SCHEDULE 14A
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
BORN LePORE & ASSOCIATES, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
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Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
BORON, LePORE & ASSOCIATES, INC.
1800 VALLEY ROAD
WAYNE, NEW JERSEY 07470
Dear Stockholder:
April 22, 2002
You are cordially invited to attend the Annual Meeting of Stockholders of
Boron, LePore & Associates, Inc. (the "Annual Meeting") to be held on Wednesday,
May 22, 2002, at 10:00 a.m. local time at the Marriott Newark Airport, Newark
International Airport, Newark, New Jersey.
The Annual Meeting has been called for the purpose of (1) electing three
Class II Directors for three-year terms; (2) amending the Company's Third
Amended and Restated Certificate of Incorporation to change the name of the
Company to BLP Group Companies, Inc.; (3) considering and voting upon a proposal
to approve a 2002 Stock Option and Incentive Plan (the "Plan") authorizing the
issuance of up to 1,200,000 shares of common stock; and (4) considering and
voting upon such other business as may properly come before the Annual Meeting
or any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on April 3, 2002 as
the record date for determining stockholders entitled to notice of, and to vote
at, the Annual Meeting and any adjournments or postponements thereof.
The Board of Directors of the Company recommends that you vote "FOR" the
election of the nominees of the Board of Directors as Directors of the Company,
"FOR" the amendment to the Third Amended and Restated Certificate of
Incorporation and "FOR" the approval of the Plan.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE REQUESTED TO
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED
ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU
ATTEND THE ANNUAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU HAVE
PREVIOUSLY RETURNED YOUR PROXY CARD.
Sincerely,
Patrick G. LePore
Chairman and Chief Executive Officer
BORON, LePORE & ASSOCIATES, INC.
1800 VALLEY ROAD
WAYNE, NEW JERSEY 07470
(973) 709-3000
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on Wednesday, May 22, 2002
Notice is Hereby Given that the Annual Meeting of Stockholders of Boron,
LePore & Associates, Inc. (the "Company") will be held on Wednesday, May 22,
2002, at 10:00 a.m. local time at the Marriott Newark Airport, Newark
International Airport, Newark, New Jersey (the "Annual Meeting"), for the
purpose of considering and voting upon:
1. The election of three Class II Directors for three-year terms;
2. The approval of an amendment to the Company's Third Amended and
Restated Certificate of Incorporation to change the name of the
Company;
3. The approval of a 2002 Stock Option and Incentive Plan authorizing the
issuance of up to 1,200,000 shares of Common Stock; and
4. Such other business as may properly come before the Annual Meeting and
any adjournments or postponements thereof.
Any action may be taken on the foregoing matters at the Annual Meeting on
the date specified above, or on any date or dates to which, by original or later
adjournment, the Annual Meeting may be adjourned.
The Board of Directors has fixed the close of business on April 3, 2002 as
the record date for determination of stockholders entitled to notice of, and to
vote at, the Annual Meeting and any adjournments or postponements thereof. Only
holders of Common Stock of record at the close of business on that date will be
entitled to notice of, and to vote at, the Annual Meeting and any adjournments
or postponements thereof.
You are requested to fill in and sign the enclosed Proxy Card, which is
being solicited by the Board of Directors, and to mail it promptly in the
enclosed postage-prepaid envelope. Any proxy delivered by a holder of Common
Stock may be revoked by a writing delivered to the Company stating that the
proxy is revoked or by delivery of a later dated proxy. Stockholders of record
of the Company's Common Stock who attend the Annual Meeting may vote in person,
even if they have previously delivered a signed proxy.
By Order of the Board of Directors
Patrick G. LePore
Chairman and Chief Executive Officer
Wayne, New Jersey
April 22, 2002
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE
REQUESTED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE
ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF
YOU ATTEND THE ANNUAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU
HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
BORON, LePORE & ASSOCIATES, INC.
1800 VALLEY ROAD
WAYNE, NEW JERSEY 07470
(973) 709-3000
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
To Be Held on May 22, 2002
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Boron, LePore & Associates, Inc. (the
"Company") for use at the Annual Meeting of Stockholders of the Company to be
held on Wednesday, May 22, 2002, at 10:00 a.m. local time at the Marriott Newark
Airport, Newark International Airport, Newark, New Jersey and any adjournments
or postponements thereof (the "Annual Meeting").
At the Annual Meeting, the stockholders of the Company will be asked to
consider and vote upon the following matters:
1. The election of three Class II Directors, each for a three-year
term, with each such term to continue until the annual meeting of
stockholders in 2005 and until such Director's successor is duly elected
and qualified;
2. The approval of an amendment to the Company's Third Amended and
Restated Certificate of Incorporation changing the Company's name to BLP
Group Companies, Inc. (the "Amendment");
3. The approval of the Company's 2002 Stock Option and Incentive Plan
(the "Plan") authorizing the issuance of up to 1,200,000 shares of the
Company's Common Stock; and
4. Such other business as may properly come before the meeting and any
adjournments or postponements thereof.
The Notice of Annual Meeting, Proxy Statement and Proxy Card are first
being mailed to stockholders of the Company on or about April 22, 2002 in
connection with the solicitation of proxies for the Annual Meeting. The Board of
Directors has fixed the close of business on April 3, 2002 as the record date
for the determination of stockholders entitled to notice of, and to vote at, the
Annual Meeting (the "Record Date"). Only holders of Common Stock of record at
the close of business on the Record Date will be entitled to notice of, and to
vote at, the Annual Meeting. As of the Record Date, there were approximately
11,677,341 shares of Common Stock outstanding and entitled to vote at the Annual
Meeting and approximately 31 stockholders of record. Each holder of a share of
Common Stock outstanding as of the close of business on the Record Date will be
entitled to one vote for each share held of record with respect to each matter
submitted at the Annual Meeting.
The presence, in person or by proxy, of a majority of the total number of
outstanding shares of Common Stock is necessary to constitute a quorum for the
transaction of business at the Annual Meeting. A quorum being present, the
affirmative vote of a plurality of the votes cast is necessary to elect each of
the nominees as Directors of the Company. With respect to Proposal 2 to amend
the Third Amended and Restated Certificate of Incorporation, the affirmative
vote of a majority of the total votes eligible to be cast is required to approve
the Amendment. With respect to Proposal 3, the affirmative vote of a majority of
the shares of Common Stock present or represented by proxy and entitled to vote
is required to approve the Plan.
Shares that reflect abstentions or "broker non-votes" (i.e., shares
represented at the meeting held by brokers or nominees as to which instructions
have not been received from the beneficial owners or persons entitled to vote
such shares and with respect to which the broker or nominee does not have
discretionary voting power to vote such shares) will be counted for purposes of
determining whether a quorum is present for the transaction of business at the
meeting and are not counted as entitled to vote on a
nondiscretionary proposal. With respect to the election of Directors, votes may
be cast in favor of or withheld from the nominee; votes that are withheld will
be excluded entirely from the vote and will have no effect. Broker non-votes
will also have no effect on the outcome of the election of the Directors. With
respect to Proposal 2, abstentions and broker non-votes will have the effect of
a vote against the Amendment. With respect to Proposal 3, abstentions will have
the effect of a vote against approval of the Plan and broker non-votes will have
no effect on approval of the Plan.
Stockholders of the Company are requested to complete, date, sign and
return the accompanying Proxy Card in the enclosed envelope. Common Stock
represented by properly executed proxies received by the Company and not revoked
will be voted at the Annual Meeting in accordance with the instructions
contained therein. If instructions are not given therein, properly executed
proxies will be voted "FOR" the election of the nominees for Director listed in
this Proxy Statement, "FOR" the approval of the amendment to the Third Amended
and Restated Certificate of Incorporation and "FOR" the approval of the Plan. It
is not anticipated that any matters other than the election of Directors, the
approval of the Amendment and the approval of the Plan will be presented at the
Annual Meeting. If other matters are presented, proxies will be voted in
accordance with the discretion of the proxy holders.
Any properly completed proxy may be revoked at any time before it is voted
on any matter (without, however, affecting any vote taken prior to such
revocation) by giving written notice of such revocation to the Secretary of the
Company, or by signing and duly delivering a proxy bearing a later date, or by
attending the Annual Meeting and voting in person. Attendance at the Annual
Meeting will not, by itself, revoke a proxy.
The Annual Report of the Company, including financial statements for the
fiscal year ended December 31, 2001 ("Fiscal 2001"), is being mailed to
stockholders of the Company concurrently with this Proxy Statement. The Annual
Report, however, is not a part of the proxy solicitation material.
PROPOSAL I
ELECTION OF DIRECTORS
The Board of Directors of the Company consists of nine members and is
divided into three classes, with three Directors in each of Class I, Class II
and Class III. Directors serve for three-year terms with one class of Directors
being elected by the Company's stockholders at each annual meeting.
At the Annual Meeting, three Class II Directors will be elected to serve
until the annual meeting of stockholders in 2005 and until each respective
Director's successor is duly elected and qualified. The Board of Directors has
nominated Joseph E. Smith, Melvin Sharoky and Steven M. Freeman for re-election
as the Class II Directors. Unless otherwise specified in the proxy, it is the
intention of the persons named in the proxy to vote the shares represented by
each properly executed proxy for the re-election of Messrs. Smith, Sharoky and
Freeman as Directors. The nominees have agreed to stand for re-election and to
serve, if elected, as Directors. However, if any person nominated by the Board
of Directors fails to stand for election or is unable to accept election, the
proxies will be voted for the election of such other person as the Board of
Directors may recommend.
Vote Required For Approval
A quorum being present, the affirmative vote of a plurality of the votes
cast is necessary to elect each of the nominees as a Director of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR THE ELECTION OF THE
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NOMINEES OF THE BOARD OF DIRECTORS AS DIRECTORS OF THE COMPANY.
INFORMATION REGARDING DIRECTORS
The Board of Directors of the Company held five meetings during Fiscal 2001
and each of the incumbent Directors attended all of the meetings. The Board of
Directors has established an Audit Committee (the "Audit Committee") and a
Compensation Committee (the "Compensation Committee"). The Audit Committee
recommends the firm to be appointed as independent accountants to audit
financial statements and to perform services related to the audit, reviews the
scope and results of the audit with the independent accountants, reviews with
management and the independent accountants the Company's annual operating
results, considers the adequacy of the internal accounting procedures and
considers the effect of such procedures on the accountants' independence, and
performs all of its related duties and obligations as set forth in the Audit
Committee Charter. The Compensation Committee reviews and recommends the
compensation arrangements for officers and other senior level employees, reviews
general compensation levels for other employees as a group, determines the
options or stock to be granted to
2
eligible persons under the Company's stock option and grant plans and takes such
other action as may be required in connection with the Company's compensation
and incentive plans. The Audit Committee consists of Roger Boissonneault, Melvin
Sharoky, and Ronald M. Nordmann and held four meetings during Fiscal 2001. The
Compensation Committee consists of Joseph E. Smith and John A. Staley, IV and
held five meetings during Fiscal 2001.
Non-employee Directors (the "Independent Directors") receive a fee of
$3,000 for each meeting of the Board of Directors and $1,500 for each committee
meeting that they attend, and each Director is reimbursed for travel and other
expenses incurred in attending meetings. During Fiscal 2001 each Independent
Director was granted options to purchase 5,000 shares of Common Stock and upon
joining the Board, Carter H. Eckert was granted options to purchase an
additional 10,000 shares of Common Stock.
Set forth below is certain information regarding the Directors of the
Company, including the Class II Directors who have been nominated for election
at the Annual Meeting, based on information furnished by them to the Company.
Director
Name Age Since
---- --- --------
Class II--Nominees for Election
Joseph E. Smith(2)* ........... 63 1997
Melvin Sharoky(1)* ............ 51 1999
Steven M. Freeman* ............ 54 1999
Class III--Term Expires in 2003
Patrick G. LePore ............. 47 1996
Roger Boissonneault(1) ........ 53 1997
Carter H. Eckert .............. 59 2002
Class I--Term Expires in 2004
John A. Staley, IV(2) ......... 58 1997
John T. Spitznagel ............ 60 1999
Ronald M. Nordmann(1) ......... 60 2000
* Nominee for re-election.
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
The principal occupation and business experience for at least the last five
years for each Director of the Company is set forth below.
Patrick G. LePore joined the Company in 1985 after six years at Hoffmann-La
Roche, a pharmaceutical company, where he worked as a product manager from 1982
to 1983 and as a product director from 1983 to 1985. Mr. LePore also served as
President of the Company from 1992 to 1999. Mr. LePore has been the Chief
Executive Officer of the Company since January 1992 and the Chairman of the
Board since December 1996.
Steven M. Freeman joined the Company as Chief Operating Officer, President
and a member of its Board of Directors in October 1999. Mr. Freeman served as
Senior Vice President, Marketing and Sales of Knoll Pharmaceutical Company, the
US division of BASF Pharma, from April 1995 until October 1999 with overall
responsibility for Knoll's marketing and sales effort. From March 1995 until
joining the Company in 1999, Mr. Freeman was also Vice President, Sales and
Marketing for Boots Pharmaceuticals, Inc., another division of BASF Pharma. From
September 1990 through March 1995, Mr. Freeman held leadership positions with
Boots Pharmaceuticals, Inc., eventually being appointed Vice President, Sales
and Marketing until the merger of Boots Pharmaceutical, Inc. with BASF Pharma in
1995. Mr. Freeman also served as Executive Vice President/General Manager at
McCann Healthcare, Inc. and he has held marketing positions with Dorsey
Laboratories, a division of Sandoz Pharmaceutical, Inc. and the Flint
Laboratories Division of Travenol Laboratories, Inc. Mr. Freeman is a member of
the Board of Trustees of Caldwell College.
3
Roger Boissonneault has served as a Director of the Company since April
1997 and is the President of Warner-Chilcott Laboratories, Inc., a
pharmaceutical company. Before becoming President of Warner-Chilcott
Laboratories, Inc. in April 1996, he was associated with Warner-Lambert Co., the
former parent company of Warner Chilcott, since 1976, most recently as Vice
President, Female Health Care from October 1991 to January 1994 and as Vice
President and General Manager from January 1994 to April 1996. Mr. Boissonneault
also serves as a director of Galen Holdings PLC.
