<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 15, 1996.
REGISTRATION NO. 333-7495
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
SNYDER COMMUNICATIONS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)
7389
(PRIMARY STANDARD INSTITUTIONAL
CLASSIFICATION CODE NUMBER)
52-1983617
(I.R.S. EMPLOYER
IDENTIFICATION NO.)
BRIAN BENHAIM
6903 ROCKLEDGE DRIVE
15TH FLOOR
BETHESDA, MARYLAND 20817
(301) 571-1236
(NAME, ADDRESS AND TELEPHONE NUMBER
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES AND AGENT FOR SERVICE)
------------------------
Copy to:
THOMAS H. MCCORMICK, ESQ.
SHAW, PITTMAN, POTTS & TROWBRIDGE
2300 N STREET, N.W.
WASHINGTON, D.C. 20037
(202) 663-8000
MICHAEL W. BLAIR, ESQ.
DEBEVOISE & PLIMPTON
875 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212) 909-6000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
possible after the effective date of this registration statement.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
SNYDER COMMUNICATIONS, INC.
EXPLANATORY NOTE
This registration statement contains a form of prospectus relating to a
United States offering by Snyder Communications, Inc., as well as certain pages
marked X-1 to X-5, which will be used to form a prospectus related to a
concurrent international offering. The prospectuses will be identical except for
such pages. Both prospectuses will be filed with the Securities and Exchange
Commission pursuant to Rule 424(b).
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED AUGUST , 1996
PROSPECTUS
12,000,000 SHARES
[SNYDER COMMUNICATIONS, INC. LOGO]
COMMON STOCK
------------------------
Of the 12,000,000 shares of Common Stock, par value $.001 per share (the
"Common Stock"), of Snyder Communications, Inc. (together with its directly and
indirectly owned subsidiaries, the "Company" or "Snyder Communications") offered
hereby, are being offered by the Company and are being
offered by a stockholder of the Company (the "Selling Stockholder"). Certain
other stockholders of the Company (the "Over-Allotment Selling Stockholders"
and, together with the Selling Stockholder, the "Selling Stockholders") have
granted to the Underwriters options to cover over-allotments, if any. The
Company will not receive any proceeds from the sale of shares of Common Stock by
the Selling Stockholders.
Of the 12,000,000 shares of Common Stock offered hereby, 9,600,000 are being
offered initially in the United States and Canada by the U.S. Underwriters and
2,400,000 shares are being offered initially outside the United States and
Canada by the International Managers. The initial public offering price and the
underwriting discount per share are identical for both Offerings. See
"Underwriting."
Prior to the Offerings, there has been no public market for the Common
Stock. It is currently estimated that the initial public offering price will be
between $14.00 and $16.00 per share. See "Underwriting" for a discussion of
certain factors to be considered in determining the initial public offering
price.
Application has been made to have the Common Stock approved for listing on
the New York Stock Exchange under the trading symbol "SNC."
SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SHARES OF COMMON
STOCK OFFERED HEREBY.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<CAPTION>
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PRICE TO UNDERWRITING PROCEEDS TO PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2) SELLING STOCKHOLDER
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<S> <C> <C> <C> <C>
Per Share...................... $ $ $ $
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Total(3)....................... $ $ $ $
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</TABLE>
(1) The Company, Snyder Marketing Services, Inc., Snyder Communications, L.P.
and the Selling Stockholders have agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses of the Offerings payable by the Company, estimated
at $1,000,000.
(3) The Over-Allotment Selling Stockholders have granted to the U.S.
Underwriters and the International Managers options, exercisable within 30
days after the date of this Prospectus, to purchase up to 1,440,000 and
360,000 additional shares of Common Stock, respectively, solely to cover
over-allotments, if any. If such options are exercised in full, the total
Price to Public, Underwriting Discount, Proceeds to Company and Proceeds to
Selling Stockholders will be $ , $ , $ and
$ , respectively. See "Underwriting."
------------------------
The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if issued to and accepted by them, and subject to
the approval of certain legal matters by counsel for the Underwriters and to
certain other conditions. The Underwriters reserve the right to withdraw, cancel
or modify such offer and to reject orders in whole or in part. It is expected
that delivery of the shares of Common Stock will be made in New York, New York,
on or about , 1996.
------------------------
MERRILL LYNCH & CO.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
ALLEN & COMPANY
INCORPORATED
MONTGOMERY SECURITIES
------------------------
The date of this Prospectus is , 1996.
<PAGE> 4
INSIDE FRONT COVER OF PROSPECTUS:
GATEFOLD
On facing page (left side): Photographs of the Company's teleservices
associates calling prospective customers, field sales representatives visiting
prospective customers and the WallBoard(R) and sampling pack programs. Centered
above the photographs is the following statement: "Providing outsourced
marketing services, primarily for Fortune 500 companies."
On Gatefold (two pages): On the left side are photographs of the Company's
teleservices associates calling prospective customers, field sales
representatives visiting prospective customers as well as examples of the
Company's different WallBoards(R). On the right side are photographs of the
Company's training facilities and information technology equipment as well as
examples of the Company's sampling pack and WallBoard(R) programs. Centered
beneath the pictures on the gatefold is the following statement: "Snyder
Communications, Inc., a national provider of outsourced marketing services,
designs and implements programs utilizing a range of complementary marketing
services, including filed sales, teleservices, WallBoard(R) information
displays, and product sampling. The Company identifies and targets high value
market segments, in addition to general markets, including residential and small
business customers in multicultural markets (using 16 foreign languages); new
and working parents through maternity wards and daycare centers; patients with
heart conditions, arthritis and diabetes, through healthcare providers' offices;
and business executives through corporate aviation terminals."
IN CONNECTION WITH THE OFFERINGS, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and the financial statements
and notes thereto appearing elsewhere in this Prospectus. Unless otherwise
indicated, all information in this Prospectus (a) assumes no exercise of the
Underwriters' over-allotment options and (b) gives effect to the consummation of
the Reorganization (as defined herein) to be effective on or prior to the
effectiveness of the Offerings. As used herein, the "Company" or "Snyder
Communications" means Snyder Communications, Inc. after giving effect to the
Reorganization, including its directly and indirectly owned subsidiaries. Snyder
Communications, Inc. was formed in June 1996 to be the holding company for
Snyder Communications, L.P., a limited partnership established in 1988 (the
"Partnership") in which Snyder Marketing Services, Inc. ("SMS") is the general
partner. On or prior to the effectiveness of the Offerings, the Company will
consummate the Reorganization, pursuant to which the Company will acquire all of
the limited partnership interests of the Partnership and all of the issued and
outstanding stock of SMS. See "The Company."
THE COMPANY
Snyder Communications is a rapidly growing provider of innovative and high
value-added outsourced marketing services. The Company designs and implements
marketing programs for its clients utilizing a range of complementary marketing
resources, including field sales, teleservices, sponsored wallboard information
displays ("WallBoards(R)") and product sampling. The Company's clients are
primarily Fortune 500 companies with large annual marketing expenditures facing
significant competitive pressures to retain or expand market share. Based on
1995 revenues, the ten largest clients of the Company, listed alphabetically,
were AT&T Communications, Inc., Eastman Kodak Company, Gerber Products Company,
Kellogg U.S.A., Inc., Kraft Foods Inc., Lehn & Fink Products (now a unit of
Reckitt & Colman, Inc.), MCI Telecommunications Corporation, Nestle Beverage
Company, The Prudential Insurance Company of America and Reckitt & Colman, Inc.
The Company enhances the value of its outsourced marketing services by
identifying and targeting high value market segments, in addition to general
markets, in order to increase market share for its clients. For example, the
Company's field sales representatives and teleservices associates have the
capability to market services in 16 foreign languages, in addition to English,
to reach both residential and business customers in multi-cultural markets, as
well as general markets. The Company utilizes its WallBoards(R) and sampling
packs to market products and services through targeted channels of distribution,
including the offices of cardiologists, rheumatologists and orthopedists, and
endocrinologists and diabetologists, to reach patients with heart conditions,
arthritis and diabetes; maternity wards and day care centers to reach new and
working parents; and corporate aviation terminals to reach business executives.
The Company seeks to identify and access market segments with high growth
characteristics.
As of June 30, 1996, the Company employed approximately 900 field sales
representatives operating out of 58 offices in 41 cities, and 445 teleservices
associates providing services from 326 call stations in three call centers. As
of that date, the Company had 11 different WallBoard(R) programs in over 17,000
sites. During 1995, the Company distributed over 3.8 million sampling packs
containing over 75 different product samples, coupons and pieces of literature
of 49 clients of the Company at approximately 20,000 locations.
The Company's revenues increased from $11.7 million in 1994 to $42.9
million in 1995, and from $14.0 million in the first six months of 1995 to $34.9
million in the first six months of 1996. Net income, as adjusted to reflect a
pro forma provision for income taxes, as if the Company were subject to
corporate income taxes and to eliminate certain non-recurring compensation in
1995, grew from $1.2 million in the first six months of 1995 to $2.5 million in
the first six months of 1996.
Consumer Markets
In its Consumer Markets division, established in 1993, the Company provides
outsourced marketing services to AT&T Communications, Inc. ("AT&T"). Using
face-to-face field sales, including event marketing, and teleservices, the
Company markets AT&T long-distance telecommunications services to residential
customers. The Company began marketing AT&T services using its field sales force
in February 1994. The
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Company expanded this relationship to add teleservices capabilities in the
second quarter of 1996. The revenues generated by AT&T have grown from $1.7
million in 1994 to $25.0 million in 1995.
The Company, jointly with AT&T, develops sales and marketing programs
designed to enroll residential long-distance telecommunications customers for
AT&T. The Company is principally responsible for implementation of substantially
all aspects of the marketing initiatives it develops with AT&T ("turn-key"
programs). The Company develops lists of potential customers to be contacted;
creates marketing materials, including customer applications; hires, trains and
supervises its sales representatives and teleservices associates to market AT&T
services; and monitors the effectiveness of its programs. The Company's turn-key
approach differentiates it from other marketing services firms, which merely
implement a client's marketing strategy using contact lists provided by the
client.
The Company targets multi-cultural markets as well as general consumer
markets throughout the United States, seeking in particular to secure customers
who AT&T believes would be high-value subscribers. To reach multi-cultural
markets, the Company develops demographic databases identifying potential
customers in such communities and employs field sales representatives and
teleservices associates who are capable of marketing services in a prospective
customer's native language as well as in English. The Company also develops and
distributes sales literature and collateral documents in these languages. In
addition, in marketing services to these multi-cultural communities, the Company
has developed databases of information on specialized demographic segments,
which the Company intends to use in the future to market products and services
for additional clients.
Relying primarily on its existing infrastructure and capabilities, the
Company believes that it will be able to expand the clients and industries
served by its Consumer Markets division. The Company recently entered into an
agreement to provide marketing and sales services for the online computer
service of Prodigy Services Company ("Prodigy"), using field sales, including
event marketing, and other marketing services. In August 1996, the Company
entered into two contracts with Foundation Health, a California Health Plan
("Foundation Health"), to market and sell memberships in certain managed health
care plans to residential customers in designated areas using the Company's
field sales (including event marketing), teleservices and other marketing
services.
Business Markets
In its Business Markets division, established in late 1994, the Company
provides marketing and sales services to MCI Telecommunications Corporation
("MCI"), targeting small business customers in general and multi-cultural
markets throughout the United States. Using both field sales and teleservices,
the Company seeks to enroll long-distance business customers for MCI. As in the
Consumer Markets division, the Company offers MCI turn-key marketing initiatives
and is principally responsible for the implementation of such initiatives.
The Company's Business Markets operations are separate from its Consumer
Markets operations. This separation helps to ensure confidentiality for the
Company's clients that operate in the same industry and permits the Company to
perform services targeted at different markets for different clients. The two
divisions have separate offices, separate field sales forces and teleservices
personnel, separate management (including senior management) and separate
demographic databases.
The Company believes that it will be able to market the capabilities that
it has developed in the Business Markets division to attract new clients in
other industries. In August 1996, the Company entered into a contract with
Lucent Technologies, BCS ("Lucent") to market and sell certain Lucent
telecommunications equipment to business customers throughout the United States
using the Company's field sales, inbound and outbound teleservices and other
marketing services.
Marketing Services
The Marketing Services division, established in 1988, specializes in two
services that provide the Company's clients with targeted channels of
distribution: the WallBoard(R) and sampling pack programs. The
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Company's WallBoard(R) or "magazine-on-the-wall" is a sponsored information
center encased in a 42X30 or 57X30 oak or mahogany frame which highlights an
exclusive sponsor and provides educational, editorial and product information
addressed specifically to the needs of the target audience. As of June 30, 1996,
the Company had 11 different WallBoard(R) programs at over 17,000 sites, in
which 44 clients of the Company participate. Each sponsor pays the Company an
annual amount for participation in the service. Locations displaying
WallBoards(R) generally do so under two- or three-year exclusive agreements with
the Company, with automatic renewal provisions. Participation in the
WallBoard(R) program is provided free of charge to the doctors' offices, child
care centers, hospitals and other locations at which the WallBoards(R) are
displayed. The Company identifies locations for its WallBoards(R) that will
reach specific high-value audiences targeted by the WallBoard(R) programs'
sponsors. For example, at June 30, 1996 the Company had WallBoards(R) in the
offices of approximately 1,200 cardiologists, 700 rheumatologists and
orthopedists, and 600 endocrinologists and diabetologists, which are utilized by
drug companies, medical product companies and other sponsors interested in
reaching the patients of such doctors. Similarly, at June 30, 1996 the Company
had WallBoards(R) in approximately 12,000 child care centers, which are utilized
by sponsors seeking to reach new parents and dual-income families.
The Company also designs, develops and delivers sampling packs, to provide
targeted distribution of sponsors' product samples, coupons and literature to
potentially high-value customers. These programs differ from mass sampling
programs which distribute large numbers of samples into the general market. The
Company designs colorful boxes containing a variety of nationally recognized
product samples, coupons and literature of particular relevance to the target
audiences at a time when the audiences are most likely to use the items included
in the pack. At June 30, 1996, the Company offered six exclusive programs. Based
on contracts with locations in effect at that date the Company expects to
distribute in 1996: (1) the Your Kids Parent's Pack(TM), to parents through day
care providers at approximately 16,600 child care centers; (2) the Diabetes
Pack(TM), to patients through approximately 2,700 endocrinologists and
diabetologists; (3) the Heart Pack(TM), to patients through approximately 2,000
cardiologists; (4) the Arthritis Pack(TM), to patients through approximately
1,700 rheumatologists and orthopedists; (5) the New Member Kit for Men(TM); and
(6) the New Member Kit for Women(TM), together with the New Member Kit for
Men(TM), to new members at approximately 1,000 health and fitness clubs. The
Company implements most of its sampling programs in cooperation with a leading
association in the targeted channel of distribution, specifically, the National
Child Care Association, the American Heart Association, the Arthritis Foundation
and the American Diabetes Association. The Company has two- and three-year
exclusive contracts to be the sole provider of sampling packs to locations
(i.e., child care centers, doctors' offices and health and fitness clubs)
through which the sampling packs are distributed.
The Company retains The Gallup Organization, Market Facts and Audits &
Surveys to provide research to assess the impact of participation in the
WallBoard(R) and sampling pack programs. The research organizations determine
for sponsors the extent to which their products and literature reach the target
audience and conduct studies designed to help measure the efficacy of the
programs.
RISK FACTORS
There are important risks associated with the Company's business, financial
results and ability to implement its growth strategy. These risks include (i)
the Company's current reliance on AT&T, which constituted 59% of its 1995
revenues, and on other major clients; (ii) the Company's ability to sustain and
manage future growth; (iii) the Company's dependence on industry trends toward
outsourcing of marketing services; (iv) risks associated with the Company's
contracts; (v) the dependence of the Company's success on its executive officers
and other key employees, in particular Daniel M. Snyder, its President, Chief
Executive Officer and Chairman of the Board of Directors; and (vi) the possible
impact of certain government regulations on the Company's operations. Before
purchasing shares of Common Stock offered hereby, prospective investors should
consider carefully all of the information set forth in this Prospectus
including, in particular, the information set forth under "Risk Factors."
5
<PAGE> 8
OUTSOURCING AND DEMOGRAPHIC TRENDS
The market for the field sales and telephone-based marketing services
provided by the Company has grown principally as a result of the increased
outsourcing of such services by large organizations in order to supplement their
internal marketing capabilities. Outsourcers can provide several advantages over
a company acting alone, including the ability to reach special, hard-to-locate
audiences; the ability to augment internal sales forces to gain market share
more quickly; the avoidance of infrastructure costs, such as opening new sales
offices; the opportunity to act quickly by utilizing the outsourcers' marketing
channels that could take months or years to develop internally; and the
opportunity to pay only for quantifiable results. The Company believes that
sellers of products and services will increasingly integrate outsourcers, such
as the Company, into their overall marketing strategies.
The Company seeks to identify and access markets with high growth
characteristics. The Company expects that the multi-cultural communities which
it targets primarily through its Consumer Markets and Business Markets divisions
will grow significantly in the coming years. For example, in February 1996, the
U.S. Bureau of the Census (the "Census Bureau") projected, based in part on 1990
census data, that the Hispanic and Asian/Pacific Islander communities in the
United States were comprised in 1995 of approximately 26.9 million and
approximately 9.4 million people, respectively, and would grow approximately 53%
and approximately 63%, respectively, by 2010. In contrast, the Census Bureau
projected at that time, based in part on 1990 census data that the general
population in the United States would grow approximately 13% by 2010. Similarly,
at that time, the Census Bureau projected, based in part on 1990 census data,
that the 50 years or older population in the United States was comprised of
approximately 68.3 million people in 1995, and would grow approximately 41% by
2010. The Company believes that many of its programs in its Marketing Services
division are in locations that are often used by people who are 50 years or
older.
GROWTH STRATEGY
The Company recently has experienced significant growth. The Company
increased the number of its field sales offices from 25 offices located in 23
cities at the end of 1994, the first year in which the Company conducted field
sales operations in both its Consumer Markets and Business Markets divisions, to
58 offices located in 41 cities at June 30, 1996. The Company also increased the
number of teleservices personnel from 177 persons working from one call center
at the end of 1995, to 445 persons working from three call centers at June 30,
1996. In its Marketing Services division, the Company increased its WallBoard(R)
programs from six different programs highlighting 11 clients at December 31,
1993, to 11 different programs highlighting 44 clients at June 30, 1996. The
Company also increased its sampling pack programs from two sampling pack
programs with 16 sponsors distributed through over 13,000 locations at the end
of 1993, to six sampling pack programs with 37 sponsors expected by the Company
to be distributed to approximately 24,000 locations in 1996 based on contracts
with locations in effect at June 30, 1996.
The Company believes that its targeted marketing strategy and
multi-cultural capabilities are adaptable to serve additional needs of existing
clients and the needs of new clients in other industries. The Company
anticipates that its existing infrastructure of offices, management, supervisory
and training personnel, and teleservices capabilities can accommodate additional
clients in each operating division.
The Company's commitment to continued growth through internal expansion and
complementary acquisitions is evidenced by the following:
Consumer Markets
- The Company is adding approximately 80 call stations, which it expects
will be operating by late 1996, to its existing 300 call stations in this
division.
- In June 1996, the Company expanded its relationship with AT&T by entering
into a new agreement with AT&T Communications (U.K.) Ltd. ("AT&T (U.K.)"),
to market long-distance telecommunications services to residential
customers based in the United Kingdom. As part of this expansion, the
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<PAGE> 9
Company intends to add one call center and one or more field sales offices
in the United Kingdom in 1997.
- The Company entered into a contract with Prodigy in June 1996, to provide
marketing and sales services for Prodigy's online service to residential
customers, using the Company's field sales, including event marketing, and
other marketing services.
- In August 1996, the Company entered into two contracts with Foundation
Health to market and sell memberships in certain managed health care plans
to residential customers in designated areas using the Company's field
sales (including event marketing), teleservices and other marketing
services.
Business Markets
- In August 1996, the Company entered into an agreement with Lucent to
market and sell certain Lucent telecommunications equipment to business
customers throughout the United States using the Company's field sales,
inbound and outbound teleservices and other marketing services.
- The Company also seeks to add additional inbound telephone-based sales in
its Business Markets division.
Marketing Services
- The Company increased the number of sales managers and executives in this
division from five as of December 31, 1993 to approximately 20 as of June
30, 1996, to take advantage of opportunities to expand the services
offered to existing clients and to develop new lines of business.
- The Company has recently developed, in conjunction with Hoechst Marion
Roussel, Inc. (formerly Marion Merrill Dow) ("Hoechst Marion Roussel"),
its Allergy Health WallBoard,(R) of which Hoechst Marion Roussel is the
exclusive client sponsor under a three-year contract with the Company.
- Since January 1996, the Company has developed three additional new
WallBoard(R) programs: the Women's Wellness WallBoard(R), which will be
located in obstetrics' and gynecologists' offices; the Caring
WallBoard(R), which will be located in oncologists' offices and oncology
treatment centers; and the New Home WallBoard(R), which will be located in
real estate offices throughout the United States. The Company anticipates
that it will begin distributing WallBoards(R) through these new programs
by January 1997.
- In May 1996, the Company acquired from RD Publications, Inc., an
affiliate of Readers Digest Association Incorporated, a "new member"
health club sampling pack program through which it expects to distribute
approximately 735,000 health club member kits to new members at
approximately 1,000 health and fitness clubs during the second half of
1996.
The Company also intends to pursue strategic acquisitions of companies that
offer complementary services or expand the geographic markets served by the
Company. Although the Company has no agreements, understandings or arrangements
with respect to any particular acquisition opportunities, it believes that the
fragmentation in the marketing services industry will result in consolidation,
providing opportunities for the Company to pursue selectively domestic and
international complementary acquisitions.
BACKGROUND OF THE COMPANY
Snyder Communications, Inc. was formed in June 1996 to be the holding
company for Snyder Communications, L.P., a limited partnership established in
1988, in which SMS is the corporate general partner. On or prior to the
effectiveness of the Offerings, the Company will consummate the Reorganization,
pursuant to which the Company will acquire all of the limited partnership
interests of the Partnership and all of the issued and outstanding stock of SMS.
Each 1% interest in the Partnership will be exchanged, directly by the limited
partners of the Partnership or indirectly by the stockholders of SMS, for
shares of the Company's Common Stock resulting in aggregate shares
issued in exchange for 100% of the Partnership.
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Prior to the consummation of the Reorganization and the Offerings, the
Partnership intends to distribute to its partners, including SMS, its then cash
balance in one or more distributions (collectively, the "Distribution"), and SMS
intends to distribute to its stockholders its then cash balance in one or more
distributions. The amount of the Distribution by the Partnership between July 1,
1996 and the date of the Offerings is not expected to exceed $10.0 million. The
Partnership distributed approximately $3.9 million in the aggregate to its
limited partners and, through SMS, to the SMS stockholders in 1995 and
approximately $8.6 million in the aggregate to date in 1996 (of which
approximately $2.7 million was a non-cash distribution), as a return on their
respective investments and to allow them to pay their income tax liability. See
"Certain Transactions." The Partnership's partners and the SMS stockholders are
liable for the income tax payable with respect to the Company's operations for
periods through the date of the Reorganization. See "The Company."
THE OFFERINGS
Of the 12,000,000 shares of Common Stock, par value $.001 per share,
offered hereby, 9,600,000 shares of the Common Stock are being offered initially
in the United States and Canada (the "U.S. Offering") and 2,400,000 shares of
the Common Stock are being offered initially outside the United States and
Canada (the "International Offering"). The U.S. Offering and the International
Offering are collectively referred to herein as the "Offerings."
Common Stock offered by:
<TABLE>
<S> <C>
The Company................................... shares
The Selling Stockholder....................... shares
Common Stock to be outstanding after the
Offerings(a)..................................... shares
Use of Proceeds.................................... The estimated net proceeds to be
received by the Company of
approximately $ million will
be used to repay certain
indebtedness, provide working
capital and for general corporate
purposes, which may include
expansion of its facilities, hiring
additional sales and marketing
personnel, capital expenditures and
acquisitions. See "Use of Proceeds."
Proposed New York Stock Exchange symbol............ SNC
</TABLE>
- ---------------
(a) Does not include (i) shares of Common Stock reserved for issuance
upon exercise of outstanding options, and (ii) shares of Common
Stock available for future issuance under the Company's Stock Option Plan.
See "Management -- Stock Option Plan."
8
<PAGE> 11
SUMMARY FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------------------------------ -------------------------
1991 1992 1993 1994 1995 1995 1996
----------- ----------- ------ ------- ------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues....................... $ 2,747 $ 4,056 $9,043 $11,740 $42,892 $13,981 $34,861
Operating expenses (excluding
compensation to SMS
stockholders)(a)............. 2,564 3,424 8,458 9,989 34,694 11,816 30,205
Compensation to SMS
stockholders(a).............. -- -- -- -- 4,424 -- --
----------- ----------- ------ ------- ------- ----------- -----------
Income from operations......... 183 632 585 1,751 3,774 2,165 4,656
Interest expense--substantially
all to related parties....... (330) (407) (314) (296) (784) (215) (552)
Interest income................ 5 5 7 20 198 12 97
----------- ----------- ------ ------- ------- ----------- -----------
Income (loss) before taxes..... (142) 230 278 1,475 3,188 1,962 4,201
SMS income tax provision
(benefit).................... -- -- 15 85 (245) 383 58
----------- ----------- ------ ------- ------- ----------- -----------
Net income (loss).............. $ (142) $ 230 $ 263 $ 1,390 $ 3,433 $ 1,579 $ 4,143
=========== =========== ====== ======== ======== =========== ===========
Pro forma income data
(unaudited):
Historical income before income
taxes as reported............ $ 3,188 $ 1,962 $ 4,201
Pro forma adjustment for
compensation to SMS
stockholders(a).............. 4,424 -- --
------- ----------- -----------
Pro forma income before income
taxes........................ $ 7,612 $ 1,962 $ 4,201
======== =========== ===========
Pro forma income tax
provision(b)................. 3,021 779 1,681
------- ----------- -----------
Pro forma net income(a)(b)..... $ 4,591 $ 1,183 $ 2,520
======== =========== ===========
Pro forma net income
per share(c)................. $ $ $
======== =========== ===========
Pro forma weighted average
number of shares
outstanding(c)...............
PRO FORMA, AS ADJUSTED, INCOME STATEMENT DATA (UNAUDITED):
Interest expense(d).......................................................... $ 41 $ 15 $ 29
Net income(e)................................................................ 5,038 1,304 2,834
Net income per share(e)(f)...................................................
Weighted average shares outstanding(f).......................................
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30, 1996
-------------------------
PRO FORMA,
ACTUAL AS ADJUSTED(g)
------- --------------
(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit)..................................................... $(5,680) $
Total assets.................................................................. 12,300
Long-term debt, less current maturities....................................... 5,906
Equity (deficit).............................................................. (5,537)
</TABLE>
Continued on next page
9
<PAGE> 12
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF
-------------------------------- JUNE 30,
1993 1994 1995 1996
------ ------ ------ --------
<S> <C> <C> <C> <C>
SELECTED OPERATING DATA (UNAUDITED):
Number of field sales offices.................. -- 25 55 58
Number of call stations........................ -- -- 90 326
Number of teleservices associates.............. -- -- 177 445
Number of WallBoard(R) programs................ 6 8 9 11
Number of sampling packs distributed (in
millions).................................... 2.6(h) 2.6(h) 3.8(h) (i)
Number of sampling pack locations (in
thousands)................................... 13.1 14.8 20.0 (i)
Number of sampling pack programs............... 2 2 4 6
Number of WallBoard(R) and sampling pack
sponsors(j).................................. 25 32 68 64
</TABLE>
- ---------------
(a) Certain employees of the Company also served as officers of SMS, the
corporate general partner of the Partnership, for which such employees
received compensation from SMS in 1995, which is treated as non-recurring.
The pro forma adjustment gives effect to the elimination in 1995 of this
non-recurring compensation based on compensation levels for the Company, as
approved by its Board of Directors. Following consummation of the
Reorganization, such officers will not be required to perform any
comparable duties or responsibilities for SMS. Further, other costs are not
likely to be incurred which would offset the impact of this pro forma
adjustment. Therefore, such compensation is treated as non-recurring. See
Note 12 to the Company's Combined Financial Statements.
(b) Prior to the Offerings, the Company's principal operations were not subject
to Federal or state corporate income taxes. The income statement data for
the year ended December 31, 1995 and the six-month periods ended June 30,
1995 and 1996 reflects a pro forma provision for income taxes as if all
operations of the Company were subject to Federal and state corporate income
taxes. The pro forma provision for income taxes represents an effective
combined Federal and state tax rate of approximately 39.7% for the year
ending December 31, 1995, and the six months ended June 30, 1995, and 40.0%
for the six months ended June 30, 1996. See "The Company" and Notes 6 and 12
to the Company's Combined Financial Statements.
(c) Prior to the consummation of the Reorganization and the Offerings, the
Partnership intends to distribute to its partners, including SMS, its then
cash balance in one or more distributions which are not expected to exceed
$10.0 million in the aggregate. Pro forma net income per share information
assumes that of the shares being offered by the Company hereby were
outstanding during the periods indicated. This represents the approximate
number of shares of Common Stock that the Company would need to issue (at
an assumed initial public offering price of $15.00 per share, which is the
mid-point of the initial public offering price range), to fund the payment
of the distribution in excess of earnings to the Partnership's existing
partners. See "The Company" and Note 2 to the Company's Combined Financial
Statements.
(d) Adjusted to give effect to reduction of interest expense associated with the
repayment of the Company's 12.25% subordinated debentures with a portion of
the proceeds from the Offerings. See "Use of Proceeds."
(e) Pro forma, as adjusted, net income and pro forma net income per share give
effect to an adjustment to reflect the elimination of the non-recurring
compensation to certain SMS stockholders (see (a) above) and a pro forma
provision for Federal and state corporate income taxes. Pro forma, as
adjusted, net income and pro forma net income per share do not give effect
to the non-recurring prepayment penalties and other expenses expected to be
incurred upon the early retirement of the 12.25% subordinated debentures.
This charge to income is estimated to be $2.1 million ($1.3 million net of
income taxes).
(f) Pro forma, as adjusted, net income per share has been calculated based on
the weighted average number of shares of common stock outstanding during
the periods plus the shares of Common Stock issued in the Offerings.
(g) Adjusted to give effect to the distribution of the Partnership's cash
balance existing at the date of such distribution ($1.3 million at June 30,
1996) to its existing partners, the recording of a net deferred tax asset,
the sale of the shares issued by the Company in the Offerings (at an assumed
initial public offering price at the mid-point of the initial public
offering price range set forth on the cover page of this Prospectus) and the
application of the estimated net proceeds therefrom as set forth under "Use
of Proceeds." See Note 12 to the Company's Combined Financial Statements.
(h) Represents sampling packs distributed during the years ended December 31,
1993, 1994 and 1995, respectively.
(i) As of June 30, 1996, the Company had contracts with clients to distribute
approximately 4.5 million sampling packs during 1996. As of the same date,
the Company had contracts with approximately 24,000 locations to distribute
such packs.
(j) A number of the Company's clients participate in both the WallBoard(R) and
sampling pack programs.
10
<PAGE> 13
RISK FACTORS
In addition to the other information set forth in this Prospectus, the
following risk factors should be considered carefully in evaluating the Company
and its business before purchasing any of the shares of Common Stock offered
hereby.
RELIANCE ON AT&T
Currently, AT&T is the Company's largest client, accounting for 17% of the
Company's revenues in 1994, 59% in 1995 and 56% in the first six months of 1996.
The contract with AT&T does not contain specific performance criteria, but
instead provides for varying payments depending on the type of customer enrolled
by the Company. In addition, under the contract, the Company is precluded from
concurrently selling similar telecommunications services for competitors of AT&T
to U.S.-based residential customers who either speak foreign languages or are
English speakers who consider foreign countries their home (the "Foreign-Origin
Consumer Market"). See "Business -- Services -- Consumer Markets."
The Company's contract with AT&T runs through December 1997, subject to
AT&T's right to seek to renew the contract upon terms mutually agreeable to AT&T
and the Company. The Company's arrangement with AT&T relating to field sales
marketing services performed by the Company for AT&T with respect to U.S.
residential customers who are not part of the Foreign-Origin Consumer Market
(the "Domestic Consumer Market") is not reflected in a formal contract. The
Company has provided such marketing services to AT&T since September 1995,
initially through a program that expired in December 1995. Since the expiration
of that program the Company has continued to provide such marketing services to
AT&T. The Company anticipates that this arrangement will continue through
December 1996. In the first six months of 1996, services performed by the
Company for AT&T in the Domestic Consumer Market accounted for approximately 21%
of the Company's total revenues.
The Company anticipates that as the expiration of the AT&T relationship
nears, it will enter into negotiations with AT&T regarding extending the
relationship. The loss of AT&T as a client, or any significant portion of the
services provided to AT&T, would have a material adverse effect on the Company.
If such negotiations were to prove unsuccessful, the Company anticipates that it
would enter into negotiations with other companies, including with other
telecommunications companies, to utilize the resources currently devoted to AT&T
(although under the terms of the AT&T contract it could not enter into such
negotiations with other telecommunications companies for services targeting the
Foreign-Origin Consumer Market until thirty days after the expiration of the
AT&T contract). The Company also anticipates that the deregulation of the U.S.
telecommunications industry by 1998, pursuant to the Telecommunications Act of
1996, and the competitive environment that will result therefrom, would provide
it with opportunities to service other telecommunications businesses. There can
be no assurance, however, that the Company would be able to find clients that
would generate the same amount of revenues or profitability of business as does
AT&T. See "Business -- Services -- Consumer Markets."
RELIANCE ON OTHER MAJOR CLIENTS
In addition to AT&T, the Company has a number of other significant clients.
Based on 1995 revenues, the ten largest clients of the Company, other than AT&T,
listed alphabetically, are Eastman Kodak Company, Gerber Products Company,
Kellogg U.S.A., Inc., Kraft Foods Inc., Lehn & Fink Products (now a unit of
Reckitt & Colman, Inc.), MCI Telecommunications Corporation, Nestle Beverage
Company, The Prudential Insurance Company of America and Reckitt & Colman, Inc.
None of these clients accounted for more than 10% of the Company's revenue in
1995, although MCI is expected to account for materially more than 10% of the
Company's revenue in 1996. In the first six months of 1996, MCI accounted for
approximately 25% of the Company's revenues. The Company does not believe that
revenues from an individual client for a particular period are necessarily
indicative of revenues from that client for the entire year. The loss of MCI as
a client would have a material adverse effect on the Company. All of the clients
named above currently have contracts with the Company of at least one year and,
in some cases multi-year, duration, with renewal options. The contract with MCI
can be terminated by MCI upon 90 days' notice to the Company. Each of these
contracts contains product exclusivity, which precludes the Company from
providing similar services for competing
11
<PAGE> 14
products. Accordingly, if any such client were to terminate or not renew its
contract with the Company, the Company could potentially replace its business
with that of a competitor of such client. If, however, the Company were to lose
any of these clients and be unable to replace its business with a competitor or
otherwise, it could have a material adverse effect on the Company. See
"Business -- Services."
MANAGEMENT OF GROWTH
The Company has experienced rapid growth over the past several years.
Continued growth depends in significant part on the Company's ability to
successfully utilize its existing infrastructure and databases to perform
services for other clients, as well as on the Company's ability to develop and
successfully implement new marketing methods or channels for new services for
existing and new clients. Continued growth will also depend on a number of other
factors, including the Company's ability to (i) maintain the high quality of the
services it provides to customers and to increase its penetration with existing
customers, (ii) recruit, motivate and retain qualified personnel, (iii) train
existing sales representatives or recruit new sales representatives on an
economic basis to sell different categories of services or products and (iv)
open new field sales offices and new call centers in a timely and economic
fashion. The Company's continued growth also will require the implementation of
enhanced operational and financial systems, will require additional management,
operational and financial resources and could place a strain on the Company's
operations and resources. There can be no assurance that the Company will be
able to manage its expanding operations effectively or that it will be able to
maintain its growth. If the Company is unable to manage growth effectively, its
business, results of operations or financial condition could be materially
adversely affected. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business -- Growth Strategy."
GROWTH THROUGH ACQUISITIONS; INTERNATIONAL EXPANSION
Among other growth strategies, the Company plans to expand its business
through complementary acquisitions. There can be no assurance that the Company
will have sufficient capital resources to pursue this aspect of its growth
strategy. Additionally, there can be no assurance that the Company will
successfully identify, complete or integrate acquisitions or that any
acquisitions will perform as expected or will contribute significant revenues or
profits to the Company. The Company has also recently expanded its business to
the United Kingdom. There can be no assurance that this or any other
international expansion will generate revenues or profits for the Company. Any
new international operation, including the United Kingdom operation, would be
subject to currency fluctuations and other risks, including adverse developments
in the foreign political and economic environment, difficulties in staffing and
managing foreign operations and potentially adverse tax consequences. There can
be no assurance that one or more of these factors will not have a material
adverse effect on the Company's international operations.
DEPENDENCE ON TREND TOWARD OUTSOURCING
The Company's business and growth depend in large part on the trend toward
outsourcing of marketing services. The Company is dependent on outsourcing from
telecommunications company clients, in particular AT&T. There can be no
assurance that this trend in outsourcing will continue, as companies may elect
to perform such services internally. A significant change in the direction of
this trend, or a trend in the telecommunications industry not to use, or reduce
the use of, outsourced marketing services, such as those provided by the
Company, would have a material adverse effect on the Company. See
"Business -- Industry Overview."
RISKS ASSOCIATED WITH THE COMPANY'S CONTRACTS
Although the Company currently seeks to sign multi-year contracts with its
clients, the Company's contracts do not assure the Company a specific level of
revenues and do not designate the Company as the client's exclusive marketing
services provider. The Company believes maintaining satisfactory relationships
with its clients has a more significant impact on the Company's revenues than
the specific terms of its client contracts. In the Marketing Services division,
the majority of the Company's contracts with clients are annual contracts with
terms that expire by the end of 1996. There can be no assurance that the clients
will renew or
12
<PAGE> 15
extend such contracts. In addition, the Company's contracts with MCI and certain
other significant clients are terminable by its clients on relatively short
notice, and all of the Company's significant contracts prohibit the Company from
providing services to a direct competitor of a client that are identical or
similar to the services the Company provides to such client during the term of
such contract and in some cases up to ninety days thereafter. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Business -- Growth Strategy" and "-- Services."
The Company's Marketing Services division depends significantly on its
ability to establish and maintain relationships with sponsors and affiliations
with industry associations. A significant reduction in the Company's ability to
establish relationships with additional sponsors or associations, or in renewal
rates on the Company's contracts with existing sponsors or associations, could
have a material adverse effect on the Company. See
"Business -- Services -- Marketing Services."
COMPETITIVE AND FRAGMENTED INDUSTRY; POTENTIAL CONSUMER SATURATION
The industry in which the Company competes is highly competitive and
fragmented. The Company competes with providers of other forms of advertising
and marketing media, such as direct mail, television, radio and other
advertising media. The Company also competes with the internal marketing
capabilities of clients and prospective clients. The Company's largest clients,
AT&T and MCI, have significant internal teleservices and field force marketing
capabilities and also contract for these services from competitors of the
Company. The Company competes as well with other marketing services firms,
ranging in size from very small firms offering special applications or
short-term projects to large independent firms. A number of competitors have
capabilities and resources equal to, or greater than, the Company's. There can
be no assurance that, as the Company's industry continues to evolve, additional
competitors with greater resources than the Company will not enter the industry
(or particular segments of the industry) or that the Company's clients will not
choose to conduct more of their targeted marketing services internally or
through alternative marketing media. See "Business -- Competition."
Moreover, the effectiveness of marketing by telephone could also decrease
as a result of consumer saturation and increased consumer resistance to this
marketing method. Although the Company intends to monitor industry trends and
respond accordingly, there can be no assurance that the Company will be able to
anticipate and successfully respond to such trends in a timely manner. See
"Business."
DEPENDENCE ON LABOR FORCE
The Company's industry is very labor intensive and experiences high
personnel turnover. Many of the Company's employees receive hourly wages plus
commissions, if earned. A significant number of the Company's employees,
including all of its teleservices associates, are employed on a part-time basis.
A higher turnover rate among the Company's employees would increase the
Company's recruiting and training costs and decrease operating efficiencies and
productivity. The Company's operations, particularly direct sales and
teleservices, require specially trained employees, such as those employees who
market services and products in languages other than English. Growth in the
Company's business will require it to recruit and train qualified personnel at
an accelerated rate from time to time. There can be no assurance that the
Company will be able to continue to hire, train and retain a sufficient labor
force of qualified employees, particularly bilingual employees. A significant
portion of the Company's costs consists of wages to hourly workers. In August
1996, the United States Congress passed and the President signed legislation
(H.R. 3448) which will increase the minimum wage 90 cents over two years;
beginning on October 1, 1996, the minimum wage will increase from $4.25 to $4.75
per hour and on September 1, 1997 will increase to $5.15 per hour. Although the
Company compensates most of its workforce above the minimum wage and therefore
will not be directly impacted by the legislation, the increase in the minimum
wage may have the effect of inflating wages among hourly workers generally in
the marketplace and, in turn, the prevailing wage for employees performing
services for the Company. An increase in hourly wages, costs of employee
benefits, employment taxes or commission rates could have a material adverse
effect on the Company. See "Business -- Hiring and Training" and "-- Employees."
13
<PAGE> 16
RELIANCE ON TECHNOLOGY; RISK OF BUSINESS INTERRUPTION
The Company has invested significantly in sophisticated and specialized
telecommunications and computer technology and has focused on the application of
this technology to provide customized solutions to meet many of its clients'
needs. In addition, the Company has invested significantly in sophisticated
end-user databases and software that enable it to market its clients' products
to targeted markets. The Company anticipates that it will be necessary to
continue to select, invest in and develop new and enhanced technology and
end-user databases on a timely basis in the future in order to maintain its
competitiveness. In addition, the Company's business is highly dependent on its
computer and telephone equipment and software systems, and the temporary or
permanent loss of such equipment or systems, through casualty or operating
malfunction, or a significant increase in the cost of telephone services that is
not recoverable through an increase in the price of the Company's services,
could have a material adverse effect on the Company's business. The Company's
property and business interruption insurance may not adequately compensate the
Company for all losses that it may incur in any such event.
DEPENDENCE ON KEY PERSONNEL
The success of the Company depends in large part upon the abilities and
continued service of its executive officers and other key employees,
particularly Mr. Daniel M. Snyder, President, Chief Executive Officer and
Chairman of the Board of Directors. There can be no assurance that the Company
will be able to retain the services of such officers and employees. The failure
of the Company to retain the services of Mr. Snyder and other key personnel
could have a material adverse effect on the Company. The Company has employment
agreements with certain executive officers, including Mr. Snyder, and also has
non-competition agreements with certain key personnel, including each of its
executive officers. However, courts are at times reluctant to enforce such
non-competition agreements. The Company maintains a key person insurance policy
on Mr. Snyder. In order to support its growth, the Company will be required to
recruit effectively, hire, train and retain additional qualified management
personnel. The inability of the Company to attract and retain the necessary
personnel could have a material adverse effect on the Company. See
"Management -- Employment Agreements."
GOVERNMENT REGULATION
The Company's business is subject to various Federal and state laws and
regulations. Certain portions of the Company's industry have become subject to
an increasing amount of Federal and state regulation in the past five years. The
Federal Communications Commission's (the "FCC") rules under the Federal
Telephone Consumer Protection Act of 1991 limit the hours during which
telemarketers may call consumers and prohibit the use of automated telephone
dialing equipment to call certain telephone numbers. The Federal Telemarketing
and Consumer Fraud and Abuse Prevention Act of 1994 (the "TCFAPA") broadly
authorizes the Federal Trade Commission (the "FTC") to issue regulations
prohibiting misrepresentation in telephone sales. In August 1995, the FTC issued
regulations under the TCFAPA which, among other things, require telemarketers to
make certain disclosures when soliciting sales. The Company believes its
operating procedures comply with the telephone solicitation rules of the FCC and
FTC. However, there can be no assurance that additional Federal or state
legislation, or changes in regulatory implementation, would not limit the
activities of the Company or its clients in the future or significantly increase
the cost of regulatory compliance.
A number of states have enacted or are considering enacting legislation to
regulate telephone and door-to-door solicitations. For example, telephone sales
in certain states cannot be final unless a written contract is delivered to and
signed by the buyer and may be canceled within three business days.
Several of the industries in which the Company's clients operate are
subject to varying degrees of government regulations, particularly the
telecommunications industries. Generally, compliance with these regulations is
the responsibility of the Company's clients. However, the Company could be
subject to a variety of enforcement or private actions for its failure or the
failure of its clients to comply with such regulations.
14
<PAGE> 17
One of the significant regulations of the FCC applicable to long distance
carriers, such as AT&T and MCI, prohibits the unauthorized switching of
subscribers' long distance carriers, also known in the industry as "slamming." A
fine of up to $100,000 may be imposed by the FCC for each instance of slamming.
In order to prevent unauthorized switches, federal law requires that switches
authorized over the telephone, such as through the Company's teleservices, be
verified contemporaneously by a third party. The Company believes its procedures
comply with this third-party verification requirement.
In the past, third-party verification has not been required for switches
obtained in person, such as those obtained by members of the Company's field
sales force. However, effective August 1, 1996, the Company became subject to
third-party verification procedures for switches obtained by the Company's field
sales force in its Business Markets division for MCI. The Company's training and
other procedures are designed to prevent unauthorized switching. However, as
with any field sales force, the Company cannot completely ensure that each
employee will always follow the Company's mandated procedures. Accordingly, it
is possible, and perhaps probable, that employees may in some instances engage
in unauthorized activities, including "slamming." In view of its recent rapid
growth in its field sales force, the Company in the second quarter of 1996 began
to institute additional protective safeguards against the occurrence of
unauthorized activities. Such new safeguards include the institution of an
additional level of field sales supervisors who oversee the activities of the
field sales force. This effort was led by a new director, previously employed by
AT&T for 19 years, with extensive experience in field sales, who was hired by
the Company for this purpose. During the course of her review of the field sales
force operations, the director recommended that two district managers be
terminated as well as certain of their subordinates. Such persons immediately
were terminated in March 1996. During this period, two additional district
managers and certain of their subordinates voluntarily left the employ of the
Company for unspecified reasons. The terminated district managers alleged that
persons in districts other than theirs were engaged in unauthorized activities.
The Company investigated such allegations but concluded that no other
terminations were warranted. The Company is unable to quantify what effect, if
any, any unauthorized activities, if they did occur, may have had on the
financial performance of the Company in 1995. The Company investigates customer
complaints reported to it by its telecommunications clients and reports the
results to its clients. To the Company's knowledge, no FCC complaint has been
brought against any of its clients as a result of the Company's services,
although the Company believes that the FCC is examining the sales activities of
long distance telecommunications providers, including the Company's clients and
the activities of outside vendors, such as the Company, used by such providers.
If any complaints were brought, the Company's client might assert that such
complaints constituted a breach of its agreement with the Company and, if
material, seek to terminate the contract. Any termination would be likely to
have a material adverse effect upon the Company's business. If such complaints
resulted in fines being assessed against a client of the Company, the client
could seek to recover such fines from the Company. Any amounts recovered from
the Company would reduce the Company's net income.
In addition, on June 21, 1996 MCI and the FCC entered into a consent
decree, under which MCI agreed to institute third-party verification procedures
for most small-business customer marketing not currently covered by third-party
verification, including field sales marketing of small-business customers. The
Company provides field sales marketing services to small-business customers on
behalf of MCI, and became subject to third-party verification of switches
obtained by the Company's field sales force for MCI effective August 1, 1996.
The Company expects that the implementation of such third-party verification
will increase the Company's costs to some extent, but does not expect the
implementation of such third-party verification to have a material adverse
effect on the Company's operations.
POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING RESULTS; SEASONALITY
The Company could experience quarterly variations in revenues and operating
income as a result of many factors, including the timing of clients' marketing
campaign, the implementation of a new product or service, the timing of
additional selling efforts and the general and administrative expenses to
acquire and support such new business and changes in the Company's revenue mix
among its various service offerings. In connection with certain contracts, the
Company could incur costs in periods prior to recognizing revenue under those
contracts. In addition, the Company must plan its operating expenditures based
on revenue forecasts, and a
15
<PAGE> 18
revenue shortfall below such forecast in any quarter would likely adversely
affect the Company's operating results for that quarter. Historically, seasonal
variations in the Company's business have been overshadowed by the Company's
growth. The Company expects that in the future its sales will reflect seasonal
effects in the first and third quarters due to weather related impact on the
field sales force and the impact on the Company's teleservices operations of the
decreased ability to reach potential customers as a result of summer vacations.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
NO PRIOR PUBLIC MARKET; POTENTIAL VOLATILITY OF STOCK PRICE
Prior to the Offerings there has been no public market for the Common
Stock. Although an application has been made to list the Common Stock on the New
York Stock Exchange, there can be no assurance that an active trading market for
the Common Stock will develop or be sustained following the Offerings. The
initial public offering price of the Common Stock offered hereby will be
determined by negotiations among the Company, the Selling Stockholder and the
Representatives of the Underwriters and may bear no relationship to the trading
prices of the Common Stock after the Offerings. See "Underwriting." The trading
price of the Common Stock could be subject to significant fluctuations in
response to actual or anticipated variations in the Company's quarterly
operating results and other factors, such as the introduction of new services or
technologies by the Company or its competitors, changes in other conditions or
trends in the Company's industry or in the industries of any of the Company's
significant clients, changes in governmental regulation, changes in securities
analysts' estimates of the Company's, or its competitors' or industry's, future
performance or general market conditions. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Quarterly Results."
General market price declines or market volatility in the future, or future
declines or volatility in the prices of stocks for companies in the Company's
industry or sector, could also affect the market price of the Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
A substantial number of shares of Common Stock will become available for
sale in the public market at various times following the completion of the
Offerings. No prediction can be made as to the effect, if any, that market sales
or the availability of shares for future market sales will have on the market
price of the Common Stock. Sales of a substantial number of shares of Common
Stock in the public market following the Offerings could adversely affect the
market price for the Company's Common Stock and the ability of the Company to
raise additional capital through sales of additional shares of Common Stock.
Upon completion of the Offerings, the Company will have outstanding an aggregate
of shares of Common Stock. The Common Stock offered hereby will be freely
tradeable (other than by an "affiliate" of the Company as such term is defined
in the Securities Act of 1933, as amended (the "Securities Act")) without
restriction or registration under the Securities Act. All remaining shares may
be sold under Rule 144 under the Securities Act, subject to the volume, manner
of sale and other restrictions of Rule 144. The Company, the Selling Stockholder
and the Company's other stockholders have agreed, subject to exceptions for
certain pledges and, in the case of the Company, the grant of employee stock
options, not to, directly or indirectly, sell, offer to sell, grant any option
for the sale of, or otherwise dispose of, any capital stock of the Company or
any security convertible or exchangeable into, or exercisable for, such capital
stock, or, in the case of the Company, file any registration statement with
respect to any of the foregoing (other than a registration statement on Form S-8
to register shares issuable upon exercise of employee stock options), for a
period of 180 days after the date of this Prospectus, without the prior written
consent of Merrill Lynch & Co. Pursuant to an agreement, Mr. Daniel M. Snyder
and certain of the Company's other stockholders are entitled to certain
registration rights with respect to their shares of Common Stock. If such
stockholders, by exercising such registration rights upon expiration of the
lock-up agreement described above, cause a large number of shares to be
registered and sold in the public market, such sales could have an adverse
effect on the market price of the Common Stock. In addition, the Company intends
to file a registration statement under the Securities Act to register initially
an aggregate of five million shares of Common Stock reserved for issuance in
connection with the Company's Stock Option Plan (as defined herein). The
issuance of such shares upon exercise of any options granted under such plan
would result in the dilution of the voting power of the Common Stock purchased
in the Offerings and could have a dilutive effect on earnings per share. See
"Management -- Stock Option Plan," "Description of Capital Stock," "Shares
Eligible for Future Sale" and "Underwriting."
16
<PAGE> 19
CONTROL BY PRINCIPAL STOCKHOLDERS
Following completion of the Offerings, Mr. Daniel M. Snyder, the Chairman
of the Board of Directors, President and Chief Executive Officer of the Company,
and Ms. Michele D. Snyder, Vice Chairman, Chief Operating Officer, and a
director of the Company, will beneficially own approximately % and %,
respectively, of the outstanding shares of Common Stock (approximately %
and % respectively, if the Underwriters' over-allotment options are
exercised in full). As a result, Mr. Snyder individually, and he and Ms. Snyder
if they act in concert, will have the ability to exercise substantial influence
over the Company's business by virtue of their voting power with respect to the
election of directors and all other matters requiring action by stockholders.
Such concentration of share ownership may have the effect of discouraging,
delaying or preventing a change in control of the Company. See "Management" and
"Principal and Selling Stockholders."
EFFECT OF CERTAIN CHARTER AND BYLAW PROVISIONS
The Company's Certificate of Incorporation and Bylaws contain certain
provisions that could discourage potential takeover attempts and make attempts
by the Company's stockholders to change management more difficult. Such
provisions include the requirement that the Company's stockholders follow an
advance notification procedure for certain shareholder nominations of candidates
for the Board of Directors and for new business to be conducted at any meeting
of the stockholders. In addition, the Certificate of Incorporation allows the
Board of Directors to issue up to five million shares of preferred stock and to
fix the rights, privileges and preferences of those shares without any further
vote or action by the stockholders. The rights of the holders of Common Stock
will be subject to, and may be adversely affected by, the rights of the holders
of any preferred shares that may be issued by the Company in the future. While
the Company has no present intention to issue any shares of preferred stock, any
such issuance could have the effect of making it more difficult for a third
party to acquire a majority of the outstanding voting stock of the Company. In
addition, the Company is subject to certain anti-takeover provisions of the
Delaware General Business Corporation Law, which could have effect of
discouraging, delaying or preventing a change of control of the Company. See
"Description of Capital Stock -- Certain Charter Provisions."
DILUTION
Investors purchasing shares of Common Stock in the Offerings will
experience immediate and substantial dilution of $ in the net tangible
book value per share of Common Stock from an assumed initial public offering
price at the mid-point of the range set forth on the cover page of this
Prospectus. Additional dilution may result from the exercise of outstanding
employee stock options. See "Dilution."
17
<PAGE> 20
THE COMPANY
Snyder Communications is a rapidly growing provider of innovative and high
value-added outsourced marketing services. The Company designs and implements
marketing programs for its clients utilizing a range of complementary marketing
resources, including field sales, teleservices, WallBoards(R) and product
sampling. The Company's clients are primarily Fortune 500 companies with large
annual marketing expenditures facing significant competitive pressures to retain
or expand market share. Based on 1995 revenues, the ten largest clients of the
Company, listed alphabetically, were AT&T Communications, Inc., Eastman Kodak
Company, Gerber Products Company, Kellogg U.S.A., Inc., Kraft Foods Inc., Lehn &
Fink Products (now a unit of Reckitt & Colman, Inc.), MCI Telecommunications
Corporation, Nestle Beverage Company, The Prudential Insurance Company of
America and Reckitt & Colman, Inc.
The Company enhances the value of its outsourced marketing services by
identifying and targeting high value market segments, in addition to general
markets, in order to increase market share for its clients. For example, the
Company's field sales representatives and teleservices associates have the
capability to market services in 16 foreign languages, in addition to English,
to reach both residential and business customers in multi-cultural markets, as
well as general markets. The Company utilizes its WallBoards(R) and sampling
packs to market products and services through targeted channels of distribution,
including the offices of cardiologists, rheumatologists and orthopedists, and
endocrinologists and diabetologists, to reach patients with heart conditions,
arthritis and diabetes; maternity wards and day care centers to reach new and
working parents; and corporate aviation terminals to reach business executives.
The Company seeks to identify and access market segments with high growth
characteristics.
As of June 30, 1996, the Company employed approximately 900 field sales
representatives operating out of 58 offices in 41 cities, and 445 teleservices
associates providing services from 326 call stations in three call centers. As
of that date, the Company had 11 different WallBoard(R) programs in over 17,000
sites. During 1995, the Company distributed over 3.8 million sampling packs
containing over 75 different product samples, coupons and pieces of literature
of 49 clients of the Company at approximately 20,000 locations.
The Company's revenues increased from $11.7 million in 1994 to $42.9
million in 1995, and from $14.0 million in the first six months of 1995 to $34.9
million in the first six months of 1996. Net income, as adjusted to reflect a
pro forma provision for income taxes, as if the Company were subject to
corporate income taxes and to eliminate certain non-recurring compensation in
1995, grew from $1.2 million in the first six months of 1995 to $2.5 million in
the first six months of 1996.
Snyder Communications, Inc. was formed in June 1996 to be the holding
company for Snyder Communications, L.P. The Partnership was established in 1988
as a limited partnership in which SMS, formerly known as Snyder Communications,
Inc., was the general partner, and a Delaware limited partnership beneficially
owned by Mr. Mortimer B. Zuckerman and Mr. Fred Drasner, Chairman and President,
respectively, of U.S. News & World Report, L.P., was the sole limited partner
(the "Original Limited Partner"). Prior to the consummation of the
Reorganization (as defined below), SMS will continue to be owned by Mr. Daniel
M. Snyder, Ms. Michele D. Snyder, Mr. Gerald S. Snyder and Dr. Anthony O.
Roberts. In May 1995, the Partnership completed a private placement of 12.25%
subordinated debentures (the "Debentures") and limited partnership interests to
certain investors, including Allen & Company Incorporated, certain officers and
related persons of Allen & Company Incorporated, and certain other investors
(collectively, the "1995 Investors"), through which the 1995 Investors became
additional limited partners. See "Certain Transactions."
On or prior to the effectiveness of the Offerings, the Company will
consummate a reorganization (the "Reorganization") pursuant to which the Company
will acquire all of the limited partnership interests of the Partnership and all
of the issued and outstanding stock of SMS. Each 1% interest in the Partnership
will be exchanged, directly by the limited partners of the Partnership or
indirectly by the stockholders of SMS, for shares of the Company's Common
Stock resulting in aggregate shares issued in exchange for 100% of the
Partnership. Upon consummation of the Reorganization, the Company will own all
of the limited partnership interests of the Partnership and all of the issued
and outstanding stock of SMS, the corporate general partner of the Partnership
and thus, effectively, 100% of the Partnership.
18
<PAGE> 21
Prior to the consummation of the Reorganization and the Offerings, the
Partnership intends to distribute to its partners, including SMS, its then cash
balance in one or more distributions, and SMS intends to distribute to its
stockholders its then cash balance in one or more distributions. The amount of
the Distribution by the Partnership between July 1, 1996 and the date of the
Offerings is not expected to exceed $10.0 million. The Partnership distributed
approximately $3.9 million in the aggregate to its limited partners and, through
SMS, to the SMS stockholders in 1995 and approximately $8.6 million in the
aggregate to date in 1996 (of which approximately $2.7 million was a non-cash
distribution), as a return on their respective investments and to allow them to
pay their income tax liability. See "Certain Transactions." The Partnership's
partners and the SMS stockholders are liable for the income tax payable with
respect to the Company's operations for periods through the date of the
Reorganization.
The Company's principal executive office is located at Two Democracy
Center, 6903 Rockledge Drive, Fifteenth Floor, Bethesda, Maryland 20817, and its
telephone number is (301) 468-1010.
19
<PAGE> 22
USE OF PROCEEDS
The net proceeds to be received by the Company from the Offerings are
estimated to be approximately $ , based on an assumed initial public
offering price of $15.00 per share, which is the mid-point of the initial public
offering price range set forth on the cover page of this Prospectus. The Company
will not receive any proceeds from the sale of the shares of Common Stock by the
Selling Stockholders (including any shares sold pursuant to the Underwriters'
over-allotment options). See "Principal and Selling Stockholders."
The Company intends to use approximately $7.1 million of the net proceeds
of the Offerings to repay in full the Company's Debentures, including accrued
and unpaid interest thereon, as of June 30, 1996, which were issued to the 1995
Investors on May 18, 1995, mature on December 31, 2001 and bear interest at a
fixed rate of 12.25% per annum. As of June 30, 1996, the outstanding principal
amount of the Debentures was $6.0 million, and accrued and unpaid interest
totaled $183,750. During the year ending May 18, 1997, the terms of the
Debentures permit prepayment of the principal at 115% of face value, plus
accrued and unpaid interest. The balance of the net proceeds will be used for
working capital and general corporate purposes, which may include expansion of
the Company's facilities, including the expansion of the Company's call centers
in Bethesda, Maryland, the establishment of the Company's call center in the
United Kingdom, the establishment of an executive office in the United Kingdom
and the establishment of additional field sales offices, expansion of the
Company's sales and marketing personnel, capital expenditures, and strategic
acquisitions of complementary businesses. The Company has not entered into any
agreements or understandings nor is it currently engaged in any negotiations or
discussions with respect to any acquisitions. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources" and "Business -- Growth Strategy."
Pending application of the net proceeds as described above, the Company
intends to invest the net proceeds in short-term, interest-bearing investment
grade securities.
DIVIDEND POLICY
The Company currently intends to retain future earnings to finance its
growth and development and therefore does not anticipate paying any cash
dividends in the foreseeable future. Payment of any future dividends will depend
upon the future earnings and capital requirements of the Company and other
factors which the Board of Directors considers appropriate.
20
<PAGE> 23
CAPITALIZATION
The following table sets forth the combined capitalization of the Company
(i) at June 30, 1996, (ii) at June 30, 1996 after giving pro forma effect to the
Reorganization and the Distribution and (iii) at June 30, 1996 as further
adjusted to reflect the issuance and sale of the 12,000,000 shares of Common
Stock offered hereby (at an assumed initial public offering price of $15.00 per
share which is the mid-point of the initial public offering price range set
forth on the cover page of this Prospectus and after deduction of underwriting
discounts and estimated offering expenses) and the receipt by the Company of its
portion of the net proceeds and the application by the Company of a portion of
its estimated net proceeds to repay the Debentures in full. See "Use of
Proceeds." This table should be read in conjunction with the Company's Combined
Financial Statements and notes thereto appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AT JUNE 30, 1996
-----------------------------------
PRO FORMA,
ACTUAL PRO FORMA AS ADJUSTED
------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Current portion of notes payable and obligations under capital
leases...................................................... $ 401 $ 401 $ 401
======= ======== =========
Long-term debt, less current maturities(a).................... $ 5,906 $ 5,906 $ 678
Equity:
Preferred stock, none authorized, actual; $.001 par value
per share, 5 million shares authorized, none issued and
outstanding, pro forma and pro forma as adjusted....... -- -- --
Common stock, no stated par value, 3,000 shares
authorized, actual; $.001 par value per share, 120
million shares authorized, pro forma and pro forma as
adjusted; 2,000 shares issued and outstanding, actual;
shares issued and outstanding, pro forma; and
shares issued and outstanding, pro forma as
adjusted(b)............................................ 1
Additional paid-in capital(c)............................ 1,360 (6,681)
Retained earnings (deficit)(c)(d)........................ (4,829) --
Limited partners' (deficit)(c)........................... (2,068) --
------- --------- -----------
Total equity (deficit).............................. (5,536) (6,681)
------- --------- -----------
Total capitalization (deficit)................. $ 370 $ (775) $
======= ======== =========
</TABLE>
- ---------------
(a) Represents obligations under capital leases and the Debentures.
(b) Does not include shares of Common Stock reserved for issuance upon
exercise of outstanding options. See "Management -- Stock Option Plan."
(c) In connection with the Reorganization, the retained earnings and limited
partners' deficit balances will be reclassified to additional paid-in
capital. The pro forma additional paid-in capital balance also reflects the
planned Distribution by the Partnership of its cash balance to its existing
partners prior to the Offerings. The Company's cash balance at June 30,
1996 was $1.3 million. The amount of the Distribution by the Partnership
between July 1, 1996 and the date of the Offerings is not expected to
exceed $10.0 million. See "The Company."
(d) Pro forma, as adjusted retained earnings represents the after-tax effect of
prepayment penalties ($0.4 million) and the write-off of unamortized
discount and issuance costs ($0.8 million) associated with the repayment of
the Debentures. See "Use of Proceeds."
21
<PAGE> 24
DILUTION
The net tangible book value (deficit) of the Company at June 30, 1996,
after giving effect to the Reorganization but prior to the Distribution, was
approximately $(6.1 million), or $ per share of Common Stock. Net tangible
book value per share represents the amount of total tangible assets less total
liabilities, divided by the number of shares of Common Stock outstanding. After
giving effect to the Reorganization and Distribution, the pro forma net tangible
book value (deficit) of the Company at June 30, 1996 would have been
approximately $(7.4 million) or $ per share of Common Stock.
Net tangible book value dilution per share represents the difference
between the amount paid by purchasers of shares of Common Stock in the Offerings
and the pro forma net tangible book value per share of Common Stock immediately
after completion of the Offerings. After giving effect to the sale of the shares
of Common Stock offered by the Company hereby at an assumed initial public
offering price of $15.00 per share, which is the mid-point of the initial public
offering price range set forth on the cover page of this Prospectus, and the
application by the Company of the estimated net proceeds to the Company
therefrom, the pro forma net tangible book value of the Company as of June 30,
1996 would have been approximately $ or $ per share. This represents
an immediate increase in pro forma net tangible book value of $ per share
to existing stockholders and an immediately dilution of $ per share to new
stockholders purchasing shares of Common Stock in the Offerings. The following
table illustrates this dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share........... $15.00
Net tangible book value per share at June 30, 1996
after giving effect to the Reorganization but prior
to the Distribution................................
Decrease per share attributable to the
Distribution.......................................
Increase per share attributable to new
stockholders.......................................
--------
Pro forma as adjusted net tangible book value per share
after the Offerings.....................................
------
Net tangible book value per share dilution to new
stockholders............................................ $
======
</TABLE>
The following table sets forth, after giving effect to the Reorganization,
the number of shares of Common Stock purchased from the Company within the last
five years, the total cash consideration paid for such shares and the average
consideration paid per share by the officers, directors, director nominees or
beneficial owners of 10% or greater of the outstanding Common Stock of the
Company and by new investors. The following computations assume an initial
public offering price of $15.00 per share, which is the mid-point of the initial
public offering price range, before deducting the underwriting discount and
estimated offering expenses.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------- --------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
-------- ------- ---------- ------- -------------
<S> <C> <C> <C> <C> <C>
Officers, directors, director nominees and
10% beneficial owners(a)................ % $ % $
New investors.............................
-------- ------- ---------- ------- -------------
Total(b)........................ % $ % $
======= ======= ========= ======= ==========
</TABLE>
- ---------------
(a) Officers, directors, director nominees and 10% beneficial owners own, in the
aggregate, 95.1% of the outstanding shares of Common Stock prior to the
Offerings.
(b) Does not include shares of Common Stock purchased by existing stockholders
who are not officers, directors, director nominees or beneficial owners of
10% or greater of the outstanding Common Stock of the Company.
22
<PAGE> 25
SELECTED FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
The following table sets forth selected financial and operating data as of
and for each of the years in the five-year period ended December 31, 1995, and
for the six months ended June 30, 1995 and 1996. The table also sets forth pro
forma income statement data for the year ended December 31, 1995 and the six
month periods ended June 30, 1995 and 1996 after giving effect to Federal and
state income taxes and the elimination in 1995 of certain non-recurring
compensation expense. The historical income statement data and balance sheet
data for and as of each of the years in the three-year period ended December 31,
1995, are derived from the audited Combined Financial Statements of the Company.
The income statement and balance sheet data for and as of each of the years in
the two-year period ended December 31, 1992 and each of the six month periods
ended June 30, 1995 and June 30, 1996, have been derived from the unaudited
Combined Financial Statements of the Company and in the opinion of Management
include all adjustments (consisting of normal and recurring adjustments) which
are necessary to present fairly the results of operation and financial position
of the Company for the periods and at the dates presented. The selected
financial and operating data for the six months ended June 30, 1996 are not
necessarily indicative of the results to be expected for the full year. The
following selected financial and operating data should be read in conjunction
with "Capitalization," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," the Combined Financial Statements and
notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
---------------------------------------------------- ------------------
1991 1992 1993 1994 1995 1995 1996
------- ------- ------- ------- -------- ------- -------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues............................................ $ 2,747 $ 4,056 $ 9,043 $11,740 $ 42,892 $13,981 $34,861
Operating expenses (excluding compensation to SMS
stockholders)(a).................................. 2,564 3,424 8,458 9,989 34,694 11,816 30,205
Compensation to SMS stockholders(a)................. -- -- -- -- 4,424 -- --
------- ------- ------- ------- -------- ------- -------
Income from operations.............................. 183 632 585 1,751 3,774 2,165 4,656
Interest expense--substantially all to related
parties........................................... (330) (407) (314) (296) (784) (215) (552)
Interest income..................................... 5 5 7 20 198 12 97
------- ------- ------- ------- -------- ------- -------
Income (loss) before taxes.......................... (142) 230 278 1,475 3,188 1,962 4,201
SMS income tax provision (benefit).................. -- -- 15 85 (245) 383 58
------- ------- ------- ------- -------- ------- -------
Net income (loss)................................... $ (142) $ 230 $ 263 $ 1,390 $ 3,433 $ 1,579 $ 4,143
======== ======== ======== ======== ========= ======== ========
Pro forma income data (unaudited):
Historical income before income taxes as reported... $ 3,188 $ 1,962 $ 4,201
Pro forma adjustment for compensation to SMS
stockholders(a)................................... 4,424 -- --
-------- ------- -------
Pro forma income before income taxes................ 7,612 1,962 4,201
Pro forma income tax provision(b)................... 3,021 779 1,681
-------- ------- -------
Pro forma net income(a)(b).......................... $ 4,591 $ 1,183 $ 2,520
========= ======== ========
Pro forma net income per share(c)................... $ $ $
========= ======== ========
Pro forma weighted average number of shares
outstanding(c)....................................
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------------------------------------- AS OF
1991 1992 1993 1994 1995 JUNE 30, 1996
------- ------- ------- ------- ------- --------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit).......................... $(2,146) $(1,214) $(1,802) $(1,509) $(1,564) $ (5,680)
Total assets....................................... 798 1,402 2,320 3,673 13,027 12,300
Long-term debt, less current maturities............ 2,426 3,234 2,638 2,057 5,460 5,906
Equity (deficit)................................... (3,983) (3,422) (3,235) (1,866) (1,050) (5,537)
</TABLE>
See Notes to Selected Financial and Operating Data
23
<PAGE> 26
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------------------- AS OF
1993 1994 1995 JUNE 30, 1996
------ ------ ------ -------------
<S> <C> <C> <C> <C>
SELECTED OPERATING DATA (UNAUDITED):
Number of field sales offices............... -- 25 55 58
Number of call stations..................... -- -- 90 326
Number of teleservices associates........... -- -- 177 445
Number of WallBoard(R) programs............. 6 8 9 11
Number of sampling packs distributed (in
millions)................................. 2.6(d) 2.6(d) 3.8(d) (e)
Number of sampling pack locations (in
thousands)................................ 13.1 14.8 20.0 (e)
Number of sampling pack programs............ 2 2 4 6
Number of WallBoard(R) and sampling pack
sponsors(f)............................... 25 32 68 64
</TABLE>
- ---------------
(a) Certain employees of the Company also served as officers of SMS, the
corporate general partner of the Partnership, for which such employees
received compensation from SMS in 1995, which is treated as non-recurring.
The pro forma adjustment gives effect to the elimination in 1995 of this
non-recurring compensation based on compensation levels for the Company, as
approved by its Board of Directors. Following consummation of the
Reorganization, such officers will not be required to perform any comparable
duties or responsibilities for SMS. Further, other costs are not likely to
be incurred which would offset the impact of this pro forma adjustment.
Therefore, such compensation is treated as non-recurring. See Note 12 to the
Company's Combined Financial Statements.
(b) Prior to the Offerings, the Company's principal operations were not subject
to Federal or state corporate income taxes. The income statement data for
the year ended December 31, 1995 and the six-month periods ended June 30,
1995 and 1996 reflects a pro forma provision for income taxes as if all
operations of the Company were subject to Federal and state corporate income
taxes. The pro forma provision for income taxes represents an effective
combined Federal and state tax rate of approximately 39.7% for the year
ending December 31, 1995 and the six months ended June 30, 1995, and 40.0%
for the six months ended June 30, 1996. See "The Company" and Notes 6 and 12
to the Company's Combined Financial Statements.
(c) Prior to the consummation of the Reorganization and the Offerings, the
Partnership intends to distribute to its partners, including SMS, its then
cash balance in one or more distributions which are not expected to exceed
$10.0 million in the aggregate. Pro forma net income per share information
assumes that of the shares being offered by the Company hereby were
outstanding during the periods indicated. This represents the approximate
number of shares of Common Stock that the Company would need to issue (at
an assumed initial public offering price of $15.00 per share, which is the
mid-point of the initial public offering price range) to fund the payment
of the Distribution in excess of earnings to the Partnership's existing
partners. See "The Company" and Note 2 to the Combined Financial
Statements.
(d) Represents sampling packs distributed during the years ended December 31,
1993, 1994 and 1995, respectively.
(e) As of June 30, 1996, the Company had contracts with clients to distribute
approximately 4.5 million sampling packs during 1996. As of the same date,
the Company had contracts with approximately 24,000 locations to distribute
such packs.
(f) A number of the Company's clients participate in both the WallBoard(R) and
sampling pack programs.
24
<PAGE> 27
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The following discussion of the Company's historical results of operations
and of its liquidity and capital resources should be read in conjunction with
the Selected Financial and Operating Data of the Company and the Combined
Financial Statements of the Company and related notes thereto included elsewhere
in this Prospectus.
The Company was established in 1988 as a limited partnership between SMS,
as the general partner, and the Original Limited Partner. Prior to the
Reorganization, SMS will continue to be owned by Mr. Daniel M. Snyder, Ms.
Michele D. Snyder, Mr. Gerald S. Snyder and one other non-family stockholder.
The Company's primary business in 1988 was its WallBoard(R) programs. In 1991,
the Company began to develop sampling pack programs for target markets, and in
1993 initiated its field sales services in its Consumer Markets division. In
late 1994, the Company began its Business Markets division utilizing, first,
field sales and, soon thereafter, teleservices. Teleservices were added to its
Consumer Markets division in the second quarter of 1996.
The Company's revenues have grown from $2.7 million in 1991 to $42.9
million in 1995. Virtually all of the growth in the Company's revenues during
such period and during the six months ended June 30, 1996, is attributable to
internal growth in the volume of services provided, rather than price increases
or acquisitions. In 1995, revenues from field sales in the Company's Consumer
Markets division contributed more than half of the Company's revenues. Revenues
from the Company's Business Markets division contributed less than ten percent
of total revenues in 1995, although revenues in this new division grew
successively in each quarter of 1995 and continued their substantial growth into
1996. In 1995 revenues from the Company's WallBoard(R) programs were slightly
higher than revenues from its sampling pack programs, and the growth in revenues
from WallBoard(R) programs during 1995 was greater than the growth in sampling
pack revenues.
The Company's growth through 1992 was attributable to the introduction,
development and expansion of new WallBoard(R) and sampling pack programs in its
Marketing Services division. This business grew significantly in 1993 and
continued to grow in subsequent years, modestly in 1994 and more substantially
in 1995.
The Company's rapid growth in 1995 and the first six months of 1996 is
primarily the result of the Company's expansion into field sales. The Company
provided targeted field sales services on a modest scale in 1993 and the
beginning of 1994. In the latter part of 1994, the Company entered into a
contract with AT&T under which the Company provided field sales services,
selling telecommunications services to residential customers in selected
multi-cultural markets and general markets. As a result of AT&T's satisfaction
with the Company's services, this client expanded the scope of the Company's
efforts in 1995. Revenues from services provided to AT&T increased from $1.7
million in 1994 to $25.0 million in 1995, and from $6.6 million in the first six
months of 1995 to $19.7 million in the first six months of 1996. In late 1994
and in 1995, the Company established a significant field sales force in its
Consumer Markets division and had opened 29 offices by the end of 1995. The
Company has continued in 1996 to add staff, including more field supervisors and
senior executives, to improve the quality of the field sales force, training
programs and support systems to allow for the continued expansion of its
existing services and the possible introduction of additional clients in the
Consumer Markets Division. The Company expects that these increases, especially
the addition of a significant number of field sales supervisors, will increase
the cost of services and may adversely affect margins in future periods. In the
second quarter of 1996, the Company added outbound teleservices in its Consumer
Markets division.
In the latter half of 1994, the Company also began to market
business-to-business telecommunications services on behalf of MCI by developing
separate field sales and teleservices in its Business Markets division. As in
its Consumer Markets division, the Company has, to date, added new staff,
locations and systems to allow for the expansion of services to MCI and the
introduction of new clients. Outbound teleservices were added in the Business
Markets division in the second quarter of 1995. Both the field sales and
teleservices
25
<PAGE> 28
components of the Business Markets division have grown continuously throughout
1995 and through June 30, 1996.
RESULTS OF OPERATIONS
In its Consumer Markets and Business Markets divisions, the Company
receives revenues from clients to which it provides field and teleservices sales
and marketing services based on both the number of accepted subscribers and the
type of services sold. The Company typically receives a fixed dollar amount per
subscriber. Revenues related to such sales are recognized on the date that the
application for service is accepted by the Company's telecommunications clients.
In its Marketing Services division, the Company is paid by sponsors in its
WallBoard(R) and product sampling programs in installments, generally quarterly
or semi-annually, over the term of the contract under which services are
rendered, which is generally one year.
Cost of services consists of all costs specifically associated with client
programs, such as salary, commissions and benefits paid to personnel, including
senior executive officers associated with specific divisions, inventory,
payments to third-party vendors and systems and other support facilities
specifically associated with client programs.
Selling, general and administrative expense is primarily comprised of costs
associated with the Company's centralized staff functions, such as financial,
accounting, human resources and personnel costs of senior executive officers not
specifically associated with any single division.
Prior to the Reorganization, the Company's principal operations have not
been subject to entity level Federal or state corporate income taxes. Further,
in addition to compensation paid by the Partnership to Mr. Daniel M. Snyder, Ms.
Michele D. Snyder and Mr. Gerald S. Snyder, SMS, the corporate general partner
of the Partnership, paid compensation to the same three individuals for services
performed for that entity. Because the financial statements of SMS and the
Partnership are combined, the compensation paid in 1995 by SMS is included in
the Combined Financial Statements of the Company even though no such
compensation will be paid in 1996 or in the future following the Reorganization
and the Offerings. Accordingly, such amount is separately set forth in the
Combined Financial Statements of the Company as "Compensation to stockholders of
SMS" and is characterized as a non-recurring charge. Pro forma net income for
the year ended December 31, 1995 and for the six-month periods ended June 30,
1995 and 1996 is adjusted for income taxes as if the Company had been treated as
a C corporation and reflects the elimination in 1995 of the non-recurring charge
of $4.4 million related to compensation paid to certain stockholders of SMS. The
Company expects to recognize a net deferred income tax asset of $137,000 at the
time of the Reorganization which will increase net income by that amount in that
period.
26
<PAGE> 29
The following sets forth, for the periods indicated, certain components of
the Company's operating statement data, including such data as a percentage of
revenues.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
---------------------------------------------------- ----------------------------------
1993 1994 1995 1995 1996
-------------- --------------- --------------- --------------- ---------------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues..................... $9,043 100.0% $11,740 100.0% $42,892 100.0% $13,981 100.0% $34,861 100.0%
Operating expenses:
Cost of services......... 5,455 60.3 6,464 55.1 27,480 64.1 9,046 64.7 23,634 67.8
Selling, general and
administrative
expenses............... 3,003 33.2 3,525 30.0 7,214 16.8 2,770 19.8 6,571 18.8
Compensation to SMS
stockholders............... -- -- 4,424 10.3 -- --
------ ----- ------- ----- ------- ----- ------- ----- ------- -----
Income from operations....... 585 6.5 1,751 14.9 3,774 8.8 2,165 15.5 4,656 13.4
Interest expense............. (314) (3.5) (296) (2.5) (784) (1.8) (215) (1.5) (552) (1.6)
Interest income.............. 7 0.1 20 0.2 198 0.5 12 0.1 97 0.3
------ ------- ------- ------- -------
Income before taxes.......... 278 3.1 1,475 12.6 3,188 7.4 1,962 14.0 4,201 12.1
SMS income tax provision
(benefit).................. 15 0.2 85 0.7 (245) (0.6) 383 2.7 58 0.2
------ ------- ------- ------- -------
Net income................... $ 263 2.9% $ 1,390 11.8% $ 3,433 8.0% $ 1,579 11.3% $ 4,143 11.9%
====== ======== ======== ======== ========
Pro forma income data
(unaudited):
Historical income before
income taxes as
reported............... $ 3,188 7.4% $ 1,962 14.0% $ 4,201 12.1%
Pro forma adjustment for
compensation to SMS
stockholders........... 4,424 10.3 -- --
Pro forma provision for
income taxes............... (3,021) (7.0) (779) (5.6) (1,681) (4.8)
------- ------- -------
Pro forma net income......... $ 4,591 10.7% $ 1,183 8.5% $ 2,520 7.2%
======== ======== ========
</TABLE>
Six Months Ended June 30, 1996 Compared to Six Months Ended June 30, 1995
Revenues. Revenues increased $20.9 million, or 149.3%, from $14.0 million
in the first six months of 1995 to $34.9 million in the first six months of
1996. This increase reflected significantly higher revenues in Consumer Markets
field sales, Business Markets field sales and Business Markets teleservices
under contracts that were in the early stages of implementation in the beginning
of 1995. Approximately two-thirds of the increase was attributable to higher
Consumer Markets field sales. In the Business Markets division, field sales
revenues grew more rapidly than teleservices revenues, reflecting the later
introduction of teleservices. Services provided under these contracts increased
throughout 1995 and the six months ended June 30, 1996. This increase in
revenues corresponded to the buildup during 1995 in sales offices and the number
of field sales personnel in both the Consumer Markets and Business Markets
divisions. Revenues in the Marketing Services division were essentially
unchanged, as growth in revenue from the WallBoard(R) programs offset a decline
in revenues from sampling pack programs. The decline in sampling pack program
revenues was due to fewer products being included in sampling packs in the 1996
programs.
Cost of Services. Cost of services increased $14.6 million from $9.0
million in the first six months of 1995 to $23.6 million in the first six months
of 1996 due to the growth in services performed for clients. Cost of services as
a percentage of revenues increased from 64.7% to 67.8%. This increase in the
cost of services as a percentage of revenues resulted from an increase in the
cost of services as a percentage of revenues in the Consumer Markets division
offset in part by a decrease in the cost of services as a percentage of revenues
in the Business Markets and Marketing Services divisions.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $3.8 million from $2.8 million in the first
six months of 1995 to $6.6 million in the first six months of 1996.
