<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarter ended JUNE 30, 1997.
--------------
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _______________________
Commission File Number 0-26138
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DENDRITE INTERNATIONAL, INC.
----------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------------------------------------
NEW JERSEY 22-2786386
---------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
__________________
1200 Mt. Kemble Avenue
Morristown, NJ 07960
973-425-1200
__________________
(ADDRESS, INCLUDING ZIP CODE AND TELEPHONE
NUMBER (INCLUDING AREA CODE) OF REGISTRANT'S
PRINCIPAL EXECUTIVE OFFICES)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the last 90 days
Y [X] N _____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the last practicable date.
CLASS SHARES OUTSTANDING AT AUGUST 12, 1997
----- --------------------------------------
Common Stock 11,099,781
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DENDRITE INTERNATIONAL, INC.
INDEX
<TABLE>
<CAPTION>
PART I -- FINANCIAL INFORMATION
ITEM 1. Financial Statements PAGE NO.
-------
<S> <C>
Consolidated Statements of Operations (unaudited)
Three months and six months ended June 30, 1997 and 1996........... 3
Consolidated Balance Sheets
June 30, 1997 (unaudited) and December 31, 1996................... 4
Consolidated Statements of Cash Flows (unaudited)
Six months ended June 30, 1997 and 1996........................... 5
Notes to Consolidated Financial Statements............................ 6
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................. 7
PART II -- OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders................... 11
ITEM 5. Other Information..................................................... 11
ITEM 6. Exhibits and Reports on Form 8-K...................................... 11
Signatures............................................................ 12
</TABLE>
2
<PAGE>
PART 1 -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DENDRITE INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------- -------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES:
License fees $ 1,725 $ 2,241 $ 2,819 $ 4,114
Services 16,342 15,019 31,890 27,370
------ ------ ------ ------
18,067 17,260 34,709 31,484
------ ------ ------ ------
COST OF REVENUES:
Cost of license fees 392 184 664 369
Cost of services 7,654 7,011 16,862 12,793
------ ------ ------ ------
8,046 7,195 17,526 13,162
------ ------ ------ ------
Gross margin 10,021 10,065 17,183 18,322
------ ------ ------ ------
OPERATING EXPENSES:
Selling, general and administrative 7,636 6,764 14,010 11,999
Research and development 1,332 1,480 2,602 3,000
Write off of in-process
research and development costs - 2,640 - 2,640
------ ------ ------ ------
8,968 10,884 16,612 17,639
------ ------ ------ ------
Operating income (loss) 1,053 (819) 571 683
INTEREST INCOME (131) (279) (266) (516)
OTHER EXPENSE 95 106 159 109
-- --- --- ---
Income (loss) before income taxes 1,089 (646) 678 1,090
INCOME TAXES 442 765 297 1,426
--- --- --- -----
NET INCOME (LOSS) $ 647 $(1,411) $ 381 $ (336)
=== ===== === ===
NET INCOME (LOSS) PER SHARE $ 0.06 $ (0.13) $ 0.03 $ (0.03)
==== ==== ==== ====
SHARES USED IN COMPUTING
NET INCOME (LOSS) PER SHARE 11,416 11,121 11,435 10,962
====== ====== ====== ======
</TABLE>
The accompanying notes are an integral part of these statements.
3
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DENDRITE INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
---- ----
(UNAUDITED)
-----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $10,505 $10,912
Short-term investments 3,356 8,421
Accounts receivable 20,801 18,732
Prepaid expenses and other 1,955 1,569
Prepaid income taxes 1,397 1,397
Deferred tax assets 1,203 1,203
------- -------
Total current assets 39,217 42,234
PROPERTY AND EQUIPMENT, net 3,476 3,391
DEFERRED TAXES 254 254
CAPITALIZED SOFTWARE DEVELOPMENT COSTS, net 2,559 2,589
GOODWILL, net 677 747
------- -------
$46,183 $49,215
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable 1,415 $ 3,344
Income taxes payable 133 584
Accrued compensation and benefits 1,682 2,446
Other accrued expenses 4,681 3,329
Deferred revenues 2,235 2,099
------- -------
Total current liabilities 10,146 11,802
------- -------
DEFERRED RENT 619 726
------- -------
DEFERRED TAXES 1,561 1,511
------- -------
STOCKHOLDERS' EQUITY:
Preferred stock, no par value, 10,000,000 shares
authorized, none issued -- --
Common stock, no par value, 50,000,000 shares
authorized: 11,300,281 and 11,163,631 shares issued
and 11,099,781 and 11,163,631 outstanding 32,170 32,198
Retained earnings 5,039 4,658
Deferred compensation (978) (1,227)
Cumulative translation adjustments (447) (453)
Less Treasury Stock (1927) --
------- -------
Total stockholders equity 33,857 35,176
------- -------
$46,183 $49,215
======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
DENDRITE INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
--------
1997 1996
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ 381 $ (336)
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization 810 1,007
Deferred income taxes (benefit) -- (48)
Write off of in-process research and development costs -- 2,640
Changes in assets and liabilities:
Increase in accounts receivable (2,069) (3,889)
(Increase) decrease in prepaid expenses and other (386) (65)
Increase (decrease) in accounts payable and accrued expenses (1,341) 3,594
Increase (decrease) in deferred rent (107) 179
Increase (decrease) in income taxes payable (451) (2,447)
Increase (decrease) in deferred revenues 136 705
------- -------
Net cash provided by (used in) operating activities (3,027) 1,340
INVESTING ACTIVITIES:
Purchases of short-term investments (1,085) (3,651)
Sales of short-term investments 6,370 2,621
Payment for purchase of SRCI -- (3,500)
Purchases of property and equipment (587) (407)
Additions to capitalized software development costs (574) (609)
------- -------
Net cash provided by (used in) investing activities 4,124 (5,546)
FINANCING ACTIVITIES:
Issuance of Common Stock from stock
offering, net -- 4,282
Purchase of treasury stock (1,927)
Issuance of common stock 96 162
------- -------
Net cash provided by (used in) financing activities (1,831) 4,444
EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH 327 (111)
------- -------
NET INCREASE/(DECREASE) IN CASH (407) 127
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 10,912 11,530
------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD $10,505 $11,657
======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
5
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DENDRITE INTERNATIONAL, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The consolidated financial statements as of June 30, 1997 and for the
three and six month periods ended June 30, 1997 and 1996 for Dendrite
International, Inc. and its subsidiaries (the "Company") are unaudited and
reflect all adjustments (consisting only of normal recurring adjustments)
which are, in the opinion of management, necessary for a fair presentation
of the financial position and operating results for the interim periods.
The consolidated financial statements should be read in conjunction with
the notes thereto, together with management's discussion and analysis of
financial condition and results of operations, contained in this Quarterly
Report on Form 10-Q. Reference should also be made to the Company's Annual
Report on Form 10-K as of and for the year ended December 31, 1996 for
additional disclosures concerning the Company, including a summary of the
Company's accounting policies.
In the opinion of management, the consolidated financial statements
contain all adjustments consisting of normal recurring accruals necessary
to present fairly the consolidated financial position of the Company for
the periods presented. The interim operating results of the Company may not
be indicative of operating results for the full year.
2. SALE OF COMMON STOCK
The Company consummated a public offering of 300,000 shares of its
Common Stock on March 13, 1996 at a public offering price of $18.25 per
share. The net proceeds to the Company from the public offering, after
payment of offering expenses, were approximately $4,282,000. An additional
2,805,000 shares of Common Stock (including 405,000 shares purchased by the
underwriters upon the exercise in full of over-allotment options) were
offered and sold by certain stockholders of the Company. The Company did
not receive any proceeds from the sale of shares by selling stockholders.
3. NET INCOME (LOSS) PER SHARE COMPUTATION
Net income (loss) per share was calculated by dividing net income
(loss) by the weighted average number of common shares and dilutive common
share equivalents (computed using the treasury stock method) outstanding
during the period, except where anti-dilutive.
4. ACQUISITION OF SRCI
On May 1, 1996, the Company acquired 100% of the capital stock of
SRCI, S.A., ("SRCI") for approximately $3,198,000 and transaction costs of
$302,000. The purchase was accounted for under the purchase method of
accounting, whereby the purchase price is allocated to the assets acquired
and liabilities assumed of SRCI based on their fair market values at the
acquisition date. The excess of purchase price over the fair value of net
assets acquired was assigned to identifiable intangibles. The Company
assigned $2,640,000 to in-process research and development and such amount
was written-off in the six months ended June 30, 1996. The Company also
recorded $860,000 as goodwill. SRCI's results of operations have been
included in the Company's consolidated financial statements from the date
of acquisition.
5. STATEMENT OF FINANCIAL ACCOUNTING STANDARDS (SFAS) NO. 128
In February 1997, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards, (SFAS) No. 128,
"Earnings Per Share", which the Company is required to adopt for both
interim and annual periods ending after December 15, 1997. SFAS No. 128
simplifies the EPS calculation by replacing primary EPS with basic EPS.
Basic EPS is computed by dividing reported earnings available to common
stockholders by weighted average shares outstanding. Fully diluted EPS, now
called diluted EPS, is still required. Early application is prohibited,
although footnote disclosure of proforma EPS amounts computed is required.
The adoption of SFAS No.128 would have no impact for the periods presented.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Overview
The Company succeeded in 1991 to a business co-founded in 1986 by the
Company's President and Chief Executive Officer and others. That business
was organized to provide comprehensive Electronic Territory Management
("ETM") solutions to be used to manage, coordinate and control the
activities of large sales forces in complex selling environments, primarily
in the ethical pharmaceutical industry. Today, the Company's solutions
combine advanced software products with a wide range of specialized support
services including implementation services, technical and hardware support
services and sales force support services. The Company develops, implements
and services advanced ETM systems in the United States, Canada, Western
Europe, Japan, Australia, New Zealand, Hong Kong and Brazil through its own
sales, support and technical personnel located in twelve offices worldwide.
The Company generates revenues from two sources: fees from support
services and license fees. Service revenues, which account for a
substantial majority of the Company's revenues, consist of fees from a wide
variety of contracted services which the Company makes available to its
customers, generally under multi-year contracts. Implementation fees are
generated from services provided to design and implement the ETM solution
for the customer. Technical and hardware support fees are derived from
services related to the operation of the customer's file server and from
the provision of ongoing technical and customer service support including
customization of the software following implementation. Sales force support
fees are derived from organizing and managing support for the customer's
sales force.
License fees are charged by the Company for use of its proprietary
computer software. Customers generally pay one-time perpetual license fees
based upon the number of users, territory covered and the number of
functions in the particular system licensed by the customer. The Company
recognizes one-time license fees as revenue using the percentage of
completion method over a period of time that commences with execution of
the license agreement and concludes with the completion of customization.
For license contracts that contain customer acceptance provisions, revenue
is not recognized until such time as the acceptance provisions are
satisfied. Additional license fees are payable when customers agree to
license additional functions or enhancements, acquire an upgraded version
of the Company's software and/or when the maximum number of users or
initial geographic coverage is exceeded. The Company has, in the past, made
available an alternative license fee arrangement known as a "capitation"
agreement under which the customer licenses Dendrite software and upgrades
for an increasing preset annual charge over a specified term (currently up
to 10 years). The fee in these cases encompasses all users in all
geographic regions, and covers all maintenance fees and upgrades.
Currently, the Company's products are marketed in over 16 countries.
The United States, the United Kingdom and France are the Company's main
markets. Approximately 60% and 52% of the Company's total revenues were
generated outside the United States during the three month periods ended
June 30, 1996 and June 30, 1997 respectively. Services provided by
Dendrite's foreign branches and subsidiaries are billed in local currency.
License fees for Dendrite products are billed in U.S. dollars regardless of
where they originate. The Company expects its foreign operations to grow
and to continue to account for a material part of its revenues. Operating
results generated in local currencies are translated into U.S. dollars at
the average exchange rate in effect for the reporting period.
Results of Operations
THREE MONTHS ENDED JUNE 30, 1996 AND 1997
REVENUES. Total revenues increased $807,000 or 5% from $17,260,000 in
the three months ended June 30, 1996 to $18,067,000 in the three months
ended June 30, 1997.
7
<PAGE>
License fee revenues decreased by 23% or $516,000 to $1,725,000 in the
three months ended June 30, 1997 from $2,241,000 in the three months ended
June 30, 1996. This decrease was primarily attributable to the recognition
of revenue related to one time license fees for a major European client
during the period ending June 30, 1996, partially offset by the inclusion
of revenue associated with the resale of third party software in the period
ending June 30, 1997.
Service revenues increased 9% from $15,019,000 in the three months
ended June 30, 1996 to $16,342,000 in the three months ended June 30, 1997.
This quarterly increase in service revenues is primarily the result of an
increase in the Company's installed base of Dendrite ETM systems with new
and existing customers and, to a lesser extent, the inclusion of a full
quarter of SRCI's results for the second quarter 1997.
COST OF REVENUES. Cost of revenues increased 12% from $7,195,000 in
the three months ended June 30, 1996 to $8,046,000 in the three months
ended June 30, 1997.