Carter H. Eckert joined the Board of Directors in January 2002. Mr. Eckert
served as President and Chief Executive Officer of Knoll Pharmaceutical Company,
a division of BASF Pharma, from June 1995 until March 2001. Prior to BASF
Pharma, Mr. Eckert was President and Chief Executive Officer of Boots
Pharmaceuticals, Inc. from October 1988 until May 1995 and was Executive Vice
President and Chief Operating Officer of Boots Pharmaceuticals, Inc. from May
1985 to September 1988. Mr. Eckert also held the position of President of Baxter
Travenol Laboratories' Pharmaceutical Products Division from June 1979 until
April 1985. Mr. Eckert currently serves as a director of OraSure Technologies,
Inc. and as a trustee of Caldwell College.
Ronald M. Nordmann joined the Board on April 13, 2000. Mr. Nordmann has
previously served as a non-executive director of Roberts Pharmaceutical
Corporation since May 1999 and has been a financial analyst in healthcare
securities since 1971. Mr. Nordmann was a portfolio manager and partner at
Deerfield Management from September 1994 until December 1999. He has held senior
positions with PaineWebber, Oppenheimer & Co., F. Eberstadt & Co., and
Warner-Chilcott Laboratories, a division of Warner-Lambert. Since November of
2000, Mr. Nordmann has held the position of Co-President of Global Health
Associates, LLC. Mr. Nordmann also serves as a director of Shire Pharmaceuticals
Group plc., Guilford Pharmaceuticals, Inc., and Pharmaceutical Resources, Inc.
In addition, Mr. Nordmann is a trustee of The Johns Hopkins University and a
member of the Advisory Board of Salu, Inc.
Melvin Sharoky joined the Board of Directors in February 1999. Since 1995,
Dr. Sharoky has been President of Somerset Pharmaceuticals, Inc. Beginning in
February 1993, Dr. Sharoky served as President and Chief Executive Officer of
Circa Pharmaceuticals, Inc. Following the merger of Circa Pharmaceuticals, Inc.
with Watson Pharmaceuticals, Inc. in July 1995, Dr. Sharoky served as President
of Watson Pharmaceuticals, Inc. and Chief Executive Officer of Circa
Pharmaceuticals, Inc., each until January 1998. Mr. Sharoky also serves as a
director of Andrx Corporation and Insmed Incorporated.
Joseph E. Smith served in various positions with Warner-Lambert Co., a
pharmaceutical company, from March 1989 until his retirement in September 1997.
He was a corporate vice president at Warner-Lambert and served as a member of
the office of the Chairman and as a member of the firm's management committee.
He also served as President, Pharmaceuticals (Parke-Davis) and President,
Shaving Products (Schick and Wilkinson Sword). Mr. Smith is also a director of
WebMD Corporation.
John T. Spitznagel joined the Board of Directors in September 1999. Mr.
Spitznagel served as President and Chief Executive Officer of Roberts
Pharmaceutical from September 1997 until December 1999 and has served as a
director of Roberts since July 1996. Mr. Spitznagel has served as President of
Reed and Carnrick and as Chief Executive Officer of BioCryst Pharmaceuticals,
Inc. Mr. Spitznagel has held various positions with Wyeth-Ayerst Laboratories,
Roche Laboratories and Warner-Chilcott Laboratories. Since November of 2000, Mr.
Spitznagel has held the position of Co-President of Global Health Associates,
LLC. Mr. Spitznagel also serves as a director of Questcor Pharmaceuticals, Inc.,
and is a trustee of Rider University.
John A. Staley, IV has served as a Director of the Company since May 1997.
Mr. Staley was Chief Executive Officer of Federated Research Corp., an
investment management firm and a subsidiary of Federated Investors Inc. which
is, in turn, a wholly owned subsidiary of Federated Investors, a Delaware
business trust, from 1984 through November 1994 when he retired. Upon his
retirement, Mr. Staley worked as a self-employed financial advisor from November
1994 to November 1996 and has been the Chief Executive Officer of Staley Capital
Advisers, Inc., an investment advisory firm, from November 1996 to present. He
is also a director of several private companies and a trustee of Duquesne
University and the Children's Hospital of Pittsburgh.
4
EXECUTIVE OFFICERS
The principal occupation and business experience for at least the last five
years for each current executive officer is set forth below (except for Messrs.
LePore and Freeman, whose business experience is discussed above).
Name Age Position
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Patrick G. LePore.......... 47 Chairman of the Board and Chief Executive
Officer
Steven M. Freeman.......... 54 President and Chief Operating Officer
Anthony J. Cherichella..... 34 Executive Vice President, Chief Financial
Officer, Secretary and Treasurer
Each of the officers holds his respective office until the regular annual
meeting of the Board of Directors following the annual meeting of stockholders
and until his successor is elected and qualified or until his earlier
resignation or removal.
Anthony J. Cherichella joined the Company as Executive Vice President,
Chief Financial Officer, Secretary and Treasurer in May 2000. Mr. Cherichella
joined the Company after ten years with Arthur Andersen LLP, most recently as
Senior Manager within the Metro New York Audit Division.
5
EXECUTIVE COMPENSATION
The following sections of this Proxy Statement set forth and discuss the
compensation paid or awarded during the last three years to the Company's Chief
Executive Officer and the four most highly compensated executive officers at the
end of Fiscal 2001 who earned in excess of $100,000 (collectively, the "Named
Executive Officers").
Summary Compensation
Summary Compensation. The following summary compensation table sets forth
information concerning compensation for services rendered in all capacities
awarded to, earned by or paid to the Named Executive Officers during each of the
last three fiscal years.
Summary Compensation Table
Long-Term
Compensation
Awards
Shares
Annual Compensation Underlying
----------------------------------------- Restricted Options All Other
Other Annual Stock Award(s) Granted Compensation
Name and Principal Position Year Salary($) Bonus($) Compensation($)(1) ($) (#) ($)(2)(3)
--------------------------- ---- --------- -------- ------------------ -------------- ------------ ------------
Patrick G. LePore.............. 2001 375,000 331,215 51,347(4) -- 60,000 121,247
Chairman and Chief 2000 347,751 210,000 53,341(4) -- 125,000 27,549
Executive Officer 1999 347,957 150,000 45,947(4) -- 175,000 30,540
Steven M. Freeman(5)........... 2001 355,000 -- 14,378(4) 714,000(7) 246,000 78,873
President and Chief 2000 332,751 362,506 12,827(4) -- 80,000 8,251
Operating Officer 1999 70,708 75,000 1,500 -- 150,000 439
Anthony J. Cherichella(6)...... 2001 220,000 -- 35,466(4) -- 123,000 41,520
Executive Vice President, 2000 128,549 63,000 12,581(4) -- 100,000 520
Chief Financial Officer, 1999 -- -- -- -- -- --
Secretary and Treasurer
(1) For 2001, includes an automobile allowance of $19,072 for Mr. LePore,
$13,950 for Mr. Freeman and $11,650 for Mr. Cherichella. For 2000, includes
an automobile allowance of $19,072 for Mr. LePore, $9,000 for Mr. Freeman,
and $5,200 for Mr. Cherichella. For 1999, includes an automobile allowance
of $17,914 for Mr. LePore and $1,500 for Mr. Freeman.
(2) Represents insurance premiums paid by the Company.
(3) For 2001, includes the following present value costs of the Company's
portion of 2001 premiums for split-dollar life insurance of approximately
$85,000 for Mr. LePore, $74,000 for Mr. Freeman and $41,000 for Mr.
Cherichella.
(4) For 2001, includes club dues of $32,275 for Mr. LePore, $428 for Mr.
Freeman and $23,816 for Mr. Cherichella. For 2000, includes club dues of
$34,269 for Mr. LePore, $3,827 for Mr. Freeman and $7,381 for Mr.
Cherichella. For 1999, includes club dues of $28,033 for Mr. LePore.
(5) Mr. Freeman joined the Company in October 1999.
(6) Mr. Cherichella joined the Company in May 2000.
(7) For 2001, represents the dollar value (net of any consideration paid by Mr.
Freeman) of 50,000 shares of restricted Common Stock granted to Mr. Freeman
as determined by multiplying the total amount of restricted shares awarded,
by the closing price of $14.29 on August 6, 2001, the grant date. The
restricted shares vest in three equal annual installments beginning on
August 6, 2001 and become fully vested upon the closing of a change of
control transaction. Mr. Freeman is entitled to receive dividends declared
on the restricted shares if the Company declares a dividend on its Common
Stock.
6
Executive Bonus Plan. The Company has an executive bonus plan to provide
incentive bonuses to executive officers of the Company for the attainment of
financial and other objectives. Target awards are expressed as a percentage of
the executive's base salary. Actual awards are based on the target award as
adjusted for Company and individual performance. Company performance is measured
by annual revenue and earnings per share targets established at the beginning of
each fiscal year. Individual performance is based on a subjective evaluation of
the executive's personal performance.
Option Grants. The following table sets forth certain information
concerning the grant of options to purchase Common Stock of the Company to the
Named Executive Officers who received such grants during Fiscal 2001.
Option Grants in Fiscal Year 2001
Potential Realizable
Value at Assumed Annual
Individual Grants Rates of Stock Price
-------------------------------------------------------------------------- Appreciation for Option
Number of Securities Percent of Total Exercise or Term(1)
Underlying Options Options Granted to Base Price Expiration -----------------------
Name Granted(#)(2) Employees in 2001(%) Per Share($/Sh) Date 5% ($) 10% ($)
------------------------ -------------------- -------------------- --------------- ---------- --------- ---------
Patrick G. LePore....... 60,000(3) 3.29 14.100 8/3/11 532,095 1,348,308
Steven M. Freeman....... 50,000(3) 2.74 14.100 8/3/11 443,371 1,123,588
196,000(4) 10.74 12.450 12/26/11 1,534,629 3,889,050
Anthony J.
Cherichella.......... 40,000(3) 2.19 14.100 8/3/11 354,697 898,871
83,000(5) 4.55 12.450 12/26/11 649,868 1,646,894
(1) Represents the value of the options granted at the end of the option terms
if the price of the Company's Common Stock were to appreciate annually by
5% and 10% respectively. There is no assurance that the stock price will
appreciate at the rates shown in the table.
(2) All options are subject to the employee's continued employment and
terminate ten years after the grant date. All options were granted at fair
market value as determined by the Board of Directors or the Compensation
Committee of the Board of Directors.
(3) Such options become exercisable in five equal annual installments,
beginning on August 3, 2002.
(4) Such options become exercisable 79,250 on each of the first and second
anniversaries, and 18,750 on each of the third and fourth anniversaries of
the grant date, beginning on December 26, 2002.
(5) Such options become exercisable 29,000 on each of the first and second
anniversaries, and 12,500 on each of the third and fourth anniversaries of
the grant date, beginning on December 26, 2002.
Option Exercises and Option Values. No stock options were exercised by the
Named Executive Officers during 2001. The following table sets forth information
concerning the number and value of unexercised options to purchase Common Stock
of the Company held by the Named Executive Officers as of December 31, 2001.
7
Aggregate Option Exercises in Fiscal Year 2001 and
Fiscal Year-End 2001 Option Values
Value of
Unexercised
Number of Securities in-the-money
Underlying Options at Options at Fiscal
Shares Fiscal Year-End Year-End ($)(1)
Acquired on Value --------------------- -----------------
Name Exercise(#) Realized($)(2) Exercisable Unexercisable Exercisable Unexercisable
---------------------------- ----------- -------------- ----------- ------------- ----------- -------------
Patrick G. LePore .......... -- -- 325,000 235,000 693,125 656,000
Steven M. Freeman .......... -- -- 91,000 385,000 631,140 1,189,700
Anthony J. Cherichella ..... -- -- 23,000 200,000 126,795 540,925
(1) Based on the last reported sale price on the Nasdaq National Market on
December 31, 2001 ($13.79) less the applicable option exercise price.
(2) Value realized equals the aggregate market value of the shares acquired on
the exercise date(s), less the applicable aggregate option exercise
price(s).
Employment Agreements with Executive Officers
In March 1999, the Company entered into an employment agreement with
Patrick G. LePore. Pursuant to this agreement, Mr. LePore will receive an annual
base salary of $400,000 during 2002 and a target bonus of 75% of his base salary
pursuant to the Company's Executive Bonus Plan for 2002. The agreement was
initially for a four year period, ending March 31, 2003, and has been extended
through March 31, 2005. In the event of a termination of employment without
cause or a material breach by the Company, the agreement provides for severance
equal to two times Mr. LePore's base salary plus the higher of Mr. LePore's most
recently paid annual bonus (or his most recently established annual target
bonus, if higher). If Mr. LePore elects to terminate his employment with the
Company within thirty (30) days following a change of control of the Company (as
defined), or if Mr. LePore's employment is terminated by the Company without
cause or upon Mr. LePore's resignation for Good Reason (as defined), in either
case within eighteen months following a change in control of the Company, Mr.
LePore will be entitled to a lump sum payment equal to three times his current
salary (or his salary immediately prior to the change of control, if higher),
plus three times his highest bonus (as defined) plus an amount that will make
Mr. LePore whole after he pays all taxes due on the amounts he receives. Mr.
LePore's employment agreement provides that Mr. LePore may not engage in certain
competitive activities, which activities include peer influence meetings,
telemarketing activities, contract sales, field force logistics services and
outsource marketing involving pharmaceutical and healthcare companies without
the Company's consent for a period of two years (or three years in certain
circumstances) following his termination of employment with the Company.
The Company has entered into an employment agreement with Steven M.
Freeman. This agreement provides for an annual base salary of $375,000 for 2002
and a target bonus of 60% of base salary pursuant to the Company's Executive
Bonus Plan for 2002. Mr. Freeman's agreement currently terminates on October 1,
2003, subject to automatic 1 year renewals unless prior written notice to the
contrary is given. In the event of a termination of employment without cause or
for a material breach by the Company, the agreement provides for severance equal
to Mr. Freeman's base salary plus the full amount of the target bonus for the
year of termination, whether or not earned, as well as family medical and dental
insurance coverage for himself, his spouse or dependents for a period of
eighteen months from the date of such termination. If Mr. Freeman's employment
is terminated without cause or for Good Reason (as defined) within the eighteen
months following a change of control of the Company (as defined), Mr. Freeman
will be entitled to the continuation of his base salary through the second
anniversary of his termination, a lump sum payment of two times his target
bonus, plus an amount that will make Mr. Freeman whole after he pays all taxes
due on the amounts he receives. Mr. Freeman's employment agreement provides that
he may not engage in certain competitive activities for a period of one year
following his termination of employment with the Company.