27
<PAGE> 30
Selling, general and administrative expense as a percentage of revenues
decreased from 19.8% in the first six months of 1995 to 18.8% in the first six
months of 1996, reflecting a moderately increased corporate overhead expense
being spread over a much larger base of revenues.
Interest Expense. Interest expense increased $.4 million from $.2 million
in the first six months of 1995 to $.6 million in the first six months of 1996
due primarily to interest expense related to the Debentures issued in May 1995.
Pro Forma Net Income. Pro forma net income increased $1.3 million from
$1.2 million in the first six months of 1995 to $2.5 million in the first six
months of 1996, primarily due to growth in revenues.
1995 Compared to 1994
Revenues. Revenues increased $31.2 million, or 265.3%, from $11.7 million
in 1994 to $42.9 million in 1995. This increase was predominantly due to the
rapid growth of the Company's Consumer Markets division related to the sale of
long distance services to residential customers in certain multi-cultural
markets under the contract with AT&T which commenced in the fourth quarter of
1994, the expansion of services in 1995 to include all domestic markets, and the
commencement of a contract with MCI to sell business-to-business long distance
services in the first quarter of 1995. Marketing services revenues also
increased as a result of new WallBoard(R) and sampling pack programs initiated
in 1995 and the addition of new clients to existing programs.
Cost of Services. Cost of services increased $21.0 million from $6.5
million in 1994 to $27.5 million in 1995. Cost of services, as a percentage of
revenues, increased from 55.1% in 1994 to 64.1% in 1995 primarily reflecting
increased staffing at the divisional level to support the significant growth and
potential future growth in the Consumer Markets and Business Markets divisions.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $3.7 million, from $3.5 million in 1994 to
$7.2 million in 1995 due primarily to additional administrative personnel and
related corporate expenses associated with the Company's growth. Selling,
general and administrative expenses, as a percentage of revenues, decreased from
30.0% in 1994 to 16.8% in 1995, reflecting a moderately increased corporate
overhead expense being spread over a much larger base of revenues.
Interest Expense. Interest expense increased from $0.3 million in 1994 to
$0.8 million in 1995 due to interest expense related to the Debentures which
were issued in May 1995.
Net Income. Net income increased $2.0 million from $1.4 million in 1994 to
$3.4 million in 1995 as a result of the combination of significantly increased
revenue from the development of the Consumer Markets and Business Markets
divisions and controlled overhead expenditures.
1994 Compared to 1993
Revenues. Revenues increased $2.7 million, or 29.8%, from $9.0 million in
1993 to $11.7 million in 1994. More than three-quarters of such increase
resulted from additional revenues in the Consumer Markets division which in late
1993 began developing a field sales force to sell long-distance services to
customers in certain multi-cultural market segments. Marketing services revenues
also increased primarily as a result of the addition of new clients in existing
WallBoard(R) and sampling pack programs and new programs.
Cost of Services. Cost of services increased $1.0 million from $5.5
million in 1993 to $6.5 million in 1994. Cost of services as a percentage of
revenues decreased from 60.3% in 1993 to 55.1% in 1994. This decrease was
primarily due to start-up costs incurred in 1993 associated with the Company's
Consumer Markets division, which were not offset by a corresponding increase in
revenues during the period.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $0.5 million from $3.0 million in 1993 to $3.5
million in 1994. Selling, general and administrative expenses as a percentage of
net revenues decreased from 33.2% in 1993 to 30.0% in 1994 as overhead costs
increased more slowly than revenues.
28
<PAGE> 31
Interest Expense. Interest expense remained constant at $0.3 million in
1993 and 1994.
Net Income. Net income increased $1.1 million from $0.3 million in 1993 to
$1.4 million in 1994, due to improved operating margins in the Marketing
Services division and the additional revenue from the Consumer Markets division.
QUARTERLY RESULTS
The Company has experienced, and in the future may experience, quarterly
variations in revenue due to a number of factors, many of which are outside of
the Company's control, including: the timing of new contracts, the timing of
clients' promotional campaigns and the seasonal patterns of certain businesses
serviced by the Company. Certain costs incurred by the Company may be recognized
in periods prior to the recognition of revenue under existing contracts.
Historically, seasonal variations in the Company's business have been
overshadowed by the Company's growth. The Company expects that in the future its
sales will reflect seasonal effects in the first and third quarters due to
weather related impact on the field sales force and the impact in the Company's
teleservices operations of the decreased ability to reach potential consumers as
a result of summer vacations.
The following table sets forth the unaudited quarterly results of
operations for each of the four quarters in 1995 and the first two quarters in
1996. In Management's opinion, this unaudited quarterly information includes all
adjustments which are necessary for a fair presentation of the information for
the quarters presented. The operating results in any quarter are not necessarily
indicative of the results which may be expected for any other interim period or
for the year ending December 31, 1996.
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30,
1995 1995 1995 1995 1996 1996
--------- -------- ------------- ------------ --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Revenues........................ $ 6,127 $7,853 $11,937 $ 16,974 $17,360 $ 17,501
Operating expenses:
Cost of services........... 3,823 5,223 7,523 10,910 11,665 11,969
Selling, general and
administrative
expenses................. 1,123 1,647 1,935 2,509 3,005 3,566
Compensation to SMS
stockholders............. -- -- -- 4,424 -- --
--------- -------- ------------- ------------ --------- --------
Income (loss) from operations... 1,181 983 2,479 (869) 2,690 1,966
Interest
expense -- substantially all
to related parties............ (64) (151) (279) (289) (274) (279)
Interest income................. 4 8 69 116 69 29
--------- -------- ------------- ------------ --------- --------
Income (loss) before taxes...... 1,121 840 2,269 (1,042) 2,485 1,716
Pro forma adjustment for
compensation to SMS
stockholders.................. -- -- -- 4,424 -- --
--------- -------- ------------- ------------ --------- --------
Pro forma income before taxes... $ 1,121 $ 840 $ 2,269 $ 3,382 $ 2,485 $ 1,716
</TABLE>
As discussed above, the rapid increase in revenues and corresponding
increase in expenses during the six quarters ended June 30, 1996 were
predominantly attributable to the Company's commencement of services with AT&T
in its Consumer Markets division in late 1994 and with MCI in its Business
Markets division in early 1995. Services performed for these clients increased
in each quarter during the six-quarter period. Revenues in the Marketing
Services division fluctuated modestly on a quarter-to-quarter basis during this
six-quarter period.
The Company's operating margins (income from operations before compensation
to SMS stockholders divided by revenues) increased during the third and fourth
quarters of 1995 compared to the second quarter of 1995, as the growth in the
Company's revenues outpaced the build-up of infrastructure to accommodate the
29
<PAGE> 32
rapid growth in revenues during the third and fourth quarters of 1995. Operating
margins decreased in the first and second quarters of 1996 compared to the prior
two quarters. The Company expects that operating margins in future periods will
be lower than those reported in the third and fourth quarters of 1995 as the
Company continues to build-up infrastructure to accommodate anticipated growth.
The Company's operating margins in the first and second quarters of 1996 were
influenced by several factors. Beginning in 1996, the Company accelerated its
infrastructure development to accommodate both its current growth and
anticipated growth and began to put in place the capability to expand its
services to additional categories of customers. Expenses relating to the
build-up of infrastructure, including training programs, additional supervisory
personnel, quality assurance programs, salaries associated with additional
marketing staff and additional executive personnel, were greater in the first
and second quarters of 1996 than in prior periods. In addition, in 1996 the
Company expanded the number of programs in its Marketing Services division,
which programs are expected to become revenue generating in 1997. To market the
additional capacity in its Marketing Services division, as well as to exploit
unutilized capacity in its existing programs, the Company significantly expanded
the sales force in this division in the second quarter of 1996. Accordingly, the
sales expense associated with the Marketing Services division increased
significantly in the second quarter of 1996, although any increase in revenue
from the expansion of the sales staff and the additional number of programs is
expected to be realized almost entirely in 1997. As a result of this combination
of actions, the Company believes it is more capable to accommodate additional
growth successfully.
The Company has experienced, and in the future expects that it will
experience, quarterly variations in its operating margins due to a number of
factors, certain of which are outside the Company's control, including: the
timing of new contracts, the timing of clients' promotional campaigns, the
seasonal patterns of certain businesses serviced by the Company, and the timing
of costs associated with the build-up in the Company's infrastructure to
accommodate anticipated future growth or new services.
LIQUIDITY AND CAPITAL RESOURCES
The following table sets forth selected cash flow information for the
periods indicated.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------- ------------------
1993 1994 1995 1995 1996
------ ------ ------- ------- -------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net cash provided by operating activities... $1,247 $1,443 $ 8,118 $ 3,372 $ 4,656
Net cash (used) by investing activities..... (691) (536) (3,903) (3,126) (1,250)
Net cash (used) by financing activities..... (424) (661) (931) 1,804 (6,006)
</TABLE>
The Company's primary source of funding has been, and continues to be, cash
flow from operations. For the years 1993, 1994 and 1995 and the first six months
of 1996, the Company generated an aggregate of $15.5 million in cash from
operating activities.
The Company's accounts receivable turnover ratio (revenues for the period
divided by average accounts receivable for the period) (annualized) was 13.51
for 1993, compared to 10.96 for 1994, and 19.68 for 1995. The Company's accounts
receivable turnover ratio (annualized) was 12.71 for the six months ended June
30, 1995, compared to 17.62 for the six months ended June 30, 1996. The
improvement in the accounts receivable turnover ratio is primarily attributable
to the significant increase over the periods presented of the Company's sales to
one telecommunications client and the resulting cash flows from its invoice
payment schedule.
Cash used in investing activities has been primarily to fund the purchase
of wallboard frames, computer equipment and other capital to support the
expansion of the Company's marketing services business and data processing and
network capabilities. Cash used in investing activities for 1995 includes $2.8
million in advances to SMS stockholders.
Cash flows from financing activities include the effect of the May 1995
issuance of the Debentures ($6.0 million face amount), the proceeds of which
were used in part to repay a note to the Original Limited Partner in the amount
of $2.6 million and to make special cash distributions to the existing limited
partners of
30
<PAGE> 33
$1.1 million. Additional cash distributions to the limited partners during the
period from January 1, 1993 through June 30, 1996 totaled $6.2 million. These
distributions included amounts necessary to cover the limited partners' tax
liability related to the income of the Partnership.
During the periods covered, the Company financed certain equipment
purchases through capital leases with various leasing companies. The leases are
secured by the related equipment. Total leases outstanding as of June 30, 1996
are $1.1 million. These leases are payable in varying installments through
fiscal 1999 with a weighted average interest rate of 12.8%.
During 1995, SMS advanced to a stockholder $2.7 million, evidenced by a
non-interest-bearing loan secured by all of such stockholder's stock in SMS. SMS
distributed the obligation, in-kind, to the stockholders of SMS, pro rata on
June 30, 1996. See "Certain Transactions."
Prior to the consummation of the Reorganization and the Offerings, the
Partnership intends to distribute to its partners, including SMS, its then cash
balance in one or more distributions, and SMS intends to distribute to its
stockholders its then cash balance in one or more distributions. The Company's
cash balance at June 30, 1996 was $1.3 million. The Company's cash balance is
expected to increase prior to the consummation of the Reorganization and the
Offerings primarily as a result of collection of receivables, recovery of
certain deposits, the completion of pending equipment financings and improved
management of other working capital balances. The amount of the Distribution by
the Partnership between July 1, 1996 and the date of the Offerings is not
expected to exceed $10.0 million in the aggregate. The Partnership distributed
approximately $3.9 million in the aggregate to its limited partners and, through
SMS, to the SMS stockholders in 1995 and approximately $8.6 million in 1996 (of
which approximately $2.7 million was a non-cash distribution), as a return on
their respective investments and to allow them to pay their income tax
liability. The Partnership's partners and the SMS stockholders are liable for
the income tax payable with respect to the Company's operations for periods
through the date of the Reorganization.
The Company expects to use a portion of the net proceeds from the Offerings
to fund its anticipated growth, including expansion of the Company's facilities,
expansion of the Company's call centers in Bethesda, Maryland, the establishment
of the Company's call center in the United Kingdom and the establishment of an
executive office in the United Kingdom. The Company currently estimates that it
will commit between $13 million to $18 million for capital expenditures relating
to such expansion during the twelve-month period ending June 30, 1997.
The Company believes that the proceeds from the Offerings, together with
cash generated from operations and cash available to the Company through future
borrowing arrangements, will be sufficient to finance the Company's current
operations, planned capital expenditures and future growth.
31
<PAGE> 34
BUSINESS
GENERAL
Snyder Communications is a rapidly growing provider of innovative and high
value-added outsourced marketing services. The Company designs and implements
marketing programs for its clients utilizing a range of complementary marketing
resources, including field sales, teleservices, WallBoards(R) and product
sampling. The Company's clients are primarily Fortune 500 companies with large
annual marketing expenditures facing significant competitive pressures to retain
or expand market share. Based on 1995 revenues, the ten largest clients of the
Company, listed alphabetically, were AT&T Communications, Inc., Eastman Kodak
Company, Gerber Products Company, Kellogg U.S.A., Inc., Kraft Foods Inc., Lehn &
Fink Products (now a unit of Reckitt & Colman, Inc.), MCI Telecommunications
Corporation, Nestle Beverage Company, The Prudential Insurance Company of
America and Reckitt & Colman, Inc.
The Company enhances the value of its outsourced marketing services by
identifying and targeting high value market segments, in addition to general
markets, in order to increase market share for its clients. For example, the
Company's field sales representatives and teleservices associates have the
capability to market services in 16 foreign languages, in addition to English,
to reach both residential and business customers in multi-cultural markets, as
well as general markets. The Company utilizes its WallBoards(R) and sampling
packs to market products and services through targeted channels of distribution,
including the offices of cardiologists, rheumatologists and orthopedists, and
endocrinologists and diabetologists, to reach patients with heart conditions,
arthritis and diabetes; maternity wards and day care centers to reach new and
working parents; and corporate aviation terminals to reach business executives.
The Company seeks to identify and access market segments with high growth
characteristics.
As of June 30, 1996, the Company employed approximately 900 field sales
representatives operating out of 58 offices in 41 cities, and 445 teleservices
associates providing services from 326 call stations in three call centers. As
of that date, the Company had 11 different WallBoard(R) programs in over 17,000
sites. During 1995, the Company distributed over 3.8 million sampling packs
containing over 75 different product samples, coupons and pieces of literature
of 49 clients of the Company at approximately 20,000 locations.
The Company's revenues increased from $11.7 million in 1994 to $42.9
million in 1995, and from $14.0 million in the first six months of 1995 to $34.9
million in the first six months of 1996. Net income, as adjusted to reflect a
pro forma provision for income taxes, as if the Company were subject to
corporate income taxes and to eliminate certain non-recurring compensation in
1995, grew from $1.2 million in the first six months of 1995 to $2.5 million in
the first six months of 1996.
INDUSTRY OVERVIEW
The market for the field sales and telephone-based marketing services
provided by the Company has grown principally as a result of the increased
outsourcing of such services by large organizations in order to supplement their
internal marketing capabilities. Outsourcers can provide several advantages over
a company acting alone, including the ability to reach special, hard-to-locate
audiences; the ability to augment internal sales forces to gain market share
more quickly; the avoidance of infrastructure costs, such as opening new sales
offices; the opportunity to act quickly by utilizing the outsourcers' marketing
channels that could take months or years to develop internally; and the
opportunity to pay only for quantifiable results. The Company believes that
sellers of products and services will increasingly integrate outsourcers, such
as the Company, into their overall marketing strategies.
The Company seeks to identify and access markets with high growth
characteristics. The Company expects that the multi-cultural communities which
it targets primarily through its Consumer Markets and Business Markets divisions
will grow significantly in the coming years. For example, in February 1996, the
Census Bureau projected, based in part on 1990 census data, that the Hispanic
and Asian/Pacific Islander communities in the United States were comprised in
1995 of approximately 26.9 million and approximately 9.4 million people,
respectively, and would grow approximately 53% and approximately 63%,
respectively, by 2010. In contrast, the Census Bureau projected at that time,
based in part on 1990 census data, that the
32
<PAGE> 35
general population in the United States would grow approximately 13% by 2010.
Similarly, at that time, the Census Bureau projected, based in part on 1990
census data, that the 50 years or older population in the United States was
comprised of approximately 68.3 million people in 1995, and would grow
approximately 41% by 2010. The Company believes that many of its programs in its
Marketing Services division are in locations that are often used by people who
are 50 years or older.
The Company focuses, in part, on identifying industries and markets in
which companies are under strong competitive pressure to enhance or retain
market share. The Company believes that prospective clients in these areas will
more fully recognize the value of using an outsourced marketing services firm to
gain such market share. The Company then identifies market segments that
prospective clients may perceive will include high-value customers, and designs
and implements marketing strategies designed to reach such customers. In
developing its field sales force and marketing services capabilities, the
Company has focused on the telecommunications industry as a source of clients,
because the competitive effects that have and will continue to occur as barriers
to competition are being removed and the number of telecommunications companies
providing various types of services is rising dramatically. In establishing
relationships with its telecommunications clients, the Company developed a
strategy to target markets, such as those in multi-cultural communities, that
its clients believe contain high-value customers.
The Company believes that other industries such as managed health care,
package delivery and on line services, will face increased competition for
customers in the future as a result of the dramatic changes in their respective
industries. Accordingly, the Company is actively pursuing opportunities with
such organizations.
The industry in which the Company operates tends to be highly fragmented
and characterized by a large number of in-house and independently owned
organizations. Most of the companies operating in the industry offer a limited
number of services within a limited geographic area. The Company believes that
consolidation within the industry will provide significant opportunities to
increase market share through strategic acquisitions. See "-- Competition."
GROWTH STRATEGY
The Company recently has experienced significant growth. The Company
increased the number of its field sales offices from 25 offices located in 23
cities at the end of 1994, the first year in which the Company conducted field
sales operations in both its Consumer Markets and Business Markets divisions, to
58 offices located in 41 cities at June 30, 1996. The Company also increased the
number of teleservices personnel from 177 persons working from one call center
at the end of 1995, to 445 persons working from three call centers at June 30,
1996. In its Marketing Services division, the Company increased its WallBoard(R)
programs from six different programs highlighting 11 clients at December 31,
1993, to 11 different programs highlighting 44 clients at June 30, 1996. The
Company also increased its sampling pack programs from two sampling pack
programs with 16 sponsors distributed through over 13,000 locations at the end
of 1993, to six sampling pack programs with 37 sponsors expected by the Company
to be distributed to approximately 24,000 locations in 1996 based on contracts
with locations in effect at June 30, 1996.
The Company believes that its targeted marketing strategy and
multi-cultural capabilities are adaptable to serve additional needs of existing
clients and the needs of new clients in other industries. The Company
anticipates that its existing infrastructure of offices, management, supervisory
and training personnel, and teleservices capabilities can accommodate additional
clients in each operating division.
The Company's commitment to continued growth through internal expansion and
complementary acquisitions is evidenced by the following:
Consumer Markets
- The Company is adding approximately 80 call stations, which it expects
will be operating by late 1996, to its existing 300 call stations in this
division.
- In June 1996, the Company expanded its relationship with AT&T by entering
into a new agreement with AT&T (U.K.), to market long-distance
telecommunications services to residential customers
33
<PAGE> 36
based in the United Kingdom. As part of this expansion, the Company
intends to add one call center and one or more field sales offices in the
United Kingdom in 1997.
- The Company entered into a contract with Prodigy in June 1996, to provide
marketing and sales services for Prodigy's online service to residential
customers, using the Company's field sales, including event marketing,
and other marketing services.
- In August 1996, the Company entered into two contracts with Foundation
Health to market and sell memberships in certain managed health care
plans to residential customers in designated areas using the Company's
field sales (including event marketing), teleservices and other marketing
services.
Business Markets
- In August 1996, the Company entered into an agreement with Lucent to
market and sell certain Lucent telecommunications equipment to business
customers throughout the United States using the Company's field sales,
inbound and outbound teleservices and other marketing services.
- The Company also seeks to add additional inbound telephone-based sales in
its Business Markets division.
Marketing Services
- The Company increased the number of sales managers and executives in this
division from five as of December 31, 1993 to approximately 20 as of June
30, 1996, to take advantage of opportunities to expand the services
offered to existing clients and to develop new lines of business.
- The Company has recently developed, in conjunction with Hoechst Marion
Roussel, its Allergy Health WallBoard(R), of which Hoechst Marion Roussel
is the exclusive client sponsor under a three-year contract with the
Company.
- Since January 1996, the Company has developed three additional new
WallBoard(R) programs: the Women's Wellness WallBoard(R), which will be
located in obstetrics' and gynecologists' offices; the Caring
WallBoard(R), which will be located in oncologists' offices and oncology
treatment centers; and the New Home WallBoard(R), which will be located
in real estate offices throughout the United States. The Company
anticipates that it will begin distributing WallBoards(R)through these
new programs by January 1997.
- In May 1996, the Company acquired from RD Publications, Inc., an
affiliate of Readers Digest Association Incorporated, a "new member"
health club sampling pack program through which it expects to distribute
approximately 735,000 health club member kits to new members at
approximately 1,000 health and fitness clubs during the second half of
1996.
The Company also intends to pursue strategic acquisitions of companies that
offer complementary services or expand the geographic markets served by the
Company. Although the Company has no agreements, understandings or arrangements
with respect to any particular acquisition opportunities, it believes that the
fragmentation in the marketing services industry will result in consolidation,
providing opportunities for the Company to pursue selectively domestic and
international complementary acquisitions.
SERVICES
The Company offers a range of complementary marketing services through its
Consumer Markets, Business Markets and Marketing Services divisions. In the
Consumer Markets and Business Markets divisions, the Company currently focuses
on marketing and selling long-distance telecommunications services, with a
particular emphasis on multi-cultural markets. The Marketing Services division
is responsible for the Company's WallBoard(R) and sampling pack programs. The
following describes the services offered by the Company.
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CONSUMER MARKETS
In its Consumer Markets division, established in 1993, the Company provides
outsourced marketing services to AT&T. Using face-to-face field sales, including
event marketing, and teleservices, the Company markets AT&T long-distance
telecommunications services to residential customers. The Company began
marketing AT&T services using its field sales force in February 1994. The
Company expanded this relationship to add teleservices capabilities in the
second quarter of 1996. The revenues generated by AT&T have grown from $1.7
million in 1994 to $25.0 million in 1995. See "Risk Factors -- Reliance on
AT&T."
The Company, jointly with AT&T, develops sales and marketing programs
designed to enroll residential long-distance telecommunications customers for
AT&T. The Company provides AT&T with turn-key programs. The Company develops
lists of potential customers to be contacted; creates marketing materials,
including customer applications; hires, trains and supervises its sales
representatives and teleservices associates to market AT&T services; and
monitors the effectiveness of its programs. The Company's turn-key approach
differentiates it from other marketing services firms, which merely implement a
client's marketing strategy using contact lists provided by the client.
The Company targets multi-cultural markets, particularly the Hispanic and
Asian markets, as well as general consumer markets throughout the United States,
seeking in particular to secure customers who AT&T believes would be high-value
subscribers. To reach multi-cultural markets, the Company develops demographic
databases identifying potential customers in such communities and employs field
sales representatives and teleservices associates who are capable of marketing
services in a prospective customer's native language as well as in English. The
Company's Consumer Markets division currently markets telecommunications
products and services in 15 foreign languages, including Spanish, Mandarin,
Cantonese, Vietnamese, Korean and Russian. The Company estimates that over sixty
percent of the field sales associates in the Consumer Markets division are
bilingual; all of the Company's teleservices associates in the Consumer Markets
division are bilingual. The Company also develops and distributes sales
literature and collateral documents in each of these languages. The Company
believes that the ability of its personnel to speak with and provide materials
to a prospective customer in either English or the customer's native language
helps the prospective customer to have a clearer understanding of the services
being offered, which the Company believes increases its ability to attract
customers for AT&T. In addition, in marketing services to these multi-cultural
communities, the Company has developed databases of information on specialized
demographic segments, which the Company intends to use in the future to market
products and services for additional clients.
FIELD SALES. The Company has provided outsourced field sales to AT&T
through its Consumer Markets division since 1994. AT&T was initially a client in
one of the Company's WallBoard(R) programs. See "-- Marketing Services." As of
June 30, 1996, the Company employed in its Consumer Markets division
approximately 550 field sales representatives, 65 field supervisors, 26 district
managers and five regional managers, located in 32 offices in 28 cities
throughout the United States. The Company's field sales representatives are
full-time employees with benefits. The Company's field sales force is supported
by the administrative and executive personnel in the division, as well as the
Company's corporate staff. The Company has established a management structure
designed to provide appropriate supervision of, and support for, its field sales
representatives. Each of the five regional managers is responsible for five to
seven districts. Each district is managed by a district manager, who oversees
from two to seven field supervisors. Field supervisors in turn manage from five
to 20 field sales representatives. All field sales representatives are trained
in appropriate sales and marketing procedures as well as the specific services
being marketed by AT&T. See "-- Hiring and Training."
In addition, the Company also offers event marketing in its Consumer
Markets division. Within each sales district, district managers and field
supervisors identify fairs, festivals and other events that they believe present
an opportunity through which the Company will be able to reach a multi-cultural
market or the general market. The Company works with the event coordinator,
leasing times during which the Company's field sales representatives market
products and services from a booth set up by the Company on the premises. Under
the Company's contract with AT&T, AT&T has the right to determine which events
will be available to the Company and often chooses to handle larger events
through AT&T's own internal sales force. The
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<PAGE> 38
Company also conducts event marketing at shopping malls. Most of the Company's
event marketing is conducted by bilingual sales representatives at community
festivals.
Through June 30, 1996, the Company's field sales operations in its Consumer
Markets division have generated a significantly greater percentage of revenues
than the division's teleservices operations.
TELESERVICES. Beginning in 1996, the Company began to perform teleservices
in its Consumer Markets division for AT&T, to provide another avenue through
which to market AT&T long distance telecommunications services. Teleservices
associates contact prospective customers by telephone, utilizing a computerized
call management system that provides the associate with a script from which to
market selected client products and services. As soon as the teleservices
associate begins to speak, the call management system provides the associate
with information regarding the prospective customer, including name and address.
The Company also recently installed a predictive dialing system, which enhances
the number of contacts a teleservices associate can make per hour by
automatically bypassing busy signals, telephone answering machines and voice
mail boxes.
In the Consumer Markets division, the Company conducts its teleservices
marketing activities from two call centers located in Bethesda, Maryland, which
had 300 call stations as of June 30, 1996. The Company is in the process of
expanding to approximately 380 the number of call stations in its Consumer
Markets division. As of June 30, 1996, the Consumer Markets division employed,
in addition to two directors and two line managers, approximately 390
teleservices associates and 18 supervisors. All of the Company's teleservices
associates are part-time employees who are trained upon hiring and periodically
throughout their employment in appropriate marketing techniques. See "-- Hiring
and Training." Teleservices associates are paid on an hourly basis and are
eligible to earn commissions based on customer sales. See "-- Employees."
CONTRACTUAL RELATIONSHIP WITH AT&T. Under its contract with AT&T, the
Company currently markets a wide range of AT&T long-distance telecommunications
services to U.S.-based residential customers, seeking to identify and access
customers in multi-cultural communities in which the Company has developed an
expertise, as well as the general population in the United States. The services
that the Company currently provides to AT&T include field sales and teleservices
for the Foreign-Origin Consumer Market, and field sales for the Domestic
Consumer Market. The Company's contract with AT&T, which relates to the Foreign-
Origin Consumer Market, runs through December 1997, subject to AT&T's right to
seek to renew the contract upon terms mutually agreeable to AT&T and the
Company.
AT&T enjoys certain exclusivity rights under its contract with respect to
the Foreign-Origin Consumer Market. During the term of the contract, the Company
cannot, for any other long-distance telecommunications company, target the
Foreign-Origin Consumer Market by (i) creating or distributing customized
application brochures to be inserted in the publications in which such brochures
are placed by the Company on behalf of AT&T, or (ii) offering programs similar
to those offered to AT&T under the contract. In addition, during the term of the
contract, if the Company wishes to institute any other marketing program that
involves long-distance telecommunications services targeted to the
Foreign-Origin Consumer Market, AT&T has an exclusive 45-day period in which to
negotiate with the Company with respect to such program. Until 30 days following
termination of the contract, the Company can neither provide, nor enter into
negotiations or discussions to provide, customer acquisition services for
long-distance telecommunications services targeted to the Foreign-Origin
Consumer Market for any other telecommunications company.
The Company's arrangement with AT&T relating to field sales marketing
services performed by the Company for AT&T with respect to the Domestic Consumer
Market is not reflected in a formal contract. The Company has provided such
services to AT&T since September 1995, initially through a program that expired
in December 1995. Since the expiration of that program, the Company has
continued to provide such services to AT&T. The Company anticipates that this
arrangement will continue through December 1996. In the first six months of
1996, services performed by the Company for AT&T in the Domestic Consumer Market
accounted for approximately 21% of the Company's total revenues.
Consistent with the Company's focus on providing turn-key marketing
programs, AT&T compensates the Company based on the type of customers enrolled
by the Company. In addition, under certain circumstances
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<PAGE> 39
these rates are adjusted if performance goals are not met. The contract with
AT&T does not establish a maximum amount the Company can earn for its services,
although the Company is subject to an informal cap on total sales in the AT&T
Domestic Consumer Market for the remainder of 1996. The Company believes that
this pricing system is attractive to AT&T, because AT&T pays only for
quantifiable results.
The Company has recently expanded its relationship with AT&T by signing a
contract with AT&T (U.K.), an affiliate of AT&T, to provide targeted marketing
services for U.K.-based long-distance residential customers. The contract
commences October 1, 1996 and expires on September 30, 1998. Under the contract,
the Company will provide field sales and teleservices for AT&T (U.K.) to sell
long-distance calling services to all residential consumers in the United
Kingdom, including customers in certain multi-cultural markets. Because of the
time associated with developing a field sales and teleservices force in the
United Kingdom, the Company does not expect to generate significant revenues
under this contract until 1997.
CLIENT EXPANSION. The Company seeks to expand the number of clients and
industries served by the Consumer Markets division, relying primarily upon its
existing infrastructure. In June 1996, the Company entered into an agreement
with Prodigy to provide marketing and sell subscriptions to the Prodigy online
service to persons using a variety of marketing techniques and strategies. The
Company currently intends to market and sell the Prodigy service relying on its
existing infrastructure through field sales, including event marketing, and
other marketing services. Prodigy will compensate the Company based on the
number of new subscribers generated by the Company's marketing efforts. The
marketing arrangement commenced on June 1, 1996 and will continue for a
three-year term, unless terminated earlier. Either Prodigy or the Company may
terminate the contract for any reason upon 90 days' written notice. The Company
does not currently anticipate that the Prodigy agreement will generate any
revenues for the Company until early 1997.
In August 1996, the Company entered into two separate agreements with
Foundation Health to market and sell memberships in certain managed health care
plans that Foundation Health operates. Foundation Health will compensate the
Company based on the number of new members generated by the Company's marketing
efforts. The marketing arrangement commences on October 1, 1996 and will
continue until December 31, 1999, unless terminated earlier. Either Foundation
Health or the Company may terminate the agreements upon 90 days' written notice
if certain annual subscription targets are not met.
The Company believes that the capabilities and infrastructure that it has
developed in the Consumer Markets division are adaptable to other companies,
including companies marketing products and services outside of the
telecommunication industry, as illustrated by its recent arrangements with
Prodigy and Foundation Health. The Company believes that its existing
infrastructure of offices, management, supervisory and training personnel and
communications can accommodate additional clients in the Consumer Markets
division, although it may be necessary to hire and train separate field sales
representatives, who may be compensated on a different basis, to market more
complex products and services.
BUSINESS MARKETS
In its Business Markets division, established in late 1994, the Company
provides marketing and sales services to MCI, targeting small business customers
in general and multi-cultural markets throughout the United States. Using both
field sales and teleservices, the Company seeks to enroll long-distance business
customers for MCI. As in the Consumer Markets division, the Company offers MCI
turn-key marketing initiatives and is principally responsible for the
implementation of such initiatives. The Company's marketing efforts for MCI are
enhanced by the electronic computer link between MCI and each of the field sales
offices in the Company's Business Markets division, through which the Company's
field sales representatives are able to directly access and print up-to-date
product information, pricing information and marketing materials. The Company
began providing marketing services to MCI in late 1994. See "Risk
Factors -- Reliance on Other Major Clients."
Consistent with the Company's overall strategy, the Company designs
programs for MCI that access both specialized demographic market segments,
particularly the Asian and Hispanic communities, as well as the general markets,
in the United States. The Company currently is capable of conducting marketing
services in the Business Markets division in nine foreign languages including
Cantonese, Mandarin, Korean, Vietnamese
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<PAGE> 40
and Spanish as well as English. The Company estimates that approximately
one-third of the field sales associates in the Business Markets division are
bilingual and are able to converse with a prospective customer in either English
or the customer's native language. All of the Company's teleservices associates
in the Business Markets division are bilingual.
The Company's Business Markets operations are separate from its Consumer
Markets operations. This separation helps to ensure confidentiality for the
Company's clients that operate in the same industry and permits the Company to
perform services targeted at different markets for different clients. The two
divisions have separate offices, separate field sales forces and teleservices
personnel, separate management (including senior management) and separate
demographic databases.
Through June 30, 1996, the field sales operations have generated a
significantly greater portion of revenue in the Business Markets division than
teleservices.
FIELD SALES. As of June 30, 1996, in its Business Markets division, the
Company employed approximately 350 field sales representatives, 26 district
managers and three regional managers, who were located in 26 offices in 23
cities throughout the United States. The Company's field sales force is
supported by the administrative and executive personnel in the division, as well
as the Company's corporate staff. Each of the three regional managers is
responsible for six to ten districts. Each district is managed by a district
manager who oversees from five to ten field sales representatives. Certain
districts also employ field sales supervisors who report to the district
managers and oversee a team of three to eight field sales representatives. The
field sales personnel are trained in appropriate sales and marketing procedures,
as well as the specific products and services being marketed. See "-- Hiring and
Training."
TELESERVICES. The Company also provides MCI with a full range of
teleservices in its Business Markets division. Teleservices associates contact
prospective customers by telephone, marketing specific products and services.
Teleservices personnel utilize a proprietary computerized lead management and
order entry system which separates leads by language and routes these to the
appropriate teleservices personnel. The Company's teleservices associates are
trained in appropriate marketing techniques. See "-- Hiring and Training."
The Business Markets' division call center, which began operating in April
1995, is located in Bethesda, Maryland. The Business Markets division had 26
call stations as of June 30, 1996. As of that same date, the Business Markets
division employed approximately 50 teleservices associates, four supervisors,
two managers and two directors.
CONTRACTUAL RELATIONSHIP WITH MCI. The Company's current agreement with
MCI is comprised of five consecutive one-year terms through 2001, subject in
each year to non-renewal. The Company currently is negotiating with MCI
regarding certain new contractual arrangements. Under the existing contract, MCI
has the right to terminate the contract upon 90 days notice to the Company. MCI
also has the right to terminate the agreement immediately if certain performance
criteria are not maintained. Under the existing agreement, MCI enjoys product
exclusivity, and the Company cannot promote or sell competing services to
commercial customers during the term of the contract. In addition, the Company
cannot offer services similar to those offered under the MCI contract to any
current MCI commercial customer until at least 90 days after termination of the
contract. Finally, for three years following termination of the agreement, the
Company cannot use or reveal any confidential material furnished by MCI or any
MCI customer lists.
MCI pays the Company an established rate per customer enrolled. The
contract with MCI does not establish a maximum amount that the Company can earn
for its services. The rate paid varies depending on the MCI service to which the
customer subscribes. MCI has the right to adjust payments made under the
contract if certain performance criteria are not met.
CLIENT EXPANSION. The Company believes that the turn-key marketing
services that it offers in its Business Markets division and the multi-cultural
distribution channels that it has developed are adaptable to serve clients
seeking to reach business customers in other industries. The Company believes
that its existing infrastructure of offices, management, supervisory and
training personnel and telecommunications capabilities are adequate to
accommodate additional clients or expansion of its business with MCI. In the
future, the
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Company also anticipates that it will use the databases it has compiled to
implement targeted marketing efforts for other clients.
In August 1996, the Company entered into an agreement with Lucent to market
and sell certain telecommunications equipment manufactured by Lucent to business
customers throughout the United States. Lucent will compensate the Company based
on the volume of telecommunications equipment sold and installed as a result of
the Company's marketing efforts. The marketing arrangement commenced on the date
of signing and continues for a three-year period. The Company anticipates that
it will begin performing marketing services for Lucent pursuant to the agreement
in the fourth quarter of 1996.
The Company recently has also marketed its services to prospective new
business clients in the package delivery business. The Company also seeks to add
inbound telephone-based sales to the services offered through its Business
Markets division and believes that it currently has the capability of adding
this service for a relatively small additional investment in equipment.
MARKETING SERVICES
The Marketing Services division, established in 1988, specializes in two
services that provide the Company's clients with targeted channels of
distribution: WallBoards(R), which are sponsored information centers mounted on
a wall and encased in a 42" x 30" or 57" x 30" oak or mahogany frame presenting
educational, editorial and product information, and sampling packs, which are
colorful boxes that contain a variety of nationally recognized sample products
and coupons. The Company's internal graphics department produces product
information booklets for customers that are distributed with the sampling packs,
or are available on information racks attached to a WallBoard(R). Most of the
Company's WallBoards(R) and sampling packs are implemented in cooperation with
industry associations with which the Company has established alliances. These
associations designate representatives to become members of an editorial
advisory board established by the Company for a particular market, providing a
quality check upon the information included in the WallBoard(R) or sampling
pack. A program is a WallBoard(R) or sampling pack that targets certain
demographic segments. Several of the WallBoard(R) and sampling pack programs
work in tandem to provide the Company's clients with multiple channels to reach
targeted, high-value potential customers.
The Company evaluates potential opportunities to expand existing or new
WallBoard(R) and sampling pack programs into new market segments. To do this,
the Company first researches new demographic segments containing potentially
high-value customers that can be reached through the Company's programs. For
example, the Company recently identified a demographic segment in new home
buyers that could provide sponsors with high-value customers through a
WallBoard(R) program. The Company then commenced its search for locations by
targeting prominent real estate brokerage companies in leading markets
throughout the United States. The Company's field operations department mails
marketing materials describing the proposed WallBoard(R) and follows up with
telephone calls to the prospective locations. The Company believes that its
method of analysis in identifying new demographic segments will allow it to
expand the number of locations through which its Marketing Services' programs
are distributed and to expand its programs to encompass new targeted channels of
distribution. Participation in the programs is provided free of charge to the
participating locations. Simultaneously, the Company began to approach sponsors
who market products or services typically associated with new home buyers.
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The following table shows the growth of the programs in the Marketing
Services division:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
---------------------- AS OF
1993 1994 1995 JUNE 30, 1996
---- ---- ---- -------------
<S> <C> <C> <C> <C>
Number of WallBoard(R) programs.................. 6 8 9 11
Number of sampling packs distributed (in
millions)...................................... 2.6(a) 2.6(a) 3.8(a) (b)
Number of sampling pack locations (in
thousands)..................................... 13.1 14.8 20.0 (b)
Number of sampling pack programs................. 2 2 4 6
Number of WallBoard(R) and sampling
pack sponsors(c)............................... 25 32 68 64
</TABLE>
- ---------------
(a) Represents sampling packs distributed during the years ended December 31,
1993, 1994 and 1995, respectively.
(b) As of June 30, 1996, the Company had contracts with clients to distribute
approximately 4.5 million sampling packs during 1996. As of the same date,
the Company had contracts with approximately 24,000 locations to distribute
such packs.
(c) A number of the Company's clients participate in both the WallBoard(R) and
sampling pack programs.
THE WALLBOARD(R) PROGRAMS. As of June 30, 1996, the Company had 11
different WallBoard(R) programs targeted at specific markets. Each WallBoard(R)
location is available only to the Company under a two- or three-year exclusive
agreement, with automatic renewal provisions. A WallBoard(R) presents
educational, editorial and product information targeted to a specific,
high-value audience and is developed by the Company's editorial staff in
conjunction with an editorial advisory board established by the Company. All of
the editorial material is reviewed by the relevant editorial advisory board
prior to publication. Each WallBoard(R) has an exclusive sponsor, and
information is published on the WallBoard(R) about the sponsor's products that
address the needs of the targeted audience. The Company had 44 sponsors of its
WallBoards(R) at June 30, 1996, including, listed alphabetically, Gerber
Products Company, Hoechst Marion Roussel, Kellogg U.S.A., Inc., Kraft Foods,
Inc., The Prudential Insurance Company of America, Quaker Oats Company, Reckitt
& Colman, Inc., Ross Products Division/Abbot Laboratories, and Sandoz
Pharmaceuticals Corporation. Each of these sponsors has "category exclusivity"
for their product in their program. Accordingly, no other product in the same
category is permitted to be a WallBoard(R) sponsor in the relevant market
segment.
The Company's graphics team produces, as a complement to the WallBoards(R),
customer marketing publications or "take-one" booklets, mounted on or near the
WallBoard(R). These publications contain further information for the targeted
audience concerning the sponsor's products relevant to the targeted audiences'
needs. The Company believes that these booklets provide additional effective
avenues for sponsors' information to reach the target audience.
To enhance the editorial quality of its WallBoards(R), the Company has also
established alliances with associations that specialize in the targeted areas.
The Company enters into multiple-year contracts (typically for three years) with
these associations which in turn supply informational brochures, license the use
of their trademarked logos, or review the editorial information on the
WallBoard(R). For instance, the Your Kids WallBoard(R), which targets
dual-income parents of toddlers and pre-schoolers through approximately 12,000
child care centers with a "parent information center," provides editorial on
quality parenting issues such as teaching behavior and stimulating early
learning development. The Company has established an alliance with the National
Child Care Association, which is a member of its editorial advisory board, for
the Your Kids WallBoard(R) and provides an endorsement to the target audience
which the Company believes helps its sponsors to reach more customers and to
gain credibility with these customers. The Company typically renders a
compensating service to the associates, such as including membership information
to customers or paying a royalty or an agreed upon donation.
Each WallBoard(R) program, such as the Your Kids WallBoard(R), has multiple
sponsors, but only one sponsor is shown at a given location. To accomplish this,
the Company creates several different versions of wallboards for each program,
each with a different sponsor and different editorial information. These
wallboards are rotated quarterly to different locations in the program to
reflect different sponsor or editorial information, the number of which varies
from sponsor to sponsor depending on each sponsor's level of
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<PAGE> 43
participation. The Company's two principal market networks for the WallBoard(R)
programs are family markets and medical markets.
In the family markets network, the Company has identified three different
audiences that it can target on behalf of its sponsors. The New Baby
WallBoard(R) and the Beginning Care WallBoard(R), which the Company has produced
since 1990, aim to reach expectant parents in hospital-based childbirth or
obstetrics training classrooms during a six-week class in the last trimester of
pregnancy and are currently located in approximately 430 locations. The
editorial material focuses on childbirth education, with tips on labor and
delivery. The Your Baby WallBoard(R), which the Company also produces in Spanish
as the Su Bebe WallBoard(R), targets new mothers and new fathers at the "point
of birth" in hospital maternity wards. The editorial includes information on new
baby care and development and features current immunization guidelines. These
three WallBoards(R) have seven sponsors, including Eastman Kodak Company and The
Prudential Insurance Company of America.
The Company also determined that medical markets would provide high-value
customers to many potential sponsors. The Company's medical market WallBoards(R)
target various patient audiences, such as diabetics and patients with heart
conditions. The Diabetes Health WallBoard(R), which has four sponsors, reaches
patients with diabetes in the waiting rooms of more than 600 endocrinologists
and diabetes educators. The Heart Health WallBoard(R), in an alliance with the
American Heart Association, reaches patients with cardiovascular disease in over
1,200 cardiologists' offices or cardiology rehabilitation centers. The editorial
material focuses on living with heart disease and includes tips on exercise and
diet.
Recently introduced medical markets WallBoards(R) include: the Arthritis
Health WallBoard(R) at approximately 700 rheumatologists' and orthopedists'
offices nationwide and, effective January 1, 1997, the Allergy Health
WallBoard(R) which will be located in allergists' and otolaryngologists'
offices, the Women's Wellness WallBoard(R) which will be located in obstetrics'
and gynecologists' offices and the Caring WallBoard(R) which will be located in
oncologists' offices and oncology treatment centers.
In developing WallBoard(R) products for other market segments, the Company
conducts research on under-served markets. For instance, the U.S. News & World
Report WallBoard(R) targets executives traveling through over 1,000 airports for
corporate and private aircraft. The editorial is compiled from U.S. News & World
Report and focuses on current business issues. The Company is also reaching out
to new immigrant markets with the Welcome/Bienvenido WallBoard(R) in over 300
locations to reach newcomers in their native languages, including Spanish,
Chinese, Vietnamese and Korean. The editorial information focuses on the
naturalization process and such issues as finding an English language course and
other educational opportunities.
The success of the Company's WallBoard(R) programs in reaching the target
markets is measured through research studies, currently conducted by The Gallup
Organization, Market Facts and Audits & Surveys, which help to assess product
awareness, editorial recall and increased sponsor awareness. In the WallBoard(R)
programs, these companies generally conduct face to face interviews with people
exiting from the WallBoard(R) location. The interviewer asks several questions
to elicit information regarding both the sponsors' products and the editorial
information which generate conclusions regarding the efficacy of the marketing
technique. These companies also use methods to determine the number of persons
who approach the WallBoard(R). The Company believes that there are numerous
untapped target markets in which WallBoards(R) could be used and believes there
are growth opportunities for the expansion of the program.
THE SAMPLING PROGRAMS. Following the start-up of its WallBoard(R)
programs, the Company established its sampling pack programs which are designed
to provide a targeted distribution of sponsors' product samples, coupons and
literature to potentially high-value customers. During 1995, the Company
distributed approximately 3.8 million sampling packs at approximately 20,000
locations. Participating locations sign a two- or three-year exclusive agreement
stating that the pack will be the only sampling pack program allowed at the
location during that time. As with the WallBoard(R) programs, the Company's
graphics team also produces customer marketing publications to be included in
the sampling packs. Each sampling pack contains an average of 12 product
samples, coupons or pieces of literature. Sponsors of the sampling packs
include, alphabetically, Bayer Corporation, Kellogg U.S.A., Inc., The Nutrasweet
Company/Equal and Reckitt & Colman Inc., among others. The Company has 37
sponsors for its six sampling packs. Each sponsor has
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"category exclusivity" within the sampling pack, as with the WallBoard(R)
sponsors, such that there are no competing products in the pack.
Additionally, as with its WallBoard(R) programs, the Company is able to
leverage its alliances with leading associations in the various fields to
provide the sampling packs with market-specific quality oversight, association
logos and informational brochures. Certain of the Company's contracts with such
associations provide that they will not endorse another sampling pack during the
period of the contract without at least six months' notification to the Company.
For instance, the American Diabetes Association (the "ADA") has permitted the
Company to print the ADA logo on the outside of the Diabetes Pack(TM) and the
Arthritis Foundation has permitted the Company to print its logo on the
Arthritis Pack(TM).
The Company's sampling packs target several different audiences at a time
when those audiences are most likely to use the products included in the packs.
For instance, in 1995, the Company shipped more than two million Your Kids
Parents Pack(TM) for distribution to parents at 12,000 day care centers
nationwide. The products inside the pack include samples of cereal, soap, snack
foods, and cleaning products. The Company ships annually approximately 600,000
of each of the Heart Pack(TM), Arthritis Pack(TM) and the Diabetes Packs(TM) for
distribution to newly diagnosed patients at more than 6,500 doctors' offices and
other locations nationwide.
As part of its growth strategy, the Company intends to pursue acquisitions
that offer complementary services to those of the Company. In May 1996, the
Company acquired from RD Publications, Inc., an affiliate of Readers Digest
Association Incorporated, for $250,000 cash, a "new member" health club sampling
pack program through which it expects to distribute more than 735,000 health
club member kits, which include such products as deodorants, razors and
nutritional supplements, at approximately 1,000 health and fitness clubs during
the remainder of 1996. The Company believes that the demographic segment reached
through these packs is complementary to the other populations that it has
targeted. Several of the Company's current sponsors of other sampling pack
programs may provide product samples for the newly acquired health club program.
The Company anticipates that it will identify more markets into which the
sampling pack programs can be expanded successfully through acquisitions and
through its own research efforts.
To maintain an even flow in the sampling pack distribution during the
course of a year, the Company monitors the flow of persons in each of the
sampling pack locations in order to determine the times during which a type of
location, such as an endocrinologist's office, would likely be distributing more
or fewer sampling packs and adjusts the delivery of the number of sampling packs
during the year accordingly. For instance, the Heart Pack(TM), with an overall
annual distribution of 600,000, is currently distributed to its locations three
times during each year in increments of 200,000.
To monitor the effectiveness of its sampling pack programs, the Company
currently employs The Gallup Organization, as well as its own independent
auditor, to conduct quality control checks on the assembly of the products for
the sampling packs, the information in the sampling packs and the impact of the
sponsors' products on the recipients of the sampling packs. Telephone interviews
are conducted by The Gallup Organization to determine the product usage or
purchases among the recipients of the sampling packs. The Company also places
customer response cards in the sampling packs from which the Company is able to
follow up with those sampling pack recipients who respond and measure the impact
of the sampling packs on their product usage or purchase. Additionally, these
customer response cards permit the Company to compile a database of persons
receiving the sampling packs which the Company could then use in cross-selling
other products through the Business Markets and Consumer Markets divisions. See
"-- Consumer Markets" and "-- Business Markets."
WALLBOARD(R) AND SAMPLING PACK TRACKING SYSTEM. The Company searches for
ways to streamline its operations and communications within its infrastructure.
In Marketing Services, the Company strives to increase its efficiency in
tracking the WallBoard(R) and sampling pack programs. A database tracking system
keeps track of the numbers of WallBoards(R), the various locations,
installations, the scheduled rotation of the WallBoards(R), comments about the
locations and information about the WallBoards(R).
To administer the WallBoard(R) and sampling pack locations, the Company
uses approximately 500 field representatives, who are hired as independent
contractors, from temporary placement agencies or outsourced
42
<PAGE> 45
personnel companies to monitor WallBoard(R) locations. WallBoard(R) information
is changed by the Company's field sales representatives, generally quarterly, to
reflect different sponsors or editorial material. These representatives complete
a "call-report" on the site and transmit that report to the Bethesda
headquarters for processing. The Company has purchased an optical character
recognition system that automatically scans the "call reports" into the system,
eliminating the human data entry, reducing human error and increasing the
efficiency in processing the field call reports. For its sampling programs, the
Company uses two outsourced distribution and fulfillment centers located on the
Eastern Shore of Maryland and in Los Angeles, California. For its WallBoard(R)
programs, the Company uses an outsourced distribution and fulfillment center
located on the Eastern Shore of Maryland, separate from the center used by its
sampling programs.
The Company is developing a postal distribution efficiency system, which
will evaluate the cost of shipping sampling packs from the two facilities on the
Eastern Shore of Maryland and in Los Angeles, California to the sampling packs'
various destinations. The new program will evaluate the various modes of
transport available and the destination to which the products are bound in order
to determine the least expensive rate for timely delivery. The Company
periodically evaluates the efficiency of its infrastructure and potential
additions to the existing infrastructure.
HIRING AND TRAINING
The Company believes a key component of its success is the quality of its
employees. Therefore, the Company seeks to refine its systematic approach to
hiring, training and managing qualified personnel for its sales force. The
Company recruits from within communities individuals who can help penetrate
specific target markets on behalf of the Company's clients. For example, the
Company recruits personnel who speak and write Spanish to market products and
services to Hispanic communities, and personnel who speak and write Cantonese or
Mandarin to market products and services to Chinese-Americans.
Hiring and training of field sales representatives is conducted separately
in the Consumer Markets and the Business Markets divisions. Each business line
determines its hiring needs and requests approval for those positions from the
Company's Human Resources department.
After an employee is hired, the field sales representative enters a period
of formal training, conducted both in a classroom and in the field to learn
appropriate selling techniques. The Company's initial training for its field
sales representatives takes from two to four weeks and includes classroom
settings during which the representatives receive training on the Company and
its operations, the competitive environment in which the Company's clients
operate, and the products and services the representatives will be marketing, as
well as field sales experience supervised by district managers or supervisors.
Field sales representatives frequently meet with supervisors or district
managers to discuss new services or promotions, and to obtain follow-up training
in sales techniques and skills. In addition, the field sales representatives
participate in periodic retraining programs. During the training period,
employees are paid a training salary to provide an opportunity for the employee
to acclimate to the sales environment before being paid on a commission basis.
In its teleservices operations, new teleservices associates attend a
multi-day formal training program, during which associates are provided
information on the Company and its operations, the competitive environment in
which the Company's clients operate, and the products and services the
associates will be marketing. In addition, these training programs make use of
simulated selling situations and other methods to teach the associates
appropriate sales techniques and skills. During the initial training period,
each teleservices associate also is teamed with either a supervisor or an
experienced sales associate who participates in actual telemarketing service
calls. The Company periodically provides its teleservices sales associates with
additional training, including frequent meetings to discuss any new products,
promotions and services and to sharpen selling skills, as well as through
periodic retraining programs. In addition, teleservices supervisors monitor
calls made by each teleservices associate and provide feedback on selling
techniques and skills. See "Risk Factors -- Dependence on Labor Force."
GOVERNMENT REGULATION
The Company's business is subject to various Federal and state laws and
regulations. Certain portions of the Company's industry have become subject to
an increasing amount of Federal and state regulation in the
43
<PAGE> 46
past five years. The Federal Communications Commission's (the "FCC") rules under
the Federal Telephone Consumer Protection Act of 1991 limit the hours during
which telemarketers may call consumers and prohibit the use of automated
telephone dialing equipment to call certain telephone numbers. The Federal
Telemarketing and Consumer Fraud and Abuse Prevention Act of 1994 (the "TCFAPA")
broadly authorizes the Federal Trade Commission (the "FTC") to issue regulations
prohibiting misrepresentation in telephone sales.
In August 1995, the FTC issued regulations under the TCFAPA which, among
other things, require telemarketers to make certain disclosures when soliciting
sales. The Company believes its operating procedures comply with the telephone
solicitation rules of the FCC and FTC. However, there can be no assurance that
additional Federal or state legislation, or changes in regulatory
implementation, would not limit the activities of the Company or its clients in
the future or significantly increase the cost of regulatory compliance.
In addition, on June 21, 1996 MCI and the FCC entered into a consent decree
under which MCI agreed to institute third-party verification procedures for most
small-business customer marketing not currently covered by third-party
verification, including field sales marketing of small-business customers. The
Company provides field sales marketing services to small-business customers on
behalf of MCI, and became subject to third-party verification of switches
obtained by the Company's field sales force for MCI effective August 1, 1996.
The Company expects that the implementation of third-party verification will
increase the Company's costs to some extent, but does not expect that
implementation of third-party verification with respect to field sales for MCI
will have a material adverse effect on the Company's operations.
A number of states have enacted or are considering enacting legislation to
regulate telephone solicitations. For example, telephone sales in certain states
cannot be final unless a written contract is delivered to and signed by the
buyer and may be canceled within three business days.
Several of the industries in which the Company's clients operate are
subject to varying degrees of government regulations, particularly the
telecommunications industries. Generally, compliance with these regulations is
the responsibility of the Company's clients. However, the Company could be
subject to a variety of enforcement or private actions for its failure or the
failure of its clients to comply with such regulations.
The industries served by the Company are also subject to varying degrees of
government regulation. The Company has never been held responsible for
regulatory noncompliance by a client. See "Risk Factors -- Government
Regulation."
COMPETITION
The Company competes with providers of other forms of advertising and
marketing media, such as direct mail, television, radio and other advertising
media for the marketing expenditures of its clients and prospective clients. The
Company also competes with the internal marketing capabilities of clients and
prospective clients. The Company's largest clients, AT&T and MCI, have
significant internal teleservices and field sales marketing capabilities and
also contract for these services from competitors of the Company. Although the
Company believes that its clients and prospective clients find it advantageous
to outsource at least a portion of their marketing services, certain clients may
choose to conduct all or a more significant portion of their marketing efforts
internally.
The Company competes as well with a number of outsourced marketing services
firms. The industry for marketing services is very competitive and highly
fragmented. Many of the companies offer a limited number of services within a
limited geographic area. The Company believes that no one participant or small
number of participants is dominant in the industry, although there are several
participants in the industry whose business, like that of the Company, tends to
be national and offer a broad array of marketing services, such as Sitel
Corporation, APAC TeleServices, Inc. and CUC International, Inc. Management
believes that there are certain competitors which have the capabilities and
resources comparable to and in certain respects greater than those of the
Company.
Management believes that it competes primarily on the basis of demonstrated
ability to attract customers, reputation for quality, price, geographic presence
(in the case of field sales and the WallBoard(R) programs),
44
<PAGE> 47
technological expertise, and the ability to promptly provide clients with
customized solutions to their sales and marketing needs.
The Company believes that its competitive strengths are its targeted
marketing channels of distribution, the length of time during which the Company
has had client relationships with major companies and has had strategic
alliances with consumer associations, and its existing national infrastructure.
EMPLOYEES
As of June 30, 1996, the Company employed 1,196 full-time and 452 part-time
personnel. In addition, the Company retained approximately 500 independent
contractors who work with the Company on a part-time basis in its WallBoard(R)
Program. The following table shows the number of the Company's full-time and
part-time employees broken down by area of operation as of June 30, 1996:
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF NUMBER OF
DISCIPLINE FULL-TIME EMPLOYEES PART-TIME EMPLOYEES TOTAL EMPLOYEES
----------------------------------- ------------------- ------------------- ---------------
<S> <C> <C> <C>
Teleservices....................... 42 445 487
Field Sales........................ 1,061 7 1,068
Marketing Services................. 53 -- 53
Executive & Administrative......... 40 -- 40
------ --- ------
Total......................... 1,196 452 1,648
=============== =============== ============
</TABLE>
Of the total number of employees, approximately 600 are located in the
Company's Bethesda, Maryland facilities and the remainder of the employees are
located among the various field sales offices. None of the Company's employees
is subject to a collective bargaining agreement. The Company considers its
relations with its employees to be good.
FACILITIES
The Company's corporate headquarters are located in Bethesda, Maryland in
leased facilities consisting of approximately 29,600 square feet of office
space. The Company also leases additional space located in two office buildings
in Bethesda, Maryland, at which its three call centers are located, consisting
of 300 work stations located in 20,800 square feet of office space for the
Consumer Markets call center, and 26 work stations located in 2,100 square feet
of office space for the Business Markets call center, respectively. The term of
the lease, as amended, expires in June 1997 with respect to substantially all of
the space, with an option to renew for an additional five-year term. The Company
is currently negotiating new lease arrangements and, based on current market
conditions, believes that it will be able to re-lease its existing headquarters
office space upon substantially the same terms and conditions as the existing
lease. The Company currently anticipates that it will relocate its call centers
to a less-expensive location in Bethesda, Maryland and based on current market
conditions believes that it be able to secure a lease for comparable office
space at a slight cost savings to the Company.
The Company also leases the facilities for its field sales offices at June
30, 1996. The leases for the Company's sales offices generally have terms
ranging from a month-to-month basis to two years and generally have renewal
options.
The Company believes that its current facilities are adequate for its
current operations. The Company intends to open one or more field sales offices
and one call center in the United Kingdom in early 1997 to support continued
growth and expansion.
LEGAL PROCEEDINGS
From time to time, the Company is involved in litigation incident to its
business. In the opinion of the Company, no such litigation has had or is likely
to have a material adverse effect on the Company's results of operations,
financial condition or liquidity.
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<PAGE> 48
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information regarding the executive
officers, directors and director nominees of the Company. Each of the executive
officers will perform for the Company duties corresponding to the duties
previously performed for the Partnership. The Company is currently conducting a
search for a Chief Financial Officer.
<TABLE>
<CAPTION>
NAME AGE POSITION
-------------------------------------- --- --------------------------------------
<S> <C> <C>
Daniel M. Snyder...................... 31 Chairman of the Board of Directors,
President and Chief Executive Officer
Michele D. Snyder..................... 34 Vice Chairman, Chief Operating
Officer, and Director
Brian Benhaim......................... 39 Senior Vice President of Corporate
Development, Acting Chief Financial
Officer and Director
Shaun P. Gilmore...................... 42 President -- Direct Sales
Mortimer B. Zuckerman................. 58 Director Nominee
Fred Drasner.......................... 53 Director Nominee
Stephen T. Baldacci................... 35 Senior Vice President of Business
Development
Noel Barnard.......................... 42 Senior Vice President of Business
Development
Terry Bateman......................... 40 Senior Vice President of Marketing
Mitchell N. Gershman.................. 38 Senior Vice President of Operations
Gary T. Griffin....................... 46 Senior Vice President of Sales
Susan L. Marentis..................... 39 Senior Vice President of Account
Management
David B. Pauken....................... 34 Chief Accounting Officer
Bruce T. Wagner....................... 46 Senior Vice President of Sales
Alfred G. Wise........................ 33 Senior Vice President of Operations
</TABLE>
Daniel M. Snyder, Chairman of the Board and a founder of the Company, has
served as the President and Chief Executive Officer of Snyder Communications and
its predecessors since the Company was founded in 1987.
Michele D. Snyder, a founder of the Company, has been with the Company
since its inception, and currently serves as the Vice Chairman, Chief Operating
Officer and a director of the Company. Ms. Snyder is responsible for the
day-to-day operations of the Company, including personnel, executive management,
contract negotiations and research and development of new programs.
Brian Benhaim, a director of the Company, has served as the Senior Vice
President of Corporate Development since May 1996. Mr. Benhaim also serves as
Acting Chief Financial Officer. Previously, he served as Vice President of
Direct Sales of the Company. Prior to joining the Company in July 1993, he
served from 1991 to 1993 as the President of Advanced Sensor Technologies, Inc.,
a company he founded to develop new products for safety-related weather
instrumentation and early warning systems. From 1989 to 1991, he served as the
Vice President of Marketing and Sales of Belfort Instruments, a division of
TransTechnology Corporation, where he was responsible for the turnaround sales
efforts of that corporation. From 1987 to 1989, Mr. Benhaim was a management
consultant with Bain & Company, a management consulting firm, where he was
responsible for strategic planning and acquisitions for Fortune 500 clients.
Shaun P. Gilmore joined the Company in August 1996 as President -- Direct
Sales and is responsible for all aspects of the Consumer and Business Markets
including international expansion. Prior to joining the Company, Mr. Gilmore
spent 16 years at AT&T where from January 1, 1996 to August 1996, he was
President -- Northeast States with responsibility for AT&T's Consumer & Small
Business Markets in New
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<PAGE> 49
York and New England. In addition, Mr. Gilmore represented all of AT&T in
matters of strategy and external communications for the region. From October
1993 to January 1, 1996, Mr. Gilmore was Vice President -- Global Consumer
Communications Services with responsibility for all aspects of AT&T's Global
Consumer Long Distance business. From 1980 to 1993, Mr. Gilmore held a variety
of positions in Marketing, Finance, Operations, Field Sales, Personnel and
Strategic Planning for AT&T's Business Markets division.
Mortimer B. Zuckerman, who has been nominated to serve as a director of the
Company, has been the Chairman of Boston Properties Inc., a national real estate
development and management company, since 1970. He has been the Chairman of U.S.
News & World Report, L.P. and Editor-in-Chief of U.S. News & World Report since
1985, Chairman of Daily News, L.P. and Co-publisher of the New York Daily News
since 1993, Chairman of The Atlantic Monthly Company since 1980 and Chairman of
the Board of Directors of Applied Graphics Technologies, Inc. since April 1996.
Fred Drasner, who has been nominated to serve as a director of the Company,
has been the Chief Executive Officer of Daily News, L.P. and Co-Publisher of the
New York Daily News since 1993, the President and Chief Executive Officer of
U.S. News & World Report, L.P. since 1985, the Chairman and Chief Executive
Officer of Applied Graphics Technologies, Inc. since April 1996, the Chief
Executive Officer of Applied Printing Technologies, L.P. since 1986, and the
Vice-Chairman and Chief Executive Officer of The Atlantic Monthly Company since
1986.
Stephen T. Baldacci has served as the Senior Vice President of Business
Development since December 1995. Previously, he was the Vice President of
Marketing of the Company from June 1992 to December 1995, where he was
responsible for oversight, development and sales of marketing programs for the
Company. Prior to joining the Company, he was the Sales Development Director for
Entertainment Weekly, a Time, Inc. publication, from November 1991 to June 1992,
where he was primarily responsible for the nationwide sales strategies for the
publication. From December 1990 to November 1991, Mr. Baldacci served as the
Market Development Manager for People Weekly, a Time, Inc. publication, where he
also oversaw the nationwide sales strategy.
Noel Barnard joined the Company in July 1996 as Senior Vice President,
Business Development -- Teleservices and is responsible for directing the
business development for teleservices within the Direct Sales Division. Prior to
joining the Company, from September 1993 to July 1996, Ms. Barnard served in
various capacities at AMR Corporation, parent to American Airlines, most
recently as Senior Vice President, Sales and Customer Service of the TeleService
Resources division where she was responsible for sales, marketing, customer
service and call center operations for telemarketing and reservation service
facilities. From January 1991 to September 1993, Ms. Noel served as Regional
Sales Manager of Software Spectrum, a software reseller. During the period from
1977 to January 1991, Ms. Noel worked in various positions with International
Business Machines Corporation including Manager of Services Marketing and
Programs, Marketing Manager, Program Manager, Account Manager and Sales
Representative.
Terry Bateman has served as the Senior Vice President of Marketing of the
Company since November 1995. Previously, he was the Vice President of Business
Development of the Company from July 1995 to November 1995 where he was
primarily responsible for developing new media programs and supervising
marketing personnel. Prior to joining the Company, he served as a Vice President
of Marketing for Times Mirror corporation from 1994 to July 1995, where he was
responsible for marketing the on-line medical service initiative of Times
Mirror, and was Executive Vice President of the Medical News Network of Whittle
Communications from June 1993 to 1994 where he was responsible for expanding the
Medical News Network into the managed care arena. From June 1991 to June 1993,
Mr. Bateman served as Executive Vice President of the Special Report Network of
Whittle Communications where he oversaw the sales effort of the network. From
March 1989 to June 1991, he served as President of Bateman & Associates, a
marketing concern.
Gary T. Griffin joined the Company in July 1996 as Senior Vice President of
Sales in Direct Sales -- Consumer Markets and is responsible for directing the
operations of the Direct Sales Division. Prior to joining the Company, Mr.
Griffin spent 28 years at Electrolux Corporation, a direct seller of floor care
products, where from January 1991 to July 1996 he served as Senior Vice
President of Sales and Marketing, North America with overall responsibility for
directing sales and marketing in North America. From February 1989 to
47
<PAGE> 50
December 1990, Mr. Griffin served as Vice President, Western Sales Area and from
May 1988 to January 1989 as Vice President, Southeast Sales Area. From 1968 to
1988, Mr. Griffin held a variety of positions at Electrolux including Midwest
Area Vice President, Division Manager, Branch Manager and Sales Representative.
Mitchell N. Gershman joined the Company in April 1996 as a Senior Vice
President of Operations. Mr. Gershman is responsible for the field operations
within the Consumer Markets division and oversees the operation and
distributions of the Company's marketing services in that division. Prior to
joining the Company, from September 1993 to March 1996, Mr. Gershman served as a
Vice President of Sprint International, a division of Sprint Communications
Corporation, where he was responsible for expanding Sprint's efforts in the
residential and small business markets outside of the United States. From
February 1991 to August 1993, he served as Vice President of the Consumer
Marketing Division for Sprint where he was responsible for developing marketing
partnerships and outsourcing relationships, including field sales forces to
expand distribution. He also served in several capacities with MCI
Telecommunications Corporation from 1980 to 1986.
Susan L. Marentis has served as the Senior Vice President of Account
Management for the Company since March 1996. She previously was the Vice
President of Marketing of the Company from July 1993 to February 1996, where she
was responsible for the oversight and development of sales and marketing
programs. Prior to joining the Company, from October 1991 to June 1993, Ms.
Marentis was the Vice President of Sales for POP Radio at Actmedia Corporation
where she managed the POP Radio product sales, creating a network in
supermarkets, toy stores, and drug stores. From October 1990 to October 1991,
she served as Group Sales Manager for several of Actmedia's programs where she
was primarily responsible for developing new accounts.
David B. Pauken joined the Company in August 1996 as the Chief Accounting
Officer. Prior to joining the Company, from July 1984 to August 1996, Mr. Pauken
served in various capacities at Arthur Andersen LLP, most recently as a Senior
Manager in the Washington, D.C. office. At Arthur Andersen LLP, he was primarily
responsible for management of financial statement audits of publicly traded
companies, including Fortune 500 companies, as well as operational and financial
consulting to various entities.
Bruce T. Wagner joined the Company in April 1996 as a Senior Vice President
of Sales. Mr. Wagner is responsible for the field operations within the Business
Markets division, overseeing the operations of that division. Prior to joining
the Company, Mr. Wagner served as Senior Vice President of Sales and Marketing
for Oncor Communications, Inc., from 1994 to 1996, where he was responsible for
the sales of the alternate operator service division and oversaw the three
national sales divisions. From 1992 to 1993, he was the Vice President of Sales
for the Eastern Region with Oncor Communications, where he was responsible for
the region's sales of multiple product lines focused on the operator service
market. As Southeast Regional Sales Manager, from 1990 to 1991, Mr. Wagner
managed the long distance and operator service sales divisions for an eight
state region.
Alfred G. Wise has served as a Senior Vice President of Operations of the
Company since 1993. Mr. Wise joined the Company in 1989 as Vice President of
Field Operations, where he was responsible for all field operations activity.
Since 1993, Mr. Wise has been responsible for the field operations within the
Marketing Services division and oversees the operation and distributions for the
Wallboard(R) and sampling packs programs. Prior to joining the Company, from
July 1988 to June 1989, Mr. Wise worked at the New York Times Company Magazine
Group for publications such as Family Circle, Child and McCall's where he was
responsible for the development of circulation management programs and the
analysis of potential acquisitions.
Directors of the Company are elected at the annual meeting of stockholders
and serve until their successors are duly elected and qualified, or until their
earlier resignation or removal. Executive officers are elected annually by the
Board of Directors and serve until their successors are duly elected and
qualified, or until their earlier resignation or removal. It is anticipated that
Messrs. Zuckerman and Drasner will become directors of the Company immediately
following the completion of the Offerings. Ms. Michele D. Snyder is Mr. Daniel
M. Snyder's sister.
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<PAGE> 51
COMMITTEES OF THE BOARD
The Board has standing Audit and Compensation Committees. It is anticipated
that, immediately following the completion of the Offerings, Mr. Drasner and one
additional director who will be elected after the Offerings and who will be an
independent director not affiliated with the Company, will be appointed to serve
on the Audit Committee of the Board of Directors. The Audit Committee will make
recommendations concerning the engagement of independent public accountants,
will review with the independent public accountants the plans and results of the
audit engagement, will review the independence of the independent public
accountants, will consider the range of audit and non-audit fees and will review
the adequacy of the Company's internal controls. It is anticipated that,
effective upon the completion of the Offerings, Mr. Drasner and one other
outside, non-employee director will be appointed to serve on the Compensation
Committee. The Compensation Committee is responsible for establishing salaries,
bonuses, and other compensation for the Company's officers, other than Chief
Executive Officer, and administering the Company's stock option plans.
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid by the Partnership to
the Company's Chief Executive Officer and to each of the other most highly
compensated executive officers of the Company (collectively, the "Named
Executive Officers") with respect to the year ended December 31, 1995. The
Partnership did not have any pension plan or a long-term incentive plan, did not
issue any restricted stock awards and did not grant any stock options during
1995.
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION(a)
--------------------
SALARY BONUS
NAME AND PRINCIPAL POSITION ($) ($)
---------------------------------------------------------------- -------- --------
<S> <C> <C>
Daniel M. Snyder................................................ $301,784 $ --(b)
Chairman, President and Chief Executive Officer
Michele D. Snyder............................................... 99,043 304,050(c)
Vice Chairman and Chief Operating Officer
Stephen T. Baldacci............................................. 94,327 58,547(d)
Senior Vice President of Business Development
Susan L. Marentis............................................... 86,923 117,846(e)
Senior Vice President of Account Management
Alfred G. Wise.................................................. 83,548 --(f)
Senior Vice President of Operations
</TABLE>
- ---------------
(a) The above compensation table excludes an executive officer of the
Partnership who is no longer with the Partnership and who will not be an
executive officer of the Company.
(b) Excludes $2,871,078 paid in 1995 by SMS, the corporate general partner of
the Partnership, for services provided to SMS. Similar compensation will
not be paid following the Reorganization and the Offerings.
(c) Excludes $1,107,134 paid in 1995 by SMS, the corporate general partner of
the Partnership, for services provided to SMS. Similar compensation will
not be paid following the Reorganization and the Offerings.
(d) Excludes bonus of $41,000 paid in 1996 for the attainment of performance
criteria during the fourth quarter of 1995 and excludes $8,206 paid in 1995
by SMS, the corporate general partner of the Partnership, for services
provided to SMS.
(e) Excludes bonus of $50,000 paid in 1996 for the attainment of performance
criteria during the fourth quarter of 1995.
(f) Excludes bonus of $75,000 paid in 1996 for the attainment of performance
criteria during 1995 and excludes $34,145 paid in 1995 by SMS, the
corporate general partner of the Partnership, for services provided to SMS.
49
<PAGE> 52
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with each of its Named
Executive Officers. The Company's employment agreements with each of Mr.
Baldacci, Ms. Marentis and Mr. Wise provide that the Company will employ each
such executive officer on an "at will" basis. The base salary for each such
executive officer for 1996 is: Mr. Baldacci -- $150,000, Ms.
Marentis -- $150,000 and Mr. Wise -- $100,000. The employment agreements between
the Company and Mr. Baldacci, Ms. Marentis and Mr. Wise also provide for
incentive bonuses based on attaining specific performance criteria. These
agreements also include a non-competition commitment during the term of the
agreement and for a period of 18 months after termination of the agreement and
contain confidentiality commitments, non-solicitation of employee provisions,
and assignment of work product agreements. In addition, the Company agreed to
grant to each such executive officer nonqualified stock options to acquire
Common Stock. See "-- Stock Option Plan."
The Company also has entered into employment agreements with Mr. Snyder and
Ms. Snyder, which are effective as of the effective time of the Offerings and
are for a term of three years, unless sooner terminated as provided in the
agreements. The agreements provide that the 1996 base salaries for Mr. Snyder
and for Ms. Snyder are $300,000 and $200,000 per year, respectively. The
agreements with Mr. Snyder and Ms. Snyder also provide for incentive bonuses
based on attaining performance criteria to be established by the Compensation
Committee or the Board of Directors, and include a non-competition commitment
during the term of the agreement, confidentiality commitments, non-solicitation
of employee provisions, and assignment of work product agreements.
The Company also has entered into employment agreements with each of its
other executive officers. These agreements generally include certain
non-competition agreements, confidentiality commitments, non-solicitation of
employee provisions and assignment of work product agreements.
STOCK OPTION PLAN
In July 1996, the Board of Directors of the Company adopted and the
stockholders of the Company approved the 1996 Stock Incentive Plan (the "Stock
Option Plan"). The Stock Option Plan, which terminates on August 1, 2006, the
tenth anniversary of the effective date of the plan, is intended to promote the
long-term growth of the Company by rewarding its officers, key employees and
consultants with a proprietary interest in the Company for outstanding long-term
performance and to attract, motivate and retain capable management employees.
The Stock Option Plan is administered by the Compensation Committee of the
Board, which is required to be composed of at least two directors, or by the
Board of Directors of the Company if no Compensation Committee is appointed. The
Stock Option Plan authorizes the grant of incentive stock options (as defined in
Section 422 of the Internal Revenue Code of 1986, as amended), non-qualified
stock options, restricted stock awards and stock appreciation rights ("SARs"),
or any combination thereof, at the discretion of the Compensation Committee.
Subject to adjustment in certain circumstances, the aggregate number of shares
of Common Stock which may be issued under the Stock Option Plan upon exercise of
options, SARs or in the form of restricted stock may not exceed five million
shares.
The exercise price of options granted under the Stock Option Plan may not
be less than 100% (110% in the case of an optionee who is a 10% stockholder) of
the fair market value per share of Common Stock on the date of the option grant.
The vesting and other provisions of the options will be determined by the
Compensation Committee.
Options may not be exercised after ten years from the option grant date
(five years in the case of an incentive stock option granted to a 10%
stockholder). In the case of any incentive stock option, the option shall
terminate on the date that is three months (one year, in the event that the
termination of employment is by reason of death or disability) after the date on
which the optionee terminates employment or, if earlier, the date specified in
the agreement relating to the option grant.
Awards under the Stock Option Plan also may be made in the form of
restricted stock, at the discretion of the Compensation Committee. The
Compensation Committee has the authority to determine the terms and conditions
of any restricted stock awards.
50
<PAGE> 53
SARs may be granted in conjunction with all or a part of an option granted
under the Stock Option Plan, either at the time of initial grant of the option
or a subsequent time prior to the expiration of the option, except that SARs may
not be granted in connection with a prior option without the consent of the
option holder. Upon the exercise of a SAR, the participant is entitled to the
difference between the fair market value of one share of Common Stock and the
option price per share in the related option, multiplied by the number of share
in respect of which the SAR has been exercised. The Compensation Committee has
the discretion to determine the form in which the payment will be made, which
may be in cash, shares of Common Stock, or a combination thereof.
The Board of Directors of the Company has approved the grant of
nonqualified options to certain officers and key employees of the Company to
purchase approximately 2.4 million shares of Common Stock in the aggregate. The
options were granted at an exercise price equal to the initial public offering
price (but not less than the fair market value on the date of grant) and become
exercisable at periods ranging from six months following the date of grant to
four years following the effective date of the Offerings.
LIMITATION OF LIABILITY AND INDEMNIFICATION
The Certificate of Incorporation of the Company provides that no director
shall be liable to the Company or its stockholders for monetary charges for a
breach of fiduciary duty to the fullest extent permissible under Delaware law.
The Company's Bylaws provide that the Company shall, to the fullest extent
permissible under Delaware law, indemnify its directors and officers against any
damages arising out of their actions as directors or officers of the Company.
The Company also intends to obtain officer and director liability insurance with
respect to liabilities arising out of certain matters, including matters arising
under the Securities Act of 1933, as amended.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent of the Company with respect to which
indemnification would be required or permitted. The Company is not aware of any
threatened litigation or proceeding which may result in a claim for such
indemnification.
51
<PAGE> 54
CERTAIN TRANSACTIONS
INVESTMENT IN THE PARTNERSHIP. On May 18, 1995, the Partnership Agreement
was amended to admit the 1995 Investors as limited partners. Concurrently with
the amendment, the Partnership entered into the Debenture and Partnership
Interest Purchase Agreement, and issued to the 1995 Investors the Debentures
(face amount $6.0 million). At that date, the 1995 Investors purchased an
aggregate 3% interest in the Partnership and, concurrently, the Original Limited
Partner purchased an additional 3.15% interest in the Partnership from SMS. A
portion of the proceeds from the issuance of the Debentures was distributed to
the Original Limited Partner to repay its capital contributions in the amount of
$297,773 and to repay a note to the Original Limited Partner in the amount of
$2,606,151. Another portion of the proceeds of such issuance was distributed to
SMS and to the Original Limited Partner in a special cash distribution in the
amount of $1,450,000 and $1,050,000, respectively. The remaining proceeds were
used for general corporate purposes.
RELATED PARTY LENDING. At December 31, 1995, the Company was owed $45,426
by certain stockholders of SMS. These loans were non-interest bearing and were
repaid in June 1996. During the three-year period ended December 31, 1995, the
largest aggregate amount of such indebtedness outstanding was $45,426.
During 1995, SMS advanced to Gerald S. Snyder $2,725,000, evidenced by a
non-interest-bearing loan secured by all of Gerald S. Snyder's stock in SMS. SMS
distributed the obligation, in-kind, to the stockholders of SMS, pro rata on
June 30, 1996.
SERVICES. The Company produces a WallBoard(R) sponsored by U.S. News &
World Report, a publication beneficially owned by Mortimer B. Zuckerman and Fred
Drasner, both of whom also own partnership interests of the Original Limited
Partner of the Partnership. The agreement between the Original Limited Partner
and the Company provides that the Original Limited Partner will provide the
Company with the use of editorial content from U.S. News & World Report, in
WallBoards(R) at airports for private aircraft nationwide, in exchange for U.S.
News & World Report being included as one of the sponsors in such program. The
arrangement is terminable by either party upon 30 days notice. This WallBoard(R)
program commenced in July 1995. Revenues earned by the Company from sponsors of
this WallBoard(R)program other than U.S. News & World Report were approximately
$850,000 during 1995 and $1,448,649 for the six months ended June 30, 1996.
RELATED PARTY LEASES. The Company leases its Bethesda, Maryland location
from Boston Properties, a company beneficially owned by Mortimer B. Zuckerman, a
director of the Company. The amounts paid to Boston Properties during 1993, 1994
and 1995 and through the six months ended June 30, 1996 were $223,666, $355,483,
$771,855 and $423,678, respectively. Such space is used as the corporate
headquarters as well as for two teleservices centers for the Business Markets
and Consumer Markets divisions. The Company believes that the terms of the lease
at the time the lease was entered into, were no less favorable to the Company
than those that could be obtained from another lessor. See Note 10 to the
Combined Financial Statements.