Cost of license fees increased from $184,000 in the three months ended
June 30, 1996 to $392,000 in the three months ended June 30, 1997. Cost of
license fees for the most recent period represent the amortization of
capitalized software of $272,000, up $88,000 from the period ending
June 30, 1996 and third party software license fees of $120,000. These
increases were primarily due to the increase in the company's installed
base of Dendrite ETM systems.
Cost of services increased from $7,011,000 in the three months ended
June 30, 1996 to $7,654,000 in the three months ended June 30, 1997. This
is primarily due to an increase in the number of service representatives
and technical staff to support current client activity and, to a lesser
extent, maintaining core staffing levels to accommodate planned client
needs in the next quarter and later in the year. As a percentage of service
revenues, cost of services remained at 47% of service revenues for the
three months ended June 30, 1996 and the three months ended June 30, 1997.
Cost of services were reduced due to a correction of $307,000 relating to
the misclassification of G&A expense in the first quarter of 1997. Without
this correction, cost of services would have been $7,961,000 or nearly 49%
of service revenues.
SELLING, GENERAL AND ADMINISTRATIVE (SG&A). SG&A expenses increased
13% from $6,764,000 in the three months ended June 30, 1996 to $7,636,000
in the three months ended June 30, 1997. As a percentage of revenues, SG&A
expenses increased from 39% for the three months ended June 30, 1996 to 42%
for the three months ended June 30, 1997. This increase was primarily
attributable to increased staff, costs associated with some management
changes in Europe and the U.S. and, to a lesser extent, an increase in
facilities growth to support operations and sales. In addition, as
discussed above, a reclassification from cost of revenues to SG&A was made
in the current period to correct a first quarter 1997 adjustment which
understated SG&A expense. SG&A expense would have been lower by $307,000 or
$7,329,000 and 41% of revenues for the three months ending June 30, 1997.
RESEARCH AND DEVELOPMENT. Research and development expenses decreased
10% from $1,480,000 in the three months ended June 30, 1996 to $1,332,000
in the three months ended June 30, 1997, representing 7% as a percentage of
revenues in the current period. The decrease in research and development
expenses in 1997 is consistent with the Company's previously discussed
intentions, as peak development efforts associated with several new
software products wind down.
PROVISION (BENEFIT) FOR INCOME TAXES. The Company's effective tax rate
is 41% for the three months ended June 30, 1997 as compared to 38% for the
three months ended June 30, 1996. This increase is due to the goodwill
amortization in the current period which is a non-deductible item.
SIX MONTHS ENDED JUNE 30, 1996 AND 1997
REVENUES. Total revenues increased $3,225,000 or 10% from $31,484,000
in the six months ended June 30, 1996 to $34,709,000 in the six months
ended June 30, 1997.
License fee revenues decreased 31% to $2,819,000 in the six months
ended June 30, 1997 from $4,114,000 in the six months ended June 30, 1996.
This decrease was primarily attributable to the recognition of revenue
related to one time license fees for a major European client and the
expansion of existing worldwide clients during the period ending June 30,
1996.
Service revenues increased 17% from $27,370,000 in the six months
ended June 30, 1996 to $31,890,000 in the six months ended June 30, 1997.
This increase in service revenues is primarily the result of an increase in
the Company's installed base of Dendrite ETM systems with new and existing
customers and,
8
<PAGE>
the inclusion of SRCI financial results for the six months ending June 30,
1997 vs. two months in the period ending June 30, 1996.
COST OF REVENUES. Cost of revenues increased 33% from $13,162,000 in
the six months ended June 30, 1996 to $17,526,000 in the six months ended
June 30, 1997.
Cost of license fees increased from $369,000 in the six months ended
June 30, 1996 to $664,000 in the six months ended June 30, 1997. Cost of
license fees for the most recent period represent the amortization of
capitalized software of $544,000 and third party software license fees of
$120,000. This increase was due to higher amortization of capitalized
software development costs and third party software license fees that
resulted from the increase in the company's installed base of Dendrite ETM
systems.
Cost of services increased from $12,793,000 in the six months ended
June 30, 1996 to $16,862,000 in the six months ended June 30, 1997. This
increase is primarily due to an increase in the resources necessary to
support client activity associated with customer delayed implementations
from 1996, and, to a lesser extent, maintaining core staffing levels to
accommodate planned client needs in the next quarter and later in the year.
As a percentage of service revenues, cost of services increased from 47% of
service revenues for the six months ended June 30, 1996 to 53% of service
revenues for the six months ended June 30, 1997.
SELLING, GENERAL AND ADMINISTRATIVE (SG&A). SG&A expenses increased
17% from $11,999,000 in the six months ended June 30, 1996 to $14,010,000
in the six months ended June 30, 1997. As a percentage of revenues, SG&A
expenses increased from 38% for the six months ended June 30, 1996 to 40%
for the six months ended June 30, 1997. This increase was primarily
attributable to increased staff, costs associated with the European and
U.S. reorganizations, and, to a lesser extent, an increase in facilities
growth to support operations and sales.
RESEARCH AND DEVELOPMENT. Research and development expenses decreased
13% from $3,000,000 in the six months ended June 30, 1996 to $2,602,000 in
the six months ended June 30, 1997, while it decreased to 7% as a
percentage of revenues. The decrease in research and development expenses
reflects the reduction of effort as peak development on several new
software products winds down.
PROVISION (BENEFIT) FOR INCOME TAXES. The Company's effective tax rate
is 44% for the six months ended June 30, 1997 as compared to 38% for the
six months ended June 30, 1996. This increase is a result of goodwill
amortization related to the SRCI acquisition in the prior year and is a
non-deductible item.
VARIABILITY OF QUARTERLY RESULTS
Fluctuations in the Company's quarterly revenues depend on a number of
factors, some of which are beyond the Company's control. These factors
include, among others, the timing of contracts, delays in customer
installations of the Company's software, the length of the sales cycle,
customer budget changes and changes in the pricing policy by the Company or
its competitors. The Company establishes its expenditure levels for product
development and other operating expenses based in large part on its
expected future revenues. As a result, should revenues fall below
expectations, operating results are likely to be adversely and
disproportionately affected because only a small portion of the Company's
expenses vary with its revenues. In addition, the Company's quarterly
revenues from software license fees and related income may vary due to
seasonal and cyclical factors. The Company typically realizes a greater
percentage of its license fees and service revenues for the year in the
second half of the year with a lower percentage in the first half. However,
the interplay between this seasonal pattern and the long selling cycles for
the Company's products means that actual results may vary from this
expectation for a given year. In the future, to the extent the percentage
of revenue from service revenues from existing customers of the Company
continues to increase, seasonal and cyclical trends in the Company's
revenues may be reduced.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically financed its operations primarily through
cash generated by operations. Net
9
<PAGE>
cash used in operating activities was $3,027,000 during the six months
ended June 30, 1997 compared to cash provided by operating activities of
$1,340,000 during the six months ended June 30, 1996. Cash provided by
operating activities for the six months ended June 30, 1997 decreased
compared to the six months ended June 30, 1996 primarily due to an increase
in prepaid expenses, in addition to a decrease in accounts payable.
The Company had $4,124,000 of cash provided by investing activities in
the first six months of 1997 compared to $5,546,000 of cash used in
investing activities in the first six months of 1996. The increase is
primarily attributable to a reduction in investment purchases during the
current year and the payment for the acquisition of SRCI, S.A. which
occurred in the second quarter of 1996. The change in the Company's net
cash provided by financing activities is due to the public offering in the
six months ending June 30, 1996, the stock buy-back during the six months
ending June 1997, and, to a lesser extent, the exercise of stock options
issued under the Corporation's existing options plans.
The Company maintains a $5,000,000 revolving line of credit agreement
with Chase Manhattan Bank N.A. The agreement provides for borrowings up to
$1,000,000 in local currencies directly by the Company or certain of its
overseas subsidiaries and is available to finance working capital needs and
possible future acquisitions. The $5,000,000 line of credit is secured by
substantially all of the Company's assets. The $5,000,000 line of credit
agreement requires the Company to maintain a minimum consolidated net
worth, among other covenants, measured quarterly which is equal to the
Company's net worth as of December 31, 1994 plus 50% of net income earned
after December 31, 1994. This covenant has the effect of limiting the
amount of cash dividends the Company may pay. At June 30, 1997 there were
no borrowings outstanding under the agreement.
At June 30, 1997, the Company's working capital was approximately
$29,071,000. The Company has no significant capital spending or purchasing
commitments other than normal purchase commitments and commitments under
facility and capital leases.
10
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
On May 20, 1997, the Company held its 1997 Annual Meeting of Shareholders
(the "Annual Meeting"). At the Annual Meeting, the following four individuals
were elected to the Company's Board of Directors: John E. Bailye, Bernard M.
Goldsmith, John H. Martinson, and Paul A. Margolis. In addition, at the Annual
Meeting the shareholders of the Company approved the following two proposals:
(1) A proposal to ratify the appointment of Arthur Andersen LLP as the Company's
independent public accountants for the fiscal year ending December 31, 1997; and
(2) A proposal to approve the Company's 1997 Employee Stock Purchase Plan. The
results of the voting in the Company's election of directors and on the
foregoing two proposals are set forth below.
Election of Directors:
Nominee For Withheld
- ------- --- --------
John E. Bailye 9,430,464 20,400
Bernard M. Goldsmith 9,430,464 20,400
John H. Martinson 9,430,464 20,400
Paul A. Margolis 9,430,464 20,400
Ratification of Appointment
of Arthur Anderson LLP
For Against Abstentions
--- ------- -----------
9,448,364 2,500 0
Adoption of the Company's 1997 Employee
Stock Purchase Plan
For Against Abstentions
--- ------- -----------
8,624,254 826,410 200
Item 5. Other Information
On July 24, 1997, Edward Kfoury was appointed to fill a vacancy on the
Company's Board of Directors.
On July 24, 1997, the Company's Board of Directors adopted the Company's
1997 Stock Incentive Plan, final approval of which is conditional upon
approval by the Company's shareholders.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The Company is furnishing the following exhibits in connection
with this report:
10.1 Employment Agreement dated as of June 2, 1997 with George
Robson
10.2 Employment Agreement dated as of June 9, 1997, with Mark
Cieplik
10.3 1997 Employee Stock Purchase Plan
10.4 1997 Stock Incentive Plan
(b) The Company did not file any Reports on Form 8-K during the
quarter for which this report is filed.
11
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: August 14, 1997
DENDRITE INTERNATIONAL, INC.
(REGISTRANT)
By: /s/ John E. Bailye
---------------------------------------------
John E. Bailye, President and
Chief Executive Officer
By: /s/ George Robson
---------------------------------------------
George Robson, Senior Vice President and
Chief Financial Officer
12
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EXHIBIT 10.1
------------
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT, dated as of June 2, 1997, between DENDRITE INTERNATIONAL,
INC., a New Jersey Corporation ("Dendrite"), having its principal place of
business at 1200 Mt. Kemble Avenue, Morristown, New Jersey 07960, and George
Robson ("Employee'), having an address at 300 Caversham Road, Bryn Mawr,
Pennsylvania 19010.
WHEREAS, Dendrite, its affiliates, and subsidiaries develop and own what is
referred to as Territory Management Systems and related hardware and equipment;
WHEREAS, Employee is or desires to be employed by Dendrite and Dendrite
desires to employ Employee; and
WHEREAS, Dendrite is willing to provide certain confidential and
proprietary information to Employee for the limited purpose of enabling Employee
to carry out duties in connection with his employment by Dendrite.
RECITAL:
NOW, THEREFORE, it is agreed as follows:
1. EMPLOYMENT AT WILL
------------------
Dendrite hereby employs Employee, and Employee hereby accepts such
employment, as Senior Vice President and Chief Financial Officer of Dendrite.
Dendrite hereby employs Employee as an at-will employee. This employment may be
terminated at any time for any reason with or without "Cause" (as defined below)
by Dendrite. Employee agrees to provide two (2) weeks notice to Dendrite before
terminating his employment.
2. DUTIES
------
Employee shall perform those duties as may from time to time be assigned to
him and shall carry out any assignments related to Dendrite or its affiliates as
directed. With the Employee's agreement, this may involve rendering services at
various locations throughout the world. In addition, Employee shall be required
to attend all meetings of the Board of Directors of Dendrite (the "Board").
Employee shall devote his full time attention, energy, knowledge, skill and best
efforts solely and exclusively to the duties assigned to him which he shall
faithfully and diligently perform. Employee shall report to Dendrite as may be
required and will fully account for all records, data, materials or other
property belonging to
<PAGE>
Dendrite or its customers of which he is given custody. Dendrite may, from time
to time, establish rules and Employee shall faithfully observe these in the
performance of his duties. Employee shall further comply with all policies and
directives of Dendrite.
3. COMPENSATION
------------
(i) Base Salary. Dendrite shall pay Employee for his services a base
-----------
salary at a rate of $300,000 per annum to be paid on a semi- monthly basis in
accordance with Dendrite's regular payroll practices.
