes that small to mid-sized pharmaceutical companies, whose
detailing forces are limited in size, may seek to expand their sales and
marketing efforts for certain products through telemarketing.
BLP believes that the use of teletechnology as a means of marketing
pharmaceutical products is in an early stage of development and that there
exists a wide range of potential future uses, particularly in relation to
consumer healthcare. The Company's strategy involves leveraging its
competitive strengths, including its established customer relationships,
existing market position, broad range of available services and experience in
communicating with physicians and other healthcare personnel, to provide an
integrated communications strategy for its customers.
With the opening of its new teleservice center in Norfolk, Virginia in July
1997, the Company's teleservices capability increased substantially. The
Norfolk teleservice center is capable of traditional modes of teleservice plus
more advanced forms of communication, such as internet and interactive
computer capabilities, which the Company may use for CE and other purposes.
The Company chose the Norfolk location as the site for its teleservice center
based on the results of an extensive east coast site selection study which
noted, among other factors, the existence of a large pool of available
healthcare industry personnel such as nurses, and a redundantly-wired, fiber
optic cable infrastructure resulting from the significant military presence in
the area.
As of December 1997, the Company had approximately 190 operational terminals
at the Norfolk facility and has expanded to 310 terminals as of May 1, 1998.
In connection with the expansion of capacity at the Norfolk facility, the
Company reduced the number of teleservice terminals operational in New Jersey
from 125 at September 1997 to approximately 25. A primary reason for the
increase in operational terminals in Norfolk and the related decrease in New
Jersey was management's decision to shift a significant portion of the
telerecruiting function for its conferencing services to the Norfolk facility
in order to take advantage of the technology and facility investment made by
the Company in its new teleservices center. 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
sales 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
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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
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 CSO engages in traditional product detailing efforts,
which involve providing pharmaceutical product samples and related promotional
and educational materials to physicians. In addition, the CSO will utilize
advanced information technology and interface with the teleservices business
to offer clients a fully integrated sales approach. This approach will include
unique training, development and recruiting disciplines designed to enable the
CSO to compete effectively to service the specialized needs of the
pharmaceutical industry. BLP believes it can leverage its existing customer
relationships and market reputation to obtain projects for the CSO.
The Company currently has two contracts for its CSO. In connection with
BLP's initial project, which expires in August 1998, the Company has hired
approximately 120 salaried sales representatives. In connection with the
second contract, which extends from January 1998 to December 1998, the Company
has hired approximately 130 salaried sales representatives.
The Company expects that its CSO will continue to be structured along the
dedicated sales force model, with groups of sales persons recruited by BLP to
conduct sales for a particular client. The Company is currently in
negotiations to provide contract sales services for additional customers.
BLP believes that the quality of sales representatives, speed of recruitment
and management of the CSO are the most important factors in responding to its
customers' needs for outsourced sales support. The Company believes that its
established reputation in the industry, as well as its ability to provide an
array of complementary promotional services, will assist it in expanding its
CSO.
Contract sales is a new business area for BLP involving a number of the same
risks as the Company's conferencing services, as well as additional risks not
present in its traditional business, such as the risk of competition from
larger, established companies having greater resources and access to capital.
For instance, some of the Company's larger competitors have computerized
resume tracking systems for recruiting contract sales representatives. There
can be no assurances that the Company will establish a significant or lasting
presence in this market.
Field Sales Force Logistics
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 needs. 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.
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<PAGE>
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. The Company acts as
the centralized source for data collection and report generation for the
relevant programs, which information is provided to the home office. BLP also
makes available to the sales representative relevant data on the programs on a
real-time 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 logistics services for up to a two-year
period. Pursuant to that contract, the Company has created an organization of
approximately 100 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.
POTENTIAL ACQUISITION
In May 1998, BLP signed an agreement, subject to the satisfaction of
conditions to closing, to acquire substantially all of the assets of Medical
Education Systems, Inc. ("MES"), a privately-held company located in
Philadelphia, Pennsylvania. MES is a provider of continuing medical education,
clinical sales training, and promotional and other conferencing services. MES
has received accreditation by the American Council for Continuing Medical
Education and the American Council on Pharmaceutical Education to provide
continuing medical education and related services. MES also provides clinical
sales training for pharmaceutical sales representatives and a range of
promotional and other conferencing services to the pharmaceutical industry.
There can be no assurance, however, that the MES acquisition will occur on the
terms described herein, or 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. The Company has enjoyed long standing relationships with
many of its customers, a number of which have lasted for more than a decade.
Prior to 1996, the Company's customers principally engaged the Company to hold
peer-to-peer meetings. Commencing in 1996, several of the relationships
expanded to include other services such as symposia, product marketing and
teleservices. The Company believes that the quality and stability of its
customer list promotes the stability of its core business and that the scope
and complexity of its customers' marketing needs present opportunities for
expansion into new areas.
BLP's customer relations strategy focuses on maintaining strong
relationships with product managers and senior management at each of its
customers and providing creative, focused and result-oriented solutions to
their marketing needs. The Company's account managers (currently 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
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<PAGE>
competing products from time to time, it does not market such products through
the same type of promotional or marketing service without the consent of its
customers.
The Company's customer relations strategy involves obtaining preferred
provider status whenever possible. The Company has achieved preferred provider
status for its services with Glaxo Wellcome and Parke-Davis. Although
preferred provider status has different meanings with each customer, the
Company believes that such status generally provides a competitive advantage
in obtaining additional business from the customer.
Revenue from two customers, Glaxo Wellcome and Bristol-Myers Squibb,
accounted for approximately 49% and 18%, respectively, of total revenue for
the Company for the year ending December 31, 1997.
COMPETITION
The business of providing promotional, marketing, educational and other
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,
educational and other 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. The Company
believes that no other companies are currently providing the broad scope of
field sales force logistics services on a scale equivalent to those services
available through the Company's field sales force logistics organization,
although other companies with greater resources may decide to expand their
service offerings into this area.
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, educational and field sales force
logistical 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,
35
<PAGE>
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 Research and Manufacturers of America, 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") or the American Council on
Pharmaceutical Education (the "ACPE") in order for the provider of the program
to receive accreditation from such entities. 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. In addition, the federal fraud and abuse statute prohibits,
subject to certain safe harbors, the payment of any remuneration in return
for, or in order to induce, the purchase of an item, such as a drug, covered
under Medicare or Medicaid. 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 or that its
activities will not need to be altered in order to comply with such
regulations.
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 including civil and criminal sanctions. Any such actions could have
a material adverse effect on the Company.
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<PAGE>
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.
LEGAL PROCEEDINGS
Thomas S. Boron, a former stockholder and officer of the Company, filed a
complaint on March 27, 1998 in the United States District Court for the
District of New Jersey against the Company, Patrick G. LePore and Gregory F.
Boron, senior officers and directors of the Company, and Michael W. Foti and
Christopher J. Sweeney, former officers of and current consultants to the
Company, alleging, among other matters, securities and common law fraud and
breach of contract in connection with the settlement of contractual
arrangements with Thomas S. Boron in December 1996. See "Certain
Transactions." The damages sought by Thomas S. Boron are not stated in the
complaint. The Company's By-laws provide for mandatory indemnification of the
Company's officers and former officers to the fullest extent authorized by the
Delaware General Corporation Law against all expenses incurred in proceedings
in which an officer or former officer is involved as a result of serving or
having served as an officer, director or employee of the Company. The Company
believes the allegations of Thomas S. Boron are without merit and intends to
contest them vigorously. The Company believes that the matter may involve
significant litigation-related expenses but that it will not have a material
adverse effect on its financial condition or results of operations; there can
be no assurance, however, that this will be the case.
In addition, 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.
FACILITIES AND EMPLOYEES
BLP's corporate headquarters are located in Fair Lawn, New Jersey, in
approximately 14,520 square feet of space occupied under a lease which expires
on July 31, 1999. In March 1998, the Company entered into a lease for
additional space in the same building as its corporate headquarters. This
lease, which expires on January 31, 2000, is for 5,600 square feet of
immediately available space and 2,700 square feet to be occupied on July 1,
1998. The Company currently leases an additional 5,247 square feet of space
for a call center in Fair Lawn, New Jersey and 2,500 square feet of office
space in Raleigh, North Carolina.
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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 used for
fulfillment functions.
The Company also leases 11,165 square feet of office space in Piscataway,
New Jersey, which lease expires on January 1, 2003.
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.
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MANAGEMENT
EXECUTIVE OFFICERS, KEY EMPLOYEES AND DIRECTORS
Executive officers, key employees and directors and their ages as of April
15, 1998 were as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Patrick G. LePore.............. 43 Chairman of the Board, Chief Executive
Officer, President and Director
Gregory F. Boron............... 45 Chief Operating Officer, Executive Vice
President--Administration and Director
Timothy J. McIntyre............ 42 Executive Vice President and President--
Promotional Conferencing Services Division
Brian J. Smith................. 42 Executive Vice President and President--BLP
Sales Support Division
Martin J. Veilleux............. 36 Executive Vice President--Finance, Chief
Financial Officer, Secretary and Treasurer
Christos S. Efessiou........... 40 Executive Vice President and President--
Strategic Implications International, Inc.
Arthur R. Marchesini........... 37 Vice President and General Manager--
Promotional Conferencing Services Division
Roger Boissonneault(1)......... 49 Director
Roger B. Kafker(1)............. 36 Director
Jacqueline C. Morby(2)......... 60 Director
Joseph E. Smith................ 59 Director
John A. Staley, IV(2).......... 54 Director
</TABLE>
- --------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
Patrick G. LePore joined the Company in 1985 after six years at Hoffmann-La
Roche, a pharmaceutical company, where he worked as a product manager from
1982 to 1983 and as a product director from 1983 to 1985. He became President
and Chief Executive Officer of the Company in January 1992 and became Chairman
of the Board in December 1996.
Gregory F. Boron joined the Company in 1985 after leaving the U.S. Army as a
Major. He served as Vice President and Chief Financial Officer from January
1991 to November 1993 and as Executive Vice President, Administration and
Production from November 1993 to December 1996. Since December 1996, he has
served as Chief Operating Officer and Executive Vice President--Administration
of the Company.
Timothy J. McIntyre joined the Company as Executive Vice President--
Corporate Development and became Executive Vice President of the Company and
President--Promotional Conferencing Services Division in June 1997. Prior to
joining the Company, he served as President and Chief Executive Officer of
Managed Marketing LLC, a healthcare marketing intelligence company, from
October 1995 until March 1997. From June 1991 until October 1995, he was
President of Medical News Network, a subdivision of Whittle Communications LP,
a marketing communications company, and from 1987 to 1991, he was Group
President of VNU Group, a conglomerate of healthcare and consumer marketing
intelligence companies.
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<PAGE>
Brian J. Smith joined the Company as Executive Vice President and
President--BLP Sales Support Division in August 1997. Prior to joining the
Company, he served as Vice President of Sales and Marketing of Watson
Laboratories, Inc., a pharmaceutical manufacturing company and a subsidiary of
Watson Pharmaceuticals, Inc., from August 1995 until joining the Company and
as Director of Marketing/Managed Care at Forest Laboratories, Inc., a
pharmaceutical manufacturing company from August 1988 to July 1995.
Martin J. Veilleux joined the Company as Controller in March 1997 and became
Executive Vice President--Finance, Chief Financial Officer, Secretary and
Treasurer in July 1997. Prior to joining the Company, he served in positions
of increasing responsibility over a ten year period at Concurrent Computer
Corporation, serving most recently as Director of Finance from November 1991
to September 1994 and as Corporate Controller until leaving Concurrent
Computer in September 1996.
Christos S. Efessiou joined the Company in March 1998 as Executive Vice
President and President of Strategic Implications International, Inc., a
wholly-owned subsidiary specializing in continuing health care education. From
1991 to March, 1998, he served as Chief Executive Officer of Strategic
Implications, a corporation he founded in 1991 and whose assets were purchased
by the Company in 1998. From May 1990 to May 1991, he was Group Product
Manager, Cardiovascular Products, at Boehringer Mannheim Pharmaceuticals
Corporation, and from August 1985 to May 1990, he held a variety of sales and
marketing positions at Boehringer Ingelheim Pharmaceuticals, Inc. From 1992 to
1995, he held a position in respiratory care and continuing education at the
Brigham and Women's hospital in Boston and the Newton-Wellesley Hospital, a
Tufts Medical School affiliate.
Arthur R. Marchesini, Jr. joined the Company as Vice President and General
Manager--Promotional Conferencing Services Division in September 1997. Prior
to joining the Company, he was with Merck for eleven years and held positions
in sales, sales training, field administration, district sales management and
product management, serving most recently as Senior Director of Managed Care.
Roger Boissonneault has served as a director of the Company since April 1997
and is the President of Warner-Chilcott Laboratories, Inc., a pharmaceutical
company. Before becoming President of Warner-Chilcott Laboratories, Inc. in
April 1996, he was associated with Warner-Lambert Co., the former parent
company of Warner Chilcott, since 1976, most recently as Vice President,
Female Health Care from October 1991 to January 1994 and Vice President and
General Manager from January 1994 to April 1996.
Roger B. Kafker has served as a director of the Company since December 1996.
He has been associated with TA Associates, Inc. or its predecessor since 1989
and became a Principal of that firm in 1994 and a Managing Director in 1995.
Mr. Kafker is also a director of ANSYS, Inc., a computer software company,
Monarch Dental Corporation, a manager of dental group practices, and
Affiliated Managers Group, Inc., an investment management holding company.
Jacqueline C. Morby has served as a director of the Company since December
1996. She has been Managing Director or a partner of TA Associates, Inc. or
its predecessor since 1982. Ms. Morby is also a director of ANSYS, Inc., a
computer software company, Ontrack Data International, Inc., a data recovery
and software company, and Pacific Life Corp., a life insurance company.
Joseph E. Smith served in various positions with Warner-Lambert Co., a
pharmaceutical company, from March 1989 until his retirement in September
1997. He was a corporate vice president at Warner-Lambert and served as a
member of the office of the Chairman and as a member of the firm's management
committee. He also served as President, Pharmaceuticals (Parke-Davis) and
President, Shaving Products (Schick and Wilkinson Sword). Mr. Smith is also a
director of VIVUS, Inc., a pharmaceutical company, and Penederm, Inc., a
pharmaceutical company.
John A. Staley, IV has served as a director of the Company since May 1997.
Mr. Staley was Chief Executive Officer of Federated Research Corp., an
investment management firm and a subsidiary of Federated Investors Inc. which
is, in turn, a wholly owned subsidiary of Federated Investors, a Delaware
business trust, from 1984
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<PAGE>
through November 1994 when he retired. Upon his retirement, Mr. Staley worked
as a self-employed financial advisor from November 1994 to November 1996 and
has been the Chief Executive Officer of Staley Capital Advisers, Inc., an
investment advisory firm, from November 1996 to present. He is also a director
of Robroy Industries, Inc., a manufacturer of conduit products.
BOARD OF DIRECTORS
The number of directors of the Company is currently fixed at seven. The
Company's Board of Directors is divided into three classes, with the members
of each class of directors serving for staggered three-year terms. The Board
consists of two Class I Directors (Ms. Morby and Mr. Staley), three Class II
Directors (Mr. Boron, Mr. Kafker and Mr. Smith) and two Class III Directors
(Mr. Boissonneault and Mr. LePore), whose terms will expire at the 1998, 1999
and 2000 annual meetings of stockholders, respectively.
The Board of Directors has established an Audit Committee (the "Audit
Committee") and a Compensation and Option Committee (the "Compensation
Committee"). The Audit Committee recommends the firm to be appointed as
independent accountants to audit financial statements and to perform services
related to the audit, reviews the scope and results of the audit with the
independent accountants, reviews with management and the independent
accountants the Company's annual operating results, considers the adequacy of
the internal accounting procedures and considers the effect of such procedures
on the accountants' independence. The Audit Committee consists of Mr. Kafker
and Mr. Boissonneault, neither of whom is an officer nor an employee of the
Company. The Compensation Committee reviews and recommends the compensation
arrangements for officers and other senior level employees, reviews general
compensation levels for other employees as a group, determines the options or
stock to be granted to eligible persons under the 1996 Stock Plan and takes
such other action as may be required in connection with the Company's
compensation and incentive plans. The Compensation Committee consists of Ms.
Morby and Mr. Staley.
Non-employee directors other than Mr. Kafker and Ms. Morby (the "Independent
Directors") each purchased 6,666 shares of restricted Class A Common Stock for
$3.00 per share upon joining the Board, and receive fees of $2,000 for each
meeting of the Board of Directors and $1,000 for each meeting of a Board
committee they attend. Further, each director is reimbursed for reasonable
travel and other expenses incurred in attending meetings. See "Management--
Employee Stock and Other Benefit Plans--Restricted Stock Grants."
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<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation. The following summary compensation table sets forth
information for each of the last two fiscal years concerning compensation for
services rendered in all capacities awarded to, earned by or paid to the
Company's Chief Executive Officer, the four most highly compensated executive
officers at the end of 1997 who earned in excess of $100,000 during 1997, and
one additional individual who would have been included in the four most highly
compensated executive officers but for the fact that he was not serving as an
executive officer at the end of 1997 (collectively, the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------ ----------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS (SHARES) COMPENSATION($)
- --------------------------- ---- ---------- --------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
Patrick G. LePore....... 1997 315,000 45,000 100,000 73,167(1)(2)
Chairman, President and 1996 421,226 998,700 -- 1,769,301(3)(4)
Chief Executive Officer
Gregory F. Boron........ 1997 285,000 -- -- 31,365(1)(2)
Chief Operating Officer 1996 392,886 897,200 -- 719,263(3)(4)
Timothy J. McIntyre(5).. 1997 113,462 100,000 249,999 86,970(1)(6)
Executive Vice 1996 -- -- -- --
President
Brian Smith(7).......... 1997 68,535 100,000 200,000 8,022(1)
Executive Vice 1996 -- -- -- --
President
Martin J. Veilleux(8)... 1997 101,500 30,000 59,999 7,886(1)
Executive Vice 1996 -- -- -- --
President and
Chief Financial Officer
Christopher J. 1997 207,419 -- -- 34,301(1)(2)
Sweeney(9)............. 1996 325,884(10) 109,400 -- 5,702,630(3)(11)
Former Executive Vice
President
</TABLE>
- --------
(1) Includes an auto allowance of $12,619 for Mr. LePore; $9,645 for Mr.
Boron; $3,388 for Mr. McIntyre; $3,150 for Mr. Smith; $3,000 for Mr.
Veilleux; and $10,800 for Mr. Sweeney; and insurance premiums paid by the
Company of $17,461 on behalf of Mr. LePore; $14,339 on behalf of Mr.
Boron; $8,582 paid on behalf of Mr. McIntyre; $4,872 paid on behalf of
Mr. Smith; $4,886 paid on behalf of Mr. Veilleux; and $7,086 paid on
behalf of Mr. Sweeney.
(2) Includes club dues paid by the Company on behalf of $43,087 for Mr.
LePore; $7,381 paid on behalf of Mr. Boron; and $16,415 paid on behalf of
Mr. Sweeney.
(3) Includes special bonuses, including a bonus paid as part of the Company's
1996 recapitalization transaction, totaling the following amounts: Mr.
LePore $1,739,499, Mr. Boron $696,125, and Mr. Sweeney $5,694,230. See
"Certain Transactions."
(4) Includes premiums on life insurance paid by the Company of $29,802 on
behalf of Mr. LePore and $23,138 paid on behalf of Mr. Boron.
(5) Employment commenced in January 1997.
(6) Includes a relocation bonus of $75,000.
(7) Employment commenced in August 1997.
(8) Employment commenced in March 1997.
(9) Mr. Sweeney resigned in September 1997.
(10) Includes $150,884 Mr. Sweeney earned in sales salaries prior to becoming
an executive officer in July 1996.
(11) Includes a car allowance of $8,400.
42
<PAGE>
Option Grants. The following table sets forth certain information concerning
the grant of options to purchase Common Stock of the Company to the Named
Executive Officers who received such grants during 1997.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF PERCENT ANNUAL RATES OF
SECURITIES OF TOTAL STOCK PRICE
UNDERLYING OPTIONS EXERCISE APPRECIATION
OPTIONS GRANTED OR BASE FOR OPTION TERM(1)
GRANTED TO EMPLOYEES PRICE PER EXPIRATION ---------------------
NAME (#) (2) IN FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
---- ---------- -------------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Patrick G. LePore....... 100,000(3) 14.0% 22.00 11/10/07 1,383,600 3,506,200
Timothy J. McIntyre..... 199,999(4) 28.0% 9.45 6/30/07 1,188,594 3,011,985
50,000(5) 7.0% 22.00 11/10/07 691,750 1,753,100
Brian J. Smith.......... 200,000(6) 28.0% 12.00 8/18/07 1,509,200 3,825,000
Martin J. Veilleux...... 13,333(7) 1.9% 9.45 6/09/07 79,238 200,795
46,666(8) 6.5% 12.00 8/07/07 352,174 892,460
</TABLE>
- --------
(1) This column shows the hypothetical gain or option spreads of the options
granted based on assumed annual compound stock appreciation rates of 5%
and 10% over the full 10-year term of the options. The 5% and 10% assumed
rates of appreciation are mandated by the rules of the Securities and
Exchange Commission and do not represent the Company's estimate or
projection of future Common Stock prices. The gains shown are net of the
option exercise price, but do not include deductions for taxes or other
expenses associated with the exercise of the option or the sale of the
underlying shares, or reflect non-transferability, vesting or termination
provisions. The actual gains, if any, on the exercises of stock options
will depend on the future performance of the Common Stock.
(2) All options are subject to the employee's continued employment and
terminate ten years after the grant date. All options were granted at fair
market value as determined by the Compensation Committee of the Board of
Directors.
(3) Such options become exercisable in four equal annual installments,
commencing on November 10, 1998.
(4) Such options become exercisable on June 30, 2004, subject to earlier
vesting based on achievement of specified performance objectives.
(5) Such options become exercisable in two equal annual installments,
commencing on November 10, 1998.
(6) 66,666 options vest and become exercisable on September 29, 1998. The
remaining 133,334 options vest in 5 equal annual installments beginning on
August 18, 2000, subject to earlier vesting based on achievement of
specified performance objectives.
(7) Such options become exercisable in four equal annual installments,
commencing on June 9, 1998.
(8) Such options become exercisable in four equal annual installments,
commencing on August 7, 1998.
Option Exercises and Option Values. The following table sets forth
information concerning the number and value of unexercised options to purchase
Common Stock of the Company held by the Named Executive Officers who held such
options at December 31, 1997. No Named Executive Officer exercised any options
to purchase Common Stock during 1997.
AGGREGATED FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT DECEMBER 31, 1997 (#) AT DECEMBER 31, 1997 ($) (1)
---------------------------------- -------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------------- ---------------- -------------- ---------------
<S> <C> <C> <C> <C>
Patrick G. LePore....... -- 100,000 -- 550,000
Timothy J. McIntyre..... 66,667 183,332 1,203,339 2,681,642
Brian J. Smith.......... -- 200,000 -- 3,100,000
Martin J. Veilleux...... -- 59,999 -- 963,984
</TABLE>
- --------
(1) Based on the last reported sale price on the Nasdaq National Market on
December 31, 1997 ($27.50 per share) less the option exercise price.
43
<PAGE>
EMPLOYEE STOCK AND OTHER BENEFIT PLANS
1996 Stock Option and Grant Plan
Summary of the Plan. The Plan was initially adopted by the Board of
Directors in December 1996 and was subsequently approved by the Company's
stockholders. The Plan permits (i) the grant of Incentive Options, (ii) the
grant of Non-Qualified Options, (iii) the issuance or sale of Common Stock
with or without vesting or other restrictions ("Restricted Stock") (iv) the
issuance or sale of Common Stock without restrictions ("Unrestricted Stock"
collectively, with Restricted Stock, "Stock Grants"), (v) the grant of Common
Stock upon the attainment of specified performance goals ("Performance Share
Awards"), (vi) the grant of the right to receive cash dividends with the
holders of the Common Stock as if the recipient held a specified number of
shares of the Common Stock ("Dividend Equivalent Rights") and (vii) the grant
of the right to receive the value of the excess of the fair market value of
the Common Stock over the exercise price of the Common Stock ("Stock
Appreciation Rights" or "SARs"). These grants may be made to officers and
other employees, directors, advisors, consultants and other key persons of the
Company and its subsidiaries. The 1996 Stock Plan currently provides for the
issuance of 3,000,000 shares of Common Stock plus an additional number of
shares equal to five percent (5%) of the shares of stock issued by the Company
in the previous six months (measured as of June 30 and December 31 of each
year). Currently, no more than 3,000,000 shares can be granted as incentive
stock options. On April 25, 1998, the Board of Directors voted to increase the
base number of shares reserved for issuance under the 1996 Stock Plan by
1,000,000 shares and to increase the number of shares for which incentive
stock options may be issued under the 1996 Stock Plan by 1,000,000 shares to
4,000,000. Of the shares currently reserved for issuance, (i) 929,893 shares
were subject to outstanding options with a weighted average exercise price of
$15.89 per share at April 15, 1998 and (ii) 1,212,986 shares were sold
pursuant to restricted and unrestricted stock awards for an aggregate cash
purchase price of $574,733 as of April 15, 1998. The Company has repurchased
466,666 of these shares from a former executive officer of the Company. See
"Certain Transactions." These repurchased shares are not available for future
grant under the 1996 Stock Plan. As of April 15, 1998, 854,739 shares were
available for future grant under the 1996 Stock Plan. On and after the date
the 1996 Stock Plan becomes subject to Section 162(m) of the Internal Revenue
Code of 1986, as amended, options with respect to no more than 333,333 shares
of Common Stock may be granted to any one individual in any calendar year.
The 1996 Stock Plan is administered by the Compensation Committee of the
Board of Directors. Subject to the provisions of the 1996 Stock Plan, the
Compensation Committee has full power to determine from among the persons
eligible for grants under the 1996 Stock Plan the individuals to whom grants
will be granted, the combination of grants to participants and the specific
terms of each grant, including vesting. Incentive Options may be granted only
to officers or other full-time employees of the Company or its subsidiaries,
including members of the Board of Directors who are also full-time employees
of the Company or its subsidiaries. The Compensation Committee may delegate
the power to grant options to non-executive employees to the Company's Chief
Executive Officer.
The 1996 Stock Plan also permits Stock Grants, Performance Share Awards,
grants of Dividend Equivalent Rights and SARs. Stock Grants may be made to
persons eligible under the 1996 Stock Plan, subject to such conditions and
restrictions as the Compensation Committee may determine. Prior to the vesting
of shares, recipients of Stock Grants generally will have all the rights of a
stockholder with respect to the shares, including voting and dividend rights,
subject only to the conditions and restrictions set forth in the 1996 Stock
Plan or in any agreement. The Compensation Committee may also make Stock
Grants to persons eligible under the 1996 Stock Plan in recognition of past
services or other valid consideration, or in lieu of cash compensation. In the
case of Performance Share Awards, the issuance of shares of Common Stock will
occur only after the conditions and restrictions set forth in the grant
agreement are satisfied. SARs may be granted in tandem with, or independently
of, Incentive Options or Non-Qualified Options. The Compensation Committee may
also grant Dividend Equivalent Rights in conjunction with any other grant made
pursuant to the 1996 Stock Plan or as a free standing grant. Dividend
Equivalent Rights may be paid currently or deemed to be reinvested in
additional shares of Common Stock, which may thereafter accrue further
dividends.
44
<PAGE>
The Compensation Committee may, in its sole discretion, accelerate or extend
the date or dates on which all or any particular award or awards granted under
the 1996 Stock Plan may be exercised or vest. Vesting of options granted under
the 1996 Stock Plan generally does not accelerate on a dissolution,
liquidation or sale of the Company. Options held by directors and certain
employees vest in whole or part on such events. To the extent not fully vested
and exercised, options granted under the 1996 Stock Plan terminate upon the
dissolution, liquidation or sale of the Company, except as the Compensation
Committee shall otherwise determine.