The Company has entered into an employment agreement with Anthony J.
Cherichella. This agreement provides for an annual base salary of $275,000 for
2002 and a target bonus of 40% of base salary pursuant to the Company's
Executive Bonus Plan for 2002. Mr. Cherichella's agreement currently terminates
on April 30, 2003, subject to automatic 1 year renewals unless prior written
notice to the contrary is given. In the event of a termination of employment
without cause or for a material breach by the Company, the agreement provides
for severance equal to Mr. Cherichella's base salary plus the full amount of the
target bonus for the year of termination, whether or not earned, as well as
family medical and dental insurance coverage for himself, his spouse or
dependents for a period of eighteen months from the date of such termination. If
Mr. Cherichella's employment is terminated without cause or for Good Reason (as
defined) within the twelve months following a change of control of the Company
(as defined), Mr. Cherichella will be entitled to the continuation of his base
salary through the second anniversary of his termination and a lump sum payment
of two times his target bonus, plus an amount that will make Mr. Cherichella
whole after
8
he pays all taxes due on the amounts he receives. Mr. Cherichella's employment
agreement provides that he may not engage in certain competitive activities for
a period of one year following his termination of employment with the Company.
The Company has entered into indemnification agreements with each of its
Directors. These agreements provide that the Company shall indemnify each of the
Directors to the fullest extent permitted by law and advance the Directors'
expenses (subject to reimbursement if it subsequently determines that
indemnification is not permitted). Under these agreements, the Company is also
obligated to indemnify and advance expenses incurred by the Directors seeking to
enforce their rights under the agreements.
Report of the Compensation Committee
The Compensation Committee is responsible for the oversight of all of the
Company's compensation policies and practices including benefits and
perquisites. Compensation is defined as base salary, all forms of variable pay
and pay-for-performance, and stock options, restricted stock or any other plans
directly or indirectly related to the Company's stock. Members of the
Compensation Committee will be appointed from the Board of Directors annually at
the first meeting of the Board following the annual meeting of stockholders. Not
less than a majority of the Compensation Committee will consist of outside
Independent Directors. It is also envisioned that the composition of the
Compensation Committee will reflect the requirements of Rule 16b-3 under the
Securities Exchange Act of 1934 as in effect from time to time. In Fiscal 2001,
the members of the Compensation Committee were Mr. Staley and Mr. Smith.
Compensation Philosophy. The objective of the Company's Compensation
Committee is to provide compensation that will attract and retain executives,
motivate each executive toward the achievement of the Company's short and
long-term financial goals and objectives and recognize individual contributions
as well as overall business results. In order to achieve this objective, the
primary focus of the Compensation Committee has been on the competitiveness of
each of the key elements of executive compensation (base salary, bonus and stock
option grants) and the compensation package as a whole. In general, the
Compensation Committee believes that total compensation should reflect both the
relative performance of the Company among its peer group as listed in the Peer
Issuer Index and other public companies of similar size, as well as the
Committee's subjective assessment of the Company's performance as measured
against its own objectives. The Company's objectives include quantitative
factors that directly improve the Company's short-term financial performance and
qualitative factors that strengthen the Company's ability to enhance profitable
growth over the long-term, such as demonstrated leadership ability, management
development, insuring compliance with laws, regulations and Company policies,
and anticipating and responding to changing market and economic conditions.
Under the Company's executive bonus program, the Compensation Committee may
award annual cash bonuses to executive officers for the achievement of specified
performance goals for the Company and the individual. Each year, the
Compensation Committee sets for each officer the maximum cash bonus that may be
awarded that officer if maximum goals are achieved. For bonuses in respect of
2001, the goals were (1) attainment of total revenue targets, (2) attainment of
total earnings per share targets, and (3) an evaluation of management
performance. For the management performance factor in determining the cash bonus
to be paid to officers, the Committee will make a subjective evaluation of the
performance of the individual manager in accomplishing certain goals of the
Company. For 2002, the goals will be consistent with the goals set by the
Committee for 2001.
Stock options granted under the Company's stock option plans are designed
to provide long-term performance incentives and rewards tied to the price of the
Company's Common Stock and, generally, will vest over periods up to five years.
The Committee believes these vesting periods encourage option recipients to
remain with the Company. Such awards are determined on a discretionary basis.
Mr. LePore has authority to grant stock options from time to time to employees
of the Company, other than executive officers, subject to guidelines set by the
Compensation Committee. The Compensation Committee views stock options as a
means of aligning management and stockholder interests and expanding
management's long-term perspective.
Compensation Committee Procedures. The Company's executive compensation
program is administered under the direction of the Company's Compensation
Committee, none of the members of which is employed by the Company. Final
compensation determinations for each fiscal year are generally made at the end
of the fiscal year when financial statements for such year become available. At
that time, cash bonuses and grants of stock options, if any, are determined
based on the past year's performance, and base salaries and maximum cash bonuses
and long-term incentive awards for the following fiscal year are set. The
Compensation Committee determined annual cash bonuses under the executive bonus
program and awards of stock options for its officers and certain key employees,
as described in the Summary Compensation Table included in this Proxy Statement.
Compensation of the Chief Executive Officer. The Company believes that Mr.
LePore's base salary of $400,000 for 2002 is generally equivalent to the base
salary earned by the chief executive officers of similarly-sized companies. Mr.
LePore's bonus
9
and option grants were determined by the Compensation Committee applying the
criteria noted above for determining executive officer compensation.
Deductibility of Executive Compensation. The Compensation Committee's
executive compensation strategy is designed to be cost and tax effective.
Therefore, the Compensation Committee's policy is, where possible and considered
appropriate, to preserve corporate tax deductions, including the deductibility
of compensation paid to officers pursuant to Section 162(m) of the Internal
Revenue Code, while maintaining the flexibility to approve compensation
arrangements that it deems to be in the best interests of the Company and its
stockholders, but which may not always qualify for full tax deductibility.
Compensation Committee
Joseph E. Smith
John A. Staley, IV
Compensation Committee Interlocks and Insider Participation
All executive officer compensation decisions are made by the Compensation
Committee. The Compensation Committee reviews and makes recommendations to the
Board of Directors regarding the compensation for senior management and key
employees of the Company, including salaries and bonuses. The current members of
the Compensation Committee are Messrs. Smith and Staley, neither of whom is, or
was formerly, an officer or employee of the Company.
Report of the Audit Committee
In Fiscal 2001 the members of the Audit Committee were Roger Boissonneault,
Melvin Sharoky and Ronald M. Nordmann. Each of the members of the Audit
Committee is an independent director as defined by the National Association of
Securities Dealers. The Audit Committee has reviewed and discussed the Company's
audited financial statements for the fiscal year ended December 31, 2001 with
the Company's management. The Audit Committee has discussed with the Company's
internal and independent auditors the matters required to be discussed by
Statement on Auditing Standards No. 61. The Audit Committee has received the
written disclosures and the letter from Arthur Andersen required by Independence
Standards Board Standard No. 1 and discussed with Arthur Andersen its
independence. Based on the review and discussions described above, the Audit
Committee recommended to the Board of Directors that the Company's audited
financial statements be included in its Annual Report on Form 10-K for the
fiscal year ended December 31, 2001. A copy of the charter for the Audit
Committee adopted by the Board of Directors was previously attached as Appendix
A to the Company's 2001 Proxy Statement filed on April 24, 2001.
Audit Committee
Roger Boissonneault
Melvin Sharoky
Ronald M. Nordmann
10
Shareholder Return Performance Graph
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total shareholder return on the Company's Common Stock, based on
the market price of the Company's Common Stock with the total return of
companies included within the Nasdaq Stock Market Index and a peer group of
companies which compete against the Company in outsourcing for the
pharmaceutical industry (the "Peer Issuer Index"). The Peer Issuer Index is
comprised of Ventiv Health, Inc., PDI, Inc., Access Worldwide Communications,
Inc., Parexel International Corp., Quintiles Transnational Corp. and Covance,
Inc. The graph below depicts the period commencing September 24, 1997 and ended
December 31, 1997 and the years ended 1998, 1999, 2000 and 2001. The calculation
of total cumulative return assumes a $100 investment in the Company's Common
Stock, the Nasdaq Stock Market Index and the Peer Issuer Index on September 24,
1997, the first day of trading of the Company's Common Stock, and the
reinvestment of all dividends.
[CHART]
9/24/1997 12/31/1997 12/31/1998 12/31/1999 12/31/2000 12/31/2001
Boron, LePore & Associates, Inc. 100 120.88 151.65 28.57 46.15 60.95
Nasdaq Stock Market Index 100 93.06 129.94 241.16 146.41 116.92
Peer Issuer Index 100 103.7491 90.716 47.36 97.43 56.91
11
PROPOSAL II
AMEND THE
CERTIFICATE OF INCORPORATION
TO CHANGE THE NAME OF THE COMPANY
The Board of Directors has proposed and recommends to the Company's
stockholders the following amendment to Article I of the Company's Third Amended
and Restated Certificate of Incorporation to change the name of the Company from
Boron, LePore & Associates, Inc. to BLP Group Companies, Inc.:
"Article I of the Third Amended and Restated Certificate of
Incorporationof Boron LePore & Associates, Inc. be amended to
read as follows:
NAME: The name of the corporation is:
BLP Group Companies, Inc."
The Board has given consideration to a possible name change primarily
because the Company's present name no longer communicates the nature and scope
of its business. The Company conducts its operations through Medical Educations
Systems, Inc., Armand Scott, Inc., the Company's Strategem Plus division,
Strategic Implications International, Inc., Boron LePore, Inc.,
Consumer2Patient, Inc., Physician2Physician (a division of Consumer2Patient,
Inc.) and Medical Media Communications, Inc. The Board believes that the new
name will more accurately reflect the Company's business. Further, the Board
believes that the name, which has been used informally by the Company in the
past, is well recognized by corporate customers and could provide the Company
with more prominence. Accordingly, after review, the Board has decided to
recommend to the stockholders that the name of the Company be changed to BLP
Group Companies, Inc.
A copy of the Amendment is attached as Appendix A.
----------
The proposed amendment to the Third Amended and Restated Certificate of
Incorporation must be approved by the affirmative vote of the holders of a
majority of the votes entitled to be cast on this matter at the Annual Meeting.
IF THE CHANGE OF NAME IS APPROVED, STOCK CERTIFICATES WILL ONLY BE REQUIRED
TO BE ALTERED IN THE CASE OF SALE OR TRANSFER OF CERTIFICATES. THERE IS NO NEED
TO RETURN YOUR STOCK CERTIFICATES TO THE COMPANY.
It is anticipated the change in name would become effective immediately
after an affirmative vote by the stockholders upon proper application with the
relevant state.
The Board of Directors reserves the right to abandon the change in name,
whether before or after stockholder approval has been obtained, if circumstances
arise, which in the opinion of the Board of Directors, render proceeding with
the change in name inadvisable.
Recommendation
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF THE
---
AMENDMENT.
12
PROPOSAL III
APPROVAL OF
THE 2002 STOCK OPTION AND INCENTIVE PLAN
Proposal
The Board of Directors believes that stock options and other stock-based awards
play an important roll in the success of the Company because such awards serve
to attract, motivate and retain the caliber of employees, officers, directors
and other key persons necessary for our future growth and success. On February
5, 2002, our Board of Directors voted to adopt the 2002 Stock Option and
Incentive Plan (the "Plan") authorizing the issuance of up to 1,200,000 shares
of Common Stock (subject to increase beginning on each June 30 and December 31
by 5% of any net increase in shares outstanding in the previous 6 month period)
to employees, officers, directors, consultants and advisors pursuant to stock
option and other stock-based awards, provided that no more than 180,000 shares
are issued in the form of Unrestricted Stock Awards, Restricted Stock Awards or
Performance Share Awards (as such terms are defined in the Plan), unless the
Awards are granted in lieu of cash compensation or fees. Our Board of Directors
is recommending the Plan to the stockholders for approval. In addition, on
February 5, 2002, the Board of Directors also adopted the 2002 Employee Stock
Option and Incentive Plan (the "Non-Qualified Plan"). Under the Non-Qualified
Plan, the Company may issue up to 500,000 additional shares of Common Stock to
non-executive employees of the Company pursuant to non-qualified stock options.
This Non-Qualified Plan does not require stockholder approval prior to
effectiveness and accordingly is not being submitted to the stockholders at the
Annual Meeting.
Based solely on the closing price of common stock as reported on the NASDAQ
National Market on April 3, 2002 of $11.97 per share, the maximum aggregate
market value of the 1,200,000 shares of common stock reserved for issuance under
the Plan would be $14,364,000, and the aggregate market value of the 1,700,000
shares reserved under the Plan and the Non-Qualified Plan would be $20,349,000.
The Plan will become effective only if Proposal III is approved by our
stockholders.
Background of the Decision to Implement the Plan. The purpose of the
Company's stock option and grant plans is to encourage and enable the employees,
officers, directors, consultants, advisors and other key persons of the Company
and its subsidiaries upon whose judgment, initiative and efforts the Company
largely depends for the successful conduct of its business to acquire a
proprietary interest in the Company. The Company has historically used its
option plans to grant options to its employees, officers and directors and in
connection with acquisitions. The Company currently maintains two option plans,
the 1996 Stock Option and Grant Plan and the 1998 Employee Stock Option and
Grant Plan. In 2000 and 2001, the Company had the following options outstanding
under these plans:
Exercise Price Weighted Average
Number of Shares Per Share Exercise Price
Outstanding at December 31, 2000 2,887,729 $6.31 - 35.75 $12.34
Outstanding at December 31, 2001 4,103,124 $6.31 - 33.75 $11.94
The outstanding options at December 31, 2000 and December 31, 2001 represented
approximately 23% and 33%, respectively, of the Company's fully diluted Common
Stock as of such dates.
