<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 18, 1998
REGISTRATION NO. 333-50929
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
PRE-EFFECTIVE AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
SNYDER COMMUNICATIONS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 52-1983617
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
TWO DEMOCRACY CENTER
6903 ROCKLEDGE DRIVE, 15TH FLOOR
BETHESDA, MARYLAND 20817
(301) 468-1010
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
A. CLAYTON PERFALL
CHIEF FINANCIAL OFFICER
TWO DEMOCRACY CENTER
6903 ROCKLEDGE DRIVE, 15TH FLOOR
BETHESDA, MARYLAND 20817
(301) 468-1010
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPY TO:
THOMAS H. MCCORMICK, ESQ. MICHAEL W. BLAIR, ESQ.
SHAW PITTMAN POTTS & TROWBRIDGE DEBEVOISE & PLIMPTON
2300 N STREET, NW 875 THIRD AVENUE
WASHINGTON, DC 20037 NEW YORK, NEW YORK 10022
(202) 663-8000 (212) 909-6000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box: [_]
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, other than securities offered only in connection with dividend or
interest reinvestment plans, 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: [X]
----------------
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.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
SNYDER COMMUNICATIONS, INC.
EXPLANATORY NOTE
This registration statement contains forms of prospectuses relating to (1) a
primary and secondary offering of common stock of the Registrant in a United
States underwritten offering (the "U.S. Prospectus") and (2) a primary and
secondary offering of common stock in an international underwritten offering
(the "International Prospectus" and together with the U.S. Prospectus, the
"Prospectuses").
The Prospectuses will be identical in all respects except for the front
cover page, the section entitled "Underwriting" and the outside back cover
page. The form of the U.S. Prospectus is included herein and the form of the
alternate pages of the International Prospectus are included herein on pages
X-1 through X-8.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY 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 MAY 18, 1998
PROSPECTUS
7,750,000 SHARES
[SNYDER COMMUNICATIONS, INC. LOGO]
COMMON STOCK
-----------
Of the 7,750,000 shares of Common Stock of Snyder Communications, Inc. (the
"Company") offered hereby, 579,294 are being offered by the Company and
7,170,706 are being offered by certain stockholders of the Company (the
"Selling Stockholders"). Certain of the Selling Stockholders (the "Over-
Allotment Selling Stockholders") have granted to the Underwriters options to
purchase up to 1,162,500 additional shares to cover over-allotments, if any.
The Company will not receive any of the proceeds from the sale of the shares of
Common Stock by the Selling Stockholders.
Of the 7,750,000 shares of Common Stock offered hereby, 6,200,000 are being
offered for sale initially in the United States and Canada by the U.S.
Underwriters and 1,550,000 shares are being offered for sale initially in a
concurrent offering outside the United States and Canada by the International
Managers. The initial public offering price and the underwriting discount per
share will be identical for both Offerings. See "Underwriting."
The Common Stock is listed on the New York Stock Exchange under the symbol
"SNC." On May 15, 1998, the last sale price of the Common Stock as reported on
the New York Stock Exchange was $44.00. See "Price Range of Common Stock."
SEE "RISK FACTORS" BEGINNING ON PAGE 7 OF THIS PROSPECTUS FOR A DISCUSSION OF
CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN
THE 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>
PROCEEDS TO
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC DISCOUNT(1) COMPANY(2) STOCKHOLDERS
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share....................... $ $ $ $
- --------------------------------------------------------------------------------
Total(3)........................ $ $ $ $
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) The Company 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 payable by the Company, estimated at $ .
(3) The Over-Allotment Selling Stockholders have granted the U.S. Underwriters
and International Managers options to purchase up to an additional 930,000
shares and 232,500 shares of Common Stock, respectively, exercisable within
30 days after the date hereof, solely to cover over-allotments, if any. If
such options are exercised in full, the total Price to Public, Underwriting
Discount 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, subject to the
approval of certain legal matters by counsel for the Underwriters and 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 , 1998.
-----------
MERRILL LYNCH & CO. GOLDMAN, SACHS & CO.
BEAR, STEARNS & CO. INC. NATIONSBANC MONTGOMERY SECURITIES LLC
-----------
The date of this Prospectus is , 1998.
<PAGE>
[INSIDE FRONT COVER]
Snyder Communications, Inc.
Complete targeted marketing solutions
Snyder provides a wide range of integrated targeted marketing solutions to
Fortune 500 companies across a wide variety of industries.
[_] Pharmaceutical
[_] Healthcare
[_] Financial Services
[_] Consumer Packaged Goods
[_] Telecommunications
[_] Gas and Electric Utilities
[_] Technology
[Images of: logo stating "SNC Listed NYSE The New York Stock Exchange"; client
logos; picture of a one dollar bill, an arrow pointing upwards and a dollar sign
displayed on a tag connected to a line ascending upwards from left to right in a
step-like fashion; photograph of satellite dishes; contents of a sample pack;
globe; capsules of medication; photograph of high-tension wire towers.]
Certain persons participating in the Offerings may engage in transactions
that stabilize, maintain or otherwise affect the price of the Common Stock.
Such transactions may include stabilizing, the purchase of Common Stock to
cover syndicate short positions and the imposition of penalty bids. For a
description of these activities, see "Underwriting."
MERRILL LYNCH SPECIALISTS INC. ("MLSI"), AN AFFILIATE OF MERRILL LYNCH,
PIERCE, FENNER & SMITH INCORPORATED, ONE OF THE UNDERWRITERS, ACTS AS A
eSPECIALIST IN THE COMMON STOCK OF THE COMPANY PURSUANT TO THE RULES OF THE NEW
YORK STOCK EXCHANGE, INC. UNDER AN EXEMPTION GRANTED BY THE SECURITIES AND
EXCHANGE COMMISSION ON JULY 31, 1995, MLSI WILL BE PERMITTED TO CARRY ON ITS
ACTIVITIES AS A SPECIALIST IN THE COMMON STOCK FOR THE ENTIRE PERIOD OF THE
DISTRIBUTION OF THE COMMON STOCK. THE EXEMPTION IS SUBJECT TO THE SATISFACTION
BY MLSI OF THE CONDITIONS SPECIFIED IN THE EXEMPTION.
<PAGE>
[Gatefold]
Snyder Communications, Inc.
The company identifies high-value consumer segments; designs and implements
targeted sales and marketing programs; and provides customer care and retention
services.
Offering a broad array of services
[_] Proprietary databases of targeted consumers and businesses
[_] Database management services
[_] Pharmaceutical detailing
[_] Targeted product sampling programs and publications
[_] Strategic planning and consulting
[_] Marketing program consultation
[_] Field sales representatives
[_] WallBoard(R) information displays
[_] Creative services
[_] Direct mail, fulfillment capabilities
[_] Interactive services
[Images of: globe; photo collages of WallBoards(R); distributor presenting
sample pack to new mother; photographs of medical detailing representatives with
physicians, working parents and healthcare professionals; representative
contents of sample packs; pamphlets included in sample packs; database operators
with computers.]
<PAGE>
SUMMARY
The following description 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 or incorporated by reference in this
Prospectus. Unless otherwise indicated, all information in this Prospectus (a)
assumes no exercise of the Underwriters' over-allotment options and (b) assumes
that each of the entities acquired by the Company through a pooling of
interests transaction was a wholly-owned subsidiary of the Company. As used
herein, the "Company" means Snyder Communications, Inc., including the
acquisitions and its other directly and indirectly owned subsidiaries.
THE COMPANY
The Company is a rapidly growing international provider of complete marketing
solutions primarily to Fortune 500 size companies. The Company integrates its
various capabilities, including its proprietary distribution channels,
producing value-added marketing solutions. The Company identifies high value
market segments; designs and implements marketing programs to reach them;
initiates and closes sales on behalf of its clients; and provides customer
care, retention and loyalty marketing services. The Company's resources include
proprietary databases of targeted consumers and small businesses, database
management services, pharmaceutical detailing services, pharmaceutical
consulting, medical educational communications, proprietary product sampling
programs and publications, sponsored information displays in proprietary
locations, marketing program consultants, creative services, field sales and
marketing representatives, customer service representatives, interactive
services and direct mail and fulfillment capabilities. By expanding the range
of its capabilities, its specialized distribution channels and its geographic
presence, the Company seeks to provide a single source for its clients'
outsourced sales and marketing needs.
The Company's consolidated revenues, restated to include revenues from all
acquisitions accounted for as pooling of interests transactions for all
reported periods, increased from $334.1 million in 1995 to $428.9 million in
1996, and to $520.0 million in 1997, and from $118.6 million in the first three
months of 1997 to $146.9 million in the first three months of 1998. Through
1997, substantially all of the Company's operations (excluding operations of
1998 acquisitions) were located in the United States and the United Kingdom. In
1998, the Company established operations in continental Europe principally
through two acquisitions in France.
The Company's clients primarily are global companies with large annual sales
and marketing expenditures facing significant competitive pressures to retain
or expand market share. The clients operate in various industries, including
pharmaceuticals, consumer packaged goods, financial services,
telecommunications and gas and electric utilities. The Company's ten largest
current clients based on 1997 revenues, listed alphabetically, are Astra
Pharmaceuticals, Bell Atlantic, Bristol Myers Squibb, IBM, McDonald's, Novartis
Consumer Health, Pharmacia & Upjohn, Procter & Gamble, Volkswagen of America
and Wyeth-Ayerst. Several of these clients use the services of more than one of
the Company's service groups.
Since completing its initial public offering in September 1996, the Company
has significantly expanded the range of marketing and sales services it is able
to offer its clients. This expansion has been accomplished both by building and
initiating new programs or service offerings and by acquiring businesses that
offer complementary services. The service offerings of acquired companies have
been combined with those previously offered by the Company to create four
service groups: Medical Services; Media and Sampling Services; Communications
Services; and Data Delivery Services. Utilizing the service offerings of its
four service groups, the Company's goal is to provide complete marketing
solutions for its clients. The Medical Services group specializes in
establishing and monitoring marketing plans as well as face-to-face interaction
with physicians or other healthcare providers to market clients' pharmaceutical
products. The programs offered by the Media and Sampling Services group are
designed to stimulate and create brand awareness for the clients' products. The
Communications Services group's offerings are designed to establish brand
awareness for clients' products and
1
<PAGE>
to provide targeted customer acquisition and customer care, retention and
loyalty marketing. The Data Delivery Services group provides services that
enable the Company's clients to target the right customers for their products
and services.
During 1997 and 1998, the Company made strategic acquisitions to broaden the
range of services it provides to clients, to expand the geographic reach of its
services and to enhance its clients' access to strategic consumer groups. To
complement and supplement its existing management depth, the Company retained
key members of management of each of the acquired companies.
GROWTH STRATEGY
The Company believes that it is well positioned to capitalize on increased
demand for marketing services due to the outsourcing of marketing and sales
functions, changes in the regulatory environment and increased demand for
marketing services in Europe by providing its clients with integrated global
marketing solutions and the capability to reach strategic consumer groups,
including aging baby-boomers, multicultural populations and young consumers. In
order to capitalize on this increased demand and its existing resources and to
continue its growth, the Company plans to broaden the range of services offered
to existing and future clients, expand its global presence, increase the scale
of its services and pursue strategic acquisitions.
Leverage Client Base and Broaden Range of Services. The Company intends to
continue its growth by providing a broader range of services to its existing
clients. Through its recent acquisitions and internal growth, the Company has
significantly increased the types of services and the range of targeted
marketing channels that the Company can offer its clients. The Company is
actively leveraging its demonstrated success on behalf of existing clients by
offering such clients additional Company services. The Company also believes it
can more successfully attract new clients as a result of its increased
capabilities.
Expand Global Presence. The Company intends to continue expanding the
geographic markets in which it provides services. Many of the Company's
existing and potential clients are large companies that market products
globally. Developing an expanded geographic market reach will enable the
Company to offer single-source solutions for its clients' global outsourced
sales and marketing needs. In furtherance of this strategy, the Company's
recent acquisitions have given the Company marketing capabilities in
continental Europe and have significantly enhanced the Company's presence in
the U.K. The Company expects that its further geographic expansion will be
accomplished by performing services for existing clients in new geographic
markets and by acquiring companies that perform services in new geographic
markets similar to those already provided by the Company.
Increase Scale of Services. The Company intends to continue to increase the
scale of services it can offer to clients. Many of the Company's current and
prospective clients, particularly those served by the Communications Services
and Medical Services groups, have an increasing need for global, comprehensive,
large-scale marketing solutions. By expanding its capacity to perform large
projects, the Company intends to enhance its ability to provide single-source
marketing solutions to its clients.
Pursue Strategic Acquisitions. The Company intends to continue to supplement
its growth through strategic acquisitions. The Company expects to pursue
acquisition opportunities that give the Company additional proprietary channels
of distribution to important demographic segments, offer complementary services
or replicate the Company's existing marketing capabilities in unserved
geographic markets. The Company believes that the fragmentation in the
marketing services industry provides opportunities for the Company to
selectively pursue complementary domestic and international acquisitions.
Although there are no definitive agreements, understandings or arrangements at
this time, the Company is currently and expects to continue evaluating
acquisition opportunities.
The Company's corporate headquarters are located at Two Democracy Center,
6903 Rockledge Drive, Bethesda, Maryland, 20817, and its telephone number is
(301) 468-1010.
2
<PAGE>
THE OFFERINGS
The offering of 6,200,000 shares of the Company's Common Stock, par value
$.001 per share, in the United States and Canada (the "U.S. Offering") and the
offering of 1,550,000 shares of the Common Stock outside the United States and
Canada (the "International Offering") are collectively referred to herein as
the "Offerings."
<TABLE>
<S> <C>
Common Stock Offered:
By the Company............................. 579,294 shares
By the Selling Stockholders................ 7,170,706 shares
Total.................................... 7,750,000 shares
==========
Common Stock to be Outstanding After the Of-
ferings(1).................................. 61,993,696 shares
Use of Proceeds.............................. The net proceeds to be
received by the Company from
the Offerings will be used
to fund working capital,
capital expenditures,
potential acquisitions and
general corporate purposes.
The Company will not receive
any proceeds from the sale
of shares of Common Stock by
the Selling Stockholders.
See "Use of Proceeds."
New York Stock Exchange Symbol............... SNC
</TABLE>
- --------
(1) Includes 71,608 shares issuable upon exercise of outstanding options and
expected to be sold in the Offerings. Does not include (i) 9,669,472 shares
of Common Stock reserved for issuance upon exercise of outstanding options
and (ii) 2,049,658 shares of Common Stock available for future issuance
under the Company's 1996 Stock Incentive Plan. See "Shares Eligible for
Future Sale."
3
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
The following table sets forth summary consolidated financial data of the
Company as of and for each of the years in the five year period ended December
31, 1997, and for the three months ended March 31, 1997 and March 31, 1998,
after giving effect to all transactions accounted for as poolings of interests
(the "Mergers"). The table gives effect to all of the Mergers, as if they had
occurred at the beginning of the earliest period presented. The table also sets
forth unaudited pro forma income statement data for each of the years in the
five year period ended December 31, 1997, and for the three months ended March
31, 1997 and March 31, 1998, which give pro forma effect to federal, state and
city income taxes as if all operations of the Company were subject to such
taxes for all periods presented. The income statement data for each of the
years in the three year period ended December 31, 1997 and the balance sheet
data as of December 31, 1996 and December 31, 1997 are derived from the audited
consolidated financial statements of the Company. All other income statement
and balance sheet data presented are derived from unaudited consolidated
financial statements of the Company and in the opinion of the management of the
Company include all adjustments, consisting of normal and recurring
adjustments, which are necessary to present fairly the combined results of
operations and financial position of the Company for each period presented. The
following summary consolidated selected financial data should be read in
conjunction with the consolidated financial statements and notes thereto
included elsewhere in this Prospectus.
Table on following page
4
<PAGE>
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
FOR THE YEARS ENDED DECEMBER 31, ENDED MARCH 31,
---------------------------------------------------- ----------------------
1993 1994 1995 1996 1997 1997 1998
----------- ----------- -------- -------- -------- ---------- ----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT
DATA:(1)
Revenues................ $149,348 $235,356 $334,090 $428,897 $520,040 $ 118,583 $ 146,853
Operating Expenses:
Cost of services....... 101,428 151,644 215,059 297,942 363,006 82,906 97,493
Selling, general and
administrative
expenses.............. 32,825 56,598 70,758 89,041 107,427 24,285 29,369
Compensation to
stockholders.......... 2,389 5,276 9,439 7,363 13,623 1,427 --
ESOP expense........... 30 2,203 2,172 6,553 5,411 1,245 --
Acquisition and related
costs(2).............. -- -- -- -- 39,431 16,181 33,953
-------- -------- -------- -------- -------- ---------- ----------
Income (loss) from
operations............. 12,676 19,635 36,662 27,998 (8,858) (7,461) (13,962)
Interest (expense)
income, net............ (615) (1,513) (1,654) (2,400) (391) (249) 738
-------- -------- -------- -------- -------- ---------- ----------
Income (loss) from
continuing operations
before income taxes.... 12,061 18,122 35,008 25,598 (9,249) (7,710) (13,224)
Income tax (provision)
benefit................ (4,663) (6,730) (9,892) (5,994) (6,246) (2,288) 2,346
-------- -------- -------- -------- -------- ---------- ----------
Income (loss) from
continuing operations.. 7,398 11,392 25,116 19,604 (15,495) (9,998) (10,878)
Loss from discontinued
operations(3).......... -- -- -- (1,498) (1,507) (558) --
-------- -------- -------- -------- -------- ---------- ----------
Income (loss) before
extraordinary item..... 7,398 11,392 25,116 18,106 (17,002) (10,556) (10,878)
Extraordinary item, less
applicable income taxes
of $806(4) ............ -- -- -- (1,215) -- -- --
-------- -------- -------- -------- -------- ---------- ----------
Net income (loss)..... $ 7,398 $ 11,392 $ 25,116 $ 16,891 $(17,002) $ (10,556) $ (10,878)
======== ======== ======== ======== ======== ========== ==========
Historical net income
(loss) per share:
Basic net income (loss)
per share
Income (loss) from
continuing
operations........... $ 0.15 $ 0.23 $ 0.48 $ 0.37 $ (0.27) $ (0.18) $ (0.18)
======== ======== ======== ======== ======== ========== ==========
Net income (loss) per
share................ $ 0.15 $ 0.23 $ 0.48 $ 0.32 $ (0.30) $ (0.19) $ (0.18)
======== ======== ======== ======== ======== ========== ==========
Diluted net income
(loss) per share
Income (loss) from
continuing
operations........... $ 0.15 $ 0.23 $ 0.48 $ 0.37 $ (0.27) $ (0.18) $ (0.18)
======== ======== ======== ======== ======== ========== ==========
Net income (loss) per
share................ $ 0.15 $ 0.23 $ 0.48 $ 0.32 $ (0.30) $ (0.19) $ (0.18)
======== ======== ======== ======== ======== ========== ==========
Unaudited:
Pro forma net income
(loss) from continuing
operations(5)......... $ 7,390 $ 10,846 $ 21,220 $ 14,291 $(18,900) $ (10,556) $ (12,432)
======== ======== ======== ======== ======== ========== ==========
Pro forma diluted net
income (loss) per
share from continuing
operations............ $ 0.15 $ 0.22 $ 0.41 $ 0.27 $ (0.33) $ (0.19) $ (0.21)
======== ======== ======== ======== ======== ========== ==========
Pro forma net income
(loss)(5)............. $ 7,390 $ 10,846 $ 21,220 $ 12,181 $(19,800) $ (10,863) $ (12,432)
======== ======== ======== ======== ======== ========== ==========
Pro forma diluted net
income (loss) per
share(6).............. $ 0.15 $ 0.22 $ 0.41 $ 0.23 $ (0.35) $ (0.20) $ (0.21)
======== ======== ======== ======== ======== ========== ==========
Pro forma net income
from continuing
operations, excluding
non-recurring
items(5)(7)........... $ 8,872 $ 15,322 $ 28,256 $ 22,061 $ 28,838 $ 6,519 $ 12,852
======== ======== ======== ======== ======== ========== ==========
Pro forma diluted net
income per share from
continuing operations,
excluding non-
recurring
items(6)(7)........... $ 0.19 $ 0.31 $ 0.54 $ 0.42 $ 0.50 $ 0.11 $ 0.21
======== ======== ======== ======== ======== ========== ==========
Shares used in
computing per share
amounts:(6)
Basic................. 47,783 49,324 52,030 52,487 56,624 55,413 60,135
Diluted............... 47,783 49,324 52,121 53,041 58,056 56,820 62,166
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------------------------------------- AS OF MARCH 31,
1993 1994 1995 1996 1997 1998
----------- ----------- -------- -------- -------- ---------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:(1)
Total assets........... $117,300 $157,269 $209,913 $295,990 $410,702 $524,679
Long-term debt(8)...... 14,708 30,758 36,826 36,707 10,439 9,410
Redeemable ESOP
stock(9).............. -- -- 269 2,452 5,278 6,891
Total equity........... 20,569 20,398 33,170 70,275 144,582 241,846
</TABLE>
Footnotes on following page
5
<PAGE>
(1) Prior to the consummation on September 24, 1996 of the reorganization (the
"Reorganization") in which the Company acquired all of the limited
partnership interests in Snyder Communications, L.P. (the "Partnership") and
all of the issued and outstanding stock of the corporate general partner,
Snyder Marketing Services, Inc. ("SMS"), the operations of the Company were
conducted through the Partnership. The Partnership was owned 63.85% by SMS
and 36.15% by the limited partners. The Reorganization resulted in the
stockholders of SMS exchanging 100% of their SMS stock for the Company's
Common Stock simultaneously with the limited partners exchanging their
limited partner interests in the Partnership for the Company's Common Stock.
After the Reorganization, the Company owned 100% of the stock of SMS and,
directly and indirectly through its ownership of SMS, 100% of the interest of
the Partnership. Because of the continuity of ownership, the Reorganization
was accounted for by combining the assets, liabilities, and operations of
SMS, the Partnership and the Company at their historical cost basis.
Accordingly, for the periods prior to the Reorganization, the income
statement and balance sheet data include a combination of the accounts of SMS
and the Partnership. Prior to its acquisition by the Company, American List
Corporation ("American List") had a fiscal year that ended in February. The
accompanying balance sheet data as of December 31, 1993, 1994, 1995 and 1996
reflect the combination of American List's accounts as of the following
February month-end while the income statement data for each of the four years
ended December 31, 1996 reflect the combination of American List's operations
for the twelve months that end in the February following the respective
income statement date.
(2) The $39.4 million of acquisition and related costs includes $34.1 million
in costs directly related to the consummation of the Company's acquisitions
accounted for as poolings of interests. These costs include primarily
investment banking fees, other professional service fees, certain United
Kingdom excise and transfer taxes, as well as a non-cash charge of $9.1
million related to the accelerated vesting of options held by Brann
employees. The remaining $5.3 million consists of the write-off of deferred
license fees and the accrual of a liability expected to resolve outstanding
litigation. Both the write-off of the deferred fees and the accrual of the
liability were recorded due to changes in fact which resulted from the
Company's acquisitions.
The Company recorded $34.0 million in acquisition and related costs during
the first quarter of 1998 primarily related to the Mergers consummated
during the first quarter of 1998. These costs consist of investment banking
fees, other professional service fees, the expense associated with stock
appreciation rights, tax payments and other contractual payments. In
addition, this amount includes approximately $4.7 million for the costs of
consolidating existing Company facilities and acquired operations, including
the external costs and liabilities to close redundant Company facilities and
severance and relocation costs related to the Company's employees.
(3) Represents the net losses of Bob Woolf Associates, Inc., which was spun off
to stockholders of record of one of the Company's 1998 acquisitions on
October 31, 1997. These losses represent $0.03 and $0.03 per diluted share
for 1996 and 1997, respectively.
(4) An extraordinary item of $1.2 million ($0.02 per diluted share) was
recorded in conjunction with the early redemption of subordinated debentures
which were due to related parties. The extraordinary item is net of a $0.8
million tax benefit and consists of prepayment penalties and the write-off of
unamortized discount and debt issuance costs.
(5) Prior to the Reorganization, the Company's principal operations were not
subject to federal or state corporate income taxes. Similarly, prior to their
respective acquisitions, certain of the U.S.-based acquirees were not subject
to federal (except for one Massachusetts incorporated acquiree) or state
income taxes. In addition, the Company's international subsidiaries are
subject to different statutory income tax rates. Pro forma data are
calculated as if the Company had been taxed similarly to a C corporation for
all periods presented.
(6) The shares used in computing the per share amounts assume that the
Reorganization and the Mergers had occurred at the beginning of each of the
periods presented and reflect the issuance of additional shares as a result
of the Company's public offerings, the impact of stock options, and certain
share repurchases.
(7) Represents income from continuing operations adjusted to reflect (a) a
provision for income taxes as if the Company had been taxed similarly to a C
corporation for all periods presented, (b) the elimination of compensation to
stockholders for amounts paid to managers of acquired companies prior to
their merger with the Company which was in excess of amounts they will
receive pursuant to employment contracts, (c) the elimination of the impact
of nonrecurring acquisition and related costs, and (d) the elimination of
ESOP related expenses incurred by the ESOP of an acquired company which will
not be incurred in the future.
(8) Includes mandatorily redeemable preferred stock of $4.6 million, $4.6
million and $8.5 million at December 31, 1994, 1995 and 1996, respectively.
The preferred stock did not carry voting rights unless dividends were in
arrears, which did not occur, and was not convertible into common stock.
Accordingly, the preferred stock was classified as long-term debt. This
preferred stock was redeemed during 1997.
(9) Represents the balance necessary to satisfy the repurchase obligation
associated with the Company's shares held by the ESOP of an acquired company
which have been allocated to former employees of the acquired company whose
employment had terminated prior to its merger with the Company.
6
<PAGE>
RISK FACTORS
The following risk factors should be considered carefully in addition to the
other information in this prospectus before purchasing the shares of Common
Stock offered hereby. Certain statements in this Prospectus and documents
incorporated herein by reference are forward-looking and are identified by the
use of forward-looking words or phrases such as "intended," "will be
positioned," "expects," is or are "expected," "anticipates," and
"anticipated." These forward-looking statements are based on the Company's
current expectations. To the extent any of the information contained or
incorporated by reference in this Prospectus constitutes a "forward-looking
statement" as defined in Section 27A(i)(1) of the Securities Act, the risk
factors set forth below are cautionary statements identifying important
factors that could cause actual results to differ materially from those in the
forward-looking statement.
RELIANCE ON SIGNIFICANT CLIENTS
The Company's ten largest current clients, based on 1997 revenues, listed
alphabetically, are Astra Pharmaceuticals, Bell Atlantic, Bristol Myers
Squibb, IBM, McDonald's, Novartis Consumer Health, Pharmacia & Upjohn, Procter
& Gamble, Volkswagen of America and Wyeth-Ayerst. These clients accounted for
27.6% of the Company's 1997 revenues. In January 1998, the Company elected not
to renew its then-existing contract with AT&T, which provided 12.1% of the
Company's 1997 revenues, and began providing similar services to another
national telecommunications client under a three-year contract. The Company
provides services to many of its most significant clients pursuant to multi-
year contracts. As is typical in the industry, the Company's multi-year
contracts are cancelable on specified notice periods by the client. As a
result, there can be no assurance that the Company's most significant clients
will continue to do business with the Company over the long term. If any of
the Company's significant clients elect not to renew their contracts, it could
have a material adverse effect on the Company's results of operations.
GROWTH THROUGH ACQUISITIONS
The Company plans to continue to supplement its growth through acquisitions
of complementary businesses. Since the beginning of 1998, the Company has
completed several strategic acquisitions. In most instances, the Company has
issued shares of Common Stock as consideration. The Company is currently
evaluating several additional acquisitions and expects to continue to consider
growth opportunities through additional acquisitions that may involve payments
in cash or the issuance of additional shares of Common Stock, although there
are no definitive arrangements or agreements to do so at this time. There can
be no assurance that the Company will have sufficient capital resources to
continue to pursue this aspect of its growth strategy or that its Common Stock
will remain an attractive acquisition currency. Additionally, there can be no
assurance that the Company will successfully identify, complete or integrate
additional acquisitions or that any acquired companies, including its recent
acquisitions, will perform as expected or will contribute significant revenues
or profits to the Company. The Company may also, in the future, face increased
competition for acquisition opportunities, which may inhibit the Company's
ability to consummate suitable acquisitions on terms favorable to the Company.
INTEGRATION OF ACQUISITIONS
Since its initial public offering in September 1996, the Company has
completed numerous acquisitions of complementary businesses. The services
provided by the acquired companies, although complementary, differ in varying
degrees from the services offered by the Company prior to making the
acquisitions. There can be no assurance that the anticipated benefits with
respect to the clients and targeted markets of these acquisitions will be
achieved. Prior to its initial public offering, the Company had limited
experience in acquiring businesses. Thus, the Company has not yet demonstrated
the long-term ability to successfully integrate and manage a large number of
acquired businesses. There can be no assurance that the Company will be able
to manage successfully the new service areas of the Company, the employees of
such service areas or the client bases supported by such service areas. The
inability of the Company to integrate and manage acquired businesses
successfully could have a material adverse effect upon the Company.
7
<PAGE>
MANAGEMENT OF GROWTH
The Company has experienced rapid growth over the past several years.
Continued growth depends to a significant degree 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 maintain the high quality of
the services it provides to customers and to increase its penetration with
existing customers, recruit, motivate and retain qualified personnel, and
train existing sales representatives or recruit new sales representatives on
an economic basis to sell different categories of services or products. The
Company's continued growth will also require the implementation of enhanced
operational and financial systems and additional management 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.
RISK ASSOCIATED WITH INTERNATIONAL OPERATIONS AND EXPANSION
In March 1997, the Company made its first international acquisition. The
Company has since acquired a number of companies in the United Kingdom and
continental Europe. A key component of the Company's growth strategy is
continued international expansion. There can be no assurance that the Company
will be able to successfully acquire companies, integrate acquired companies
or successfully introduce new services into these markets in order to expand
its international operations. In addition, there are certain risks inherent in
conducting international business, including exposure to currency
fluctuations, difficulties in complying with a variety of foreign laws,
unexpected changes in regulatory requirements, difficulties in staffing and
managing foreign operations, and potentially adverse tax consequences. There
can be no assurance that one or more of such factors will not have a material
adverse effect on the Company's international operations and consequently on
the Company's business, results of operations or financial condition.
ADVERSE EFFECT OF FOREIGN EXCHANGE RATES ON RESULTS OF OPERATIONS
As a result of a number of acquisitions in the United Kingdom and
continental Europe, approximately 32.6% of the Company's revenues in 1997 were
from outside of the United States, the majority of which were denominated in
British pounds and French francs. The U.S. dollar value of the Company's
revenues varies with currency exchange rate fluctuations. Significant
increases in the value of the U.S. dollar relative to the British pound or
French franc could have a material adverse effect on the Company's results of
operations. The Company continually evaluates its exposure to exchange rate
risk but does not currently hedge such risk.
DEPENDENCE ON TREND TOWARD OUTSOURCING
The Company's business and growth depend in large part on the trend toward
outsourcing of marketing services. 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 generally, or
a trend in the pharmaceutical or telecommunications industries not to use, or
to reduce the use of, outsourced marketing services, such as those provided by
the Company, would have a material adverse effect on the Company.
COMPETITIVE AND FRAGMENTED INDUSTRY
The industry in which the Company competes is highly competitive and
fragmented. The Company competes with providers of other forms of sales and
marketing media, such as direct mail, television, radio and other media. The
Company also competes with the internal marketing capabilities of clients and
prospective clients. 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 certain 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
8
<PAGE>
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 providers.
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. In
addition, many of the Company's initial sources for names in its databases
could also be available to a competitor wishing to develop a data delivery
business.
DEPENDENCE ON LABOR FORCE
Many aspects of the Company's business are very labor intensive and
experience high personnel turnover. Many of the Company's employees receive
hourly wages plus commissions, if earned. 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
typically require specially trained persons, such as those employees and
independent contractors in the pharmaceutical detailing business and 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. The labor
markets for quality personnel are competitive, and there can be no assurance
that the Company will be able to continue to hire, train and retain a
sufficient labor force of qualified persons.
RELIANCE ON TECHNOLOGY; RISK OF BUSINESS INTERRUPTION
The Company has invested significantly in sophisticated and specialized
computer and telecommunications 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 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 Daniel M. Snyder, Chairman of the Board of Directors and Chief
Executive Officer. 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 or of 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. Courts, however, are at times reluctant to enforce such
non-competition agreements. In addition, many of the Company's executive
officers and other key personnel either are participants in the Company's 1996
Stock Incentive Plan or hold a significant amount of Common Stock (as is the
case with Mr. Snyder). The Company believes that these interests increase the
incentives such key employees have to remain with the Company. In order to
support its growth, the Company will be required to effectively recruit, 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.
GOVERNMENT REGULATION
Several of the industries in which the Company's clients operate are subject
to varying degrees of governmental regulation, particularly the
pharmaceutical, healthcare and telecommunications industries.
9
<PAGE>
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.
In connection with the handling and distribution of samples of
pharmaceutical products, the Medical Services group is subject to regulation
by its clients, the Prescription Drug Marketing Act of 1987 and other
applicable federal, state and local laws and regulations in the United States
and certain regulations of the United Kingdom, France and the European Union.
Pharmaceutical manufacturers and the health care industry in general are
subject to significant U.S. federal and state, U.K., French and European Union
regulation. In particular, regulations affecting the pricing or marketing of
pharmaceuticals could make it uneconomic or infeasible for pharmaceutical
companies to market their products through medical marketing detailers. Other
changes in the domestic and international regulation of the pharmaceutical
industry could also have a material adverse effect on the Medical Services
group.
The Company's physician education services are also subject to a variety of
federal and state regulations relating to both the education of medical
professionals and sales of pharmaceuticals. Any changes in such regulations or
their application could have a material adverse effect on the Medical Services
group.
From time to time state and federal legislation is proposed with regard to
the use of proprietary databases of consumer and health groups. The
uncertainty of the regulatory environment is increased by the fact that the
Company generates and receives data from many sources. As a result, there are
many ways both domestic and foreign governments might attempt to regulate the
Company's use of its data. Any such restriction could have a material adverse
affect on the Data Delivery Services group.
The Communications Services group is subject to a large number of federal
and state regulations. The Federal Communications Commission (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 Protection Act of 1994
broadly authorizes the Federal Trade Commission to issue regulations
prohibiting misrepresentation in telephone sales.
One of the significant regulations of the FCC applicable to long distance
carriers, including the Company's telecommunication clients, prohibits the
unauthorized switching of subscribers' long distance carriers. A fine of up to
$100,000 may be imposed by the FCC for each instance of unauthorized
switching. 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. Third-party
verification generally is not required for switches obtained in person, such
as those obtained by members of the Company's Communications Services field
sales force. 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 that employees may
in some instances engage in unauthorized activities, including unauthorized
switching. To the Company's knowledge, no formal FCC complaint has been
brought against the Company or any of its clients as a result of the Company's
services. If any complaints were brought, the Company's clients might assert
that such complaints constituted a breach of its agreement with the Company
and, if material, seek to terminate the contract. Legislation currently
pending in Congress would increase penalties against carriers that engage in
unauthorized switching of subscribers' long distance carriers and would impose
additional procedural safeguards to ensure against such unauthorized switches.
If such proposed legislation is enacted, compliance with the additional
procedural safeguards could result in increased costs associated with the
Communications Services group's marketing efforts on behalf of its
telecommunications clients.
The services offered by the Company outside the United States may be subject
to certain regulations of the United Kingdom, France and the European Union,
including regulations relating to inbound and outbound teleservices,
advertising content, promotions of financial products, activities requiring
customers to send money with mail orders and the maintenance and use of
customer data held on databases. In addition, the Company
10
<PAGE>
operates a small U.K. printing facility which is subject to certain
environmental regulations regarding the storage and disposal of certain
chemicals involved in the printing process. The Company believes that its
operations outside the United States are substantially in compliance with
applicable regulations. There can be no assurance, however, that additional
U.K., French or European Union legislation, or changes in the regulatory
implementation, would not limit the Company's international activities or
significantly increase the cost of regulatory compliance.
POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
The Company could experience quarterly variations in revenues and operating
income as a result of many factors, including the timing of clients' marketing
campaigns, the implementation of new products or services, 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 revenue shortfall below such forecast in any
quarter would be likely to affect adversely the Company's operating results
for that quarter.
SHARES ELIGIBLE FOR FUTURE SALE AND REGISTRATION RIGHTS
The Company has outstanding an aggregate of 61,342,794 shares of Common
Stock. Of the outstanding shares, 24,715,061 shares are freely transferable
without restriction or further registration under the Securities Act,
7,099,098 shares owned by the Selling Stockholders may be offered for resale
pursuant hereto and 29,528,635 shares are "restricted securities" within the
meaning of Rule 144 under the Securities Act and will not be able to be sold
other than pursuant to an effective registration statement under the
Securities Act, pursuant to an exemption from the registration requirements of
the Securities Act, or subject to the volume limitations of Rule 144 under the
Securities Act. In addition, shares of Common Stock to be issued upon the
exercise of certain options will be freely transferable upon such exercise.
On September 24, 1997, D.M.S. Endowment, LLC, a limited liability company of
which Daniel M. Snyder and Michele D. Snyder are the beneficial owners, F.D.
Sutton, LLC, a limited liability company of which Fred Drasner is the
beneficial owner, USN College Marketing, L.P., a limited partnership of which
Mortimer B. Zuckerman, the MBZ Trust of 1996 and Fred Drasner are the
beneficial owners, and A.O. Roberts, LLC, a limited liability company of which
Dr. A.O. Roberts is the beneficial owner, each entered into a forward purchase
contract (the "Contracts") with the Snyder STRYPES Trust, a Delaware business
trust. Pursuant to the Contracts, such stockholders are obligated to deliver
to the Snyder STRYPES Trust an aggregate of up to 5,175,000 shares of Common
Stock owned by such stockholders, or cash equal to the value thereof, three
years from the date of the Contracts. Prior to any such delivery, such
stockholders will retain voting and dividend rights with respect to the shares
that are the subject of the Contracts.
Pursuant to agreements, Mr. 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, 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.
Future sales of substantial amounts of Common Stock in the public market
could adversely affect the market price of the Common Stock and the ability of
the Company to raise additional capital or engage in business combinations
through sales of additional shares of Common Stock. See "Shares Eligible for
Future Sale."
