<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 27, 1998
REGISTRATION STATEMENT NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
BORON, LEPORE & ASSOCIATES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
DELAWARE 7389 22-2365997
(STATE OR OTHER (PRIMARY STANDARD 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, CARL L. REISNER, ESQ.
GOODWIN, PROCTER & HOAR LEPORE & LUIZZI PAUL, WEISS, RIFKIND,
LLP 1593 ROUTE 88 WEST WHARTON & GARRISON
EXCHANGE PLACE BRICK, NEW JERSEY 08724 1285 AVENUE OF THE
BOSTON, MASSACHUSETTS (908) 840-0550 AMERICAS
02109-2881 NEW YORK, NEW YORK 10019
(617) 570-1000 (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. [_]
----------------
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF EACH CLASS OF AMOUNT MAXIMUM MAXIMUM AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE FEE
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par
value................. 4,485,000 shares $29.50 $132,307,500 $39,031
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Includes 585,000 shares of Common Stock which the Underwriters have the
option to purchase solely to cover over-allotments, if any.
(2) Based upon the average of the high and low sale prices reported on the
Nasdaq National Market on April 22, 1998, and estimated solely for the
purpose of calculating the registration fee pursuant to Rule 457(c) of the
Securities Act of 1933, as amended.
----------------
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 APRIL 27, 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 April , 1998, the last reported sale price of the Common
Stock was $ 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 $ .
(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; and (vi) continued to expand its
infrastructure, including hiring approximately 60 new employees.
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........... 12,387,413 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
Incentive Plan, as amended (the "1996 Stock Plan") (subject to adjustment
as provided in the 1996 Stock Plan) and (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. See "Management--Employee
Stock and Other Benefit Plans--1996 Stock Option and Incentive 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>
YEARS ENDED DECEMBER 31,
-----------------------------------------
1993 1994 1995 1996 1997
------- ------- ------- -------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues............................ $19,339 $20,580 $21,775 $ 40,219 $72,907
Cost of sales....................... 13,820 12,378 12,788 26,004 51,580
------- ------- ------- -------- -------
Gross profit...................... 5,519 8,202 8,987 14,215 21,327
Selling, general and administrative
expenses........................... 5,319 6,536 6,341 19,995(1) 12,444
------- ------- ------- -------- -------
Operating income (loss)........... 200 1,666 2,646 (5,780) 8,883
Interest expense, net............... 49 43 86 255 1,071
Nonrecurring loss on forgiveness of
related party loan................. -- -- -- 1,076 --
------- ------- ------- -------- -------
Income (loss) before provision for
income taxes..................... 151 1,623 2,560 (7,111) 7,812
Provision for income taxes(2)....... -- 25 51 -- 1,700
------- ------- ------- -------- -------
Net income (loss)................. $ 151 $ 1,598 $ 2,509 $ (7,111) $ 6,112
======= ======= ======= ======== =======
Net income (loss) per common share--
basic.............................. $ 0.02 $ 0.19 $ 0.29 $ (1.18) $ 1.07
======= ======= ======= ======== =======
Weighted average common shares out-
standing--basic.................... 8,602 8,602 8,602 6,028 4,947
======= ======= ======= ======== =======
Net income (loss) per common share--
diluted............................ $ 0.02 $ 0.19 $ 0.29 $ (1.18) $ 0.72
======= ======= ======= ======== =======
Weighted average common shares out-
standing diluted................... 8,602 8,602 8,602 6,028 8,507
======= ======= ======= ======== =======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1997 AS ADJUSTED(3)
------- --------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................ $24,016 $66,041
Working capital.......................................... 29,804 71,830
Total assets............................................. 51,056 93,081
Long-term debt, less current maturities.................. -- --
Total stockholders' equity............................... 32,843 74,868
</TABLE>
- --------
(1) Includes $10.0 million for special officer bonuses, including $7.5 million
as part of the TA Transaction and $0.6 million for fees related to the TA
Transaction.
(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 $30.00 per share and the receipt and application of the estimated
net proceeds from this offering, as if such transactions had been completed
on December 31, 1997. See "The Company," "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Use of
Proceeds" and "Capitalization."
5
<PAGE>
RISK FACTORS
An investment in the Common Stock offered hereby involves a high degree of
risk. Prospective investors should carefully consider the following risk
factors, in addition to the other information contained in this Prospectus,
before purchasing the Common Stock offered hereby. This Prospectus contains
forward-looking statements within the meaning of 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 84% of its revenues in 1997, 83% of its
revenues in 1996 and approximately 90% of its revenues in 1995. 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 accounted for 49%, 44% and 45% of revenues 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.
6
<PAGE>
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 % of total revenues in the first quarter
of 1998. 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 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."
7
<PAGE>
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.
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, 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. 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.
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,
8
<PAGE>
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. 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.
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.
9
<PAGE>
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. 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
10
<PAGE>
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 $68.0 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 December 31, 1997, the Company had an accumulated deficit of $7.1
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 %, 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,
6,607,979 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 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 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 of such
holders have agreed not to sell or offer to sell or otherwise dispose of any
shares of Common Stock currently held by them, any right to acquire any shares
of Common Stock or any securities exercisable for or convertible into any
shares of Common Stock for a period of 90 days after the
11
<PAGE>
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."
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
$30.00 per share are estimated to be approximately $42.0 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 such transactions. Pending such use,
the balance of the net proceeds will be invested in short-term, investment
grade, interest bearing obligations.
12
<PAGE>
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............................................ $ 33.500 $ 32.250
</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 April 15, 1998, the high and low bid for the Common Stock as reported by
Nasdaq were $33.875 and $33.250.
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.
13
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
December 31, 1997 (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 $30.00 per share and the
application of the estimated net proceeds therefrom as described in "Use of
Proceeds." This table should be read in conjunction with the Financial
Statements of the Company and the Notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-------------------------
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
December 31, 1997 actual; none authorized, issued
or outstanding as adjusted........................ $ -- $ --
Common Stock, $.01 par value, 50,000,000 shares
authorized, 14,947,978 issued, 10,747,979
outstanding at December 31, 1997 actual;
50,000,000 shares authorized, 16,447,978 shares
issued and 12,247,979 shares outstanding as
adjusted(3)....................................... 149 164
-------- --------
Additional paid-in capital......................... 64,177 106,187
Treasury Stock, 4,199,999 shares of Common Stock at
December 31, 1997 actual and as adjusted at
cost.............................................. (24,350) (24,350)
Accumulated deficit................................ (7,133) (7,133)
-------- --------
Total stockholders' equity....................... 32,843 74,868
-------- --------
Total capitalization............................. $ 32,843 $ 74,868
======== ========
</TABLE>
- --------
(1) Gives effect to the completion of this offering at an assumed offering
price of $30.00 per share and the receipt and application of the estimated
net proceeds from this offering, as if such transactions had been
completed on December 31, 1997. 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); and (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. See "Management--Employee Stock and Other Benefit Plans--
1996 Stock Option and Incentive Plan."
14
<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 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>
YEARS ENDED DECEMBER 31,
-----------------------------------------
1993 1994 1995 1996 1997
------- ------- ------- -------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues............................ $19,339 $20,580 $21,775 $ 40,219 $72,907
Cost of sales....................... 13,820 12,378 12,788 26,004 51,580
------- ------- ------- -------- -------
Gross profit...................... 5,519 8,202 8,987 14,215 21,327
Selling, general and administrative
expenses........................... 5,319 6,536 6,341 19,995(1) 12,444
------- ------- ------- -------- -------
Operating income (loss)........... 200 1,666 2,646 (5,780) 8,883
Interest expense, net............... 49 43 86 255 1,071
Nonrecurring loss on forgiveness of
related party loan................. -- -- -- 1,076 --
------- ------- ------- -------- -------
Income (loss) before provision for
income taxes..................... 151 1,623 2,560 (7,111) 7,812
Provision for income taxes(2)....... -- 25 51 -- 1,700
------- ------- ------- -------- -------
Net income (loss)................. $ 151 $ 1,598 $ 2,509 $ (7,111) $ 6,112
------- ------- ------- -------- -------
Net income (loss) per common share--
basic.............................. $ 0.02 $ 0.19 $ 0.29 $ (1.18) $ 1.07
======= ======= ======= ======== =======
Weighted average common shares
outstanding--basic................. 8,602 8,602 8,602 6,028 4,947
======= ======= ======= ======== =======
Net income (loss) per common share--
diluted............................ $ 0.02 $ 0.19 $ 0.29 $ (1.18) $ 0.72
======= ======= ======= ======== =======
Weighted average common shares
outstanding--diluted............... 8,602 8,602 8,602 6,028 8,507
======= ======= ======= ======== =======
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
AS
1993 1994 1995 1996 1997 ADJUSTED(3)
------- ------ ------- ------- ------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equiva-
lents................... $ 2 $ 30 $ 963 $ 7,176 $24,016 $66,041
Working capital (defi-
cit).................... (1,707) 78 3,046 2,416 29,805 71,830
Total assets............. 1,792 5,128 10,499 23,097 51,056 93,081
Long-term debt, less cur-
rent maturities......... 11 308 2,061 20,000 -- --
Redeemable equity securi-
ties.................... -- -- -- 12,500 -- --
Total stockholders' eq-
uity (deficit).......... (1,453) 145 2,505 (29,387) 32,843 74,868
</TABLE>
- --------
(1) Includes $10.0 million for special officer bonuses, including $7.5 million
as part of the TA Transaction and $0.6 million for fees related to the TA
Transaction.
(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 $30.00 per share and the receipt and application of the
estimated net proceeds from this offering as if such transactions had been
completed on December 31, 1997. See "The Company," "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Use of Proceeds" and "Capitalization.