The Company has historically allowed certain senior executives and key employees
the choice of receiving all or part of their bonus and/or commission in cash or
in options to purchase shares of the Company's Common Stock at a price equal to
the fair market value of the Common Stock at the time of grant, in addition to
option grants at levels consistent with the Company's past practices. Certain of
these key employees made this election for 2001. In addition, as a result of the
increased employee base from the growth of the business as well as acquisitions,
a significant number of options were granted at year-end. As a result of these
issuances, only 67,587 shares remained available for issuance under the
Company's existing stock option plans at December 31, 2001. As the Company
continues to expand its employee base through the routine hiring of additional
staff as well as through acquisitions of compatible businesses, the need for
additional option grants will continue to grow. As a result, the Board has
determined that the remaining shares of Common Stock available for issuance as
stock options are insufficient to provide the
13
desired incentive effect to both current employees and potential employees.
Therefore, on February 5, 2002, the Board of Directors approved the adoption of
the Plan and the Non-Qualified Plan. Outstanding options under the prior plans
will not be affected by the new plans. The Company is now submitting the Plan to
the stockholders for ratification. If the Plan is not adopted by the
stockholders, the Company may continue to grant options to non-executives under
the Non-Qualified Plan, increase the cash compensation paid to officers and
employees and/or take such other action as the Board may determine.
Background of the Company's Option Grants to Date. At December 31, 2001,
the Company had two stock options plans, the 1996 Stock Option and Grant Plan
and the 1998 Employee Stock Option and Grant Plan. At December 31, 2001, there
were options outstanding to purchase an aggregate of approximately 4,103,124
shares of Common Stock under the Company's 1996 Stock Option and Grant Plan, as
amended (the "1996 Plan") and under the Company's 1998 Employee Stock Option and
Grant Plan, pursuant to which only Non-Qualified Options may be granted. Of
these, options to purchase approximately 1,517,981 shares were exercisable and
options to purchase approximately 2,585,143 shares were not exercisable as of
December 31, 2001. Of those outstanding options, approximately 350,000 were
significantly out of the money. Approximately 67,587 shares remained available
for issuance under both of the Company's then existing plans. An additional
500,000 shares became available in February 2002 upon the adoption of the
Non-Qualified Plan. Upon approval of the Plan, an aggregate of approximately
1,767,587 shares will be available for issuance under all four plans. This will
represent approximately 15% of the fully diluted common shares of the Company as
of March 31, 2002. The outstanding options have been granted as follows as of
December 31, 2001:
. approximately 2,199,124 to approximately 200 employees;
. 150,000 to directors of the Company;
. 1,259,000 to three executive officers of the Company; and
. approximately 495,000 for new employees in connection with
acquisitions.
The weighted average exercise price of all of the outstanding options is
$11.94. See also "Executive Compensation - Summary Compensation Table" and
"Executive Compensation - Option Grants in Fiscal Year 2001."
The following table further summarizes information about options outstanding at
December 31, 2001:
Options Outstanding at December 31, 2001 Options Exercisable at December 31, 2001
---------------------------------------- ----------------------------------------
Weighted
Weighted Average Weighted
Range Number of Shares Average Exercise Contractual Average Exercise
Price Life (Years) Number of Shares Price
$ 6.31 - 7.70 763,500 $ 7.18 8.0 472,500 $ 7.10
$ 7.71 - 11.55 1,107,068 9.56 8.6 328,753 9.51
$11.56 - 23.10 1,901,719 12.83 9.6 431,375 12.84
$23.11 - 35.75 330,837 25.73 6.4 285,353 25.07
--------- ------ --------- ------
4,103,124 $11.94 1,517,981 $12.63
Summary of the Plan
The following description of the material terms of the Plan is intended to be a
summary only. This summary is qualified in its entirety by the full text of the
Plan, which is attached to this proxy statement as Appendix B.
----------
Plan Administration. The Plan provides for administration by a committee of not
fewer than two non-employee directors (the "Administrator"), as appointed by our
Board of Directors from time to time.
14
The Administrator has full power to select, from among the individuals eligible
for awards, the individuals to whom awards will be granted, to make any
combination of awards to participants, and to determine the specific terms and
conditions of each award, subject to the provisions of the Plan. The
Administrator may permit common stock, and other amounts payable pursuant to an
award, to be deferred. In such instances, the Administrator may permit interest,
dividend or deemed dividends to be credited to the amount of deferrals.
Eligibility and Limitations on Grants. All officers, employees, directors,
consultants, advisors and other key persons of the Company are eligible to
participate in the Plan, subject to the discretion of the Administrator. In no
event may any one participant receive options to purchase more than 500,000
shares of common stock (subject to adjustment for stock splits and similar
events) during any one calendar year period, as stated above. In addition, as
stated above, the maximum award of restricted stock, performance shares or
deferred stock (or combination thereof) for any one individual that is intended
to qualify as "performance-based compensation" under Section 162(m) of the
Internal Revenue Code of 1986, as amended and the regulations thereunder (the
"Code") will not exceed 50,000 shares of common stock (subject to adjustment for
stock splits and similar events) for any performance cycle. The number of
individuals potentially eligible to participate in the Plan is approximately 150
persons.
Stock Options. Options granted under the Plan may be either Incentive Stock
Options ("Incentive Options") (within the meaning of Section 422 of the Code) or
Non-Qualified Stock Options ("Non-Qualified Options"). Options granted under the
Plan will be Non-Qualified Options if they (i) fail to meet such definition of
Incentive Options, (ii) are granted to a person not eligible to receive
Incentive Options under the Code, or (iii) otherwise so provide. Incentive
Options may be granted only to officers or other employees of the Company.
Non-Qualified Options may be granted to persons eligible to receive Incentive
Options and to non-employee directors, consultants, advisors and other key
persons.
Other Option Terms. The Administrator has authority to determine the terms of
options granted under the Plan. Generally, Incentive Options are granted with an
exercise price that is not less than the fair market value of the shares of
common stock on the date of the option grant.
The term of each option will be fixed by the Administrator and may not exceed
ten years from date of grant. The Administrator will determine at what time or
times each option may be exercised and, subject to the provisions of the Plan,
the period of time, if any, after retirement, death, disability or termination
of employment during which options may be exercised. Options may be made
exercisable in installments, and the exercisability of options may be
accelerated by the Administrator. In general, unless otherwise permitted by the
Administrator, no option granted under the Plan is transferable by the optionee
other than by will or by the laws of descent and distribution, and options may
be exercised during the optionee's lifetime only by the optionee, or by the
optionee's legal representative or guardian in the case of the optionee's
incapacity.
Options granted under the Plan may be exercised for cash or, if permitted by the
Administrator, by transfer to the Company (either actually or by attestation) of
shares of common stock which are not then subject to restrictions under any
Company stock plan, which have been held by the optionee for at least six months
or were purchased on the open market, and which have a fair market value
equivalent to the option exercise price of the shares being purchased, or by
compliance with certain provisions pursuant to which a securities broker
delivers the purchase price for the shares to the Company.
At the discretion of the Administrator, stock options granted under the Plan may
include a "re-load" feature. A "re-load" feature enables an optionee to exercise
an option by delivering shares of common stock and to automatically be granted
an additional stock option (with an exercise price equal to the fair market
value of the common stock on the date the additional stock option is granted) to
purchase that number of shares of common stock equal to the number delivered to
exercise the original stock option. The purpose of this feature is to enable
participants to maintain any equity interest in the Company without dilution.
For example, assume an employee has an option to acquire 100 shares at an
exercise price of $10 per share and the option contains a reload feature. Assume
also that the employee exercises the entire option when the fair market value of
the shares is $25 and that the employee pays the entire $1,000 exercise price by
delivering to the Company 40 shares of stock she has owned for over six months.
The employee will receive 100 shares of stock from the Company for the exercise
plus a new option to acquire 40 shares at an exercise price of $25 per share.
To qualify as Incentive Options, options must meet additional federal tax
requirements, including a $100,000 limit on the value of shares subject to
Incentive Options which first become exercisable in any one calendar year, and a
shorter term and higher minimum exercise price in the case of certain large
stockholders.
Stock Appreciation Rights. The Administrator may award a stock appreciation
right ("SAR") either as a freestanding award or in tandem with a stock option.
Upon exercise of the SAR, the holder will be entitled to receive an amount equal
to the excess of the
15
fair market value on the date of exercise of one share of common stock over the
exercise price per share specified in the related stock option (or, in the case
of a freestanding SAR, the price per share specified in such right) times the
number of shares of common stock with respect to which the SAR is exercised.
This amount may be paid in cash, common stock, or a combination thereof, as
determined by the Administrator.
Restricted Stock Awards. The Administrator may grant shares (at par value or for
a higher purchase price determined by the Administrator) of common stock to any
participant subject to such conditions and restrictions as the Administrator may
determine. These conditions and restrictions may include the achievement of
pre-established performance goals and/or continued employment with the Company
through a specified vesting period. The vesting period shall be determined by
the Administrator. The purchase price of shares of restricted stock will be
determined by the Administrator. If the applicable performance goals and other
restrictions are not attained, the participant will forfeit his or her award of
restricted stock. In addition, restricted stock may be granted to any
participant by the Administrator in lieu of cash compensation due to such
participant.
Unrestricted Stock Awards. The Administrator may also grant shares (at par value
or for a higher purchase price determined by the Administrator) of common stock
which are free from any restrictions under the Plan. Unrestricted stock may be
granted to any participant in recognition of past services or other valid
consideration, and may be issued in lieu of cash compensation due to such
participant.
Other Awards. The Administrator may also grant dividend equivalent rights and
phantom stock units as deferred stock awards.
Performance Share Awards. The Administrator may grant performance share awards
to any participant which entitle the recipient to receive shares of common stock
upon the achievement of individual or company performance goals and such other
conditions as the Administrator shall determine.
Tax Withholding. Participants under the Plan are responsible for the payment of
any federal, state or local taxes which we are required by law to withhold upon
any option exercise or vesting of other awards. Participants may elect to have
the minimum tax withholding obligations satisfied either by authorizing us to
withhold shares of common stock to be issued pursuant to an option exercise or
other award, or by transferring to the Company shares of common stock having a
value equal to the amount of such taxes.
Adjustments for Stock Dividends, Mergers, etc. The Plan authorizes the
Administrator to make appropriate adjustments to the number of shares of common
stock that are subject to the Plan and to any outstanding stock options to
reflect stock dividends, stock splits and similar events. In the event of
certain transactions, such as a merger, consolidation, dissolution or
liquidation of the Company, our Board of Directors in its discretion may provide
for appropriate substitutions or adjustments of outstanding stock options or
awards. Alternatively, outstanding stock options and awards will terminate; the
option holder will receive a cash or in kind payment equal to the excess of the
fair market value per share over the applicable exercise price, multiplied by
the number of shares of common stock covered by the stock option, and the award
holder will receive a cash or in kind payment of such appropriate consideration
as determined by the Administrator in its sole discretion after taking into
account the consideration payable per share of common stock pursuant to the
business combination.
Amendments and Termination. Our Board of Directors may at any time amend or
discontinue the Plan and the Administrator may at any time amend or cancel any
outstanding award for the purpose of satisfying changes in law or for any other
lawful purpose, but no such action shall adversely affect the rights under any
outstanding awards without the holder's consent. To the extent required by the
Code to ensure that options granted under the Plan qualify as Incentive Options
or that compensation earned under stock options granted under the Plan qualify
as performance-based compensation under the Code, Plan amendments shall be
subject to approval by our stockholders.
16
New Plan Benefits
No grants have been made with respect to the shares of common stock reserved for
issuance under the Plan. The number of shares of common stock that may be
granted to executive officers and non-executive officers is indeterminable at
this time, as such grants are subject to the discretion of the Administrator.
Tax Aspects under the U.S. Internal Revenue Code
The following is a summary of the principal federal income tax consequences of
transactions under the Plan. It does not describe all federal tax consequences
under the Plan, nor does it describe state or local tax consequences.
Incentive Options. No taxable income is generally realized by the optionee upon
the grant or exercise of an Incentive Option. If shares of common stock issued
to an optionee pursuant to the exercise of an Incentive Option are sold or
transferred after two years from the date of grant and after one year from the
date of exercise, then (i) upon sale of such shares, any amount realized in
excess of the option price (the amount paid for the shares) will be taxed to the
optionee as a long-term capital gain, and any loss sustained will be a long-term
capital loss, and (ii) there will be no deduction for the Company for federal
income tax purposes. The exercise of an Incentive Option will give rise to an
item of tax preference that may result in alternative minimum tax liability for
the optionee.
If shares of common stock acquired upon the exercise of an Incentive Option are
disposed of prior to the expiration of the two-year and one-year holding periods
described above (a "disqualifying disposition"), generally (i) the optionee will
realize ordinary income in the year of disposition in an amount equal to the
excess (if any) of the fair market value of the shares of common stock at
exercise (or, if less, the amount realized on a sale of such shares of common
stock) over the option price thereof, and (ii) the Company will be entitled to
deduct such amount. Special rules will apply where all or a portion of the
exercise price of the Incentive Option is paid by tendering shares of common
stock.
If an Incentive Option is exercised at a time when it no longer qualifies for
the tax treatment described above, the option is treated as a Non-Qualified
Option. Generally, an Incentive Option will not be eligible for the tax
treatment described above if it is exercised more than three months following
termination of employment (or one year in the case of termination of employment
by reason of disability). In the case of termination of employment by reason of
death, the three-month rule does not apply.
Non-Qualified Options. With respect to Non-Qualified Options under the Plan, no
income is realized by the optionee at the time the option is granted. Generally
(i) at exercise, ordinary income is realized by the optionee in an amount equal
to the difference between the option price and the fair market value of the
shares of common stock on the date of exercise, and the Company receives a tax
deduction for the same amount, and (ii) at disposition, appreciation or
depreciation after the date of exercise is treated as either short-term or
long-term capital gain or loss depending on how long the shares of common stock
have been held. Special rules will apply where all or a portion of the exercise
price of the Non-Qualified Option is paid by tendering shares of common stock.
Parachute Payments. The vesting of any portion of any option or other award that
is accelerated due to the occurrence of a change of control may cause a portion
of the payments with respect to such accelerated awards to be treated as
"parachute payments" as defined in the Code. Any such parachute payments may be
non-deductible to the Company, in whole or in part, and may subject the
recipient to a non-deductible 20% federal excise tax on all or a portion of such
payment (in addition to other taxes ordinarily payable).