CONTROL BY PRINCIPAL STOCKHOLDERS
Daniel M. Snyder, the Chairman of the Board of Directors and Chief Executive
Officer of the Company, and Michele D. Snyder, Vice Chairman, President, Chief
Operating Officer and a director of the Company, beneficially own
approximately 15.7% and 5.4%, respectively, of the outstanding shares of
Common Stock. As a result, Mr. Snyder individually, and he and Ms. Snyder if
they act in concert, have the ability to exercise substantial influence over
the Company's business by virtue of their voting power with respect to the
election of
11
<PAGE>
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.
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 stockholder nominations of
candidates for the Board of Directors of the Company (the "Board") and for new
business to be conducted at any meeting of the stockholders. In addition, the
Certificate of Incorporation allows the Board to issue up to 5,000,000 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 Corporation Law,
which could have the effect of discouraging, delaying or preventing a change
of control of the Company.
VOLATILITY OF STOCK PRICE AND ABSENCE OF DIVIDENDS
The public trading market for Common Stock was first established after the
Company's initial public offering in September 1996. Between the date of the
Company's initial public offering and May 15, 1998, the market price of Common
Stock has traded at a high of $54.19 per share and a low of $17.75 per share.
Future announcements concerning the Company or its competitors, including
quarterly results, innovations, new product introductions, governmental
regulation, litigation or changes in earnings estimates published by analysts
may cause the market price of Common Stock to fluctuate significantly. The
stock market has from time to time experienced extreme price and volume
fluctuations that have particularly affected the market price for many
emerging growth companies that often have been unrelated to the operating
performance or prospects of these companies. These fluctuations, as well as
general economic, political and market conditions, such as recessions or
international currency fluctuations, may adversely affect the market price of
Common Stock. There can be no assurance that the market price of Common Stock
will not decline below its present market price. The market price of Common
Stock is based upon anticipated future earnings growth. Furthermore, the
Company is reliant on a core group of key customers. Any loss of any of these
customers could be detrimental to the market price of Common Stock. See "--
Reliance on Significant Clients." The future market price of Common Stock will
depend on delivering results anticipated by public investors. Any failure to
meet specific expectations may have an adverse effect on the market price of
Common Stock.
YEAR 2000
The Company is undergoing an assessment of its current systems and equipment
and is in the process of making the modifications necessary to address the
issues presented by the Year 2000 issue. The Company expects to incur no more
than $3.0 million in capital expenditures in 1998 with respect to system
upgrades which are designed in part to address specific Year 2000
requirements. The Company does not expect expenditures incurred after 1998 for
Year 2000 compliance to be material. To the extent that additional
acquisitions are consummated, the Company will need to evaluate how the Year
2000 issue will impact its future acquirees. If such expenditures exceed
expectations or if a future acquiree requires substantial expenditures to
address its Year 2000 issues, the Company's financial results could be
adversely affected. There can be no assurance that the Company's systems or
the systems of other companies on which the Company's systems rely will be
timely installed or converted. Although the impact on the Company caused by
the failure of the Company's significant customers or vendors to achieve Year
2000 compliance in a timely or effective manner is uncertain, the Company's
business and results of operations could be materially affected by such
failure.
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<PAGE>
USE OF PROCEEDS
The net proceeds to be received by the Company of $ million will be used
to fund working capital, capital expenditures, potential acquisitions and
general corporate purposes. See "Business--Growth Strategy." The Company is
currently considering and expects to continue to consider additional
acquisitions that may involve payments in cash or the issuance of additional
shares of Common Stock, although there are no definitive agreements,
understandings or arrangements to do so at this time. The Company will not
receive any proceeds from the sale of shares of Common Stock by the Selling
Stockholders.
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 that the Board considers appropriate.
PRICE RANGE OF COMMON STOCK
The Common Stock is traded in the U.S. on the New York Stock Exchange (the
"NYSE") under the symbol "SNC." At March 31, 1998, there were approximately
330 holders of record of Common Stock, and the Company believes there were
approximately 8,100 beneficial owners of the Common Stock. The following table
sets forth, for the fiscal periods indicated, the range of high and low sale
prices per share of Common Stock as reported on the NYSE.
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
1996
Third Quarter (From September 24, 1996).......................... $21.75 $17.75
Fourth Quarter................................................... 29.38 18.63
1997
First Quarter.................................................... $33.13 $23.50
Second Quarter................................................... 28.00 19.50
Third Quarter.................................................... 31.06 24.00
Fourth Quarter................................................... 37.25 28.00
1998
First Quarter.................................................... $47.25 $32.56
Second Quarter (Through May 15, 1998)............................ 54.19 39.75
</TABLE>
On May 15, 1998, the closing sale price of the Common Stock on the NYSE was
$44.00 per share.
13
<PAGE>
CAPITALIZATION
The following table sets forth the combined capitalization of the Company,
based on the Consolidated Financial Statements of the Company found elsewhere
in this Prospectus, (i) as of March 31, 1998 and (ii) as of March 31, 1998 as
adjusted to reflect (a) the issuance of and the use of the net proceeds from
the sale of 579,294 shares of Common Stock by the Company (after deduction of
underwriting discounts and estimated offering expenses) and (b) the proceeds
from the exercise of 71,608 options by certain Selling Stockholders. See "Use
of Proceeds." This table should be read in conjunction with the Company's
supplemental consolidated financial statements and notes thereto appearing
elsewhere in the Prospectus.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1998
---------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Cash and equivalents.................................. $ 62,517 $ 86,098
======== ========
Current maturities of long-term debt.................. $ 3,527 $ 3,527
======== ========
Long-term debt and obligations under capital leases... $ 9,410 $ 9,410
Redeemable ESOP stock(1).............................. 6,891 6,891
Equity(2):
Preferred stock, $.001 par value per share, 5,000
shares authorized, none issued and outstanding,
actual and as adjusted -- --
Common stock, $.001 par value per share, 120,000
shares authorized, actual and as adjusted; 62,266
shares issued and 61,170 outstanding, actual; and
62,917 shares issued and 61,821 outstanding, as
adjusted(3)........................................ 62 63
Additional paid-in capital.......................... 266,293 289,873
Retained deficit.................................... (18,209) (18,209)
Treasury stock, at cost............................. (7,575) (7,575)
Accumulated other comprehensive income(4)........... 1,275 1,275
-------- --------
Total equity...................................... 241,846 265,427
-------- --------
Total capitalization.............................. $258,147 $281,728
======== ========
</TABLE>
- --------
(1) Represents the balance necessary to satisfy the repurchase obligations
associated with the Company's shares held by the ESOP of an acquired
company which have been allocated to former employees of the acquired
company whose employment had terminated prior to its merger with the
Company.
(2) Includes 71,608 shares issuable upon exercise of outstanding options and
expected to be sold in the Offerings. Does not include (i) 9,669,472
shares of Common Stock issuable upon exercise of outstanding options and
(ii) 2,049,658 shares of Common Stock reserved for future issuance under
the Company's 1996 Stock Incentive Plan. See "Shares Eligible for Future
Sale."
(3) Does not reflect the amendment on May 6, 1998 of the Company's Certificate
of Incorporation that increased the authorized number of shares of Common
Stock to 400,000,000.
(4) The Company adopted Statement of Financial Accounting Standards No. 130
"Reporting Comprehensive Income" during the first quarter of 1998.
Included within accumulated other comprehensive income are the cumulative
amounts for foreign currency translation adjustments and unrealized gains
and losses on marketable securities.
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BUSINESS
GENERAL
The Company is a rapidly growing international provider of complete
marketing solutions primarily to Fortune 500 size companies. The Company
integrates its various capabilities, including its proprietary distribution
channels, producing value-added marketing solutions. The Company identifies
high value market segments; designs and implements marketing programs to reach
them; initiates and closes sales on behalf of its clients; and provides
customer care, retention and loyalty marketing services. The Company's
resources include proprietary databases of targeted consumers and small
businesses, database management services, pharmaceutical detailing services,
pharmaceutical consulting, medical educational communications, proprietary
product sampling programs and publications, sponsored information displays in
proprietary locations, marketing program consultants, creative services, field
sales and marketing representatives, customer service representatives,
interactive services and direct mail and fulfillment capabilities. By
expanding the range of its capabilities, its specialized distribution channels
and its geographic presence, the Company seeks to provide a single source for
its clients' outsourced sales and marketing needs.
The Company's consolidated revenues, restated to include revenues from all
acquisitions accounted for as pooling of interests transactions for all
reported periods, increased from $334.1 million in 1995 to $428.9 million in
1996, and to $520.0 million in 1997, and from $118.6 million in the first
three months of 1997 to $146.9 million in the first three months of 1998.
Through 1997 substantially all of the Company's operations (excluding
operations of 1998 acquisitions) were located in the United States and the
United Kingdom. In 1998, the Company established operations in continental
Europe principally through two acquisitions in France.
The Company's clients primarily are global companies with large annual sales
and marketing expenditures facing significant competitive pressures to retain
or expand market share. The clients operate in various industries, including
pharmaceuticals, consumer packaged goods, financial services,
telecommunications and gas and electric utilities. The Company's ten largest
current clients based on 1997 revenues, listed alphabetically, are Astra
Pharmaceuticals, Bell Atlantic, Bristol Myers Squibb, IBM, McDonald's,
Novartis Consumer Health, Pharmacia & Upjohn, Procter & Gamble, Volkswagen of
America and Wyeth-Ayerst. Several of these clients use the services of more
than one of the Company's service groups.
Since completing its initial public offering in September 1996, the Company
has significantly expanded the range of marketing and sales services it is
able to offer its clients. This expansion has been accomplished both by
building and initiating new programs or service offerings and by acquiring
businesses that offer complementary services. The service offerings of
acquired companies have been combined with those previously offered by the
Company to create four service groups: Medical Services; Media and Sampling
Services; Communications Services; and Data Delivery Services. Utilizing the
service offerings of its four service groups, the Company's goal is to provide
complete marketing solutions for its clients. The Medical Services group
specializes in establishing and monitoring marketing plans as well as face-to-
face interaction with physicians or other healthcare providers to market
clients' pharmaceutical products. The programs offered by the Media and
Sampling Services group are designed to stimulate and create brand awareness
for the clients' products. The Communications Services group's offerings are
designed to establish brand awareness for clients' products and to provide
targeted customer acquisition and customer care, retention and loyalty
marketing. The Data Delivery Services group provides services that enable the
Company's clients to target the right customers for their products and
services.
During 1997 and 1998, the Company made strategic acquisitions to broaden the
range of services it provides to clients, to expand the geographic reach of
its services and to enhance its clients' access to strategic consumer groups.
To complement and supplement its existing management depth, the Company
retained key members of management of each of the acquired companies.
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<PAGE>
MARKETING OPPORTUNITIES
The Company believes that it is well positioned to capitalize on increased
demand for marketing services due to the outsourcing of marketing and sales
functions, changes in the regulatory environment and increased demand for
marketing services in Europe.
Outsourcing. In recent years, many businesses have integrated outsourcers
into their overall marketing strategies. The Company believes that, as more
companies adopt capital saving strategies and focus on their core
competencies, the demand for outsourced marketing services will increase. The
Company believes that it is well positioned to capitalize on the continued
momentum of the corporate trend toward outsourcing. The Company also perceives
that businesses value service providers who can provide them with a wide range
of services, thereby lowering transaction costs. The Company believes that its
recent acquisitions increase its competitive position by, among other things,
expanding the scope and scale of services the Company can offer its clients.
Deregulation--Changes in the Regulatory Environment. The Company believes
that there is a trend towards deregulation of industry in the United States
and the United Kingdom and continental Europe. A typical result of
deregulation is increased competition as companies seek to acquire market
share. Deregulation often finds companies with less developed internal sales
capabilities than are needed in the changing competitive environment. For
example, telecommunications companies now actively compete for market share
and market new services in markets newly opened by deregulation in that
industry. Similarly, the more recent deregulation of the U.S. gas and electric
utilities industries presents opportunities for companies in those industries
to market their products directly to consumers who, historically, have had no
choices among gas and electric service providers. The Company believes that,
with its ability to provide integrated targeted marketing solutions, it is
well positioned to service the needs of firms that, as a result of
deregulation, need rapidly implemented, sophisticated marketing capability.
The Company believes that it is not only well positioned to take advantage of
the current deregulatory climate, but that it is also capable of responding to
and benefiting from changing regulatory conditions. For example, the Company
believes that the increased pace at which pharmaceuticals are approved will
increase the number of products available to physicians and thereby increase
the demand for the Company's pharmaceutical detailing services.
Increased Demand for Direct Marketing Services in the United Kingdom and
Continental Europe. Direct marketing activities are not as prevalent in the
United Kingdom and continental Europe as they are in the United States. The
Company believes that there will be strong growth in the demand for direct
marketing services in both the United Kingdom and continental Europe during
the next few years. The Company believes that its existing United Kingdom
infrastructure and capabilities and its expansion into continental Europe in
the first quarter of 1998 along with the Company's direct marketing experience
will enable the Company to capitalize on this demand.
MEETING CLIENT NEEDS
The Company helps its clients respond to the demands of a global marketplace
by providing its clients with integrated global marketing solutions and the
capability to reach strategic consumer groups, including aging baby-boomers,
multicultural populations and young consumers.
Globalization. The vast majority of the Company's significant clients are
companies that have international operations. The Company believes that these
and other multinational companies will seek to do business with companies that
can provide sales and marketing solutions that span national boundaries. The
Company believes that its 1997 acquisitions significantly increased its
ability to provide sales and marketing solutions to multinational clients.
With the acquisitions in the first quarter of 1998 of two Medical Services
businesses located in France, the Company expanded its operations into
continental Europe.
Access to Strategic Consumer Groups. Through internal expansion and
strategic acquisitions, the Company has obtained the capability to give its
clients targeted access to consumer groups that the Company believes will be
increasingly important to its clients, including:
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<PAGE>
. Aging Baby Boomers. According to population projections prepared by the
U.S. Bureau of the Census which are based in part on 1990 census data
("Census Bureau Population Projection"), in 1997 there were
approximately 71.1 million people who were 50 years or older in the
United States. The 50 years and older age group is the fastest growing
age group in the United States, and it is projected to grow by
approximately 36% through the year 2010 according to the Census Bureau
Population Projection. The Company's Media and Sampling services
programs are designed to give clients targeted access to this affluent
population sector. As the baby boomers age and experience increased
health problems, the Medical Services group provides pharmaceutical
manufacturers with access to each point in the continuance of patient
care, from hospitals, to physicians, to pharmacists, to the patients
themselves. In addition, the Company's service infrastructure allows it
to continue to develop and improve marketing data with respect to this
population sector.
. Multicultural Populations. Multicultural populations are growing much
more rapidly than the overall population. According to the Census Bureau
Population Projection, there were approximately 10.1 million
Asian/Pacific Islanders living in the United States during 1997 and that
group is expected to grow approximately 51% by the year 2010. In 1997,
there were approximately 28.7 million Hispanics living in the United
States and that group is expected to grow approximately 43% by the year
2010 according to the Census Bureau Population Projection. In contrast,
the total population in the United States is expected to grow
approximately 11% by the year 2010. The Company reaches the rapidly
growing multicultural populations through bilingual field sales and
teleservices representatives in the Communications Services group and
through targeted sampling programs, proprietary publications and
WallBoard(R) information displays specifically designed by the Media and
Sampling Services group to address the needs of multicultural
populations.
. Young Consumers. The Company believes that the size, sophistication and
buying power of the youth market make it an attractive marketing
opportunity for its clients. The Company believes that today's youth are
well-educated and highly discriminating consumers who are making
increasingly independent purchasing decisions. According to SVP Market
Research, teens influence approximately $250 billion in spending each
year. Teens influence family purchases of both disposable goods and big-
ticket items. They also influence how families spend their leisure time
and money. Through the integration of its data delivery services,
creative/direct response services and targeted product sampling
programs, the Company has a broad offering of youth-oriented marketing
programs.
GROWTH STRATEGY
In order to capitalize on the increased demand for marketing services and
its existing resources and to continue its growth, the Company plans to
broaden the range of services offered to existing and future clients, expand
its global presence, increase the scale of its services and pursue strategic
acquisitions.
Leverage Client Base and Broaden Range of Services. The Company intends to
continue its growth by providing a broader range of services to its existing
clients. Through its recent acquisitions and internal growth, the Company has
significantly increased the types of services and the range of targeted
marketing channels that the Company can offer its clients. The Company is
actively leveraging its demonstrated success on behalf of existing clients by
offering such clients additional Company services. The Company also believes
it can more successfully attract new clients as a result of its increased
capabilities.
Expand Global Presence. The Company intends to continue expanding the
geographic markets in which it provides services. Many of the Company's
existing and potential clients are large companies that market products
globally. Developing an expanded geographic market reach will enable the
Company to offer single-source solutions for its clients' global outsourced
sales and marketing needs. In furtherance of this strategy, the Company's
recent acquisitions have given the Company marketing capabilities in
continental Europe and have significantly enhanced the Company's presence in
the U.K. The Company expects that its further geographic expansion will be
accomplished by performing services for existing clients in new geographic
markets and by acquiring companies that perform services in new geographic
markets similar to those already provided by the Company.
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<PAGE>
Increase Scale of Services. The Company intends to continue to increase the
scale of services it can offer to clients. Many of the Company's current and
prospective clients, particularly those served by the Communications Services
and Medical Services groups, have an increasing need for global,
comprehensive, large-scale marketing solutions. By expanding its capacity to
perform large projects, the Company intends to enhance its ability to provide
single-source marketing solutions to its clients.
Pursue Strategic Acquisitions. The Company intends to continue to supplement
its growth through strategic acquisitions. The Company expects to pursue
acquisition opportunities that give the Company additional proprietary
channels of distribution to important demographic segments, offer
complementary services or replicate the Company's existing marketing
capabilities in unserved geographic markets. The Company believes that the
fragmentation in the marketing services industry provides opportunities for
the Company to selectively pursue complementary domestic and international
acquisitions. Although there are no definitive agreements, understandings or
arrangements at this time, the Company is currently and expects to continue
evaluating acquisition opportunities.
SERVICES
The Company's marketing programs utilize the resources of one or more of the
Company's four service groups, depending on the client's needs. The Company's
four service groups are: Medical Services, Media and Sampling Services,
Communications Services and Data Delivery Services.
MEDICAL SERVICES. The Medical Services group provides medical sales,
marketing research and strategic planning and educational communications
services to pharmaceutical and medical device manufacturers.
Medical Sales. The Medical Services group uses field sales to obtain
customers for the Company's pharmaceutical clients through a process known as
"detailing." Pharmaceutical detailing entails a presentation to a physician by
an account executive during which the features and benefits of a drug are
discussed and product literature and samples are provided to the physician.
The Company focuses its direct detailing and selling on physicians,
pharmacists and long-term care facilities. The Medical Services group uses the
services of approximately 4,000 account executives and managers located
throughout the United States, the United Kingdom and continental Europe, who
operate both as independent contractors and as full- and part-time employees.
The Company seeks to hire individuals with medical or scientific backgrounds
as its account executives. More specifically, most of the account executives
have experience in sales of pharmaceutical products. In addition, each account
executive undergoes specialized training before providing detailing services
on behalf of clients in order to familiarize himself or herself with the
products being detailed. The Company's pharmaceutical detailing contracts
range from six months to three years in duration. Generally, each Medical
Services client contract provides for the detailing of between one and three
pharmaceutical products. The Company's compensation for these services is
based upon the number of account executives in the field, the number of
physicians contacted or the level of product sales experienced by the client.
Marketing Research and Strategic Planning. In addition to pharmaceutical
detailing services, Medical Services group provides strategic and tactical
sales force market planning and evaluation services, including sales marketing
resource allocation, sales force planning and the integration and evaluation
of sales and marketing promotions, to more than 100 pharmaceutical and medical
device manufacturers. The Company developed and uses for its clients its
proprietary Promotion Real-time Operating Models (PROMSM) as an analytical
system which aims to provide a comprehensive understanding of the sales
dynamics of an individual pharmaceutical product or medical device. PROMSM
consists of a family of statistical and mathematical models which relate a
product's sales to a structure of all market factors, their respective
dynamics and interactions. The relationship is then analyzed individually for
each doctor using the product class. The Company also provides training for
pharmaceutical sales forces. This training capability gives the Company the
opportunity to enhance the capabilities of its own pharmaceutical detailing
representatives and to provide services to companies with in-house sales
staffs that would otherwise not require the Company's services.
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<PAGE>
Educational Communications. The Company is also engaged in the development
and implementation of educational marketing programs targeted to doctors,
nurses and pharmacists. The Company produces educational literature and slide
kits, clinical simulations and the serial publications that it produces and
provides to healthcare professionals, all of which are developed by physicians
and sponsored by medical and educational institutions. The Company also hosts
proprietary medical seminars in the U.S. and continental Europe which are
attended by physicians and led by recognized experts in their respective
medical fields. Attendees are typically granted continuing medical education
credit for their participation. These events are funded through grants
provided by major pharmaceutical manufacturers.
MEDIA AND SAMPLING SERVICES. The Media and Sampling Services group uses
WallBoard(R) and other information displays, proprietary sample pack
distribution channels and proprietary publications to reach potentially high-
value market segments at the time that the targeted customers are most likely
to use the products.
Information Displays. WallBoards(R) are framed information and sponsor
displays that are mounted on a wall. WallBoards(R) present educational,
editorial and product information targeted to specific user groups. They are
located in areas where the targeted customers are likely to be waiting for a
service, such as the offices of specialty health-care providers, child-care
centers and corporate airport terminals. Most of the Company's WallBoards(R)
are strategically located to provide information to targeted consumers at a
time when the customers are likely to be interested in receiving information
and trying new products. Each WallBoard(R) location is available only to the
Company under a two- or three-year exclusive agreement, with automatic renewal
provisions. WallBoard(R) locations provide the WallBoard(R) free of charge
because of its perceived benefit to the targeted audience. Two examples of the
Company's WallBoard(R) information displays are the Heart Health WallBoard(R),
which targets cardiology patients, and the Your Kids WallBoard(R), which
targets working parents. Each of the WallBoard(R) sponsors has "category
exclusivity" for their product in their program. The Company also has
information centers located in approximately 6,500 retail outlets. The
information centers are displays which include pockets for take-one
literature, tear-off pads for the distribution of rebate offers and recipes,
mini-posters which contain consumer information and commercial messages, and
free ad cards for individuals to offer products or services.
To enhance the editorial quality of its WallBoards(R), the Company has also
established alliances with associations that specialize in the targeted areas,
such as the American Heart Association, the National Child Care Association,
the Arthritis Foundation and the Children's National Medical Center. As of
December 31, 1997, there were 15 different WallBoard(R) programs as well as
the information centers displayed in approximately 35,000 locations throughout
the United States.
Sample Packs. Similar to WallBoards(R), sample packs distribute products and
information to targeted customers at a time when they are generally most
interested in trying new products. Sample packs are given away for free in
areas where targeted customers can be reached, such as fitness centers,
college dormitories, child-care centers, the offices of specialty health-care
providers and hospital maternity wards. Participating locations sign a two- or
three-year exclusivity agreement stating that the pack will be the only
sampling program allowed at the location during that time. Three examples of
the Company's sample pack programs are the New Member Pack, which is
distributed at fitness centers, the Diabetes Pack, which is distributed to
diabetes patients by specialty health-care providers, and the New Mom Giftpax,
which is distributed to new mothers in hospital maternity wards. As with its
WallBoard(R) programs, the Company is able to leverage its alliances with
leading associations, such as the American Diabetes Association, which has
permitted the Company to print the association's logo on the outside of the
Diabetes Pack, and the Arthritis Foundation, which has permitted the Company
to print the foundation's logo on the Arthritis Pack.
In the U.S., the Media and Sampling Services group provides targeted product
sampling programs for packaged goods manufacturers, with distribution channels
that include over 180,000 separate locations reaching primary and secondary
schools, daycare/preschool centers, colleges, specialty healthcare providers
and immigrant organizations. The Company provides access to a variety of
target audiences, including patients with specific health conditions, working
mothers, teens in junior high and high school, 18-25 year old college and
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<PAGE>
junior college students, African-American teens, Hispanic teens and
immigrants. During 1997, the Company used over 100 distribution centers to
deliver over 230 million program elements. The Company's distribution channels
currently include approximately 100,000 day care centers and pre-schools,
approximately 26,000 specialty healthcare provider locations, approximately
84,000 primary and secondary schools, and approximately 22,000 other
locations, including immigrant and maternity centers. As of December 31, 1997,
there were 51 different Company-administered sample pack programs, and
approximately 47.6 million sample packs were distributed in Company-
administered programs during 1997.
Outside of the U.S., the Media and Sampling Services group provides targeted
product sampling services and proprietary health-oriented publications to
expectant mothers, new mothers and parents of toddlers in the United Kingdom
and The Republic of Ireland. The Company conducts three primary sampling
programs in the U.K.: its Mother-to-Be Program, reaching approximately 600,000
expectant mothers each year in the United Kingdom; its New Mother Program,
reaching approximately 700,000 mothers each year within three days of their
babies' birth; and the Baby's Progress Program, reaching approximately 500,000
mothers with babies over three months old. Approximately 260 part-time
distributors distribute sample packs to the expectant mothers and new mothers,
with revenues based on the number of samples packed and distributed.
The marketing value of the Company's program is enhanced by long-term
marketing contracts with the hospitals in which it operates. These contracts
give the Company's distributors the opportunity to personally call on each new
mother at the hospital, hand each new mother a sample pack and obtain
marketing data from each new mother. Through its programs, the Company
estimates, based on census data, that it reaches approximately 95% of all new
parents in the United Kingdom.
Proprietary Publications. To enhance the value of sample packs to
recipients, as well as to provide an additional source of revenue to the
Company and an additional means of collecting data, the Company also includes
proprietary literature in its sample packs and on WallBoards(R). The
proprietary literature contains information, coupons and advertisements
relevant to the targeted consumer market.
In the U.S., as a part of multiple-client, theme-based sample packs, the
Company distributes proprietary literature designed for the targeted consumer
group that receives each sample pack. These digest-sized booklets or magazines
contain consumer-relevant articles in addition to coupons and sponsored
messages. The publications are distributed as a part of programs targeting
high school teens each spring and fall, working mothers close to Mothers' Day,
elementary school parents each spring and fall, Hispanic elementary school
parents each spring and fall, and college students each fall.
In the U.K., the Company also distributes proprietary publications as a part
of its sampling program. The Company publishes three titles: The Bounty
Pregnancy Guide, The Bounty Baby Care Guide and The Bounty Infant Health and
Feeding Guide. In addition, the Company publishes hospital information
booklets on behalf of nearly 150 maternity hospitals for distribution to
expectant mothers. The publications are funded through sponsored messages and
are distributed free of charge.
COMMUNICATIONS SERVICES. The Communications Services group performs
strategic planning and consulting, creative, establishment of brand awareness
for clients' products, face-to-face field sales, teleservices, interactive
services, database management and mailings and return-on-investment evaluation
services. The Communications Services group's creative services capabilities
were further enhanced by the acquisition of Arnold Communications, Inc.
("Arnold") in March 1998. Arnold is a full-service marketing communications
firm based in Boston, Massachusetts, with offices in Washington, D.C. and 11
other U.S. cities. Arnold provides creative services, direct marketing, new
media marketing, database management services and full-service public
relations for its clients, which include Volkswagen of America, McDonald's and
Bell Atlantic. In addition to enhancing expertise in fields in which the
Company already offers services, the Company expects Arnold to play an
important role in expanding its direct-to-consumer pharmaceutical marketing
capabilities.
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Strategic Planning and Consulting/Creative Services. The Company's goal in
strategic planning is to become a partner in the direct marketing and customer
development process of its clients. The strategic planning and management
services provided include creating strategic marketing plans, analyzing market
information, defining target audiences, planning and purchasing media
campaigns, and managing marketing campaigns. The creative services area aims
to develop in conjunction with the client the ideas and content to execute the
client's marketing campaign. For example, in the initial stages of the
development of a direct marketing program, the strategic consulting and
creative services might assist the client in assessing its business, profit
and sales objectives, defining the target market and developing a marketing
plan to achieve those objectives. The media and research staff would then
design, produce and execute the client's direct marketing program using
qualitative and quantitative market research techniques, statistical modeling
and analysis of demographic segments.
Establishment of Brand Awareness. Consumer research and brand development
focus groups are conducted to determine how to achieve or maintain a high
profile position in the market place for the client's brand. The client's
brand is tested on existing and prospective customers prior to developing a
full creative campaign. The Company believes that brand awareness is essential
to increasing purchasing frequency of the brand and creating loyal customers.
Field Sales and Marketing. Using field sales (face-to-face) and event
marketing, the Company's field sales representatives make face-to-face contact
with potential customers at the customers' offices or homes and at local
cultural events. Field sales representatives who are targeting consumer
residential customers focus their sales efforts on event marketing, mainly at
fairs, festivals and shopping malls. Field sales representatives who are
targeting business customers typically call on small businesses either on a
"cold call" basis or, increasingly, from leads generated by the Company's
direct mail or database marketing efforts. The productivity of the field sales
representatives is enhanced by the fact that they generally live in the area
in which they are soliciting business. The Company's field sales
representatives currently market in 12 different languages, and well over half
of the Company's U.S. field sales representatives are bilingual. The Company
has over 1,800 field sales representatives working in its Communications
Services group in 35 offices in 11 U.S. states and over 1,000 field sales
representatives in the United Kingdom.
Database Management and Mailings. The Company assumes responsibility for the
editorial content and graphic design of the direct mail pieces, arranges for
the mailings to be printed, executes the direct mail campaign and handles
inbound responses to the mailings through its teleservices facilities. The
responses to the database mailings are input into the Company's demographic
marketing database and provide leads for field sales and teleservices
representatives. In the United States, the Company's production managers
maintain relationships with many specialized vendors with whom they contract
for printing, computer personalization and mailing services. In 1997, the
Company managed the design, production and mailing of more than 365 million
direct marketing pieces with more than 1.7 billion individual components.
Teleservices. Prospective customers may also be contacted by telephone. The
Company's U.S. teleservices associates, almost all of whom are bilingual, use
an internally prepared sales script to market the client's products or
services. Teleservices associates in the Company's U.S. call centers use a
computerized call management system that employs state-of-the-art call routing
and predictive dialing technologies. The Company has a total of 329 call
stations and approximately 450 teleservices associates in the United States.
The Company's 200-work station call center in Bristol, England provides
teleservices for its European clients. In contrast to the United States, where
teleservices are generally outbound, in the United Kingdom teleservices are
mostly inbound focusing more on customer assistance and follow-up than on
customer acquisition. There are approximately 310 teleservices employees in
the U.K. call center.
Return-on-Investment Evaluation. In addition to creating and executing
strategic marketing plans for its clients, the Company also analyzes market
information and defines the clients' target audiences in order to provide an
ongoing evaluation to the client of the performance of the marketing campaign
in achieving its goals. The Company recognizes that its clients' marketing
needs are dynamic, and through the analysis of the effectiveness of the
marketing plan, the Company strives to provide its clients with a real-time
evaluation of the clients' return-on-investment in the Company's services.
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The Company's contracts with its most significant Communications Services
clients are multi-year contracts, with certain early termination rights. The
Company's principal contracts in the Communications Services group limit the
ability of the Company to, or prevent the Company from, working for the
clients' competitors during the term of the contract and, in some cases, for a
defined period after termination.
DATA DELIVERY SERVICES. The Data Delivery Services group develops and
maintains demographic marketing databases that include data on approximately
46 million individuals and two million small businesses in the United States.
Because the Data Delivery Services group's databases are owned by the Company,
it is able to utilize the databases for multiple client contracts and at
various purchase points in a customer's life cycle. The databases have been
used to support the Communications Services and Media and Sampling Services
groups' marketing efforts.
The Data Delivery Services group has compiled databases of more than 30
million individuals in the United States and markets lists of high school
students, college students, pre-school through junior high school students,
young adults and religiously and ethnically distinct individuals. The primary
customers of such lists are list brokers, advertising agencies and end-users
employing direct mail and telemarketing advertising campaigns. The Company
also maintains a database of more than 18 million names in the U.S., which was
developed by the Communications Services group, but is now being managed by
the Data Delivery Services group.
In addition, using the contacts with new mothers in its U.K. sampling
programs as a base, the Company has constructed a database which it estimates
covers over 92% of all new mothers in the United Kingdom, which the Company
has recently begun to market. The Company believes that by using its
experience in marketing valuable database assets it will be able to profitably
commercialize the new family database. While the Company has granted category
exclusivity to certain users of its database, the database can be used to
market other products to new mothers. For example, the Company believes that
its existing clients in the automotive and financial services industries could
benefit from access to the database. The Company's database management unit in
the United Kingdom which consists of approximately 100 employees, builds and
runs customer information systems, databases and direct marketing systems for
the Company's clients on dedicated computer hardware housed in its facilities.
These databases have been used to support the Company's U.K. marketing efforts
and to deliver direct mail pieces to targeted markets.
EMPLOYEES
As of March 31, 1998, the Company used the services of approximately 7,000
full-time employees. The Company believes its relations with its employees are
satisfactory.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information regarding the executive
officers and directors of the Company. Each of the directors serves for a term
of one year and has served on the Company's Board since 1996.
<TABLE>
<CAPTION>
NAME AGE(1) POSITION
---- ------ --------
<S> <C> <C>
Daniel M. Snyder........ 33 Chairman of the Board of Directors and Chief Executive Officer
Michele D. Snyder....... 35 Vice Chairman, President, Chief Operating Officer and Director
A. Clayton Perfall...... 39 Chief Financial Officer and Director
Mortimer B. Zuckerman... 60 Director
Fred Drasner............ 54 Director
Philip Guarascio........ 56 Director
Mark E. Jennings........ 35 Director
</TABLE>
- --------
(1) At March 31, 1998.
Daniel M. Snyder, Chairman of the Board and a founder of the Company, has
served as Chief Executive Officer of the Company 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, President, Chief
Operating Officer and a director of the Company. Ms. Snyder is Mr. Snyder's
sister.
A. Clayton Perfall has served as Chief Financial Officer and a director of
the Company since September 1996. Prior to joining the Company, Mr. Perfall
spent 15 years with Arthur Andersen LLP. During his tenure as a partner with
Arthur Andersen LLP, Mr. Perfall had a wide range of responsibilities within
the Washington, D.C., Baltimore, Maryland and Richmond, Virginia marketplaces,
including responsibility for the firm's Structured Finance and Financial
Products tax practice and responsibility for its Business Valuation Services
Group. Mr. Perfall was a key participant in the development of business
strategies, the hiring of professional staff and the development and marketing
of services.
Mortimer B. Zuckerman, 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 and 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, 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 of U.S. News and World Report, L.P. from 1985 to February
1997 and Chief Executive Officer of U.S. News and 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.
Philip Guarascio, a director of the Company, has been a Vice President of
General Motors Corporation since July 1994, where he is primarily responsible
for worldwide advertising resource management, managing consolidated media
placement efforts and working with General Motors' North American Operations
vehicle divisions to increase marketing effectiveness and efficiency. Mr.
Guarascio also manages corporate image advertising activities and oversees GM
Credit Card operations. Prior to his current position, from July 1992 to July
1994, Mr. Guarascio served as General Manager of Marketing and Advertising for
General Motors' North
23
<PAGE>
American Operations. Mr. Guarascio joined General Motors in 1985 after 21
years with the New York advertising agency D'Arcy, Masius, Benton & Bowles
(formerly, Benton & Bowles, Inc.). Mr. Guarascio is Chairman Emeritus of the
Advertising Council and serves on the Executive Committee of that
organization. He also serves on the boards of the Association of National
Advertisers, the Women's Sports Foundation and the Ellis Island Restoration
Commission.
Mark E. Jennings, a director of the Company, has been a Managing Partner of
Generation Partners L.P. since August 1995. Generation Partners L.P. is the
managing general partner of Generation Capital Partners L.P., a $165 million
investment partnership. Prior to August 1995, he was a Partner of Centre
Partners L.P., an investment affiliate of Lazard Freres & Co., where he had
been employed since 1987. From 1986 to 1987, Mr. Jennings was employed at
Goldman, Sachs & Co. in its Corporate Finance Department. Mr. Jennings also
serves on the board of directors of Scientific Games, Inc.
24
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information known to the Company
regarding the beneficial ownership of shares of Common Stock as of May 15,
1998 (except as otherwise noted), and as adjusted to reflect the sale of the
shares of Common Stock in the Offerings, by (a) all persons who beneficially
own 5% or more of the outstanding stock, (b) each of the Company's directors,
(c) each of the Company's executive officers and (d) all directors and
executive officers as a group. If the over-allotment options are exercised, it
is currently expected that Daniel M. Snyder and Michele D. Snyder will
participate as Over-Allotment Selling Stockholders.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICALLY
OWNED PRIOR TO THE OWNED AFTER THE
OFFERINGS(1) OFFERINGS(1)
-----------------------------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT NUMBER PERCENT
------------------------ ------------ -------------------- -------
<S> <C> <C> <C> <C>
Daniel M. Snyder(2)................... 9,604,624 15.7% 9,141,148 14.7%
Michele D. Snyder(3).................. 3,341,972 5.4 3,202,748 5.2
Mortimer B. Zuckerman and MBZ Trust of
1996(4).............................. 4,860,236 7.9 4,860,236 7.8
Fred Drasner(5)....................... 2,350,606 3.8 2,350,606 3.8
Philip Guarascio(6)................... 6,250 * 6,250 *
Mark E. Jennings(7)................... 10,850 * 10,850 *
A. Clayton Perfall(8)................. 200,000 * 200,000 *
Ark Asset Management Co., Inc.(9)..... 3,075,000 5.0 3,075,000 5.0
All directors and executive officers
as a group
(7 persons)(10)...................... 20,374,538 33.2 19,771,838 31.9
</TABLE>
- --------
* Less than 1%.
(1) Based upon 61,342,794 shares of Common Stock outstanding before the
Offerings and 61,993,696 shares outstanding after the Offerings. As
required under the rules of the Securities and Exchange Commission,
beneficial ownership of Common Stock includes any shares as to which a
person has the sole or shared voting power or investment power and also
any shares that a person has the right to acquire within 60 days of the
date set forth above through the exercise of any stock option or other
right ("currently exercisable options"). Unless otherwise indicated, each
named owner has sole voting power and sole investment power over the
shares set forth.
(2) Includes 2,475,000 shares held by D.M.S. Endowment, LLC ("Endowment"), a
limited liability company of which Daniel M. Snyder and Michele D. Snyder
are the members. All of the 3,675,000 shares of Common Stock held by
Endowment, including the 2,475,000 shares beneficially owned by Mr.