Options. The option exercise price of options granted under the 1996 Stock
Plan is determined by the Compensation Committee but, in the case of Incentive
Options, may not be less than 100% of the fair market value of the underlying
shares on the date of grant. If any employee of the Company or any subsidiary
owns (or is deemed to own) at the date of grant shares of stock representing
in excess of 10% of the combined voting power of all classes of stock of the
Company or any parent or subsidiary, the option exercise price for Incentive
Options granted to such employee may not be less than 110% of the fair market
value of the underlying shares on that date. Non-Qualified Options may be
granted at prices which are less than the fair market value of the underlying
shares on the date granted. Options typically are subject to vesting
schedules, terminate 10 years from the date of grant and may be exercised for
specified periods subsequent to the termination of the optionee's employment
or other business relationship with the Company. At the discretion of the
Compensation Committee, any option may include a "reload" feature pursuant to
which an optionee exercising an option receives in addition to the number of
shares of Common Stock due on the exercise of such an option an additional
option with an exercise price equal to the fair market value of the Common
Stock on the date such additional option is granted. Upon the exercise of
options, the option exercise price must be paid in full either in cash or by
certified or bank check or other instrument acceptable to the Compensation
Committee or, in the sole discretion of the Compensation Committee, by
delivery of shares of Common Stock already owned by the optionee. The exercise
price may also be delivered to the Company by a broker pursuant to irrevocable
instructions to the broker selling the underlying shares from the optionee, or
by the delivery of a promissory note if the Board has authorized the loan of
funds, provided that at least the par value of the shares is paid other than
by promissory note.
Restricted and Unrestricted Stock Grants. Since adopting the 1996 Stock
Plan, the Company has sold an aggregate of 802,988 shares of restricted Common
Stock to employees and directors of the Company under the 1996 Stock Plan for
an aggregate cash purchase price of $390,883, including an aggregate of
400,000 shares sold to Messrs. LePore & Boron for an aggregate cash purchase
price of $171,000. The Company has sold an aggregate of 409,998 shares of
unrestricted Common Stock to employees and consultants for an aggregate cash
purchase price of $183,850. These shares generally vest upon the achievement
of specified performance objectives and/or at a specified date or dates, with
unvested shares subject to repurchase at cost upon the termination of the
purchaser's employment or other relationship with the Company. All shares of
restricted Common Stock issued are generally treated as fully vested on any
merger, liquidation or sale of substantially all of the assets of the Company.
Executive Bonus Plan. The Company recently adopted an executive bonus plan
to provide incentive bonuses to executive officers of the Company for the
attainment of financial and other objectives. Target awards are expressed as a
percentage of the executive's base salary. Actual awards are based on the
target award as adjusted for Company and individual performance. Company
performance is measured by pre-established operating income goals of the
Company and, for executives with divisional responsibility, operating income
goals of the division for which such person had direct management
responsibility. Individual performance is based on a subjective evaluation of
the executive's personal performance. Of the award, two-thirds is based on
Company performance and one-third is based on individual performance.
Depending on actual Company and individual performance, the actual bonus may
range from 0% to 200% of the individual's target bonus.
EMPLOYMENT AGREEMENTS
In connection with the TA Transaction, the Company entered into Employment
Agreements with Patrick G. LePore and Gregory F. Boron, both of which contain
substantially the same terms (except for titles, duties and base salary.) The
Employment Agreements provide for base salary payments to Mr. LePore at the
annual rate of
45
<PAGE>
$350,000 and Mr. Boron at the annual rate of $285,000. Both of these
agreements provides for (i) an initial employment term ending on December 4,
1999 with one year renewals thereafter, subject to earlier termination by
either party and (ii) the continuation of base salary payments until the later
of December 4, 1999 or one year following termination of employment in the
event the employee's employment is terminated by the Company without cause (as
defined) or by such employee following a material default by the Company. In
connection with the TA Transactions, the Company also entered into Non-
Competition Agreements with Messrs. LePore and Boron. These agreements provide
that these employees will not compete with the Company until December 4, 2000
or the first anniversary of termination of their employment, if later.
In June 1997, the Company entered into an Employment Agreement with Timothy
J. McIntyre. The agreement provides for (i) an annual base salary of $225,000,
(ii) an employment term ending on June 9, 1999 with potential one-year
renewals thereafter, subject to earlier termination by either party, and (iii)
the continuation of base salary and benefit payments until the later of June
9, 1999 or one year following termination of employment in the event the
employee's employment is terminated by the Company without cause (as defined)
or by Mr. McIntyre following a material default by the Company. Mr. McIntyre's
agreement prohibits competition with the Company until June 9, 1999 or the
first anniversary of the termination of his employment, if later.
In August 1997, the Company entered into an Employment Agreement with Martin
J. Veilleux. The agreement provides for (i) an annual base salary of $160,000,
(ii) an initial employment term expiring on July 2, 1999 with one-year
renewals thereafter, subject to earlier termination by either party and (iii)
the continuation of base salary payments until the later of July 2, 1999 or
one year following termination of employment in the event the employee's
employment is terminated by the Company without cause (as defined) or by Mr.
Veilleux following a material default by the Company. Mr. Veilleux's agreement
prohibits competition with the Company until the first anniversary of the date
of his termination of employment with the Company.
In August 1997, the Company also entered into an Employment Agreement with
Brian J. Smith. The agreement provides for (i) an annual base salary of
$200,000, (ii) an employment term expiring on December 31, 1999 with potential
one-year renewals thereafter, subject to earlier termination by either party
and (iii) the continuation of base salary and benefit payments until the later
of December 31, 1999 or 270 days following termination of employment in the
event the employee's employment is terminated by the Company without cause (as
defined) or by Mr. Smith following a material default by the Company. Mr.
Smith's agreement prohibits competition with the Company until 270 days after
the date of his termination of employment with the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to December 1996, Patrick G. LePore made compensation decisions as
Chief Executive Officer of the Company. Since December 1996, all executive
officer compensation decisions have been made by the Compensation Committee.
The current members of the Compensation Committee are Mr. Staley and Ms.
Morby. Neither of these individuals is an executive officer of the Company.
The Compensation Committee reviews and makes recommendations to the Board of
Directors regarding the compensation for senior management and key employees
of the Company, including salaries and bonuses.
46
<PAGE>
CERTAIN TRANSACTIONS
In December 1996, the Company completed a series of transactions with TA
Associates, Inc. and the Company's senior executive officers. In connection
with these transactions:
(i) the Company, then a New Jersey corporation, was reorganized under the
laws of Delaware;
(ii) the Company incurred $21.0 million of senior secured indebtedness
under the Credit Facility;
(iii) the TA Investors, principally including investment funds associated
with TA Associates, Inc. and John A. Staley, IV, a director of the
Company, invested $12.5 million to acquire 7,000,000 shares of
Convertible Participating Preferred Stock which were convertible into
4,666,664 shares of Common Stock and 5,600,000 shares of Redeemable
Preferred Stock redeemable upon completion of the IPO for an
aggregate cash payment of $10 million plus accumulated and unpaid
dividends;
(iv) the Company redeemed shares of Common Stock held by Patrick G. LePore,
Chief Executive Officer of the Company, for a cash payment of $9.4
million, paid or agreed to pay cash and in-kind bonuses to Mr. LePore
in the amount of $1,739,499 (which bonuses were fully paid by the end
of the first quarter of 1997), entered into an Employment Agreement
with Mr. LePore as described under "Management--Employment
Agreements," and sold 200,000 shares of restricted Common Stock to Mr.
LePore for an aggregate purchase price of $85,500;
(v) the Company redeemed shares of Common Stock held by Gregory F. Boron,
Chief Operating Officer and Executive Vice President--Administration,
for a cash payment of $9.4 million, paid or agreed to pay cash and in-
kind bonuses to Mr. Boron in the amount of $696,125 (which bonuses
were fully paid by the end of the first quarter of 1997), entered into
an Employment Agreement with Mr. Boron as described under
"Management--Employment Agreements," and sold 200,000 shares of
restricted Common Stock to Mr. Boron for an aggregate purchase price
of $85,500;
(vi) the Company paid or agreed to pay cash and in-kind bonuses to
Christopher J. Sweeney, the former Executive Vice President of the
Company, in an aggregate amount of $5,694,230 (which bonuses were
fully paid by the end of the first quarter of 1997), entered into an
Employment Agreement with Mr. Sweeney as described below and sold
166,666 shares of restricted Common Stock to Mr. Sweeney for an
aggregate purchase price of $71,250 and 300,000 shares of unrestricted
Common Stock to Mr. Sweeney for an aggregate purchase price of
$128,250;
(vii) the Company paid or agreed to pay cash and in-kind bonuses to Michael
W. Foti, the former Chief Financial Officer of the Company, in an
aggregate amount of $1,894,139 (which bonuses were fully paid by the
end of the first quarter of 1997), entered into an Employment
Agreement with Mr. Foti as described below, and sold 100,000 shares
of restricted Common Stock to Mr. Foti for an aggregate purchase
price of $42,750 and 100,000 shares of unrestricted Common Stock to
Mr. Foti for an aggregate purchase price of $42,750; and
(viii) the Company paid Thomas S. Boron, a former officer and shareholder
of the Company and the brother of Gregory F. Boron, Chief Operating
Officer and Executive Vice President--Administration, $6,175,000 in
satisfaction of obligations relating to the repurchase of Thomas
Boron's stock under a stock purchase agreement dated June 18, 1996
and a related consulting agreement, following payment by the
Company's predecessor to Mr. Boron of $549,662 in 1996 in connection
with these agreements.
See "Business--Legal Proceedings," "Management--Employment Agreements," "--
Employee Stock and Other Benefit Plans--Restricted Stock Grants" and
"Principal and Selling Shareholders."
In 1996, the Company entered into an Employment Agreement and a Non-
Competition Agreement with Mr. Foti, the Company's former Chief Financial
Officer, which agreement provides for base salary payments to Mr. Foti at the
annual rate of $185,000 through December 4, 1999. Mr. Foti is now a consultant
to the Company and is compensated therefor substantially in accordance with
the financial terms of the Employment Agreement.
47
<PAGE>
In 1996, the Company entered into an Employment Agreement and a Non-
Competition Agreement with Mr. Sweeney, a former Executive Vice President of
the Company. In connection with Mr. Sweeney's resignation in September, 1997,
the Company repurchased 466,666 shares of Common Stock held by Mr. Sweeney for
$5,600,000. Mr. Sweeney is now a consultant to the Company and receives a
salary of $150,000 per annum until September 15, 1998.
Upon completion of the Company's IPO in September, 1997, the 7,000,000
shares of Convertible Participating Preferred Stock held by the TA Investors
converted into 4,666,664 shares of Common Stock and 5,600,000 shares of
Redeemable Preferred Stock. By its terms, the Redeemable Preferred Stock was
immediately redeemed for $10,000,000 plus accumulated dividends of $831,000.
In 1996, the Company rented a house from Mr. Thomas S. Boron for
approximately $84,000. This lease was canceled in connection with the TA
Transaction.
Mr. James LePore and Mr. Robert LePore, brothers of Patrick G. LePore, the
Company's Chief Executive Officer, are each partners of LePore, Zimmerer,
LePore & Luizzi, the Company's general counsel. During fiscal 1997, the
Company paid fees of approximately $75,000 to LePore, Zimmerer, LePore &
Luizzi for legal services rendered. The Company believes that the fees paid
for these services are at rates no less favorable to the Company than could
have been obtained from unaffiliated third parties.
Mr. Gerard LePore, brother of Patrick G. LePore, is employed as a Group
Account Supervisor for the Company. During 1997, Mr. Gerard LePore's salary
was approximately $95,000 and was paid sales commissions of approximately
$154,000.
Pursuant to a Stockholders' Agreement, as amended (the "Stockholders'
Agreement"), initially entered into in connection with the TA Transaction, to
which the Company, the TA Investors, Patrick G. LePore, Gregory Boron,
Christopher Sweeney and Michael W. Foti are parties, (i) each party received
"piggy back" registration rights, (ii) the TA Investors received demand
registration rights, (iii) each party received the right to demand one or more
registrations on Form S-3 if the Company becomes eligible to use Form S-3 and
if the anticipated net aggregate sale price of such registered shares exceeds
$500,000, (iv) each party granted to and received from the other investors
rights (the "Co-Sale Rights") to participate on a pro rata basis in certain
resales of Common Stock and agreed to restrictions on transfers of shares, (v)
each party was granted participation rights with respect to certain future
issuances of securities by the Company, and (vi) each party agreed to elect
and continue in office as Directors two individuals nominated by two-thirds
interest of the employee stockholders who are parties to the Stockholders'
Agreement. Mr. LePore and Mr. Boron have been elected as Directors of the
Company pursuant to the Stockholders' Agreement. Also in connection with the
TA Transactions, the Company agreed to indemnify the TA Investors and the
controlling persons of the TA Investors (of whom Mr. Kafker and Ms. Morby are
directors of the Company) against claims and liabilities including claims and
liabilities arising under the securities laws. Effective upon the completion
of the IPO, provisions of the Stockholders' Agreement relating to the
participation rights, the Co-Sale Rights, restrictions on transfers of shares
and the election of the Board of Directors terminated.
The Company has a contract with Warner-Chilcott in connection with its
teleservices and contract sales services businesses, and Mr. Roger
Boissonneault, a director of the Company, is the President of Warner-Chilcott.
The Company has a policy providing that all material transactions between
the Company and its officers, directors and other affiliates must (i) be
approved by a majority of the members of the Company's Board of Directors and
by a majority of the disinterested members of the Company's Board of Directors
and (ii) be on terms no less favorable to the Company than could be obtained
from unaffiliated third parties. In addition, this policy requires that any
loans by the Company to its officers, directors or other affiliates be for
bona fide business purposes only.
48
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth information as to the beneficial ownership of
the Company's Common Stock as of April 15, 1998 and as adjusted to reflect the
sale of the shares of Common Stock offered hereby of (i) each person known by
the Company to own beneficially five percent or more of the outstanding shares
of Common Stock, (ii) each director and the Named Executive Officers of the
Company and (iii) all directors and executive officers of the Company as a
group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO THIS OWNED AFTER THIS
OFFERING(1) NUMBER OF OFFERING(1)
DIRECTORS, OFFICERS -------------------- SHARES -----------------------
AND 5% STOCKHOLDERS NUMBER PERCENTAGE OFFERED NUMBER PERCENTAGE(2)
------------------- --------- ---------- --------- --------- -------------
<S> <C> <C> <C> <C> <C>
TA Associates Group
(3)(4)................. 4,060,066 37.3% 2,000,000 2,060,066 16.6%
AMVESCAP PLC(3)(5)...... 688,000 6.3% 0 688,000 5.6%
Patrick G. LePore (6)... 993,333 9.1% 200,000 793,333 6.4%
Gregory F. Boron (7).... 921,333 8.5% 200,000 721,333 5.8%
Roger Boissonneault
(8).................... 6,666 * 0 6,666 * %
Roger B. Kafker (9)..... 5,728 * 0 5,728 * %
Jacqueline C. Morby
(10)................... 6,304 * 0 6,304 * %
Joseph E. Smith (11).... 6,666 * 0 6,666 * %
John A. Staley, IV
(12)................... 193,332 1.8% 0 193,332 1.6%
Timothy J. McIntyre
(13)................... 80,833 * 0 80,833 * %
Brian J. Smith (14)..... 0 * 0 0 * %
Martin J. Veilleux
(15)................... 3,333 * 0 3,333 * %
Christopher J. Sweeney
(16)................... 0 * 0 0 * %
Park Street Investors,
L.P. (17).............. 400,000 3.7% 100,000 300,000 2.4%
All executive officers
and directors as a
group (10 persons)..... 2,217,528 20.0% 2,400,000 1,817,528 14.7%
</TABLE>
- --------
* Less than 1%.
(1) All percentages have been determined as of April 15, 1998 in accordance
with Rule 13d-3 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). For purposes of this table, a person or group of
persons is deemed to have "beneficial ownership" of any shares of Common
Stock which such person has the right to acquire within 60 days after the
date of this Prospectus. For purposes of computing the percentage of
outstanding shares of Common Stock held by each person or group of
persons named above, any security which such person or persons has or
have the right to acquire within 60 days after the date of this
Prospectus is deemed to be outstanding for such person, but is not deemed
to be outstanding for the purpose of computing the percentage ownership
of any other person. As of April 15, 1998, a total of 10,887,411 shares
of Common Stock were issued and outstanding. The applicable percentage of
"beneficial ownership" after this offering is based upon 12,387,411
shares of Common Stock outstanding.
(2) Assumes no exercise of the Underwriters' over-allotment option.
(3) The address of the TA Associates Group is High Street Tower, Suite 2500,
125 High Street, Boston, Massachusetts 02110-2720. The address of
AMVESCAP PLC is 11 Devonshire Square, London, EC2M 4YR. The address of
Mr. Kafker and Ms. Morby is c/o TA Associates, Inc., High Street Tower,
Suite 2500, 125 High Street, Boston, Massachusetts 02110-2720. The
address of all other listed stockholders is c/o Boron, LePore &
Associates, Inc., 17-17 Route 208 North, Fair Lawn, New Jersey 07410.
(4) Includes (i) 2,488,318 shares of Common Stock owned by Advent VII L.P.,
(ii) 1,527,617 shares of Common Stock owned by Advent Atlantic and
Pacific III L.P., and (iii) 44,131 shares of Common Stock owned by TA
Venture Investors Limited Partnership. Advent VII L.P., Advent Atlantic
and Pacific III L.P., and TA Venture Investors Limited Partnership are
part of an affiliated group of investment partnerships referred to,
collectively, as the "TA Associates Group" or the "Selling Stockholders."
The general partner of Advent VII L.P. is TA Associates VII L.P. The
general partner of Advent Atlantic and
49
<PAGE>
Pacific III L.P. is TA Associates AAP III Partners L.P. The general
partner of each of TA Associates VII L.P. and TA Associates AAP III
Partners L.P. is TA Associates, Inc. In such capacity, TA Associates, Inc.
exercises sole voting and investment power with respect to all of the
shares held of record by the named investment partnerships, with the
exception of those shares held by TA Venture Investors Limited
Partnership; individually, no stockholder, director or officer of TA
Associates, Inc. is deemed to have or share such voting or investment
power. Principals and employees of TA Associates, Inc. (including Ms.
Morby and Mr. Kafker, directors of the Company) comprise the general
partners of TA Venture Investors Limited Partnership. In such capacity,
Ms. Morby and Mr. Kafker may each be deemed to share voting and investment
power with respect to the 44,131 shares held of record by TA Venture
Investors Limited Partnership. Ms. Morby and Mr. Kafker each disclaim
beneficial ownership of all shares, except as to 6,304 shares and 5,728
shares, respectively, held by TA Venture Investors Limited Partnership, as
to which each holds a pecuniary interest. See Notes 9 and 10.
(5) Based upon a Schedule 13G filed with the Securities and Exchange
Commission on February 12, 1998 as a parent holding company for its
numerous subsidiaries who hold shares of Common Stock.
(6) Includes 80,000 shares of restricted Common Stock held by Mr. LePore,
which shares vest on December 4, 2003 (subject to earlier vesting based
on achievement by the Company of specified performance objectives or a
sale of the Company) and which are subject to repurchase at a price of
$.43 per share upon a voluntary termination of Mr. LePore's employment or
a termination for cause prior to the relevant vesting date. Also includes
400,000 shares of Common Stock held by Park Street Investors, L.P., a
limited partnership in which Mr. LePore holds a 40% limited partnership
interest. The general partner of Park Street Investors, L.P. is Park
Street Investors, Inc., a corporation in which Mr. LePore shares voting
and investment power. Park Street Investors, L.P. is selling 100,000 of
the 200,000 shares of Common Stock reported as being sold by Mr. LePore
in this offering. See Note 17. Does not include 29,998 shares of Common
Stock held by siblings of Mr. LePore, as to which shares Mr. LePore
disclaims beneficial ownership. Does not include 100,000 options which
vest in four equal annual installments beginning on November 10, 1998.
(7) Includes 80,000 shares of restricted Common Stock held by Mr. Boron,
which shares vest on December 4, 2003 (subject to earlier vesting based
on achievement by the Company of specified performance objectives or a
sale of the Company) and which are subject to repurchase at a price of
$.43 per share upon a voluntary termination of Mr. Boron's employment or
a termination for cause prior to the relevant vesting date. Does not
include 78,664 shares of Common Stock held by irrevocable trusts for the
benefit of members of Mr. Boron's family of which Mr. Boron is not a
trustee, as to which shares Mr. Boron disclaims beneficial ownership.
(8) Includes 6,666 shares of restricted Common Stock held by Mr.
Boissonneault, which shares vest in four equal annual installments
beginning on April 10, 1998 subject to earlier vesting upon a sale of the
Company, and which are subject to repurchase at a price of $3.00 per
share upon termination of Mr. Boissonneault's service as a director prior
to the relevant vesting date.
(9) Includes 5,758 shares of Common Stock beneficially owned by Mr. Kafker
through TA Venture Investors Limited Partnership, all of which shares are
included in the 4,060,066 shares described in footnote (4) above. Does
not include any shares beneficially owned by Advent VII L.P. or Advent
Atlantic and Pacific III L.P., of which Mr. Kafker disclaims beneficial
ownership.
(10) Includes 6,304 shares of Common Stock beneficially owned by Ms. Morby
through TA Venture Investors Limited Partnership, all of which shares are
included in the 4,060,066 shares described in footnote (4) above. Does
not include any shares beneficially owned by Advent VII L.P. or Advent
Atlantic and Pacific III L.P., of which Ms. Morby disclaims beneficial
ownership.
(11) Includes 6,666 shares of restricted Common Stock held by Mr. Smith, which
shares vest in four equal annual installments beginning on April 10,
1998, subject to earlier vesting upon a sale of the Company and which are
subject to repurchase at a price of $3.00 per share upon termination of
Mr. Smith's service as a director prior to the relevant vesting date.
(12) Includes 186,666 shares of Common Stock held in an individual retirement
rollover account for Mr. Staley's benefit and 6,666 shares of restricted
Common Stock held by Mr. Staley, which shares vest in four equal annual
installments beginning on May 27, 1998 subject to earlier vesting upon a
sale of the
50
<PAGE>
Company, and which are subject to repurchase at a price of $3.00 per share
upon termination of Mr. Staley's service as a director prior to the
relevant vesting date.
(13) Includes 66,667 shares of Common Stock issuable upon exercise of Options
to purchase Common Stock exercisable within 60 days of April 15, 1998.
Does not include 133,337 options which vest on June 30, 2004, subject to
earlier vesting based upon achievement of specified performance
objectives. Also does not include 50,000 options which vest in two equal
annual installments beginning on November 10, 1998.
(14) Does not include 66,666 options which vest and become exercisable on
September 29, 1998 or 133,333 options which vest in 5 equal annual
installments beginning on August 18, 2000, subject to earlier vesting
based on achievement of specific performance goals.
(15) Consists of 3,333 shares of Common Stock issuable upon exercise of
options to purchase Common Stock exercisable within 60 days of April 15,
1998. Does not include 13,333 options which become exercisable in four
equal annual installments beginning on June 9, 1998, or 46,666 options
which become exercisable in four equal annual installments beginning on
August 7, 1998.
(16) Mr. Sweeney, a former Executive Vice President of the Company, resigned
in September 1997.
(17) Patrick G. LePore is the principal stockholder of Park Street Investors,
Inc., the general partner of Park Street Investors, L.P.
51
<PAGE>
DESCRIPTION OF CAPITAL STOCK
AUTHORIZED AND OUTSTANDING CAPITAL STOCK
The authorized capital stock of the Company consists of 50,000,000 shares of
Common Stock, of which 12,387,411 shares will be issued and outstanding upon
completion of this Offering (based upon the number of shares outstanding at
April 15, 1998), and 2,000,000 shares of undesignated preferred stock issuable
in one or more series by the Board of Directors ("Preferred Stock"), of which
no shares will be issued and outstanding upon completion of this Offering.
Common Stock. The holders of Common Stock are entitled to one vote per share
on all matters to be voted on by stockholders and are entitled to receive such
dividends, if any, as may be declared from time to time by the Board of
Directors from funds legally available therefor. Any issuance of Preferred
Stock with a dividend preference over Common Stock could adversely affect the
dividend rights of holders of Common Stock. Holders of Common Stock are not
entitled to cumulative voting rights. Therefore, the holders of a majority of
the shares voted in the election of directors can elect all of the directors
then standing for election, subject to any voting rights of the holders of any
then outstanding Preferred Stock. The holders of Common Stock have no
preemptive or other subscription rights, and there are no conversion rights or
redemption or sinking fund provisions with respect to the Common Stock. All
outstanding shares of Common Stock, including the shares offered hereby, are,
or will be upon completion of the offering, fully paid and non-assessable.
The Company's By-laws provide, subject to the rights of the holders of any
Preferred Stock then outstanding, that the number of directors shall be fixed
by the stockholders. The directors, other than those who may be elected by the
holders of any Preferred Stock, are divided into three classes, as nearly
equal in number as possible, with each class serving for a three-year term.
Subject to any rights of the holders of any Preferred Stock to elect
directors, and to remove any director whom the holders of any Preferred Stock
had the right to elect, any director of the Company may be removed from office
only with cause and by the affirmative vote of at least two-thirds of the
total votes which would be eligible to be cast by stockholders in the election
of such director.
Undesignated Preferred Stock. The Board of Directors of the Company is
authorized, without further action of the stockholders, to issue up to
2,000,000 shares of Preferred Stock in one or more series and to fix the
designations, powers, preferences and the relative, participating, optional or
other special rights of the shares of each series and any qualifications,
limitations and restrictions thereon as set forth in the Company's
Certificate. Any such Preferred Stock issued by the Company may rank prior to
the Common Stock as to dividend rights, liquidation preference or both, may
have full or limited voting rights and may be convertible into shares of
Common Stock.
The issuance of Preferred Stock could have the effect of making it more
difficult for a third party to acquire, or of discouraging a third party from
acquiring or seeking to acquire, a significant portion of the outstanding
Common Stock.
CERTAIN PROVISIONS OF CERTIFICATE AND BY-LAWS
A number of provisions of the Company's Amended and Restated Certificate of
Incorporation, as amended (the "Certificate"), and By-laws concern matters of
corporate governance and the rights of stockholders. Certain of these
provisions, as well as the ability of the Board of Directors to issue shares
of Preferred Stock and to set the voting rights, preferences and other terms
thereof, may be deemed to have an anti-takeover effect and may discourage
takeover attempts not first approved by the Board of Directors, including
takeovers which stockholders may deem to be in their best interests. To the
extent takeover attempts are discouraged, temporary fluctuations in the market
price of the Company's Common Stock, which may result from actual or rumored
takeover attempts, may be inhibited. These provisions, together with the
classified Board of Directors and the ability of the Board to issue Preferred
Stock without further stockholder action, also could delay or frustrate the
removal of incumbent directors or the assumption of control by stockholders,
even if such removal or assumption would be beneficial to stockholders of
Company. These provisions also could discourage or make more difficult
52
<PAGE>
a merger, tender offer or proxy contest, even if favorable to the interests of
stockholders, and could depress the market price of the Common Stock. The
Board of Directors believes that these provisions are appropriate to protect
the interests of the Company and all of its stockholders. The Board of
Directors has no present plans to adopt any other measures or devices which
may be deemed to have an "anti-takeover effect."