(ii) Bonus. Commencing on the completion of the third fiscal quarter
-----
of 1997, Employee shall be eligible to receive a quarterly bonus (the "Bonus")
of $50,000 per quarter, payable in the next payroll period occurring at least
two weeks after Dendrite publicly discloses its financial results in such fiscal
quarter; provided, however, that the payment of the Bonus is subject to: (a)
Dendrite's achievement of quarterly financial goals as set forth in the Board
approved annual business plan, (b) such other objectives as mutually agreed
upon, and (c) Employee remaining in the employ of Dendrite as of the end of any
such quarter. Subject to the foregoing conditions, Employee shall also be
eligible to receive a bonus of $16,667 for the second fiscal quarter of 1997.
(iii) Stock Options
-------------
(a) Pursuant to Dendrite's 1992 Stock Plan (the "Stock Plan"), upon
the execution of this Agreement, Dendrite shall give Employee an option to
purchase 200,000 shares of the common stock of Dendrite. Upon the first
anniversary of this Agreement, Dendrite shall give Employee an option to
purchase an additional 40,000 shares of the common stock of Dendrite, provided
that Employee remains in the full-time employment of Dendrite on such date.
Upon the second anniversary of this Agreement, Dendrite shall give Employee an
option to purchase an additional 25,000 shares of the common stock of Dendrite,
provided that Employee remains in the full-time employment of Dendrite on such
date. The price for such options shall be determined by the Option Committee
and Compensation Committee of the Board. Employee's entitlement to such options
shall be subject to (i) a four year vesting schedule, (ii) approval by the
Board, (iii) Employee's execution of a definitive option agreement in form and
substance satisfactory to Dendrite and (iv) in all instances subject to the
terms and conditions of the Stock Plan. Notwithstanding anything to the
contrary, in the event of a "Change of Control" (as defined below), if Employee
is not retained in a similar position or no similar position is offered to
Employee following a Change of Control, all of Employee's options owned by him
at the time of such event shall immediately vest.
(b) For purposes of this Agreement, "Change in Control" means the
occurrence of any one of the following events:
2
<PAGE>
(i) any "person" (as such term is defined in Section 3(a)(9) of the
Securities Exchange Act of 1934 (the "Exchange Act") and as used in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a
"beneficial owner" (as defined in rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of Dendrite representing 33% or more
of the combined voting power of Dendrite's then outstanding securities
eligible to vote for the election of the Board (the "Dendrite Voting
Securities"); provided, however, that the event described in this paragraph
-------- -------
(i) shall not be deemed to be a Change in Control by virtue of any of the
following acquisitions: (A) by Dendrite or any of its subsidiaries, (B) by
any employee benefit plan sponsored or maintained by Dendrite or any of its
subsidiaries, (C) by any underwriter temporarily holding securities
pursuant to an offering of such securities, (D) pursuant to a Non-
Qualifying Transaction (as defined in paragraph (iii)), (E) pursuant to any
acquisition by Employee or any group of persons including Employee or any
entity controlled by Employee or such group ("Employee Holders"), or (F) a
transaction (other than one described in paragraph (iii) below) in which
Dendrite Voting Securities are acquired from Dendrite, if a majority of the
Board approves a resolution providing expressly that the acquisition
pursuant to this clause (F) does not constitute a Change in Control under
this paragraph (i). Notwithstanding the foregoing, a transaction that would
otherwise be considered a Change in Control but for the operation of
clauses D or F of this paragraph (i) will be deemed a Change in Control if
John Bailye immediately after the consummation of such a transaction is
neither Chairman, President or Chief Executive Officer (or holds a position
comparable to the foregoing positions) of Dendrite or any successor
corporation to Dendrite as a result of such Change in Control transaction;
(ii) individuals who, on June 2, 1997, constituted the Board (the
"Incumbent Directors") cease for any reason to constitute at least a
majority thereof, provided that any person becoming a director subsequent
to June 2, 1997, whose election or nomination for election was approved by
a vote of at least a majority of the Incumbent Directors then on the Board
(either by a specific vote or by approval of the proxy statement of
Dendrite in which such person is named as a nominee for director, without
objection to such nomination) shall be an Incumbent Director; provided,
--------
however, that no individual elected or nominated as a director of Dendrite
-------
initially as a result of an actual or threatened election contest with
respect to directors or as a result of any other actual or threatened
solicitation of proxies or consents by or on behalf of any person other
than the Board shall be deemed to be an Incumbent Director;
(iii) the consummation of a merger, consolidation, share exchange or
similar form of corporate reorganization (other than a transaction with
Employee, any group of persons including Employee or any entity controlled
by Employee or such a group
3
<PAGE>
of persons) involving Dendrite or any of its subsidiaries that requires the
approval of Dendrite's stockholders whether for such transaction or the
issuance of securities in connection with the transaction or otherwise, (a
"Business Combination"), unless immediately following such Business
Combination: (A) more than 50% of the total voting power of (x) the
corporation resulting from such Business Combination (the "Surviving
Corporation"), or (y) if applicable, the ultimate parent corporation that
directly or indirectly has beneficial ownership of 100% of the voting
securities eligible to elect directors of the Surviving Corporation (the
"Parent Corporation"), is represented by Dendrite Voting Securities that
were outstanding immediately prior to the consummation of such Business
Combination (or, if applicable, is represented by shares into which such
Dendrite Voting Securities were converted pursuant to such Business
Combination), and such voting power among the holders thereof is in
substantially the same proportion as the voting power of such Dendrite
Voting Securities among the holders thereof immediately prior to the
Business Combination, (B) no person (other than the Employee Holders or any
employee benefit plan sponsored or maintained by the Surviving Corporation
or the Parent Corporation), is or becomes the beneficial owner, directly or
indirectly, of 33% or more of the total voting power of the outstanding
voting securities eligible to elect directors of the Parent Corporation
(or, if there is no Parent Corporation, the Surviving Corporation) and (C)
at least a majority of the members of the board of directors of the Parent
Corporation (or if there is no Parent Corporation, the Surviving
Corporation) were Incumbent Directors at the time of the Board's approval
of the execution of the initial agreement providing for such Business
Combination (any Business Combination which satisfies all of the criteria
specified in (A), (B) and (C) above shall be deemed to be a "Non-Qualifying
Transaction"); or
(iv) the stockholders of Dendrite approve a sale of all or
substantially all of the Dendrite's assets.
Notwithstanding the foregoing, a Change in Control of Dendrite shall not be
deemed to occur solely because any person acquires beneficial ownership of more
than 33% of Dendrite Voting Securities as a result of the acquisition of
Dendrite Voting Securities by Dendrite which, by reducing the number of Dendrite
Voting Securities outstanding, increases the percentage of shares beneficially
owned by such person; provided, that if a Change in Control of Dendrite would
-------- ----
occur as a result of such an acquisition by Dendrite (if not for the operation
of this sentence), and after Dendrite's acquisition such person becomes the
beneficial owner of additional Dendrite Voting Securities that increase the
percentage of outstanding Dendrite Voting Securities beneficially owned by such
person, then a Change in Control of Dendrite shall occur.
4
<PAGE>
4. SEVERANCE
---------
(a) Upon Employee's termination of employment by Dendrite for any reason
other than termination by Dendrite for Cause (as defined below), Disability (as
defined below) or upon Employee's death, Employee shall solely be entitled to
(subject to any applicable off-sets) applicable payments and benefits in Section
4(b), his base salary through the date of his termination, and payment for any
unused but accrued vacation through the date of termination.
(b) If Employee's employment hereunder is terminated by Dendrite for any
reason other than death, Cause, or Disability, then Employee shall be entitled
to receive severance payments in an aggregate amount equal to the annual rate of
Employee's base salary in effect as of the date of termination. The severance
payments to be paid to Employee under this Section 4(b) shall be referred to
herein as the "Severance Payment". Employee's Severance Payment shall be paid
by Dendrite in cash in twelve (12) consecutive equal monthly payments
commencing not later than thirty (30) days after the effective date of the
termination of Employee's employment. No interest shall accrue or be payable on
or with respect to any Severance Payment. In the event of a termination of
Employee's employment described in this Section 4(b), Employee shall be provided
continued "COBRA" coverage pursuant to Sections 601 et seq. of ERISA under
Dendrite's group medical and dental plans. During the period which Employee
receives the Severance Payment, Employee's cost of COBRA coverage shall be the
same as the amount paid by employees of Dendrite for the same coverage under
Dendrite's group health and dental plans. Notwithstanding the foregoing, in the
event Employee becomes re-employed with another employer and becomes eligible to
receive health coverage from such employer, the payment of COBRA coverage by
Dendrite as described herein shall cease.
(c) The making of any Severance Payment under Section 4(b) hereunder is
conditioned upon the signing of a general release in form and substance
satisfactory to Dendrite under which Employee releases Dendrite and its
affiliates together with their respective officers, directors, shareholders,
employees, agents and successors and assigns from any and all claims he may have
against them. In the event Employee breaches Sections 7, 8, 9 or 11 of this
Agreement, in addition to any other remedies at law or in equity, Dendrite may
cease making any Severance Payment or any payments for COBRA coverage otherwise
due under Section 4(b). Nothing herein shall affect any of Employee's
obligations or Dendrite's rights under this Agreement.
(d) For purposes of this Agreement, "Cause" as used herein shall mean (i)
any gross misconduct on the part of Employee with respect to his duties under
this Agreement, (ii) the engaging by Employee in an indictable offense which
relates to Employee's duties under this Agreement or which is likely to have a
material adverse effect on the business of Dendrite, (iii) the commission by
Employee of any willful or intentional act which injures in any material respect
or could reasonably be expected to injure in any material respect the
5
<PAGE>
reputation, business or business relationships of Dendrite, including without
limitation, a breach of Sections 7, 8 or 11 of this Agreement, or (iv) the
engaging by Employee through gross negligence in conduct which injures
materially or could reasonably be expected to injure materially the business or
reputation of Dendrite.
(e) For purposes of this Agreement, "Disabled" as used herein shall have
the same meaning as that term, or such substantially equivalent term, has in any
group disability policy carried by Dendrite. If no such policy exists, the term
"Disabled" shall mean the occurrence of any physical or mental condition which
materially interferes with the performance of Employee's customary duties in his
capacity as an employee where such disability has been in effect for a period of
six (6) months (excluding permitted vacation time), which need not be
consecutive, during any single twelve (12) month period.
(g) In the event Employee terminates his employment with Dendrite or
Dendrite terminates Employee's employment with Dendrite for "Cause" or
Employee's employment ends as a result of his death or becoming "Disabled," it
is understood and agreed that Dendrite's only obligation is to pay Employee any
unused but accrued vacation days and his base salary through the date of his
termination.
5. BENEFITS
--------
Dendrite shall provide Employee:
(i) Vacation. Four weeks vacation per annum in accordance with Dendrite
--------
policy in effect from time to time.
(ii) Business Expenses. Reimbursement for all reasonable travel,
-----------------
entertainment and other reasonable and necessary out-of-pocket expenses incurred
by Employee in connection with the performance of his duties, including first
class airline travel. Reimbursement will be made upon the submission by the
Employee of appropriate documentation and verification of the expenses.
(iii) Relocation Expenses. In connection with Employee's moving from
-------------------
either Kansas City or Philadelphia, Dendrite will reimburse Employee for all
reasonable relocation expenses incurred in connection with such relocation
including closing costs, realtor fees, legal fees, out-of-pocket expenses,
temporary living arrangements, freight and other costs associated with
Employee's relocation. Such amounts will be reimbursed to Employee on an after
tax basis. Reimbursement will be made upon the submission by the Employee of
appropriate documentation and verification of such relocation expenses.
(iv) Other. Dendrite will provide Employee other benefits to the same
-----
extent as may be provided to other employees generally in accordance with
Dendrite policy in effect from time to time and subject to the terms and
conditions of such benefit plans.
6
<PAGE>
6. INFORMATION AND BUSINESS OPPORTUNITY
------------------------------------
During Employee's employment with Dendrite, Employee may acquire knowledge
of (i) information that is relevant to the business of Dendrite or its
affiliates or (ii) knowledge of business opportunities pertaining to the
business in which Dendrite or its affiliates are engaged. Employee shall
promptly disclose to Dendrite that information or business opportunity but shall
not disclose it to anyone else without Dendrite's written consent.
7. DENDRITE CONFIDENTIAL INFORMATION
---------------------------------
The Employee will, as a result of his employment with Dendrite, acquire
information which is proprietary and confidential to Dendrite. This information
includes, but is not limited to, technical and commercial information, customer
lists, financial arrangements, salary and compensation information, competitive
status, pricing policies, knowledge of suppliers, technical capabilities,
discoveries, algorithms, concepts, software in any stage of development,
designs, drawings, specifications, techniques, models, data, technical manuals,
research and development materials, processes procedures, know-how and other
business affairs relating to Dendrite. Confidential information also includes
any and all technical information involving Dendrite's work. Employee will keep
all such information confidential and will not reveal it at any time without the
express written consent of Dendrite. This obligation is to continue in force
after employment terminates for whatever reason.
8. CLIENT CONFIDENTIAL INFORMATION
-------------------------------
Dendrite may, from time to time, be furnished information and data which is
proprietary and confidential to its clients, customers or suppliers. Employee
will not, at any time for any reason, reveal any information provided by any of
Dendrite's clients, customers or suppliers to anyone, unless provided with prior
written consent by Dendrite or by the applicable client, customer or supplier.