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the results of operations and financial
condition of the Company should be read in conjunction with the Company's
Financial Statements and the Notes thereto included elsewhere in this
Prospectus. This Prospectus contains forward-looking statements. Discussions
containing such forward-looking statements may be found in the material set
forth below and under "Business," as well as in this Prospectus generally.
Prospective investors are cautioned that any such forward looking statements
are not guarantees of future performance and involve risks and uncertainties.
Actual events or results may differ materially from those discussed in the
forward-looking statements as a result of various factors, including, without
limitation, the risk factors set forth under "Risk Factors" and the matters
set forth below and in this Prospectus generally.
OVERVIEW
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. This
growth resulted from increased business with existing customers, the addition
of new customers and the expansion of services offered. The Company believes
that the increase in business with existing customers and the addition of new
customers reflect increased recognition of peer-to-peer meeting programs as an
effective promotional technique and increased levels of promotional, marketing
and educational spending in the pharmaceutical industry. Principal elements of
the Company's growth strategy are further enhancing and expanding its service
offerings, continuing to increase business with existing customers and
obtaining new customers. As part of this strategy, over the last two years,
the Company has expanded its portfolio of services to include symposia,
medical education, product marketing, teleservices, contract sales and field
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 revenues in 1998. The management
fee for the second year is subject to future negotiation. The fee-for-service
component is dependent upon the level of services provided. The Company
believes field 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 services 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 March 1998, the Company acquired a continuing
medical education company which will be operated as a separate subsidiary.
Although revenues from the Company's peer-to-peer meeting business grew from
$20.6 million in 1995 to $33.4 million in 1996 and to $45.1 million in 1997,
the Company does not anticipate that future growth of revenues, if any, from
this line of business will continue at such an accelerated rate. In addition,
certain of BLP's newer services, particularly symposia and field sales force
logistics, have lower gross margin percentages than the Company's historical
peer-to-peer business. Furthermore, the on-going start-up costs related to the
Company's new teleservice center and new contract sales organization, as well
as the continued development
16
<PAGE>
and implementation costs of the Company's technology enhancement effort 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 these costs and an
anticipated increase in the proportion of 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 the Company's efforts to enhance the
profitability of its services are not successful, the proportion of symposia
or field force logistics revenue to total revenues increases more than
anticipated, total revenues do not grow sufficiently to fully leverage
operating expenses or the costs associated with the teleservice center,
contract sales organization, field 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 "--Competition."
RESULTS OF OPERATIONS
The following table sets forth as a percentage of revenues certain items
reflected in the Company's Statement of Operations for the periods indicated.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
REVENUES.......................................... 100.0% 100.0% 100.0%
Cost of sales..................................... 58.7 64.7 70.7
------- -------- -------
Gross profit...................................... 41.3 35.3 29.3
Selling, general and administrative expenses...... 29.1 49.7(1) 17.1
------- -------- -------
Operating income (loss)......................... 12.2 (14.4) 12.2
Nonrecurring loss on forgiveness of related party
loan............................................. -- 2.7 --
------- -------- -------
Interest expense, net............................. 0.4 0.6 1.5
------- -------- -------
Income (loss) before provision for income taxes... 11.8 (17.7) 10.7
Provision for income taxes(2)..................... 0.3 -- 2.3
------- -------- -------
Net income (loss)............................... 11.5% (17.7)% 8.4%
======= ======== =======
</TABLE>
- --------
(1) Includes $10.0 million, or 24.9% of revenues, for special officer bonuses,
including $7.5 million as part of the TA Transaction, 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.
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 average gross profit than the Company's
historical business due to the higher proportion of production costs
17
<PAGE>
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, 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.
18
<PAGE>
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.
19
<PAGE>
QUARTERLY FINANCIAL INFORMATION
The following table sets forth unaudited quarterly operating results for
each of the Company's last ten quarters as well as certain of such data
expressed as a percentage of revenues for the periods indicated. This
information has been prepared by the Company on a basis consistent with the
Company's audited financial statements and includes all adjustments
(consisting of normal and recurring adjustments) that management considers
necessary for a fair presentation of the data. These quarterly results are not
necessarily indicative of future results of operations. This information
should be read in conjunction with the Financial Statements and Notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31,
1996 1996 1996 1996 1997 1997 1997 1997
--------- -------- --------- -------- --------- -------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $6,973 $9,173 $9,592 $14,481 $13,673 $18,448 $17,500 $23,286
Cost of sales........... 4,496 5,976 5,949 9,583 9,737 13,103 12,408 16,332
------ ------ ------ ------- ------- ------- ------- -------
Gross profit.......... 2,477 3,197 3,643 4,898 3,936 5,345 5,092 6,954
Selling, general and
administrative
expenses............... 2,171 2,179 1,972 13,673(1) 2,250 2,759 3,060 4,375
------ ------ ------ ------- ------- ------- ------- -------
Operating income
(loss)............... 306 1,018 1,671 (8,775) 1,686 2,586 2,032 2,579
Interest expense (in-
come), net............. 55 49 24 127 409 357 658 (353)
Nonrecurring loss on
forgiveness of related
party loan............. -- -- -- 1,076 -- -- -- --
------ ------ ------ ------- ------- ------- ------- -------
Income (loss) before
provision for income
taxes................ 251 969 1,647 (9,978) 1,277 2,229 1,374 2,932
Provision for income
taxes.................. -- -- -- -- 400 800 300 200
------ ------ ------ ------- ------- ------- ------- -------
Net income (loss)..... $ 251 $ 969 $1,647 $(9,978) $ 877 $ 1,429 $ 1,074 $ 2,732
====== ====== ====== ======= ======= ======= ======= =======
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31,
1996 1996 1996 1996 1997 1997 1997 1997
--------- -------- --------- -------- --------- -------- --------- --------
<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........... 64.5 65.1 62.0 66.2 71.2 71.0 70.9 70.1
------ ------ ------ ------- ------- ------- ------- -------
Gross profit.......... 35.5 34.9 38.0 33.8 28.8 29.0 29.1 29.9
Selling, general and
administrative
expenses............... 31.1 23.8 20.6 94.4(1) 16.5 15.0 17.5 18.8
------ ------ ------ ------- ------- ------- ------- -------
Operating income
(loss)............... 4.4 11.1 17.4 (60.6) 12.3 14.0 11.6 11.1
Interest expense
(income), net.......... 0.8 0.5 0.3 0.9 3.0 1.9 3.8 (1.5)
Nonrecurring loss on
forgiveness of related
party loan............. -- -- -- 7.4 -- -- -- --
------ ------ ------ ------- ------- ------- ------- -------
Income (loss) before
provision for income
taxes................ 3.6 10.6 17.2 (68.9) 9.3 12.1 7.8 12.6
Provision for income
taxes.................. -- -- -- -- 2.9 4.4 1.7 0.9
------ ------ ------ ------- ------- ------- ------- -------
Net income (loss)..... 3.6% 10.6% 17.2% (68.9)% 6.4% 7.7% 6.1% 11.7%
====== ====== ====== ======= ======= ======= ======= =======
</TABLE>
- -------
(1) Includes $10.0 million, or 69.1% of revenues, for special officer bonuses,
including $7.5 million as part of the TA Transaction and $0.6 million, or
3.8% of revenues, for fees related to the TA Transaction.
20
<PAGE>
BLP's results of operations historically have fluctuated on a quarterly
basis and can be expected to continue to be subject to quarterly fluctuations.
In recent years, the Company has experienced substantially higher revenues in
the fourth quarter of its fiscal year than in the preceding three quarters of
such fiscal year. The Company believes these increases were related to 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 December 31, 1997, the Company had $29.8 million in net working capital,
an increase of $27.4 million from December 31, 1996. As described below,
substantially all of the Company's net working capital resulted from its
initial public offering of Common Stock which was completed in September 1997.
The Company's primary sources of liquidity as of December 31, 1997 consisted
of cash and cash equivalents, accounts receivable and borrowing availability
under a revolving credit facility.
The Company's accounts receivable turnover averaged 84 days for the period
ended December 31, 1997 and 93 days for the period ended December 31, 1996.
The allowance for doubtful accounts was $0.4 million at December 31, 1997 and
$0.3 million at December 31, 1996.
During 1997, the Company used approximately $1.3 million in operating
activities. This included $7.5 million in payments of officer bonuses which
were accrued in 1996, partially offset by $6.2 million of cash 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 IPO 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. 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 IPO 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
be consistent with the amount incurred in 1997.
The Company's credit facility (the "Credit Facility") provides for a $5.0
million revolving credit facility which is secured by the Company's assets. As
of December 31, 1996 and December 31, 1997, $1.0 million and $0, respectively,
was outstanding under the revolving credit facility. Borrowings under the
revolver are due on December 31, 2001. The Credit Facility contains various
financial and reporting covenants. In July and November 1997, certain
covenants in the Credit Facility were amended to allow for the anticipated
increases in capital expenditures related to its teleservice center in
Norfolk, Virginia.
21
<PAGE>
In January 1998, the Company purchased certain assets from Decision Point,
Inc., an Illinois corporation. The purchase price was $800,000 in cash,
subject to adjustment upward or downward, based on certain revenue and pre-tax
earnings goals in the calendar year subsequent to the date of the acquisition.
The acquisition will be accounted for using the purchase method of accounting.
The excess of purchase price over net assets acquired, estimated to be
$800,000, will be amortized over twenty years. The Company does not anticipate
a material change in cash flows from operations related to this acquired
business.
In March 1998, the Company purchased substantially all of the assets and
assumed certain liabilities of Strategic Implications International, Inc., a
Maryland corporation. The purchase price was $4,330,000 in cash and
approximately 137,000 shares of the Company's common stock. In addition, the
Company may be required to pay certain contingent payments based on certain
revenue goals related to the calendar year subsequent to the date of the
acquisition. The acquisition will be accounted for using the purchase method
of accounting. The excess of purchase price over net assets acquired is
estimated to be approximately $8,500,000 and will be amortized over twenty
years. The Company does not anticipate a material change in cash flows from
operations related to this acquired business.