Meetings of Stockholders. The By-laws provide that a special meeting of
stockholders may be called only by the President or the Board of Directors
unless otherwise required by law. The By-laws provide that only those matters
set forth in the notice of the special meeting may be considered or acted upon
at that special meeting unless otherwise provided by law. In addition, the By-
laws set forth certain advance notice and informational requirements and time
limitations on any director nomination or any new proposal which a stockholder
wishes to make at an annual meeting of stockholders.
Indemnification and Limitation of Liability. The By-laws provide that
directors and officers of the Company shall be, and in the discretion of the
Board of Directors non-officer employees may be, indemnified by the Company to
the fullest extent authorized by Delaware law, as it now exists or may in the
future be amended, against all expenses and liabilities reasonably incurred in
connection with service for or on behalf of the Company. The By-laws also
provide that the right of directors and officers to indemnification shall be a
contract right and shall not be exclusive of any other right now possessed or
hereafter acquired under any by-law, agreement, vote of stockholders or
otherwise. The Certificate contains a provision permitted by Delaware law that
generally eliminates the personal liability of Directors for monetary damages
for breaches of their fiduciary duty, including breaches involving negligence
or gross negligence in business combinations, unless the director has breached
his or her duty of loyalty, failed to act in good faith, engaged in
intentional misconduct or a knowing violation of law, paid a dividend or
approved a stock repurchase in violation of the Delaware General Corporation
Law or obtained an improper personal benefit. This provision does not alter a
director's liability under the federal securities laws and does not affect the
availability of equitable remedies, such as an injunction or rescission, for
breach of fiduciary duty. The Company also entered into indemnification
agreements with each of its non-employee directors reflecting the foregoing
and requiring the advancement of expenses in proceedings involving the
directors in most circumstances.
Amendment of the Certificate. The Certificate provides that an amendment
thereof must first be approved by a majority of the Board of Directors and
(with certain exceptions) thereafter approved by a majority (or 66 2/3% in the
case of any proposed amendment to the provisions of the Certificate relating
to the composition of the Board or amendments of the Certificate) of the total
votes eligible to be cast by holders of voting stock with respect to such
amendment.
Amendment of By-laws. The Certificate provides that the By-laws may be
amended or repealed by the Board of Directors or by the stockholders. Such
action by the Board of Directors requires the affirmative vote of a majority
of the directors then in office. Such action by the stockholders requires the
affirmative vote of at least two-thirds of the total votes eligible to be cast
by holders of voting stock with respect to such amendment or repeal at an
annual meeting of stockholders or a special meeting called for such purpose
unless the Board of Directors recommends that the stockholders approve such
amendment or repeal at such meeting, in which case such amendment or repeal
shall only require the affirmative vote of a majority of the total votes
eligible to be cast by holders of voting stock with respect to such amendment
or repeal.
Ability to Adopt Shareholder Rights Plan. The Board of Directors may in the
future resolve to issue shares of Preferred Stock or rights to acquire such
shares to implement a shareholder rights plan. A shareholder rights plan
typically creates voting or other impediments or under which shares are
distributed to a third-party investor, to a group of investors or stockholders
or to an employee stock ownership plan, to discourage persons seeking to gain
control of the Company by means of a merger, tender offer, proxy contest or
otherwise if such change in control is not in the best interest of the Company
and its stockholders. The Board of Directors has no present intention of
adopting a shareholder rights plan and is not aware of any attempt to obtain
control of the Company.
53
<PAGE>
STATUTORY BUSINESS COMBINATION PROVISION
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law ("Section 203"). Section 203 provides, with certain
exceptions, that a Delaware corporation may not engage in any of a broad range
of business combinations with a person or affiliate, or associate of such
person, who is an "interested stockholder" for a period of three years from
the date that such person became an interested stockholder unless: (i) the
transaction resulting in a person becoming an interested stockholder, or the
business combination, is approved by the board of directors of the corporation
before the person becomes an interested stockholder; (ii) the interested
stockholder acquired 85% or more of the outstanding voting stock of the
corporation in the same transaction that makes it an interested stockholder
(excluding shares owned by persons who are both officers and directors of the
corporation, and shares held by certain employee stock ownership plans); or
(iii) on or after the date the person becomes an interested stockholder, the
business combination is approved by the corporation's board of directors and
by the holders of at least 66% of the corporation's outstanding voting stock
at an annual or special meeting, excluding shares owned by the interested
stockholder. Under Section 203, an "interested stockholder" is defined (with
certain limited exceptions) as any person that is (i) the owner of 15% or more
of the outstanding voting stock of the corporation or (ii) an affiliate or
associate of the corporation and was the owner of 15% or more of the
outstanding voting stock of the corporation at any time within the three-year
period immediately prior to the date on which it is sought to be determined
whether such person is an interested stockholder.
A corporation may, at its option, exclude itself from the coverage of
Section 203 by amending its certificate of incorporation or by-laws by action
of its stockholders to exempt itself from coverage, provided that such by-law
or charter amendment shall not become effective until 12 months after the date
it is adopted. Neither the Certificate nor the By-laws contains any such
exclusion.
TRANSFER AGENT AND REGISTRAR
The Company has selected Boston EquiServe as the transfer agent and
registrar for the Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the offering, the Company will have a total of 12,387,411
shares of Common Stock outstanding (based upon the number of shares
outstanding at April 15, 1998). Of these shares, the 3,900,000 shares of
Common Stock offered hereby and 4,142,382 of the shares sold prior to this
offering will be freely tradable without restriction or registration under the
Securities Act by persons other than "affiliates" of the Company, as defined
in the Securities Act, who would be required to sell such shares under Rule
144 under the Securities Act. The remaining 4,345,029 shares of Common Stock
outstanding are "restricted securities" as that term is defined by Rule 144
(the "Restricted Shares"). The Restricted Shares were issued and sold by the
Company in private transactions in reliance upon exemptions from registration
under the Securities Act.
Of the Restricted Shares, 4,207,977 Restricted Shares are eligible for sale
in the public market pursuant to Rule 144 under the Securities Act and 137,052
shares will be eligible for sale in the public market pursuant to Rule 144 in
March 1999.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned restricted securities
for at least one year (including the holding period of any prior owner except
an affiliate), including persons who may be deemed "affiliates" of the
Company, would be entitled to sell within any three-month period a number of
shares that does not exceed the greater of one percent of the number of shares
of Common Stock then outstanding (approximately 123,874 shares upon completion
of the offering) or the average weekly trading volume of the Common Stock
during the four calendar weeks preceding the filing of a Form 144 with respect
to such sale. Sales under Rule 144 are also subject to certain manner of sale
provisions and notice requirements, and to the availability of current public
information about the Company. In addition, a person who is not deemed to have
been an affiliate of the Company at the time during the 90 days
54
<PAGE>
preceding a sale, and who has beneficially owned the shares proposed to be
sold for at least two years (including the holding period of any prior owner
except an affiliate), would be entitled to sell such shares under Rule 144(k)
without regard to the requirements described above. Rule 144 also provides
that affiliates who are selling shares that are not Restricted Shares must
nonetheless comply with the same restrictions applicable to Restricted Shares
with the exception of the holding period requirement.
Certain stockholders of the Company (who in the aggregate will hold
3,988,896 Restricted Shares upon completion of the offering) have agreed
pursuant to lock-up agreements not to sell or offer to sell or otherwise
dispose of any shares of Common Stock currently held by them, any right to
acquire any shares of Common Stock or any securities exercisable for or
convertible into any shares of Common Stock for a period of 90 days after the
date of this Prospectus without the prior written consent of Bear, Stearns &
Co. Inc., other than as gifts or transfers by will or the laws of descent and
distribution, sales to the Company or pursuant to the Underwriters' over-
allotment option. In addition, the Company has agreed that for a period of 90
days after the date of this Prospectus it will not, without the prior written
consent of Bear, Stearns & Co. Inc., offer, sell or otherwise dispose of any
shares of Common Stock except for shares of Common Stock offered hereby,
shares issued and options granted pursuant to the 1996 Stock Plan, and shares
issued or to be issued in acquisitions, if any.
As of April 15, 1998, there were 929,893 outstanding options to purchase
shares of Common Stock. 3,000,000 shares of Common Stock are reserved for
issuance under the 1996 Stock Plan. If the Company's stockholders approve an
amendment to the 1996 Stock Plan at the Company's Annual Meeting, 4,000,000
shares will be reserved for issuance under the 1996 Stock Plan. The Company
filed a registration statement on Form S-8 under the Securities Act to
register all shares of Common Stock currently issuable pursuant to the 1996
Stock Plan. Shares covered by this registration statement are eligible for
sale in the public markets, subject to Rule 144 limitations applicable to
affiliates. The Company intends to amend its Registration Statement on Form S-
8 to register such additional shares which become reserved for issuance under
the 1996 Stock Plan.
The holders of approximately 2,253,398 shares of Common Stock have the right
on two occasions (each of which must be at least six months apart) to require
the Company to register their shares under the Securities Act for resale to
the public (if such right is exercised, the holders of 3,968,063 shares will
have the right to have their shares registered); holders of approximately
4,105,115 shares have the right in primary and secondary offerings, excluding
offerings relating to employment plans, under Rule 145 under the Securities
Act or demand registrations, to include their shares in a registration
statement filed by the Company; and holders of approximately 3,968,063 shares
have the right on one or more occasions to request and have effected a
registration of shares on Form S-3 if the anticipated net aggregate sale price
of such registered shares exceeds $500,000. Holders of 3,968,063 shares of
Common Stock have agreed pursuant to lock-up agreements not to sell or offer
to sell or otherwise dispose of any shares of Common Stock currently held by
them, any right to acquire any shares of Common Stock or any securities
exercisable for or convertible into any shares of Common Stock for a period of
90 days after the date of this Prospectus without the prior written consent of
Bear, Stearns & Co. Inc., other than as gifts or transfers by will or the laws
of descent and distribution, sales to the Company or pursuant to the
Underwriters' over-allotment option.
No predictions can be made of the effect, if any, that the sale or
availability for sale of shares of additional Common Stock will have on the
market price of the Common Stock. Nevertheless, sales of substantial amounts
of such shares in the public market, or the perception that such sales could
occur, could materially and adversely affect the market price of the Common
Stock and could impair the Company's future ability to raise capital through
an offering of its equity securities.
55
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below, through their Representatives, Bear, Stearns & Co.
Inc., Dain Rauscher Wessels, a division of Dain Rauscher Incorporated ("Dain
Rauscher Wessels"), NationsBanc Montgomery Securities LLC, Smith Barney Inc.,
have severally agreed to purchase from the Company the following respective
number of shares of Common Stock.
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
---- ---------
<S> <C>
Bear, Stearns & Co. Inc. .........................................
Dain Rauscher Wessels.............................................
NationsBanc Montgomery Securities LLC.............................
Smith Barney Inc. ................................................
-------
Total.......................................................
=======
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters thereunder are subject to approval of certain legal matters by
counsel and to various other conditions. The nature of the Underwriters'
obligations is such that they are committed to purchase and pay for all of the
above shares of Common Stock if any are purchased.
The Underwriters propose to offer the shares of Common Stock directly to the
public at the public offering price set forth on the cover page of this
Prospectus, and at such price less a concession not in excess of $ per
share of Common Stock to certain other dealers who are members of the National
Association of Securities Dealers, Inc. The Underwriters may allow, and such
dealers may reallow, concessions not in excess of $ per share to certain
other dealers. After the offering, the offering price, concessions and other
selling terms may be changed by the Underwriters. The Common Stock is offered
subject to receipt and acceptance by the Underwriters and to certain other
conditions, including the right to reject orders in whole or in part.
The Company has granted a 30-day over-allotment option to the Underwriters
to purchase up to an aggregate of 585,000 additional shares of Common Stock of
the Company exercisable at the public offering price less the underwriting
discount. If the Underwriters exercise such over-allotment option, then each
of the Underwriters will be committed, subject to certain conditions, to
purchase such additional shares in approximately the same proportion as set
forth in the above table. All Common Stock sold to the Underwriters upon
exercise of their over-allotment option will be sold by the Company. The
Underwriters may exercise such option only to cover over-allotments made in
connection with the sale of the shares of Common Stock offered hereby. The
underwriting agreement provides that the Company and the Selling Stockholders
will indemnify the Underwriters against certain liabilities under the
Securities Act or will contribute to payments that the Underwriters may be
required to make in respect thereof.
Current stockholders of the Company holding an aggregate of 3,988,896 shares
of Common Stock have agreed pursuant to lock-up agreements not to sell or
offer to sell or otherwise dispose of any shares of Common Stock currently
held by them, any right to acquire any shares of Common Stock or any
securities exercisable for or convertible into any shares of Common Stock for
a period of 90 days after the date of this Prospectus without the prior
written consent of Bear, Stearns & Co. Inc., other than as gifts or transfers
by will or the laws of descent and distribution, sales to the Company or
pursuant to the Underwriters' over-allotment option.
In addition, the Company has agreed that for a period of 90 days after the
date of this Prospectus it will not, without the prior written consent of
Bear, Stearns & Co. Inc., offer, sell or otherwise dispose of any shares of
Common Stock except for shares of Common Stock offered hereby, shares issued
and options granted pursuant to the 1996 Stock Plan, and shares issued or to
be issued in acquisitions, if any.
In order to facilitate the offering, the Underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
Common Stock during and after the Offering. Specifically, the Underwriters
56
<PAGE>
may over-allot or otherwise create a short position in the Common Stock for
their own account by selling more shares of Common Stock than have been sold
to them by the Company. The Underwriters may elect to cover any such short
position by purchasing shares of Common Stock in the open market or by
exercising the over-allotment option granted to the Underwriters. In addition,
the Underwriters may stabilize or maintain the price of the Common Stock by
bidding for or purchasing shares of Common Stock in the open market and may
impose penalty bids, under which selling concessions allowed to syndicate
members or other broker-dealers participating in the offering are reclaimed if
shares of Common Stock previously distributed in the offering are repurchased
in connection with stabilization transactions or otherwise. The effect of
these transactions may be to stabilize or maintain the market price at a level
above that which might otherwise prevail in the open market. The imposition of
a penalty bid may also affect the price of the Common Stock to the extent that
it discourages resales thereof. No representation is made as to the magnitude
or effect of any such stabilization or other transactions. Such transactions
may be effected on the NASDAQ National Market or otherwise and, if commenced,
may be discontinued at any time.
Certain persons participating in this offering may engage in passive market
making transactions in the Common Stock on the Nasdaq National Market in
accordance with Rule 103 of Regulation M under the Exchange Act. Rule 103
permits, upon the satisfaction of certain conditions, underwriting and selling
group members participating in a distribution that are also registered Nasdaq
market makers in the security being distributed (or a related security) to
engage in limited passive market making transactions during the period when
Regulation M would otherwise prohibit such activity. In general, a passive
market maker may not bid for or purchase a security at a price that exceeds
the highest independent bid for those securities by a person that is not
participating in the distribution and must identify its passive market making
bids on the Nasdaq electronic inter-dealer reporting system. In addition, the
net daily purchases made by a passive market maker generally may not exceed
30% of such market maker's average daily trading volume in the security for
the two full consecutive calendar months (or any 60 consecutive days ending
within 10 days) immediately preceding the date of filing of the Registration
Statement of which this Prospectus forms a part.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Goodwin, Procter & Hoar LLP, Boston, Massachusetts.
Certain legal matters related to this offering will be passed upon for the
Underwriters by Paul, Weiss, Rifkind, Wharton & Garrison, New York, New York.
As of the date of this Prospectus, a total of approximately 20,532 shares of
Common Stock were beneficially owned by partners of Goodwin, Procter & Hoar
LLP.
EXPERTS
The financial statements of the Company as of December 31, 1996 and 1997 and
for the years ended December 31, 1996 and 1997 included in this prospectus and
elsewhere in the registration statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of said firm
as experts in giving said reports. The financial statements of the Company as
of December 31, 1995 and for the year ended December 31, 1995 have been
audited by M.R. Weiser & Co. LLP, independent certified public accountants, as
indicated in their report with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in accounting and
auditing.
The Company retained Arthur Andersen LLP as its independent public
accountants and replaced M.R. Weiser & Co. LLP in February 1997. The report of
M.R. Weiser & Co. LLP on the financial statements of the Company as of
December 31, 1995 contained no adverse opinion or disclaimer of opinion and
was not qualified or modified as to uncertainty, audit scope or application of
accounting principles. During the year ended December 31, 1995 and through the
date of replacement, there were no disagreements with M.R. Weiser & Co. LLP on
any matter of accounting principles or practices, financial statements
disclosure, or auditing scope or procedure. The change in independent public
accountants was approved by the Board of Directors.
57
<PAGE>
INDEX TO FINANCIAL STATEMENTS
BORON, LEPORE & ASSOCIATES, INC.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Arthur Andersen LLP, Independent Public Accountants............. F-2
Report of M.R. Weiser & Co. LLP, Independent Public Accountants........... F-3
Balance Sheets as of March 31, 1998 (unaudited) and December 31, 1997 and
1996..................................................................... F-4
Statements of Operations for the Three Months Ended March 31, 1998 and
1997 (unaudited) and for the Years Ended December 31, 1997, 1996 and 1995
......................................................................... F-5
Statements of Stockholders' Equity (Deficit) for the Three Months Ended
March 31, 1998 (unaudited) and for the Years Ended December 31, 1997,
1996 and 1995 ........................................................... F-6
Statements of Cash Flows for the Three Months Ended March 31, 1998 and
1997 (unaudited) and for the Years Ended December 31, 1997, 1996 and 1995
......................................................................... F-7
Notes to Financial Statements............................................. F-9
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Boron, LePore & Associates, Inc.:
We have audited the accompanying balance 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 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 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.
Arthur Andersen LLP
Roseland, New Jersey
February 10, 1998
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders of
Boron, LePore & Associates, Inc.
We have audited the accompanying statements of operations, stockholders'
equity and cash flows of Boron, LePore & Associates, Inc. for the year ended
December 31, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our 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 results of operations and cash flow of Boron,
LePore & Associates, Inc. for the year ended December 31, 1995 in conformity
with generally accepted accounting principles.
M. R. Weiser & Co. LLP
Edison, NJ
April 10, 1996
F-3
<PAGE>
BORON, LEPORE & ASSOCIATES, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, --------------------------
1998 1997 1996
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents........... $ 16,631,864 $ 24,015,554 $ 7,175,648
Accounts receivable, net of allow-
ance for doubtful accounts of
$450,000, $400,000 and $300,000
at March 31, 1998, December 31,
1997 and December 31, 1996, re-
spectively........................ 35,207,755 21,764,173 14,969,261
Prepaid expenses and other current
assets............................ 3,304,702 729,559 254,802
------------ ------------ ------------
Total current assets............. 55,144,321 46,509,286 22,399,711
------------ ------------ ------------
FURNITURE, FIXTURES AND EQUIPMENT,
at cost, net of accumulated depre-
ciation of $1,069,059, $848,732 and
$544,232 at March 31, 1998, Decem-
ber 31, 1997 and December 31, 1996,
respectively....................... 6,353,859 4,454,023 325,296
OTHER ASSETS........................ 185,797 72,921 27,166
INTANGIBLE ASSETS................... 9,086,729 20,250 344,767
------------ ------------ ------------
Total assets..................... $ 70,770,706 $ 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 ex-
penses............................ 15,692,021 9,729,766 12,775,623
Deferred revenue................... 13,023,926 6,245,196 5,138,696
Billings in excess of costs........ 629,500 729,500 1,069,850
------------ ------------ ------------
Total current liabilities........ 29,345,447 16,704,462 19,984,169
------------ ------------ ------------
LONG-TERM DEBT, less current maturi-
ties............................... -- -- 19,000,000
------------ ------------ ------------
REVOLVING LINE OF CREDIT............ -- -- 1,000,000
------------ ------------ ------------
DEFERRED INCOME TAXES............... 2,559,000 1,509,000 --
------------ ------------ ------------
CONVERTIBLE PARTICIPATING PREFERRED
STOCK, $.01 par value; none autho-
rized, issued and outstanding at
March 31, 1998 and 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 March 31, 1998 and
December 31, 1997; 5,600,000 shares
authorized, none issued and out-
standing 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 March
31, 1998 and December 31, 1997;
none authorized, issued or out-
standing at December 31, 1996..... -- -- --
Common stock, $.01 par value,
50,000,000 shares authorized,
15,087,410 and 14,947,978 issued
and 10,887,411 and 10,747,979
outstanding at March 31, 1998 and
December 31, 1997, respectively;
12,000,000 shares authorized,
5,733,328 issued and 1,999,995
outstanding at December 31,
1996.............................. 150,875 149,480 57,333
Class A common stock, $.01 par
value; none authorized issued and
outstanding at March 31, 1998 and
December 31, 1997; 1,333,333 au-
thorized, 666,666 issued and out-
standing at December 31, 1996..... -- -- 6,667
Class B common stock, $.01 par
value, none authorized, issued
and outstanding at March 31, 1998
and 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 March 31, 1998 and De-
cember 31, 1997; 3,733,333 shares
at December 31, 1996.............. (24,349,992) (24,349,992) (18,850,000)
Additional paid-in capital......... 68,323,819 64,176,975 1,813,606
Accumulated deficit................ (5,258,443) (7,133,445) (12,414,835)
------------ ------------ ------------
Total stockholders' deficit (eq-
uity)........................... 38,886,259 32,843,018 (29,387,229)
------------ ------------ ------------
Total liabilities and stockhold-
ers' equity (deficit)........... $ 70,770,706 $ 51,056,480 $ 23,096,940
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-4
<PAGE>
BORON, LEPORE & ASSOCIATES, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
------------------------ ------------------------------------
1998 1997 1997 1996 1995
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES................ $32,153,876 $13,672,863 $72,907,104 $40,219,534 $21,774,824
COST OF SALES........... 23,756,673 9,736,739 51,579,923 26,004,405 12,788,018
----------- ----------- ----------- ----------- -----------
Gross profit.......... 8,397,203 3,936,124 21,327,181 14,215,129 8,986,806
SELLING, GENERAL AND
ADMINISTRATIVE
EXPENSES............... 5,780,408 2,249,522 12,443,944 19,995,398 6,340,631
----------- ----------- ----------- ----------- -----------
OPERATING INCOME
(LOSS)................. 2,616,795 1,686,602 8,883,237 (5,780,269) 2,646,175
INTEREST EXPENSE, net of
interest income of
$308,207, $18,257,
$460,592, $55,561 and
$33,370 for the three
month-periods ended
March 31, 1998 and 1997
and for the years ended
December 31, 1997, 1996
and 1995, respectively
....................... (308,207) 409,104 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................ 2,925,002 1,277,498 7,812,175 (7,111,363) 2,560,582
PROVISION FOR INCOME
TAXES.................. 1,050,000 400,000 1,700,000 -- 51,000
----------- ----------- ----------- ----------- -----------
Net income (loss)..... $ 1,875,002 $ 877,498 $ 6,112,175 $(7,111,363) $ 2,509,582
=========== =========== =========== =========== ===========
EARNINGS (LOSS) PER
SHARE--BASIC........... $ 0.17 $ 0.20 $ 1.07 $ (1.18) $ 0.29
=========== =========== =========== =========== ===========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING--
BASIC.................. 10,769,416 2,736,384 4,947,018 6,027,869 8,602,151
=========== =========== =========== =========== ===========
EARNINGS (LOSS) PER
SHARE--DILUTED......... $ 0.17 $ 0.12 $ 0.72 $ (1.18) $ 0.29
=========== =========== =========== =========== ===========
WEIGHTED AVERAGE COMMON
AND COMMON EQUIVALENT
SHARES OUTSTANDING--
DILUTED................ 11,173,588 7,403,048 8,507,293 6,027,869 8,602,151
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<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)
Net income............ -- -- -- -- -- 1,875,002
Issuance of common
stock................ 1,395 -- -- -- 4,146,844 --
-------- ------- ----- ------------ ----------- ------------
BALANCE AS OF MARCH 31,
1998 (unaudited)....... $150,875 $ -- $ -- $(24,349,992) $68,323,819 $ (5,258,443)
======== ======= ===== ============ =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
BORON, LEPORE & ASSOCIATES, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
------------------------ -------------------------------------
1998 1997 1997 1996 1995
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income (loss)...... $ 1,875,002 $ 877,498 $ 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.......... 232,826 53,934 359,683 112,618 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.. 1,050,000 400,000 1,509,000 (75,000) 50,000
Changes in operating
assets and
liabilities:
Increase in accounts
receivable, net...... (8,615,207) (1,708,942) (6,794,912) (7,561,243) (2,636,435)
Increase in prepaid
expenses and other
current assets....... (2,548,830) (78,742) (474,757) (58,028) (45,024)
Increase (decrease) in
other assets......... (105,628) (1,391) (474,757) 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)
Increase (decrease) in
due from officers.... -- -- -- 28,651 (672,324)
Increase (decrease) in
accounts payable and
accrued expenses..... 5,106,861 (6,046,034) (3,045,857) 9,928,526 1,381,141
Increase in deferred
revenue and billings
in excess of costs... 2,726,569 1,128,518 766,150 3,438,414 945,751
----------- ----------- ----------- ----------- -----------
Net cash used in
operating
activities........... (278,407) (5,375,159) (1,302,381) (713,234) (590,402)
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Purchases of furniture,
fixtures and
equipment.............. (2,014,364) (86,664) (4,433,227) (134,965) (43,493)
Acquisitions net of
acquired cash.......... (5,091,652) -- -- -- --
----------- ----------- ----------- ----------- -----------
Net cash used in
investing
activities........... (7,106,016) (86,664) (4,433,227) (134,965) (43,493)
----------- ----------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
------------------------ --------------------------------------
1998 1997 1997 1996 1995
----------- ----------- ------------ ------------ ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM FINANC-
ING 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........ -- (1,000,000) (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................. 733 35,768 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
(used in) financing
activities......... 733 (964,232) 22,575,514 7,061,187 1,566,451
----------- ----------- ------------ ------------ ----------
Net increase
(decrease) in
cash............... (7,383,690) (6,426,055) 16,839,906 6,212,988 932,556
CASH AND CASH
EQUIVALENTS, beginning
of period.............. 24,015,554 7,175,648 7,175,648 962,660 30,104
----------- ----------- ------------ ------------ ----------
CASH AND CASH
EQUIVALENTS, end of
period................. $16,631,864 $ 749,593 $ 24,015,554 $ 7,175,648 $ 962,660
=========== =========== ============ ============ ==========
SUPPLEMENTAL DISCLOSURES
OF CASH FLOW
INFORMATION:
Cash paid during the
period for:
Interest.............. $ -- $ 402,000 $ 1,614,079 $ 321,000 $ 145,000
Taxes................. $ 120,000 $ -- $ 252,220 $ 20,015 $ --
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-8
<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.
The accompanying unaudited financial statements as of March 31, 1998 and for
the three months ended March 31, 1998 and 1997 have been prepared by the
Company pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, certain information and note disclosures normally
included in financial statements prepared in conformity with generally
accepted accounting principles have been condensed or omitted. In the opinion
of the Company, all adjustments, consisting of only normal recurring
adjustments, necessary to present fairly the financial position, results of
operations and changes in cash flows for the periods presented have been made.
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.
F-9
<PAGE>
BORON, LEPORE & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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.
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 sales 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 March 31, 1998, December
31, 1997 and December 31, 1996 approximated $630,000, $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 goodwill, (see Note 16) 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.
F-10
<PAGE>
BORON, LEPORE & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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.
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).