52
<PAGE> 55
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information known to the Company
regarding the beneficial ownership of shares of Common Stock immediately
following the Reorganization, and as adjusted to reflect the sale of the shares
of Common Stock in the Offerings, assuming no exercise of the over-allotment
options, by (a) all persons who beneficially own 5% or more of the outstanding
stock, (b) each of the Company's directors and director nominees, (c) each of
the Named Executive Officers and (d) all directors, director nominees and
executive officers as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF SHARES
OF COMMON STOCK OF COMMON STOCK
BENEFICIALLY BENEFICIALLY
OWNED OWNED
PRIOR TO THE AFTER THE
OFFERINGS(a) NUMBER OF OFFERINGS(a)
NAME OF ----------------- SHARES BEING -----------------
BENEFICIAL OWNER NUMBER PERCENT OFFERED NUMBER PERCENT
- ------------------------------------------------- ------- ------- ------------- ------- -------
<S> <C> <C> <C> <C> <C>
Daniel M. Snyder(b).............................. 36.4 % %
Mortimer B. Zuckerman and
MBZ Trust of 1996(b)(c)(d)..................... 23.2
Michele D. Snyder(b)............................. 12.8
Gerald S. Snyder(e).............................. 12.8 0.0
Fred Drasner(b)(c)(f)............................ 9.9
All directors, director nominees and executive
officers as a group (10 persons)............... 95.1 %
</TABLE>
- ---------------
(a) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. To the Company's knowledge, except as
set forth in the footnotes to this table and subject to applicable community
property laws, each person named in the table will have sole voting and
investment power with respect to the shares set forth opposite such person's
name. Unless otherwise specified in the footnotes to this table, the address
of each person set forth in the above table is Two Democracy Center, 6903
Rockledge Drive, 15th Floor, Bethesda, Maryland 20817.
(b) Assumes that the over-allotment options granted to the Underwriters by the
Over-Allotment Selling Stockholders are not exercised.
(c)The shares held by such persons are held in a limited partnership in which a
corporation is a 70% general partner and Fred Drasner is a 30% limited
partner. One third of the shares of such corporate general partner is owned
by Mortimer B. Zuckerman and two thirds of the shares of such corporation are
owned by the MBZ Trust of 1996 of which an outside person acts as the
trustee. The address of the trust is c/o Boston Properties, 8 Arlington
Street, Boston, MA 02116.
(d) Mr. Zuckerman's address is 599 Lexington Avenue, Suite 1300, New York, N.Y.
10022.
(e) Mr. Gerald S. Snyder has never been a senior executive officer of the
Company and will be retiring at age 63 in August 1996. Includes
shares of Common Stock held in a trust of which Mr. Snyder is deemed to be
the beneficial owner.
(f) Mr. Drasner's address is 450 West 33rd Street, New York, N.Y. 10001.
The following table sets forth certain information regarding the beneficial
ownership of shares of Common Stock by the 1995 Investors immediately following
the Reorganization, and as adjusted to reflect the sale of the shares of Common
Stock in the Offerings, assuming no exercise of the over-allotment options
granted to the Underwriters by each of the 1995 Investors.
<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF SHARES
OF COMMON STOCK OF COMMON STOCK
BENEFICIALLY OWNED BENEFICIALLY OWNED
PRIOR TO THE AFTER THE
OFFERINGS OFFERINGS
------------------ ------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT NUMBER PERCENT
- -------------------------------------------------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Allen & Company Incorporated............................ 0.88% %
Susan K. Allen.......................................... 0.45
Susan Strauss Breen..................................... 0.05
Barry Diller............................................ 0.30
Paul Gould.............................................. 0.44
(Continued on next page)
</TABLE>
53
<PAGE> 56
<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF SHARES
OF COMMON STOCK OF COMMON STOCK
BENEFICIALLY OWNED BENEFICIALLY OWNED
PRIOR TO THE AFTER THE
OFFERINGS OFFERINGS
------------------ ------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT NUMBER PERCENT
- -------------------------------------------------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
HAGC Partners........................................... 0.45%
Dan Lufkin.............................................. 0.15
Robert Marston.......................................... 0.13
Robert A. Strauss....................................... 0.05
Robert S. Strauss....................................... 0.05
Robert S. Strauss, Trustee.............................. 0.05
------- ------- ------- -------
3.0%
</TABLE>
The only other stockholder of the Company is Dr. Anthony O. Roberts who
owns 1.9% of the outstanding shares of Common Stock prior to the Offerings.
54
<PAGE> 57
DESCRIPTION OF CAPITAL STOCK
COMMON STOCK
The Certificate of Incorporation of the Company authorizes the issuance of
up to 120,000,000 shares of Common Stock, par value of $.001 per share. Upon
completion of the Offerings, there will be shares of Common Stock issued
and outstanding. As of the date of this Prospectus, there are shares of
Common Stock outstanding. To date, there has been no public market for the
Common Stock.
Holders of Common Stock ("Holders") are entitled to one vote per share for
each share held of record on all matters submitted to a vote of the
stockholders. Holders are entitled to receive ratably such dividends as may be
declared by the Board on the Common Stock out of funds legally available
therefor. The Holders have no preemptive rights, cumulative voting rights, or
rights to convert shares of Common Stock into any other securities, and are not
subject to future calls or assessments by the Company. All shares of Common
Stock of the Company issued in connection with the Offerings will be fully paid
and nonassessable.
PREFERRED STOCK
The Certificate of Incorporation authorizes the Board of Directors to issue
up to an aggregate of 5,000,000 shares of preferred stock (the "Preferred
Stock"), to establish one or more series of Preferred Stock and to determine,
with respect to each such series, the preferences, rights and other terms
thereof. Upon completion of the Offerings, no shares of Preferred Stock will be
outstanding and the Board of Directors has no present plans to issue any such
shares.
CERTAIN CHARTER PROVISIONS
Preferred Stock. The Certificate of Incorporation authorizes the Board of
Directors to establish one or more series of Preferred Stock and to determine,
with respect to any series of Preferred Stock, the preferences, rights and other
terms of such series. See "Description of Capital Stock -- Preferred Stock." The
Company believes that the ability of the Board of Directors to issue one or more
series of Preferred Stock will provide the Company with increased flexibility in
structuring possible future financings and acquisitions and in meeting other
corporate needs. The authorized shares of Preferred Stock, as well as shares of
Common Stock, would be available for issuance without further action by the
Company's stockholders, unless such action is required by applicable law or the
rules of any stock exchange or automated quotation system on which the Company's
securities may be listed or traded. Although the Board of Directors has no
present intention to do so, it could, in the future, issue a series of Preferred
Stock which, due to its terms, could impede a merger, tender offer or other
transaction that some, or a majority, of the Company's stockholders might
believe to be in their best interests.
Section 203 of the Delaware General Corporation Law. The Company is
subject to the provisions of Section 203 of the Delaware Law (the "Antitakeover
Law") regulating corporate takeovers. The Antitakeover Law prevents certain
Delaware corporations, including those whose securities are listed on the New
York Stock Exchange, from engaging, under certain circumstances, in a "business
combination" (which includes a merger or sale of more than 10% of the
corporation's assets) with any "interested stockholder" (a stockholder who
acquired 15% or more of the corporation's outstanding voting stock without the
prior approval of the corporation's Board of Directors) for three years
following the date that such stockholder became an "interested stockholder." A
Delaware corporation may "opt out" of the Antitakeover Law with an express
provision in its original certificate of incorporation, or an express provision
in its certificate of incorporation or bylaws resulting from a stockholders'
amendment approved by at least a majority of the outstanding voting shares. The
Company has not "opted out" of the application of the Antitakeover Law.
Certain Other Provisions. The Company's Certificate of Incorporation does
not provide for cumulative voting in the election of directors. The Company's
Bylaws provide that stockholders holding, in the aggregate, not less than
twenty-five percent of the Common Stock are permitted to call a special meeting
of the stockholders.
55
<PAGE> 58
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is American Stock
Transfer & Trust Company.
LISTING
Application has been made to list the Common Stock on the New York Stock
Exchange under the trading symbol "SNC."
56
<PAGE> 59
SHARES ELIGIBLE FOR FUTURE SALE
GENERAL
Upon completion of the Offerings, there will be outstanding shares
of Common Stock. Of the outstanding shares, all of the 12,000,000 shares sold in
the Offerings (13,800,000 if the Underwriters' over-allotment options are
exercised in full) will be eligible for sale in the public market without
restriction under the Securities Act, except that any shares purchased by an
"affiliate" of the Company (as that term is defined in Rule 144 adopted under
the Securities Act) will be subject to the resale limitations of Rule 144. The
remaining issued and outstanding shares of Common Stock were issued by
the Company in reliance on an exemption from the registration provisions of the
Securities Act. These shares of Common Stock are "restricted securities" within
the meaning of Rule 144 and may not be sold other than pursuant to an effective
registration statement under the Securities Act or pursuant to an exception from
such registration requirement.
In general, Rule 144 provides that any person (or persons whose shares are
aggregated) to whom the Rule is applicable, including an affiliate, who has
beneficially owned shares for at least a two-year period (as computed under Rule
144) is entitled to sell within any three-month period the number of shares that
does not exceed the greater of (i) 1% of the then outstanding shares of the
Common Stock (approximately shares after giving effect to the Offerings)
and (ii) the reported average weekly trading volume of the then outstanding
shares of Common Stock during the four calendar weeks immediately preceding the
date on which the notice of sale is filed with the Securities and Exchange
Commission. Sales under Rule 144 also are subject to certain provisions relating
to the manner and notice of sale and the availability of current public
information about the Company. A person (or persons whose shares are aggregated)
who is not deemed an affiliate of the Company at any time during the 90 days
immediately preceding a sale, and who has beneficially owned shares for at least
a three-year period (as computed under Rule 144), would be entitled to sell such
shares under Rule 144(k) without regard to the volume limitation and other
conditions described above. All of the current stockholders other than the 1995
Investors, who in the aggregate will own shares upon completion of the
Offerings, will satisfy the two-year holding period under Rule 144 and will be
eligible to sell shares in accordance with the Rule 144 limitations. The 1995
Investors, who in the aggregate will own shares upon completion of the
Offerings will satisfy the two-year holding period as of May 18, 1997.
All current stockholders have agreed, subject to exceptions for certain
pledges and, in the case of the Company, the grant of employee stock options,
not to, directly or indirectly, sell, offer to sell, grant any option for the
sale of or otherwise dispose of any capital stock of the Company or any security
convertible or exchangeable into, or exercisable for, such capital stock or, in
the case of the Company, file any registration statement with respect to any of
the foregoing (other than a registration statement on Form S-8 to register
shares issuable upon exercise of employee stock options), for a period of 180
days after the date of this Prospectus (the "Lock-Up Period") without the prior
written consent of Merrill Lynch & Co. Upon expiration of the Lock-Up Period,
the shares held by such persons will be eligible for sale in the public market,
subject to the conditions and restrictions of Rule 144, as described above.
Prior to the date of this Prospectus, there has been no public market for
the Common Stock. Trading of the Common Stock is expected to commence following
the completion of the Offerings. No prediction can be made as to the effect, if
any, that future sales of shares, or the availability of shares for future sale,
will have on the market price prevailing from time to time. Sales of substantial
amounts of Common Stock, or the perception that such sales could occur, could
adversely affect prevailing market prices of the Common Stock and the Company's
ability to raise capital in the future through the sale of additional
securities.
REGISTRATION RIGHTS
The Company has granted to Mr. Daniel M. Snyder and the 1995 Investors, as
a group, certain "demand" and "piggyback" registration rights and Ms. Snyder and
the Original Limited Partner certain "piggyback" registration rights
(collectively, the "Registration Rights") in connection with the shares of
Common Stock that will be held by each of them at the conclusion of the
Offerings (the "Registrable
57
<PAGE> 60
Shares"). See "Principal and Selling Stockholders." Subject to certain
conditions and limitations, the Registration Rights grant to Mr. Snyder and his
assignees and the 1995 Investors as a group the opportunity to register all or
any portion of their Registrable Shares and grants to all of the stockholders
named above the right to have their Registrable Shares registered in connection
with any registration by the Company of shares of Common Stock or other
securities substantially similar to the Common Stock. The 1995 Investors, as a
group, may exercise their demand registration rights only once and Mr. Snyder
may exercise his demand registration rights no more than five times in total.
The Registration Rights will be transferable in connection with any private sale
of Registrable Shares. The Company will bear all expenses incident to its
registration obligations upon exercise of the Registration Rights, except that
it will not bear any underwriting discounts or commissions, Federal or state
securities registration fees or transfer taxes relating to registration of the
Registrable Shares.
58
<PAGE> 61
CERTAIN UNITED STATES FEDERAL TAX CONSEQUENCES
TO NON-UNITED STATES HOLDERS
The following is a general discussion of certain U.S. Federal income and
estate tax consequences of the ownership and disposition of Common Stock
applicable to Non-U.S. Holders. In general, a "Non-U.S. Holder" is any holder
other than (i) a citizen or resident of the United States, (ii) a corporation or
partnership created or organized in the United States or under the laws of the
United States or of any state, or (iii) an estate or trust, the income of which
is includable in gross income for U.S. Federal income tax purposes regardless of
its source. This discussion is based on current law and is for general
information only. This discussion does not address aspects of U.S. Federal
taxation other than income and estate taxation and does not address all aspects
of income and estate taxation, nor does it consider any specific facts or
circumstances that may apply to a particular Non-U.S. Holder. ACCORDINGLY,
PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISERS REGARDING THE U.S.
FEDERAL, STATE, LOCAL AND NON-UNITED STATES INCOME AND OTHER TAX CONSEQUENCES OF
HOLDING AND DISPOSING OF SHARES OF COMMON STOCK.
EFFECTIVELY CONNECTED INCOME
In general, if the income earned by a Non-U.S. Holder with respect to the
Common Stock (i.e., dividends payable with respect to the stock or gains from
the disposition of such stock) is effectively connected with a trade or business
carried on by the Non-U.S. Holder within the United States, such income will be
subject to U.S. Federal income tax on a "net income" basis in the same manner as
if the Non-U.S. Holder were a resident of the United States. If certain tax
treaties apply, taxation on a net income basis applies only if the income is
attributable to a U.S. permanent establishment of the Non-U.S. Holder. A
Non-U.S. Holder who is taxable on a net income basis with respect to dividend
income can avoid having U.S. tax withheld on the dividend payment by filing
certain forms, including Internal Revenue Service Form 4224.
In addition to the regular U.S. Federal income tax on the Non-U.S. Holder's
U.S. net income, a Non-U.S. Holder that is a corporation may be subject to the
U.S. branch profits tax at a rate of 30% (or such lower rate as may be specified
by an applicable treaty) on the repatriation from the United States of its
"effectively connected earnings and profits attributable to its income that is
effectively connected with a U.S. trade or business," subject to certain
adjustments.
The remainder of this section discusses the U.S. Federal income tax
consequences of income earned with respect to the Common Stock held by a
Non-U.S. Holder assuming that such income is not effectively connected with the
conduct of a U.S. trade or business (or, where an applicable tax treaty so
provides, not attributable to a U.S. permanent establishment).
DIVIDENDS NOT EFFECTIVELY CONNECTED
In general, dividends paid on the Common Stock to a Non-U.S Holder will be
subject to United States withholding tax at a 30% rate, or a lower rate
prescribed by an applicable tax treaty. To determine the applicability of a tax
treaty providing for a lower rate of withholding, dividends paid to an address
in a foreign country are presumed to be paid to a resident of that country
absent knowledge to the contrary. Proposed Treasury regulations that have not
been finally adopted, (the "1996 Proposed Regulations"), however, would require
Non-U.S. Holders to file certain forms to obtain the benefit of any applicable
tax treaty providing for a lower rate of withholding tax on dividends. Such
forms would contain the Non-U.S. Holders' name and address and certain other
information. The 1996 Proposed Regulations would generally apply to dividends
paid on Common Stock after December 31, 1997. A Non-U.S. Holder that is eligible
for a reduced rate of U.S. withholding tax pursuant to a tax treaty may obtain a
refund of any excess amounts withheld by filing an appropriate claim for refund
with the Internal Revenue Service.
SALE OF COMMON STOCK NOT EFFECTIVELY CONNECTED
In general, a Non-U.S. Holder will not be subject to United States Federal
income tax on any gain realized upon the disposition of such holder's shares of
Common Stock unless (i) in the case of a Non-
59
<PAGE> 62
U.S. Holder who is an individual and holds shares of Common Stock as a capital
asset and is present in the United States for 183 days or more in the taxable
year of disposition (subject to certain other conditions and limitations), (ii)
the Non-U.S. Holder is subject to tax pursuant to the provisions of United
States tax law applicable to certain United States expatriates whose loss of
United States citizenship had as one of its principal purposes the avoidance of
United States taxes; or (iii) the Company is or has been a United States real
property holding corporation (a "USRPHC") for United States federal income tax
purposes at any time within the shorter of the five year period preceding such
disposition or such Non-U.S. Holder's holding period. The Company believes that
it is not, it has not been, and it is not likely to become, a USRPHC. If the
Company were or were to become a USRPHC, gains realized upon a disposition of
Common Stock by a Non-U.S. Holder which did not directly or indirectly own more
than 5% of the Common Stock during the shorter of the periods described above,
generally would not be subject to United States Federal income tax, provided
that the Common Stock is "regularly traded" on an established securities market.
If the Company Common Stock is listed on the New York Stock Exchange, the
Company believes that the Common Stock will be "regularly traded" on an
established market.
ESTATE TAX
Common Stock owned or treated as owned by an individual who is not a
citizen or resident (as defined for United States Federal estate tax purposes)
of the United States at the time of death will be includable in the individual's
gross estate for United States Federal estate tax purposes (unless an applicable
estate tax treaty provides otherwise), and therefore may be subject to United
States Federal estate tax.
BACKUP WITHHOLDING, INFORMATION REPORTING AND OTHER REPORTING REQUIREMENTS
The Company must report annually to the Internal Revenue Service and to
each Non-U.S. Holder the amount of dividends paid to and the tax withheld with
respect to each Non-U.S. Holder. These reporting requirements apply regardless
of whether withholding was reduced or eliminated by an applicable tax treaty.
Copies of this information also may be made available under the provisions of a
specific treaty or agreement with the tax authorities in the country in which
the Non-U.S. Holder resides or is established.
Under current Treasury Regulations, generally, dividends paid on Common
Stock to a Non-U.S. Holder at an address outside the United States will be
exempt from U.S. Federal backup withholding tax and U.S. information reporting
requirements (other than the reporting of dividend payments described above).
Under the 1996 Proposed Regulations, generally, dividends paid on Common Stock
will be exempt from such backup withholding and information reporting
requirements only if the Non-U.S. Holder provides certain certifications.
The payment of proceeds from the disposition of Common Stock by a Non-U.S.
Holder to or through a United States office of a broker will be subject to
information reporting and backup withholding unless such Non-U.S. Holder, under
penalties of perjury, certifies, among other things, its status as a Non-U.S.
Holder or otherwise establishes an exemption. The payment of proceeds from the
disposition of Common Stock to or through a non-U.S. office of a non-U.S. broker
generally will not be subject to backup withholding and information reporting,
except as noted below. In the case of proceeds from a disposition of Common
Stock paid to or through a non-United States office of a broker that is (i) a
United States person, (ii) a "controlled foreign corporation" for United States
federal income tax purposes or (iii) a foreign person 50% or more of whose gross
income from certain periods is effectively connected with a United States trade
or business, (a) backup withholding will not apply unless such broker has actual
knowledge that the owner is not a Non-U.S. Holder, and (b) information reporting
will apply unless the broker has documentary evidence in its files that the
owner is a Non-U.S. Holder (and the broker has no actual knowledge to the
contrary).
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules from a payment to a Non-U.S. Holder will be refunded or
credited against the Non-U.S. Holder's United States Federal income tax
liability, if any, provided that the required information is furnished to the
Internal Revenue Service.
60
<PAGE> 63
UNDERWRITING
Subject to the terms and conditions set forth in the U.S. purchase
agreement (the "U.S. Purchase Agreement") among the Company, SMS, the
Partnership, the Selling Stockholders and each of the underwriters named below
(the "U.S. Underwriters"), and concurrently with the sale of 2,400,000 shares of
Common Stock to the International Managers (as defined below), the Company and
the Selling Stockholder have agreed to sell to the U.S. Underwriters, and each
of the U.S. Underwriters severally has agreed to purchase from the Company and
the Selling Stockholder, the number of shares of Common Stock set forth opposite
its name below at the initial public offering price less the underwriting
discount set forth on the cover page of this Prospectus.
<TABLE>
<CAPTION>
U.S. UNDERWRITER NUMBER OF SHARES
--------------------------------------------------------------------- -----------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated............................................
Donaldson, Lufkin & Jenrette Securities Corporation..................
Allen & Company Incorporated.........................................
Montgomery Securities................................................
----------
Total................................................... 9,600,000
----------
----------
</TABLE>
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"),
Donaldson, Lufkin & Jenrette Securities Corporation, Allen & Company
Incorporated and Montgomery Securities are acting as representatives (the "U.S.
Representatives") of the U.S. Underwriters.
The Company, SMS, the Partnership and the Selling Stockholders have also
entered into the international purchase agreement (the "International Purchase
Agreement") with certain underwriters outside the United States and Canada (the
"International Managers" and, together with the U.S. Underwriters, the
"Underwriters") for whom Merrill Lynch International, Donaldson, Lufkin &
Jenrette Securities Corporation, Allen & Company Incorporated and Montgomery
Securities are acting as representatives (the "International Representatives"
and, together with the U.S. Representatives, the "Representatives"). Subject to
the terms and conditions set forth in the International Purchase Agreement, and
concurrently with the sale of 9,600,000 shares of Common Stock to the U.S.
Underwriters pursuant to the U.S. Purchase Agreement, the Company and the
Selling Stockholder have agreed to sell to the International Managers, and the
International Managers severally have agreed to purchase from the Company and
the Selling Stockholder, an aggregate of 2,400,000 shares of Common Stock. The
initial public offering price per share and the total underwriting discount per
share of Common Stock are identical under the U.S. Purchase Agreement and the
International Purchase Agreement.
In the U.S. Purchase Agreement and the International Purchase Agreement,
the several U.S. Underwriters and the several International Managers,
respectively, have agreed, subject to the terms and conditions set forth
therein, to purchase all of the shares of Common Stock being sold pursuant to
each such agreement if any of the shares of Common Stock being sold pursuant to
each such agreement are purchased. Under certain circumstances, the commitments
of non-defaulting U.S. Underwriters or International Managers, as the case may
be, may be increased. The closings with respect to the sale of shares of Common
Stock to be purchased by the U.S. Underwriters and the International Managers
are conditioned upon one another.
The U.S. Underwriters and the International Managers have entered into an
intersyndicate agreement (the "Intersyndicate Agreement") that provides for the
coordination of their activities. Pursuant to the Intersyndicate Agreement, the
U.S. Underwriters and the International Managers are permitted to sell shares of
Common Stock to each other for purposes of resale at the initial public offering
price, less an amount not
61
<PAGE> 64
greater than the selling concession. Under the terms of the Intersyndicate
Agreement, the U.S. Underwriters and any dealer to whom they sell shares of
Common Stock will not offer to sell or sell shares of Common Stock to persons
who are non-United States or non-Canadian persons or to persons they believe
intend to resell to persons who are non-United States or non-Canadian persons,
and the International Managers and any dealer to whom they sell shares of Common
Stock will not offer to sell or sell shares of Common Stock to persons who are
United States or Canadian persons or to persons they believe intend to resell to
persons who are United States or Canadian persons, except in each case for
transactions pursuant to the Intersyndicate Agreement.
The U.S. Representatives have advised the Company and the Selling
Stockholder that the U.S. Underwriters propose initially to offer the shares of
Common Stock offered hereby to the public at the initial public offering price
set forth on the cover page of this Prospectus, and to certain dealers at such
price less a concession not in excess of $ per share of Common Stock. The
U.S. Underwriters may allow, and such dealers may reallow, a discount not in
excess of $ per share of Common Stock on sales to certain other dealers.
After the initial public offering, the public offering price, concession and
discount may be changed.
The Over-Allotment Selling Stockholders have granted an option to the U.S.
Underwriters, exercisable during the 30-day period after the date of this
Prospectus, to purchase up to an aggregate of 1,440,000 additional shares of
Common Stock at the initial public offering price set forth on the cover page of
this Prospectus, less the underwriting discount. The U.S. Underwriters may
exercise this option only to cover over-allotments, if any, made on the sale of
the Common Stock offered hereby. To the extent that the U.S. Underwriters
exercise this option, each U.S. Underwriter will be obligated, subject to
certain conditions, to purchase a number of additional shares of Common Stock
proportionate to such U.S. Underwriter's initial amount reflected in the
foregoing table. The Over-Allotment Selling Stockholders also have granted an
option to the International Managers, exercisable during the 30-day period after
the date of this Prospectus, to purchase up to an aggregate of 360,000
additional shares of Common Stock to cover over-allotments, if any, on terms
similar to those granted to the U.S. Underwriters.
At the request of the Company, the U.S. Underwriters have reserved up to
360,000 shares of Common Stock for sale at the initial public offering price to
certain employees of the Company and other persons associated with the Company.
The number of shares of Common Stock available for sale to the general public
will be reduced to the extent such persons purchase such reserved shares. Any
reserved shares not so purchased will be offered by the U.S. Underwriters to the
general public on the same basis as the other shares offered hereby. Certain
individuals purchasing reserved shares may be required to agree not to sell,
offer or otherwise dispose of any shares of Common Stock for a period of three
months after the date of this Prospectus.
The Company, the Selling Stockholders and the Company's other existing
stockholders have agreed, subject to exceptions for certain pledges and, in the
case of the Company, the grant of employee stock options, not to, directly or
indirectly, sell, offer to sell, grant any option for the sale of, or otherwise
dispose of, any capital stock of the Company or any security convertible or
exchangeable into, or exercisable for, such capital stock, or, in the case of
the Company, file any registration statement with respect to the foregoing
(other than a registration statement on Form S-8 to register shares issuable
upon exercise of employee stock options), for a period of 180 days after the
date of this Prospectus, without the prior written consent of Merrill Lynch. See
"Shares Eligible for Future Sale."
Prior to the Offerings, there has been no public market for the Common
Stock. The initial public offering price will be determined by negotiations
among the Company, the Selling Stockholder and the Representatives. Among the
factors that will be considered in determining the initial public offering
price, are an assessment of the Company's recent results of operations, the
future prospects of the Company and the industry in general, the price-earnings
ratios and market prices of securities of other companies engaged in activities
similar to the Company, prevailing conditions in the securities market and other
factors deemed relevant. There can be no assurance that an active trading market
will develop for the Common Stock or that the Common Stock will trade in the
public market subsequent to the Offerings at or above the initial public
offering price.
62
<PAGE> 65
Application has been made to list the Common Stock on the New York Stock
Exchange, under the symbol "SNC." In order to meet the requirements for listing
of the Common Stock on that exchange, the U.S. Underwriters have undertaken to
sell lots of 100 or more shares to a minimum of 2,000 beneficial owners.
The Underwriters do not intend to confirm sales of shares of Common Stock
offered hereby to any accounts over which they exercise discretionary authority.
The Company, SMS, the Partnership and the Selling Stockholders have agreed
to indemnify the U.S. Underwriters and the International Managers against
certain liabilities, including liabilities under the Securities Act, or to
contribute to payments made in respect thereof.
More than 10% in aggregate principal amount of the Debentures, which
constitute all of the outstanding subordinated debt of the Company, is owned by
Allen & Company Incorporated and certain officers and related persons thereof.
See "The Company" and "Certain Transactions." Consequently, the Offerings are
being made pursuant to the provisions of Section 2720 of the Conduct Rules of
the National Association of Securities Dealers, Inc. Pursuant to such
provisions, the public offering price of an equity security can be no higher
than the price recommended by a "qualified independent underwriter" meeting
certain standards. In accordance with this requirement, Merrill Lynch will serve
in such role, and the price of the Common Stock will be no higher than that
recommended by Merrill Lynch in its capacity as the qualified independent
underwriter. In such capacity and in its capacity as one of the Underwriters,
Merrill Lynch has participated in the preparation of the Registration Statement
of which this Prospectus is a part and has performed due diligence with respect
thereto. The Company, SMS, the Partnership and the Selling Stockholders have
agreed to indemnify Merrill Lynch, in its capacity as the qualified independent
underwriter, against certain liabilities, including liabilities under the
Securities Act.
Allen & Company Incorporated, together with certain officers and related
persons thereof, own 2.37% of the shares of Common Stock (assuming no exercise
of the over-allotment options granted to the Underwriters). See "The Company,"
"Principal and Selling Stockholders" and "Certain Transactions." In addition, a
portion of the proceeds of the Offerings is expected to be used to repay amounts
owed under the Debentures to such investors. See "Use of Proceeds."
Merrill Lynch has provided certain financial advisory services to the
Company for which it will receive customary fees.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Shaw, Pittman, Potts & Trowbridge, Washington, D.C., a partnership
including professional corporations. Debevoise & Plimpton, New York, New York,
has acted as counsel for the Underwriters with respect to certain legal matters
in connection with the Offerings.
EXPERTS
The Combined Financial Statements of Snyder Communications (as defined in
Note 1 to the Combined Financial Statements) as of December 31, 1994 and 1995
and for each of the three years in the period ended December 31, 1995 included
in this Prospectus have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and are included
herein in reliance upon the authority of said firm as experts in giving said
reports.
63
<PAGE> 66
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C., a Registration Statement on Form S-1 (together
with all amendments, schedules and exhibits thereto, the "Registration
Statement") under the Securities Act with respect to the shares of Common Stock
offered hereby. This Prospectus, which constitutes a part of the Registration
Statement, does not contain all of the information set forth in the Registration
Statement, certain items of which are omitted in accordance with the rules and
regulations of the Commission. For further information with respect to the
Company and the Common Stock, reference is made to the Registration Statement,
which may be inspected, without charge, at the public reference facilities
maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549; Seven World Trade Center, 13th Floor, New York, New York
10048; and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies
of such materials may be obtained from the public reference section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
The Registration Statement is also publicly available through the Commission's
web site located at http://www.sec.gov.
The Company intends to furnish its stockholders with annual reports
containing audited financial statements certified by its independent auditors
and quarterly reports containing unaudited financial information for the first
three quarters of each fiscal year.
64
<PAGE> 67
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Public Accountants...................................... F-2
Combined Balance Sheets as of December 31, 1994 and 1995, and June 30, 1996
(unaudited) and Pro Forma, unaudited as of June 30, 1996..................... F-3
Combined Statements of Income, including pro forma data for the years ending
December 31, 1993, 1994 and 1995 and the six months ended June 30, 1995
(unaudited) and 1996 (unaudited)............................................. F-4
Combined Statements of Equity for the years ending December 31, 1993, 1994,
1995 and June 30, 1996 (unaudited)........................................... F-5
Combined Statements of Cash Flows for the years ending December 31, 1993, 1994
and 1995 and (unaudited) the six months ended June 30, 1995 and 1996......... F-6
Notes to Combined Financial Statements........................................ F-7
</TABLE>
F-1
<PAGE> 68
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Snyder Marketing Services, Inc. and
Snyder Communications, L.P.:
We have audited the accompanying combined balance sheets of Snyder
Communications (as defined in Note 1) as of December 31, 1994 and 1995, and the
related combined statements of income, equity and cash flows for each of the
three years in the period ended December 31, 1995. These financial statements
are the responsibility of Snyder Communications' management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Snyder Communications as of
December 31, 1994 and 1995, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Washington, D.C.,
July 1, 1996
F-2
<PAGE> 69
SNYDER COMMUNICATIONS
(SEE NOTE 1)
COMBINED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
-------------------------- --------------------------
1994 1995 1996 1996
----------- ----------- ----------- -----------
(UNAUDITED) (PRO FORMA,
UNAUDITED)
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................. $ 596,977 $ 3,881,512 $ 1,281,154 $ --
Accounts receivable, net of allowance for
doubtful accounts of $50,000, $100,000
and $150,000 at December 31, 1994 and
1995, and June 30, 1996 (unaudited),
respectively........................... 1,313,279 3,046,460 4,868,929 4,868,929
Prepaid expenses and other assets......... 62,776 124,837 100,380 100,380
----------- ----------- ----------- -----------
Total current assets................. 1,973,032 7,052,809 6,250,463 4,969,309
NOTE AND ADVANCES TO STOCKHOLDERS............. 5,657 2,770,426 -- --
PROPERTY AND EQUIPMENT, NET................... 1,505,702 2,336,254 3,742,546 3,742,546
DEFERRED FINANCING COSTS, NET................. -- 496,001 443,847 443,847
DEFERRED TAX ASSET............................ 118,000 58,000 -- 137,000
DEPOSITS...................................... 54,081 313,025 1,051,529 1,051,529
OTHER ASSETS.................................. 16,320 -- 811,488 811,488
----------- ----------- ----------- -----------
Total assets......................... $ 3,672,792 $13,026,515 $12,299,873 $11,155,719
============ ============ ============ ============
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Current portion of notes payable and
obligations under capital leases....... $ 804,757 $ 204,047 $ 400,931 $ 400,931
Accrued payroll........................... 306,195 2,854,630 4,407,392 4,407,392
Accounts payable.......................... 1,047,486 3,348,051 4,651,835 4,651,835
Unearned revenue.......................... 1,323,139 2,209,809 2,470,403 2,470,403
----------- ----------- ----------- -----------
Total current liabilities............ 3,481,577 8,616,537 11,930,561 11,930,561
OBLIGATIONS UNDER CAPITAL LEASES.............. 135,353 334,418 677,519 677,519
NOTE PAYABLE TO LIMITED PARTNER............... 1,921,397 -- -- --
SUBORDINATED DEBENTURES DUE TO LIMITED
PARTNERS.................................... -- 5,125,821 5,228,748 5,228,748
----------- ----------- ----------- -----------
Total liabilities.................... 5,538,327 14,076,776 17,836,828 17,836,828
COMMITMENTS AND CONTINGENCIES
EQUITY:
Common stock, no stated par value, 3,000
shares authorized; ($.001 par value,
120,000,000 shares authorized on a pro
forma basis) 2,000 shares issued and
outstanding at December 31, 1994, 1995,
and June 30, 1996; ( shares issued
and outstanding on a pro forma basis).. 500 500 500 --
Additional paid-in capital................ 138,342 1,359,703 1,359,703 (6,681,109)
Retained earnings (deficit)............... (593,897) (960,134) (4,828,995) --
Limited partners' (deficit) equity........ (1,410,480) (1,450,330) (2,068,163) --
----------- ----------- ----------- -----------
Total (deficit) equity............... (1,865,535) (1,050,261) (5,536,955) (6,681,109)
----------- ----------- ----------- -----------
Total liabilities and equity......... $ 3,672,792 $13,026,515 $12,299,873 $11,155,719
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these combined balance sheets.
F-3
<PAGE> 70
SNYDER COMMUNICATIONS
(SEE NOTE 1)
COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
----------------------------------------
1993 1994 1995
---------- ----------- -----------
<S> <C> <C> <C>
REVENUES......................................................... $9,042,523 $11,740,235 $42,891,561
OPERATING EXPENSES:
Cost of services............................................. 5,455,345 6,463,703 27,479,690
Selling, general and administrative expenses................. 3,003,096 3,525,363 7,214,074
---------- ----------- -----------
8,458,441 9,989,066 34,693,764
Compensation to SMS stockholders............................. -- -- 4,423,868
---------- ----------- -----------
INCOME FROM OPERATIONS........................................... 584,082 1,751,169 3,773,929
INTEREST EXPENSE--SUBSTANTIALLY ALL TO RELATED PARTIES........... (313,649) (295,774) (783,441)
INTEREST INCOME.................................................. 7,401 19,600 197,954
---------- ----------- -----------
INCOME BEFORE TAXES.............................................. 277,834 1,474,995 3,188,442
SMS INCOME TAX PROVISION (BENEFIT)............................... 15,000 85,000 (245,000)
---------- ----------- -----------
NET INCOME....................................................... $ 262,834 $ 1,389,995 $ 3,433,442
========== ============ ============
PRO FORMA INCOME DATA (UNAUDITED):
Historical income before income taxes as reported............ $ 3,188,442
Pro forma adjustment for compensation to SMS stockholders.... 4,423,868
-----------
Pro forma income before income taxes......................... 7,612,310
-----------
Pro forma provision for income taxes......................... 3,021,088
-----------
Pro forma net income.................................... $ 4,591,222
============
Pro forma net income per share.......................... $
============
Pro forma weighted average number of shares
outstanding...........................................
============
</TABLE>
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30,
--------------------------
1995 1996
----------- -----------
(UNAUDITED)
<S> <C> <C>
REVENUES.................................................................... $13,980,843 $34,861,276
OPERATING EXPENSES:
Cost of services........................................................ 9,046,169 23,633,694
Selling, general and administrative expenses............................ 2,769,616 6,571,484
----------- -----------
11,815,785 30,205,178
----------- -----------
INCOME FROM OPERATIONS...................................................... 2,165,058 4,656,098
INTEREST EXPENSE--SUBSTANTIALLY ALL TO RELATED PARTIES...................... (215,261) (552,404)
INTEREST INCOME............................................................. 12,477 96,837
----------- -----------
INCOME BEFORE TAXES......................................................... 1,962,274 4,200,531
SMS INCOME TAX PROVISION.................................................... 383,000 58,000
----------- -----------
NET INCOME.................................................................. $ 1,579,274 $ 4,142,531
============ ============
PRO FORMA INCOME DATA (UNAUDITED):
Historical income before income taxes as reported....................... $ 1,962,274 $ 4,200,531
Pro forma provision for income taxes.................................... 779,023 1,680,212
----------- -----------
Pro forma net income............................................... $ 1,183,251 $ 2,520,319
============ ============
Pro forma net income per share..................................... $ $
============ ============
Pro forma weighted average number of shares outstanding............
============ ============
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-4
<PAGE> 71
SNYDER COMMUNICATIONS
(SEE NOTE 1)
COMBINED STATEMENTS OF EQUITY
<TABLE>
<CAPTION>
ADDITIONAL RETAINED LIMITED
COMMON PAID-IN EARNINGS PARTNERS'
STOCK CAPITAL (DEFICIT) DEFICIT TOTAL
------ ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1992......... $500 $ 138,342 $ (641,295) $(2,919,358) $(3,421,811)
Distributions to SMS
stockholders................ -- -- (76,425) -- (76,425)
Net income.................... 23,897 238,937 262,834
------ ---------- ----------- ----------- -----------
BALANCE, December 31, 1993......... 500 138,342 (693,823) (2,680,421) (3,235,402)
Distributions to SMS
stockholders................ -- -- (20,128) -- (20,128)
Net income.................... 120,054 1,269,941 1,389,995
------ ---------- ----------- ----------- -----------
BALANCE, December 31, 1994......... 500 138,342 (593,897) (1,410,480) (1,865,535)
Proceeds from sale of
partnership interest, net of
income taxes of $815,000.... -- 1,221,361 -- 13,639 1,235,000
Distributions to limited
partners.................... -- -- -- (3,853,168) (3,853,168)
Net income (loss)............. -- (366,237) 3,799,679 3,433,442
------ ---------- ----------- ----------- -----------
BALANCE, December 31, 1995......... 500 1,359,703 (960,134) (1,450,330) (1,050,261)
Net income (unaudited)........ 2,591,364 1,551,167 4,142,531
Distributions (unaudited)..... -- -- (6,460,225) (2,169,000) (8,629,225)
------ ---------- ----------- ----------- -----------
BALANCE, June 30, 1996
(unaudited)...................... $500 $1,359,703 $(4,828,995) $(2,068,163) $(5,536,955)
====== ========= ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-5
<PAGE> 72
SNYDER COMMUNICATIONS
(SEE NOTE 1)
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
------------------------------------- --------------------------
1993 1994 1995 1995 1996
---------- ---------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................. $ 262,834 $1,389,995 $ 3,433,442 $ 1,579,274 $ 4,142,531
Adjustments to reconcile net income to
net cash provided by operating
activities--
Depreciation and amortization..... 237,167 389,037 595,759 242,876 436,236
Loss on disposal of assets........ 141,540 -- 152,490 (20,207) --
Deferred tax provision............ 15,000 83,000 60,000 42,000 58,000
Changes in assets and liabilities--
Accounts receivable............... (319,360) (490,274) (1,733,181) (1,672,057) (1,822,469)
Deposits and other assets......... 1,600 (38,601) (242,624) (122,407) (1,299,992)
Prepaid expenses and other
assets.......................... 90,661 (50,164) (62,061) (13,262) 24,457
Accounts payable and other
liabilities..................... 817,791 160,267 5,914,670 3,336,278 3,117,140
---------- ---------- ----------- ----------- -----------
Net cash provided by operating
activities.................. 1,247,233 1,443,260 8,118,495 3,372,495 4,655,903
---------- ---------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment.... (938,040) (530,506) (1,137,827) (401,007) (1,295,554)
Note and net advances to SMS
stockholders......................... 246,676 (5,657) (2,764,769) (2,725,000) 45,426
---------- ---------- ----------- ----------- -----------
Net cash used in investing
activities.................. (691,364) (536,163) (3,902,596) (3,126,007) (1,250,128)
---------- ---------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of notes payable to limited
partner.............................. (181,330) (465,300) (2,606,151) (2,606,151) --
Repayment of note payable.............. (166,370) (126,813) (35,817) (35,817) --
Proceeds from issuance of subordinated
debentures due to limited partners... -- -- 5,000,000 5,000,000 --
Proceeds from sale of partnership
interest............................. -- -- 2,050,000 2,050,000 --
Tax effect of equity transaction....... -- -- (815,000) (815,000) --
Debt issuance costs.................... -- -- (557,000) (557,000) --
Distributions to SMS stockholders...... (76,425) (20,128) -- -- (3,735,225)
Distributions to limited partners...... -- -- (3,853,168) (1,200,000) (2,169,000)
Payments on capital lease
obligations.......................... -- (49,060) (114,228) (31,876) (101,908)
---------- ---------- ----------- ----------- -----------
Net cash (used in) provided by
financing activities........ (424,125) (661,301) (931,364) 1,804,156 (6,006,133)
---------- ---------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS.............................. 131,744 245,796 3,284,535 2,050,644 (2,600,358)
CASH AND CASH EQUIVALENTS, beginning of
year..................................... 219,437 351,181 596,977 596,977 3,881,512
---------- ---------- ----------- ----------- -----------
CASH AND CASH EQUIVALENTS, end of year..... $ 351,181 $ 596,977 $ 3,881,512 $ 2,647,621 $ 1,281,154
========== ========== ============ ============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for
interest............................. $ 293,512 $ 247,339 $ 529,108 $ 245,158 $ 491,158
SUPPLEMENTAL DISCLOSURE OF NONCASH
ACTIVITIES:
Equipment purchased during the period
under capital leases................. $ -- $ 268,599 $ 433,154 $ 90,492 $ 641,893
Distribution of note receivable from
stockholder to SMS stockholders...... -- -- -- -- 2,725,000
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-6
<PAGE> 73
SNYDER COMMUNICATIONS
NOTES TO COMBINED FINANCIAL STATEMENTS
(INFORMATION AS OF JUNE 30, 1995 AND 1996, AND FOR THE SIX MONTHS ENDED
JUNE 30, 1995 AND 1996 IS UNAUDITED)
1. ORGANIZATION, BASIS OF PRESENTATION AND BUSINESS:
On October 19, 1988, Collegiate Marketing and Communications, Inc., a
Delaware corporation (the "General Partner"), and a Delaware limited partnership
beneficially owned by Mortimer B. Zuckerman and Fred Drasner (the "Original
Limited Partner") entered into a partnership agreement (the "Partnership
Agreement") pursuant to the provisions of the Delaware Act, under the name
Collegiate Marketing and Communications, L.P. (the "Partnership"). On September
1, 1989, the name of the Partnership was changed to Snyder Communications, L.P.,
and the name of the General Partner was changed to Snyder Communications, Inc.
On May 18, 1995, the Partnership Agreement was amended to admit several new
limited partners into the Partnership. On June 25, 1996, the name of the General
Partner was changed to Snyder Marketing Services, Inc. ("SMS").
Snyder Communications, Inc., a Delaware corporation, was incorporated on
June 25, 1996, to continue the business operations of the Partnership. Snyder
Communications, Inc., in conjunction with all of the existing partners in the
Partnership, intends to reorganize (the "Reorganization"), on or prior to the
effectiveness of the initial public offering of its common stock (the
"Offerings").
Prior to the Reorganization, SMS owns 63.85 percent of the partnership and
the limited partners own the remaining 36.15 percent. The Reorganization will
result in the stockholders of SMS exchanging 100 percent of their SMS stock for
stock of Snyder Communications, Inc. simultaneously with the limited partners
exchanging their limited partnership interests in the partnership for common
stock of Snyder Communications, Inc. After consummation of the Reorganization,
Snyder Communications, Inc. will own 100 percent of the stock of SMS and,
directly and indirectly (through its ownership of SMS), 100 percent of the
interests in the Partnership.
Because of the continuity of ownership, the Reorganization will be
accounted for by combining the assets, liabilities and operations of SMS, the
Partnership and Snyder Communications, Inc., at their historical cost basis.
Accordingly, for all periods presented, the accompanying combined financial
statements include a combination of the accounts of SMS and the Partnership (the
combined entity will be referred to herein as the "Company" or "Snyder
Communications") after elimination of all significant intercompany transactions.
Snyder Communications provides outsourced marketing services. The Company
designs and implements marketing programs for its customers utilizing field
sales, teleservices, sponsored wallboards, and product sampling. The Company's
operations are conducted throughout the United States with planned expansion to
the United Kingdom.
There are important risks associated with the Company's business and
financial results. These risks include (i) the Company's current reliance on one
significant customer, which constituted 59% of its 1995 revenues, and on other
major clients (see Note 3); (ii) the Company's ability to sustain and manage
future growth; (iii) the Company's dependence on industry trends toward
outsourcing of marketing services; (iv) the risks associated with the Company's
contracts; and (v) the dependence of the Company's success on its executive
officers and other key employees, in particular, its President, Chief Executive
Officer and Chairman of the Board of Directors.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
CASH AND CASH EQUIVALENTS
Cash and cash equivalents are comprised principally of amounts in operating
accounts and other money market investments, stated at cost which approximates
market value, with original maturities of three months or less.
F-7
<PAGE> 74
SNYDER COMMUNICATIONS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DEFERRED FINANCING COSTS
Deferred financing costs, which were incurred in connection with the
issuance of the subordinated debentures (see Note 5), are charged to expense as
additional interest expense over the life of the subordinated debentures using
the interest method.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. The Company depreciates
furniture, fixtures, and office and telephone equipment on a straight-line basis
over 3 to 10 years. Custom wood cases used to display wallboards are placed in
locations targeted at specific advertising markets. The original cost of these
cases is capitalized and amortized over 5 years.
When assets are retired or sold, the cost and related accumulated
depreciation and amortization are removed from the accounts, and any gain or
loss is reflected in income.
REVENUE RECOGNITION
FIELD SALES AND TELESERVICES REVENUE -- The Company provides field sales
and teleservices sales and marketing of telecommunication services to clients
under contracts which provide for payments based on accepted subscribers and the
type of service purchased by the subscriber. Revenues related to these sales are
recognized on the date the application for service installment is accepted by
the Company's telecommunication clients. At this point, the Company has no
further performance obligation related to the submitted subscriber and is
contractually entitled to payment. One of the Company's contracts provides the
client with the right to seek a return of previously paid commissions if the
subscribers submitted by the Company do not meet certain defined characteristics
and performance standards. These relate to the telecommunication client's
ability to successfully install and provide service to the subscriber, the bad
debt experience of the subscriber base submitted by the Company and certain
minimum usage and life measures of the subscriber base. At the point of revenue
recognition, an allowance is recorded by the Company based on an estimate for
these returned commissions. The allowance is estimated based on the Company's
historical experience and periodically reviewed by the Company and adjusted when
necessary.
WALLBOARD REVENUE -- The Company contracts with sponsors to display
sponsored information in mounted wall units at target market locations.
Wallboard revenue is recognized over the life of the contract as services are
rendered which is generally one year. Unearned revenue is recorded for billings
prior to the earning of such revenue.
PRODUCT SAMPLING -- The Company contracts with sponsors to produce and
distribute product samples, coupons and pieces of literature to target markets.
Sampling revenue is recognized over the contract term of the sampling program as
services are rendered which generally extends for one year.
INCOME TAXES
The accompanying combined financial statements reflect no provision for
Federal or state income taxes related to income earned by the Partnership since
each of the partners of the Partnership reflected their share of the
Partnership's net income on their respective tax returns. Prior to January 1,
1996, SMS was taxed as a C corporation and accordingly a provision (benefit) for
taxes of SMS is reflected in the accompanying statements of income for each of
the three years in the period ended December 31, 1995, and the six months ended
June 30, 1995. During this period, SMS accounted for income taxes in accordance
with Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes." Effective January 1, 1996, SMS
F-8
<PAGE> 75
SNYDER COMMUNICATIONS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
elected to be taxed as an S corporation under the Internal Revenue Code. In lieu
of corporate taxes, the stockholders of an S corporation are taxed on their
proportionate share of the Company's taxable income.
After the Reorganization, the Company will be subject to Federal and state
corporate income taxes. Accordingly, the accompanying combined statements of
income for the year ended December 31, 1995 and the six month periods ended June
30, 1995 and 1996 include unaudited pro forma adjustments for income tax
expense, which would have been recorded had all of the income generated by the
Company been subject to Federal and state corporate income taxes based on the
tax laws in effect during those periods (see Note 6).
ESTIMATES AND ASSUMPTIONS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CONCENTRATION OF CREDIT RISK
Concentration of credit risk is limited to trade accounts receivable and is
subject to the financial conditions of certain major clients as described in
Note 3. The Company's receivables are concentrated with customers in the
telecommunications industry. The Company does not require collateral or other
security to support clients' receivables.
PRO FORMA NET INCOME PER SHARE
Pro forma net income per share has been computed by dividing pro forma net
income by the pro forma weighted average number of shares outstanding during
each period. The pro forma weighted-average number of shares outstanding has
been adjusted for the estimated number of shares ( ) that the Company
would need to issue (at an assumed initial public offering price of $15.00 per
share, which is the mid-point of the proposed initial public offering price
range) to fund distributions in excess of earnings of approximately $ to the
Company's existing stockholders and limited partners (see Note 12).
ACCOUNTING FOR STOCK OPTIONS
Statement of Financial Accounting Standard No. 123 (SFAS 123) establishes a
fair value based method of accounting for stock-based compensation plans. It
encourages entities to adopt that method in place of the provisions of APB
Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25), for all
arrangements under which employees receive shares of stock or other equity
instruments of the employer. The Company will follow APB 25 and will comply with
the specific provision of SFAS 123 that requires pro forma disclosures
concerning compensation expense in the notes to the financial statements.
INTERIM FINANCIAL STATEMENTS
The combined financial statements of Snyder Communications as of and for
the six months ending June 30, 1995 and 1996, presented herein have been
prepared by the Company without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. The financial statements reflect all
adjustments (consisting of only normal recurring adjustments) which, in the
opinion of management, are necessary to present fairly the combined financial
position, results of operations and cash flows of the Company as of June 30,
1995 and 1996, and for the quarters then ended. The results for the interim
periods
F-9
<PAGE> 76
SNYDER COMMUNICATIONS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
are not necessarily indicative of the results to be obtained for the full year
due to the seasonal nature of the Company's business.
3. SIGNIFICANT CLIENTS:
The Company had one client which represented 59, 17 and 3 percent of the
Company's revenues for the years ended December 31, 1995, 1994 and 1993,
respectively. The loss of this client would have a material adverse effect on
the Company's business. The Company's principal contract with this client
extends through December 1997.
In addition, the Company had three and four clients that each accounted for
more than ten percent of the Company's revenues for the years ended December 31,
1994 and 1993, respectively. For the year ended December 31, 1994, these three
clients accounted for 17, 12 and 11 percent of the Company's revenues,
respectively. For the year ended December 31, 1993, these four clients accounted
for 19, 15, 10 and 10 percent of the Company's revenues, respectively.
The Company had two telecommunications clients that accounted for more than
10 percent of the Company's revenues for the six months ended June 30, 1996. For
this period, these two clients accounted for 56 and 25 percent of the Company's
revenues, respectively.
4. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following.
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- JUNE 30,
1994 1995 1996
---------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Wallboards..................................... $1,503,159 $ 1,829,398 $ 2,028,330
Office and telephone equipment................. 687,848 1,415,795 2,158,677
Furniture and fixtures......................... 101,415 166,919 952,428
Leasehold improvements......................... 61,030 166,614 250,251
---------- ----------- -----------
2,353,452 3,578,726 5,389,686
Accumulated depreciation....................... (847,750) (1,242,472) (1,647,140)
---------- ----------- -----------
$1,505,702 $ 2,336,254 $ 3,742,546
========= ========== ==========
</TABLE>
5. DEBT:
SUBORDINATED DEBENTURES
On May 18, 1995, the Partnership issued $6,000,000 (face value) of
subordinated debentures (the "Debentures") with a stated interest rate of 12.25
percent (effective interest rate to maturity of approximately 17 percent), due
December 31, 2001, to a group consisting of certain limited partners in the
Partnership for $5,000,000 in cash. The difference between the cash proceeds
received and the face amount of the Debentures has been accounted for as an
original issue discount. This discount is being amortized as additional interest
expense over the life of the Debentures using the interest method. The
Debentures require annual principal payments of $1,200,000 beginning on December
31, 1997 and continuing through December 31, 2000 and contain penalties for
prepayment. The remaining unpaid principal balance will be due on December 31,
2001. The Debentures are subordinate to future borrowings, if any (not to exceed
$2,000,000), made under any working capital facility that may be secured by the
Company and contain covenants that restrict distributions (other than those
required for the partners to make tax payments) unless certain liquidity ratios,
as defined,
F-10
<PAGE> 77
SNYDER COMMUNICATIONS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
5. DEBT (CONTINUED)
are met. Interest is due semi-annually in April and October of each year. At
December 31, 1995, the fair value of the Debentures approximated their carrying
value.
The Company intends to use a portion of the proceeds from the Offerings to
repay all amounts due under the Debentures. Extinguishment of the Debentures as
of June 30, 1996, would result in an extraordinary charge to income of
approximately $2.1 million ($1.3 million net of income taxes) representing
prepayment penalties plus the write off of unamortized discount and debt
issuance costs.
NOTES PAYABLE
Notes payable consisted of the following at December 31, 1994:
<TABLE>
<S> <C>
Notes payable to a limited partner.............................. $2,606,151
Note payable.................................................... 35,817
----------
2,641,968
Less--Current portion........................................... (720,571)
----------
$1,921,397
=========
</TABLE>
Concurrent with the formation of the Partnership, the Original Limited
Partner loaned the Partnership $350,000 as evidenced by a promissory note. On
May 10, 1989, the Partnership entered into another promissory note agreement
with the Original Limited Partner to repay the principal amount of advances
previously made by the Original Limited Partner to the Partnership. Effective
January 1, 1993, all prior notes payable and the related accrued interest to the
Original Limited Partner were combined into one note totaling $3,252,781. This
note bore interest of 8 percent per annum. This note was paid in full in May of
1995 with a portion of the proceeds from the Debentures.
In November 1992, a settlement agreement was reached between the Company
and an independent contractor hired by the Company whereby the Company was
required to pay the contractor $499,000. Under the settlement agreement, the
Company paid $170,000 to the independent contractor at the date of settlement,
with the remaining $329,000 plus interest at 15 percent per annum paid in
installments through March 1995. This obligation was fully satisfied in 1995.
6. INCOME TAXES:
Prior to January 1, 1996, SMS was taxed as a C corporation for Federal and
state corporate income tax purposes. Effective January 1, 1996, SMS elected to
be taxed as an S corporation and accordingly, SMS's income was taxable to its
stockholders rather than to SMS for the three months ended March 31, 1996. Upon
conversion to an S corporation on January 1, 1996, the deferred tax asset
balance of $58,000 was written off and is reflected as SMS income tax provision
in the accompanying combined financial statements. The SMS income tax provision
(benefit) for periods when it operated as a C corporation includes the following
components.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1993 1994 1995
------- ------- ---------
<S> <C> <C> <C>
Current................................................ $ -- $ 2,000 $ 510,000
Tax effect of equity transaction....................... -- -- (815,000)
Deferred............................................... 15,000 83,000 60,000
------- ------- ---------
SMS income tax provision (benefit)................ $15,000 $85,000 $(245,000)
======= ======= =========
</TABLE>
F-11
<PAGE> 78
SNYDER COMMUNICATIONS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
6. INCOME TAXES (CONTINUED)
A reconciliation of taxes at the U.S. Federal income tax rate to the
Company's actual income taxes is as follows.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1993 1994 1995
-------- --------- -----------
<S> <C> <C> <C>
Taxes at U.S. Federal income tax rate............. $ 97,000 $ 516,000 $ 1,116,000
Income taxed directly to limited partners......... (84,000) (445,000) (1,330,000)
State taxes (benefit), net of Federal and
permanent differences........................... 2,000 14,000 (31,000)
-------- --------- -----------
Total income taxes........................... $ 15,000 $ 85,000 $ (245,000)
======== ========= ==========
</TABLE>
At December 31, 1995 and 1994, the Company had recorded net deferred tax
assets of $58,000 and $118,000, respectively, related to differences in SMS's
book and tax earnings generated from its general partnership interest in the
Partnership.
Upon the successful completion of the Offerings and the related
Reorganization, a net deferred tax asset will be recorded with an associated
credit to the provision for income taxes. If the effective date of the Offerings
and the Reorganization had been June 30, 1996, a net deferred tax asset of
approximately $137,000 would have been recorded. As of June 30, 1996, the net
deferred tax asset would have consisted of the following:
<TABLE>
<S> <C>
Reserves and other liabilities........................................... $ 122,000
Allowance for doubtful accounts.......................................... 60,000
Property and equipment................................................... (124,000)
Other.................................................................... 79,000
---------
$ 137,000
=========
</TABLE>
7. LEASES:
The Company leases certain facilities, office equipment and other assets.
The following is a schedule of future minimum lease payments for capital leases
and for operating leases (with initial or remaining terms in excess of one year
at December 31, 1995).
<TABLE>
<CAPTION>
YEAR ENDING CAPITAL OPERATING
DECEMBER 31, LEASES LEASES
----------------- --------- ----------
<S> <C> <C>
1996.................................................... $ 257,186 $1,362,364
1997.................................................... 230,868 1,077,808
1998.................................................... 133,648 444,144
1999.................................................... 6,163 444,144
2000.................................................... -- 444,144
Thereafter.............................................. -- 629,204
--------- ----------
Total minimum lease payments....................... 627,865 $4,401,808
=========
Less--Amount representing interest........................... (89,400)
---------
Total obligation under capital leases.............. 538,465
Less--Current portion........................................ (204,047)
---------
Long-term portion............................................ $ 334,418
=========
</TABLE>
F-12
<PAGE> 79
SNYDER COMMUNICATIONS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
7. LEASES (CONTINUED)
Subsequent to December 31, 1995, the Company amended its headquarters and
office lease agreement to lease additional office space in order to house an
expanded call-center adjacent to its existing space and to extend the term of
the lease agreement for approximately six years under similar terms. The total
additional future minimum lease payments under this amendment will approximate
$1.6 million.
Property and equipment, net on the balance sheet includes $219,563,
$538,798 and $1,076,331 for equipment purchased under capital leases as of
December 31, 1994, 1995 and June 30, 1996 (unaudited), respectively.
Rental expense for all operating leases was approximately $271,000,
$434,000 and $1,201,000 for the years ended December 31, 1993, 1994 and 1995,
respectively and approximately $417,215, and $1,097,533 for the six months ended
June 30, 1995 (unaudited) and 1996 (unaudited), respectively.
8. CAPITAL STOCK:
In May 1995, SMS sold a 6.15 percent interest in the Partnership for
$2,050,000 in cash proceeds. These proceeds are reflected (net of associated
income taxes of $815,000 and SMS's basis in the equity interest) as a
contribution to additional paid-in capital in the accompanying combined
financial statements.
9. OPTIONS:
In July 1996, the Board of Directors of the Company adopted and the
stockholders of the Company approved the 1996 Stock Incentive Plan (the "Stock
Option Plan"). The Stock Option Plan, which terminates on August 1, 2006, the
tenth anniversary of the effective date of the plan is to be administered by the
Compensation Committee, which is required to be composed of at least two
directors. Following the Offerings, the directors serving on the Compensation
Committee must constitute "non-employee directors" as defined under Rule 16b-3
under the Securities Exchange Act of 1934, as amended. The Stock Option Plan
authorizes the granting of incentive stock options, non-qualified stock options,
restricted stock awards and stock appreciation rights ("SARs"), or any
combination thereof, at the discretion of the Compensation Committee of the
Board of Directors. Subject to adjustment in certain circumstances, the
aggregate number of shares of Common Stock which may be issued under the Stock
Option Plan upon exercise of options, SARs or in the form of restricted stock
may not exceed five million shares.
The exercise price of options granted under the Stock Option Plan may not
be less than 100 percent (110 percent in the case of an optionee who is a 10
percent stockholder) of the fair market value per share of Common Stock on the
date of the option grant. The vesting and other provisions of the options will
be determined by the Compensation Committee.
In the case of any incentive stock option, the option shall terminate on
the date that is three months (one year, in the event that the termination of
employment is by reason of death or disability) after the date on which the
optionee terminates employment or, if earlier, the date specified in the
agreement relating to the option grant.
As of June 30, 1996, no options had been issued under the Stock Option
Plan, although the Company anticipates issuing approximately 2.4 million options
at the time of the Offerings with exercise prices equal to the price of shares
offered to the public.
10. RELATED PARTIES:
At December 31, 1995 and June 30, 1996, the Company was owed $45,426 and
$17,536, respectively, by certain stockholders of SMS. These advances were
non-interest bearing and were repaid in June, 1996.
F-13
<PAGE> 80
SNYDER COMMUNICATIONS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
10. RELATED PARTIES (CONTINUED)
The Company's headquarters office space is leased from a third party, in
which one of the limited partners has an ownership interest. Rent paid under
this lease was $223,666, $355,483, $771,855 and $423,678 in 1993, 1994, 1995,
and June 30, 1996 (unaudited) respectively.
The Company produces a wallboard for which a publication beneficially owned
by the Original Limited Partner is one of the sponsors. Such publication
participates as a sponsor in exchange for the use by the Company of its
editorial information. Because it is not practicable to estimate the benefit
received by or provided to the Company and the Original Limited Partner, no
accounting recognition has been provided for this transaction in the
accompanying combined financial statements.
During 1995, the Company advanced $2,725,000 to a stockholder of SMS as
evidenced by a promissory note. The note was non-interest bearing and secured by
SMS stock. This note was distributed to the SMS stockholders, pro rata, on June
30, 1996.
11. COMMITMENTS AND CONTINGENCIES:
The Company is subject to lawsuits, investigations and claims arising out
of the conduct of its business, including those related to commercial
transactions, contracts, government regulation and employment matters. Certain
claims, suits and complaints have been filed or are pending against the Company.
In the opinion of management, and based on all known facts, all matters are
without merit or are of such kind, or involve such amounts, as would not have a
material effect on the financial position or results of operations of the
Company if disposed of unfavorably.
12. PRO FORMA DATA (UNAUDITED):
The unaudited pro forma combined balance sheet is presented as if the
Reorganization had occurred on June 30, 1996. As explained in Note 1, the
Reorganization will entail the limited partners exchanging their limited
partnership interests in the Partnership, and the stockholders of SMS exchanging
their stock in SMS for common stock in Snyder Communications, Inc. The SMS
retained earnings and limited partners' deficit balances will be reclassified to
additional paid-in capital. The Company will be taxed as a C corporation
resulting in the recording of a net deferred tax asset of $137,000, as discussed
in Note 6. Prior to consummation of the Offerings, the Company intends to make a
distribution of its cash balance existing at the date of the distribution (not
expected to exceed $10.0 million between July 1, 1996 and the date of the
Offerings) to its existing shareholders and limited partners. The unaudited pro
forma combined balance sheet gives effect to these items.
The pro forma net income and net income per share amounts for the year
ended December 31, 1995 and the six month periods ended June 30, 1995 and 1996
include a provision for Federal and state income taxes as if the combined
Company had been a C corporation for all the periods presented. The effective
income tax rate reflects the combined Federal and state income taxes of
approximately 39.7 percent for the year ending December 31, 1995, and the six
months ending June 30, 1995, and 40.0 percent for the six months ended June 30,
1996. The difference between the pro forma income tax rate and the Federal
statutory rate of 34% relates primarily to the impact of state income taxes.
Certain stockholders of the Company served as officers of SMS for which such
officers received compensation from SMS in 1995. The unaudited pro forma
combined income statement data includes an adjustment which reflects the
elimination in 1995 of this non-recurring compensation based on compensation
levels for the Company, as approved by its Board of Directors. Following
consummation of the Reorganization, such officers will not be required to
perform any comparable duties or responsibilities for SMS. Further, other costs
are not likely to be incurred which would offset the impact of this pro forma
adjustment. Therefore, such compensation is treated as non-recurring. The
unaudited pro forma combined statement of income data gives effect to these
items.
F-14
<PAGE> 81
SNYDER COMMUNICATIONS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
12. PRO FORMA DATA (UNAUDITED) (CONTINUED)
A portion of the net proceeds from the Offerings is to be used to repay all
amounts due under the Debentures. If the Debentures had been repaid on January
1, 1995 or January 1, 1996, the unaudited pro forma net income per share (as
adjusted for the number of shares the Company would need to issue (at an assumed
initial public offering price of $15.00 per share) to repay the Debentures)
would have been $ and $ for the year ended December 31, 1995,
and the six months ended June 30, 1996, respectively.
The unaudited pro forma combined financial statements and data are not
necessarily indicative of what the actual results of operations or financial
position would have been assuming such transactions had been completed on the
specified dates and they do not purport to represent the future results of
operation or financial position of the Company.
F-15
<PAGE> 82
INSIDE BACK COVER OF PROSPECTUS:
This inside back cover is a multi-color map, in a landscape orientation, of
the United States showing the locations of the Company's Consumer Markets
district offices, marked by squares; Business Markets district offices, marked
by triangles; and Marketing Services offices, marked by circles.
The map also shows an inset of the Company's planned offices in the United
Kingdom.
<PAGE> 83
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY, THE SELLING STOCKHOLDER OR THE UNDERWRITERS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE
COMMON STOCK IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR
IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 11
The Company........................... 18
Use of Proceeds....................... 20
Dividend Policy....................... 20
Capitalization........................ 21
Dilution.............................. 22
Selected Financial and Operating
Data................................ 23
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 25
Business.............................. 32
Management............................ 46
Certain Transactions.................. 52
Principal and Selling Stockholders.... 53
Description of Capital Stock.......... 55
Shares Eligible for Future Sale....... 57
Certain United States Federal Tax
Consequences to Non-United States
Holders............................. 59
Underwriting.......................... 61
Legal Matters......................... 63
Experts............................... 63
Additional Information................ 64
Index to Financial Statements......... F-1
UNTIL , 1996, (25 DAYS AFTER THE
DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK,
WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
- ---------------------------------------------
- ---------------------------------------------
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
12,000,000 SHARES
[SNYDER COMMUNICATIONS, INC. LOGO]
COMMON STOCK
---------------------
PROSPECTUS
---------------------
MERRILL LYNCH & CO.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
ALLEN & COMPANY
INCORPORATED
MONTGOMERY SECURITIES
, 1996
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 84
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
[ALTERNATE COVER FOR INTERNATIONAL PROSPECTUS]
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED AUGUST , 1996
PROSPECTUS
12,000,000 SHARES
[SNYDER COMMUNICATIONS, INC. LOGO]
COMMON STOCK
------------------------
Of the 12,000,000 shares of Common Stock, par value $.001 per share (the
"Common Stock"), of Snyder Communications, Inc. (together with its directly and
indirectly owned subsidiaries, the "Company" or "Snyder Communications") offered
hereby, are being offered by the Company and are being
offered by a stockholder of the Company (the "Selling Stockholder"). Certain
other stockholders of the Company (the "Over-Allotment Selling Stockholders"
and, together with the Selling Stockholder, the "Selling Stockholders") have
granted to the Underwriters options to cover over-allotments, if any. The
Company will not receive any proceeds from the sale of shares of Common Stock by
the Selling Stockholders.
Of the 12,000,000 shares of Common Stock offered hereby, 2,400,000 are being
offered initially outside the United States and Canada by the International
Managers and 9,600,000 shares are being offered initially in the United States
and Canada by the U.S. Underwriters. The initial public offering price and the
underwriting discount per share are identical for both Offerings. See
"Underwriting."
Prior to the Offerings, there has been no public market for the Common
Stock. It is currently estimated that the initial public offering price will be
between $14.00 and $16.00 per share. See "Underwriting" for a discussion of
certain factors to be considered in determining the initial public offering
price.
Application has been made to have the Common Stock approved for listing on
the New York Stock Exchange under the trading symbol "SNC."
SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SHARES OF COMMON
STOCK OFFERED HEREBY.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
PRICE TO UNDERWRITING PROCEEDS TO PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2) SELLING STOCKHOLDER
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share...................... $ $ $ $
- ---------------------------------------------------------------------------------------------------------------------------
Total(3)....................... $ $ $ $
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Company, Snyder Marketing Services, Inc., Snyder Communications, L.P.
and the Selling Stockholders have agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses of the Offerings payable by the Company, estimated
at $1,000,000.
(3) The Over-Allotment Selling Stockholders have granted to the International
Managers and the U.S. Underwriters options, exercisable within 30 days after
the date of this Prospectus, to purchase up to 360,000 and 1,440,000
additional shares of Common Stock, respectively, solely to cover
over-allotments, if any. If such options are exercised in full, the total
Price to Public, Underwriting Discount, Proceeds to Company and Proceeds to
Selling Stockholders will be $ , $ , $ and
$ , respectively. See "Underwriting."
------------------------
The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if issued to and accepted by them, and subject to
the approval of certain legal matters by counsel for the Underwriters and to
certain other conditions. The Underwriters reserve the right to withdraw, cancel
or modify such offer and to reject orders in whole or in part. It is expected
that delivery of the shares of Common Stock will be made in New York, New York,
on or about , 1996.
------------------------
MERRILL LYNCH INTERNATIONAL
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
ALLEN & COMPANY
INCORPORATED
MONTGOMERY SECURITIES
------------------------
The date of this Prospectus is , 1996.
X-1
<PAGE> 85
[ALTERNATE PAGES FOR INTERNATIONAL PROSPECTUS]
UNDERWRITING
Subject to the terms and conditions set forth in the international purchase
agreement (the "International Purchase Agreement") among the Company, SMS, the
Partnership, the Selling Stockholders and each of the underwriters named below
(the "International Managers"), and concurrently with the sale of 9,600,000
shares of Common Stock to the U.S. Underwriters (as defined below), the Company
and the Selling Stockholder have agreed to sell to the International Managers,
and each of the International Managers severally has agreed to purchase from the
Company and the Selling Stockholder, the number of shares of Common Stock set
forth opposite its name below at the initial public offering price less the
underwriting discount set forth on the cover page of this Prospectus.
<TABLE>
<CAPTION>
INTERNATIONAL MANAGER NUMBER OF SHARES
-----------------
<S> <C>
Merrill Lynch International..........................................
Donaldson, Lufkin & Jenrette Securities Corporation..................
Allen & Company Incorporated.........................................
Montgomery Securities................................................
----------
Total................................................... 2,400,000
----------
----------
</TABLE>
Merrill Lynch International, Donaldson, Lufkin & Jenrette Securities
Corporation, Allen & Company Incorporated and Montgomery Securities are acting
as representatives (the "International Representatives") of the International
Managers.
The Company, SMS, the Partnership and the Selling Stockholders have also
entered into the U.S. purchase agreement (the "U.S. Purchase Agreement") with
certain underwriters in the United States and Canada (the "U.S. Underwriters"
and, together with the International Managers, the "Underwriters") for whom
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), Donaldson,
Lufkin Jenrette Securities Corporation, Allen & Company Incorporated and
Montgomery Securities are acting as representatives (the "U.S. Representatives"
and, together with the International Representatives, the "Representatives").
Subject to the terms and conditions set forth in the U.S. Purchase Agreement,
and concurrently with the sale of 2,400,000 shares of Common Stock to the
International Managers pursuant to the International Purchase Agreement, the
Company and the Selling Stockholder have agreed to sell to the U.S.
Underwriters, and the U.S. Underwriters severally have agreed to purchase from
the Company and the Selling Stockholder, an aggregate of 9,600,000 shares of
Common Stock. The initial public offering price per share and the total
underwriting discount per share of Common Stock are identical under the
International Purchase Agreement and the U.S. Purchase Agreement.
In the International Purchase Agreement and the U.S. Purchase Agreement,
the several International Managers and the several U.S. Underwriters,
respectively, have agreed, subject to the terms and conditions set forth
therein, to purchase all of the shares of Common Stock being sold pursuant to
each such agreement if any of the shares of Common Stock being sold pursuant to
each such agreement are purchased. Under certain circumstances, the commitments
of nondefaulting International Managers or U.S. Underwriters, as the case may
be, may be increased. The closings with respect to the sale of shares of Common
Stock to be purchased by the International Managers and the U.S. Underwriters
are conditioned upon one another.
The International Managers and the U.S. Underwriters have entered into an
intersyndicate agreement (the "Intersyndicate Agreement") that provides for the
coordination of their activities. Pursuant to the Intersyndicate Agreement, the
International Managers and the U.S. Underwriters are permitted to sell shares of
Common Stock to each other for purposes of resale at the initial public offering
price, less an amount not greater than the selling concession. Under the terms
of the Intersyndicate Agreement, the International
X-2
<PAGE> 86
[ALTERNATE PAGES FOR INTERNATIONAL PROSPECTUS]
Managers and any dealer to whom they sell shares of Common Stock will not offer
to sell or sell shares of Common Stock to persons who are United States or
Canadian persons or to persons they believe intend to resell to persons who are
United States or Canadian persons, and the U.S. Underwriters and any dealer to
whom they sell shares of Common Stock will not offer to sell or sell shares of
Common Stock to persons who are non-United States or non-Canadian persons or to
persons they believe intend to resell to persons who are non-United States or
non-Canadian persons, except in each case for transactions pursuant to the
Intersyndicate Agreement.
The International Representatives have advised the Company and the Selling
Stockholder that the International Managers propose initially to offer the
shares of Common Stock offered hereby to the public at the initial public
offering price set forth on the cover page of this Prospectus, and to certain
dealers at such price less a concession not in excess of $ per share of
Common Stock. The International Managers may allow, and such dealers may
reallow, a discount not in excess of $ per share of Common Stock on sales
to certain other dealers. After the initial public offering, the public offering
price, concession and discount may be changed.
The Over-Allotment Selling Stockholders have granted an option to the
International Managers, exercisable during the 30-day period after the date of
this Prospectus, to purchase up to an aggregate of 360,000 additional shares of
Common Stock at the initial public offering price set forth on the cover page of
this Prospectus, less the underwriting discount. The International Managers may
exercise this option only to cover aver-allotments, if any, made on the sale of
the Common Stock offered hereby. To the extent that the International Managers
exercise this option, each International Manager will be obligated, subject to
certain conditions, to purchase a number of additional shares of Common Stock
proportionate to such International Manager's initial amount reflected in the
foregoing table. The Over-Allotment Selling Stockholders also have granted an
option to the U.S. Underwriters, exercisable during the 30-day period after the
date of this Prospectus, to purchase up to an aggregate of 1,440,000 additional
shares of Common Stock to cover over-allotments, if any, on terms similar to
those granted to the International Managers.
At the request of the Company, the U.S. Underwriters have reserved up to
360,000 shares of Common Stock for sale at the initial public offering price to
certain employees of the Company and other persons associated with the Company.
The number of shares of Common Stock available for sale to the general public
will be reduced to the extent such persons purchase such reserved shares. Any
reserved shares which are not so purchased will be offered by the U.S.
Underwriters to the general public on the same basis as the other shares offered
hereby. Certain individuals purchasing reserved shares may be required to agree
not to sell, offer or otherwise dispose of any shares of Common Stock for a
period of three months after the date of this Prospectus.
The Company, the Selling Stockholders and the Company's other existing
stockholders have agreed, subject to exceptions for certain pledges and, in the
case of the Company, the grant of employee stock options, not to, directly or
indirectly, sell, offer to sell, grant any option for the sale of, or otherwise
dispose of, any capital stock of the Company, or any security convertible or
exchangeable into, or exercisable for, such capital stock, or in the case of the
Company, file any registration statement with respect to the foregoing (other
than a registration statement on Form S-8 to register shares issuable upon
exercise of employee stock options), for a period of 180 days after the date of
this Prospectus, without the prior written consent of Merrill Lynch. See "Shares
Eligible for Future Sale."
Prior to the Offerings, there has been no public market for the Common
Stock. The initial public offering price will be determined by negotiations
among the Company, the Selling Stockholder and the Representatives. Among the
factors that will be considered in determining the initial public offering
price, are an assessment of the Company's recent results of operations, the
future prospects of the Company and the industry in general, the price-earnings
ratios and market prices of securities of other companies engaged in activities
similar to the Company, prevailing conditions in the securities market and other
factors deemed relevant. There can be no assurance that an active trading market
will develop for the Common Stock or that the Common Stock will trade in the
public market subsequent to the Offerings at or above the initial public
offering price.
X-3
<PAGE> 87
[ALTERNATE PAGES FOR INTERNATIONAL PROSPECTUS]
Each International Manager has agreed that (i) it has not offered or sold
and, for a period of six months following consummation of the Offerings, will
not offer or sell any shares of Common Stock to persons in the United Kingdom,
except to persons whose ordinary activities involve them in acquiring, holding,
managing or disposing of investments (as principal or agent) for the purposes of
their businesses or otherwise in circumstances which do not constitute an offer
to the public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995; (ii) it has complied and will comply with all
applicable provisions of the Financial Services Act 1986 with respect to
anything done by it in relation to the Common Stock in, from or otherwise
involving the United Kingdom; and (iii) it has only issued or passed on and will
only issue or pass on in the United Kingdom any document received by it in
connection with the issuance of Common Stock to a person who is of a kind
described in Article 11(3) of the Financial Services Act 1986 (Investment
Advertisement)(Exemptions) Order 1995, as amended, or is a person to whom such
document may otherwise lawfully be issued or passed on.
No action has been or will be taken in any jurisdiction (except in the
United States) that would permit a public offering of the shares of Common
Stock, or the possession, circulation or distribution of this Prospectus or any
other material relating to the Company, the Selling Stockholders or shares of
Common Stock in any jurisdiction where action for that purpose is required.
Accordingly, the shares of Common Stock may not be offered or sold, directly or
indirectly, and neither this Prospectus nor any other offering material or
advertisements in connection with the shares of Common Stock may be distributed
or published, in or from any country or jurisdiction except in compliance with
any applicable rules and regulations of any such country or jurisdiction.
Purchasers of the shares offered hereby may be required to pay stamp taxes
and other charges in accordance with the laws and practices of the country of
purchase in addition to the offering price set forth on the cover page hereof.
Application has been made to list the Common Stock on the New York Stock
Exchange, under the symbol "SNC." In order to meet the requirements for listing
of the Common Stock on that exchange, the U.S. Underwriters have undertaken to
sell lots of 100 or more shares to a minimum of 2,000 beneficial owners.
The Company, SMS, the Partnership and the Selling Stockholders have agreed
to indemnify the International Managers and the U.S. Underwriters against
certain liabilities, including liabilities under the Securities Act, or to
contribute to payments made in respect thereof.
More than 10% in aggregate principal amount of the Debentures, which
constitute all of the outstanding subordinated debt of the Company, is owned by
Allen & Company Incorporated and certain officers and related persons thereof.
See "The Company" and "Certain Transactions." Consequently, the Offerings are
being made pursuant to the provisions of Section 2720 of the Conduct Rules of
the National Association of Securities Dealers, Inc. Pursuant to such
provisions, the public offering price of an equity security can be no higher
than the price recommended by a "qualified independent underwriter" meeting
certain standards. In accordance with this requirement, Merrill Lynch will serve
in such role, and the price of the Common Stock will be no higher than that
recommended by Merrill Lynch in its capacity as the qualified independent
underwriter. In such capacity and in its capacity as one of the Underwriters,
Merrill Lynch has participated in the preparation of the Registration Statement
of which this Prospectus is a part and has performed due diligence with respect
thereto. The Company, SMS, the Partnership and the Selling Stockholders have
agreed to indemnify Merrill Lynch, in its capacity as the qualified independent
underwriter, against certain liabilities, including liabilities under the
Securities Act.
Allen & Company Incorporated, together with certain officers and related
persons thereof, owns 2.37% of the shares of Common Stock (assuming no exercise
of the over-allotment options granted to the Underwriters). See "The Company,"
"Principal and Selling Stockholders" and "Certain Transactions." In addition, a
portion of the proceeds of the Offerings is expected to be used to repay the
amounts owed under the Debentures to such investors. See "Use of Proceeds."
Merrill Lynch has provided certain financial advisory services to the
Company for which it will receive customary fees.
X-4
<PAGE> 88
[ALTERNATE PAGES FOR INTERNATIONAL PROSPECTUS]
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY, THE SELLING STOCKHOLDER OR THE UNDERWRITERS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE
COMMON STOCK IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR
IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
THERE ARE RESTRICTIONS ON THE OFFER AND SALE OF THE COMMON STOCK OFFERED
HEREBY IN THE UNITED KINGDOM. ALL APPLICABLE PROVISIONS OF THE FINANCIAL
SERVICES ACT 1986 AND THE PUBLIC OFFERS OF SECURITIES REGULATIONS 1995 WITH
RESPECT TO ANYTHING DONE BY ANY PERSONS IN RELATION TO THE COMMON STOCK IN, FROM
OR OTHERWISE INVOLVING THE UNITED KINGDOM MUST BE COMPLIED WITH. SEE
"UNDERWRITING."
IN THE PROSPECTUS, REFERENCES TO "DOLLARS" AND "$" ARE TO UNITED STATES
DOLLARS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary................... 3
Risk Factors......................... 11
The Company.......................... 18
Use of Proceeds...................... 20
Dividend Policy...................... 20
Capitalization....................... 21
Dilution............................. 22
Selected Financial and Operating 23
Data...............................
Management's Discussion and Analysis 25
of Financial Condition and Results
of Operations......................
Business............................. 32
Management........................... 46
Certain Transactions................. 52
Principal and Selling Stockholders... 53
Description of Capital Stock......... 55
Shares Eligible for Future Sale...... 57
Certain United States Federal Tax 59
Consequences to Non-United States
Holders............................