This obligation is to continue in force after employment terminates for whatever
reason.
9. RETURN OF PROPERTY
------------------
Upon termination of employment for any reason or upon the request of
Dendrite, Employee shall return to Dendrite all property which Employee received
or prepared or helped prepare in connection with his employment including, but
not limited to, all copies of any confidential information or material, disks,
notes, notebooks, blueprints, customer lists and any and all other papers or
material in any tangible media or computer readable form belonging to Dendrite
or to any of its customers, clients or suppliers, and Employee will not retain
any copies, duplicates, reproductions or excerpts thereof.
7
<PAGE>
10. INVENTIONS
----------
All work performed by Employee and all materials, products, deliverables,
inventions, software, ideas, disclosures and improvements, whether patented or
unpatented, and copyrighted material made or conceived by Employee, solely or
jointly, in whole or in part, during the term of Employee's employment by
Dendrite which (i) relate to methods, apparatus, designs, products, processes or
devices sold, licensed, used or under development by Dendrite, (ii) otherwise
relate to or pertain to the present, proposed or contemplated business,
functions or operations of Dendrite, (iii) relate to Dendrite actual or
anticipated research or development, (iv) involve the use of Dendrite's
equipment, supplies or facilities, or (v) result from access to any Dendrite
assets, information, inventions or the like are confidential information, are
the property of Dendrite and shall be deemed to be a work made for hire. To the
extent that title to any of the foregoing shall not, by operation of law, vest
in Dendrite, all right, title and interest therein are hereby irrevocably
assigned to Dendrite. Employee agrees to give Dendrite or any person or entity
designated by Dendrite reasonable assistance required to perfect its rights
therein.
If Employee conceives any idea, makes any discovery or invention within one
(1) year after the termination of employment with Dendrite that relate to any
matters pertaining to the business of Dendrite, it shall be deemed that it was
conceived while in the employ of Dendrite.
11. RESTRICTION ON FUTURE EMPLOYMENT
--------------------------------
Employee agrees that in the event employment with Dendrite is terminated,
for any reason, with or without Cause, Employee shall not for two (2) years
after termination of employment:
(i) Perform services that compete with the business or businesses
conducted by Dendrite or any of its affiliates or render services to any
organization or entity which competes with the business or businesses
conducted by Dendrite or any of its affiliates in any area of the United
States of America or elsewhere where Dendrite or any of its affiliates do
business;
(ii) Solicit any customers or potential customers of Dendrite with
whom Employee had contact while employed by Dendrite or who was a customer
of Dendrite at any time during the two (2) years immediately before
termination;
(iii) Request that any of Dendrite's customers or suppliers
discontinue doing business with it;
8
<PAGE>
(iv) Knowingly take any action which would disparage Dendrite or be to
its disadvantage; or
(v) Employ or attempt to employ or assist anyone else to employ any
employee or contractor of Dendrite or induce or attempt to induce any
employee or contractor of Dendrite to terminate their employment or
engagement with Dendrite.
For purposes of Section 11(i) "the business or businesses conducted by
Dendrite or any of its affiliates" means Electronic Territory Management Systems
used to manage, coordinate and control the activities of large sales forces and
complex selling environments and/or sales productivity tools of the type and
nature marketed by Dendrite or any of its affiliates and support services
related thereto as of the date of Employee's termination of employment (or which
Dendrite can at the time of Employee's termination of employment establish it
will likely market within one (1) year following the date of Employee's
termination).
12. OUTSIDE CONTRACTING
--------------------
Employee shall not enter into any agreements to provide programming or
other services to any company, person or organization outside of his employment
by Dendrite (an "Outside Agreement") without the prior written express consent
from Dendrite. Employee must notify Dendrite of his intent to enter into an
Outside Agreement specifying therein the other party to such Outside Agreement
and the type of programming and/or services to be provided by Employee.
Dendrite shall not unreasonably withhold permission to Employee to enter into
Outside Agreements unless such Outside Agreements (i) are with competitors or
potential competitors of Dendrite, or (ii) as determined in Dendrite's sole
discretion, shall substantially hamper or prohibit Employee from satisfactorily
carrying out all duties assigned to Employee by Dendrite.
13. AFTER-HOURS DEVELOPMENT
-----------------------
In the event that Employee shall develop any software which, pursuant to
Section 10 herein, is not the property of Dendrite, Dendrite shall have a right
of first refusal to publish and/or purchase the rights to such software.
Employee shall notify Dendrite of any such After-Hours Development as soon as
reasonably possible before or during the development process including a
description of the intended functions of the After-Hours Development and the
estimated date of completion.
9
<PAGE>
14. PRIOR EMPLOYMENT
----------------
Employee represents and warrants that Employee has not taken or otherwise
misappropriated and does not have in Employee's possession or control any
confidential and proprietary information belonging to any of Employee's prior
employers or connected with or derived from Employee's services to prior
employers. Employee represents and warrants that Employee has returned to all
prior employers any and all such confidential and proprietary information.
Employee further acknowledges, represents and warrants that Dendrite has
informed Employee that Employee is not to use or cause the use of such
confidential or proprietary information in any manner whatsoever in connection
with Employee's employment by Dendrite. Employee agrees, represents and
warrants that Employee will not use such information. Employee shall indemnify
and hold harmless Dendrite from any and all claims arising from any breach of
the representations and warranties in this Section.
15. REMEDIES
--------
The parties agree that in the event Employee breaches or threatens to
breach this Agreement, money damages may be an inadequate remedy for Dendrite
and that Dendrite will not have an adequate remedy at law. It is understood,
therefore, that in the event of a breach of this Agreement by Employee, Dendrite
shall have the right to obtain from a court of competent jurisdiction restraints
or injunctions prohibiting Employee from breaching or threatening to breach this
Agreement. In that event, the parties agree that Dendrite will not be required
to post bond or other security. It is also agreed that any restraints or
injunctions issued against Employee shall be in addition to any other remedies
which Dendrite may have available to it.
16. APPLICABLE LAW
--------------
This Agreement shall be governed by and construed in accordance with the
laws of the State of New Jersey.
17. NOTICES
-------
In the event any notice is required to be given under the terms of this
Agreement, it shall be delivered in the English language, in writing, as
follows:
If to Employee: George Robson
300 Caversham Road
Bryn Mawr, Pennsylvania 19010
10
<PAGE>
If to Dendrite: Christopher French, Vice President, Legal Counsel
Dendrite International, Inc.
1200 Mt. Kemble Avenue
Morristown, New Jersey 07960
18. NON-ASSIGNABILITY
-----------------
Employee's rights or obligations under the terms of this Agreement or of
any other agreement with Dendrite may not be assigned. Any attempted assignment
will be void as to Dendrite. Dendrite may, however, assign its rights to any
affiliated or successor entity.
19. BINDING AGREEMENT
-----------------
This Agreement shall be binding upon and inure to the benefit of Employee's
heirs and personal representatives and to the successors and assigns of
Dendrite.
20. INTEGRATION
-----------
This Agreement sets forth the entire agreement between the parties hereto
and fully supersedes any and all prior negotiations, discussions, agreements or
understandings between the parties hereto pertaining to the subject matter
hereof. No representations, oral or otherwise, with respect to the subject
matter of this Agreement have been made by either party.
21. WAIVER
------
This Agreement may not be modified or waived except by a writing signed by
both parties. No waiver by either party of any breach by the other shall be
considered a waiver of any subsequent breach of the Agreement.
22. JURISDICTION
------------
The State of New Jersey shall have exclusive jurisdiction to entertain any
legal or equitable action with respect to this Agreement except that Dendrite
may institute suit against Employee in any jurisdiction in which Employee may be
at the time. In the event suit is instituted in New Jersey, it is agreed that
service of summons or other appropriate legal process may be effected upon any
party by delivering it to the address in this Agreement specified for that party
in Section 17.
11
<PAGE>
IN WITNESS WHEREOF, the parties have signed this Agreement as of the first
date written above.
DENDRITE INTERNATIONAL, INC.
/s/ John Bailye
-------------------------------
Name: John Bailye
Title: President
/s/ George Robson
-------------------------------
George Robson
12
<PAGE>
EXHIBIT 10.2
------------
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT, dated as of June 9, 1997, between DENDRITE INTERNATIONAL,
INC., a New Jersey Corporation ("Dendrite"), having its principal place of
business at 1200 Mt. Kemble Avenue, Morristown, New Jersey 07960, and MARK
CIEPLIK ("Employee"), having an address at 23366 Chesapeake Drive, Lake
Barrington, Illinois 60010.
WHEREAS, Dendrite, its affiliates, and subsidiaries develop and own what is
referred to as Territory Management Systems and related hardware and equipment;
WHEREAS, Employee is or desires to be employed by Dendrite and Dendrite
desires to employ Employee; and
WHEREAS, Dendrite is willing to provide certain confidential and
proprietary information to Employee for the limited purpose of enabling Employee
to carry out duties in connection with his employment by Dendrite.
RECITAL:
NOW, THEREFORE, it is agreed as follows:
1. EMPLOYMENT AT WILL
------------------
Dendrite hereby employs Employee, and Employee hereby accepts such
employment, as Senior Vice President of Worldwide Sales of Dendrite. Dendrite
hereby employs Employee as an at-will employee. This employment may be
terminated at any time for any reason with or without "Cause" (as defined below)
by Dendrite. Employee agrees to provide two (2) weeks notice to Dendrite before
terminating his employment.
2. DUTIES
------
Employee shall perform those duties as may from time to time be assigned to
him and shall carry out any assignments related to Dendrite or its affiliates as
directed. With the Employee's agreement, this may involve rendering services at
various locations throughout the world. In addition, Employee shall serve as an
officer of Dendrite in such positions as appointed by the Board of Directors of
Dendrite (the "Board"). Employee shall devote his full time attention, energy,
knowledge, skill and best efforts solely and exclusively to the duties assigned
to him which he shall faithfully and diligently perform. Employee shall
<PAGE>
report to the Chairman and Chief Executive Officer of Dendrite (currently John
Bailye) as may be required and will fully account for all records, data,
materials or other property belonging to Dendrite or its customers of which he
is given custody. Dendrite may, from time to time, establish rules and Employee
shall faithfully observe these in the performance of his duties. Employee shall
further comply with all policies and directives of Dendrite.
3. COMPENSATION
------------
A. Base Salary and Bonus. Employee shall be compensated by Dendrite
---------------------
as follows:
(i) Base Salary. Dendrite shall pay Employee for his services a
-----------
base salary at a rate of $250,000 per annum to be paid on a semi-
monthly basis in accordance with Dendrite's regular payroll practices.
(ii) Bonus. Commencing on the completion of the third fiscal
-----
quarter of 1997, Employee shall be eligible to receive a quarterly
bonus (the "Bonus") of $50,000 per quarter, payable in the next
payroll period occurring at least two weeks after Dendrite publicly
discloses its financial results in such fiscal quarter; provided,
however, that the payment of the Bonus is subject to: (a) Dendrite's
achievement of quarterly financial goals as set forth in the Board
approved annual business plan, (b) such other objectives as mutually
agreed upon, and (c) Employee remaining in the employ of Dendrite as
of the end of any such quarter.
The payments in respect of base salary and bonus payable to Employee are
collectively referred to herein as "Compensation". All Compensation payments
and any Severance Payment (as defined below) shall be reduced by any and all
applicable withholdings, contributions and payroll taxes.
B. Stock Option. Pursuant to Dendrite's 1992 Stock Plan (the "Stock
------------
Plan"), upon the execution of this Agreement, Dendrite shall give Employee an
option to purchase 110,000 shares of the common stock of Dendrite. The price
for such options shall be the closing price of the common stock of Dendrite on
the day the Option Committee grants such option. Employee's entitlement to such
option shall be subject to (i) a four year vesting schedule, (ii) Employee's
execution of a definitive option agreement in form and substance satisfactory to
Dendrite and (iii) in all instances subject to the terms and conditions of the
Stock Plan.
4. SEVERANCE
---------
(a) If, on or before June 8, 1998, Employee's employment hereunder is
terminated by Dendrite for any reason other than death, Cause, or Disability,
then Employee shall be
2
<PAGE>
entitled to receive severance payments totaling an amount equal to twelve (12)
months Compensation (calculated at the rate of Compensation then being paid to
Employee). Any severance payments to be paid to Employee under this Section 4(a)
or under Section 4(b) below shall be referred to herein as the "Severance
Payment". Employee's Severance Payment under this Section 4(a) shall be paid by
Dendrite in twelve (12) consecutive equal monthly payments commencing not later
than thirty (30) days after the effective date of the termination of Employee's
employment.
(b) If, after June 8, 1998, Employee's employment hereunder is terminated
by Dendrite for any reason other than death, Cause, or Disability, then Employee
shall be entitled to receive severance payments totaling an amount equal to six
(6) months Compensation (calculated at the rate of Compensation then being paid
to Employee). Employee's Severance Payment under this Section 4(b) shall be paid
by Dendrite in six (6) consecutive equal monthly payments commencing not later
than thirty (30) days after the effective date of the termination of Employee's
employment.