In March 1998, the Company signed a contract with a large pharmaceutical
company to provide field sales 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.
YEAR 2000
In prior years, certain computer programs were written using two digits
rather than four to define the applicable year. These programs were written
without considering the impact of the upcoming change in the century and may
experience problems handling dates beyond the year 1999. The Company plans to
modify certain portions of its software so that its computer systems will
function properly with respect to dates in the year 2000 and thereafter. The
total cost of compliance and its effect on the Company's future results is
currently being determined as part of the conversion planning, however, the
Company does not believe such cost will be material. The Company anticipates
completion of the conversion process by December 31, 1998. There can be no
assurance that the timing and cost estimates related to the year 2000
conversion will be achieved. Actual results could differ materially from those
anticipated.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income"
("SFAS 130") and Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information" ("SFAS
131"). SFAS 130 establishes standards for reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements and requires that all items that are required to be
recognized under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same prominence
as other financial statements. SFAS 130 is required to be adopted for the
Company's fiscal year ending December 31, 1998. The adoption of this
pronouncement is expected to have no impact on the Company's financial
position or results of operations. SFAS 131 establishes standards for the way
that public business enterprises report information about operating segments
in annual financial statements and requires that those enterprises report
selected information about operating segments in interim financial reports
issued to stockholders. It also establishes standards for related disclosures
about products and services, geographic areas, and major customers. SFAS 131
is required to be adopted for the Company's 1998 year-end financial
statements. The Company is currently evaluating the impact, if any, of the
adoption of this pronouncement on the Company's existing disclosures.
22
<PAGE>
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.
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.
23
<PAGE>
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.
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 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
24
<PAGE>
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 useful in connection with
new product launches and products that require an in-depth explanation of
their associated therapeutic benefits.
25
<PAGE>
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.
Symposia. The Company added symposia in the fourth quarter of 1996 to
complement its peer-to-peer meeting business. A Company organized symposium
generally involves attendance by approximately 50 to 300 physicians over a
weekend. The physicians hear presentations regarding a drug or treatment
protocol presented by a faculty of experts in the field for the purpose of
being trained to serve as consultants and spokespeople for the sponsoring
pharmaceutical company. The sponsoring company pays the faculty in the form of
fees or medical grants and reimburses faculty and attending physicians for
their travel expenses.
Symposia are organized and conducted on an in-person basis by BLP throughout
the United States. BLP actively works with its customers to identify speakers
and select locations for each conference. The Company utilizes its in-house
travel agent and its other relationships with vendors to assist in
coordinating symposia. The
26
<PAGE>
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.
Additional Conferencing Services. The Company provides a range of additional
conferencing services. The Company emphasizes flexibility and conducts
meetings in any format that can effectively communicate its customer's
message. Video satellite conferences are an example of one of the many
possible formats for meetings. Video satellite conferences are lectures
sponsored by pharmaceutical companies. The speakers typically are physicians
or other medical experts who are retained by the pharmaceutical company for a
fee to discuss a new drug or indication or other medical topic. The Company
broadcasts the conferences via satellite on television to various locations
throughout the United States. The video satellite conferences typically
utilize interactive media involving one-way video, two-way audio, and special
keypads for audience participation. By using new forms of technology and media
in connection with such video satellite conferences, and CET programs for
peer-to-peer meetings, the Company seeks to enable its clients to effectively
and efficiently communicate medical information to physicians so that
physicians can better understand and utilize pharmaceutical products.
Educational Conferencing Services
Physicians and other healthcare professionals must dedicate a minimum number
of hours to certified continuing education ("CE") to remain certified to
practice their respective professions in certain jurisdictions. BLP
coordinates CE conferences that are funded by pharmaceutical companies and
held for approximately 50 to 350 healthcare professionals, primarily
physicians, at various locations throughout the United States. Each CE
conference is designed, if applicable, to satisfy CE requirements in
accordance with relevant regulations or accreditation procedures. Not all of
the educational conferences conducted by the Company are intended to satisfy
certified CE requirements. As with the Company's promotional conferencing
services, some of the CE programs are conducted by teleconference.
The CE programs, which 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.
27
<PAGE>
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.
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
28
<PAGE>
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 anticipates expanding to approximately 310
terminals by 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 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
29
<PAGE>
to shift fixed cost to variable cost by outsourcing portions of its sales
function and to respond quickly to the need for alternative and additional
sales support for its products. The Company expects that the CSO will engage
in traditional product detailing efforts, which involve providing
pharmaceutical product samples and related promotional and educational
materials to physicians. In addition, the CSO will utilize advanced
information technology and interface with the teleservices business to offer
clients a fully integrated sales approach. This approach will include unique
training, development and recruiting disciplines designed to enable the CSO to
compete effectively to service the specialized needs of the pharmaceutical
industry. BLP believes it can leverage its existing customer relationships and
market reputation to obtain projects for the CSO.
The Company currently has two contracts for its CSO. In connection with
BLP's initial project, which expires in August 1998, the Company has hired
approximately 100 salaried sales representatives. In connection with the
second contract, which extends from January 1998 to December 1998, the Company
expects to hire approximately 100 salaried sales representatives by April
1998.
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.
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.
30
<PAGE>
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 80 employees dedicated to servicing the field sales force
logistics requirements of that customer. BLP is currently in the preliminary
stages of negotiations to provide field sales force logistics services to
other customers.
Field sales force logistics is a new area of business for BLP involving a
number of the same risks as the Company's conferencing services, as well as
risks not present in its traditional business, such as the risks that it will
be unable to efficiently implement the significant planning and coordination
efforts required by this business or that this new service will not be
accepted generally by pharmaceutical companies. There can be no assurance that
the Company will establish a significant or lasting presence in the market, or
that this market will develop at all.
CUSTOMERS
BLP believes that its relationships with its customers, which include many
of the largest pharmaceutical companies, are among its most important
strategic advantages. 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 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, and , accounted for approximately
$35,900,000 (49%) and $13,400,000 (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
31
<PAGE>
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, licensing,
labeling, marketing, promotion, sale and reimbursement of healthcare services
and products, including pharmaceutical products. Certain areas of the
telemarketing and teleservices industry recently also have become subjected to
increasing government regulation. It is possible that additional or amended
laws, regulations or guidelines could be adopted in the future.
BLP's service offerings are affected by various guidelines promulgated by
industry and professional organizations. For example, certain ethical
guidelines promulgated by the AMA govern, among other matters, the receipt by
physicians of gifts from health-related entities. These guidelines govern the
honoraria and other items of pecuniary value which AMA-member physicians may
receive in connection with peer-to-peer meetings and symposia sponsored by the
pharmaceutical company customers of the Company. Similar regulations have been
implemented by other professional and industry organizations, such as the
Pharmaceutical Manufacturers Association, and some of the Company's customers
also have their own policies regarding such matters. The provision of CE
services is subject to compliance with guidelines promulgated by various
accreditation bodies. For instance, providers of continuing medical education
programs must comply with the rules of the Accreditation Council of Continuing
Medical Education (the "ACCME") or the American Council on Pharmaceutical
Education (the "ACPE") in order for the provider of the program to receive
accreditation from the ACCME. Other professional associations and some of the
Company's customers also have their own standards for continuing education
programs.
The pharmaceutical industry is subject to extensive federal regulation and
oversight by the FDA. For instance, the Federal Food, Drug and Cosmetic Act,
as supplemented by various other statutes, regulates, among
32
<PAGE>
other matters, the approval, labeling, advertising, promotion, sale and
distribution of drugs, including the practice of providing product samples to
physicians. Under this statute, the FDA asserts its authority to regulate all
promotional activities involving prescription drugs. For example, in
connection with focus groups conducted by one of the Company's competitors,
the FDA recently issued warning letters indicating concern about the manner in
which the focus groups were conducted, and the FDA also questioned the content
of the information provided to the focus group participants and requested
delivery of remedial information. Accordingly, the businesses of BLP and its
customers, to the extent such business involves promotion and marketing of
pharmaceutical products, are subject to the extensive regulation governing the
pharmaceutical industry, and there can be no assurance that the Company will
not be subject to increased regulatory scrutiny in the future.
Certain portions of the telemarketing and teleservices industry have become
subject to increased federal and state regulation in recent years. The rules
of the Federal Communications Commission (the "FCC") under the Federal
Telephone Consumer Protection Act of 1991 limit the hours during which
telemarketers may call consumers and prohibit the use of automated telephone
dialing equipment to call certain telephone numbers. The Federal Telemarketing
and Consumer Fraud and Abuse Prevention Act of 1994 (the "TCFAPA") broadly
authorizes the Federal Trade Commission (the "FTC") to issue regulations
prohibiting misrepresentation in telephone sales. In August 1995, the FTC
issued regulations under the TCFAPA which, among other things, require
telemarketers to make certain disclosures when soliciting sales. The Company
believes its operating procedures comply with the telephone solicitation rules
of the FCC and the FTC. However, there can be no assurance that additional
federal or state legislation, or changes in the regulatory environment, would
not limit the activities of the Company or its customers in the future or
significantly increase the cost of regulatory compliance.
The failure of BLP or its customers to comply with, or any change in, the
applicable regulatory requirements or professional organization or industry
guidelines could, among other things, limit or prohibit the Company or its
customers from conducting certain business activities, subject the Company or
its customers to adverse publicity, increase the costs of regulatory
compliance or subject the Company or its customers to monetary fines or other
penalties. Any such actions could have a material adverse effect on the
Company.
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
33
<PAGE>
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.
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.
34
<PAGE>
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.
35
<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-
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 firms 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
36
<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."