Limitation on the Company's Deductions. As a result of Section 162(m) of the
Code, the Company's deduction for certain awards under the 2002 Plan may be
limited to the extent that a Covered Employee receives compensation in excess of
$1,000,000 in such taxable year of the Company (other than performance-based
compensation that otherwise meets the requirements of Section 162(m) of the
Code).
Vote Required
A quorum must be present and the holders of a majority of shares present or
represented by proxy and entitled to vote and voting on such matter must vote in
favor of approval of the Plan.
Recommendation
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF THE
---
PLAN.
17
PRINCIPAL AND MANAGEMENT STOCKHOLDERS
Security Ownership of Management and Certain Beneficial Owners
The following table sets forth information as to the beneficial ownership
of the Company's Common Stock as of April 12, 2002 of persons or entities known
to the Company to own, directly or indirectly, more than five percent of the
Company's Common Stock and each Director and Named Executive Officers of the
Company. All individuals listed in the table have sole voting and investment
power over the shares reported as owned unless otherwise indicated, subject to
community property laws where applicable.
Beneficial Ownership Table
Shares Beneficially
Owned
-------------------
Name and Address of Beneficial Owner Number Percent of Class
------------------------------------ --------- ----------------
Dimensional Fund Advisors, Inc.(1).................................... 951,300 8.15%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
T. Rowe Price Associates, Inc.(1)..................................... 700,000 5.99%
100 E. Pratt Street
Baltimore, MD 21202
T. Rowe Price New Horizon Fund, Inc.(1)............................... 700,000 5.99%
100 E. Pratt Street
Baltimore, MD 21202
Merrill Lynch & Co., Inc.(1).......................................... 1,375,900 11.78%
World Financial Center, North Tower
250 Vessey Street
New York, NY 10381
Master Small Cap Value Trust(1)....................................... 1,004,600 8.60%
800 Scudders Mill Road
Plainsboro, NJ 08536
Patrick G. LePore(2).................................................. 1,143,333 9.51%
Roger Boissonneault(3)................................................ 26,666 *
Ronald M. Nordmann(4)................................................. 30,000 *
John T. Spitznagel(4)................................................. 25,000 *
Melvin Sharoky(5)..................................................... 64,400 *
Joseph E. Smith(6).................................................... 21,666 *
John A. Staley, IV(7)................................................. 308,332 2.64%
Steven M. Freeman(8).................................................. 141,000 1.20%
Anthony J. Cherichella(9)............................................. 38,000 *
Carter H. Eckert (10) ................................................ 10,000 *
All Directors and Named Executive Officers as a group (10 persons).... 1,808,397 15.20%
18
(1) The information reported is based upon Schedule 13G's filed with the
Securities and Exchange Commission in February 2002.
(2) Includes 300,000 shares of Common Stock held by Park Street Investors,
L.P., a limited partnership in which Mr. LePore holds a 40% limited
partnership interest. The general partner of Park Street Investors, L.P. is
Park Street Investors, Inc., a corporation in which Mr. LePore shares
voting and investment power. Does not include any shares of Common Stock
held by adult siblings of Mr. LePore, as to which shares Mr. LePore
disclaims beneficial ownership. Includes options to purchase 350,000 shares
of common stock which are exercisable within 60 days of April 15, 2002.
Does not include options to purchase 210,000 shares of common stock which
are not exercisable within 60 days of April 15, 2002.
(3) Includes 6,666 shares of restricted Common Stock held by Mr. Boissonneault,
which shares vest in four equal annual installments beginning on April 10,
1998 subject to earlier vesting upon a sale of the Company, and which are
subject to repurchase at a price of $3.00 per share upon termination of Mr.
Boissonneault's service as a Director prior to the relevant vesting date.
Also includes options to purchase 15,000 shares of Common Stock which are
currently exercisable.
(4) Includes options to purchase 20,000 shares of Common Stock, which are
currently exercisable.
(5) Includes options to purchase 25,000 shares of Common Stock, which are
currently exercisable.
(6) Includes 6,666 shares of restricted Common Stock held by Mr. Smith, which
shares vest in four equal annual installments beginning on April 10, 1998
subject to earlier vesting upon a sale of the Company, and which are
subject to repurchase at a price of $3.00 per share upon termination of Mr.
Smith's service as a Director prior to the relevant vesting date. Also
includes options to purchase 15,000 shares of Common Stock which are
currently exercisable.
(7) Includes 186,666 shares of Common Stock held in an individual retirement
rollover account for Mr. Staley's benefit and 6,666 shares of restricted
Common Stock held by Mr. Staley, which shares vest in four equal annual
installments beginning on May 27, 1998 subject to earlier vesting upon a
sale of the Company, and which are subject to repurchase at a price of
$3.00 per share upon termination of Mr. Staley's service as a Director
prior to the relevant vesting date. Also includes 100,000 shares of Common
Stock owned by Glen Arden Associates, L.P., an investment partnership of
which Mr. Staley is a general partner and options to purchase 15,000 shares
of Common Stock which are currently exercisable.
(8) Includes 50,000 shares of restricted Common Stock held by Mr. Freeman,
which vest in three equal annual installments beginning on August 6, 2001.
Also includes options to purchase 91,000 shares of Common Stock, which are
exercisable within 60 days of April 15, 2002. Does not include options to
purchase 385,000 shares of Common Stock, which are not exercisable within
60 days of April 15, 2002.
(9) Includes options to purchase 38,000 shares of Common Stock, which are
exercisable within 60 days of April 15, 2002. Does not include options to
purchase 185,000 shares of Common Stock, which are not exercisable within
60 days of April 15, 2002.
(10) Includes options to purchase 10,000 shares of Common Stock, which are
currently exercisable.
* Ownership does not exceed 1% of the class
19
CERTAIN TRANSACTIONS
In 2001, the Company was retained by Somerset Pharmaceuticals, Inc.
("Somerset") in connection with its sales services businesses, and Dr. Melvin
Sharoky, a Director of the Company, is the President and Chief Executive Officer
of Somerset. The Company will assist Somerset in the preparation and launch of a
new pharmaceutical. Somerset has made in Fiscal 2001 payments to the Company for
services in the amount of $1,087,000.
In 2001, the Company was retained by Shire Pharmaceuticals Group plc
("Shire") to support the launch of a new pharmaceutical and other products
marketed by Shire USA. Mr. Ronald Nordmann serves as a director of both the
Company and Shire. The support consisted of content development, advocacy
development, implementation of accredited and non-accredited medical education
meetings, and the management of medical education meetings conducted by Shire's
sales force with physicians. In Fiscal 2001, Shire made payments to the Company
for these services in the amount of approximately $12.1 million.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and Directors, and persons who own more than 10% of the Company's
outstanding shares of Common Stock (collectively, "Section 16 Persons"), to file
initial reports of ownership and reports of changes in ownership with the
Securities and Exchange Commission ("SEC") and The Nasdaq Stock Market, Inc.
Section 16 Persons are required by SEC regulations to furnish the Company with
copies of all Section 16(a) forms they file.
Based solely on the Company's review of the copies of such forms and
written representations from certain Section 16 Persons, during Fiscal 2001 all
Section 16 reports were timely filed.
INDEPENDENT ACCOUNTANTS
Arthur Andersen LLP ("Arthur Andersen") has served as the Company's
independent auditors since February 1997, and continues to provide services to
the Company. In light of the recent events surrounding Arthur Andersen, however,
we have not, as of the date of this proxy statement, selected the independent
public accountants to audit the Company's financial statements for 2002. The
selection process is ongoing, and the firm to be selected remains under review.
A representative of Arthur Andersen will be available to respond to
appropriate questions regarding the financial condition of the Company, and will
be present at the Annual Meeting and given the opportunity to make a statement
if he or she so desires with respect thereto.
Audit Fees. During Fiscal 2001, the aggregate fees billed for professional
services rendered by Arthur Andersen for the audit of the Company's annual
financial statements and review of the Company's quarterly financial statements
totaled $92,000.
Financial Information Systems Design and Implementation Fees. During Fiscal
2001, the aggregate fees billed for professional services rendered by Arthur
Andersen for the design and implementation of the Company's financial
information system totaled $0.
All Other Fees. During Fiscal 2001, the aggregate fees billed for
professional services rendered by Arthur Andersen to the Company not covered in
either of the preceding two paragraphs totaled $98,335.
The Audit Committee has considered whether the provision of services by
Arthur Andersen is compatible with maintaining Arthur Andersen's independence.
All of the hours spent on the preparation of the annual financial
statements are attributable to work performed by Arthur Andersen's full time
employees.
20
EXPENSES OF SOLICITATION
The Company will pay the entire expense of soliciting proxies for the
Annual Meeting. In addition to solicitations by mail, certain Directors,
officers and regular employees of the Company (who will receive no compensation
for their services other than their regular compensation) may solicit proxies by
telephone, telegram or personal interview. Banks, brokerage houses, custodians,
nominees and other fiduciaries have been requested to forward proxy materials to
the beneficial owners of shares held of record by them and such custodians will
be reimbursed for their expenses.
SUBMISSION OF STOCKHOLDER PROPOSALS FOR 2003 ANNUAL MEETING
Stockholder proposals intended to be presented at the Company's 2003 annual
meeting of stockholders must be received by the Company on or before December
25, 2002 in order to be considered for inclusion in the Company's proxy
statement and form of proxy for that meeting. The Company's By-laws provide that
any stockholder of record wishing to have a stockholder proposal considered at
an annual meeting must provide written notice of such proposal and appropriate
supporting documentation, as set forth in the By-laws, to the Company at its
principal executive office not later than March 8, 2003 or earlier than January
22, 2003. In the event, however, that the annual meeting is scheduled to be held
more than 30 days before such anniversary date or more than 60 days after such
anniversary date, notice must be so delivered not later than the 15th day after
the date of public disclosure of the date of such meeting or the 75th day prior
to the scheduled date of such meeting. Any such proposal should be mailed to:
Boron, LePore & Associates, Inc., 1800 Valley Road, Wayne, NJ 07470, Attention:
Secretary.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 2001 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION WILL BE
PROVIDED WITHOUT CHARGE UPON WRITTEN REQUEST TO BORON, LEPORE & ASSOCIATES,
INC., 1800 VALLEY ROAD, WAYNE, NEW JERSEY 07470, ATTENTION: INVESTOR RELATIONS.
21
Appendix A
Boron, LePore & Associates, Inc.
FIRST CERTIFICATE OF AMENDMENT
OF
THIRD AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
Boron, LePore & Associates, Inc., a corporation organized and existing under the
laws of the State of Delaware (the "Corporation"), pursuant to Section 242 of
the General Corporation Law of the State of Delaware (the "DGCL"), does hereby
certify that:
FIRST: This First Certificate of Amendment (i) amends the Third Amended and
Restated Certificate of Incorporation of the Corporation as filed with the
Delaware Secretary of State on October 7, 1997, (ii) was duly adopted by the
Board of Directors of the Corporation at a special meeting called for the
purpose, (iii) was declared by the Board of Directors to be advisable and in the
best interest of the Corporation and was directed by the Board of Directors to
be submitted to and be considered by the stockholders of the Corporation for
approval by written consent and (iv) was duly adopted by the written consent of
a majority of the Corporation's stockholders entitled to vote thereon in
accordance with the provisions of Sections 228 and 242 of the DGCL and the terms
of the Third Amended and Restated Certificate of Incorporation.
SECOND: Paragraph 1 of the Third Amended and Restated Certificate of
Incorporation of the Corporation is hereby amended to read in its entirety as
follows:
"1. The name of the Corporation is BLP Group Companies, Inc. The date
of the filing of its original Certificate of Incorporation with
the Secretary of State of the State of Delaware was November 22,
1996, under the name BLA Acquisition Corp., which name was
subsequently changed to Boron, LePore & Associates, Inc., and
then BLP Group Companies, Inc. pursuant to Article I of the
---------
original Certificate of Incorporation."
[End of Text]
A-1
IN WITNESS WHEREOF, the Corporation has caused this First Certificate of
Amendment of the Third Amended and Restated Certificate of Incorporation to be
signed by Steven M. Freeman, its President and Chief Operating Officer, this
---
day of May, 2002, which signature constitutes the affirmation and
acknowledgement of such officer, under penalty of perjury, that this instrument
is the act and deed of the Corporation, and that the facts stated herein are
true.
BORON, LePORE & ASSOCIATES, INC.
By:
-----------------------------------
Steven M. Freeman
President & Chief Operating Officer
A-2
Appendix B
Boron, LePore & Associates, Inc.
2002 Stock Option and Incentive Plan
SECTION 1. GENERAL PURPOSE OF THE PLAN; DEFINITIONS
----------------------------------------
The name of the plan is the Boron, LePore & Associates, Inc. 2002 Stock
Option and Incentive Plan (the "Plan"). The purpose of the Plan is to encourage
and enable the officers, employees, Independent Directors, consultants, advisors
and other key persons of Boron, LePore & Associates, Inc. (the "Company") and
its Subsidiaries upon whose judgment, initiative and efforts the Company largely
depends for the successful conduct of its business to acquire a proprietary
interest in the Company. It is anticipated that providing such persons with a
direct stake in the Company's welfare will assure a closer identification of
their interests with those of the Company, thereby stimulating their efforts on
the Company's behalf and strengthening their desire to remain with the Company.
The following terms shall be defined as set forth below:
"Act" means the Securities Act of 1933, as amended, and the rules and
regulations thereunder.
"Administrator" is defined in Section 2(a).
"Award" or "Awards," except where referring to a particular category of
grant under the Plan, shall include Incentive Stock Options, Non-Qualified Stock
Options, Stock Appreciation Rights, Deferred Stock Awards, Restricted Stock
Awards, Unrestricted Stock Awards, Performance Share Awards and Dividend
Equivalent Rights.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor Code, and related rules, regulations and interpretations.
"Committee" means the Committee of the Board referred to in Section 2.
"Covered Employee" means an employee who is a "Covered Employee" within
the meaning of Section 162(m) of the Code.
"Deferred Stock Award" means Awards granted pursuant to Section 8.
"Dividend Equivalent Right" means Awards granted pursuant to Section 12.