F-11
<PAGE>
BORON, LEPORE & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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 THREE MONTHS ENDING
MARCH 31 FOR THE YEARS ENDED DECEMBER 31,
---------------------------- ------------------------------------
1998 1997 1997 1996 1995
-------------- ------------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Numerator:
Net income (loss)--
Diluted.............. $ 1,875,002 $ 877,498 $6,112,175 $(7,111,363) $ 2,509,582
Less dividends on
preferred stock...... -- (332,000) (830,785) -- --
-------------- ------------- ---------- ----------- -----------
Net income (loss)--
Basic................ $ 1,875,002 $ 545,498 $5,281,390 $(7,111,363) $ 2,509,582
============== ============= ========== =========== ===========
Denominator:
Weighted average
number of common
shares outstanding--
Basic................ 10,769,416 2,736,384 4,947,018 6,027,869 8,602,151
Incremental shares
from assumed
conversions of
options.............. 404,172 -- 159,364 -- --
Convertible
Participating
Preferred Stock..... -- 4,666,664 3,400,911 -- --
-------------- ------------- ---------- ----------- -----------
Weighted average
common and common
equivalent shares
outstanding--
Diluted.............. 11,173,588 7,403,048 8,507,293 6,027,869 8,602,151
============== ============= ========== =========== ===========
Earnings (loss) per
share--Basic......... $ 0.17 $ 0.20 $ 1.07 $ (1.18) $ 0.29
============== ============= ========== =========== ===========
Earnings (loss) per
share--Diluted....... $ 0.17 $ 0.12 $ 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
March 31, 1998 and December 31, 1997, there were no outstanding borrowings
under the revolving credit facility and $5,000,000 was available for future
borrowings.
F-12
<PAGE>
BORON, LEPORE & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
5. FURNITURE, FIXTURES AND EQUIPMENT:
Furniture, fixtures and equipment consists of:
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, ---------------------
1998 1997 1996
----------- ---------- ---------
(UNAUDITED)
<S> <C> <C> <C>
Telephone and computer equipment....... $ 4,903,955 $3,467,283 $ 543,444
Office equipment....................... 1,587,775 936,560 254,147
Other.................................. 931,188 898,912 71,937
----------- ---------- ---------
7,422,918 5,302,755 869,528
Less: Accumulated depreciation......... (1,069,059) (848,732) (544,232)
----------- ---------- ---------
Furniture, fixtures and equipment net
of accumulated depreciation........... $ 6,353,859 $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,
MARCH 31, ----------------------
1998 1997 1996
----------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Accounts payable......................... $10,398,261 $3,838,286 $ 1,729,688
Accrued payroll.......................... 1,189,722 1,287,565 8,170,078
Accrued honoraria........................ 3,007,115 3,548,554 1,860,656
Other accrued expenses................... 1,096,923 1,055,361 1,015,201
----------- ---------- -----------
Accounts payable and accrued expenses.... $15,692,021 $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 $246,000, $95,000,
$525,000, $387,000 and $340,000 for the three months ending March 31, 1998 and
1997 and 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.
F-13
<PAGE>
BORON, LEPORE & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
------------------- ---------------------------
1998 1997 1997 1996 1995
---------- -------- ---------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Current......................... $ -- $ -- $ 191,000 $75,000 $ 1,000
Deferred........................ 1,050,000 400,000 1,509,000 (75,000) 50,000
---------- -------- ---------- ------- -------
Total......................... $1,050,000 $400,000 $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>
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>
F-14
<PAGE>
BORON, LEPORE & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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.
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
F-15
<PAGE>
BORON, LEPORE & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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 3,733,333 shares of common
stock from two individual shareholders for payments aggregating $18,850,000
pursuant to the terms contained in the Preferred Stock Purchase Agreement.
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
F-16
<PAGE>
BORON, LEPORE & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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 $63,000, $0 and $32,000 during the three
months ending March 31, 1998, March 31, 1997 and the year ending December 31,
1997. The basic per share impact would have been immaterial for those periods.
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 three months ending March 31, 1998 and the year
ending December 31, 1997 was $11.94 and $4.38, respectively. The fair value
was estimated using the Black Scholes option pricing model based on the
weighted average market price at grant date of $29.94 and $10.60 as of March
31, 1998 and December 31, 1997, respectively, volatility of 45% and 38% as of
March 31, 1998 and December 31, 1997 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.
F-17
<PAGE>
BORON, LEPORE & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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 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 has been accounted for using the purchase method of
accounting. The excess of purchase price over net assets acquired was
estimated to be approximately $8,300,000 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 has been 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 has entered into an agreement to purchase substantially all of
the assets and assume certain liabilities of Medical Education Systems, Inc.
The purchase price is $10,000,000 in cash and 160,103 shares of common stock
of the Company. In addition, the Company may be required to pay up to
$10,000,000 in contingent cash payments based on certain operating income
goals of the acquired business during the twelve-month period subsequent to
the acquisition date. The acquisition will be accounted for using the purchase
method of accounting with the resulting goodwill being amortized over twenty
years.
Litigation:
Thomas S. Boron, a former stockholder and officer of the Company, filed a
complaint against the Company and certain senior officers and former officers
of the Company, alleging, among other matters, securities and common law fraud
and breach of contract in connection with the settlement of contractual
arrangements with Thomas S. Boron in December 1996. The damages sought by
Thomas S. Boron are not stated in the complaint. The Company's By-laws provide
for mandatory indemnification of the Company's officers and former officers to
the fullest extent authorized by the Delaware General Corporation Law against
all expenses incurred in proceedings in which an officer or former officer is
involved as a result of serving or having served as an officer, director or
employee of the Company. The Company believes the allegations of Thomas S.
Boron are without merit and intends to contest them vigorously. The Company
believes that the matter may involve significant litigation-related expenses
but that it will not have a material adverse effect on its financial condition
or results of operations; there can be no assurance, however, that this will
be the case. In addition, 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.
F-18
<PAGE>
BORON, LEPORE & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Stock Option and Grant Plan and Employee Stock Purchase Plan:
Subsequent to year-end, the Company terminated its Employee Stock Purchase
Plan. In addition, the Company, subject to shareholder approval, increased the
number of shares available for grant under the stock option and grant plan
from 3,000,000 to 4,000,000.
F-19
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALES PERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION WOULD BE UNLAWFUL OR TO ANY PERSON TO WHOM IT IS UNLAW-
FUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE MADE HERE-
UNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 6
Use of Proceeds.......................................................... 14
Market Price of Common Stock and
Dividend Policy ........................................................ 14
Capitalization........................................................... 15
Selected Financial Information........................................... 16
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 17
Business................................................................. 26
Management............................................................... 39
Certain Transactions..................................................... 47
Principal and Selling Stockholders....................................... 49
Description of Capital Stock............................................. 52
Shares Eligible for Future Sale.......................................... 54
Underwriting............................................................. 56
Legal Matters............................................................ 57
Experts.................................................................. 57
Index to Financial Statements............................................ F-1
</TABLE>
----------------
UNTIL JUNE , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN
THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY RE-
QUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
3,900,000 SHARES
BORON, LEPORE & ASSOCIATES, INC.
COMMON STOCK
----------------
PROSPECTUS
----------------
BEAR, STEARNS & CO. INC.
DAIN RAUSCHER WESSELS
A DIVISION OF DAIN RAUSCHER INCORPORATED
NATIONSBANC MONTGOMERY SECURITIES LLC
SALOMON SMITH BARNEY
, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION (1)
The following table sets forth the estimated expenses payable by the Company
in connection with this offering (excluding underwriting discounts and
commissions):
<TABLE>
<CAPTION>
NATURE OF EXPENSE AMOUNT
----------------- --------
<S> <C>
SEC Registration Fee............................................. $ 39,031
NASD Filing Fee.................................................. $ 30,500
Nasdaq Listing Fee............................................... $ 17,500
Accounting Fees and Expenses..................................... $100,000
Legal Fees and Expenses.......................................... $200,000
Printing Expenses................................................ $ 60,000
Blue Sky Qualification Fees and Expenses......................... $ 5,000
Transfer Agent's Fee............................................. $ 5,000
Miscellaneous.................................................... $ 42,969
--------
Total.......................................................... $500,000
========
</TABLE>
- --------
(1) The amounts set forth above, except for the SEC and NASD fees, are in each
case estimated.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
In accordance with Section 145 of the General Corporation Law of the State
of Delaware, Article VIII of the Company's Amended and Restated Certificate of
Incorporation (the "Certificate") provides that no director of the Company
shall be personally liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability (i)
for any breach of the director's duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) in respect of
certain unlawful dividend payments or stock redemptions or repurchases, or
(iv) for any transaction from which the director derived an improper personal
benefit. In addition, the Certificate provides that if the Delaware General
Corporation Law is amended to authorize the further elimination or limitation
of the liability of directors, then the liability of a director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the Delaware General Corporation Law, as so amended.
Article V of the Company's Amended and Restated By-laws provides for
indemnification by the Company of its directors, officers and certain non-
officer employees under certain circumstances against expenses (including
attorneys fees, judgments, fines and amounts paid in settlement) reasonably
incurred in connection with the defense or settlement of any threatened,
pending or completed legal proceeding in which any such person is involved by
reason of the fact that such person is or was a director, officer or employee
of the Company if such person acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to criminal actions or proceedings, if such person
had no reasonable cause to believe his or her conduct was unlawful.
The Stockholder's Agreement, filed as Exhibit 2.4 hereto, provides for
indemnification by the Company of certain of its existing principal
stockholders and the controlling persons of such stockholders (two of whom are
directors of the Company) against claims and liabilities, including claims and
liabilities arising under the securities laws.
The Company has entered into indemnification agreements with certain of its
directors reflecting the foregoing provisions of its By-laws and requiring the
advancement of expenses in proceedings involving such directors in most
circumstances.
II-1
<PAGE>
Under Section 8 of the Underwriting Agreement filed as Exhibit 1.1 hereto,
the Underwriters have agreed to indemnify, under certain conditions, the
Company, its directors, certain officers and persons who control the Company
within the meaning of the Securities Act of 1933 against certain liabilities.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Set forth in chronological order below is information regarding the number
of unregistered shares of capital stock issued by the Registrant since its
incorporation in 1996. Further included is the consideration, if any, received
by the Registrant for such shares, and information relating to the section of
the Securities Act of 1933, as amended (the "Securities Act"), or rule of the
Securities and Exchange Commission under which exemption from registration was
claimed. The following transactions give effect to the Company's two-for-three
reverse stock split of its Common Stock and Class A Common Stock.
(1) In November 1996, the Company sold 3 shares of the Company's Common
Stock for an aggregate purchase price of $10.00 to Patrick G. LePore, and 3
shares of the Company's Common Stock for an aggregate purchase price of
$10.00 to Gregory F. Boron in reliance upon the exemption from registration
under section 4(2) of the Securities Act.
(2) In November 1996, the Company issued 6 shares of the Company's Common
Stock to Patrick G. LePore in exchange for 14 shares of common stock of the
predecessor held by Mr. LePore pursuant to a merger agreement, and the
Company issued 6 shares of the Company's Common Stock to Gregory F. Boron
in exchange for 14 shares of common stock of the predecessor held by Mr.
Boron pursuant to a merger agreement and in reliance upon the exemption
from registration under section 4(2) of the Securities Act.
(3) In December 1996, pursuant to a Preferred Stock Purchase Agreement,
the Company sold an aggregate of 4,666,664 shares of the Company's
Convertible Participating Preferred Stock for an aggregate purchase price
of $12,500,000 to Advent VII L.P., Advent Atlantic and Pacific III L.P., TA
Venture Investors Limited Partnership and four other accredited investors,
in reliance upon the exemption from registration under Regulation D of the
Securities Act.
(4) In December 1996, pursuant to the Company's 1996 Stock Plan, the
Company granted an aggregate of 666,666 shares of the Company's restricted
Class A Common Stock at a price of approximately $0.43 per share for an
aggregate purchase price of $285,500 and the Company granted an aggregate
of 400,000 shares of the Company's Common Stock at a price of approximately
$0.43 per share for an aggregate purchase price of $171,000 to four
employees in reliance upon the exemption from registration under Rule 701
promulgated under the Securities Act.
(5) In January 1997, pursuant to the Company's 1996 Stock Plan, the
Company granted 96,992 shares of the Company's restricted Class A Common
Stock at a price of approximately $0.43 per share for an aggregate purchase
price of $41,468 to employees and granted 6,665 shares of the Company's
Common Stock at a price of approximately $0.43 per share for an aggregate
purchase price of $2,850 to consultants of the Company in reliance upon the
exemption from registration under Rule 701 promulgated under the Securities
Act.
(6) In February 1997, pursuant to the Company's 1996 Stock Plan, the
Company granted 10,000 shares of the Company's restricted Class A Common
Stock at a price of approximately $0.43 per share for an aggregate purchase
price of $4,275 to an employee in reliance upon the exemption from
registration under Rule 701 promulgated under the Securities Act.
(7) In March 1997, pursuant to the Company's 1996 Stock Plan, the Company
granted options to purchase 16,666 shares of the Company's restricted Class
A Common Stock at a price of approximately $0.43 per share for an aggregate
exercise price of $7,125 to an employee in reliance upon the exemption from
registration under Rule 701 promulgated under the Securities Act.
(8) In April 1997, pursuant to the Company's 1996 Stock Plan, the Company
granted 3,333 shares of the Company's Common Stock at a price of $3.00 per
share to a consultant of the Company for an aggregate purchase price of
$10,000 and granted 6,666 shares of the Company's restricted Class A Common
Stock at
II-2
<PAGE>
a price of $3.00 per share to each of two directors of the Company for an
aggregate purchase price of $20,000 each in reliance upon the exemption
from registration under Rule 701 promulgated under the Securities Act.
(9) In May 1997, pursuant to the Company's 1996 Stock Plan, the Company
granted 6,666 shares of the Company's restricted Class A Common Stock at a
price of $3.00 per share to a director for an aggregate purchase price of
$20,000 in reliance upon the exemption from registration under Rule 701
promulgated under the Securities Act.
(10) In June 1997, pursuant to the Company's 1996 Stock Plan, the Company
granted options to purchase 262,327 shares of the Company's restricted
Class A Common Stock at a price of approximately $9.45 per share for an
aggregate purchase price of $2,479,050 to employees of the Company and
granted 9,332 shares of the Company's Class A Common Stock at a price of
approximately $.01 per share to employees of the Company for an aggregate
cash purchase price of $93 in reliance upon the exemption from registration
under Rule 701 promulgated under the Securities Act and the exemption from
registration under Section 4(2) of the Securities Act.
(11) In August 1997, pursuant to the Company's 1996 Stock Plan, the
Company granted options to purchase 246,666 shares of the Company's
restricted Class A Common Stock at a price of $12.00 per share to two
employees of the Company for an aggregate cash purchase price of $1,973,328
in reliance upon the exemption from registration under Rule 701 promulgated
under the Securities Act and the exemption from registration under Section
4(2) of the Securities Act.
(12) In September 1997, pursuant to the Company's 1996 Stock Plan, the
Company granted an option to purchase 40,000 shares of the Company's
restricted Class A Common Stock at a price of $17.00 per share to an
employee of the Company for an aggregate cash purchase price of $680,000 in
reliance upon the exemption from registration under Section 4(2) of the
Securities Act.
(13) In March 1998, pursuant to an Asset Purchase Agreement with
Strategic Implications International, Inc. ("SII"), the Company issued
137,052 shares of its Common Stock to SII, along with $4,330,000, in
exchange for substantially all of the assets of SII, in reliance upon the
exemption from registration under Section 4(2) of the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement.
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)
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. (5)
2.5 Asset Purchase Agreement by and among the Company, Strategics
Implications International, Inc., EFAN Holdings, Inc., Christos S.
Efessiou and Alicia A. Angelides, dated March 18, 1998. (5)
2.6 Registration Rights Agreement by and among the Company, Christos S.
Efessiou and Alicia A. Angelides, dated March 18, 1998. (5)
2.7 Asset Purchase Agreement by and among the Company, MES Acquisition
Corp., Medical Education Systems, Inc., Mary Parenti and James
Jamieson.
3.1 Third Amended and Restated Certificate of Incorporation. (5)
3.2 Amended and Restated By-laws. (5)
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)
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S>
5.1 Opinion of Goodwin, Procter & Hoar LLP as to the validity of the
securities being offered. (6)
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)
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. (5)
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. (5)
10.28 Incentive Stock Option Agreement for Timothy J. McIntyre. (6)
10.29 Incentive Stock Option Agreement for Patrick G. LePore. (5)
10.30 Form of Advancement Agreement between the registrant and certain
directors and former officers.
16.1 Letter re: Change in Certifying Accountant. (1)
21.1 Subsidiaries of the Registrant. (5)
23.1 Consent of Goodwin, Procter & Hoar LLP (included in Exhibit 5.1).
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of M.R. Weiser & Co. LLP.
24. Power of Attorney. (6)
</TABLE>
- --------
(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.
II-4
<PAGE>
(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.
(5) Previously filed as an exhibit to the Company's Annual Report on Form 10-K
filed with the Commission on March 31, 1998.
(6) Previously filed as an exhibit to the Company's Registration Statement on
Form S-1 (SEC File No. 333-51101) filed with the Commission on April 27,
1998.
(B) FINANCIAL STATEMENT SCHEDULES
Schedule II--Valuation and Qualifying Accounts.
All other schedules have been omitted because they are not required or
because the required information is given in the Financial Statements or Notes
thereto.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN FAIR LAWN, NEW
JERSEY, ON MAY 4, 1998.
Boron, Lepore & Associates, Inc.
/s/ Patrick G. LePore
By: __________________________________
PATRICK G. LEPORE
CHAIRMAN OF THE BOARD,
CHIEF EXECUTIVE OFFICER AND
PRESIDENT
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING
PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ Patrick G. LePore Chairman of the
- ------------------------------------ Board, Chief May 4, 1998
PATRICK G. LEPORE Executive Officer,
President and
Director
(Principal
Executive Officer)
* Chief Operating May 4, 1998
- ------------------------------------ Officer and
GREGORY F. BORON Director
* Chief Financial May 4, 1998
- ------------------------------------ Officer, Secretary
MARTIN J. VEILLEUX and Treasurer
(Principal
Financial and
Accounting
Officer)
* Director May 4, 1998
- ------------------------------------
ROGER BOISSONNEAULT
* Director May 4, 1998
- ------------------------------------
ROGER B. KAFKER
* Director May 4, 1998
- ------------------------------------
JACQUELINE C. MORBY
* Director May 4, 1998
- ------------------------------------
JOSEPH E. SMITH
* Director May 4, 1998
- ------------------------------------
JOHN A. STALEY, IV
* By:
/s/ Patrick G. LePore
------------------------------
PATRICK G. LEPORE, ATTORNEY-IN-FACT
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Boron, LePore & Associates, Inc.:
We have audited in accordance with generally accepted auditing standards,
the 1997 and 1996 financial statements of Boron, LePore & Associates, Inc.
included on pages F-4 through F-18 of this registration statement and have
issued our report thereon dated February 10, 1998. Our audits were made for
the purpose of forming an opinion on the basic financial statements taken as a
whole. The schedule listed in Item 16(b) of this registration statement is the
responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part
of the basic financial statements as of December 31, 1997 and 1996 and for the
years then ended and, in our opinion, fairly states in all material respects
the financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
Arthur Andersen LLP
Roseland, New Jersey
February 10, 1998
S-1
<PAGE>
SCHEDULE II
BORON, LEPORE & ASSOCIATES, INC.
VALUATION AND QUALIFYING ACCOUNTS
ALLOWANCE FOR DOUBTFUL ACCOUNTS
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO
BEGINNING COSTS AND BALANCE AT
OF YEAR EXPENSES DEDUCTIONS END OF YEAR
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
For the year ended December 31,
1996............................ $ 0 $300,000 $ 0 $300,000
For the year ended December 31,
1997............................ $300,000 $100,000 $ 0 $400,000
</TABLE>
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement.
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)
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. (5)
2.5 Asset Purchase Agreement by and among the Company, Strategics
Implications International, Inc., EFAN Holdings, Inc., Christos S.
Efessiou and Alicia A. Angelides, dated March 18, 1998. (5)
2.6 Registration Rights Agreement by and among the Company Christos S.
Efessiou and Alicia A. Angelides, dated March 18, 1998. (5)
2.7 Asset Purchase Agreement by and among the Company, MES Acquisition
Corp., Medical Education Systems, Inc., Mary Parenti and James
Jamieson.
3.1 Third Amended and Restated Certificate of Incorporation. (5)
3.2 Amended and Restated By-laws. (5)
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)
5.1 Opinion of Goodwin, Procter & Hoar LLP as to the validity of the
securities being offered. (6)
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)
10.19 Restricted Stock Agreement for Timothy J. McIntyre. (2)
</TABLE>
<PAGE>
<TABLE>
<C> <S>
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. (5)
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. (5)
10.28 Incentive Stock Option Agreement for Timothy J. McIntyre. (6)
10.29 Incentive Stock Option Agreement for Patrick G. LePore. (5)
10.30 Form of Advancement Agreement between the registrant and certain
directors and former officers.
16.1 Letter re: Change in Certifying Accountant. (1)
21.1 Subsidiaries of the Registrant. (5)
23.1 Consent of Goodwin, Procter & Hoar LLP (included in Exhibit 5.1). (6)
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of M.R. Weiser & Co. LLP.
24. Power of Attorney. (6)
</TABLE>
- --------
(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.
(5) Previously filed as an exhibit to the Company's Annual Report on Form 10-K
filed with the Commission on March 31, 1998.
(6) Previously filed as an exhibit to the Company's Registration Statement on
Form S-1 (SEC File No. 333-51101) filed with the Commission on April 27,
1998.
<PAGE>
EXHIBIT 1.1
3,900,000 Shares of Common Stock
BORON, LePORE & ASSOCIATES, INC.
UNDERWRITING AGREEMENT
----------------------
[_____ __, 1998]
BEAR, STEARNS & CO. INC.,
DAIN RAUSCHER WESSELS,
SALOMON SMITH BARNEY,
NATIONSBANC MONTGOMERY SECURITIES LLC,
as Representatives of the
several Underwriters named in
Schedule I attached hereto
c/o Bear, Stearns & Co. Inc.
245 Park Avenue
New York, N.Y. 10167
Dear Sirs:
Boron, LePore & Associates, Inc., a corporation organized and existing
under the laws of Delaware (the "Company"), proposes, subject to the terms and
conditions stated herein, to issue and sell to the several underwriters named in
Schedule I hereto (the "Underwriters") an aggregate of [3,900,000] shares (the
"Firm Shares") of its common stock, par value $.01 per share (the "Common
Stock"), of which [1,500,000] shares will be sold by the Company and [2,400,000]
shares will be sold by certain stockholders of the Company named in Schedule II
hereto (stockholders collectively, the "Selling Stockholders"). In addition,
for the sole purpose of covering over-allotments in connection with the sale of
the Firm Shares, at the option of the Underwriters, the Company also proposes to
sell to the Underwriters an aggregate of up to an additional 585,000
<PAGE>
2
shares (the "Additional Shares") of Common Stock. The Firm Shares and any
Additional Shares purchased by the Underwriters are referred to herein as the
"Shares." The Shares are more fully described in the Registration Statement
referred to below.
1. Representations and Warranties of the Company. The Company
---------------------------------------------
represents and warrants to, and agrees with, the Underwriters that:
(a) The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement, and may have filed an
amendment or amendments thereto, on Form S-1 (No. 333-[_____]), for the
registration of the Shares under the Securities Act of 1933, as amended (the
"Act"). Such registration statement, including the prospectus, financial
statements and schedules, exhibits and all other documents filed as a part
thereof, as amended at the time of effectiveness of the registration statement,
including any information deemed to be a part thereof as of the time of
effectiveness pursuant to paragraph (b) of Rule 430A or Rule 434 of the Rules
and Regulations of the Commission under the Act (the "Regulations"), is herein
called the "Registration Statement" and the prospectus, in the form first filed
with the Commission pursuant to Rule 424(b) of the Regulations or filed as part
of the Registration Statement at the time of effectiveness if no Rule 424(b) or
Rule 434 filing is required, is herein called the "Prospectus". The term
"preliminary prospectus" as used herein means a preliminary prospectus included
in a Registration Statement prior to the time of effectiveness of the
Registration Statement. If the Company files a registration statement to
register a portion of the Shares and relies on Rule 462(b) of the Regulations
for such registration statement to become effective upon filing with the
Commission (the "Rule 462 Registration Statement"), then any reference to the
"Registration Statement" shall be deemed to include the Rule 462 Registration
Statement, as amended from time to time.
(b) At the time of the effectiveness of the Registration
Statement or the effectiveness of any post-effective amendment to the
Registration Statement, when the Prospectus is first filed with the Commission
pursuant to Rule 424(b) or Rule 434 of the Regulations, when any supplement to
or amendment of the Prospectus is filed with the Commission and at the Closing
Date and the Additional Closing Date, if any, (as hereinafter respectively
defined), the Registration Statement and the Prospectus and any amendments
thereof and supplements thereto complied or will comply in all material respects
with the applicable provisions of the Act and the Regulations and does not or
will not contain an untrue statement of a material fact and does not or will not
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein (i) in the case of the Registration
Statement, not misleading and (ii) in the case of the Prospectus, in light of
the circumstances under which they were made, not misleading. When
<PAGE>
3
any related preliminary prospectus was first filed with the Commission (whether
filed as part of the registration statement for the registration of the Shares
or any amendment thereto or pursuant to Rule 424(a) of the Regulations) and when
any amendment thereof or supplement thereto was first filed with the Commission,
such preliminary prospectus and any amendments thereof and supplements thereto
complied in all material respects with the applicable provisions of the Act and
the Regulations and did not contain an untrue statement of a material fact and
did not omit to state any material fact required to be stated therein or
necessary in order to make the statements therein in light of the circumstances
under which they were made not misleading. No representation and warranty is
made in this subsection (b), however, with respect to any information contained
in or omitted from the Registration Statement or the Prospectus or any related
preliminary prospectus or any amendment thereof or supplement thereto in
reliance upon and in conformity with information furnished in writing to the
Company by or on behalf of any Underwriter through you as herein stated
expressly for use in connection with the preparation thereof. If Rule 434 is
used, the Company will comply with the requirements of Rule 434.
(c) Arthur Andersen LLP and M.R. Weiser & co. LLP, have
certified certain financial statements and supporting schedules included in the
Registration Statement, each are independent public accountants as required by
the Act and the Regulations.
(d) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus, except as
set forth in the Registration Statement and the Prospectus, there has been no
material adverse change or any development involving a prospective material
adverse change in the business, prospects, properties, operations, condition
(financial or other) or results of operations of the Company, whether or not
arising from transactions in the ordinary course of business, and since the date
of the latest balance sheet presented in the Registration Statement and the
Prospectus, except in the ordinary course of business, the Company has not
incurred nor undertaken any liabilities or obligations, direct or contingent,
which are material to the Company, except for liabilities or obligations which
are reflected in the Registration Statement and the Prospectus.
(e) This Agreement and the transactions contemplated herein
have been duly and validly authorized by the Company and this Agreement has been
duly and validly executed and delivered by the Company.
(f) The execution, delivery, and performance of this
Agreement and the consummation of the transactions contemplated hereby do not
and will not (i) conflict with or result in a breach of any of the terms and
provisions of,
<PAGE>
4
or constitute a default (or an event which with notice or lapse of time, or
both, would constitute a default) under, or result in the creation or imposition
of any lien, charge or encumbrance upon any property or assets of the Company
pursuant to, any material agreement, instrument, franchise, license or permit to
which the Company is a party or by which it or its properties or assets may be
bound or (ii) violate or conflict with any provision of the certificate of
<PAGE>
5
incorporation or by-laws of the Company or any judgment, decree, order, statute,
rule or regulation of any court or any public, governmental or regulatory agency
or body having jurisdiction over the Company or any of its properties or assets.
No consent, approval, authorization, order, registration, filing, qualification,
license or permit of or with any court or any public, governmental or regulatory
agency or body having jurisdiction over the Company or any of its properties or
assets is required for the execution, delivery and performance of this Agreement
or the consummation of the transactions contemplated hereby, including the
issuance, sale and delivery of the Shares to be issued, sold and delivered by
the Company hereunder, except the registration under the Act of the Shares and
such consents, approvals, authorizations, orders, registrations, filings,
qualifications, licenses and permits as may be required under state or other
securities or Blue Sky laws in connection with the purchase and distribution of
the Shares by the Underwriters.