Snyder, are subject to a forward purchase contract (the "Endowment
Contract") entered into by Endowment with the Snyder STRYPES Trust, a
Delaware business trust (the "Trust"). Pursuant to the Endowment
Contract, on November 15, 2000 (the "Exchange Date"), Endowment shall be
obligated to deliver to the Trust certain shares of Common Stock owned by
Endowment and subject to the Endowment Contract. To the extent that the
value of the Common Stock appreciates between the date of the Endowment
Contract and the Exchange Date, the sale requirement is reduced pursuant
to a formula contained in the Endowment Contract. Prior to the Exchange
Date, Endowment retains voting and dividend rights with respect to the
shares that are the subject of the Endowment Contract. Pursuant to
Endowment's limited liability company operating agreement (the "Endowment
Operating Agreement"), Mr. Snyder retains voting and investment control
over the 2,475,000 shares of Common Stock contributed by him to
Endowment. Pursuant to the Endowment Contract, Endowment may deliver up
to 3,675,000 shares of Common Stock. Endowment's obligation to deliver
shares of Common Stock under the Endowment Contract may be settled in
cash, at Endowment's option, in whole or in part, by delivering to the
Trust on the business day immediately preceding the Exchange Date for
distribution to the holders of the securities issued by the Trust (the
"STRYPES") on the Exchange Date, in lieu of the number of shares of
Common Stock otherwise deliverable in respect of which an election to
exercise the cash settlement option is made, cash in an amount equal to
the value of such shares at the price as determined by the formula in the
Endowment Contract. The address of Mr. Snyder and Endowment is 6903
Rockledge Drive, 15th Floor, Bethesda, Maryland 20817.
25
<PAGE>
(3) Includes 1,200,000 shares held by Endowment. All of the 3,675,000 shares
of Common Stock held by Endowment, including the 1,200,000 shares
beneficially owned by Ms. Snyder, are subject to the Endowment Contract.
Pursuant to the Endowment Contract, on the Exchange Date, Endowment shall
be obligated to deliver to the Trust certain shares of Common Stock owned
by Endowment and subject to the Endowment Contract. To the extent that
the value of the Common Stock appreciates between the date of the
Endowment Contract and the Exchange Date, the sale requirement is reduced
pursuant to a formula contained in the Endowment Contract. Prior to the
Exchange Date, Endowment retains voting and dividend rights with respect
to the shares that are the subject of the Endowment Contract. Pursuant to
the Endowment Operating Agreement, Ms. Snyder retains voting and
investment control over the 1,200,000 shares of Common Stock contributed
by her to Endowment. Pursuant to the Endowment Contract, Endowment may
deliver up to 3,675,000 shares of Common Stock. Endowment's obligation to
deliver shares of Common Stock under the Endowment Contract may be
settled in cash, at Endowment's option, in whole or in part, by
delivering to the Trust on the business day immediately preceding the
Exchange Date for distribution to the holders of the STRYPES on the
Exchange Date, in lieu of the number of shares of Common Stock other
deliverable in respect of which an election to exercise the cash
settlement option is made, cash in an amount equal to the value of such
shares at the price as determined by the formula in the Endowment
Contract. Ms. Snyder's address is 6903 Rockledge Drive, 15th Floor,
Bethesda, Maryland 20817.
(4) Consists of shares held by USN College Marketing, L.P. ("College
Marketing") (a limited partnership in which USN College Marketing, Inc.
("USN Inc.") is the general partner and Fred Drasner is the sole limited
partner) and attributable to USN Inc.'s general partnership interest in
College Marketing. USN Inc. is owned one third by Mortimer B. Zuckerman
and two thirds by the MBZ Trust of 1996, for which an outside person acts
as the Trustee. Mr. Zuckerman is the sole director of USN Inc. Does not
include 1,225,303 shares held by College Marketing that are beneficially
owned by Mr. Drasner. See Note 5. Mr. Zuckerman's address is 599
Lexington Avenue, Suite 1300, New York, New York 10022. The address of
MBZ Trust of 1996 is c/o Boston Properties, 8 Arlington Street, Boston,
Massachusetts 02116.
(5) Consists of (i) 325,303 shares owned by Mr. Drasner in his individual
capacity and over which he exercises sole voting and investment
discretion, (ii) 1,225,303 shares beneficially owned by Mr. Drasner as
limited partner in College Marketing and (iii) 800,000 shares
beneficially owned by Mr. Drasner as a result of his ownership of F.D.
Sutton, LLC ("Sutton") a limited liability company of which Mr. Drasner
is the sole member. Of the shares of Common Stock beneficially owned by
Mr. Drasner, 300,000 of the shares of Common Stock held by College
Marketing and all 800,000 shares of Common Stock held by Sutton are
subject to forward purchase contracts (the "Drasner Contracts") entered
into by College Marketing and Sutton with the Trust. Pursuant to the
Drasner Contracts, on the Exchange Date, College Marketing and Sutton
shall be obligated to deliver to the Trust certain shares of Common Stock
beneficially owned by Mr. Drasner through College Marketing and Sutton
and subject to the Drasner Contracts. To the extent that the value of the
Common Stock appreciates between the date of the Drasner Contracts and
the Exchange Date, the sale requirement is reduced pursuant to a formula
contained in the Drasner Contracts. Prior to the Exchange Date, College
Marketing and Sutton retain voting and dividend rights with respect to
the shares that are subject to the Drasner Contracts. Pursuant to the
Drasner Contracts, College Marketing and Sutton may deliver up to a total
of 1,100,000 shares of Common Stock. College Marketing's and Sutton's
obligations to deliver shares of Common Stock under the Drasner Contracts
may be settled in cash, at the option of those respective entities, in
whole or in part, by delivering to the Trust on the business day
immediately preceding the Exchange Date for distribution to the holder of
the STRYPES on the Exchange Date, in lieu of the number of shares of
Common Stock otherwise deliverable in respect of which an election to
exercise the cash settlement option is made, in an amount equal to the
value of such share at the price as determined by the formula in the
Drasner Contracts.
(6) Consists of shares of Common Stock issuable upon exercise of currently
exercisable options.
(7) Includes 6,250 shares of Common Stock issuable upon exercise of currently
exercisable options.
(8) Consists of shares of Common Stock issuable upon exercise of currently
exercisable options.
26
<PAGE>
(9) Ownership is as reported on Schedule 13G of Ark Asset Management Co.,
Inc. and is as of December 31, 1997. Ark's address is One New York Plaza,
29th Floor, New York, New York 10004.
(10) Includes 212,500 shares of Common Stock issuable upon exercise of
currently exercisable options. In calculating the percent of class, it
was assumed that each person in the group exercised all of his currently
exercisable options, but that no other individuals or entities exercised
theirs.
SELLING STOCKHOLDERS
The following tables set forth certain information regarding the beneficial
ownership of shares of Common Stock as of May 15, 1998, and as adjusted to
reflect the sale of the shares of Common Stock in the Offerings, by the
Selling Stockholders. The first table shows the number of shares beneficially
owned and offered hereby by the Selling Stockholders who are former
shareholders of acquired companies as a group, by the Selling Stockholders who
are officers and directors of the Company as a group and by all of the Selling
Stockholders as a group. The second table sets forth this information in
detail for each of the Selling Stockholders and for all of the Selling
Stockholders as a group. Unless otherwise indicated in the second table each
of the Selling Stockholders is a former shareholder or optionholder of an
acquired company. If the over-allotment options are exercised, it is currently
expected that Daniel M. Snyder and Michele D. Snyder will participate as Over-
Allotment Selling Stockholders. Pursuant to the U.S. Purchase Agreement and
the International Purchase Agreement, the Over-Allotment Selling Stockholders
have granted to the Underwriters options to purchase an aggregate of up to
1,162,500 shares of Common Stock, with such shares divided among the Over-
Allotment Selling Stockholders in proportion to the number of shares of Common
Stock each beneficially owns prior to the Offerings.
<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF SHARES
BENEFICIALLY OWNED BENEFICIALLY OWNED PERCENT OWNED
CATEGORY OF PRIOR TO THE NUMBER OF SHARES AFTER THE AFTER THE
BENEFICIAL OWNER OFFERINGS BEING OFFERED OFFERINGS OFFERINGS (1)
---------------- ------------------ ---------------- ------------------ -------------
<S> <C> <C> <C> <C>
Former Acquisition
Stockholders........... 11,453,085 6,568,006 4,885,079 7.9%
Officers and Directors.. 12,946,596 602,700 12,343,896 19.9
---------- --------- ---------- ----
TOTAL................. 24,399,681 7,170,706 17,228,975 27.8%
========== ========= ========== ====
</TABLE>
- --------
* Less than 1%.
(1) Based upon 61,993,696 shares of Common Stock outstanding after the
Offerings. As required under the rules of the Securities and Exchange
Commission, beneficial ownership of Common Stock includes any shares as to
which a person has the sole or shared voting power or investment power and
also any shares that a person has the right to acquire within 60 days of
the date set forth above through the exercise of any stock option or other
right.
27
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF SHARES
BENEFICIALLY OWNED BENEFICIALLY OWNED PERCENT OWNED
NAME AND RELATIONSHIP PRIOR TO THE NUMBER OF SHARES AFTER THE AFTER THE
OF BENEFICIAL OWNER OFFERINGS BEING OFFERED OFFERINGS OFFERINGS (1)
--------------------- ------------------ ---------------- ------------------ -------------
<S> <C> <C> <C> <C>
FORMER ACQUISITION
STOCKHOLDERS
- ------------------
Adam & Company
International Trustees
Limited................ 127,214 89,049 38,165 *
Karen Allan............. 892 446 446 *
Barbara Anrod........... 8,785 4,392 4,393 *
Jerrold Appelbaum....... 3,820 1,910 1,910 *
P. Attaway.............. 15,260 15,260 0 0
Neil Bayer.............. 764 382 382 *
M. Beeching............. 916 916 0 0
Beta Investments, Inc... 210,582 153,303 57,279 *
Alan Taylor Bigg........ 90,590 70,000 20,590 *
Mrs. C.B. Taylor Bigg... 7,630 3,500 4,130 *
P. Blackburn............ 916 916 0 0
Robert Blau............. 3,820 1,910 1,910 *
Peter Blau.............. 58,777 29,388 29,389 *
R. Booth................ 1,526 1,526 0 0
Peter Borrell........... 764 382 382 *
Royston Gary Goodwell
Boss................... 39,676 29,676 10,000 *
R. Bracewell............ 1,831 1,831 0 0
Alvin I. Brandeis....... 2,420 1,210 1,210 *
David Braun............. 1,910 955 955 *
Judith Brewster......... 764 382 382 *
Richard Britton......... 107,830 65,954 41,876 *
C. Bromiley............. 1,831 831 1,000 *
J. Brown................ 458 458 0 0
Robert Brown............ 659,399 280,244 379,155 *
Peter Campbell.......... 254 127 127 *
Lydell A. Capritta...... 1,910 955 955 *
Victoria Azarian-
Cennamo................ 510 255 255 *
P. Chandler............. 305 150 155 *
Robert Cipriani......... 20,139 12,318 7,821 *
A. Claxton.............. 763 763 0 0
John Costa.............. 131 65 66 *
Stephen Cottrell........ 8,774 6,300 2,474 *
M. Crooks............... 763 463 300 *
D. Crosbee.............. 916 916 0 0
K. Cullum............... 916 916 0 0
S. Dally................ 458 458 0 0
C. Davidson............. 6,104 6,104 0 0
Lynda E. Deilus......... 382 191 191 *
Linda F. Doyle.......... 764 382 382 *
Dennis M. Eastham....... 101,488 50,744 50,744 *
Richard B. Emerson...... 127,315 77,873 49,442 *
Joanne Epstein.......... 1,146 573 573 *
Edward Eskandarian...... 1,596,299 976,376 619,923 *
Jennifer Fassman........ 573 286 287 *
Richard Feldman......... 5,602 2,801 2,801 *
Walter M. Fiederowicz... 17,826 8,913 8,913 *
Walter M. Fiederowicz,
Trustee................ 710,297 301,459 408,838 *
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES
NUMBER OF SHARES BENEFICIALLY OWNED PERCENT OWNED
NAME AND RELATIONSHIP BENEFICIALLY OWNED NUMBER OF SHARES AFTER THE AFTER THE
OF BENEFICIAL OWNER PRIOR TO THE OFFERINGS BEING OFFERED OFFERINGS OFFERINGS (1)
--------------------- ---------------------- ---------------- ------------------ -------------
<S> <C> <C> <C> <C>
N. Finan................ 916 250 666 *
S. Findlay.............. 3,052 1,526 1,526 *
David P. Finkel......... 39,218 19,609 19,609 *
Ian Joseph Fogg......... 570,789 342,473 228,316 *
D. Foster............... 2,289 450 1,839 *
J. Fox.................. 3,052 3,052 0 0
Jill K. Franzon......... 764 382 382 *
Ronald Friedman......... 19,997 9,998 9,999 *
William B. Fuentes...... 254 127 127 *
C. Gater Settlement..... 15,260 15,260 0 0
Christopher John Gater.. 137,340 67,340 70,000 *
Mrs. D. Gater........... 30,520 30,520 0 0
C. Glaisyer............. 916 916 0 0
D. Greenman............. 916 916 0 0
Peter Hanley............ 11,905 7,282 4,623 *
Mrs. C.P. Hansel........ 7,630 7,630 0 0
John Madoc Hansel....... 47,306 10,682 36,624 *
James Hartman........... 5,850 4,209 1,641 *
James R. Haughton....... 21,902 10,951 10,951 *
Roger Hines............. 586 293 293 *
Gerald D. Hogan......... 1,528 764 764 *
M. Horne................ 1,526 1,526 0 0
Amy Hunt................ 23,143 14,155 8,988 *
J. Hyde................. 763 763 0 0
A. Irons................ 458 458 0 0
Jacqueline Jackson...... 128 64 64 *
Jeffrey G. Jarrett...... 27,122 13,561 13,561 *
Jack Jefferson.......... 128 64 64 *
Steven Jenkins.......... 66,815 25,000 41,815 *
I. Johnston............. 916 916 0 0
Fred Kaseff............. 48,743 24,371 24,372 *
Charles F. Keifer, III.. 221,621 135,554 86,067 *
Francis J. Kelly, III... 39,638 24,245 15,393 *
Steven Kernan........... 23,398 17,034 6,364 *
Barry Kessel............ 1,274 637 637 *
T. Kibble............... 610 610 0 0
Rosemary Kienlen........ 382 191 191 *
B. King................. 1,526 1,526 0 0
Paul Jonathan Ayle
Kitcatt................ 16,786 16,786 0 0
David S. Klang.......... 8,022 4,011 4,011 *
Malcolm Langman......... 659,399 299,699 359,700 *
Ojars Lasmanis.......... 2,907 1,453 1,454 *
Ron Lawner.............. 94,815 57,994 36,821 *
Thomas E. Lawson........ 144,871 88,610 56,261 *
Hazel Lazarus........... 764 382 382 *
Laura L. Lesko.......... 306 153 153 *
Nicole Leturc........... 322,720 161,360 161,360 *
Christian Leturc........ 232,822 116,411 116,411 *
Christian Levistre...... 576,078 250,000 326,078 *
Charles F. Lloyd, III... 128 64 64 *
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF SHARES
BENEFICIALLY OWNED BENEFICIALLY OWNED PERCENT OWNED
NAME AND RELATIONSHIP PRIOR TO THE NUMBER OF SHARES AFTER THE AFTER THE
OF BENEFICIAL OWNER OFFERINGS BEING OFFERED OFFERINGS OFFERINGS (1)
--------------------- ------------------ ---------------- ------------------ -------------
<S> <C> <C> <C> <C>
Karen Lundy............. 764 382 382 *
Rosemary M. Lyon........ 7,208 3,208 4,000 *
S. Martin............... 3,052 552 2,500 *
David Mason............. 14,624 10,000 4,624 *
Susan J. McLaughlin..... 3,947 1,973 1,974 *
Nancy Mehlman........... 128 64 64 *
Anthony M.G. Melillo.... 120,728 48,952 71,776 *
George R. Melillo,
Jr. ................... 120,729 48,952 71,777 *
George R. Melillo, Sr... 451,266 182,977 268,289 *
Joseph Melillo.......... 120,728 48,953 71,775 *
Laura Melillo........... 120,729 48,952 71,777 *
Michael Melillo......... 120,728 48,953 71,775 *
Peter Metz.............. 1,591 795 796 *
John W. Miller.......... 14,262 7,131 7,131 *
Dan Minnick............. 128 64 64 *
Mario Moschitta......... 117,212 47,527 69,685 *
David Motta............. 5,093 2,546 2,547 *
NatWest Ventures
Investments Limited.... 409,773 409,773 0 0
Charles M. Needle....... 382 191 191 *
Christopher Nemec....... 573 286 287 *
Owen Nieberg............ 5,093 2,546 2,547 *
H. Olsen................ 1,831 1,000 831 *
Jay Orenstein........... 3,310 1,655 1,655 *
Joseph Page............. 6,366 3,183 3,183 *
J. Parsons.............. 6,104 6,104 0 0
K. Pembroke............. 610 610 0 0
P. Pembroke............. 305 200 105 *
D. Plotkin.............. 458 458 0 0
Patricia A. Pocograno... 764 382 382 *
William Pollock......... 90,291 55,000 35,291 *
S. Priestnall........... 1,831 1,831 0 0
Peter J. Raimondi,
Trustee................ 112,534 68,831 43,703 *
Susan M. Reeves......... 2,292 1,146 1,146 *
Lawrence H. Reilly...... 789 267 522 *
James Riess............. 445 222 223 *
I. Robb................. 3,052 3,052 0 0
Michael Robinson........ 5,850 4,259 1,591 *
Jason C. Rogers......... 128 64 64 *
Victor M. Rosenzweig.... 764 382 382 *
Lynn A. Rotando......... 138,616 84,784 53,832 *
Rothschild Trust Guern-
sey Limited,
Trustee................ 805,612 563,928 241,684 *
Kenneth Schlesinger..... 382 191 191 *
Thomas J. Scott......... 9,296 4,648 4,648 *
A. Shrimpton............ 916 616 300 *
Barbara Stewart Sibley.. 128 64 64 *
Barry Sideroff.......... 636 315 321 *
Sigma Rx Corp. ......... 210,582 153,303 57,279 *
J. Snedden.............. 916 916 0 0
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF SHARES
BENEFICIALLY OWNED BENEFICIALLY OWNED PERCENT OWNED
NAME AND RELATIONSHIP PRIOR TO THE NUMBER OF SHARES AFTER THE AFTER THE
OF BENEFICIAL OWNER OFFERINGS BEING OFFERED OFFERINGS OFFERINGS (1)
--------------------- ------------------ ---------------- ------------------ -------------
<S> <C> <C> <C> <C> <C>
Societe Civile LMRN..... 264,612 132,306 132,306 *
Societe Civile MCRL..... 175,311 87,655 87,656 *
Susan C. Sovinski....... 128 64 64 *
Ira B. Stechel.......... 764 382 382 *
John Steinert........... 254 127 127 *
A. Styler............... 6,104 5,494 610 *
Charles F. Tarzian...... 7,640 2,500 5,140 *
Joseph Teixeira......... 112,674 68,916 43,758 *
D. Thomas............... 305 305 0 0
A. Thornton............. 610 610 0 0
H. Vass................. 1,526 300 1,226 *
Gregory T. Verdino...... 764 382 382 *
Margaret A. Wagner...... 128 64 64 *
Paul M. Walczyk......... 892 446 446 *
P. Ward................. 3,052 3,052 0 0
Gilbert K. Watkins...... 382 191 191 *
Lysle Wickersham........ 27,771 16,986 10,785 *
Robert T. Wilke......... 48,794 24,397 24,397 *
A. Wright............... 24,416 24,416 0 0
Brenda Joyce Wynn....... 96,820 86,000 10,820 *
John Gordon Wynn........ 15,260 15,260 0 0
3i Group plc............ 229,528 229,528 0 0
OFFICERS AND DIRECTORS
- ----------------------
Daniel M. Snyder (2).... 9,604,624 463,476 9,141,148 14.7%
Michele D. Snyder (3)... 3,341,972 139,224 3,202,748 5.2%
---------- --------- ---------- ----
Total................. 24,399,681 7,170,706 17,228,975 27.8%
========== ========= ========== ====
</TABLE>
- --------
* Less than 1%.
(1) Based upon 61,993,696 shares of Common Stock outstanding after the
Offerings. As required under the rules of the Securities and Exchange
Commission, beneficial ownership of Common Stock includes any shares as to
which a person has the sole or shared voting power or investment power and
also any shares that a person has the right to acquire within 60 days of
the date set forth above through the exercise of any stock option or other
right.
(2) Chairman and Chief Executive Officer of the Company.
(3) Vice Chairman, President and Chief Operating Officer of the Company.
31
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
GENERAL
Upon completion of the Offerings, there will be 61,993,696 outstanding
shares of Common Stock. Of the outstanding shares, all of the 7,750,000 shares
sold in the Offerings (8,912,500 shares if the Underwriters' over-allotment
options are exercised in full), as well as the 8,970,000 shares issued in the
Company's initial public offering in September 1996, the 5,032,322 shares
issued to the former stockholders of American List in July 1997, the 8,776,334
shares sold in the Company's public offering in September 1997 (the "September
1997 Offering"), 105,000 shares registered in January 1998 pursuant to a shelf
registration statement, 73,831 shares issued upon exercise of options pursuant
to the American List Stock Option Plan and 1,757,574 shares issued upon
exercise of options pursuant to the Company's 1996 Stock Incentive Plan and
not being offered hereby, 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 29,528,635 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.
The Company, certain stockholders and the Company's directors and executive
officers have agreed, subject to certain exceptions for pledges and, in the
case of the Company, the grant and exercise of employee stock options and the
issuance of shares in connection with acquisitions as long as all executive
officers, directors and other affiliates of the entity being acquired have
agreed in writing to the restrictions set forth below, 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 or a
registration statement on Form S-4 to register shares issuable in connection
with an acquisition), for a period of 90 days after the date of this
Prospectus (the "Lock-Up Period") without the prior written consent of Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch").
In September 1997, Endowment, Sutton, College Marketing and another
stockholder entered into a forward purchase contract with the Trust. Pursuant
to the Contract each such stockholder will be obligated to deliver to the
Trust certain shares of Common Stock owned by such stockholder, or cash with
the value thereof, three years from the date of the Contract. To the extent
that the value of the Common Stock appreciates between the date of the
Contract and the sale date, the sale requirement is reduced pursuant to a
formula contained in the Contract. Prior to any such sales, the stockholders
will retain voting and dividend rights with respect to the shares that are the
subject of the Contract. Pursuant to the Contract, Endowment may deliver up to
3,675,000 shares of Common Stock, Sutton may deliver up to 800,000 shares,
College Marketing may deliver up to 300,000 shares and the other stockholder
may deliver up to 400,000 shares.
REGISTRATION RIGHTS AND RESTRICTED SECURITIES
Following the Offerings, non-affiliate holders of 745,453 shares of Common
Stock will continue to hold piggyback registration rights with respect to
those shares. Additionally, the holders of 249,272 shares of this Common Stock
may exercise one demand registration right. In connection with a recent
acquisition by the Company, Merrill Lynch and Goldman, Sachs & Co. acquired
199,002 shares of Common Stock and were granted certain registration rights.
The Company is required to file a shelf registration statement on Form S-3
with respect to such shares not later than 90 days after the date of this
Prospectus.
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<PAGE>
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 one-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 then outstanding shares
of the Common Stock (approximately 619,937 shares after giving effect to the
Offerings) and (ii) the reported average weekly trading volume of 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 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 two-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. Certain non-affiliate holders who currently
hold an aggregate of 11,453,085 shares, including options, received in
connection with acquisitions expect to sell 6,568,006 shares in the Offerings.
The remainder of such shares are restricted securities and are eligible to be
sold pursuant to the restrictions of Rule 144 upon the expiration of the one-
year holding period. After giving effect to the sales of shares of Common
Stock in the Offerings, 348,212 shares of Common Stock will become eligible
for sale pursuant to Rule 144 in the quarter ending June 30, 1998, 1,612,178
shares will become eligible for sale in the quarter ending September 30, 1998,
1,753,964 shares will become eligible for sale in the quarter ending December
31, 1998, and 4,374,233 shares will become eligible for sale in the quarter
ending March 31, 1999.
Upon completion of the Offerings (assuming no exercise of the over-allotment
option), Daniel M. Snyder will beneficially own 9,141,148 shares, Michele D.
Snyder will beneficially own 3,202,748 shares, Mortimer B. Zuckerman and the
MBZ Trust of 1996 will beneficially own 4,860,236 shares collectively, and
Fred Drasner will beneficially own 2,350,606 shares, for an aggregate of
19,554,738 restricted shares of Common Stock that will be beneficially owned
by affiliates of Snyder (the "Affiliates"). All of these shares are
"restricted securities" within the meaning of Rule 144. The holding period
limitations of Rule 144 applicable to the restricted securities held by these
Affiliates expired on September 24, 1997. All of these shares are currently
and will remain subject to the volume limitations of Rule 144 until such
shares are registered under the Securities Act. In addition, Mr. Snyder was
granted certain "demand" and "piggyback" registration rights and Ms. Snyder,
Mr. Zuckerman and the MBZ Trust of 1996 and Mr. Drasner were also granted
certain piggyback registration rights (collectively, the "Snyder Registration
Rights") in connection with the shares of Common Stock held by each of them
(the "Registrable Shares"). The Snyder Registration Rights grant Mr. Snyder
and his assignees the opportunity to register all or any portion of their
Registrable Shares and grant all of the Affiliates 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. Mr. Snyder may exercise his demand registration rights no
more than five times in total, and he elected to exercise his first demand in
connection with the STRYPES offering in September 1997. The Affiliates have
elected to register 602,700 of such shares in the Offerings and, additionally,
such number of their beneficially owned shares in connection with the
Offerings as may be necessary to provide for the exercise of the Underwriters'
over-allotment options.
Certain of the foregoing registration rights are subject to cut-back
provisions in connection with underwritten offerings, the ability of the
Company to defer any requested filings pursuant to the exercise of demand
registration rights for periods up to 120 days and certain other customary
conditions and limitations.
In addition, the Company has registered under the Securities Act an
aggregate of 6,100,000 shares of Common Stock reserved for issuance in
connection with the Company's 1996 Stock Incentive Plan and an aggregate of
93,582 shares of Common Stock reserved for issuance under the American List
Stock Option Plan. As of May 15, 1998, the Company has granted 8,491,663
options under the Company's 1996 Stock Incentive Plan, of which 620,738
options are vested and currently exercisable. There are also 1,249,417 options
outstanding which were granted in connection with certain acquisitions, of
which 482,485 are currently exercisable. The Offerings include 71,608 of such
shares. The remainder of the shares issuable upon conversion of such options
are either entitled to be registered for transfer by the Company or will be
freely transferable upon issuance.
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<PAGE>
CONSIDERATIONS FOR 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 of the District of Columbia, (iii) an
estate the income of which is subject to United States federal income taxation
regardless of its source, (iv) a trust if a court within the United States is
able to exercise primary jurisdiction over administration of the trust and one
or more U.S. persons have authority to control all substantial decisions of
the trust, or (v) a partnership to the extent the interest therein is owned by
any of the persons described in clauses (i), (ii), (iii), or (iv) above. 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 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 or, after
December 31, 1999, Internal Revenue Service Form W-8.
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," 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, as
determined under U.S. tax principles, 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 under current Treasury regulations to be paid to a resident of that
country absent knowledge to the contrary. Effective January 1, 2000, the
Treasury regulations will require Non-U.S. Holders to file Internal Revenue
Service Form W-8 to obtain the benefit of any applicable
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<PAGE>
tax treaty providing for a lower rate of withholding tax on dividends. Such
form will contain the Non-U.S. Holder's name and address and a certification
as to the Non-U.S. Holder's status as a resident of the treaty country. If, as
the Company expects, the Common Stock remains publicly traded, i.e. traded on
a United States national exchange or in the over-the-counter market, Non-U.S.
Holders will not be required to obtain a U.S. Taxpayer Identification Number
in order to file a Form W-8. 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. Under Treasury regulations and under recently
enacted legislation, a Non-U.S. Holder that is a fiscally transparent entity
may not be entitled to the benefit of a lower rate of withholding provided by
an otherwise applicable tax treaty.
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) the Non-U.S. Holder is a nonresident alien
individual who 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 (which the Company does not believe that it is or is likely to
become) at any time within the shorter of the five year period preceding such
disposition or such Non-U.S. Holder's holding period. If the Company were or
were to become a USRPHC, gains realized upon a disposition of Common Stock by
a Non-U.S. Holder that 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. Because the
Company's Common Stock is listed on the NYSE, the Company believes that the
Common Stock is "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.
United States information reporting requirements and backup withholding tax
will apply to certain payments to certain noncorporate Non-U.S. Holders.
Information reporting will generally apply to payments of dividends on, and to
proceeds from the sale or redemption of Common Stock by a payor within the
United States to a holder of Common Stock who is not a corporation or an
otherwise "exempt recipient," including a Non-U.S. Holder that provides an
appropriate certification of foreign status. A payor within the United States
will be required to withhold 31% of any dividends paid on the Common Stock or
any payments of the proceeds from the sale or redemption of the Common Stock
unless the recipient (i) is a corporation or otherwise establishes an
exemption from the backup withholding rules or (ii) furnishes a correct U.S.
Taxpayer Identification Number and otherwise complies with the backup
withholding requirements.
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<PAGE>
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-U.S.
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).
Recently issued Treasury regulations would modify certain of the rules
discussed above with respect to payments on the Common Stock made after
December 31, 1999. In particular, a payor within the United States, including
the Company, will be required to withhold 31% of any payments of dividends on,
or proceeds from the sale of Common Stock within the United States to a Non-
U.S. Holder if such holder fails to provide an appropriate certification. In
the case of such payments by a payor within the United States to a foreign
partnership (other than a partnership that qualifies as a "withholding foreign
partnership" within the meaning of such Treasury regulations), the partners of
such partnership will be required to provide the certification discussed above
in order to establish an exemption from backup withholding tax and information
reporting requirements. Moreover, a payor may only rely on a certification
provided by a Non-U.S. Holder if such payor does not have actual knowledge or
a reason to know that any information or certification stated in such
certificate is unreliable.
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.
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<PAGE>
UNDERWRITING
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Goldman, Sachs & Co.,
Bear, Stearns & Co. Inc. and NationsBanc Montgomery Securities LLC are acting
as representatives (the "U.S. Representatives") of each of the Underwriters
named below (the "U.S. Underwriters"). Subject to the terms and conditions set
forth in a U.S. purchase agreement (the "U.S. Purchase Agreement") among the
Company, the Selling Stockholders and the U.S. Underwriters, and concurrently
with the sale of 1,550,000 shares of Common Stock to the International
Managers (as defined below), the Company and the Selling Stockholders have
agreed to sell to the U.S. Underwriters, and each of the U.S. Underwriters
severally and not jointly has agreed to purchase from the Company and the
Selling Stockholders, the number of shares of Common Stock set forth opposite
its name below.
<TABLE>
<CAPTION>
NUMBER OF
U.S. UNDERWRITER SHARES
---------------- ---------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated..............................................
Goldman, Sachs & Co................................................
Bear, Stearns & Co. Inc............................................
NationsBanc Montgomery Securities LLC..............................
---------
Total......................................................... 6,200,000
=========
</TABLE>
The Company and the Selling Stockholders have also entered into an
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, Goldman Sachs International, Bear, Stearns
International Limited and NationsBanc Montgomery Securities LLC are acting as
lead managers (the "Lead Managers"). Subject to the terms and conditions set
forth in the International Purchase Agreement, and concurrently with the sale
of 6,200,000 shares of Common Stock to the U.S. Underwriters pursuant to the
U.S. Purchase Agreement, the Company and the Selling Stockholders have agreed
to sell to the International Managers, and the International Managers
severally have agreed to purchase from the Company and the Selling
Stockholders, an aggregate of 1,550,000 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 term 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 such agreement are purchased. Under certain circumstances, under the U.S.
Purchase Agreement and the International Purchase Agreement, the commitments
of non-defaulting Underwriters 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. Representatives have advised the Company 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 options to the U.S.
Underwriters, exercisable for 30 days after the date of this Prospectus, to
purchase up to an aggregate of 930,000 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
these options 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
these options, each U.S. Underwriter will be obligated, subject to certain
conditions, to purchase a number of additional shares of
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<PAGE>
Common Stock proportionate to such U.S. Underwriter's initial amount reflected
in the foregoing table. The Over-Allotment Selling Stockholders also have
granted options to the International Managers, exercisable for 30 days after
the date of this Prospectus, to purchase up to an aggregate of 232,500
additional shares of Common Stock to cover over-allotments, if any, on terms
similar to those granted to the U.S. Underwriters.
The Company, certain stockholders and the Company's directors and executive
officers have agreed, subject to certain exceptions for pledges and, in the
case of the Company, the grant and exercise of employee stock options and the
issuance of shares in connection with acquisitions as long as all executive
officers, directors and other affiliates of the entity being acquired have
agreed in writing to the restrictions set forth below, 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 or a
registration statement on Form S-4 to register shares issuable in connection
with an acquisition), for a period of 90 days after the date of this
Prospectus, without the prior written consent of Merrill Lynch.
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 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-U.S. or
non-Canadian persons or to persons they believe intend to resell to persons
who are non-U.S. 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 U.S. persons or to Canadian persons or to
persons they believe intend to resell to U.S. or Canadian persons, except in
the case of transactions pursuant to the Intersyndicate Agreement.
The Company 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 of 1933, as amended, or to
contribute to payments the U.S. Underwriters and the International Managers
may be required to make in respect hereof.
Until the distribution of the Common Stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the Underwriters
and certain selling group members to bid for and purchase the Common Stock. As
an exception to these rules, the U.S. Representatives are permitted to engage
in certain transactions that stabilize the price of the Common Stock. Such
transactions consist of bids or purchases for the purpose of pegging, fixing
or maintaining the price of Common Stock.
If the Underwriters create a short position in the Common Stock in
connection with the Offerings, i.e., if they sell more shares of Common Stock
than are set forth on the cover page of the Prospectus, the U.S.
Representatives may reduce that short position by purchasing Common Stock in
the open market. The U.S. Representatives may also elect to reduce any short
position by exercising all or part of the over-allotment option described
above.
The U.S. Representatives may also impose a penalty bid on certain
Underwriters and selling group members. This means that if the U.S.
Representatives purchase shares of Common Stock in the open market to reduce
the Underwriters' short position or to stabilize the price of the Common
Stock, they may reclaim the amount of the selling concession from the
Underwriters and selling group members who sold those shares as part of the
Offerings.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher
than it might be in the absence of such purchases. The imposition of a
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<PAGE>
penalty bid might also have an effect on the price of the Common Stock to the
extent that it discourages resales of the Common Stock.
Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the
transactions described above may have on the price of the Common Stock. In
addition, neither the Company nor any of the Underwriters makes any
representation that the U.S. Representatives will engage in such transactions
or that such transactions, once commenced, will not be discontinued without
notice.
Each of Merrill Lynch and NationsBanc Montgomery Securities LLC has from
time to time provided investment banking advisory services to the Company, for
which it has received customary compensation, and may continue to do so in the
future. Each of Goldman, Sachs & Co. and Bear, Stearns & Co. Inc. has from
time to time provided investment banking advisory services to the Company, and
may continue to do so in the future. In connection with a recent acquisition
by the Company, Merrill Lynch and Bear, Stearns & Co. Inc. acquired shares of
Common Stock and were granted certain registration rights, which shares were
registered and sold in January 1998 pursuant to a shelf registration
statement. In connection with another recent acquisition by the Company,
Merrill Lynch and Goldman, Sachs & Co. acquired shares of Common Stock and
were granted certain registration rights. See "Shares Eligible for Future
Sale."
Merrill Lynch Specialists Inc. ("MLSI"), an affiliate of Merrill Lynch,
Pierce, Fenner & Smith Incorporated, one of the Underwriters, acts as a
specialist in the Common Stock of the Company pursuant to the rules of the New
York Stock Exchange, Inc. Under an exemption granted by the Securities and
Exchange Commission on July 31, 1995, MLSI will be permitted to carry on its
activities as a specialist in the Common Stock for the entire period of the
distribution of the Common Stock. The exemption is subject to the satisfaction
by MLSI of the conditions specified in the exemption.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Shaw Pittman Potts & Trowbridge, a partnership including
professional corporations, Washington, D.C. 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 historical consolidated financial statements of the Company as of
December 31, 1997 and 1996 and for each of the three years in the period ended
December 31, 1997 and the related schedule included in this Prospectus and
elsewhere in the Registration Statement, have been audited by Arthur Andersen
LLP, independent public accountants, as set forth in their reports. In those
reports, that firm states that, with respect to the operations of Brann
Holdings Limited and its subsidiaries and American List Corporation and its
subsidiaries, their opinions are based on the reports of other independent
public accountants, namely Price Waterhouse, Chartered Accountants and
Registered Auditors and Grant Thornton LLP. The financial statements and
supporting schedules referred to above have been included herein in reliance
upon the authority of those firms as experts in giving said reports.
The consolidated financial statements of Brann Holdings Limited and its
subsidiaries as of December 31, 1996 and 1995 and for each of the two years in
the period ended December 31, 1996, have been audited by Price Waterhouse,
Chartered Accountants, as set forth in its report thereon included herein.
The consolidated financial statements of American List Corporation and its
subsidiaries as of February 28, 1997 and for each of the years in the two-year
period then ended, have been audited by Grant Thornton LLP, independent
certified public accountants, as set forth in its report thereon included
herein.
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<PAGE>
AVAILABLE INFORMATION
The Company is subject to the information reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as
applicable to U.S. private issuers with securities registered thereunder, and,
in accordance therewith, files reports and other information with the
Securities and Exchange Commission (the "Commission"). Copies of reports,
proxy statements, information statements and other information filed by the
Company with the Commission can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and also are available for inspection at
the Commission's regional offices located at Citicorp Center, 500 West
Madison, Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center, Suite
1300, New York, New York 10048. Copies of such material also can be obtained
at prescribed rates from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549. The Company's Common Stock is
listed on the NYSE and such reports, proxy statements, information statements
and other information may also be inspected at the offices of the NYSE at 20
Broad Street, New York, New York 10005. Materials that the Company files
electronically with the Commission are available at the Commission's website
(http://www.sec.gov), which contains reports, proxy statements, information
statements and other information regarding issuers that file electronically
with the Commission.