37
<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 Fiscal 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 Fiscal 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 $8,400.
38
<PAGE>
Option Grants. The following table sets forth certain information concerning
the grant of options to purchase Common Stock of the Company to the Named
Executive Officers who received such grants during Fiscal 1997.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF PERCENT ANNUAL RATES OF
SECURITIES OF TOTAL STOCK PRICE
UNDERLYING OPTIONS EXERCISE APPRECIATION
OPTIONS GRANTED OR BASE FOR OPTION TERM(1)
GRANTED TO EMPLOYEES PRICE PER EXPIRATION ---------------------
NAME (#) (2) IN FISCAL YEAR ($/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.
39
<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"),
(v) the grant of Common Stock upon the attainment of specified performance
goals ("Performance Share Awards collectively, with Restricted Stock", "Stock
Grants"), (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
$ 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.
40
<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
41
<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.
42
<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.
43
<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.
44
<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
------------------- --------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
TA Associates Group
(2)(4)................... 4,060,066 37.3% 2,000,000 2,060,066 16.6%
AMVESCAP PLC(2)(5)........ 688,000 6.3% 0 688,000 5.6%
Patrick G. LePore (6)..... 993,333 9.1% 100,000 793,333 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 10,887,413 shares
of Common Stock were issued and outstanding and options to acquire
Common Stock were exercisable within 60 days. The applicable percentage
of "beneficial ownership" after this offering is based upon 12,387,413
shares of Common Stock outstanding.
(2) 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.
(3) Assumes no exercise of the Underwriters' over-allotment option.
(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
45
<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. See Note 16. 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 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.
46
<PAGE>
(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.
47
<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 12,387,413 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, 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 a merger, tender offer
or proxy
48
<PAGE>
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.
49
<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 12,387,413
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 6,745,031 shares of Common Stock
outstanding will be "restricted securities" as that term is defined by Rule
144 (the "Restricted Shares"). The Restricted Shares were issued and sold by
the Company in private transactions in reliance upon exemptions from
registration under the Securities Act.
Of the Restricted Shares, 6,607,979 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
50
<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 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 the 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. All of such holders have agreed
pursuant to lock-up agreements not to sell or offer to sell or otherwise
dispose of any shares of Common Stock currently held by them, any right 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.
51
<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.............................
Salomon 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 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
52
<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 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.
53
<PAGE>
INDEX TO FINANCIAL STATEMENTS
BORON, LEPORE & ASSOCIATES, INC.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Arthur Andersen LLP, Independent Public Accountants............ F-2
Report of M.R. Weiser & Co. LLP, Independent Public Accountants.......... F-3
Balance Sheets as of December 31, 1996 and 1997.......................... F-4
Statements of Operations for the Years Ended December 31, 1995, 1996 and
1997.................................................................... F-5
Statements of Stockholders' Equity (Deficit) for the Years Ended December
31, 1995, 1996 and 1997................................................. F-6
Statements of Cash Flows for the Years Ended December 31, 1995, 1996 and
1997.................................................................... 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,
--------------------------
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents........................ $ 24,015,554 $ 7,175,648
Accounts receivable, net of allowance for
doubtful accounts of $400,000 and $300,000 at
December 31, 1997 and 1996, respectively........ 21,764,173 14,969,261
Prepaid expenses and other current assets........ 729,559 254,802
------------ ------------
Total current assets........................... 46,509,286 22,399,711
------------ ------------
FURNITURE, FIXTURES AND EQUIPMENT, at cost, net of
accumulated depreciation of $848,732 and $544,232
at December 31, 1997 and 1996, respectively....... 4,454,023 325,296
SECURITY DEPOSITS.................................. 72,921 27,166
INTANGIBLE ASSETS.................................. 20,250 344,767
------------ ------------
Total assets................................... $ 51,056,480 $ 23,096,940
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Current maturities of long-term debt............. $ -- $ 1,000,000
Accounts payable and accrued expenses............ 9,729,766 12,775,623
Deferred revenue................................. 6,245,196 5,138,696
Billings in excess of costs...................... 729,500 1,069,850
------------ ------------
Total current liabilities...................... 16,704,462 19,984,169
------------ ------------
LONG-TERM DEBT, less current maturities............ -- 19,000,000
------------ ------------
REVOLVING LINE OF CREDIT........................... -- 1,000,000
------------ ------------
DEFERRED INCOME TAXES.............................. 1,509,000 --
------------ ------------
CONVERTIBLE PARTICIPATING PREFERRED STOCK, $.01 par
value; none authorized, issued and outstanding at
December 31, 1997; 7,000,000 shares authorized,
issued and outstanding at December 31,1996........ -- 12,500,000
------------ ------------
REDEEMABLE PREFERRED STOCK, $.01 par value; none
authorized, issued and outstanding at December 31,
1997; 5,600,000 shares authorized, none issued and
outstanding at December 31, 1996.................. -- --
------------ ------------
COMMITMENTS AND CONTINGENCIES......................
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, $.01 par value, 2,000,000 shares
authorized, none issued and outstanding at
December 31, 1997, none authorized, issued or
outstanding at December 31, 1996................
Common stock, $.01 par value, 50,000,000 shares
authorized, 14,947,978 issued and 10,747,979
outstanding at December 31, 1997; 12,000,000
shares authorized, 5,733,328 issued and
1,999,995 outstanding at December 31, 1996...... 149,480 57,333
Class A common stock, $.01 par value; none
authorized issued and outstanding at December
31, 1997; 1,333,333 authorized, 666,666 issued
and outstanding at December 31, 1996............ -- 6,667
Class B common stock, $.01 par value, none
authorized, issued and outstanding at December
31, 1997, 4,666,666 shares authorized; none
issued and outstanding at December 31, 1996..... -- --
Treasury stock, at cost, 4,199,999 shares at
December 31, 1997; 3,733,333 shares at December
31, 1996........................................ (24,349,992) (18,850,000)
Additional paid-in capital....................... 64,176,975 1,813,606
Accumulated deficit.............................. (7,133,445) (12,414,835)
------------ ------------
Total stockholders' deficit (equity)........... 32,843,018 (29,387,229)
------------ ------------
Total liabilities and stockholders' equity
(deficit)..................................... $ 51,056,480 $ 23,096,940
============ ============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-4
<PAGE>
BORON, LEPORE & ASSOCIATES, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES................................. $72,907,104 $40,219,534 $21,774,824
COST OF SALES............................ 51,579,923 26,004,405 12,788,018
----------- ----------- -----------
Gross profit........................... 21,327,181 14,215,129 8,986,806
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES................................ 12,443,944 19,995,398 6,340,631
----------- ----------- -----------
OPERATING INCOME (LOSS).................. 8,883,237 (5,780,269) 2,646,175
INTEREST EXPENSE, net of interest income
of $460,592, $55,561 and $33,370 in
1997, 1996 and 1995, respectively....... 1,071,062 254,676 85,593
NONRECURRING LOSS ON FORGIVENESS OF
RELATED PARTY LOAN...................... -- 1,076,418 --
----------- ----------- -----------
Income (loss) before provision for
income taxes.......................... 7,812,175 (7,111,363) 2,560,582
PROVISION FOR INCOME TAXES............... 1,700,000 -- 51,000
----------- ----------- -----------
Net income (loss)...................... $ 6,112,175 $(7,111,363) $ 2,509,582
=========== =========== ===========
EARNINGS (LOSS) PER SHARE--BASIC......... $ 1.07 $ (1.18) $ 0.29
=========== =========== ===========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING--BASIC...................... 4,947,018 6,027,869 8,602,151
=========== =========== ===========
EARNINGS (LOSS) PER SHARE--DILUTED....... $ 0.72 $ (1.18) $ 0.29
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING--DILUTED.. 8,507,293 6,027,869 8,602,151
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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 $ -- $--NM $(24,349,992) $64,176,975 $ (7,133,445)
======== ======= ===== ============ =========== ============
</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>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)...................... $ 6,112,175 $(7,111,363) $ 2,509,582
Adjustments to reconcile net income
(loss) to net cash used in operating
activities:
Depreciation and amortization......... 359,683 112,618 93,818
Nonrecurring loss on forgiveness of
related party loan................... -- 1,076,418 --
Write-off of unamortized deferred
financing costs...................... 270,834 -- --
Non-cash compensation expense......... 42,558 -- --
Deferred income taxes................. 1,509,000 (75,000) 50,000
Changes in operating assets and
liabilities:
Increase in accounts receivable,
net................................. (6,794,912) (7,561,243) (2,636,435)
Increase in prepaid expenses and
other current assets................ (474,757) (58,028) (45,024)
Increase (decrease) in security
deposits............................ (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........ (3,045,857) 9,928,526 1,381,141
Increase in deferred revenue and
billings in excess of costs......... 766,150 3,438,414 945,751
----------- ----------- -----------
Net cash used in operating
activities......................... (1,302,381) (713,234) (590,402)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of furniture, fixtures and
equipment............................. (4,433,227) (134,965) (43,493)
----------- ----------- -----------
</TABLE>
F-7
<PAGE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
1997 1996 1995
------------ ------------ ----------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt.......... $ -- $ 20,000,000 $1,250,000
Proceeds from revolving line of
credit............................... -- 1,000,000 1,156,000
Repayments of long term debt and
revolving line of credit............. (21,000,000) (2,301,833) (589,549)
(Redemption of) Proceeds from
convertible participating preferred
stock................................ (10,830,785) 12,500,000 --
Proceeds from the issuance of common
stock................................ 59,787,125 171,000 --
Proceeds from the issuance of Class A
common stock......................... 119,166 285,000 --
Capital contributions by
stockholders......................... -- 451,000 --
Repayment of stockholder loan......... -- -- (100,000)
Stockholder distributions............. -- -- (150,000)
Payment of stock issuance costs....... -- (18,980) --
Repurchase of treasury stock from
stockholders......................... -- (18,850,000) --
Repurchase of treasury stock from
former stockholders.................. (5,499,992) (6,175,000) --
------------ ------------ ----------
Net cash provided by financing
activities........................ 22,575,514 7,061,187 1,566,451
------------ ------------ ----------
Net increase in cash............... 16,839,906 6,212,988 932,556
CASH AND CASH EQUIVALENTS, beginning of
period................................ 7,175,648 962,660 30,104
------------ ------------ ----------
CASH AND CASH EQUIVALENTS, end of
period................................ $ 24,015,554 $ 7,175,648 $ 962,660
============ ============ ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest............................. $ 1,614,079 $ 321,000 $ 145,000
Taxes................................ $ 252,220 $ 20,015 $ --
</TABLE>
The accompanying notes are an integral part of these financial statements.