"Effective Date" means the date on which the Plan is approved by
stockholders as set forth in Section 19.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder.
"Fair Market Value" of the Stock on any given date means the fair market
value of the Stock determined in good faith by the Administrator; provided,
however, that if the Stock is admitted to quotation on the National Association
of Securities Dealers Automated Quotation System ("NASDAQ"), NASDAQ National
System or a national securities exchange, the determination shall be made by
reference to market quotations. If there are no market quotations for such date,
the determination shall be made by reference to the last date preceding such
date for which there are market quotations.
"Incentive Stock Option" means any Stock Option designated and qualified as
an "incentive stock option" as defined in Section 422 of the Code.
"Independent Director" means a member of the Board who is not also an
employee of the Company or any Subsidiary.
"Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
B-1
"Option" or "Stock Option" means any option to purchase shares of Stock
granted pursuant to Section 5.
"Performance Share Award" means Awards granted pursuant to Section 10.
"Performance Cycle" means one or more periods of time, which may be of
varying and overlapping durations, as the Administrator may select, over which
the attainment of one or more performance criteria will be measured for the
purpose of determining a grantee's right to and the payment of a Performance
Share Award, Restricted Stock Award or Deferred Stock Award.
"Restricted Stock Award" means Awards granted pursuant to Section 7.
"Stock" means the Common Stock, par value $.01 per share, of the Company,
subject to adjustments pursuant to Section 3.
"Stock Appreciation Right" means any Award granted pursuant to Section 6.
"Subsidiary" means any corporation or other entity (other than the Company)
in which the Company has a controlling interest, either directly or indirectly.
"Unrestricted Stock Award" means any Award granted pursuant to Section 9.
SECTION 2. ADMINISTRATION OF PLAN; ADMINISTRATOR AUTHORITY TO SELECT GRANTEES
------------------------------------------------------------------
AND DETERMINE AWARDS
--------------------
(a) Committee. The Plan shall be administered by either the Board or a
---------
committee of not less than two Independent Directors (in either case, the
"Administrator").
(b) Powers of Administrator. The Administrator shall have the power and
-----------------------
authority to grant Awards consistent with the terms of the Plan, including the
power and authority:
(i) to select the individuals to whom Awards may from time to time be
granted;
(ii) to determine the time or times of grant, and the extent, if any,
of Incentive Stock Options, Non-Qualified Stock Options, Stock Appreciation
Rights, Restricted Stock Awards, Deferred Stock Awards, Unrestricted Stock
Awards, Performance Share Awards and Dividend Equivalent Rights, or any
combination of the foregoing, granted to any one or more grantees;
(iii) to determine the number of shares of Stock to be covered by any
Award;
(iv) to determine and modify from time to time the terms and
conditions, including restrictions, not inconsistent with the terms of the Plan,
of any Award, which terms and conditions may differ among individual Awards and
grantees, and to approve the form of written instruments evidencing the Awards;
(v) to accelerate at any time the exercisability or vesting of all or
any portion of any Award;
(vi) subject to the provisions of Section 5(a)(ii), to extend at any
time the period in which Stock Options may be exercised;
(vii) to determine at any time whether, to what extent, and under what
circumstances distribution or the receipt of Stock and other amounts payable
with respect to an Award shall be deferred either automatically or at the
election of the grantee and whether and to what extent the Company shall pay or
credit amounts constituting interest (at rates determined by the Administrator)
or dividends or deemed dividends on such deferrals; and
(viii) at any time to adopt, alter and repeal such rules, guidelines
and practices for administration of the Plan and for its own acts and
proceedings as it shall deem advisable; to interpret the terms and provisions of
the Plan and any Award (including related written instruments); to make all
determinations it deems advisable for the administration of the Plan; to decide
all disputes arising in connection with the Plan; and to otherwise supervise the
administration of the Plan.
B-2
All decisions and interpretations of the Administrator shall be binding on
all persons, including the Company and Plan grantees.
(c) Delegation of Authority to Grant Awards. The Administrator, in its
---------------------------------------
discretion, may delegate to the Chief Executive Officer of the Company all or
part of the Administrator's authority and duties with respect to the granting of
Awards at Fair Market Value, to individuals who are not subject to the reporting
and other provisions of Section 16 of the Exchange Act or "covered employees"
within the meaning of Section 162(m) of the Code. Any such delegation by the
Administrator shall include a limitation as to the amount of Awards that may be
granted during the period of the delegation and shall contain guidelines as to
the determination of the exercise price of any Stock Option or Stock
Appreciation Right, the conversion ratio or price of other Awards and the
vesting criteria. The Administrator may revoke or amend the terms of a
delegation at any time but such action shall not invalidate any prior actions of
the Administrator's delegate or delegates that were consistent with the terms of
the Plan.
(d) Indemnification. Neither the Board nor the Committee, nor any member of
---------------
either or any delegatee thereof, shall be liable for any act, omission,
interpretation, construction or determination made in good faith in connection
with the Plan, and the members of the Board and the Committee (and any delegatee
thereof) shall be entitled in all cases to indemnification and reimbursement by
the Company in respect of any claim, loss, damage or expense (including, without
limitation, reasonable attorneys' fees) arising or resulting therefrom to the
fullest extent permitted by law and/or under any directors' and officers'
liability insurance coverage which may be in effect from time to time.
SECTION 3. STOCK ISSUABLE UNDER THE PLAN; MERGERS; SUBSTITUTION
----------------------------------------------------
(a) Stock Issuable. The maximum number of shares of Stock reserved and
--------------
available for issuance under the Plan shall be such aggregate number of shares
of Stock, subject to adjustment as provided in Section 3(b), as does not exceed
the sum of (i) 1,200,000 shares, plus (ii) as of each June 30 and December 31
starting with December 31, 2002, an additional positive number of shares equal
to five percent (5%) of the shares of Stock issued by the Company during that
six month period; provided that not more than 1,200,000 shares shall be issued
in the form of Incentive Stock Options and provided further that not more than
180,000 shares shall be issued in the form of Unrestricted Stock Awards,
Restricted Stock Awards, or Performance Share Awards except to the extent such
Awards are granted in lieu of cash compensation or fees. For purposes of this
limitation, the shares of Stock underlying any Awards which are forfeited,
canceled, reacquired by the Company, satisfied without the issuance of Stock or
otherwise terminated (other than by exercise) shall be added back to the shares
of Stock available for issuance under the Plan. Subject to such overall
limitation, shares of Stock may be issued up to such maximum number pursuant to
any type or types of Award; provided, however, that Stock Options or Stock
Appreciation Rights with respect to no more than 500,000 shares of Stock may be
granted to any one individual grantee during any one calendar year period. The
shares available for issuance under the Plan may be authorized but unissued
shares of Stock or shares of Stock reacquired by the Company and held in its
treasury.
(b) Changes in Stock. Subject to Section 3(c) hereof, if, as a result of
----------------
any reorganization, recapitalization, reclassification, stock dividend, stock
split, reverse stock split or other similar change in the Company's capital
stock, the outstanding shares of Stock are increased or decreased or are
exchanged for a different number or kind of shares or other securities of the
Company, or additional shares or new or different shares or other securities of
the Company or other non-cash assets are distributed with respect to such shares
of Stock or other securities, or, if, as a result of any merger or
consolidation, sale of all or substantially all of the assets of the Company,
the outstanding shares of Stock are converted into or exchanged for a different
number or kind of securities of the Company or any successor entity (or a parent
or subsidiary thereof), the Administrator shall make an appropriate or
proportionate adjustment in (i) the maximum number of shares reserved for
issuance under the Plan, including the maximum number of shares that may be
issued in the form of Unrestricted Stock Awards, Restricted Stock Awards or
Performance Share Awards, (ii) the number of Stock Options or Stock Appreciation
Rights that can be granted to any one individual grantee and the maximum number
of shares that may be granted under a Performance-based Award, (iii) the number
and kind of shares or other securities subject to any then outstanding Awards
under the Plan, (iv) the repurchase price per share subject to each outstanding
Restricted Stock Award, and (v) the price for each share subject to any then
outstanding Stock Options and Stock Appreciation Rights under the Plan, without
changing the aggregate exercise price (i.e., the exercise price multiplied by
the number of Stock Options and Stock Appreciation Rights) as to which such
Stock Options and Stock Appreciation Rights remain exercisable. The adjustment
by the Administrator shall be final, binding and conclusive. No fractional
shares of Stock shall be issued under the Plan resulting from any such
adjustment, but the Administrator in its discretion may make a cash payment in
lieu of fractional shares.
The Administrator may also adjust the number of shares subject to
outstanding Awards and the exercise price and the terms of outstanding Awards to
take into consideration material changes in accounting practices or principles,
extraordinary dividends, acquisitions or dispositions of stock or property or
any other event if it is determined by the Administrator that such adjustment is
appropriate to avoid distortion in the operation of the Plan, provided that no
such adjustment shall be made in the
B-3
case of an Incentive Stock Option, without the consent of the grantee, if it
would constitute a modification, extension or renewal of the Option within the
meaning of Section 424(h) of the Code.
(c) Mergers and Other Transactions. In the case of (i) the dissolution or
------------------------------
liquidation of the Company, (ii) the sale of all or substantially all of the
assets of the Company on a consolidated basis to an unrelated person or entity,
(iii) a merger, reorganization or consolidation in which the holders of the
Company's outstanding voting power immediately prior to such transaction do not
own a majority of the outstanding voting power of the surviving or resulting
entity immediately upon completion of such transaction, (iv) the sale of all of
the Stock of the Company to an unrelated person or entity in which the holders
of the Company's outstanding voting power immediately prior to such transaction
do not own a majority of the outstanding voting power of the surviving or
resulting entity immediately upon completion of such transaction, or (v) any
other transaction in which the owners of the Company's outstanding voting power
immediately prior to such transaction do not own at least a majority of the
outstanding voting power of the relevant entity after the transaction (in each
case, a "Transaction"), the Plan and all outstanding Options, Stock Appreciation
Rights and other Awards granted hereunder shall terminate, unless provision is
made in connection with the Transaction for the assumption of Awards, the
continuation of Awards by the Company as survivor or the substitution of such
Awards with new Awards of the successor entity or parent thereof, with
appropriate adjustment as to the number and kind of shares and, if appropriate,
the per share exercise prices, as provided in Section 3(b) above. In the event
of such termination, each grantee shall be permitted to exercise, for a period
of at least 15 days prior to the date of such termination, all outstanding
Options, Stock Appreciation Rights and other Awards held by such grantee which
are then exercisable or become exercisable upon the effectiveness of the
Transaction. Notwithstanding anything herein to the contrary, in the event that
provision is made in connection with the Transaction for the assumption or
continuation of Awards, or the substitution of such Awards with new Awards of
the successor entity or parent thereof, then, except as the Administrator may
otherwise determine with respect to particular Awards, any Award so assumed or
continued or substituted therefor shall be deemed vested and exercisable in full
upon the date on which the grantee's employment or service relationship with the
Company and its subsidiaries or successor entity terminates if (i) such
termination occurs within eighteen (18) months after the closing of such
Transaction and (ii) such termination is by the Company or its Subsidiaries or
successor entity without Cause (as defined below) or by the grantee for Good
Reason (as defined below). For purposes of this Section 3(c), the term "Cause"
means a vote of the Board of Directors of the Company or the successor entity,
as the case may be, resolving that the grantee should be dismissed as a result
of (i) any material breach by the grantee of any agreement to which the grantee
and the Company are parties, (ii) any act (other than retirement) or omission to
act by the grantee which would reasonably be likely to have a material adverse
effect on the business of the Company or its subsidiaries or successor entity,
as the case may be, or on the grantee's ability to perform services for the
Company or its Subsidiaries or successor entity, as the case may be, including,
without limitation, the conviction of any crime (other than ordinary traffic
violations), or (iii) any material misconduct or willful and deliberate
non-performance of duties by the grantee in connection with the business or
affairs of the Company or its Subsidiaries or successor entity, as the case may
be; and the term "Good Reason" means the occurrence of any of the following
events: (A) a substantial adverse change in the nature or scope of the grantee's
responsibilities, authorities, title, powers, functions, or duties; (B) a
reduction in the grantee's annual base salary except for across-the-board salary
reductions similarly affecting all or substantially all management employees; or
(C) the relocation of the offices at which the grantee is principally employed
to a location more than fifty (50) miles from such offices.
(d) Substitute Awards. The Administrator may grant Awards under the Plan in
-----------------
substitution for stock and stock based awards held by employees, directors or
other key persons of another corporation in connection with the merger or
consolidation of the employing corporation with the Company or a Subsidiary or
the acquisition by the Company or a Subsidiary of property or stock of the
employing corporation. The Administrator may direct that the substitute awards
be granted on such terms and conditions as the Administrator considers
appropriate in the circumstances. Any substitute Awards granted under the Plan
shall not count against the share limitation set forth in Section 3(a).
SECTION 4. ELIGIBILITY
-----------
Grantees under the Plan will be such full or part-time officers and
other employees, Independent Directors, consultants, advisors and key persons
(including prospective employees) of the Company and its Subsidiaries as are
selected from time to time by the Administrator in its sole discretion.
SECTION 5. STOCK OPTIONS
-------------
Any Stock Option granted under the Plan shall be in such form as the
Administrator may from time to time approve.
Stock Options granted under the Plan may be either Incentive Stock Options
or Non-Qualified Stock Options. Incentive Stock Options may be granted only to
employees of the Company or any Subsidiary that is a "subsidiary corporation"
within the
B-4
meaning of Section 424(f) of the Code. To the extent that any Option does not
qualify as an Incentive Stock Option, it shall be deemed a Non-Qualified Stock
Option.
No Incentive Stock Option shall be granted under the Plan after Feburary 5,
2012.
(a) Stock Options Granted to Employees and Key Persons. The Administrator
--------------------------------------------------
in its discretion may grant Stock Options to eligible employees and key persons
of the Company or any Subsidiary. Stock Options granted pursuant to this Section
5(a) shall be subject to the following terms and conditions and shall contain
such additional terms and conditions, not inconsistent with the terms of the
Plan, as the Administrator shall deem desirable. If the Administrator so
determines, Stock Options may be granted in lieu of cash compensation at the
optionee's election, subject to such terms and conditions as the Administrator
may establish.