(g) All of the outstanding shares of Common Stock have been
duly and validly authorized and issued, fully paid and nonassessable and were
not issued and are not now in violation of or subject to any preemptive rights
under the Delaware General Corporation Law. The Shares to be sold by the
Company, when issued, delivered and sold against payment therefor in accordance
with this Agreement, will be duly and validly issued, fully paid and
nonassessable, and will not have been issued in violation of or be subject to
any preemptive rights. The Company had, at [__________, 1998], an authorized and
outstanding capitalization as set forth in the Registration Statement and the
Prospectus. The Common Stock, the Firm Shares and the Additional Shares conform
to the descriptions thereof contained in the Registration Statement and the
Prospectus.
(h) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of
Delaware. The Company is duly qualified and in good standing as a foreign
corporation in each jurisdiction in which the character or location of its
properties (owned, leased or licensed) or the nature or conduct of its business
makes such qualification necessary, except for those failures to be so qualified
or in good standing which will not in the aggregate have a material adverse
effect on the Company. The Company has all requisite corporate power and
authority, and all necessary consents, approvals, authorizations, orders,
registrations, qualifications, licenses and permits of and from all public,
regulatory or governmental agencies and bodies, to own, lease and operate its
properties and conduct its business as now being conducted and as described in
the Registration Statement and the Prospectus (subject to any qualifications as
may be set forth therein), and no such consent, approval, authorization, order,
registration, qualification, license or permit contains a materially burdensome
restriction not adequately disclosed in the Registration Statement and the
Prospectus.
<PAGE>
6
(i) Except as described in the Registration Statement and
the Prospectus, there is no litigation or governmental proceeding to which the
Company is a party or to which any property of the Company is subject or which
is pending or, to the knowledge of the Company, threatened against the Company
which might result in any material adverse change or any development involving a
material adverse change in the business, prospects, properties, operations,
condition (financial or other) or, results of operations of the Company or which
is required to be disclosed in the Registration Statement and the Prospectus.
(j) The Company has not taken and will not take, directly
or indirectly, any action designed to cause or result in, or which constitutes
or which might reasonably be expected to constitute, the stabilization or
manipulation of the price of the shares of Common Stock to facilitate the sale
or resale of the Shares.
(k) The financial statements, including the notes thereto,
and supporting schedules included in the Registration Statement and the
Prospectus present fairly the financial position of the Company as of the dates
indicated and the results of its operations for the periods specified; except as
otherwise stated in the Registration Statement, said financial statements have
been prepared in conformity with generally accepted accounting principles
applied on a consistent basis; and the supporting schedules included in the
Registration Statement present fairly the information required to be stated
therein.
(l) Except as described in the Registration Statement and
the Prospectus, no holder of securities of the Company has any rights to the
registration of securities of the Company because of the filing of the
Registration Statement or otherwise in connection with the sale of the Shares
contemplated hereby.
(m) The Company is not, and upon consummation of the
transactions contemplated hereby will not be, subject to registration as an
"investment company" under the Investment Company Act of 1940, as amended.
(n) The Shares have been approved for [listing] on the
Nasdaq National Market, subject to official notice of issuance.
(o) There is no document or contract of a character
required to be described in the Registration Statement or the Prospectus or to
be filed as an exhibit to the Registration Statement which is not described or
filed as required.
(p) Any real property and buildings held under lease by the
Company are held by it under valid, subsisting and enforceable leases with such
<PAGE>
7
exceptions as are not material and do not interfere with the use made and
proposed to be made of such property and buildings by the Company.
(q) Neither the Company nor any of its affiliates does
business with the government of Cuba or with any person or affiliate located in
Cuba within the meaning of Section 517.075, Florida Statutes.
(r) The Company is, and the services provided by the
Company are, in material compliance with all current statutes, rules,
regulations, standards and guidelines applicable to the Company.
(s) Except as disclosed in the Registration Statement and
the Prospectus, the Company owns or has adequate licenses or other rights to use
any trademarks, trade names, service marks, service names, copyrights, and other
proprietary intellectual property rights necessary to conduct the business of
the Company in the manner presently conducted and proposed to be conducted,
without any conflict with the rights of others, except where the failure to own
or possess such licenses or other rights would not have a material adverse
effect on the Company.
(t) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(u) The Company has filed all necessary federal and state
income and franchise tax returns required to be filed through the date hereof
and has paid all taxes when due, except where the failure to file or pay such
taxes, in the aggregate, could not reasonably be expected to have a material
adverse effect on the Company and there is no tax deficiency that has been, or
to the knowledge of the Company might be, asserted against the Company, or its
properties or assets, that would have a material adverse effect on the Company's
condition (financial or other) or the results of operations of the Company.
(v) The Company has received all required approvals of any
federal or state governmental department or agency, including those of the Food
and Drug Administration, to conduct "fulfillment" functions at its leased
warehouse in Norfolk, Virginia.
<PAGE>
8
(w) Any "forward-looking statement" within the meaning of
the federal securities laws contained in the Registration Statement and the
Prospectus is based on reasonable assumptions and made in good faith.
2. Representations and Warranties of the Selling Stockholders.
----------------------------------------------------------
Each of the Selling Stockholders severally and not jointly represents and
warrants to, and agrees with, the Underwriters that:
(a) All consents, approvals, authorizations and orders necessary for
the execution and delivery by such Selling Stockholder of this Agreement, the
Power of Attorney and the Custodian Agreement herein referred to, and for the
sale and delivery of the Shares to be sold by such Selling Stockholder hereunder
have been obtained; and such Selling Stockholder has full right, power and
authority to enter into this Agreement, the Power of Attorney and the Custodian
Agreement and to sell, assign, transfer and deliver the Shares to be sold by
such Selling Stockholder hereunder.
(b) The sale of the Shares to be sold by such Selling Stockholder
hereunder and the compliance by such Selling Stockholder with all of the
provisions of this Agreement, the Power of Attorney and the Custodian Agreement
and the consummation of the transactions herein and therein contemplated will
not conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any statute, indenture, mortgage,
deed of trust, loan agreement or other material agreement or instrument to which
such Selling Stockholder is a party or by which such Selling Stockholder is
bound, or to which any of the property or assets of such Selling Stockholder is
subject, nor will such action result in any violation of the provisions of the
Certificate of Incorporation or By-laws of such Selling Stockholder if such
Selling Stockholder is a corporation, the Partnership Agreement of such Selling
Stockholder if such Selling Stockholder is a partnership or any statute or any
order, rule or regulation of any court or governmental agency or body having
jurisdiction over such Selling Stockholder or the property of such Selling
Stockholder.
(c) Immediately prior to the Closing Date (as defined in Section 3
hereof) such Selling Stockholder will have, good and valid title to the Shares
to be sold by such Selling Stockholder hereunder, free and clear of all liens,
encumbrances, equities or claims, except those created by this Agreement, the
Power of Attorney and the Custodian Agreement; and, upon delivery of such Shares
and payment therefor in accordance with this Agreement, the Underwriters will
have acquired from the Selling Stockholders good and valid title to such Shares,
free and clear of all liens, encumbrances, equities or claims.
<PAGE>
9
(d) Such Selling Stockholder has not taken and will not take, directly
or indirectly, any action designed to cause or result in, or which constitutes
or which might reasonably be expected to constitute, the stabilization or
manipulation of the price of the shares of Common Stock to facilitate the sale
or resale of the Shares.
(e) To the extent that any statements or omissions made in the
Registration Statement, any preliminary prospectus, the Prospectus or any
amendment or supplement thereto are made in reliance upon and in conformity with
written information furnished to the Company by such Selling Stockholder
expressly for use therein, such statements contained in the preliminary
prospectus and the Registration Statement in reliance thereon did, and such
statements contained in the Prospectus and any further amendments or supplements
to the Registration Statement and the Prospectus in reliance thereon, when they
become effective or are filed with the Commission, as the case may be, will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading.
(f) In order to document the Underwriters' compliance with the
reporting and withholding provisions of the Tax Equity and Fiscal Responsibility
Act of 1982 with respect to the transactions herein contemplated, such Selling
Stockholder will deliver to you prior to or at the Additional Closing Date (as
hereinafter defined) a properly completed and executed United States Treasury
Department Form W-9 (or other applicable form or statement specified by Treasury
Department regulations in lieu thereof).
(g) Certificates in negotiable form representing the shares of
Convertible Participating Preferred Stock of the Company which, upon
consummation of the transactions contemplated hereby and by the Prospectus, will
convert into all of the Shares to be sold by such Selling Stockholder hereunder
have been placed in custody under a Custodian Agreement, in the form heretofore
furnished to you (the "Custodian Agreement"), duly executed and delivered by
such Selling Stockholder to the Company, as custodian (the "Custodian"), and
such Selling Stockholder has duly executed and delivered a Power of Attorney, in
the form heretofore furnished to you (the "Power of Attorney"), appointing the
persons indicated in Schedule II hereto, and each of them, as such Selling
Stockholder's attorneys-in-fact (the "Attorneys-in-Fact") with authority to
execute and deliver this Agreement on behalf of such Selling Stockholder, to
determine the purchase price to be paid by the Underwriters to the Selling
Stockholders as provided in Section 3 hereof, to authorize the delivery of the
Shares to be sold by such Selling Stockholder hereunder and otherwise to act on
behalf of such Selling Stockholder in connection with the transactions
contemplated by this Agreement and the Custodian Agreement.
<PAGE>
10
(h) The Shares represented by the certificates held in custody for
such Selling Stockholder under the Custodian Agreement are subject to the
interests of the Underwriters hereunder; the arrangements made by such Selling
Stockholder for such custody, and the appointment by such Selling Stockholder of
the Attorneys-in-Fact by the Power of Attorney, are to that extent irrevocable;
the obligations of the Selling Stockholders hereunder shall not be terminated by
operation of law, whether by the death or incapacity of any individual Selling
Stockholder or, in the case of an estate or trust, by the death or incapacity of
any executor or trustee or the termination of such estate or trust, or in the
case of a partnership or corporation, by the dissolution of such partnership or
corporation, or by the occurrence of any other event; if any individual Selling
Stockholder or any such executor or trustee should die or become incapacitated,
or if any such estate or trust should be terminated, or if any such partnership
or corporation should be dissolved, or if any other such event should occur,
before the delivery of the Shares hereunder, certificates representing the
Shares shall be delivered by or on behalf of the Selling Stockholders in
accordance with the terms and conditions of this Agreement and of the Custodian
Agreement; and actions taken by the Attorneys-in-Fact pursuant to the Powers of
Attorney shall be as valid as if such death, incapacity, termination,
dissolution or other event had not occurred, regardless of whether or not the
Custodian, the Attorneys-in-Fact, or any of them, shall have received notice of
such death, incapacity, termination, dissolution or other event.
3. Purchase, Sale and Delivery of the Shares.
------------------------------------------
(a) On the basis of the representations, warranties,
covenants and agreements herein contained, but subject to the terms and
conditions herein set forth, the Company and the Selling Stockholders agree to
sell to the Underwriters and the Underwriters, severally and not jointly, agree
to purchase from the Company and the Selling Stockholders, at a purchase price
per share of $[_______], the number of Firm Shares set forth opposite the
respective names of the Underwriters in Schedule I hereto plus any additional
number of Shares which such Underwriter may become obligated to purchase
pursuant to the provisions of Section 10 hereof. You represent and warrant that
you have been authorized by each of the other Underwriters to enter into this
Agreement on its behalf and to act for it in the manner herein provided.
(b) Payment of the purchase price for, and delivery of
certificates for, the Shares shall be made at the office of Bear, Stearns & Co.
Inc., 245 Park Avenue, New York, New York 10167, or at such other place as shall
be agreed upon by you and the Company, at 10:00 A.M. on the third or fourth
business day (as permitted under Rule 15c6-1 under the Securities Exchange Act
of 1934, as amended (the "Exchange Act")) (unless postponed in accordance with
the
<PAGE>
11
provisions of Section 10 hereof) following the date of the effectiveness of the
Registration Statement (or, if the Company has elected to rely upon Rule 430A of
the Regulations, the third or fourth business day (as permitted under Rule
15c6-1 under the Exchange Act) after the determination of the initial public
offering price of the Shares), or such other time not later than ten business
days after such date as shall be agreed upon by you and the Company (such time
and date of payment and delivery being herein called the "Closing Date").
Payment shall be made to the Company by wire transfer in same day funds, against
delivery to you for the respective accounts of the Underwriters of certificates
for the Shares to be purchased by them. Certificates for the Shares shall be
registered in such name or names and in such authorized denominations as you may
request in writing at least two full business days prior to the Closing Date.
The Company will permit you to examine and package such certificates for
delivery at least one full business day prior to the Closing Date.
(c) In addition, subject to the terms and conditions set forth
herein, the Company hereby grants to the Underwriters the option to purchase up
to [585,000] Additional Shares and, all at the same purchase price per share to
be paid by the Underwriters to the Company and the Selling Stockholders for the
Firm Shares as set forth in this Section 3, for the sole purpose of covering
over-allotments in the sale of Firm Shares by the Underwriters. These options
may be exercised at any time, in whole or in part, on or before the thirtieth
day following the date of the Prospectus, by written notice by you to the
Company. Such notice shall set forth the aggregate number of Additional Shares
as to which the option is being exercised and the date and time, as reasonably
determined by you, when the Additional Shares are to be delivered (such date and
time being herein sometimes referred to as the "Additional Closing Date");
provided, however, that the Additional Closing Date shall not be earlier than
- -------- -------
the Closing Date or earlier than the second full business day after the date on
which the option shall have been exercised nor later than the eighth full
business day after the date on which the option shall have been exercised
(unless such time and date are postponed in accordance with the provisions of
Section 10 hereof). Certificates for the Additional Shares shall be registered
in such name or names and in such authorized denominations as you may request in
writing at least two full business days prior to the Additional Closing Date.
The Company will permit you to examine and package such certificates for
delivery at least one full business day prior to the Additional Closing Date.
The number of Additional Shares to be sold to each Underwriter shall
be the number which bears the same ratio to the aggregate number of Additional
Shares being purchased as the number of Firm Shares set forth opposite the name
of such Underwriter in Schedule I hereto (or such number increased as set forth
in Section 10 hereof) bears to [___________], subject, however, to such
<PAGE>
12
adjustments to eliminate any fractional shares as you in your sole discretion
shall make.
Payment for the Additional Shares shall be made to the Company by wire
transfer in same day funds at the offices of Bear, Stearns & Co. Inc., 245 Park
Avenue, New York, New York 10167, or such other location as may be mutually
acceptable, upon delivery of the certificates for the Additional Shares to you
for the respective accounts of the Underwriters.
4. Offering. The Company has been advised by you that, upon your
--------
authorization of the release of the Firm Shares, the Underwriters propose to
offer the Shares for sale to the public upon the terms set forth in the
Prospectus.
5. Covenants of the Company. The Company covenants and agrees with
------------------------
the Underwriters that:
(a) If the Registration Statement has not yet been declared
effective the Company will use its best efforts to cause the Registration
Statement and any amendments thereto to become effective as promptly as
possible, and if Rule 430A is used or the filing of the Prospectus is otherwise
required under Rule 424(b) or Rule 434, the Company will file the Prospectus
(properly completed if Rule 430A has been used) pursuant to Rule 424(b) or Rule
434 within the prescribed time period and will provide evidence satisfactory to
you of such timely filing. If the Company elects to rely on Rule 434, the
Company will prepare and file a term sheet that complies with the requirements
of Rule 434.
The Company will notify you promptly (and, if requested by you, will
confirm such notice in writing) (i) when the Registration Statement and any
amendments thereto become effective, (ii) of any request by the Commission for
any amendment of or supplement to the Registration Statement or the Prospectus
or for any additional information, (iii) of the mailing or the delivery to the
Commission for filing of any amendment of or supplement to the Registration
Statement or the Prospectus, (iv) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or any post-
effective amendment thereto or of the initiation, or the threatening, of any
proceedings therefor, (v) of the receipt of any comments regarding the
Registration Statement or any post-effective amendment from the Commission, and
(vi) of the receipt by the Company of any notification with respect to the
suspension of the qualification of the Shares for sale in any jurisdiction or
the initiation or threatening of any proceeding for that purpose. If the
Commission shall propose or enter a stop order at any time, the Company will
make every reasonable effort to prevent the issuance of any such stop order and,
if issued, to obtain the lifting of such order as soon as possible. The Company
will not file any amendment to the
<PAGE>
13
Registration Statement or any amendment of or supplement to the Prospectus
(including the prospectus required to be filed pursuant to Rule 424(b)or Rule
434) after the effective date of the Registration Statement that differs from
the prospectus on file at the time of the effectiveness of the Registration
Statement to which you shall reasonably object in writing after being timely
furnished in advance a copy thereof.
(b) If at any time when a prospectus relating to the Shares is
required to be delivered under the Act any event shall have occurred as a result
of which the Prospectus as then amended or supplemented would, in the judgment
of the Company include an untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or if it shall be necessary at any time to amend or
supplement the Prospectus or Registration Statement to comply with the Act or
the Regulations, the Company will notify you promptly and prepare and file with
the Commission an appropriate amendment or supplement which will correct such
statement or omission and will use its best efforts to have any amendment to the
Registration Statement declared effective as soon as possible.
(c) The Company will promptly deliver to you four signed copies of
the Registration Statement, including exhibits and all amendments thereto, and
the Company will promptly deliver to each of the Underwriters such number of
copies of any preliminary prospectus, the Prospectus, the Registration
Statement, and all amendments of and supplements to such documents, if any, as
you may reasonably request.
(d) The Company will endeavor in good faith, in cooperation with you,
at or prior to the time of effectiveness of the Registration Statement, to
qualify the Shares for offering and sale under the securities laws relating to
the offering or sale of the Shares of such jurisdictions as you may designate
and to maintain such qualification in effect for so long as required for the
distribution thereof; except that in no event shall the Company be obligated in
connection therewith to qualify as a foreign corporation or to execute a general
consent to service of process.
(e) The Company will make generally available (within the meaning of
Section 11(a) of the Act) to its security holders and to you as soon as
practicable, but not later than 45 days after the end of its fiscal quarter in
which the first anniversary date of the effective date of the Registration
Statement occurs, an earning statement (in form complying with the provisions of
Rule 158 of the Regulations) covering a period of at least twelve consecutive
months beginning after the effective date of the Registration Statement.
<PAGE>
14
(f) During the period of 180 days from the date of the Prospectus,
the Company will not, without your prior written consent, issue, sell, offer or
agree to sell, grant any option for the sale of, or otherwise dispose of,
directly or indirectly, any Common Stock (or any securities convertible into,
exercisable for or exchangeable for Common Stock), other than (i) the Company's
sale of Shares hereunder, (ii) the Company's issuance of Common Stock upon the
exercise of presently outstanding stock options, (iii) grants of stock options
and other awards pursuant to the Company's 1996 Stock Option and Grant Plan (and
issuances of Common Stock upon the exercise of such awards), (iv) sales of
shares of Common Stock pursuant to the 1997 Employee Stock Purchase Plan and (v)
shares to be issued in connection with Company acquisitions, if any. In
addition, the Company will obtain the undertaking of each of its officers and
directors and such of its stockholders as have been heretofore designated by you
and listed on Schedule III attached hereto not to issue, sell, offer or agree to
sell, grant any option for the sale of, or otherwise dispose of, directly or
indirectly, any Common Stock (or any securities convertible into, exercisable
for or exchangeable for Common Stock), without your prior written consent during
the period of 180 days from the date of the Prospectus, other than (i) the sale
of Shares by the Selling Stockholders hereunder, (ii) pursuant to a bona fide
gift, (iii) by will or the laws of descent and distribution or (iv) to the
Company.
(g) During a period of three years from the effective date of the
Registration Statement, the Company will furnish to you copies of (i) all
reports to its stockholders; and (ii) all reports, financial statements and
proxy or information statements filed by the Company with the Commission or any
national securities exchange.
(h) The Company will apply the proceeds from the sale of the Shares
as set forth under "Use of Proceeds" in the Prospectus.
(i) The Company will use its best efforts to cause the Shares to be
approved for listing on the Nasdaq National Market.
(j) The Company will file with the Commission such reports on Form SR
as may be required pursuant to Rule 463 of the Regulations.
(k) If the Company elects to rely upon Rule 462(b), the Company shall
file a Rule 462(b) Registration Statement with the Commission in compliance with
Rule 462(b) by 10:00 P.M., Washington, D.C. time, on the date of this Agreement,
and the Company shall at the time of filing either pay to the Commission the
filing fee for the Rule 462(b) Registration Statement or give irrevocable
instructions for the payment of such fee pursuant to Rule 111(b) under the Act.
<PAGE>
15
6. Payment of Expenses. Whether or not the transactions
-------------------
contemplated in this Agreement are consummated or this Agreement is terminated,
the Company hereby agrees to pay all costs and expenses incident to the
performance of the obligations of the Company hereunder, including those in
connection with (i) preparing, printing, duplicating, filing and mailing the
Registration Statement, as originally filed and all amendments thereof
(including all exhibits thereto), any preliminary prospectus, the Prospectus and
any amendments or supplements thereto (including, without limitation, fees and
expenses of the Company's accountants and counsel), the underwriting documents
(including this Agreement) and all other documents related to the public
offering of the Shares (including those supplied to the Underwriters in
quantities as hereinabove stated), (ii) the issuance, transfer and delivery of
the Shares to the Underwriters, (iii) the qualification of the Shares under
state or foreign securities or Blue Sky laws, including the costs of printing
and mailing a preliminary and final "Blue Sky Survey" and the fees of counsel
for the Underwriters and such counsel's disbursements in relation thereto, (iv)
quotation of the Shares on the Nasdaq National Market, (v) filing fees of the
Commission and the National Association of Securities Dealers, Inc., (vi) the
cost of printing certificates representing the Shares and (vii) the cost and
charges of any transfer agent or registrar. Any transfer or other taxes imposed
in connection with the sale of the Shares to the Underwriters will be borne by
the Company and the Selling Stockholders pro rata. To the extent, if at all,
that any of the Selling Stockholders engage special legal counsel to represent
them in connection with this offering, the fees and expenses of such counsel
shall be borne by such Selling Stockholders.
7. Conditions of Underwriters' Obligations. The obligations of the
---------------------------------------
Underwriters to purchase and pay for the Firm Shares and the Additional Shares,
as provided herein, shall be subject to the accuracy of the representations and
warranties of the Company and the Selling Stockholders herein contained, as of
the date hereof and as of the Closing Date (for purposes of this Section 7
"Closing Date" shall refer to the Closing Date for the Firm Shares and any
Additional Closing Date, if different, for the Additional Shares), to the
performance by the Company and the Selling Stockholders of their respective
obligations hereunder, and to the following additional conditions:
(a) The Registration Statement shall have become effective
not later than 5:30 P.M., New York time, on the date of this Agreement, or at
such later time and date as shall have been consented to in writing by you; if
the Company shall have elected to rely upon Rule 430A or Rule 434 of the
Regulations, the Prospectus shall have been filed with the Commission in a
timely fashion in accordance with Section 5(a) hereof; if the Company has
elected to rely upon Rule 462(b), the Rule 462(b) Registration Statement shall
have become effective by 10:00 P.M., Washington, D.C. time, on the date of this
Agreement; and, at or
<PAGE>
16
prior to the Closing Date no stop order suspending the effectiveness of the
Registration Statement or any post-effective amendment thereof shall have been
issued and no proceedings therefor shall have been initiated or threatened by
the Commission.
(b) At the Closing Date you shall have received the opinion of
Goodwin, Procter & Hoar LLP, counsel for the Company and the Selling
Stockholders, dated the Closing Date, addressed to the Underwriters and in form
and substance satisfactory to Paul, Weiss, Rifkind, Wharton & Garrison
("Underwriters' Counsel"), to the effect that:
(i) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of
Delaware. The Company has all requisite corporate authority to own, lease
and license its properties as described in the Registration Statement and
the Prospectus.
(ii) The Company has an authorized capital stock as set
forth in the Registration Statement and the Prospectus. All of the
outstanding shares of Common Stock are duly and validly authorized and
issued, are fully paid and nonassessable and were not issued in violation
of or subject to any preemptive rights. The Shares to be delivered on the
Closing Date have been duly and validly authorized and, when delivered by
the Company in accordance with this Agreement, will be duly and validly
issued, fully paid and nonassessable and will not have been issued in
violation of or subject to any preemptive rights under the Delaware General
Corporation Law. The statements set forth in the Registration Statement
regarding the Company's capital stock under the caption "Description of
Capital Stock", insofar as they purport to constitute a summary of such
capital stock, are complete and accurate.
(iii) This Agreement has been duly and validly authorized
executed and delivered by the Company.
(iv) The execution, delivery, and performance of this
Agreement and the consummation of the transactions contemplated hereby by
the Company do not and will not (A) conflict with or result in a breach of
any of the terms and provisions of, or constitute a default (or an event
which with notice or lapse of time, or both, would constitute a default)
under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company pursuant to, any
agreement, instrument, franchise, license or permit filed as an exhibit to
the Registration Statement to which the Company is a party or by which it
or its properties or assets may be bound or
<PAGE>
17
(B) violate or conflict with any provision of the certificate of
incorporation or by-laws of the Company or, to the best knowledge of such
counsel, any judgment, decree, order, statute, rule or regulation of any
Delaware, Massachusetts or United States federal court or any Delaware,
Massachusetts or United States federal governmental or regulatory agency or
body having jurisdiction over the Company or any of its properties or
assets. No consent, approval, authorization, order, registration, filing,
qualification, license or permit of or with any Delaware, Massachusetts or
United States federal court or any public, governmental, or regulatory
agency or body having jurisdiction over the Company or any of its
properties or assets is required for the execution, delivery and
performance of this Agreement or the consummation of the transactions
contemplated hereby, except for (1) such as may be required under state or
other securities or Blue Sky laws in connection with the purchase and
distribution of the Shares by the Underwriters (as to which such counsel
need express no opinion) and (2) such as have been made or obtained under
the Act.
(v) The Registration Statement (including the Rule
462(b) Registration Statement, if any) and the Prospectus and any
amendments thereof or supplements thereto (other than the financial
statements and schedules and other financial data included or incorporated
by reference therein, as to which no opinion need be rendered) comply as to
form in all material respects with the requirements of the Act and the
Regulations.
(vi) The Registration Statement (including the Rule
462(b) Registration Statement, if any) is effective under the Act, and, to
the best knowledge of such counsel, no stop order suspending the
effectiveness of the Registration Statement, the Rule 462(b) Registration
Statement, if any, or any post-effective amendment thereof has been issued
and, to such counsel's knowledge, no proceedings therefor have been
initiated or threatened by the Commission and all filings required by Rule
424(b) of the Regulations have been made.
(vii) To the best of such counsels' knowledge, any
instrument, document, lease, license, contract or other agreement
(collectively, "Documents") required to be described or referred to in the
Registration Statement or the Prospectus has been properly described or
referred to therein and any Document required to be filed as an exhibit to
the Registration Statement has been filed as an exhibit thereto.
(viii) A Power of Attorney and a Custodian Agreement have
been duly and validly authorized, executed and delivered by each Selling
Stockholder and constitute valid and binding agreements of such Selling
Stockholder in accordance with their terms.