(c) No interest shall accrue or be payable on or with respect to any
Severance Payment. In the event of a termination of Employee's employment
described in Sections 4(a) or 4(b) above, Employee shall be provided continued
"COBRA" coverage pursuant to Sections 601 et seq. of ERISA under Dendrite's
group medical and dental plans. During the period which Employee receives any
Severance Payment, Employee's cost of COBRA coverage shall be the same as the
amount paid by employees of Dendrite for the same coverage under Dendrite's
group health and dental plans. Notwithstanding the foregoing, in the event
Employee becomes re-employed with another employer and becomes eligible to
receive health coverage from such employer, the payment of COBRA coverage by
Dendrite as described herein shall cease.
(d) The making of any Severance Payment hereunder is conditioned upon
the signing of a general release in form and substance satisfactory to Dendrite
under which Employee releases Dendrite and its affiliates together with their
respective officers, directors, shareholders, employees, agents and successors
and assigns from any and all claims he may have against them. In the event
Employee breaches Sections 7, 8, 9 or 11 of this Agreement, in addition to any
other remedies at law or in equity, Dendrite may cease making any Severance
Payment or any payments for COBRA coverage otherwise due under this Section 4.
Nothing herein shall affect any of Employee's obligations or Dendrite's rights
under this Agreement.
(e) For purposes of this Agreement, "Cause" as used herein shall mean
(i) any gross misconduct on the part of Employee with respect to his duties
under this Agreement, (ii) the engaging by Employee in an indictable offense
which relates to Employee's duties under this Agreement or which is likely to
have a material adverse effect on the business of Dendrite, (iii) the commission
by Employee of any willful or intentional act which injures in any material
respect or could reasonably be expected to injure in any material respect the
3
<PAGE>
reputation, business or business relationships of Dendrite, including, without
limitation, a breach of Sections 7, 8 or 11 of this Agreement, or (iv) the
engaging by Employee through gross negligence in conduct which injures
materially or could reasonably be expected to injure materially the business or
reputation of Dendrite.
(f) For purposes of this Agreement, "Disabled" as used herein shall have
the same meaning as that term, or such substantially equivalent term, has in any
group disability policy carried by Dendrite. If no such policy exists, the term
"Disabled" shall mean the occurrence of any physical or mental condition which
materially interferes with the performance of Employee's customary duties in his
capacity as an employee where such disability has been in effect for a period of
six (6) months (excluding permitted vacation time), which need not be
consecutive, during any single twelve (12) month period.
(g) In the event Employee terminates his employment with Dendrite or
Dendrite terminates Employee's employment with Dendrite for "Cause" or
Employee's employment ends as a result of his death or becoming "Disabled," it
is understood and agreed that Dendrite's only obligation is to pay Employee any
unused but accrued vacation days and his base salary through the date of his
termination.
5. BENEFITS
--------
Dendrite shall provide Employee:
(i) Vacation. Four weeks vacation per annum in accordance with Dendrite
--------
policy in effect from time to time.
(ii) Business Expenses. Reimbursement for all reasonable travel,
-----------------
entertainment and other reasonable and necessary out-of-pocket expenses incurred
by Employee in connection with the performance of his duties. Reimbursement
will be made upon the submission by the Employee of appropriate documentation
and verification of the expenses.
(iii) Relocation Expenses. In connection with Employee's relocation to
-------------------
the Morristown, New Jersey area, Dendrite will reimburse Employee for all
reasonable relocation expenses incurred in connection with such relocation
including closing costs, realtor fees, legal fees, out-of-pocket expenses,
temporary living arrangements, freight and other costs associated with
Employee's relocation. Such amounts will be reimbursed to Employee on an after
tax basis. Reimbursement will be made upon the submission by the Employee of
appropriate documentation and verification of such relocation expenses.
(iv) Other. Dendrite will provide Employee other benefits to the same
-----
extent as may be provided to other employees generally in accordance with
Dendrite policy in effect from time to time and subject to the terms and
conditions of such benefit plans.
4
<PAGE>
6. INFORMATION AND BUSINESS OPPORTUNITY
------------------------------------
During Employee's employment with Dendrite, Employee may acquire knowledge
of (i) information that is relevant to the business of Dendrite or its
affiliates or (ii) knowledge of business opportunities pertaining to the
business in which Dendrite or its affiliates are engaged. Employee shall
promptly disclose to Dendrite that information or business opportunity but shall
not disclose it to anyone else without Dendrite's written consent.
7. DENDRITE CONFIDENTIAL INFORMATION
---------------------------------
The Employee will, as a result of his employment with Dendrite, acquire
information which is proprietary and confidential to Dendrite. This information
includes, but is not limited to, technical and commercial information, customer
lists, financial arrangements, salary and compensation information, competitive
status, pricing policies, knowledge of suppliers, technical capabilities,
discoveries, algorithms, concepts, software in any stage of development,
designs, drawings, specifications, techniques, models, data, technical manuals,
research and development materials, processes procedures, know-how and other
business affairs relating to Dendrite. Confidential information also includes
any and all technical information involving Dendrite's work. Employee will keep
all such information confidential and will not reveal it at any time without the
express written consent of Dendrite. This obligation is to continue in force
after employment terminates for whatever reason.
8. CLIENT CONFIDENTIAL INFORMATION
-------------------------------
Dendrite may, from time to time, be furnished information and data which is
proprietary and confidential to its clients, customers or suppliers. Employee
will not, at any time for any reason, reveal any information provided by any of
Dendrite's clients, customers or suppliers to anyone, unless provided with prior
written consent by Dendrite or by the applicable client, customer or supplier.
This obligation is to continue in force after employment terminates for whatever
reason.
9. RETURN OF PROPERTY
------------------
Upon termination of employment for any reason or upon the request of
Dendrite, Employee shall return to Dendrite all property which Employee received
or prepared or helped prepare in connection with his employment including, but
not limited to, all copies of any confidential information or material, disks,
notes, notebooks, blueprints, customer lists and any and all other papers or
material in any tangible media or computer readable form belonging to Dendrite
or to any of its customers, clients or suppliers, and Employee will not retain
any copies, duplicates, reproductions or excerpts thereof.
5
<PAGE>
10. INVENTIONS
----------
All work performed by Employee and all materials, products, deliverables,
inventions, software, ideas, disclosures and improvements, whether patented or
unpatented, and copyrighted material made or conceived by Employee, solely or
jointly, in whole or in part, during the term of Employee's employment by
Dendrite which (i) relate to methods, apparatus, designs, products, processes or
devices sold, licensed, used or under development by Dendrite, (ii) otherwise
relate to or pertain to the present, proposed or contemplated business,
functions or operations of Dendrite, (iii) relate to Dendrite actual or
anticipated research or development, (iv) involve the use of Dendrite's
equipment, supplies or facilities, or (v) result from access to any Dendrite
assets, information, inventions or the like are confidential information, are
the property of Dendrite and shall be deemed to be a work made for hire. To the
extent that title to any of the foregoing shall not, by operation of law, vest
in Dendrite, all right, title and interest therein are hereby irrevocably
assigned to Dendrite. Employee agrees to give Dendrite or any person or entity
designated by Dendrite reasonable assistance required to perfect its rights
therein.
If Employee conceives any idea, makes any discovery or invention within one
(1) year after the termination of employment with Dendrite that relate to any
matters pertaining to the business of Dendrite, it shall be deemed that it was
conceived while in the employ of Dendrite.
11. RESTRICTION ON FUTURE EMPLOYMENT
--------------------------------
Employee agrees that in the event employment with Dendrite is terminated,
for any reason, with or without Cause, Employee shall not for two (2) years
after termination of employment:
(i) Perform services that compete with Dendrite or any of its
affiliates or render services to any organization or entity which competes
with Dendrite or any of its affiliates in any area of the United States of
America or elsewhere where Dendrite or any of its affiliates do business;
(ii) Solicit any customers or potential customers of Dendrite with
whom Employee had contact while employed by Dendrite or who was a customer
of Dendrite at any time during the two (2) years immediately before
termination;
(iii) Request that any of Dendrite's customers or suppliers
discontinue doing business with it;
(iv) Knowingly take any action which would disparage Dendrite or be
to its disadvantage; or
6
<PAGE>
(v) Employ or attempt to employ or assist anyone else to employ any
employee or contractor of Dendrite or induce or attempt to induce any
employee or contractor of Dendrite to terminate their employment or
engagement with Dendrite.
12. OUTSIDE CONTRACTING
--------------------
Employee shall not enter into any agreements to provide programming or
other services to any company, person or organization outside of his employment
by Dendrite (an "Outside Agreement") without the prior written express consent
from Dendrite. Employee must notify Dendrite of his intent to enter into an
Outside Agreement specifying therein the other party to such Outside Agreement
and the type of programming and/or services to be provided by Employee.
Dendrite shall not unreasonably withhold permission to Employee to enter into
Outside Agreements unless such Outside Agreements (i) are with competitors or
potential competitors of Dendrite, or (ii) as determined in Dendrite's sole
discretion, shall substantially hamper or prohibit Employee from satisfactorily
carrying out all duties assigned to Employee by Dendrite.
13. AFTER-HOURS DEVELOPMENT
-----------------------
In the event that Employee shall develop any software which, pursuant to
Section 10 herein, is not the property of Dendrite, Dendrite shall have a right
of first refusal to publish and/or purchase the rights to such software.
Employee shall notify Dendrite of any such After-Hours Development as soon as
reasonably possible before or during the development process including a
description of the intended functions of the After-Hours Development and the
estimated date of completion.
14. PRIOR EMPLOYMENT
----------------
Employee represents and warrants that Employee has not taken or otherwise
misappropriated and does not have in Employee's possession or control any
confidential and proprietary information belonging to any of Employee's prior
employers or connected with or derived from Employee's services to prior
employers. Employee represents and warrants that Employee has returned to all
prior employers any and all such confidential and proprietary information.
Employee further acknowledges, represents and warrants that Dendrite has
informed Employee that Employee is not to use or cause the use of such
confidential or proprietary information in any manner whatsoever in connection
with Employee's employment by Dendrite. Employee agrees, represents and
warrants that Employee will not use such information. Employee shall indemnify
and hold harmless Dendrite from any and all claims arising from any breach of
the representations and warranties in this Section.
7
<PAGE>
15. REMEDIES
--------
The parties agree that in the event Employee breaches or threatens to
breach this Agreement, money damages may be an inadequate remedy for Dendrite
and that Dendrite will not have an adequate remedy at law. It is understood,
therefore, that in the event of a breach of this Agreement by Employee, Dendrite
shall have the right to obtain from a court of competent jurisdiction restraints
or injunctions prohibiting Employee from breaching or threatening to breach this
Agreement. In that event, the parties agree that Dendrite will not be required
to post bond or other security. It is also agreed that any restraints or
injunctions issued against Employee shall be in addition to any other remedies
which Dendrite may have available to it.
16. APPLICABLE LAW
--------------
This Agreement shall be governed by and construed in accordance with the
laws of the State of New Jersey.
17. NOTICES
-------
In the event any notice is required to be given under the terms of this
Agreement, it shall be delivered in the English language, in writing, as
follows:
If to Employee: Mark Cieplik
23366 Chesapeake Drive
Lake Barrington, Illinois 60010
If to Dendrite: Christopher French, Vice President, General Counsel
Dendrite International, Inc.
1200 Mt. Kemble Avenue
Morristown, New Jersey 07960
18. NON-ASSIGNABILITY
-----------------
Employee's rights or obligations under the terms of this Agreement or of
any other agreement with Dendrite may not be assigned. Any attempted assignment
will be void as to Dendrite. Dendrite may, however, assign its rights to any
affiliated or successor entity.
19. BINDING AGREEMENT
-----------------
This Agreement shall be binding upon and inure to the benefit of Employee's
heirs and personal representatives and to the successors and assigns of
Dendrite.
8
<PAGE>
20. INTEGRATION
-----------
This Agreement sets forth the entire agreement between the parties hereto
and fully supersedes any and all prior negotiations, discussions, agreements or
understandings between the parties hereto pertaining to the subject matter
hereof. No representations, oral or otherwise, with respect to the subject
matter of this Agreement have been made by either party.
21. WAIVER
------
This Agreement may not be modified or waived except by a writing signed by
both parties. No waiver by either party of any breach by the other shall be
considered a waiver of any subsequent breach of the Agreement.
22. JURISDICTION
------------
The State of New Jersey shall have exclusive jurisdiction to entertain any
legal or equitable action with respect to this Agreement except that Dendrite
may institute suit against Employee in any jurisdiction in which Employee may be
at the time. In the event suit is instituted in New Jersey, it is agreed that
service of summons or other appropriate legal process may be effected upon any
party by delivering it to the address in this Agreement specified for that party
in Section 17.
9
<PAGE>
IN WITNESS WHEREOF, the parties have signed this Agreement as of the first
date written above.
DENDRITE INTERNATIONAL, INC.