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.
Incorporation and Merger:
On November 22, 1996, BLA Acquisition Corporation ("BLA") was incorporated
in the State of Delaware. On November 27, 1996, the stockholders of BLA and
the stockholders of Boron, LePore & Associates, Inc., all under common
control, unanimously approved the Agreement and Plan of Merger ("Merger
Agreement") of the two companies. On December 3, 1996, the merger became
effective and was accounted for comparable to a pooling of interests. The
surviving corporation was BLA, which subsequently changed its name to Boron,
LePore & Associates, Inc. (the "Company").
On December 4, 1996, the Company amended and restated its certificate of
incorporation to include the authority to issue 26,400,000 shares of common
stock.
On September 24, 1997, the Company completed the initial public offering of
3,735,000 shares (including the underwriters' over allotment of 135,000
shares) of Common Stock at $17.50 per share resulting in net proceeds, after
underwriter commissions and offering costs, of approximately $59,800,000 (the
"Offering"). Of these net proceeds, approximately $19,600,000 was used to
retire outstanding debt and pay related interest expense, approximately
$10,800,000 was used to redeem all shares of Redeemable Preferred Stock and
related accumulated dividends and approximately $5,600,000 was used to
purchase 466,666 shares of Common Stock from a former officer of the Company.
In connection with the Offering, the authorized stock of the Company was
increased on September 22, 1997 to 50,000,000 shares of $.01 par value common
stock and 2,000,000 shares of $.01 par value preferred stock. Upon completion
of the Offering, all outstanding shares of non-voting Class A Common Stock
converted into shares of Common Stock. Also upon completion of the Offering,
the Convertible Participating Preferred Stock of the Company converted into
4,666,664 shares of Common Stock and 5,600,000 shares of Redeemable Preferred
Stock which, as described above, was redeemed with a portion of the net
proceeds of the Offering.
All share amounts have been retroactively adjusted to reflect a two-for-
three reverse stock split which occurred on September 11, 1997.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Use of estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-9
<PAGE>
BORON, LEPORE & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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 December 31, 1997 and
December 31, 1996 approximated $730,000 and $1,070,000, respectively, and are
reflected as billings in excess of costs in the accompanying balance sheets.
Depreciation and Amortization:
Depreciation and amortization is provided on the straight-line method over
the estimated useful lives of the related assets, generally a three to ten
year period. Expenditures for repairs and maintenance are expensed as incurred
while renewals and betterments are capitalized.
Intangible Assets:
Intangible assets generally represent non-compete agreements and deferred
financing costs. Such assets are amortized over the term of the related
agreement or debt instrument. During December 1996, as part of a Preferred
Stock Purchase Agreement (see Note 13), the Company incurred certain financing
costs related to the transaction. The costs were comprised primarily of
commitment fees related to long-term debt financing costs and totaled
$312,500. Such amount was being amortized over the life of the debt
instrument. During September 1997, in conjunction with the Offering and the
settlement of all outstanding bank debt (Note 4), the Company wrote-off the
remaining balance of unamortized deferred financing costs, which amounted to
approximately $270,000.
Income Taxes:
On December 4, 1996, the Company began operations as a Delaware corporation
and was subject to Federal and state corporate tax rates as a "C" corporation
(see Note 8). The Company has adopted the provisions of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." This standard
requires the use of the asset and liability method of accounting for income
taxes. Under this method, deferred tax assets and liabilities are determined
based on temporary differences between financial reporting and tax bases of
assets and liabilities, tax credit carryforwards and operating loss
carryforwards. A valuation allowance is established to
F-10
<PAGE>
BORON, LEPORE & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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 YEARS ENDED DECEMBER 31,
------------------------------------
1997 1996 1995
---------- ----------- -----------
<S> <C> <C> <C>
Numerator:
Net income (loss)--Diluted............... $6,112,175 $(7,111,363) $ 2,509,582
Less dividends on preferred stock........ (830,785) -- --
---------- ----------- -----------
Net income (loss)--Basic................. $5,281,390 $(7,111,363) $ 2,509,582
========== =========== ===========
Denominator:
Weighted average number of common shares
outstanding--Basic...................... 4,947,018 6,027,869 8,602,151
Incremental shares from assumed
conversions of options.................. 159,364 -- --
Convertible Participating Preferred
Stock.................................. 3,400,911 -- --
---------- ----------- -----------
Weighted average common and common
equivalent shares outstanding--Diluted.. 8,507,293 6,027,869 8,602,151
========== =========== ===========
Earnings (loss) per share--Basic......... $ 1.07 $ (1.18) $ .29
========== =========== ===========
Earnings (loss) per share--Diluted....... $ 0.72 $ (1.18) $ 0.29
========== =========== ===========
</TABLE>
4. LONG-TERM DEBT:
During 1996, the Company entered into a borrowing agreement with a bank. The
borrowing agreement provided for a $5,000,000 revolving credit facility and a
$20,000,000 term loan (the "Credit Facility"). As of December 31,1996,
$1,000,000 was outstanding under the revolving credit facility. Borrowings
under the revolving credit facility are due on December 31, 2001. The interest
rates on the loans vary and are a function of the stated LIBOR rate and the
effective prime rate as defined in the Agreement. In September 1997, in
conjunction with the Offering, the Company repaid the then outstanding balance
of the term loan, $19,500,000, and the $1,000,000 revolving credit facility.
In connection with this debt repayment, the Company wrote-off the balance of
unamortized deferred financing costs related to the credit facility, resulting
in a charge of approximately $270,000. In 1997, the Company amended certain
covenants to allow for anticipated increases in capital expenditures. As of
December 31, 1997, there were no outstanding borrowings under the revolving
credit facility and $5,000,000 was available for future borrowings.
5. FURNITURE, FIXTURES AND EQUIPMENT:
Furniture, fixtures and equipment consists of:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1997 1996
---------- ---------
<S> <C> <C>
Telephone and computer equipment.................... $3,467,283 $ 543,444
Office equipment.................................... 936,560 254,147
Other............................................... 898,912 71,937
---------- ---------
5,302,755 869,528
Less: Accumulated depreciation...................... (848,732) (544,232)
---------- ---------
Furniture, fixtures and equipment net of accumulated
depreciation....................................... $4,454,023 $ 325,296
========== =========
</TABLE>
F-12
<PAGE>
BORON, LEPORE & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
6. ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
Accounts payable and accrued expenses are comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1997 1996
---------- -----------
<S> <C> <C>
Accounts payable..................................... $3,838,286 $ 1,729,688
Accrued payroll...................................... 1,287,565 8,170,078
Accrued honoraria.................................... 3,548,554 1,860,656
Other accrued expenses............................... 1,055,361 1,015,201
---------- -----------
Accounts payable and accrued expenses................ $9,729,766 $12,775,623
========== ===========
</TABLE>
7. COMMITMENTS AND CONTINGENCIES:
Operating Leases:
The Company leases office space, automobiles, and equipment under various
operating leases expiring in 2007. Approximate annual lease commitments for
the next five years are as follows:
<TABLE>
<S> <C>
1998.......................................................... $1,061,739
1999.......................................................... 958,457
2000.......................................................... 734,193
2001.......................................................... 624,705
2002.......................................................... 558,512
</TABLE>
Rent expense charged against operations approximated $525,000, $387,000 and
$340,000 for the years ended December 31, 1997, 1996 and 1995, respectively.
Litigation:
The Company, from time to time, is involved in legal proceedings incurred in
the normal course of business. The Company believes none of these proceedings
will have a material adverse effect on the financial condition or liquidity of
the Company. Additionally, Thomas S. Boron, a former shareholder and officer
of the Company has sent correspondence to the Company alleging securities and
common law fraud and breach of contract by senior officers of the Company in
connection with the settlement of contractual arrangements with him in
December, 1996. See "Certain Transactions." The Company believes the
allegations of Thomas S. Boron are without merit and intends to contest them
vigorously should litigation be commenced against the Company, its officers or
other personnel. The Company does not believe that this matter will have a
material adverse effect on its financial condition or results of operations,
although there can be no assurance that this will be the case.
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.