The Company has filed with the Commission a Registration Statement on Form
S-3 (together with all amendments thereto, the "Registration Statement") under
the Securities Act with respect to the Offerings. This Prospectus does not
contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and
regulations of the Commission. Statements made in this Prospectus as to the
contents of any contract, agreement or other document referred to are not
necessarily complete and, with respect to each such contract, agreement or
other document filed as an exhibit to the Registration Statement, reference is
made to the exhibit for a more complete description of the matter involved,
and each such statement is deemed qualified in its entirety by such reference.
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<PAGE>
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by the Company with the Commission pursuant to
the Securities Act and the Exchange Act (File No. 1-12145) are incorporated by
reference in this Prospectus: (i) the Company's Annual Report on Form 10-K for
its fiscal year ended December 31, 1997, filed by the Company with the
Commission on March 31, 1998; (ii) the Company's Current Report on Form 8-K
dated November 25, 1997, filed by the Company with the Commission on January
21, 1998; (iii) the Company's Current Report on Form 8-K dated December 31,
1997, filed by the Company with the Commission on February 17, 1998; (iv) the
Company's Current Report on Form 8-K dated February 28, 1998, filed by the
Company with the Commission on March 30, 1998; (v) the Company's Current
Report on Form 8-K dated March 25, 1998, filed by the Company with the
Commission on April 3, 1998, as amended by the Company's Current Report on
Form 8-K/A, filed by the Company with the Commission on May 15, 1998; (vi) the
Company's Current Report on Form 8-K dated March 31, 1998, filed by the
Company with the Commission on May 5, 1998; (vii) the Company's Quarterly
Report on Form 10-Q for its fiscal quarter ended March 31, 1998, filed by the
Company with the Commission on May 15, 1998; and (viii) the description of the
Company's Common Stock contained in the Company's Registration Statement on
Form 8-A, filed with the Commission on September 9, 1996, including any
amendment or report filed for the purposes of updating such description.
All reports and other documents filed by the Company with the Commission
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent
to the date of this Prospectus and prior to the termination of the Offerings
shall be deemed to be incorporated herein by reference and to be a part hereof
on and from the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference in this
Prospectus shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or incorporated
herein by reference or in any other subsequently filed document that also is
or is deemed to be incorporated by reference herein modifies or supersedes
such statement. Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon the written or
oral request of such person, a copy of any and all documents incorporated by
reference in this Prospectus (not including, however, the exhibits to such
documents unless such exhibits are specifically incorporated by reference in
such information). Such requests should be directed to: Snyder Communications,
Inc., Two Democracy Center, 6903 Rockledge Drive, 15th Floor, Bethesda,
Maryland 20817; Attention: Secretary, telephone number (301) 468-1010.
41
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SNYDER COMMUNICATIONS, INC.
CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheet as of December 31, 1997 and March 31,
1998 (Unaudited)......................................................... F-2
Unaudited Condensed Consolidated Statement of Income for the three months
ended March 31, 1997 and 1998 ........................................... F-3
Unaudited Condensed Consolidated Statement of Cash Flows for the three
months ended March 31, 1997 and 1998..................................... F-4
Unaudited Condensed Consolidated Statement of Equity for the three months
ended March 31, 1998..................................................... F-5
Notes to Unaudited Condensed Consolidated Financial Statements............ F-6
Report of Independent Public Accountants.................................. F-10
Consolidated Balance Sheet as of December 31, 1996 and 1997............... F-11
Consolidated Statement of Income, including unaudited pro forma data, for
the years ended December 31, 1995, 1996 and 1997......................... F-12
Consolidated Statement of Equity for the years ended December 31, 1995,
1996 and 1997............................................................ F-13
Consolidated Statement of Cash Flows for the years ended December 31,
1995, 1996 and 1997...................................................... F-14
Notes to Consolidated Financial Statements................................ F-15
BRANN HOLDINGS LIMITED
Report of Independent Accountants......................................... F-39
AMERICAN LIST CORPORATION
Report of Independent Certified Public Accountants........................ F-40
</TABLE>
F-1
<PAGE>
SNYDER COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ ---------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents.................................. $ 81,915 $ 62,517
Marketable securities................................. 2,127 2,042
Accounts receivable, net of allowance for doubtful
accounts of $6,769 and $7,398 at December 31, 1997
and March 31, 1998, respectively..................... 157,743 198,901
Unbilled services..................................... 19,365 12,974
Other current assets.................................. 30,259 22,448
-------- --------
Total current assets................................ 291,409 298,882
-------- --------
Property and equipment, net............................. 42,202 50,738
Goodwill and other intangible assets, net............... 68,943 118,014
Deferred tax asset...................................... -- 49,944
Deposits and other assets............................... 8,148 7,101
-------- --------
Total assets........................................ $410,702 $524,679
======== ========
LIABILITIES AND EQUITY
Current liabilities:
Lines of credit....................................... $ 7,427 $ 2,523
Current maturities of long-term debt.................. 2,086 3,527
Accrued payroll....................................... 17,163 24,761
Accounts payable...................................... 97,404 119,763
Accrued expenses...................................... 85,511 88,923
Client advances....................................... 12,045 5,528
Unearned revenue...................................... 21,770 18,352
-------- --------
Total current liabilities........................... 243,406 263,377
-------- --------
Related party borrowings, net of current maturities..... 4,753 3,743
Long-term obligations under capital leases.............. 1,751 1,791
Long-term debt, net of current maturities............... 3,935 3,876
Other liabilities....................................... 6,997 3,155
Commitments and contingencies
Redeemable ESOP stock, 147 shares outstanding as of
December 31, 1997 and
March 31, 1998, respectively........................... 5,278 6,891
Equity:
Preferred stock, $.001 par value per share, 5,000 shares
authorized, none issued and outstanding at December 31,
1997 and March 31, 1998, respectively.................. -- --
Common stock, $.001 par value per share, 120,000 shares
authorized, 60,470 and 62,266 shares issued and
outstanding at December 31, 1997 and March 31, 1998,
respectively........................................... 60 62
Additional paid-in capital.............................. 152,086 266,293
Treasury stock, at cost, 1,059 and 1,096 shares at
December 31, 1997 and March 31, 1998, respectively..... (5,473) (7,575)
Accumulated other comprehensive income.................. 477 1,275
Retained deficit........................................ (2,568) (18,209)
-------- --------
Total equity........................................ 144,582 241,846
-------- --------
Total liabilities and equity........................ $410,702 $524,679
======== ========
</TABLE>
The accompanying notes are an integral part of this condensed consolidated
balance sheet.
F-2
<PAGE>
SNYDER COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
----------------------
1997 1998
---------- ----------
(IN THOUSANDS EXCEPT
PER SHARE DATA)
<S> <C> <C>
Revenues............................................... $ 118,583 $ 146,853
Operating expenses:
Cost of services..................................... 82,906 97,493
Selling, general, and administrative expenses........ 24,285 29,369
Compensation to stockholders......................... 1,427 --
ESOP expense......................................... 1,245 --
Acquisition and related costs........................ 16,181 33,953
---------- ----------
Loss from operations................................... (7,461) (13,962)
Interest income (expense), net......................... (249) 738
---------- ----------
Loss from continuing operations before income taxes.... (7,710) (13,224)
Income tax (provision) benefit......................... (2,288) 2,346
---------- ----------
Loss from continuing operations........................ (9,998) (10,878)
Loss from discontinued operations...................... (558) --
---------- ----------
Net loss............................................. $ (10,556) $ (10,878)
========== ==========
Historical net loss per share:
Basic net loss per share
Loss from continuing operations...................... $ (0.18) $ (0.18)
========== ==========
Net loss............................................. $ (0.19) $ (0.18)
========== ==========
Diluted net loss per share
Loss from continuing operations...................... $ (0.18) $ (0.18)
========== ==========
Net loss............................................. $ (0.19) $ (0.18)
========== ==========
Pro forma net loss per share (Note 4):
Basic net loss per share
Loss from continuing operations...................... $ (0.19) $ (0.21)
========== ==========
Net loss............................................. $ (0.20) $ (0.21)
========== ==========
Diluted net loss per share
Loss from continuing operations...................... $ (0.19) $ (0.21)
========== ==========
Net loss............................................. $ (0.20) $ (0.21)
========== ==========
</TABLE>
The accompanying notes are an integral part of this condensed consolidated
financial statement.
F-3
<PAGE>
SNYDER COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE
THREE MONTHS
ENDED MARCH 31,
------------------
1997 1998
-------- --------
(IN THOUSANDS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $(10,556) $(10,878)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization............................ 3,008 4,081
Noncash charge from accelerated vesting of Brann
Holdings options........................................ 9,097 --
Noncash ESOP expense..................................... 1,293 --
Loss on disposal of assets............................... 63 67
Other noncash amounts.................................... 1,372 (6,803)
Changes in assets and liabilities:
Accounts receivable, net................................. (10,211) (23,023)
Unbilled services........................................ (2,842) 7,326
Deposits and other assets................................ 886 274
Other current assets..................................... 202 1,466
Accrued payroll, accounts payable and accrued expenses... 5,903 29,709
Unearned revenue......................................... (3,062) (5,472)
Client advances.......................................... 667 (7,959)
Impact from differing fiscal year ends................... (2,761) --
-------- --------
Net cash used in operating activities.................. (6,941) (11,212)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of subsidiaries, net of cash acquired............ (4,398) 1,884
Purchase of property and equipment........................ (7,007) (9,424)
Proceeds from sale of equipment........................... 126 --
Net sales of marketable securities........................ 235 243
Purchase of intangible assets............................. (3,694) (702)
Note and net advances to stockholders..................... (134) 276
Impact from differing fiscal year ends.................... (446) --
-------- --------
Net cash used in investing activities.................. (15,318) (7,723)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term notes payable to limited partners
and others............................................... (1,830) --
Proceeds from issuance of subordinated debentures due to
related parties.......................................... 6,115 245
Distributions and dividends............................... (4,211) (2,175)
Acquisition of treasury stock............................. (1,590) (2,097)
Repayment of long-term debt............................... -- (5,617)
Redemption of mandatorily redeemable preferred stock...... (5,110) --
Net borrowings (repayments) on line of credit............. 577 (4,246)
Payments on capital lease obligations..................... (390) (518)
Proceeds from exercise of options......................... 5,957 7,172
Proceeds from issuance of common stock.................... 105 6,874
Impact from differing fiscal year ends.................... 3,704 --
-------- --------
Net cash provided by (used in) financing activities.... 3,327 (362)
Effect of exchange rate changes........................... 561 (101)
-------- --------
Net decrease in cash and equivalents...................... (18,371) (19,398)
Cash and equivalents, beginning of period................. 70,916 81,915
-------- --------
Cash and equivalents, end of period....................... $ 52,545 $62,517
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest including dividends on mandatorily
redeemable preferred stock............................... 229 280
Cash paid for income taxes................................ 215 2,171
SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES:
Equipment purchased under capital leases.................. 437 201
Distribution of non-operating assets by a subsidiary...... -- 947
Issuance of shares of common stock for purchase of
subsidiaries............................................. -- 50,496
Issuance of common stock related to stock appreciation
rights................................................... -- 3,484
</TABLE>
The accompanying notes are an integral part of this condensed consolidated
statement of cash flows.
F-4
<PAGE>
SNYDER COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENT OF EQUITY FOR THE THREE MONTHS ENDED MARCH 31,
1998
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON ACCUMULATED
COMMON STOCK ADDITIONAL RETAINED OTHER
STOCK PAR PAID-IN EARNINGS TREASURY COMPREHENSIVE COMPREHENSIVE
SHARES VALUE CAPITAL (DEFICIT) STOCK INCOME TOTAL INCOME
---------- ------ ---------- --------- -------- ------------- -------- -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1997, as previously
restated for poolings.. 60,470,000 $60 $152,086 $ (2,568) $(5,473) $ 477 $144,582 $ --
Distributions and
dividends............. -- -- -- (3,149) -- -- (3,149) --
Exercise of stock
options and subsidiary
stock appreciation
rights................ 386,000 -- 12,517 -- 20 -- 12,537 --
Issuance of shares for
purchase of
subsidiaries.......... 1,211,000 2 50,383 -- -- -- 50,385 --
Reissuance of treasury
stock by subsidiary
prior to Merger with
SCI................... 199,000 -- 6,873 -- -- -- 6,873 --
Foreign currency
translation
adjustment............ -- -- -- -- -- 739 739 739
Unrealized gain on
marketable
securities............ -- -- -- -- -- 59 59 59
Purchases and
retirement of treasury
stock................. -- -- 86 -- (2,122) -- (2,036) --
Reclassification of
redeemable ESOP
stock................. -- -- -- (1,613) -- -- (1,613) --
Tax benefit from
taxable merger
transaction........... -- -- 44,348 -- -- -- 44,348 --
Net loss............... -- -- -- (10,879) -- -- (10,879) (10,879)
--------
Comprehensive loss..... -- -- -- -- -- -- -- $(10,081)
---------- --- -------- -------- ------- ------ -------- ========
Balance, March 31,
1998................... 62,266,000 $62 $266,293 $(18,209) $(7,575) $1,275 $241,846 --
========== === ======== ======== ======= ====== ========
</TABLE>
The accompanying notes are an integral part of this condensed consolidated
statement of equity.
F-5
<PAGE>
SNYDER COMMUNICATIONS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
(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, reorganized on September 24, 1996 (the "Reorganization"), upon
the effectiveness of the initial public offering of its common stock. After
consummation of the Reorganization, Snyder Communications, Inc. owned 100
percent of the stock of SMS and, directly and indirectly (through its
ownership of SMS), 100 percent of the interests in the Partnership (the
consolidated entity will be referred to herein as "SCI" or "Snyder
Communications").
During the first quarter of 1998, SCI issued 7,620,568 shares in pooling of
interests transactions (the "1998 Mergers"). The transactions include the
acquisitions of Health Products Research, Inc. ("HPR"), Publimed Promotions
S.A. ("Publimed"), Blau Marketing Technologies, Inc. ("Blau") and Arnold
Communications, Inc. ("Arnold"). HPR and Publimed both provide sales and
marketing services to the pharmaceutical industry. HPR operates primarily in
the U.S. and provides strategic and tactical sales force market planning and
evaluation services to leading pharmaceutical and medical device
manufacturers. Publimed markets medical products for pharmaceutical companies
in France utilizing field sales. Blau's operations are conducted throughout
the U.S. and consist primarily of strategic consulting, creative services,
program design and implementation, consumer database management, response
tracking and analysis, interactive services and production management.
Arnold's operations are also conducted throughout the U.S. , and they include
creative services, direct marketing, new media marketing, database management
services and full-service public relations for its clients.
The accompanying condensed consolidated financial statements have been
retroactively restated to reflect the combined financial position and combined
results of operations and cash flows of the 1998 Mergers, giving effect to
these acquisitions as if they had occurred at the beginning of the earliest
period presented (the combined entity will be referred to herein as the
"Company"). The condensed consolidated balance sheet for all periods presented
gives effect to the conversion of the 1998 Mergers common stock to 7,620,568
shares of SCI common stock. Certain amounts previously presented have been
reclassified to conform to the March 31, 1998 presentation.
Snyder Communications provides fully integrated outsourced marketing
solutions. The Company identifies high value market segments; designs and
implements marketing programs to reach them; initiates and closes sales on
behalf of its clients; and provides customer care, retention and loyalty
marketing services. The Company's resources include proprietary databases of
targeted customers and small businesses; database management services;
pharmaceutical detailing services; pharmaceutical consulting; medical
education communications; proprietary product sampling programs and
publications; sponsored information displays in proprietary locations;
marketing program consultants; creative services; field sales and marketing
representatives; customer service representatives; and direct mail and
fulfillment capabilities. The Company's operations are conducted throughout
the United States, the United Kingdom ("U.K."), France, Ireland and Hungary.
F-6
<PAGE>
SNYDER COMMUNICATIONS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The accompanying unaudited condensed consolidated financial statements have
been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. As a result, certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted. The
Company believes that the disclosures made are adequate to make the
information presented not misleading. The condensed consolidated financial
statements reflect all adjustments (consisting of only normal recurring
adjustments) which, in the opinion of management, are necessary to present
fairly the financial position, results of operations and cash flows of the
Company as of March 31, 1998 and for the three months ended March 31, 1997 and
1998. Operating results for the three month period ended March 31, 1998 are
not necessarily indicative of the results that may be expected for the year
ended December 31, 1998. The unaudited condensed consolidated financial
statements should be read in conjunction with the financial statements and
footnotes thereto included elsewhere in this Prospectus.
2. BUSINESS COMBINATIONS
The following details revenues and net income (loss) for each of the three
months ended March 31, 1997 and 1998 of SCI and all entities acquired by SCI
through pooling of interests combinations ("Pooled Entities") through the
dates of their respective mergers. The SCI amounts include the financial
results of the original operations of SCI for the entire period and the
financial results of the Pooled Entities for the period subsequent to the
dates of their respective mergers.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
-------------------
1997 1998
--------- --------
(IN THOUSANDS)
<S> <C> <C>
Revenues:
SCI................................................... $ 33,085 $107,049
Pooled Entities....................................... 85,498 39,804
--------- --------
$118,583 $146,853
========= ========
Net Income (Loss):
SCI................................................... $ (12,484) $ (1,428)
Pooled Entities....................................... 1,928 (9,450)
--------- --------
$ (10,556) $(10,878)
========= ========
</TABLE>
During the three months ended March 31, 1997, SCI recorded $16.2 million in
non-recurring acquisition and related costs, and the Pooled Entities recorded
$3.2 million in non-recurring costs which consisted of $1.4 million in
compensation to stockholders, $1.2 million in ESOP expense and $0.6 million
loss from discontinued operations. Excluding the non-recurring costs and
assuming that all of the Pooled Entities had been taxed similarly to C
corporations, SCI would have recorded approximately $3.1 million in net income
for the three months ended March 31, 1997 and the Pooled Entities would have
recorded approximately $3.4 million in net income for the same period for a
combined net income per share from continuing operations and excluding non-
recurring costs of $0.11.
During the three months ended March 31, 1998, SCI and the Pooled Entities
recorded $16.9 million and $17.0 million, respectively, in non-recurring
acquisition and related costs. Excluding the non-recurring acquisition and
related costs and assuming that all of the Pooled Entities had been taxed
similarly to C corporations, SCI and the Pooled Entities would have recorded
approximately $11.7 million and $1.2 million, respectively in net income for
the three months ended March 31, 1998 for a combined net income per share from
continuing operations and excluding non-recurring costs of $0.21.
During the first quarter of 1998 SCI acquired CLI Pharma (March 25, 1998)
and HealthCare Promotions ("HCP") (February 13, 1998) in transactions which
have been accounted for as purchase business combinations.
F-7
<PAGE>
SNYDER COMMUNICATIONS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The total consideration paid for first quarter 1998 purchase business
combinations was approximately $50.5 million consisting of 1,261,000 shares of
SCI common stock and $5 million in cash. Based upon a preliminary allocation
of purchase consideration, these purchase business combinations have resulted
in additional goodwill of approximately $48.8 million.
The following table presents pro forma financial information as if the
Company's 1997 purchase of Halliday Jones Sales Ltd. and its 1998 purchase
business combinations had been consummated at the beginning of each of the
periods presented and all of the Company's operations had been taxed similarly
to a C corporation (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
------------------
1997 1998
-------- --------
(UNAUDITED)
<S> <C> <C>
Pro Forma Revenues....................................... $135,463 $157,644
Pro Forma Loss from Continuing Operations................ (9,807) (10,393)
Pro Forma Net Loss....................................... (10,365) (10,393)
Pro Forma Basic Net Loss Per Share....................... (0.18) (0.17)
Pro Forma Diluted Net Loss Per Share..................... (0.18) (0.17)
</TABLE>
During the three months ended March 31, 1997, the Company recorded $18.9
million in non-recurring costs, consisting of $16.2 million in acquisition and
related costs, $1.4 million in compensation to stockholders and $1.3 million
in ESOP expense. Excluding these non-recurring costs, the Company would have
recorded $6.7 million in pro forma net income for the three months ended March
31, 1997 and pro forma basic and diluted net income per share of $0.12 and
$0.11, respectively, for the period.
During the three months ended March 31, 1998, the Company recorded $34.0
million in non-recurring acquisition and related costs. Excluding the non-
recurring acquisition and related costs, the Company would have recorded $13.3
million in pro forma net income for the three months ended March 31, 1998 and
pro forma basic and diluted net income per share of $0.21 for the period.
3. ACQUISITION AND RELATED COSTS:
During the three months ended March 31, 1998, SCI recorded $34.0 million in
non-recurring acquisition and related costs. These costs are primarily related
to the consummation of the 1998 Mergers and consist of investment banking
fees, expenses associated with stock appreciation rights, other professional
service fees, tax payments and other contractual payments. In addition, this
amount includes a charge of approximately $4.7 million for costs necessary to
implement the Company's first quarter 1998 consolidation of certain U.S. and
U.K. operations. The charge consists of approximately $2.3 million to
consolidate and terminate lease obligations and write off leasehold
improvements at the office facilities of three acquired subsidiaries and $2.4
million in severance and related costs to terminate the employment of 66
management and administrative personnel at the acquired subsidiaries. As of
March 31, 1998, ten employees had terminated employment with the Company while
$0.5 million in severance and related costs had been charged against the
liability.
4. INCOME TAXES:
The Company's effective tax rate for the three months ended March 31, 1997
and 1998 differs from the federal statutory rate due primarily to the
nondeductibility of certain non-recurring acquisition costs, state income
taxes, the different tax status of certain of the Pooled Entities prior to
their merger with SCI and different statutory rates for the Company's
international operations.
5. PRO FORMA INCOME DATA:
The pro forma net loss per share amounts include a provision for federal and
state income taxes as if the Company had been a taxable C corporation for all
periods presented. The pro forma income tax rate reflects the
F-8
<PAGE>
SNYDER COMMUNICATIONS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
combined federal and state income taxes of approximately 41.5 percent and 38.0
percent for the three months ended March 31, 1997 and 1998. These tax
provisions exceed the Company's statutory rate due to the recognition of
certain acquisition and related costs which are not deductible for income tax
purposes.
The table below presents this pro forma calculation of net loss (in
thousands):
<TABLE>
<CAPTION>
FOR THE THREE
MONTHS ENDED
MARCH 31,
------------------
1997 1998
-------- --------
<S> <C> <C>
Pro forma net loss data (unaudited):
Historical loss from continuing operations before income
taxes.................................................... $ (7,710) $(13,224)
Pro forma benefit (provisions) for income taxes........... (2,846) 792
-------- --------
Pro forma loss from continuing operations................. (10,556) (12,432)
Loss from discontinued operations, less applicable pro
forma income taxes....................................... (307) --
-------- --------
Pro forma net loss........................................ $(10,863) $(12,432)
======== ========
</TABLE>
6. NEW ACCOUNTING PRONOUNCEMENTS:
The Company adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income," ("SFAS 130"), during the first quarter of
1998. SFAS 130 requires companies to report as comprehensive income all
changes in equity during a period, except those resulting from investments and
distributions to owners, in financial statements for the period in which they
are recognized. Included within accumulated other comprehensive income are the
cumulative amounts for foreign currency translation adjustments and unrealized
gains and losses on marketable securities. The cumulative foreign currency
translation adjustment was $1,152,000 and $413,000 as of March 31, 1998 and
December 31, 1997, respectively. The cumulative gain on marketable securities
was $123,000 and $64,000 as of March 31, 1998 and December 31, 1997,
respectively.
7. TAX BENEFIT FROM TAXABLE MERGER TRANSACTION:
SCI will receive a future tax benefit arising from the tax treatment of its
first quarter 1998 merger with Arnold Communications, Inc. In accordance with
generally accepted accounting principles, because the merger has been
accounted for as a pooling of interests, the net estimated future tax benefit
of approximately $44.4 million is reflected as a deferred tax asset in the
accompanying condensed consolidated balance sheet at March 31, 1998 with the
offsetting credit made to additional paid-in-capital.
8. NET INCOME PER SHARE:
A reconciliation of the shares used to compute basic and diluted earnings
per share follows. For each of the periods presented, the same net income used
to compute basic earnings per share was used to compute diluted earnings per
share.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
--------------------
1997 1998
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Weighted average shares outstanding for the period
used in computation of basic net income per
share............................................. 55,413 60,135
Diluted impact of stock options.................... -- --
---------- ----------
Shares used in computation of diluted net income
per share......................................... 55,413 60,135
</TABLE>
For the three months ended March 31, 1997 and 1998, there existed weighted
average common stock equivalents of 1,407,095 and 2,030,944, respectively,
which are not included in the calculation of diluted net income per share
because they were antidilutive for the periods.
F-9
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Snyder Communications, Inc.:
We have audited the accompanying consolidated balance sheet of Snyder
Communications, Inc. and subsidiaries (the "Company") as of December 31, 1996
and 1997, and the related consolidated statements of income, equity, and cash
flows for each of the years in the three year period ended December 31, 1997.
These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits. We did not audit the
1995 and 1996 financial statements of American List Corporation or Brann
Holdings Limited included in the consolidated financial statements of the
Company, which statements reflect total assets constituting 17 percent of the
related consolidated total as of December 31, 1996, and revenues constituting
19 percent and 15 percent of the related consolidated totals in 1995 and 1996,
respectively. These statements were audited by other auditors whose reports
thereon have been furnished to us, and our opinion expressed herein, insofar
as it relates to the amounts included for American List Corporation or Brann
Holdings Limited, is based solely upon the reports of the other auditors.
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 and the reports of other
auditors provide a reasonable basis for our opinion.
In our opinion, based upon our audits and the reports of the other auditors,
the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Snyder Communications, Inc. and
subsidiaries as of December 31, 1996 and 1997, and the results of their
operations and their cash flows for each of the years in the three year period
ended December 31, 1997, in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
Washington, D.C.
April 15, 1998
F-10
<PAGE>
SNYDER COMMUNICATIONS, INC.
CONSOLIDATED BALANCE SHEET
(NOTE 1)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1997
-------- --------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
------
Current assets:
Cash and equivalents..................................... $ 70,916 $ 81,915
Marketable securities.................................... 6,985 2,127
Accounts receivable, net of allowance for doubtful
accounts of $2,432 and $6,769 at December 31, 1996 and
1997, respectively...................................... 122,145 157,743
Unbilled services........................................ 13,720 19,365
Other current assets..................................... 15,518 30,259
-------- --------
Total current assets................................... 229,284 291,409
-------- --------
Property and equipment, net................................ 33,920 42,202
Goodwill and other intangible assets, net.................. 23,432 68,943
Deposits and other assets.................................. 9,354 8,148
-------- --------
Total assets........................................... $295,990 $410,702
======== ========
LIABILITIES AND EQUITY
----------------------
Current liabilities:
Lines of credit.......................................... $ 6,772 $ 7,427
Current maturities of long-term debt..................... 6,920 2,086
Accrued payroll.......................................... 7,461 17,163
Accounts payable......................................... 80,529 97,404
Accrued expenses......................................... 54,305 85,511
Client advances.......................................... 8,152 12,045
Unearned revenue......................................... 17,885 21,770
-------- --------
Total current liabilities.............................. 182,024 243,406
-------- --------
Related party borrowings, net of current maturities........ 11,697 4,753
Mandatorily redeemable preferred stock, held by related
parties................................................... 8,452 --
Long-term obligations under capital leases................. 2,413 1,751
Long-term debt, net of current maturities.................. 14,145 3,935
Other liabilities (including deferred income taxes of $283
and $762 at December 31, 1996 and 1997, respectively)..... 4,532 6,997
Commitments and contingencies
Redeemable ESOP stock, 72 and 147 shares outstanding at
December 31, 1996 and 1997, respectively.................. 2,452 5,278
Equity:
Preferred stock, $.001 par value per share, 5,000 shares
authorized, none issued and outstanding at December 31,
1996 and 1997............................................. -- --
Common stock, $.001 par value per share, 120,000 shares
authorized, 56,868 and 60,470 shares issued and
outstanding at December 31, 1996 and 1997, respectively... 57 60
Additional paid-in capital................................. 58,005 152,086
Treasury stock, at cost, 1,146 and 1,059 shares at December
31, 1996 and 1997, respectively........................... (9,432) (5,473)
Accumulated other comprehensive income..................... 176 477
Unearned ESOP compensation................................. (1,566) --
Retained earnings (deficit)................................ 23,035 (2,568)
-------- --------
Total equity........................................... 70,275 144,582
-------- --------
Total liabilities and equity........................... $295,990 $410,702
======== ========
</TABLE>
The accompanying notes are an integral part of this consolidated balance sheet.
F-11
<PAGE>
SNYDER COMMUNICATIONS, INC.
CONSOLIDATED STATEMENT OF INCOME
(NOTE 1)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------
1995 1996 1997
------------ ------------ -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Revenues............................ $ 334,090 $ 428,897 $ 520,040
Operating expenses:
Cost of services.................. 215,059 297,942 363,006
Selling, general and
administrative expenses.......... 70,758 89,041 107,427
Compensation to stockholders...... 9,439 7,363 13,623
ESOP expense...................... 2,172 6,553 5,411
Acquisition and related costs..... -- -- 39,431
------------ ------------ -------------
Income (loss) from operations....... 36,662 27,998 (8,858)
Interest expense, including amounts
to related parties of $1,785,
$2,728 and $1,099 in 1995, 1996,
and 1997, respectively............. (3,616) (5,047) (3,474)
Investment income................... 1,962 2,647 3,083
------------ ------------ -------------
Income (loss) from continuing
operations before income taxes..... 35,008 25,598 (9,249)
Income tax provision................ (9,892) (5,994) (6,246)
------------ ------------ -------------
Income (loss) from continuing
operations......................... 25,116 19,604 (15,495)
Loss from discontinued operations... -- (1,498) (1,507)
------------ ------------ -------------
Income (loss) before extraordinary
item............................... 25,116 18,106 (17,002)
Extraordinary item, less applicable
income taxes of $806............... -- (1,215) --
------------ ------------ -------------
Net income (loss)................. $ 25,116 $ 16,891 $ (17,002)
============ ============ =============
Historical net income (loss) per
share:
Basic net income (loss) per share
Income (loss) from continuing
operations....................... $ .48 $ .37 $ (.27)
============ ============ =============
Net income (loss)................. $ .48 $ .32 $ (.30)
============ ============ =============
Diluted net income (loss) per share
Income (loss) from continuing
operations....................... $ .48 $ .37 $ (.27)
============ ============ =============
Net income (loss)................. $ .48 $ .32 $ (.30)
============ ============ =============
Pro forma net income (loss) per
share (unaudited) (Note 3):
Basic net income (loss) per share
Income (loss) from continuing
operations....................... $ .41 $ .27 $ (.33)
============ ============ =============
Net income (loss)................. $ .41 $ .23 $ (.35)
============ ============ =============
Diluted net income (loss) per share
Income (loss) from continuing
operations....................... $ .41 $ .27 $ (.33)
============ ============ =============
Net income (loss)................. $ .41 $ .23 $ (.35)
============ ============ =============
</TABLE>
The accompanying notes are an integral part of this consolidated statement of
income.
F-12
<PAGE>
SNYDER COMMUNICATIONS, INC.
CONSOLIDATED STATEMENT OF EQUITY
(NOTE 1)
<TABLE>
<CAPTION>
COMMON ACCUMULATED
COMMON STOCK ADDITIONAL RETAINED LIMITED UNEARNED OTHER
STOCK PAR PAID-IN EARNINGS PARTNERS' ESOP TREASURY COMPREHENSIVE COMPREHENSIVE
SHARES VALUE CAPITAL (DEFICIT) DEFICIT COMPENSATION STOCK INCOME TOTAL INCOME
---------- ------ ---------- --------- --------- ------------ -------- ------------- -------- -------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December
31, 1994, as
previously
restated for
poolings........ 14,490,000 $14 $ 7,619 $ 13,527 $(1,410) $ -- $ (438) $ 63 $ 19,375 $ --
Pooling of 1998
Mergers........ 8,161,000 9 6,122 4,353 -- (5,249) (1,903) 66 3,398 --
---------- --- -------- -------- ------- ------- ------- ---- -------- --------
Balance, December
31, 1994, as
restated for
poolings........ 22,651,000 23 13,741 17,880 (1,410) (5,249) (2,341) 129 22,773 --
Pooling of
Bounty Group
Holdings
Ltd. .......... 1,327,000 1 171 (5,008) -- -- -- -- (4,836) --
Proceeds from
sale of
Partnership
interest, net
of income taxes
of $815,000.... -- -- 1,221 -- 14 -- -- -- 1,235 --
Distributions
and dividends.. -- -- -- (7,809) (3,853) -- -- -- (11,662) --
Issuance of
common stock... 819,000 1 226 -- -- -- -- -- 227 --
Exercise of
stock options.. 480,000 -- 827 -- -- -- -- -- 827 --
Foreign currency
translation
adjustment..... -- -- -- -- -- -- -- 101 101 101
Unrealized gain
on marketable
securities..... -- -- -- -- -- -- -- 306 306 306
Purchases and
retirements of
treasury
stock.......... (28,000) -- (517) -- -- -- (1,133) -- (1,650) --
ESOP
obligation..... -- -- -- -- -- (1,729) -- -- (1,729) --
Release of ESOP
shares......... -- -- (54) (142) -- 2,654 -- -- 2,458 --
Reclassification
to redeemable
ESOP stock..... -- -- 5 -- -- -- -- -- 5 --
Net income...... -- -- -- 21,316 3,800 -- -- -- 25,116 25,116
--------
Comprehensive
income......... -- -- -- -- -- -- -- -- -- $ 25,523
---------- --- -------- -------- ------- ------- ------- ---- -------- ========
Balance, December
31, 1995........ 25,249,000 25 15,620 26,237 (1,449) (4,324) (3,474) 536 33,171 --
Distributions
and dividends.. -- -- -- (24,988) (8,612) -- -- -- (33,600) --
Net proceeds
from secondary
stock offering
and other stock
issuances...... 4,271,000 4 59,364 -- -- -- -- -- 59,368 --
Reorganization.. 28,959,000 29 (15,558) 7,630 7,899 -- -- -- -- --
Exercise of
stock options.. 63,000 -- 1,005 -- -- -- -- -- 1,005 --
Foreign currency
translation
adjustment..... -- -- -- -- -- -- -- (205) (205) (205)
Unrealized loss
on marketable
securities..... -- -- -- -- -- -- -- (155) (155) (155)
Purchases and
retirements of
treasury
stock.......... (1,674,000) (1) (2,768) (34) -- -- (6,433) -- (9,236) --
Reissuance of
treasury
stock.......... -- -- 96 -- -- -- 475 -- 571 --
Release of ESOP
shares......... -- -- 2,429 (539) -- 2,758 -- -- 4,648 --
Reclassification
to redeemable
ESOP stock..... -- -- (2,183) -- -- -- -- -- (2,183) --
Net income...... -- -- -- 14,729 2,162 -- -- -- 16,891 16,891
--------
Comprehensive
income......... -- -- -- -- -- -- -- -- -- $ 16,531
---------- --- -------- -------- ------- ------- ------- ---- -------- ========
Balance, December
31, 1996........ 56,868,000 57 58,005 23,035 -- (1,566) (9,432) 176 70,275
Distributions
and dividends.. -- -- -- (7,096) -- -- -- -- (7,096) --
Net proceeds
from secondary
stock
offering....... 1,850,000 2 42,711 -- -- -- -- -- 42,713 --
Exercise of
stock options.. 1,789,000 2 39,179 -- -- -- -- -- 39,181 --
Issuance of
shares for
purchase of
subsidiaries... 492,000 -- 13,320 -- -- -- -- -- 13,320 --
Foreign currency
translation
adjustment..... -- -- -- -- -- -- -- 265 265 265
Unrealized gain
on marketable
securities..... -- -- -- -- -- -- -- 36 36 36
Purchases and
retirements of
treasury
stock.......... (634,000) (1) (4,223) -- -- -- 3,011 -- (1,213) --
Reissuance of
treasury
stock.......... 105,000 -- 3,949 -- -- -- 948 -- 4,897 --
Release of ESOP
shares......... -- -- 1,971 -- -- 1,566 -- -- 3,537 --
Reclassification
to redeemable
ESOP stock..... -- -- (2,826) -- -- -- -- -- (2,826) --
Net loss........ -- -- -- (17,002) -- -- -- -- (17,002) (17,002)
--------
Comprehensive
income (loss).. -- -- -- -- -- -- -- -- -- $(16,701)
========
Impact from
differing
fiscal year-
ends (Note 1).. -- -- -- (1,505) -- -- -- -- (1,505)
---------- --- -------- -------- ------- ------- ------- ---- --------
Balance, December
31, 1997........ 60,470,000 $60 $152,086 $ (2,568) $ -- $ -- $(5,473) $477 $144,582
========== === ======== ======== ======= ======= ======= ==== ========
</TABLE>
The accompanying notes are an integral part of this consolidated statement of
equity.
F-13
<PAGE>
SNYDER COMMUNICATIONS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(NOTE 1)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------
1995 1996 1997
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)......................... $ 25,116 $ 16,891 $ (17,002)
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation and amortization............ 11,438 12,961 14,655
Loss on repayment of subordinated debt... -- 2,021 --
Noncash charge from accelerated vesting
of Brann Holdings options............... -- -- 9,097
Noncash ESOP expense..................... -- 5,282 4,851
Deferred taxes........................... (96) (3,168) (7,423)
Loss on disposal of assets............... 139 820 3,357
Other noncash amounts.................... 32 2,052 946
Changes in assets and liabilities:
Accounts receivable, net................. (11,212) (37,307) (36,788)
Unbilled services........................ 196 (4,868) (5,545)
Deposits and other assets................ (4,776) (495) 141
Other current assets..................... (1,165) (1,569) 1,663
Accrued payroll, accounts payable and
accrued expenses........................ 10,917 38,493 52,430
Unearned revenue......................... 1,088 8,084 5,837
Impact from differing year ends.......... -- -- (2,761)
---------- ---------- ----------
Net cash provided by operating
activities............................ 31,677 39,197 23,458
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of subsidiaries.................. (5,637) -- (22,066)
Purchase of property and equipment........ (9,611) (12,217) (17,771)
Proceeds from sale of equipment........... 168 245 219
Net (purchases) sales of marketable
securities............................... (570) 2,021 5,300
Purchase of intangible assets............. (3,395) (2,845) (5,088)
Note and net advances to stockholders..... (2,765) 30 1,467
Impact from differing year ends........... -- -- (446)
---------- ---------- ----------
Net cash used in investing activities.. (21,810) (12,766) (38,385)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term notes payable to
limited partners and others.............. (4,984) (3,483) (31,090)
Proceeds from issuance of subordinated
debentures due to related parties........ 9,531 294 --
Repayment of subordinated debentures due
to related parties....................... -- (6,900) --
Net proceeds from sale of partnership
interest................................. 1,235 -- --
Debt issuance costs....................... (604) (25) --
Distributions and dividends............... (10,609) (30,325) (9,547)
Acquisition of treasury stock............. (1,435) (6,641) (1,213)
Net increase in short term borrowings..... 2,500 500 --
Repayment of long-term debt............... 915 1,592 7,101
Proceeds from mandatorily redeemable
preferred stock.......................... -- 3,238 --
Redemption of mandatorily redeemable
preferred stock.......................... -- -- (8,330)
Net borrowings (repayments) on line of
credit................................... 5,601 (6,620) (621)
Payments on capital lease obligations..... (1,123) (1,079) (2,052)
Proceeds from exercise of options......... -- 425 25,128
Proceeds from public offerings............ 166 60,233 42,713
Impact from differing year ends........... -- -- 3,704
---------- ---------- ----------
Net cash provided by financing
activities............................ 1,193 11,209 25,793
Effect of exchange rate changes........... (295) 1,180 133
---------- ---------- ----------
Net increase in cash and equivalents...... 10,765 38,820 10,999
Cash and equivalents, beginning of
period................................... 21,331 32,096 70,916
---------- ---------- ----------
Cash and equivalents, end of period....... $ 32,096 $ 70,916 $ 81,915
========== ========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest including dividends
on mandatorily redeemable preferred
stock.................................... 2,485 3,872 1,425
Cash paid for income taxes................ 7,573 8,225 6,470
SUPPLEMENTAL DISCLOSURE OF NONCASH
ACTIVITIES:
Equipment purchased under capital leases.. 526 3,558 293
Distribution of note receivable from
stockholder to SMS Stockholders.......... 437 2,725 --
Issuance of shares of common stock for
purchase of subsidiaries................. 215 -- 13,320
Issuance of note for purchase of treasury
stock.................................... -- 2,595 --
</TABLE>
The accompanying notes are an integral part of this consolidated statement of
cash flows.