/s/ John Bailye
---------------------------------------
Name: John Bailye
Title: President
/s/ Mark Cieplik
---------------------------------------
Mark Cieplik
10
<PAGE>
EXHIBIT 10.3
------------
DENDRITE INTERNATIONAL, INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
1. Purpose. The purpose of the Dendrite International, Inc. 1997
-------
Employee Stock Purchase Plan (the "Plan") is to provide employees of Dendrite
International, Inc. (the "Company") and its subsidiaries with an opportunity to
acquire an interest in the Company through the purchase of Common Stock of the
Company, no par value per share (the "Common Stock") with accumulated payroll
deductions. The Company intends the Plan to qualify as an "employee stock
purchase plan" within the meaning of Section 423 of the Internal Revenue Code of
1986, as amended (the "Code"), and the provisions of the Plan shall be construed
in a manner consistent with the requirements of Section 423 of the Code.
2. Definitions.
-----------
a. "Authorization Form" shall mean a form supplied by and
delivered to the Company by a Participant authorizing payroll deductions as set
forth in Section 5 hereof and such other terms and conditions as the Company
from time to time may determine.
b. "Board" shall mean the Board of Directors of the Company.
c. "Committee" shall mean a committee of at least three members
of the Board appointed by the Board to administer the Plan and to perform the
functions set forth herein and who are "non-employee directors" within the
meaning of Rule 16b-3 as promulgated under Section 16 of the Securities Exchange
Act of 1934 (the "Exchange Act").
d. "Compensation" shall mean the base salary or wage payable by
the Company to an Employee, including an Employee's portion of salary deferral
contributions pursuant to Section 401(k) of the Code and any amount excludable
pursuant to Section 125 of the Code, but excluding any bonus, fee, overtime pay,
severance pay, or other special emolument or any credit or benefit under any
employee plan maintained by the Company.
e. "Designated Subsidiaries" shall mean all Subsidiaries unless
designated to the contrary by the Board from time to time, in its sole
discretion, as not eligible to participate in the Plan.
<PAGE>
f. "Eligible Employee" shall mean any Employee of the Company or
a Subsidiary excluding:
(1) any Employee who customarily is employed for twenty (20) hours
per week or less;
(2) any Employee who customarily is employed for not more than
five (5) months in a calendar year; or
(3) any Employee who would own (immediately after the grant of an
option under the Plan and applying the rules of Section 424(d) of the
Code in determining stock ownership) shares, and/or hold outstanding
options to purchase shares, possessing five percent (5%) or more of
the total combined voting power or value of all classes of shares of
the Company.
g. "Employee" shall mean any person, including an officer, who is
regularly employed by the Company or one of its Designated Subsidiaries.
h. "Exercise Date" shall mean the last business day of each
Offering Period in which payroll deductions are made under the Plan.
i. "Fair Market Value" per share as of a particular date shall
mean the last reported sale price (on that date) of the Common Stock on the
NASDAQ National Market List.
j. "Offering Date" shall mean the first business day of each
Offering Period of each Plan Year.
k. "Offering Period" shall mean a period of time as determined
from time to time by the Committee during the effectiveness of the Plan.
l. "Participant" shall mean an Employee who participates in the
Plan.
m. "Plan Year" shall mean the period beginning on April 1, 1997
and ending on December 31, 1997 and each calendar year thereafter.
n. "Subsidiary" shall mean any corporation, if any, having the
relationship to the Company described in Section 424(f) of the Code.
3. Eligibility and Participation.
-----------------------------
-2-
<PAGE>
a. Any person who is an Eligible Employee on an Offering Date
shall be eligible to become a Participant in the Plan beginning on that Offering
Date and shall become a Participant as of that Offering Date by (i) completing
an Authorization Form and filing it with the Company by the date required by the
Company, (ii) properly completing enrollment over the telephone through the
voice response system ("VRS") maintained by the Plan's administrator or (iii)
speaking with a customer service representative of the Plan's administrator.
Such authorization will remain in effect for subsequent Offering Periods, until
modified or terminated by the Participant.
b. Any person who first becomes an Eligible Employee during an
Offering Period shall be eligible to become a Participant in the Plan as of the
first day of the Offering Date occurring after the date on which that person
became an Eligible Employee and shall become a Participant as of such date by
(i) completing an Authorization Form and filing it with the Company by the date
required by the Company, (ii) properly completing enrollment over the telephone
through the VRS maintained by the Plan's administrator or (iii) speaking with a
customer service representative of the Plan's administrator. Such authorization
will remain in effect for subsequent Offering Periods, until modified or
terminated by the Participant.
c. A person shall cease to be a Participant upon the earliest to
occur of:
(1) the date the Participant ceases to be an Eligible Employee,
for any reason;
(2) the first day of the Offering Period beginning after the date
on which the Participant ceases payroll deductions under the Plan; or
(3) the date of a withdrawal from the Plan by the Participant.
4. Grant of Option.
---------------
a. On each Offering Date the Company shall grant each Eligible
Employee an option to purchase shares of Common Stock, subject to the
limitations set forth in Sections 3.b., 3.c. and 10 hereof.
b. The option price per share of the Common Stock subject to an
offering shall be the lesser of: (i) eighty-five percent (85%) of the Fair
Market Value of a share of Common Stock on the Offering Date or (ii) eighty-five
percent (85%) of the Fair Market Value of a share of Common Stock on the
Exercise Date.
-3-
<PAGE>
c. No Participant shall be granted an option which permits his
rights to purchase Common Stock under all employee stock purchase plans of the
Company to accrue at a rate which exceeds $25,000 of the Fair Market Value of
the Common Stock (determined at the time the option is granted) for each
calendar year in which such stock option is outstanding at any time.
5. Payroll Deductions.
------------------
a. A Participant may, in accordance with rules adopted by the
Committee, submit an Authorization Form or, provide proper instructions via the
Plan's 800 telephone number that authorize a payroll deduction of any whole
percentage from one (1) percent to ten (10) percent of such Participant's
Compensation on each pay period during the Offering Period. A Participant may
increase or decrease such payroll deduction (including a cessation of payroll
deductions) effective as of January 1, April 1, July 1 and October 1 of each
Plan Year, provided the Employee files with the Company the Authorization Form
requesting such change by the date required by the Company.
b. All payroll deductions made by a Participant shall be credited
to such Participant's account under the Plan. A Participant may not make any
additional payments into such account.
6. Exercise of Option.
------------------
a. Unless a Participant withdraws from the Plan as provided in
Section 8 hereof, such Participant's election to purchase shares will be
exercised automatically on the Exercise Date, and the maximum number of full and
fractional shares subject to such option will be purchased for such Participant
at the applicable option price with the accumulated payroll deductions and cash
dividends (credited pursuant to Section 9 hereof) in such Participant's account.
During a Participant's lifetime, his or her option to purchase shares hereunder
is exercisable only by such Participant.
b. The shares of Common Stock purchased upon exercise of an
option hereunder shall be credited to the Participant's account under the Plan
and shall be deemed to be transferred to the Participant on the Exercise Date
and, except as otherwise provided herein, the Participant shall have all rights
of a stockholder with respect to such shares.
7. Delivery of Common Stock. As promptly as practicable after
------------------------
receipt by the Committee of a written request or, if applicable, request via the
Plan's 800 telephone number for withdrawal of Common Stock from any Participant,
the Company shall arrange the delivery to such Participant of a stock
certificate representing the shares of Common Stock which the Participant
requests to withdraw. Withdrawals may be
-4-
<PAGE>
made no more frequently than twice each Plan Year unless approved by the
Committee in its sole discretion. Shares of Common Stock received upon stock
dividends or stock splits shall be treated as having been purchased on the
Exercise Date of the shares to which they relate.
8. Withdrawal; Termination of Employment.
-------------------------------------
a. A Participant may withdraw all, but not less than all, the
payroll deductions and cash dividends credited to such Participant's account
(that have not been used to purchase shares of Common Stock) under the Plan at
any time by giving written notice to the Company received at least 15 days prior
to the Exercise Date. All such payroll deductions and cash dividends credited
to such Participant's account will be paid to such Participant promptly after
receipt of such Participant's notice of withdrawal and such Participant's option
for the Offering Period in which the withdrawal occurs will be automatically
terminated. No further payroll deductions for the purchase of shares of Common
Stock will be made for such Participant during such Offering Period, and any
additional cash dividends during the Offering Period will be distributed to the
Participant.
b. Upon termination of a Participant's status as an Employee
during the Offering Period for any reason, including voluntary termination,
retirement or death, the payroll deductions and cash dividends credited to such
Participant's account that have not been used to purchase shares of Common Stock
will be returned (and any future cash dividends will be distributed) to such
Participant or, in the case of such Participant's death, his estate, and such
Participant's option will be automatically terminated. A Participant's status
as an Employee shall not be considered terminated in the case of a leave of
absence agreed to in writing by the Company (including, but not limited to,
military and sick leave), provided that such leave is for a period of not more
--------
than ninety (90) days or reemployment upon expiration of such leave is
guaranteed by contract or statute.
c. A Participant's withdrawal from an offering will not have any
effect upon such Participant's eligibility to participate in a succeeding
offering or in any similar plan which may hereafter be adopted by the Company.
9. Dividends.
---------
a. Cash dividends paid on Common Stock held in a Participant's
account shall be credited to such Participant's account and used in addition to
payroll deductions to purchase shares of Common Stock on the Exercise Date.
Dividends paid in Common Stock or stock splits of the Common Stock shall be
credited to the accounts of Participants. Dividends paid in property other than
cash or Common Stock shall be distributed to Participants as soon as
practicable.
-5-
<PAGE>
b. No interest shall accrue on or be payable with respect to the
payroll deductions or credited cash dividends of a Participant in the Plan.
10. Stock.
-----
a. The maximum number of shares of Common Stock which shall be
reserved for sale under the Plan shall be 150,000, subject to adjustment upon
the occurrence of an event as provided in Section 14 hereof. If the total
number of shares which would otherwise be subject to options granted pursuant to
Section 4.a. hereof on an Offering Date exceeds the number of shares then
available under the Plan (after deduction of all shares for which options have
been exercised or are then outstanding), the Committee shall make a pro rata
allocation of the shares remaining available for option grant in as uniform a
manner as shall be practicable and as it shall determine to be equitable. In
such event, the Committee shall give written notice to each Participant of such
reduction of the number of option shares affected thereby and shall similarly
reduce the rate of payroll deductions, if necessary.
b. Shares of Common Stock to be delivered to a Participant under
the Plan will be registered in the name of the Participant or, at the election
of the Participant, in the name of the Participant and another person as joint
tenants with rights of survivorship.
11. Administration. The Plan shall be administered by the Committee,
--------------
and the Committee may select an administrator to whom its duties and
responsibilities hereunder may be delegated. The Committee shall have full
power and authority, subject to the provisions of the Plan, to promulgate such
rules and regulations as it deems necessary for the proper administration of the
Plan, to interpret the provisions and supervise the administration of the Plan,
and to take all action in connection therewith or in relation thereto as it
deems necessary or advisable. Any decision reduced to writing and signed by a
majority of the members of the Committee shall be fully effective as if it had
been made at a meeting duly held. The Company will pay all expenses incurred in
the administration of the Plan. No member of the Committee shall be personally
liable for any action, determination, or interpretation made in good faith with
respect to the Plan, and all members of the Committee shall be fully indemnified
by the Company with respect to any such action, determination or interpretation.
12. Transferability. Neither payroll deductions credited to a
---------------
Participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution) by the Participant. Any such attempt at assignment, transfer,
pledge or other disposition shall be without effect, except that the Company may
treat such act as an election to withdraw funds in accordance with Section 8
hereof.
-6-
<PAGE>
13. Use of Funds. All payroll deductions received or held by the
------------
Company under the Plan may be used by the Company for any corporate purpose, and
the Company shall not be obligated to segregate such payroll deductions.
14. Effect of Certain Changes. In the event of any increase,
-------------------------
reduction, or change or exchange of shares of Common Stock for a different
number or kind of shares or other securities of the Company by reason of a
reclassification, recapitalization, merger, consolidation, reorganization, stock
dividend, stock split or reverse stock split, combination or exchange of shares,
repurchase of shares, change in corporate structure, distribution of an
extraordinary dividend or otherwise, the Committee shall conclusively determine
the appropriate equitable adjustments, if any, to be made under the Plan,
including without limitation adjustments to the number of shares of Common Stock
which have been authorized for issuance under the Plan but have not yet been
placed under option, as well as the price per share of Common Stock covered by
each option under the Plan which has not yet been exercised.
15. Amendment or Termination. The Board may at any time terminate or
------------------------
amend the Plan. Except as provided in Section 14 hereof, no such termination
can adversely affect options previously granted and no amendment may make any
change in any option theretofore granted which adversely affects the rights of
any Participant. No amendment shall be effective unless approved by the
stockholders of the Company if stockholder approval of such amendment is
required to comply with any law, regulation or stock exchange rule.
16. Notices. All notices or other communications by a Participant to
-------
the Company under or in connection with the Plan shall be deemed to have been
duly given when received in the form specified by the Company at the location,
or by the person, designated by the Company for the receipt thereof, including,
if applicable, via the Plan's 800 telephone number.