F-13
<PAGE>
BORON, LEPORE & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
8. INCOME TAXES:
The components of the provision for income taxes are summarized as follows
for the years ending December 31:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ------- -------
<S> <C> <C> <C>
Current........................................ $ 191,000 $75,000 $ 1,000
Deferred....................................... 1,509,000 (75,000) 50,000
---------- ------- -------
Total........................................ $1,700,000 $ -- $51,000
========== ======= =======
</TABLE>
As discussed in Note 2 the Company began operating as a "C" Corporation on
December 4, 1996. The following table indicates the significant elements
contributing to the difference between the Federal statutory rate and the
Company's effective tax rate--
<TABLE>
<CAPTION>
1997 1996
----- -----
<S> <C> <C>
Federal statutory rate..................................... 34.0% (34.0%)
State taxes net of Federal effect.......................... (6.0%) 6.0%
Utilization of net operating loss carryforwards............ (38.5%) --
Valuation allowance on net operating loss carryforwards.... 17.8% 40.0%
Alternative minimum tax.................................... 2.5% --
----- -----
Effective tax rate......................................... 21.8% 0.0%
===== =====
</TABLE>
Deferred income taxes represent the tax effect of the difference between and
tax bases of assets and liabilities. The major components of deferred tax
assets and liabilities as of December 31 are as follows:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Net operating loss carryforward.................. $ 1,755,000 $ 4,764,000
Allowance for doubtful accounts.................. 160,000 120,000
Other operating reserves......................... 44,000 20,000
Tax over book depreciation....................... (24,000) (4,000)
Cash to accrual liability........................ (1,880,000) (2,400,000)
Alternative minimum tax credit................... 191,000 --
----------- -----------
Subtotal....................................... 246,000 2,500,000
----------- -----------
Valuation allowance.............................. (1,755,000) (2,500,000)
----------- -----------
Total.......................................... $(1,509,000) $ --
=========== ===========
</TABLE>
The Company has a net operating loss for book purposes in the amount of
approximately $4,400,000 which is available to offset future earnings. The
Company has recorded a valuation allowance due to the uncertainty of the
realization of this asset.
9. MAJOR CUSTOMERS:
Revenue from two customers accounted for approximately $35,900,000 (49%) and
$13,400,000 (18%) of total revenue for the year ending December 31, 1997.
Revenue from three customers accounted for approximately $17,600,000 (44%),
$6,300,000 (16%) and $4,100,000 (10%) of total revenue for the year ending
December 31, 1996.
Revenue from four customers accounted for approximately $9,700,000 (45%),
$4,400,000 (20%), $2,300,000 (11%) and $2,300,000 (11%) of total revenue for
the year ending December 31, 1995.
F-14
<PAGE>
BORON, LEPORE & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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
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.
F-15
<PAGE>
BORON, LEPORE & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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 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
F-16
<PAGE>
BORON, LEPORE & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
received $285,000 in payment for the 666,666 shares on December 4, 1996. The
Plan calls for certain performance levels to be attained or the passage of a
specified period of time before the shares of Class A Common Stock vest. In
September 1997, in connection with the Offering, all shares of Class A Common
Stock were converted to Common Stock.
The Company has adopted the provisions of SFAS 123. As permitted by the
statement, the Company has elected to continue to account for stock-based
compensation using the intrinsic value method. Accordingly, no compensation
expense has been recognized for stock options granted at or above market
value. Had the fair value method of accounting been applied to the Company's
stock option grants, which requires recognition of compensation cost ratably
over the vesting period of the underlying equity instruments, net income would
have been reduced by approximately $32,000 during the year ending December 31,
1997. The per share impact would have been immaterial. This pro forma impact
only takes into account options granted since January 1, 1995 and is likely to
increase in future years as additional options are granted and amortized
ratably over the vesting period. The average fair value of options granted
during the year ending December 31, 1997 was $4.38. The fair value was
estimated using the Black Scholes option pricing model based on the weighted
average market price at grant date of $10.60, volatility of 38% and a risk
free interest rate of 6.5%. There were no options granted for any periods
prior to December 31, 1996.
In August 1997, the Company's 1997 Employee Stock Purchase Plan (the
"Purchase Plan") was established. The Purchase Plan allows for up to 225,000
shares of Common stock to be issued at 85% of fair market value. As of
December 31, 1997, no shares were issued under the Purchase Plan.
15. RELATED PARTY TRANSACTIONS:
The Company entered into a consulting agreement on December 23, 1991 with a
stockholder of the Company. The agreement provided, among other things, for
the payment of monthly consulting fees through December 31, 2001. The total
consulting fees charged to operations during the years ended December 31,
1997, 1996 and 1995 approximated $0, $516,000 and $360,000, respectively. The
consulting agreement was terminated pursuant to the terms contained in the
Preferred Stock Purchase Agreement and the Company received and executed a
general release from the former stockholder in consideration for the payment
made.
During the years ending December 31, 1997, 1996, and 1995, the Company
leased space from a stockholder of the Company. The aggregate rent expense
charged to operations for those periods approximated $24,000, $84,000 and
$82,000, respectively.
16. SUBSEQUENT EVENTS (UNAUDITED):
Business Acquisitions:
In March 1998, the Company purchased substantially all of the assets and
assumed certain liabilities of Strategic Implications International, Inc., a
Maryland corporation. The purchase price was $4,330,000 in cash and
approximately 137,000 shares of the Company's common stock. In addition, the
Company may be required to pay certain contingent payments based on revenue
goals related to the calendar year subsequent to the date of the acquisition.
The acquisition will be accounted for using the purchase method of accounting.
The excess of purchase price over net assets acquired is estimated to be
approximately $8,500,000 and will be amortized over twenty years.
In January 1998, the Company purchased certain assets from Decision Point,
Inc., an Illinois company. The purchase price was $800,000 in cash, subject to
adjustment upward or downward, based on certain revenue and pre-tax earnings
goals related to the calendar year subsequent to the date of the acquisition.
The acquisition will be accounted for using the purchase method of accounting.
The excess of purchase price over net assets acquired, estimated to be
$800,000, will be amortized over twenty years.
F-17
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALES PERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION WOULD BE UNLAWFUL OR TO ANY PERSON TO WHOM IT IS UNLAW-
FUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE MADE HERE-
UNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 6
Use of Proceeds.......................................................... 12
Market Price of Common Stock and
Dividend Policy ........................................................ 13
Capitalization........................................................... 14
Selected Financial Information........................................... 15
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 16
Business................................................................. 23
Management............................................................... 35
Certain Transactions..................................................... 43
Principal and Selling Stockholders....................................... 45
Description of Capital Stock............................................. 48
Shares Eligible for Future Sale.......................................... 50
Underwriting............................................................. 52
Legal Matters............................................................ 53
Experts.................................................................. 53
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................................................ *
Accounting Fees and Expenses...................................... *
Legal Fees and Expenses........................................... *
Printing Expenses................................................. *
Blue Sky Qualification Fees and Expenses.......................... *
Transfer Agent's Fee.............................................. *
Miscellaneous..................................................... *
-------
Total........................................................... $ *
=======
</TABLE>
- --------
(1) The amounts set forth above, except for the SEC, NASD and Nasdaq fees, are
in each case estimated.
* To be completed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
In accordance with Section 145 of the General Corporation Law of the State
of Delaware, Article VIII of the Company's Amended and Restated Certificate of
Incorporation (the "Certificate") provides that no director of the Company
shall be personally liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability (i)
for any breach of the director's duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) in respect of
certain unlawful dividend payments or stock redemptions or repurchases, or
(iv) for any transaction from which the director derived an improper personal
benefit. In addition, the Certificate provides that if the Delaware General
Corporation Law is amended to authorize the further elimination or limitation
of the liability of directors, then the liability of a director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the Delaware General Corporation Law, as so amended.
Article V of the Company's Amended and Restated By-laws provides for
indemnification by the Company of its officers and certain non-officer
employees under certain circumstances against expenses (including attorneys
fees, judgments, fines and amounts paid in settlement) reasonably incurred in
connection with the defense or settlement of any threatened, pending or
completed legal proceeding in which any such person is involved by reason of
the fact that such person is or was an officer or employee of the Company if
such person acted in good faith and in a manner he or she reasonably believed
to be in or not opposed to the best interests of the Company, and, with
respect to criminal actions or proceedings, if such person had no reasonable
cause to believe his or her conduct was unlawful.
The Stockholder's Agreement, filed as Exhibit 2.4 hereto, provides for
indemnification by the Company of certain of its existing principal
stockholders and the controlling persons of such stockholders (two of whom are
directors of the Company) against claims and liabilities, including claims and
liabilities arising under the securities laws.
The Company has entered into indemnification agreements with certain of its
directors reflecting the foregoing provisions of its By-laws and requiring the
advancement of expenses in proceedings involving such directors in most
circumstances.
II-1
<PAGE>
Under Section 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)
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.
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.
10.29 Incentive Stock Option Agreement for Patrick G. LePore. (5)
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
hereto).
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of M.R. Weiser & Co. LLP.
24. Power of Attorney (included on the signature page hereto).
</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.
*To be filed by amendment.
(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 REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN FAIR LAWN, NEW JERSEY, ON APRIL 23,
1998.
Boron, Lepore & Associates, Inc.
/s/ Patrick G. LePore
By: _________________________________
PATRICK G. LEPORE
CHAIRMAN OF THE BOARD,
CHIEF EXECUTIVE OFFICER AND
PRESIDENT
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each individual whose signature appears
below constitutes and appoints each of Patrick G. LePore and Gregory F. Boron
such person's true and lawful attorney-in-fact and agent with full power of
substitution and resubstitution, for such person and in such person's name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement (or to
any other registration statement for the same offering that is to be effective
upon filing pursuant to Rule 462(b) under the Securities Act), and to file the
same, with all exhibits thereto, and all documents in connection therewith,
with the Securities and Exchange Commission, granting unto each said attorney-
in-fact and agent full power and authority to do and perform each and every
act and thing requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as such person might or could do in person,
hereby ratifying and confirming all that any said attorney-in-fact and agent,
or any substitute or substitutes of any of them, may lawfully do or cause to
be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ Patrick G. LePore Chairman of the April 23, 1998
- ------------------------------------- Board, Chief
PATRICK G. LEPORE Executive Officer,
President and
Director (Principal
Executive Officer)
/s/ Gregory F. Boron Chief Operating April 23, 1998
- ------------------------------------- Officer and
GREGORY F. BORON Director
/s/ Martin J. Veilleux Chief Financial April 23, 1998
- ------------------------------------- Officer, Secretary
MARTIN J. VEILLEUX and Treasurer
(Principal
Financial and
Accounting Officer)
/s/ Roger Boissonneault Director April 23, 1998
- -------------------------------------
ROGER BOISSONNEAULT
/s/ Roger B. Kafker Director April 23, 1998
- -------------------------------------
ROGER B. KAFKER
II-6
<PAGE>
SIGNATURE TITLE DATE
/s/ Jacqueline C. Morby Director April 23, 1998
- -------------------------------------
JACQUELINE C. MORBY
/s/ Joseph E. Smith Director April 23, 1998
- -------------------------------------
JOSEPH E. SMITH
/s/ John A. Staley Director April 23, 1998
- -------------------------------------
JOHN A. STALEY, IV
II-7
<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)
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.