<PAGE>
18
(ix) This Agreement has been duly and validly
authorized, executed and delivered by or on behalf of each Selling
Stockholder; and the sale of the Shares to be sold by each Selling
Stockholder hereunder and the compliance by such Selling Stockholder with
all of the provisions of this Agreement, the Power of Attorney and the
Custodian Agreement and the consummation of the transactions contemplated
herein will not result in any violation of the provisions of the
Certificate of Incorporation or By-laws of such Selling Stockholder if such
Selling Stockholder is a corporation, the Partnership Agreement of such
Selling Stockholder if such Selling Stockholder is a partnership or any
order, rule or regulation known to such counsel of any Delaware,
Massachusetts or United States federal court or governmental agency or body
having jurisdiction over such Selling Stockholder or the property of such
Selling Stockholder;
(x) No consent, approval, authorization or order of any
Delaware, Massachusetts or United States court or governmental agency or
body is required for the consummation of the transactions contemplated by
this Agreement in connection with the Shares to be sold by each Selling
Stockholder hereunder, except such as have been obtained under the Act and
such as may be required under state or other securities or Blue Sky laws in
connection with the purchase and distribution of such Shares by the
Underwriters.
(xi) Upon payment and delivery in accordance with this
Agreement, good and valid title to the Shares being sold by each Selling
Stockholder free and clear of all liens, encumbrances, equities or claims,
will have been transferred to each of the several Underwriters who
purchased such Shares in good faith and without notice of any such liens,
encumbrances, equities, claims or other adverse claims within the meaning
of the Uniform Commercial Code.
In addition, such opinion shall also contain a statement in such
counsels' customary form that such counsel has participated in conferences with
officers and representatives of the Company, representatives of the independent
public accountants for the Company and the Underwriters at which the contents
and the Prospectus and related matters were discussed and, no facts have come to
the attention of such counsel which would lead such counsel to believe that
either the Registration Statement at the time it became effective (including the
information deemed to be part of the Registration Statement at the time of
effectiveness pursuant to Rule 430A(b) or Rule 434, if applicable), the Rule
462(b) Registration Statement, if any, or any amendment thereof made prior to
the Closing Date as of the date of such Rule 462(b) Registration Statement or
amendment, contained an untrue statement of a material fact or omitted to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading or that the Prospectus as of its date (or any
amendment thereof
<PAGE>
19
or supplement thereto made prior to the Closing Date as of the date of such
amendment or supplement) and as of the Closing Date contained or contains an
untrue statement of a material fact or omitted or omits to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading (it
being understood that such counsel need express no belief or opinion with
respect to the financial statements and schedules and other financial,
statistical or accounting data included or incorporated by reference therein).
In rendering such opinion, such counsel may rely as to matters
involving the application of laws other than the laws of the United States and
jurisdictions in which they are admitted, to the extent such counsel deems
proper and to the extent specified in such opinion, if at all, upon an opinion
or opinions (in form and substance reasonably satisfactory to Underwriters'
Counsel) of other counsel reasonably acceptable to Underwriters' Counsel,
familiar with the applicable laws. The opinion of such counsel for the Company
and the Selling Stockholders shall state that the opinion of any such other
counsel is in form satisfactory to such counsel and, in their opinion, you and
they are justified in relying thereon.
(c) At the Closing Date you shall have received the opinion of
LePore, Zimmerer, LePore & Luizzi, counsel for the Company, dated the Closing
Date addressed to the Underwriters and in form and substance satisfactory to
Underwriters' Counsel, to the effect that:
(i) The Company is duly qualified and in good standing
as a foreign corporation in New Jersey, Virginia and each other
jurisdiction in which the character or location of its properties (owned,
leased or licensed) or the nature or conduct of its business makes such
qualification necessary, except for those failures to be so qualified or in
good standing which will not in the aggregate have a material adverse
effect on the Company.
(ii) The Company has all requisite corporate authority
to own, lease and license its properties and conduct its business as now
being conducted and as described in the Registration Statement and the
Prospectus.
(iii) To the best of such counsel's knowledge, there is
no litigation or governmental or other action, suit, proceeding or
investigation before any court or before or by any public, regulatory or
governmental agency or body pending or threatened against, or involving the
properties or business of, the Company, which is of a character required to
be disclosed in the Registration Statement and the Prospectus which has not
been properly disclosed therein.
<PAGE>
20
(iv) The execution, delivery, and performance of this
Agreement and the consummation of the transactions contemplated hereby by
the Company do not and will not violate or conflict with, to the best of
such counsel's knowledge, any judgment, decree, order, statute, rule or
regulation of any New Jersey court or any governmental or regulatory agency
or body having jurisdiction over the Company or any of its properties or
assets. No consent, approval, authorization, order, registration, filing,
qualification, license or permit of or with any New Jersey court or any
public, governmental, or regulatory agency or body having jurisdiction over
the Company or any of its properties or assets is required for the
execution, delivery and performance of this Agreement or the consummation
of the transactions contemplated hereby, except for (1) such as may be
required under New Jersey state or other securities or Blue Sky laws in
connection with the purchase and distribution of the Shares by the
Underwriters (as to which such counsel need express no opinion) and (2)
such as have been made or obtained under the Act.
In rendering such opinion, such counsel may rely as to matters
involving the application of laws other than the laws of the United States and
jurisdictions in which they are admitted, to the extent such counsel deems
proper and to the extent specified in such opinion, if at all, upon an opinion
or opinions (in form and substance reasonably satisfactory to Underwriters'
Counsel) of other counsel reasonably acceptable to Underwriters' Counsel,
familiar with the applicable laws. The opinion of such counsel for the Company
shall state that the opinion of any such other counsel is in form satisfactory
to such counsel and, in their opinion, you and they are justified in relying
thereon.
(d) All documents provided to satisfy the conditions contained
herein shall be satisfactory in form and substance to you and to Underwriters'
Counsel, and the Underwriters shall have received from said Underwriters'
Counsel a favorable opinion, dated as of the Closing Date with respect to the
issuance and sale of the Shares, the Registration Statement and the Prospectus
and such other related matters as you may reasonably require, and the Company
shall have furnished to Underwriters' Counsel such documents as they reasonably
request for the purpose of enabling them to pass upon such matters.
(e) At the Closing Date you shall have received a certificate of
the Chief Executive Officer and Chief Financial Officer of the Company, dated
the Closing Date to the effect that (i) the conditions set forth in subsection
(a) of this Section 7 have been satisfied, (ii) as of the date hereof and as of
the Closing Date the representations and warranties of the Company set forth in
Section 1 hereof are accurate, (iii) as of the Closing Date the obligations of
the Company to be performed hereunder on or prior thereto have been duly
performed and (iv) subsequent to the respective dates as of which information is
given in the Registration Statement and the
<PAGE>
21
Prospectus, the Company has not sustained any material loss or interference with
its businesses or properties from fire, flood, hurricane, accident or other
calamity, whether or not covered by insurance, or from any labor dispute or any
legal or governmental proceeding, and there has not been any material adverse
change, or any development involving a material adverse change, in the business,
properties, operations, condition (financial or otherwise), or results of
operations of the Company, except in each case as described in or contemplated
by the Registration Statement and the Prospectus.
(f) At the time this Agreement is executed and at the Closing
Date, you shall have received a letter, from each of Arthur Andersen LLP and
M.R. Weiser & Co. LLP, independent public accountants for the Company, dated,
respectively, as of the date of this Agreement and as of the Closing Date
addressed to the Underwriters and substantially in the form heretofore approved
by you.
(g) Prior to the Closing Date the Company and the Selling
Stockholders shall have furnished to you such further information, certificates
and documents as you may reasonably request.
(h) You shall have received from each person who is a director
or officer of the Company or such stockholders as have been heretofore
designated by you and listed on Schedule II hereto an agreement to the effect
that such person will not, directly or indirectly, without your prior written
consent, offer, sell, offer or agree to sell, grant any option to purchase or
otherwise dispose (or announce any offer, sale, grant of an option to purchase
or other disposition) of any shares of Common Stock (or any securities
convertible into, exercisable for or exchangeable or exercisable for shares of
Common Stock) for a period of 180 days after the date of the Prospectus, other
than (i) the sale of Additional Shares by the Selling Stockholders hereunder,
(ii) pursuant to a bona fide gift, (iii) by will or the laws of descent and
distribution or (iv) to the Company.
(i) At the Closing Date, the Shares shall have been approved for
[listing] on the Nasdaq National Market, subject to official notice of issuance.
If any of the conditions specified in this Section 7 shall not have
been fulfilled when and as required by this Agreement, or if any of the
certificates, opinions, written statements or letters furnished to you or to
Underwriters' Counsel pursuant to this Section 7 shall not be in all material
respects reasonably satisfactory in form and substance to you and to
Underwriters' Counsel, all obligations of the Underwriters hereunder may be
canceled by you at, or at any time prior to, the Closing Date and the
obligations of the Underwriters to purchase the Additional Shares may be
canceled by you at, or at any time prior to, the Additional Closing Date. Notice
of such cancellation shall be given to the Company in writing, or by telex or
telegraph or confirmed by letter via overnight mail.
<PAGE>
22
8. Indemnification.
---------------
(a) The Company agrees and each of the Selling Stockholders
severally and not jointly agrees to indemnify and hold harmless each Underwriter
and each person, if any, who controls any Underwriter within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act, against any and all
losses, liabilities, claims, damages and expenses as incurred (including but
limited to attorneys' fees and any and all expenses whatsoever incurred in
investigating, preparing or defending against any litigation, commenced or
threatened, or any claim, and any and all amounts paid in settlement of any
claim or litigation), joint or several, to which they or any of them may become
subject under the Act, the Exchange Act or otherwise, insofar as such losses,
liabilities, claims, damages or expenses (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement for the registration of
the Shares, as originally filed or any amendment thereof, or any related
preliminary prospectus or the Prospectus, or in any supplement thereto or
amendment thereof, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however, that
-------- -------
the Company will not be liable in any such case to the extent but only to the
extent that any such loss, liability, claim, damage or expense arises out of or
is based upon any such untrue statement or alleged untrue statement or omission
or alleged omission made therein in reliance upon and in conformity with written
information furnished to the Company by or on behalf of any Underwriter through
you expressly for use therein; and provided, further, that each Selling
-------- -------
Stockholder will be liable in any such case to the extent but only to the extent
that any such loss, liability, claim, damage or expense arises out of or is
based upon any such untrue statement or alleged untrue statement or omission or
alleged omission made therein in reliance upon and in conformity with written
information furnished to the Company by or on behalf of any such Selling
Stockholder expressly for use therein. In no case shall any Selling Stockholder
be liable or responsible for any amount in excess of the gross proceeds received
by such Selling Stockholder with respect to the Shares sold by such Selling
Stockholder. The indemnity contained in this subsection (a) with respect to any
preliminary prospectus shall not inure to the benefit of any Underwriter from
whom the person asserting any such losses, liabilities, claims, damages and
expenses purchased the Shares which are the subject thereof (or to the benefit
of any person controlling such Underwriter) if at or prior to the written
confirmation of the sale of such Shares a copy of the Prospectus (or the
Prospectus as amended or supplemented) was not sent or delivered to such person
and the untrue statement or omission of a material fact contained in such
preliminary prospectus was corrected in the Prospectus (or the prospectus as
amended or supplemented). This indemnity agreement will be in addition to any
liability which the Company or the Selling Stockholders may otherwise have
including under this Agreement.
<PAGE>
23
(b) Each Underwriter severally, and not jointly, agrees to
indemnify and hold harmless the Company, the Selling Stockholders, each of the
directors of the Company, each of the officers of the Company who shall have
signed the Registration Statement, and each other person, if any, who controls
the Company or the Selling Stockholders within the meaning of Section 15 of the
Act or Section 20(a) of the Exchange Act, against any losses, liabilities,
claims, damages and expenses as incurred (including but not limited to
attorneys' fees and any and all expenses incurred in investigating, preparing or
defending against any litigation, commenced or threatened, or any claim, and any
and all amounts paid in settlement of any claim or litigation), jointly or
several, to which they or any of them may become subject under the Act, the
Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages
or expenses (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement for the registration of the Shares, as originally filed
or any amendment thereof, or any related preliminary prospectus or the
Prospectus, or in any amendment thereof or supplement thereto, or arise out of
or are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, in each case to the extent, but only to the extent, that any
such loss, liability, claim, damage or expense arises out of or is based upon
any such untrue statement or alleged untrue statement or omission or alleged
omission made therein in reliance upon and in conformity with written
information furnished to the Company by or on behalf of any Underwriter through
you expressly for use therein; provided, however, that in no case shall any
-------- -------
Underwriter be liable or responsible for any amount in excess of the
underwriting discount applicable to the Shares purchased by such Underwriter
hereunder. This indemnity will be in addition to any liability which any
Underwriter may otherwise have including under this Agreement. The Company
acknowledges that the statements set forth in the last paragraph of the cover
page of the Prospectus, the legend concerning passive market making on the
second page of the Prospectus, the number of Shares to be purchased by each
Underwriter appearing in the Prospectus under the caption "Underwriting" and the
statements contained in the Prospectus in the third and seventh paragraphs under
the caption "Underwriting" constitute the only information furnished in writing
by or on behalf of any Underwriter expressly for use in the registration
statement relating to the Shares as originally filed or in any amendment
thereof, any related preliminary prospectus or the Prospectus or in any
amendment thereof or supplement thereto, as the case may be.
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify each party against whom
indemnification is to be sought in writing of the commencement thereof (but the
failure so to notify an indemnifying party shall not relieve it from any
liability which it may
<PAGE>
24
have under this Section 8), except that no indemnification provided for in this
Section 8 shall be available to any party who shall fail to give notice as
provided for in this subsection (c) if the party to whom notice was not given
was unaware of the action, suit, investigation inquiry or proceedings to which
the notice would have related and was prejudiced by the failure to give notice.
In case any such action is brought against any indemnified party, and it
notifies an indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein, and to the extent it may elect by
written notice delivered to the indemnified party promptly after receiving the
aforesaid notice from such indemnified party, to assume the defense thereof with
counsel satisfactory to such indemnified party. Notwithstanding the foregoing,
the indemnified party or parties shall have the right to employ its or their own
counsel in any such case, but the fees and expenses of such counsel shall be at
the expense of such indemnified party or parties unless (i) the employment of
such counsel shall have been authorized in writing by one of the indemnifying
parties in connection with the defense of such action, (ii) the indemnifying
parties shall not have employed counsel to have charge of the defense of such
action within a reasonable time after notice of commencement of the action, or
(iii) such indemnified party or parties shall have reasonably concluded that
there may be defenses available to it or them which are different from or
additional to those available to one or all of the indemnifying parties and that
the use of separate counsel is necessary in order to protect the interests of
the indemnified party (in which case the indemnifying parties shall not have the
right to direct the defense of such action on behalf of the indemnified party or
parties but shall have a right to participate in such defense), in any of which
events such fees and expenses shall be borne by the indemnifying parties.
Anything in this subsection to the contrary notwithstanding, an indemnifying
party shall not be liable for any settlement of any claim or action effected
without its written consent; provided, however, that such consent was not
-------- -------
unreasonably withheld.
9. Contribution. In order to provide for contribution in
------------
circumstances in which the indemnification provided for in Section 8 hereof is
for any reason held to be unavailable from any indemnifying party or is
insufficient to hold harmless a party indemnified thereunder, each indemnifying
party shall contribute to the aggregate losses, claims, damages, liabilities and
expenses of the nature contemplated by such indemnification provision (including
any investigation, legal and other expenses incurred in connection with, and any
amount paid in settlement of, any action, suit or proceeding or any claims
asserted) as incurred to which an indemnified party may be subject, in such
proportions as is appropriate to reflect the relative benefits received by the
Company and the Selling Stockholders on the one hand and the Underwriters on the
other from the offering of the Shares or, if such allocation is not permitted by
applicable law or indemnification is not available as a result of the
indemnifying party not having received notice as provided in Section 8 hereof,
in such proportion as is appropriate to reflect not only the relative benefits
referred to above but also the relative fault of the Company and the Selling
Stockholders on the one hand and the
<PAGE>
25
Underwriters on the other in connection with the statements or omissions which
resulted in such losses, claims, damages, liabilities or expenses, as well as
any other relevant equitable considerations. The relative benefits received by
the Company and the Selling Stockholders on the one hand and the Underwriters on
the other shall be deemed to be in the same proportion as (x) the total proceeds
from the offering (net of underwriting discounts and commissions but before
deducting expenses) received by the Company and the Selling Stockholders bear to
(y) the underwriting discounts and commissions received by the Underwriters, in
each case as set forth in the table on the cover page of the Prospectus. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company or the Selling Stockholders on the one hand or the Underwriters on the
other and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company, the
Selling Stockholders and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 9 were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above. Notwithstanding the provisions of
this Section 9, (i) in no case shall any Under writer be required to contribute
an amount in excess of the underwriting discount applicable to the Shares
purchased by such Underwriter hereunder, (ii) in no case shall any Selling
Stockholder be required to contribute an amount in excess of the gross proceeds
received by such Selling Stockholder with respect to the Shares sold by such
Selling Stockholder and (iii) no person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. Notwithstanding the provisions of this Section 9 and the
preceding sentence, no Underwriter shall be required to contribute any amount
in excess of the amount by which the total price at which the Shares
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages that such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. For purposes of this Section 9, each person, if any, who
controls an Underwriter within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act shall have the same rights to contribution as such
Underwriter, and each person, if any, who controls the Company or the Selling
Stockholders within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, each officer of the Company who shall have signed the Registration
Statement and each director of the Company shall have the same rights to
contribution as the Company and the Selling Stockholders, subject in each case
to clauses (i) and (ii) of this Section 9. Any party entitled to contribution
will, promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim for contribution may
be made against another party or parties, notify each party or parties from whom
contribution may be sought, but the omission to so notify such party or
<PAGE>
26
parties shall not relieve the party or parties from whom contribution may be
sought from any obligation it or they may have under this Section 9 or
otherwise, except as otherwise specifically provided in Section 8(c). No party
shall be liable for contribution with respect to any action or claim settled
without its consent; provided, however, that such consent was not unreasonably
-------- -------
withheld.
10. Default by an Underwriter.
-------------------------
(a) If any Underwriter or Underwriters shall default in its or
their obligation to purchase Firm Shares or Additional Shares hereunder, and if
the Firm Shares or Additional Shares with respect to which such default relates
do not (after giving effect to arrangements, if any, made by you pursuant to
subsection (b) below) exceed in the aggregate 10% of the number of Firm Shares
or Additional Shares, the Firm Shares or the Additional Shares to which the
default relates shall be purchased by the non-defaulting Underwriters in
proportion to the respective proportions which the numbers of Firm Shares set
forth opposite their respective names in Schedule I hereto bear to the aggregate
number of Firm Shares set forth opposite the names of the non-defaulting
Underwriters.
(b) In the event that such default relates to more than 10% of
the Firm Shares or Additional Shares, as the case may be, or the Underwriters
fail to purchase the Firm Shares or Additional Shares as required by Section
10(a), you may in your discretion arrange for yourself or for another party or
parties (including any non-defaulting Underwriter or Underwriters who so agree)
to purchase such Firm Shares or Additional Shares, as the case may be, to which
such default relates on the terms contained herein. If within 24 hours after
such default by any Underwriter, you do not arrange for the purchase of the Firm
Shares or the Additional Shares, as the case may be, then the Company and the
Selling Stockholders shall be entitled to a further period of 24 hours within
which to arrange for another party or parties satisfactory to you to purchase
such Firm Shares or Additional Shares on such terms. In the event that within
two aforementioned 24-hour periods after such a default you do not arrange for
the purchase of the Firm Shares or Additional Shares, as the case may be, to
which such default relates as provided in this Section 10, this Agreement or, in
the case of a default with respect to the Additional Shares, the obligations of
the Underwriters to purchase and of the Company and of the Selling Stockholders
to sell the Additional Shares shall thereupon terminate, without liability on
the part of the Company or the Selling Stockholders with respect thereto (except
in each case as provided in Section 6, 8(a) and 9 hereof) or the Underwriters,
but nothing in this Agreement shall relieve a defaulting Underwriter or
Underwriters of its or their liability, if any, to the other Underwriters and
the Company and the Selling Stockholders for damages occasioned by its or their
default hereunder.
<PAGE>
27
(c) In the event that the Firm Shares or Additional Shares to
which the default relates are to be purchased by the non-defaulting
Underwriters, or are to be purchased by another party or parties as aforesaid,
you or the Company and the Selling Stockholders shall have the right to postpone
the Closing Date or Additional Closing Date, as the case may be, for a period,
not exceeding five business days, in order to effect whatever changes may
thereby be made necessary in the Registration Statement or the Prospectus or in
any other documents and arrangements, and the Company agrees to file promptly
any amendment or supplement to the Registration Statement or the Prospectus
which, in the reasonable opinion of Underwriters' Counsel, may thereby be made
necessary or advisable. The term "Underwriter" as used in this Agreement shall
include any party substituted under this Section 10 with like effect as if it
had originally been a party to this Agreement with respect to such Firm Shares
and Additional Shares.
11. Survival of Representations and Agreements. All representations
------------------------------------------
and warranties, covenants and agreements of the Underwriters, the Company and
the Selling Stockholders contained in this Agreement, including the agreements
contained in Section 6, the indemnity agreements contained in Section 8 and the
contribution agreements contained in Section 9, shall remain operative and in
full force and effect regardless of any investigation made by or on behalf of
any Underwriter or any controlling person thereof or by or on behalf of the
Company, any of its officers and directors or any controlling person thereof, or
on behalf of the Selling Stockholders or any controlling person thereof, and
shall survive delivery of and payment for the Shares to and by the Underwriters.
The representations contained in Section 1 and 2 and the agreements contained in
Sections 6, 8, 9 and 12(d) hereof shall survive the termination of this
Agreement, including termination pursuant to Section 10 or 12 hereof.
12. Effective Date of Agreement; Termination.
----------------------------------------
(a) This Agreement shall become effective, upon the later of
when (i) the Commission shall have provided notification of the effectiveness of
the Registration Statement or (ii) the execution of this Agreement. If either
the initial public offering price or the purchase price per Share has not been
agreed upon prior to 5:00 P.M., New York time, on the fifth full business day
after the Registration Statement shall have become effective, this Agreement
shall thereupon terminate without liability to the Company or the Underwriters
except as herein expressly provided. Until this Agreement becomes effective as
aforesaid, it may be terminated by the Company by notifying you or by you
notifying the Company and the Selling Stockholders. Notwithstanding the
foregoing, the provisions of this Section 12 and of Sections 1, 2, 6, 8 and 9
hereof shall at all times be in full force and effect.
(b) You shall have the right to terminate this Agreement at
any time prior to the Closing Date or the obligations of the Underwriters to
purchase the
<PAGE>
28
Additional Shares at any time prior to the Additional Closing Date,
as the case may be, if (A) any domestic or international event or act or
occurrence has materially disrupted, or in your opinion will in the immediate
future materially disrupt, the market for the Company's securities or securities
in general; or (B) if trading on the New York or American Stock Exchanges shall
have been suspended, or minimum or maximum prices for trading shall have been
fixed, or maximum ranges for prices for securities shall have been required, on
the New York or American Stock Exchanges by the New York or American Stock
Exchanges or by order of the Commission or any other governmental authority
having jurisdiction; or (C) if a banking moratorium has been declared by a state
or federal authority or if any new restriction materially adversely affecting
the distribution of the Firm Shares or the Additional Shares, as the case may
be, shall have become effective; or (D) (i) if the United States becomes engaged
in hostilities or there is an escalation of hostilities involving the United
States or there is a declaration of a national emergency or war by the United
States or (ii) if there shall have been such change in political, financial or
economic conditions if the effect of any such event in (i) or (ii) as in your
judgment makes it impracticable or inadvisable to proceed with the offering,
sale and delivery of the Firm Shares or the Additional Shares, as the case may
be, on the terms contemplated by the Prospectus.
(c) Any notice of termination pursuant to this Section 12
shall be by telephone, telex, or telegraph, confirmed in writing by letter.
(d) If this Agreement shall be terminated pursuant to any of
the provisions hereof (otherwise than pursuant to (i) notification by you as
provided in Section 12(a) hereof or (ii) Section 10(b) or 12(b) hereof), or if
the sale of the Shares provided for herein is not consummated because any
condition to the obligations of the Underwriters set forth herein is not
satisfied or because of any refusal, inability or failure on the part of the
Company or the Selling Stockholders to perform any agreement herein or comply
with any provision hereof, the Company or the Selling Stockholders (pro rata to
the extent of their refusal, inability or failure to perform) will, subject to
demand by you, reimburse the Underwriters for all out-of-pocket expenses
(including the fees and expenses of their counsel), incurred by the Underwriters
in connection herewith.
12. Notices. All communications hereunder, except as may be otherwise
-------
specifically provided herein, shall be in writing and , if sent to any
Underwriter, shall be mailed, delivered, or telexed or telegraphed and confirmed
in writing, to such Underwriter c/o Bear, Stearns & Co. Inc., 245 Park Avenue,
New York, New York 10167, Attention: Corporate Finance Department [with a copy
to Carl L. Reisner, Paul, Weiss, Rifkind, Wharton & Garrison, 1285 Avenue of the
Americas, New York, New York 10019-6064]; if sent to the Company, shall be
mailed, delivered, or telegraphed and confirmed in writing to the Company, 17-17
Route 208 North, Fair Lawn, New Jersey 07410, Attention: Patrick G. LePore,
with a copy to John R. LeClaire, P.C.,
<PAGE>
29
Goodwin, Procter & Hoar LLP, Exchange Place, Boston, Massachusetts 02109-2881;
if sent to the Selling Stockholders, shall be mailed, delivered or telegraphed
and confirmed in writing to TA Associates, Inc., 125 High Street, Suite 2500,
Boston, Massachusetts 02110, Attention: Kathleen Cromwell.
13. Parties. This Agreement shall insure solely to the benefit of,
-------
and shall be binding upon, the Underwriters, the Company, the Selling
Stockholders and the controlling persons, directors, officers, employees and
agents referred to in Section 8 and 9, and their respective personal
representatives, successors and assigns, and no other person shall have or be
construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Agreement or any provision herein contained.
The term "successors and assigns" shall not include a purchaser, in its capacity
as such, of Shares from any of the Underwriters.
14. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, BUT WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
<PAGE>
30
If the foregoing correctly sets forth the understanding between you
and the Company, please so indicate in the space provided below for that
purpose, whereupon this letter shall constitute a binding agreement among us.
Very truly yours,
BORON, LePORE & ASSOCIATES, INC.
By: _________________________________
Name:
Title:
SELLING STOCKHOLDERS
By: _________________________________
Attorney-in-Fact
Accepted as of the date first above written
BEAR, STEARNS & CO. INC.
DAIN RAUSCHER WESSELS
SALOMON SMITH BARNEY
NATIONSBANC MONTGOMERY SECURITIES LLC
By: _______________________________
Name:
Title:
On behalf of themselves and the other
Underwriters named in Schedule I hereto.
<PAGE>
31
SCHEDULE I
Number of Firm
Name of Underwriter Shares to be Purchased
- ------------------- ----------------------
Bear, Stearns & Co. Inc.
Dain Rauscher Wessels
Salomon Smith Barney
NationsBanc Montgomery Securities LLC
Cowen & Company
Credit Suisse First Boston Corporation
Furman Selz LLC
Goldman, Sachs & Co.
Hambrecht & Quist LLC
Lehman Brothers Inc.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
UBS Securities LLC
Adams, Harkness & Hill, Inc.
Anglo-American Investor Services Corp.
William Blair & Company
Blaylock & Partners, L.P.
Gaines, Berland Inc.
Gerard Klauer Mattison & Co., LLC
Pennsylvania Merchant Group Ltd.
The Robinson-Humphrey Company, Inc.
Tucker Anthony Incorporated
Vector Securities International, Inc.
Volpe Brown Whelan & Company
Total. . . . . . . . . .
<PAGE>
32
SCHEDULE II
Selling Stockholders
--------------------
1) Advent VII L.P.