F-14
<PAGE>
SNYDER COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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, reorganized on September 24, 1996 (the "Reorganization"), upon
the effectiveness of the initial public offering of its common stock.
Prior to the Reorganization, SMS owned 63.85 percent of the Partnership and
the limited partners owned the remaining 36.15 percent. The Reorganization
resulted 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. owned 100 percent of the stock of
SMS and, directly and indirectly (through its ownership of SMS), 100 percent
of the interests in the Partnership. In connection with the Reorganization,
29,458,400 shares of common stock were issued to the stockholders of Snyder
Communications, Inc.
Because of the continuity of ownership, the Reorganization was accounted for
by combining the assets, liabilities and operations of SMS, the Partnership
and Snyder Communications, Inc., at their historical cost basis. Accordingly,
the accompanying consolidated financial statements as of and for the year
ended December 31, 1995, include a combination of the accounts of SMS and the
Partnership after elimination of all significant intercompany transactions.
The accompanying consolidated financial statements as of and for the years
ended December 31, 1996 and 1997, include the consolidated accounts of Snyder
Communications, Inc., SMS and the Partnership (the consolidated entity will be
referred to herein as "SCI" or "Snyder Communications") after elimination of
all significant intercompany transactions. Certain amounts previously
presented have been reclassified to conform to the December 31, 1997
presentation. Throughout 1997 and the first quarter of 1998, SCI acquired
several companies in transactions that were accounted for as poolings of
interests for financial reporting purposes. The accompanying consolidated
financial statements have been retroactively restated to reflect the poolings
of interests transactions. During 1997, the Company (as defined herein) also
made several acquisitions that have been accounted for as purchase business
combinations.
Snyder Communications provides fully integrated outsourced marketing
solutions. The Company identifies high value market segments; designs and
implements marketing programs to reach them; initiates and closes sales on
behalf of its clients; and provides customer care, retention and loyalty
marketing services. The Company's resources include proprietary databases of
targeted customers and small businesses; database management services;
pharmaceutical detailing services; pharmaceutical consulting; medical
educational communications; proprietary product sampling programs and
publications; sponsored information displays in proprietary locations;
marketing program consultants; creative services; field sales and marketing
representatives; customer service representatives; and direct mail and
fulfillment capabilities. The Company's operations are conducted throughout
the United States, the United Kingdom ("U.K."), France, Ireland and Hungary.
The Company characterizes its service offerings into four types: medical
services, media and sampling services, communication services and data
delivery services. The Company provides complete marketing solutions for its
clients by integrating these four types of services into sales and marketing
programs.
F-15
<PAGE>
SNYDER COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The medical services offered by the Company are designed to establish and
monitor marketing plans as well as to provide face-to-face interaction with
physicians and other healthcare providers. Medical services consist primarily
of pharmaceutical detailing, but also include establishing marketing plans,
targeting specific markets and evaluating sales performance. During 1997 and
the first quarter of 1998, the Company issued 4,035,182 and 2,314,263 shares,
respectively, in poolings of interests transactions with companies that
provide medical services. These transactions include the acquisitions of MMD,
Inc. ("MMD"), GEM Communications, Inc. ("GEM"), Rapid Deployment Group Limited
("RDL"), PharmFlex, Health Products Research, Inc. ("HPR"), and Publimed
Promotions S.A. ("Publimed"). During 1997, the Company also acquired Halliday
Jones Sales Ltd. ("HJ") in a purchase transaction. MMD, RDL, HJ, PharmFlex and
Publimed all market medical products for pharmaceutical companies utilizing
field sales. MMD and PharmFlex operate throughout the U.S. RDL operates
primarily in the U.K., but also in Hungary; HJ in the U.K., but also Ireland;
and Publimed in France. GEM provides a complete range of healthcare
communications services with specialties in educational marketing and
publishing for the pharmaceutical industry. HPR provides strategic and
tactical sales force market planning and evaluation services to leading
pharmaceutical and medical device manufacturers. HPR's services include sales
and marketing resource allocation, sales force planning and the integration
and evaluation of sales and marketing promotions.
The media and sampling services offered by the Company are designed to
stimulate and create brand awareness for clients' products. Media and sampling
services consist of WallBoard(R) and other information displays, and
proprietary sample packs and publications which reach potentially high-value
market segments at the time that the targeted customers are most likely to use
the products. During 1997 and the first quarter of 1998, the Company issued
3,032,414 and 30,344 shares, respectively, in poolings of interests
transactions with companies that provide media and sampling services. These
transactions include the acquisitions of Bounty Group Holdings Limited
("Bounty") and Sampling Corporation of America ("SCA"). Bounty provides
targeted product sampling and proprietary health-oriented publications to
expectant mothers, new mothers and parents of toddlers in the U.K. and
Ireland. SCA designs advertising programs and distributes product samples and
proprietary publications on behalf of consumer packaged goods manufacturers
through primary and secondary schools, daycare centers, colleges and immigrant
organizations.
The communications services offered by the Company are designed to establish
brand awareness for clients' products and to provide targeted customer
acquisition and customer care and retention for clients' customers.
Communication services include strategic planning and creative services,
establishment of brand awareness for clients' products, teleservices, face-to-
face field sales, database mailings and return-on-investment evaluation.
During 1997 and the first quarter of 1998, the Company issued 2,350,152 and
5,275,961 shares, respectively, in poolings of interests transactions with
companies that provide communications services. These transactions include the
acquisitions of Brann Holdings Limited ("Brann"), Blau Marketing Technologies,
Inc. ("Blau"), and Arnold Communications, Inc. ("Arnold"). Brann's operations
are conducted throughout the U.K. and consist primarily of planning, creating
and delivering direct response marketing communications; marketing systems
design and consultancy; print production services; and telephone and response
management services for companies involved in marketing, advertising and
direct selling. Blau's operations are conducted throughout the U.S. and
consist primarily of strategic consulting, creative services, program design
and implementation, consumer database management, response tracking and
analysis, interactive services and production management. Arnold's operations
are also conducted throughout the U.S., and they include creative services,
direct marketing, new media marketing, database management services and full-
service public relations for its clients.
The data delivery services offered by the Company are designed to assist
clients in targeting the right customers for their products and services. The
Company develops and maintains demographic marketing databases that include
data on consumers and small businesses. During 1997, the Company issued
5,032,322
F-16
<PAGE>
SNYDER COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
shares in a pooling of interests transaction with American List Corporation
("American List"). American List develops, maintains and markets databases of
high school, college and pre-school through junior high school students in the
U.S. Prior to its merger with the Company, American List utilized a February
28 fiscal year end. Concurrent with its merger with the Company, American List
changed its fiscal year end to December 31.
The companies with whom Snyder has entered into mergers accounted for as
poolings of interests for financial reporting purposes will be collectively
referred to as the "Pooled Entities" and their mergers will be referred to
herein as the "Acquisitions." The accompanying consolidated financial
statements have been retroactively restated to reflect the combined financial
position and combined results of operations and cash flows of the Pooled
Entities for all periods presented, giving effect to the Acquisitions as if
they had occurred at the beginning of the earliest period presented (the
combined entity will be referred to herein as the "Company"). The accompanying
consolidated balance sheet as of December 31, 1996 reflects the combination of
the accounts of American List as of February 28, 1997, while the related
consolidated statements of income, equity and cash flows for each of the two
years in the period ended December 31, 1996 reflect the combination of the
American List statements of income, equity and cash flows for the two years in
the period ended February 28, 1997. The consolidated balance sheets for all
periods presented give effect to the conversion of the shares of the Pooled
Entities' common stock into 22,070,638 shares of SCI common stock. The
accompanying financial statements include the financial information of SCI's
combinations with Arnold Communications, Inc., Health Products Research, Inc.,
Blau Marketing Technologies, Inc., and Publimed Promotions, S.A. (the "1998
Mergers") which are accounted for as poolings of interests.
The following details revenues and net income (loss) for each of the years
ended December 31, 1995, 1996, and 1997 of SCI and the Pooled Entities through
the dates of their respective Acquisitions.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1995 1996 1997
-------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues:
SCI........................................... $ 42,892 $ 82,840 $ 220,907
Pooled Entities............................... 291,198 346,057 299,133
-------- -------- ---------
$334,090 $428,897 $ 520,040
======== ======== =========
Net Income (Loss):
SCI........................................... $ 3,972 $ 6,977 $ (14,396)
Pooled Entities............................... 21,144 9,914 (2,606)
-------- -------- ---------
$ 25,116 $ 16,891 $ (17,002)
======== ======== =========
</TABLE>
During the year ended December 31, 1997, SCI recorded $39.4 million in non-
recurring acquisition and related costs in conjunction with the consummation
of its mergers with the Pooled Entities (see Note 11). Excluding the non-
recurring acquisition and related costs, SCI would have recorded $20.7 million
in net income for the year ended December 31, 1997.
The Company's 1997 purchase business combination transactions resulted in
the recognition of additional amounts of goodwill and other intangible assets
of approximately $42.4 million.
The total consideration paid in connection with the acquisition of HJ,
including the repayment of assumed debt immediately following the closing, was
$19.4 million, consisting of 425,478 shares of SCI common stock
F-17
<PAGE>
SNYDER COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
and $7.4 million in cash. The following table presents pro forma financial
information as if the Company's 1997 purchase business combination of HJ had
been consummated at the beginning of each of the periods presented and all of
the Company's operations had been taxed as a C corporation (in thousands).
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1996 1997
------------ ------------
(UNAUDITED)
(IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
Pro Forma Revenues.............................. $ 444,415 $ 530,562
Pro Forma Income (Loss) from Continuing
Operations..................................... 14,102 (18,886)
Pro Forma Net Income (Loss)..................... 11,389 (20,393)
Pro Forma Basic Net Income (Loss) Per Share..... 0.22 (0.36)
Pro Forma Diluted Net Income (Loss) Per Share... 0.21 (0.36)
</TABLE>
The pro forma loss from continuing operations and the pro forma net loss for
the year ended December 31, 1997, include $39.4 million in non-recurring
acquisition and related costs that were recorded in conjunction with the
consummation of the Company's mergers with the Pooled Entities. Excluding the
non-recurring acquisition and related costs, the Company would have recorded
pro forma income from continuing operations and pro forma net income of $14.7
million and $16.6 million, respectively.
The Company's other purchase business combinations are immaterial to the
consolidated financial statements.
There are important risks associated with the Company's business and
financial results. These risks include: (i) the Company's reliance on
significant clients, one of which constituted 12 percent of its 1997 revenues
(see Note 2); (ii) the Company's ability to sustain and manage future growth;
(iii) the Company's ability to manage and successfully integrate the
businesses it has acquired and may acquire in the future; (iv) the Company's
ability to successfully manage its international operations; (v) the potential
adverse effects of fluctuations in foreign exchange rates; (vi) the Company's
dependence on industry trends toward outsourcing of marketing services; (vii)
the risks associated with the Company's reliance on technology and the risk of
business interruption resulting from a temporary or permanent loss of such
technology; (viii) the entrance of new competitors with greater resources than
the Company; (ix) the Company's ability to recruit and retain qualified
personnel; and (x) the dependence of the Company's success on its executive
officers and other key employees, in particular, its Chairman of the Board of
Directors and Chief Executive Officer.
2. SIGNIFICANT CLIENTS:
The Company had one client which represented 7 percent, 12 percent and 12
percent of the Company's total revenues for the years ended December 31, 1995,
1996 and 1997, respectively. The Company's principal contract with this client
extended through December 1997. In December 1997 the Company elected not to
renew its contract with this client, and instead has entered into a contract
with a new client to provide services similar to those previously provided to
this customer. There can be no assurance, however, that the contract with the
new client will generate revenues or profitability which are greater than or
equal to those generated by this one client.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Cash and Equivalents
Cash and equivalents are comprised principally of amounts in operating
accounts, money market investments, and other short-term instruments, stated
at cost, which approximates market value, with original maturities of three
months or less.
F-18
<PAGE>
SNYDER COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Marketable Securities
The Company's investments are classified into two categories. Those
securities classified as "available-for-sale" are reported at market value.
Debt securities consisting of state municipal bonds, certificates of deposit,
and U.S. Treasury bills are classified as "held-to-maturity" and are reported
at amortized cost. Cost is determined using the specific identification
method. Unrealized gains and losses from securities "available-for-sale" are
reported as a separate component of equity.
Debt Issuance Costs
Debt issuance costs are charged to expense as additional interest expense
over the life of the related debt using the effective 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
three to ten years; computer equipment over two to four years and buildings
over fifty years. Leasehold improvements are amortized on a straight-line
basis over the shorter of the term of the lease or the estimated useful lives
of the improvements.
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
MEDICAL SERVICES--On pharmaceutical detailing contracts, the Company
recognizes revenue and associated costs when services have been performed by
account executives. Unbilled services represent revenues earned on contracts
but billed in a subsequent accounting period.
MEDIA AND SAMPLING SERVICES--Media and Sampling services revenues are
recognized over the contract term as program services are rendered. Unearned
revenue is recorded for billings prior to the earning of such revenue.
COMMUNICATION SERVICES--The Company performs marketing and sales
communications services on behalf of its clients, including field sales,
teleservices, database management, creative design, direct response marketing
and print production. Revenues are recognized as services are rendered in
accordance with the terms of the contracts. Certain of these contracts provide
for payments based on accepted customers and the type of service purchased by
the customer. Revenues related to these sales are recognized on the date the
application for service is accepted by the Company's clients. At this point,
the Company has no further performance obligation related to the submitted
customer and is contractually entitled to payment. Certain of the contracts
include postage and other pass-through costs incurred by the Company on behalf
of its clients. For these contracts, the Company records as revenue the net
billings to its clients. Certain other contracts of the Company have provided
the client with the right to seek a return of previously paid commissions if
the customers submitted by the Company do not meet certain defined
characteristics and performance standards. These relate to the client's
ability to successfully provide service to the customer, the bad debt
experience of the customer base submitted by the Company, the achievement of
targeted customer goals and certain minimum usage and life measures of the
customer 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.
F-19
<PAGE>
SNYDER COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DATA DELIVERY SERVICES--Revenues from the sale of lists are recognized upon
the shipment to customers of lists on computerized labels, magnetic tape or
computer diskettes for a one-time usage. Additional billings are made by the
Company for additional usage by the customers.
Goodwill and Other Intangible Assets
Goodwill equal to the fair value of consideration paid in excess of the fair
value of net assets purchased has been recorded in conjunction with several of
the Company's purchase business combinations and is being amortized on a
straight-line basis over periods of fifteen to thirty years.
The cost of customer lists which were acquired in conjunction with certain
of the Company's purchase business combinations are amortized on a straight
line basis over seven years. The covenant not to compete and the marketing
rights are amortized over the term of the related agreements, which are four
and ten to fifteen years, respectively.
Costs of purchased lists are amortized on a straight-line basis over their
estimated useful lives, generally one to five years. The Company determines
the useful lives of its lists based upon the estimated period of time such
lists are marketable. The Company periodically reviews the marketability of
its lists and, accordingly, their respective estimated useful lives.
The costs of licenses to use, reproduce, distribute lists, and market
pharmaceutical products are amortized on a straight-line basis over the term
of the related license agreement.
When conditions or events occur which management believes might indicate
that the goodwill or any other intangible asset is impaired, an analysis of
estimated future undiscounted cash flows is undertaken to determine if any
write down in the carrying value of the asset is required.
Income Taxes
The accompanying consolidated financial statements reflect no provision for
federal or state income taxes related to income earned by the Partnership
prior to the Reorganization 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 for taxes of SMS is reflected in the accompanying
consolidated statement of income for the year ended December 31, 1995. During
this period, SMS accounted for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
No. 109"). Effective January 1, 1996, SMS 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.
Effective with the Reorganization, SCI is treated as a C corporation for
federal and state income tax purposes. At the date of the Reorganization, SCI
recognized a net deferred tax asset and an associated tax benefit equal to the
cumulative net deductible temporary differences existing at that date. The
income tax provision recorded for the year ended December 31, 1996 includes a
provision for income taxes for SCI for the period from September 24, 1996, the
date of the Reorganization, through December 31, 1996, offset by the net
deductible temporary differences existing at the date of the Reorganization.
Prior to their combination with SCI, certain of the U.S. based Pooled
Entities were taxed as S corporations. Accordingly, no provision for federal
or, in the case of all the U.S. based acquirees except one which was
incorporated in Massachusetts, state income taxes has been made for these
entities through the date of their mergers with SCI in the accompanying
consolidated financial statements.
F-20
<PAGE>
SNYDER COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Pooled Entities with operations in the U.K. and France pay taxes in
their respective countries, on a corporate level similar to a C corporation in
the United States.
Pro Forma Income Data (Unaudited)
The unaudited pro forma net income (loss) and net income (loss) per share
amounts include a provision for federal and state income taxes as if the
Company had been a taxable C corporation for all periods presented. The shares
used in computing pro forma net income per share assume that the
Reorganization and the Acquisitions had occurred at the beginning of each of
the periods presented, reflect the issuance of additional shares as a result
of issuances of stock, the exercise of stock options, and the repurchase of
outstanding shares by certain subsidiaries of the Company prior to their
mergers with SCI. The pro forma income tax rate reflects the combined federal
and state income taxes of approximately 39.4, 44.2 and 104 percent, for the
years ended December 31, 1995, 1996 and 1997, respectively. The Company's
December 31, 1997 tax provision exceeds its statutory rate due to the
recognition of certain acquisition and related costs which are not deductible
for income tax purposes.
The table below presents this pro forma calculation of net income (in
thousands):
<TABLE>
<CAPTION>
1995 1996 1997
------- ------- --------
<S> <C> <C> <C>
Pro forma net income (loss) data (unaudited):
Historical income (loss) from continuing
operations before income taxes.................. $35,008 $25,598 $ (9,249)
Pro forma provision for income taxes............. 13,788 11,307 9,651
------- ------- --------
Pro forma income (loss) from continuing
operations...................................... 21,220 14,291 (18,900)
Discontinued operations, less applicable pro
forma income taxes of $603 and $607 for 1996 and
1997, respectively.............................. -- (895) (900)
Extraordinary item, less applicable income taxes
of $806......................................... -- (1,215) --
------- ------- --------
Pro forma net income (loss)...................... $21,220 $12,181 $(19,800)
======= ======= ========
</TABLE>
Accounting for Stock Options
The Company accounts for its stock-based compensation plan using the
intrinsic value based method in accordance with the provisions of APB Opinion
No. 25, "Accounting for Stock Issued to Employees." Pro forma disclosure of
net income and earnings per share, calculated as if the Company accounted for
its stock-based compensation plan using the fair value based method in
accordance with the provisions of Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123"), is
included in Note 14.
Foreign Currency Translations
Assets and liabilities of the Company's international subsidiaries are
translated using the exchange rate in effect at the balance sheet date.
Revenue and expense accounts for these subsidiaries are translated using the
average exchange rate during the period. Foreign currency translation
adjustments are disclosed as a separate component of equity.
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
F-21
<PAGE>
SNYDER COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
revenues and expenses during the reporting period. Actual results could differ
from those estimates. The Company's most significant estimates relate to
certain of its contracts to provide outsourced marketing services. The terms
of these contracts provide that the Company's clients may seek a return of
previously paid commissions if certain defined characteristics or performance
standards are not met. The Company has recorded an allowance in the
accompanying consolidated financial statements in an amount which it considers
sufficient to satisfy any claims which might be made pursuant to these
provisions.
Fair Value of Financial Instruments
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments,"
requires disclosures of the fair value of certain financial instruments. For
purposes of this disclosure, the fair value of a financial instrument is the
amount at which the instrument could be exchanged in a current transaction
between willing parties. Cash and equivalents, accounts receivable, unbilled
services, and accounts payable approximate fair value because of the
relatively short maturity of these instruments. As a result of the related
party nature of the majority of the Company's outstanding December 31, 1996
and 1997 borrowings, and the fact that these borrowings were secured by the
previously independent Pooled Entities who had capital structures which are
different than the Company's, it is impracticable to estimate the fair value
of the debt outstanding at these dates.
Concentration of Credit Risk
Concentration of credit risk is limited to cash and equivalents, marketable
securities, accounts receivable, and unbilled services and is subject to the
financial conditions of a major client as described in Note 2. The Company
places its investments in highly rated financial institutions, U.S. Treasury
bills, investment grade short-term debt instruments and state and local
municipalities, while limiting the amount of credit exposure to any one
entity. The Company's receivables are concentrated with customers in the
telecommunications, pharmaceutical and consumer packaged goods industries. The
Company does not require collateral or other security to support clients'
receivables.
New Accounting Pronouncements
During 1997, the Company adopted Statement of Financial Accounting Standards
No. 128, "Earnings Per Share" ("SFAS No. 128") and has applied its provisions
to all years presented in these financial statements. SFAS No. 128 requires
primary earnings per share ("EPS") to be replaced with basic EPS. Basic EPS is
computed by dividing reported earnings available to common stockholders by the
weighted average number of shares outstanding without consideration of common
stock equivalents or other potentially dilutive securities. Fully diluted EPS,
now called diluted EPS is also reported. Diluted EPS gives effect to common
stock equivalents and other potentially dilutive securities outstanding during
the period.
During June 1997, the Financial Accounting Standards Board issued SFAS No.
130, "Reporting Comprehensive Income" ("SFAS No. 130"). SFAS No. 130
establishes standards for the reporting and display of comprehensive income
and its components in a full set of general purpose financial statements. The
Company adopted SFAS No. 130 during the first quarter of 1998. Included within
accumulated other comprehensive income are the cumulative amounts for foreign
currency translation adjustments and unrealized gains and losses on marketable
securities. The accompanying consolidated financial statements have been
restated to conform to the SFAS No. 130 requirements. The cumulative foreign
currency translation adjustment was $148,000 and $413,000 as of December 31,
1996 and 1997, respectively. The cumulative gain on marketable securities was
$28,000 and $64,000 as of December 31, 1996 and 1997, respectively.
F-22
<PAGE>
SNYDER COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. MARKETABLE SECURITIES
The amortized cost, unrealized gains and losses, and market values of the
Company's held-to-maturity and available-for-sale securities are summarized as
follows (in thousands):
<TABLE>
<CAPTION>
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
--------- ---------- ---------- ------
<S> <C> <C> <C> <C>
December 31, 1996
Held to maturity, maturing in less than
one year:
State and municipal bonds............. $5,571 $-- $ -- $5,571
Certificates of deposit............... 189 -- -- 189
------ ---- ----- ------
$5,760 $-- $ -- $5,760
====== ==== ===== ======
Available for sale:
Equity securities..................... $ 740 $ 31 $ (1) $ 770
Government income securities.......... 457 -- (2) 455
------ ---- ----- ------
$1,197 $ 31 $ (3) $1,225
====== ==== ===== ======
December 31, 1997
Held to maturity, maturing in less than
one year:
State and municipal bonds............. $ 665 $-- $ -- $ 665
Available for sale:
Equity securities..................... $ 915 $ 60 $ -- $ 975
Government income securities.......... 483 4 -- 487
------ ---- ----- ------
$1,398 $ 64 $ -- $1,462
====== ==== ===== ======
</TABLE>
As a result of changes in market value of the available-for-sale security
portfolio, a cumulative valuation adjustment of $183, $28 and $64 is recorded
as a separate component of equity at December 31, 1995, 1996 and 1997,
respectively.
5. PROPERTY AND EQUIPMENT:
Property and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1997
-------- --------
<S> <C> <C>
Buildings and leasehold improvements.................. $ 22,396 $ 25,729
Computer and equipment................................ 32,458 40,475
Furniture and fixtures................................ 10,434 12,683
-------- --------
65,288 78,887
Accumulated depreciation.............................. (31,368) (36,685)
-------- --------
$ 33,920 $ 42,202
======== ========
</TABLE>
F-23
<PAGE>
SNYDER COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. GOODWILL AND OTHER INTANGIBLE ASSETS:
Goodwill and other intangible assets consist of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1997
-------- --------
<S> <C> <C>
Goodwill.............................................. $ 17,806 $ 60,080
Unamortized costs of lists............................ 5,121 4,459
License agreements.................................... 4,451 7,669
Customer lists and covenant not to compete............ 9,294 12,669
-------- --------
36,672 84,877
Accumulated amortization.............................. (13,240) (15,934)
-------- --------
$ 23,432 $ 68,943
======== ========
</TABLE>
Goodwill arose from management buy-outs and purchase acquisitions at certain
of the acquirees prior to their respective mergers with SCI and the Company's
1997 purchase business combinations.
Effective July 1, 1994, one acquiree entered into an exclusive licensing
agreement, whereby it obtained a ten-year license to use, reproduce and
distribute a defined segment of the licensor's lists and to use its sources
and customer list to compile and market its own lists. As consideration for
the granting of the license, it is obligated to pay a total of $4.2 million.
The license fee is payable in three annual installments of $0.6 million which
began July 1994; three annual installments of $0.5 million which began July
1997; three annual installments of $0.3 million beginning July 2000; and a
final installment of $0.1 million in July 2003 (see Note 7). The Company
recorded the cost and related obligation for the license, net of imputed
interest at 7.25%, which approximated $3.3 million. The net cost of the
license was amortized on a straight-line basis over the ten-year term of the
license agreement. In conjunction with SCI's acquisitions in July 1997 and the
Company's current competitive strategy, management determined that the
intangible asset associated with the license fee had been impaired and
accordingly, an impairment loss was recorded in the Company's third quarter
1997 income statement as an acquisition related cost.
Amortization expense of goodwill and other intangible assets totaled $4.4
million, $4.3 million and $4.2 million in 1995, 1996, and 1997, respectively.
7. DEBT:
Long-Term Borrowings
In the U.K., the Company had a loan payable to a commercial bank in the
amount of $7.2 million as of December 31, 1996. The loan had an interest rate
of 7.6275 percent per annum until January 28, 1999, at which date the interest
rate was to change to the bank's base rate plus 1.75 percent. The loan was
payable in annual installments of $0.9 million, until March 1, 2004, when the
entire unpaid amount was due in full. The loan was secured by certain of the
Company's assets in the U.K. and the book value of the loan approximated its
fair value as of December 31, 1996. In April 1997, the full amount of the loan
outstanding was repaid. At December 31, 1997, the Company has a loan payable
to a commercial bank in the U.K. of $0.4 million. The loan has an interest
rate of 2.25 percent above the bank's base rate, which equated to an interest
rate of 7.25 percent at December 31, 1997. The loan is due in full in December
2006.
The Company had a loan payable to a commercial bank in the U.K. in the
amount of $4.1 million as of December 31, 1996. The loan had an interest rate
of 2.75 percent above the bank's base rate, which equated to
F-24
<PAGE>
SNYDER COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
an interest rate of 8.75 percent at December 31, 1996. The loan was secured by
certain of the Company's assets in the U.K. In September 1997, the full amount
of the loan outstanding was repaid.
The Company is obligated under a license agreement to make future payments
(see Note 6). This net obligation is $1.9 million and $1.6 million at December
31, 1996 and 1997, respectively. Of these amounts, $0.4 million and $0.4
million have been classified as current at December 31, 1996 and 1997,
respectively, and the remaining balance has been classified as a long-term
borrowing in the accompanying consolidated balance sheet.
The Company had a loan payable to a commercial bank in the U.K. in the
amount of $0.4 million as of December 31, 1996. The loan had an interest rate
of 1.25 percent above the bank's base rate. Of this amount, $0.04 million was
classified as current as of December 31, 1996. On December 31, 1997, the full
amount of the loan outstanding was repaid.
The Company had a loan payable to a commercial bank in the U.S. in the
amount of $4.4 million as of December 31, 1996. The loan had an interest rate
of the bank's prime rate plus .25% (8.25% as of December 31, 1996). During
1997, the Company refinanced this loan payable with a financial institution.
The balance of this loan payable at December 31, 1997 was $2.1 million. The
loan had an interest rate of the 30 day commercial paper rate plus 2.7%, or
8.55% as of December 31, 1997. Of these amounts, $2.3 million and $0.6 million
are classified as current at December 31, 1996 and 1997, respectively and the
remaining balance is classified as a long-term borrowing in the accompanying
consolidated balance sheet.
The Company had promissory notes in the amount of $1.7 million and $1.2
million as of December 31, 1996 and 1997, respectively which were issued in
conjunction with certain 1996 and 1997 purchase business combinations. The
notes were recorded at their present value, with effective rates ranging from
6% to 9%. Of this amount, $0.4 million and $0.3 million is classified as
current as of December 31, 1996 and 1997, respectively with the remaining
balance classified as a long-term borrowing in the accompanying consolidated
balance sheet.
Related Party Borrowings--Subordinated Debentures
On October 28, 1996 SCI used approximately $7.0 million of cash to redeem in
full the subordinated debentures (the "Debentures") due to related parties.
The Debentures were originally issued on May 18, 1995, with a face amount of
$6.0 million. Cash proceeds of $5.0 million were received upon issuance of the
Debentures. The difference between the cash proceeds received and the face
amount of the Debentures was accounted for as an original issue discount. The
Debentures had a stated interest rate of 12.25 percent (effective interest
rate to maturity of approximately 17 percent) and an original maturity date of
December 31, 2001. The $7.0 million payment consisted of the face amount of
the Debentures, a prepayment penalty and accrued interest. A non-recurring
charge of $1.2 million ($0.02 per diluted share), net of a $0.8 million tax
benefit, was recorded at December 31, 1996 as an extraordinary loss related to
this early debt extinguishment. The extraordinary item consists of prepayment
penalties and the write-off of unamortized discount and debt issuance costs.
Related Party Borrowings--Stockholder Loans
A subsidiary of the Company borrowed approximately $10.4 million from
certain of its stockholders to fund, in part, its August 1995 management buy-
out. The borrowings had a blended stated interest rate of 8.31 percent with
maturities beginning in 1996 and extending through 2008. At December 31, 1996,
$10.5 million remained outstanding under these borrowings. In July 1997, the
full amount outstanding under these borrowings was repaid.
During 1994, a subsidiary of the Company borrowed approximately $0.4 million
from its principal shareholder. The borrowings had interest rates equivalent
to the U.K. bank rate applied quarterly with a maturity on December
F-25
<PAGE>
SNYDER COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
31, 2004. At December 31, 1996, $0.1 million remained outstanding under these
borrowings. In October 1997, the full amount outstanding under these
borrowings was repaid.
In conjunction with the repurchase during 1995 and 1996 of common stock from
certain former employees by a subsidiary of the Company prior to its merger
with SCI, the subsidiary incurred borrowings at interest rates ranging from
5.73 to 5.91 percent with maturities from 1997 to 1999. At December 31, 1997,
the Company had $1.6 million outstanding under these borrowings. Of this
amount, $0.5 million is classified as current as of December 31, 1997.
Related Party Borrowings--Notes Payable
Concurrent with the formation of the Partnership, the Original Limited
Partner loaned the Partnership $0.4 million 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
$3.3 million. This note bore interest of 8% per annum. This note was paid in
full in May 1995 with a portion of the proceeds from the Debentures.
In conjunction with an October 1997 purchase business combination, the
Company issued a $3.7 million note payable to the former owner of the acquired
company. Interest is payable on the note quarterly at the rate of 7% per
annum. The note may be repaid at any time after the third anniversary of the
issuance and matures on September 30, 2002.
Future minimum payments as of December 31, 1997 on all long-term borrowings,
excluding capital leases, are as follows (in thousands):
<TABLE>
<S> <C>
1998................................. $ 1,995
1999................................. 2,035
2000................................. 1,209
2001................................. 1,224
2002................................. 4,176
Thereafter........................... 135
-------
Total................................ 10,774
Less--current portion................ 2,086
-------
Total.............................. $ 8,688
=======
</TABLE>
Lines of Credit
SCI obtained a $2.5 million line of credit in September 1996. The line of
credit has a variable rate of interest with borrowings payable on an
amortizing basis to September 1999, the date the line expires. At December 31,
1996, approximately $0.9 million was outstanding and the interest rate was
6.75%. The weighted average interest for the period ended December 31, 1996
was 6.71%. There were no amounts outstanding on this line at December 31,
1997.
One of the Company's U.S. subsidiaries has a $2.0 million revolving line of
credit agreement with a bank. The line of credit has a variable interest rate
based on the bank's prime rate (8.25% as of December 31, 1996). The
outstanding balance on this line was $0.5 million at December 31, 1996 and the
effective interest rate was 8.0% for the year ended December 31, 1996.
Borrowings pursuant to the line of credit are collateralized by
F-26
<PAGE>
SNYDER COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
substantially all of the assets of the subsidiary. In February 1997, the
outstanding balance of $0.5 million was repaid, and no amounts were
outstanding on this line at December 31, 1997.
Two of the Company's U.K. subsidiaries maintain lines of credit for general
business expenditures. These lines bear interest at the commercial bank's base
rate plus 1.25 to 2.75 percent. There was $1.0 million outstanding under these
lines of credit at December 31, 1996, and no amounts were outstanding on these
lines at December 31, 1997.
Another U.S. subsidiary maintained a $4.0 million line of credit that was
due on demand. The line of credit bore interest at the bank's prime rate plus
.5%. The subsidiary has $3.0 million outstanding on this line of credit as of
December 31, 1996. During 1997, the subsidiary obtained a new line of credit
with a financial institution. The line of credit bears interest at the 30 day
commercial paper rate plus 2.7%. There were no borrowings outstanding as of
December 31, 1997. Borrowings pursuant to the line of credit are
collateralized by substantially all of its assets. The weighted average
interest rates of the borrowings were 8.75% and 8.55% as of December 31, 1996
and 1997.
One of the Company's French subsidiaries maintains various lines of credit
with varying borrowing limits from approximately $0.07 million to $0.7
million. The aggregate borrowing limit of all of the lines of credits combined
is approximately $4.1 million. These lines of credit have expiration dates
ranging from August 1998 to August 2004 and interest rates on borrowings
ranging from 6.7% to 11.16%. The weighted average of the stated interest rates
is 8.02% as of December 31, 1997. The subsidiary has $1.1 million and $2.6
million outstanding on these lines of credit as of December 31, 1996 and 1997,
respectively.
One of the Company's U.S. subsidiaries has a revolving line-of-credit
agreement with a bank, which is renewed annually. The revolving credit
agreement provides for advances up to the lesser of $10.0 million or 50% of
accounts receivable, as defined. Among other things, the agreement requires
the subsidiary to meet certain restrictive covenants concerning net worth and
debt service coverage. As of December 31, 1997, the subsidiary was in default
of certain financial reporting and maximum employee lending covenants.
Advances under the revolving credit agreement are secured by all assets of the
subsidiary. This line is guaranteed by an officer of the subsidiary. Interest
is charged at the bank's prime rate or LIBOR plus 1%. As of December 31, 1997,
no amounts were outstanding under the revolving credit agreement.
8. MANDATORILY REDEEMABLE PREFERRED STOCK:
The preferred shares were redeemed in full subsequent to December 31, 1996,
in conjunction with the Acquisitions.
On January 25, 1994, in connection with the management buy-out at one of the
Company's acquirees in the U.K., fixed cumulative mandatorily redeemable
preferred shares with a par value of (Pounds)0.90 were issued for
(Pounds)1.00. All of the 3,067,000 authorized shares were issued yielding
proceeds of $4.6 million less associated issue costs of $0.1 million. A fixed
cumulative dividend was payable at the following rates:
<TABLE>
<S> <C>
1995..................................... 6%
1996..................................... 7%
1997..................................... 8%
Thereafter............................... 8%
</TABLE>
The shares were redeemable at (Pounds)1.00 per share, including the
(Pounds)0.10 premium per share on the following dates by the holders or
earlier at the option of the acquiree.
<TABLE>
<CAPTION>
NUMBER
-------
<S> <C>
December 31, 1998.................... 517,000
December 31, 1999.................... 850,000
December 31, 2000.................... 850,000
December 31, 2001.................... 850,000
</TABLE>
F-27
<PAGE>
SNYDER COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In October 1996, a subsidiary of the Company in the U.K. issued 750,000
shares of fixed cumulative mandatorily redeemable preferred shares with a par
value of (Pounds)1.0 per share. A fixed cumulative dividend was payable on
these preferred shares at 8% through December 1997 increasing to 10%
thereafter. The shares were mandatorily redeemable in five equal annual
installments beginning March 31, 2003.
In September 1996, a subsidiary of the Company in the U.K. issued 1,333,333
shares of fixed cumulative mandatorily redeemable preferred shares for $2.1
million. A fixed cumulative dividend was payable on these preferred shares at
(Pounds).09 per annum per share. The shares were mandatorily redeemable in
three equal installments commencing on December 31, 2000.
The preferred shares were mandatorily redeemable on specific dates, did not
carry voting rights unless dividends were in arrears, which did not occur, and
were not convertible into common equity. Accordingly, the preferred shares are
classified as long-term debt obligations and the dividends, as well as the
amortization of associated issue costs and discounts, are charged as a
component of interest expense in the accompanying consolidated financial
statements. Dividends included in interest expense were $0.4 million, $0.6
million, and $0.2 million in 1995, 1996, and 1997, respectively.