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)
</TABLE>
<PAGE>
<TABLE>
<C> <S>
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.
10.29 Incentive Stock Option Agreement for Patrick G. LePore. (5)
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
hereto).
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of M.R. Weiser & Co. LLP.
24. Power of Attorney (included on the signature page hereto).
</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.
* To be filed by amendment.
<PAGE>
EXHIBIT 5.1
[LETTERHEAD OF GOODWIN, PROCTER
& HOAR LLP APPEARS HERE]
April 24, 1998
Boron, LePore & Associates, Inc.
17-17 Route 208 North
Fair Lawn, NJ 07410
Re: Registration Statement on Form S-1
Ladies and Gentlemen:
This opinion is delivered in our capacity as special counsel to Boron,
LePore & Associates, Inc. (the "Company") in connection with the preparation and
filing with the Securities and Exchange Commission under the Securities Act of
1933, as amended, of a Registration Statement on Form S-1 (the "Registration
Statement") relating to 4,485,000 shares of Common Stock, par value $.01 per
share (the "Registered Shares"), including 585,000 shares which the underwriters
have an option to purchase solely for the purpose of covering over-allotments.
Of the 4,485,000 Registered Shares, 2,085,000 shares (including the 585,000
shares to cover the over-allotment option) are to be sold by the Company (the
"Company Shares") and 2,400,000 shares are to be sold by certain selling
stockholder (the "Selling Stockholder Shares") to the several underwriters (the
Underwriters") of which Bear, Stearns & Co. Inc., Dain Rauscher Wessels, a
division of Dain Rauscher Incorporated, NationsBanc Montgomery Securities LLC,
and Smith Barney Inc. are the representatives (the "Representatives") pursuant
to an Underwriting Agreement (the "Underwriting Agreement") to be entered into
between the Company and the Representatives of the Underwriters.
As counsel for the Company, we have examined the form of the proposed
Underwriting Agreement being filed as an exhibit to the Registration Statement,
the Company's Amended and Restated Certificate of Incorporation, as amended, and
the Company's Amended and Restated By-laws, each as presented in effect, and
such records, certificates and other documents of the Company as we have deemed
necessary or appropriate for the purposes of this opinion.
Based on the foregoing, we are of the opinion that (A) when (i) the
Underwriting Agreement is completed (including the insertion therein of pricing
terms) and executed by the Company and on behalf of the Underwriters, and (ii)
the Company Shares are sold to the Underwriters and paid for pursuant to the
terms of the Underwriting Agreement, the Company
<PAGE>
[LETTERHEAD OF GOODWIN, PROCTER & HOAR LLP APPEARS HERE]
Shares will be duly authorized, legally issued, fully paid and non-assessable by
the Company under the General Corporation Law of the State of Delaware (the
"DGCL"), and (B) the Selling Stockholder Shares are duly authorized, legally
issued, fully paid and non-assessable by the Company under the DGCL.
We hereby consent to being named as counsel to the Company in the
Registration Statement, to the references therein to our firm under the caption
"Legal Matters," and to the inclusion of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
GOODWIN, PROCTER & HOAR LLP
<PAGE>
Exhibit 10.28
Incentive Stock Option Agreement
under the Boron, LePore & Associates, Inc.
Amended and Restated
1996 Stock Option and Grant Plan
Name of Optionee: Timothy McIntyre
------- --------
No. of Option Shares: 50,000 Shares of Common Stock
------
Grant Date: 11/10/97
--------
Final Expiration Date: [10 years after grant date]
Option Exercise Price/Share: $22.00
------
Pursuant to the Boron, LePore & Associates, Inc. Amended and Restated
1996 Stock Option and Grant Plan (the "Plan"), Boron, LePore & Associates, Inc.,
a Delaware corporation (the "Company"), hereby grants to the person named above
(the "Optionee"), who is an officer or full-time employee of the Company or any
of its subsidiaries, an option (the "Stock Option") to purchase on or prior to
the expiration date specified above (the "Expiration Date") all or any part of
the number of shares of Common Stock, par value $0.01 per share ("Common
Stock"), of the Company indicated above (the "Option Shares"), at the per share
option exercise price specified above, subject to the terms and conditions set
forth in this Incentive Stock Option Agreement (the "Agreement") and in the
Plan. This Stock Option is intended to qualify as an "incentive stock option" as
defined in Section 422(b) of the Internal Revenue Code of 1986, as amended from
time to time (the "Code"). To the extent that any portion of the Stock Option
does not so qualify, it shall be deemed a non-qualified stock option. All
capitalized terms used herein and not otherwise defined shall have the
respective meanings set forth in the Plan.
<PAGE>
1. Vesting and Exercisability.
------- --- --------------
(a) No portion of this Stock Option may be exercised until such portion
shall have vested.
(b) Except as set forth below and in Section 6, and subject to the
determination of the Compensation Committee of the Board of Directors of the
Company or the Board of Directors of the Company, as applicable (the
"Committee"), in its sole discretion to accelerate the vesting schedule
hereunder, this Stock Option shall be vested and exercisable with respect to the
following number of Option Shares on the date indicated:
Incremental (Aggregate Number)
Of Option Shares Exercisable* Vesting Date
------------------------------ ------------
1. [50% of Grant] [50% of Total] [1 year from Grant Date]
2. [50% of Grant] [100% of Total] [2 years from Grant Date]
(c) In the event that the Optionee's Service Relationship (as
hereinafter defined) with the Company and its subsidiaries terminates for any
reason or under any circumstances, including the Optionee's resignation,
retirement or termination by the Company, upon the Optionee's death or
disability, or for any other reason, regardless of the circumstances thereof,
this Stock Option shall no longer vest or become exercisable with respect to any
Option Shares not vested as of the date of such termination from and after the
date of such termination, and this Stock Option may thereafter be exercised, to
the extent it was vested and exercisable on such date of such termination, until
the Expiration Date
- -----------------------------
* Subject to Section 5.
<PAGE>
was vested and exercisable on such date of such termination, until the
Expiration Date contemplated by Section 1(d), except as the Committee may
otherwise determine. For purposes hereof, a "Service Relationship" shall mean
any relationship as an employee, part-time employee or consultant of the Company
or any subsidiary of the Company such that, for example, a Service Relationship
shall be deemed to continue without interruption in the event the Optionee's
status changes from full-time employee to part-time employee or consultant.
(d) Once any portion of this Stock Option becomes vested and
exercisable, it shall continue to be exercisable by the Optionee or his or her
successors as contemplated herein at any time or times prior to the earlier of
(i) the date which is 12 months following the date on which the Optionee's
Service Relationship with the Company and its subsidiaries terminates due to
death or disability or for three months following the date on which the
Optionee's Service Relationship with the Company terminates if the termination
is due to any other reason or (ii) the date which is ten years after the Grant
Date first above written, subject to the provisions hereof, including, without
limitation, Section 6 hereof which provides for the termination of unexercised
options upon completion of certain transactions as described therein (the
"Expiration Date").
(e) It is understood and intended that this Stock Option shall qualify
as an "incentive stock option" as defined in Section 422 of the Code.
Accordingly, the Optionee understands that in order to obtain the benefits of an
incentive stock option under Section 422 of the Code, no sale or other
disposition may be made of any Option Shares within the one-year period
beginning on the day after the day of the transfer of such Option shares to him
<PAGE>
or her, nor within the two-year period beginning on the day after the grant of
this Stock Option. If the Optionee disposes (whether by sale, gift, transfer or
otherwise) of any such Option Shares within either of these periods, he or she
will notify the Company within thirty (30) days after such disposition. The
Optionee also agrees to provide the Company with any information concerning any
such dispositions required by the Company for tax purposes.
2. Exercise of Stock Option.
------------------------
(a) The Optionee may exercise only vested portions of this Stock Option
and only in the following manner: Prior to the Expiration Date (subject to
Section 6), the Optionee may deliver a Stock Option Exercise Notice (an
"Exercise Notice") in the form of Appendix A hereto indicating his or her
----------
election to purchase some or all of the Option Shares with respect to which
this Stock Option was vested at the time of such notice. such notice shall
specify the number of Option Shares to be purchased.
Payment of the purchase price for the Option Shares may be made by one
or more of the following methods: (a) in cash, by certified or bank check or
other instrument acceptable to the Option Committee; or (b) either (i) in the
form of shares of Common Stock that are not then subject to restrictions under
any Company plan and that have been held by the Optionee for at least six
months, if permitted by the Committee in its discretion; or (ii) by the Optionee
delivering to the Company a properly executed Exercise Notice together with
irrevocable instructions to a broker to promptly deliver to the Company cash or
a check payable and acceptable to the Company to pay the option purchase price,
provided that in the event the Optionee chooses to pay the option purchase
price, provided that in the event the Optionee chooses to pay the option
purchase price as so provided, the Optionee and the broker shall comply with
such procedures and enter into such agreements of indemnity and other
<PAGE>
agreements as the Committee shall prescribe as a condition of such payment
procedure, or (c) a combination of (a), (b)(i) and (b)(ii) above. Payment
instruments will be received subject to collection.