Attorneys-in-Fact: Patrick G. LePore and Roger B. Kafker
2) Advent Atlantic and Pacific III L.P.
Attorneys-in-Fact: Patrick G. LePore and Roger B. Kafker
3) TA Venture Investors Limited Partnership
Attorneys-in-Fact: Patrick G. LePore and Roger B. Kafker
4) [Gregory F. Boron]
<PAGE>
33
SCHEDULE III
Stockholders Subject to the Lock-up Provision
TA Venture Investors Limited Partnership
Advent VII L.P.
Advent Atlantic and Pacific III L.P.
Patricia S. Feeney and Theresa Connelly, as trustees, for:
Gregory F. Boron Trust for Catherine Boron
Gregory F. Boron Trust for James Boron
Gregory F. Boron Trust for Kevin Connelly
Gregory F. Boron Trust for Brian Connelly
Susanne M. Boron Trust for Catherine Boron
Susanne M. Boron Trust for James Boron
Suzanne M. Boron Trust for Kevin Connelly
Suzanne M. Boron Trust for Brian Connelly
Joseph H. Smith
Christopher J. Sweeney
Roger Boissonneault
John A. Staley, IV
MLPFS FBO John A. Staley, IV IRRA
Patrick G. LePore
Gregory F. Boron
Timothy J. McIntyre
Martin J. Veilleux
Jacqueline C. Morby
Brian J. Smith
Roger B. Kafker
Park Street Investors, L.P.
<PAGE>
EXHIBIT 2.7
ASSET PURCHASE AGREEMENT
BY AND AMONG
MES ACQUISITION CORP.
A DELAWARE CORPORATION
AS BUYER
BORON, LEPORE & ASSOCIATES, INC.
A DELAWARE CORPORATION
AS PARENT
MEDICAL EDUCATION SYSTEMS, INC.
A PENNSYLVANIA CORPORATION
AS SELLER
AND
MARY A. PARENTI
AND
JAMES JAMIESON
AS STOCKHOLDERS
OF SELLER
MAY 4, 1998
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 1. PURCHASE AND SALE OF ASSETS................................. 1
1.1 Sale of Assets.............................................. 1
1.2 Liabilities................................................. 3
1.3 Purchase Price and Payment.................................. 3
1.4 Place of Closing; Closing Date.............................. 4
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
1.11 Stockholders' Representatives............................... 6
SECTION 2. REPRESENTATIONS AND WARRANTIES OF SELLER AND STOCKHOLDER.... 7
2.1 Making of Representations and Warranties.................... 7
2.2 Organization and Qualification; Capital Stock............... 7
2.3 Authority................................................... 8
2.4 Title to Properties; Liens; Condition of Properties......... 9
2.5 Location of Subject Assets.................................. 10
2.6 Financial Statements; Undisclosed Liabilities............... 10
2.7 Tax Matters................................................. 10
2.8 Collectibility of Accounts Receivable....................... 11
2.9 Intellectual Property Rights; Employee Restrictions......... 11
2.10 Business; Compliance with Laws.............................. 12
2.11 Insurance................................................... 13
2.12 Transactions with Affiliates................................ 13
2.13 Employee Benefit Plans...................................... 13
2.14 Hazardous Waste, Etc........................................ 13
2.15 List of Certain Employees and Suppliers..................... 14
2.16 Employees; Labor Matters.................................... 15
2.17 Customers, Distributors, Meeting Moderators, Salespersons... 15
2.18 Litigation.................................................. 15
2.19 Finder's Fee................................................ 16
2.20 Material Adverse Change..................................... 16
2.21 Contracts................................................... 16
2.22 Banking Relations........................................... 17
2.23 Millennium Compliance....................................... 18
2.24 Disclosure.................................................. 18
2.25 Securities Law Matters...................................... 18
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 3. COVENANTS OF STOCKHOLDER AND SELLER.......................... 19
3.1 Making of Covenants and Agreements........................... 19
3.2 Conduct of Business.......................................... 19
3.3 Authorization from Others.................................... 20
3.4 Consummation of Agreement.................................... 20
3.5 Confidentiality.............................................. 21
3.6 Non-Use of Trade Names, etc.................................. 21
3.7 Non-Disclosure and Non-Competition........................... 21
3.8 Payment of Obligations....................................... 22
3.9 Collection of Assets......................................... 22
3.10 Securities Filings........................................... 22
3.11 Assist in Accreditation...................................... 23
3.12 Transfer of Bank Accounts.................................... 23
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT........... 23
4.1 Making of Representations and Warranties..................... 23
4.2 Organization of Buyer........................................ 23
4.3 Authority of Buyer........................................... 23
4.4 Finder's Fees................................................ 24
4.5 SEC Reports.................................................. 24
4.6 Material Adverse Change...................................... 25
4.7 Disclosure................................................... 25
4.8 Litigation................................................... 25
SECTION 5. COVENANTS OF BUYER AND PARENT................................ 25
5.1 Making of Covenants and Agreement............................ 25
5.2 Confidentiality.............................................. 25
5.3 Consummation of Agreement.................................... 25
5.4 No Disclosure of Consideration............................... 26
5.5 Registration Rights.......................................... 26
SECTION 6. CONDITIONS................................................... 26
6.1 Conditions to the Obligations of Buyer....................... 26
6.2 Conditions to Obligations of Seller.......................... 28
SECTION 7. TERMINATION OF AGREEMENT; RIGHTS TO PROCEED.................. 29
7.1 Termination.................................................. 29
7.2 Effect of Termination........................................ 29
7.3 Right to Proceed............................................. 29
SECTION 8. SURVIVAL OF WARRANTIES....................................... 30
8.1 Survival of Warranties....................................... 30
</TABLE>
(ii)
<PAGE>
<TABLE>
<S> <C>
SECTION 9. INDEMNIFICATION............................................ 30
9.1 Indemnification by Stockholders............................ 30
9.2 Indemnification by Buyer and Parent........................ 32
9.3 Notice; Defense of Claims.................................. 34
9.4 Sole Remedy................................................ 35
9.5 Satisfaction of Indemnification Obligations................ 35
SECTION 10. MISCELLANEOUS.............................................. 35
10.1 Law Governing.............................................. 35
10.2 Notices.................................................... 35
10.3 Prior Agreements Superseded................................ 36
10.4 Assignability.............................................. 37
10.5 Captions and Gender........................................ 37
10.6 Certain Definitions........................................ 37
10.7 Execution in Counterparts.................................. 37
10.8 Amendments; Waivers........................................ 37
10.9 Severability............................................... 38
10.10 Publicity and Disclosures.................................. 38
10.11 Dispute Resolution......................................... 38
10.12 Expenses................................................... 38
</TABLE>
(iii)
<PAGE>
ASSET PURCHASE AGREEMENT dated as of May 4, 1998 by and among Boron, LePore
& Associates, Inc., a Delaware corporation ("Parent"), MES Acquisition Corp., a
Delaware corporation and a wholly-owned subsidiary of Parent ("Buyer"), Medical
Education Systems, Inc., a Pennsylvania corporation ("Seller"), and Mary A.
Parenti and James Jamieson (each 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 name
"Medical Education Systems" 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, all of which are listed
on Schedule 1.1(a) (iii);
---------------------
(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, accreditations
and authorizations 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 as set forth 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 of value over $250 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 the following property and assets of Seller:
(i) Seller's corporate franchise, stock record books, and
corporate record books containing minutes of meetings of directors and
stockholders (collectively, the "Corporate Records");
(ii) those certain assets specified in Schedule 1.1(b); and
---------------
2
<PAGE>
(iii) the consideration delivered by Buyer to Seller pursuant to
Section 1.3 of this Agreement.
The assets, property and business of Seller which are excluded from the
Subject Assets under this Section 1.1(b) are hereinafter referred to as 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 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) with the exception of the Contract
Liabilities, 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, the Stockholders 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, 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 Ten Million Dollars ($10,000,000); and (ii) 160,103 shares of Parent's
common stock, par value $.01 per share ("Parent Stock").
(b) Upon the achievement of the performance goals listed in Schedule A
----------
hereto and subject to the terms and conditions contained therein, Buyer shall
deliver to Seller
3
<PAGE>
an aggregate payment of ten million dollars ($10,000,000) (the "Contingent
Payment") by check or wire transfer of immediately available funds to accounts
designated by Seller.
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
Manta and Welge at 9:00 a.m. (local time) on May 28, 1998, or if the conditions
to Closing specified herein have not been satisfied or waived by such date, at
such other place or later date as may be fixed by mutual agreement of Buyer and
Seller (the "Closing Date") following satisfaction or waiver of such conditions.
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 and which form will be provided to
Seller by Buyer at least one (1) day prior to the Closing, (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; and (ii) such other documentation as may be reasonably agreed to prior
to Closing by Buyer and Seller in connection with the consummation of the
transactions contemplated by this Agreement; and (b) Buyer shall deliver to
Seller and Stockholder (i) the amounts of cash and Parent Stock set forth in
Section 1.3; and (ii) such other documentation as may be reasonably agreed to
prior to Closing 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
and providing Seller with reasonable opportunity to copy such records prior to
destruction, such copying to be permitted only for a purpose not in
contravention of the best interests of the Buyer. Seller at the Closing shall
also provide Buyer with copies of the Corporate Records.
1.7 Further Assurances. Seller from time to time after the Closing at the
------------------
request of Buyer (at Buyer's expense if there is any expense) 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 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
4
<PAGE>
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.
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 in the amount 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. The Contingent Payment shall be allocated to goodwill.
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 not assume Seller's obligations with respect thereto, but 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, and to attempt to
employ, those employees of Seller listed on Schedule 1.10(b) upon compensation
----------------
terms substantially similar to those set forth on Schedule 1.10(b). Buyer
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. Buyer reserves the right
to alter the employee benefits to be offered to its employees consistent with
those offered to other employees of Parent.
5
<PAGE>
(c) Seller shall pay all wages, salaries 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 by Seller, 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, or vacation accrued but not taken
as of the Closing Date.
(e) Buyer agrees to use its best efforts to cause stock options for
an aggregate of 15,000 shares of Parent Stock to be granted by Parent to
employees of the Business in connection with their employment by Buyer. Seller
acknowledges that the grant of such stock options is subject to the approval of
the Compensation Committee of Parent's Board of Directors and will have an
exercise price equal to fair market value on the date of grant.
1.11 Stockholders' Representatives.
-----------------------------
(a) In order to administer efficiently (i) the implementation of the
Agreement by the Stockholders, (ii) the waiver of any condition to the
obligations of the Stockholders to consummate the transactions contemplated
hereby, and (iii) the settlement of any dispute with respect to the Agreement,
the Stockholders hereby designate Mary A. Parenti as their representative (the
"Stockholders' Representative").
(b) The Stockholders hereby authorize the Stockholders'
Representative (i) to take all action necessary in connection with the
implementation of the Agreement on behalf of the Stockholders, the waiver of any
condition to the obligations of the Stockholders to consummate the transactions
contemplated hereby, or the settlement of any dispute, (ii) to give and receive
all notices required to be given under the Agreement and (iii) to take any and
all additional action as is contemplated to be taken by or on behalf of the
Stockholders by the terms of this Agreement.
(c) In the event that the Stockholders' Representative dies, becomes
legally incapacitated or resigns from such position, James Jamieson shall fill
such vacancy and shall be deemed to be the Stockholders' Representative for all
purposes of this Agreement; however, no change in the Stockholders'
Representative shall be effective until Buyer is given notice of it by the
Stockholders.
(d) All decisions and actions by the Stockholders' Representative
shall be binding upon all of the Stockholders, and no Stockholder shall have the
right to object, dissent, protest or otherwise contest the same.
(e) By their execution of this Agreement, the Stockholders agree
that:
6
<PAGE>
(i) Buyer shall be able to rely conclusively on the instructions
and decisions of the Stockholders' Representative as to any actions
required or permitted to be taken by the Stockholders or the Stockholders'
Representative hereunder, and no party hereunder shall have any cause of
action against Buyer for any action taken by Buyer in reliance upon the
instructions or decisions of the Stockholders' Representative;
(ii) all actions, decisions and instructions of the Stockholders'
Representative shall be conclusive and binding upon all of the Stockholders
and no Stockholder shall have any cause of action against the Stockholders'
Representative for any action taken, decision made or instruction given by
the Stockholders' Representative under this Agreement, except for fraud or
willful breach of this Agreement by the Stockholders' Representative;
(iii) remedies available at law for any breach of the provisions of
this Section 1.11 are inadequate; therefore, Buyer shall be entitled to
temporary and permanent injunctive relief without the necessity of proving
damages if Buyer brings an action to enforce the provisions of this Section
1.11; and
(iv) the provisions of this Section 1.11 are independent and
severable, shall constitute an irrevocable power of attorney, coupled with
an interest and surviving death, granted by the Stockholders to the
Stockholders' Representative and shall be binding upon the executors,
heirs, legal representatives and successors of each Stockholder.
(f) All fees and expenses incurred by the Stockholders'
Representative shall be paid by the Stockholders.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF SELLER AND STOCKHOLDER.
- -------------------------------------------------------------------
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 Stockholder 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 Commonwealth of Pennsylvania 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 Georgia and has
filed an application to qualify to do business as a foreign corporation in
Michigan, these being the only jurisdictions 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. As of the Closing, all of the issued
and outstanding capital stock of the Seller will
7
<PAGE>
be 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 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.
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.
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 (except
that no representation is made with respect to the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 ("HSR") except as set forth in Section
2.3(c) below); and
(iii) do not and will not result in a material breach of, constitute
a material default under, accelerate any material obligation under, require
a material consent under or give rise to a material 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.
8
<PAGE>
(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 the 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 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 HSR except as set forth in Section 2.3(c) below); and
(ii) do not and will not result in a material breach of, constitute
a material default under, accelerate any material obligation under, or give
rise to a material 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.
(c) With respect to the HSR, Mary Parenti is the "ultimate parent
entity" (as defined in HSR) of Seller and she does not have annual net sales or
total assets for purposes of HSR (after taking into account the applicable
attribution rules of HSR) in excess of $100 million.
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, included in the Subject Assets. Except as set forth on Schedule 2.4,
------------
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
9
<PAGE>
any secured party thereunder to file any such financing statement. The Subject
Assets and the Excluded Assets listed on Schedule 1.1(b) are all of the assets
used in the operation of the Business as the same has been operated prior to the
date hereof. Except as set forth on Schedule 2.4, the Subject Assets (i) are in
working order which is generally sufficient for the purpose for which they are
being used), (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 tangible Subject Assets are located
--------------------------
at those locations set forth on Schedule 2.5.
------------
2.6 Financial Statements; Undisclosed Liabilities.
---------------------------------------------
(a) Seller has previously furnished to Buyer and Parent copies of its
reviewed, unaudited financial statements for the fiscal years ended December 31,
1996 and 1997 and the unaudited interim period ending March 31, 1998. Except as
described in Schedule 2.6(a), the financial statements referred to in this
---------------
Section 2.6(a) 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), are complete, correct and
consistent in all material respects with the books and records of Seller and to
the best knowledge of Seller, were prepared in conformity with generally
accepted accounting principles applied on a consistent basis (except that
revenues were recognized on a modified percentage of completion basis).
(b) Except as and to the extent reflected or reserved against in the
unaudited balance sheet of Seller at March 31, 1998 contained in the financial
statements referred to in Section 2.6(a) (the "Base Balance Sheet") or as listed
on Schedule 2.6(b), the Seller does not have and is not subject to any material
---------------
accrued liability or obligation, or to its best knowledge, any other material
obligation of any nature, whether contingent or otherwise.
2.7 Tax Matters. Except as set forth on Schedule 2.7, 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 accrued and unpaid
federal, state, county and local taxes of any
10
<PAGE>
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 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 July 1, 1990, 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 Commonwealth of Pennsylvania.
2.8 Collectibility of Accounts Receivable. All of the accounts receivable
-------------------------------------
of the Seller (less the reserve for bad debts set forth on the Base Balance
Sheet) are valid and enforceable claims, are not subject to set-off or
counterclaim except for adjustments and carryovers in the ordinary course of
business, provided that the foregoing representation is not a guarantee of
collectibility. 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 May 1, 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 (the "Seller Rights"), provided that no representation is made with
respect to "off the shelf" software used by Seller that is generally
commercially available.
(b) To the best knowledge of Seller, the business of Seller as
presently conducted does not violate any agreements which Seller has with any
third party or infringe any patent, trademark, copyright or trade secret or 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) Seller has taken commercially reasonable steps required to
establish and preserve its ownership of all of the Seller Rights; since 1996,
current and former employees of the Seller, and each of Seller's consultants and
independent contractors involved in
11
<PAGE>
development of any of the Seller Rights has executed an agreement regarding
confidentiality, proprietary information and assignment of inventions and
copyrights to Seller as set forth in Schedule 2.9(d), 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 or assignment of
inventions.
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 or the United States Register of Copyrights
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.
2.10 Business; Compliance with Laws. Seller has all necessary material
------------------------------
franchises, permits, licenses and other rights and privileges necessary to
permit it to own its property and to conduct the Business as it is presently
conducted. Seller is currently and has heretofore been in compliance in all
material respects with all federal, state, local and foreign laws, regulations
and guidelines, including without limitation all applicable 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"), the American Council on
Pharmaceutical Education (the "ACPE"), and the pending accreditation with the
Pennsylvania Nurses Association ("PNA"), and each additional action required to
be taken by Seller, the ACCME, the ACPE or the PNA in order for Seller to obtain
full accreditation from each of the ACCME, the ACPE and the PNA. Seller has no
knowledge that any 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 Seller's various continuing education
divisions or any person who was "accredited" by the ACCME or the ACPE does not
plan to accept employment with Buyer after the Closing. None of Seller, the
Stockholder or any former subsidiary of Seller 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; (c) found by a
court of competent jurisdiction in a civil action or by the Securities and
Exchange Commission ("SEC") 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; or (d) involved in any other type of legal proceeding
that would require Stockholder to disclose such involvement under Item 401(f) of
SEC Regulation S-K if
12
<PAGE>
Stockholder were subject to such Regulation. 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.
2.11 Insurance. Seller has fire, casualty, product liability and business
---------
interruption and other insurance policies listed on Schedule 2.11. There is no
-------------
default or event which could give rise to a default under any such policy.
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 member or affiliate of the foregoing persons and there have
been no such transactions within the past three (3) years except as set forth in
Schedule 2.12.
- -------------
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. The terms and operation of each Employee Benefit
-------------
Plan, to the best of Seller's knowledge, 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. 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 Seller's best 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,
operated, leased, or used by Seller, or has ever been located in the soil or
groundwater at any such site; (iii) to Seller's best knowledge, no Hazardous
Material has ever been transported from any site presently or formerly owned, or
operated, leased, or used by Seller for treatment, storage, or disposal at any
other place; (iv) to Seller's best knowledge, Seller does not presently own,
operate, lease, or use, nor has it previously owned, or previously operated,
leased, or used any site on which underground storage tanks are or were located;
and (v) to Seller's best knowledge, no lien has ever been imposed by any
13
<PAGE>
governmental agency on any property, facility, machinery, or equipment owned,
operated, leased, or used by Seller in connection with the presence of any
Hazardous Material.
(b) Except as set forth in Schedule 2.14 hereto, (i) Seller does not
-------------
have any liability under, nor has it ever violated, any Environmental Law (as
defined below); (ii) to Seller's best knowledge, Seller, any property owned,
operated, leased, or used by Seller, and any facilities and operations thereon,
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, to Seller's best
-------------
knowledge, no site owned, 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
14
<PAGE>
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 of all suppliers material to the Business 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 53 full-time
------------------------
employees and 6 part-time employees as listed on Schedule 2.16, and generally
-------------
enjoys 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, no severance or other payments
will become due except for commissions earned and payable under Seller's
commission policy (as such commissions may be calculated on such projects) are
set forth on Schedule 2.16. 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. 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, except as contemplated by this Agreement, 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, Meeting Moderators, Salespersons. Schedule
--------------------------------------------------------- --------
2.17 sets forth each representative, distributor and independent contractor of
- ----
Seller at the date hereof (whether pursuant to a commission, royalty or other
arrangement), 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"). Except as disclosed 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 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.
15
<PAGE>
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, financial condition, properties, assets, liabilities
or obligations of the Business;
(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, financial condition, 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 reasonably be expected to cause any
such material adverse change (other than facts or events affecting the
industry generally);
(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) there has not been any payment made by Seller to either
Stockholder (except for salaries as disclosed on Schedule 2.15) or 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 material 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
- ----------- ------------------
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:
(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;
16
<PAGE>
(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 verbal contract, agreement, arrangement or understanding with
the suppliers or customers of the Business.
To the best of Seller's knowledge, all of the Contracts listed in Schedule
--------
1.1(a)(iv) 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. To the best knowledge of
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 set forth in Schedule 2.22 attached
-------------
hereto, indicating with respect to each of such arrangements the type of
arrangement maintained (such as checking account, borrowing arrangements, safe
deposit box, etc.) and the person or persons authorized in respect thereof. The
signature cards and other authorization forms or requirements for such banking
arrangements have been amended as of Closing in the manner requested by Buyer
which request will be made two (2) days prior to Closing.
17
<PAGE>
2.23 Millennium Compliance. To the best of Seller's knowledge, 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; and
(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.
2.24 Disclosure. To the best knowledge of Seller and the Stockholders,
----------
the representations, warranties and statements made or contained in this
Agreement, in the certificates, Schedules and Exhibits given or delivered by
Seller and the Stockholders 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
misleading in light of the circumstances in which they were made or delivered.
2.25 Securities Law Matters. Seller and each Stockholder hereby
----------------------
represent and warrant 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. Each of Seller and each Stockholder 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) Each of Seller and each Stockholder 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. Each of Seller and each Stockholder
acknowledges and understands it has no right to require Parent to register
the Parent Stock. Each of Seller and each Stockholder further understands
that the Parent may, as a condition to the transfer of any of the Parent
Stock, require that
18
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the request for transfer be accompanied by an opinion of counsel as
described below. Each of Seller and each Stockholder 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 THE HOLDER'S 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 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.
SECTION 3. COVENANTS OF STOCKHOLDER AND SELLER.
-----------------------------------
3.1 Making of Covenants and Agreements. Seller and Stockholder hereby
----------------------------------
covenant and agree as set forth in this Section 3.
3.2 Conduct of Business. Between the date of this Agreement and the
-------------------
Closing Date, Seller will:
(a) Conduct its business only in the ordinary course and refrain from
changing or introducing any method of management or operations except in the
ordinary course of business and consistent with prior practices;
(b) Refrain from making any purchase, sale or disposition of any
asset or property other than in the ordinary course of business, from purchasing
any capital asset costing more than $7,500 and from mortgaging, pledging,
subjecting to a lien or otherwise encumbering any of its properties or assets
other than in the ordinary course of business;
(c) Refrain from incurring any contingent liability as a guarantor or
otherwise with respect to the obligations of others, and from incurring any
other contingent or fixed obligations or liabilities except in the ordinary
course of business;
(d) Refrain from making any change or incurring any obligation to
make a change in its Articles of Incorporation, By-laws or authorized or issued
capital stock, it being understood that Seller may issue up to 78 shares of
Seller's treasury stock to Jamieson;
19
<PAGE>
(e) Refrain from declaring, setting aside or paying any dividend,
making any other distribution in respect of its capital stock or making any
direct or indirect redemption, purchase or other acquisition of its stock;
(f) Refrain from making any change in the compensation payable or to
become payable to any of its officers, employees, agents or independent
contractors;
(g) Refrain from prepaying loans (if any) from its stockholders,
officers or directors or making any change in its borrowing arrangements;
(h) Use its best efforts to prevent any change with respect to its
management and supervisory personnel and banking arrangements, except as
contemplated by this Agreement;
(i) Except as contemplated by this Agreement, use its best efforts to
keep intact its business organization, to keep available its present officers
and employees, subject to any WARN Act or similar state or local notifications,
and to preserve the goodwill of all suppliers, customers, independent
contractors and others having business relations with it;
(j) Have in effect and maintain at all times all insurance of the
kind, in the amount and with the insurers set forth in the Schedule 2.11 hereto
-------------
or equivalent insurance with any substitute insurers approved in writing by
Buyer; and
(k) Furnish Buyer with unaudited monthly balance sheets and statements
of income and retained earnings and cash flows of Seller within fifteen (15)
days after each month end for each month ending more than ten (10) days before
the Closing.
(l) Permit Buyer and its authorized representatives to have, after
prior notice, reasonable full access to all its properties, assets, records, tax
returns, contracts and documents and furnish to Buyer or its authorized
representatives such financial and other information with respect to its
business or properties as Buyer may from time to time reasonably request.
3.3 Authorization from Others. Prior to the Closing Date, Seller will use
-------------------------
its best efforts to obtain all authorizations, consents and permits of others
required to permit the consummation by Seller of the transactions contemplated
by this Agreement.
3.4 Consummation of Agreement. Seller and Stockholder shall use their
-------------------------
best efforts to perform and fulfill all conditions and obligations on their
parts to be performed and fulfilled under this Agreement, to the end that the
transactions contemplated by this Agreement shall be fully carried out. To this
end, Seller will obtain prior to the Closing all necessary authorizations or
approvals of its stockholders and Board of Directors, including, without
limitation, the following:
20
<PAGE>
(a) To change, by the Closing, Seller's corporate name to another
title which does not include the words Medical Education Systems; and
(b) Authorization of the officers and directors of Seller to discharge
all debts and obligations of Seller (other than those assumed by Buyer hereunder
and as set forth in Section 3.8 below).
3.5 Confidentiality. Seller and each Stockholder agree that, unless and
---------------
until the Closing has been consummated, Seller, its officers, directors, agents
and representatives, and each Stockholder will hold in strict confidence, and
will not use, any confidential or proprietary data or information obtained from
Buyer with respect to its business or financial condition except for the purpose
of evaluating, negotiating and completing the transaction contemplated hereby.
Information generally known in Buyer's industry or which has been disclosed to
Seller or either Stockholder by third parties which have a right to do so shall
not be deemed confidential or proprietary information for purposes of this
agreement. If the transaction contemplated by this Agreement is not
consummated, Seller and each Stockholder will return to Buyer (or certify that
it has destroyed) all copies of such data and information, including but not
limited to financial information, customer lists, business and corporate
records, worksheets, test reports, tax returns, lists, memoranda, and other
documents prepared by or made available to Seller in connection with the
transaction.
3.6 Non-Use of Trade Names, etc. After the Closing Date, neither Seller
---------------------------
nor either Stockholder, nor any entity controlled by or under common control
with Seller or either Stockholder will for any reason, directly or indirectly,
(a) use any Intellectual Property Rights transferred pursuant to this Agreement
(including the name "Medical Education Systems"), 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, 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.
3.7 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, nor any entity or person controlled by or under common control
with Seller or either Stockholder, will, directly or indirectly, (a) for a
period of eight (8) 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, Seller, Buyer or Parent or
any affiliate of Seller, 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
21
<PAGE>
of the Buyer or Parent 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 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 providing outsourced promotional,
marketing, educational and field sales force logistics services, or providing
other services currently provided by Seller or contemplated to be provided by
Seller in such general areas of service. Without implied limitation, the
forgoing covenant shall include hiring or engaging or attempting to hire or
engage for or on behalf of themselves 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 themselves 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 themselves 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. In addition, Stockholder will not disparage the Buyer or Parent,
the Business or the products or services conducted or offered by the Buyer or
Parent and their subsidiaries.
3.8 Payment of Obligations. Subsequent to the Closing, Seller shall pay
----------------------
all of the Excluded Liabilities in the ordinary course of business as they
become due. Seller and each Stockholder agree that Seller shall maintain
sufficient net worth and liquidity after the Closing in order to satisfy such
Excluded Liabilities, it being understood that Seller may assign its rights to
receive payments hereunder (including Parent Stock) to the Stockholders. Seller
and Stockholders agree to dissolve Seller promptly following the satisfaction of
such Excluded Liabilities and the expiration of the period during which the
Contingent Payment can be earned.