(i) Exercise Price. The exercise price per share for the Stock covered
--------------
by a Stock Option granted pursuant to this Section 5(a) shall be determined by
the Administrator at the time of grant but shall not be less than 100 percent of
the Fair Market Value on the date of grant in the case of Incentive Stock
Options, or 85 percent of the Fair Market Value on the date of grant, in the
case of Non-Qualified Stock Options (other than options granted in lieu of cash
compensation). If an employee owns or is deemed to own (by reason of the
attribution rules of Section 424(d) of the Code) more than 10 percent of the
combined voting power of all classes of stock of the Company or any parent or
subsidiary corporation and an Incentive Stock Option is granted to such
employee, the option price of such Incentive Stock Option shall be not less than
110 percent of the Fair Market Value on the grant date.
(ii) Option Term. The term of each Stock Option shall be fixed by the
-----------
Administrator, but no Stock Option shall be exercisable more than 10 years after
the date the Stock Option is granted. If an employee owns or is deemed to own
(by reason of the attribution rules of Section 424(d) of the Code) more than 10
percent of the combined voting power of all classes of stock of the Company or
any parent or subsidiary corporation and an Incentive Stock Option is granted to
such employee, the term of such Stock Option shall be no more than five years
from the date of grant.
(iii) Exercisability; Rights of a Stockholder. Stock Options shall
---------------------------------------
become exercisable at such time or times, whether or not in installments, as
shall be determined by the Administrator at or after the grant date. The
Administrator may at any time accelerate the exercisability of all or any
portion of any Stock Option. An optionee shall have the rights of a stockholder
only as to shares acquired upon the exercise of a Stock Option and not as to
unexercised Stock Options.
(iv) Method of Exercise. Stock Options may be exercised in whole or in
------------------
part, by giving written notice of exercise to the Company, specifying the number
of shares to be purchased. Payment of the purchase price may be made by one or
more of the following methods to the extent provided in the Option Award
agreement:
(A) In cash, by certified or bank check or other instrument
acceptable to the Administrator;
(B) Through the delivery (or attestation to the ownership) of
shares of Stock that have been purchased by the optionee on the open market
or that have been beneficially owned by the optionee for at least six
months and are not then subject to restrictions under any Company plan.
Such surrendered shares shall be valued at Fair Market Value on the
exercise date;
(C) By the optionee delivering to the Company a properly executed
exercise notice together with irrevocable instructions to a broker to
promptly deliver to the Company cash or a check payable and acceptable to
the Company for the purchase price; provided that in the event the optionee
chooses to pay the purchase price as so provided, the optionee and the
broker shall comply with such procedures and enter into such agreements of
indemnity and other agreements as the Administrator shall prescribe as a
condition of such payment procedure; or
(D) By the optionee delivering to the Company a promissory note
if the Board has expressly authorized the loan of funds to the optionee for
the purpose of enabling or assisting the optionee to effect the exercise of
his Stock Option; provided that at least so much of the exercise price as
represents the par value of the Stock shall be paid other than with a
promissory note if otherwise required by state law.
Payment instruments will be received subject to collection. The delivery of
certificates representing the shares of Stock to be purchased pursuant to the
exercise of a Stock Option will be contingent upon receipt from the optionee (or
a purchaser acting in his stead in accordance with the provisions of the Stock
Option) by the Company of the full purchase price for such shares and the
fulfillment of any other requirements contained in the Option Award agreement or
applicable provisions of laws. In the event an
B-5
optionee chooses to pay the purchase price by previously-owned shares of Stock
through the attestation method, the number of shares of Stock transferred to the
optionee upon the exercise of the Stock Option shall be net of the number of
shares attested to.
(v) Termination. Unless otherwise provided in the Stock Option Award
-----------
agreement or determined by the Administrator, upon the optionee's termination of
employment (or other business relationship) with the Company and its
Subsidiaries, the optionee's rights in his Stock Options shall automatically
terminate.
(vi) Annual Limit on Incentive Stock Options. To the extent required
---------------------------------------
for "incentive stock option" treatment under Section 422 of the Code, the
aggregate Fair Market Value (determined as of the time of grant) of the shares
of Stock with respect to which Incentive Stock Options granted under this Plan
and any other plan of the Company or its parent and subsidiary corporations
become exercisable for the first time by an optionee during any calendar year
shall not exceed $100,000. To the extent that any Stock Option exceeds this
limit, it shall constitute a Non-Qualified Stock Option.
(b) Reload Options. At the discretion of the Administrator, Options granted
--------------
under the Plan may include a "reload" feature pursuant to which an optionee
exercising an option by the delivery of a number of shares of Stock in
accordance with Section 5(a)(iv)(B) hereof would automatically be granted an
additional Option (with an exercise price equal to the Fair Market Value of the
Stock on the date the additional Option is granted and with the same expiration
date as the original Option being exercised, and with such other terms as the
Administrator may provide) to purchase that number of shares of Stock equal to
the sum of (i) the number delivered to exercise the original Option and (ii) the
number withheld to satisfy tax liabilities, with an Option term equal to the
remainder of the original Option term unless the Administrator otherwise
determines in the Award agreement for the original Option grant.
(c) Non-transferability of Options. No Stock Option shall be transferable
------------------------------
by the optionee otherwise than by will or by the laws of descent and
distribution and all Stock Options shall be exercisable, during the optionee's
lifetime, only by the optionee, or by the optionee's legal representative or
guardian in the event of the optionee's incapacity. Notwithstanding the
foregoing, the Administrator, in its sole discretion, may provide in the Award
agreement regarding a given Option that the optionee may transfer his
Non-Qualified Stock Options to members of his immediate family, to trusts for
the benefit of such family members, or to partnerships in which such family
members are the only partners, provided that the transferee agrees in writing
with the Company to be bound by all of the terms and conditions of this Plan and
the applicable Option.
SECTION 6. STOCK APPRECIATION RIGHTS.
-------------------------
(a) Nature of Stock Appreciation Rights. A Stock Appreciation Right is an
-----------------------------------
Award entitling the recipient to receive an amount in cash or shares of Stock or
a combination thereof having a value equal to the excess of the Fair Market
Value of the Stock on the date of exercise over the exercise price of the Stock
Appreciation Right, which price shall not be less than 85 percent of the Fair
Market Value of the Stock on the date of grant (or more than the option exercise
price per share, if the Stock Appreciation Right was granted in tandem with a
Stock Option) multiplied by the number of shares of Stock with respect to which
the Stock Appreciation Right shall have been exercised, with the Administrator
having the right to determine the form of payment.
(b) Grant and Exercise of Stock Appreciation Rights. Stock Appreciation
-----------------------------------------------
Rights may be granted by the Administrator in tandem with, or independently of,
any Stock Option granted pursuant to Section 5 of the Plan. In the case of a
Stock Appreciation Right granted in tandem with a Non-Qualified Stock Option,
such Stock Appreciation Right may be granted either at or after the time of the
grant of such Option. In the case of a Stock Appreciation Right granted in
tandem with an Incentive Stock Option, such Stock Appreciation Right may be
granted only at the time of the grant of the Option.
A Stock Appreciation Right or applicable portion thereof granted in tandem
with a Stock Option shall terminate and no longer be exercisable upon the
termination or exercise of the related Option.
(c) Terms and Conditions of Stock Appreciation Rights. Stock Appreciation
-------------------------------------------------
Rights shall be subject to such terms and conditions as shall be determined from
time to time by the Administrator, subject to the following:
(i) Stock Appreciation Rights granted in tandem with Options shall be
exercisable at such time or times and to the extent that the related Stock
Options shall be exercisable.
(ii) Upon exercise of a Stock Appreciation Right, the applicable
portion of any related Option shall be surrendered.
B-6
(iii) All Stock Appreciation Rights shall be exercisable during the
grantee's lifetime only by the grantee or the grantee's legal representative.
SECTION 7. RESTRICTED STOCK AWARDS
-----------------------
(a) Nature of Restricted Stock Awards. A Restricted Stock Award is an Award
---------------------------------
entitling the recipient to acquire, at such purchase price as determined by the
Administrator, shares of Stock subject to such restrictions and conditions as
the Administrator may determine at the time of grant ("Restricted Stock").
Conditions may be based on continuing employment (or other service relationship)
and/or achievement of pre-established performance goals and objectives. The
grant of a Restricted Stock Award is contingent on the grantee executing the
Restricted Stock Award agreement. The terms and conditions of each such
agreement shall be determined by the Administrator, and such terms and
conditions may differ among individual Awards and grantees.
(b) Rights as a Stockholder. Upon execution of a written instrument setting
-----------------------
forth the Restricted Stock Award and payment of any applicable purchase price, a
grantee shall have the rights of a stockholder with respect to the voting of the
Restricted Stock, subject to such conditions contained in the written instrument
evidencing the Restricted Stock Award. Unless the Administrator shall otherwise
determine, certificates evidencing the Restricted Stock shall remain in the
possession of the Company until such Restricted Stock is vested as provided in
Section 7(d) below, and the grantee shall be required, as a condition of the
grant, to deliver to the Company a stock power endorsed in blank.
(c) Restrictions. Restricted Stock may not be sold, assigned, transferred,
------------
pledged or otherwise encumbered or disposed of except as specifically provided
herein or in the Restricted Stock Award agreement. If a grantee's employment (or
other service relationship) with the Company and its Subsidiaries terminates for
any reason, the Company shall have the right to repurchase Restricted Stock that
has not vested at the time of termination at its original purchase price, from
the grantee or the grantee's legal representative.
(d) Vesting of Restricted Stock. The Administrator at the time of grant
---------------------------
shall specify the date or dates and/or the attainment of pre-established
performance goals, objectives and other conditions on which the
non-transferability of the Restricted Stock and the Company's right of
repurchase or forfeiture shall lapse. Subsequent to such date or dates and/or
the attainment of such pre-established performance goals, objectives and other
conditions, the shares on which all restrictions have lapsed shall no longer be
Restricted Stock and shall be deemed "vested." Except as may otherwise be
provided by the Administrator either in the Award agreement or, subject to
Section 15 below, in writing after the Award agreement is issued, a grantee's
rights in any shares of Restricted Stock that have not vested shall
automatically terminate upon the grantee's termination of employment (or other
service relationship) with the Company and its Subsidiaries and such shares
shall be subject to the Company's right of repurchase as provided in Section
7(c) above.
(e) Waiver, Deferral and Reinvestment of Dividends. The Restricted Stock
----------------------------------------------
Award agreement may require or permit the immediate payment, waiver, deferral or
investment of dividends paid on the Restricted Stock.
SECTION 8. DEFERRED STOCK AWARDS
---------------------
(a) Nature of Deferred Stock Awards. A Deferred Stock Award is an Award of
-------------------------------
phantom stock units to a grantee, subject to restrictions and conditions as the
Administrator may determine at the time of grant. Conditions may be based on
continuing employment (or other service relationship) and/or achievement of
pre-established performance goals and objectives. The grant of a Deferred Stock
Award is contingent on the grantee executing the Deferred Stock Award agreement.
The terms and conditions of each such agreement shall be determined by the
Administrator, and such terms and conditions may differ among individual Awards
and grantees. At the end of the deferral period, the Deferred Stock Award, to
the extent vested, shall be paid to the grantee in the form of shares of Stock.
(b) Election to Receive Deferred Stock Awards in Lieu of Compensation. The
-----------------------------------------------------------------
Administrator may, in its sole discretion, permit a grantee to elect to receive
a portion of the cash compensation or Restricted Stock Award otherwise due to
such grantee in the form of a Deferred Stock Award. Any such election shall be
made in writing and shall be delivered to the Company no later than the date
specified by the Administrator and in accordance with rules and procedures
established by the Administrator. The Administrator shall have the sole right to
determine whether and under what circumstances to permit such elections and to
impose such limitations and other terms and conditions thereon as the
Administrator deems appropriate.
B-7
(c) Rights as a Stockholder. During the deferral period, a grantee shall
-----------------------
have no rights as a stockholder; provided, however, that the grantee may be
credited with Dividend Equivalent Rights with respect to the phantom stock units
underlying his Deferred Stock Award, subject to such terms and conditions as the
Administrator may determine.
(d) Restrictions. A Deferred Stock Award may not be sold, assigned,
------------
transferred, pledged or otherwise encumbered or disposed of during the deferral
period.
(e) Termination. Except as may otherwise be provided by the Administrator
-----------
either in the Award agreement or, subject to Section 15 below, in writing after
the Award agreement is issued, a grantee's right in all Deferred Stock Awards
that have not vested shall automatically terminate upon the grantee's
termination of employment (or cessation of service relationship) with the
Company and its Subsidiaries for any reason.
SECTION 9. UNRESTRICTED STOCK AWARDS
-------------------------
Grant or Sale of Unrestricted Stock. The Administrator may, in its sole
-----------------------------------
discretion, grant (or sell at par value or such higher purchase price determined
by the Administrator) an Unrestricted Stock Award to any grantee pursuant to
which such grantee may receive shares of Stock free of any restrictions
("Unrestricted Stock") under the Plan. Unrestricted Stock Awards may be granted
in respect of past services or other valid consideration, or in lieu of cash
compensation due to such grantee.
SECTION 10. PERFORMANCE SHARE AWARDS
------------------------
(a) Nature of Performance Share Awards. A Performance Share Award is an
----------------------------------
Award entitling the recipient to acquire shares of Stock upon the attainment of
specified performance goals. The Administrator may make Performance Share Awards
independent of or in connection with the granting of any other Award under the
Plan. The Administrator in its sole discretion shall determine whether and to
whom Performance Share Awards shall be made, the performance goals, the periods
during which performance is to be measured, and all other limitations and
conditions.
(b) Rights as a Stockholder. A grantee receiving a Performance Share Award
-----------------------
shall have the rights of a stockholder only as to shares actually received by
the grantee under the Plan and not with respect to shares subject to the Award
but not actually received by the grantee. A grantee shall be entitled to receive
a stock certificate evidencing the acquisition of shares of Stock under a
Performance Share Award only upon satisfaction of all conditions specified in
the Performance Share Award agreement (or in a performance plan adopted by the
Administrator).