Underwriting......................... 61
Legal Matters........................ 63
Experts.............................. 63
Additional Information............... 64
Index to Financial Statements........ F-1
UNTIL , 1996, (25 DAYS AFTER THE
DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK,
WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- --------------------------------------------
- --------------------------------------------
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
12,000,000 SHARES
[SNYDER COMMUNICATIONS, INC. LOGO]
COMMON STOCK
---------------------
PROSPECTUS
---------------------
MERRILL LYNCH INTERNATIONAL
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
ALLEN & COMPANY
INCORPORATED
MONTGOMERY SECURITIES
, 1996
- ------------------------------------------------------
- ------------------------------------------------------
X-5
<PAGE> 89
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses expected to be incurred in
connection with the issuance and distribution of the Common Stock registered
hereby, all of which expenses, except for the Commission registration fee and
the New York Stock Exchange listing fee, are estimates:
<TABLE>
<CAPTION>
DESCRIPTION AMOUNT
------------------------------------------------------------------- -------
<S> <C>
SEC Registration Fee............................................... $76,138
New York Stock Exchange Listing Fee................................ *
NASD filing fee.................................................... 22,580
Transfer Agent's and Registrar's Fee............................... 2,000
Printing and Engraving Fees........................................ 225,000
Legal Fees and Expenses (other than Blue Sky)...................... 400,000
Accounting Fees and Expenses....................................... *
Blue Sky Fees and Expenses (including fees of counsel)............. 25,000
Miscellaneous...................................................... *
-------
TOTAL.................................................... *
=======
</TABLE>
- ---------------
* To be furnished by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Delaware General Corporation Law (the "Delaware Law") provides that a
corporation may limit the liability of each director to the corporation or its
stockholders for monetary damages except for liability (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders; (ii) for acts
or omissions not in good faith or that involve intentional misconduct or a
knowing violation of law; (iii) in respect of certain unlawful dividend payments
or stock redemptions or repurchases; and (iv) for any transaction from which the
director derives an improper personal benefit. The Certificate of Incorporation
and Bylaws provide for the elimination and limitation of the personal liability
of directors of the Company for monetary damages to the fullest extent permitted
by the Delaware Law. In addition, the Certificate of Incorporation and Bylaws
provide that if the Delaware Law is amended to authorize the further elimination
or limitation of the liability of a director, then the liability of the
directors shall be eliminated or limited to the fullest extent permitted by the
Delaware Law, as so amended. The effect of this provision is to eliminate the
right of the Company and its stockholders (through stockholders' derivative
suits on behalf of the Company) to recover monetary damages against a director
for breach of the fiduciary duty of care as a director (including breaches
resulting from negligent or grossly negligent behavior) except in the situations
described in clauses (i) through (iv) above. The provision does not limit or
eliminate the rights of the Company or any stockholder to seek non-monetary
relief such as an injunction or rescission in the event of a breach of a
director's duty of care. In addition, the Bylaws provide that the Company shall,
to the full extent permitted by the Delaware Law, as amended from time to time,
indemnify and advance expenses to each of its currently acting and former
directors, officers, employees and agents.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
In connection with the Reorganization of the Company, Daniel M. Snyder,
Mortimer B. Zuckerman, Fred Drasner, Michele D. Snyder, Gerald S. Snyder,
Anthony O. Roberts and certain other stockholders will receive shares of the
Company in exchange for and in proportion to their interests in the Partnership.
These issuances of Common Stock are claimed to be exempt from the registration
provisions of the Securities Act of 1933 pursuant to Section 4(2) of the Act.
II-1
<PAGE> 90
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<C> <S>
1.1* Form of U.S. Purchase Agreement
1.2* Form of International Purchase Agreement
3.1** Certificate of Incorporation of the Registrant
3.2** Bylaws of the Registrant
4.1** Instruments defining the rights of securityholders: Reference is made to
exhibits 3.1 and 3.2
4.2* Specimen common stock certificate
4.3* Exchange Agreement by and among the Registrant, Snyder Marketing Services,
Inc., each of the stockholders of Snyder Marketing Services, Inc. and each
of the limited partners of Snyder Communications, L.P., dated August ,
1996
5* Opinion of Shaw, Pittman, Potts & Trowbridge as to the legality of the
Common Stock being registered
10.1* 1996 Stock Incentive Plan of Snyder Communications, Inc.
10.2+ Professional Services Agreement, dated February 1996, as amended, between
the Company and AT&T Communications Inc.
10.3+ Authorized Sales Agent Agreement, dated February 16, 1996, as amended,
between the Company and MCI Telecommunications Corporation
10.4 Services Agreement between the Company and U.S. News & World Report, L.P.
10.5 Lease Agreement, Democracy Center, Bethesda, Maryland, dated July 30, 1992,
as amended, between the Company and Democracy Associates Limited Partnership
10.6 Employment Agreement between the Company and Daniel M. Snyder
10.7 Employment Agreement between the Company and Michele D. Snyder
10.8 Employment Agreement between the Company and Stephen T. Baldacci
10.9 Employment Agreement between the Company and Susan L. Marentis
10.10 Employment Agreement between the Company and Alfred G. Wise
21** Subsidiaries of the Registrant
23.1* Consent of Shaw, Pittman, Potts & Trowbridge (included as part of Exhibit 5)
23.2 Consent of Arthur Andersen LLP
24** Power of Attorney (included on signature page to the Registration Statement)
27 Financial Data Schedule
</TABLE>
- ---------------
* To be filed by amendment.
** Previously filed.
+ Confidential treatment requested.
(b) Financial Statement Schedules
Schedule II -- Allowance For Doubtful Accounts
Schedules other than those listed above have been omitted since they are
not required or are not applicable or the required information is in the
financial statements or related notes.
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes to provide to the
underwriter at the closing specified in the underwriting agreements,
certificates in such denominations and registered in such names as required by
the underwriter to permit prompt delivery to each purchaser.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
II-2
<PAGE> 91
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(c) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be a part of this
registration statement as of the time it was declared effective.
(2) For purposes of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 92
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Washington, District of
Columbia, on August 15, 1996.
SNYDER COMMUNICATIONS, INC.
(Registrant)
By: /s/ DANIEL M. SNYDER
------------------------------------
DANIEL M. SNYDER
CHAIRMAN OF THE BOARD OF DIRECTORS,
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and as of the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ------------------------------------------ --------------------------------- ----------------
<C> <S> <C>
/s/ DANIEL M. SNYDER Chairman of the Board of August 15, 1996
- ------------------------------------------ Directors, President and Chief
DANIEL M. SNYDER Executive Officer (Principal
Executive Officer)
/s/ MICHELE D. SNYDER Vice Chairman, Chief Operating August 15, 1996
- ------------------------------------------ Officer and Director
MICHELE D. SNYDER
/s/ BRIAN BENHAIM Senior Vice President of August 15, 1996
- ------------------------------------------ Corporate Development, Acting
BRIAN BENHAIM Chief Financial Officer and
Director (Principal Financial
Officer)
/s/ DAVID B. PAUKEN Chief Accounting Officer August 15, 1996
- ------------------------------------------ (Principal Accounting Officer)
DAVID B. PAUKEN
</TABLE>
II-4
<PAGE> 93
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Snyder Communications
We have audited in accordance with generally accepted auditing standards, the
combined financial statements of Snyder Communications (as defined in Note 1 of
the combined financial statements) included in this registration statement, and
have issued our report thereon dated July 1, 1996. Our audit was made for the
purpose of forming an opinion on the basic financial statements taken as a
whole. Schedule II -- Allowance for Doubtful Accounts is the responsibility of
the Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Washington, DC
July 1, 1996
S-1
<PAGE> 94
SNYDER COMMUNICATIONS
(SEE NOTE 1)
SCHEDULE II
ALLOWANCE FOR DOUBTFUL ACCOUNTS
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
<TABLE>
<CAPTION>
DEDUCTIONS
ADDITIONS FROM RESERVE
BALANCE AT CHARGED TO FOR PURPOSES FOR
BEGINNING OF COST AND WHICH RESERVE BALANCE AT
YEAR EXPENSE WAS CREATED END OF YEAR
------------ ---------- ---------------- -----------
<S> <C> <C> <C> <C>
1993.......................................... $ -- $ -- $ -- $ --
1994.......................................... -- 57,400 7,400 50,000
1995.......................................... 50,000 105,777 55,777 100,000
</TABLE>
S-2
<PAGE> 95
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NO.
- ------- -------------------------------------------------------------------------- ----------
<C> <S> <C>
1.1* Form of U.S. Purchase Agreement...........................................
1.2* Form of International Purchase Agreement..................................
3.1** Certificate of Incorporation of the Registrant............................
3.2** Bylaws of the Registrant..................................................
4.1** Instruments defining the rights of securityholders: Reference is made to
exhibits 3.1 and 3.2......................................................
4.2* Specimen common stock certificate.........................................
4.3* Exchange Agreement by and among the Registrant, Snyder Marketing Services,
Inc., each of the stockholders of Snyder Marketing Services, Inc. and each
of the limited partners of Snyder Communications, L.P., dated August ,
1996
5* Opinion of Shaw, Pittman, Potts & Trowbridge as to the legality of the
Common Stock being registered.............................................
10.1* 1996 Stock Incentive Plan of Snyder Communications, Inc...................
10.2+ Professional Services Agreement, dated February 1996, as amended, between
the Company and AT&T Communications Inc...................................
10.3+ Authorized Sales Agent Agreement, dated February 16, 1996, as amended,
between the Company and MCI Telecommunications Corporation................
10.4 Services Agreement between the Company and U.S. News & World Report,
L.P.......................................................................
10.5 Lease Agreement, Democracy Center, Bethesda, Maryland, dated July 30,
1992, as amended, between the Company and Democracy Associates Limited
Partnership...............................................................
10.6 Employment Agreement between the Company and Daniel M. Snyder.............
10.7 Employment Agreement between the Company and Michele D. Snyder............
10.8 Employment Agreement between the Company and Stephen T. Baldacci..........
10.9 Employment Agreement between the Company and Susan L. Marentis............
10.10 Employment Agreement between the Company and Alfred G. Wise...............
21** Subsidiaries of the Registrant............................................
23.1* Consent of Shaw, Pittman, Potts & Trowbridge (included as part of Exhibit
5)........................................................................
23.2 Consent of Arthur Andersen LLP............................................
24** Power of Attorney (included on signature page to the Registration
Statement)................................................................
27 Financial Data Schedule...................................................
</TABLE>
- ---------------
* To be filed by amendment.
** Previously filed.
+ Confidential treatment requested.
<PAGE> 1
EXHIBIT 10.2
CONFIDENTIAL TREATMENT
PROFESSIONAL SERVICES AGREEMENT
WITNESSETH:
That in consideration of the agreements expressed herein, AT&T COMMUNICATIONS,
INC., ("Company"), having an office at 295 North Maple Avenue, Basking Ridge,
New Jersey 07920, and SNYDER COMMUNICATIONS, L.P., ("Contractor"), having an
office at Democracy Center, 6903 Rockledge Drive, Fifteenth Floor, Bethesda,
Maryland 20817, and whose Tax Identification Number is 52-1629980, do hereby
agree as follows:
ARTICLE 1 - STATEMENT OF WORK
Contractor shall render to Company all the services specified in Exhibit A,
attached hereto and made a part hereof, for the foreign-origin consumer market
(defined as the market comprising consumers in the United States, its
territories and possessions who (a) speak the foreign languages spoken as the
native tongue in all foreign countries except those countries listed on
Schedule 1 hereto or (b) are English speakers who consider foreign countries
other than those countries listed on Schedule 1 hereto their home) (the
"Foreign-Origin Consumer Market"). Contractor shall provide all such services
to the highest professional standards and in conformity with ethical and legal
standards.
ARTICLE 2 - DURATION
This Agreement applies to all work performed by Contractor or on behalf of
Contractor described in Exhibit A hereto before the expiration of this
Agreement, whether such work is performed in anticipation of or following the
execution of this Agreement. This Agreement shall expire on March 31, 1995.
This Agreement may be renewed upon mutual agreement of both parties. Company
shall provide Contractor notice of its intent to renew the program contemplated
hereby at least thirty (30) days prior to the expiration of this Agreement.
Company shall have a right of first refusal for the renewal of the program
contemplated hereby until thirty (30) days prior to the date of the expiration
of this Agreement; provided, however, that the period during which company
shall have a right of first refusal shall be extended through the date of the
expiration of this Agreement in the event that Company has, on or prior to the
thirtieth day prior to the date of the expiration of this Agreement, given
notice of its intent to renew the program contemplated hereby. If Contractor
and Company do not agree upon the terms and conditions of such renewal during
the period in which Company has a right of first refusal, Contractor shall
thereafter have the right to offer such program to other parties, subject to
the provisions of Section 12 of Exhibit A.
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
<PAGE> 2
CONFIDENTIAL TREATMENT
ARTICLE 3 - AGREEMENT PRICE
Upon submission of accurate invoices by Contractor as required herein, Company
shall pay Contractor for the performance of this Agreement in accordance with
the schedule contained in Exhibit B, attached hereto and made a part hereof.
Unless otherwise specifically provided herein, the scheduled payments include
the cost of all labor, equipment, materials, work products and other
disbursements required to complete the services described in Exhibit A, and
there shall be no additional charges unless agreed to by both parties.
ARTICLE 4 - INVOICING
Contractor shall invoice Company monthly for all payments due based on the
compensation schedule set forth in Exhibit B using the reports provided by
Company under Exhibit A. Contractor shall render invoices against this
Agreement, which shall indicate amounts due (and the basis for the
determination thereof) in accordance with the schedule of payments in Exhibit
B, shall reflect this Agreement Number ______, and shall be submitted in
duplicate to:
Diana Garcia Farrell
AT&T
412 Mt. Kemble Avenue
Room C 374-C
Morristown, New Jersey 07962
Contractor shall mail invoices with copies of any supporting documentation
required herein.
ARTICLE 5 - REPRESENTATIVES
Company's Representative is Diana Garcia Farrell or such other persons as may
be designated in writing by Company from time to time. Contractor's
Representative is Sheila Cosgarea or such other persons as may be designated in
writing by Contractor from time to time.
ARTICLE 6 - NOTICES
Any notice or demand which under the terms of this Agreement or under any
statute must or may be given or made by Contractor or company shall be in
writing and shall be given or made by telegram, tested telex, confirmed
facsimile, or similar communication or by certified or registered mail
addressed to the respective parties as follows:
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
-2-
<PAGE> 3
CONFIDENTIAL TREATMENT
<TABLE>
<S> <C>
To Company: Diana Garcia Farrell
AT&T
412 Mt. Kemble Avenue
Room C 374-C
Morristown, New Jersey 07962
telephone: (201) 644-8460
facsimile: (201) 644-6326
To Contractor: Sheila Cosgarea
Snyder Communications, LP
Democracy Center Two
6903 Rockledge Drive, 15th Floor
Bethesda, Maryland 20817
telephone: (301) 468-1010
facsimile: (301) 468-0305
</TABLE>
Such notice or demand shall be deemed to have been given or made when sent by
telegram, telex, facsimile, or other similar communication or five days after
deposit, postage prepaid, in the U.S. mail. The above addresses may be changed
at any time by giving prior notice as above provided.
ARTICLE 7 - COMPANY INFORMATION
"Company Information" shall mean any tangible or intangible work and work
products comprising or incorporated in specifications, drawings, sketches,
models, samples, tools, computer or other apparatus programs, technical or
business information or data, whether expressed in written or other recorded
form or orally or otherwise, owned or controlled by Company and furnished to or
acquired by Contractor under this Agreement, including, but not limited to,
lists of customers provided by Company or developed by Contractor for Company
in connection with the services performed or promotion activities undertaken
pursuant to this Agreement and the Field Sales Booths and Editorial and Graphic
Property referenced in Article 9 of this Agreement. All Company Information
shall be deemed to be and remain Company's property. All copies of such
Company Information in written, graphic or other tangible form, including but
not limited to customer lists, shall, at no extra cost to Company and as it
directs, be destroyed, surrendered or returned to Company promptly upon
termination of this Agreement. Unless such Company Information was previously
known to Contractor free of any obligation to keep it confidential as evidenced
by documentation in Contractor's possession, or has been or is subsequently
made public through no improper means imputable to Contractor, or is
independently developed by Contractor, or is lawfully received free of known
restrictions from
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
-3-
<PAGE> 4
CONFIDENTIAL TREATMENT
another source, it shall be kept confidential by Contractor, shall be used only
in performing Contractor's obligations or exercising Contractor's rights under
this Agreement, and may not be used for other purposes except upon such terms
as may be agreed upon between Contractor and Company separately in writing.
Contractor shall ensure that none of Contractor's employees or subcontractors
who are providing services, or supporting the provision of services, to other
companies engaged in the provision of long-distance telecommunications services
(other than Contractor's President and Chief Executive Officer, Chief Operating
Officer, Vice President of Direct Sales and Senior Vice President) shall
receive or have communicated to them any Company Information.
ARTICLE 8 - CONTRACTOR INFORMATION
"Contractor Information" shall mean any tangible or intangible work and work
products comprising or incorporated in specifications, drawings, sketches,
models, samples, tools, computer or other apparatus programs, technical or
business information or data, whether expressed in written or other recorded
form or orally or otherwise, owned or controlled by Contractor and furnished to
or acquired by Company under this Agreement. Except as may be otherwise
provided in Article 9, all Contractor Information shall be deemed to be and
remain Contractor's property. All copies of such Contractor Information in
written, graphic or other tangible form shall, at no extra cost to Contractor
and as it directs, be destroyed or surrendered to Contractor promptly upon
termination of this Agreement. Unless such Contractor Information was
previously known to Company free of any obligation to keep it confidential as
evidenced by documentation in Company's possession, or has been or is
subsequently made public through no improper means imputable to Company, or is
independently developed by Company, or is lawfully received free of known
restrictions from another source, it shall be kept confidential by Company,
shall be used only in performing Company's obligations or exercising Company's
rights under this Agreement, and may not be used for other purposes except upon
such terms as may be agreed upon between Company and Contractor separately in
writing.
ARTICLE 9 - TITLE TO WORK PRODUCTS
All of Contractor's right, title and interest in and to the Field Sales Booths
(as defined in Exhibit A hereof) and the editorial and graphic portions of
other advertising and marketing materials (the "Editorial and Graphic
Property") developed or produced under this Agreement by or on behalf of
Contractor for Company, all of Contractor's right, title and interest in
copyrights and other intellectual property rights derived from the same, and
all of Contractor's right, title and interest in and to customer lists
developed by Contractor for Company in connection with the services provided or
promotional activities undertaken pursuant to this Agreement shall be and are
hereby assigned by Contractor to Company and are hereby agreed by Contractor to
be transferred to Company or otherwise vested therein, effective when first
capable of being so assigned, transferred or vested. Contractor shall obligate
its employees, subcontractors and others to provide, and shall supply to
Company at no extra cost, all such assignments, rights and covenants
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
-4-
<PAGE> 5
CONFIDENTIAL TREATMENT
as Company reasonably deems appropriate to assure and perfect such transfer or
other vesting. The Editorial and Graphic Property shall be provided to Company
as required herein or on termination or expiration of this Agreement, whichever
is earlier, unless Contractor is requested in writing to do otherwise. The
Field Sales Booths shall be made available by Contractor for pick up by Company
at Contractor's offices or at one other location in the Washington, D.C.
metropolitan area upon termination or expiration of this Agreement. The Field
Sales Booths and the Editorial and Graphic Property shall be considered to be a
"work made for hire" to the extent allowed by law. Notwithstanding anything in
this Article 9 to the contrary, Company shall not acquire title to (a)
Contractor's trademarks, service marks, or trade secrets, (b) Contractor's
copyrights, other intellectual property rights, and tangible work products
preexisting execution of this Agreement and not developed or produced in
anticipation hereof, and (c) any information used in the program which is not
specifically related to Company, including, by way of illustration and not of
limitation, training manuals used by Contractor.
The work and work products developed or produced under this Agreement shall be
the original work of Contractor, unless Company's Representative has consented
in writing to the inclusion of work or work products owned or copyrighted by
others (hereafter "included works"). In requesting such consent, Contractor
shall notify Company of the scope of the rights and permissions Contractor
intends to obtain for Company with respect to such included works and modify
the scope of same as requested by Company. Copies of all rights and
permissions, clearly identifying the included works to which they apply, shall
be supplied to Company promptly after their acquisition.
Company acknowledges that Contractor normally obtains stock photography under
single-use licenses from third-party copyright owners. Company hereby
generally consents to inclusion of stock photography in the work products to be
produced under this Agreement.
ARTICLE 10 - INDEMNIFICATION/INFRINGEMENT
Contractor agrees to indemnify and save harmless Company, its subsidiaries and
other affiliates, its and their direct and indirect customers, and the
officers, directors, employees, successors and assigns of any of them (all
hereinafter referred to in this paragraph as "Company") from and against
claims, losses, damages, expenses, liabilities, suits, demands, or liens that
arise out of or result from:
(1) Injuries or death to persons or damage to property,
including theft, in any way arising out of or occasioned by,
caused or alleged to have been caused by or on account of
the performance of the work or services performed by
Contractor or persons furnished by Contractor;
(2) Assertions under Workers' Compensation or similar acts made
by persons furnished by Contractor or by any subcontractor
of Contractor, or by reason of
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
-5-
<PAGE> 6
CONFIDENTIAL TREATMENT
any injuries to such persons for which Company would be
responsible under Workers' Compensation or similar acts if
the persons were employed by the Company;
(3) Any failure on the part of Contractor to satisfy all claims
for labor, equipment, materials and other obligations
relating to the performance of the work hereunder;
(4) Any failure by Contractor to perform Contractor's
obligations under this clause or the Insurance clause; and
(5) Any alleged act of infringement of any patent, trademark,
copyright or other right or any misappropriation (including
misuse) of any trade secret or other proprietary interest,
except where such infringement or misappropriation arises
from Contractor's adherence to or reliance on Company's
written instructions or authorization, in which case Company
shall so indemnify Contractor.
Company agrees to indemnify and save harmless Contractor, its partners and
other affiliates and the officers, directors, employees, successors and assigns
of any of them (all hereinafter referred to in this paragraph as "Contractor")
from and against claims, losses, damages, expenses, liabilities, suits,
demands, or liens that arise out of or result from:
(1) any error or omission by Company with respect to long
distance services product or rate information furnished or
approved by Company, provided that the indemnification
obligations of this clause (1) shall apply only where such
information is included in (a) an English language
advertisement, brochure, application, insert or other
promotional or training document, publication or
dissemination that has been approved by Company or (b) an
English language version of an advertisement, brochure,
application, insert or other promotional or training
document, publication or dissemination that is to be
distributed or otherwise disseminated in a language or
languages other than English, which English language version
has been provided by Contractor to Company and has been
approved by Company prior to its translation into
language(s) other than English, provided that the
indemnification obligations of this paragraph shall not
extend to errors or omissions in long-distance services
product or rate information that result from foreign
language translation errors where such translation services
are provided by Contractor; or
(2) any act or omission for which the Company (as such term is
used in the preceding paragraph) is obligated pursuant to
the terms of clause (5) of the preceding paragraph to
indemnify Contractor.
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
-6-
<PAGE> 7
CONFIDENTIAL TREATMENT
Each party shall defend or settle, at its own expense, any action or suit
against the other for which it is responsible hereunder and shall reimburse the
other for reasonable attorneys' fees, interest, costs of suit and all other
expenses incurred by the other in connection therewith. Each party shall
notify the other promptly of any claim for which the other is responsible
hereunder, and shall cooperate with the other in every reasonable way to
facilitate the defense of any such claim.
ARTICLE 11 - INSURANCE
Contractor shall maintain during the term of this Agreement (1)______________
*_____________________ insurance as prescribed by the law of the state or nation
in which the work is performed, (2) _________________ * _______________________
insurance with limits of __________________*____________ for each occurrence,
(3)______________*_____________ insurance, if the use of___________*___________
____________ is required, with limits of____________________*__________________
combined single limit for______________*_____________ and____________*________
for each occurrence, (4)___________*_______ insurance, including _______*______
and _____________ * ___________________________ , with limits of ______________
*_____________ combined single limit for_________________ *________________ and
*____________________ for each occurrence. All______*_____ insurance shall
designate Company as an additional insured. All such insurance must be primary
and required to respond and pay prior to any other available coverage.
Contractor agrees that Contractor, Contractor's insurer(s) and anyone claiming
by, through, under or in Contractor's behalf shall have no claim, right of
action or right of subrogation against Company based on any loss or liability
insured under the foregoing insurance. Contractor shall furnish within 30 days
following the effective dates hereof certificates or adequate proof of the
foregoing insurance. Company shall be notified in writing at least thirty (30)
days prior to cancellation or any change in the policy.
ARTICLE 12 - RELATIONSHIP
Contractor shall exercise full control and direction over the employees of
Contractor performing the services covered by this Agreement. Contractor shall
provide direction and detailed specifications to any subcontractors or
employees of subcontractors performing the services covered by this Agreement.
Any changes in personnel that may be reasonably requested by Company through
its authorized representative shall be made as soon as possible.
Neither Contractor nor its employees or agents shall be deemed to be Company's
employees or agents. It is understood that Contractor is an independent
contractor for all purposes and at all times. Contractor is wholly responsible
for withholding and payment of all applicable federal, state and local income
and other payroll taxes with respect to its employees, including contributions
from them as required by law.
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
-7-
<PAGE> 8
CONFIDENTIAL TREATMENT
ARTICLE 13 - COMPENSATION AND OTHER VERIFICATION
Upon reasonable prior request by Company, Contractor will permit Company to
inspect its facilities and procedures used to perform services for Company
hereunder, and Contractor shall comply promptly with all reasonable requests
made by Company to modify such facilities and procedures to maintain and
enhance to Company's satisfaction Contractor's security arrangements and
procedures for the protection of Company Information and property, including
but not limited to, all Company customer data maintained by Contractor.
Contractor shall have the right, at its sole expense, to have an independent
certified public accountant (the "Examining Accountant") examine individual
customer data in accordance with the procedures set forth in Exhibit C hereto.
Such examinations shall be made during regular business hours and upon ten (10)
days' prior written notice and may be conducted no more than twice per calendar
year.
If the results of the Examining Accountant's review indicate that Contractor is
owed additional compensation by Company hereunder, Company shall pay such
additional compensation to Contractor within thirty (30) days of the completion
of the Examining Accountant's review. If the results of the Examining
Accountant's review indicate that Contractor has received more compensation
from Company than Company is obligated to pay Contractor hereunder, the amount
of any such excess compensation shall be credited against future payments owed
by Company to Contractor hereunder.
ARTICLE 14 - TERMINATION
In the event either party materially breaches any of the terms of this
Agreement, the other party may terminate this Agreement, in whole or in part,
if such breach is not cured within 30 days after notice thereof is given to the
breaching party. In such case, subject to Company's right of set off,
Company's liability, if any, shall be limited to payment of the amount due for
services performed by Contractor hereunder through the date of termination in
accordance with the compensation provisions set forth in Exhibit B hereto,
including without limitation the provisions of Section 1(d) of Exhibit B. Such
payment shall constitute a full and complete discharge of Company's
obligations. In no event shall Company's liability exceed the amounts
calculated in accordance with Exhibit B of this Agreement. Upon such a
termination, Company shall pay Contractor monies due and owing pursuant to this
Article or Contractor shall refund monies due Company, if any.
ARTICLE 15 - FORCE MAJEURE
Neither party shall be held responsible for any delay or failure in performance
of any part of this Agreement to the extent such delay or failure is caused by
fire, flood, explosion, war, strike, embargo, government requirement, civil or
military authority, act of God, act or omission of
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
-8-
<PAGE> 9
CONFIDENTIAL TREATMENT
carriers or other similar causes beyond its control and without the fault or
negligence of the delayed or non-performing party or its subcontractors ("force
majeure conditions"). Notwithstanding the foregoing, Contractor's liability
for loss or damage to Company's material in Contractor's possession or control
shall not be modified by this clause. If any force majeure condition occurs,
the party delayed or unable to perform shall give immediate notice to the other
party, stating the nature of the force majeure condition and any action being
taken to avoid or minimize its effect, and the party affected by the other's
delay or inability to perform may elect to: (1) suspend this Agreement for the
duration of the force majeure condition and, (a) at its option, obtain
elsewhere services to be furnished under this Agreement and (b) once the force
majeure condition ceases, resume performance under this Agreement with an
option in the affected party to extend the period of the Agreement up to the
length of time the force majeure condition endured; and/or (2) when the delay
of non-performance continues for a period of at least fifteen (15) days,
terminate, at no charge, this Agreement or the part of it relating to services
not already performed. Unless written notice is given within forty-five (45)
days after the affected party is notified of the force majeure condition,
option (1) shall be deemed to have been selected.
ARTICLE 16 - ASSIGNMENT
Contractor shall not assign any right or interest under this Agreement
(excepting monies due or to become due), or delegate or subcontract any work or
other obligation to be performed or owed under this Agreement without prior
written consent of Company except for printing services and the use by
Contractor of independent sales agents in Field Marketing Activities (as
defined in Exhibit A hereto). Any attempted assignment or delegation in
contravention of the above provisions shall be void and ineffective. Any
assignment of monies shall be void and ineffective to the extent that (1)
Contractor shall not have given Company at least thirty (30) days' prior
written notice of such assignment or (2) such assignment attempts to impose
upon Company obligations to the assignee additional to the payment of such
monies, or to preclude Company from dealing solely and directly with Contractor
in all matters pertaining to this Agreement including the negotiation of
amendments or settlements of charges due. All work performed by Contractor' s
subcontractor(s) at any tier shall be deemed work performed by Contractor.
ARTICLE 17 - TAXES
Company shall reimburse Contractor for state and local sales and use taxes
incurred by Contractor with respect to production of the sales booths described
in Section 1.c of Exhibit B and the services to be performed under this
Agreement. Taxes payable by Company shall be billed as separate items on
Contractor's invoices and shall not be included in Contractor's prices.
Company shall have the right to have Contractor contest any such taxes that
Company deems improperly levied, at Company's expense and subject to Company's
direction and control.
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
-9-
<PAGE> 10
CONFIDENTIAL TREATMENT
ARTICLE 18 - COMPLIANCE WITH LAWS
Contractor and all persons furnished by Contractor shall comply at their own
expense with all applicable federal, state, local and foreign laws, ordinances,
regulations and codes, including all applicable laws, ordinances, regulations
and codes governing telemarketing (collectively, "Applicable Laws"), including
identification and procurement of required permits, certificates, licenses,
insurance, approvals and inspections (collectively, "Applicable Permits") in
performing its duties under this Agreement. Contractor shall instruct its
subcontractors and independent agents to comply with all Applicable Laws and
Applicable Permits in performing their duties under this Agreement. Contractor
agrees to indemnify Company for any loss or damage that may be sustained by
reason of any failure of Contractor to do so.
ARTICLE 19 - PUBLICITY/IDENTIFICATION
Contractor shall not, unless expressly authorized hereunder or by Company's
written consent, engage in promotion or publicity about either party's
participation in this Agreement, or in any circumstance connected herewith make
public use of any AT&T identification. As used herein, "AT&T identification"
means any copy or semblance of any trade name, trademark, service mark,
insignia, symbol, logo, designation or other product or service identification
of American Telephone and Telegraph Company or any of its subsidiaries or other
affiliates (all "AT&T entities"), or any evidence of inspection by or for any
AT&T entity. Contractor agrees to remove or obliterate any AT&T identification
prior to any sale, use or disposition of any items rejected by Company, and
shall indemnify any AT&T entity against any claim brought against it on account
of Contractor's failure to do so. This article does not modify the Article
entitled "Company Information".
Notwithstanding the foregoing, Contractor may represent that Company is a
client of Contractor; however, Contractor is prohibited hereunder from making
any other representations to anyone regarding its relationship to Company.
ARTICLE 20 - RIGHT OF ACCESS
Each party shall have the right to enter the premises of the other party during
normal business hours with respect to the performance of this Agreement,
subject to all applicable laws, rules and regulations.
ARTICLE 21 - WAIVER
The failure of either party at any time to enforce any right or remedy
available to it under this Agreement or otherwise with respect to any breach or
failure by the other party shall not be
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
-10-
<PAGE> 11
CONFIDENTIAL TREATMENT
construed to be a waiver of such right or remedy with respect to any other
breach or failure by the other party.
ARTICLE 22 - SEVERABILITY
If any of the provisions of this Agreement shall be invalid or unenforceable,
such invalidity or unenforceability shall not invalidate or render
unenforceable the entire Agreement, but rather the entire Agreement shall be
construed as if not containing the particular invalid or unenforceable
provision or provisions, and the rights and obligations of Contractor and
Company shall be construed and enforced accordingly.
ARTICLE 23 - SURVIVAL OF OBLIGATION
The obligations of the parties under this Agreement that by their nature would
continue beyond the termination, cancellation or expiration of this Agreement,
including, by way of illustration only and not of limitation, those in the
clauses COMPLIANCE WITH LAWS, INSURANCE, INDEMIFICATION/INFRINGEMENT,
PUBLICITY/IDENTIFICATION, COMPANY INFORMATION, CONTRACTOR INFORMATION and TITLE
TO WORK PRODUCTS, shall survive termination, cancellation or expiration of this
Agreement.
ARTICLE 24 - CHOICE OF LAW
The construction, interpretation and performance of this Agreement and all
transactions under it shall be governed by the laws of the State of New Jersey
excluding its choice of law rules. Contractor agrees to submit to the
jurisdiction of any court wherein an action is commenced against Company based
on a claim for which Contractor has agreed to indemnify Company under this
Agreement.
ARTICLE 25 - IMPLEADER
Contractor shall not implead or bring an action against Company, its employees
or customers based on any claim by any person for personal injury or death to
an employee of Company or its customers occurring in the course or scope of
employment and that arises out of materials or services furnished under this
Agreement.
ARTICLE 26 - RELEASES VOID
Neither party shall require (1) waivers or releases of any personal rights or
(2) execution of documents, in both cases which conflict with the terms of this
Agreement, from employees, representatives or customers of the other in
connection with visits to its premises and both parties agree that no such
releases, waivers or documents shall be pleaded by them or third persons in any
action or proceeding.
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
-11-
<PAGE> 12
CONFIDENTIAL TREATMENT
ARTICLE 27 - NONEXCLUSIVE MARKET RIGHTS
It is expressly understood and agreed that this Agreement does not grant
Contractor exclusive rights or privileges of any nature with respect to the
provision to Company of the services to be provided by Contractor hereunder.
It is, therefore, understood that Company may contract with other contractors
for the procurement of services of the type to be provided by Contractor
hereunder or itself engage in activities of the type to be provided as services
by Contractor hereunder.
ARTICLE 28 - CHANGES
Company may, at any time, by written notice of its Representative, advise
Contractor of Company's intent to make changes in or additions to the services
to be rendered hereunder. If such intended changes cause an increase in the
amount or character of Contractor's work under this Agreement, or in the time
required for its performance, Contractor shall promptly so advise Company,
specifying the impact of such change on the price or the time required for
performance. Thereafter, if Company elects to make changes, Company and
Contractor shall negotiate in good faith to agree on an equitable adjustment to
all appropriate terms and conditions, including the amount to be paid to
Contractor and the time for performance, and this Agreement shall be modified
accordingly with an amendment executed by both parties. Company shall not be
liable for any additional amounts to be paid Contractor and Contractor shall
not be obligated to make any changes to the services provided hereunder unless
the parties reach an agreement with respect to such modifications and execute
an amendment to this Agreement.
ARTICLE 29 - ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between Contractor and Company
relating to the subject matter hereof and shall not be modified or rescinded in
any manner except by an amendment executed by both parties. Both Contractor
and Company agree that no prior or contemporaneous oral representations form a
part of their agreement. Additional or different terms inserted in this
Agreement by Contractor, or deletions thereto, whether by alterations, addenda,
or otherwise, shall be of no force and effect, unless expressly consented to by
Company in writing. Estimates and forecasts furnished by Company shall not
constitute commitments. The provisions of this Agreement supersede all
contemporaneous oral agreements and all prior oral and written quotations,
communications, agreements and understandings of the parties with respect to
the subject matter of this Agreement.
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
-12-
<PAGE> 13
CONFIDENTIAL TREATMENT
IN WITNESS WHEREOF, Contractor and Company have executed this Agreement in
duplicate as of February _, 1994.
<TABLE>
<S> <C>
SNYDER COMMUNICATIONS, L.P. AT&T COMMUNICATIONS,
INC.
By: /s/ Michele D. Snyder By:
- -------------------------------- --------------------------------
- --------------------------------
Title: Chief Operating Officer
- --------------------------------
Michele D. Snyder
- -------------------------------- --------------------------------
Name (print) Name (print)
</TABLE>
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
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<PAGE> 14
CONFIDENTIAL TREATMENT
SCHEDULE 1
This is Schedule 1 to Agreement No. ___ between AT&T Communications, Inc.
(Company) and Snyder Communications, L.P. (Contractor) and sets forth the
excluded countries to which reference is made in Article I of the Agreement.
The excluded countries are:
*
-----------------
*
-----------------
*
-----------------
*
-----------------
*
-----------------
*
-----------------
*
-----------------
*
-----------------
*
-----------------
*
-----------------
*
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*
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*
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*
-----------------
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
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<PAGE> 15
CONFIDENTIAL TREATMENT
EXHIBIT A
This is Exhibit A to Agreement No. _____________________________ between AT&T
Communications, Inc. (Company) and Snyder Communications, LP (Contractor) and
shows the principal services to be provided hereunder.
1. Contractor shall create, design and print (subject to Company's review
and approval), at Contractor's sole expense, customized application
brochures marketing Company's long distance services for consumers to
the Foreign-Origin Consumer Market. Company shall use its reasonable
best efforts to review and approve such brochures as quickly as
possible, and in any event shall in all cases complete its review of
such brochures by the sixth business day following Company's receipt
of the draft brochure from Contractor. Contractor shall distribute
such brochures by insertion into publications targeted at the
Foreign-Origin Consumer Market in the United States, its territories
and possessions for which Contractor has contracts or obtains
contracts during the term of this Agreement (collectively, the
"Subject Publications"). Contractor shall insert such brochures only
in publications for which Contractor has exclusive insertion rights
for insertions relating to long-distance telecommunications services.
2. Contractor shall provide Company thirty (30) days' prior notice of the
publications into which such application brochures will be inserted
and the particular schedule for such insertions. Company shall have
the right to refuse any publication which it deems inappropriate for
its image by providing Contractor notice of its objection within ten
(10) days of receiving notice from Contractor of the proposed
publication. Contractor may make good faith modifications to the
schedule of insertions in the event of reasonable business
contingencies, with notice to Company. Company will make reasonable
efforts not to run any acquisition advertising marketing Company's
long distance services for consumers in any publication on the same
date which Contractor has notified Company that it will be inserting
an application brochure into such publication.
3. Such inserts will not be marketed in the same issue of the Subject
Publications with any other inserts provided by Contractor, provided,
however, that Contractor may include one insert relating to banking
products in such issue so long as such insert does not promote any
alliances or promotions relating to long distance telecommunication
services in connection with such banking products. Whenever an insert
is marketed in the same issue of a Subject Publication as an insert
provided by Contractor relating to banking products, Contractor shall
provide a copy of the banking-products insert to Company within ten
(10) days after the date of the publication.
4. Contractor shall market and sell Company long distance services for
consumers to Foreign-Origin Consumer Market communities in the United
States, its territories and possessions through door-to-door and other
face-to-face selling activities and "take one"
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
-15-
<PAGE> 16
CONFIDENTIAL TREATMENT
displays and any other marketing activities mutually agreed upon by
the parties (collectively, "Field Marketing Activities"). Company
shall provide Contractor ten (10) days' prior notice of the proposed
location for any Company event targeted to the Foreign-Origin Consumer
Market and Contractor shall not conduct Field Marketing Activities at
such location during any such Company event.
5. Contractor shall make its sales management staff available at
Contractor's offices or at another location in the Washington, D.C.
metropolitan area for such training as is contemplated hereby and
shall otherwise cooperate with Company in ensuring that Contractor's
sales management staff are appropriately trained with respect to
Company products and services to be marketed hereunder.
6. Contractor shall provide inbound telemarketing services as necessary
for the receipt of subscriber authorizations arising from application
brochures distributed by Contractor pursuant hereto. Upon the mutual
agreement of both parties, Contractor may provide outbound
telemarketing services for purposes to be specified by the parties.
7. Contractor shall make its telemarketing personnel reasonably available
at Contractor's offices or another location in the Washington, D.C.
metropolitan area for such training as is contemplated hereby and
shall otherwise cooperate with Company in ensuring that Contractor's
telemarketing personnel are appropriately trained with respect to
Company's products and services to be marketed hereunder. Contractor
agrees to submit telemarketing scripts, job aids and other written
materials to Company for its review and approval prior to such
materials, first use by telemarketers.
8. Contractor shall receive, process, and transmit subscriber
authorizations in accordance with such reasonable procedures as
Company may require.
9. Contractor hereby agrees that it shall not create or distribute
customized application brochures targeted to the Foreign-Origin
Consumer Market to be inserted into the Subject Publications for any
other long-distance telecommunications company during the term of this
Agreement.
10. It is agreed and understood that during the term of this Agreement
Company shall have category exclusivity for the long-distance
telecommunications category for programs that are of the type
contemplated by this Agreement and are targeted at the Foreign-Origin
Consumer Market.
11. Contractor shall offer Company an exclusive right to negotiate an
agreement relating to any other marketing program involving
long-distance telecommunications services targeted to the
Foreign-Origin Consumer Market during the term of this Agreement for a
period of forty-five (45) days after Contractor submits the proposed
program to
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
-16-
<PAGE> 17
CONFIDENTIAL TREATMENT
Company. If Contractor and Company do not agree upon the terms and
conditions of such program within such period, Contractor shall,
subject to the provisions of Section 12 of this Exhibit A in the case
of an acquisition program, thereafter have the right to offer such
program to other parties.
12. Contractor agrees that it shall not provide any Foreign-Origin
Consumer Market-targeted services involving acquisition programs for
long-distance telecommunications services to any other
telecommunications company, nor shall it enter into negotiations or
discussions with any other telecommunications company with a view to
providing such services to such other telecommunications company,
until the thirtieth (30th) day following the termination or expiration
of this Agreement.
13. Company shall provide___________*___________ that are ________* _____
throughout the term of this Agreement.
14. Company shall use reasonable efforts to supply timely product and rate
information to Contractor during the term of this Agreement.
15. Company shall provide to Contractor's telemarketing personnel, at
Company's own expense and on a timely basis, training and appropriate
materials regarding products and services to be marketed hereunder.
Company shall provide to Contractor's field sales management staff, at
Company's own expense and on a timely basis, training and information
regarding Company's products and services to be marketed hereunder.
16. Company shall provide a monthly report to Contractor, sorted by
identification number and, so long as Contractor has provided an
electronic media file to Company for the relevant data, accompanied by
an electronic media file, providing the following information for each
application submitted:
a. an identification number which can be utilized to track the
publication into which the application was inserted or the
source from which the application originated;
b. status as "Acceptable" or "Unacceptable" sorted by the
application number described in item 1 above, and if
installed, the enrollment date and if not installed, the
reason it was deemed unacceptable; and
c. ___________________________*_______________________________
17. Contractor agrees to take the following actions to prevent the
fraudulent solicitation of customer switching that is customarily
referred to as "slamming" (referred to herein as "Fraudulent
Solicitation"):
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
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<PAGE> 18
CONFIDENTIAL TREATMENT
a. Contractor shall institute and maintain strict training
guidelines for its field sales people designed to ensure that
its field sales people are aware that Fraudulent Solicitation
is prohibited;
b. Contractor shall supervise its field sales personnel so as to
permit prompt detection of any Fraudulent Solicitation;
c. Contractor shall not provide any compensation to any member of
its field sales staff for a ______*_____ customer if Contractor
has previously paid the field sales staff member for obtaining
a______*_____ customer at the same billing telephone number in
the previous three (3) months and, in addition, shall deduct
from future compensation payable to the field sales staff
member the amount of any compensation paid by Contractor to
the field sales staff member for the initial authorization
obtained from the _________*___________ customer; and
d. Contractor shall promptly discharge any member of its field
sales staff that is determined by Contractor to have engaged
in Fraudulent Solicitation.
18. Company shall promptly return all uninstalled applications to
Contractor. Such returned applications shall be utilized by
Contractor exclusively for training, reapplication and quality control
purposes. Uninstalled applications are Company Information as defined
in Article 7 of this Agreement and shall be returned to Company upon
termination or expiration of this Agreement.
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
-18-
<PAGE> 19
CONFIDENTIAL TREATMENT
EXHIBIT B
This is Exhibit B to Agreement No. _________________________ between AT&T
Communications, Inc. (Company) and Snyder Communications, LP (Contractor) and
shows the amounts to be paid Contractor for the various services to be
performed hereunder.
Company shall pay Contractor, following receipt and acceptance of Contractor's
invoices by Company, in accordance with the following:
1. COMPENSATION
a. Company shall pay Contractor as follows for each new Company
_______*_____ customer obtained through Contractor's marketing
efforts hereunder:
i. Company shall pay Contractor_____*_____for each new
Company____________*______ customer________________
________________________*__________________________
____________________________*____________.
ii. Company shall pay Contractor_____*_____for each new
Company__________*________ customer________________
__________________________________ *_______________
___________________________*_____.
iii. Company shall pay Contractor_____*_____for each new
Company___________*_______ customer________________
____________________*______________________________
_____________________________*_______.
iv. _______________*___________________________________
__________________*________________________________
_____________________*_________________.
b. In addition to the compensation payable pursuant to Section
1.a of this Exhibit B, Company shall pay Contractor in
addition_______________*____________________________________
___________________*________________________________________
________________*___________.
c. Contractor shall, at its own cost and expense, construct or
arrange for the construction of field sales booths for ______
sales people to be used by it in providing the services
contemplated hereby (the "Field Sales Booths"). Company shall
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
-19-
<PAGE> 20
CONFIDENTIAL TREATMENT
make a payment (the "Booth Payment") to Contractor in
connection with the construction of the Field Sales Booths
that is equal to the lesser of (a)_____ * _____ and (b)
________________________*___________________________________
_____________________________________________________________
_________________________*___________________________________
___________________*_________________________. Company shall
pay Contractor a ______*_____ portion of the Booth Payment
within thirty (30) days of receipt of an appropriate invoice
after the execution of this Agreement and shall pay Contractor
the balance of the Booth Payment within thirty (30) days of
receipt of notice that Contractor has staffed its Field
Marketing Activities with at least____*___ sales people and
has provided Company with documented actual materials and
labor costs.
d. For a period ___________*_________ following the termination
or expiration of this Agreement, Company shall accept
outstanding but not yet submitted applications that were
obtained by Contractor from customers prior to the expiration
or termination of the Agreement or were distributed to
customers prior to the expiration or termination of the
Agreement. Contractor shall be compensated for these
submitted sales under the terms of this Agreement.
2. LIMITATION ON COMPENSATION
a. Notwithstanding any provision of Section 1 of this Exhibit B,
the total compensation payable by Company to Contractor during
the term of this agreement shall not exceed ________*________.
Contractor shall notify Company not less than sixty (60) days
before the date it reasonably expects the total compensation
paid under the agreement to reach________*________. Following
such notification, Company and Contractor shall negotiate in
good faith to increase the maximum total compensation limit of
this Agreement.
b. Company shall notify Contractor on the date that total
compensation paid reaches the then applicable maximum total
compensation limit. If the parties have not amended this
Agreement to increase the maximum total compensation limit
prior to such date, then Contractor's obligations to perform
any services under this Agreement shall cease, and Contractor
shall not have any obligation to deliver to Company any
additional applications obtained by Contractor under the
agreement. If the parties do not execute an amendment
increasing the maximum total compensation within ten (10) days
after the date on which the maximum total compensation limit
is reached, then either party may immediately terminate this
Agreement.
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
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<PAGE> 21
CONFIDENTIAL TREATMENT
3. PAYMENT SCHEDULE
a. Subject to Section 3.b below, compensation payments to
Contractor shall be made according to the following schedule:
i. An initial payment of______*_____ for each______*____
customer shall be made by Company on or before___*___
______________________*___________.
ii. A_________ *____________ payment shall be made for
each___________*__________ customer on or before the
__________________*_______________________ as follows:
a. Company shall pay Contractor____*__for each
_____*________customer ________*_____________
__________*__________________________________
_____________*________.
b. Company shall pay Contractor___ *___________
for each________ *_____ customer ______*____
____________________*_______________________
______________________*_____________________
__________________*___________.
c. _______________________*____________________
______________________*_____________________
_____________________*______________________
___________________*________________________
__________________*____________.
b. If Company's information systems are not able to process the
information required to make payments to Contractor in
accordance with Section 3.a above for applications______*____,
compensation payments shall be made for applications submitted
______*__________as follows:
i. An_____*_____ payment of _____*_____ for each
application submitted shall be made by Company.
Company shall use its best efforts to make this
payment on or before the tenth (10th) day, and shall
in all cases make this payment an or before the
thirtieth (30th) day, of the first month following
the month the application was submitted.
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
21
<PAGE> 22
ii. A_________*________ payment shall be made for each
application submitted on or before the thirtieth
(30th) day _________*_____________________________
_____________________*____________________________
_______________________*__________________________
________________________*______as follows:
a. Company shall pay Contractor______*_________
for each____*___ customer __________________
_______________*____________________________
____________________*_______________________
_______________________*____________________
___________*______________________________.
b. Company shall pay Contractor______*_________
for each__________*________ customer________
___________________ *_______________________
_______________________*____________________
_________________________*__________________
_____________*________________________.
c. Company shall pay Contractor * for each
customer____*_______________________________
___________________ *_______________________
_______________________*____________________
_________________________*__________________
_____________*________________________.
d. _________________*__________________________
___________________ *_______________________
_______________________*____________________
_________________________*__________________
_____________*________________________.
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
-22-
<PAGE> 23
CONFIDENTIAL TREATMENT
EXHIBIT C
This is Exhibit C to Agreement No. ______ between AT&T communications, Inc.
(Company) and Snyder Communications, L.P. (Contractor) and sets forth the
procedures contemplated by Article 13 of the Agreement.
The specific documents to be provided by Company and the specific compensation
verification procedures to be performed by the Examining Accountant on
Company's relevant customer and billing records, which are in support of the
periodic payments required to be made by Company to Contractor under the
Agreement, will be as follows:
1. Documents to be provided by Company:
Upon request by Contractor pursuant to Article 13, Company will
provide the Examining Accountant with an electronic media file
containing a detailed listing of individual customer data. All
references to customer herein refer to customers originated and
presented by Contractor to Company for acceptance. This detailed
listing of individual customer data will reflect all customers
accepted or rejected by Company since the later of the original
agreement date and the last presentation of a detailed listing of
individual customer data to the Examining Accountant, and will at the
least include the following data:
a. amounts paid to Contractor for each customer.
b. unique application/customer identification number for each
customer identifiable by Contractor.
c. date of acceptance for each individual customer.
d. if applicable, the reason(s) for rejection of the individual
customer.
2. The following procedures will be employed by the Examining Accountant:
a. The Examining Accountant, utilizing the detailed listing of
individual customer data described in Section 1.a above, upon
request by Contractor pursuant to Article 13, will select, no
more than twice per year, a sample of ____*, providing the
detailed listing of individual customer data reflects ___*__.
If the detailed listing of individual customer data reflects
_____*________, the sample selected will__________*_________.
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
-23-
<PAGE> 24
CONFIDENTIAL TREATMENT
b. The sample of customers selected will be presented to Company,
and Company will then provide individual detailed billing
information for each of the customers in the sample group for
both of the relevant billing cycles.
c. During the compensation review, the Examining Accountant will
provide to Company an exception list of customer names and/or
unique application numbers along with the individual nature
and amount of the exceptions.
d. Company's key channel or systems personnel will work with the
Examining Accountant and the excepted customers to resolve the
exceptions.
e. Exceptions, when projected using sampling techniques to the
full population of customers from which the sample was
selected, that are valued at the greater of_______*________ or
___*___of the total fee value for that population of customers,
will allow the Examining Accountant to perform further
sampling and testing of _____*_______from that population.
f. In no event will the Examining Accountant be permitted to
review or audit the books of account, journals or ledgers of
Company.
g. Prior to commencing review, the Examining Accountant will
execute a non-disclosure agreement containing reasonable and
customary terms.
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
-24-
<PAGE> 25
CONFIDENTIAL TREATMENT
SNYDER
- --------------------------------------------------------------------------------
COMMUNICATIONS, L.P.
FIRST AMENDMENT TO PROFESSIONAL SERVICES AGREEMENT
This First Amendment to Professional Services Agreement is
entered into as of this 27th day of September, 1994, by AT&T COMMUNICATIONS,
INC. (the "Company") and SNYDER COMMUNICATIONS L.P. (the "Contractor"), and
amends, supplements and modifies that certain Professional Services Agreement
entered into as of February 1994 by and between the Company and the Contractor
(the "Agreement").
1. Subject in all respect to the conditions contained in
this First Amendment, the Agreement is hereby amended as follows:
A. Section 4. of Exhibit A to the Agreement is hereby
amended to read, in its entirety, as follows:
4. Contractor shall market and sell Company long
distance services for consumers to
Foreign-Origin Consumer Market communities in
the United States, its territories and
possessions through door-to-door and other
face-to-face selling activities and "take
one" displays and any other marketing
activities mutually agreed upon by the
parties (collectively, "Field Marketing
Activities"). THE COMPANY'S LONG DISTANCE
SERVICES FOR CONSUMERS SOLD BY CONTRACTOR
SHALL INCLUDE, WITHOUT LIMITATION AND AT
COMPANY'S OPTION,______* ______________,
_______*________AND____* _______ OR SUCH
OTHER LONG DISTANCE SERVICES THAT COMPANY MAY
CHOOSE TO OFFER TO THE FOREIGN-ORIGIN
CONSUMER MARKET. Company shall provide
Contractor ten (10) days' prior notice of the
proposed location for any Company event
targeted to the Foreign-Origin Consumer
Market and Contractor shall not conduct Field
Marketing Activities at such location during
any such Company event.
Two Democracy Center
6903 Rockledge Drive
Fifteenth Floor
Bethesda, MD 20817
(301) 468-1010
FAX (301) 468-0305
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
<PAGE> 26
CON94/AT&T First Amendment CONFIDENTIAL TREATMENT
October 20, 1994 (Revised)
Page 2
B. A new paragraph marked "v" is hereby added to
sub-section "a." of Section 1. ("Compensation") of Exhibit B to the Agreement,
providing as follows:
v. In addition to any other payments provided
herein, Company shall pay Contractor___*___
for each current AT&T customer_____*_______,
_______*_________or the_________*__________,
_____*_________.
C. A new paragraph marked "iii." is hereby added to
sub-section "a." of Section 3. ("Payment Schedule") of Exhibit B to the
Agreement, providing as follows:
iii. The payment of____*_____for_____*___________
Customer in the____________*____________,
__________*______or the __________*______,
shall be made by the Company on or
before the thirtieth (30th) day of the first
month_________________*____________________
___________________*_______________________
________________*__________________________
_______*___________________________________
__________________*________________________
______________*______________.
2. Except as specifically provided in this First
Amendment, all other terms provisions, conditions and covenants contained in
the Agreement shall remain in full force and effect.
3. In the event any conflict shall arise with respect to
interpretation or enforcement, between the provisions of this First Amendment
and the provisions of the Agreement, the provisions of this First Amendment
shall control the resolution of such conflict.
IN WITNESS WHEREOF, the Company and the Contractor have
executed this First Amendment to Professional Services Agreement as of the date
and year first written above.
<TABLE>
<S> <C>
SNYDER COMMUNICATIONS, L.P. AT&T COMMUNICATIONS, INC.
BY: Michele D. Snyder BY:
- ------------------------------- ---------------------------------------
Title: Chief Operating Officer TITLE:
- ------------------------------- ---------------------------------------
DATE: 10/20/94 DATE:
- ------------------------------- ---------------------------------------
</TABLE>
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
<PAGE> 27
CONFIDENTIAL TREATMENT
PROFESSIONAL SERVICES AGREEMENT
WITNESSETH:
That in consideration of the agreements expressed herein, AT&T COMMUNICATIONS,
INC., ("Company"), having an office at 295 North Maple Avenue, Basking Ridge,
New Jersey 07920, and SNYDER COMMUNICATIONS, L.P., ("Contractor"), having an
office at Democracy Center, 6903 Rockledge Drive, Fifteenth Floor, Bethesda,
Maryland 20817, and whose Tax Identification Number is 52-1629980, do hereby
agree as follows:
ARTICLE 1 - STATEMENT OF WORK
Contractor shall render to Company all the services specified in Exhibit A,
attached hereto and made a part hereof, for the foreign-origin consumer market
(defined as the market comprising consumers in the United States, its
territories and possessions who (a) speak the foreign languages spoken as the
native tongue in all foreign countries except those countries listed on
Schedule 1 hereto or (b) are English speakers who consider foreign countries
other than those countries listed on Schedule 1 hereto their home) (the
"Foreign-Origin Consumer Market"). Contractor shall provide all such services
to the highest professional standards and in conformity with ethical and legal
standards.
ARTICLE 2 - DURATION
This Agreement applies to all work performed by Contractor or on behalf of
Contractor described in Exhibit A hereto before the expiration of this
Agreement, whether such work is performed in anticipation of or following the
execution of this Agreement. This Agreement shall expire on March 31, 1995.
This Agreement may be renewed upon mutual agreement of both parties. Company
shall provide Contractor notice of its intent to renew the program contemplated
hereby at least thirty (30) days prior to the expiration of this Agreement.
Company shall have a right of first refusal for the renewal of the program
contemplated hereby until thirty (30) days prior to the date of the expiration
of this Agreement; provided, however, that the period during which company
shall have a right of first refusal shall be extended through the date of the
expiration of this Agreement in the event that Company has, on or prior to the
thirtieth day prior to the date of the expiration of this Agreement, given
notice of its intent to renew the program contemplated hereby. If Contractor
and Company do not agree upon the terms and conditions of such renewal during
the period in which Company has a right of first refusal, Contractor shall
thereafter have the right to offer such program to other parties, subject to
the provisions of Section 12 of Exhibit A.
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
<PAGE> 28
CONFIDENTIAL TREATMENT
ARTICLE 3 - AGREEMENT PRICE
Upon submission of accurate invoices by Contractor as required herein, Company
shall pay Contractor for the performance of this Agreement in accordance with
the schedule contained in Exhibit B, attached hereto and made a part hereof.
Unless otherwise specifically provided herein, the scheduled payments include
the cost of all labor, equipment, materials, work products and other
disbursements required to complete the services described in Exhibit A, and
there shall be no additional charges unless agreed to by both parties.
ARTICLE 4 - INVOICING
Contractor shall invoice Company monthly for all payments due based on the
compensation schedule set forth in Exhibit B using the reports provided by
Company under Exhibit A. Contractor shall render invoices against this
Agreement, which shall indicate amounts due (and the basis for the
determination thereof) in accordance with the schedule of payments in Exhibit
B, shall reflect this Agreement Number ______, and shall be submitted in
duplicate to:
Diana Garcia Farrell
AT&T
412 Mt. Kemble Avenue
Room C 374-C
Morristown, New Jersey 07962
Contractor shall mail invoices with copies of any supporting documentation
required herein.
ARTICLE 5 - REPRESENTATIVES
Company's Representative is Diana Garcia Farrell or such other persons as may
be designated in writing by Company from time to time. Contractor's
Representative is Sheila Cosgarea or such other persons as may be designated in
writing by Contractor from time to time.
ARTICLE 6 - NOTICES
Any notice or demand which under the terms of this Agreement or under any
statute must or may be given or made by Contractor or company shall be in
writing and shall be given or made by telegram, tested telex, confirmed
facsimile, or similar communication or by certified or registered mail
addressed to the respective parties as follows:
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
- 2 -
<PAGE> 29
CONFIDENTIAL TREATMENT
<TABLE>
<S> <C>
To Company: Diana Garcia Farrell
AT&T
412 Mt. Kemble Avenue
Room C 374-C
Morristown, New Jersey 07962
telephone: (201) 644-8460
facsimile: (201) 644-6326
To Contractor: Sheila Cosgarea
Snyder Communications, LP
Democracy Center Two
6903 Rockledge Drive, 15th Floor
Bethesda, Maryland 20817
telephone: (301) 468-1010
facsimile: (301) 468-0305
</TABLE>
Such notice or demand shall be deemed to have been given or made when sent by
telegram, telex, facsimile, or other similar communication or five days after
deposit, postage prepaid, in the U.S. mail.
The above addresses may be changed at any time by giving prior notice as above
provided.
ARTICLE 7 - COMPANY INFORMATION
"Company Information" shall mean any tangible or intangible work and work
products comprising or incorporated in specifications, drawings, sketches,
models, samples, tools, computer or other apparatus programs, technical or
business information or data, whether expressed in written or other recorded
form or orally or otherwise, owned or controlled by Company and furnished to or
acquired by Contractor under this Agreement, including, but not limited to,
lists of customers provided by Company or developed by Contractor for Company
in connection with the services performed or promotion activities undertaken
pursuant to this Agreement and the Field Sales Booths and Editorial and Graphic
Property referenced in Article 9 of this Agreement. All Company Information
shall be deemed to be and remain Company's property. All copies of such
Company Information in written, graphic or other tangible form, including but
not limited to customer lists, shall, at no extra cost to Company and as it
directs, be destroyed, surrendered or returned to Company promptly upon
termination of this Agreement. Unless such Company Information was previously
known to Contractor free of any obligation to keep it confidential as evidenced
by documentation in Contractor's possession, or has been or is subsequently
made public through no improper means imputable to Contractor, or is
independently developed by Contractor, or is lawfully received free of known
restrictions from
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
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<PAGE> 30
CONFIDENTIAL TREATMENT
another source, it shall be kept confidential by Contractor, shall be used only
in performing Contractor's obligations or exercising Contractor's rights under
this Agreement, and may not be used for other purposes except upon such terms
as may be agreed upon between Contractor and Company separately in writing.
Contractor shall ensure that none of Contractor's employees or subcontractors
who are providing services, or supporting the provision of services, to other
companies engaged in the provision of long-distance telecommunications services
(other than Contractor's President and Chief Executive Officer, Chief Operating
Officer, Vice President of Direct Sales and Senior Vice President) shall
receive or have communicated to them any Company Information.
ARTICLE 8 - CONTRACTOR INFORMATION
"Contractor Information" shall mean any tangible or intangible work and work
products comprising or incorporated in specifications, drawings, sketches,
models, samples, tools, computer or other apparatus programs, technical or
business information or data, whether expressed in written or other recorded
form or orally or otherwise, owned or controlled by Contractor and furnished to
or acquired by Company under this Agreement. Except as may be otherwise
provided in Article 9, all Contractor Information shall be deemed to be and
remain Contractor's property. All copies of such Contractor Information in
written, graphic or other tangible form shall, at no extra cost to Contractor
and as it directs, be destroyed or surrendered to Contractor promptly upon
termination of this Agreement. Unless such Contractor Information was
previously known to Company free of any obligation to keep it confidential as
evidenced by documentation in Company's possession, or has been or is
subsequently made public through no improper means imputable to Company, or is
independently developed by Company, or is lawfully received free of known
restrictions from another source, it shall be kept confidential by Company,
shall be used only in performing Company's obligations or exercising Company's
rights under this Agreement, and may not be used for other purposes except upon
such terms as may be agreed upon between Company and Contractor separately in
writing.
ARTICLE 9 - TITLE TO WORK PRODUCTS
All of Contractor's right, title and interest in and to the Field Sales Booths
(as defined in Exhibit A hereof) and the editorial and graphic portions of
other advertising and marketing materials (the "Editorial and Graphic
Property") developed or produced under this Agreement by or on behalf of
Contractor for Company, all of Contractor's right, title and interest in
copyrights and other intellectual property rights derived from the same, and
all of Contractor's right, title and interest in and to customer lists
developed by Contractor for Company in connection with the services provided or
promotional activities undertaken pursuant to this Agreement shall be and are
hereby assigned by Contractor to Company and are hereby agreed by Contractor to
be transferred to Company or otherwise vested therein, effective when first
capable of being so assigned, transferred or vested. Contractor shall obligate
its employees, subcontractors and others to provide, and shall supply to
Company at no extra cost, all such assignments, rights and covenants
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
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CONFIDENTIAL TREATMENT
as Company reasonably deems appropriate to assure and perfect such transfer or
other vesting. The Editorial and Graphic Property shall be provided to Company
as required herein or on termination or expiration of this Agreement, whichever
is earlier, unless Contractor is requested in writing to do otherwise. The
Field Sales Booths shall be made available by Contractor for pick up by Company
at Contractor's offices or at one other location in the Washington, D.C.
metropolitan area upon termination or expiration of this Agreement. The Field
Sales Booths and the Editorial and Graphic Property shall be considered to be a
"work made for hire" to the extent allowed by law. Notwithstanding anything in
this Article 9 to the contrary, Company shall not acquire title to (a)
Contractor's trademarks, service marks, or trade secrets, (b) Contractor's
copyrights, other intellectual property rights, and tangible work products
preexisting execution of this Agreement and not developed or produced in
anticipation hereof, and (c) any information used in the program which is not
specifically related to Company, including, by way of illustration and not of
limitation, training manuals used by Contractor.
The work and work products developed or produced under this Agreement shall be
the original work of Contractor, unless Company's Representative has consented
in writing to the inclusion of work or work products owned or copyrighted by
others (hereafter "included works"). In requesting such consent, Contractor
shall notify Company of the scope of the rights and permissions Contractor
intends to obtain for Company with respect to such included works and modify
the scope of same as requested by Company. Copies of all rights and
permissions, clearly identifying the included works to which they apply, shall
be supplied to Company promptly after their acquisition.
Company acknowledges that Contractor normally obtains stock photography under
single-use licenses from third-party copyright owners. Company hereby
generally consents to inclusion of stock photography in the work products to be
produced under this Agreement.
ARTICLE 10 - INDEMNIFICATION/INFRINGEMENT
Contractor agrees to indemnify and save harmless Company, its subsidiaries and
other affiliates, its and their direct and indirect customers, and the
officers, directors, employees, successors and assigns of any of them (all
hereinafter referred to in this paragraph as "Company") from and against
claims, losses, damages, expenses, liabilities, suits, demands, or liens that
arise out of or result from:
(1) Injuries or death to persons or damage to property, including
theft, in any way arising out of or occasioned by, caused or
alleged to have been caused by or on account of the
performance of the work or services performed by Contractor or
persons furnished by Contractor;
(2) Assertions under Workers' Compensation or similar acts made by
persons furnished by Contractor or by any subcontractor of
Contractor, or by reason of
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
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CONFIDENTIAL TREATMENT
any injuries to such persons for which Company would be
responsible under Workers' Compensation or similar acts if the
persons were employed by the Company;
(3) Any failure on the part of Contractor to satisfy all claims
for labor, equipment, materials and other obligations relating
to the performance of the work hereunder;
(4) Any failure by Contractor to perform Contractor's obligations
under this clause or the Insurance clause; and
(5) Any alleged act of infringement of any patent, trademark,
copyright or other right or any misappropriation (including
misuse) of any trade secret or other proprietary interest,
except where such infringement or misappropriation arises from
Contractor's adherence to or reliance on Company's written
instructions or authorization, in which case Company shall so
indemnify Contractor.
Company agrees to indemnify and save harmless Contractor, its partners and
other affiliates and the officers, directors, employees, successors and assigns
of any of them (all hereinafter referred to in this paragraph as "Contractor")
from and against claims, losses, damages, expenses, liabilities, suits,
demands, or liens that arise out of or result from:
(1) any error or omission by Company with respect to long distance
services product or rate information furnished or approved by
Company, provided that the indemnification obligations of this
clause (1) shall apply only where such information is included
in (a) an English language advertisement, brochure,
application, insert or other promotional or training document,
publication or dissemination that has been approved by Company
or (b) an English language version of an advertisement,
brochure, application, insert or other promotional or training
document, publication or dissemination that is to be
distributed or otherwise disseminated in a language or
languages other than English, which English language version
has been provided by Contractor to company and has been
approved by Company prior to its translation into language(s)
other than English, provided that the indemnification
obligations of this paragraph shall not extend to errors or
omissions in long-distance services product or rate
information that result from foreign language translation
errors where such translation services are provided by
Contractor; or
(2) any act or omission for which the Company (as such term is
used in the preceding paragraph) is obligated pursuant to the
terms of clause (5) of the preceding paragraph to indemnify
Contractor.
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
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CONFIDENTIAL TREATMENT
Each party shall defend or settle, at its own expense, any action or suit
against the other for which it is responsible hereunder and shall reimburse the
other for reasonable attorneys' fees, interest, costs of suit and all other
expenses incurred by the other in connection therewith. Each party shall
notify the other promptly of any claim for which the other is responsible
hereunder, and shall cooperate with the other in every reasonable way to
facilitate the defense of any such claim.
ARTICLE 11 - INSURANCE
Contractor shall maintain during the term of this Agreement (1)______*_________
insurance as prescribed by the law of the state or nation in which the work is
performed, (2)________*__________insurance with limits of__________*_______
each occurrence, (3)_______*________insurance, if the use of_________*________
is required, with limits of________*________combined single limit for___*___
and_____________________*__________________for each occurrence, (4)
________*__________ insurance, including______________________*______________
and_____________________*______________________, with limits of_______*_______
combined single limit for____________*_________and_______________ *___________
for each occurrence. All ________insurance shall designate Company as an
additional insured. All such insurance must be primary and required to respond
and pay prior to any other available coverage.
Contractor agrees that Contractor, Contractor's insurer(s) and anyone claiming
by, through, under or in Contractor's behalf shall have no claim, right of
action or right of subrogation against Company based on any loss or liability
insured under the foregoing insurance. Contractor shall furnish within 30 days
following the effective dates hereof certificates or adequate proof of the
foregoing insurance. Company shall be notified in writing at least thirty (30)
days prior to cancellation or any change in the policy.
ARTICLE 12 - RELATIONSHIP
Contractor shall exercise full control and direction over the employees of
Contractor performing the services covered by this Agreement. Contractor shall
provide direction and detailed specifications to any subcontractors or
employees of subcontractors performing the services covered by this Agreement.
Any changes in personnel that may be reasonably requested by Company through
its authorized representative shall be made as soon as possible.
Neither Contractor nor its employees or agents shall be deemed to be Company's
employees or agents. It is understood that Contractor is an independent
contractor for all purposes and at all times. Contractor is wholly responsible
for withholding and payment of all applicable federal, state and local income
and other payroll taxes with respect to its employees, including contributions
from them as required by law.
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
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<PAGE> 34
CONFIDENTIAL TREATMENT
ARTICLE 13 - COMPENSATION AND OTHER VERIFICATION
Upon reasonable prior request by Company, Contractor will permit Company to
inspect its facilities and procedures used to perform services for Company
hereunder, and Contractor shall comply promptly with all reasonable requests
made by Company to modify such facilities and procedures to maintain and
enhance to Company's satisfaction Contractor's security arrangements and
procedures for the protection of Company Information and property, including
but not limited to, all Company customer data maintained by Contractor.
Contractor shall have the right, at its sole expense, to have an independent
certified public accountant (the "Examining Accountant") examine individual
customer data in accordance with the procedures set forth in Exhibit C hereto.
Such examinations shall be made during regular business hours and upon ten (10)
days' prior written notice and may be conducted no more than twice per calendar
year.
If the results of the Examining Accountant's review indicate that Contractor is
owed additional compensation by Company hereunder, Company shall pay such
additional compensation to Contractor within thirty (30) days of the completion
of the Examining Accountant's review. If the results of the Examining
Accountant's review indicate that Contractor has received more compensation
from Company than Company is obligated to pay Contractor hereunder, the amount
of any such excess compensation shall be credited against future payments owed
by Company to Contractor hereunder.
ARTICLE 14 - TERMINATION
In the event either party materially breaches any of the terms of this
Agreement, the other party may terminate this Agreement, in whole or in part,
if such breach is not cured within 30 days after notice thereof is given to the
breaching party. In such case, subject to Company's right of set off,
Company's liability, if any, shall be limited to payment of the amount due for
services performed by Contractor hereunder through the date of termination in
accordance with the compensation provisions set forth in Exhibit B hereto,
including without limitation the provisions of Section 1(d) of Exhibit B. Such
payment shall constitute a full and complete discharge of Company's
obligations. In no event shall Company's liability exceed the amounts
calculated in accordance with Exhibit B of this Agreement. Upon such a
termination, Company shall pay Contractor monies due and owing pursuant to this
Article or Contractor shall refund monies due Company, if any. [In handwriting]
Company may also terminate this agreement in accordance with Section 12 of
Exhibit A. [Initialed by both parties.]
ARTICLE 15 - FORCE MAJEURE
Neither party shall be held responsible for any delay or failure in performance
of any part of this Agreement to the extent such delay or failure is caused by
fire, flood, explosion, war, strike,
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
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CONFIDENTIAL TREATMENT
embargo, government requirement, civil or military authority, act of God, act
or omission of carriers or other similar causes beyond its control and without
the fault or negligence of the delayed or non-performing party or its
subcontractors ("force majeure conditions"). Notwithstanding the foregoing,
Contractor's liability for loss or damage to Company's material in Contractor's
possession or control shall not be modified by this clause. If any force
majeure condition occurs, the party delayed or unable to perform shall give
immediate notice to the other party, stating the nature of the force majeure
condition and any action being taken to avoid or minimize its effect, and the
party affected by the other's delay or inability to perform may elect to: (1)
suspend this Agreement for the duration of the force majeure condition and, (a)
at its option, obtain elsewhere services to be furnished under this Agreement
and (b) once the force majeure condition ceases, resume performance under this
Agreement with an option in the affected party to extend the period of the
Agreement up to the length of time the force majeure condition endured; and/or
(2) when the delay of non-performance continues for a period of at least
fifteen (15) days, terminate, at no charge, this Agreement or the part of it
relating to services not already performed. Unless written notice is given
within forty-five (45) days after the affected party is notified of the force
majeure condition, option (1) shall be deemed to have been selected.
ARTICLE 16 - ASSIGNMENT
Contractor shall not assign any right or interest under this Agreement
(excepting monies due or to become due), or delegate or subcontract any work or
other obligation to be performed or owed under this Agreement without prior
written consent of Company except for printing services and the use by
Contractor of independent sales agents in Field Marketing Activities (as
defined in Exhibit A hereto). Any attempted assignment or delegation in
contravention of the above provisions shall be void and ineffective. Any
assignment of monies shall be void and ineffective to the extent that (1)
Contractor shall not have given Company at least thirty (30) days' prior
written notice of such assignment or (2) such assignment attempts to impose
upon Company obligations to the assignee additional to the payment of such
monies, or to preclude Company from dealing solely and directly with Contractor
in all matters pertaining to this Agreement including the negotiation of
amendments or settlements of charges due. All work performed by Contractor' s
subcontractor(s) at any tier shall be deemed work performed by Contractor.
ARTICLE 17 - TAXES
Company shall reimburse Contractor for state and local sales and use taxes
incurred by Contractor with respect to production of the sales booths described
in Section 1.c of Exhibit B and the services to be performed under this
Agreement. Taxes payable by Company shall be billed as separate items on
Contractor's invoices and shall not be included in Contractor's prices.
Company shall have the right to have Contractor contest any such taxes that
Company deems improperly levied, at Company's expense and subject to Company's
direction and control.
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
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CONFIDENTIAL TREATMENT
ARTICLE 18 - COMPLIANCE WITH LAWS
Contractor and all persons furnished by Contractor shall comply at their own
expense with all applicable federal, state, local and foreign laws, ordinances,
regulations and codes, including all applicable laws, ordinances, regulations
and codes governing telemarketing (collectively, "Applicable Laws"), including
identification and procurement of required permits, certificates, licenses,
insurance, approvals and inspections (collectively, "Applicable Permits") in
performing its duties under this Agreement. Contractor shall instruct its
subcontractors and independent agents to comply with all Applicable Laws and
Applicable Permits in performing their duties under this Agreement. Contractor
agrees to indemnify Company for any loss or damage that may be sustained by
reason of any failure of Contractor to do so.
ARTICLE 19 - PUBLICITY/IDENTIFICATION
Contractor shall not, unless expressly authorized hereunder or by Company's
written consent, engage in promotion or publicity about either party's
participation in this Agreement, or in any circumstance connected herewith make
public use of any AT&T identification. As used herein, "AT&T identification"
means any copy or semblance of any trade name, trademark, service mark,
insignia, symbol, logo, designation or other product or service identification
of American Telephone and Telegraph Company or any of its subsidiaries or other
affiliates (all "AT&T entities"), or any evidence of inspection by or for any
AT&T entity. Contractor agrees to remove or obliterate any AT&T identification
prior to any sale, use or disposition of any items rejected by Company, and
shall indemnify any AT&T entity against any claim brought against it on account
of Contractor's failure to do so. This article does not modify the Article
entitled "Company Information".
Notwithstanding the foregoing, Contractor may represent that Company is a
client of Contractor; however, Contractor is prohibited hereunder from making
any other representations to anyone regarding its relationship to Company.
ARTICLE 20 - RIGHT OF ACCESS
Each party shall have the right to enter the premises of the other party during
normal business hours with respect to the performance of this Agreement,
subject to all applicable laws, rules and regulations.
ARTICLE 21 - WAIVER
The failure of either party at any time to enforce any right or remedy
available to it under this Agreement or otherwise with respect to any breach or
failure by the other party shall not be
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
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CONFIDENTIAL TREATMENT
construed to be a waiver of such right or remedy with respect to any other
breach or failure by the other party.
ARTICLE 22 - SEVERABILITY
If any of the provisions of this Agreement shall be invalid or unenforceable,
such invalidity or unenforceability shall not invalidate or render
unenforceable the entire Agreement, but rather the entire Agreement shall be
construed as if not containing the particular invalid or unenforceable
provision or provisions, and the rights and obligations of Contractor and
Company shall be construed and enforced accordingly.
ARTICLE 23 - SURVIVAL OF OBLIGATION
The obligations of the parties under this Agreement that by their nature would
continue beyond the termination, cancellation or expiration of this Agreement,
including, by way of illustration only and not of limitation, those in the
clauses COMPLIANCE WITH LAWS, INSURANCE, INDEMIFICATION/INFRINGEMENT,
PUBLICITY/IDENTIFICATION, COMPANY INFORMATION, CONTRACTOR INFORMATION and TITLE
TO WORK PRODUCTS, shall survive termination, cancellation or expiration of this
Agreement.
ARTICLE 24 - CHOICE OF LAW
The construction, interpretation and performance of this Agreement and all
transactions under it shall be governed by the laws of the State of New Jersey
excluding its choice of law rules. Contractor agrees to submit to the
jurisdiction of any court wherein an action is commenced against Company based
on a claim for which Contractor has agreed to indemnify Company under this
Agreement.
ARTICLE 25 - IMPLEADER
Contractor shall not implead or bring an action against Company, its employees
or customers based on any claim by any person for personal injury or death to
an employee of Company or its customers occurring in the course or scope of
employment and that arises out of materials or services furnished under this
Agreement.
ARTICLE 26 - RELEASES VOID
Neither party shall require (1) waivers or releases of any personal rights or
(2) execution of documents, in both cases which conflict with the terms of this
Agreement, from employees, representatives or customers of the other in
connection with visits to its premises and both parties agree that no such
releases, waivers or documents shall be pleaded by them or third persons in any
action or proceeding.
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
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CONFIDENTIAL TREATMENT
ARTICLE 27 - NONEXCLUSIVE MARKET RIGHTS
It is expressly understood and agreed that this Agreement does not grant
Contractor exclusive rights or privileges of any nature with respect to the
provision to Company of the services to be provided by Contractor hereunder.
It is, therefore, understood that Company may contract with other contractors
for the procurement of services of the type to be provided by Contractor
hereunder or itself engage in activities of the type to be provided as services
by Contractor hereunder.
ARTICLE 28 - CHANGES
Company may, at any time, by written notice of its Representative, advise
Contractor of Company's intent to make changes in or additions to the services
to be rendered hereunder. If such intended changes cause an increase in the
amount or character of Contractor's work under this Agreement, or in the time
required for its performance, Contractor shall promptly so advise Company,
specifying the impact of such change on the price or the time required for
performance. Thereafter, if Company elects to make changes, Company and
Contractor shall negotiate in good faith to agree on an equitable adjustment to
all appropriate terms and conditions, including the amount to be paid to
Contractor and the time for performance, and this Agreement shall be modified
accordingly with an amendment executed by both parties. Company shall not be
liable for any additional amounts to be paid Contractor and Contractor shall
not be obligated to make any changes to the services provided hereunder unless
the parties reach an agreement with respect to such modifications and execute
an amendment to this Agreement.
ARTICLE 29 - ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between Contractor and Company
relating to the subject matter hereof and shall not be modified or rescinded in
any manner except by an amendment executed by both parties. Both Contractor
and Company agree that no prior or contemporaneous oral representations form a
part of their agreement. Additional or different terms inserted in this
Agreement by Contractor, or deletions thereto, whether by alterations, addenda,
or otherwise, shall be of no force and effect, unless expressly consented to by
Company in writing. Estimates and forecasts furnished by Company shall not
constitute commitments. The provisions of this Agreement supersede all
contemporaneous oral agreements and all prior oral and written quotations,
communications, agreements and understandings of the parties with respect to
the subject matter of this Agreement.
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
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CONFIDENTIAL TREATMENT
IN WITNESS WHEREOF, Contractor and Company have executed this Agreement in
duplicate as of February _, 1994.
<TABLE>
<S> <C>
SNYDER COMMUNICATIONS, L.P. AT&T COMMUNICATIONS,
INC.
By: /s/ Michele D. Snyder By:
- ------------------------------------ ----------------------------------
- ------------------------------------
Title: Chief Operating Officer
- ------------------------------------
Michele D. Snyder
- ------------------------------------- ----------------------------------
Name(print) Name(print)
</TABLE>
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
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CONFIDENTIAL TREATMENT
SCHEDULE 1
This is Schedule 1 to Agreement No. ___ between AT&T Communications, Inc.
(Company) and Snyder Communications, L.P. (Contractor) and sets forth the
excluded countries to which reference is made in Article I of the Agreement.
The excluded countries are:
*
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*
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*
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*
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*
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*
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*
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*
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* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
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CONFIDENTIAL TREATMENT
EXHIBIT A
This is Exhibit A to Agreement No. _____________________________ between AT&T
Communications, Inc. (Company) and Snyder Communications, LP (Contractor) and
shows the principal services to be provided hereunder.
1. Contractor shall create, design and print (subject to company's review
and approval), at Contractor's sole expense, customized application
brochures marketing Company's long distance services for consumers to
the Foreign-Origin Consumer Market. Company shall use its reasonable
best efforts to review and approve such brochures as quickly as
possible, and in any event shall in all cases complete its review of
such brochures by the sixth business day following Company's receipt
of the draft brochure from Contractor. Contractor shall distribute
such brochures by insertion into publications targeted at the
Foreign-Origin Consumer Market in the United States, its territories
and possessions for which Contractor has contracts or obtains
contracts during the term of this Agreement (collectively, the
"Subject Publications"). Contractor shall insert such brochures only
in publications for which Contractor has exclusive insertion rights
for insertions relating to long-distance telecommunications services.