(b) Certificates for the Option Shares so purchased will be issued and
delivered to the Optionee upon compliance to the satisfaction of the Committee
with all requirements under applicable laws or regulations in connection with
such issuance. Until the Optionee shall have complied with the requirements
hereof and of the Plan, the Company shall be under no obligation to issue the
Option Shares subject to this Stock Option, and the determination of the
Committee as to such compliance shall be final and binding on the Optionee. The
Optionee shall not be deemed to be the holder of, or to have any of the rights
of a holder with respect to, any shares of stock subject to this Stock Option
unless and until this Stock Option shall have been exercised pursuant to the
terms hereof, the Company shall have issued and delivered the Option Shares to
the Optionee, and the Optionee's name shall have been entered as a stockholder
of record on the books of the Company. Thereupon, the Optionee shall have full
dividend and other ownership rights with respect to such Option Shares, subject
to the terms of this Agreement.
(c) Notwithstanding any other provision hereof or of the Plan, no
portion of this Stock Option shall be exercisable after the Expiration Date,
including or after such date as in contemplated by Section 6 hereof.
3. Incorporation of Plan. Nothwithstanding anything herein to the
---------------------
contrary, this Stock Option shall be subject to and governed by all the terms
and conditions of the Plan.
4. Transferability. This Agreement is personal to the Optionee and is
---------------
not
<PAGE>
transferable by the Optionee in any manner other than by will or by the laws of
descent and distribution. This Stock Option may be exercised during the
Optionee's lifetime only by the Optionee. The Optionee may elect to designate a
beneficiary by providing written notice of the name of such beneficiary to the
Company, and may revoke or change such designation at any time by filing written
notice of revocation or change with the Company; such beneficiary may exercise
the Optionee's Stock Option in the event of the Optionee's death to the extent
provided herein. If the Optionee does not designate a beneficiary, or if the
designated beneficiary predeceases the Optionee, the personal representative of
the Optionee may exercise this Stock Option to the extent provided herein in the
event of the Optionee's death.
5. Adjustment Upon Changes in Capitalization. The shares of stock
-----------------------------------------
covered by this Stock Option are shares of Common Stock of the Company. Subject
to Section 6 hereof, if the shares of Common Stock as a whole are increased,
decreased, changed or converted into or exchanged for a different number or kind
of shares or securities of the Company, whether through merger or consolidation,
reorganization, recapitalization, reclassification, stock dividend, stock split,
combination of shares, exchange of shares, change in corporate structure or the
like, an appropriate and proportionate adjustment shall be made in the number
and kind of shares and in the per share exercise price of shares subject to any
unexercised portion of this Stock Option. In the event of any such adjustment in
this Stock Option, the Optionee thereafter shall have the right to purchase the
number of shares under this Stock Option at the per share price, as so adjusted,
which the Optionee could purchase at the total purchase price applicable to this
Stock Option immediately prior to such adjustment. Adjustments under this
Section 5 shall be determined by the Committee of the Company, whose
determination as to
<PAGE>
what adjustment shall be made, and the extent thereof, shall be conclusive. No
fractional shares of Common Stock shall be issued under the Plan resulting from
any such adjustment, by the Company in its discretion may make a cash payment in
lieu of fractional shares.
6. Effect of Certain Transactions. In the case of (a) the dissolution
------------------------------
or liquidation of the Company; (b) the sale of all or substantially all of the
assets of the Company and its subsidiaries to another person or entity; (c) a
merger, reorganization or consolidation in which the holders of the Company's
outstanding voting power immediately prior to such transaction do not own a
majority of the outstanding voting power of the surviving or resulting entity
immediately upon completion of such transaction; (d) the sale of the outstanding
stock of the Company to an unrelated person or entity; or (e) any other
transaction or series of transactions where the owners of the Company's
outstanding voting power immediately prior to such transaction do not own a
majority of the outstanding voting power of the surviving or resulting entity
immediately upon completion of such transaction, this Stock Option shall no
longer vest except as the Committee may determine in its sole discretion and in
any case this Stock Option (with respect to both vested and unvested Stock
Options) shall terminate on the effective date of (or, if relevant, the record
date for determining stockholders entitled to participate in) such transaction,
unless provision is made in such transaction in the sole discretion of the
parties thereto for the assumption of this Stock Option or the substitution for
this Stock Option of a new stock option of the successor person or entity or a
parent or subsidiary thereof, with such adjustment as to the number and kind of
shares and the per share exercise price as such parties shall agree to, and (in
the case of an assumption) with references to the Company deemed to refer to
such successor entity. In the event of any transaction which will result in such
<PAGE>
termination, the Company shall give to the Optionee written notice thereof at
least fifteen (15) days prior to the effective date of such transaction or the
record date on which stockholders of the COmpany entitled to participate in such
transaction shall be determined, whichever comes first. Until the earlier to
occur of such effective date or record date, the Optionee may exercise any
vested portion of this Stock Option, but after such effective date or record
date, as the case may be, the Optionee may not exercise this Stock Option unless
it is assumed or substituted by the successor as provided above.
7. Withholding Taxes. The Optionee shall, not later than the date as of
-----------------
which the exercise of this Stock Option becomes a taxable event for federal
income tax purposes, pay to the Company or make arrangements satisfactory to the
Committee for payment of any federal, state or local taxes required by law to be
withheld on account of such taxable event. Subject to approval by the Committee,
the Optionee may elect to have such tax withholding obligation satisfied, in
whole or in part, by authorizing the Company to withhold from shares of Common
Stock to be issued or transferring to the Company, a number of shares of Common
Stock with an aggregate Fair Market Value that would satisfy the withholding
amount due. For purposes of this Section 7 "Fair Market Value" on any given date
means the last reported sale price at which Common Stock is traded on such date
or, if no Common Stock is traded on such date, the next preceding date on which
Common Stock was traded, as reflected on the principal stock exchange or, if
applicable, any other national stock exchange on which the Common Stock is
traded or admitted to trading. The Optionee acknowledges and agrees that the
Company or any subsidiary of the Company has the right to deduct from payments
of any kind otherwise due to the Optionee, or from the Option Shares to be
issued in respect of an
<PAGE>
exercise of this Stock Option, any federal, state or local taxes of any kind
required by law to be withheld with respect to the issuance of Option Shares to
the Optionee.
8. Miscellaneous Provisions.
------------------------
(a) Equitable Relief. The parties hereto agree and declare that
----------------
legal remedies may be inadequate to enforce the provisions of this Agreement and
that equitable relief, including specific performance and injunctive relief, may
be used to enforce the provisions of this Agreement.
(b) Change and Modifications. This Agreement may not be orally
------------------------
changed, modified or terminated, nor shall any oral waiver of any of its terms
be effective. This Agreement may be changed, modified or terminated only by
an agreement in writing signed by the Company and the Optionee.
(c) Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Delaware.
(d) Headings. The headings are intended only for convenience in
--------
finding the subject matter and do not constitute part of the text of this
Agreement and shall not be considered in the interpretation of this Agreement.
(e) Saving Clause. If any provision(s) of this Agreement shall
-------------
be determined to be illegal or unenforceable, such determination shall in no
manner affect the legality or enforceability of any other provision hereof.
(f) Notices. All notices, requests, consents and other
-------
communications shall be in writing and be deemed given when delivered
personally, by telex or facsimile transmission or when received if mailed by
first class registered or certified mail, postage
<PAGE>
prepaid. Notices to the Company or the Optionee shall be addressed as set forth
underneath their signatures below, or to such other address or addresses as may
have been furnished by such party in writing to the other.
(g) Benefit and Binding Effect. This Agreement shall be binding
--------------------------
upon and shall inure to the benefit of the parties hereto, their respective
successors, permitted assigns, and legal representatives. The Company has the
right to assign this Agreement, and such assignee shall become entitled to all
the rights of the Company hereunder to the extent of such assignment.
(h) Counterparts. For the convenience of the parties and to
------------
facilitate execution, this Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same document.
[Remainder of Page Intentionally Left Blank]
<PAGE>
The foregoing Agreement is hereby accepted and the terms and conditions
thereof hereby agreed to by the undersigned as of the date first above written.
BORON, LePORE & ASSOCIATES, INC.
By: [SIGNATURE APPEARS HERE]
--------------------------------
Title: COO,EVP
--------------------------------
Address: BORON, LePORE & ASSOCIATES, INC.
Attention: President
17-17 Route 208 North
Fair Lawn, New Jersey 07410
OPTIONEE:
[SIGNATURE APPEARS HERE]
----------------------------------------
Optionee's Address:
1735 York Ave. #25C
-------------------
New York, NY
-------------------
10128
-------------------
DESIGNATED BENEFICIARY:
/s/ Kathleen Long McIntyre
------------------------------------
Beneficiary's Address:
1735 York Ave. #25C
---------------------
New York, NY
---------------------
10128
---------------------
<PAGE>
Appendix A
STOCK OPTION EXERCISE NOTICE
Boron, LePore & Associates, Inc.
Attention: Chief Financial Officer
17-17 Route 208 North
Fair Lawn, New Jersey 07410
Dear Sirs:
Pursuant to the terms of my stock option agreement dated _________ (the
"Agreement") under the Boron, LePore & Associates, Inc. Amended and Restated
1996 Stock Option and Grant Plan, I, [Insert Name] _________, hereby [Circle
One] partially/fully exercise such option by including herein payment in the
amount of $______ representing the purchase price for [Fill in number of Option
Shares] _______ Option Shares. I have chosen the following form(s) of payment:
[_] 1. Cash
[_] 2. Certified or Bank Check payable to Boron, LePore & Associates,
Inc.
[_] 3. Other (as described in the Agreement (please describe)) _______.
Sincerely yours,
--------------------------------------
Please Print Name
--------------------------------------
Signature
A-1
<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
April 24, 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 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
April 24, 1998