9. CAPITAL STOCK:
On September 24, 1997 the Company completed the public offering of 8,776,334
shares of its common stock, par value $0.001 per share at an offering price of
$25.8125 per share. The offering included 1,850,000 newly issued shares of
common stock sold by the Company and 6,926,334 previously outstanding shares
of common stock sold by selling stockholders. The Company received net
proceeds of approximately $42.7 million from the offering, net of offering
costs. The Company did not receive any proceeds from the sale of shares of
common stock in the offering by the selling stockholders.
On September 30, 1996 SCI completed an initial public offering of 8,970,000
shares of its common stock, par value $0.001 per share at an offering price of
$17.00 per share. The offering included 4,038,162 newly issued shares of
common stock sold by SCI and 4,931,838 previously outstanding shares of common
stock sold by selling stockholders. SCI received net proceeds of approximately
$59.2 million from the offering, net of offering costs. SCI did not receive
any proceeds from the sale of shares of common stock in the offering by the
selling stockholders.
In May 1994, the Board of Directors of one of the Company's acquirees
approved a stock repurchase plan that pertained to any stockholder terminating
employment with the acquiree. Under such plan, shares were required to be
repurchased by the acquiree. The shares were valued based on a certain
percentage of gross income over a three-year period, less outstanding bank and
stockholder debt. Payment terms for repurchased stock varied based on total
aggregate shares purchased over specified periods and ranged from 1 to 10
years. In conjunction with its merger with SCI, the provisions of this stock
repurchase plan were terminated.
F-28
<PAGE>
SNYDER COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. INCOME TAXES:
The Company's income tax provision includes the following components (in
thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C> <C>
Current................... U.S.--Federal $ 5,417 $ 5,647 $ 6,637
U.S.--State and City 1,257 1,297 2,853
Foreign 4,129 2,218 4,179
-------- -------- --------
10,803 9,162 13,669
-------- -------- --------
Deferred.................. U.S.--Federal (101) (1,954) (5,173)
U.S.--State and City (32) (469) (1,408)
Foreign 37 (745) (842)
-------- -------- --------
(96) (3,168) (7,423)
Tax effect of equity transaction............... (815) -- --
-------- -------- --------
Income tax provision........................... $ 9,892 $ 5,994 $ 6,246
======== ======== ========
</TABLE>
The provision for taxes on income before extraordinary item differs from the
amount computed by applying the U.S. federal income tax rate as a result of the
following:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
Taxes at statutory U.S. Federal income tax
rate......................................... 35.00% 35.00% 35.00%
Income taxed directly to owners............... (11.04) (19.50) 35.64
State and city income taxes, net of Federal
tax benefit.................................. 3.42 3.71 (19.89)
Tax effect of Reorganization.................. -- (2.52) --
Foreign tax rate differential................. 0.46 0.39 13.54
Dividends on mandatorily redeemable preferred
stock........................................ 0.35 0.71 (1.82)
Goodwill amortization......................... 0.30 0.52 (2.99)
Acquisition costs and other permanent
differences.................................. (0.23) 5.11 (127.02)
------- ------- --------
Effective tax rate............................ 28.26% 23.42% (67.54)%
======= ======= ========
</TABLE>
F-29
<PAGE>
SNYDER COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Deferred income taxes are recorded based upon differences between the
financial statement and tax bases of assets and liabilities. As of December
31, 1996 and 1997 temporary differences that give rise to the deferred tax
assets and liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1996 1997
------- -------
<S> <C> <C>
Reserve for doubtful accounts.............................. $ 419 $ 2,242
Accrued expenses........................................... 1,657 7,355
Tax losses of a non U.S. subsidiary........................ 1,965 1,964
Tax benefit of capital losses.............................. 1,202 1,202
Other, net................................................. -- 586
------- -------
Gross deferred tax assets.................................. 5,243 13,349
Prepaid pension costs...................................... (84) (74)
Performance revenues....................................... -- (619)
Other, net................................................. (199) (69)
------- -------
Gross deferred tax liabilities............................. (283) (762)
Valuation allowance........................................ (3,166) (3,166)
------- -------
Net deferred tax asset..................................... $ 1,794 $ 9,421
======= =======
</TABLE>
Two of the Company's subsidiaries have certain tax capital and operating
losses which can be realized only if these subsidiaries generate taxable
capital gains or operating income, respectively. At December 31, 1996 and
1997, management determined that a valuation allowance against the deferred
tax asset associated with these tax losses was required.
11. ACQUISITION AND RELATED COSTS:
The Company recorded $39.4 million in non-recurring acquisition and related
costs during 1997. Of the $39.4 million, $34.1 million are costs directly
related to the consummation of the Acquisitions. These costs consist primarily
of investment banking fees, other professional service fees, certain U.K.
excise and transfer taxes, as well as a non-cash charge of approximately $9.1
million related to the accelerated vesting of the options held by employees of
one of the Company's acquirees. The remaining $5.3 million consists of the
write-off of deferred license fees and the accrual of a liability expected to
resolve outstanding litigation. Both the write-off of the deferred fees and
the accrual of the liability were recorded due to changes in fact that
resulted from the Acquisitions.
The Company will record approximately $34.0 million in non-recurring
acquisition and related costs during the first quarter of 1998. These costs
are primarily related to the consummation of the 1998 Mergers and consist of
investment banking fees, the expense associated with stock appreciation
rights, other professional service fees, tax payments and other contractual
payments. In addition, this amount includes approximately $4.7 million for the
costs of consolidating existing Company facilities and acquired operations,
including the external costs and liabilities to close redundant Company
facilities and severance and relocation costs related to the Company's
employees.
12. COMPENSATION TO STOCKHOLDERS:
Prior to the Reorganization, SCI's operations were conducted by the
Partnership. SMS, the general partner of the Partnership, paid compensation to
certain officers and employees of the Partnership for services performed for
SMS. The compensation from SMS was in addition to the compensation that these
individuals received from
F-30
<PAGE>
SNYDER COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
the Partnership. Following consummation of the Reorganization, these
individuals are not performing any comparable duties or responsibilities for
SMS. No such compensation was paid by SMS to these individuals in 1996 or
1997, nor is any such compensation expected to be paid in the future. This
non-recurring compensation is included in compensation to stockholders on the
consolidated statement of income for the year ended December 31, 1995.
Prior to their merger with SCI, certain stockholders of the acquired
companies received annual compensation in their roles as managers in excess of
amounts that they will receive pursuant to employment agreements they have
entered into with the Company. The amount by which the historical compensation
paid to these managers exceeds that provided in their employment contracts has
been classified as compensation to stockholders in the accompanying
consolidated statement of income.
13. EMPLOYEE STOCK OWNERSHIP PLAN:
One of the Company's U.S. subsidiaries sponsors a leveraged employee stock
ownership plan (ESOP) which covers primarily all of its employees who work one
thousand hours or more per plan year. Contributions to the ESOP were made at
the discretion of the subsidiary's Board of Directors and were equal to the
ESOP's debt service less dividends received by the ESOP. In December 1994, the
ESOP acquired 534,800 shares from the former chairman of the subsidiary in
exchange for $0.4 million in cash and a promissory note of $6.0 million. The
note was guaranteed by the subsidiary, secured by the ESOP stock and bore
interest, which was payable monthly at 2.7% over the 30 day commercial paper
rate. Principal payments were due in five annual installments of $1.2 million
commencing January 1, 1996. As of December 31, 1997, the subsidiary had repaid
the entire amount. In January 1995, the ESOP acquired an additional 176,571
shares at a cost of $1.9 million. Of this amount, $1.7 million was financed
through a promissory note with the remaining $0.1 million paid in cash. This
promissory note was guaranteed by the subsidiary and its former chairman and
was due in 84 monthly installments commencing January 1996 with interest at
2.7% over the 30 day commercial paper rate. As of December 31, 1997, the
subsidiary had repaid this borrowing.
All dividends and contributions received by the ESOP are used to pay debt
service. As the debt is repaid, shares are released and allocated to active
employees, based on the proportion of debt service paid in the year. The ESOP
is accounted for in accordance with Statement of Position No. 93-6 "Employees'
Accounting for Employee Stock Ownership Plans". Accordingly, the debt of the
ESOP is recorded as debt in the accompanying consolidated balance sheet and
the shares that have not been allocated to participants are reported as
unearned ESOP compensation in the equity section on the consolidated balance
sheet. As shares are committed to be released, the Company records
compensation expense equal to the current market price of the shares committed
to be released, and the shares become outstanding for earnings-per-share (EPS)
computations. Dividends on allocated ESOP shares are recorded as a reduction
of retained earnings; dividends on unallocated ESOP shares are recorded as a
reduction of debt and accrued interest. ESOP compensation expense was $2.2
million, $6.5 million, and $5.4 million for 1995, 1996, and 1997,
respectively. The status of ESOP shares as of December 31 is as follows:
<TABLE>
<CAPTION>
1996 1997
---------- --------
<S> <C> <C>
Allocated shares..................................... 337,411 570,590
Shares released for allocation....................... 233,179 140,781
Unreleased shares.................................... 140,781 --
---------- --------
Total ESOP shares.................................... 711,371 711,371
---------- --------
Fair value of unreleased shares at December 31,...... $4,784,000 $ --
========== ========
</TABLE>
F-31
<PAGE>
SNYDER COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Former employees who had terminated employment with the subsidiary prior to
its merger with SCI may, at their option, require SCI to repurchase their
vested SCI shares held by the ESOP for fair value. The balance necessary to
satisfy this repurchase obligation has been classified as Redeemable ESOP
stock in the accompanying consolidated balance sheet with a like amount shown
as a reduction of paid-in-capital for each year.
14. STOCK INCENTIVE PLAN:
In September 1996, SCI adopted the 1996 Stock Incentive Plan (the Stock
Option Plan"). The Stock Option Plan authorizes SCI to grant incentive stock
options, non-qualified stock options, restricted stock awards and stock
appreciation rights ("SARs"). Subject to adjustment, 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
17.5% of the number of shares of common stock outstanding.
In conjunction with the management buy-out at one of the Company's acquirees
in January 1994, the acquiree adopted a stock option plan. Granted options
were exercisable upon a sale or flotation of the acquiree as defined in the
terms of the plan. No compensation expense was recognized in the financial
statements for the acquiree's options for any of the periods prior to its
merger with SCI as the conditions for their exercise were not probable. In
conjunction with the March 1997 acquisition by SCI, all of the outstanding
options of the acquiree were exchanged for options of the common stock of the
Company under the Stock Option Plan. The exchange of the acquiree's options
for SCI options was based on the final common stock exchange rates used in the
acquisition, with the SCI options possessing identical terms to the acquiree's
options at the date of conversion. The Company recognized a charge to first
quarter 1997 income of approximately $9.1 million related to the accelerated
vesting of these options.
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 are
determined by the Company's Board of Directors. All options granted as of
December 31, 1997 vest on or before the fourth anniversary of the date of
grant and expire on or before the tenth anniversary of the date of grant.
A summary of the activity within the Stock Option Plan, for the three years
ended December 31, 1997, after giving retroactive effect to the conversion of
the Pooled Entities options, is as follows:
<TABLE>
<CAPTION>
SHARES OUTSTANDING
--------------------
1995 1996 1997
----- ----- ------
(IN THOUSANDS)
<S> <C> <C> <C>
Beginning of year...................................... 1,027 970 5,157
Granted.............................................. 321 4,619 5,705
Exercised............................................ (336) (66) (1,790)
Forfeited............................................ (42) (281) (2,160)
Expired.............................................. -- (85) --
----- ----- ------
End of year............................................ 970 5,157 6,912
===== ===== ======
Exercisable at end of year............................. 863 1,281
===== ======
</TABLE>
F-32
<PAGE>
SNYDER COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
EXERCISE PRICE
-------------------
1995 1996 1997
----- ------ ------
<S> <C> <C> <C>
Beginning of year....................................... $3.29 $ 4.88 $14.97
Granted............................................... 6.98 17.07 24.11
Exercised............................................. 2.21 13.73 14.10
Forfeited............................................. 1.47 15.65 20.24
Expired............................................... -- 15.79 --
End of year............................................. 4.88 14.97 22.59
Exercisable at end of year.............................. 11.07 17.03
</TABLE>
The weighted average option fair value on the grant date was $9.97 for
options issued during the year ended December 31, 1997.
The following table presents information related to the 6.9 million options
outstanding at December 31, 1997.
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
COMPANY OPTIONS NUMBER OF CONTRACTUAL
ISSUED BY OPTIONS EXERCISE PRICE LIFE IN YEARS
- ---------------- -------------- -------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C>
SCI prior to initial public
offering......................... 1,615 $ 17.00 8.68
SCI subsequent to initial public
offering......................... 4,689 $19.38-$33.94 9.45
Pooled Entities................... 608 $ 1.31-$29.59 8.41
-----
6,912
=====
</TABLE>
The fair value of each option grant is estimated on the date of grant using
a Black-Scholes option pricing model with the following weighted average
assumptions used for grants in 1996 and 1997: risk-free interest rate of 6.2
percent and 5.7 percent, expected dividend yield of zero, expected life of 5
years, and expected volatility of 50 percent and 48 percent.
If the Company had recorded compensation expense using the fair value based
method prescribed by SFAS No. 123, the Company's 1996 and 1997 pro forma net
income (loss) and 1996 and 1997 pro forma net income (loss) per share amounts,
which reflect a pro forma adjustment for income taxes, would have been reduced
to the following as adjusted amounts.
<TABLE>
<CAPTION>
1996 1997
------- --------
<S> <C> <C>
Pro forma net income (loss):
As reported.............................................. $12,181 $(19,800)
As adjusted.............................................. 5,286 (33,205)
Pro forma basic net income (loss) per share:
As reported.............................................. .23 (.35)
As adjusted.............................................. .10 (.59)
Pro forma diluted net income (loss) per share:
As reported.............................................. .23 (.35)
As adjusted.............................................. .10 (.59)
</TABLE>
15. PENSION AND PROFIT-SHARING PLANS:
One of the Company's subsidiaries in the U.K. operates a retirement benefit
plan, which is a funded defined benefit plan available to all employees. The
assets of the plan are held separately from those of the subsidiary
F-33
<PAGE>
SNYDER COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
and are invested in managed funds principally comprised of equity securities.
Plan benefits are based on years of service and compensation levels at the
time of retirement. The funding of the plan is determined following
consultation with actuaries using the projected unit credit method.
For purposes of these financial statements, the actuarial value of the
plan's liabilities has been estimated using the available actuarial valuations
and the plan's asset values reflect the actual market value of those assets at
each balance sheet date based on records maintained by the plan's trustees.
The most recent actuarial update of the plan's liabilities was performed as of
December 31, 1997. The significant assumptions used and the funded status of
the plan are set out in the tables below.
<TABLE>
<CAPTION>
SIGNIFICANT ASSUMPTIONS
AS OF DECEMBER 31,
--------------------------
1995 1996 1997
------- ------- --------
% % %
------- ------- --------
<S> <C> <C> <C>
Discount rate................................ 8.0 8.0 6.75
Expected long-term rate of return on plan as-
sets........................................ 9.0 9.0 7.75
Rate of increase in compensation............. 6.0 6.0 5.25
</TABLE>
Net Periodic Pension Cost
Net periodic pension cost is determined using the assumptions as of the
beginning of the year and is comprised of the following (in thousands).
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
Service cost................................. $ 726 $ 1,109 $ 1,360
Interest cost on projected benefit
obligation.................................. 710 875 1,065
Actual return on plan assets................. (1,704) (1,078) (2,899)
Net amortization of unrecognized net loss and
deferral of actual return on plan assets.... 915 125 1,638
-------- -------- --------
Net periodic pension cost.................... $ 647 $ 1,031 $ 1,164
======== ======== ========
</TABLE>
Funded Status
The funded status is determined using the assumption as of the end of the
year and is reflected as follows (in thousands).
<TABLE>
<CAPTION>
AS OF DECEMBER
31,
----------------
1996 1997
------- -------
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated and fully vested............................... $11,501 $14,351
------- -------
Accumulated benefit obligation............................. 11,501 14,351
Effect of projected future compensation levels............. 2,430 3,151
------- -------
Projected benefit obligation............................... 13,931 17,502
Plan assets at fair value.................................. 13,777 17,321
------- -------
Plan assets less than projected benefit obligation......... (154) (181)
Unrecognized loss.......................................... 411 428
------- -------
Prepaid pension cost....................................... $ 257 $ 247
======= =======
</TABLE>
F-34
<PAGE>
SNYDER COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company and certain of its subsidiaries maintain defined contribution
benefit plans. Pension and profit sharing costs related to these plans
amounted to approximately $0.6 million, $0.8 million and $0.9 million for
1995, 1996, and 1997, respectively.
The Company and certain of its subsidiaries maintain deferred compensation
plans for certain key executives. The related expense for these agreements, on
a present value basis, is being recognized as earned. The Company recognized
approximately $0.3 million, $1.2 million and $0.4 million of deferred
compensation expense, including interest charges in 1995, 1996, and 1997,
respectively.
16. NET INCOME PER SHARE
A reconciliation of the shares used to compute basic and diluted earnings
per share follows. For each of the years presented, the same net income used
to compute basic earnings per share was used to compute diluted earnings per
share.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1995 1996 1997
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Weighted average shares outstanding for the
period used in computation of basic net income
per share...................................... 52,030 52,487 56,624
Diluted impact of stock options................. 91 554 --
Shares used in computation of diluted net income
per share...................................... 52,121 53,041 56,624
</TABLE>
For the years ended December 31, 1996 and 1997, there existed weighted
average common stock equivalents of 12,437 and 1,432,136, respectively, which
are not included in the calculation of diluted net income per share because
they were antidilutive for the period.
17. DISCONTINUED OPERATIONS
On October 24, 1997, the Board of Directors of one of the Company's 1998
acquirees approved the spin-off of its sports management operations, which
were carried on by Bob Woolf Associates, Inc. ("BWA"), a wholly owned
subsidiary. The acquiree purchased BWA in May 1996. The spin-off was executed
in the form of a dividend to the acquiree's stockholders of record on October
31, 1997, whereby each stockholder received one share of BWA for each share of
the acquiree's common stock held.
The net losses of BWA prior to October 31, 1997, are included in the
consolidated statement of income under "discontinued operations" and represent
a net loss of $0.03 per diluted share for 1996 and 1997. Revenues from BWA
were approximately $0.3 million for the period from May 1, 1996 (date of BWA
acquisition) to December 31, 1996, and approximately $2.0 million for the ten
months ended October 31, 1997.
F-35
<PAGE>
SNYDER COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
18. 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, 1997 (in thousands):
<TABLE>
<CAPTION>
CAPITAL OPERATING
YEARS ENDING DECEMBER 31, LEASES LEASES
------------------------- ------- ---------
<S> <C> <C>
1998................................................... $ 1,993 $ 25,872
1999................................................... 1,522 21,184
2000................................................... 375 16,981
2001................................................... 74 14,236
2002................................................... -- 12,895
Thereafter............................................. -- 33,734
------- --------
Total minimum lease payments........................... 3,964 $124,902
========
Less--Amount representing interest..................... (337)
-------
Total obligation under capital leases.................. 3,627
Less--Current portion.................................. (1,876)
-------
Long-term portion...................................... $ 1,751
=======
</TABLE>
Property and equipment, net, on the consolidated balance sheet includes $4.2
million and $3.7 million for equipment purchased under capital leases as of
December 31, 1996 and 1997, respectively.
Rental expense for all operating leases was approximately $17.5 million,
$20.9 million and $23.1 million for the years ended December 31, 1995, 1996,
and 1997, respectively.
19. COMMITMENTS AND CONTINGENCIES:
The Company has entered into employment agreements with certain key
executives and consulting agreements with certain former executives that call
for guaranteed minimum salaries and bonuses for varying terms.
An officer of one of the acquired Companies was terminated in February 1997,
and the matter is subject to ongoing litigation. Due to changes in fact that
resulted from the acquisition, the Company recorded a liability in the quarter
ended September 1997 equal to the expected cost to resolve the matter.
One of the Company's U.S. subsidiaries issued irrevocable letters of credit,
automatically renewable on an annual basis for $2,200 to a landlord as a
security deposit for a lease. This subsidiary also has standby letters of
credit with a bank, secured by compensating balance arrangements, totaling
$1,267. The standby letters of credit renew annually and interest is charged
at a rate of 1.25% per year.
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, 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.
20. RELATED PARTIES:
SCI's headquarters office space is leased from a third party, in which one
of the non-employee directors of the Company has a minority ownership
interest. Rent paid under this lease was $0.8 million, $1.1 million, and $2.4
million in 1995, 1996 and 1997, respectively.
F-36
<PAGE>
SNYDER COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
During 1995, SCI advanced $2.7 million 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.
SCI produces a WallBoard(R) for which a publication beneficially owned by
certain non-employee directors of the Company is one of the sponsors. Revenues
earned under this program were $2.0 million in 1997.
In December 1997, the Company entered into a software license agreement with
a company in which certain non-employee directors of the Company are directors
and in which they own a minority interest. The Company will pay approximately
$2.5 million for the license and related equipment.
21. GEOGRAPHICAL DATA:
After giving effect to the Acquisitions, the Company has operations in the
United States, the U.K., France, Ireland and Hungary. Financial information
for the Company's operations in the U.K., France, Ireland, and Hungary are
classified as international and consist primarily of operations in the U.K (in
thousands).
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1995 1996 1997
-------- -------- ---------
<S> <C> <C> <C>
Revenues
United States................................ $206,815 $286,681 $ 350,715
International................................ 127,275 142,216 169,325
-------- -------- ---------
Total revenues............................. $334,090 $428,897 $ 520,040
======== ======== =========
Income (loss) from operations
United States................................ $ 25,199 $ 24,344 $ (11,186)
International................................ 11,463 3,654 2,328
-------- -------- ---------
Total income (loss) from operations........ $ 36,662 $ 27,998 $ (8,858)
======== ======== =========
Identifiable assets
United States................................ $215,535 $ 281,256
International................................ 80,455 129,446
-------- ---------
Total identifiable assets.................. $295,990 $ 410,702
======== =========
</TABLE>
F-37
<PAGE>
SNYDER COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following table summarizes financial data by quarter for the Company for
1996 and 1997, giving effect to the Acquisitions as if they had occurred at
the beginning of the earliest period presented (Unaudited, in thousands,
except per share data).
<TABLE>
<CAPTION>
1996 QUARTER ENDED
-------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 TOTAL
-------- -------- ------------ ----------- --------
<S> <C> <C> <C> <C> <C>
Revenues................ $ 93,942 $102,254 $110,042 $122,659 $428,897
Gross profit............ 27,934 31,471 33,593 37,957 130,955
Income from continuing
operations............. 4,105 5,624 5,870 4,005 19,604
Income from continuing
operations per share
(diluted).............. 0.08 0.11 0.11 0.07 0.37
Net income.............. 4,105 5,435 5,163 2,188 16,891
Net income per share
(diluted).............. 0.08 0.10 0.10 0.04 0.32
Pro forma net income
from continuing
operations............. 3,270 4,082 2,938 4,001 14,291
Pro forma net income
from continuing
operations per share
(diluted).............. 0.06 0.08 0.06 0.07 0.27
Pro forma net income.... 3,270 3,969 2,516 2,426 12,181
Pro forma net income per
share (diluted)........ 0.06 0.08 0.05 0.04 0.23
<CAPTION>
1997 QUARTER ENDED
-------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 TOTAL
-------- -------- ------------ ----------- --------
<S> <C> <C> <C> <C> <C>
Revenues................ $118,584 $129,164 $128,858 $143,434 $520,040
Gross profit............ 35,677 40,594 38,934 41,829 157,034
Income (loss) from
continuing operations.. (9,997) 8,678 (7,564) (6,612) (15,495)
Income (loss) from
continuing operations
per share (diluted).... (0.18) 0.15 (0.13) (0.11) (0.27)
Net income (loss)....... (10,555) 8,054 (7,863) (6,638) (17,002)
Net income (loss) per
share (diluted)........ (0.19) 0.14 (0.14) (0.11) (0.30)
Pro forma net income
(loss) from continuing
Operations............. (10,556) 7,449 (8,042) (7,751) (18,900)
Pro forma net income
(loss) from continuing
Operations per share
(diluted).............. (0.19) 0.13 (0.14) (0.13) (0.33)
Pro forma net income
(loss)................. (10,862) 7,092 (8,277) (7,753) (19,800)
Pro forma net income
(loss) per share
(diluted) (a).......... (0.20) 0.12 (0.15) (0.13) (0.35)
</TABLE>
The pro forma amounts include a provision for federal and state income taxes
as if the Company had been a taxable C corporation for all periods presented.
(a) The sum of these amounts does not equal the annual amount because the
quarterly calculations are based on varying numbers of shares outstanding.
22. SUBSEQUENT EVENT (UNAUDITED):
In February 1998, the Company acquired Healthcare Promotions, LLC, a
provider of pharmaceutical marketing and sales force training services, in the
United States. The transaction was valued at $22.0 million and will be
accounted for as a purchase business combination.
In March 1998, the Company acquired CLI Pharma S.A., a provider of
outsourced pharmaceutical sales and sales force recruitment services in
France. The transaction was valued at $25.0 million and will be accounted for
as a purchase business combination.
F-38
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Brann Holdings Limited:
We have audited the consolidated balance sheets of Brann Holdings Limited
(the Company) and its subsidiaries as of December 31, 1995 and 1996, and the
related consolidated statements of income, changes in stockholders' equity and
cash flows for each of the three years in the period ended December 31, 1996
(not presented separately herein). These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United Kingdom, which do not differ in any material respect
from generally accepted auditing standards in the United States. 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 consolidated financial statements audited by us present
fairly, in all material respects, the financial position of the Company and
its subsidiaries as of December 31, 1995 and 1996, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1996 in conformity with generally accepted accounting
principles in the United States.
Price Waterhouse
Chartered Accountants and Registered
Auditors
Bristol, England
May 30, 1997
F-39
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
American List Corporation
We have audited the consolidated balance sheet of American List Corporation
and Subsidiaries as of February 28, 1997, and the related consolidated
statements of earnings, stockholders' equity and cash flows for each of the
years in the two-year period then ended (not presented separately herein).
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our 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 consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall consolidated 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 consolidated financial position of American List
Corporation and Subsidiaries as of February 28, 1997, and the consolidated
results of their operations and their consolidated cash flows for each of the
years in the two-year period then ended in conformity with generally accepted
accounting principles.
Grant Thornton LLP
Melville, New York
April 11, 1997
F-40
<PAGE>
[Inside Back Cover]
Delivering market share
[Images of: a globe; photographs of seniors, teenagers, an infant, a physician
and detailing representatives.]
Snyder reaches millions of potential customers through a variety of targeted
distribution channels.
[_] Mothers-to-be
[_] New Mothers
[_] Working Parents
[_] New Home Owners
[_] Healthcare Professionals
[_] Patients with Specific Health Conditions
[_] Physicians
[_] Recent Immigrants
[_] Teenagers
[_] Households with Children
[_] Students
[_] Fitness-conscious Individuals
[_] Seniors
[_] Small Businesses
[_] Business Professionals
[_] Multicultural Consumers
Snyder Communications, Inc.
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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 STOCKHOLDERS 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 AN 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>
Summary.................................................................... 1
Risk Factors............................................................... 7
Use of Proceeds............................................................ 13
Dividend Policy............................................................ 13
Price Range of Common Stock................................................ 13
Capitalization............................................................. 14
Business................................................................... 15
Management................................................................. 23
Principal Stockholders..................................................... 25
Selling Stockholders....................................................... 27
Shares Eligible for Future Sale............................................ 32
Considerations for Non-United States Holders............................... 34
Underwriting............................................................... 37
Legal Matters.............................................................. 39
Experts.................................................................... 39
Available Information...................................................... 40
Incorporation of Certain Information by Reference.......................... 41
Index to Consolidated Financial Statements................................. F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
7,750,000 SHARES
[SNYDER COMMUNICATIONS, INC. LOGO]
COMMON STOCK
----------------
PROSPECTUS
----------------
MERRILL LYNCH & CO.
GOLDMAN, SACHS & CO.
BEAR, STEARNS & CO. INC.
NATIONSBANC MONTGOMERY SECURITIES LLC
, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY 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 PAGES FOR INTERNATIONAL PROSPECTUS]
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED MAY 18, 1998
PROSPECTUS
7,750,000 SHARES
[LOGO OF SNYDER COMMUNICATIONS APPEARS HERE]
COMMON STOCK
-----------
Of the 7,750,000 shares of Common Stock of Snyder Communications, Inc. (the
"Company") offered hereby, 579,294 are being offered by the Company and
7,170,706 are being offered by certain stockholders of the Company (the
"Selling Stockholders"). Certain of the Selling Stockholders (the "Over-
Allotment Selling Stockholders") have granted to the Underwriters options to
purchase up to 1,162,500 additional shares to cover over-allotments, if any.
The Company will not receive any of the proceeds from the sale of the shares of
Common Stock by the Selling Stockholders.
Of the 7,750,000 shares of Common Stock offered hereby, 1,550,000 are being
offered for sale initially outside the United States and Canada by the
International Managers and 6,200,000 shares are being offered for sale
initially in a concurrent offering in the United States and Canada by the U.S.
Underwriters. The initial public offering price and the underwriting discount
per share will be identical for both Offerings. See "Underwriting."
The Common Stock is listed on the New York Stock Exchange under the symbol
"SNC." On May 15, 1998, the last sale price of the Common Stock as reported on
the New York Stock Exchange was $44.00. See "Price Range of Common Stock."
SEE "RISK FACTORS" BEGINNING ON PAGE 7 OF THIS PROSPECTUS FOR A DISCUSSION OF
CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN
THE 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>
PROCEEDS TO
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC DISCOUNT(1) COMPANY(2) STOCKHOLDERS
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share....................... $ $ $ $
- --------------------------------------------------------------------------------
Total(3)........................ $ $ $ $
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) The Company 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 payable by the Company, estimated at $ .
(3) The Over-Allotment Selling Stockholders have granted the International
Managers and U.S. Underwriters options to purchase up to an additional
232,500 shares and 930,000 shares of Common Stock, respectively,
exercisable within 30 days after the date hereof, solely to cover over-
allotments, if any. If such options are exercised in full, the total Price
to Public, Underwriting Discount 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, subject to the
approval of certain legal matters by counsel for the Underwriters and 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 , 1998.
-----------
MERRILL LYNCH INTERNATIONAL GOLDMAN SACHS INTERNATIONAL
BEAR, STEARNS INTERNATIONAL LIMITED NATIONSBANC MONTGOMERY SECURITIES LLC
-----------
The date of this Prospectus is , 1998.
X-1
<PAGE>
UNDERWRITING
Merrill Lynch International, Goldman Sachs International, Bear, Stearns
International Limited and NationsBanc Montgomery Securities LLC are acting as
lead managers (the "Lead Managers") for each of the International Managers
named below (the "International Managers"). Subject to the terms and
conditions set forth in an international purchase agreement (the
"International Purchase Agreement") among the Company, the Selling
Stockholders and the International Managers, and concurrently with the sale of
6,200,000 shares of Common Stock to the U.S. Underwriters (as defined below),
the Company and the Selling Stockholders have agreed to sell to the
International Managers, and each of the International Managers severally and
not jointly has agreed to purchase from the Company and the Selling
Stockholders, the number of shares of Common Stock set forth opposite its name
below.
<TABLE>
<CAPTION>
NUMBER
INTERNATIONAL MANAGER OF SHARES
--------------------- ---------
<S> <C>
Merrill Lynch International.......................................
Goldman Sachs International.......................................
Bear, Stearns International Limited...............................
NationsBanc Montgomery Securities LLC.............................
---------
Total........................................................ 1,550,000
=========
</TABLE>
The Company and the Selling Stockholders have also entered into a 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"), Goldman, Sachs & Co.,
Bear, Stearns & Co. Inc. and NationsBanc Montgomery Securities LLC are acting
as representatives (the "U.S. Representatives"). Subject to the terms and
conditions set forth in the U.S. Purchase Agreement, and concurrently with the
sale of 1,550,000 shares of Common Stock to the International Managers
pursuant to the International Purchase Agreement, the Company and the Selling
Stockholders 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 Stockholders, an aggregate of 6,200,000 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, under the
U.S. Purchase Agreement and the International Purchase Agreement, the
commitments of non-defaulting Underwriters 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 Lead Managers have advised the Company 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 options to the
International Managers, exercisable for 30 days after the date of this
Prospectus, to purchase up to an aggregate of 232,500 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 these options only to cover over-allotments, if
X-2
<PAGE>
any, made on the sale of the Common Stock offered hereby. To the extent that
the International Managers exercise these options, 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 options to the U.S. Underwriters,
exercisable for 30 days after the date of this Prospectus, to purchase up to
an aggregate of 930,000 additional shares of Common Stock to cover over-
allotments, if any, on terms similar to those granted to the International
Managers.
The Company, certain stockholders and the Company's directors and executive
officers have agreed, subject to certain exceptions for pledges and, in the
case of the Company, the grant and exercise of employee stock options and the
issuance of shares in connection with acquisitions as long as all executive
officers, directors and other affiliates of the entity being acquired have
agreed in writing to the restrictions set forth below, 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 or a
registration statement on Form S-4 to register shares issuable in connection
with an acquisition), for a period of 90 days after the date of this
Prospectus, without the prior written consent of Merrill Lynch.
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
Managers and any dealer to whom they sell shares of Common Stock will not
offer to sell or sell shares of Common Stock to U.S. persons or to Canadian
persons or to persons they believe intend to resell to U.S. 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-U.S. or non-Canadian persons or to persons they believe intend to
resell to persons who are non-U.S. or non-Canadian persons, except in the case
of transactions pursuant to the Intersyndicate Agreement.
The Company 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 of 1933, as amended, or to
contribute to payments the International Managers and the U.S. Underwriters
may be required to make in respect thereof.
Until the distribution of the Common Stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the Underwriters
and certain selling group members to bid for and purchase the Common Stock. As
an exception to these rules, the U.S. Representatives are permitted to engage
in certain transactions that stabilize the price of the Common Stock. Such
transactions consist of bids or purchases for the purpose of pegging, fixing
or maintaining the price of the Common Stock.
If the Underwriters create a short position in the Common Stock in
connection with the Offerings, i.e., if they sell more shares of Common Stock
than are set forth on the cover page of this Prospectus, the U.S.
Representatives may reduce that short position by purchasing Common Stock in
the open market. The U.S. Representatives may also elect to reduce any short
position by exercising all or part of the over-allotment option described
above.
The U.S. Representatives may also impose a penalty bid on certain
Underwriters and selling group members. This means that if the U.S.
Representatives purchase shares of Common Stock in the open market to reduce
the Underwriters' short position or to stabilize the price of the Common
Stock, they may reclaim the amount of the selling concession from the
Underwriters and selling group members who sold those shares as part of the
Offerings.
X-3
<PAGE>
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher
than it might be in the absence of such purchases. The imposition of a penalty
bid might also have an effect on the price of the Common Stock to the extent
that it discourages resales of the Common Stock.
Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the
transactions described above may have on the price of the Common Stock. In
addition, neither the Company nor any of the Underwriters makes any
representation that the U.S. Representatives will engage in such transactions
or that such transactions, once commenced, will not be discontinued without
notice.
Each International Manager has agreed that (i) it has not offered or sold
and, prior to the expiration period of six months from the Closing Date, 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 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 Advertisements) (Exemptions) Order 1996, 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.
Each of Merrill Lynch and NationsBanc Montgomery Securities LLC has from
time to time provided investment banking advisory services to the Company, for
which it has received customary compensation, and may continue to do so in the
future. Each of Goldman, Sachs & Co. and Bear, Stearns & Co. Inc. has from
time to time provided investment banking advisory services to the Company, and
may continue to do so in the future. In connection with a recent acquisition
by the Company, Merrill Lynch and Bear, Stearns & Co. Inc. acquired shares of
Common Stock and were granted certain registration rights, which shares were
registered and sold in January 1998 pursuant to a shelf registration
statement. In connection with another recent acquisition by the Company,
Merrill Lynch and Goldman, Sachs & Co. acquired shares of Common Stock and
were granted certain registration rights. See "Shares Eligible for Future
Sale."
Merrill Lynch Specialists Inc. ("MSLI"), an affiliate of Merrill Lynch,
Pierce, Fenner & Smith Incorporated, one of the Underwriters, acts as a
specialist in the Common Stock of the Company pursuant to the rules of the New
York Stock Exchange, Inc. Under an exemption granted by the Securities and
Exchange Commission on July 31, 1995, MSLI will be permitted to carry on its
activities as a specialist in the Common Stock for the entire period of the
distribution of the Common Stock. The exemption is subject to the satisfaction
by MSLI of the conditions specified in the exemption.
X-4
<PAGE>
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Shaw Pittman Potts & Trowbridge, a partnership including
professional corporations, Washington, D.C. 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 historical consolidated financial statements of the Company as of
December 31, 1997 and 1996 and for each of the three years in the period ended
December 31, 1997 and the related schedule included in this Prospectus and
elsewhere in the Registration Statement, have been audited by Arthur Andersen
LLP, independent public accountants, as set forth in their reports. In those
reports, that firm states that, with respect to the operations of Brann
Holdings Limited and its subsidiaries and American List Corporation and its
subsidiaries, their opinions are based on the reports of other independent
public accountants, namely Price Waterhouse, Chartered Accountants and
Registered Auditors and Grant Thornton LLP. The financial statements and
supporting schedules referred to above have been included herein in reliance
upon the authority of those firms as experts in giving said reports.
The consolidated financial statements of Brann Holdings Limited and its
subsidiaries as of December 31, 1996 and 1995 and for each of the two years in
the period ended December 31, 1996, have been audited by Price Waterhouse,
Chartered Accountants, as set forth in its report thereon included herein.
The consolidated financial statements of American List Corporation and its
subsidiaries as of February 28, 1997 and for each of the years in the two-year
period then ended, have been audited by Grant Thornton LLP, independent
certified public accountants, as set forth in its report thereon included
herein.