(c) Termination. Except as may otherwise be provided by the Administrator
-----------
either in the Award agreement or, subject to Section 15 below, in writing after
the Award agreement is issued, a grantee's rights in all Performance Share
Awards shall automatically terminate upon the grantee's termination of
employment (or cessation of service relationship) with the Company and its
Subsidiaries for any reason.
(d) Acceleration, Waiver, Etc. At any time prior to the grantee's
-------------------------
termination of employment (or other service relationship) by the Company and its
Subsidiaries, the Administrator may in its sole discretion accelerate, waive or,
subject to Section 15, amend any or all of the goals, restrictions or conditions
applicable to a Performance Share Award.
SECTION 11. PERFORMANCE-BASED AWARDS TO COVERED EMPLOYEES
---------------------------------------------
Notwithstanding anything to the contrary contained herein, if any
Restricted Stock Award, Deferred Stock Award or Performance Share Award granted
to a Covered Employee is intended to qualify as "Performance-based Compensation"
under Section 162(m) of the Code and the regulations promulgated thereunder (a
"Performance-based Award"), such Award shall comply with the provisions set
forth below:
(a) Performance Criteria. The performance criteria used in performance
--------------------
goals governing Performance-based Awards granted to Covered Employees may
include any or all of the following: (i) the Company's return on equity, assets,
capital or investment, (ii) pre-tax or after-tax profit levels of the Company or
any Subsidiary, a division, an operating unit or a business segment of the
Company, or any combination of the foregoing; (iii) cash flow, funds from
operations or similar measure; (iv) total shareholder return; (v) changes in the
market price of the Stock; (vi) sales or market share; or (vii) earnings per
share.
(b) Grant of Performance-based Awards. With respect to each
---------------------------------
Performance-based Award granted to a Covered Employee, the Committee shall
select, within the first 90 days of a Performance Cycle (or, if shorter, within
the maximum period allowed under Section 162(m) of the Code) the performance
criteria for such grant, and the achievement targets with respect to
B-8
each performance criterion (including a threshold level of performance below
which no amount will become payable with respect to such Award). Each
Performance-based Award will specify the amount payable, or the formula for
determining the amount payable, upon achievement of the various applicable
performance targets. The performance criteria established by the Committee may
be (but need not be) different for each Performance Cycle and different goals
may be applicable to Performance-based Awards to different Covered Employees.
(c) Payment of Performance-based Awards. Following the completion of a
-----------------------------------
Performance Cycle, the Committee shall meet to review and certify in writing
whether, and to what extent, the performance criteria for the Performance Cycle
have been achieved and, if so, to also calculate and certify in writing the
amount of the Performance-based Awards earned for the Performance Cycle. The
Committee shall then determine the actual size of each Covered Employee's
Performance-based Award, and, in doing so, may reduce or eliminate the amount of
the Performance-based Award for a Covered Employee if, in its sole judgment,
such reduction or elimination is appropriate.
(d) Maximum Award Payable. The maximum Performance-based Award payable to
---------------------
any one Covered Employee under the Plan for a Performance Cycle is 50,000 Shares
(subject to adjustment as provided in Section 3(b) hereof).
SECTION 12. DIVIDEND EQUIVALENT RIGHTS
--------------------------
(a) Dividend Equivalent Rights. A Dividend Equivalent Right is an Award
--------------------------
entitling the grantee to receive credits based on cash dividends that would have
been paid on the shares of Stock specified in the Dividend Equivalent Right (or
other award to which it relates) if such shares had been issued to and held by
the grantee. A Dividend Equivalent Right may be granted hereunder to any grantee
as a component of another Award or as a freestanding award. The terms and
conditions of Dividend Equivalent Rights shall be specified in the Award
agreement. Dividend equivalents credited to the holder of a Dividend Equivalent
Right may be paid currently or may be deemed to be reinvested in additional
shares of Stock, which may thereafter accrue additional equivalents. Any such
reinvestment shall be at Fair Market Value on the date of reinvestment or such
other price as may then apply under a dividend reinvestment plan sponsored by
the Company, if any. Dividend Equivalent Rights may be settled in cash or shares
of Stock or a combination thereof, in a single installment or installments. A
Dividend Equivalent Right granted as a component of another Award may provide
that such Dividend Equivalent Right shall be settled upon exercise, settlement,
or payment of, or lapse of restrictions on, such other award, and that such
Dividend Equivalent Right shall expire or be forfeited or annulled under the
same conditions as such other award. A Dividend Equivalent Right granted as a
component of another Award may also contain terms and conditions different from
such other award.
(b) Interest Equivalents. Any Award under this Plan that is settled in
--------------------
whole or in part in cash on a deferred basis may provide in the grant for
interest equivalents to be credited with respect to such cash payment. Interest
equivalents may be compounded and shall be paid upon such terms and conditions
as may be specified by the grant.
(c) Termination. Except as may otherwise be provided by the Administrator
-----------
either in the Award agreement or, subject to Section 15 below, in writing after
the Award agreement is issued, a grantee's rights in all Dividend Equivalent
Rights or interest equivalents shall automatically terminate upon the grantee's
termination of employment (or cessation of service relationship) with the
Company and its Subsidiaries for any reason.
SECTION 13. TAX WITHHOLDING
---------------
(a) Payment by Grantee. Each grantee shall, no later than the date as of
------------------
which the value of an Award or of any Stock or other amounts received thereunder
first becomes includable in the gross income of the grantee for Federal income
tax purposes, pay to the Company, or make arrangements satisfactory to the
Administrator regarding payment of, any Federal, state, or local taxes of any
kind required by law to be withheld with respect to such income. The Company and
its Subsidiaries shall, to the extent permitted by law, have the right to deduct
any such taxes from any payment of any kind otherwise due to the grantee. The
Company's obligation to deliver stock certificates to any grantee is subject to
and conditioned on tax obligations being satisfied by the grantee.
(b) Payment in Stock. Subject to approval by the Administrator, a grantee
----------------
may elect to have the minimum required tax withholding obligation satisfied, in
whole or in part, by (i) authorizing the Company to withhold from shares of
Stock to be issued pursuant to any Award a number of shares with an aggregate
Fair Market Value (as of the date the withholding is effected) that would
satisfy the withholding amount due, or (ii) transferring to the Company shares
of Stock owned by the grantee with an aggregate Fair Market Value (as of the
date the withholding is effected) that would satisfy the withholding amount due.
B-9
SECTION 14. TRANSFER, LEAVE OF ABSENCE, ETC.
--------------------------------
For purposes of the Plan, the following events shall not be deemed a
termination of employment:
(a) a transfer to the employment of the Company from a Subsidiary or from
the Company to a Subsidiary, or from one Subsidiary to another; or
(b) an approved leave of absence for military service or sickness, or for
any other purpose approved by the Company, if the employee's right to
re-employment is guaranteed either by a statute or by contract or under the
policy pursuant to which the leave of absence was granted or if the
Administrator otherwise so provides in writing.
SECTION 15. AMENDMENTS AND TERMINATION
--------------------------
The Board may, at any time, amend or discontinue the Plan and the
Administrator may, at any time, amend or cancel any outstanding Award for the
purpose of satisfying changes in law or for any other lawful purpose, but no
such action shall adversely affect rights under any outstanding Award without
the holder's consent. If and to the extent determined by the Administrator to be
required by the Code to ensure that Incentive Stock Options granted under the
Plan are qualified under Section 422 of the Code or to ensure that compensation
earned under Awards qualifies as performance-based compensation under Section
162(m) of the Code, if and to the extent intended to so qualify, Plan amendments
shall be subject to approval by the Company stockholders entitled to vote at a
meeting of stockholders. Nothing in this Section 15 shall limit the
Administrator's authority to take any action permitted pursuant to Section 3(c).
SECTION 16. STATUS OF PLAN
--------------
With respect to the portion of any Award that has not been exercised and
any payments in cash, Stock or other consideration not received by a grantee, a
grantee shall have no rights greater than those of a general creditor of the
Company unless the Administrator shall otherwise expressly determine in
connection with any Award or Awards. In its sole discretion, the Administrator
may authorize the creation of trusts or other arrangements to meet the Company's
obligations to deliver Stock or make payments with respect to Awards hereunder,
provided that the existence of such trusts or other arrangements is consistent
with the foregoing sentence.
SECTION 17. GENERAL PROVISIONS
------------------
(a) No Distribution; Compliance with Legal Requirements. The Administrator
---------------------------------------------------
may require each person acquiring Stock pursuant to an Award to represent to and
agree with the Company in writing that such person is acquiring the shares
without a view to distribution thereof.
No shares of Stock shall be issued pursuant to an Award until all
applicable securities law and other legal and stock exchange or similar
requirements have been satisfied. The Administrator may require the placing of
such stop-orders and restrictive legends on certificates for Stock and Awards as
it deems appropriate.
(b) Delivery of Stock Certificates. Stock certificates to grantees under
------------------------------
this Plan shall be deemed delivered for all purposes when the Company or a stock
transfer agent of the Company shall have mailed such certificates in the United
States mail, addressed to the grantee, at the grantee's last known address on
file with the Company.
(c) Other Compensation Arrangements; No Employment Rights. Nothing
-----------------------------------------------------
contained in this Plan shall prevent the Board from adopting other or additional
compensation arrangements, including trusts, and such arrangements may be either
generally applicable or applicable only in specific cases. The adoption of this
Plan and the grant of Awards do not confer upon any employee any right to
continued employment with the Company or any Subsidiary.
(d) Trading Policy Restrictions. Option exercises and other Awards under
---------------------------
the Plan shall be subject to such Company's insider trading policy, as in effect
from time to time.
(e) Loans to Grantees. The Company shall have the authority to make loans
-----------------
to grantees of Awards hereunder (including to facilitate the purchase of shares)
and shall further have the authority to issue shares for promissory notes
hereunder.
(f) Designation of Beneficiary. Each grantee to whom an Award has been made
--------------------------
under the Plan may designate a beneficiary or beneficiaries to exercise any
Award or receive any payment under any Award payable on or after the grantee's
B-10
death. Any such designation shall be on a form provided for that purpose by the
Administrator and shall not be effective until received by the Administrator. If
no beneficiary has been designated by a deceased grantee, or if the designated
beneficiaries have predeceased the grantee, the beneficiary shall be the
grantee's estate.
SECTION 18. EFFECTIVE DATE OF PLAN
----------------------
This Plan shall become effective upon approval by the holders of a majority
of the votes cast at a meeting of stockholders at which a quorum is present.
Subject to such approval by the stockholders and to the requirement that no
Stock may be issued hereunder prior to such approval, Stock Options and other
Awards may be granted hereunder on and after adoption of this Plan by the Board.
SECTION 19. GOVERNING LAW
-------------
This Plan and all Awards and actions taken thereunder shall be governed by,
and construed in accordance with, the laws of the State of Delaware, applied
without regard to conflict of law principles.
DATE APPROVED BY BOARD OF DIRECTORS:
DATE APPROVED BY STOCKHOLDERS:
B-11
BORON, LEPORE & ASSOCIATES, INC.
C/O EQUISERVE
P.O. BOX 43068
PROVIDENCE, RI 02940
BORON, LEPORE & ASSOCIATES, INC.
Dear Shareholder,
Please take note of the important information enclosed with this Proxy Ballot.
There are a number of issues related to the management and operation of your
Corporation that require your immediate attention and approval. These are
discussed in detail in the enclosed proxy materials.
Your vote counts, and you are strongly encouraged to exercise your right to vote
your shares.
Please mark the boxes on this proxy card to indicate how your shares will be
voted, then sign the card, detach it and return your proxy vote in the enclosed
postage paid envelope.
Your vote must be received prior to the Annual Meeting of Shareholders, May 22,
2002.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
Boron, LePore & Associates, Inc.
DETACH HERE ZBLPC1
Please mark
[X] votes as in
this example.
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BORON, LEPORE & ASSOCIATES, INC.
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FOR AGAINST ABSTAIN
1. Election of Directors. 2. The approval of an amendment to the [_] [_] [_]
(01) Joseph E. Smith Company's Third Amended and Restated
(02) Melvin Sharoky Certificate of Incorporation authorizing
(03) Steven M. Freeman the Company to change its name to BLP
Group Companies, Inc. (the "Amendment");
FOR WITHHELD
ALL [_] [_] FROM ALL 3. Approval of the Company's 2002 Stock Option FOR AGAINST ABSTAIN
NOMINEES NOMINEES and Incentive Plan. [_] [_] [_]
[_] __________________________ 4. In their discretion, the proxies are authorized to vote upon any other
For all nominees except business that may properly come before the meeting or at any adjournment(s)
as noted above thereof.
Mark box at right if an address change or comment has been [_]
noted on the reverse side of this card.
Please be sure to sign and date this Proxy.
Signature: ____________________________ Date: __________________ Signature: ____________________________ Date: __________________
DETACH HERE ZBLPC2
BORON, LEPORE & ASSOCIATES, INC.
1800 Valley Road
Wayne, New Jersey 07470
Annual Meeting of Shareholders - May 22, 2002
Proxy Solicited on Behalf of the Board of Directors
The undersigned, revoking all prior proxies, hereby appoints Patrick G. LePore
and Steven M. Freeman as Proxies, with full power of substitution to each, to
vote for and on behalf of the undersigned at the 2002 Annual Meeting of
Shareholders of Boron, LePore & Associates, Inc., to be held at the Marriot
Newark Airport, Newark International Airport, Newark, New Jersey on Wednesday,
May 22, 2002 at 10:00 a.m., and at any adjournment or adjournments thereof. The
undersigned hereby directs the said proxies to vote in accordance with their
judgment on any matters which may properly come before the Annual Meeting, all
as indicated in the Notice of Annual Meeting, receipt of which is hereby
acknowledged, and to act on the following matters set forth in such notice as
specified by the undersigned.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED HEREIN BY THE
UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED
"FOR" PROPOSAL 1, "FOR" PROPOSAL 2 AND "FOR" PROPOSAL 3.
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PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY
IN THE ENCLOSED ENVELOPE.
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Please sign exactly as your name(s) appear(s) on the books of the Company. Joint
owners should each sign personally. Trustees and other fiduciaries should
indicate the capacity in which they sign, and where more than one name appears,
a majority must sign. If a corporation, this signature should be that of an
authorized officer who should state his or her title.
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HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
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