2. Contractor shall provide Company thirty (30) days' prior notice of the
publications into which such application brochures will be inserted
and the particular schedule for such insertions. Company shall have
the right to refuse any publication which it deems inappropriate for
its image by providing Contractor notice of its objection within ten
(10) days of receiving notice from Contractor of the proposed
publication. Contractor may make good faith modifications to the
schedule of insertions in the event of reasonable business
contingencies, with notice to Company. Company will make reasonable
efforts not to run any acquisition advertising marketing Company's
long distance services for consumers in any publication on the same
date which Contractor has notified Company that it will be inserting
an application brochure into such publication.
3. Such inserts will not be marketed in the same issue of the Subject
Publications with any other inserts provided by Contractor, provided,
however, that Contractor may include one insert relating to banking
products in such issue so long as such insert does not promote any
alliances or promotions relating to long distance telecommunication
services in connection with such banking products. Whenever an insert
is marketed in the same issue of a Subject Publication as an insert
provided by Contractor relating to banking products, Contractor shall
provide a copy of the banking-products insert to Company within ten
(10) days after the date of the publication.
4. Contractor shall market and sell Company long distance services for
consumers to Foreign-Origin Consumer Market communities in the United
States, its territories and possessions through door-to-door and other
face-to-face selling activities and "take one"
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
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CONFIDENTIAL TREATMENT
displays and any other marketing activities mutually agreed upon by
the parties (collectively, "Field Marketing Activities"). Company
shall provide Contractor ten (10) days' prior notice of the proposed
location for any Company event targeted to the Foreign-Origin Consumer
Market and Contractor shall not conduct Field Marketing Activities at
such location during any such Company event.
5. Contractor shall make its sales management staff available at
Contractor's offices or at another location in the Washington, D.C.
metropolitan area for such training as is contemplated hereby and
shall otherwise cooperate with Company in ensuring that Contractor's
sales management staff are appropriately trained with respect to
Company products and services to be marketed hereunder.
6. Contractor shall provide inbound telemarketing services as necessary
for the receipt of subscriber authorizations arising from application
brochures distributed by Contractor pursuant hereto. Upon the mutual
agreement of both parties, Contractor may provide outbound
telemarketing services for purposes to be specified by the parties.
7. Contractor shall make its telemarketing personnel reasonably available
at Contractor's offices or another location in the Washington, D.C.
metropolitan area for such training as is contemplated hereby and
shall otherwise cooperate with Company in ensuring that Contractor's
telemarketing personnel are appropriately trained with respect to
Company's products and services to be marketed hereunder. Contractor
agrees to submit telemarketing scripts, job aids and other written
materials to Company for its review and approval prior to such
materials, first use by telemarketers.
8. Contractor shall receive, process, and transmit subscriber
authorizations in accordance with such reasonable procedures as
Company may require.
9. Contractor hereby agrees that it shall not create or distribute
customized application brochures targeted to the Foreign-Origin
Consumer Market to be inserted into the Subject Publications for any
other long-distance telecommunications company during the term of this
Agreement.
10. It is agreed and understood that during the term of this Agreement
Company shall have category exclusivity for the long-distance
telecommunications category for programs that are of the type
contemplated by this Agreement and are targeted at the Foreign-Origin
Consumer Market.
11. Contractor shall offer Company an exclusive right to negotiate an
agreement relating to any other marketing program involving
long-distance telecommunications services targeted to the
Foreign-Origin Consumer Market during the term of this Agreement for a
period of forty-five (45) days after Contractor submits the proposed
program to
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
- 16 -
<PAGE> 43
CONFIDENTIAL TREATMENT
Company. If Contractor and Company do not agree upon the terms and
conditions of such program within such period, Contractor shall,
subject to the provisions of Section 12 of this Exhibit A in the case
of an acquisition program, thereafter have the right to offer such
program to other parties.
12. Contractor agrees that it shall not provide any Foreign-Origin
Consumer Market-targeted services involving acquisition programs for
long-distance telecommunications services to any other
telecommunications company, nor shall it enter into negotiations or
discussions with any other telecommunications company with a view to
providing such services to such other telecommunications company,
until the thirtieth (30th) day following the termination or expiration
of this Agreement. *[In handwriting in margin] *If Contractor enters
into any agreement, written or oral, with any other long distance
telecommunications company concerning a provision of a customer
retention program to the Foreign Origin Consumer Market at any time
during the term of this Agreement, AT&T may in its sole judgment
terminate this agreement upon five (5) days notice if AT&T determines
such activity by Contractor is a conflict of interest. [Initialed by
both parties.]
13. Company shall provide_____________________________*__________________
that are ________________________________________* __________________
throughout the term of this Agreement.
14. Company shall use reasonable efforts to supply timely product and rate
information to Contractor during the term of this Agreement.
15. Company shall provide to Contractor's telemarketing personnel, at
Company's own expense and on a timely basis, training and appropriate
materials regarding products and services to be marketed hereunder.
Company shall provide to Contractor's field sales management staff, at
Company's own expense and on a timely basis, training and information
regarding Company's products and services to be marketed hereunder.
16. Company shall provide a monthly report to Contractor, sorted by
identification number and, so long as Contractor has provided an
electronic media file to Company for the relevant data, accompanied by
an electronic media file, providing the following information for each
application submitted:
a. an identification number which can be utilized to track the
publication into which the application was inserted or the
source from which the application originated;
b. status as "Acceptable" or "Unacceptable" sorted by the
application number described in item 1 above, and if
installed, the enrollment date and if not installed, the
reason it was deemed unacceptable; and
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
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<PAGE> 44
CONFIDENTIAL TREATMENT
c. _____________________________*___________________________________.
17. Contractor agrees to take the following actions to prevent the
fraudulent solicitation of customer switching that is customarily
referred to as "slamming" (referred to herein as "Fraudulent
Solicitation"):
a. Contractor shall institute and maintain strict training
guidelines for its field sales people designed to ensure that
its field sales people are aware that Fraudulent Solicitation
is prohibited;
b. Contractor shall supervise its field sales personnel so as to
permit prompt detection of any Fraudulent Solicitation;
c. Contractor shall not provide any compensation to any member of
its field sales staff for a_____*_____customer if Contractor
has previously paid the field sales staff member for obtaining
a_____*_____customer at the same billing telephone number in
the previous three (3) months and, in addition, shall deduct
from future compensation payable to the field sales staff
member the amount of any compensation paid by Contractor to
the field sales staff member for the initial authorization
obtained from the_____*____ customer; and
d. Contractor shall promptly discharge any member of its field
sales staff that is determined by Contractor to have engaged
in Fraudulent Solicitation.
18. Company shall promptly return all uninstalled applications to
Contractor. Such returned applications shall be utilized by
Contractor exclusively for training, reapplication and quality control
purposes. Uninstalled applications are Company Information as defined
in Article 7 of this Agreement and shall be returned to Company upon
termination or expiration of this Agreement.
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
- 18 -
<PAGE> 45
CONFIDENTIAL TREATMENT
EXHIBIT B
This is Exhibit B to Agreement No. _________________________ between AT&T
Communications, Inc. (Company) and Snyder Communications, LP (Contractor) and
shows the amounts to be paid Contractor for the various services to be
performed hereunder.
Company shall pay Contractor, following receipt and acceptance of Contractor's
invoices by Company, in accordance with the following:
1. COMPENSATION
a. Company shall pay Contractor as follows for each new Company
_______*_____customer obtained through Contractor's marketing
efforts hereunder:
i. Company shall pay Contractor ____*____ for each new
Company ________*_________ customer________________
___________________*_______________________________
_____________________*_____________________________
_______________________*______________________.
ii. Company shall pay Contractor ____*____ for each new
Company ________*_________ customer _______________
___________________*_______________________________
_____________________*_____________________________
_______________________*______________________.
iii. Company shall pay Contractor_____*_____for each new
Company _________*________ customer _______________
___________________*_______________________________
_____________________*_____________________________
_______________________*______________________.
iv.
___________________*_______________________________
_____________________*_____________________________
_______________________*______________________.
b. In addition to the compensation payable pursuant to Section
1.a of this Exhibit B, Company shall pay Contractor in
addition_________________________*____________________________
______________________________*_______________________________
________________________________*_____________________________
____________________________________*_________________________
______________________*_____________________________________.
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
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<PAGE> 46
CONFIDENTIAL TREATMENT
c. Contractor shall, at its own cost and expense, construct or
arrange for the construction of field sales booths for _ ____
sales people to be used by it in providing the services
contemplated hereby (the "Field Sales Booths"). Company shall
make a payment (the "Booth Payment") to Contractor in
connection with the construction of the Field Sales Booths
that is equal to the lesser of (a)______*______________and (b)
_______________________________________________________________
_______________________*______________________________________
__________________________________________. Company shall pay
Contractor a * portion of the Booth Payment within
thirty (30) days of receipt of an appropriate invoice after
the execution of this Agreement and shall pay Contractor the
balance of the Booth Payment within thirty (30) days of
receipt of notice that Contractor has staffed its Field
Marketing Activities with at least _______ sales people and
has provided Company with documented actual materials and
labor costs.
d. For a period ___________________*______________ following the
termination or expiration of this Agreement, Company shall
accept outstanding but not yet submitted applications that
were obtained by Contractor from customers prior to the
expiration or termination of the Agreement or were distributed
to customers prior to the expiration or termination of the
Agreement. Contractor shall be compensated for these
submitted sales under the terms of this Agreement.
2. LIMITATION ON COMPENSATION
a. Notwithstanding any provision of Section 1 of this Exhibit B,
the total compensation payable by Company to Contractor during
the term of this agreement shall not exceed ________*_______.
Contractor shall notify Company not less than sixty (60)
days before the date it reasonably expects the total
compensation paid under the agreement to reach________*______.
Following such notification, Company and Contractor shall
negotiate in good faith to increase the maximum total
compensation limit of this Agreement.
b. Company shall notify Contractor on the date that total
compensation paid reaches the then applicable maximum total
compensation limit. If the parties have not amended this
Agreement to increase the maximum total compensation limit
prior to such date, then Contractor's obligations to perform
any services under this Agreement shall cease, and Contractor
shall not have any obligation to deliver to Company any
additional applications obtained by Contractor under the
agreement. If the parties do not execute an amendment
increasing the maximum total compensation within ten (10) days
after the date on which the maximum total compensation limit
is reached, then either party may immediately terminate this
Agreement.
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
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<PAGE> 47
CONFIDENTIAL TREATMENT
3. PAYMENT SCHEDULE
a. Subject to Section 3.b below, compensation payments to
Contractor shall be made according to the following schedule:
i. An initial payment of _____*_____ for each ____*____
customer shall be made by Company on or before _____
______________________*_______________________.
ii. A ___________*_____________ payment shall be made for
each _____________*___________ customer on or before
_______________*___________as follows:
a. Company shall pay Contractor___________*_____
for each ________*_______ customer __________
____________________*________________________
______________________*______________________
_________________*___________________________
____________________________*________________
____________________*_____________________.
b. Company shall pay Contractor______*______ for
each _________________*______________customer
____________________*________________________
______________________*______________________
_________________*___________________________
____________________________*________________
____________________*_____________________.
c. ____________________*________________________
______________________*______________________
_________________*___________________________
____________________________*________________
____________________*_____________________.
b. If Company's information systems are not able to process the
information required to make payments to Contractor in
accordance with Section 3.a above for applications
__________________*____________________________, compensation
payments shall be made for applications submitted______*___as
follows:
i. An _________*_________ payment of ____*_____ for each
application submitted shall be made by Company.
Company shall use its best efforts to make this
payment on or before the tenth (10th) day, and shall
in all cases make this payment on or before the
thirtieth (30th) day, of the first month following
the month the application was submitted.
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
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<PAGE> 48
CONFIDENTIAL TREATMENT
ii. A ________________*________ payment shall be made for
each application submitted on or before the thirtieth
(30th) day ______________________*__________________
________________________*___________________________
____________________________*_______________________
________*_________ as follows:
a. Company shall pay Contractor ________*_____
for each ______*______customer ____________
____________________*______________________
______________________*____________________
_______________*___________________________
_____________________________*________.
b. Company shall pay Contractor _________*____
for each ______* __________________customer
____________________*______________________
______________________*____________________
_______________*___________________________
_____________________________*________.
c. Company shall pay Contractor ______*_______
for each _____________*____________customer
____________________*______________________
______________________*____________________
_______________*___________________________
_____________________________*________.
d. ___________*_______________________________
____________________*______________________
______________________*____________________
_______________*___________________________
_____________________________*________.
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
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<PAGE> 49
CONFIDENTIAL TREATMENT
EXHIBIT C
This is Exhibit C to Agreement No. ______ between AT&T Communications, Inc.
(Company) and Snyder Communications, L.P. (Contractor) and sets forth the
procedures contemplated by Article 13 of the Agreement.
The specific documents to be provided by Company and the specific compensation
verification procedures to be performed by the Examining Accountant on
Company's relevant customer and billing records, which are in support of the
periodic payments required to be made by Company to Contractor under the
Agreement, will be as follows:
1. Documents to be provided by Company:
Upon request by Contractor pursuant to Article 13, Company will
provide the Examining Accountant with an electronic media file
containing a detailed listing of individual customer data. All
references to customer herein refer to customers originated and
presented by Contractor to Company for acceptance. This detailed
listing of individual customer data will reflect all customers
accepted or rejected by Company since the later of the original
agreement date and the last presentation of a detailed listing of
individual customer data to the Examining Accountant, and will at the
least include the following data:
a. amounts paid to Contractor for each customer.
b. unique application/customer identification number for each
customer identifiable by Contractor.
c. date of acceptance for each individual customer.
d. if applicable, the reason(s) for rejection of the individual
customer.
2. The following procedures will be employed by the Examining Accountant:
a. The Examining Accountant, utilizing the detailed listing of
individual customer data described in Section 1.a above, upon
request by Contractor pursuant to Article 13, will select, no
more than twice per year, a sample of __________*____________
, providing the detailed listing of individual customer data
reflects __________________*_________________________. If the
detailed listing of individual customer data reflects________
________________*_______________________, the sample selected
will____________________*__________________.
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
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<PAGE> 50
CONFIDENTIAL TREATMENT
b. The sample of customers selected will be presented to Company,
and Company will then provide individual detailed billing
information for each of the customers in the sample group for
both of the relevant billing cycles.
c. During the compensation review, the Examining Accountant will
provide to Company an exception list of customer names and/or
unique application numbers along with the individual nature
and amount of the exceptions.
d. Company's key channel or systems personnel will work with the
Examining Accountant and the excepted customers to resolve the
exceptions.
e. Exceptions, when projected using sampling techniques to the
full population of customers from which the sample was
selected, that are valued at the greater of______*_________
or ______*_______of the total fee value for that population of
customers, will allow the Examining Accountant to perform
further sampling and testing of ____________*________________
from that population.
f. In no event will the Examining Accountant be permitted to
review or audit the books of account, journals or ledgers of
Company.
g. Prior to commencing review, the Examining Accountant will
execute a non-disclosure agreement containing reasonable and
customary terms.
[On a page attached to Schedule C]: If after complying with Section 11 of
Exhibit A, contractor enters into any agreement for the provision of services
targeted to the Foreign-Origin Consumer Market for long distance
telecommunications services (including but not limited to acquisition and
retention services) with any other telecommunications company during the term
of this Agreement, Contractor shall immediately notify Company of such other
agreement. If Company determines in its reasonable discretion that
Contractor's provision of any such services to such other telecommunications
company would result in contractor having an inappropriate conflict of
interest, Company shall have the right to terminate this Agreement immediately
by notice to the Contractor within five (5) business days of Contractor's
notice to Company of such other agreement.
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
- 24 -
<PAGE> 51
CONFIDENTIAL TREATMENT
AMENDMENT NO. 2 TO PROFESSIONAL SERVICES AGREEMENT
This Amendment No. 2 to Professional Services Agreement
("Amendment No. 2") is entered into as of this ____ day of December, 1994 by
AT&T Communications, Inc. (the "Company") and Snyder Communications, L.P. (the
"Contractor") and amends, supplements and modifies the Professional Services
Agreement dated as of February, 1994 by and between the Company and the
Contractor, as amended by the First Amendment to Professional Services
Agreement dated as of September 27, 1994 between Company and Contractor (as
amended, the "Agreement").
The Agreement is hereby amended as follows:
1. Effective as of January 1, 1995, the first sentence
of Article 1 is amended to read, in its entirety, as follows:
"Contractor shall render to Company all the
services specified in Exhibit A, attached to this
Agreement and made a part of this Agreement, to
long-distance customers who speak foreign languages
or, are English speakers who consider foreign
countries their home, with a focus on customers who
make international calls________________*______ (the
"Foreign-Origin Consumer Market")."
2. Effective as of January 1, 1995, Schedule 1 to the
Agreement is hereby deleted in its entirety.
3. The second sentence of Article 2 is amended to read,
in its entirety, as follows:
"This Agreement shall expire on December 31,
1995."
4. The first sentence of Article 4 is amended to read,
in its entirety, as follows:
"Contractor shall invoice Company for all
payments due based on the compensation schedule set
forth in Exhibit B using the reports provided by
Company under Exhibit A."
5. The second sentence of Section 4 of Exhibit A to the
Agreement is hereby amended to read in its entirety, as follows:
"The telecommunications services for
customers sold by Contractor shall be designated by
Company and shall include, without limitation,
________________*_______________________, __________
______________*_________________________and _________
* Text deleted pursuant to an application for Confidential Treatment under
Rule 406 of the Securities Act of 1933 and filed separately with the
Securities and Exchange Commission.
<PAGE> 52
CONFIDENTIAL TREATMENT
_______*_______(collectively,_________*_____________
________), and, at Company's option, such other
long-distance and other services (including
_______________*___________________) that Company may
choose to offer to the Foreign-Origin Consumer
Market."
6. Section 8 of Exhibit A is amended by adding the
following after the first sentence thereof:
"Contractor shall use its reasonable efforts
to transmit subscriber applications to Company within
two business days, but no later than five business
days, after the receipt of a completed application
from the customer."
7. Section 16 of Exhibit A is amended to read in its
entirety as follows:
"Company shall generate a Pic File Status
Report in substantially the form set forth as
Schedule 16.1 hereto (the "Pic Report") and use its
best efforts to transmit such Pic Report to
Contractor within five days of Company's receipt of
Contractor's submission of each batch of customer
applications. Each Pic Report shall identify for
such batch__________________________________________
______________________________________________________
______________________________________________________
______________________________________________________
______________________________________________________
______________________________________________________
____________________________*_________________________
______________________________________________________
______________________________________________________
______________________________________________________
______________________________________________________
______________________________________________________
______________________________________________________
______________________________________________________
__________.
Company shall also generate with each Pic
Report, a rolling reconciliation file (a
"reconciliation file") setting forth a cumulative
listing of ________*__________and ________*________
from Pic Reports that have been generated in the
previous 120 days (including BTN numbers and the Pic
file source number), with a reconciliation of each
outstanding _________*__________ or _______*_______
as either remaining an * or
_____*__________ or changing to _______*_________ or
_____*___ or closed status. Any ___*_____________or
_____* ____ which has not been reconciled to ________
____*____ or ________*_____________ status within 120
days of the generation of the Pic Report on which
such Customer's status was originally reported shall
be deemed closed and no compensation shall be payable
to Contractor. An ________*_______ or ______*______
who is changed to ________*__________ or _______*___
______ status shall thereafter be considered an
_____*___________ or _____*_____,
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
-2-
<PAGE> 53
CONFIDENTIAL TREATMENT
as the case may be, for all purposes of this
Agreement, including the payment of compensation, the
___*___ payment and calculation of the Test Ratio
described in Exhibit B hereto."
8. Exhibit B to the Agreement is amended by replacing it
in its entirety with the Exhibit B attached to this Amendment No. 2.
9. Except as specifically provided in this Amendment No.
2, all other terms, provisions, conditions and covenants contained in the
Agreement shall remain in full force and effect.
10. In the event any conflict shall arise with respect to
interpretation or enforcement, between the provisions of this Amendment No. 2
and the provisions of the Agreement, the provisions of this Amendment No. 2
shall control the resolution of such conflict.
IN WITNESS WHEREOF, Company and Contractor have executed this
Amendment No. 2 to Professional Services Agreement as of the date and year
first written above.
<TABLE>
<S> <C>
SNYDER COMMUNICATIONS, L.P. AT&T COMMUNICATIONS, INC.
BY: /s/ Michele D. Snyder BY:
- ----------------------------------- ---------------------------
TITLE: Chief Operating Officer TITLE:
- ----------------------------------- ---------------------------
DATE: December 9, 1994 DATE:
- ----------------------------------- ---------------------------
</TABLE>
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
-3-
<PAGE> 54
CONFIDENTIAL TREATMENT
EXHIBIT B
This is Exhibit B to Agreement No. ____ between AT&T
Communications, Inc. ("Company") and Snyder Communications, L.P. ("Contractor")
and shows the amounts to be paid Contractor for the various services to be
performed hereunder.
Company shall pay Contractor, following receipt and acceptance
of Contractor's invoices by Company, in accordance with the following:
1. COMPENSATION
a. Company shall pay Contractor ____*_____ for (i) each
_____*_____ arising from any subscriber applications
previously submitted by Contractor in Batches 15-30
and (ii) for each ______*_____ arising from any batch
of Subscriber authorizations submitted after Batch 30
to ______*___________ . Company shall pay Contractor
______*_____ for each ____*__________ arising from any
batch of subscriber applications submitted by
Contractor ______________________*_____________ to the
expiration of the term of the Agreement.
b. Company shall pay Contractor _______*_______ for each
______*_________ arising from (i) any subscriber
applications previously submitted by Contractor in
Batches 24-30, and (ii) any batch of subscriber
applications submitted by Contractor after Batch 30
to the expiration of the term of this Agreement.
c. Notwithstanding the provisions of paragraph 1.a
above, ________________*___________________________
_________________________*_________________________
__________________________*________________________
______________________________* __________.
d. In addition to the compensation payable pursuant to
Sections 1.a and 1.b of this Exhibit B, Company shall
pay Contractor _________________*___________________
if the sum of (i) the number of new ________*_______
customers for which Company paid Contractor prior to
__________*________________ and (ii) the number of __
_____*_______ arising from applications submitted by
Contractor on or after ______________________________
_____________*________________________, exceeds (iii)
________________*_______.
e. For a period of ___________*__________ following the
termination or expiration of this Agreement, Company
shall accept outstanding but not yet submitted
applications that were obtained by Contractor from
customers prior to the expiration or termination of
the Agreement or were distributed to customers prior
to the expiration or termination of the Agreement.
Contractor shall be compensated for these submitted
sales under the terms of this Agreement.
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
B-1
<PAGE> 55
CONFIDENTIAL TREATMENT
2. PAYMENT SCHEDULE
a. Subject to Section 2.b below, compensation payments
to Contractor shall be made according to the
following schedule:
Upon receipt of the Pic Report, Contractor shall
invoice Company for the applicable amount specified
in Section 1 above for each __________*________ and
______*_____ reflected on the Pic Report and for any
amounts then due pursuant to subparagraph (ii) below.
Upon receipt of each reconciliation file, Contractor
shall invoice Company for the applicable amount
specified in Section 1 above for each _____*________
or __________*_____________which has been changed to
_______*______or_________*_______status.
b. Commencing on the date forty-five days after March
31, 1995 and on each date forty-five days after March
31, June 30, September 30 and December 31 of each
year, Company shall calculate a ratio, the __________
______________________________________________________
______________________*_______________________________
______________________________________________________
("Test Ratio"). If the Test Ratio exceeds ____*____
(i.e., a ratio greater than______*____________to_____
__________________*______________________________),
______________________________________________________
____________________*_________________________________
__________________________________*___________________
______________________________________________________
_____:_______________________*________________________
In addition, Company shall conduct a
performance review evaluating the ____*____ rates of
______* ______ and of _______*___________arising from
applications submitted by Contractor during each such
quarterly period and who have been customers of the
Company for at least 90 days. If the percentage of
such customers with _____________*___________ exceeds
__________*____________, Company and Contractor shall
consult immediately as to appropriate actions to be
implemented by Contractor to reduce the percentage of
such customers.
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
B-2
<PAGE> 56
CONFIDENTIAL TREATMENT
[AT&T Logo]
September 15, 1995
Snyder Communications, L.P.
Democracy Center
6903 Rockledge Drive
Fifteenth Floor
Bethesda, Maryland 20817
Attn: Mr. Greg Bosiak
This Amendment No 3 (Contract No. LF9167D) sets forth the agreement between
AT&T Communications, Inc. ("Company") and Snyder Communications, L.P.
("Contractor") regarding Contractors marketing and selling of Company Long
Distance services to residential customers in the United States.
Company and Contractor are parties to that certain Professional Services
Agreement dated February 1994, as amended by Amendment No. 1 on September 27,
1994 and by Amendment No. 2 December 20, 1994. The terms and conditions of the
Agreement as it may be amended and supplemented, are incorporated herein and
made part hereof.
I. Company agrees to pay commissions to Contractor for the sale
of Company services in accordance with this agreement. The
work described in this Amendment will commence on September
15, 1995 and end on December 30, 1995 and will be viewed as a
trial for both Contractor and Company. The commission payment
per order accepted by Company shall be as follows:
A. Contractor shall be compensated __________*_________
for each _________________*_____________ that changes
their long distance PIC to Company ______*____, and
_____________*______________________________.
B. Compensation to Contractor is for sales that are
"'Credited" ______*_____________________. Credited
_______________*____________ are defined as eligible
_____*_________ as defined and required by Companies
_______*_______________ systems.
C. During the term of this Amendment, Contractor shall
market and sell Company Long Distance service known
as ____________________*________________________ to
residential consumers in the United States who
currently are customers of other Long Distance
Carriers only when taking a PIC to AT&T. Contractor
may communicate an offer of a _________*_____,
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
<PAGE> 57
Amendment No. 3
Contract No. LF9167D
CONFIDENTIAL TREATMENT Page 2
which includes ___*__ to Customer, said offer will be
paid by Company directly to Customer.
D. Contractor shall not give any portion of any
commission to any __________*_____________ and shall
not directly or indirectly give any payment or other
incentive to any __________________*_______________
as an inducement to purchase Company's services that
is not authorized in writing by Company. Contractor
agrees that violation of this provision shall be
grounds for immediate termination of this Agreement
and immediate return to Company of commissions paid
in respect of the affected ____________*___________.
E. Company reserves the right to debit from commission
payments due Contractor any amount paid or requested
to be paid by Contractor for the sale of Services
made by an employee or representative of Contractor
who has not been authorized, certified or trained by
Company to sell such Services.
F. If a Local Exchange Company (LEC) rejects the order
for any reason, Contractor shall credit Company on
the subsequent invoice the entire amount of any
previously paid commission.
G. Commission payments may be debited for all incorrect
orders that are caused by Contractor error or
negligence.
H. The cost of implementing all systems, training coupon
processing and curing, coupon printing, quality
assurance and all other performances under this
Agreement, including but not limited to, any and all
taxes, and customer satisfaction/complaint handling
costs, shall be borne wholly by Contractor.
II. Sales efforts will be focused in existing locations, with a
concentration of efforts in the attached ADI's. (Exhibit A)
III. Contractor will not receive any lists from Company.
Contractor commits to sell __________________________________
__________________*__________, and will go not further unless
specified in writing from Company. It is expressly understood
an agreed by Company that projections set forth in this
amendment shall be viewed as a trail.
IV. Company reserves the right to cancel the trial at any time.
V. Contractor shall submit subscriber applications for Domestic
Consumers and invoice Company for ________________*___________,
and Company shall transmit PIC reports for ___________*______
and shall make payment to Contractor in accordance with the
procedures established under this Agreement.
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
<PAGE> 58
Amendment No. 3
Contract No. LF9167D
CONFIDENTIAL TREATMENT Page 3
VI. Contractor shall invoice Company monthly, and all invoices
shall reflect this Agreement Number, and shall be submitted in
duplicate to
AT&T Communications - DCCS
Room 3450I11
295 North Maple Avenue
Basking Ridge, NJ 07920
Attn: Tim Heidemann
Contractor shall submit in writing mid-month estimates of total commissions to
be incurred in given month, no later than the 10 calendar day.
The maximum expenditure against this Amendment No. 3 shall not exceed _________
______________*____________________________________.
Subject to the above maximum, notwithstanding any other provisions in this
Amendment, the total amount payable by Company for the Work shall be determined
by applying the stated rate of compensation to the work actually performed by
Contractor. Company shall not render work and company shall not be required to
pay for work in excess for the amount stipulated in this Amendment, unless
Contractor has first secured an amendment to the Agreement authorizing the
increased expenditure.
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
<PAGE> 59
Amendment No. 3
Contract No. LF9167D
CONFIDENTIAL TREATMENT Page 4
All other terms and conditions to remain unchanged.
<TABLE>
<S> <C>
ACCEPTED BY: SNIDER COMMUNICATIONS, L.P. AT&T CORP.
/s/ Michele D. Snyder /s/ Mary B. Aromin
- ------------------------------------------- ---------------------------------------------
Signature Signature
Michele D. Snyder Mary B. Aromin
- ------------------------------------------- ----------------------------------------------
Name Name
Executive Vice President Procurement Manager
- -------------------------------------------- ----------------------------------------------
Title Title
October 18, 1995 September 18, 1995
- -------------------------------------------- ----------------------------------------------
Date Date
</TABLE>
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
<PAGE> 60
Amendment No. 3
Contract No. LF9167D
CONFIDENTIAL TREATMENT Page 5
EXHIBIT A
Top ADI's for Concentration
<TABLE>
<CAPTION>
ADI Code ADI Name
<S> <C>
9 *
---------------------
13 *
---------------------
51 *
---------------------
65 *
---------------------
19 *
---------------------
109 *
---------------------
201 *
---------------------
11 *
---------------------
3 *
---------------------
127 *
---------------------
25 *
---------------------
67 *
---------------------
15 *
---------------------
241 *
---------------------
203 *
---------------------
271 *
---------------------
15 *
---------------------
73 *
---------------------
371 *
---------------------
</TABLE>
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
<PAGE> 61
Confidential Treatment
AMENDMENT NO. 4 TO PROFESSIONAL SERVICES AGREEMENT
THIS AMENDMENT NO. 4 TO PROFESSIONAL SERVICES AGREEMENT
("Amendment No. 4") is entered into this 22nd day of December, 1995 by and
between AT&T Communications, Inc. (the "Company") and Snyder Communications,
L.P. (the "Contractor") and amends, supplements and modifies that certain
Professional Services Agreement, dated as of February 1994, by and between the
Company and the Contractor, as amended by the First Amendment to Professional
Services Agreement, dated as of September 27, 1994, by and between the Company
and the Contractor, by Amendment No. 2 to Professional Services Agreement,
dated as of December 20, 1994, by and between the Company and Contractor, and
by Amendment No. 3 to Professional Services Agreement, dated as of September
15, 1995, by and between the Company and Contractor (such agreement, as
amended, is hereinafter referred to as the "Agreement").
The Agreement is hereby amended as follows:
1. The second sentence of Article 2 is amended to read
in its entirety as follows:
"This Agreement shall expire on December 31, 1997."
2. The name and address to which invoices shall be
submitted by the Contractor pursuant to Article 4 is amended as follows:
Vilma Viola
AT&T Communications, Inc.
Room C380W29
412 Mt. Kemble Avenue
Morristown, NJ 07960
3. The text of Article 5 is amended to read in its
entirety as follows:
"Company's representative is Paul Walker or
such other person as may be designated in writing by
Company from time to time. Contractor's
representative is Susan Marentis or such other person
as may be designated in writing by Contractor from
time to time."
4. The names and addresses to which notices or demands
must or may be given or made pursuant to Article 6 is amended as follows:
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
<PAGE> 62
Confidential Treatment
If to Company:
Paul Walker
AT&T Communications, Inc.
Room C362
412 Mt. Kemble Avenue
Morristown, NJ 07960
Telephone: (201) 644-7121
Facsimile: (201) 644-1996
If to Contractor:
Susan Marentis
Snyder Communications, L.P.
Democracy Center Two
6903 Rockledge Drive, 15th Floor
Bethesda, Maryland 20817
Telephone: (301) 468-1010
Facsimile: (301) 493-5165
5. The reference to "Section 1(d) of Exhibit B"
contained in the second sentence of Article 14 shall be amended to read
"Section 1(e) of Exhibit B."
6. The second sentence of Section 6 of Exhibit A is
amended to read in its entirety as follows:
"Contractor may provide outbound
telemarketing services for purposes of marketing and
selling Company long distance services for consumers
to Foreign-Origin Consumer Market communities in the
United States."
7. A new Section 19 is hereby added to Exhibit A, which
Section shall read in its entirety as follows:
"19. Contractor projects that it shall
obtain __________________*__________________per year
during each of 1996 and 1997. Of such ______________
________________*_________________________, Contractor
projects a Strategy Mix of approximately ____________
__________*___________________ obtained through Field
Marketing Activities and approximately ______*_______
obtained through telemarketing activities. With
respect to such ________________*___________________
projected to be obtained through telemarketing
activities, Contractor projects a Market Mix of
approximately _______________*______________________
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
-2-
<PAGE> 63
customers, approximately ___________*_____________
customers and approximately ___*__ customers from
other consumer groups comprising the Foreign-Origin
Consumer Market. With respect to such ____________
_______________________*___________________________
projected to be obtained through Field Marketing
Activities, Contractor projects a Market Mix of
approximately ______________*_____________ customers,
approximately _________*_________ customers,
approximately _________________________*___________
customers, and approximately * customers from
other consumer groups comprising the Foreign-Origin
Consumer Market.
Contractor agrees that, to the extent that it
does not obtain during each of 1996 and 1997, through
a combination of Field Marketing Activities and
telemarketing activities, at least _____*_____ of the
aggregate number of _______________*________________
projected above for any consumer group (such annual
minimum aggregate number of _______*_____________
is herein referred to as the "Target
Number"), the compensation specified in Section 1(a)
of Exhibit B shall be adjusted as specified in the
following paragraph. The Target Number for each
consumer group is as follows: (i)_________________
____*_______________, (ii) ________________________
_____________*_____________, (iii) ________________
_______________*____________________________ and (iv)
_______________* ________________ from other consumer
groups comprising the Foreign-Origin Consumer Market.
The difference between (a) the Target Number
for each consumer group specified above and (b) the
number of ________*__________ actually obtained from
such consumer group is herein referred to as the
"Shortfall Number." In the event that Contractor
obtains fewer than, but more than _____*____ of, the
Target Number of _____________*_____________ from any
consumer group specified above, Contractor shall
receive (i) ______*_______ per __________*__________
for that number of __________*_________ obtained from
such consumer group equal to the Shortfall Number and
(ii) ______*_______ per ______*_____________ for that
number of _________*______________ obtained from such
consumer group that exceeds the Shortfall Number. In
the event Contractor obtains fewer than ____*______ of
the Target Number of _________*______________ from any
consumer group, Contractor shall receive _____*______
per ________*_________ obtained from such consumer
group.
In the event that Contractor obtains the
Target Number for each consumer group specified
above, Company shall pay Contractor ____*______to be
determined in accordance with Section 1(d) of Exhibit
B."
8. A new Section 20 is hereby added to Exhibit A, which
Section shall read in its entirety as follows:
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
-3-
<PAGE> 64
"20. Contractor shall use its best efforts
to ensure that Pic Disputes do not exceed (a) ___*___
during the first quarter of 1996 and (b)____*________
during the remainder of the term of the Agreement."
9. A new Section 21 is hereby added to Exhibit A, which
Section shall read in its entirety as follows:
"21. On or prior to April 1, 1996,
Contractor shall implement a "Mystery Shopper"
customer satisfaction program with respect to
services provided by Contractor hereunder. Such
program shall be reviewed and approved by Company's
ICLD division prior to implementation."
10. A new Section 22 is hereby added to Exhibit A, which
Section shall read in its entirety as follows:
"22. Contractor and Company agree that in
the event that the percentage of___________________
_______________________*___________________________
within an ADI shall exceed ___________*____________,
Company will take immediate action, which may include
requiring Contractor to cease operations in such
ADI."
11. Effective as of January 1, 1996, the second sentence
of Section 1 (a) of Exhibit B shall be amended to read in its entirety as
follows:
"Company shall pay Contractor (i) ___*____
for each _______*____________ arising from any batch
of subscriber applications submitted by Contractor
from January 1, 1995 to December 31, 1995 and (ii)
subject to the provisions of Section 19 of Exhibit A,
___*_____ for each ______*__________ arising from any
batch of subscriber applications submitted by
Contractor from January 1, 1996 to the expiration of
the term of the Agreement."
12. Effective as of January 1, 1996, Section 1(c) of
Exhibit B shall be amended to read in its entirety as follows:
"Notwithstanding the provisions of paragraph
1.a above, Company shall not be obligated to pay
Contractor for the _________________*___________
__________________*______________________________
____________________________*____________________
______*__________."
13. Effective as of January 1, 1996, a new sentence shall
be added to end of Section 1(d) of Exhibit B, which sentence shall read as
follows:
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
-4-
<PAGE> 65
"In the event that Contractor obtains the
Target Number of _______________*___________ for each
consumer group specified in Section 19 of Exhibit A
in 1996 and/or 1997, Company shall pay Contractor, in
addition to compensation otherwise payable under the
Agreement, _________________*________________ for each
year that such Target Numbers are obtained."
14. The first sentence of Section 2(a) of Exhibit B is
amended to read in its entirety as follows:
"Subject to Section 2.b below, compensation
payments to Contractor shall be made according to the
following schedule:
Upon receipt of the Pic Report, Contractor
shall invoice Company for the applicable amount
specified in Section 1 above for each _____*________
and ________*________________ reflected on the Pic
Report."
15. Except as specifically provided in this Amendment No.
4, all other terms, provisions, conditions and covenants contained in the
Agreement shall remain in full force and effect.
16. In the event any conflict shall arise with respect to
interpretation or enforcement between the provisions of this Amendment No. 4
and the provisions of the Agreement, the provisions of this Amendment No. 4
shall control the resolution of such conflict.
IN WITNESS WHEREOF, the Company and the Contractor have
executed this Amendment No. 4 to Professional Services Agreement as of the date
and year first written above.
<TABLE>
<S> <C>
SNYDER COMMUNICATIONS, L.P. AT&T COMMUNICATIONS, INC.
BY: /s/ Daniel M. Snyder BY: /s/ Shaun P. Gilmore
- ------------------------------ ---------------------------------
NAME: Daniel M. Snyder NAME: Shaun P. Gilmore
- ------------------------------ ---------------------------------
TITLE: President and CEO TITLE: Vice President
- ------------------------------ ---------------------------------
</TABLE>
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
-5-
<PAGE> 1
EXHIBIT 10.3
CONFIDENTIAL TREATMENT
AUTHORIZED SALES AGENT AGREEMENT
AGREEMENT made this 16th day of February 1996, by and between MCI
TELECOMMUNICATIONS CORPORATION ("MCI"), 1801 Pennsylvania Avenue, N.W.,
Washington, D.C. 20006, a Delaware corporation, and SNYDER COMMUNICATIONS, L.P.
("Agent"), with principal offices located at 6903 Rockledge Drive, Bethesda, MD
20817.
WHEREAS, MCI wishes to expand all commercial entities access to __________
__*______________, ______________*___________, and ____________*_______________
_________________________ as described in __________________*_________________,
any state tariffs, and any amendments thereto or successor tariffs (together,
the "Tariff"); and _________________*_________________, __________*____________
______________ and ______________*______________ (the "MCI Services").
WHEREAS, Agent desires to market the MCI Services set forth herein as an
independent Authorized Sales Agent of MCI;
NOW, THEREFORE, the parties agree as follows:
1. Grant of Agency.
Subject to the terms of this Agreement, Agent is hereby appointed an
independent agent authorized to solicit in the Territory (as defined in
Exhibit C), on behalf of MCI, commercial customers (as distinguished from
residential customers) for MCI Services.
2. ___________________________*__________________________.
a. The _________________________*______________________________ has
three (3) potential applications. The first is the
_______________________*_______________________, which is
________________________________________________________. The
second is the _____________________________*_________________________
which is ____________________________*_______________________________
_____________________________. The third is the ____________________
_______________________________*_____________________________________
which is _____________________________*______________________________
________________________________.
b. With respect to ___________________________*________________________,
Agent shall not be required to comply with the provisions
contained in Section 15.a., b. or c., Non-Competition, of this
Agreement.
3. Definitions.
a. Account. For purposes of this Agreement, Account shall mean a
commercial entity which purchases MCI Services (which services are
identified in the first WHEREAS clause, above) in response to
solicitation by Agent.
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
<PAGE> 2
CONFIDENTIAL TREATMENT
b. ___________________________________*__________________________________
c. ___________________________________*__________________________________
d. ___________________________________*__________________________________
e. ___________________________________*__________________________________
f. ___________________________________*__________________________________
g. ___________________________________*__________________________________
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
-- 2 --
<PAGE> 3
CONFIDENTIAL TREATMENT
h. ___________________________________*__________________________________
i. ___________________________________*__________________________________
j. ___________________________________*__________________________________
4. Commitment.
a. Agent agrees that during the Term of this Agreement the ______*______
________ in each month shall be _____________________________________
_____________________________________*_______________________________
__________________________________ as a material condition of this
Agreement.
Month of Term One *
----------------- ---------------
1 - 11
12
Month of Terms Two
Through Five
--------------------
1 - 12
b. Agent agrees that _____________________*____________________ of the
________________________*__________________________ shall derive
from revenue of the ___________________*____________________. If
during any month of the Term of this Agreement Agent fails to reach
the _______________________________*______________________*___________
under this Section 4(b), then MCI may, at its discretion, terminate
this Agreement.
c. Agent agrees that an amount ______________________*__________________
of the ______________________*____________________ sold by Agent shall
derive from the sale of MCI's ___________*____________. If during
any six (6) month period of the Term of this Agreement Agent fails
to reach the ______________*__________________ under this
Section 4(c), then MCI may, at its discretion, terminate this
Agreement.
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
-- 3 --
<PAGE> 4
CONFIDENTIAL TREATMENT
5. Sales Agency.
a. Agent hereby accepts the appointment by MCI as its authorized
representative to solicit orders from commercial customers for MCI
Services subject to the terms and conditions of this Agreement.
b. Neither ____________*___________ nor commission shall be payable on
_________________________*___________________________ derived
from any person or entity that is an ______________*_____________ or
____________*____________ account.
c. Upfront Payment.
(1) Subject to Sections 5.c.(2), 5.c.(3), 5.c.(4), 5.c.(5) and
5.c.(6), below, MCI shall pay Agent _____________*______________
for each ___________*_________ and each ____________*___________
which receives either _____________*______________ or _____*____
(__________________*__________________ and ____________*_______),
that is installed in MCI's system and approved by MCI (which
approval shall be according to criteria developed by MCI and
which approval may be determined after installation) ("Approved
and Installed"), and that is designated by customer to be changed
to MCI as the Primary Interexchange Carrier ("PIC"), which PIC
designation is ______________*_______________. MCI's systems
that measure PIC status and disconnects will be operated with
the same degree of efficiency as used for MCI's internal orders.
MCI is not responsible for attempted PICs for which no response
is received, or if rejection is received from the customer, which
MCI believes may total ____________*____________of all submitted
______*_____. The ___________*____________ for each ____*______
number and ___________*___________ receiving ________*__________
shall be ________________________*_____________________________;
the __________*__________ for each ____________*________________
______________ and __________*___________ receiving _____*______
________ under a _______________*_________________ agreement
shall be _______________________*________________________.
(2) If (i) a ________________*________________ or__________*_________
________ has ___*____ within the first ninety (90) days after
such _________________*________________ was installed or _______
_________*___________ was _______________*______________ but
the charges for such __*___ are later ____________*____________;
or, (ii) a ____________________*_____________________ or
______________*_______________ was ________________*____________
such confirmation is not received within forty-five (45) days
of payment of the ______________*____________ for such _________
______*______, then MCI will either deduct the ________*________
____________ MCI paid Agent for
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
-- 4 --
<PAGE> 5
CONFIDENTIAL TREATMENT
such _______________*________________ or __________*____________
from the next consecutive commission payments or if on the day
the last commission is due and payable, MCI has not fully
deducted the __________*__________ MCI paid Agent for such _____
______________*________________ or ______________*_____________,
on that day Agent shall pay MCI any amounts owed.
(3) Notwithstanding Section 5.c.(1), MCI will not make an __________
_______*________ on any _________________*______________________
or ________________*______________. If Agent receives an ______
___________*_____________ on any such ___*____, Agent shall
repay to MCI such ___________________*____________________
received.
(4) Notwithstanding Section 5.c.(1) , MCI will not make an _________
_______*_________ on any __________________*____________________
or ___________* __________ converted to MCI from _______________
_______________*_________________ (formerly know as ______*___).
If Agent receives an ____________*______________ on any
such ___*___, Agent shall repay to MCI the __________*__________
__________ received.
(5) Notwithstanding Section 5.c.(1), MCI will pay ________*_________
on only _______*________ domestic _____________*________________
_________ per ___*___ and ______*______ international __________
_________*____________ per __*__ when such ___*__ are approved
and installed in MCI's system. If Agent receives an ___________
_______*_______ on more than __*__ such number per __*__, Agent
shall repay to MCI the excess ________________*_________________
received.
(6) Notwithstanding Section 5.c.(1), MCI will not pay ______________
______*_________ on ________*_______ and ____________*__________
_______ and features _________________*_________________.
(7) MCI shall pay Agent a ___________________*__________________
for each _________________*_________________ and _______*_______
which received ________________*_____________________ during
the period of November 1, 1995 through December 31, 1995
pursuant to the MCI/Agent ASA Agreement executed on June 27,
1994 ("Old MCI/Agent ASA"). Said retroactive payment shall
equal the ______________________*_______________________________
____________________________________________ set forth in this
Agreement minus the ________________________*___________________
_______________ set forth in the Agent's Old MCI/Agent ASA.
d. Estimated Payment.
_________________________________*___________________________________
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
-- 5 --
<PAGE> 6
CONFIDENTIAL TREATMENT
_________________________________*_______________________________________
_________________________________*_______________________________________
_________________________________*_______________________________________
e. Non-Long Distance Services.
Revenues attributable to ____________________*_______________________
shall count towards the Agent's __________________*__________________
_______________________, however, revenues from _____________________
______________*______________ shall not be commissionable.
f. ANI Underutilization
Agent's ANI Average must equal or exceed ____________________________
_________________________________*__________________________________.
If Agent's ANI Average is more than _________________________________
________________*___________________________ but less than the
_____________*______________, then MCI may, at its discretion
terminate or renegotiate this Agreement at any time. Furthermore,
if Agent's ___*___ Average is less than ______________*______________
___________, then MCI may, at its discretion terminate this
Agreement at any time and Agent shall pay MCI ___________*___________
__ that Agent falls short of the _______________*___________________.
MCI shall measure compliance with the ____________*__________________
restriction on a semi-annual basis, with the calculation being done
as soon as the data is available for the preceding calendar
semi-annual period.
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
-- 6 --
<PAGE> 7
CONFIDENTIAL TREATMENT
g. When an Account has one or more invoices ninety (90) days or more
past due, MCI may declare the amounts owed from such Accounts to be
bad debt. MCI shall calculate the amount of bad debt generated by
Agent's Accounts from time to time, but in no event more often than
once every three (3) months ("Quarter"). In the event that bad debt
from sales solicited by Agent equals or exceeds a bad debt limit,
which limit shall initially be five percent (5%) of the average
monthly Total Revenue for the Quarter prior to the date of bad debt
calculation, MCI may, at its discretion, deduct from any subsequent
commission payments to Agent commissions paid on bad debt charged
off in the Quarter prior to the date of calculation. _______________
_____________________________________________________________________
________________________________*____________________________________
_____________________________________________________________________
________________________________________________. MCI may, in its
reasonable discretion and from time to time, change the amount of
the bad debt limit, though MCI shall not change the bad debt limit
more than two (2) times in a calendar year. No failure or refusal
by MCI to offset any amount of bad debt shall be deemed a waiver or
forfeiture of any right of MCI to offset such amounts at a later
time.
As an example, if in Quarter One, ___________________________________
_____________________________________________________________________
________________________________*____________________________________
_____________________________________________________________________
_____________________________________________________________________
___________________________________________. To calculate the
deduction of commission and fees paid on the bad debt, ______________
_____________________________________________________________________
_____________________________________________________________________
________________________________*____________________________________
_____________________________________________________________________
_____________________________________________________________________
____________________.
MCI will use the same degree of effort to collect revenue associated
with an Accounts as is used for MCI's accounts. Upon request by
Agent, MCI will use its best efforts to provide Agent with the
necessary information, as deemed by MCI, to identify bad debt
customers.
h. Agent shall be permitted to solicit orders by means of telemarketing
as long as Agent is in compliance with the following provisions:
(i) Agent shall not conduct telemarketing through any subagent,
assignee or third party contractor without the prior, express
written consent of MCI; (ii) no PIC change order shall be submitted
without third party verification in accordance with FCC regulations;
(iii) Agent
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
-- 7 --
<PAGE> 8
CONFIDENTIAL TREATMENT
may not use any third party verifier ("TPV") without the prior review
and written approval of such TPV by MCI; (iv) Agent's TPV must be
capable of transferring information on delivery and verification of
orders to MCI in a computer readable format determined by MCI; and
(v) Agent shall not change the TPV without prior, written notice to
and approval from MCI. Upon request, MCI will provide a list of
MCI-approved TPVs to Agent.
Agent shall be responsible for the costs and actions of TPV and MCI
shall have no liability for any failure or mistake of TPV, either in
transmitting data to MCI or otherwise. Agent shall indemnify and
hold MCI harmless from any loss, cost, claim, fine or demand
associated with any act or omission of either Agent or TPV in
connection with telemarketing. MCI may deduct from any commission or
fee due Agent any such loss, cost, claim or fine imposed upon MCI
which is covered by this indemnity.
i. Agent will not solicit customers that allow others to use their long
distance services for a fee ("Calling Houses"). If Agent solicits a
Calling House, Agent will pay all the uncollectible amounts owed to
MCI by such Calling House.
j. Agent may not delegate all or any portion of the agency appointment
under this Agreement to any third party without prior express written
consent of MCI and under a written agreement satisfactory to MCI.
Breach of this provision shall be deemed an irregular marketing
activity. MCI shall not be liable to pay commissions under this
Agreement or otherwise for revenue generated by any unauthorized
subagent.
k. MCI agrees to consider Agent, provided that Agent pricing and
services are competitive, as an MCI vendor for sales event
opportunities that may become available during the term of this
Agreement and for which Agent services, at MCI's discretion, are
appropriate.
6. Sales Leads.
a. In addition to soliciting orders for the MCI Services, Agent may
submit leads for the following MCI services: _________*________
services and ________*________ services ("Lead Services").
b. All leads shall be submitted in writing by Agent. Agent shall only
submit Leads generated for prospects in the territory identified in
Exhibit C.
c. MCI at its discretion, shall decide whether revenues from leads that
result, within _______________________*__________________________ of
receipt of the lead, in a sale of a Lead Service
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
-- 8 --
<PAGE> 9
CONFIDENTIAL TREATMENT
for which customer was not a subscriber on or within _________*______
days prior to Lead submission date, shall be counted towards
Agent's _________________*_________________. However, revenue from
accounts obtained through leads shall not exceed _________*__________
of the Agent's _________________________*___________________________.
Furthermore, Agent understands that MCI will not pay commissions for
said leads.
7. Relationship of Parties.
a. Agent will have no authority to bind MCI by contract or otherwise or
to make representations as to the policies or procedures of MCI other
than as specifically authorized by this Agreement. MCI and Agent
acknowledge and agree that their agency relationship arising from
this Agreement does not constitute or create a general agency, joint
venture, partnership, employee relationship or franchise between them
and that Agent is an independent contractor with respect to the
services provided by it under this Agreement.
b. Agent will identify itself as an Authorized Sales Agent of MCI only
with respect to the MCI Services and will otherwise identify itself
as an independent business. Unless specifically authorized in
writing, neither MCI nor Agent will make any express or implied
agreements, guarantees or representations, or incur any debt, in the
name of or on behalf of the other.
c. Agent's employees will not be or be deemed to be MCI employees or
joint employees. Agent assumes full responsibility for the acts of
its employees and for their supervision, daily direction and control.
MCI will not be responsible for worker's compensation, disability
benefits, unemployment insurance, withholding taxes, social security
and any other taxes or benefits for Agent's employees.
8. Training and Certification.
a. MCI shall provide product sales training for each of the MCI Services
as provided for in Exhibit A. Agent and Agent employees may not
solicit orders for any MCI Service until trained in product sales for
that product by MCI.
b. Any additional training and charges for training will be mutually
agreed upon by the Parties.
9. Sales Aids.
a. Agent shall use only marketing materials and order forms approved in
advance by MCI, and MCI shall reimburse Agent for the production
costs for such approved materials and forms in any amount approved in
advance by MCI.
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
-- 9 --
<PAGE> 10
CONFIDENTIAL TREATMENT
b. AGENT SHALL MAKE NO REPRESENTATIONS OR WARRANTIES RELATING TO THE
SERVICES EXCEPT AS SET FORTH IN SALES LITERATURE APPROVED IN WRITING
BY MCI OR AS SET FORTH IN THE FORM OR FORMS OF ORDERS . PROVIDED
AGENT BY MCI, OR AS OTHERWISE EXPRESSLY PERMITTED BY MCI.
c. MCI will use its best efforts to provide Agent with agreed upon sales
support.
10. Reporting; Payment.
MCI will provide Agent with monthly commission reporting, which will
include the usage of each customer solicited by Agent and for which
commission is due hereunder. Exhibit B sets forth an example of such
reports, which may vary. In addition, MCI will use its best efforts to
provide Agent with mutually agreed upon reports necessary for Agent's
effective management of the MCI accounts.
11. Order Acceptance.
Agent expressly acknowledges that its appointment hereunder is as a sales
representative for MCI Services offered by MCI, that any solicitation by
Agent of orders from customers for the MCI Services will be subject to
MCI's acceptance, in its sole discretion, of such orders and the
availability, from time to time, of the MCI Services, and that MCI will
have no responsibility or liability whatsoever to Agent with respect to
the continued availability or operation of the MCI Services or MCI's
acceptance of, or failure to accept, orders therefore from customers
solicited by Agent.
After such time as the MCI Order Entry System ("OES") for agents is fully
operational in an electronic batch transfer mode, MCI and Agent will
review the performance of the OES and will attempt to reach a mutually
acceptable timeframe for MCI's generation of Agent's reports. Once an
agreement regarding the reporting timeframe has been reached, MCI will
provide Agent with the necessary information regarding the installation
and/or rejection of all ___*_____ received at MCI's Order Entry hub. If
the mutually agreed reporting timeframe is not sufficient for MCI to
provide Agent reports in timely manner, then MCI and Agent will negotiate
a mutually acceptable solution. The information provided by MCI will
consist of installation or rejection in the MCI billing system only, and
will not include information regarding LEC level status. MCI is not
liable for ____*_____ that are rejected by the LEC after the mutually
agreed upon reporting timeframe.
12. Standards of Conduct.
In performing duties under this Agreement, Agent will observe the highest
standard of integrity and fair dealing with members of the public. Agent
will do nothing which would
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
-- 10 --
<PAGE> 11
CONFIDENTIAL TREATMENT
tend to discredit, dishonor, reflect adversely upon or in any manner
injure the reputation of MCI.
13. Tradenames and Trademarks.
a. During the term of this Agreement, unless otherwise instructed by
MCI, Agent may refer to itself as an MCI Authorized Sales Agent, but
solely in connection with the marketing of MCI Services to commercial
customers hereunder. Agent may use MCI marks, tradename, and logo
design only in marketing materials, advertising, and promotional
literature (collectively, "Materials") in conjunction with its sale
of MCI products and services, provided that any usage of any MCI mark
or tradename in such Materials and the advertising claims associated
therewith, in each instance, has been approved in writing in advance
by MCI.
b. Agent acknowledges and agrees that: (i) the marks are owned by MCI,
(ii) it will do nothing inconsistent with such ownership, (iii) all
use of the MCI marks by it shall inure to the benefit of and be on
behalf of MCI, (iv) that nothing in this grant shall give it any
right, title or interest in MCI marks other than the right to use the
marks in accordance herewith, (v) it will not attack MCI's title to
the marks or the validity of this grant, and (vi) further agrees to
use MCI marks only in the form and manner prescribed from time to
time by MCI, and not to use any other trademark or service mark in
combination with any of MCI's marks without the prior written
approval of MCI.
c. This grant of a limited, nonexclusive authorization may not be
assigned to any other entity or party without the prior written
approval of MCI.
d. Agent agrees, at its own expense, to defend, indemnify and hold MCI
harmless from and against any and all claims, suits, actions,
proceedings, judgments, damages, liabilities, costs and expenses
(including attorneys' fees) arising either from use of MCI marks by
agent or any third party authorized by agent or advertising claims
made in connection therewith, other than a claim based on an
assertion by a third party either that MCI does not own the marks
and/or does not have the right to grant the authorization provided
herein, or that the substance of an advertising claim approved by MCI
is materially false or misleading.
e. Upon termination of this Agreement, any permission or right to use
Marks granted hereunder will cease to exist and Agent will
immediately cease any use of such marks and immediately cease
referring to itself as an MCI Authorized Sales Agent.
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
-- 11 --
<PAGE> 12
CONFIDENTIAL TREATMENT
14. Advertising Review.
a. Agent shall under no circumstances advertise MCI's products and
services without prior written approval.
b. Agent agrees to submit all advertising, claims language and marketing
materials (including but not limited to business letterhead, business
cards, print, radio or television advertising, press releases,
flyers, brochures, posters and LOAs) for prior written approval to:
Advertising Group
Office of the General Counsel
MCI Communications Corporation
10th Floor
1133 19th Street, N.W.
Washington, D.C. 20036
ATTN: Director, Advertising Group
15. Non-Competition/Confidentiality.
a. During the term of this Agreement, Agent will not promote, sell or
provide leads to commercial customers for the services of any other
person or entity that offers services identical or similar to any one
or more of the MCI Services.
b. After normal expiration of the term, or if MCI terminates this
Agreement pursuant to Section 16.(a)(i), Agent will not promote, sell
or provide leads to current MCI commercial customers for the services
of any other person or entity that offers services identical or
similar to any one or more of the MCI Services for as long as MCI is
paying a commission under this Agreement but in no event fewer than
ninety (90) days after termination.
c. In addition to all other legal rights or remedies available to MCI
under this Agreement, Agent will pay MCI an amount equal to
______________________*______________________ upon termination of
this Agreement for breach of sections 5(h), 12, 13, 15(a), (d), (e),
(f) by Agent. In addition, Agent will not promote, sell or provide
leads to current MCI commercial customers for the services of any
other person or entity that offers services identical or similar to
any one or more of the MCI Services for as long as MCI is paying a
commission under this Agreement but in no event fewer than ninety
(90) days after termination.
d. Any confidential specifications, drawings, sketches, data or
technical or business information, and any other confidential
material ("Information"), furnished or disclosed by MCI to Agent
hereunder, will be deemed the exclusive property of
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
-- 12 --
<PAGE> 13
CONFIDENTIAL TREATMENT
MCI. In addition, any customer names or lists identifying MCI
customers as such and related information or data ("Customer
Information") are the exclusive property of MCI, and are to be used
by Agent solely in the performance of its obligations and duties
hereunder and are to be returned to MCI upon termination of this
Agreement.
e. Any confidential specifications, drawings, sketches, data or
technical or business information, and any other confidential
material ("Information") , furnished or disclosed by Agent to MCI
hereunder, will be deemed the exclusive property of Agent.
f. During the term of this Agreement and for a period of three (3) years
after termination of this Agreement, Agent agrees not to reveal,
divulge, make known, sell, exchange, lease or in any other way
transfer any Information or Customer Information to any third party
or to utilize such Information or Customer Information in direct or
indirect competition with MCI or any of its other Agents. Agent
agrees that monetary damages for breach of its obligations under this
Section may not be adequate and that MCI will be entitled to
injunctive relief with respect thereto.
16. Term and Termination.
a. After the execution of this Agreement by both parties, this
Agreement shall become effective as of January 1, 1996, and shall
continue for one (1) year and will thereafter be renewed for an
additional term of one (1) year if Agent meets the conditions set
forth in this Agreement, not to exceed more than a total of five
terms, unless either party notifies the other in writing of its
desire to terminate the Agreement at least ninety (90) days prior to
the expiration of the initial term. This Agreement may be
terminated: (i) at any time by MCI on ninety (90) days prior written
notice to the Agent; (ii) for breach by Agent of any provision of
this Agreement provided that written notice of such breach has been
given to Agent and such breach has not been cured within thirty (30)
days after delivery of such notice; (iii) immediately upon notice by
MCI in the event MCI discovers any irregular marketing activity by
Agent or irregular customer activity by customers solicited by
Agent; (iv) at any time by MCI if after the sixth month of the
execution of this Agreement Agent's _____________*___________________
is ____________________*_________________________; (v) at any time
after December 31, 1996 by Agent on ninety (90) days prior written
notice to MCI.
b. If this Agreement terminates prior to the end of the scheduled one
(1) year term for any reason other than MCI's termination pursuant
to Section 16.a.(i), above, then: (i) all MCI obligations for
commissions and ________________*_____________ shall
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
-- 13 --
<PAGE> 14
CONFIDENTIAL TREATMENT
immediately cease; and (ii) any money owed to MCI from Agent shall
become immediately due and payable.
c. After the first year term of this Agreement, upon termination for any
reason other then a breach of the terms of this Agreement by Agent,
all commission obligations at the time of said termination shall be
payable by MCI in accordance to Section 5(c).
17. Insurance.
Agent will at all times during the term of this Agreement, at Agent's
sole expense, maintain _________________________*_________________________
against claims for _________________________*____________________________,
__________________________*________________________ and __________________
_______________*_____________________________ caused by or occurring in
connection with Agent's acts, omissions and/or misrepresentations. Such
insurance will name MCI as an additional insured in the amount of
________________*_____________________________ per occurrence. Each such
insurance policy will provide for not less than thirty (30) days prior
notice to all insureds of any modification, cancellation or nonrenewal.
Upon request of MCI, Agent will furnish proof satisfactory to MCI that
insurance coverage required is in effect.
18. Limitation of Liability.
a. Agent agrees to defend and hold MCI free and harmless from any loss,
claim, damage, liability cost, or expense (including without
limitation court costs, legal expenses and counsel fees) that MCI may
become liable for by reason of any act or omission of Agent, its
employees, officers, affiliates, subagent or contractors in marketing
the MCI Services, such as: misrepresenting to customers the MCI
Services or the terms under which the MCI Services are made available
by MCI; breach of this Agreement; or, irregular marketing activities.
b. MCI will have no liability to Agent for commissions that might have
been earned hereunder but for the inability or failure of MCI to
provide MCI Services to any person solicited by Agent or in the event
of discontinuation or modification of the MCI Services.
c. Agent acknowledges and agrees that MCI directly or through other
sales agents may offer MCI Services and that Agent will be entitled
to no compensation for sales made through such other channels. In
the event MCI receives conflicting orders for services from different
agents or MCI employees, MCI may in its sole discretion determine who
will receive credit for such orders. In the event of such conflicts
relating to orders for MCI Services, MCI may in its discretion
compensate Agent as if the order were for a service subject to
commission.
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
-- 14 --
<PAGE> 15
CONFIDENTIAL TREATMENT
d. NEITHER PARTY WILL BE LIABLE TO THE OTHER FOR SPECIAL, INDIRECT,
CONSEQUENTIAL DAMAGES, WHETHER OR NOT FORESEEABLE, OR PUNITIVE
DAMAGES.
e. In the event MCI is required to enforce or preserve its rights
hereunder, Agent will pay all of MCI's reasonable attorney's fees and
costs, including allocable costs of in-house counsel, incurred in
connection with any such successful action.
f. In the event Agent is required to enforce or preserve its rights
hereunder, MCI will pay all of Agent's reasonable attorney's fees and
costs, including allocable costs of in-house counsel, incurred in
connection with any such successful action.
19. Notices.
Notices to be given pursuant to this Agreement will be in writing and will
be deemed to have been duly and properly given on the earlier of (a) the
date such notice has been received or (b) five (5) days after deposit of
such notice in the United States Mail, Postage prepaid, to be delivered by
certified mail, return receipt requested, addressed to the Agent at the
address given above or at such address as it may designate in writing from
time to time and addressed to MCI at:
Director, Alternate Channels
Agent Sales
MCI Telecommunications Corporation,
Business Markets
Three Ravinia Drive
Atlanta, Georgia 30346
or at such address it may designate in writing from time to time.
20. Compliance with Law.
a. Agent will, at its own expense, operate in full compliance with all
laws, rules and regulations applicable to, and maintain in force all
licenses and permits required for, its performance under this
Agreement.
b. Agent will notify MCI in writing immediately of the commencement or
threatened commencement of any action, suit or proceeding, and of the
issuance or threatened issuance of any order, writ, injunction, award
or decree of any court, agency or other governmental instrumentality,
involving Agent's activities under this Agreement or which may affect
Agent's ability to perform its obligations hereunder.
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
-- 15 --
<PAGE> 16
CONFIDENTIAL TREATMENT
21. Non-Waiver.
No failure by either party to take action on account of any default by the
other will constitute a waiver of any such default or of the performance
required of the other.
22. Impossibility of Performance.
Neither MCI nor Agent will be liable for loss or damage or deemed to be in
breach of this Agreement if its failure to perform its obligations results
from (a) compliance with any law, ruling, order, regulation, requirement
of any federal, state or municipal government or department or agency
thereof or court of competent jurisdiction; (b) acts of God; (c) acts or
omissions of the other party; (d) fires, strikes, war, insurrection or
riot; (e) or any other cause beyond its reasonable control. Any delay
resulting therefrom will extend performance accordingly or excuse
performance, in whole or in part, as may be reasonable.
23. Binding Effect.
This Agreement will be binding upon and inure to the benefit of the
parties, their successors and assigns; provided, however, that Agent may
not assign or otherwise transfer this Agreement or any of its interest
herein without the prior and express written consent thereto by MCI.
Neither the whole nor any part of the interest of Agent in this
appointment will be transferred or assigned by operation of law.
24. Severability.
No provision of this Agreement which may be deemed unenforceable will in
any way invalidate any other provisions of this Agreement, all of which
will remain in full force and effect.
25. Arbitration.
Any dispute arising out of or related to this Agreement, which cannot be
resolved by negotiation, shall be settled by binding arbitration in
accordance with the J.A.M.S/ENDISPUTE Arbitration Rules and Procedures
("Endispute Rules"), as amended by this Agreement. The costs of
arbitration, including the fees and expenses of the arbitrator, shall be
shared equally by the parties unless the arbitration award provides
otherwise. Each party shall bear the cost of preparing and presenting its
case. The parties agree that this provision and the Arbitrator's
authority to grant relief shall be subject to the United States
Arbitration Act, 9 U.S.C. 1-16 et seq. ("USAA"), the provisions of this
Agreement, and the ABA-AAA Code of Ethics for Arbitrators in Commercial
Disputes. The parties agree that the arbitrator shall have no power or
authority to make awards or issue orders of any kind except as expressly
permitted by this Agreement, and in no event
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
-- 16 --
<PAGE> 17
CONFIDENTIAL TREATMENT
shall the arbitrator have the authority to make any award that provides
for punitive or exemplary damages. The Arbitrator's decision shall follow
the plain meaning of the relevant documents, and shall be final and
binding. The award may be confirmed and enforced in any court of
competent jurisdiction. All post-award proceedings shall be governed by
the USAA.
26. Controlling Law and Entire Agreement.
This Agreement, with Attachments, will be governed by the domestic laws of
the State of New York; constitutes the entire Agreement between Agent and
MCI with respect to the subject matter hereof; and supersedes all prior
Agreements and representations, written or oral, concerning the subject
matter herein. This Agreement cannot be changed or modified except by
written amendment signed by Agent and MCI.
27. Headings.
The section numbers and captions appearing in this Agreement are inserted
only as a matter of convenience and are in no way intended to define,
limit, construe or describe the scope or intent of such sections of this
Agreement, or in any way affect this Agreement.
28. Offer Expiration.
This offer shall remain open and be capable of being accepted by Agent
until February 23, 1996. Any and all prior offers made to Agent, whether
written or oral, shall be superseded by this offer.
SNYDER COMMUNICATIONS, L.P. MCI TELECOMUNICATIONS
CORPORATION
/s/ Michele D. Snyder /s/ Tom Schilling
- --------------------------- ----------------------------
Signature Signature
Michele D. Snyder Tom Schilling
- --------------------------- ----------------------------
Printed Name Printed Name
E.V.P./C.O.D. Director
- --------------------------- ----------------------------
Title Title
2/16/96 3/5/96
- --------------------------- ----------------------------
Date Date
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
-- 17 --
<PAGE> 18
CONFIDENTIAL TREATMENT
EXHIBIT A
TRAINING PLAN
MCI will develop a custom training module for Agent and will present said
training module at mutually agreed upon times and locations. All costs for
room, board and for Agent's personnel travel incidentals will be borne by the
Agent. Direct costs of initial training and materials will be borne by MCI.
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
-- 18 --
<PAGE> 19
CONFIDENTIAL TREATMENT
EXHIBIT B
SAMPLE MONTHLY REVENUE REPORT
AGENT NAME/MONTH/YEAR
<TABLE>
<CAPTION>
NET COMM COMM
INVOICE FED TAX ST TAX AMT RATE REVEN
------- ------- ------ --- ---- -----
<S> <C> <C> <C> <C> <C> <C>
Customer Name $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Account (#'s)
Customer Name
Account (#'s)
Customer Name
Account (#'s)
----- ----- ----- ----- ----- -----
Total $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
</TABLE>
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
-- 19 --
<PAGE> 20
CONFIDENTIAL TREATMENT
EXHIBIT C
TERRITORY
Agent may sell MCI Services or submit leads for Lead Services in ______________
_______________________*______________________________________.
* Text deleted pursuant to an application for Confidential Treatment under Rule
406 of the Securities Act of 1933 and filed separately with the Securities and
Exchange Commission.
-- 20 --
<PAGE> 1
EXHIBIT 10.4
SERVICING AGREEMENT
This Servicing Agreement is entered into effective as of this 30th day
of June, 1996 (the "Agreement"), by and between Snyder Communications, L.P. , a
Delaware limited partnership ("Snyder"), and U.S. News and World Report, L.P.,
a Delaware limited partnership ("USN").
RECITALS:
WHEREAS, Snyder is in the business of, among other things, creating
sponsored wallboard information centers (WallBoards(R)); and
WHEREAS, Snyder has developed a WallBoard(R) targeting senior
executives traveling through airports for corporate and private aircraft (the
"FBO WallBoard"); and
WHEREAS, the FBO WallBoard utilizes editorials from the U.S. News &
World Report, a magazine published by USN;
WHEREAS, USN provides Snyder with U.S. News & World Report editorials
for its FBO WallBoard in exchange for Snyder's agreement to permit U.S. News &
World Report to be a client sponsor of the FBO WallBoard; and
WHEREAS, Snyder and USN wish to memorialize their agreement with
respect to the FBO WallBoard as set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the adequacy and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Services Agreement. During the term of this Agreement, USN
agrees to provide Snyder with editorial and other relevant information from
U.S. News & World Report on an "as needed" basis for use in the FBO WallBoard
program, free of charge to Snyder. In exchange for the use of such information,
Snyder agrees to use such editorial and other relevant information only in its
FBO WallBoard program, and to include sponsor information for the U.S. News &
World Report as part of its FBO WallBoards, free of charge to USN.
2. Term. The term of this Agreement shall be from the date first
appearing above and shall continue until terminated by either party hereto upon
ninety (90) days prior written notice to the other party.
3. No Assignment. USN and Snyder shall not have the right to
assign this Agreement or any other right or obligation hereunder without the
prior written consent of the other party. The covenants and conditions herein
contained shall, subject to the provisions as to assignment, apply to and bind
the successors and assigns of the parties hereto.
1
<PAGE> 2
4. Entire Agreement. This Agreement constitutes the entire
agreement of the parties and supersedes all prior or contemporaneous
communications between the parties (whether written or oral) with regard to its
subject matter.
5. Governing Law; Jurisdiction. This Agreement shall be
construed and enforced in accordance with the laws of the State of Maryland
(without regard to the conflict of law provisions thereof). Each of the
parties hereto irrevocably consents to, and waives any objection to the
exercise of, personal jurisdiction by the state and federal courts of the State
of Maryland with respect to any action or proceeding arising out of this
Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
SNYDER COMMUNICATIONS, L.P.
By: Snyder Communications, Inc.,
its general partner
------------------------------------
By:
Title:
U.S. NEWS & WORLD REPORT, L.P.
By: U.S. News & World Report, Inc.,
its general partner
------------------------------------
By:
Title:
2
<PAGE> 1
EXHIBIT 10.5
LEASE AGREEMENT
DEMOCRACY CENTER
BETHESDA, MARYLAND
THIS LEASE AGREEMENT (the "Lease") is made as of the 30th day of July,
1992, by and between DEMOCRACY ASSOCIATES LIMITED PARTNERSHIP, a Maryland
limited partnership (hereinafter referred to as "Landlord"), and SNYDER
COMMUNICATIONS, L.P., a Delaware limited partnership (hereinafter referred to
as "Tenant").
RECITALS:
A. Landlord is the developer and owner of an office complex known
as Democracy Center, located at 6901-6905 Rockledge Drive, West Bethesda,
Maryland, situated on certain real property owned by Landlord (all such real
property is referred to herein as the "Land"). Said office complex consists of
one 15-story office building, two 9-story office buildings, three surface
parking areas, a recreation area, a plaza area and a 2-level below grade
parking structure serving all of the office buildings. Said office complex is
referred to herein as the "Office Complex."
B. Tenant desires to lease space in the Office Complex and
Landlord is willing to rent space in the Office Complex to Tenant, upon the
terms, conditions, covenants and agreements set forth herein.
NOW, THEREFORE, the parties hereto, intending legally to be bound,
hereby covenant and agree as set forth below.
ARTICLE I
THE PREMISES
1.1 Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord, for the term and upon the terms, conditions, covenants and agreements
herein provided, approximately 13, 000 square feet of rentable area on the
fifteenth (15th) floor of the fifteen story office building included as part of
the Office Complex which office building is known and referred to herein
interchangeably either as "Two Democracy Center" or as the "Building." The
space which is the subject of this Lease Agreement is hereinafter referred to
as the "Premises." The location and configuration of the Premises is outlined
in red on Exhibit A attached hereto and made a part hereof.
1.2 The lease of the Premises includes the right, together with
other tenants of the Office Complex and members of the public, to use the
common and public areas of the Office Complex subject to the rules and
regulations promulgated by Landlord hereunder, but includes no other rights not
specifically set forth herein. The lease of the Premises also is subject to
the covenants, conditions and restrictions of record.
1.3 Promptly after the Lease Commencement Date and, if applicable,
upon commencement of the Renewal Term described in Rider No. 1 to this Lease,
Landlord and Tenant shall enter
<PAGE> 2
into an agreement in substantially the form attached as Exhibit D to this
Lease, setting forth the exact number of square feet of rentable area included
in the Premises. The number of square feet of rentable area included in the
Premises shall be determined by Landlord's architect in accordance with the
provisions of Exhibit C hereto and Tenant shall have the right to review such
calculation. Tenant, at Tenant's sole cost and expense, shall have the right
to perform or cause to be performed a field measurement to verify the number of
square feet of rentable area in the Premises. If the number of square feet of
rentable area included in the Premises, as determined in accordance with the
preceding sentence, is different from the number calculated by Landlord's
architect, then Landlord and Tenant shall appoint an independent licensed
architect who shall be mutually agreeable to both Landlord and Tenant to
determine the number of square feet of rentable area in the Premises in
accordance with the provisions of Exhibit C attached hereto and made a part
hereof. Promptly after the architect jointly appointed by Landlord and Tenant
determines the number of square feet of rentable space in the Premises,
Landlord and Tenant shall enter into an amendment to this Lease setting forth
the exact number of square feet of rentable area included in the Premises, and
the Lease shall be deemed amended accordingly.
ARTICLE II
TERM
2.1 The term of this Lease (hereinafter referred to as the "Lease
Term") shall commence on June 5, 1992 (the "Lease Commencement Date") and shall
continue through June 15, 1993 unless such Lease Term shall be terminated
earlier in accordance with the provisions hereof. The term "Lease Term" shall
include any and all renewals and extensions of the term of the Lease.
2.2 Promptly after the Lease Commencement Date and, if applicable,
upon commencement of the Renewal Term described in Rider No. 1 to this Lease,
Landlord and Tenant shall execute, in recordable form, a written declaration
setting forth the Lease Commencement Date, the date upon which the Lease Term
will expire and the other information set forth therein. The form of such
declaration is attached hereto as Exhibit D, and is made a part hereof.
2.3 In the event that delivery of possession of the Premises to
Tenant is delayed, regardless of the reasons or causes of such delay, this
Lease shall not be rendered void or voidable as a result of such delay, and the
term of this Lease shall commence on the Lease Commencement Date. Furthermore,
Landlord shall not have any liability whatsoever to Tenant on account of any
such delay.
2.4 For purposes of this Lease, the term "Lease Year" shall mean a
period of twelve (12) consecutive calendar months commencing on the first day
of the month in which the Lease Commencement Date occurs and each successive
twelve (12) month period, except that if the Lease Commencement Date shall
occur on a date other than the first day of a month, then the first Lease Year
shall also include the period from the Lease Commencement Date to the first day
of the following month.
-2-
<PAGE> 3
ARTICLE III
BASE RENT
3.1 Commencing on October 1, 1992 and on the first (1st) day of
each and every calendar month thereafter during the balance of first (1st)
Lease Year, Tenant shall pay to Landlord as annual base rent for the Premises,
without set off, deduction or demand an amount equal to Twelve Thousand Five
Hundred Dollars ($12,500.00). Concurrently with the signing of this Lease,
Tenant shall pay to Landlord the amount of Twelve Thousand Five Hundred Dollars
($12,500.00), which amount shall be credited by Landlord towards the monthly
installment of base rent due for October 1, 1992. Notwithstanding anything to
the contrary in this Section 3.1, Tenant shall not be obligated to pay annual
base rent for the period commencing June 1, 1993 and continuing through June
15, 1993.
3.2 All rent shall be paid to Landlord in legal tender of the
United States at the address to which notices to Landlord are to be given or to
such other party or to such other address as Landlord may designate from time
to time by written notice to Tenant. If Landlord shall at any time accept rent
after it shall become due and payable, such acceptance shall not excuse a delay
upon subsequent occasions, or constitute or be construed as a waiver of any of
Landlord's rights hereunder.
ARTICLE IV
ADDITIONAL RENT
4.1 Introduction. An integral part of Landlord's leasing program
for the Office Complex involves the requirement that all tenants of the Office
Complex bear their proportionate share of the costs and expenses incurred each
year in the operation of the Office Complex and that the tenants in each of the
three buildings in the Office Complex bear their proportionate share of the
costs and expenses incurred each year in the operation of the particular
building in which such tenants occupy space, above a predetermined base amount.
It is the intent and desire of Landlord that such costs and expenses shall be
allocated among all the tenants of the Office Complex, and with respect to
expenses attributable to any particular building in the Office Complex, among
the tenants of that building, in a fair and equitable manner consistent with
sound and practical administrative practice. The allocation of any costs and
expenses to a particular building rather than to the entire Office Complex
shall be made by the managing agent of the Office Complex, in its reasonable
discretion and judgment. The operating expenses of the Office Complex are
classified into the following three separate categories:
(i) The first category is called Basic Operating Charges
and consists of the basic administrative and operating costs
and expenses incurred in the operation of the Office Complex.
(ii) The second category is called Tenant Area Electricity
Charges and consists of charges for electrical power furnished
to or for the benefit of the tenants of the Office Complex.
-3-
<PAGE> 4
(iii) The third category is called Tenant Area Janitorial
Charges and consists of the costs incurred by Landlord in
providing janitorial and char services for the tenants of the
Office Complex.
By execution of this Lease, Tenant accepts the basic obligation to pay its
proportionate share of the cost increases incurred with respect to the
categories of expenses described above. The specific obligations of Tenant
with respect to such cost increases shall be governed by the remaining sections
of this Article IV.
4.2 Basic Operating Charges.
(a) As additional rent for the Premises, Tenant shall pay
to Landlord its proportionate share of the amount by which the Basic Operating
Charges (as hereinafter defined) incurred by Landlord in the operation of the
Office Complex during any calendar year falling entirely or partly within the
Lease Term exceed a sum (the "Basic Operating Charges Base Amount") equal to
the product of (i) Five Dollars ($5.00) and (ii) the number of square feet of
rentable area in the Office Complex excluding the number of square feet devoted
to storage space and parking. For purposes of this Section 4.2, Tenant's
proportionate share of such increases shall be that percentage which is equal
to a fraction, the numerator of which is the number of square feet of Net
Rentable Area in the Premises, and the denominator of which is the total number
of square feet of rentable area in the Office Complex excluding the number of
square feet devoted to storage space and parking.
(b) The Basic Operating Charges shall include the costs
and expenses described in subsection (1) below but shall not include the costs
and expenses described in subsection (2) below.
(1) Included costs and expenses:
(i) Gas, water, sewer and other utility charges
(including surcharges) of every type and nature, but excluding
electricity charges except to the extent otherwise provided in
subsection (1)(x) below.
(ii) Insurance premiums paid by Landlord.
(iii) Personnel costs of the Office Complex, including, but
not limited to, salaries, wages, fringe benefits and other
direct and indirect costs of engineers, superintendents,
watchmen, porters and any other personnel related to the
management, maintenance, repair and operation of the Office
Complex but excluding the costs of any compensation paid to
partners of Landlord or officers or directors of the managing
agent.
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(iv) Costs of service and maintenance contracts,
including, but not limited to, chillers, boilers, controls,
elevators, mail chute, window, security services, and
management fees.
(v) Except to the extent excluded by subsection (2)
below, all other maintenance, supply and repair expenses
incurred in connection with the Office Complex which are
deductible by Landlord in computing its Federal income tax
liability under the tax laws and regulations in effect from
time to time when such expenses are incurred.