X-5
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the information reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as
applicable to U.S. private issuers with securities registered thereunder, and,
in accordance therewith, files reports and other information with the
Securities and Exchange Commission (the "Commission"). Copies of reports,
proxy statements, information statements and other information filed by the
Company with the Commission can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and also are available for inspection at
the Commission's regional offices located at Citicorp Center, 500 West
Madison, Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center, Suite
1300, New York, New York 10048. Copies of such material also can be obtained
at prescribed rates from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549. The Company's Common Stock is
listed on the NYSE and such reports, proxy statements, information statements
and other information may also be inspected at the offices of the NYSE at 20
Broad Street, New York, New York 10005. Materials that the Company files
electronically with the Commission are available at the Commission's website
(http://www.sec.gov), which contains reports, proxy statements, information
statements and other information regarding issuers that file electronically
with the Commission.
The Company has filed with the Commission a Registration Statement on Form
S-3 (together with all amendments thereto, the "Registration Statement") under
the Securities Act with respect to the Offerings. This Prospectus does not
contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and
regulations of the Commission. Statements made in this Prospectus as to the
contents of any contract, agreement or other document referred to are not
necessarily complete and, with respect to each such contract, agreement or
other document filed as an exhibit to the Registration Statement, reference is
made to the exhibit for a more complete description of the matter involved,
and each such statement is deemed qualified in its entirety by such reference.
X-6
<PAGE>
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by the Company with the Commission pursuant to
the Securities Act and the Exchange Act (File No. 1-12145) are incorporated by
reference in this Prospectus: (i) the Company's Annual Report on Form 10-K for
its fiscal year ended December 31, 1997, filed by the Company with the
Commission on March 31, 1998; (ii) the Company's Current Report on Form 8-K
dated November 25, 1997, filed by the Company with the Commission on January
21, 1998; (iii) the Company's Current Report on Form 8-K dated December 31,
1997, filed by the Company with the Commission on February 17, 1998; (iv) the
Company's Current Report on Form 8-K dated February 28, 1998, filed by the
Company with the Commission on March 30, 1998; (v) the Company's Current
Report on Form 8-K dated March 25, 1998, filed by the Company with the
Commission on April 3, 1998, as amended by the Company's Current Report on
Form 8-K/A, filed by the Company with the Commission on May 15, 1998; (vi) the
Company's Current Report on Form 8-K dated March 31, 1998, filed by the
Company with the Commission on May 5, 1998; (vii) the Company's Quarterly
Report on Form 10-Q for its fiscal quarter ended March 31, 1998, filed by the
Company with the Commission on May 15, 1998; and (viii) the description of the
Company's Common Stock contained in the Company's Registration Statement on
Form 8-A, filed with the Commission on September 9, 1996, including any
amendment or report filed for the purposes of updating such description.
All reports and other documents filed by the Company with the Commission
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent
to the date of this Prospectus and prior to the termination of the Offerings
shall be deemed to be incorporated herein by reference and to be a part hereof
on and from the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference in this
Prospectus shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or incorporated
herein by reference or in any other subsequently filed document that also is
or is deemed to be incorporated by reference herein modifies or supersedes
such statement. Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon the written or
oral request of such person, a copy of any and all documents incorporated by
reference in this Prospectus (not including, however, the exhibits to such
documents unless such exhibits are specifically incorporated by reference in
such information). Such requests should be directed to: Snyder Communications,
Inc., Two Democracy Center, 6903 Rockledge Drive, 15th Floor, Bethesda,
Maryland 20817; Attention: Secretary, telephone number (301) 468-1010.
X-7
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 STOCKHOLDERS OR ANY UNDERWRITER. 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
AN 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>
Summary.................................................................... 1
Risk Factors............................................................... 7
Use of Proceeds............................................................ 13
Dividend Policy............................................................ 13
Price Range of Common Stock................................................ 13
Capitalization............................................................. 14
Business................................................................... 15
Management................................................................. 23
Principal Stockholders..................................................... 25
Selling Stockholders....................................................... 27
Shares Eligible for Future Sale............................................ 32
Considerations for Non-United States Holders............................... 34
Underwriting............................................................... 37
Legal Matters.............................................................. 40
Experts.................................................................... 40
Available Information...................................................... 41
Incorporation of Certain Information by Reference.......................... 42
Index to Consolidated Financial Statements................................. F-1
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7,750,000 SHARES
[SNYDER COMMUNICATIONS, INC. LOGO]
COMMON STOCK
---------------
PROSPECTUS
---------------
MERRILL LYNCH INTERNATIONAL
GOLDMAN SACHS INTERNATIONAL
BEAR, STEARNS INTERNATIONAL LIMITED
NATIONSBANC MONTGOMERY SECURITIES LLC
, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
X-8
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<S> <C>
1.1 Form of U.S. Purchase Agreement.
1.2 Form of International Purchase Agreement.
2.1 Agreement and Plan of Merger, dated as of March 18, 1997, among
American List Corporation, the Company and Snyder Z Acquisition, Inc.
(Incorporated by reference to Exhibit 2.1 to the Company's Form 8-K
dated July 11, 1997).
2.2 Agreement and Plan of Merger among Brann Holdings Limited and the
Company, dated as of March 18, 1997 (Incorporated by reference to
Exhibit 2.1 to the Company's Form 8-K dated March 18, 1997).
2.3 Agreement and Plan of Merger among MMD, Inc., the stockholders of MMD,
Inc., the Company, and Snyder Acquisition Corp., dated as of January
6, 1997 (Incorporated by reference to Exhibit 2.1 to the Company's
Form 8-K dated January 6, 1997).
2.4 Share Sale and Purchase Agreement among the Shareholders of Bounty
Group Limited as listed on the signature page thereto and the Company,
dated as of July 13, 1997 (Incorporated by reference to Exhibit 2.1 to
the Company's Form 8-K dated July 13, 1997).
2.5 Agreement and Plan of Merger among Sampling Corporation of America,
the Company and Snyder Acquisition Corp., dated as of July 14, 1997
(Incorporated by reference to Exhibit 2.2 to the Company's Form 8-K
dated July 14, 1997).
2.6 Agreement and Plan of Merger dated as of March 25, 1998, by and among
the Company, Snyder AR Acquisition, LLC, Arnold Communications, Inc.
and the Stockholders of Arnold Communications, Inc. (Incorporated by
referenced to Exhibit 2.1 to the Company's Form 8-K dated March 25,
1998).
3.1 Certificate of Incorporation of the Company (as amended through May 6,
1998) (Incorporated by reference to Exhibit 3.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1998).
3.2 Bylaws of the Company (Incorporated by reference to Exhibit 3.2
forming a part of the Company's Registration Statement on Form S-1
(File No. 333-7495) filed with the Securities and Exchange Commission
under the Securities Act of 1933, as amended).
4.1 Reference is made to exhibits 3.1 and 3.2.
5* Opinion of Shaw Pittman Potts & Trowbridge as to the legality of the
Common Stock being registered.
23.1 Consent of Shaw Pittman Potts & Trowbridge (included as part of
Exhibit 5).
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of Grant Thornton LLP.
23.4 Consent of Price Waterhouse, Chartered Accountants and Registered
Auditors.
24* Powers of Attorney (included as part of the signature page of this
Registration Statement).
27.1* Financial Data Schedule for Consolidated Financial Statements as of
and for the years ended December 31, 1996 and 1997.
27.2* Financial Data Schedule for Condensed Consolidated Financial
Statements as of and for the three months ended March 31, 1998.
</TABLE>
- --------
* Previously filed.
II-1
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS
ALL OF THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS
AMENDMENT NO. 2 TO REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN BETHESDA, MARYLAND, ON THIS 18TH
DAY OF MAY, 1998.
Snyder Communications, Inc.
/s/ Daniel M. Snyder
By: _________________________________
DANIEL M. SNYDER
CHAIRMAN OF THE BOARD OF DIRECTORS
AND CHIEF EXECUTIVE OFFICER
II-2
<PAGE>
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS AMENDMENT NO. 2 TO
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATE INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
Chairman of the
/s/ Daniel M. Snyder Board of Directors May 18, 1998
- ------------------------------------- and Chief Executive
DANIEL M. SNYDER Officer
/s/ Michele D. Snyder* Vice Chairman,
- ------------------------------------- President, Chief May 18, 1998
MICHELE D. SNYDER Operating Officer
and Director
/s/ A. Clayton Perfall* Chief Financial
- ------------------------------------- Officer May 18, 1998
A. CLAYTON PERFALL and Director
/s/ David B. Pauken* Chief Accounting
- ------------------------------------- Officer May 18, 1998
DAVID B. PAUKEN
/s/ Mortimer B. Zuckerman* Director
- ------------------------------------- May 18, 1998
MORTIMER B. ZUCKERMAN
/s/ Fred Drasner* Director
- ------------------------------------- May 18, 1998
FRED DRASNER
/s/ Philip Guarascio* Director
- ------------------------------------- May 18, 1998
PHILIP GUARASCIO
/s/ Mark E. Jennings* Director
- ------------------------------------- May 18, 1998
MARK E. JENNINGS
/s/ Daniel M. Snyder
*By: ________________________________
DANIEL M. SNYDER,
ATTORNEY-IN-FACT
</TABLE>
II-3
<PAGE>
EXHIBIT INDEX
<TABLE>
<C> <S>
1.1 Form of U.S. Purchase Agreement.
1.2 Form of International Purchase Agreement.
2.1 Agreement and Plan of Merger, dated as of March 18, 1997, among American
List Corporation, the Company and Snyder Z Acquisition, Inc.
(Incorporated by reference to Exhibit 2.1 to the Company's Form 8-K
dated July 11, 1997).
2.2 Agreement and Plan of Merger among Brann Holdings Limited and the
Company, dated as of March 18, 1997 (Incorporated by reference to
Exhibit 2.1 to the Company's Form 8-K dated March 18, 1997).
2.3 Agreement and Plan of Merger among MMD, Inc., the stockholders of MMD,
Inc., the Company, and Snyder Acquisition Corp., dated as of January 6,
1997 (Incorporated by reference to Exhibit 2.1 to the Company's Form 8-K
dated January 6, 1997).
2.4 Share Sale and Purchase Agreement among the Shareholders of Bounty Group
Limited as listed on the signature page thereto and the Company, dated
as of July 13, 1997 (Incorporated by reference to Exhibit 2.1 to the
Company's Form 8-K dated July 13, 1997).
2.5 Agreement and Plan of Merger among Sampling Corporation of America, the
Company and Snyder Acquisition Corp., dated as of July 14, 1997
(Incorporated by reference to Exhibit 2.2 to the Company's Form 8-K
dated July 14, 1997).
2.6 Agreement and Plan of Merger dated as of March 25, 1998, by and among
the Company, Snyder AR Acquisition, LLC, Arnold Communications, Inc. and
the Stockholders of Arnold Communications, Inc. (Incorporated by
referenced to Exhibit 2.1 to the Company's Form 8-K dated March 25,
1998).
3.1 Certificate of Incorporation of the Company (as amended through May 6,
1998) (Incorporated by reference to Exhibit 3.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1998).
3.2 Bylaws of the Company (Incorporated by reference to Exhibit 3.2 forming
a part of the Company's Registration Statement on Form S-1 (File No.
333-7495) filed with the Securities and Exchange Commission under the
Securities Act of 1933, as amended).
4.1 Reference is made to exhibits 3.1 and 3.2.
5* Opinion of Shaw Pittman Potts & Trowbridge as to the legality of the
Common Stock being registered.
23.1 Consent of Shaw Pittman Potts & Trowbridge (included as part of Exhibit
5).
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of Grant Thornton LLP.
Consent of Price Waterhouse, Chartered Accountants and Registered
23.4 Auditors.
Powers of Attorney (included as part of the signature page of this
24* Registration Statement).
27.1* Financial Data Schedule for Consolidated Financial Statements as of and
for the years ended December 31, 1996 and 1997.
27.2* Financial Data Schedule for Condensed Consolidated Financial Statements
as of and for the three months ended March 31, 1998.
</TABLE>
- --------
* Previously filed.
<PAGE>
PAGE>
EXHIBIT 1.1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SNYDER COMMUNICATIONS, INC.
(a Delaware corporation)
[_________] Shares of Common Stock
U.S. PURCHASE AGREEMENT
-----------------------
Dated: May , 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
U.S. PURCHASE AGREEMENT..................................................................................1
SECTION 1. Representations and Warranties.............................................4
(a) Representations and Warranties by the Company..............................4
(i) Compliance with Registration Requirements.........................4
(ii) Incorporated Documents............................................5
(iii) Independent Accountants...........................................6
(iv) Financial Statements..............................................6
(v) No Material Adverse Change in Business............................6
(vi) Good Standing of the Company......................................7
(vii) Good Standing of Subsidiaries.....................................7
(viii) Capitalization....................................................8
(ix) Authorization.....................................................8
(x) Authorization and Description of Securities.......................8
(xi) Absence of Defaults and Conflicts.................................8
(xii) Absence of Labor Dispute.........................................9
(xiii) Absence of Proceedings............................................9
(xiv) Accuracy of Exhibits.............................................10
(xv) Possession of Intellectual Property.............................10
(xvi) Absence of Further Requirements.................................10
(xvii) Possession of Licenses and Permits..............................11
(xviii) Title to Property...............................................11
(xix) Investment Company Act..........................................11
(xx) Environmental Laws..............................................12
(xxi) Registration Rights.............................................12
(xxii) Compliance with Laws............................................12
(xxiii) Taxes...........................................................12
(xxiv) Insurance........................................................13
(b) Representations, Warranties and Covenants by the
Selling Shareholders......................................................13
(i) Authorization of Agreements......................................13
(ii) Good and Valid Title.............................................14
(iii) Due Execution of Custody Agreement and Power
of Attorney......................................................14
(iv) Absence of Manipulation..........................................14
(v) Absence of Further Requirements..................................15
(vi) Certificates Suitable for Transfer; Instruments of
Transfer.........................................................15
(vii) No Association with NASD.........................................15
(c) Additional Representations and Warranties by the
Executive Selling Shareholders............................................15
(d) Officer's Certificates....................................................17
SECTION 2. Sale and Delivery to U.S. Underwriters; Closing...........................17
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
(a) Initial Securities........................................................17
(b) Option Securities.........................................................17
(c) Payment...................................................................18
(d) Denominations; Registration...............................................19
SECTION 3. Covenants of the Company..................................................19
(a) Compliance with Securities Regulations and
Commission Requests.......................................................19
(b) Filing of Amendments......................................................19
(c) Delivery of Registration Statement........................................20
(d) Delivery of Prospectuses..................................................20
(e) Continued Compliance with Securities Laws.................................20
(f) Blue Sky Qualifications...................................................21
(g) Rule 158..................................................................21
(h) Use of Proceeds...........................................................22
(i) Listing...................................................................22
(j) Restriction on Sale of Securities.........................................22
(k) Reporting Requirements....................................................22
SECTION 4. Payment of Expenses.......................................................22
(a) Expenses..................................................................22
(b) Expenses of the Selling Shareholders......................................23
(c) Termination of Agreement..................................................23
(d) Allocation of Expenses....................................................24
SECTION 5. Conditions of U.S. Underwriters' Obligations..............................24
(a) Effectiveness of Registration Statement...................................24
(b) Opinion of Counsel for Company............................................24
(c) Opinions of Counsel for the Selling Shareholders..........................25
(d) Opinion of Counsel for U.S. Underwriters..................................25
(e) Officers' Certificate.....................................................26
(f) Certificate of Selling Shareholders.......................................26
(g) Accountant's Comfort Letter...............................................26
(h) Bring-down Comfort Letter.................................................27
(i) Approval of Listing.......................................................27
(j) No Objection..............................................................27
(k) Lock-up Agreements........................................................27
(l) Form W-9 and Form W-8.....................................................27
(m) Purchase of Initial International Securities..............................27
(n) Conditions to Purchase of U.S. Option Securities..........................27
(o) Additional Documents......................................................29
(p) Termination of Agreement..................................................29
SECTION 6. Indemnification...........................................................29
(a) Indemnification of U.S. Underwriters......................................29
(b) Indemnification of U.S. Underwriters by the Non-
Executive Selling Shareholders............................................32
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
(c) Indemnification of Company, Directors and Officers
and Selling Shareholders..................................................33
(d) Actions against Parties; Notification.....................................33
(e) Settlement without Consent if Failure to Reimburse........................34
(f) Other Agreements with Respect to Indemnification..........................34
SECTION 7. Contribution..............................................................34
SECTION 8. Representations, Warranties and Agreements to Survive
Delivery..................................................................36
SECTION 9. Termination of Agreement..................................................36
(a) Termination; General......................................................36
(b) Liabilities...............................................................37
SECTION 10. Default by One or More of the U.S. Underwriters...........................37
SECTION 11. Default by One or More of the Selling Shareholders or the
Company...................................................................38
SECTION 12. Notices...................................................................39
SECTION 13. Parties...................................................................39
SECTION 14. GOVERNING LAW AND TIME....................................................39
SECTION 15. Effect of Headings........................................................40
SCHEDULES
Schedule A - List of U.S. Underwriters...........................................Sch A-1
Schedule B - List of Selling Shareholders........................................Sch B-1
Schedule C - Pricing Information.................................................Sch C-1
Schedule D - List of Persons Subject to Lock-up..................................Sch D-1
Schedule E - List of Subsidiaries...............................................Sch E -1
EXHIBITS
Exhibit A - Form of Opinion of Company's Counsel.....................................A-1
Exhibit B - Form of Opinion of Selling Shareholders' Counsel.........................B-1
Exhibit C- Form of Lock-up Letter...................................................C-1
Exhibit D - Form of Pledgee Lock-up Letter...........................................D-1
</TABLE>
iii
<PAGE>
SNYDER COMMUNICATIONS, INC.
(a Delaware corporation)
[______________] Shares of Common Stock
(Par Value $.001 Per Share)
U.S. PURCHASE AGREEMENT
-----------------------
May __, 1998
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Goldman, Sachs & Co.
Bear, Stearns & Co. Inc.
NationsBanc Montgomery Securities LLC
as U.S. Representatives of the several U.S. Underwriters
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Ladies and Gentlemen:
Snyder Communications, Inc., a Delaware corporation (the "Company"), and
the persons listed in Schedule B hereto (collectively, the "Selling
Shareholders") confirm their respective agreements with Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and each of
the other U.S. Underwriters named in Schedule A hereto (collectively, the "U.S.
Underwriters", which term shall also include any underwriter substituted as
hereinafter provided in Section 10 hereof), for whom Merrill Lynch, Goldman,
Sachs & Co., Bear, Stearns & Co. Inc. and NationsBanc Montgomery Securities LLC
are acting as representatives (in such capacity, the "U.S. Representatives"),
with respect to (i) the sale by the Company and the Selling Shareholders, acting
-
severally and not jointly, and the purchase by the U.S. Underwriters, acting
severally and not jointly, of the respective numbers of shares of Common Stock,
par value $.001 per share, of the Company ("Common Stock") set forth in
Schedules A and B
<PAGE>
hereto and (ii) the grant by Daniel M. Snyder and Michele D. Snyder
--
(collectively, the "Executive Selling Shareholders") to the U.S. Underwriters,
acting severally and not jointly, of the option described in Section 2(b) hereof
to purchase all or any part of [___________________] additional shares of Common
Stock to cover over-allotments, if any. The aforesaid [_____________________]
shares of Common Stock (the "Initial U.S. Securities") to be purchased by the
U.S. Underwriters and all or any part of the [__________________] shares of
Common Stock subject to the option described in Section 2(b) hereof (the "U.S.
Option Securities") are hereinafter called, collectively, the "U.S. Securities".
It is understood that the Company and the Selling Shareholders are
concurrently entering into an agreement dated the date hereof (the
"International Purchase Agreement") providing for the offering by the Company
and the Selling Shareholders, acting severally and not jointly, of an aggregate
of [______________________] shares of Common Stock (the "Initial International
Securities") through arrangements with certain underwriters outside the United
States and Canada (the "International Managers") for which Merrill Lynch
International, Goldman Sachs International, Bear, Stearns International Limited
and NationsBanc Montgomery Securities LLC are acting as lead managers (the "Lead
Managers") and the grant by the Executive Selling Shareholders to the
International Managers, acting severally and not jointly, of an option to
purchase all or any part of the International Managers' pro rata portion of up
to [__________________] additional shares of Common Stock solely to cover over-
allotments, if any (the "International Option Securities" and, together with the
U.S. Option Securities, the "Option Securities"). The Initial International
Securities and the International Option Securities are hereinafter called the
"International Securities". It is understood that the Company and the Selling
Shareholders are not obligated to sell, and the U.S. Underwriters are not
obligated to purchase, any Initial U.S. Securities unless all of the Initial
International Securities are contemporaneously purchased by the International
Managers.
The U.S. Underwriters and the International Managers are hereinafter
collectively called the "Underwriters", the Initial U.S. Securities and the
Initial International Securities are hereinafter collectively called the
"Initial Securities", and the U.S. Securities and the International Securities
are hereinafter collectively called the "Securities". The Selling Shareholders
other than the Executive Selling Shareholders are hereinafter collectively
called the "Non-Executive Selling Shareholders".
The Underwriters will concurrently enter into an Intersyndicate Agreement
of even date herewith (the "Intersyndicate Agreement") providing for the
coordination of certain transactions among the Underwriters under the direction
of Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated (in
such capacity, the "Global Coordinator").
The Company and the Selling Shareholders understand that the U.S.
Underwriters propose to make a public offering of the U.S. Securities as soon as
the U.S. Representatives deem advisable after this Agreement has been executed
and delivered.
2
<PAGE>
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (No. 333-50929) covering the
registration of the Securities under the Securities Act of 1933, as amended (the
"1933 Act"), including the related preliminary prospectus or prospectuses.
Promptly after execution and delivery of this Agreement, the Company will either
(i) prepare and file a prospectus in accordance with the provisions of Rule 430A
-
("Rule 430A") of the rules and regulations of the Commission under the 1933 Act
(the "1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule 424(b)") of
the 1933 Act Regulations or (ii) if the Company has elected to rely upon Rule
--
434 ("Rule 434") of the 1933 Act Regulations, prepare and file a term sheet (a
"Term Sheet") in accordance with the provisions of Rule 434 and Rule 424(b).
Two forms of prospectus are to be used in connection with the offering and sale
of the Securities: one relating to the U.S. Securities (the "Form of U.S.
Prospectus") and one relating to the International Securities (the "Form of
International Prospectus"). The Form of International Prospectus is identical
to the Form of U.S. Prospectus, except for the front cover and back cover pages
and the information under the caption "Underwriting". The information included
in any such prospectus or in any such Term Sheet, as the case may be, that was
omitted from such registration statement at the time it became effective but
that is deemed to be part of such registration statement at the time it became
effective (a) pursuant to paragraph (b) of Rule 430A is referred to as "Rule
-
430A Information" or (b) pursuant to paragraph (d) of Rule 434 is referred to as
-
"Rule 434 Information." Each Form of U.S. Prospectus and Form of International
Prospectus used before such registration statement became effective, and any
prospectus that omitted, as applicable, the Rule 430A Information or the Rule
434 Information, that was used after such effectiveness and prior to the
execution and delivery of this Agreement, is herein called a "preliminary
prospectus." Such registration statement, including the exhibits thereto and
schedules thereto and the documents incorporated by reference therein pursuant
to Item 12 of Form S-3 under the 1933 Act, at the time it became effective and
including the Rule 430A Information and the Rule 434 Information, as applicable,
is herein called the "Registration Statement." Any registration statement filed
pursuant to Rule 462(b) of the 1933 Act Regulations is herein referred to as the
"Rule 462(b) Registration Statement," and after such filing the term
"Registration Statement" shall include the Rule 462(b) Registration Statement.
The final Form of U.S. Prospectus and the final Form of International
Prospectus, including in each case the documents incorporated by reference
therein pursuant to Item 12 of Form S-3 under the 1933 Act, in the forms first
furnished to the Underwriters for use in connection with the offering of the
Securities are herein called the "U.S. Prospectus" and the "International
Prospectus," respectively, and collectively, the "Prospectuses." If Rule 434 is
relied on, the terms "U.S. Prospectus" and "International Prospectus" shall
refer to the preliminary U.S. Prospectus dated May 1, 1998 and preliminary
International Prospectus dated May 1, 1998, respectively, each together with the
applicable Term Sheet, and all references in this Agreement to the date of such
Prospectuses shall mean the date of the applicable Term Sheet. For purposes of
this Agreement, all references to the Registration Statement, any preliminary
prospectus, the U.S. Prospectus, the International Prospectus or any Term Sheet
or any amendment or
3
<PAGE>
supplement to any of the foregoing shall be deemed to include the copy filed
with the Commission pursuant to its Electronic Data Gathering, Analysis and
Retrieval system ("EDGAR").
All references in this Agreement to financial statements and schedules
and other information which is "contained," "included" or "stated" in the
Registration Statement, any preliminary prospectus or the Prospectuses (or other
references of like import) shall be deemed to mean and include all such
financial statements and schedules and other information which is incorporated
by reference in the Registration Statement, any preliminary prospectus or the
Prospectuses, as the case may be; and all references in this Agreement to
amendments or supplements to the Registration Statement, any preliminary
prospectus or the Prospectuses shall be deemed to mean and include the filing of
any document under the Securities Exchange Act of 1934 (the "1934 Act") which is
incorporated by reference in the Registration Statement, such preliminary
prospectus or the Prospectuses, as the case may be.
Capitalized terms used herein without definition have the respective
meanings specified therefor in the Prospectuses.
SECTION 1. Representations and Warranties.
------------------------------
(a) Representations and Warranties by the Company. The Company represents
and warrants to each U.S. Underwriter as of the date hereof, as of the Closing
Time referred to in Section 2(c) hereof, and as of each Date of Delivery (if
any) referred to in Section 2(b) hereof, and agrees with each U.S. Underwriter,
as follows:
(i) Compliance with Registration Requirements. The Company meets the
-----------------------------------------
requirements for use of Form S-3 under the 1933 Act. Each of the
Registration Statement and any Rule 462(b) Registration Statement has
become effective under the 1933 Act and no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b) Registration
Statement has been issued under the 1933 Act and no proceedings for that
purpose have been instituted or are pending or, to the knowledge of the
Company, are contemplated by the Commission, and any request on the part of
the Commission for additional information has been complied with.
At the respective times the Registration Statement, any Rule 462(b)
Registration Statement and any post-effective amendments thereto became
effective and at the Closing Time (and, if any U.S. Option Securities are
purchased, at the Date of Delivery), the Registration Statement, the Rule
462(b) Registration Statement and any amendments and supplements thereto
complied and will comply in all material respects with the requirements of
the 1933 Act and the 1933 Act Regulations and did not and will not contain
an untrue statement of a
4
<PAGE>
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading. Neither
of the Prospectuses nor any amendments or supplements thereto, at the time
the Prospectuses or any amendments or supplements thereto were issued and
at the Closing Time (and, if any U.S. Option Securities are purchased, at
the Date of Delivery), included or will include an untrue statement of a
material fact or omitted or will omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading. If Rule 434 is used, the
Company will comply with the requirements of Rule 434 and the Prospectuses
shall not be "materially different", as such term is used in Rule 434, from
the prospectuses included in the Registration Statement at the time it
became effective. The representations and warranties in this subsection
shall not apply to statements in or omissions from the Registration
Statement or the U.S. Prospectus made in reliance upon and in conformity
with information furnished to the Company in writing by any U.S.
Underwriter through the U.S. Representatives expressly for use in the
Registration Statement or the U.S. Prospectus.
Each preliminary prospectus and the prospectuses filed as part of the
Registration Statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the 1933 Act, complied when so
filed in all material respects with the 1933 Act Regulations and each
preliminary prospectus and the Prospectuses delivered to the Underwriters
for use in connection with this offering was identical to the
electronically transmitted copies thereof filed with the Commission
pursuant to EDGAR, except to the extent permitted by Regulation S-T.
(ii) Incorporated Documents. The documents incorporated or deemed to
----------------------
be incorporated by reference in the Registration Statement and the
Prospectuses, when they became effective or at the time they were or
hereafter are filed with the Commission, complied and will comply in all
material respects with the requirements of the 1934 Act and the rules and
regulations of the Commission thereunder (the "1934 Act Regulations"), and,
when read together with the other information in the Prospectuses, at the
time the Registration Statement became effective, at the time the
Prospectuses were issued and at the Closing Time (and if any Option
Securities are purchased, at the Date of Delivery), did not and will not
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading.
(iii) Independent Accountants. The accountants who certified the
-----------------------
financial statements and supporting schedules included in the Registration
Statement are
5
<PAGE>
independent public accountants as required by the 1933 Act and the 1933 Act
Regulations.
(iv) Financial Statements. The financial statements included in the
--------------------
Registration Statement and the Prospectuses, together with the related
schedules and notes, present fairly the financial position of the Company
and its consolidated subsidiaries at the dates indicated and the statement
of operations, stockholders' equity and cash flows of the Company and its
consolidated subsidiaries for the periods specified; said financial
statements have been prepared in conformity with generally accepted
accounting principles ("GAAP") applied on a consistent basis throughout the
periods involved. The supporting schedules included in the Registration
Statement present fairly in accordance with GAAP the information required
to be stated therein. The summary financial information included in the
Prospectuses present fairly the information shown therein and have been
compiled on a basis consistent with that of the audited financial
statements included in the Registration Statement. The financial statements
have been prepared in accordance with the Commission's rules and guidelines
with respect to consolidated financial statements and have been properly
compiled on the bases described therein. The pro forma financial data
included in the Registration Statement and the Prospectuses present fairly
the information shown therein, have been prepared in accordance with the
Commission's rules and guidelines with respect to pro forma financial
statements and have been properly compiled on the bases described therein,
and the assumptions used in the preparation thereof are reasonable and the
adjustments used therein are appropriate to give effect to the transactions
and circumstances referred to therein.
(v) No Material Adverse Change in Business. Since March 31, 1998 or
--------------------------------------
such later dates as of which information is given in the Registration
Statement and the Prospectuses, except as otherwise stated therein, (A)
-
there has been no material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of
the Company and its subsidiaries considered as one enterprise, whether or
not arising in the ordinary course of business (a "Material Adverse
Effect"), (B) there have been no transactions entered into by the Company
-
or any of its subsidiaries, other than those in the ordinary course of
business, which are material with respect to the Company and its
subsidiaries considered as one enterprise, and (C) there has been no
-
dividend or distribution of any kind declared, paid or made by the Company
or any subsidiary on any class of its capital stock or any partnership
interest, as the case may be.
(vi) Good Standing of the Company. The Company has been duly
----------------------------
organized and is validly existing as a corporation in good standing under
the laws of the State of Delaware and has corporate power and authority to
own, lease and operate its properties and to conduct its business as
described in the Prospectuses
6
<PAGE>
and to enter into and perform its obligations under this Agreement; and the
Company is duly qualified as a foreign corporation to transact business and
is in good standing in each other jurisdiction in which such qualification
is required, whether by reason of the ownership or leasing of property or
the conduct of business, except where the failure so to qualify or to be in
good standing would not result in a Material Adverse Effect.
(vii) Good Standing of Subsidiaries. Each subsidiary of the Company
-----------------------------
listed on Schedule E hereto (each, a "Subsidiary" and, collectively, the
"Subsidiaries") has been duly organized and is validly existing as a
corporation or partnership, as the case may be, in good standing under the
laws of the jurisdiction of its incorporation or organization, as the case
may be, has corporate or partnership, as the case may be, power and
authority to own, lease and operate its properties and to conduct its
business as described in the Prospectuses and is duly qualified as a
foreign corporation or partnership, as the case may be, to transact
business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to qualify
or to be in good standing would not result in a Material Adverse Effect;
all of the issued and outstanding capital stock of each corporate
Subsidiary has been duly authorized and validly issued, is fully paid and
non-assessable and is owned by the Company directly or indirectly through
subsidiaries, free and clear of any security interest, mortgage, pledge,
lien, encumbrance, claim or equity; none of the outstanding shares of
capital stock or other equity interests, as the case may be, of any
Subsidiary was issued in violation of the preemptive or similar rights of
any securityholder of such Subsidiary. The only subsidiaries of the Company
are (a) the subsidiaries listed on Schedule E hereto and (b) certain other
subsidiaries which, considered in the aggregate as a single subsidiary, do
not constitute a "significant subsidiary" as defined in Rule 1-02 of
Regulation S-X.
(viii) Capitalization. The authorized, issued and outstanding capital
--------------
stock of the Company is as set forth in the Prospectuses in the column
entitled "Actual" under the caption "Capitalization" (except for subsequent
issuances, if any, pursuant to this Agreement, pursuant to reservations,
agreements or employee benefit plans referred to in the Prospectuses or
pursuant to the exercise of convertible securities or options referred to
in the Prospectuses). The shares of issued and outstanding capital stock
of the Company, including the Securities to be purchased by the
Underwriters from the Selling Shareholders, have been (or, in the case of
the Securities underlying options to be sold by certain former shareholders
of Blau Marketing Technologies, Inc. (the "Blau Option Securities"), prior
to the Closing Time will be) duly authorized and validly issued and are
(or, in the case of the Blau Option Securities, prior to the Closing Time
will be) fully paid and non-assessable; none of the outstanding shares of
capital stock of the Company,
7
<PAGE>
including the Securities to be purchased by the Underwriters from the
Selling Shareholders, was (or, in the case of the Blau Option Securities,
prior to the Closing Time will be) issued in violation of the preemptive or
other similar rights of any securityholder of the Company.
(ix) Authorization. This Agreement and the International Purchase
-------------
Agreement have been duly authorized, executed and delivered by the Company.
The performance of this Agreement and the International Purchase Agreement
and the consummation of the transactions contemplated in this Agreement,
the International Purchase Agreement and the Registration Statement
(including the issuance and sale of the Securities and the use of the
proceeds from the sale of the Securities as described in the Prospectuses
under the caption "Use Of Proceeds") and compliance by the Company with its
obligations under this Agreement and the International Purchase Agreement
have been duly authorized by the Company.
(x) Authorization and Description of Securities. The Securities to
-------------------------------------------
be purchased by the U.S. Underwriters and the International Managers from
the Company have been duly authorized for issuance and sale to the U.S.
Underwriters pursuant to this Agreement and the International Managers
pursuant to the International Purchase Agreement, respectively, and, when
issued and delivered by the Company pursuant to this Agreement and the
International Purchase Agreement, respectively, against payment of the
consideration set forth herein and the International Purchase Agreement,
respectively, will be validly issued, fully paid and non-assessable; the
Common Stock conforms to all statements relating thereto contained in the
Prospectuses and such description conforms to the rights set forth in the
instruments defining the same; no holder of the Securities will be subject
to personal liability by reason of being such a holder; and the issuance of
the Securities is not subject to the preemptive or other similar rights of
any securityholder of the Company.
(xi) Absence of Defaults and Conflicts. Neither the Company nor any
---------------------------------
of the Subsidiaries is in violation of its charter or by-laws or
partnership agreement, as the case may be, or in default in the performance
or observance of any obligation, agreement, covenant or condition contained
in any contract, indenture, mortgage, deed of trust, loan or credit
agreement, note, lease or other agreement or instrument to which the
Company or any of the Subsidiaries is a party or by which any of them may
be bound, or to which any of the property or assets of the Company or any
of the Subsidiaries is subject (collectively, "Agreements and
Instruments"), except for such defaults that would not result in a Material
Adverse Effect; and the execution, delivery and performance of this
Agreement and the International Purchase Agreement and the consummation of
the transactions contemplated in this Agreement, the International Purchase
Agreement and in the Registration Statement (including the issuance and
sale of the Securities and the
8
<PAGE>
use of the proceeds from the sale of the Securities as described in the
Prospectuses under the caption "Use of Proceeds") and compliance by the
Company with its obligations under this Agreement and the International
Purchase Agreement have been duly authorized by all necessary corporate
action and do not and will not, whether with or without the giving of
notice or passage of time or both, conflict with or constitute a breach of,
or default or Repayment Event (as defined below) under, or result in the
creation or imposition of any lien, charge or encumbrance upon any property
or assets of the Company or any Subsidiary pursuant to, the Agreements and
Instruments (except for such conflicts, breaches or defaults or liens,
charges or encumbrances that would not result in a Material Adverse
Effect), nor will such action result in any violation of the provisions of
the charter or by-laws or other organizational instrument of the Company or
any Subsidiary or any applicable law, statute, rule, regulation, judgment,
order, writ or decree of any government, government instrumentality or
court, domestic or foreign, having jurisdiction over the Company or any
Subsidiary or any of their assets, properties or operations. As used
herein, a "Repayment Event" means any event or condition which gives the
holder of any note, debenture or other evidence of indebtedness (or any
person acting on such holder's behalf) the right to require the repurchase,
redemption or repayment of all or a portion of such indebtedness by the
Company or any Subsidiary.
(xii) Absence of Labor Dispute. No labor dispute with the employees
------------------------
of the Company or any Subsidiary exists or, to the knowledge of the
Company, is imminent, and the Company is not aware of any existing or
imminent labor disturbance by the employees of any of its or any
Subsidiary's principal suppliers, manufacturers, customers or contractors,
which, in either case, might reasonably be expected to result in a Material
Adverse Effect.
(xiii) Absence of Proceedings. There is no action, suit, proceeding,
----------------------
inquiry or investigation before or brought by any court or governmental
agency or body, domestic or foreign, now pending, or, to the knowledge of
the Company, threatened, against or affecting the Company or any
subsidiary, which is required to be disclosed in the Registration Statement
(other than as disclosed therein), or which might reasonably be expected to
result in a Material Adverse Effect, or which might reasonably be expected
to materially and adversely affect the properties or assets thereof or the
consummation of the transactions contemplated in this Agreement and the
International Purchase Agreement or the performance by the Company of its
obligations hereunder or thereunder; the aggregate of all pending legal or
governmental proceedings to which the Company or any subsidiary is a party
or of which any of their respective properties or assets is the subject
which are not described in the Registration Statement, including ordinary
routine litigation incidental to the business, could not reasonably be
expected to result in a Material Adverse Effect.
9
<PAGE>
(xiv) Accuracy of Exhibits. There are no contracts or documents which
--------------------
are required to be described in the Registration Statement, the
Prospectuses or the documents incorporated by reference therein or to be
filed as exhibits thereto which have not been so described and filed as
required.
(xv) Possession of Intellectual Property. The Company and the
-----------------------------------
Subsidiaries own or possess, or can acquire on reasonable terms, adequate
patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
trademarks, service marks, trade names or other intellectual property
(collectively, "Intellectual Property") necessary to carry on the business
now operated by them, and the Company has not received any notice or is not
otherwise aware of any infringement of or conflict with asserted rights of
others with respect to any Intellectual Property or of any facts or
circumstances which would render any Intellectual Property invalid or
inadequate to protect the interest of the Company or any of the
Subsidiaries therein, and which infringement or conflict (if the subject of
any unfavorable decision, ruling or finding) or invalidity or inadequacy,
singly or in the aggregate, would result in a Material Adverse Effect.