17. Regulations and other Approvals;
Governing Law.
--------------------------------
a. This Plan and the rights of all persons claiming hereunder
shall be construed and determined in accordance with the laws of the State of
New Jersey applicable to contracts made and to be performed in such State.
b. The obligation of the Company to sell or deliver shares of
Common Stock with respect to options granted under the Plan shall be subject to
all applicable laws, rules and regulations, including all applicable Federal
and state securities laws, and the obtaining of all such approvals by
governmental agencies as may be deemed necessary or appropriate by the
Committee.
-7-
<PAGE>
c. The Plan is intended to comply with Rule 16b-3 as promulgated
under Section 16 of the Exchange Act and the Committee shall interpret and
administer the provisions of the Plan in a manner consistent therewith. Any
provisions inconsistent with such Rule shall be inoperative and shall not affect
the validity of the Plan.
18. Withholding of Taxes. If the Participant makes a disposition,
--------------------
within the meaning of Section 424(c) of the Code and regulations promulgated
thereunder, of any share or shares issued to such Participant pursuant to such
Participant's exercise of an option, and such disposition occurs within the two-
year period commencing on the day after the Offering Date or within the one-year
period commencing on the day after the Exercise Date, such Participant shall,
within five (5) days of such disposition, notify the Company thereof and
thereafter immediately deliver to the Company any amount of Federal, state or
local income taxes and other amounts which the Company informs the Participant
the Company is required to withhold.
19. Effective Date; Approval of Stockholders. The Plan is effective
----------------------------------------
as of April 1, 1997. The Plan shall be submitted to the stockholders of the
Company for their approval within twelve (12) months after the date the Plan is
adopted. The Plan is conditioned upon the approval of the stockholders of the
Company, and failure to receive their approval shall render the Plan and all
outstanding options issued thereunder void and of no effect.
-8-
<PAGE>
EXHIBIT 10.4
------------
DENDRITE INTERNATIONAL, INC.
1997 STOCK INCENTIVE PLAN
1. Purpose. The purpose of the Dendrite International, Inc. 1997
-------
Stock Incentive Plan (the "Plan") is to enhance the ability of Dendrite
International, Inc. (the "Company") and its subsidiaries to attract and retain
employees and directors of outstanding ability and to provide employees and
directors with an interest in the Company parallel to that of the Company's
shareholders.
2. Definitions.
-----------
(a) "Award" shall mean an award determined in accordance with the
terms of the Plan.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Change in Control" shall mean the occurrence of any one of
the following events:
(i) any "person" (as such term is defined in Section 3(a)(9)
of the Exchange Act and as used in Sections 13(d)(3) and 14(d)(2) of
the Exchange Act) is or becomes a "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 33-1/3% or more of the combined
voting power of the Company's then outstanding securities eligible to
vote for the election of the Board (the "Company Voting Securities");
provided, however, that the event described in this paragraph (i)
-------- -------
shall not be deemed to be a Change in Control by virtue of any of the
following acquisitions: (A) by the Company or any subsidiary, (B) by
any employee benefit plan sponsored or maintained by the Company or
any subsidiary, (C) by any underwriter temporarily holding securities
pursuant to an offering of such securities, (D) pursuant to a Non-
Control Transaction (as defined in paragraph (iii)), or (E) a
transaction (other than one described in (iii) below) in which Company
Voting Securities are acquired from the Company, if a majority of the
Incumbent Board (as defined below) approves a resolution providing
expressly that the acquisition pursuant to this clause (E) does not
constitute a Change in Control under this paragraph (i);
(ii) individuals who, on the Effective Date, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at
<PAGE>
least a majority thereof, provided that any person becoming a director
subsequent to the Effective Date, whose election or nomination for
election was approved by a vote of at least two-thirds of the
directors comprising the Incumbent Board (either by a specific vote or
by approval of the proxy statement of the Company in which such person
is named as a nominee for director, without objection to such
nomination) shall be considered a member of the Incumbent Board;
provided, however, that no individual initially elected or nominated
-------- -------
as a director of the Company as a result of an actual or threatened
election contest with respect to directors or any other actual or
threatened solicitation of proxies or consents by or on behalf of any
person other than the Board shall be deemed to be a member of the
Incumbent Board;
(iii) the shareholders of the Company approve a merger,
consolidation, share exchange or similar form of corporate
reorganization of the Company or any such type of transaction
involving the Company or any of its subsidiaries (whether for such
transaction or the issuance of securities in the transaction or
otherwise) (a "Business Combination"), unless immediately following
such Business Combination: (A) more than 50% of the total voting
power of the publicly traded corporation resulting from such Business
Combination (including, without limitation, any corporation which
directly or indirectly has beneficial ownership of 100% of the Company
Voting Securities or all or substantially all of the assets of the
Company and its subsidiaries) eligible to elect directors of such
corporation would be represented by shares that were Company Voting
Securities immediately prior to such Business Combination (either by
remaining outstanding or being converted), and such voting power would
be in substantially the same proportion as the voting power of such
Company Voting Securities immediately prior to the Business
Combination, (B) no person (other than any publicly traded holding
company resulting from such Business Combination, any employee benefit
plan sponsored or maintained by the Company (or the corporation
resulting from such Business Combination), or any person which
beneficially owned, immediately prior to such Business Combination,
directly or indirectly, 33-1/3% or more of the Company Voting
Securities (a "Company 33-1/3% Stockholder")) would become the
beneficial owner, directly or indirectly, of 33-1/3% or more of the
total voting power of the outstanding voting securities eligible to
elect directors of the corporation resulting from such Business
Combination and no Company 33-1/3% Stockholder would increase its
percentage of such total voting power, and (C) at least a majority of
the members of the board of directors of the corporation resulting
from such Business Combination would be members of the Incumbent Board
at the time of the Board's approval of the
-2-
<PAGE>
execution of the initial agreement providing for such Business
Combination (a "Non-Control Transaction"); or
(iv) the shareholders of the Company approve a plan of
complete liquidation or dissolution of the Company or the sale or
disposition of all or substantially all of the Company's assets.
Notwithstanding the foregoing, a Change in Control of the Company
shall not be deemed to occur solely because any person acquires beneficial
ownership of more than 33-1/3% of the Company Voting Securities as a result of
the acquisition of Company Voting Securities by the Company which, by reducing
the number of Company Voting Securities outstanding, increases the percentage of
shares beneficially owned by such person; provided, that if a Change in Control
-------- ----
of the Company would occur as a result of such an acquisition by the Company (if
not for the operation of this sentence), and after the Company's acquisition
such person becomes the beneficial owner of additional Company Voting Securities
that increases the percentage of outstanding Company Voting Securities
beneficially owned by such person, then a Change in Control of the Company shall
occur.
(d) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(e) "Committee" shall mean a committee of at least two members of
the Board appointed by the Board to administer the Plan and to perform the
functions set forth herein and who are "non-employee directors" within the
meaning of Rule 16b-3 as promulgated under Section 16 of the Exchange Act and
who are also "outside directors" within the meaning of Section 162(m) of the
Code.
(f) "Common Stock" shall mean the common stock, no par value per
share, of the Company.
(g) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(h) "Fair Market Value" per share as of a particular date shall
mean the last reported sale price (on the day immediately preceding such date)
of the Common Stock on the NASDAQ National Market List.
(i) "Immediate Family Member" shall mean, except as otherwise
determined by the Committee, a Participant's children, stepchildren,
grandchildren, parents, stepparents, grandparents, spouse, siblings, in-laws and
persons related by reason of legal adoption.
-3-
<PAGE>
(j) "Incentive Stock Option" shall mean a stock option which is
intended to meet the requirements of Section 422 of the Code.
(k) "Non-Employee Director" shall mean a member of the Board who
is not an employee of the Company or any Subsidiary.
(l) "Nonqualified Stock Option" shall mean a stock option which
is not intended to be an Incentive Stock Option.
(m) "Option" shall mean either an Incentive Stock Option or a
Nonqualified Stock Option.
(n) "Participant" shall mean an employee or director of the
Company or its Subsidiaries who is selected to participate in the Plan in
accordance with Section 5.
(o) "Subsidiary" shall mean any subsidiary of the Company that is
a corporation and which at the time qualifies as a "subsidiary corporation"
within the meaning of Section 424(f) of the Code.
3. Shares Subject to the Plan. Subject to adjustment in accordance
--------------------------
with Section 16, the total of the number of shares of Common Stock which shall
be available for the grant of Awards under the Plan shall not exceed 500,000
shares; provided, that, for purposes of this limitation, any Option which is
-------- ----
canceled or expires without exercise shall again become available for Awards
under the Plan. Upon forfeiture of Awards in accordance with the provisions of
the Plan, and the terms and conditions of the Award, such shares shall no longer
be counted in any determination of the number of shares available under the Plan
and shall be available for subsequent Awards. Subject to adjustment in
accordance with Section 16, no employee shall be granted in any calendar year
Options to purchase more than 500,000 shares of Common Stock. Shares of Common
Stock available for issue or distribution under the Plan shall be authorized and
unissued shares or shares reacquired by the Company in any manner.
4. Administration. (a) The Plan shall be administered by the
--------------
Committee.
(b) The Committee shall (i) approve the selection of
Participants, (ii) determine the type of Awards to be made to Participants,
(iii) determine the number of shares of Common Stock subject to Awards, (iv)
determine the terms and conditions of any Award granted hereunder (including,
but not limited to, any restriction and forfeiture conditions on such Award) and
(v) have the authority to interpret the Plan, to establish, amend, and rescind
any rules and regulations relating to the Plan, to determine the terms and
provisions of any agreements entered into hereunder, and to make all other
determinations necessary or advisable for the administration of the Plan. The
Committee may correct any defect, supply any omission or reconcile any
-4-
<PAGE>
inconsistency in the Plan or in any Award in the manner and to the extent it
shall deem desirable to carry it into effect.
(c) Any action of the Committee shall be final, conclusive and
binding on all persons, including the Company and its Subsidiaries and
shareholders, Participants and persons claiming rights from or through a
Participant.
(d) The Committee may delegate to officers or employees of the
Company or any Subsidiary, and to service providers, the authority, subject to
such terms as the Committee shall determine, to perform administrative functions
with respect to the Plan and Award agreements.
(e) Members of the Committee and any officer or employee of the
Company or any Subsidiary acting at the direction of, or on behalf of, the
Committee shall not be personally liable for any action or determination taken
or made in good faith with respect to the Plan, and shall, to the extent
permitted by law, be fully indemnified by the Company with respect to any such
action or determination.
5. Eligibility. Individuals eligible to receive Awards under the
-----------
Plan shall be the officers and other key employees of the Company and its
Subsidiaries selected by the Committee. In addition, all Non-Employee Directors
shall be eligible to receive Options as provided in Section 9 hereof.
6. Awards. Awards under the Plan may consist of Options, stock
------
awards or other awards based on the value of the Common Stock. Awards shall be
subject to the terms and conditions of the Plan and shall be evidenced by an
agreement containing such additional terms and conditions, not inconsistent with
the provisions of the Plan, as the Committee shall deem desirable.
7. Options. Options may be granted under the Plan in such form as
-------
the Committee may from time to time approve pursuant to terms set forth in an
Option agreement. The Committee may alter or waive, at any time, any term or
condition of an Option that is not mandatory under the Plan.
(a) Types of Options. Each Option agreement shall state whether or
----------------
not the Option will be treated as an Incentive Stock Option or Nonqualified
Stock Option.
(b) Option Price. The purchase price per share of the Common
------------
Stock purchasable under an Option shall be determined by the Committee, but in
the case of Incentive Stock Options, the Option price will be not less than 100%
of the Fair Market Value of the Common Stock on the date of the grant of the
Option and in the case of Incentive Stock Options granted to an employee owning
stock possessing more than
-5-
<PAGE>
10% of the total combined voting power of all classes of stock of the Company
and its Subsidiaries (a "10% Shareholder") the price per share specified in the
agreement relating to such Option shall not be less than 110% of the Fair Market
Value per share of the Common Stock on the date of grant.
(c) Option Period. The term of each Option shall be fixed by the
-------------
Committee, but no Option shall be exercisable after the expiration of 10 years
from the date the Option is granted, provided, however, that in the case of
-------- -------
Incentive Stock Options granted to 10% Shareholders, the term of such Option
shall not exceed 5 years from the date of grant.
(d) Exercisability. Each Option shall vest and become exercis able
--------------
at a rate determined by the Committee at or subsequent to grant; provided,
----------
however, that no Option granted under this Section 7 shall become exercisable
- -------
earlier than the time that the Plan is approved by the shareholders of the
Company in accordance with Section 21; provided, further, that upon the
--------- --------
occurrence of a Change in Control before such shareholder approval, all
Incentive Stock Options granted hereunder shall automatically become
Nonqualified Stock Options and all Options shall vest and become immediately
exercisable in accordance with Section 10.