(vi) Depreciation (on a straight-line basis) for capital
expenditures made by Landlord (A) to reduce operating expenses
if Landlord reasonably shall have determined that the annual
reduction in operating expenses which results from such
capital expenditure shall exceed the actual charge for
depreciation therefor or (B) to comply with applicable laws,
rules, regulations, requirements, statutes, ordinances,
by-laws and court decisions of all public authorities which
are now or hereafter in force ("Legal Requirements").
(vii) Any other reasonable costs and expenses incurred by
Landlord in cleaning, maintaining or operating the Office
Complex.
(viii) The reasonable costs of any additional services not
provided to the Office Complex at the Lease Commencement Date
but thereafter provided by Landlord in the prudent management
of the Office Complex.
(ix) Real Estate Taxes (as hereinafter defined).
(x) Common Area Electricity Charges (as hereinafter
defined).
(xi) Common Area Janitorial Charges (as hereinafter
defined).
(2) Excluded costs and expenses:
(i) Principal or interest payments on and any other
charges paid by Landlord in connection with any mortgages,
deeds of trust or other financing encumbrances.
(ii) Rental payments (including percentage rent and any
increases in base rent) made under any ground lease, except to
the extent such rental payments represent payment of Real
Estate Taxes (as hereinafter defined).
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(iii) Leasing commissions payable by Landlord and
advertising and promotional expenditures associated with
marketing vacant space in the Office Complex.
(iv) Deductions for depreciation for the Office Complex,
except to the extent included in subsection (1) (vi) above.
(v) Capital improvements that are not deducted by
Landlord in computing its Federal income tax liability, except
to the extent included in subsection (1)(vi) above.
(vi) The costs of insurance premiums, special services,
tenant improvements and concessions, repairs, maintenance
items, or utilities separately chargeable to, or specifically
provided for, other individual tenants of the Office Complex.
(vii) Costs associated with the operation and maintenance
of the garage and parking facilities servicing the Office
Complex.
(viii) Tenant Area Electricity Charges (as hereinafter
defined).
(ix) Tenant Area Janitorial Charges (as hereinafter
defined).
(c) As used above, the term "Real Estate Taxes" shall
mean (i) all real estate taxes, including general and special assessments, if
any, which are imposed upon Landlord or assessed against the Office Complex
and/or the land upon which the Office Complex is situated, (ii) any other
present or future taxes or governmental charges that are imposed upon Landlord,
or assessed against the Office Complex and/or the land upon which the Office
Complex is situated, including, but not limited to, any tax levied on or
measured by the rents payable by tenants of the Office Complex, which are in
the nature of, or in substitution for, real estate taxes, and (iii) all taxes
which are imposed upon Landlord, and which are assessed against the value of
any improvements to the Premises made by Tenant or any machinery, equipment,
fixtures or other personal property of Tenant used therein.
(d) As used above, the term "Common Area Electricity
Charges" shall consist of the charges for electrical power consumed in the
operation of the public and common areas of the Office Complex.
(e) As used above, the term "Common Area Janitorial
Charges" shall mean the charges for janitorial and cleaning services and
supplies furnished for all public and common areas in the Office Complex.
4.3 Tenant Area Electricity Charges. As additional rent for the
Premises, Tenant shall pay to Landlord its proportionate share of the amount by
which the Tenant Area Electricity
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Charges (as hereinafter defined) incurred by Landlord in the operation of the
Office Complex during each calendar year falling entirely or partly within the
Lease Term exceed a sum (the "Tenant Area Electricity Base Amount") equal to
the product of (i) One Dollar and Sixty Cents ($1.60), and (ii) the total
number of square feet of rentable area in the Office Complex, excluding storage
space and the rentable area occupied by tenants who pay by separate meter for
the electricity furnished to their premises. For purposes of this Section 4.3,
Tenant's proportionate share of such increase shall be that percentage which is
equal to a fraction, the numerator of which is the number of square feet of Net
Rentable Area in the Premises and the denominator of which is the total number
of square feet of rentable area in the Office Complex, excluding storage space
and the rentable area occupied by tenants who pay by separate meter for
electricity furnished to their premises.
4.4 Tenant Area Janitorial Charges. As additional rent for the
Premises, Tenant shall pay to Landlord its proportionate share of the amount by
which the Tenant Janitorial Charges (as hereinafter defined) incurred by
Landlord in the operation of the Office Complex during each calendar year
falling entirely or partly within the Lease Term exceed a sum (the "Janitorial
Base Amount") equal to the product of One Dollar ($1.00), and (ii) the number
of square feet of rentable area in the Office Complex excluding the rentable
area devoted to storage space, parking, and the rentable area occupied by
tenants who furnish their own janitorial and cleaning services. For purposes
of this Section 4.4, Tenant's proportionate share of such increase shall be
that percentage which is equal to a fraction, the numerator of which is the
number of square feet of Net Rentable Area in the Premises, and the denominator
of which is the total number of square feet of rentable area in the Office
Complex, excluding any storage space and the rentable area occupied by tenants
who furnish their own janitorial and cleaning services.
4.5 In the event the average occupancy rate for the entire Office
Complex shall be less than ninety-five percent (95%) for any calendar year,
for purposes of calculating the additional rent payable by Tenant pursuant to
this Article IV for each calendar year, the Basic Operating Charges, Tenant
Area Electricity Charges and Tenant Area Janitorial charges (referred to
collectively in this Section 4.5 as "Operating Expenses") for such calendar
year shall be increased by the respective amounts of additional costs and
expenses that Landlord reasonably estimates would have been incurred in each
such category of charges if the average occupancy rate for the entire Office
Complex had been ninety-five percent (95%) for such calendar year. When making
the foregoing calculation, Landlord shall be governed by the following:
(1) It is the intent of this provision to permit Landlord
to recover for increases in Operating Expenses attributable to
occupied space in the entire Office Complex even though the aggregate
of such expenses shall have been reduced below either (i) the actual
Operating Expenses incurred by Landlord for the preceding calendar
year or (ii) the base amounts applicable to such expenses (as set
forth in Sections 4.2, 4.3 and 4.4 hereof), whichever is applicable,
as a result of vacancies in the Office Complex.
(2) It is not the intent of this provision to permit
Landlord to recover from Tenant additional rent pursuant to Article IV
for any Calendar year which, when added to the total amount of
additional rent payable by all tenants of the Office Complex on
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account of Operating Expenses for such year, will exceed (i) the
actual amount of Operating Expenses incurred by Landlord for such
year, less (ii) the product of $7.60 multiplied by the average number
of square feet of rentable area occupied in the entire Office Complex
for such year.
4.6 In the event that the charges in any of the categories of
charges described in Sections 4.2, 4.3 or 4.4 for any calendar year falling
entirely or partly within the Lease Term are less than the base amounts
applicable to such category, Tenant shall be entitled to a credit in an amount
equal to Tenant's proportionate share of the amount by which such base amount
exceeds such actual charges. Tenant's proportionate share of such excess shall
be determined in accordance with the same ratio provided in Section 4.2, 4.3 or
4.4, as applicable, with respect to the determination of Tenant's proportionate
share of increase in such category of expenses. If Tenant is entitled to a
credit pursuant to this Section 4.6, such credit shall be applied in reduction
of the next installments of base rent or additional rent falling due hereunder.
Landlord represents that to the best of its knowledge as of the Lease
Commencement Date, the base amounts of the charges set forth in Sections 4.2,
4.3 and 4.4 above approximate the current charges in the Office Complex for
such services.
4.7 Tenant shall make estimated monthly payments to Landlord on
account of increases in each of the categories of charges described in Sections
4.2, 4.3 and 4.4 that are expected to be incurred during each calendar year
falling entirely or partly within the Lease Term. The amount of such monthly
payments shall be determined as follows: At the beginning of the Lease Term,
and at the beginning of each calendar year thereafter, Landlord shall submit to
Tenant a statement setting forth Landlord's reasonable estimate of the amounts
by which the charges in each such category of expenses that are expected to be
incurred during such calendar year will exceed the base amounts applicable to
each such category, and the computation of Tenant's proportionate share of each
such anticipated increase. Tenant shall pay to Landlord on the first day of
each month following receipt of such statement during such calendar year an
amount equal to Tenant's proportionate share of the anticipated increases in
such categories of expenses multiplied by a fraction, the numerator of which is
1, and the denominator of which is the number of months during such calendar
year which fall within the Lease Term and follow the date of the foregoing
statement. Within ninety (90) days after the expiration of each calendar year,
Landlord shall submit to Tenant a statement showing (i) Tenant's proportionate
share of the amounts by which the costs and expenses actually incurred in each
of the categories described in Sections 4.2, 4.3 and 4.4 during the preceding
calendar year exceeded the base amounts applicable to each such category and
(ii) the aggregate amount of the estimated payments made by Tenant on account
thereof. If the aggregate amount of such estimated payments exceeds Tenant's
actual liability for such increases, Tenant shall deduct the net overpayment
from its next estimated payment or payments on account of increases in such
categories of charges for the then current year. If Tenant's actual liability
for such increases exceeds the estimated payments made by Tenant on account
thereof, then Tenant promptly shall pay to Landlord the total amount of such
deficiency as additional rent due hereunder.
4.8 In the event the Lease Term commences or expires on a day
other than the first day or the last day of a calendar year, the increases in
the categories of charges described in
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Sections 4.2, 4.3 and 4.4 to be paid by Tenant for such calendar year shall be
apportioned by multiplying the amount of Tenant's proportionate share thereof
for the full calendar year by a fraction, the numerator of which is the number
of days during such calendar year falling within the Lease Term, and the
denominator of which is 365.
4.9 All payments required to be made by Tenant pursuant to this
Article IV shall be paid to Landlord, without setoff or deduction, in the same
manner as base rent is payable pursuant to Article III hereof.
4.10 Tenant's liability for its proportionate share of the
increases in the categories of charges described in Sections 4.2, 4.3 and 4.4
for the last calendar year falling entirely or partly within the Lease Term
shall survive the expiration of the Lease Term. Similarly, Landlord's
obligation to refund to Tenant the excess, if any, of the amount of Tenant's
estimated payments on account of such increases for such last calendar year
over Tenant's actual liability therefor shall survive the expiration of the
Lease Term.
4.11 Notwithstanding anything to the contrary in this Article IV
and provided Tenant is not otherwise in default under this Lease, Landlord
hereby agrees to grant Tenant an abatement of additional rent attributable to
Operating Expenses for the first (1st) Lease Year.
ARTICLE V
SECURITY DEPOSIT
5.1 There shall be no security deposit required of Tenant under
this Lease.
ARTICLE VI
USE OF PREMISES
6.1 Tenant shall use and occupy the Premises solely for general
office purposes and for no other use or purpose without the prior written
consent of Landlord. Tenant shall not use or occupy the Premises for any
unlawful purpose or in any manner that will constitute waste, nuisance or
unreasonable annoyance to Landlord or other tenants of the Office Complex.
Tenant shall comply with all present and future laws, ordinances (including
zoning ordinances and land use requirements), regulations, and orders of the
United States of America, the State of Maryland, the County of Montgomery and
any other public or quasi-public authority having jurisdiction over the
Premises, concerning the use, occupancy and condition of the Premises and all
machinery, equipment and furnishings therein. Landlord has agreed, pursuant to
Paragraph 10 of Exhibit B hereto, to obtain at its expense the initial
occupancy permit required for Tenant to lawfully occupy the Premises. It is
expressly understood that if any change in the use of the Premises by Tenant,
or any alterations to the Premises by Tenant, or any future law, ordinance,
regulation or order requires a new or additional permit from, or approval by,
any governmental agency having jurisdiction over the Office Complex, such
permit or approval shall be obtained by Tenant on its behalf and at its sole
expense. Further, Tenant shall comply with all Legal Requirements which shall
impose a duty on Landlord or Tenant relating to or as a result of the use or
occupancy of the
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Premises. Tenant shall pay all fines, penalties and damages that may arise out
of or be imposed because of Tenant's failure to comply with the provisions of
this Lease.
6.2 Tenant shall pay any business rent or other taxes that are now
or hereafter levied upon Tenant's use or occupancy of the Premises, the conduct
of Tenant's business at the Premises, or Tenant's equipment, fixtures or
personal property. In the event that any such taxes are enacted, changed or
altered so that any of such taxes are levied against Landlord, or the mode of
collection of such taxes is changed so that Landlord is responsible for
collection or payment of such taxes, Tenant shall pay any and all such taxes to
Landlord upon written demand from Landlord.
ARTICLE VII
ASSIGNMENT AND SUBLETTING
7.1 (a) Tenant shall not have the right to assign, transfer
mortgage or otherwise encumber this Lease or its interest herein without first
obtaining the prior written consent of Landlord, which consent may be granted
or withheld by Landlord in its sole discretion. No assignment or transfer of
this Lease or the right of occupancy hereunder may be effectuated by operation
of law or otherwise without the prior written consent of Landlord, which
consent may be granted or withheld by Landlord in its sole discretion. If
Tenant is a partnership, a withdrawal or change, whether voluntary, involuntary
or by operation of law, of partners owning, individually or collectively, a
controlling interest in Tenant shall be deemed a voluntary assignment of this
Lease shall be and subject to the foregoing provisions. If Tenant is a
corporation, any dissolution, merger, consolidation or other reorganization of
Tenant, or the sale or transfer of a controlling interest of the capital stock
of Tenant, shall be deemed a voluntary assignment of this Lease and subject to
the foregoing provisions. However, the preceding sentence shall not apply to
corporations the stock of which is traded through a national or regional stock
exchange. Any attempted assignment or transfer by Tenant of this Lease or its
interest herein without Landlord's consent shall, at the option of Landlord,
terminate this Lease. However, in the event of such termination, Tenant shall
remain liable for all rent and other sums due under this Lease and all damages
suffered by Landlord on account of such breach by Tenant.
(b) Notwithstanding the restrictions on assignment set
forth in Section 7.1(a) above, Landlord's prior consent shall not be
unreasonably withheld with respect to any assignment of this Lease resulting
from the merger, consolidation, or other corporate reorganization of Tenant, or
the sale or transfer of the capital stock of Tenant, provided that (i) Tenant
after such merger, consolidation, reorganization or sale of stock has a
creditworthiness (e.g. assets and capitalization) and net worth (which shall be
determined on a pro forma basis using generally accepted accounting principles
consistently applied and using the most recent financial statements) reasonably
acceptable to Landlord, (ii) Tenant after such merger, consolidation,
reorganization or sale of stock agrees in writing to be bound by the terms and
conditions of this Lease and to assume all of the obligations and liabilities
of Tenant under this Lease, (iii) Tenant after such merger, consolidation,
reorganization or sale of stock shall conduct substantially the same business
on the Premises as that conducted by Tenant or a related business which is a
permitted use pursuant to Article VI of the Lease, (iv) Tenant provides
Landlord with prior written notice of its intent to assign all or a portion of
the Premises not more than ninety (90) nor less than thirty (30) days prior to
the date
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such assignment is to be effective, (v) the character of Tenant after the
merger, consolidation, reorganization or sale of stock, as the case may be, and
the nature of Tenant's activities on the Premises and in the Office Complex
will not adversely affect other tenants in the Office Complex or impair the
reputation of the Office Complex as a first-class office building, (vi) the
assignment is not a so-called "sham" transaction intended by Tenant to
circumvent the provisions of Article VII of the Lease, (vii) Tenant is not in
default under any of the terms and provisions of this Lease and (viii) the
assignment (A) will not result in an increase in Operating Expenses for the
Office Complex beyond that which Landlord now incurs for use by Tenant or (B)
will not increase the burden on elevators or other Building systems or
equipment over the burden prior to such assignment.
(c) In the event of any such assignment pursuant to
Section 7. 1 (b) above, Tenant shall remain fully liable as a primary obligor
and principal for Tenant's obligations and responsibilities under this Lease,
including without limitation, the payment of all rent and other charges
required hereunder and the performance of all conditions and obligations to be
performed under this Lease.
7.2 Tenant shall not have the right to sublease (which term, as
used herein, shall include any type of subrental arrangement and any type of
license to occupy) all or any part of the Premises without first obtaining the
prior written consent of Landlord, which consent shall not be unreasonably
withheld; provided, however, that it shall not be unreasonable for Landlord to
withhold its consent if Tenant is in default hereunder, or if Landlord
determines, in its sole, but not arbitrary or capricious, discretion, that the
character of the proposed subtenant or the nature of the activities to be
conducted by such proposed subtenant would adversely affect the other tenants
of the Office Complex or would impair the reputation of the Office Complex as a
first-class office building, or that the financial history or credit rating of
the proposed subtenant is unacceptable to Landlord or that the character of the
business to be conducted or the proposed use of the Premises by the proposed
subtenant or assignee (i) is likely to increase operating Expenses for the
Building or the Office Complex beyond that which Landlord now incurs for use of
by Tenant; (ii) is likely to increase the burden on elevators or other Building
systems or equipment over the burden prior to such proposed subletting or
assignment; or (iii) violates or is likely to violate any provisions or
restrictions contained herein relating to the use or occupancy of the Premises.
Furthermore, Tenant shall not have the right to sublease all or any portion of
the Premises without first complying with the provisions of subsections (a)
through (d) below:
(a) Tenant shall give Landlord written notice of its
desire to sublease all or a portion of the Premises. Such notice shall specify
the portion of the Premises proposed to be sublet and the date such portion is
to be made available for subleasing. If Tenant occupies or, as a result of
such sublease, would occupy fifty percent (50%) or more of the rentable area in
the original Premises, Landlord shall not have the right to retake possession
of the portion of the Premises proposed to be sublet.
(b) If Tenant occupies, or as a result of such sublease,
would occupy less than fifty percent (50%) of the rentable area in the original
Premises, Landlord shall have the right to retake possession of the portion of
the Premises proposed to be sublet. In such case, Landlord
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shall notify Tenant in writing, within fifteen (15) days after Landlord's
receipt of the notice provided for in subsection (a) above, whether or not
Landlord will retake possession of the portion of the Premises proposed to be
sublet and thereby delete such portion of the Premises from the Premises being
leased to Tenant hereunder. If Landlord elects to retake such portion of the
Premises, Landlord shall retake possession of such portion on the date
specified in Tenant's notice and Tenant's obligation to pay rent for such
portion shall cease on such date. Thereafter, Tenant shall not have any
further rights of any kind, including any rights of renewal, in or to the
portion of the Premises so retaken. If Landlord does not elect to retake such
portion of the Premises within the aforesaid fifteen (15) day period, Tenant
shall comply with the provisions of subsection (c) below with respect to any
proposed sublease of such portion of the Premises.
(c) Tenant shall have the right to sublease any portion
of the Premises that Landlord has no right to retake pursuant to subsection (a)
above or which Landlord has not elected to retake pursuant to subsection (b)
above, provided that Tenant obtains the prior written consent of Landlord to
such proposed sublease. Landlord agrees not to unreasonably withhold its
consent to any such proposed sublease; provided, however, that it shall not be
unreasonable for Landlord to withhold its consent if Tenant is in default
hereunder, or if Landlord determines, in its sole, but not arbitrary or
capricious, discretion, that the character of the proposed subtenant or the
nature of the activities to be conducted by such proposed subtenant would
adversely affect the other tenants of the Office Complex or would impair the
reputation of the Office Complex as a first-class office building, or that the
financial history or credit rating of the proposed subtenant is unacceptable to
Landlord or that the character of the business to be conducted or the proposed
use of the Premises by the proposed subtenant or assignee (i) is likely to
increase operating Expenses for the Building or the Office Complex beyond that
which Landlord now incurs for use of by Tenant; (ii) is likely to increase the
burden on elevators or other Building systems or equipment over the burden
prior to such proposed subletting or assignment; or (iii) violates or is likely
to violate any provisions or restrictions contained herein relating to the use
or occupancy of the Premises. Notwithstanding the foregoing, Tenant shall in
no event have the right to sublease the Premises, or any portion thereof, to
more than two (2) subtenants at any one time.
(d) Tenant agrees to give Landlord at least thirty (30)
days advance written notice of Tenant's intention to sublease a portion of the
Premises, along with sufficient information about the proposed subtenant to
enable Landlord to make the determination called for by subsection (c) above.
(e) Tenant's right to sublease any portion of the
Premises that Landlord has not elected to retake pursuant to subsection (a)
above shall expire ninety (90) days after the giving of the notice required by
subsection (a). Thereafter, Tenant shall have no right to sublease the portion
of the Premises described in the notice furnished pursuant to subsection (a),
unless Tenant shall have again complied with the procedures set forth in this
Section 7.2. Notwithstanding anything to the contrary in this Section 7.2(e),
in the event Tenant's ongoing and continuing negotiations with one (1)
prospective subtenant shall extend beyond such ninety (90) day period, Tenant
shall not be obligated to repeat the procedures set forth in this Section 7.2,
provided that Tenant shall provide Landlord with written notice that its
negotiations with such prospective subtenant are continuing. In the event
Tenant's negotiations with such prospective subtenant fail after the
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expiration of such ninety (90) day period, Tenant shall have no right to
sublease the portion of the Premises described in the notice furnished pursuant
to subsection (a) or subsection (d) above, to another prospective subtenant,
unless Tenant shall have again complied with the procedures set forth in this
Section 7.2.
(f) Provided Tenant is not in default under any terms and
provisions of this Lease, beyond any applicable notice and cure period, Tenant
shall be entitled to retain any profit derived from subletting the Premises or
any part thereof.
7.3 Notwithstanding the provisions of Section 7.1 or 7.2 hereof to
the contrary, if consent to any assignment or subletting is required by the
holder of any mortgage on the Building or the Office Complex, no assignment of
this Lease or sublease of all or any portions of the Premises shall be
permitted without the prior written consent of such holder. Landlord agrees to
use its reasonable efforts to obtain such consent.
7.4 Notwithstanding the provisions of Sections 7.1 and 7.2 hereof
to the contrary, Tenant acknowledges that so long as IBM occupies space in the
Building, Tenant shall not be permitted to sublet any portion of the Premises
to competitors of IBM. Tenant agrees to submit sufficient information to
Landlord about any proposed subtenant at the time Tenant gives Landlord notice
of its intention to sublease pursuant to Section 7.2(a) above to enable
Landlord and IBM to make a determination as to whether any proposed subtenant
is a competitor of IBM. Tenant shall consult with Landlord before refusing any
subtenant or making any commitment that may violate this Section 7.4.
7.5 The consent by Landlord to any assignment or subletting shall
not be construed as a waiver or release of Tenant from any and all liability
for the performance of all covenants and obligations to be performed by Tenant
under this Lease, nor shall the collection or acceptance of rent from any
assignee, transferee or subtenant constitute a waiver or release of Tenant from
any of its liabilities or obligations under this Lease. Landlord's consent to
any assignment or subletting shall not be construed as relieving Tenant from
the obligation of complying with the provisions of Sections 7.1 or 7.2 hereof,
as applicable, with respect to any subsequent assignment or subletting. For
any period during which Tenant is in default hereunder, Tenant hereby assigns
to Landlord the rent due from any subtenant of Tenant and hereby authorizes
each subtenant to pay said rent directly to Landlord. Tenant further agrees to
submit any and all instruments of assignment and sublease to Landlord for
Landlord's prior written approval as to form and substance, which approval
shall not be unreasonably withheld, but which instruments shall provide, as an
express condition precedent to Landlord's prior approval, that any sublessee or
assignee agree to remain jointly and severally liable to Landlord for all
obligations imposed by any such agreement of assignment or sublease.
7.6 (a) Notwithstanding the above restrictions on subletting
and assignments, Landlord's prior consent shall not be required with respect to
any assignment or subletting to an "Affiliate of Tenant" (as hereinafter
defined) or a "Parent of Tenant" (as hereinafter defined), provided (i) that
such assignee or sublessee has a creditworthiness (e.g. assets and
capitalization) and net worth (which shall be determined on a pro forma basis
using generally accepted accounting
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principles consistently applied and using the most recent financial statements)
acceptable to Landlord, in Landlord's sole, but not arbitrary or capricious
judgment, (ii) that such assignee or sublessee agrees in writing to be bound by
the terms and conditions of this lease and to assume all of the obligations and
liabilities of Tenant under this Lease, (iii) that such assignee or sublessee
shall conduct substantially the same business on the Premises as that conducted
by Tenant or a related business which is a permitted use pursuant to Article VI
of this Lease, (iv) Tenant provides Landlord with prior written notice of its
intent to assign or sublease all or a portion of the Premises not more than
ninety (90) nor less than forty-five (45) days prior to the date such assignee
or sublessee is to occupy the Premises, (v) that the character of such person
or entity and the nature of its activities on the Premises and in the Office
Building will not adversely affect other tenants in the Office Building or
impair the reputation of the Office Building as a first-class office building,
and (vi) that the sublease with such person or entity is not a so-called "sham"
transaction intended by Tenant to circumvent the provisions of this Article
VII.
(b) In the event of any such assignment or subletting
pursuant to this Section 7.6, Tenant shall remain fully liable as a primary
obligor and principal for Tenant's obligations and responsibilities under this
Lease, including without limitation, the payment of all rent and other charges
required hereunder and the performance of all conditions and obligations to be
performed under this Lease.
(c) For purposes of this Section 7.6, an "Affiliate of
Tenant" shall mean any corporation, association, trust or partnership (i) which
Controls (as herein defined) Tenant or (ii) which is under the Control of
Tenant through stock ownership or otherwise or (iii) which is under common
Control with Tenant. For the purposes hereof, a "Parent of Tenant" shall mean
any corporation, association, trust or partnership (i) which Controls Tenant or
(ii) which owns more than fifty percent (50%) of the issued and outstanding
voting securities of Tenant. The terms "Control" or "Controls" as used in this
Section 7.6 shall mean the power to directly or indirectly influence the
direction, management or policies of Tenant or such other entity.
ARTICLE VIII
MAINTENANCE AND REPAIRS
8.1 Tenant will keep and maintain the Premises and all fixtures
and equipment located therein in clean, safe and sanitary condition, will take
good care thereof and make all required repairs thereto, and will suffer no
waste or injury thereto. At the expiration or other termination of the Lease
Term, Tenant shall leave in the Premises any and all furniture, fixtures,
furnishings and equipment (e.g. conference room tables, refrigerators, etc.)
which was in the Premises on the Lease Commencement Date and shall surrender
the Premises, broom clean, all in the same order and condition in which they
are in on the Lease Commencement Date, ordinary wear and tear and unavoidable
damage by the elements excepted. Landlord, at its cost, shall install all
replacement tubes for the fluorescent light fixtures in the Premises on the
Lease Commencement Date. All other bulbs, tubes and lighting fixtures for the
Premises shall be provided and installed by Landlord at Tenant's cost and
expense.
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8.2 Except as otherwise provided in Article XVII hereof, all
injury, breakage and damage to the Premises and to any other part of the Office
Complex caused by any act or omission of Tenant, or of any agent, employee,
subtenant, contractor, customer or invitee of Tenant, shall be repaired by and
at the sole expense of Tenant, except that Landlord shall have the right, at
its option, to make such repairs and to charge Tenant for all costs and
expenses reasonably incurred by Landlord in light of the urgency, as determined
by Landlord in its sole judgment, of the repairs, solely in connection
therewith as additional rent hereunder. The liability of Tenant for such costs
and expenses shall be reduced by the amount of any insurance proceeds received
by Landlord on account of such injury, breakage or damage.
8.3 Landlord shall keep and maintain the exterior and demising
walls, foundations, roof and common areas that form a part of the Building, and
the mechanical, electrical, HVAC and plumbing systems, pipes and conduits that
are provided by Landlord in the operation of the Building or, on a
non-exclusive basis, the Premises in clean, safe, sanitary and operating
condition in accordance with standards customarily maintained by first-class
office buildings in the Bethesda, Maryland area, and will make all required
repairs thereto. All common or public areas of the Office Complex and the land
upon which it is situated (including without limitation the first floor lobby
area and the exterior landscaping) shall be maintained by Landlord in
accordance with standards customarily maintained by first-class office
buildings in the Bethesda, Maryland area. Tenant shall promptly provide
Landlord with written notice of any defect or need for repairs in or about the
Office Complex or the Building of which Tenant is aware; provided, however,
Landlord's obligation to repair hereunder shall not be limited to matters of
which it has been given notice by Tenant.
ARTICLE IX
TENANT ALTERATIONS
9.1 The Premises shall be delivered to and accepted by Tenant in
their present "as-is" condition, except that Landlord (a) shall erect two (2)
demising walls in the approximate locations shown on the plan attached hereto
as Exhibit A and made a part hereof and (b) shall erect partition walls and a
door creating an additional office in the Premises in the approximate location
shown on the plan attached hereto as Exhibit A and made a part hereof. It is
understood and agreed that, except as provided in the preceding sentence,
Landlord will not make, and is under no obligation to make, any structural or
other alterations, decorations, additions or improvements in or to the
Premises.
9.2 (a) Prior to June 15, 1993, Tenant will not make or
permit anyone to make any alterations, decorations, additions or improvements,
structural or otherwise, in or to the Premises or the Office Complex, without
the prior written consent of Landlord, which may be granted or withheld in
Landlord's sole discretion.
(b) In the event Tenant (i) renews this Lease in
accordance with the provisions of Rider No. 1 attached hereto and made a part
hereof and (ii) Landlord does not terminate Tenant's right to renew the Lease
Term or the exercise of that right as provided in Section 25.22 hereof and in
Rider No. 1, Tenant will not make or permit anyone to make any alterations,
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decorations (visible to the exterior of the Building or the Office Complex or
to the common or public areas of the Building or the Office Complex), additions
or improvements (hereinafter referred to collectively as "improvements") ,
structural or otherwise, in or to the Premises or the Office Complex, without
the prior written consent of Landlord. Improvements to the interior of the
Premises which (i) are not readily visible to the exterior of the Building or
the Office Complex or the common and public areas thereof, (ii) are not
structural, (iii) do not affect the electrical or mechanical systems within the
Building and (iv) are otherwise in conformance with all applicable building,
zoning and other codes or regulations affecting the Building and the Office
Complex, shall be subject to the prior written consent of Landlord, which
consent shall not be unreasonably withheld or delayed. When granting its
consent, Landlord may impose any conditions it deems appropriate, including,
without limitation, the approval of plans and specifications, approval of the
contractor or other persons who will perform the work, and the obtaining of
required permits and specified insurance. All improvements permitted by
Landlord must conform to and comply with all rules and regulations established
from time to time by the Underwriters' Association of the State of Maryland and
to all laws, regulations and requirements of the Federal, State and local
governments. Landlord's review and approval of any such plans and
specifications and consent to perform work described therein shall not be
deemed an agreement by Landlord that such plans, specifications and work
conform with all applicable Legal Requirements and requirements of the insurers
of the Office Complex ("Insurance Requirements") nor deemed a waiver of
Tenant's obligations under this Lease with respect to Legal Requirements and
Insurance Requirements nor impose any liability or obligation upon Landlord
with respect to the completeness, design sufficiency or compliance with Legal
Requirements or Insurance Requirements of such plans, specifications and work.
As a condition precedent to such written consent of Landlord, Tenant agrees to
obtain and deliver to Landlord written, unconditional waivers of mechanic's and
materialmen's liens against the Office Complex and the land upon which it is
situated from all proposed contractors, subcontractors, laborers and material
suppliers for all work, labor and services to be performed and materials to be
furnished in connection with improvements to the Premises. If, notwithstanding
the foregoing, any mechanic's or materialmen's lien is filed against the
Premises, the Office Complex and/or the land upon which it is situated, for
work claimed to have been done for, or materials claimed to have been furnished
to, the Premises, such lien shall be discharged by Tenant within twenty (20)
days thereafter, at Tenant's sole cost and expense, by the payment thereof or
by the filing of a surety bond in form and substance acceptable to Landlord.
If Tenant shall fail to discharge any such mechanic's or materialmen's lien,
Landlord may, at its option, discharge such lien and treat the cost thereof
(including attorneys' fees incurred in connection therewith) as additional rent
payable with the next monthly installment of base rent falling due; it being
expressly agreed that such discharge by Landlord shall not be deemed to waive
or release the default of Tenant in not discharging such lien. It is
understood and agreed that any improvements to the Premises, other than those
made by Landlord pursuant to Exhibit B, shall be conducted on behalf of Tenant,
and that Tenant shall be fully responsible therefor. It is further understood
and agreed that in the event Landlord shall give its written consent to the
making of any improvements to the Premises, such written consent shall not be
deemed to be an agreement or consent by Landlord to subject its interest in the
Premises, the Office Complex or the land upon which it is situated to any
mechanic's or materialmen's liens which may be filed in connection therewith.
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9.3 Tenant shall indemnify and hold Landlord harmless from and
against any and all expenses, liens, claims, liabilities and damages based on
or arising, directly or indirectly, by reason of the making of any improvements
to the Premises by Tenant, or its contractors, agents or employees. If any
improvements are made without the prior written consent of Landlord, Landlord
shall have the right to remove and correct such improvements and restore the
Premises to their condition immediately prior thereto, and Tenant shall be
liable for all expenses incurred by Landlord in connection therewith. All
improvements to the Premises or the Office Complex made by either party shall
remain upon and be surrendered with the Premises as a part thereof at the end
of the Lease Term, except that if Tenant is not in default under this Lease,
Tenant shall have the right to remove, prior to the expiration of the Lease
Term, all movable furniture, furnishings and equipment installed in the
Premises solely at the expense of Tenant. All damage and injury to the
Premises or the Office Complex caused by such removal shall be repaired by
Tenant at Tenant's sole expense. If such property of Tenant is not removed by
Tenant prior to the expiration or termination of this Lease, the same shall
become the property of Landlord and shall be surrendered with the Premises as a
part thereof.
ARTICLE X
SIGNS AND FURNISHINGS
10.1 No sign, advertisement or notice referring to Tenant shall be
inscribed, painted, affixed or otherwise displayed on any part of the exterior
or the interior of the Office Complex, except on the directories and doors of
offices and such other areas as are designated by Landlord, and then only in
such place, number, size, color and style as are approved by Landlord and are
in accordance with any applicable Montgomery County building code or zoning
regulation. All of Tenant's signs that are approved by Landlord shall be
installed by Landlord at Tenant's cost and expense. If any sign, advertisement
or notice that has not been approved by Landlord is exhibited or installed by
Tenant, Landlord shall have the right to remove the same at Tenant's expense.
Landlord shall have the right to prohibit any advertisement of or by Tenant
which in its opinion tends to impair the reputation of the Office Complex or
its desirability as a first class office building and, upon written notice from
Landlord, Tenant shall immediately refrain from and discontinue any such
advertisement. Landlord reserves the right to affix, install and display
signs, advertisements and notices on any part of the exterior or interior of
the Office Complex.
10.2 Landlord shall have the right to prescribe the weight and
position of safes and other heavy equipment and fixtures, which, if considered
necessary by the Landlord, shall be installed in such manner as Landlord
directs in order to distribute their weight adequately. Any and all damage or
injury to the Premises or the Office Complex caused by moving the property of
Tenant into or out of the Premises, or due to the same being in or upon the
Premises, shall be repaired at the sole cost of Tenant. No furniture,
equipment or other bulky matter of any description will be received into the
Office Complex or carried in the elevators except as approved by Landlord, and
all such furniture, equipment and other bulky matter shall be delivered only
through the designated delivery entrance of the Office Complex and the
designated freight elevator. All moving of furniture, equipment and other
materials shall be under the supervision of Landlord, who shall not, however,
be responsible for any damage to or charges for moving the same.
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Tenant agrees to remove promptly from the sidewalks adjacent to the Office
Complex any of Tenant's furniture, equipment or other material there delivered
or deposited.
ARTICLE XI
TENANT'S EQUIPMENT
11.1 Tenant will not install or operate in the Premises any
electrically operated equipment or machinery that operates on greater than 110
volt power without first obtaining the prior written consent of Landlord.
Landlord may condition such consent upon the payment by Tenant of additional
rent in compensation for the excess consumption of electricity or other
utilities and for the cost of any additional wiring or apparatus that may be
occasioned by the operation of such equipment or machinery. Tenant shall not
install any equipment of any type or nature that will or may necessitate any
changes, replacements or additions to, or in the use of, the water system,
heating system, plumbing system, air conditioning system or electrical system
of the Premises or the Office Complex, without first obtaining the prior
written consent of Landlord. Business machines and mechanical equipment
belonging to Tenant which cause noise or vibration that may be transmitted to
the structure of the Office Complex or to any space therein to such a degree as
to be objectionable to Landlord or to any tenant in the Office Complex shall be
installed and maintained by Tenant, at Tenant's expense, on vibration
eliminators or other devices sufficient to reduce such noise and vibration to a
level satisfactory to Landlord.
ARTICLE XII
INSPECTION BY LANDLORD
12.1 Tenant will permit Landlord, or its agents or representatives,
to enter the Premises, without charge therefor to Landlord and without
diminution of the rent payable by Tenant, to examine, inspect and protect the
Premises and the Office Complex, to make such alterations or repairs as in the
sole judgment of Landlord may be deemed necessary, or to exhibit the same to
prospective tenants during the last one hundred eighty (180) days of the Lease
Term. In connection with any such entry, Landlord shall endeavor to provide
twenty-four (24) hours prior to notice to Tenant (except in the case of an
emergency) and to minimize the disruption to Tenant's use of the Premises.
Notwithstanding anything to the contrary in this Section 12.1, Landlord, its
agents and representatives, retain the unequivocal right to show the Premises
to Vitro Corporation, its affiliates or parent or any of their representatives
or agents at any time upon reasonable prior telephonic notice to Tenant.
ARTICLE XIII
INSURANCE
13.1 Tenant shall not conduct or permit to be conducted any
activity, or place any equipment in or about the Premises or the Building,
which will in any way increase the rate of fire insurance or other insurance on
the Building. If any increase in the rate of fire insurance or other insurance
is stated by any insurance company or by the applicable Insurance Rating Bureau
to be due to any activity or equipment of Tenant in or about the Premises or
the Building, such statement shall be conclusive evidence that the increase in
such rate is due to such activity or
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equipment and, as a result thereof, Tenant shall be liable for the amount of
such increase. Tenant shall reimburse Landlord for such amount upon written
demand from Landlord and such sum shall be considered additional rent payable
hereunder.
13.2 Throughout the Lease Term, Landlord shall insure the Building
of which the Premises are a part against loss due to fire and other casualties
included in standard extended coverage insurance policies in an amount equal to
at least 90% of the replacement cost thereof, exclusive of architectural and
engineering fees, excavation, footings and foundations. Such insurance shall
also cover the initial tenant improvements installed in the Premises by
Landlord in accordance with Exhibit B hereto, but shall not cover Tenant's
furniture, fixtures, equipment or other personal property of Tenant on the
Premises.
13.3 Throughout the Lease Term, Tenant shall insure the contents of
the Premises, including its furnishings, fixtures and equipment used or
installed in the Premises by Tenant, and any other personal property of Tenant
in the Premises, against loss due to fire and other casualties included in
standard extended coverage insurance policies, in minimum amounts reasonably
approved by Landlord from time to time. Throughout the Lease Term, Tenant
shall obtain and maintain comprehensive public liability insurance in a company
or companies licensed to do business in the State of Maryland and reasonably
approved by Landlord. Such insurance shall be for coverage equivalent to a
comprehensive single limited policy of not less than Two Million Dollars
($2,000,000.) and shall be issued for a minimum term of one (1) year. In
addition, said policies of insurance shall name Landlord, including the
constituent partners of Landlord, Boston Properties, Inc. as managing agent of
the Office Complex, and, if requested, the holder of any mortgage or deed of
trust secured by the Office Complex as additional insureds. If requested by
Landlord, receipts or certificates evidencing payment of the premiums for such
insurance shall be delivered by Tenant at least annually. Each such policy
shall contain an endorsement prohibiting cancellation or reduction of coverage
without first giving Landlord and the holder of any mortgage or deed of trust
on the Building at least thirty (30) days' prior written notice of such
proposed action.
13.4 Tenant hereby waives its right of recovery against Landlord
and releases Landlord from any claim arising out of losses, claims, casualties
or other damages for which Landlord may otherwise be liable to the extent
Tenant is either required to maintain insurance pursuant to this Article XIII
or receives insurance proceeds on account thereof. Landlord hereby waives its
right of recovery against Tenant and releases Tenant from any claim arising out
of losses, claims, casualties or other damages for which Tenant may otherwise
be liable to the extent Landlord is either required to maintain insurance
pursuant to this Article XIII or receives insurance proceeds on account
thereof. Each policy obtained by the either party pursuant to the provisions
of this Article XIII shall include a waiver of the insurer's right of
subrogation against the other party, and shall contain an endorsement to the
effect that any loss payable under such policy shall be payable notwithstanding
any act or negligence of such other party, or its agents, contractors or
employees, which might, absent such agreement, result in the forfeiture of
payment for such loss.
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ARTICLE XIV
SERVICES AND UTILITIES
14.1 (a) Landlord shall furnish to the Premises year-round
ventilation and air conditioning and heat during the seasons when they are
required, as determined in Landlord's reasonable judgment. Landlord shall also
provide reasonably adequate electricity, water, exterior window-cleaning
service, and char and janitorial service after 6:00 p.m. on Monday through
Friday only (excluding legal holidays), as determined in Landlord's reasonable
judgment, and in accordance with standards customarily provided in first class
office buildings in the Bethesda, Maryland area. Landlord will also provide
elevator service; provided, however, that Landlord shall have the right to
remove elevators from service as may be required for moving freight, or for
servicing and maintaining the elevators or the Office Complex. At least one
elevator cab shall be available for use by Tenant at all times. The normal
hours of operation of the Office Complex will be 7:30 a.m. to 7:00 p.m. on
Monday through Friday (except legal holidays), and 8:00 a.m. to 2:00 p.m. on
Saturday (except legal holidays). There will be no normal hours of operation
of the Office Complex on Sundays or legal holidays and Landlord shall not be
obligated to maintain or operate the Office Complex at such times unless
special arrangements are made by Tenant. The services and utilities required
to be furnished by Landlord, other than electricity and water, will be provided
only during the normal hours of operation of the Office Complex, except as
otherwise specified herein. It is agreed that if Tenant requires air
conditioning or heat beyond the normal hours of operation set forth herein,
Landlord will furnish such air conditioning or heat, provided Tenant gives
Landlord's agent sufficient advance notice of such requirement and Tenant
agrees to pay for the cost of such extra service in accordance with Landlord's
then current schedule of costs and assessments for such extra service.
Landlord agrees to provide a security system in the Office Complex comparable
to security systems in first class office buildings in the Bethesda, Maryland
area, which shall permit Tenant to have access to the Premises on a 24-hour,
seven-days-a-week basis.
(b) Landlord, at the time of the execution of this Lease,
has no intent to eliminate or to close the health club available to tenants
occupying the Office Complex. Landlord agrees that for so long as Tenant is a
tenant in the Office Complex and the health club remains open to all tenants of
the Office Complex, tenant shall have the right, along with other tenants in
the Office Complex and subject to Tenant's paying the applicable fees and
complying with all applicable rules governing the use of the health club, to
use the health club. The preceding sentence notwithstanding, Landlord agrees
that, provided the health club is open to tenants occupying the Office Complex,
prior to June 15, 1993, eight (8) employees of Tenant shall have the right to
use the health club without paying the membership charge. Neither Landlord nor
Boston Properties, Inc., Landlord's agent, shall have any liability to Tenant
or its employees, agents, invitees, licensees, customers, clients, family
members or guests for any damage, injury, loss, expense, compensation or claim
whatsoever arising out of the use of the health club and exercise facilities in
and around the Building and the Office Complex by Tenant or its employees,
agents, invitees, licensees, customers, clients, family members or guests.
Further, Tenant agrees to indemnify and save harmless Landlord and Boston
Properties, Inc. from and against any and all such damages, injuries, losses,
expenses, compensation or claims (including attorneys' fees) arising from the
use of the health club or exercise facilities by Tenant or its employees,
agents, invitees, licensees,
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customers, clients, family members or guests, the gross negligence or willful
misconduct of Landlord, its employees and agents excepted.
14.2 It is understood and agreed that Landlord shall not have any
liability to Tenant whatsoever as a result of Landlord's failure or inability
to furnish any of the utilities or services required to be furnished by
Landlord hereunder, whether resulting from breakdown, removal from service for
maintenance or repairs, strikes, scarcity of labor or materials, acts of God,
governmental requirements or from any other cause whatsoever. It is further
agreed that any such failure or inability to furnish the utilities or services
required hereunder shall not be considered an eviction, actual or constructive,
of Tenant from the Premises, and shall not entitle Tenant to terminate this
Lease or to an abatement of any rent payable hereunder.
14.3 (a) Notwithstanding provisions of Section 14.2 to the
contrary, if (i) the services described in Section 14.1 hereof are interrupted
for a period of more than fifteen (15) consecutive business days, (ii) Landlord
has not commenced or is not diligently pursuing curing such interruption, (iii)
such interruption is not the result of strikes, unavailability of parts or
other materials, or any other cause beyond Landlord's control, and (iv) such
interruption renders all or a substantial portion of the Premises unusable by
Tenant, then Tenant shall be entitled to a pro rata abatement of rent beginning
on the sixteenth (16th) consecutive business day that the Premises are unusable
and continuing until the use of the Premises is restored to Tenant.
(b) Landlord will use its best efforts (including, in
Landlord's sole discretion, reasonable expenditures of money) to cause the
restoration of any interrupted utility services; further, should any equipment
or machinery in the Building break down so as to render the Premises unusable
by Tenant, Landlord shall promptly repair or replace it (subject to delays
which result from strikes, unavailability of parts or other materials, or other
matters beyond Landlord's control).
14.4 The parties hereto agree to comply with all mandatory and
voluntary energy conservation controls and requirements applicable to office
buildings that are imposed or instituted by the Federal, State of Maryland or
Montgomery County governments, including without limitation, controls on the
permitted range of temperature settings in office buildings, and requirements
necessitating curtailment of the volume of energy consumption or the hours of
operation of the Office Complex. Any terms or conditions of this Lease that
conflict or interfere with compliance with such controls or requirements shall
be suspended for the duration of such controls or requirements. It is further
agreed that compliance with such controls or requirements shall not be
considered an eviction, actual or constructive, of Tenant from the Premises and
shall not entitle Tenant to terminate this Lease or to an abatement of any rent
payable hereunder.
14.5 Tenant shall reimburse Landlord for any excess water usage in
the Premises. "Excess water usage" shall mean the excess of Tenant's water
usage during any billing period for water services over the estimated average
water usage during the same period for other tenants of the Office Complex, as
computed by Landlord.
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ARTICLE XV
LIABILITY OF LANDLORD
15.1 Landlord shall not be liable to Tenant, its employees, agents,
business invitees, licensees, customers, clients, family members or guests for
any damage, injury, loss, compensation or claim, including, but not limited to,
claims for the interruption of or loss to Tenant's business, based on, arising,
out of or resulting from any cause whatsoever, including but not limited to the
following: repairs to any portion of the Premises or the Office Complex;
interruption in the use of the Premises; any accident or damage resulting from
the use or operation (by Landlord, Tenant or any other person or persons) of
elevators, or of the heating, cooling, electrical or plumbing equipment or
apparatus; the termination of this Lease by reason of the destruction of the
Premises, the Building or the Office Complex; any fire, robbery, theft,
mysterious disappearance or any other casualty; the actions of any other
tenants of the Office Complex or of any other person or persons; and any
leakage in any part or portion of the Premises or the Office Complex, or from
water, rain or snow that may leak into, or flow from, any part of the Premises
or the Office Complex, or from drains, pipes or plumbing fixtures in the Office
Complex. Any goods, property or personal effects stored or placed by Tenant or
its employees in or about the Premises or Office Complex shall be at the sole
risk of Tenant, and Landlord shall not in any manner be held responsible
therefor. It is understood that the employees of Landlord are prohibited from
receiving any packages or other articles delivered to the Office Complex for
Tenant, and if any such employee receives any such package or articles, such
employee shall be acting as the agent of Tenant for such purposes and not as
the agent of Landlord. Notwithstanding the foregoing provisions of this
Section 15.1, Landlord shall not be released from liability to Tenant for
damage or injury caused by the willful misconduct or gross negligence of
Landlord, its employees or agents; provided, however, in no event shall
Landlord have any liability to Tenant for any claims based on the interruption
of or loss to Tenant's business.
15.2 Tenant hereby agrees to indemnify and hold Landlord harmless
from and against all costs, damages, claims, liabilities and expenses
(including attorneys' fees and any costs of litigation) suffered by or claimed
against Landlord, directly or indirectly, based on, arising out of or resulting
from (i) Tenant's use and occupancy of the Premises or the business conducted
by Tenant therein, (ii) any accident, injury or damage whatsoever caused to any
person, or the property of any person, occurring on or about the Premises
during the Lease Term, the gross negligence or willful misconduct of Landlord,
its employees and agents excepted, (iii) any act or omission to act by Tenant
or its employees, contractors, agents, licensees, or invitees, or (iv) any
breach or default by Tenant in the performance or observance of its covenants
or obligations under this Lease.
15.3 In the event that at any time Landlord shall sell or transfer
title to the Building or the Office Complex, provided the purchaser or
transferee assumes the obligations of Landlord hereunder, Landlord named herein
shall not be liable to Tenant for any obligations or liabilities based on or
arising out of events or conditions occurring on or after the date of such sale
or transfer. Furthermore, Tenant agrees to attorn to any such purchaser or
transferee upon all the terms and conditions of this Lease.
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15.4 In the event that at any time during the Lease Term Tenant
shall have a claim against Landlord, Tenant shall not have the right to deduct
the amount allegedly owed to Tenant from any rent or other sums payable to
Landlord hereunder, it being understood that Tenant's sole remedy for
recovering upon such claim shall be to institute an independent action against
Landlord.
15.5 Tenant agrees that in the event Tenant is awarded a money
judgment against Landlord, Tenant's sole recourse for satisfaction of such
judgment shall be limited to execution against the estate and interest of
Landlord in the Office Complex. In no event shall any other assets of
Landlord, any partner of Landlord, or any other person or entity be available
to satisfy, or be subject to, such judgment nor shall any partner of Landlord
or any other person or entity be held to have any personal liability for
satisfaction of any claims or judgments that Tenant may have against Landlord
or any constituent partner of Landlord in such partner's capacity as a partner
of Landlord.
ARTICLE XVI
RULES AND REGULATIONS
16.1 Tenant and its agents, employees, invitees, licensees,
customers, clients, family members, guests and permitted subtenants shall at
all times abide by and observe the rules and regulations attached hereto as
Exhibit B. In addition, Tenant and its agents, employees, invitees, licensees,
customers, clients, family members, guests and permitted subtenants shall abide
by and observe all other rules or regulations that Landlord may promulgate from
time to time for the operation and maintenance of the Office Complex, provided
that notice thereof is given to Tenant and such rules and regulations are not
inconsistent with the provisions of this Lease. Nothing contained in this
Lease shall be construed as imposing upon Landlord any duty or obligation to
enforce such rules and regulations, or the terms, conditions or covenants
contained in any other lease, as against any other tenant, and Landlord shall
not be liable to Tenant for the violation of such rules or regulations by any
other tenant or its employees, agents, business invitees, licensees, customers,
clients, family members or guests. If there is any inconsistency between this
Lease and the Rules and Regulations set forth in Exhibit B, this Lease shall
govern.
ARTICLE XVII
DAMAGE OR DESTRUCTION
17.1 If, during the Lease Term, the Premises or the Building are
totally or partially damaged or destroyed from any cause, thereby rendering the
Premises totally or partially inaccessible or unusable, Landlord shall
diligently (taking into account the time necessary to effectuate a satisfactory
settlement with any insurance company involved) restore and repair the Premises
and the Building to substantially the same condition they were in prior to such
damage; provided, however, if in the sole and reasonable judgment of Landlord
the repairs and restoration cannot be completed within one hundred twenty (120)
days after the occurrence of such damage, including the time needed for removal
of debris, preparation of plans and issuance of all required governmental
permits, Landlord shall have the right, at its sole option, to terminate this
Lease by giving written notice of termination to Tenant within forty-five (45)
days after the occurrence of such
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damage. Landlord shall use reasonable efforts not to discriminate against
Tenant in determining whether to exercise its right to terminate this Lease in
accordance with the provisions of this Section 17.1.
17.2 If Landlord determines, in its sole but reasonable judgment,
that the repairs and restoration cannot be substantially completed within one
hundred eighty (180) days after the date of such damage or destruction,
Landlord shall promptly notify Tenant of such determination. For a period of
thirty (30) days after receipt of such determination, Tenant shall have the
right to terminate this Lease by providing written notice to Landlord. If
Tenant does not elect to terminate this Lease within such thirty (30) day
period, and provided that Landlord has not elected to terminate this Lease,
Landlord shall proceed to repair and restore the Premises (including the means
of access thereto) and the Building. Notwithstanding the foregoing, Tenant
shall not have the right to terminate this Lease if the act or omission of
Tenant, or any of its employees, agents, licensees, subtenants, customers,
clients, family members or guests, shall have caused the damage or destruction.
17.3 If this Lease is terminated pursuant to Section 17.1 or
Section 17.2 above, all rent payable hereunder shall be apportioned and paid to
the effective date of the occurrence of such damage or destruction, and Tenant
shall have no further rights or remedies as against Landlord pursuant to this
Lease, or otherwise. If this Lease is not terminated as a result of such
damage, and provided that such damage was not caused by the act or omission to
act of Tenant, or any of its employees, agents, licensees, subtenants,
invitees, customers, clients, family members or guests, until the repair and
restoration of the Premises is completed Tenant shall be required to pay base
rent and additional rent only for that part of the Premises that Tenant is able
to use while repairs are being made, based on the ratio that the amount of
usable Net Rentable Area bears to the total Net Rentable Area in the Premises.
Landlord shall bear the costs and expenses of repairing and restoring the
Premises, except that if such damage or destruction was caused by the act or
omission to act of Tenant, or any of its employees, agents, licensees,
subtenants, invitees, customers, clients, family members or guests, upon
written demand from Landlord, Tenant shall pay to Landlord the amount by which
such costs and expenses exceed the insurance proceeds, if any, received by
Landlord on account of such damage or destruction. Provided, however, that
Landlord shall not be obligated to restore the Premises if the estimated cost
of such restoration, as prepared by Landlord's architect, exceeds the amount of
insurance proceeds available to Landlord for such restoration by more than 10%
of such amount.
17.4 If Landlord repairs and restores the Premises as provided in
Section 17.1, Landlord shall not be required to repair or restore any
decorations, alterations or improvements to the Premises previously made by or
at the expense of Tenant or any trade fixtures, furnishings, equipment or
personal property belonging to Tenant. It shall be Tenant's sole
responsibility to repair and restore all such items.
17.5 Notwithstanding anything to the contrary contained herein, if
the Building is damaged or destroyed from any cause to such an extent that the
costs of repairing and restoring the Building would exceed fifty percent (50%)
of the replacement value of the Building, whether or not the Premises are
damaged or destroyed, Landlord shall have the right to terminate this Lease
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by written notice to Tenant, provided the leases of all other tenants in the
Building are similarly terminated. This right of termination shall be in
addition to any other right of termination provided in this Lease.
ARTICLE XVIII
CONDEMNATION
18.1 If the whole or a substantial part (as hereinafter defined) of
the Premises, or the use or occupancy of the Premises, shall be taken or
condemned by any governmental or quasi-governmental authority for any public or
quasi-public use or purpose including a sale thereof under threat of such a
taking), then this Lease shall terminate on the date title thereto vests in
such governmental or quasi-governmental authority, and all rent payable
hereunder shall be apportioned as of such date. If less than a substantial
part of the Premises, or the use or occupancy thereof, is taken or condemned by
any governmental or quasi-governmental authority for any public or quasi-public
use or purpose (including a sale thereof under threat of such a taking), this
Lease shall continue in full force and effect, but the base rent and additional
rent thereafter payable hereunder shall be equitably adjusted (on the basis of
the ratio of the number of square feet of Net Rentable Area taken to the total
Net Rentable Area in the Premises prior to such taking) as of the date title
vests in the governmental or quasi-governmental authority. For purposes of
this Section 18.1, a substantial part of the Premises shall be considered to
have been taken if more than one-third (1/3) of the Premises is rendered
unusable as a result of such taking.
18.2 All awards, damages and other compensation paid by the
condemning authority on account of such taking or condemnation (or sale under
threat of such a taking) shall belong to Landlord, and Tenant hereby assigns to
Landlord all rights to such awards, damages and compensation. Tenant agrees
not to make any claim against Landlord or the condemning authority for any
portion of such award or compensation attributable to damages to the Premises,
the value of the unexpired term of this Lease, the loss of profits or goodwill,
leasehold improvements or severance damages. Nothing contained herein,
however, shall prevent Tenant from pursuing a separate claim against the
condemning authority for the value of furnishings, equipment and trade fixtures
installed in the Premises at Tenant's expense and for relocation expenses,
provided that such claim does not in any way diminish the award or compensation
payable to or recoverable by Landlord in connection with such taking or
condemnation.
ARTICLE XIX
DEFAULT BY TENANT
19.1 The occurrence of any of the following shall constitute a
default by Tenant under this Lease:
(a) If Tenant shall fail to pay any installment of base
rent or additional rent when due, or shall fail to pay when due any other
payment required by this Lease and such failure shall remain uncured for a
period of five (5) days after Landlord notifies Tenant of such failure;
provided, however, that Landlord shall not be required to give Tenant more than
two (2) such written notices in any twelve (12) month period.
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(b) If Tenant shall violate or fail to perform any other
term, condition, covenant or agreement to be performed or observed by Tenant
under this Lease and such violation or failure shall continue uncured for a
period of twenty (20) days after Landlord notifies Tenant in writing of such
violation or failure. If such violation or failure is not capable of being
cured within such twenty (20) day period, Tenant shall not be deemed to be in
default hereunder if Tenant commences curative action within such twenty (20)
day period and proceeds diligently and in good faith thereafter to cure such
violation or failure until completion.
(c) If Tenant shall abandon the Premises.
(d) If an Event of Bankruptcy, as defined in Section 20.1
of this Lease, shall occur.
19.2 If Tenant shall be in default under this Lease, Landlord shall
have the right, at its sole option, to terminate this Lease. With or without
terminating this Lease, Landlord may re-enter and take possession of the
Premises and the provisions of this Article XIX shall operate as a notice to
quit, any other notice to quit or of Landlord's intention to re-enter the
Premises being hereby expressly waived. If necessary, Landlord may proceed to
recover possession of the Premises under and by virtue of the laws of the State
of Maryland, or by such other proceedings, including re-entry and possession,
as may be applicable. If Landlord elects to terminate this Lease, everything
contained in this Lease on the part of Landlord to be done and performed shall
cease without prejudice, however, to the right of Landlord to recover from
Tenant all rent and other sums due under this Lease. Whether or not this Lease
is terminated by reason of Tenant's default, Landlord may, but shall not be
obligated to, relet the Premises for such rent and upon such terms as are not
unreasonable under the circumstances, and if the full rental provided herein
plus the costs, expenses and damages hereafter described shall not be realized
by Landlord, Tenant shall be liable for all damages sustained by Landlord,
including, without limitation, deficiency in base rent and additional rent,
reasonable attorneys' fees, brokerage fees, and the expenses of placing the
Premises in first class rentable condition. Landlord shall in no way be
responsible or liable for any failure to relet the Premises or any part
thereof, or any failure to collect any rent due or accrued upon such reletting
(provided, however, that Landlord shall endeavor to act diligently in
collecting any rent due or accrued upon such reletting), to the end and intent
that Landlord may elect to hold Tenant liable for the base rent, additional
rent, and any and all other items of cost and expense which Tenant shall have
been obligated to pay throughout the remainder of the Lease Term. Any damages
or loss of rent sustained by Landlord may be recovered by Landlord, at
Landlord's option, at the time of the reletting, or in separate actions, from
time to time, as said damage shall have been made more easily ascertainable by
successive relettings, or, at Landlord's option, may be deferred until the
expiration of the Lease Term, in which event Tenant hereby agrees that the
cause of action shall not be deemed to have accrued until the date of
expiration of the Lease Term. The provisions contained in this Section 19.2
shall be in addition to, and shall not prevent the enforcement of, any claim
Landlord may have against Tenant for anticipatory breach of this Lease.
19.3 All rights and remedies of Landlord set forth herein are in
addition to all other rights and remedies available to
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Landlord at law or in equity. All rights and remedies available to Landlord
hereunder or at law or in equity are expressly declared to be cumulative. The
exercise by Landlord of any such right or remedy shall not prevent the
concurrent or subsequent exercise of any other right or remedy. No delay in
the enforcement or exercise of any such right or remedy shall constitute a
waiver of any default by Tenant hereunder or of any of Landlord's rights or
remedies in connection therewith. Landlord shall not be deemed to have waived
any default by Tenant hereunder unless such waiver is set forth in a written
instrument signed by Landlord. If Landlord waives in writing any default by
Tenant, such waiver shall not be construed as a waiver of any covenant,
condition or agreement set forth in this Lease except as to specific
circumstances described in such written waiver.
19.4 If Landlord shall institute proceedings against Tenant and a
compromise or settlement thereof shall be made, neither shall the same
constitute a waiver of default or of any other covenant, condition or agreement
set forth herein nor of any of Landlord's rights hereunder. Neither the
payment by Tenant of a lesser amount than the installments of base rent,
additional rent or of any sums due hereunder nor any endorsement or statement
on any check or letter accompanying a check for payment of rent or other sums
payable hereunder shall be deemed an accord and satisfaction, and Landlord may
accept such check or payment without prejudice to Landlord's right to recover
the balance of such rent or other sums or to pursue any other remedy available
to Landlord. No re-entry by Landlord, and no acceptance by Landlord of keys
from Tenant, shall be considered an acceptance of a surrender of this Lease.
19.5 If Tenant defaults in the making of any payment or in the
doing of any act herein required to be made or done by Tenant, then Landlord
may, but shall not be required to, make such payment or do such act. If
Landlord elects to make such payment or do such act, all costs and expenses
incurred by Landlord, plus interest thereon at the rate per annum which is two
percent (2%) higher than the "prime rate" then being charged by Riggs National
Bank of Washington, D.C., from the date paid by Landlord to the date of payment
thereof by Tenant, shall be immediately paid by Tenant to Landlord; provided
however, that nothing contained herein shall be construed as permitting
Landlord to charge or receive interest in excess of the maximum legal rate then
allowed by law. The taking of such action by Landlord shall not be considered
as a cure of such default by Tenant or prevent Landlord from pursuing any
remedy it is otherwise entitled to in connection with such default.
19.6 If Tenant fails to make any payment of base rent or of
additional rent on or before the date such payment is due and payable, Tenant
shall pay to Landlord a late charge of five percent (5%) of the amount of such
payment. In addition, such payment shall bear interest at the rate per annum
which is two percent (2%) higher than the "prime rate" then being charged by
Riggs National Bank of Washington, D.C. from the date such payment became due
to the date of payment thereof by Tenant; provided, however, that nothing
contained herein shall be construed as permitting Landlord to charge or receive
interest in excess of the maximum legal rate then allowed by law. Such late
charge and interest shall constitute additional rent due and payable hereunder
with the next installment of base rent due hereunder.
19.7 Landlord shall have a lien upon, and Tenant hereby grants to
Landlord a security interest in all personal property and equipment of Tenant
located in the Premises, as security for
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the payment of all rent and the performance of all other obligations of Tenant
required by this Lease. In order to perfect and enforce said lien and security
interest, Tenant agrees to execute all required financing statements. At any
time after a default by Tenant hereunder, Landlord may seize and take
possession of any and all personal property and equipment belonging to Tenant
which may be found in and upon the Premises. If Tenant fails to redeem the
personal property and equipment so seized by payment of all sums due Landlord
under and by virtue of this Lease, Landlord shall have the right, after twenty
(20) days' written notice to Tenant, to sell such personal property and
equipment so seized at public or private sale and upon such terms and
conditions as to Landlord may appear advantageous. After the payment of all
proper charges incident to such sale, the proceeds thereof shall be applied to
the payment of any and all sums due to Landlord pursuant to this Lease. In the
event there shall be any surplus remaining after the payment of all sums due to
Landlord, such surplus shall be paid over to Tenant.
ARTICLE XX
BANKRUPTCY
20.1 The following shall be Events of Bankruptcy under this Lease:
(a) Tenant's becoming insolvent, as that term is defined
in Title 11 of the United States Code (the "Bankruptcy Code"), or under the
insolvency laws of any state, district, commonwealth or territory of the United
States (the "Insolvency Laws");
(b) The appointment of a receiver or custodian for any or
all of Tenant's property or assets, or the institution of a foreclosure action
upon any of Tenant's real or personal property;
(c) The filing of a voluntary petition under the
provisions of the Bankruptcy Code or Insolvency Laws;
(d) The filing of an involuntary petition against Tenant
as the subject debtor under the Bankruptcy Code or Insolvency Laws, which
either (i) is not dismissed within thirty (30) days of filing, or (ii) results
in the issuance of an order for relief against the debtor; or
(e) Tenant's making or consenting to an assignment for
the benefit of creditors or a common law composition of creditors.
20.2 (a) Upon occurrence of an Event of Bankruptcy, Landlord
shall have all rights and remedies available to Landlord pursuant to Article
XIX, provided that while a case in which Tenant is the subject debtor under the
Bankruptcy Code is pending and only for so long as Tenant or its Trustee in
Bankruptcy (hereafter referred to as "Trustee") is in compliance with the
provisions of Sections 20.2 (b) , (c) and (d) below, Landlord shall not
exercise its rights and remedies pursuant to Article XIX.
(b) In the event Tenant becomes the subject debtor in a
case pending under the Bankruptcy Code, Landlord's right to terminate this
Lease pursuant to Section 20.2(a) shall be
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subject to the rights of the Trustee to assume or assign this Lease. Trustee
shall not have the right to assume or assign this Lease unless Trustee promptly
(i) cures all defaults under this Lease, (ii) compensates Landlord for monetary
damages incurred as a result of such defaults, and (iii) provides adequate
assurance of future performance on the part of Tenant as debtor in possession
or on the part of the assignee tenant.
(c) Landlord and Tenant hereby agree in advance that
adequate assurance of future performance, as used in Section 20.2(b) above,
shall mean that all of the following minimum criteria must be met: (i) Tenant's
gross receipts in the ordinary course of business during the thirty (30) day
period immediately preceding the initiation of the case under the Bankruptcy
Code must be at least two (2) times greater than the next monthly installment
of annual base rent and additional rent due under this Lease; (ii) both the
average and median of Tenant's gross receipts in the ordinary course of
business during the six (6) month period immediately preceding the initiation
of the case under the Bankruptcy Code must be at least (2) times greater than
the next monthly installment of annual base rent and additional rent due under
this Lease; (iii) Tenant must pay its estimated pro rata share of the cost of
all services provided by Landlord (whether directly or through agents or
contractors and whether or not previously included as part of the annual base
rent), in advance of the performance or provision of such services; (iv)
Trustee must agree that Tenant's business shall be conducted in a first class
manner, and that no liquidating sales, auctions, or other non-first class
business operations shall be conducted on the Premises; (v) Trustee must agree
that the use of the Premises as stated in this Lease will remain unchanged and
that no prohibited use shall be permitted; (vi) Trustee must agree that the
assumption or assignment of this Lease will not violate or affect the rights of
other tenants in the Office Complex; (vii) Trustee must pay to Landlord at the
time the next monthly installment of annual base rent is due under this Lease,
in addition to such installment of annual base rent, an amount equal to the
monthly installments of annual base rent and additional rent due under this
Lease for the next six (6) months under this Lease, said amount to be held by
Landlord in escrow until either Trustee or Tenant defaults in its payment of
rent or other obligations under this Lease (whereupon Landlord shall have the
right to draw on such escrowed funds) or until the expiration of this Lease
(whereupon the funds shall be returned to Trustee or Tenant); and (viii) Tenant
or Trustee must agree to pay to Landlord at any time Landlord is authorized to
and does draw on the escrow account the amount necessary to restore such escrow
account to the original level required by Section 20.2(c)(vii).
(d) In the event Tenant is unable to (i) cure its
defaults, (ii) reimburse the Landlord for its monetary damages, (iii) pay the
rent due under this Lease and all other payments required of Tenant under this
Lease on time (or within five (5) days of the due date) or (iv) meet the
criteria and obligations imposed by Section 20.2(c) above, Tenant agrees in
advance that it has not met its burden to provide adequate assurance of future
performance, and this Lease may be terminated by Landlord in accordance with
Section 20.2(a) above.
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ARTICLE XXI
SUBORDINATION
21.1 This Lease is subject and subordinate to the lien of any and
all mortgages (which term "mortgages" shall include both construction and
permanent financing and shall include deeds of trust and similar security
instruments) which may now encumber the Building or the Office Complex, and to
any and all renewals, extensions, modifications, recastings or refinancings
thereof. This Lease shall also be subject and subordinate to the lien of (i)
any new first mortgage that hereafter may encumber the Building or the Office
Complex, and (ii) any second or junior mortgages that may hereafter encumber
the Building or the Office Complex, provided the holder of the first mortgage
consents to such subordination. At any time after the execution of this Lease,
the holder of any mortgage to which this Lease is subordinate shall have the
right to declare this Lease to be superior to the lien of such mortgage and
Tenant agrees to execute all documents required by such holder in confirmation
thereof.
21.2 In confirmation of the foregoing subordination, Tenant shall,
at Landlord's request, promptly execute any requisite or appropriate
certificate or other document. In the event Tenant does not execute and
deliver any requisite or appropriate certificate or other document within ten
(10) days of Landlord's request therefor, Tenant hereby constitutes and
appoints Landlord as Tenant's attorney-in-fact to execute any such certificate
or other document for or on behalf of Tenant. Tenant agrees that in the event
any proceedings are brought for the foreclosure of any mortgage encumbering the
Building or the Office Complex, Tenant shall attorn to the purchaser at such
foreclosure sale, if requested to do so by such purchaser, and shall recognize
such purchaser as the landlord under this Lease, and Tenant waives the
provisions of any statute or rule of law, now or hereafter in effect, which may
give or purport to give Tenant any right to terminate or otherwise adversely
affect this Lease and the obligations of Tenant hereunder in the event any such
foreclosure proceeding is prosecuted or completed. Tenant agrees that upon
such attornment, such purchaser shall not be (i) bound by any payment of annual
base rent or additional rent for more than one (1) month in advance, except
prepayments in the nature of security for the performance by Tenant of its
obligations under this Lease but only to the extent such prepayments have been
delivered to such purchaser, (ii) bound by any amendment of this Lease made
without the consent of any lender providing construction or permanent financing
for the Office Complex, (iii) liable for damages for any act or omission of any
prior landlord, (iv) subject to any offsets or defenses which Tenant might have
against any prior landlord, provided, however, that after succeeding to
Landlord's interest under this Lease, such purchaser shall perform in
accordance with the terms of this Lease all obligations of Landlord arising
after the date such purchaser acquires title to the Office Complex. Landlord
agrees to use reasonable efforts to obtain the consent of any Lender providing
financing for the Office Complex to any amendment to this Lease, where such
consent is required. Upon request by such purchaser, Tenant shall execute and
deliver an instrument or instruments confirming its attornment.
21.3 (a) After receiving notice from any person, firm or other
entity that it holds a mortgage, deed of trust or a ground lease on the
Building, or the land on which the Building is situated or the Office Complex,
no notice from Tenant to Landlord alleging any default by Landlord shall be
effective unless and until a copy of the same is given to such holder, trustee,
or
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ground lessor; provided, however, that Tenant shall have been furnished with
the name and address of such holder, trustee or ground lessor. The curing of
any of Landlord's defaults by such holder, trustee or ground lessor shall be
treated as performance by Landlord.
(b) In addition to the time afforded Landlord for the
curing of any default, any such holder, trustee, or ground lessor shall have an
additional thirty (30) days after the expiration of the period allowed to
Landlord for the cure of any such default within which to commence a cure.
(c) In the event that any lender providing construction
or permanent financing or any refinancing for the Building or the Office
Complex requires, as a condition of such financing, that modifications to this
Lease be obtained, and provided that such modifications (i) are reasonable,
(ii) do not adversely affect in a material manner Tenant's use and occupancy of
the Premises as herein permitted, (iii) do not increase the rent and other sums
to be paid by Tenant hereunder, (iv) do not reduce the services provided to
Tenant under this Lease, (v) do not materially decrease Landlord's obligations
under this Lease and (vi) do not materially affect the rights and obligations
of Tenant under this Lease, Landlord may submit to Tenant a written amendment
to this Lease incorporating such required changes, and Tenant hereby covenants
and agrees to execute, acknowledge and deliver such amendment to Landlord
within ten (10) days of Tenant's receipt thereof.
(d) Landlord shall use reasonable efforts to obtain from
the First National Bank of Boston ("FNBB"), holder of the first deed of trust
secured by the Office Complex, and any future holder of any mortgage or deed of
trust on the Office Complex a non-disturbance agreement in favor of Tenant to
the end and intent that as long as Tenant pays all rent when due and punctually
observes all other covenants and obligations on its part to be observed under
the Lease, the terms and conditions of this Lease shall continue in full force
and effect and Tenant's possession, use and occupancy of the Premises shall not
be disturbed during the term of this Lease by the holder of such mortgage or
deed of trust or by any purchaser upon foreclosure of such mortgage or deed of
trust.
ARTICLE XXII
HOLDING OVER
22.1 Tenant acknowledges, understands and agrees that if Landlord
executes a letter of intent or a lease agreement with Vitro Corporation or any
parent or affiliate of Vitro Corporation, Tenant shall be permitted to holdover
and occupy the Premises beyond the expiration of the Lease Term only in
accordance with the provisions of Section 25.22 hereof and that Tenant shall
not be permitted to holdover and occupy the Premises beyond the time period
provided in Section 25.22. In the event (a) Tenant renews the Lease in
accordance with the provisions of Rider No.1 hereof, (b) Landlord does not
execute a letter of intent or lease agreement with Vitro Corporation or a
parent or affiliate of Vitro Corporation and (c) Tenant shall not immediately
surrender the Premises on the date of the expiration of the Lease Term, as
renewed, then Tenant shall become a tenant by the month at a base rent and
additional rent equal to one hundred fifty percent (150%) of the base rent and
all additional rent in effect during the last month of the Lease Term. Said
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monthly tenancy shall commence on the first day following the expiration of the
Lease Term. As a monthly tenant, Tenant shall be subject to all the terms,
conditions, covenants and agreements of this Lease. Tenant shall give to
Landlord at least thirty (30) days' written notice of any intention to quit the
Premises, and Tenant shall be entitled to thirty (30) days' written notice to
quit the Premises, unless Tenant is in default hereunder, in which event Tenant
shall not be entitled to any notice to quit, the usual thirty (30) days' notice
to quit being hereby expressly waived. Notwithstanding the foregoing
provisions of this Section 22.1, in the event that Tenant shall hold over after
the expiration of the Lease Term, and if Landlord shall desire to regain
possession of the Premises promptly at the expiration of the Lease Term, then
at any time prior to Landlord's acceptance of rent from Tenant as a monthly
tenant hereunder, Landlord, at its option, may forthwith re-enter and take
possession of the Premises without process, or by any legal process in force in
the State of Maryland.
ARTICLE XXIII
COVENANTS OF LANDLORD
23.1 Landlord covenants that it has the right to make this Lease
for the term aforesaid, and that if Tenant shall pay all rent when due and
punctually perform all the covenants, terms, conditions and agreements of this
Lease to be performed by Tenant, Tenant shall, during the term hereby created,
freely, peaceably and quietly occupy and enjoy the full possession of the
Premises without molestation or hindrance by Landlord or any party claiming
through or under Landlord, subject to the provisions of Section 23.2 hereof.
Tenant acknowledges and agrees that its leasehold estate in and to the Premises
vests on the date this Lease is executed, notwithstanding that the term of this
Lease will not commence until a future date.
23.2 Landlord hereby reserves to itself and its successors and
assigns the following rights (all of which are hereby consented to by Tenant):
(i) to change the street address and/or name of the Building or the Office
Complex and/or the arrangement and/or location of entrances, passageways,
doors, doorways, corridors, elevators, stairs, toilets, or other public parts
of the Office Complex, provided such changes to not materially and adversely
interfere with Tenant's use or occupancy of the Premises; (ii) to erect, use
and maintain pipes and conduits in and through the Premises, provided that
Landlord shall use its reasonable efforts to minimize the disruption to
Tenant's use and occupancy of the Premises and provided such changes do not
materially or adversely interfere with Tenant's use or occupancy of the
Premises; and (iii) to grant to anyone the exclusive right to conduct any
particular business or undertaking in the Office Complex. Landlord may
exercise any or all of the foregoing rights without being deemed to be guilty
of an eviction, actual or constructive, or a disturbance or interruption of the
business of Tenant or of Tenant's use or occupancy of the Premises.
ARTICLE XXIV
PARKING
24.1 (a) During the Lease Term, upon the request of Tenant,
Landlord agrees to make available to Tenant and its employees and to Tenant's
permitted subtenants monthly parking permits for the parking of standard-sized
passenger automobiles in the garage beneath the Office
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Complex (the "Garage") or in the surface parking areas of the Office Complex
not designated for the exclusive use of particular tenants in the Office
Complex in an amount not to exceed three (3) parking permits for each 1,000
square feet of Net Rentable Area in the Premises, such permits to be used for
surface or Garage parking at Landlord's sole discretion. Landlord agrees that
it shall endeavor to determine whether Tenant and its employees shall park in
the Garage or in surface parking areas of the Office Complex in a manner which
does not discriminate against Tenant.
(b) The charge for such monthly parking permits shall be
the prevailing rate charged from time to time by Landlord for the garage
operation. The preceding sentence notwithstanding, eighteen (18) of such
permits shall be provided without charge to Tenant. In the event Tenant does
not use all eighteen (18) parking permits, Tenant shall not be entitled to a
credit therefor.
24.2 It is understood and agreed that the Garage and the surface
parking areas of the Office Complex will be operated on a self-parking basis
and no specific parking spaces will be allocated for use by Tenant. Each user
of the Garage and the surface parking areas not designated for the exclusive
use of particular tenants of the Office Complex will have the right to park in
any available stall in accordance with regulations of uniform applicability
promulgated for all users of the Garage and the surface parking areas by
Landlord or the Garage operator.
24.3 Tenant agrees that it and its employees shall observe
reasonable safety precautions in the use of the Garage and the surface parking
areas and shall at all times abide by all rules and regulations promulgated by
Landlord or the Garage operator governing the use of the Garage and the surface
parking areas, including the requirement that an identification or parking
sticker shall be displayed at all times in all cars parked in the Garage or the
surface parking areas. Any car not displaying such a sticker may be towed away
at the car owner's expense.
24.4 The Garage and the surface parking areas will remain open on
Monday through Friday (excluding legal holidays) during the normal hours of
operation of the Office Complex on such days. Landlord reserves the right to
close the Garage or the surface parking areas during periods of unusually
inclement weather. At all times when the Garage or the surface parking areas
are closed, monthly permit holders shall be afforded access to the Garage or
the surface parking areas by means of a magnetic card or other procedure
provided by Landlord or the Garage operator.
24.5 It is understood and agreed that Landlord does not assume any
responsibility for, and shall not be held liable for, any damage or loss to any
automobiles parked in the Garage or the surface parking areas or to any
personal property located therein, or for any injury sustained by any person in
or about the Garage or the surface parking areas.
ARTICLE XXV
GENERAL PROVISIONS
25.1 Tenant acknowledges that neither Landlord nor any broker,
agent or employee of Landlord has made any representations or promises with
respect to the Premises or the Office
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Complex except as herein expressly set forth, and no rights, privileges,
easements or licenses are being acquired by Tenant except as herein expressly
set forth.
25.2 Nothing contained in this Lease shall be construed as creating
a partnership or joint venture of or between Landlord and Tenant, or to create
any other relationship between the parties hereto other than that of landlord
and tenant.
25.3 Landlord and Tenant each represents and warrants to the other
that neither of them has employed or dealt with any broker, agent or finder in
carrying on the negotiations relating to this Lease. Tenant shall indemnify
and hold Landlord harmless from and against any claim or claims for brokerage
or other commissions asserted by any broker, agent or finder engaged by Tenant
or with whom Tenant has dealt in connection with this Lease.
25.4 Tenant agrees, at any time and from time to time, upon not
less than five (5) days' prior written notice by Landlord, to execute,
acknowledge and deliver to Landlord a statement in writing (i) certifying that
this Lease is unmodified and in full force and effect (or if there have been
any modifications, that the Lease is in full force and effect as modified and
stating the modifications), (ii) stating the dates to which the rent and any
other charges hereunder have been paid by Tenant, (iii) stating whether or not,
to the best knowledge of Tenant, Landlord is in default in the performance of
any covenant, agreement or condition contained in this Lease, and if so,
specifying the nature of such default, (iv) stating the address to which
notices to Tenant are to be sent, and (v) stating such other information as may
be reasonably requested by Landlord. Any such statement delivered by Tenant
may be relied upon by any owner of the Building or the Office Complex or the
land upon which they are situated, any prospective purchaser of the Building or
the Office Complex or such land, any mortgagee or prospective mortgagee of the
Building or the Office Complex or such land or of Landlord's interest therein,
or any prospective assignee of any such mortgagee.
25.5 Landlord and Tenant each hereby waive trial by jury in any
action, proceeding or counterclaim brought by either of them against the other
in connection with any matter arising out of or in any way connected with this
Lease, the relationship of Landlord, and Tenant hereunder, Tenant's use or
occupancy of the Premises, and/or any claim of injury or damage.
25.6 All notices or other communications required hereunder shall
be in writing and shall be deemed duly given if delivered in person (with
receipt therefor), or if sent by certified or registered mail, return receipt
requested, postage prepaid, to the following addresses: (i) if to Landlord at
c/o Boston Properties, Inc., 500 E Street, S.W., Washington, D.C. 20024, with a
copy to Boston Properties, Inc., 8 Arlington Street, Boston, Massachusetts
02116; (ii) if to Tenant, at the Premises, except that prior to the Lease
Commencement Date, notices to Tenant shall be sent to such address as Tenant
shall designate and inform Landlord. Either party may change its address for
the giving of notices by notice given in accordance with this Section.
25.7 If any provision of this Lease or the application thereof to
any person or circumstances shall to any extent be invalid or unenforceable,
the remainder of this Lease, or the application of such provision to persons or
circumstances other than those as to which it is invalid or
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unenforceable, shall not be affected thereby, and each provision of this Lease
shall be valid and enforced to the fullest extent permitted by law.
25.8 Feminine or neuter pronouns shall be substituted for those of
the masculine form, and the plural shall be substituted for the singular
number, in any place or places herein in which the context may require such
substitution.
25.9 The provisions of this Lease shall be binding upon, and shall
inure to the benefit of, the parties hereto and each of their respective
representatives, successors and assigns, subject to the provisions hereof
restricting assignment or subletting by Tenant.