3.9 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 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. Buyer agrees to defend, hold
harmless and indemnify Seller and the Stockholders for any claims, suits or
liabilities which may arise out of the conduct of these collection efforts
relating to the receivables, but not for any claims which Buyer may have against
Seller or either Stockholder arising from the receivables.
3.10 Securities Filings. Seller and Stockholder shall reasonably
------------------
cooperate at Buyer's expense 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
22
<PAGE>
thereof all filings required to be made by Buyer or Parent with the NASDAQ Stock
Market and 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, and to permit Parent to include in
its filings with the SEC all information which may be required with respect to
Seller and Stockholder.
3.11 Assist in Accreditation. Seller and Stockholder shall each use their
-----------------------
reasonable best efforts to assist Buyer in transferring the accreditation status
of Seller to Buyer.
3.12 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 (which bank accounts and deposits therein and other cash as of the date
hereof are listed in Schedule 2.22), excluding payments made to Seller pursuant
-------------
to Sections 1.3(a) and 1.3(b).
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT.
--------------------------------------------------
4.1 Making of Representations and Warranties. As a material inducement to
----------------------------------------
Seller and Stockholder to enter into this Agreement and consummate the
transactions contemplated hereby, Buyer and Parent hereby make the
representations and warranties to Seller and 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 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.
------------------
(a) 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:
23
<PAGE>
(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.
(b) With respect to HSR, Parent is the "ultimate parent entity"
(as defined in HSR) of Buyer and Parent does not have annual net sales or total
assets for purposes of HSR in excess of $100 million.
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 Form 10-K filed with the SEC on March 30, 1998
-----------
and all other forms, reports and documents filed with the SEC since March 30,
1998 (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 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 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.
24
<PAGE>
4.6 Material Adverse Change. Except as set forth on Schedule 4.6, since
----------------------- ------------
December 31, 1998, (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.
4.7. Disclosure. To Buyer's knowledge, the representations, warranties
----------
and statements made or contained in this Agreement, in the certificates,
Schedules and Exhibits given or delivered by Buyer 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 misleading in light of the circumstances in which they were made
or delivered.
4.8. Litigation. Except as set forth on Schedule 4.8, there is no
---------- ------------
material litigation, claim or governmental, arbitration or other proceeding,
investigation, order or decree pending or in effect or, to the best knowledge of
Parent or Buyer, threatened against Parent or Buyer.
SECTION 5. COVENANTS OF BUYER AND PARENT.
-----------------------------
5.1 Making of Covenants and Agreement. Buyer and Parent hereby make the
---------------------------------
covenants and agreements set forth in this Section 5.
5.2 Confidentiality. Buyer and Parent agree that, unless and until the
---------------
Closing has been consummated, Buyer and Parent, their officers, directors,
agents and representatives will hold in strict confidence, and will not use any
confidential or proprietary data or information obtained from Seller or the
Stockholders with respect to the business or financial condition of Seller
except for the purpose of evaluating, negotiating and completing the transaction
contemplated hereby. Information generally known in Seller's industry or which
has been disclosed to Buyer by third parties which have a right to do so shall
not be deemed confidential or proprietary information for purposes of this
Agreement. If the transaction contemplated by this Agreement is not consummated,
Buyer will return to Seller (or certify that it has destroyed) all copies of
such data and information, including but not limited to financial information,
customer lists, business and corporate records, worksheets, test reports, tax
returns, lists, memoranda, and other documents prepared by or made available to
Buyer in connection with the transaction.
5.3 Consummation of Agreement. Buyer and Parent shall use their best
-------------------------
efforts to perform and fulfill all conditions and obligations on its part to be
performed and fulfilled under this agreement, to the end that the transactions
contemplated by this agreement shall be fully carried out. To this end, Buyer
and Parent will obtain prior to the Closing all necessary authorizations or
approvals of their stockholders and Board of Directors and provide a copy of
evidence thereof to Seller at Closing.
25
<PAGE>
5.4 No Disclosure of Consideration. Unless otherwise required by any
------------------------------
statute, law, ordinance, regulation, judgment, order or decree or applicable
Nasdaq listing requirement, neither Buyer or Parent, or any affiliates, will
disclose to any third person the amount of consideration paid for the Subject
Assets pursuant to this Agreement, it being acknowledged and agreed that Parent
may disclose such information in its filings with the SEC, and in any press
releases announcing the signing of this Agreement and the consummation of the
transactions contemplated hereby in order to comply with applicable Nasdaq
listing requirements and federal securities laws.
5.5 Registration Rights. Parent agrees that if, one year following the
-------------------
Closing of this Agreement, Rule 144 promulgated under the Securities Act of
1933, as amended, (or any comparable provision available in replacement thereof)
becomes unavailable to Seller or the Stockholders, as applicable, to resell the
shares of Parent Stock to be received by Seller pursuant to this Agreement,
through no action of the Seller or Stockholders, as applicable, Parent shall
enter into a registration rights agreement with Seller or the Stockholders, as
applicable, pursuant to which Parent agrees to register Parent Stock received
pursuant to this Agreement. Such registration shall be at the expense of Parent,
with the exception of underwriting or broker discounts and commissions, and
shall contain standard terms and conditions as agreed to by the parties acting
in good faith.
SECTION 6. CONDITIONS.
----------
6.1 Conditions to the Obligations of Buyer. The obligation of Buyer to
--------------------------------------
consummate this Agreement and the transactions contemplated hereby are subject
to the fulfillment, prior to or at the Closing, of the following conditions
precedent:
(a) Representations; Warranties; Covenants. Each of the
--------------------------------------
representations and warranties of Seller and Stockholders contained in Section 2
shall be true and correct in all material respects (except for such
representations and warranties that are qualified by their terms as to
materiality, which representations and warranties as so qualified shall be true
in all respects) as though made on and as of the Closing; and Seller shall, on
or before the Closing, have performed all of its obligations hereunder which by
the terms hereof are to be performed on or before the Closing, unless such
performance has been waived in writing by Buyer.
(b) No Material Change. There shall have been no material adverse
------------------
change in the financial condition, prospects, properties, assets, liabilities,
business or operations of Seller since the date hereof, whether or not in the
ordinary course of business.
(c) Certificate from Officers. Seller shall have delivered to Buyer
-------------------------
a certificate of Seller's President and Chief Financial Officer dated as of the
Closing to the effect that the statements set forth in paragraph (a) and (b)
above in this Section 6.1 are true and correct.
26
<PAGE>
(d) Title Insurance - Leased Real Property. If requested, Seller
--------------------------------------
will arrange (as evidenced by assurances from the issuer reasonably satisfactory
to Buyer) for Buyer to receive at Buyer's expense, immediately after the
Closing, a current ALTA leasehold form title insurance policy insuring
marketable leasehold title to the Leased Real Property and all appurtenances
thereto as more fully set forth in Section 2.6(b) above, subject only to the
Permitted Encumbrances and any other matters disclosed on Schedule 2.6(b) which
---------------
Buyer has agreed to accept.
(e) Approval of Buyer's Counsel. All actions, proceedings,
---------------------------
instruments and documents required to carry out this Agreement and the
transactions contemplated hereby and all related legal matters contemplated by
this Agreement shall have been approved by Goodwin, Procter & Hoar LLP as
counsel for Buyer, and such counsel shall have received on behalf of Buyer such
other certificates, opinions, and documents in form satisfactory to such
counsel, as Buyer may reasonably require from Seller and the Stockholders to
evidence compliance with the terms and conditions hereof as of the Closing and
the correctness as of the Closing of the representations and warranties of the
Stockholders and Seller and the fulfillment of their respective covenants.
(f) Opinion of Counsel. On the Closing Date, Buyer shall have
------------------
received from Manta and Welge counsel for Seller, an opinion as of said date, in
a form mutually agreed to by Buyer and Seller acting in good faith.
(g) No Litigation. There shall have been no determination by Buyer,
-------------
acting in good faith, that the consummation of the transactions contemplated by
this Agreement has become impracticable by reason of the institution or threat
by any person or any federal, state or other governmental authority of
litigation, proceedings or other action against Buyer, Seller or any Stockholder
or any material adverse change in the laws, regulations or accreditations
applicable to Seller.
(h) Consents. Seller shall have made, except as qualified by this
--------
Agreement, all filings with and notifications of governmental authorities,
regulatory agencies and other entities required to be made by Seller in
connection with the execution and delivery of this Agreement, the performance of
the transactions contemplated hereby and the continued operation of the business
of Seller by Buyer subsequent to the Closing; and Seller and Buyer shall have
received all authorizations, waivers, consents and permits, in form and
substance reasonably satisfactory to Buyer, from all third parties, including,
without limitation, applicable governmental authorities, regulatory agencies,
lessors, lenders and contract parties, required to permit the continuation of
the business of Seller and the consummation of the transactions contemplated by
this Agreement, and in connection with the transfer of Subject Assets or
Seller's contracts, permits, leases, licenses and franchises, to avoid a breach,
default, termination, acceleration or modification of any material indenture,
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 as a result of, or in connection
with, the execution and performance of this Agreement.
27
<PAGE>
(i) FIRPTA Withholding. At or prior to the Closing, Buyer shall
------------------
have received from Seller a "transferor's certificate of non-foreign status" as
provided in the Treasury Regulations under Section 1445 of the Code.
(j) No Liens. The Subject Assets shall be free and clear of any
--------
liens, restrictions or encumbrances, and the public records applicable to Seller
shall reflect no Uniform Commercial Code financing statements applicable to
Seller or the Subject Assets.
6.2 Conditions to Obligations of Seller. Seller's obligation to
-----------------------------------
consummate this Agreement and the transactions contemplated hereby is subject to
the fulfillment, prior to or at the Closing, of the following conditions
precedent:
(a) Representations; Warranties; Covenants. Each of the
--------------------------------------
representations and warranties of Buyer and Parent contained in Section 4 shall
be true and correct in all material respects as though made on and as of the
Closing; Buyer and Parent shall, on or before the Closing, have performed all of
its obligations hereunder which by the terms hereof are to be performed on or
before the Closing; and Buyer and Parent shall have delivered to Seller a
certificate of the President or any Vice President of Buyer and Parent dated on
the Closing to such effect.
(b) Approval of Seller's Counsel. All actions, proceedings,
----------------------------
instruments and documents required to carry out this Agreement and the
transactions contemplated hereby and all related legal matters contemplated by
this agreement shall have been approved by Manta and Welge as counsel for
Seller, and such counsel shall have received on behalf of Seller and the
Stockholders such other certificates, opinions and documents in form
satisfactory to counsel for Seller as Seller may reasonably require from Buyer
to evidence compliance with the terms and conditions hereof as of the Closing
and the correctness as of the Closing of the representations and warranties of
Buyer and Parent and the fulfillment of their covenants.
(c) No Litigation. There shall have been no determination by
-------------
Seller, acting in good faith, that the consummation of the transactions
contemplated by this Agreement has become impracticable by reason of the
institution or threat by any person or any federal, state or other governmental
authority of material litigation, proceedings or other action against Buyer,
Parent, Seller or any Stockholder.
(d) Opinion of Counsel. On the Closing Date, Seller shall have
------------------
received from Goodwin, Procter & Hoar LLP, counsel for Buyer, an opinion as of
said date, in a form to be mutually agreed upon by Buyer and Seller acting in
good faith.
(e) Buyer will have used its reasonable best efforts to offer
employment to the employees listed on Schedule 1.10(b) on the terms set forth
----------------
therein.
28
<PAGE>
SECTION 7. TERMINATION OF AGREEMENT; RIGHTS TO PROCEED.
-------------------------------------------
7.1 Termination. At any time prior to the Closing, this Agreement may be
-----------
terminated as follows:
(i) by mutual written consent of all of the parties to this
Agreement;
(ii) by Buyer, pursuant to written notice by Buyer to Seller, if
any of the conditions set forth in Section 6.1 of this Agreement have not
been satisfied at or prior to the Closing, or if it has become reasonably
certain that any of such conditions, other than a condition within the
control of Seller or Stockholder, will not be satisfied at or prior to the
Closing, such written notice to set forth such conditions which have not
been or will not be so satisfied;
(iii) by Seller, pursuant to written notice by Seller to Buyer, if
any of the conditions set forth in Section 6.2 of this Agreement have not
been satisfied at or prior to the Closing, or if it has become reasonably
certain that any of such conditions, other than a condition within the
control of Buyer, will not be satisfied at or prior to the Closing, such
written notice to set forth such conditions which have not been or will not
be so satisfied; and
(iv) by either Seller or Parent if the Closing shall not have
occurred by June 30, 1998.
7.2 Effect of Termination. All obligations of the parties hereunder
---------------------
shall cease upon any termination pursuant to Section 7.1, provided, however,
that (i) the provisions of this Section 7, Section 3.5, Section 5.2, Section
10.2 and Section 10.10 hereof shall survive any termination of this Agreement;
(ii) nothing herein shall relieve any party from any liability for a material
error or omission in any of its representations or warranties contained herein
or a material failure to comply with any of its covenants, conditions or
agreements contained herein, if such error, omission or failure was willful or
deliberate (a "Deliberate Breach"), but in the absence of a Deliberate Breach,
the liability of the responsible party to the other party shall be limited to
out-of-pocket expenses incurred by the other party in connection with
negotiating, preparing and entering into this Agreement and carrying out the
transactions contemplated hereby and (iii) the parties shall have rights to
proceed as further set forth in Section 7.3 below.
7.3 Right to Proceed. Anything in this Agreement to the contrary
----------------
notwithstanding, if any of the conditions specified in Section 6.1 hereof have
not been satisfied, Buyer shall have the right to proceed with the transactions
contemplated hereby without waiving any of its rights hereunder, and if any of
the conditions specified in Section 6.2 hereof have not been satisfied, Seller
shall have the right to proceed with the transactions contemplated hereby
without waiving any of its rights hereunder.
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SECTION 8. SURVIVAL OF WARRANTIES.
----------------------
8.1 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 (subject to the provisions of Sections 9.1
and 9.2 hereof) regardless of any 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 9 shall
expire.
SECTION 9. INDEMNIFICATION.
---------------
9.1 Indemnification by Stockholders.
-------------------------------
(a) Stockholders (subject to subsection (b) of this Section 9.1)
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, 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 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
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,
30
<PAGE>
acts, omissions, conditions or any other state of facts or Claims occurring
or existing on or prior to the Closing Date (including, in each case,
without limitation, any Claim relating to or associated with the Business
on or prior to the Closing Date); 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 9.1(a) shall not be limited by the fact that such Claim may also
constitute a Buyer Representation and Warranty Claim.
(b) The rights of Buyer Indemnified Parties to recover
indemnification under this Section 9.1 shall be subject to the following
limitations:
(i) No indemnification shall be payable by Seller or Stockholder
with respect to Buyer Representation and Warranty Claims or Claims arising
under Section 9.1(a)(i) or (ii) unless the total of all amounts payable
pursuant to this Section 9.1 shall exceed $50,000 in the aggregate,
whereupon the total amount of such Claims shall be recoverable in
accordance with the terms thereof; provided, however, that such $50,000
limitation shall not apply with respect to Claims involving fraud or
intentional misrepresentation and provided further that any claim brought
under Sections 9.1(a)(iii), 9.1(a)(iv) or 9.1(a)(v) above shall not be
subject to such limitation notwithstanding that 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 18 month anniversary
of the Closing Date (that is, the same numbered day of the month on which
the Closing occurs in the 18th month following the Closing), 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 18
month 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 9.1(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 9.1 with respect to claims arising under Section 9.1(a)(ii),
9.1(a)(iii), 9.1(a)(iv) and 9.1(a)(v) shall, except as they may otherwise
be extended, survive until and shall expire on the date 20 days 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 9.1(a)(ii), 9.1(a)(iii) and 9.1(a)(iv)
shall not limit the rights of any Buyer Indemnified Party with respect to
any other claims under this Section 9.1; and
31
<PAGE>
(iii) Notwithstanding anything contained in this Section 9.1 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 9.1(a)(ii) in an aggregate amount in
excess of $6,500,000, plus any Contingent Payment actually paid (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.
9.2 Indemnification by Buyer and Parent.
-----------------------------------
(a) Buyer and Parent (subject to subsection (b) of this Section 9.2)
agrees to defend, indemnify and hold Seller and 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 or
claims 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
(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.
32
<PAGE>
The rights of Seller Indemnified Parties to recover indemnification in
respect of any Claim arising under clause (ii), (iii) or (iv) of this Section
9.2(a) shall not be limited by the fact that such Claim may also constitute a
Seller Representation and Warranty Claim.
(b) The rights of Seller Indemnified Parties to recover
indemnification under this Section 9.2 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 9.2(a)(i) or (ii) unless the total of all amounts payable by
Buyer and Parent taken as a whole pursuant to this Section 9.2 shall exceed
$50,000 in the aggregate, whereupon the total amount of such Claims shall
be recoverable in accordance with the terms thereof; provided, however,
that such $50,000 limitation shall not apply with respect to Claims
involving fraud (it being understood that any claim brought under Sections
9.1(a)(iii) or 9.1(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 18 month anniversary
of the Closing Date (that is, the same numbered day of the month on which
the Closing occurs in the 18th month following the Closing), 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 18 month 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 9.2(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 9.2 with respect to Claims arising under
Section 9.2(a)(ii), 9.2(a)(iii) and 9.2(a)(iv), except as they may
otherwise be extended, survive until and shall expire on the date 20 days
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 9.2(a)(ii), 9.2(a)(iii)
and 9.2(a)(iv) shall not limit the rights of any Seller Indemnified Party
with respect to any other claims under this Section 9.2; and
(iii) Notwithstanding anything contained in this Section 9.2 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 9.2(a)(ii) in an aggregate amount in
excess of the Indemnity Cap, except with respect to claims relating to or
involving fraud, as to which no such limit shall apply.
33
<PAGE>
9.3 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, 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. 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
34
<PAGE>
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 10.11 hereof.
9.4 Sole Remedy. Following the Closing, the parties agree that the rights
-----------
to indemnification under this Section 9 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, 3.7, 3.9 or
5.2 hereof.
9.5 Satisfaction of Indemnification Obligations. In order to satisfy the
-------------------------------------------
indemnification obligations set forth in Section 9.1 above, a Buyer Indemnified
Party shall have the right (in addition to collecting directly from the
Stockholders) to notify the Stockholders of its intention to set off
indemnification claims against amounts under the Contingent Payment (whether or
not then due and payable); provided that if the Stockholders object to such set-
off, Buyer shall place any payment due to Seller or Stockholders on account of
the Contingent Payment, in escrow with a third party escrow agent in accordance
with the terms of a mutually acceptable escrow agreement (with any Contingent
Payment to be invested in investment grade obligations), pending final
determination of the dispute in accordance with Section 10.11.
SECTION 10. MISCELLANEOUS.
-------------
10.1 Law Governing. This Agreement shall be construed under and governed
-------------
by the laws of the Commonwealth of Pennsylvania without regard to the conflicts
of laws provisions thereof.
10.2 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
35
<PAGE>
(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:
----------------------------
Medical Education Systems
1800 John F. Kennedy Blvd., Suite 800
Philadelphia, PA 19103-7408
Attn: Mary A. Parenti and James Jamieson
Facsimile Number: (215) 665-1210
With a copy to:
--------------
Manta and Welge
2000 Market Street, 6th Floor
Philadelphia, PA 19103
Attn: Thomas B. O'Brien, Jr., Esq.
Facsimile: (215) 851-6644
provided, however, that if any party shall have designated a different address
by notice to the others in accordance with this Section 10.2, then to the last
address so designated.
10.3 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 March 23, 1998
among Parent, Seller and the Stockholder.
36
<PAGE>
10.4 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.
10.5 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.
10.6 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;
(c) "knowledge" or "to best of a person's knowledge" means 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.
10.7 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.
10.8 Amendments; Waivers. This Agreement may not be amended or modified
-------------------
except by a writing duly and validly executed by Parent and Seller or, following
the Closing, by Parent and the Stockholders' Representative. 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
37
<PAGE>
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.
10.9 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.
10.10 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 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.
10.11 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 York in an expedited manner in accordance with
the Commercial Rules of the American Arbitration Association (the "AAA") by
three duly registered arbitrators to be selected jointly by the parties in
accordance with AAA rules. The decision of the arbitrators shall be final and
binding upon the parties.
10.12 Expenses. Buyer, Seller and Stockholder shall each bear its own
--------
expenses in connection with the negotiation and performance of this Agreement
and the transactions contemplated hereby. 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), shall be paid 50% by Seller out of the proceeds of the sale
of the Subject Assets and 50% by Buyer.
38
<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:
-----
MES Acquisition Corp.
By:/s/ Martin J. Veilleux
----------------------
Martin J. Veilleux
Treasurer
PARENT:
------
BORON, LEPORE & ASSOCIATES, INC.
By:/s/ Patrick G. LePore
----------------------
Patrick G. LePore
President
SELLER:
------
Medical Education Systems, Inc.
By:/s/ Mary A. Parenti
----------------------
Mary A. Parenti
President and Chief Executive Officer
39
<PAGE>
STOCKHOLDERS:
------------
/s/ Mary A. Parenti
-----------------------------------
Mary A. Parenti, individually
/s/ James Jamieson
-----------------------------------
James Jamieson, Individually
40
<PAGE>
EXHIBIT 10.30
ADVANCEMENT AGREEMENT
WHEREAS, Patrick LePore and Gregory Boron, each of whom is a member of the
Board of Directors and an officer of Boron, LePore and Associates, Inc. (the
"Company") and Michael Foti and Christopher Sweeney, each of whom is a former
senior officer of the Company and a current consultant to the Company (Messrs.
LePore, Boron and Foti and Sweeney being collectively referred to as the
"Individual Defendants"), have been named as defendants in a lawsuit brought by
Thomas Boron, a former stockholder of the Company, against the Company and the
Individual Defendants asserting claims relating to a transaction by which Thomas
Boron agreed to sell his remaining interest in the Company to the Company, and a
subsequent transaction by which Thomas Boron accepted a fixed amount of cash in
exchange for certain contractual rights arising from the initial sale
transaction (but not including the matters described in the Fifth Count of the
Complaint relating thereto) (the "Legal Claims"); and
WHEREAS, the Company is a defendant against whom Thomas Boron is seeking
damages based upon the Legal Claims (the Individual Defendants and the Company
being collectively referred to as the "Defendants"); and
WHEREAS, the Company's Bylaws require that each Officer of the Corporation
"shall be indemnified and held harmless by the Corporation to the fullest extent
authorized by the DGCL... 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..."
(provided that indemnification shall not be provided "with respect to a matter
as to which such person shall be finally adjudicated in any Proceeding (a) not
to have acted in good faith or in a manner he or she reasonably believed to be
in, or not opposed to, the best interest of the Corporation" or in the case of a
claim which is settled, if there is 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 interest of the
Corporation); and
WHEREAS, the Company's Bylaws also provide in pertinent part that, "Unless
otherwise determined by (a) the Board of Directors... or (c) if directed by the
Board of Directors, by independent legal counsel in a written opinion, any
indemnification extended to an Officer... 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 an undertaking by such Officer... seeking indemnification to
repay such payment if such Officer... shall be adjudicated or determined not to
be entitled to indemnification under this Article V," (emphasis added) and
WHEREAS, the Board of Directors and its Special Counsel, Morris, Nichols,
Arsht and Tunnell, have discussed the Legal Claims (including the factual
background of the Legal Claims and the defenses thereto) with the Individual
Defendants and attorneys at Goodwin, Procter & Hoar LLP ("GP&H"), outside
counsel to the Company and litigation counsel to the Defendants; and
WHEREAS, the Defendants have been advised by GP&H that it is not possible
to estimate with reasonable accuracy the fees and expenses that may be incurred
in connection with the Legal Claims, but that such counsel does not presently
estimate that such fees and expenses will exceed $1,000,000,
<PAGE>
IT IS HEREBY AGREED among the undersigned parties as follows:
1. Each of the Potential Defendants shall be represented by the law firm
of Goodwin, Procter & Hoar LLP, or such other counsel as the Company may from
time to time select ("Litigation Counsel"), in defense of the Legal Claims and
any matters arising therefrom or relating thereto. Any Individual Defendant may
consult with his own legal counsel at any time, but the Company shall be
financially responsible for the cost of such consultation (by way of advancement
or indemnification) only if the Individual Defendant has previously consulted
with Litigation Counsel, and the Individual Defendant and Litigation Counsel
mutually determine that consultation with separate counsel is necessary and
appropriate in the circumstances.
2. Each Individual Defendant shall reasonably cooperate in the defense of
the Legal Claims and any litigation arising therefrom or relating thereto, and
in particular, shall (i) provide to Litigation Counsel all information and
documents as Litigation Counsel shall determine to be necessary or appropriate
for the defense of the Legal Claims and any litigation arising therefrom or
relating thereto, (ii) be available to testify at such times as Litigation
Counsel may reasonably request; and (iii) in the absence of a determination
pursuant to Paragraph 1 hereof that consultation with separate counsel is
necessary and appropriate, follow the recommendations of Litigation Counsel and
the Company concerning the defense of the Legal Claims, including without
limitation any proposed or actual settlement thereof.
3. The Company shall pay on a timely basis all reasonable legal fees
billed by Litigation Counsel, as well as the reasonable and necessary fees and
expenses of any additional counsel, consultation with whom is authorized
pursuant to paragraph 1 hereof.
4. The undersigned parties shall request that Litigation Counsel keep a
record of time spent in defense of each of the Defendants, with the
understanding time and expense relating to matters which impact equally one or
more of the Defendants shall be apportioned equally each to each of the
Defendants so impacted.
5. In the event that it is ultimately determined pursuant to Article V of
the Company's Bylaws that an Individual Defendant is not entitled to
indemnification, Litigation Counsel shall, within ten days thereafter, transmit
to that Individual Defendant a statement showing his share of fees and expenses
previously paid by the Company that incurred on his behalf as determined by
Litigation Counsel, which determination shall not be challenged by any of the
undersigned parties. The Individual Defendant shall pay the amount of such
statement to the Company within 45 days after receiving it.
6. This agreement shall be binding upon each of the undersigned parties
and their heirs and successors. This agreement shall be governed by the
substantative law of the State of Delaware (without reference to Delaware choice
of law provisions). This agreement reflects the entire agreement of the parties
concerning the subject matter hereof, except that nothing herein is intended to
alter or affect the parties' rights pursuant to the Bylaws of the Company or the
Delaware General Corporation Law, as the latter may be amended from time to
-2-
<PAGE>
time. This agreement may be signed in counterparts, and shall be amended only by
a writing signed, directly or in counterparts, by all parties affected by that
amendment.
BORON, LEPORE & ASSOCIATES, INC.
By:______________________________________
[Title]
PATRICK LEPORE
_________________________________________
GREGORY BORON
_________________________________________
MICHAEL FOTI
_________________________________________
CHRISTOPHER SWEENEY
_________________________________________
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<PAGE>
[Arthur Andersen Letterhead]
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Boron, LePore & Associates, Inc.
As independent public accountants, we hereby consent to the use of our report
and to all references to our Firm included in or made part of this
registration statement.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Roseland, New Jersey
May 5, 1998
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To Boron, LePore & Associates, Inc.
We consent to the reference of our firm under the caption "Experts" and to the
use of our report dated April 10, 1996 relating to the financial statements of
Boron, LePore & Associates, Inc. for the year ended December 31, 1995 included
in the 1998 Registration Statement of Form S-1, as amended, and related
Prospectus for the registration of 4,485,000 shares of its common stock.
/s/ M.R. Weiser & Co. LLP
M.R. Weiser & Co. LLP
Edison, New Jersey
May 5, 1998