(e) Method of Exercise. Options may be exercised, in whole or in
------------------
part, by giving written notice of exercise to the Company specifying the number
of shares of Common Stock to be purchased. Such notice shall be accompanied by
the payment in full of the Option purchase price. Such payment shall be made:
(a) in cash, or (b) to the extent authorized by the Committee, by surrender of
shares of Common Stock owned by the holder of the Option, or (c) through
simultaneous sale through a broker of shares acquired on exercise, as permitted
under Regulation T of the Federal Reserve Board, or (d) through additional
methods prescribed by the Committee, or (e) by a combination of any such
methods.
8. Stock Awards. Subject to such performance and employment
------------
conditions as the Committee may determine, awards of Common Stock or awards
based on the value of the Common Stock may be granted either alone or in
addition to Options granted under the Plan. Any Awards under this Section 8 and
any Common Stock covered by any such Award may be forfeited to the extent so
provided in the Award agreement, as determined by the Committee.
9. Non-Employee Director Stock Options.
-----------------------------------
(a) Initial Grant. Nonqualified Stock Options to purchase 30,000
-------------
shares of Common Stock shall be granted automatically to each Non-Employee
Director who is a Non-Employee Director on the day the Board approves the
adoption of the Plan. With respect to each person who becomes a Non-Employee
Director after such
-6-
<PAGE>
date, Nonqualified Stock Options to purchase 30,000 shares of Common Stock shall
be granted automatically to each such Non-Employee Director on the day he or she
first becomes a Non-Employee Director.
(b) Subsequent Options. In addition to the Nonqualified Stock
------------------
Options granted to Non-Employee Directors under Section 9(a), Nonqualified Stock
Options to purchase 10,000 shares of Common Stock shall be granted automatically
to each Non-Employee Director, effective on the third anniversary date on which
such director was granted an Initial Option under Section 9(a) and on each
anniversary date thereafter; provided, however, he or she continues to serve as
-------- -------
a Non-Employee Director on such date.
(c) Option Price. The purchase price for each Option granted under
------------
this Section 9 to a Non-Employee Director shall be the Fair Market Value of the
Common Stock on the date of grant of the Option.
(d) Exercisability. Each Initial Option granted under Section 9(a)
--------------
shall become exercisable and vest on the first anniversary of the date of grant
of such Option; provided, however, that no Option shall become exercisable
-------- -------
earlier than the time that the Plan is approved by the shareholders of the
Company in accordance with Section 21; provided, further, that upon the
--------- -------
occurrence of a Change in Control before such shareholder approval, all Options
shall vest and become immediately exercisable in accordance with Section 10.
Subsequent Options granted under Section 9(b) shall become exercisable and vest
1 year from the date of the grant thereof.
(e) Method of Exercise. Each Option granted under this Section 9
------------------
may be exercised in the same manner as provided in Section 7(e).
(f) Option Period. Each Option granted under this Section 9 shall
-------------
terminate 10 years from the date of grant unless sooner terminated by reason of
termination of service as a director of the Company and its Subsidiaries.
(g) Termination of Director Status.
------------------------------
(i) In the event of termination of service as a director of
the Company and its Subsidiaries for any reason other than death or
permanent disability (as determined by the Committee), an Option
granted under this Section 9 (to the extent exercisable as of the date
of termination) shall be exercisable for 90 days following such
termination (but in no event beyond the term of the Option), and shall
thereafter terminate.
-7-
<PAGE>
(ii) In the event of the death of a Non-Employee Director
while a director of the Company or any Subsidiaries, the Option (to
the extent exercisable as of the date of death), shall be exercisable
by any prior transferee or by the Non-Employee Director's designated
beneficiary, or if none, the person(s) to whom such Non-Employee
Director's rights under the Option are transferred by will or the laws
of descent and distribution for 1 year following the date of death
(but in no event beyond the term of the Option), and shall thereafter
terminate.
(iii) In the event of the termination of service as a
director of the Company and its Subsidiaries due to permanent
disability (as determined by the Committee), the Option (to the extent
exercisable as of the date of termination), shall be exercisable for 3
years following such termination of service (but in no event beyond
the term of the Option), and shall thereafter terminate.
(h) Except as expressly provided in this Section 9, any Option
granted to a Non-Employee Director hereunder shall be subject to the terms and
conditions of the Plan.
10. Change in Control. Upon the occurrence of a Change in
-----------------
Control, all Options shall automatically become vested and exercisable in full
and all restrictions or conditions, if any, on any stock awards granted
hereunder shall automatically lapse. The Committee may, in its discretion,
include such further provisions and limitations in any agreement documenting
such Options as it may deem equitable and in the best interests of the Company.
11. Forfeiture. Notwithstanding anything in the Plan to the
----------
contrary, the Committee may provide in any Award agreement that in the event of
a serious breach of conduct by an employee or former employee (including,
without limitation, any conduct prejudicial to or in conflict with the Company
or its Subsidiaries), or any activity of any employee or former employee in
competition with any of the businesses of the Company or any Subsidiary, (a)
cancel any outstanding Award granted to such employee or former employee, in
whole or in part, whether or not vested, and/or (b) if such conduct or activity
occurs within 1 year following the exercise or payment of an Award, require such
employee or former employee to repay to the Company any gain realized or payment
received upon the exercise or payment of such Award (with such gain or payment
valued as of the date of exercise or payment). Such cancellation or repayment
obligation shall be effective as of the date specified by the Committee. Any
repayment obligation may be satisfied in Common Stock or cash or a combination
thereof (based upon the Fair Market Value of Common Stock on the day prior to
the date of payment), and the Committee may provide for an offset to any future
payments owed by the Company or any Subsidiary to the employee or former
employee if necessary to satisfy
-8-
<PAGE>
the repayment obligation. The determination of whether an employee or former
employee has engaged in a serious breach of conduct or any activity in
competition with any of the businesses of the Company or any Subsidiary shall be
determined by the Committee in good faith and in its sole discretion. This
Section 11 shall have no application following a Change in Control.
12. Withholding. The Company shall have the right to deduct from
-----------
any payment to be made pursuant to the Plan the amount of any taxes required by
law to be withheld therefrom, or to require a Participant to pay to the Company
in cash such amount required to be withheld prior to the issuance or delivery of
any shares of Common Stock or the payment of cash under the Plan. Such taxes may
be paid by (a) delivering previously owned shares of Common Stock or (b) having
the Company retain shares of Common Stock which would otherwise be delivered
upon exercise or payment of Awards or (c) any combination of a cash payment or
the methods set forth in (a) and (b) above. For purposes of (a) and (b) above,
shares of Common Stock shall be valued at Fair Market Value determined as of the
day immediately prior to exercise or payment. If and to the extent authorized by
the Committee, the Company may, upon election by a Participant, withhold from
any distribution of Common Stock hereunder shares of Common Stock with a Fair
Market Value in excess of the Participant's required withholding obligation.
13. Nontransferability, Beneficiaries. Unless otherwise determined
---------------------------------
by the Committee with respect to the transferability of Nonqualified Stock
Options by a Participant to his Immediate Family Members (or to trusts or
partnerships or limited liability companies established for such family
members), no Award shall be assignable or transferable by the Participant,
otherwise than by will or the laws of descent and distribution or pursuant to a
beneficiary designation, and Options shall be exercisable, during the
Participant's lifetime, only by the Participant (or by the Participant's legal
representatives in the event of the Participant's incapacity). Each Participant
may designate a beneficiary to exercise any Option held by the Participant at
the time of the Participant's death or to be assigned any other Award
outstanding at the time of the Participant's death. If no beneficiary has been
named by a deceased Participant, any Award held by the Participant at the time
of death shall be transferred as provided in his will or by the laws of descent
and distribution. Except in the case of the holder's incapacity, an Option may
only be exercised by the holder thereof.
14. No Right to Employment. Nothing contained in the Plan or in
----------------------
any Award under the Plan shall confer upon any employee any right with respect
to the continuation of employment with the Company or any of its Subsidiaries,
or interfere in any way with the right of the Company to terminate his or her
employment at any time. Nothing contained in the Plan shall confer upon any
employee or other person any claim or right to any Award under the Plan.
-9-
<PAGE>
15. Governmental Compliance. Each Award under the Plan shall be
-----------------------
subject to the requirement that if at any time the Committee shall determine
that the listing, registration or qualification of any shares issuable or
deliverable thereunder upon any securities exchange or under any Federal or
state law, or the consent or approval of any governmental regulatory body, is
necessary or desirable as a condition thereof, or in connection therewith, no
such grant or award may be exercised or shares issued or delivered unless such
listing, registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Committee.
16. Adjustments. In the event of any change in the outstanding
-----------
shares of Common Stock by reason of any stock dividend or split,
recapitalization, merger, consolidation, spinoff, combination or exchange of
shares or other corporate change, or any distribution to holders of Common Stock
other than regular cash dividends, the number or kind of shares available for
Options and Awards under the Plan may be adjusted by the Committee as it shall
in its sole discretion deem equitable and the number and kind of shares subject
to any outstanding Awards granted under the Plan and the purchase price thereof
may be adjusted by the Committee as it shall in its sole discretion deem
equitable to preserve the value of such Awards.
17. Award Agreement. Each Award under the Plan shall be evidenced
---------------
by an agreement setting forth the terms and conditions, as determined by the
Committee, which shall apply to such Award, in addition to the terms and
conditions specified in the Plan.
18. Amendment. The Board may amend, suspend or terminate the Plan
---------
or any portion thereof at any time, provided that (a) no amendment shall be made
without shareholder approval if such approval is necessary to comply with any
applicable law, regulation or stock exchange rule and (b) except as provided in
Section 16, no amendment shall be made that would adversely affect the rights of
a Participant under an Award theretofore granted, without such Participant's
written consent.
19. General Provisions.
------------------
(a) The Committee may require each Participant purchasing or
acquiring shares pursuant to an Award under the Plan to represent to and agree
with the Company in writing that such Participant is acquiring the shares for
investment and without a view to distribution thereof.
(b) All certificates for shares of Common Stock delivered
under the Plan pursuant to any Award shall be subject to such stock-transfer
orders and other restrictions as the Committee may deem advisable under the
rules, regulations, and other requirements of the Securities and Exchange
Commission, any stock exchange upon which the Common Stock is then listed, and
any applicable Federal or state securities
-10-
<PAGE>
law, and the Committee may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions. If the
Committee determines that the issuance of shares of Common Stock hereunder is
not in compliance with, or subject to an exemption from, any applicable Federal
or state securities laws, such shares shall not be issued until such time as the
Committee determines that the issuance is permissible.
(c) It is the intent of the Company that the Plan satisfy, and be
interpreted in a manner that satisfies, the applicable requirements of Rule 16b-
3 as promulgated under Section 16 of the Exchange Act so that Participants will
be entitled to the benefit of Rule 16b-3, or any other rule promulgated under
Section 16 of the Exchange Act, and will not be subject to short-swing liability
under Section 16. Accordingly, if the operation of any provision of the Plan
would conflict with the intent expressed in this Section 19(c), such provision
to the extent possible shall be interpreted and/or deemed amended so as to avoid
such conflict.
(d) Except as otherwise provided by the Committee in the
applicable grant or Award agreement, a Participant shall have no rights as a
shareholder with respect to any shares of Common Stock subject to Options until
a certificate or certificates evidencing shares of Common Stock shall have been
issued to the Participant and, subject to Section 16, no adjustment shall be
made for dividends or distributions or other rights in respect of any share for
which the record date is prior to the date on which Participant shall become the
holder of record thereof.
(e) The law of the State of New Jersey shall apply to all Awards
and interpretations under the Plan regardless of the effect of such state's
conflict of laws principles.
(f) Where the context requires, words in any gender shall include
any other gender.
20. Term of Plan. Subject to earlier termination pursuant to Section
------------
18, the Plan shall have a term of 10 years from its Effective Date.
21. Effective Date; Approval of Shareholders. The Plan is effective
----------------------------------------
as of July 24, 1997. The Plan is conditioned upon the approval of the
shareholders of the Company, and failure to receive their approval shall render
the Plan and all outstanding Awards issued thereunder void and of no effect;
provided, however, that this limitation shall have no effect upon the occurrence
- -------- -------
of a Change in Control before such shareholder approval, and all Awards shall be
exercisable in accordance with their terms.
-11-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-START> JAN-01-1997 JAN-01-1996
<PERIOD-END> JUN-30-1997 JUN-30-1996
<CASH> 10,505 11,657
<SECURITIES> 3,356 11,985
<RECEIVABLES> 20,801 18,588
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 39,217 44,742
<PP&E> 3,476 3,401
<DEPRECIATION> 724 1,007
<TOTAL-ASSETS> 46,183 51,245
<CURRENT-LIABILITIES> 10,146 12,830
<BONDS> 0 0
0 0
0 0
<COMMON> 32,170 31,520
<OTHER-SE> 1,687 4,787
<TOTAL-LIABILITY-AND-EQUITY> 46,183 51,245
<SALES> 0 0
<TOTAL-REVENUES> 34,709 31,484
<CGS> 0 0
<TOTAL-COSTS> 17,526 13,162
<OTHER-EXPENSES> 16,612 17,639
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 678 1,090
<INCOME-TAX> 297 1,426
<INCOME-CONTINUING> 381 (336)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 381 (336)
<EPS-PRIMARY> .03 (.03)
<EPS-DILUTED> .03 (.03)
</TABLE>