25.10 This Lease contains and embodies the entire agreements of the
parties hereto and supersedes all prior agreements, negotiations and
discussions between the parties hereto. Any representation, inducement or
agreement that is not contained in this Lease shall not be of any force or
effect. This Lease may not be modified or changed in whole or in part in any
manner other than by an instrument in writing duly signed by both parties
hereto.
25.11 This Lease shall be governed by and construed in accordance
with the laws of the State of Maryland.
25.12 Article and section headings are used herein for the
convenience of reference and shall not be considered when construing or
interpreting this Lease.
25.13 The submission of an unsigned copy of this document to Tenant
for Tenant's consideration does not constitute an offer to lease the Premises
or an option to or for the premises. This document shall become effective and
binding only upon the execution and delivery of this Lease by both Landlord and
Tenant.
25.14 Time is of the essence of each provision of this Lease.
25.15 This Lease shall not be recorded, except that upon the request
of either party, the parties agree to execute, in recordable form, a short-form
memorandum of this Lease, provided that such memorandum shall not contain any
of the specific rental terms set forth herein. Such memorandum may be recorded
in the land records of Montgomery County, Maryland and the party desiring such
recordation shall pay all recordation costs.
25.16 The Net Rentable Area in the Office Complex and in the
Premises shall be determined in accordance with Exhibit C hereto.
25.17 Tenant hereby represents and warrants to Landlord that all
necessary corporate action has been taken to enter this Lease and that the
person signing this Lease on behalf of Tenant has been duly authorized to do
so.
25.18 In the event that (a) Tenant renews this Lease in accordance
with the provisions of Rider No. 1 attached hereto and made a part hereof and
(b) Landlord does not terminate Tenant's
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right to renew the Lease Term or the exercise of that right as provided in
Section 25.22 hereof and in Rider No. 1, Landlord shall reimburse Tenant for
the actual cost and expenses related to and incurred by Tenant in connection
with Tenant's normal, typical and reasonable expenses of moving into the
Premises, including packing and unpacking, telephone and computer installation
and moving all of Tenant's furniture and equipment to relocate Tenant's offices
("Tenant's Moving Costs") , in an aggregate amount up to, but not exceeding,
Four Thousand Dollars ($4,000.00) ("Tenant's Moving Allowance"). If Tenant's
Moving Costs are less than Tenant's Moving Allowance, Landlord shall not be
obligated to pay or credit to Tenant and Tenant shall not be entitled to nor
have any claim or cause of action against Landlord with respect to the
difference between Four Thousand Dollars ($4,000.00) and Tenant's Moving Costs.
In the event the cost and expenses incurred by Tenant in connection with
Tenant's Moving Costs exceed Tenant's Moving Allowance, Tenant agrees to pay
such moving costs in excess of Tenant's Moving Allowance. Tenant shall submit
to Landlord within sixty (60) days of moving into the Premises, copies of any
and all invoices, bills, receipts or charges incurred by Tenant in connection
with Tenant's Moving Costs. Landlord shall reimburse Tenant, in accordance
with the provisions of this Section 25.18, within thirty (30) days after the
expiration of the first (1st) Lease Year.
25.19 Except as otherwise provided in Section 4.7 of this Lease, any
additional rent owed by Tenant to Landlord, and any cost, expense, damage, or
liability shall be paid by Tenant to Landlord no later than the later of (i)
twenty (20) days after the date Landlord notifies Tenant of the amount of such
additional rent or such cost, expense, damage or liability, or (ii) the day the
next monthly installment of base rent is due. If any payment hereunder is due
after the end of the Lease Term, such additional rent or such cost, expense,
damage or liability shall be paid by Tenant to Landlord not later than twenty
(20) days after Landlord notifies Tenant of the amount of such additional rent
or such cost, expense, damage or liability.
25.20 All of Tenant's duties and obligations hereunder, including
but not limited to Tenant's duties and obligations to pay base rent, additional
rent and the costs, expenses, damages and liabilities incurred by Landlord for
which Tenant is liable, shall survive the termination of this Lease for any
reason whatsoever.
25.21 In the event Landlord is in any way delayed, interrupted or
prevented from performing any of its obligations under this Lease, and such
delay, interruption or prevention is due to fire, act of God, governmental act,
strike, labor dispute, inability to procure materials, or any other cause
beyond Landlord's reasonable control (whether similar or dissimilar), then
Landlord shall be excused from performing the affected obligations for the
period of such delay, interruption or prevention.
25.22 (a) In the event Tenant exercises its option to renew the
term of the Lease as provided in Rider No.1 hereto and Landlord thereafter
enters into a letter of intent or a lease agreement with Vitro Corporation or
any parent or affiliate of Vitro Corporation (collectively, the "Vitro Lease"),
Tenant's renewal right or its exercise thereof shall terminate and be of no
force or effect and Landlord promptly shall notify Tenant (the "Vitro Lease
Notice") of the execution of the Vitro Lease and the termination of Tenant's
renewal right or its exercise thereof. In the event Landlord executes the
Vitro Lease any time after March 15, 1993, Tenant shall not be obligated
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to vacate the Premises until the day (the "Vacation Date") that is ninety (90)
days after the date on which Landlord notifies Tenant of the execution of the
Vitro Lease. During the period that Tenant occupies the Premises after June
15, 1993, Tenant shall pay to Landlord annual base rent and additional rent
attributable to Tenant's proportionate share of increases in operating expenses
in the amounts and manner set forth in Article III and Article IV hereof. If
Tenant occupies the Premises for any portion of a month then the annual base
rent and additional rent to be paid by Tenant which is attributable to such
partial month shall be prorated on a per diem basis. Notwithstanding anything
to the contrary in this Section 25.22(a), Tenant may vacate the Premises at any
time after it receives the Vitro Lease Notice and this Lease shall terminate on
the date Tenant vacates the Premises.
(b) In the event Tenant notifies Landlord not more than
thirty (30) days after its receipt of the Vitro Lease Notice that it desires to
remain in the Premises beyond the Vacation Date, Landlord shall use reasonable
efforts, at Landlord's expense, to relocate Tenant to other premises of
comparable size and otherwise suitable to Tenant's reasonable short term needs
(the "Temporary Premises") in the Office Complex. Tenant shall not occupy the
Temporary Premises for a period longer than ninety (90) days beyond the
Vacation Date. During the period that Tenant occupies the Temporary Space,
Tenant shall pay to Landlord annual base rent and additional rent attributable
to Tenant's proportionate share of increases in operating expenses in the
amounts and manner set forth in Article III (i.e. $100,000 per year divided by
365 and multiplied by the number of days Tenant occupies the Temporary
Premises) and Article IV hereof. Except as otherwise provided herein, all of
the terms, provisions, conditions and covenants contained in this Lease, except
Rider No. 1 attached hereto, shall be applicable to and binding upon Landlord
and Tenant during Tenant's occupancy of the Temporary Space. Tenant shall
accept the Temporary Space in its "as-is" condition (provided that the
Temporary Space is secure, broom clean and in compliance with applicable
life-safety codes); neither Landlord nor Boston Properties, Inc. shall have any
obligation to make any improvements to the Temporary Space; Tenant shall not
make or cause or permit to be made any alterations, decorations, additions or
improvements to the Temporary Space without Landlord's prior written consent
which may be granted or withheld for any reason or for no reason; and Tenant
shall not sublet or assign all or any portion of the Temporary Space. Landlord
shall not be liable to Tenant and Tenant shall not have a claim or cause of
action against Landlord if Landlord determines that it is unable to provide
Temporary Space to Tenant.
(c) In the event Landlord is unable to provide Temporary
Space to Tenant as provided in Section 25.22 (b) above, Tenant shall vacate and
surrender the Premises to Landlord on or before the Vacation Date as provided
in Section 8.1 hereof and Tenant shall have no right to occupy any space in the
Office Complex after the Vacation Date.
25.23 This Lease includes and incorporates Rider No. 1 and Exhibits
A, B, C, and D attached hereto.
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IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease under seal on
or as of the day and year first above written.
<TABLE>
<S> <C>
LANDLORD:
DEMOCRACY ASSOCIATES LIMITED
PARTNERSHIP, a Maryland limited
partnership
By: Boston Rockledge Associates
Limited Partnership, a
Massachusetts limited partnership,
its General Partner
By: Boston Democracy Associates
Limited, Limited Partnership, a
Massachusetts limited partnership,
its General Partner
By: Boston Democracy Associates
General, a Massachusetts general
partnership, its General Partner
WITNESS:
/S/ KATHRYN R. STEVENSON By: /S/ EDWARD H. LINDE
- -------------------------------------- ------------------------------
Edward H. Linde
General Partner
TENANT:
SNYDER COMMUNICATIONS, L.P., a
Delaware limited partnership
By: Snyder Communications, Inc., a
Delaware corporation,
ATTEST: its general partner
By:/S/ LAURA K. DARLINGTON By:/S/ MICHELE D. SNYDER
----------------------- -------------------------------
Title: Accounting Manager Title: Chief Operating Officer
[CORPORATE SEAL]
</TABLE>
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<PAGE> 39
RIDER NO. 1
THIS RIDER NO. 1 is attached to and made a part of that certain Lease
Agreement dated July ___, 1992 (the "Lease"), by and between DEMOCRACY
ASSOCIATES LIMITED PARTNERSHIP ("Landlord") and SNYDER COMMUNICATIONS, L.P.
("Tenant"). The terms used in this Rider which are defined in the Lease have
the same meanings as provided in the Lease.
WITNESSETH, that for and in consideration of Tenant's entering into
the Lease Agreement described above, and other good and valuable consideration,
and intending to be legally bound hereby, Landlord hereby grants to Tenant the
right to renew the initial term of the Lease upon the following terms and
conditions:
(1) Landlord hereby grants to Tenant the conditional right,
exercisable at Tenant's option, to renew the term of the Lease for one (l)
additional term of four (4) years. If exercised and if the conditions
applicable thereto have been satisfied, such renewal term (the "Renewal Term")
shall commence immediately following the end of the initial term provided in
Section 2.1 of the Lease. The right of renewal herein granted to Tenant shall
be subject to, and shall be exercised in accordance with, the following terms
and conditions:
(a) Tenant shall exercise its right of renewal with
respect to the Renewal Term by giving Landlord written notice of the exercise
thereof (the "renewal option notice") not less than five (5) months prior to
the expiration of the initial term of the Lease. In the event that the renewal
option notice is not given in a timely manner, Tenant's right of renewal with
respect to the Renewal Term shall lapse and be of no further force or effect.
If Tenant is in default under the Lease, beyond any applicable notice and cure
period, on the date the renewal option notice is given or any time thereafter,
beyond any applicable notice and cure period, on or before the commencement
date of the Renewal Term, then, at Landlord's option, the renewal option notice
shall be totally ineffective and Tenant's right of renewal as to the Renewal
Term shall lapse and be of no further force or effect.
(b) During the Renewal Term, all the terms, conditions,
covenants and agreements set forth in the Lease shall continue to apply and be
binding upon Landlord and Tenant, except that the annual base rent payable
during each Lease Year of the Renewal Term shall be as follows:
June 16, 1993 - $22.00 multiplied by the total
June 15, 1994 number of square feet of Net
Rentable Area in the Premises
June 16, 1994 - $22.55 multiplied by the total
June 15, 1995 number of square feet of Net
Rentable Area in the Premises
<PAGE> 40
June 16, 1995 - $23.11 multiplied by the total
June 15, 1996 number of square feet of Net
Rentable Area in the Premises
June 16, 1996 - $23.69 multiplied by the total
June 15, 1997 number of square feet of Net
Rentable Area in the Premises
The annual base rent payable hereunder during each Lease Year of the
Renewal Term shall be divided into equal monthly installments and such monthly
installments shall be due and payable in advance on the first day of each month
during such Lease Year.
(2) Tenant shall have the right (a) to expand the Premises to
include any additional space on the fifteenth floor of the Building or (b) to
contract the Premises to minimum of 9,000 square feet of Net Rentable Area by
so indicating in the renewal option notice, provided that any remaining space
on the fifteenth floor of the Building not a part of the Premises constitutes
leasable space or spaces in Landlord's reasonable judgment.
(3) Tenant's rights hereunder are subject to Landlord's execution
of a letter of intent or a lease agreement with Vitro Corporation or any parent
or affiliate of Vitro Corporation, which letter of intent or lease agreement
shall include all or a portion of the rentable space on the fifteenth floor of
the Building occupied by Tenant and which Tenant is unwilling to release to
Landlord. In the event that Landlord executes such a letter of intent or a
lease agreement, then Landlord, by notice to Tenant, shall terminate Tenant's
right to lease the Premises for the Renewal Term.
(4) Tenant's rights under this Rider No. 1 are personal to and may
be executed only by Tenant and shall not be exercisable by any assignee or
subtenant of Tenant, other than a successor to Tenant.
Initials of:
- ------------------------
Landlord
-------------------------
Tenant
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<PAGE> 41
EXHIBIT A
Graphic: Map of portion of 15th floor leased by the Tenant at the Office
Complex.
A-1
<PAGE> 42
EXHIBIT B
RULES AND REGULATIONS
This Exhibit B is attached to and made a part of that Lease
Agreement dated July 30, 1992 (the "Lease"), between DEMOCRACY ASSOCIATES
LIMITED PARTNERSHIP, a Maryland limited partnership ("Landlord") and SNYDER
COMMUNICATIONS, L.P. ("Tenant"). Unless the context otherwise requires, the
terms used in this Exhibit that are defined in the Lease shall have the same
meanings as provided in the Lease.
The following rules and regulations have been formulated for the
safety and well-being of all tenants of the Office Complex and to insure
compliance with municipal and other requirements. Strict adherence to these
rules and regulations is necessary to guarantee that each and every tenant will
enjoy a safe and undisturbed occupancy of its premises in the Office Complex.
Any continuing violation of these rules and regulations by Tenant shall
constitute a default by Tenant under the Lease.
Landlord may, upon request of any tenant, waive the compliance by
such tenant of any of the following rules and regulations, provided that (i) no
waiver shall be effective unless signed by Landlord or Landlord's authorized
agent, (ii) any such waiver shall not relieve such tenant from the obligation
to comply with such rule or regulation in the future unless otherwise agreed to
by Landlord, (iii) no waiver granted to any tenant shall relieve any other
tenant from the obligation of complying with these rules and regulations,
unless such other tenant has received a similar written waiver from the
Landlord and (iv) any such waiver by Landlord shall not relieve such Tenant
from any liability to Landlord for any loss or damage occasioned as a result of
such tenant's failure to comply with any rule or regulation.
1. The sidewalks, entrances, passages, courts, elevators,
vestibules, stairways, corridors, halls and other parts of the Office Complex
not exclusively occupied by any tenant shall not be obstructed or encumbered by
any tenant or used for any purpose other than ingress and egress to and from
each tenant's premises. If a tenant's premises are situated on the ground
floor of the Office Complex, the tenant thereof shall, at such tenant's own
expense, keep the sidewalks and curb directly in front of its premises clean
and free from ice and snow. Landlord shall have the right to control and
operate the public portions of the Office Complex, and the facilities furnished
for common use of the tenants, in such manner as Landlord deems best for the
benefit of the tenants generally. No tenant shall permit the visit to its
premises of persons in such numbers or under such conditions as to interfere
with the use and enjoyment of the entrances, corridors, elevators and other
public portions or facilities of the Office Complex by other tenants.
2. No awnings or other projections shall be attached to the
outside walls of the Office Complex without the prior written consent of
Landlord. No drapes, blinds, shades or screens shall be attached to or hung
in, or used in connection with, any window or door of any tenant's premises,
without the prior written consent of Landlord. All awnings, projections,
curtains, blinds, shades, screens and other fixtures must be of a quality, type
and design or color, and
B-1
<PAGE> 43
attached in the manner, approved by Landlord.
3. No showcases or other articles shall be in front of or affixed
to any part of the exterior of the Office Complex, nor placed in the halls,
corridors or vestibules without the prior written consent of Landlord.
4. The water and wash closets and other plumbing fixtures shall
not be used for any purposes other than those for which they were constructed,
and no debris, rubbish, rags or other substances shall be thrown therein. All
damage resulting from any misuse of the fixtures shall be borne by the tenant
who, or whose servants, employees, agents, visitors or licensees, shall have
caused the same.
5. There shall be no marking, painting, drilling into or
defacement of the Office Complex or any part of the premises that is visible
from public areas of the Office Complex. Tenants shall not construct,
maintain, use or operate within their respective premises any electrical
device, wiring or apparatus in connection with a loud speaker system or other
sound system, except as reasonably required as part of a communication system
approved prior to the installation thereof by Landlord. No such loud speaker
or sound system shall be constructed, maintained, used or operated outside of
the premises.
6. No bicycles or vehicles and no animals, birds or pets of any
kind shall be brought into or kept in or about the Office Complex or any
tenant's premises, except that this rule shall not prohibit the parking of
bicycles or vehicles in the garage in the Office Complex. No cooking or
heating of food shall be done or permitted by any tenant on its premises. No
tenant shall cause or permit the unusual or objectionable odors to be produced
upon or permeate from its premises.
7. No space in the Office Complex shall be used for the
manufacture of goods for sale in the ordinary course of business, or for the
sale at auction of merchandise, goods or property of any kind. Furthermore,
the use of its premises by any tenant shall not be changed without the prior
approval of Landlord.
8. No tenant shall make any unseemly or disturbing noises or
disturb or interfere with occupants of this or neighboring buildings or
premises or those having business with them, whether by the use of any musical
instrument, radio, talking machine, whistling, singing, or in any other way.
No tenant shall throw anything out of the doors or windows or down the
corridors or stairs of the Office Complex.
9. No flammable, combustible or explosive fluid, chemical or
substance shall be brought into or kept upon the premises.
10. No additional locks or bolts of any kind shall be placed upon
any of the doors or windows by any tenant, nor shall any changes be made in any
existing locks or the locking mechanism therein, without Landlord's approval.
The doors leading to the corridors or main halls shall be kept closed during
business hours except as they may be used for ingress or egress. Each tenant
shall, upon the termination of its tenancy, restore to the Landlord all keys of
stores, offices,
B-2
<PAGE> 44
storage and toilet rooms either furnished to, or otherwise procured by, such
tenant, and in the event of the loss of any keys so furnished, such tenant
shall pay to Landlord the replacement cost thereof. Tenant's key system shall
be separate from that for the rest of the Office Complex.
11. Landlord reserves the right to inspect all freight to be
brought into the Office Complex and to exclude from the Office Complex all
freight which violates any of these rules and regulations of the Lease.
12. No tenant shall pay any employees on the premises except those
actually working for such tenant at the tenant's premises.
13. Landlord reserves the right to exclude from the Office Complex
at all times any person who is not known or does not properly identify himself
to the Office Complex management or watchman on duty. Landlord may, at its
option, require all persons admitted to or leaving the Office Complex between
the hours of 7:00 p.m. and 7:30 a.m., Monday through Friday, and at any hour on
Saturdays, Sundays and legal holidays, to register. Each tenant shall be
responsible for all persons for whom it authorizes entry into the Office
Complex, and shall be liable to Landlord for acts or omissions of such persons.
14. The premises shall not, at any time, be used for lodging or
sleeping or for an immoral or illegal purpose.
15. Each tenant, before closing and leaving the premises at any
time, shall see that any windows are closed and all lights turned off.
16. Landlord's employees shall not perform any work or do anything
outside of their regular duties, unless under special instructions from the
management of the Office Complex. The requirements of tenants will be attended
to only upon application to Landlord, and any such special requirements shall
be billed to Tenant (and paid when the next installment of rent is due) in
accordance with the schedule of charges maintained by Landlord from time to
time or at such charge as is agreed upon in advance by Landlord and Tenant.
17. Canvassing, soliciting and peddling in the Office is
prohibited and each tenant shall cooperate to prevent the same.
18. There shall not be used in any space, or in the public halls
of the Office Complex, either by any tenant or by jobbers or others in the
delivery or receipt of merchandise, any hand trucks, except those equipped with
rubber tires and side guards. Tenant shall be responsible to Landlord for any
loss or damage resulting from any deliveries made by or for Tenant to the
Office Complex.
19. Mats, trash or other objects shall not be placed in the public
corridors of the Office Complex.
20. Landlord does not maintain suite finishes which are
non-standard, such as kitchens,
B-3
<PAGE> 45
bathrooms, wallpaper, special lights, etc. However, should the need arise for
repairs of items not maintained by Landlord, Landlord will arrange for the work
to be done at Tenant's expense.
21. Drapes installed by Landlord for the use of Tenant or drapes
installed by Tenant, which are visible from the exterior of the Office Complex,
must be cleaned by Tenant at least once a year, without notice, at Tenant's own
expense.
Initials of:
- ----------------------------
Landlord
- -----------------------------
Tenant
B-4
<PAGE> 46
EXHIBIT C
METHOD OF MEASURING NET RENTABLE AREA
The Net Rentable Area of the Premises shall be determined in accordance with
the following:
(1) Net Rentable Area shall equal the sum of (i) net usable area,
(ii) floor core factor and (iii) common core factor.
(2) For the purposes hereof, the terms identified in Paragraph (1)
hereof shall have the following definitions:
a. Net usable area shall be computed by measuring from
the finished surface for the corridor side of the common corridor and/or wall
of the building core to the inside finished surface of the glassline of the
permanent outer building walls, and to the center of any demising walls which
separate the Premises from any adjoining space.
b. Floor core factor shall be a pro rata allocation of
all building service areas on the floor or floors on which the Premises are
located which are not measured in the net usable area calculation, including
but not limited to restrooms, public corridors, telephone and electrical
closets, and mechanical rooms, but excluding vertical penetrations through the
floor slab which serve more than one floor in the building, including but not
limited to stairs, elevator shafts, flues, pipe shafts, vertical ducts and
their enclosing walls. The pro rata allocation will be based on the ratio of
net usable area of the Premises on the floor relative to the total net usable
area on the floor.
c. Common core factor shall be a pro rata allocation of
the building service areas on the first floor that are for the benefit of the
general population of the building, and shall include the first floor lobby
area, public corridors, janitorial storage area, building engineer's office,
shop, and locker room, building receiving/service area, mail room, fire control
rooms, and energy management rooms, but shall exclude first floor net usable
area, building service areas exclusively for the use of first floor tenants,
and vertical penetrations previously defined. The pro rata allocation will be
based on the net usable area of the Premises on the floor or floors on which
such Premises are located relative to the total net usable area in the
Building.
Initials of:
- --------------------------- --------------------------
Landlord Tenant
C-1
<PAGE> 47
EXHIBIT D
FORM OF ESTOPPEL CERTIFICATE
This Exhibit D is attached to and made a part of that certain Lease
Agreement dated _______________________, 1992 (the "Lease"), between DEMOCRACY
ASSOCIATES LIMITED PARTNERSHIP ("Landlord") and SNYDER COMMUNICATIONS, L.P. The
terms used in this Exhibit that are defined in the Lease shall have the same
meaning as provided in the Lease. The Estoppel Certificate to be executed by
Landlord and Tenant pursuant to Section 2.2 of the Lease shall provide as
follows:
"This Estoppel Certificate made as of the _____ day of ______________,
1992, is being provided pursuant to the terms and provisions of that certain
Lease Agreement dated ________, 1992 (the "Lease"), between Democracy
Associates Limited Partnership ("Landlord") and Snyder Communications, L.P.
("Tenant"). The parties to the Lease desire to confirm that the following
terms which are defined in the Lease shall have the meanings set forth below
for all purposes in the Lease:
1. The Lease Commencement Date is ____________________, 1992.
2. The initial term of the Lease shall expire on ____________ __,
19__.
3. The number of square feet of rentable area in the Premises is
_____________.
4. The annual base rent with respect to the Premises for the
first Lease Year is an amount equal to the product of _____________________
Dollars ($_____________) multiplied by the total number of square feet of
rentable area in the Premises.
5. As of the date hereof the Lease has not been modified and is
in full force and effect and there are no defaults thereunder.
Attached to this Estoppel Certificate is evidence of payment of all
insurance required pursuant to Article XIII of the Lease."
Initials of:
- ------------------------
Landlord
- ------------------------
Tenant
D-1
<PAGE> 48
LEASE MODIFICATION AND RENEWAL AGREEMENT
THIS LEASE MODIFICATION AND RENEWAL AGREEMENT (the "Agreement") is
made as of the 11th day of June, 1993, by and between DEMOCRACY ASSOCIATES
LIMITED PARTNERSHIP (hereinafter referred to as "Landlord") and SNYDER
COMMUNICATIONS, L.P., a Delaware limited partnership (hereinafter referred to
as "Tenant").
RECITALS:
A. Landlord and Tenant have heretofore entered into a Lease
Agreement dated July 30, 1992 (the "Lease"), respecting the lease by Landlord
to Tenant of certain premises, more particularly described therein, comprising
approximately 13,000 square feet of space situated on the fifteenth (15th)
floor of the fifteen-story office building located at 6903 Rockledge Drive,
Bethesda, Maryland (the "Office Building") and which Office Building is a part
of the three office building complex known as Democracy Center (the "Office
Complex").
B. Landlord and Tenant desire (i) to amend the Lease to include
in the description of the premises covered thereby the entire fifteenth (15th)
floor of the Office Building comprising 16,492 square feet of Net Rentable
Area, (ii) to extend the term of the Lease on the terms and conditions set
forth in Rider No. 1 to the Lease and (iii) to modify certain other terms and
provisions of the Lease as hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration the receipt and sufficiency of
which hereby are acknowledged, the parties hereto, intending to be legally
bound hereby, covenant and agree as follows:
1. Term. Landlord hereby leases to Tenant and Tenant hereby
leases from Landlord for a term of four (4) years (the "Renewal Term"), and
upon the terms, conditions, covenants and agreements herein provided, the
Premises described in Paragraph 2 below. The Renewal Term shall commence on
June 16, 1993 (the "Renewal Commencement Date") immediately following the
expiration of the initial Lease Term set forth in the Lease and shall continue
through and terminate on June 15, 1997, subject to earlier termination as
provided in the Lease.
2. The Premises. On and as of the Renewal Commencement Date, the
definition of the "Premises" in the Lease hereby is amended to include therein
the entire fifteenth (15th) floor of the Office Building comprising 16,492
square feet of Net Rentable Area. In addition, on and as of the Renewal
Commencement Date, Exhibit 1, attached hereto, depicting the location and
configuration of the entire fifteenth (15th) floor of the Office Building
hereby is substituted for Exhibit A to the Lease.
3. Rent. (a) During the Renewal Term, Tenant shall pay to
Landlord, without setoff, deduction or demand, as annual base rent for the
Premises, the amounts set forth below:
<PAGE> 49
June 16, 1993 - $22.00 multiplied by the total number of
June 15, 1994 square feet of Net Rentable Area in the
Premises
June 16, 1994 - $22.55 multiplied by the total number of
June 15, 1995 square feet of Net Rentable Area in the
Premises
June 16, 1995 - $23.11 multiplied by the total number of
June 15, 1996 square feet of Net Rentable Area in the
Premises
June 16, 1996 - $23.69 multiplied by the total number of
June 15, 1997 square feet of Net Rentable Area in the
Premises
(b) The annual base rent payable hereunder during each
Lease Year of the Renewal Term shall be divided into equal monthly installments
and such monthly installments shall be due and payable in advance on the first
day of each month during such Lease Year. All rent shall be paid to Landlord
in legal tender of the United States, at the address set forth in Section 25.6
of the Lease or at such other address as Landlord may designate from time to
time by written notice to Tenant. If Landlord shall at any time accept rent
after it shall become due and payable, such acceptance shall not excuse a delay
upon subsequent occasions, nor shall it constitute or be construed as a waiver
of any of Landlord's rights under the Lease.
4. Additional Rent. During the Renewal Term, Tenant shall
continue to pay additional rent in respect of Tenant's proportionate share of
the anticipated increases in Basic Operating Charges, Tenant Area Electricity
Charges and Tenant Area Janitorial Charges incurred by Landlord in the
operation of the Office Complex, as more fully set forth in Article IV of this
Lease, above the base amount applicable to each such category of expenses, as
if the initial Lease Term had not expired.
5. Condition of the Premises. (a) Landlord shall deliver and
Tenant agrees to accept the Premises for the Renewal Term in their present "as
is" condition. The preceding sentence notwithstanding, it is understood and
agreed that Tenant intends, during the first six (6) months of the Renewal
Term, to make certain alterations and improvements to the Premises. All such
alterations and improvements shall be subject to the provisions of Article IX
of the Lease and shall be made at Tenant's sole cost and expense; provided,
however, that, subject to the terms and provisions of this Paragraph 5,
Landlord agrees to provide Tenant with an improvement allowance (the "Tenant
Improvement Allowance") in an amount equal to Thirty Thousand Dollars
($30,000.00). The Tenant Improvement Allowance shall be applied, as hereinafter
set forth, to all "hard" and "soft" costs incurred in connection with the
design, construction and installation of additional tenant improvements in the
Premises, including, without limitation, any and all architectural, engineering
and consulting fees. The funding of the Tenant Improvement Allowance is
subject to the fulfillment by Tenant of all covenants and conditions set forth
in the Lease and this Agreement. In the event the entire Tenant Improvement
Allowance is not utilized
-2-
<PAGE> 50
during the first six (6) months of the Renewal Term for repainting,
recarpeting, altering and upgrading the tenant improvements in the Premises,
such unused portion of the Tenant Improvement Allowance shall be applied
against the seventh (7th) installment of base rent due with respect to the
Premises pursuant to Paragraph 3 hereof.
(b) If Tenant requests Landlord to make such alterations
and improvements, Landlord agrees to cause its contractor to perform such work.
Tenant agrees to pay Landlord promptly upon being billed therefor, all costs
and expenses incurred by Landlord in connection therewith in excess of the
Tenant Improvement Allowance provided in subparagraph (a) above. Such costs
and expenses shall include all amounts charged by Landlord's contractor for
performing such work and providing such materials (including the contractor's
general conditions, overhead and profit), plus an amount equal to ten percent
(10%) of the contractor's charges as compensation for Landlord's overhead and
Landlord's direct and indirect costs of supervising construction and
installation of the tenant improvements in the Premises. Tenant will be billed
for one-half (1/2) of the cost and expenses in excess of the improvement
allowance provided in subparagraph (a) above upon approval of the cost
estimates for such work and materials. Forty percent (40%) of all such costs
and expenses in excess of the improvement allowance shall be due and payable
when such work is one-half (1/2) completed, as determined by Landlord's
architect and/or engineer, and the remaining ten percent (10%) shall be due and
payable upon substantial completion of such work, as determined by Landlord's
architect and/or engineer.
(c) If Tenant elects to employ its own contractor to make
such alterations and improvements, Landlord agrees to pay such contractor, up
to the amount of the Tenant Improvement Allowance provided in subparagraph (a)
above, promptly upon Landlord's receipt of (i) invoices for work performed and
materials supplied and (ii) signed lien waiver and release forms from the
applicable contractors, subcontractors and suppliers.
(d) Tenant acknowledges and agrees that if it does not
perform the anticipated repainting, recarpeting, altering and upgrading of the
tenant improvements of the Premises during the first six (6) months of the
Renewal Term, Landlord shall apply all or the balance, as the case may be, of
the Tenant Improvement Allowance toward the seventh (7th) monthly installment
of base rent, as provided in subparagraph (a) above, and Tenant shall not be
entitled to or have any claim or cause of action against Landlord with respect
to such portion of the Tenant Improvement Allowance.
(e) Except as otherwise provided in this Paragraph 5,
Landlord shall not make and shall have no obligation to make any alterations
(structural or otherwise), decorations, additions, improvements or repairs in
or to the Premises whatsoever.
6. Entry upon the Premises. The following subsection 12.1(b)
hereby is added at the end of Section 12.1 of the Lease; which Section 12.1
hereby is renumbered as Section 12.1(a):
-3-
<PAGE> 51
(b) Notwithstanding anything to the contrary provided in
Section 12.1(a) above,* Tenant acknowledges and agrees that it will permit
Landlord, its employees, agents and contractors, to enter the Premises, without
charge therefor to Landlord and without diminution of the rent payable by
Tenant, so that Landlord, its employees, agents and contractors shall have
expedient access to the roof and penthouse area of the Building. Accordingly,
Tenant shall include Landlord's building manager, engineers and other
identified staff members on Tenant's security card reader system and shall
provide Landlord with keys to all stairwell entrances to the Premises.
7. Health Club Memberships. The date June 15, 1993 in the third
sentence of Section 14.1(b) of the Lease hereby is deleted in its entirety and
the date June 15, 1994 hereby is substituted therefor.
8. Parking. The number eighteen (18) in the second (2nd) and
third (3rd) sentences of Section 24.1(b) of the Lease hereby is deleted in its
entirety and the number twenty-four (24) hereby is substituted therefor in both
sentences.
9. General Provisions. (a) Except as otherwise provided herein,
all of the capitalized terms used herein shall have the same meanings as
provided in the Lease.
(b) Except as expressly modified or amended by this Lease
Modification and Renewal Agreement, all of the terms, conditions, covenants and
agreements contained in the Lease (i) are incorporated herein by reference,
(ii) shall remain in full force and effect and (iii) shall be applicable to and
binding on Landlord and Tenant during the Renewal Term.
(c) Landlord and Tenant each represents and warrants to
the other that neither of them has employed or dealt with an other broker,
agent or finder in carrying on the negotiations relating to this Agreement.
Tenant shall indemnify and hold Landlord harmless from and against any claim or
claims for brokerage or other commissions asserted by any broker, agent or
finder engaged by Tenant or with whom Tenant has dealt in connection with this
Agreement.
(d) Landlord hereby acknowledges and agrees that from and
after the Renewal Commencement Date, Landlord shall not have the right, as
provided in Section 25.22 of the Lease and Rider No. 1 to the Lease, to
terminate Tenant's right to renew the Lease Term or Tenant's exercise of that
right.
[SIGNATURES ON NEXT PAGE]
- --------------------------------------------------------------------------------
* provided that Landlord complies with the security procedures set forth on
Exhibit E to the Lease, attached hereto and made a part hereof.
-4-
<PAGE> 52
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease
Modification and Renewal Agreement as of the date and year first above written.
<TABLE>
<S> <C>
LANDLORD:
DEMOCRACY ASSOCIATES LIMITED
PARTNERSHIP, a Maryland limited partnership
By: Boston Rockledge Associates Limited
Partnership, a Massachusetts limited
partnership, its General Partner
By: Boston Democracy Associates Limited,
Limited Partnership, a Massachusetts
limited partnership, its General Partner
By: Boston Democracy Associates General, a
Massachusetts limited partnership, its
General Partner
WITNESS:
/s/ Kathryn R. Stevenson By: /S/ Edward H. Linde
- -------------------------------- ------------------------------------
Edward H. Linde
General Partner
TENANT:
SNYDER COMMUNICATIONS, L.P., a Delaware limited partnership
ATTEST: By: Snyder Communications, Inc., a Delaware corporation,
its General Partner
By: /s/ Alfred Wise By: /s/ Michele D. Snyder
------------------------------- --------------------------------------
Title: Senior Vice President Title: Chief Operating Officer
[CORPORATE SEAL]
</TABLE>
-5-
<PAGE> 53
AMENDMENT NO. 2
TO
LEASE AGREEMENT
This Amendment No. 2 to Lease Agreement (the "Amendment") is made as
of the ____ day of __________, 1994, by and between DEMOCRACY ASSOCIATES
LIMITED PARTNERSHIP (hereinafter referred to as "Landlord") and SNYDER
COMMUNICATIONS, L.P., a Delaware limited partnership (hereinafter referred to
as "Tenant").
RECITALS:
A. Landlord and Tenant have heretofore entered into a Lease
Agreement dated July 30, 1992, as modified by that certain Lease Modification
and Renewal Agreement dated as of June 11, 1993 ("Amendment No. 1") between
Landlord and Tenant (collectively, the "Lease"), respecting the lease by
Landlord to Tenant of certain premises, more particularly described therein,
comprising 16,492 square feet of Net Rentable Area constituting the entire
fifteenth (15th) floor of the fifteen-story office building located at 6903
Rockledge Drive, Bethesda, Maryland (the "Office Building") and which Office
Building is a part of the three office building complex known as Democracy
Center (the "Office Complex").
WHEREAS, Tenant desires to lease certain additional space on the
seventh (7th) floor of the Office Building on the same terms and conditions as
are provided in the Lease, except as otherwise provided herein; and
WHEREAS, Landlord and Tenant wish to amend the Lease (i) to include in
the description of the premises covered thereby an additional 4,263 square feet
of Net Rentable Area on the seventh (7th) floor of the Office Building (the
"Additional Premises"), as depicted on Exhibit 1 attached hereto and made a
part hereof and (ii) to modify the terms and provisions of the Lease as
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and premises
contained herein and other good and valuable consideration the receipt and
sufficiency of which hereby is acknowledged, Landlord and Tenant hereby agree
to amend the Lease as follows:
1. Defined Terms. Except as otherwise provided herein, all of
the capitalized terms used herein shall have the same meanings as provided in
the Lease.
2. The Premises. Commencing on the Lease Commencement Date-II,
as defined in Paragraph 3(a) below, the definition of the "Premises" in the
Lease hereby is amended to include therein the Additional Premises. In
addition, commencing on the Lease Commencement Date-II, Exhibit 1, attached
hereto, depicting the floor plan for the Additional Premises, hereby is added
to Exhibit A to the Lease. As a result, commencing on the Lease Commencement
Date-II, the aggregate number of square feet of rentable area comprising the
Premises hereby is increased to a total of 20,755 square feet. Commencing on
the Lease Commencement Date-II, the Additional
<PAGE> 54
Premises shall be subject to all the terms and conditions of the Lease, except
as otherwise provided below.
3. Lease Commencement Date-II: Term.
(a) The term of the Lease with respect to the Additional
Premises shall commence on the earlier to occur of (i) September 1, 1994,
except as provided in subparagraph (b) below, (ii) the date on which Tenant
commences to perform the work described in Paragraph 6 hereof and (iii) the
date on which Tenant commences beneficial use of the Additional Premises (the
"Lease Commencement Date-II") and shall be coterminous with the Lease Term
(i.e. through June 15, 1997); provided, however, if Landlord is performing the
work described in Paragraph 6 hereof and delivery of the Additional Premises is
delayed due to causes within Landlord's reasonable control then the Lease
Commencement Date-II shall be the earlier to occur of (x) the date on which
Tenant commences beneficial use of the Additional Premises or (y) the date on
which the Additional Premises are substantially complete, as determined by
Landlord's architect in its professional judgment. Tenant shall be deemed to
have commenced beneficial use of the Additional Premises when Tenant begins to
move furniture and furnishings into the Additional Premises. Notwithstanding
anything to the contrary in this Amendment, all of the terms and conditions of
the Lease, including without limitation the insurance, release and waiver of
liability provisions set forth in Articles XIII and XV of the Lease, shall
apply to and be effective commencing on the Lease Commencement Date - II except
for the obligations to pay annual base rent and additional rent attributable to
increases in operating expenses, which obligations shall commence on the Lease
Commencement Date-II, but not prior to September 1, 1994.
(b) In the event that the delivery of possession of the
Additional Premises to Tenant is delayed beyond September 1, 1994, regardless
of the reasons or causes of such delay, the Lease with respect to the
Additional Premises shall not be rendered void or voidable as a result of such
delay, and the term of the Lease with respect to the Additional Premises shall
commence on the date on which the Additional Premises are delivered to Tenant;
provided however, if Landlord is performing the work described in Paragraph 6
hereof and substantial completion of such work is delayed beyond September 1,
1994 due to causes within Tenant's reasonable control or for any of the reasons
set forth in Section 25.21 of the Lease, then the term of the Lease with
respect to the Additional Premises shall commence on the day the Additional
Premises would have been delivered to Tenant but for such delays but in no
event earlier than September 1, 1994. In no event shall Landlord have any
liability whatsoever to Tenant on account of any such delay.
4. Base Rent. Commencing on the Lease Commencement Date-II, but
not prior to September 1, 1994, and continuing until the first adjustment is
made pursuant to the next sentence, Tenant shall pay to Landlord as annual base
rent for the Additional Premises an amount equal to the product of (a) the
dollar amount per square foot of annual base rent being paid by Tenant on the
Lease Commencement Date-II with respect to the original Premises multiplied by
(b) the number of square feet of Net Rentable Area in the Additional Premises.
The annual base rent for the Additional Premises shall be payable as provided
in Section 3.1 of the Lease and shall be adjusted each Lease Year at the same
times and in the same manner as provided in Section 3.2
2
<PAGE> 55
of the Lease with respect to adjustments in the annual base rent payable for
the original Premises.
5. Additional Rent. The provisions of Article IV of the Lease,
respecting the payment by Tenant of its proportionate share of increases in
certain operating expenses incurred by Landlord in the operation of the Office
Complex, shall be applicable to this lease of the Additional Premises.
Accordingly, commencing on the Lease Commencement Date-II, but not prior to
September 1, 1994, Tenant's proportionate share of increases in such operating
expenses shall be determined with reference to the entire Premises, including
the Additional Premises.
6. Condition of the Additional Premises. (a) Landlord shall
deliver and Tenant agrees to accept the Additional Premises in their present
"as is" condition. The preceding sentence notwithstanding, it is understood
and agreed that Tenant intends during the first six (6) months immediately
following the Lease Commencement Date-II, to make certain alterations and
improvements to the Additional Premises. All such alterations and improvements
shall be subject to the provisions of Article IX of the Lease and shall be made
at Tenant's sole cost and expense; provided, however, that subject to the terms
and provisions of this Paragraph 6, Landlord agrees to provide Tenant with an
improvement allowance (the "Tenant Improvement Allowance") in an amount up to
but not exceeding the product of Ten Dollars ($10.00) multiplied by the number
of square feet of Net Rentable Area in the Additional Premises, and provided
further, that Landlord shall provide to Tenant, at Landlord's cost, one (1)
building standard stain grade suite entry door with side light ("Landlord's
Door") and if Tenant desires to upgrade such suite entry door and not use
Landlord's Door, Landlord's shall provide Tenant with a credit in an amount
equal to Fifteen Hundred Dollars ($1500.00 ). The Tenant Improvement Allowance
shall be applied, as hereinafter set forth, to all "hard" and "soft" costs
incurred in connection with the design, construction and installation of
additional tenant improvements in the Additional Premises, including, without
limitation, any and all architectural, engineering and consulting fees. The
funding of the Tenant Improvement Allowance is subject to the fulfillment by
Tenant of all covenants and conditions set forth in the Lease and this
Amendment. In the event the entire Tenant Improvement Allowance is not
utilized during the first six (6) months immediately following the Lease
Commencement Date-II for repainting, recarpeting, altering and upgrading the
tenant improvements in the Additional Premises, Landlord shall not be obligated
to pay or to credit to Tenant and Tenant shall not be entitled to or have a
claim or cause of action against Landlord with respect to the difference
between the Tenant Improvement Allowance and the actual costs and expenses, if
any, incurred in connection with repainting, recarpeting, altering, upgrading
and otherwise renovating the tenant improvements in the Additional Premises.
(b) If Tenant requests Landlord to make such alterations and
improvements, Landlord agrees to cause its contractor to perform such work.
Tenant agrees to pay Landlord, promptly upon being billed therefor, all costs
and expenses incurred by Landlord in connection therewith in excess of the
Tenant Improvement Allowance provided in subparagraph (a) above. Such costs
and expenses shall include all amounts charged by Landlord's contractor for
performing such work and providing such materials (including the contractor's
general conditions, overhead and profit), plus an amount equal to ten percent
(10%) of the contractor's charges as compensation for Landlord's overhead and
Landlord's direct and indirect costs of supervising construction and
installation of the tenant improvements in the Additional Premises. Tenant
will
3
<PAGE> 56
be billed for one-half (1/2) of the costs and expenses in excess of the Tenant
Improvement Allowance provided in subparagraph (a) above upon approval of the
cost estimates for such work and materials. Forty percent (40%) of all such
costs and expenses in excess of the Tenant Improvement Allowance shall be due
and payable when such work is one-half (1/2) completed, as determined by
Landlord's architect and/or contractor, and the remaining ten percent (10%)
shall be due and payable upon substantial completion of such work, as
determined by Landlord's architect and/or contractor.
(c) If Tenant elects to employ its own contractor to make
such alterations and improvements, Landlord agrees to pay such contractor, up
to the amount of the Tenant Improvement Allowance provided in subparagraph (a)
above, promptly upon Landlord's receipt of (i) invoices for work performed and
materials supplied and (ii) signed lien waiver and release forms from the
applicable contractors, subcontractors and suppliers.
(d) Tenant acknowledges and agrees that if it does not
perform the anticipated repainting, recarpeting, altering and upgrading of the
tenant improvements of the Additional Premises during the first six (6) months
immediately following the Lease Commencement Date-II, or if the cost of the
work which Tenant does have performed in the Additional Premises is less than
the amount of the Tenant Improvement Allowance, Landlord shall not be obligated
to pay or to credit to Tenant and Tenant shall not be entitled to or have any
claim or cause of action against Landlord with respect to such unused portion
of the Tenant Improvement Allowance.
(e) Not more than ten (10) business days after the execution
of this Amendment by Landlord and Tenant, Tenant shall notify Landlord of its
election whether to have Landlord make or cause to be made the alterations and
improvements to the Additional Premises or its intent to manage the performance
of such work itself. In the event Tenant fails to notify Landlord within such
ten (10) business day period of its election whether to have Landlord perform
the work described in this Paragraph 6, Tenant shall be deemed to have elected
to perform such work or cause such work to be performed itself. In the event
Tenant elects to perform the work in the Additional Premises or fails to notify
Landlord of its election, Tenant and its contractors shall be allowed access to
the Additional Premises and the common areas of the seventh (7th) floor of the
Office Building commencing on the earlier of (i) the day after the date on
which Tenant makes its election or (ii) ten (10) business days after the date
of this Amendment for the purpose of constructing and installing tenant
improvements in the Additional Premises and to perform other related activity,
and such construction, installation and related activity shall not be
considered the commencement of beneficial use of the Additional Premises by
Tenant.
(f) Except as otherwise provided in this Paragraph 6,
Landlord shall not make and shall have no obligation to make any alterations
(structural or otherwise), decorations, additions, improvements or repairs in
or to the Additional Premises or the original Premises whatsoever.
7. Right of First Offer. Landlord agrees that Tenant shall have
the right (a) at any time during the second (2nd) or third (3rd) Lease Year of
the Renewal Term or (b) at any time during the remainder of the Renewal Term
provided Tenant has exercised its right to renew the Lease in accordance with
the provisions of Paragraph 8 below or (c) at any time during the first (1st),
second (2nd), third (3rd) or fourth (4th) Lease Year of the Second Renewal
Term, as
4
<PAGE> 57
defined in Paragraph 8 below, to lease any space on the fourteenth (14th) floor
of the Building (the "Expansion Space") as it becomes available following
vacation of such leased space by the then current tenant of such space, subject
to the following terms and conditions:
(i) Landlord shall notify Tenant of the availability of
the Expansion Space.
(ii) The annual base rent to be paid by Tenant with
respect to the Expansion Space shall be the same amount per square foot and
shall be adjusted at the same time and in the same manner as the adjusted
annual base rent then being paid by Tenant with respect to the original
Premises.
(iii) For a period of five (5) days after Tenant's receipt
of the notice described in subparagraph (i) above from Landlord, Tenant shall
have the right to lease the Expansion Space from Landlord upon the terms and
conditions set forth in the notice from Landlord to the extent not inconsistent
with the provisions of this Paragraph 7 and the Lease. In the event Tenant
agrees to lease the Expansion Space within such five (5) day period, Landlord
and Tenant shall promptly execute an amendment to the Lease indicating the
location and configuration of the Expansion Space and stating the Net Rentable
Area thereof and the annual base rent therefore.
(iv) In no event shall Tenant have the right to lease less
than all of the Expansion Space available.
(v) Tenant shall accept the Expansion Space in "as is"
condition and Landlord shall not be obligated to provide Tenant a construction
or moving allowance with respect to the Expansion Space nor to make any
improvements, changes, alterations, modifications or decorations to the
Expansion Space whatsoever. All work performed in the Expansion Space pursuant
to this Paragraph 7 (iii) shall be performed in accordance with the terms and
conditions of Article IX of the Lease.
(vi) Tenant shall be obligated to pay additional rent with
respect to the Expansion Space in accordance with the provisions of Paragraph 5
hereof and Article IV of the Lease.
(vii) In the event Tenant does not agree to lease the
Expansion Space within the five (5) day period provided in Paragraph 7 (iii)
above, Landlord shall have the right to lease such space to any other person or
entity upon any terms and conditions which Landlord desires, in its discretion.
(viii) The term of the lease for the Expansion Space shall
be for a period of not less than one (1) year and shall be coincident with the
remaining Renewal Term and, if applicable, the Second Renewal Term.
(ix) If Tenant is in default under the Lease, beyond any
applicable notice and cure period, on the date Landlord's notice is given to
Tenant by Landlord or at any time thereafter prior to the commencement of the
term for such Expansion Space, then, at Landlord's option, Tenant's right to
lease the Expansion Space shall lapse and be of no further force effect.
5
<PAGE> 58
(x) Tenant's rights under this Paragraph 7 are subject to
(1) Landlord's obligation to extend or renew the lease of the then current
tenant of such space beyond the expiration date of such tenant's lease upon the
terms and conditions to which Landlord and such tenant have agreed and (2) to
the expansion rights of any other tenant occupying space in the Office Building
on the date of this Amendment with respect to such tenant's right to lease all
or any portion of the Expansion Space.
(xi) Tenant's rights under this Paragraph 7 are personal
to Snyder Communications, L.P. and may be exercised only by Synder
Communications, L.P. and shall not be exercisable by any assignee or subtenant
of Synder Communications, L.P.
(xii) Tenant shall not be entitled to exercise its rights
to lease the Expansion Space under this Paragraph 7 if at the time Tenant would
otherwise be entitled to exercise its rights hereunder Tenant is occupying less
than fifty percent (50%) of the Premises.
8. Renewal. Landlord hereby grants to Tenant the conditional
right, exercisable at Tenant's option, to renew the term of the Lease for one
(1) additional term of five (5) years. If exercised and if the conditions
applicable hereto have been satisfied, such renewal term (the "Second Renewal
Term") shall commence immediately following the end of the Renewal Term
provided in Paragraph I of Amendment No. 1. The right of renewal herein
granted to Tenant shall be subject to, and shall be exercised in accordance
with, the following terms and conditions:
(a) Tenant shall exercise its right of renewal with
respect to the Second Renewal Term by giving Landlord written notice (the
"renewal option notice") of the exercise thereof not more than nine (9) and not
less than six (6) months prior to the expiration of the Renewal Term. The
preceding sentence notwithstanding, Tenant may exercise its right of renewal
prior to nine (9) months prior to the expiration of the Renewal Term, if Tenant
exercises its right to lease additional space on the fourteenth (14th) floor of
the Building in accordance with the provisions of Paragraph 7 above. In the
event the renewal option notice is not given timely, Tenant's right of renewal
with respect to the Second Renewal Term shall lapse and be of no further force
or effect. If Tenant shall be in default, beyond any applicable notice and
cure period, under the Lease on the date the renewal option notice is given, or
at any time thereafter on or before the commencement date of the Second Renewal
Term, then, at Landlord's option, the renewal option notice shall be totally
ineffective and Tenant's right of renewal as to the Second Renewal Term shall
lapse and be of no further force or effect.
(b) Promptly following Landlord's timely receipt of the
renewal option notice for the Second Renewal Term, Landlord and Tenant shall
commence negotiations concerning the amount of annual base rent which shall be
payable during each Lease Year of the Second Renewal Term, it being intended
that such annual base rent shall be equal to ninety-five percent (95%) of the
then prevailing fair market rent, including market concessions, for the
Premises during the Second Renewal Term. The parties shall have thirty (30)
days after Landlord's receipt of the renewal option notice in which to agree on
the base rent which shall be payable during each year of the Second Renewal
Term. The parties shall be obligated to conduct such negotiations in good
faith. Among the factors to be considered by the parties during such
negotiations shall be (i) the
6
<PAGE> 59
general office rental market in the North Bethesda, Maryland area, (ii) rental
rates than being realized by other building owners of office buildings of
comparable size, location and quality to the Office Complex in the North
Bethesda, Maryland area, (iii) the rental rates then being obtained (and if
there are no recent comparables (i.e., within the last six (6) months, rental
rates then being quoted shall be considered) by Landlord to prospective tenants
for comparable office space in "as is" condition in the Office Complex and (iv)
the Basic Operating Charges Base Amount set forth in Paragraph 4.2 hereof. In
no event, however, shall the base rent payable during any year of the Second
Renewal Term be less than the base rent in effect under the Lease during the
Lease Year immediately preceding the commencement of the Second Renewal Term.
If the parties agree on the base rent payable during each year of the Second
Renewal Term, they shall promptly execute an amendment to the Lease stating the
rent to agreed upon.
(c) If, during the thirty (30) day period referred to in
subparagraph (b) above, the parties are unable to agree on the base rent
payable during the Second Renewal Term, then Tenant shall have the option
either (i) to rescind its renewal option notice or (ii) to agree that the fair
market rent shall be determined in accordance with the appraisal procedure set
forth in this subparagraph (c). Tenant shall exercise its option, by giving
Landlord written notice of its election within five (5) days of the termination
of the thirty (30) day period provided for in subparagraph (b) above. If
Tenant elects to rescind its renewal option notice, Tenant's right to renew the
term of the Lease shall lapse and be of no further force or effect. If Tenant
shall elect to proceed with the appraisal procedure provided in this
subparagraph (c) then, within fifteen (15) days after Landlord's receipt of
Tenant's election to proceed with the appraisal procedure, the parties shall
appoint an appraiser who shall be mutually agreeable to both Landlord and
Tenant, shall be a member, Appraisal Institute, and shall be knowledgeable in
office rentals in the North Bethesda, Montgomery County, Maryland market. If
the parties are unable to agree on an appraiser within such fifteen (15) day
period, then each party shall appoint an appraiser (with the same
qualifications) and the two (2) appraisers shall together appoint a third
appraiser with the same qualifications. The appraiser or appraisers so
appointed then shall determine, within sixty (60) days after the appointment of
such appraiser or appraisers, the then fair market base rent for the Premises.
Among the factors to be considered by the appraiser(s) in determining the fair
market base rent for the Premises shall be those factors set out in
subparagraph (b) above. The figure arrived at by the three appraisers, (or the
average of the figures arrived at by the three appraisers, if applicable) shall
be used as the fair market base rent for such renewal term. If the three
appraiser method is chosen, then if any appraiser's estimate of fair market
base rent is either (x) less than ninety percent (90%) of the average figure or
(y) more than one hundred ten percent (110%) of such average, the fair market
rent will be either (1) the average of the remaining two (2) appraisal figures
falling within such range of percentages, (2) the remaining appraisal which is
within such range of percentages or (3) if none of the figures are within such
range, the average of the three (3) appraisals. Landlord and Tenant shall each
bear the cost of its appraiser and shall share equally the cost of the third
appraiser.
(d) During the Second Renewal Term, all of the terms,
conditions, covenants and agreements set forth in the Lease shall continue to
apply and be binding upon Landlord and Tenant, except that (i) the base rent
payable during each year of the Second Renewal Term shall be the amount agreed
upon by Landlord and Tenant in the manner provided in Paragraph 8 (b)
7
<PAGE> 60
above or as determined in accordance with Paragraph 8 (c) above and (ii) in no
event shall Tenant have the right to renew the term of the Lease beyond the
expiration of the Second Renewal Term.
(e) The base rent payable during the Second Renewal Term
shall be increased as of the first day of the second Lease Year of the Second
Renewal Term and on the first day of each and every Lease Year thereafter
during the Second Renewal Term accordance with the provision of Paragraph 4
hereof.
(f) Tenant's rights of renewal under this Paragraph 8 are
personal to and may be exercised only by Snyder Communications, L.P. and shall
not be exercisable by any assignee or subtenant of Synder Communications, L.P.
(g) Tenant shall not be entitled to exercise its rights
under this Paragraph 8 to renew the Renewal Term if at the time Tenant would
otherwise be entitled to exercise its right of renewal Tenant is occupying less
than fifty percent (50%) of the Premises.
9. General Provisions. (a) Except as expressly modified or
amended by this Amendment, all of the terms, conditions, covenants and
agreements contained in the Lease (i) are incorporated herein by reference,
(ii) shall remain in full force and effect and (iii) shall be applicable to and
binding upon Landlord and Tenant.
(b) Landlord and Tenant each represents and warrants to the
other that neither of them has employed or dealt with any other broker, agent
or finder in carrying on the negotiations relating to this Amendment. Tenant
shall indemnify and hold Landlord harmless from and against any claim or claims
for brokerage or other commissions asserted by any broker, agent or finder
engaged by Tenant or with whom Tenant has dealt in connection with this
Amendment.
8
<PAGE> 61
IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment
No. 2 to Lease Agreement as of the date and year first above written.
<TABLE>
<S> <C>
LANDLORD:
DEMOCRACY ASSOCIATES LIMITED
PARTNERSHIP, a Maryland limited partnership
By: Boston Rockledge Associates Limited
Partnership, a Massachusetts limited
partnership, its General Partner
By: Boston Democracy Associates Limited,
Limited Partnership, a Massachusetts limited partnership,
its General Partner
By: Boston Democracy Associates General, a
Massachusetts limited partnership, its
General Partner
WITNESS:
/s/ Kathryn R. Stevenson By: /s/ Edward H. Linde
- ------------------------ -----------------------------------------------------
Edward H. Linde
General Partner
TENANT:
SNYDER COMMUNICATIONS, L.P., a Delaware limited partnership
ATTEST: By: Snyder Communications, Inc.,
a Delaware corporation,
its General Partner
By: /s/ Alfred Wise By: /s/ Michele D. Snyder
--------------- ---------------------
Title: Senior Vice President Title: Treasurer
[CORPORATE SEAL]
</TABLE>
9
<PAGE> 62
AMENDMENT NO. 3
TO
LEASE AGREEMENT
This Amendment No. 3 to Lease Agreement (the "Amendment") is made as
of the 5th day of October, 1994, by and between DEMOCRACY ASSOCIATES LIMITED
PARTNERSHIP (hereinafter referred to as "Landlord") and SNYDER COMMUNICATIONS,
L.P., a Delaware limited partnership (hereinafter referred to as "Tenant").
RECITALS:
A. Landlord and Tenant have heretofore entered into a Lease
Agreement dated July 30, 1992, as modified by that certain Lease Modification
and Renewal Agreement dated as of June 11, 1993 ("Amendment No. 1") between
Landlord and Tenant and as further modified by Amendment No. 2 to Lease
Agreement dated July 29, 1994, ("Amendment No. 2") between Landlord and Tenant
(collectively, the "Lease"), respecting the lease by Landlord to Tenant of
certain premises, more particularly described therein, comprising 20,755 square
feet of Net Rentable Area constituting a portion of the seventh (7th) floor and
the entire fifteenth (15th) floor of the fifteen-story office building located
at 6903 Rockledge Drive, Bethesda, Maryland (the "Office Building") and which
Office Building is a part of the three office building complex known as
Democracy Center (the "Office Complex").
WHEREAS, Tenant desires to lease certain additional space on the
fourteenth (14th) floor of the Office Building on the same terms and conditions
as are provided in the Lease, except as otherwise provided herein; and
WHEREAS, Landlord and Tenant wish to amend the Lease (i) to include in
the description of the Space covered thereby an additional 3,159 square feet of
Net Rentable Area on the fourteenth (14th) floor of the Office Building (the
"Additional Space"), as depicted on Exhibit 1 attached hereto and made a part
hereof and (ii) to modify the terms and provisions of the Lease as hereinafter
set forth.
NOW, THEREFORE, in consideration of the mutual covenants and premises
contained herein and other good and valuable consideration the receipt and
sufficiency of which hereby is acknowledged, Landlord and Tenant hereby agree
to amend the Lease as follows:
1. Defined Terms. Except as otherwise provided herein all of the
capitalized terms used herein shall have the same meanings as provided in the
Lease.
2. The Premises. Commencing on the Lease Commencement Date-III,
as defined in Paragraph 3(a) below, the definition of the "Premises" in the
Lease hereby is amended to include therein the Additional Space. In addition,
commencing on the Lease Commencement Date-III, Exhibit 1, attached hereto,
depicting the floor plan for the Additional Space, hereby is added to Exhibit A
to the Lease. As a result, commencing on the Lease Commencement Date-III, the
<PAGE> 63
aggregate number of square feet of rentable area comprising the Premises hereby
is increased to a total of 23,914 square feet. Commencing on the Lease
Commencement Date-III, the Additional Space shall be subject to all the terms
and conditions of the Lease, except as otherwise provided below.
3. Term.
(a) The term of the Lease with respect to the Additional
Space shall commence on October 1, 1994 (the "Lease Commencement Date-III") and
shall be coterminous with the Lease Term (i.e. through June 15, 1997);
provided, however, if delivery of the Additional Space is delayed due to causes
solely and directly attributable to Landlord's gross negligence or willfull
misconduct, then the Lease Commencement Date-III shall be the earlier to occur
of the date on which (i) Tenant commences beneficial use, as defined in
Paragraph 3(a) of the Amendment No. 2, of the Additional Space or (ii) the
Additional Space is substantially complete, as determined by Landlord's
architect in its professional judgment. Notwithstanding anything to the
contrary in this Amendment, all of the terms and conditions of the Lease,
including without limitation the insurance, release and waiver of liability
provisions set forth in Articles XIII and XV of the Lease, shall apply to and
be effective with respect to the Additional Space commencing on the Lease
Commencement Date-III except for the obligations to pay annual base rent and
additional rent attributable to increases in operating expenses, which
obligations shall commence on the Lease Commencement Date-III, but not prior to
October 1, 1994.
(b) In the event that the delivery of possession of the
Additional Space to Tenant is delayed beyond October 1, 1994, regardless of the
reasons or causes of such delay, the Lease with respect to the Additional Space
shall not be rendered void or voidable as a result of such delay, and the term
of the Lease with respect to the Additional Space shall commence on the Lease
Commencement Date-III; provided however, if Landlord is performing the work
described in Paragraph 6 hereof and substantial completion of such work is
delayed beyond October 1, 1994 due to causes within Tenant's reasonable control
or for any of the reasons set forth in Section 25.21 of the Lease or due to
causes other than Landlord's gross negligence or willful misconduct, then the
term of the Lease with respect to the Additional Space shall commence on the
day the Additional Space would have been delivered to Tenant but for such
delays but in no event earlier than October 1, 1994. In no event shall
Landlord have any liability whatsoever to Tenant on account of any such delay.
4. Base Rent.
(a) Commencing on the Lease Commencement Date-III, but
not prior to October 1, 1994, and continuing until the first adjustment is made
pursuant to the next sentence, Tenant shall pay to Landlord as annual base rent
for the Additional Space an amount equal to the product of (i) the dollar
amount per square foot of annual base rent being paid by Tenant on the Lease
Commencement Date-III with respect to the original Premises multiplied by (ii)
number of square feet of Net Rentable Area in the Additional Space which amount
shall be subject to increase and adjustment as provided in paragraph 4(b)
below. The annual base rent for the Additional Space shall be payable as
provided in Section 3.1 of the Lease and shall be adjusted
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<PAGE> 64
each Lease Year at the same times and in the same manner as provided in Section
3.2 of the Lease with respect to adjustments in the annual base rent payable
for the original Premises.
(b) In the event the costs to design, construct and
improve the original Premises, Additional Premises and/or the Additional Space
exceeds the sum of the Tenant Improvement Allowance, as defined in Paragraph
6(a) of Amendment No. 2, and the Additional Tenant Improvement Allowance, as
defined in Paragraph 6(a) below (collectively, the "Excess Improvement Costs"),
then the annual base rent with respect to the original Premises, Additional
Premises and/or the Additional Space, as the case may be, shall be increased by
an amount necessary to amortize the Excess Improvement Costs, or such portion
thereof as Tenant may determine, at a rate of ten percent (10%) per annum over
the remainder of the Lease Term (excluding any renewal term) applicable to the
original Premises, Additional Premises or the Additional Space, as the case may
be. Any portion of the Excess Improvement Costs which Tenant determines not to
amortize over the remaining Lease Term shall be paid to Landlord in accordance
with the provisions of Paragraph 6 hereof or Paragraph 6 of Amendment No. 2, as
applicable. Promptly after Tenant notifies Landlord of the portion of the
Excess Improvement Cost which it desires to amortize and include in annual base
rent, Landlord and Tenant shall enter into a letter agreement stating the
amount by which the annual base rent shall be increased.
5. Additional Rent. The provisions of Article IV of the Lease,
respecting the payment by Tenant of its proportionate share of increases in
certain operating expenses incurred by Landlord in the operation of the Office
Complex, shall be applicable to this lease of the Additional Space.
Accordingly, commencing on the Lease Commencement Date-III, but not prior to
October 1, 1994, Tenant's proportionate share of increases in such operating
expenses shall be determined with reference to the entire Premises, including
the Additional Space.
6. Condition of the Additional Space.
(a) Landlord shall deliver and Tenant agrees to accept
the Additional Space in its present "as is" condition. The preceding sentence
notwithstanding, it is understood and agreed that Tenant intends during the
first six (6) months immediately following the Lease Commencement Date-III, to
make certain alterations and improvements to the original Premises and/or the
Additional Space. All such alterations and improvements shall be subject to
the provisions of Article IX of the Lease and shall be made at Tenant's sole
cost and expense; provided, however, that subject to the terms and provisions
of this Paragraph 6, Landlord agrees to provide Tenant with an improvement
allowance (the "Additional Tenant Improvement Allowance") in an amount up to
but not exceeding the product of Ten Dollars ($10.00) multiplied by the number
of square feet of Net Rentable Area in the Additional Space. The Additional
Tenant Improvement Allowance shall be applied, as hereinafter set forth, to all
"hard" and "soft" costs incurred in connection with the design, construction
and installation of additional tenant improvements in the original Premises
and/or the Additional Space, including, without limitation, any and all
architectural, engineering and consulting fees. The funding of the Additional
Tenant Improvement Allowance is subject to the fulfillment by Tenant of all
covenants and conditions set forth in the Lease and this Amendment. In the
event the entire Additional Tenant Improvement Allowance is not utilized during
the first six (6) months immediately following the Lease
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<PAGE> 65
Commencement Date-III for repainting, recarpeting, altering and upgrading the
tenant improvements in the original Premises and/or the Additional Space,
Landlord shall not be obligated to pay or to credit to Tenant and Tenant shall
not be entitled to or have a claim or cause of action against Landlord with
respect to the difference between the Additional Tenant Improvement Allowance
and the actual costs and expenses, if any, incurred in connection with
repainting, recarpeting, altering, upgrading and otherwise renovating the
tenant improvements in the original Premises and/or Additional Space.
(b) If Tenant requests Landlord to make such alterations
and improvements, Landlord agrees to cause its contractor to perform such work.
Subject to the provisions of Paragraph 4(b) above, Tenant agrees to pay
Landlord, promptly upon being billed therefor, all costs and expenses incurred
by Landlord in connection therewith in excess of the Additional Tenant
Improvement Allowance provided in subparagraph (a) above. Such costs and
expenses shall include all amounts charged by Landlord's contractor for
performing such work and providing such materials (including the contractor's
general conditions, overhead and profit), plus an amount equal to ten percent
(10%) of the contractor's charges as compensation for Landlord's overhead and
Landlord's direct and indirect costs of supervising construction and
installation of the tenant improvements in the Additional Space. Subject to
provisions of Paragraph 4(b) above, Tenant will be billed for one-half (1/2) of
the costs and expenses in excess of the Additional Tenant Improvement Allowance
provided in subparagraph (a) above upon approval of the cost estimates for such
work and materials. Subject to provisions of Paragraph 4(b) above, forty
percent (40%) of all such costs and expenses in excess of the Additional Tenant
Improvement Allowance shall be due and payable when such work is one-half (1/2)
completed, as determined by Landlord's architect and/or contractor, and the
remaining ten percent (10%) shall be due and payable upon substantial
completion of such work, as determined by Landlord's architect and/or
contractor.
(c) If Tenant elects to employ its own contractor to make
such alterations and improvements, Landlord agrees to pay such contractor, up
to the amount of the Additional Tenant Improvement Allowance provided in
subparagraph (a) above, promptly upon Landlord's receipt of (i) invoices for
work performed and materials supplied and (ii) signed lien waiver and release
forms from the applicable contractors, subcontractors and suppliers.
(d) Tenant acknowledges and agrees that if it does not
perform the anticipated repainting, recarpeting, altering and upgrading of the
tenant improvements in the original Premises and/or the Additional Space during
the first six (6) months immediately following the Lease Commencement Date-III,
or if the cost of the work which Tenant does have performed in the original
Premises and/or the Additional Space is less than the amount of the Additional
Tenant Improvement Allowance, Landlord shall not be obligated to pay or to
credit to Tenant and Tenant shall not be entitled to or have any claim or cause
of action against Landlord with respect to such unused portion of the
Additional Tenant Improvement Allowance.
(e) Not more than ten (10) business days after the
execution of this Amendment by Landlord and Tenant, Tenant shall notify
Landlord of its election whether to have Landlord make or cause to be made the
alterations and improvements to the original Premises and/or the Additional
Space or its intent to manage the performance of such work itself. In the
event Tenant
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<PAGE> 66
fails to notify Landlord within such ten (10) business day period of its
election whether to have Landlord perform the work described in this Paragraph
6, Tenant shall be deemed to have elected to perform such work or cause such
work to be performed itself. In the event Tenant elects to perform the work in
the Additional Space or fails to notify Landlord of its election, Tenant and
its contractors shall be allowed access to the Additional Space and the common
areas of the fourteenth (14th) floor of the Office Building commencing on the
earlier of (i) the day after the date on which Tenant makes its election or
(ii) ten (10) business days after the date of this Amendment for the purpose of
constructing and installing tenant improvements in the Additional Space and to
perform other related activity, and such construction, installation and related
activity shall not be considered the commencement of beneficial use of the
Additional Space by Tenant.
(f) Except as otherwise provided in this Paragraph 6,
Landlord shall not make and shall have no obligation to make any alterations
(structural or otherwise), decorations, additions, improvements or repairs in
or to the Additional Space or the original Premises whatsoever.
7. General Provisions.
(a) Except as expressly modified or amended by this
Amendment, all of the terms, conditions, covenants and agreements contained in
the Lease, including, without limitation, Tenant's right of first offer and
right of renewal set forth in Paragraphs 7 and 8, respectively, of Amendment
No. 2, (i) are incorporated herein by reference, (ii) shall remain in full
force and effect and (iii) shall be applicable to and binding upon Landlord and
Tenant.
(b) Landlord and Tenant each represents and warrants to
the other that neither of them has employed or dealt with any other broker,
agent or finder in carrying on the negotiations relating to this Amendment.
Tenant shall indemnify and hold Landlord harmless from and against any claim or
claims for brokerage or other commissions asserted by any broker, agent or
finder engaged by Tenant or with whom Tenant has dealt in connection with this
Amendment.
5
<PAGE> 67
IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment
No. 3 to Lease Agreement as of the date and year first above written.
<TABLE>
<S> <C>
LANDLORD:
DEMOCRACY ASSOCIATES LIMITED
PARTNERSHIP, a Maryland limited partnership
By: Boston Rockledge Associates Limited
Partnership, a Massachusetts limited
partnership, its General Partner
By: Boston Democracy Associates Limited,
Limited Partnership, a Massachusetts limited
partnership, its General Partner
By: Boston Democracy Associates General, a
Massachusetts limited partnership, its
General Partner
WITNESS:
/s/ Kathryn R. Stevenson By: /s/ Edward H. Linde
- ------------------------------------ ----------------------------------------------------------
Edward H. Linde
General Partner
TENANT:
SNYDER COMMUNICATIONS, L.P., a Delaware
limited partnership
ATTEST: By: Snyder Communications, Inc.,
a Delaware corporation,
its General Partner
By: /s/ By: /s/
--------------------------- ------------------------------
Title: Director, Business Analysis Title: Executive Vice President
[CORPORATE SEAL]
</TABLE>
6
<PAGE> 68
AMENDMENT NO. 4 TO LEASE AGREEMENT
This Amendment No. 4 to Lease Agreement (this "Amendment") is made as
of the 7th day of September, 1995, by and between DEMOCRACY ASSOCIATES LIMITED
PARTNERSHIP (hereinafter referred to as "Landlord") and SNYDER COMMUNICATIONS,
L.P., a Delaware limited partnership (hereinafter referred to as "Tenant").
R E C I T A L S :
A. Landlord and Tenant have heretofore entered into a Lease
Agreement dated as of July 30, 1992, as modified by that certain Lease
Modification and Renewal Agreement dated as of June 11, 1993 ("Amendment No.
1") between Landlord and Tenant, that certain Amendment No. 2 to Lease
Agreement dated July 29, 1994 ("Amendment No. 2") between Landlord and Tenant,
and that certain Amendment No. 3 to Lease Agreement dated as of October 5, 1994
("Amendment No. 3") between Landlord and Tenant (collectively, the "Lease"),
respecting the lease by Landlord to Tenant of certain premises, more
particularly described therein, comprising 23,914 square feet of Net Rentable
Area constituting a portion of the seventh (7th) and fourteenth (14th) floors
and the entire fifteenth (15th) floor of the fifteen-story office building
located at 6903 Rockledge Drive, Bethesda, Maryland (the "Office Building 2")
and which Office Building 2 is a part of the three office building complex
known as Democracy Center (the "Office Complex").
B. Tenant desires to lease certain additional space comprising
the entire fourth (4th) floor of the nine-story office building in the Office
Complex located at 6905 Rockledge Drive, Bethesda, Maryland (the "Office
Building 3"), on the same terms and conditions as are provided in the Lease,
except as otherwise provided herein; and
C. Landlord and Tenant wish to further amend the Lease (i) to
include in the description of the space covered thereby an additional 23,544
square feet of Net Rentable Area on the fourth (4th) floor of Office Building 3
(the "Building 3 Space"), as depicted on Exhibit 1 attached hereto and made a
part hereof and (ii) to modify the terms and provisions of the Lease as
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and premises
contained herein and other good and valuable consideration the receipt and
sufficiency of which hereby are acknowledged, Landlord and Tenant hereby agree
to amend the Lease as follows:
1. Defined Terms. Except as otherwise provided herein, all of
the capitalized terms used herein shall have the same meanings as provided in
the Lease.
2. The Premises. Commencing on the Lease Commencement Date-IV
and continuing through the Building 3 Space Term, each as defined in Paragraph
3(a) below, (a) the definition of the "Premises" in the Lease hereby is amended
to include therein the Building 3 Space, and (b) Exhibit 1 attached hereto,
depicting the floor plan for the Building 3 Space, hereby is added to
<PAGE> 69
Exhibit A to the Lease. As a result, during the Building 3 Space Term, the
aggregate number of square feet of rentable area comprising the Premises hereby
is increased to a total of 47,458 square feet. During the Building 3 Space
Term, the Building 3 Space shall be subject to all the terms and conditions of
the Lease, except as otherwise provided below. With respect to the Building 3
Space, all references in the Lease to "Building" shall mean Office Building 3.
3. Term. The term of the Lease with respect to the Building 3
Space (the "Building 3 Space Term") shall commence on September 1, 1995 (the
"Lease Commencement Date-IV") and shall continue through August 31, 1996,
subject to earlier termination as provided in the Lease (as amended hereby).
Notwithstanding anything herein or in the Lease to the contrary, either
Landlord or Tenant shall have the right to terminate the Lease with respect to
the Building 3 Space only, without penalty, by providing at least forty-five
(45) days prior written notice to the other party. At the expiration or
earlier termination of the Building 3 Space Term, Tenant shall surrender the
Building 3 Space to Landlord in accordance with Section 8.1 of the Lease. With
respect to the Building 3 Space, all references in the Lease to "Lease Term"
shall be deemed to mean "Building 3 Space Term."
4. Base Rent. Commencing on the Lease Commencement Date-IV and
continuing through the Building 3 Space Term, Tenant shall pay to Landlord as
annual base rent for the Building 3 Space an amount equal to One Hundred Twenty
Thousand Dollars ($120,000). The annual base rent for the Building 3 Space
shall be payable as provided in Sections 3.1 and 3.2 of the Lease; provided,
however, that such rent shall not be increased as provided in Section 3.2 of
the Lease. Notwithstanding anything to the contrary set forth in the Lease, no
abatements, concessions or allowances of any kind shall apply with respect to
the Building 3 Space.
5. Additional Rent. The provisions of Article IV of the Lease,
respecting the payment by tenant of its proportionate share of increases in
certain operating expenses incurred by Landlord in the operation of the Office
Complex, shall not apply to the Building 3 Space.
6. Condition of the Building 3 Space. Landlord shall deliver and
Tenant agrees to accept the Building 3 Space in its "as is" condition as of the
Lease Commencement Date-IV. The preceding sentence notwithstanding, it is
understood and agreed that Tenant intends to make certain minor alterations and
improvements to the Building 3 Space. All such alterations and improvements
shall be subject to the provisions of Article IX of the Lease and shall be made
at Tenant's sole cost and expense. Landlord shall have no obligation to make
any alterations (structural or otherwise), decorations, additions, improvements
or repairs in or to the Building 3 Space, the Premises or the Office Complex
whatsoever.
7. Parking. During the Building 3 Space Term Tenant shall have
the right to use (at no cost to Tenant) eighty (80) additional monthly parking
permits for the parking of standard-sized passenger automobiles in the Garage
(as defined in Section 24.1 of the Lease) or in the surface parking areas of
the Office Complex not designated for the exclusive use of particular tenants
in the Office Complex, such permits to be used for surface or Garage parking,
as determined by Landlord in its sole discretion.
-2-
<PAGE> 70
8. Assignment and Subletting. Notwithstanding anything to the
contrary set forth in the Lease, Tenant shall not assign this Lease or sublet
all or any portion of the Building 3 Space.
9. General Provisions. (a) Tenant's right of first offer and
right of first renewal set forth in Paragraphs 7 and 8, respectively, of
Amendment No. 2 shall not apply with respect to the Building 3 Space. Except
as expressly modified or amended by this Amendment, all of the terms,
conditions, covenants and agreements contained in the Lease (i) are
incorporated herein by reference, (ii) shall remain in full force and effect
and (iii) shall be applicable to and binding upon Landlord and Tenant.
(b) Landlord and Tenant each represents and warrants to the
other that neither of them has employed or dealt with any other broker, agent
or finder in carrying on the negotiations relating to this Amendment. Tenant
shall indemnify and hold Landlord harmless from and against any claim or claims
for brokerage or other commissions asserted by any broker, agent or finder
engaged by Tenant or with whom Tenant has dealt in connection with this
Amendment.
[On next page is Exhibit 1, a map of the fourth floor area leased by Tenant.]
-3-
<PAGE> 71
IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment
No. 4 to Lease Agreement as of the date and year first above written.
<TABLE>
<S> <C>
LANDLORD:
DEMOCRACY ASSOCIATES LIMITED
PARTNERSHIP, a Maryland limited partnership
By: Boston Rockledge Associates Limited Partnership,
a Massachusetts limited partnership, its General Partner
By: Boston Democracy Associates Limited, Limited
Partnership, a Massachusetts limited partnership,
its General Partner
By: Boston Democracy Associates General, a Massachusetts
limited partnership, its General Partner
WITNESS:
/s/ Kathryn R. Stevenson By: /s/ Edward H. Linde
- -------------------------------------------- -----------------------------------------
Edward H. Linde
General Partner
TENANT:
SNYDER COMMUNICATIONS, L.P., a Delaware
limited partnership
ATTEST: By: Snyder Communications, Inc., a Delaware
corporation, its General Partner
By: /s/ Vincent Candida By: /s/
------------------- -------------------------------------------
Title: Title: Executive Vice President
--------------------
[CORPORATE SEAL]
</TABLE>
-4-
<PAGE> 72
LEASE AGREEMENT
This LEASE AGREEMENT is made and entered into as of the ____ day of
January, 1995, by and between DEMOCRACY ASSOCIATES LIMITED PARTNERSHIP, a
limited partnership formed and existing under the laws of the State of
Maryland, having a business address of c/o Boston Properties, Inc., 500 E
Street, S.W., Washington, D.C. 20024 ("Landlord"), and SNYDER COMMUNICATIONS,
L.P., having a business address of 6903 Rockledge Drive, Bethesda, Maryland
20817 ("Tenant").
RECITALS:
A. Landlord and Tenant have heretofore entered into a Lease
Agreement dated July 30, 1992, as modified by that certain Lease Modification
and Renewal Agreement dated as of June 11, 1993 (the "Renewal Agreement")
between Landlord and Tenant and as further amended by Amendment No. 2 to Lease
Agreement dated as of July 29, 1994 ("Amendment No. 2") between Landlord and
Tenant (collectively, the "Lease"), respecting the lease by Landlord to Tenant
of certain premises, more particularly described therein, comprising 16,492
square feet of Net Rentable Area constituting the entire fifteenth (15th) floor
and 4,263 square feet of Net Rentable Area on the seventh (7th) floor of the
fifteen-story office building located at 6903 Rockledge Drive, Bethesda,
Maryland (the "Building") and which Building is a part of the three office
building complex known as Democracy Center (the "Office Complex").
B. Landlord and Tenant desire to enter into this Lease respecting
the lease by Tenant of certain storage space in the Building.
NOW, THEREFORE, the parties agree as follows:
1. LEASED PREMISES. Landlord hereby leases to Tenant, and Tenant
hereby accepts from Landlord, for the term and upon the term, conditions,
covenants and agreements set forth herein, the premises which include 189
square feet of space on the P-2 parking level of the Building, which premises
are hereinafter referred to as the "leased premises".
2. TERM. Subject to and upon the terms and conditions set forth
herein, and/or in any exhibit or addendum hereto, the term of this Lease shall
be for two (2) years and six (6) months commencing on February 6, 1995, and
continuing in full force until June 15, 1997 (the "Lease Term"), which is
coterminous with the lease term under the Renewal Agreement, with respect to
the leased premises described in Paragraph 1 above.
3. BASE RENT.
(a) Tenant covenants to pay to Landlord at its main
office, or at such other place, notice of which Landlord may from time to time
give to Tenant, base rent as set forth below and all other payments and charges
herein provided for to be paid by Tenant.
<PAGE> 73
(b) As base rent for the leased premises, during each
Lease Year of the Lease Term, Tenant agrees to pay Landlord an amount equal to
the product of Eight Dollars and Fifty Cents ($8.50) multiplied by the total
number of square feet of rentable area in the leased premises, which amount
shall be subject to annual adjustment as provided in Paragraph 3(c) below and
shall be increased during the first (1st) Lease Year as provided in the next
sentence.
(c) Commencing on February 6, 1996 and on each and every
February 6 thereafter during the Lease Term, the annual base rent shall be
increased by four percent (4%) of the amount of the annual base rent payable
for the preceding Lease Year.
(d) For purposes of this Lease, the term "Lease Year"
shall mean each period of twelve (12) consecutive calendar months commencing on
February 6 and continuing through the following February 5 during the Lease
Term; except that the final Lease Year shall include only the months of
February 6 through June 15, 1997.
(e) The total annual base rent payable hereunder during
each Lease Year, or portion thereof, shall be divided into equal monthly
installments. Tenant agrees to pay each monthly installment of annual base
rent in advance, on the first day of each month during the Lease Term, without
prior demand, deduction or setoff.
(f) If Landlord shall at any time accept rent after it
shall be come due and payable, such acceptance shall not excuse a delay upon
subsequent occasions, nor shall it constitute or be construed as a waiver of
any of Landlord's rights hereunder.
4. USE. It is understood and agreed that the leased premises
shall be used and occupied by Tenant for file and general office equipment
storage and for no other purpose and that Tenant shall comply with all
applicable laws, ordinances, governmental regulations, and all protective
covenants and restrictions of record affecting such use.
5. IMPROVEMENTS FURNISHED BY LANDLORD. Tenant agrees to, and
hereby does, accept the leased premises in their present "as is" condition.
Landlord shall have no obligation to make any improvement to the leased
premises or the Building at any time during the term of this Lease.
6. SERVICES PROVIDED BY LANDLORD. Except as otherwise provided
herein, Landlord agrees, at its cost, to furnish Tenant during the term of the
Lease with electric lighting service for all common areas and special areas of
the Building (including the leased premises) in the manner and to the extent
deemed by Landlord, in its sole discretion, to be standard.
Failure by Landlord to any extent to furnish these defined services,
or any cessation thereof, resulting from causes beyond the control of Landlord
shall not render Landlord liable in any respect for damages to either person or
property, nor be construed as an eviction of Tenant, nor entitle Tenant to an
abatement of rent, nor relieve Tenant from fulfillment of any covenant or
agreement hereunder.
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<PAGE> 74
7. REPAIRS AND MAINTENANCE. (a) Landlord shall not be required
to make any improvements or repairs of any kind or character to the leased
premises during the term of this Lease, except such repairs as may be necessary
because of damages by persons other than Tenant, its agents, employees,
invitees or visitors, and as may be necessary solely because of the gross
negligence of Landlord which repairs shall be made by Landlord at its expense
beginning not more than fifteen (15) days after written notice thereof by
Tenant.
(b) In the event of any material damage to the leased
premises or the Building during the term of this Lease, Tenant shall have the
option to make the necessary repairs, subject to Landlord's prior approval. If
such damage renders the leased premises, or substantial portion thereof,
untenantable for a period exceeding thirty (30) calendar days, Tenant shall
have the further option to terminate this Lease.
8. LANDLORD'S INSURANCE. Tenant agrees not to do or permit
anything to be done, in or about the leased premises that will in any increase
the rate paid by Landlord for fire, liability and casualty insurance on the
Building or impair or invalidate the obligation of any policy of insurance with
respect to the leased premises or the Building in which the leased premises are
situated. Tenant agrees to pay, upon demand, as additional rent, any increase
in insurance premiums resulting from the business carried on in the leased
premises, even though Landlord has consented to same.
9. INDEMNIFICATION/TENANT'S INSURANCE. (a) Tenant agrees to
indemnify and save Landlord harmless from and against any and all claims,
damages, costs and expenses, including reasonable attorney's fees, arising from
the conduct and operation of the business conducted in the leased premises or
from any breach or default on the part of Tenant in the performance of any
covenant or agreement on the part of Tenant to be performed pursuant to the
terms of the Lease, or from any act of Tenant, its agents, contractors,
servants, employees, sublessees, customers, invitees, or licensees in or about
the leased premises. In case any action or proceedings be brought against
Landlord by reason of any such claim, Tenant, upon notice from Landlord,
covenants and agrees to defend such action or proceedings by counsel
satisfactory to Landlord.
(b) Tenant hereby represents and warrants to Landlord that
the general liability, contents and property insurance which it is required to
maintain pursuant to Article XIII of the Lease shall and does cover Tenant's
use and occupancy of the leased premises. If Tenant fails to comply with such
insurance requirements, Landlord may obtain such insurance and keep the same in
effect and Tenant shall pay Landlord the premium cost thereof upon demand as
additional rent.
10. ALTERATIONS/INSTALLATIONS. Tenant agrees not to make any
alteration in or addition to the leased premises.
11. OCCUPANCY STANDARD/LAWS AND REGULATIONS. (a) If required by
the applicable laws. rules or regulations of the State of Maryland, Montgomery
County or other municipality, Tenant shall obtain a certificate of occupancy
for the leased premises at Tenant's expense. Tenant shall not use or occupy or
permit the leased premises to be used or occupied,
3
<PAGE> 75
nor do or permit anything to be done in or on the leased premises in whole or
in part, in any manner which would in any way (i) make void or voidable any
insurance carried by Tenant or Landlord hereunder with respect thereto, or
which may make it impossible to obtain fire or other insurance thereof, (ii)
violate any laws, regulations, ordinances or requirements of any governmental,
public or quasi-public authorities now existing or hereafter created, having
jurisdiction in or over the leased premises (iii) tend to create a nuisance or
tend to disturb other tenants of the Building, or (iv) damage the Building or
the leased premises.
(b) In the event any governmental, public or quasi-public
authority, now existing or hereafter created, shall find, rule, state, decree
or order that the use of the Premises provided in Paragraph 4 hereof is
invalid, improper, illegal or otherwise not permitted by law, then (i) this
Lease shall terminate and be void and of no further force or effect and (ii)
Tenant agrees that it shall have no claim, cause or right of action against
Landlord arising out of or with respect to the termination of this Lease,
otherwise attributable to the value of the unexpired term of this Lease, any
loss of profits or goodwill or severance damages.
12. ACCESS TO LEASED PREMISES. Landlord reserves for itself and
its representatives the right to enter upon the leased premises at all
reasonable hours for the purpose of inspecting the same and making repairs,
additions or alterations to the Building in which the leased premises are
located. The exercise by Landlord of any of its rights under this paragraph
shall not be deemed an eviction or disturbance of Tenant's use and possession
of the leased premises.
13. EMINENT DOMAIN. If the leased premises shall be taken by any
governmental or quasi-governmental authority or any other person possessing the
power of eminent domain pursuant to such power of eminent domain, this Lease
shall terminate when title to the leased premises is taken by the condemning
authority and base rent shall be adjusted pro rata to such date. In the event
of such taking, Tenant shall be entitled to claim, prove and receive in the
condemnation proceedings only such award as may be allowed for movable fixtures
and any equipment installed in the leased premises by Tenant, but only if such
award is made by the condemnation court in addition to the awards made by it
for the land, the Building and the value of the leasehold, which latter shall
be the property of the Landlord and the Tenant hereby assigns to Landlord all
its right, title and interest in and to any such awards.
14. DAMAGE TO LEASED PREMISES.
(a) Landlord shall not be liable to Tenant, its
employees, agents, business invitees, licensees, customers, clients, family
members or guests for any damage, injury, loss, compensation or claim,
including but not limited to claims for the interruption of or loss to Tenant's
business, based on, arising out of or resulting from any cause whatsoever. Any
goods, property or personal effects stored or placed by Tenant or its employees
in or about the leased premises or the Building shall be at the sole risk of
Tenant, and Landlord shall not in any manner be held responsible therefor.
(b) In the event the leased premises shall be destroyed,
or so damaged by fire,
4
<PAGE> 76
explosion, windstorm or other casualty as to be untenantable, unless (i)
Landlord shall elect to make the necessary repairs or (ii) Tenant shall make
the election reserved to it by Paragraph 7 hereof to make the necessary repairs
to the leased premises, this Lease shall terminate upon ten (10) days written
notice from either party to the other.
15. ASSIGNMENT OR SUBLETTING. Tenant agrees not to sell, assign,
mortgage, pledge or in any manner transfer this Lease or any estate or interest
hereunder, nor to sublet the leased premises or any part or parts thereof, nor
to permit any licensee therein without the prior written consent of Landlord in
each instance, which consent shall not be unreasonably withheld. Consent by
Landlord in any one instance shall not be a waiver of Landlord's rights under
this paragraph as to any subsequent instance. Landlord's rights to assign this
Lease are and shall remain unqualified.
16. REMEDIES OF LANDLORD. (a) Landlord may terminate this Lease
upon the happening of any one or more of the following events: (i) the failure
of Tenant to pay an installation of rent, or any other payment, or charge
herein provided for, more than five (5) days after the date when due; (ii) the
violation by Tenant of, or its failure to perform or threat to break, any
material covenant or agreement herein contained, if such continues after ten
(10) days, and if Tenant does not within such period commence to cure such
violation, failure, or threat and thereafter diligently complete the same;
(iii) subject to the provisions of Paragraph 18 below, failure to vacate the
premises as of June 15, 1997; or (iv) any default by Tenant under Article XIX
of the Lease.
(b) Upon such termination of this Lease, Landlord may
re-enter the leased premises with or without process of law, using such force
as may be necessary, and remove all persons and chattels therefrom and Landlord
shall not be liable for damages or otherwise by reason of re-entry or
termination of this Lease nor shall such re-entry or termination waive, bar, or
in any way prejudice any other remedies available to Landlord. Notwithstanding
such termination, the liability of Tenant for the rent provided for herein
shall not be extinguished for the balance of the term remaining after said
termination and Landlord shall be entitled to recover immediately as liquidated
damages an amount equal to the rent for the said balance of the term, less the
fair rental value of the leased premises for the said balance of the term, as
determined by rental of, or responsible offers to rent the leased premises.
(c) In the event of any breach hereunder, beyond any
applicable notice and cure period, by Tenant, Landlord may immediately or at
any time thereafter, without notice, cure such breach for the account and at
the expense of Tenant. If Landlord at any time, by reason of such breach, is
compelled to pay, or elects to pay any sum of money or do any act that will
require the payment of any sum of money, or is compelled to incur any expense,
including reasonable attorneys' fees, in instituting or prosecuting any action
or proceeding to enforce Landlord's rights hereunder, the sum or sums paid by
Landlord, with interest thereon at the rate of twelve percent (12%) per annum
from the date of payment thereof, shall be deemed to be additional rent
hereunder and shall be due from Tenant to Landlord on the first day of the
month following the payment of such respective sums or expenses.
5
<PAGE> 77
(d) When this Lease is terminated in accordance with this
Paragraph 16, Tenant will yield up possession to Landlord on the date of
termination, and failing to so do, will pay as liquidated damages for each day
possession is withheld an amount equal to double the amount of the daily base
rent computed on a thirty-day month basis.
(e) All rights and remedies of Landlord herein enumerated
shall be cumulative and none shall exclude any other right or remedy allowed by
law and said rights and remedies may be exercised and enforced concurrently and
whenever and as often as occasion therefor arises. Any base rent, additional
rent, or other payment or charge herein provided for may be recovered by the
Landlord from the Tenant by distress or action or by any legal process as may
at the time be in operation and force in like cases relating to proceedings
between landlords and tenants.
(f) Notwithstanding any of the other rights of Landlord set
forth in the Lease, during the term of this Lease, should the rent or other
charges reserved herein remain unpaid on the fifth (5th) day after the date
when the same ought to be paid, the Landlord may elect to waive such default
and Landlord, at its option, may make a service charge for the purpose of
defraying the expenses incidental to handling delinquent payments. Such charge
shall be in an amount of five percent (5%) of the delinquent rent and charges
for each month, or part thereof, during which said rent and charges remain
delinquent or a minimum charge of Ten Dollars ($10.00) per month, whichever
shall be greater.
17. NOTICES. Any notice or demand required or permitted under
this Lease shall be in writing and shall be sent by registered or certified
mail to Tenant at the address of the leased premises and to Landlord at the
address set forth at the beginning of this Lease Agreement, and either party
may by like notice at any time and from time to time designate a different
address to which notice shall be sent. Notices given in accordance with these
provisions shall be deemed given when mailed.
18. RENEWAL. Provided that Tenant exercises its right to renew
the term of the Office Lease pursuant to Paragraph 8 of Amendment No. 2,
Landlord hereby grants to Tenant the conditional right, exercisable at Tenant's
option, to renew the term of the Lease for one (1) additional term of five (5)
years. If exercised and if the conditions applicable thereto have been
satisfied, such renewal term (the "Renewal Term") shall commence immediately
following the end of the initial Lease Term provided in Paragraph 2 above. The
right of renewal herein granted to Tenant shall be subject to, and shall be
exercised in accordance with the following terms and conditions:
(a) Tenant shall exercise its right of renewal with
respect to the Renewal Term by giving Landlord written notice of the exercise
thereof (the "renewal option notice") not less than six (6) months and not more
than nine (9) months prior to the expiration of the Lease Term. In the event
that the renewal option notice is not given in a timely manner, Tenant's right
of renewal with respect to the Renewal Term shall lapse and be of no further
force or effect. If Tenant shall be in default under the Lease on the date the
renewal option notice is given or any time thereafter on or before the
commencement date of the Renewal Term, then, at Landlord's option, the renewal
option notice shall be totally ineffective and Tenant's right of renewal as to
the
6
<PAGE> 78
Renewal Term shall lapse and be of no further force or effect.
(b) Commencing on the first (1st) day of the Renewal Term
and on the first (1st) day of each and every Lease Year thereafter during the
Renewal Term, the annual base rent payable for such Lease Year of the Renewal
Term shall be the amount of annual base rent payable for the Lease Year
immediately preceding such Lease Year increased by four percent (4%). Annual
base rent during each Lease Year of the Renewal Term shall be adjusted and paid
in the manner and at the time set forth in Paragraph 3 above.
(c) During the Renewal Term, all of the terms,
conditions, covenants and agreements set forth in the Lease shall continue to
apply and be binding upon Landlord and Tenant, except that (i) the base rent
payable during each year of the Renewal Term shall be the amount calculated in
accordance with Paragraph 18(b) above and (ii) in no event shall Tenant have
the right to renew the Lease Term, or any renewal term thereof, beyond the
expiration of the Renewal Term.
19. GENERAL.
(a) Tenant hereby represents and warrants to Landlord
that all necessary corporate action has been taken to enter into this Lease and
that the person signing this Lease on behalf of Tenant has been duly authorized
to do so.
(b) Nothing contained in this Lease shall be deemed or
construed parties hereto or by any third party to create the relationship of
principal and agent or of partnership or of joint venture or of any association
between Landlord and Tenant other than the relationship of landlord and tenant.
No waiver of any default of Tenant hereunder shall be implied from any omission
by Landlord to take any action on account of such default and no express waiver
shall affect any default other than the default specified in the express waiver
and that only for the time and to the extent therein stated. One or more
waivers of any covenant, term or conditions of this Lease by Landlord shall not
be construed as a waiver of a subsequent breach of the same covenant, term or
condition. The consent or approval by Landlord to or of any act by Tenant
requiring Landlord's consent or approval shall not be deemed to waive or render
unnecessary Landlord's consent or approval to or any subsequent similar act by
Tenant. The invalidity or unenforceability of any provision hereof shall not
affect or impair any other provisions. The necessary grammatical changes
required to make the provisions of this Lease apply in the plural sense where
there is more than one tenant and to either corporations, associations,
partnerships or individuals, males or females, shall in all instances be
assumed as though in each case fully expressed. The laws of the State of
Maryland shall govern the validity, performance and enforcement of this Lease.
(c) This Lease contains the entire agreement between the
parties with respect to the subject matter hereof and each party acknowledges
that it did not, in entering into this Lease, rely upon any representation or
promises made by or on behalf of the other except as expressly set forth
herein. Landlord and Tenant hereby waive trial by jury in any action or
proceeding brought by either of them against the other on any matters
whatsoever arising out of, or by virtue of the terms of this Lease.
7
<PAGE> 79
(d) The capitalized terms used in this Lease shall have
the same meanings herein as defined in the Renewal Agreement.
8
<PAGE> 80
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease
Agreement as of the date and year first written above.
<TABLE>
<S> <C>
Landlord:
DEMOCRACY ASSOCIATES LIMITED
PARTNERSHIP, a Maryland limited partnership
By: Boston Rockledge Associates Limited
Partnership, a Massachusetts limited
partnership, its General Partner
By: Democracy Associates Limited,
Limited Partnership, a Massachusetts
limited partnership, its General Partner
By: Boston Democracy Associates General,
its General Partner
WITNESS:
/s/ Dianne Regan By: /s/ Edward H. Linde
- --------------------------------------- -------------------------------------------
Edward H. Linde
General Partner
Tenant:
WITNESS: SNYDER COMMUNICATIONS, L.P.,
a Delaware limited partnership
/s/ By: /s/
- ----------------------------------------- --------------------------------------------
</TABLE>
9
<PAGE> 1
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made this 8th day of
August, 1996 by and between Snyder Communications, Inc., a Delaware
corporation with its principal place of business at 6903 Rockledge Drive,
Bethesda, Maryland 20817 (the "Company"), and Daniel M. Snyder, an individual
residing at 7109 Armat Drive, Bethesda, MD 20817 (the "Employee").
WHEREAS, the Company or its predecessor has employed the Employee since
inception; and
WHEREAS, the parties wish to set forth the terms and conditions upon
which the Company will continue to employ the Employee;
NOW THEREFORE, in consideration of the mutual covenants and promises
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the
parties agree as follows:
1. Term of Employment.
The Company hereby employs the Employee, and the Employee hereby accepts
employment with the Company, upon the terms set forth in this Agreement,
commencing on the effective date of the initial public offering of the Company
(the "Effective Date"). The Company shall employ the Employee for a
continuous period of three (3) years (the "Employment Period"), commencing on
the Effective Date.
<PAGE> 2
2. Title; Duties.
The Employee shall serve as the Chairman of the Board, President and
Chief Executive Officer of the Company during the Employment Period. The
Employee shall report to the Board of Directors of the Company (the "Board of
Directors"), which shall have the authority to direct, control and supervise
the activities of the Employee. The Employee shall perform such services
consistent with his position as may be assigned to him from time to time by
the Board of Directors. The Employee shall work at the principal office of
the Company located in the Washington, D. C. metropolitan area.
3. Base Salary.
The Company shall pay the Employee a base annual salary of $300,000.00,
subject to such increases as may be approved by the Board of Directors or the
Compensation Committee of the Board of Directors (the "Compensation
Committee"). The salary shall be payable in biweekly installments of
$11,538.46, minus such deductions as may be required by law or reasonably
requested by the Employee. The Board of Directors or the Compensation
Committee will review the Employee's base salary no less often than annually
in conjunction with its regular review of the compensation of executive
officers of the Company.
- 2 -
<PAGE> 3
4. Bonus.
The Employee shall be eligible for periodic bonuses in an amount
determined by the Board of Directors or the Compensation Committee, which
shall not exceed $200,000 in any calendar year.
5. Fringe Benefits.
The Employee shall be entitled to all benefits generally available to
employees of the Company. The Company shall pay for one parking space permit
for the Employee. The Employee shall be entitled to three (3) weeks of
vacation during each year of employment. The Employee shall be entitled to
sick leave and holidays in accordance with the policy of the Company as to its
executive employees.
6. Reimbursement of Business Expenses.
The Company shall reimburse the Employee for all reasonable out-of-pocket
costs incurred or paid by the Employee in connection with, or related to, the
performance of his duties, responsibilities or services under this Agreement,
upon presentation by the Employee of documentation, expense statements,
vouchers, and/or such other supporting information as the Company may
reasonably request
7. Automobile Allowance.
The Company shall pay all expenses related to providing Employee with the
exclusive use of an automobile.
- 3 -
<PAGE> 4
8. Non-Solicitation and Non-Competition.
(a) Except as provided in paragraph (e) below, the Employee agrees that
while the Employee is employed pursuant to this Agreement and for any period
as to which the Employee receives severance pay as provided in Section 12 (the
"Non-Competition Period"), the Employee will not, except as otherwise provided
herein, engage or participate, directly or indirectly, as principal, agent,
employee, employer, consultant, stockholder, partner or in any other
individual capacity whatsoever, in the conduct or management of, or own any
stock or any other equity investment in or debt of, any business which is
competitive with any business conducted by the Company.
For the purpose of this Agreement, a business shall be considered to be
competitive with the business of the Company if such business is engaged in
providing outsourced marketing services for clients utilizing a range of
complementary marketing resources including field sales, teleservices
capabilities, sponsored wallboard information displays and product sampling
(or any other business in which the Company is engaged at the time of
termination of the Employee's employment).
(b) Non-Solicitation of Employees. During the Non-Competition Period,
the Employee will not (for his/her own benefit or for the benefit of any
person or entity other than the Company) solicit, or assist any person or
entity other than the
- 4 -
<PAGE> 5
Company to solicit, any officer, director, executive or employee of the
Company to leave his/her employment.
(c) Non-Solicitation of Customers. During the Non-Competition Period,
the Employee will not solicit, or assist any person or entity other than the
Company to solicit, any person or entity that is a client of the Company or
has been a client of the Company during the prior twelve months, to purchase
outsourced marketing services (or any other products or services the Company
provides to a client).
(d) Reasonableness. The Employee acknowledges that (i) the markets
served by the Company are national in scope and are not dependent on the
geographic location of the executive personnel or the businesses by which they
are employed; and (ii) the above covenants are manifestly reasonable on their
face, and the parties expressly agree that such restrictions have been
designed to be reasonable and no greater than is required for the protection
of the Company. The Company and the Employee agree that in the event any of
the restrictions in this Section 9 are found to be unreasonable by a court of
competent jurisdiction, such court shall determine the limits allowable by law
and shall enforce the same.
(e) Investment. Nothing in this Agreement shall be deemed to prohibit
the Employee from owning equity or debt investments in any corporation,
partnership or other entity which is competitive with the Company, provided
that such investments (i) are passive investments and constitute five percent
(5%) or less of
- 5 -
<PAGE> 6
the outstanding equity securities of such an entity the equity securities of
which are traded on a national securities exchange or other public market, or
(ii) are approved by the Board of Directors or the Compensation Committee.
(f) Change in Control. The restrictions on Employee contained in this
Section 9 shall cease to apply in the event of a Change of Control of the
Company. Upon a Change in Control, Employee shall no longer be restricted
with respect to competition with or solicitation of the Company, the Company's
Employees and the Company's Customers. For purposes of this subparagraph (f),
a "Change in Control" shall mean any of the following events: (i) if the
individuals who, as of the Effective Date, are directors or the nominees to
the directors (the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board; provided, however, that any individual becoming
a director subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a person other than the
Board; (ii) if any individual, entity or group (within the meaning of Sections
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) (a "Person"), other than those Persons who of the date hereof
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<PAGE> 7
beneficially own 20% or greater of the outstanding shares of the Company's
common stock, becomes the beneficial owner (within the meaning of Rule 13d-3
promulgated under the Exchange Act), directly or indirectly, of 20% or more of
the outstanding shares of the Company's common stock.
9. Confidential Information.
(a) The Employee shall not (for his own benefit or the benefit of any
person or entity other than the Company) use or disclose any of the Company's
trade secrets or other confidential information; provided, however, that the
term "trade secrets or other confidential information" shall not include the
general knowledge, skills or personal experience of Employee relating to the
provision of outsourced marketing services. The term "trade secrets or other
confidential information" includes, by way of example, matters of a technical
nature, "know-how", computer programs (including documentation of such
programs), research projects, and matters of a business nature, such as
proprietary information about costs, profits, markets, sales, lists of
customers, and other information of a similar nature to the extent not
available to the public, and plans for future development. After termination
of this Agreement, the Employee shall not use or disclose trade secrets or
other confidential information unless such information becomes a part of the
public domain other than through a breach of this Agreement or is disclosed to
the Employee by a third party who is entitled to receive and disclose such
information.
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<PAGE> 8
(b) Upon the effective date of notice of the Employee's or the Company's
election to terminate this Agreement, or at any time upon the request of the
Company, the Executive (or his heirs or personal representatives) shall
deliver to the Company all documents and materials containing trade secrets
and confidential information relating to the Company's business and all
documents, materials and other property belonging to the Company, which in
either case are in the possession or under the control of the Employee (or his
heirs or personal representatives.
(c) All discoveries and works made or conceived by the Employee during
his employment by the Company, jointly or with others, that relate to the
Company's activities shall be owned by the Company. The terms "discoveries
and works" include, by way of example, inventions, computer programs
(including documentation of such programs), technical improvements, processes,
drawings, and works of authorship, including sales materials which relate to
wall media products, sampling/comparing or services. The Employee shall
promptly notify and make full disclosure to, and execute and deliver any
documents requested by, the Company to evidence or better assure title to such
discoveries and works by the Company, assist the Company in obtaining or
maintaining for itself at its own expense United States and foreign patents,
copyrights, trade secret protection and other protection of any and all such
discoveries and works, and promptly execute, whether during his employment or
thereafter, all applications or other endorsements necessary or appropriate to
maintain patents and other rights for the
- 8 -
<PAGE> 9
Company and to protect its title thereto. Any discoveries and works which,
within six months after the termination of the Employee's employment by the
Company, are made, disclosed, reduced to a tangible or written form or
description, or are reduced to practice by the Employee and which pertain to
work performed by the Employee while with the Company shall, as between the
Employee and the Company, be presumed to have been made during the Employee's
employment by the Company.
10. Enforcement.
The Employee agrees that the Company's remedies at law for any breach or
threat of breach by him/her of the provisions of Sections 9 and 10 hereof will
be inadequate, and that the Company shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of Sections 9 and 10 hereof
and to enforce specifically the terms and provisions thereof, in addition to
any other remedy to which the Company may be entitled at law or equity.
11. Termination.
(a) The Company may at any time terminate the Employee's employment under
this Agreement for cause, upon written notice by the Company to the Employee.
For the purposes of this Section 12, "cause" for termination shall mean (i)
the conviction of the Employee of, or the entry of a guilty (or nolo
contendre) plea by the Employee to, any felony; (ii) fraud, misappropriation
or embezzlement by the Employee; or (iii) the Employee's willful failure or
gross negligence in the performance of his assigned duties for the Company; or
(iv) the Employee's
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<PAGE> 10
material breach of this Agreement. If the Company terminates the Employee's
employment under this Agreement for cause, the Company shall pay to the
Employee only the salary and benefits otherwise payable to him under this
Agreement through the last day of him employment by the Company. If the
Company terminates the Employee's employment under this Agreement for cause,
the Employee shall not be entitled to receive any unpaid bonus for any period
prior to his termination even if the performance objectives have been
attained.
(b) Either party may terminate this Agreement at any time without cause,
upon giving the other party ninety (90) days written notice. In the event of
a termination by either party without cause, the Employee shall be entitled to
receive his salary and benefits in accordance with this Agreement through the
last date of his employment. In addition, the Employee shall be entitled to
receive any bonus due for any period prior to his termination of employment
that has not been paid as of the date of such termination. Finally, if such
termination occurs during the term of this Agreement, Employee shall receive
severance equal to one year's total compensation, including base salary and
applicable bonuses.
(c) The Employee's employment shall terminate immediately upon the
Employee's death or disability. As used in this Agreement, the term
"disability" shall mean the inability of the Employee, due to a physical or
mental disability, to perform the services contemplated under this Agreement
for a period of one hundred eighty (180) days in any consecutive twelve-month
period. If the Employee's
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<PAGE> 11
employment is terminated by the Employee's death or disability, the Company
shall pay to the estate of the Employee or to the Employee, as the case may
be, the salary and benefits which would otherwise be payable to the Employee
through the end of the month in which his employment is terminated because of
death or disability.
(d) This Agreement shall terminate at the end of the Employment Period,
unless sooner terminated as provided herein. If the Employee's employment is
terminated at the end of the Employment Period, the Company shall have no
further obligation to the Employee.
12. Miscellaneous.
(a) Notices. All notices required or permitted under this Agreement
shall be in writing and shall be deemed effective upon personal delivery or
upon deposit with the United States Postal Service, by registered or certified
mail, postage prepaid, addressed to the other party at the address shown
above, or at such other address or addresses as either party shall designate
to the other in writing from time to time.
(b) Pronouns. Whenever the context may require, any pronouns used in
this Agreement shall include the corresponding masculine, feminine or neuter
forms, and the singular forms of nouns and pronouns shall include the plural,
and vice versa.
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<PAGE> 12
(c) Entire Agreement. This Agreement constitutes the entire agreement
between the parties and supersedes all prior agreements and understandings,
whether written or oral, relating to the subject matter of this Agreement.
(d) Amendment. This Agreement may be amended or modified only by a
written instrument executed by both the Company and the Employee.
(e) Governing Law. This Agreement shall be construed, interpreted and
enforced in accordance with the laws of the State of Maryland, without regard
to its conflicts of laws principles.
(f) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of both parties and their respective successors and
assigns; provided, however, that the obligations of the Employee are personal
and shall not be assigned or delegated by him.
(g) Waiver. No delays or omission by the Company or the Employee in
exercising any right under this Agreement shall operate as a waiver of that or
any other right. A waiver or consent given by the Company or the Employee on
any one occasion shall be effective only in that instance and shall not be
construed as a bar or waiver of any right on any other occasion.
(h) Captions. The captions appearing in this Agreement are for
convenience of reference only and in no way define, limit or affect the scope
or substance of any section of this Agreement.
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<PAGE> 13
(i) Severability. In case any provision of this Agreement shall be held
by a court with jurisdiction over the parties to this Agreement to be invalid,
illegal or otherwise unenforceable, the validity, legality and enforceability
of the remaining provisions shall in no way be affected or impaired thereby.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first above written, but effective as of the Effective Date.
SNYDER COMMUNICATIONS, INC. EMPLOYEE
By: /s/Michele D. Snyder /s/ Daniel M. Snyder
-------------------------- --------------------
Michele D. Snyder, Vice Chairman Daniel M. Snyder
and Chief Operating Officer
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<PAGE> 1
EXHIBIT 10.7
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made this 8th day of
August, 1996 by and between Snyder Communications, Inc., a Delaware
corporation with its principal place of business at 6903 Rockledge Drive,
Bethesda, Maryland 20817 (the "Company"), and Michele D. Snyder, an individual
residing at 10001 Abbey Drive, Bethesda, MD 20854 (the "Employee").
WHEREAS, the Company or its predecessor has employed the Employee
since inception; and
WHEREAS, the parties wish to set forth the terms and conditions upon
which the Company will continue to employ the Employee;
NOW THEREFORE, in consideration of the mutual covenants and promises
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the
parties agree as follows:
1. Term of Employment.
The Company hereby employs the Employee, and the Employee hereby
accepts employment with the Company, upon the terms set forth in this
Agreement, commencing on the effective date of the initial public offering of
the Company (the "Effective Date"). The Company shall employ the Employee for
a continuous period of three (3) years (the "Employment Period"), commencing
on the Effective Date.
<PAGE> 2
2. Title; Duties.
The Employee shall serve as Vice Chairman and Chief Operating
Officer of the Company during the Employment Period. The Employee shall
report to the Board of Directors of the Company (the "Board of Directors"),
which shall have the authority to direct, control and supervise the activities
of the Employee. The Employee shall perform such services consistent with her
position as may be assigned to her from time to time by the Board of
Directors. The Employee shall work at the principal office of the Company
located in the Washington, D. C. metropolitan area.
3. Base Salary.
The Company shall pay the Employee a base annual salary of
$200,000.00, subject to such increases as may be approved by the Board of
Directors or the Compensation Committee of the Board of Directors (the
"Compensation Committee"). The salary shall be payable in biweekly
installments of $7,692.30, minus such deductions as may be required by law or
reasonably requested by the Employee. The Board of Directors or the
Compensation Committee will review the Employee's base salary no less often
than annually in conjunction with its regular review of the compensation of
executive officers of the Company.
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<PAGE> 3
4. Bonus.
The Employee shall be eligible for periodic bonuses in an amount
determined by the Board of Directors or the Compensation Committee which shall
not exceed $150,000 in any calendar year.
5. Fringe Benefits.
The Employee shall be entitled to all benefits generally available
to employees of the Company. The Company shall pay for one parking space
permit for the Employee.
The Employee shall be entitled to three (3) weeks of vacation during
each year of employment. Such vacation shall be taken at such times as the
Employee and the Chief Executive Officer mutually agree. The Employee shall
be entitled to sick leave and holidays in accordance with the policy of the
Company as to its executive employees.
6. Reimbursement of Business Expenses.
The Company shall reimburse the Employee for all reasonable
out-of-pocket costs incurred or paid by the Employee in connection with, or
related to, the performance of her duties, responsibilities or services under
this Agreement, upon presentation by the Employee of documentation, expense
statements, vouchers, and/or such other supporting information as the Company
may reasonably request.
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<PAGE> 4
7. Automobile Allowance.
The Company shall pay all expenses related to providing Employee
with the exclusive use of an automobile.
8. Non-Solicitation and Non-Competition.
(a) Except as provided in paragraph (e) below, the Employee agrees
that while the Employee is employed pursuant to this Agreement and for any
period as to which the Employee receives severance pay as provided in Section
12 (the "Non-Competition Period"), the Employee will not, except as otherwise
provided herein, engage or participate, directly or indirectly, as principal,
agent, employee, employer, consultant, stockholder, partner or in any other
individual capacity whatsoever, in the conduct or management of, or own any
stock or any other equity investment in or debt of, any business which is
competitive with any business conducted by the Company.
For the purpose of this Agreement, a business shall be considered to
be competitive with the business of the Company if such business is engaged in
providing outsourced marketing services for clients utilizing a range of
complementary marketing resources including field sales, teleservices
capabilities, sponsored wallboard information displays and product sampling
(or any other business in which the Company is engaged at the time of
termination of the Employee's employment).
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<PAGE> 5
(b) Non-Solicitation of Employees. During the Non-Competition
Period, the Employee will not (for her own benefit or for the benefit of any
person or entity other than the Company) solicit, or assist any person or
entity other than the Company to solicit, any officer, director, executive or
employee of the Company to leave his/her employment.
(c) Non-Solicitation of Customers. During the Non-Competition
Period, the Employee will not solicit, or assist any person or entity other
than the Company to solicit, any person or entity that is a client of the
Company or has been a client of the Company during the prior twelve months, to
purchase outsourced marketing services (or any other products or services the
Company provides to a client).
(d) Reasonableness. The Employee acknowledges that (i) the markets
served by the Company are national in scope and are not dependent on the
geographic location of the executive personnel or the businesses by which they
are employed; and (ii) the above covenants are manifestly reasonable on their
face, and the parties expressly agree that such restrictions have been
designed to be reasonable and no greater than is required for the protection
of the Company. The Company and the Employee agree that in the event any of
the restrictions in this Section 9 are found to be unreasonable by a court of
competent jurisdiction, such court shall determine the limits allowable by law
and shall enforce the same.
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<PAGE> 6
(e) Investment. Nothing in this Agreement shall be deemed to
prohibit the Employee from owning equity or debt investments in any
corporation, partnership or other entity which is competitive with the
Company, provided that such investments (i) are passive investments and
constitute five percent (5%) or less of the outstanding equity securities of
such an entity the equity securities of which are traded on a national
securities exchange or other public market, or (ii) are approved by the Board
of Directors or the Compensation Committee.
(f) Change in Control. The restrictions on Employee contained in
this Section 9 shall cease to apply in the event of a Change of Control of the
Company. Upon a Change in Control, Employee shall no longer be restricted
with respect to competition with or solicitation of the Company, the Company's
Employees and the Company's Customers. For purposes of this subparagraph (f),
a "Change in Control" shall mean any of the following events: (i) if the
individuals who, as of the Effective Date, are directors or the nominees to
the directors (the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board; provided, however, that any individual becoming
a director subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or
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<PAGE> 7
other actual or threatened solicitation of proxies or consents by or on behalf
of a person other than the Board; or (ii) if any individual, entity or group
(within the meaning of Sections 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person"), other
than those Persons who of the date hereof beneficially own 20% or greater of
the outstanding shares of the Company's common stock, becomes the beneficial
owner (within the meaning of Rule 13d-3 promulgated under the Exchange Act),
directly or indirectly, of 20% or more of the outstanding shares of the
Company's common stock.
9. Confidential Information.
(a) The Employee shall not (for her own benefit or the benefit of
any person or entity other than the Company) use or disclose any of the
Company's trade secrets or other confidential information; provided, however,
that the term "trade secrets or other confidential information" shall not
include the general knowledge, skills or personal experience of Employee
relating to the provision of outsourced marketing services. The term "trade
secrets or other confidential information" includes, by way of example,
matters of a technical nature, "know-how", computer programs (including
documentation of such programs), research projects, and matters of a business
nature, such as proprietary information about costs, profits, markets, sales,
lists of customers, and other information of a similar nature to the extent
not available to the public, and plans for future development. After
termination of this Agreement, the Employee shall not use or disclose trade
secrets or other confidential information unless such information becomes a
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<PAGE> 8
part of the public domain other than through a breach of this Agreement or is
disclosed to the Employee by a third party who is entitled to receive and
disclose such information.
(b) Upon the effective date of notice of the Employee's or the
Company's election to terminate this Agreement, or at any time upon the
request of the Company, the Employee (or her heirs or personal
representatives) shall deliver to the Company all documents and materials
containing trade secrets and confidential information relating to the
Company's business and all documents, materials and other property belonging
to the Company, which in either case are in the possession or under the
control of the Employee (or her heirs or personal representatives).
(c) All discoveries and works made or conceived by the Employee
during her employment by the Company, jointly or with others, that relate to
the Company's activities shall be owned by the Company. The terms
"discoveries and works" include, by way of example, inventions, computer
programs (including documentation of such programs), technical improvements,
processes, drawings, and works of authorship, including sales materials which
relate to wall media products, sampling/comparing or services. The Employee
shall promptly notify and make full disclosure to, and execute and deliver any
documents requested by, the Company to evidence or better assure title to such
discoveries and works by the Company, assist the Company in obtaining or
maintaining for itself at its own
-8-
<PAGE> 9
expense United States and foreign patents, copyrights, trade secret protection
and other protection of any and all such discoveries and works, and promptly
execute, whether during her employment or thereafter, all applications or
other endorsements necessary or appropriate to maintain patents and other
rights for the Company and to protect its title thereto. Any discoveries and
works which, within six (6) months after the termination of the Employee's
employment, are made, disclosed, reduced to a tangible or written form or
description, or are reduced to practice by the Employee and which pertain to
work performed by the Employee while with the Company shall, as between the
Employee and the Company, be presumed to have been made during the Employee's
employment by the Company.
10. Enforcement.
The Employee agrees that the Company's remedies at law for any
breach or threat of breach by her of the provisions of Section 9 and 10 hereof
will be inadequate, and that the Company shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of Section 9 and 10 hereof
and to enforce specifically the terms and provisions thereof, in addition to
any other remedy to which the Company may be entitled at law or equity.
11. Termination.
(a) The Company may at any time terminate the Employee's employment
under this Agreement for cause, upon written notice by the Company to the
Employee. For the purposes of this Section 12, "cause" for termination shall
mean (i) the conviction of the Employee of, or the entry of a guilty (or nolo
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<PAGE> 10
contendere) plea by the Employee to, any felony; (ii) fraud, misappropriation
or embezzlement by the Employee; or (iii) the Employee's willful failure or
gross negligence in the performance of her assigned duties for the Company; or
(iv) the Employee's material breach of this Agreement. If the Company
terminates the Employee's employment under this Agreement for cause, the
Company shall pay to the Employee only the salary and benefits otherwise
payable to her under this Agreement through the last day of her employment by
the Company. If the Company terminates the Employee's employment under this
Agreement for cause, the Employee shall not be entitled to receive any unpaid
bonus for any period prior to her termination even if the performance
objectives have been attained.
(b) Either party may terminate this Agreement at any time without
cause, upon giving the other party ninety (90) days written notice. In the
event of a termination by either party without cause, the Employee shall be
entitled to receive her salary and benefits in accordance with this Agreement
through the last date of her employment. In addition, the Employee shall be
entitled to receive any bonus due for any period prior to her termination of
employment that has not been paid as of the date of such termination.
Finally, if such termination occurs during the term of this Agreement,
Employee shall receive severance equal to one year's total compensation,
including base salary and applicable bonuses.
(c) The Employee's employment shall terminate immediately upon the
Employee's death or disability. As used in this Agreement, the term
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<PAGE> 11
"disability" shall mean the inability of the Employee, due to a physical or
mental disability, to perform the services contemplated under this Agreement
for a period of one hundred eighty (180) days in any consecutive twelve-month
period. If the Employee's employment is terminated by the Employee's death or
disability, the Company shall pay to the estate of the Employee or to the
Employee, as the case may be, the salary and benefits which would otherwise be
payable to the Employee through the end of the month in which her employment
is terminated because of death or disability.
(d) This Agreement shall terminate at the end of the Employment
Period, unless sooner terminated as provided herein. If the Employee's
employment is terminated at the end of the Employment Period, the Company
shall have no further obligation to the Employee.
12. Miscellaneous.
(a) Notices. All notices required or permitted under this Agreement
shall be in writing and shall be deemed effective upon personal delivery or
upon deposit with the United States Postal Service, by registered or certified
mail, postage prepaid, addressed to the other party at the address shown
above, or at such other address or addresses as either party shall designate
to the other in writing from time to time.
(b) Pronouns. Whenever the context may require, any pronouns used
in this Agreement shall include the corresponding masculine, feminine or
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<PAGE> 12
neuter forms, and the singular forms of nouns and pronouns shall include the
plural, and vice versa.
(c) Entire Agreement. This Agreement constitutes the entire
agreement between the parties and supersedes all prior agreements and
understandings, whether written or oral, relating to the subject matter of
this Agreement.
(d) Amendment. This Agreement may be amended or modified only by a
written instrument executed by both the Company and the Employee.
(e) Governing Law. This Agreement shall be construed, interpreted
and enforced in accordance with the laws of the State of Maryland, without
regard to its conflicts of laws principles.
(f) Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of both parties and their respective successors and
assigns; provided, however, that the obligations of the Employee are personal
and shall not be assigned or delegated by her.
(g) Waiver. No delays or omission by the Company or the Employee in
exercising any right under this Agreement shall operate as a waiver of that or
any other right. A waiver or consent given by the Company or the Employee on
any one occasion shall be effective only in that instance and shall not be
construed as a bar or waiver of any right on any other occasion.
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<PAGE> 13
(h) Captions. The captions appearing in this Agreement are for
convenience of reference only and in no way define, limit or affect the scope
or substance of any section of this Agreement.
(i) Severability. In case any provision of this Agreement shall be
held by a court with jurisdiction over the parties to this Agreement to be
invalid, illegal or otherwise unenforceable, the validity, legality and
enforceability of the remaining provisions shall in no way be affected or
impaired thereby.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first above written, but effective as of the Effective Date.
SNYDER COMMUNICATIONS, INC. EMPLOYEE
By: /s/ Daniel M. Snyder /s/ Michele D. Snyder
------------------------------------- ---------------------
Daniel M. Snyder, Chairman of the Michele D. Snyder
Board of Directors, President and
Chief Executive Officer
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<PAGE> 1
EXHIBIT 10.8
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made this 30th day of
June, 1996, by Snyder Communications, L. P., a Delaware limited partnership
with its principal place of business at 6903 Rockledge Drive, Bethesda,
Maryland 20817 (the "Company") and Steven T. Baldacci residing at 11509
Deborah Dr., Potomac, MD 20854 (the "Employee").
WHEREAS, the Company has employed the Employee since January 1, 1993
pursuant to the terms of an agreement dated January 1, 1993 (the "Prior
Agreement") and the Company and the Employee seek to terminate the Prior
Agreement in its entirety; and
WHEREAS, the parties wish to set forth the terms and conditions upon
which the Company will continue to employ the Employee;
NOW THEREFORE, in consideration of the mutual covenants and promises
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the
parties agree as follows:
1. Term of Employment.
The Company hereby employs the Employee, and the Employee hereby
accepts employment with the Company, upon the terms set forth in this
Agreement. The Employee is an employee "at will" and may be terminated by the
Company at any time with or without cause.
<PAGE> 2
2. Title; Duties.
The Employee shall serve as the Senior Vice President of Business
Development during the term of his employment under this Agreement. The
Employee shall report to the Chief Executive Officer of the Company (the
"Chief Executive Officer"), who shall have the authority to direct, control
and supervise the activities of the Employee. The Employee shall perform such
services consistent with his position as may be assigned to him from time to
time by the Chief Executive Officer.
3. Extent of Services.
The Employee agrees to devote his entire business time and
attention to the performance of his duties under this Agreement. He shall
perform his duties to the best of his ability and shall use his best efforts
to further the interests of the Company. The Employee shall work at the
principal office of the Company located in the Washington, D. C. metropolitan
area.
4. Base Salary.
The Company shall pay the Employee a base annual salary of $150,000.
The salary shall be payable in biweekly installments, minus such deductions as
may be required by law or reasonably requested by the Employee. The Company
will review the Employee's base salary no less often than annually in
conjunction with its regular review of executive salaries.
-2-
<PAGE> 3
5. Bonus.
The Employee shall be eligible for an annual bonus in an amount
determined by the Compensation Committee based on a recommendation from the
Chief Executive Officer. The amount of the bonus shall be based on the
Employee's success in reaching or exceeding certain performance objectives as
established in advance by the Compensation Committee. The performance
objectives for the first year of this Agreement and the bonus which may be
paid are attached as Exhibit A.
6. Stock Options.
On the date on which the initial public offering of shares of the
common stock of Snyder Communications, Inc., a Delaware corporation, is
consummated, the Employee shall be granted a nonqualified stock option for
150,000 shares of the common stock of Snyder Communications, Inc. with an
exercise price equal to the initial public offering price of the common stock
of Snyder Communications, Inc. The stock option agreement shall provide that
the option shall vest at the rate of twenty-five percent (25%) per year on
each anniversary date of the date on which the initial public offering of
Snyder Communications, Inc. is declared effective such that the stock option
shall be fully vested on the fourth anniversary of such initial public
offering, provided that the Employee continues to be employed by the Company.
The stock option shall provide that it may be exercised for ten (10) years
from the date of grant, unless earlier terminated. The option shall may be
exercised within ninety (90) days following the Employee's
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<PAGE> 4
termination of employment to the extent vested. The stock option also shall
provide that the option shall become fully vested and exercisable in the event
of the Employee's death or disability. The Company shall register the common
stock that may be acquired upon exercise of the option on Form S-8 no later
than thirty (30) days following the initial public offering of the common
stock of the Company. The stock option shall be issued under a stock option
plan that complies with the provisions of Rule 16b-3 of the Securities and
Exchange Commission. If for any reason the initial public offering of shares
of the common stock of Snyder Communications, Inc. is not consummated, the
Company shall not be obligated to grant, and the Employee shall not be
entitled to receive, any stock options.
7. Fringe Benefits.
The Employee shall be entitled to all benefits generally available
to employees of the Company. The Company shall pay for one parking space
permit for the Employee.
The Employee shall be entitled to two (2) weeks of vacation during
each year of employment. Such vacation shall be taken at such times as the
Employee and the Chief Executive Officer of the Company. The Employee shall
be entitled to sick leave and holidays in accordance with the policy of the
Company as to its executive employees.
8. Reimbursement of Business Expenses.
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<PAGE> 5
The Company shall reimburse the Employee for all reasonable
out-of-pocket costs incurred or paid by the Employee in connection with, or
related to, the performance of his duties, responsibilities or services under
this Agreement, upon presentation by the Employee of documentation, expense
statements, vouchers, and/or such other supporting information as the Company
may reasonably request.
9. Automobile Allowance.
The Employee shall receive an automobile allowance of $450 per month
which shall be paid with and in addition to the Employee's base salary. The
Employee shall not be required to account for the Employee's use of such
allowance.
10. Non-Solicitation and Non-Competition.
(a) Except as provided in paragraph (e) below, the Employee agrees
that while the Employee is employed pursuant to this Agreement and for a
period of eighteen (18) months following termination of the Employee's
employment by the Company for any reason (the "Non-Competition Period"),
whether by action of the Employee or the Company, the Employee will not,
except as otherwise provided herein, engage or participate, directly or
indirectly, as principal, agent, employee, employer, consultant, stockholder,
partner or in any other individual capacity whatsoever, in the conduct or
management of, or own any stock or any other equity investment in or debt of,
any business which is competitive with any business conducted by the Company.
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<PAGE> 6
For the purpose of this Agreement, a business shall be considered to
be competitive with the business of the Company if such business is engaged in
providing outsourced marketing services for clients utilizing a range of
complementary marketing resources including field sales, teleservices
capabilities, sponsored wallboard information displays and product sampling
(or any other business in which the Company is engaged at the time of
termination of the Employee's employment).
(b) Non-Solicitation of Employees. During the Non-Competition
Period, the Employee will not (for his/her own benefit or for the benefit of
any person or entity other than the Company) solicit, or assist any person or
entity other than the Company to solicit, any officer, director, executive or
employee of the Company to leave his/her employment.
(c) Non-Solicitation of Customers. During the Non-Competition
Period, the Employee will not solicit, or assist any person or entity other
than the Company to solicit, any person or entity that is a client of the
Company or has been a client of the Company during the prior twelve months, to
purchase outsourced marketing services (or any other products or services the
Company provides to a client).
(d) Reasonableness. The Employee acknowledges that (i) the markets
served by the Company are national in scope and are not dependent on the
geographic location of the executive personnel or the businesses by which they
are
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<PAGE> 7
employed; and (ii) the above covenants are manifestly reasonable on their
face, and the parties expressly agree that such restrictions have been
designed to be reasonable and no greater than is required for the protection
of the Company.
(e) Investment. Nothing in this Agreement shall be deemed to
prohibit the Employee from owning equity or debt investments in any
corporation, partnership or other entity which is competitive with the
Company, provided that such investments (i) are passive investments and
constitute five percent (5%) or less of the outstanding equity securities of
such an entity the equity securities of which are traded on a national
securities exchange or other public market, or (ii) are approved by the
Company.
11. Confidential Information.
(a) The Employee shall not (for his own benefit or the benefit of
any person or entity other than the Company) use or disclose any of the
Company's trade secrets or other confidential information. The term "trade
secrets or other confidential information" includes, by way of example,
matters of a technical nature, "know-how", computer programs (including
documentation of such programs), research projects, and matters of a business
nature, such as proprietary information about costs, profits, markets, sales,
lists of customers, and other information of a similar nature to the extent
not available to the public, and plans for future development. After
termination of this Agreement, the Employee shall not use or disclose trade
secrets or other confidential information unless such information
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<PAGE> 8
becomes a part of the public domain other than through a breach of this
Agreement or is disclosed to the Employee by a third party who is entitled to
receive and disclose such information.
(b) Upon the effective date of notice of the Employee's or the
Company's election to terminate this Agreement, or at any time upon the
request of the Company, the Executive (or his heirs or personal
representatives) shall deliver to the Company all documents and materials
containing trade secrets and confidential information relating to the
Company's business and all documents, materials and other property belonging
to the Company, which in either case are in the possession or under the
control of the Employee (or his heirs or personal representatives).
(c) All discoveries and works made or conceived by the Employee
during his employment by the Company, jointly or with others, that relate to
the Company's activities shall be owned by the Company. The terms
"discoveries and works" include, by way of example, inventions, computer
programs (including documentation of such programs), technical improvements,
processes, drawings, and works of authorship, including sales materials which
relate to wall media products, sampling/comparing or services. The Employee
shall promptly notify and make full disclosure to, and execute and deliver any
documents requested by, the Company to evidence or better assure title to such
discoveries and works by the Company, assist the Company in obtaining or
maintaining for itself at its own
-8-
<PAGE> 9
expense United States and foreign patents, copyrights, trade secret protection
and other protection of any and all such discoveries and works, and promptly
execute, whether during his employment or thereafter, all applications or
other endorsements necessary or appropriate to maintain patents and other
rights for the Company and to protect its title thereto. Any discoveries and
works which, within six months after the termination of the Employee's
employment by the Company, are made, disclosed, reduced to a tangible or
written form or description, or are reduced to practice by the Employee and
which pertain to work performed by the Employee while with the Company shall,
as between the Employee and the Company, be presumed to have been made during
the Employee's employment by the Company.
12. Enforcement.
The Employee agrees that the Company's remedies at law for any breach
or threat of breach by him/her of the provisions of Section 10 and 11 hereof
will be inadequate, and that the Company shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of Section 10 and 11 hereof
and to enforce specifically the terms and provisions thereof, in addition to
any other remedy to which the Company may be entitled at law or equity.
13. Arbitration.
(a) Subject to the Company's right to enforce Section 10 and 11
hereof by an injunction issued by a court having jurisdiction (which right
shall prevail over and supersede the provisions of this Section 13), any
dispute relating to this Agreement, including the enforceability of this
Section 13, arising between the
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<PAGE> 10
Employee and the Company or any of its affiliates shall be settled by
arbitration before a single arbitrator in accordance with the commercial
arbitration rules of the American Arbitration Association.
(b) The award of any such arbitrator shall be final. Judgment upon
such award may be entered by the prevailing party in any federal or state
court sitting in the State of Maryland.
(c) The costs of arbitration proceedings, excluding attorneys fees,
shall be paid by the party that does not prevail in the arbitration
proceedings.
14. Miscellaneous.
(a) Notices. All notices required or permitted under this Agreement
shall be in writing and shall be deemed effective upon personal delivery or
upon deposit with the United States Postal Service, by registered or certified
mail, postage prepaid, addressed to the other party at the address shown
above, or at such other address or addresses as either party shall designate
to the other in writing from time to time.
(b) Pronouns. Whenever the context may require, any pronouns used
in this Agreement shall include the corresponding masculine, feminine or
neuter forms, and the singular forms of nouns and pronouns shall include the
plural, and vice versa.
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<PAGE> 11
(c) Entire Agreement. This Agreement constitutes the entire
agreement between the parties and supersedes all prior agreements and
understandings, whether written or oral, relating to the subject matter of
this Agreement, including, but not limited to, all prior agreements and
understandings relating to stock options or stock ownership in Snyder
Marketing Services, Inc. (formerly known as Snyder Communications, Inc.) and
Snyder Communications, Inc.
(d) Amendment. This Agreement may be amended or modified only by a
written instrument executed by both the Company and the Employee.
(e) Governing Law. This Agreement shall be construed, interpreted
and enforced in accordance with the laws of the State of Maryland, without
regard to its conflicts of laws principles.
(f) Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of both parties and their respective successors and
assigns. The Employee agrees that the Company may assign its rights and
obligations under this Agreement to Snyder Communications, Inc., a Delaware
corporation; provided, however, that the obligations of the Employee are
personal and shall not be assigned or delegated by him.
(g) Waiver. No delays or omission by the Company or the Employee in
exercising any right under this Agreement shall operate as a waiver of that or
any other right. A waiver or consent given by the Company or the Employee on
any
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<PAGE> 12
one occasion shall be effective only in that instance and shall not be
construed as a bar or waiver of any right on any other occasion.
(h) Captions. The captions appearing in this Agreement are for
convenience of reference only and in no way define, limit or affect the scope
or substance of any section of this Agreement.
(i) Severability. In case any provision of this Agreement shall be
held by a court with jurisdiction over the parties to this Agreement to be
invalid, illegal or otherwise unenforceable, the validity, legality and
enforceability of the remaining provisions shall in no way be affected or
impaired thereby.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the day and year first above written.
SNYDER COMMUNICATIONS, L. P. EMPLOYEE
By: Snyder Marketing Services,
Inc., Its General Partner
By: /s/ Daniel M. Snyder /s/ Steven T. Baldacci
-------------------------------- ----------------------
Daniel M. Snyder, President Steven T. Baldacci
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<PAGE> 1
EXHIBIT 10.9
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made as of the 1st day of July 1993
between Snyder Communications, L.P., a Delaware limited partnership (the
"Company"), and Susan Lynn Marentis (the "Employee").
RECITAL
The Company desires to employ the Employee, and the Employee desires
to accept such employment by the Company on the terms and conditions set forth
herein.
NOW, THEREFORE, the parties agree as follows:
1. Employment. The Company hereby employs the Employee to serve as
Vice President of Marketing, and the Employee hereby accepts such employment by
the Company, on the terms and conditions set forth in this Agreement.
2. Duties. The Employee will perform such marketing and other duties
and responsibilities commensurate with her position as may from time to time be
assigned to the Employee by the Company.
3. Commitment.
(a) The Employee will devote her entire business time,
attention and energies and her best efforts to the performance of her duties
and responsibilities under this Agreement. During the term of the Employee's
employment, the Employee will not engage in any other business activity,
whether or not such activity is pursued for gain, profit or other pecuniary
advantage; provided, however, that the Employee may invest her personal assets
in businesses which
<PAGE> 2
do not compete with the Company, so long as any participation is solely that of
a passive investor. Notwithstanding the foregoing, the Employee may teach one
class per school semester which meets at night or otherwise outside of
customary business hours.
(b) The Employee represents and warrants to the Company that
she is able to enter into this Agreement and that such ability is not limited
or restricted by any agreements or understandings between the Employee and any
other person. For the purposes of this Agreement, the term "person" means any
natural person, corporation, partnership, unincorporated association or other
entity of any nature.
4. Compensation.
(a) For all services rendered by the Employee to the Company,
the Company will pay to the Employee a base biweekly salary of $2,884.62.
(b) In addition to the base salary provided for in Section
4(a), the Employee shall be entitled to receive the following incentive
payments (the "Incentive Payments") to be paid in accordance with the terms of
Section 4(d):
(i) In the event the Recognized Income (as defined in
Section 4(c) during any Employment Year (as defined in Section 4(e) equals or
exceeds $1,440,000 and is less than $2,165,000, then the Employee will be
entitled to receive an incentive payment of $31,000.
(ii) In the event the Recognized Income during any
Employment Year equals or exceeds $2,165,000 and is less than $2,890,000, then
the Employee will be entitled to receive an additional incentive payment of
$31,000.
2
<PAGE> 3
(iii) In the event the Recognized Income during any
Employment Year equals or exceeds $2,890,000 and is less than $4,500,000, then
the Employee will be entitled to receive an additional incentive payment of
$63,000.
(iv) In the event the Recognized Income during any
Employment Year equals or exceeds $4,500,000, and is less than $5,950,000 then
the Employee will be entitled to receive an additional incentive payment of
$63,000.
(v) In the event the Recognized Income during any
Employment Year equals or exceeds $5,950,000, then the Employee will be
entitled to receive an additional incentive payment of $63,000.
(c) For the purposes of this Agreement, the "Recognized Income"
shall be computed in the manner described in this section 4(c). From time to
time the Employee shall give written notice to Michele Snyder (or such other
person as the Company may designate in writing) that she believes executed
contracts entered into by the Company for wall media and product
sampling/coupons or any other business the Company assigns to the Employee
should be designated as the "Employee's Contracts." The Company shall, within
30 days after receiving such written notice, determine, in its sole discretion,
whether to designate such contracts as "Employee Contracts" and shall notify
the Employee of its decision. Although the determination as to which contracts
are designated the Employee's Contracts shall be made by the Company in its
sole discretion, the Company agrees that it will, in considering whether to so
designate any contract, evaluate whether the contract was entered into
principally as a result of the efforts of the Employee. A contract designated
as an Employee's Contract shall be considered an Employee's
3
<PAGE> 4
Contract only for the term stated in the original executed contract. Any
renewals or extensions thereof shall not be deemed to be an Employee's Contract
unless the Company explicitly provides in writing that such renewed or extended
Contract shall be designated as an Employee's Contract. With respect to every
contract designated an Employee's Contract, the Recognized Income for any
Employment Year equals the amount of revenue to be recognized by the Company in
accordance with the terms of the contract during such Employment Year (less any
commissions and fees paid to advertising agencies or other client
representatives performing similar functions).
(d) The Incentive Payments required by each of the bonus levels
set forth in Sections 4(b)(i), 4(b)(ii), 4(b)(iii) and 4(b)(iv) shall begin to
be paid only if the amounts payable under the Employee's Contracts exceeds the
minimum Recognized Income specified in such section. The Employee shall be
paid pro rata amounts of each Incentive Payment specified in Section 4(b) ten
days after receipt of such amounts by the Company based on the ratio of the
cash received by the Company pursuant to the Employee's Contract in excess of
the minimum amount in the applicable bonus level set forth in Section 4(b) to
the total size of such bonus level.
(e) For the purposes of this Agreement, the term "Employment
Year" means the period of twelve consecutive months commencing on January 1,
1994 through December 31, 1994, and each subsequent period of 12 consecutive
months.
(f) The payment of all compensation to the Employee will be
subject to tax and other required withholdings.
4
<PAGE> 5
5. Benefits. The Employee shall be entitled to all benefits generally
available to employees of the Company. The Company shall in addition provide
two months in temporary lodging expenses for the employee. The Company shall
supply during the employee's first two months in the Bethesda office a Company
car.
6. Expense Reimbursement. Upon receipt of appropriate documentation,
the Company will reimburse the Employee not less frequently than monthly for
her reasonable travel, lodging, entertainment and other ordinary and necessary
business expenses incurred in the course of her duties on behalf of the
Company.
7. Term of Employment. The Employee is an employee at will and may be
terminated at any time with or without cause. If the Employee is terminated
for any reason other than for willfully engaging in misconduct, the Employee
shall be entitled to receive 100% of the Incentive Payments to which she would
have been entitled pursuant to Section 4 if she had continued to be employed by
the Company, which amounts shall be paid to the Employee at the times specified
in Section 4(d).
8. Nonsolicitation and Noncompetition. (a) For a period of 12 months
following termination of her employment for any reason, whether voluntary or
involuntary, with or without cause, the Employee agrees that she will not,
anywhere in the continental United States of America:
(a) Induce or attempt to induce any of the Company's employees
to terminate their employment with the Company; or
5
<PAGE> 6
(b) Use any of the Company's Confidential Information (as
defined in Section 9) for purposes of which the Company is engaged at the time
of termination of employment, alone or for or through any person other than the
Company; or
(c) Notwithstanding the foregoing, in the event that (i) Daniel
Snyder ceases to be Chief Executive Officer of the Company (a "Change of
Control") and (ii) the Company terminates the employment of the Employee within
six months after such Change in Control, then the noncompetition provision
contained in paragraph (d) of this Section 8 shall be of no further force and
effect.
(d) Become employed, directly or indirectly, as an employee,
vendor, contractor, joint-venturer or agent, by or with Whittle Communications,
or MarketSource, or their respective affiliates, subsidiaries or
joint-ventures, or organize, create, direct or manage as a principal any new
venture engaged in the business of marketing or sale of wall media products,
product sampling/couponing or services (or any other products or services
marketed or sold by the Company at the time of termination of employment).
9. Confidentiality.
(a) The Employee recognizes and acknowledges that to enable the
Company to perform its services its clients furnish to the Company Confidential
Information concerning their affairs; that the good will of the Company
depends, among other things, upon its keeping information confidential and that
unauthorized disclosure of the same may irreparably damage the Company; and
that by reason of her duties at the Company, the Employee will come into
possession of the Company's Confidential Information and into possession of
Confidential
6
<PAGE> 7
Information furnished to the Company by its clients including, without
limitation, the Confidential Information of clients to whom the Employee does
not herself market or sell the Company products or services or Confidential
Information which the Employee does not herself use. The Employee agrees that,
except as required in her duties to the Company or as required by law, the
Employee will not while employed by the Company and thereafter directly,
indirectly or otherwise use, disseminate, disclose or communicate to third
parties any precautions necessary to protect the loss or disclosure of any
parties hereto stipulate that, as between them, the foregoing matters are
important, material and confidential and gravely affect the successful conduct
of the business of the Company, and the Company's good will, and that any
breach of the terms of this Section 9 will be a material breach of this
Agreement.
(b) For the purposes of this Agreement, the term "Confidential
Information" means knowledge or information not generally known in the
advertising industry (and with respect to Confidential Information of Company
clients, the industry in which such client conducts its business), including
information conceived, discovered or developed by the Employee, which is made
known to the Employee, over which the Employee exercised or exercises custody
or possession in any form, or to which the Employee has access as a consequence
of or through her employment by the Company, and which information is related
to the Company's or its information relating to research, development,
marketing strategies and pricing information, and clients' needs and desires
with respect to advertising services.
(c) The Employee agrees that the restrictions set forth in
Sections 8 and 9 are reasonable, proper and necessitated by legitimate business
interests of the Company and do not constitute an unlawful or unreasonable
restraint upon the Employee's ability to earn a livelihood.
7
<PAGE> 8
The parties agree that in the event any of the restrictions in Sections 8 and
9, interpreted in accordance with the Agreement as a whole, are found to be
unreasonable by a court of competent jurisdiction, such court shall determine
the limits allowable by law and shall enforce the same.
(d) The Employee acknowledges that it may be impossible to
assess the monetary damages incurred by her violation of Sections 8 and 9 of
this Agreement, and that violation of such provisions will cause irreparable
injury to the Company. Accordingly, the Employee agrees that the Company will
be entitled, in addition to all other rights and remedies which may be
available, to an injunction enjoining and restraining the Employee and any
other involved party from committing a violation of this Agreement. In
addition, the Company will be entitled to such violation of the Agreement by
the Employee and/or others. The Employee also agrees in the event the Company
is successful in whole or in part in any legal action against the Employee
under this Agreement, that the Company will be entitled to payment of all
costs, including reasonable attorney's fees, from the Employee.
(e) In the event the Company enforces this Agreement through a
court order, the parties agree that the restrictions on the Employee following
termination of employment shall remain in effect for a period of 18 consecutive
months from the date of the court order enforcing this Agreement; conduct
constituting a violation of this Agreement prior to the entry of such a court
order, then the restrictions on the Employee following termination of
employment set forth in Section 9 shall remain in effect for a period of 18
consecutive months from the date the Employee ceased such conduct.
8
<PAGE> 9
10. Return of the Company Property. The Employee agrees that all the
Company equipment, documents, records, notes, customer lists, proposals,
programs or other documents concerning or containing Confidential Information
or Work Products, or both, including all copies thereof, and other documents
and materials furnished to the Employee by the Company or relating to the
business of the Company and/or any other person with which the Company does
business and obtained by the Employee in the course of her employment, relating
to the business or prospective business of the Company and/or any person with
which the Company does business are and shall remain the exclusive property of
the Company. The Employee will deliver the same to the Company upon demand
therefor and in any event upon the termination of her employment for any
reason. The Employee agrees that she will not make copies of any of the
foregoing Company property without the written permission of the Company.
11. Assignment of Work Product. All Work Products made or conceived by
Employee, either solely or jointly with other person(s), whether or not during
her hours of employment or with the use of the Company resources or facilities
and whether or not using Confidential Information, during the term of her
employment by the Company, shall be the sole and exclusive property of the
Company. Employee shall execute any and all applications, certificates or
other instruments which the Company shall deem necessary to register or to
protect its rights in such Work Products.
Employee acknowledges that the Work Products constitute "works made for
hire" under the U.S. Copyright Laws, in which the Company shall be the
copyright owner; however, in the event that any Work Products do not constitute
"works made for hire." Employee hereby assigns her entire right and interest in
such Work Products to the Company.
9
<PAGE> 10
For the purposes of this Agreement, "Work Product" means works of
authorship, inventions and ideas, including but not limited to marketing plans,
business proposals, sales materials which relate to the business, of wall media
products, product sampling/couponing or services or any other business in which
the Company is engaged during Employee's employment by the Company.
12. Notices. All notices and other communications required or permitted
to be given by this Agreement shall be in writing and shall be deemed given if
delivered personally, mailed by registered or certified first class mail
(return receipt requested) or sent by telefax numbers specified below, or to
such other persons, addresses or telefax numbers as the party entitled to
notice shall give to the other party from time to time, by like notice.
(i) If to the Employee, to:
14 Random Farms Dr.
Chappaqua, New York 10514
(914) 762-5729
Attention: Susan L. Marentis
Telefax No.: ______________
(ii) If to the Company, to:
Snyder Communications, L.P.
6903 Rockledge Drive
Fifteenth Floor
Bethesda, Maryland 20817
Attention: Daniel M. Snyder
Telefax No.: (301) 493-5165
13. Interpretation. The headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.
10
<PAGE> 11
14. Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
15. Assignment. This Agreement shall not be assigned, by operation of
law or otherwise, by either party without the prior written consent of the
other party.
16. Survival. The obligations of the Employee set forth in Sections 8,
9, 10 and 11 shall survive the termination of the Employee's employment for any
reason.
17. Waiver. The waiver by either party of a breach of any term or
provision of this Agreement will not be construed as a waiver of any subsequent
breach.
18. Miscellaneous. This Agreement (i) constitutes the entire agreement
and supersedes all other prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof; (ii) is
not intended to and shall not confer upon any other person, other than the
parties hereto, any rights or remedies with respect to the subject matter
hereof; and (iii) shall be governed in all respects by the laws of the State of
Maryland without regard to its laws and regulations relating to conflicts of
laws.
11
<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have executed or caused to be
executed this Agreement as of the date first above written.
Snyder Communications, L.P.
By: Snyder Communications, Inc.
Its General Partner
By: /s/ Susan Lynn Marentis By: /s/ Daniel M. Snyder
------------------------- ---------------------------
Susan Lynn Marentis Daniel M. Snyder, President & CEO
12
<PAGE> 1
EXHIBIT 10.10
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made this 9th day of August,
1996, by Snyder Communications, L. P., a Delaware limited partnership with its
principal place of business at 6903 Rockledge Drive, Bethesda, Maryland 20817
(the "Partnership"); Snyder Communications, Inc., a Delaware corporation,
having the same principal place of business and having been formed to succeed
to the businesses of the Partnership by becoming a holding company of the
Partnership (the "Corporation"); and Alfred G. Wise residing at 4250 Garrison
Street, N.W., Apt. 3, Washington, DC 20016 (the "Employee"). The Partnership
and the Corporation shall be referred to herein as the "Employer."
WHEREAS, the Employer has employed the Employee since June 1989 [part of
text in original deleted by hand]; and
WHEREAS, the parties wish to set forth the terms and conditions upon
which the Employer will continue to employ the Employee;
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the parties
agree as follows:
<PAGE> 2
1. Term of Employment.
The Employer hereby employs the Employee, and the Employee hereby
accepts employment with the Employer, upon the terms set forth in this
Agreement. The Employee is an employee "at will" and may be terminated by the
Employer at any time with or without cause.
2. Title; Duties.
The Employee shall serve as a Senior Vice President of Operations -
Marketing Services during the term of his employment under this Agreement. The
Employee shall report to the Chief Operating Officer of the Employer (the
"Chief Operating Officer"), who shall have the authority to direct, control and
supervise the activities of the Employee. The Employee shall perform such
services consistent with his position as may be assigned to him from time to
time by the Chief Operating Officer.
3. Extent of Services.
The Employee agrees to devote his entire business time and attention
to the performance of his duties under this Agreement. He shall perform his
duties to the best of his ability and shall use his best efforts to further the
interests of the Employer. The Employee shall work at the principal office of
the Employer located in the Washington, D. C. metropolitan area.
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<PAGE> 3
4. Base Salary.
The Employer shall pay the Employee a base annual salary of
$100,000.00. The salary shall be payable in biweekly installments of
$3,846.15, minus such deductions as may be required by law or reasonably
requested by the Employee. The Employer will review the Employee's base salary
no less often than annually in conjunction with its regular review of executive
salaries.
5. Bonus.
The Employee shall be eligible for an annual bonus in each calendar
year based on the Employee's success in reaching or exceeding certain
performance objectives as set forth in, or established in connection with, the
annual business plan or budget by the Chief Executive Officer or the
Compensation Committee of the Board of Directors of the Corporation.
6. Stock Options.
On the date on which the initial public offering of shares of the
common stock of Snyder Communications, Inc., a Delaware corporation, is
consummated, the Employee shall be granted two nonqualified stock options for
the purchase of 50,000 shares and 150,000 shares, respectively, for an
aggregate of 200,000 shares of the common stock of Snyder Communications, Inc.
each with an exercise price equal to the initial public offering price of the
common stock of Snyder Communications, Inc. The stock option agreement for the
award of 50,000 shares shall provide that the option is fully vested from the
date of grant, shall become
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<PAGE> 4
exercisable six (6) months from the date of grant, and shall provide that the
option shall remain exercisable through the fourth anniversary of the date of
grant whether or not the Employee's employment with the Employer continues.
Accordingly, such option shall remain exercisable through such fourth
anniversary even if Employee voluntarily terminates his employment with the
Employer or is terminated by the Employer with or without cause. Following
such fourth anniversary, if the Employee continues to be employed by the
Employer, such stock option shall remain exercisable through, and shall
terminate on, the earlier of ninety (90) days following the Employee's
termination of employment or the tenth anniversary of the date of grant.
The stock option agreement for the grant of 150,000 shares shall
provide that the option shall vest at the rate of twenty-five percent (25%) per
year on each anniversary date of the date on which the initial public offering
of Snyder Communications, Inc. is declared effective such that the stock option
shall be fully vested on the fourth anniversary of such initial public
offering, provided that the Employee continues to be employed by the Employer.
The Corporation shall register the common stock that may be acquired
upon exercise of the options on Form S-8 no later than thirty (30) days
following the initial public offering of the common stock of the Corporation.
The stock options shall be issued under a stock option plan that complies with
the provisions of Rule 16b-3 of the Securities and Exchange Commission. The
stock option agreements may contain such other and further terms as are not
inconsistent with
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<PAGE> 5
this Agreement or the stock option plan. Such stock options shall be granted
by means of the Employee's signing stock option agreements pursuant to the
stock option plan. If Employee fails to execute such stock option agreements
prior to the consummation of the initial public offering of Snyder
Communications, Inc., no such options shall be granted. In addition, if for
any reason the initial public offering of shares of the common stock of Snyder
Communications, Inc. is not consummated, the Employer shall not be obligated to
grant, and the Employee shall not be entitled to receive, any stock options.
7. Fringe Benefits.
The Employee shall be entitled to all benefits generally available
to employees of the Employer. The Employer shall pay for one parking space
permit for the Employee.
The Employee shall be entitled to three (3) weeks of vacation during
each year of employment. Such vacation shall be taken at such times as the
Employee and the Chief Operating Officer agree upon [part of text in original
deleted by hand]. The Employee shall be entitled to sick leave and holidays in
accordance with the policy of the Employer as to its executive employees.
8. Reimbursement of Business Expenses.
The Employer shall reimburse the Employee for all reasonable
out-of-pocket costs incurred or paid by the Employee in connection with, or
related to, the performance of his duties, responsibilities or services under
this
-5-
<PAGE> 6
Agreement, upon presentation by the Employee of documentation, expense
statements, vouchers, and/or such other supporting information as the Employer
may reasonably request
9. Automobile Allowance.
The Employee shall receive an automobile allowance of $450 per month
which shall be paid with and in addition to the Employee's base salary. The
Employee shall not be required to account for the Employee's use of such
allowance.
10. Non-Solicitation and Non-Competition.
(a) Except as provided in paragraph (e) below, the Employee
agrees that while the Employee is employed pursuant to this Agreement and for
a period of eighteen (18) months following termination of the Employee's
employment by the Employer for any reason (the "Non-Competition Period"),
whether by action of the Employee or the Employer, the Employee will not,
except as otherwise provided herein, engage or participate, directly or
indirectly, as principal, agent, employee, employer, consultant, stockholder,
partner or in any other individual capacity whatsoever, in the conduct or
management of, or own any stock or any other equity investment in or debt of,
any business which is competitive with any business conducted by the Employer.
For the purpose of this Agreement, a business shall be considered to
be competitive with the business of the Employer if such business is engaged in
-6-
<PAGE> 7
providing outsourced marketing services for clients utilizing a range of
complementary marketing resources including field sales, teleservices
capabilities, sponsored wallboard information displays and product sampling (or
any other business in which the Employer is engaged at the time of termination
of the Employee's employment).
(b) Non-Solicitation of Employees. During the
Non-Competition Period, the Employee will not (for his/her own benefit or for
the benefit of any person or entity other than the Employer) solicit, or assist
any person or entity other than the Employer to solicit, any officer, director,
executive or employee of the Employer to leave his/her employment.
(c) Non-Solicitation of Customers. During the
Non-Competition Period, the Employee will not solicit, or assist any person or
entity other than the Employer to solicit, any person or entity that is a
client of the Employer or has been a client of the Employer during the prior
twelve months, to purchase outsourced marketing services (or any other products
or services the Employer provides to a client).
(d) Reasonableness. The Employee acknowledges that (i) the
markets served by the Employer are national in scope and are not dependent on
the geographic location of the executive personnel or the businesses by which
they are employed; and (ii) the above covenants are manifestly reasonable on
their face,
-7-
<PAGE> 8
and the parties expressly agree that such restrictions have been designed to be
reasonable and no greater than is required for the protection of the Employer.
(e) Investment. Nothing in this Agreement shall be deemed to
prohibit the Employee from owning equity or debt investments in any
corporation, partnership or other entity which is competitive with the
Employer, provided that such investments (i) are passive investments and
constitute five percent (5%) or less of the outstanding equity securities of
such an entity the equity securities of which are traded on a national
securities exchange or other public market, or (ii) are approved by the
Employer.
11. Confidential Information.
(a) The Employee shall not (for his own benefit or the
benefit of any person or entity other than the Employer) use or disclose any of
the Employer's trade secrets or other confidential information. The term
"trade secrets or other confidential information" includes, by way of example,
matters of a technical nature, "know-how", computer programs (including
documentation of such programs), research projects, and matters of a business
nature, such as proprietary information about costs, profits, markets, sales,
lists of customers, and other information of a similar nature to the extent not
available to the public, and plans for future development. After termination
of this Agreement, the Employee shall not use or disclose trade secrets or
other confidential information unless such information becomes a part of the
public domain other than through a breach of this Agreement
-8-
<PAGE> 9
or is disclosed to the Employee by a third party who is entitled to receive and
disclose such information.
(b) Upon the effective date of notice of the Employee's or
the Employer's election to terminate this Agreement, or at any time upon the
request of the Employer, the Executive (or his heirs or personal
representatives) shall deliver to the Employer all documents and materials
containing trade secrets and confidential information relating to the
Employer's business and all documents, materials and other property belonging
to the Employer, which in either case are in the possession or under the
control of the Employee (or his heirs or personal representatives).
(c) All discoveries and works made or conceived by the
Employee during his employment by the Employer, jointly or with others, that
relate to the Employer's activities shall be owned by the Employer. The terms
"discoveries and works" include, by way of example, inventions, computer
programs (including documentation of such programs), technical improvements,
processes, drawings, and works of authorship, including sales materials which
relate to wall media products, sampling/comparing or services. The Employee
shall promptly notify and make full disclosure to, and execute and deliver any
documents requested by, the Employer to evidence or better assure title to such
discoveries and works by the Employer, assist the Employer in obtaining or
maintaining for itself at its own expense United States and foreign patents,
copyrights, trade secret protection and
-9-
<PAGE> 10
other protection of any and all such discoveries and works, and promptly
execute, whether during his employment or thereafter, all applications or other
endorsements necessary or appropriate to maintain patents and other rights for
the Employer and to protect its title thereto. Any discoveries and works
which, within six months after the termination of the Employee's employment by
the Employer, are made, disclosed, reduced to a tangible or written form or
description, or are reduced to practice by the Employee and which pertain to
work performed by the Employee while with the Employer shall, as between the
Employee and the Employer, be presumed to have been made during the Employee's
employment by the Employer.
12. Enforcement.
The Employee agrees that the Employer's remedies at law for any
breach or threat of breach by him/her of the provisions of Section 10 and 11
hereof will be inadequate, and that the Employer shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of Section 10
and 11 hereof and to enforce specifically the terms and provisions thereof, in
addition to any other remedy to which the Employer may be entitled at law or
equity.
-10-
<PAGE> 11
13. Miscellaneous.
(a) Notices. All notices required or permitted under this
Agreement shall be in writing and shall be deemed effective upon personal
delivery or upon deposit with the United States Postal Service, by registered
or certified mail, postage prepaid, addressed to the other party at the address
shown above, or at such other address or addresses as either party shall
designate to the other in writing from time to time.
(b) Pronouns. Whenever the context may require, any pronouns
used in this Agreement shall include the corresponding masculine, feminine or
neuter forms, and the singular forms of nouns and pronouns shall include the
plural, and vice versa.
(c) Entire Agreement. This Agreement constitutes the entire
agreement between the parties and supersedes all prior agreements and
understandings, whether written or oral, relating to the subject matter of this
Agreement, including, but not limited to, all prior agreements and
understandings relating to stock options or stock ownership in Snyder Marketing
Services, Inc. (formerly known as Snyder Communications, Inc.) and Snyder
Communications, Inc.
(d) Amendment. This Agreement may be amended or modified
only by a written instrument executed by both the Employer and the Employee.
-11-
<PAGE> 12
(e) Governing Law. This Agreement shall be construed,
interpreted and enforced in accordance with the laws of the State of Maryland,
without regard to its conflicts of laws principles.
(f) Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of both parties and their respective successors
and assigns. The Employee agrees that the Employer may assign its rights and
obligations under this Agreement to Snyder Communications, Inc., a Delaware
corporation; provided, however, that the obligations of the Employee are
personal and shall not be assigned or delegated by him.
(g) Waiver. No delays or omission by the Employer or the
Employee in exercising any right under this Agreement shall operate as a waiver
of that or any other right. A waiver or consent given by the Employer or the
Employee on any one occasion shall be effective only in that instance and shall
not be construed as a bar or waiver of any right on any other occasion.
(h) Captions. The captions appearing in this Agreement are
for convenience of reference only and in no way define, limit or affect the
scope or substance of any section of this Agreement.
(i) Severability. In case any provision of this Agreement
shall be held by a court with jurisdiction over the parties to this Agreement
to be invalid,
-12-
<PAGE> 13
illegal or otherwise unenforceable, the validity, legality and enforceability
of the remaining provisions shall in no way be affected or impaired thereby.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
SNYDER COMMUNICATIONS, L. P. EMPLOYEE
By: Snyder Marketing Services,
Inc., Its General Partner
By: /s/ Michele D. Snyder /s/ Alfred G. Wise
------------------------------- ---------------------------
Michele D. Snyder, Alfred G. Wise
Vice Chairman and
Chief Operating Officer
SNYDER COMMUNICATIONS, INC.
By: /s/ Michele D. Snyder
--------------------------------
Michele D. Snyder, Vice Chairman
and Chief Operating Officer
-13-
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
(and all references to our firm) included in or made a part of this registration
statement.
ARTHUR ANDERSEN LLP
Washington, DC
August 15, 1996
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