(xvi) Absence of Further Requirements. No filing with, or
-------------------------------
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or agency
is necessary or required by or on behalf of the Company for the performance
by the Company of its obligations hereunder, in connection with the
offering, issuance or sale of the Securities under this Agreement and the
International Purchase Agreement or the consummation of the transactions
contemplated by this Agreement and the International Purchase Agreement,
except such as have been already obtained or as may be required under the
1933 Act or the 1933 Act Regulations and foreign or state securities or
blue sky laws.
(xvii) Possession of Licenses and Permits. The Company and the
----------------------------------
Subsidiaries possess such permits, licenses, approvals, consents and other
authorizations (collectively, "Governmental Licenses") issued by the
appropriate federal, state, local or foreign regulatory agencies or bodies
necessary to conduct the business now operated by them; the Company and the
Subsidiaries are in compliance with the terms and conditions of all such
Governmental Licenses, except where the failure so to comply would not,
singly or in the aggregate, have a Material Adverse Effect; all of the
Governmental Licenses are valid and in full force and effect, except when
the invalidity of such Governmental Licenses or the failure of such
Governmental Licenses to be in full force and effect would not have a
Material Adverse Effect; and neither the Company nor any of the
Subsidiaries has received any notice of proceedings relating to the
revocation or modification of
10
<PAGE>
any such Governmental Licenses which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would result in a
Material Adverse Effect.
(xviii) Title to Property. The Company and the Subsidiaries have good
-----------------
and marketable title to all real property owned by the Company and the
Subsidiaries and good title to all other properties owned by them, in each
case, free and clear of all mortgages, pledges, liens, security interests,
claims, restrictions or encumbrances of any kind except such as (a) are
-
described in the Prospectuses, including those disclosed in the financial
statements and the related notes included therein, or (b) do not, singly or
-
in the aggregate, materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by the
Company or any of the Subsidiaries; and all of the leases and subleases
material to the business of the Company and its subsidiaries, considered
as one enterprise, and under which the Company or any of its subsidiaries
holds properties described in the Prospectuses, are in full force and
effect, and the Company does not have any notice of any material claim of
any sort that has been asserted by anyone adverse to the rights of the
Company or any Subsidiary under any of the leases or subleases mentioned
above, or affecting or questioning the rights of the Company or such
Subsidiary to the continued possession of the leased or subleased premises
under any such lease or sublease.
(xix) Investment Company Act. The Company is not, and upon the
----------------------
issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom as described in the Prospectuses
will not be, an "investment company" or an entity "controlled" by an
"investment company" as such terms are defined in the Investment Company
Act of 1940, as amended (the "1940 Act").
(xx) Environmental Laws. Except as described in the Registration
------------------
Statement and except as would not, singly or in the aggregate, result in a
Material Adverse Effect, (A) neither the Company nor any of the
-
Subsidiaries is in violation of any federal, state, local or foreign
statute, law, rule, regulation, ordinance, code, policy or rule of common
law or any judicial or administrative interpretation thereof, including any
judicial or administrative order, consent, decree or judgment, relating to
pollution or protection of human health, the environment (including,
without limitation, ambient air, surface water, groundwater, land surface
or subsurface strata) or wildlife, including, without limitation, laws and
regulations relating to the release or threatened release of chemicals,
pollutants, contaminants, wastes, toxic substances, hazardous substances,
petroleum or petroleum products (collectively, "Hazardous Materials") or to
the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials (collectively,
"Environmental Laws"), (B) the Company and
-
11
<PAGE>
the Subsidiaries have all permits, authorizations and approvals required
under any applicable Environmental Laws and are each in compliance with
their requirements, (C) there are no pending or threatened administrative,
-
regulatory or judicial actions, suits, demands, demand letters, claims,
liens, notices of noncompliance or violation, investigation or proceedings
relating to any Environmental Law against the Company or any of the
Subsidiaries and (D) there are no events or circumstances that might
-
reasonably be expected to form the basis of an order for clean-up or
remediation, or an action, suit or proceeding by any private party or
governmental body or agency, against or affecting the Company or any of the
Subsidiaries relating to Hazardous Materials or any Environmental Laws.
(xxi) Registration Rights. Except as described in the Registration
-------------------
Statement and the Prospectuses, there are no persons with registration
rights or other similar rights to have any securities registered pursuant
to the Registration Statement or otherwise registered by the Company under
the 1933 Act.
(xxii) Compliance with Laws. Each of the Company and the
--------------------
Subsidiaries is in compliance with all applicable laws, statutes,
ordinances, rules or regulations of any applicable jurisdiction, the
enforcement of which, singly or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect.
(xxiii) Taxes. Each of the Company and the Subsidiaries has filed all
-----
material federal, state, local and foreign income and franchise tax returns
required to be filed by it and has paid all taxes shown as due thereon,
other than taxes which are being contested in good faith or state
withholding taxes and for both of which adequate reserves have been
established in accordance with GAAP; and the Company does not have
knowledge of any tax deficiency which has been or might be asserted or
threatened against the Company or any Subsidiary other than those for which
adequate reserves have been established in accordance with GAAP. Adequate
charges, accruals and reserves have been provided for in the financial
statements referred to in Section 1(a)(iv) hereof in respect of all
material federal, state, local and foreign taxes for all periods as to
which the tax liability of the Company or any Subsidiary has not been
finally determined or remains open to examination by applicable taxing
authorities.
(xxiv) Insurance. Each of the Company and the Subsidiaries carries
---------
or is entitled to the benefits of insurance in such amounts and covering such
risks as it reasonably believes are sufficient to cover potential losses or
damages, and all such insurance is in full force and effect.
(b) Representations, Warranties and Covenants by the Selling Shareholders.
Each Selling Shareholder severally and not jointly represents and warrants to
each U.S.
12
<PAGE>
Underwriter as of the date hereof, as of the Closing Time, and, if the Selling
Shareholder is selling U.S. Option Securities on a Date of Delivery, as of each
such Date of Delivery, and agrees with each U.S. Underwriter, as follows:
(i) Authorization of Agreements. Each Selling Shareholder has the
---------------------------
full right, power and authority to enter into this Agreement and a Custody
Agreement and Power of Attorney (the "Custody Agreement and Power of
Attorney") and to sell, transfer and deliver the Securities to be sold by
such Selling Shareholder hereunder. The execution and delivery of this
Agreement, the International Purchase Agreement and the Custody Agreement
and Power of Attorney and the sale and delivery of the Securities to be
sold by such Selling Shareholder and the consummation by such Selling
Shareholder of the transactions contemplated herein, in the International
Purchase Agreement and in the Registration Statement and compliance by such
Selling Shareholder with its obligations hereunder have been duly
authorized by each Selling Shareholder that is not an individual and do not
and will not, whether with or without the giving of notice or passage of
time or both, result in the creation or imposition of any tax, lien, charge
or encumbrance upon the Securities to be sold by such Selling Shareholder,
nor will such action result in any violation of the provisions of the
charter or by-laws or other organizational instrument of such Selling
Shareholder, if applicable, or, to the best of such Selling Shareholder's
knowledge, any applicable treaty, law, statute, rule, regulation, judgment,
order, writ or decree of any government, government instrumentality or
court, domestic or foreign, having jurisdiction over such Selling
Shareholder or any of its properties.
(ii) Good and Valid Title. Such Selling Shareholder has (or, in the
--------------------
case of a holder of Blau Option Securities, prior to the Closing Time will
have) and will at the Closing Time and, if any U.S. Option Securities are
purchased, such Executive Selling Shareholder will on the Date of Delivery
have good and valid title to the Securities to be sold by such Selling
Shareholder hereunder, free and clear of any security interest, mortgage,
pledge, lien, charge, claim, equity or encumbrance of any kind, other than
pursuant to this Agreement or the Custody Agreement and Power of Attorney;
and upon delivery of such Securities and payment of the purchase price
therefor as herein contemplated, assuming each such U.S. Underwriter has no
notice of any adverse claim, each of the U.S. Underwriters will receive
good and valid title to the Securities purchased by it from such Selling
Shareholder, free and clear of any security interest, mortgage, pledge,
lien, charge, claim, equity or encumbrance of any kind created, directly or
indirectly, by or through such Selling Shareholder.
(iii) Due Execution of Custody Agreement and Power of Attorney. Such
--------------------------------------------------------
Selling Shareholder has duly executed and delivered, in the forms
heretofore furnished to the U.S. Representatives, the Custody Agreement and
Power of
13
<PAGE>
Attorney with Daniel M. Snyder, A. Clayton Perfall and Fred Drasner, or any
of them, as attorneys-in-fact (the "Attorneys-in-Fact") and American Stock
Transfer & Trust Company, as custodian (the "Custodian"); the Custodian is
authorized to deliver the Securities to be sold by such Selling Shareholder
hereunder and to accept payment therefor, pursuant to the Custody Agreement
and Power of Attorney; and each Attorney-in-Fact is authorized to execute
and deliver this Agreement and the certificate referred to in Section 5(f)
or that may be required pursuant to Sections 5(n) (in the case of any
Executive Selling Shareholder) and 5(o) on behalf of such Selling
Shareholder, to sell, assign and transfer to the U.S. Underwriters the
Securities to be sold by such Selling Shareholder hereunder, subject to the
provisions thereof, to determine the purchase price to be paid by the U.S.
Underwriters to such Selling Shareholder, as provided in Section 2 hereof,
to authorize the delivery of the Securities to be sold by such Selling
Shareholder hereunder, to accept payment therefor, and otherwise to act on
behalf of such Selling Shareholder in connection and in accordance with
this Agreement and the Custody Agreement and Power of Attorney.
(iv) Absence of Manipulation. Such Selling Shareholder has not taken,
-----------------------
and will not take, directly or indirectly, any action which is designed to
or which has constituted or which might reasonably be expected to cause or
result in a violation of Regulation M of the 1934 Act Regulations with
respect to any security of the Company.
(v) Absence of Further Requirements. To the best of such Selling
-------------------------------
Shareholder's knowledge, no filing with, or consent, approval,
authorization, order, registration, qualification or decree of, any court
or governmental authority or agency, domestic or foreign, is necessary or
required by such Selling Shareholder for the performance by such Selling
Shareholder of its obligations hereunder or in the Custody Agreement and
Power of Attorney, or in connection with the offering, sale and delivery of
the Securities hereunder or the consummation of the transactions
contemplated by this Agreement and the International Purchase Agreement,
except such as may have previously been made or obtained or as may be
required under the 1933 Act or the 1933 Act Regulations or state securities
laws.
(vi) Certificates Suitable for Transfer; Instruments of Transfer.
-----------------------------------------------------------
Certificates for all of the Securities sold by such Selling Shareholder
pursuant to this Agreement, in suitable form for transfer by delivery or
accompanied by duly executed instruments of transfer or assignment in
blank, or, in the case of uncertificated stock, duly executed stock
powers, in each case with signatures guaranteed (or notarized, in the case
of any such Selling Shareholder not resident in the United States), have
been placed in custody with the Custodian with irrevocable conditional
instructions to deliver such Securities or stock powers to
14
<PAGE>
the U.S. Underwriters pursuant to this Agreement and the Custody Agreement
and Power of Attorney.
(vii) No Association with NASD. Except as described in the
------------------------
Registration Statement and the Prospectuses, neither such Selling
Shareholder nor any of its affiliates directly, or indirectly through one
or more intermediaries, controls, or is controlled by, or is under common
control with, or has any other association with (within the meaning of
Article I, Section 1(m) of the By-laws of the NASD), any member firm of the
NASD, except that each of 3i Group plc and NatWest Ventures Investments
Limited may be affiliated or associated with certain member firms of the
NASD.
(c) Additional Representations and Warranties by the Executive Selling
Shareholders. Each Executive Selling Shareholder further severally represents
and warrants to each U.S. Underwriter as of the date hereof, as of the Closing
Time, and, if the Executive Selling Shareholder is selling U.S. Option
Securities on a Date of Delivery, as of each such Date of Delivery, and agrees
with each U.S. Underwriter, as follows:
(i) During a period of 90 days from the date of the Prospectuses,
such Executive Selling Shareholder will not, without the prior written
consent of the Global Coordinator, (i) offer, pledge, sell, contract to
-
sell, sell any option or contract to purchase, purchase any option or
contract to sell, grant any option, right or warrant to purchase or
otherwise transfer or dispose of, directly or indirectly, any share of
Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock or file any registration statement under the
1933 Act with respect to any of the foregoing or (ii) enter into any swap
--
or any other agreement or any transaction that transfers, in whole or in
part, directly or indirectly, the economic consequence of ownership of the
Common Stock, whether any such swap or transaction described in clause (i)
or (ii) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise; provided that any Executive Selling
--------
Shareholder may, at any time after 30 days from the date of the Closing
Time, pledge as security for borrowed money up to 50% of the shares of
Common Stock then owned by such Executive Selling Shareholder to any
commercial banking institution that is a member of the Federal Reserve
System or any institutional lender that makes loans secured by margin
securities in the ordinary course of business having combined capital and
surplus in excess of $500,000,000 (a "Pledgee") as long as such Pledgee
shall have agreed in writing to be bound by the obligations and
restrictions applicable to the Common Stock under this Section 1(c) and the
U.S. Representatives shall have received an agreement substantially in the
form of Exhibit D hereto signed by such Pledgee. The foregoing sentence
shall not apply to the Securities to be sold hereunder.
15
<PAGE>
(ii) To the best of such Executive Selling Shareholder's knowledge,
the representations and warranties of the Company contained in Section 1(a)
hereof are true and correct; such Executive Selling Shareholder has
reviewed and is familiar with the Registration Statement and the
Prospectuses and the Prospectuses do not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading; and such person is not prompted to sell the
Securities to be sold by it, he or she, as the case may be, hereunder by
any information concerning any of the Company or any of its subsidiaries
which is not set forth in the Prospectuses. The representations and
warranties in this subsection shall not apply to statements in or omissions
from the Registration Statement or the U.S. Prospectus made in reliance
upon and in conformity with information furnished to the Company in writing
by any U.S. Underwriter through the U.S. Representatives expressly for use
in the Registration Statement or the U.S. Prospectus.
(d) Officer's Certificates. Any certificate signed by any officer of the
Company delivered to the Global Coordinator, the U.S. Representatives or to
counsel for the U.S. Underwriters shall be deemed a representation and warranty
by the Company to each U.S. Underwriter as to the matters covered thereby; and
any certificate signed by or on behalf of any Selling Shareholder as such and
delivered to the Global Coordinator, the U.S. Representatives or to counsel for
the U.S. Underwriters pursuant to the terms of this Agreement shall be deemed a
representation and warranty by such Selling Shareholder to each U.S. Underwriter
as to matters covered thereby.
SECTION 2. Sale and Delivery to U.S. Underwriters; Closing.
-----------------------------------------------
(a) Initial Securities. On the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth, the
Company and the Selling Shareholders, severally and not jointly, agree to sell
to each U.S. Underwriter, severally and not jointly, and each U.S. Underwriter,
severally and not jointly, agrees to purchase from the Company and the Selling
Shareholders, at the price per share set forth in Schedule C, that proportion of
the number of U.S. Securities set forth in Schedule B opposite the name of the
Company or the Selling Shareholders, as the case may be, which the number of
Initial U.S. Securities set forth in Schedule A opposite the name of such U.S.
Underwriter, plus any additional number of Initial U.S. Securities which such
Underwriter may become obligated to purchase pursuant to the provisions of
Section 10 hereof, bears to the total number of Initial U.S. Securities,
subject, in each case, to such adjustments among the U.S. Underwriters as the
U.S. Representatives in their sole discretion shall make to eliminate any sales
or purchases of fractional securities.
16
<PAGE>
(b) Option Securities. In addition, on the basis of the representations
and warranties herein contained and subject to the terms and conditions herein
set forth, the Option Selling Shareholders, acting severally and not jointly,
hereby grant an option to the U.S. Underwriters, severally and not jointly, to
purchase up to an additional [_____________] shares of Common Stock, as set
forth in Schedule B, at the price per share set forth in Schedule C. The option
hereby granted will expire 30 days after the date hereof and may be exercised in
whole or in part from time to time only for the purpose of covering over-
allotments which may be made in connection with the offering and distribution of
the Initial U.S. Securities upon notice by the Global Coordinator to the Company
and the Executive Selling Shareholders setting forth the number of U.S. Option
Securities as to which the several U.S. Underwriters are then exercising the
option and the time and date of payment and delivery for such U.S. Option
Securities. Any such time and date of delivery for the U.S. Option Securities (a
"Date of Delivery") shall be determined by the Global Coordinator, but shall not
be later than seven full business days after the exercise of said option, nor in
any event prior to the Closing Time, as hereinafter defined. If the option is
exercised as to all or any portion of the U.S. Option Securities, each of the
U.S. Underwriters, acting severally and not jointly, will purchase that
proportion of the total number of U.S. Option Securities then being purchased
which the number of Initial U.S. Securities set forth in Schedule A opposite the
name of such U.S. Underwriter bears to the total number of Initial U.S.
Securities, subject in each case to such adjustments as the Global Coordinator
in its discretion shall make to eliminate any sales or purchases of fractional
shares.
(c) Payment. Payment of the purchase price for, and delivery of
certificates for, the Initial Securities shall be made at the offices of
Debevoise & Plimpton, 875 Third Avenue, New York, New York, or at such other
place as shall be agreed upon by the Global Coordinator and the Company, at 9:00
A.M. (Eastern time) on the third (fourth, if the pricing occurs after 4:30 P.M.
(Eastern time) on any given day) business day after the date hereof (unless
postponed in accordance with the provisions of Section 10 hereof), or such other
time not later than ten business days after such date as shall be agreed upon by
the Global Coordinator and the Company (such time and date of payment and
delivery being herein called "Closing Time").
In addition, in the event that any or all of the U.S. Option Securities are
purchased by the U.S. Underwriters, payment of the purchase price for, and
delivery of certificates for, such U.S. Option Securities shall be made at the
above-mentioned offices, or at such other place as shall be agreed upon by the
Global Coordinator and the Company, on each Date of Delivery as specified in the
notice from the Global Coordinator to the Company and the Executive Selling
Shareholders.
17
<PAGE>
Payment shall be made to the Company and the Selling Shareholders by wire
transfer of immediately available funds to bank accounts designated by the
Company and the Custodian pursuant to each Selling Shareholder's Custody
Agreement and Power of Attorney against delivery to the U.S. Representatives for
the respective accounts of the U.S. Underwriters of certificates for the U.S.
Securities to be purchased by them. It is understood that each U.S. Underwriter
has authorized the U.S. Representatives, for its account, to accept delivery of,
receipt for, and make payment of the purchase price for, the Initial U.S.
Securities and the U.S. Option Securities, if any, which it has agreed to
purchase. Merrill Lynch, individually and not as representative of the U.S.
Underwriters, may (but shall not be obligated to) make payment of the purchase
price for the Initial U.S. Securities or the U.S. Option Securities, if any, to
be purchased by any U.S. Underwriter whose funds have not been received by the
Closing Time or the relevant Date of Delivery, as the case may be, but such
payment shall not relieve such U.S. Underwriter from its obligations hereunder.
(d) Denominations; Registration. Certificates for the Initial U.S.
Securities and the U.S. Option Securities, if any, shall be in such
denominations and registered in such names as the U.S. Representatives may
request in writing at least one full business day before the Closing Time or the
relevant Date of Delivery, as the case may be. The certificates for the Initial
U.S. Securities and the U.S. Option Securities, if any, will be made available
for examination and packaging by the U.S. Representatives in The City of New
York not later than 10:00 A.M. (Eastern time) on the business day prior to the
Closing Time or the relevant Date of Delivery, as the case may be.
SECTION 3. Covenants of the Company. The Company covenants with each
------------------------
U.S. Underwriter as follows:
(a) Compliance with Securities Regulations and Commission Requests.
The Company, subject to Section 3(b) hereof, will comply with the
requirements of Rule 430A or Rule 434, as applicable, and will notify the
Global Coordinator immediately, and confirm the notice in writing, (i) when
-
any post-effective amendment to the Registration Statement, shall become
effective, or any supplement to the Prospectuses or any amended
Prospectuses shall have been filed, (ii) of the receipt of any comments
--
from the Commission, (iii) of any request by the Commission for any
---
amendment to the Registration Statement or any amendment or supplement to
the Prospectuses or for additional information, and (iv) of the issuance by
--
the Commission of any stop order suspending the effectiveness of the
Registration Statement or of any order preventing or suspending the use of
any preliminary prospectus, or of the suspension of the qualification of
the Securities for offering or sale in any jurisdiction, or of the
initiation or threatening of any proceedings for any of such purposes. The
Company will promptly effect the
18
<PAGE>
filings necessary pursuant to Rule 424(b) and will take such steps as it
deems necessary to ascertain promptly whether the form of prospectus
transmitted for filing under Rule 424(b) was received for filing by the
Commission and, in the event that it was not, it will promptly file such
prospectus. The Company will make every reasonable effort to prevent the
issuance of any stop order and, if any stop order is issued, to obtain the
lifting thereof at the earliest possible moment.
(b) Filing of Amendments. The Company will give the Global
Coordinator notice of the Company's intention to file or prepare any
amendment to the Registration Statement (including any filing under Rule
462(b)), any Term Sheet or any amendment, supplement or revision to either
the prospectus included in the Registration Statement at the time it became
effective or to the Prospectuses, whether pursuant to the 1933 Act, the
1934 Act or otherwise, will furnish the Global Coordinator with copies of
any such documents a reasonable amount of time prior to such proposed
filing or use, as the case may be, and will not file or use any such
document to which the Global Coordinator or counsel for the U.S.
Underwriters shall object.
(c) Delivery of Registration Statement. The Company has furnished or
will deliver to the U.S. Representatives and counsel for the U.S.
Underwriters, without charge, signed copies of the Registration Statement
as originally filed and of each amendment thereto (including exhibits filed
therewith or incorporated by reference therein and documents incorporated
or deemed to be incorporated by reference therein) and signed copies of all
consents and certificates of experts, and will also deliver to the U.S.
Representatives, without charge, a conformed copy of the Registration
Statement as originally filed and of each amendment thereto (without
exhibits) for each of the U.S. Underwriters. The copies of the
Registration Statement and each amendment thereto furnished to the U.S.
Underwriters will be identical to the electronically transmitted copies
thereof filed with the Commission pursuant to EDGAR, except to the extent
permitted by Regulation S-T.
(d) Delivery of Prospectuses. The Company has delivered to each U.S.
Underwriter, without charge, as many copies of each preliminary prospectus
as such U.S. Underwriter reasonably requested, and the Company hereby
consents to the use of such copies for purposes permitted by the 1933 Act.
The Company will furnish to each U.S. Underwriter, without charge, during
the period when the U.S. Prospectus is required to be delivered under the
1933 Act or the 1934 Act, such number of copies of the U.S. Prospectus (as
amended or supplemented) as such U.S. Underwriter may reasonably request.
The U.S. Prospectus and any amendments or supplements thereto furnished to
the U.S. Underwriters will be
19
<PAGE>
identical to the electronically transmitted copies thereof filed with the
Commission pursuant to EDGAR, except to the extent permitted by Regulation
S-T.
(e) Continued Compliance with Securities Laws. The Company will
comply with the 1933 Act and the 1933 Act Regulations and the 1934 Act and
the 1934 Act Regulations so as to permit the completion of the distribution
of the Securities as contemplated in this Agreement, the International
Purchase Agreement and in the Prospectuses. If at any time when a
prospectus is required by the 1933 Act to be delivered in connection with
sales of the Securities, any event shall occur or condition shall exist as
a result of which it is necessary, in the opinion of counsel for the U.S.
Underwriters or for the Company, to amend the Registration Statement or
amend or supplement any Prospectus in order that the Prospectuses will not
include any untrue statements of a material fact or omit to state a
material fact necessary in order to make the statements therein not
misleading in the light of the circumstances existing at the time it is
delivered to a purchaser, or if it shall be necessary, in the opinion of
such counsel, at any such time to amend the Registration Statement or amend
or supplement any Prospectus in order to comply with the requirements of
the 1933 Act or the 1933 Act Regulations, the Company will promptly prepare
and file with the Commission, subject to Section 3(b) hereof, such
amendment or supplement as may be necessary to correct such statement or
omission or to make the Registration Statement or the Prospectuses comply
with such requirements, and the Company will furnish to the U.S.
Underwriters such number of copies of such amendment or supplement as the
U.S. Underwriters may reasonably request.
(f) Blue Sky Qualifications. The Company will use its best efforts,
in cooperation with the U.S. Underwriters, to qualify the Securities for
offering and sale under the applicable securities laws of such states and
other jurisdictions (domestic or foreign) as the Global Coordinator may
designate and to maintain such qualifications in effect for such period
after the effective date of the Registration Statement and any Rule 462(b)
Registration Statement as the Prospectuses are required by the 1933 Act or
such state securities laws to be delivered in connection with sales of the
Securities by any underwriter or dealer; provided, however, that the
Company shall not be obligated to file any general consent to service of
process or to qualify as a foreign corporation or as a dealer in securities
in any jurisdiction in which it is not so qualified or to subject itself to
taxation in respect of doing business in any jurisdiction in which it is
not otherwise so subject. In each jurisdiction in which the Securities have
been so qualified, the Company will file such statements and reports as may
be required by the laws of such jurisdiction to continue such qualification
in effect for the period specified above.
20
<PAGE>
(g) Rule 158. The Company will timely file such reports pursuant to
the 1934 Act as are necessary in order to make generally available to its
securityholders as soon as practicable an earnings statement for the
purposes of, and to provide the benefits contemplated by, the last
paragraph of Section 11(a) of the 1933 Act.
(h) Use of Proceeds. The Company will use the net proceeds received
by the Company from the sale of the Securities in the manner specified in
the Prospectuses under "Use of Proceeds".
(i) Listing. The Company will use its best efforts to effect the
listing of the Securities on the New York Stock Exchange.
(j) Restriction on Sale of Securities. During a period of 90 days
from the date of the Prospectuses, the Company will not, without the prior
written consent of the Global Coordinator, (i) directly or indirectly,
-
offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right
or warrant to purchase or otherwise transfer or dispose of any share of
Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock or file any registration statement under the
1933 Act with respect to any of the foregoing or (ii) enter into any swap
--
or any other agreement or any transaction that transfers, in whole or in
part, directly or indirectly, the economic consequence of ownership of the
Common Stock, whether any such swap or transaction described in clause (i)
or (ii) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise. The foregoing sentence shall not apply to
(A) the Securities to be sold hereunder or under the International Purchase
Agreement, (B) any options to purchase shares of Common Stock granted or
shares of Common Stock sold pursuant to any employee benefit plan of the
Company whether existing at the date of this Agreement or adopted
subsequent hereto and the filing of any registration statement on Form S-8
related thereto or (C) any option or warrant to purchase shares of Common
Stock or shares of Common Stock issued or sold in connection with an
acquisition by the Company and the filing of any registration statement on
Form S-4 in connection therewith as long as all executive officers,
directors and other affiliates of the person being acquired have agreed in
writing to be bound by the obligations and restrictions of the foregoing
sentence of this Section 3(j).
(k) Reporting Requirements. The Company, during the period when the
Prospectuses are required to be delivered under the 1933 Act or the 1934
Act, will file all documents required to be filed with the Commission
pursuant to the
21
<PAGE>
1934 Act within the time periods required by the 1934 Act and the 1934 Act
Regulations.
SECTION 4. Payment of Expenses. (a) Expenses. The Company will pay
-------------------
all expenses incident to the performance of its obligations under this
Agreement, including (i) the preparation, printing (or reproduction) and filing
-
of the Registration Statement (including financial statements and exhibits) as
originally filed and of each amendment thereto, (ii) the preparation, printing
--
(or reproduction) and delivery to the Underwriters of this Agreement, any
Agreement among Underwriters and such other documents as may be required in
connection with the offering, purchase, sale, issuance or delivery of the
Securities, (iii) the preparation, issuance and delivery of the certificates for
the Securities to the Underwriters, including any stock or other transfer taxes
and any stamp or other duties payable upon the sale, issuance or delivery of the
Securities to the Underwriters and the transfer of the Securities between the
U.S. Underwriters and the International Managers, (iv) the fees and
--
disbursements of the Company's counsel, accountants and other advisors, (v) the
-
qualification of the Securities under securities laws in accordance with the
provisions of Section 3(f) hereof, including filing fees and the reasonable fees
and disbursements of counsel for the Underwriters in connection therewith and in
connection with the preparation of the Blue Sky Survey and any supplement
thereto, (vi) the printing and delivery to the Underwriters of copies of each
--
preliminary prospectus, any Term Sheets and of the Prospectuses and any
amendments or supplements thereto, (vii) the preparation, printing (or
---
reproduction) and delivery to the Underwriters of copies of the Blue Sky Survey
and any supplement thereto, (viii) the fees and expenses of any transfer agent
----
or registrar for the Securities, (ix) the filing fees incident to, and the
--
reasonable fees and disbursements of counsel to the Underwriters in connection
with, the review by the NASD of the terms of the sale of the Securities and (x)
-
the fees and expenses incurred in connection with the listing of the Securities
on the New York Stock Exchange.
(b) Expenses of the Selling Shareholders. The Selling Shareholders,
severally and not jointly, will pay all expenses incident to the performance of
their respective obligations under, and the consummation of the transactions
contemplated by, this Agreement, including (i) any stamp duties, capital duties
-
and stock transfer taxes, if any, payable upon the sale of the Securities to the
U.S. Underwriters, and their transfer between Underwriters pursuant to any
agreement between Underwriters, and (ii) the fees and disbursements of their
--
respective counsel and accountants, except in each case (as between the Company
and any Selling Shareholder) as otherwise provided in any agreement between the
Company and any Selling Shareholder.
(c) Termination of Agreement. If this Agreement is terminated by the U.S.
Representatives in accordance with the provisions of Section 5 (other than
Section 5(j)), Section 9(a)(i) or Section 11 hereof, the Company and each of the
Selling Shareholders,
22
<PAGE>
severally and not jointly, shall reimburse the U.S. Underwriters for all of
their out-of-pocket expenses, including the reasonable fees and disbursements of
counsel for the U.S. Underwriters, except (as between the Company and any
Selling Shareholder) as otherwise provided in any agreement between the Company
and any Selling Shareholder.
(d) Allocation of Expenses. The provisions of this Section shall not
affect any agreement that the Company and the Selling Shareholders may make for
the sharing of such costs and expenses.
SECTION 5. Conditions of U.S. Underwriters' Obligations. The obligations
--------------------------------------------
of the several U.S. Underwriters hereunder are subject to the accuracy of the
representations and warranties of the Company and the Selling Shareholders
contained in Section 1 hereof or in certificates of any officer of the Company
or by or on behalf of any Selling Shareholder delivered pursuant to the
provisions hereof, to the performance by the Company of its covenants and other
obligations hereunder, and to the following further conditions:
(a) Effectiveness of Registration Statement. The Registration
Statement, including any Rule 462(b) Registration Statement, has become
effective and at Closing Time no stop order suspending the effectiveness of
the Registration Statement shall have been issued under the 1933 Act or
proceedings therefor initiated or threatened by the Commission, and any
request on the part of the Commission for additional information shall have
been complied with to the reasonable satisfaction of counsel to the U.S.
Underwriters. A prospectus containing the Rule 430A Information shall have
been filed with the Commission in accordance with Rule 424(b) (or a post-
effective amendment providing such information shall have been filed and
declared effective in accordance with the requirements of Rule 430A) or, if
the Company has elected to rely upon Rule 434, a Term Sheet shall have been
filed with the Commission in accordance with Rule 424(b).
(b) Opinion of Counsel for Company. At Closing Time, the U.S.
Representatives shall have received the favorable opinion and letter, in
each case dated as of Closing Time, of Shaw Pittman Potts & Trowbridge,
counsel for the Company, in form and substance satisfactory to counsel for
the U.S. Underwriters, together with signed or reproduced copies of such
opinion and letter for each of the other U.S. Underwriters to the effect
set forth in Exhibit A-1 and Exhibit A-2, respectively, hereto. In giving
such opinion such counsel may rely, as to all matters governed by the laws
of jurisdictions other than the law of the State of New York, the federal
law of the United States and the General Corporation Law of the State of
Delaware, upon the opinions of counsel satisfactory to the U.S.
23
<PAGE>
Representatives. Such counsel may also state that, insofar as such opinion
involves factual matters, they have relied, to the extent they deem proper,
upon certificates of officers of the Company and its subsidiaries and
certificates of public officials.
(c) Opinions of Counsel for the Selling Shareholders. At Closing
Time, the U.S. Representatives shall have received the favorable opinions,
dated as of the Closing Time, of the several counsel of the Selling
Shareholders in each case in form and substance satisfactory to counsel for
the U.S. Underwriters, together with signed or reproduced copies of such
letter for each of the other U.S. Underwriters, to the effect set forth in
Exhibit B hereto. In giving such opinion such counsel may rely, as to all
matters governed by the laws of jurisdictions other than the law of the
State of New York, the federal law of the United States and the General
Corporation Law and the Revised Uniform Limited Partnership Act of
Delaware, as applicable, upon the opinions of counsel satisfactory to the
U.S. Representatives. Such counsel may also state that, insofar as such
opinion involves factual matters, they have relied, to the extent they deem
proper, upon certificates of the Selling Shareholders or officers of the
Company and its subsidiaries and certificates of public officials.
(d) Opinion of Counsel for U.S. Underwriters. At Closing Time, the
U.S. Representatives shall have received the favorable opinion, dated as of
Closing Time, of Debevoise & Plimpton, counsel for the U.S. Underwriters,
together with signed or reproduced copies of such letter for each of the
other U.S. Underwriters with respect to the matters set forth in clauses 1,
2, 4 (as to the third clause thereof), 5 (solely as to preemptive or other
similar rights arising by operation of law or under the charter or by-laws
of the Company), 8 through 10, inclusive, 12 and Exhibit A-2 hereto. In
giving such opinion such counsel may rely, as to all matters governed by
the laws of jurisdictions other than the law of the State of New York, the
federal law of the United States and the General Corporation Law of the
State of Delaware, upon the opinions of counsel satisfactory to the U.S.
Representatives. Such counsel may also state that, insofar as such opinion
involves factual matters, they have relied, to the extent they deem proper,
upon certificates of officers of the Company and its subsidiaries and
certificates of public officials.
(e) Officers' Certificate. At Closing Time, there shall not have
been, since the date hereof or since the respective dates as of which
information is given in the Prospectuses, any material adverse change in
the condition, financial or otherwise, or in the earnings, business affairs
or business prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising
24
<PAGE>
in the ordinary course of business, and the U.S. Representatives shall have
received a certificate of each of the Chairman of the Board, the President
or a Vice President of the Company and of the chief financial or chief
accounting officer of the Company dated as of Closing Time and to the
effect that (i) there has been no such material adverse change, (ii) the
- --
representations and warranties in Section 1(a) hereof are true and correct
with the same force and effect as though expressly made at and as of
Closing Time, (iii) the Company has complied with all agreements and
---
satisfied all conditions on its part to be performed or satisfied at or
prior to Closing Time, and (iv) no stop order suspending the effectiveness
--
of the Registration Statement has been issued and no proceedings for that
purpose have been instituted or are pending or are contemplated by the
Commission.
(f) Certificate of Selling Shareholders. At the Closing Time, the
U.S. Representatives shall have received a certificate of an Attorney-in-
Fact on behalf of each Selling Shareholder, dated as of Closing Time, to
the effect that (i) the representations and warranties of each Selling
-
Shareholder contained in Section 1(b) and 1(c) hereof are true and correct
in all respects with the same force and effect as though expressly made at
and as of Closing Time and (ii) each Selling Shareholder has complied in
--
all material respects with all agreements and all conditions on its part to
be performed under this Agreement at or prior to Closing Time.
(g) Accountant's Comfort Letter. At the time of the execution of this
Agreement, the U.S. Representatives shall have received from Arthur
Andersen LLP a letter dated such date, in form and substance satisfactory
to the U.S. Representatives, together with signed or reproduced copies of
such letter for each of the other U.S. Underwriters, containing statements
and information of the type ordinarily included in accountants' "comfort
letters" to underwriters with respect to the financial statements and
certain financial information contained in the Registration Statement and
the Prospectuses.
(h) Bring-down Comfort Letter. At Closing Time, the Representatives
shall have received from Arthur Andersen LLP a letter, dated as of Closing
Time, to the effect that they reaffirm the statements made in the letter
furnished pursuant to subsection (g) of this Section, except that the
specified date referred to shall be a date not more than three business
days prior to Closing Time.
(i) Approval of Listing. At Closing Time, the Securities shall have
been approved for listing on the New York Stock Exchange, subject only to
official notice of issuance.
25
<PAGE>
(j) No Objection. The NASD shall not have raised any objection with
respect to the fairness and reasonableness of the underwriting terms and
arrangements.
(k) Lock-up Agreements. At the date of this Agreement, the U.S.
Representatives shall have received an agreement substantially in the form
of Exhibit C hereto signed by the persons listed on Schedule D hereto.
(l) Form W-9 and Form W-8. At or prior to Closing Time, the U.S.
Representatives shall have received from each Selling Shareholder a
properly completed and executed United States Treasury Form W-9 or Form W-
8, as applicable.
(m) Purchase of Initial International Securities. Contemporaneously
with the purchase by the U.S. Underwriters of the Initial U.S. Securities
under this Agreement, the International Managers shall have purchased the
Initial International Securities under the International Purchase
Agreement.
(n) Conditions to Purchase of U.S. Option Securities. In the event
that the U.S. Underwriters exercise their option provided in Section 2(b)
hereof to purchase all or any portion of the U.S. Option Securities, the
representations and warranties of the Company and the Executive Selling
Shareholders contained herein and the statements in any certificates
furnished by any of them hereunder shall be true and correct as of each
Date of Delivery and, at the relevant Date of Delivery, and the U.S.
Representatives shall have received:
(i) Officers' Certificates. A certificate, dated such Date of
----------------------
Delivery, of each of the Chairman of the Board, President or a Vice
President of the Company and of the chief financial or chief
accounting officer of the Company confirming that the certificate
delivered at the Closing Time pursuant to Section 5(e) hereof remains
true and correct as of such Date of Delivery.
(ii) Certificate of the Executive Selling Shareholders. A
-------------------------------------------------
certificate, dated such Date of Delivery, of an Attorney-in-Fact on
behalf of each Executive Selling Shareholder confirming that the
certificate delivered at Closing Time pursuant to Section 5(f) hereof
remains true and correct as of such Date of Delivery.
(iii) Opinion of Counsel for Company. The favorable opinion of Shaw
------------------------------
Pittman Potts & Trowbridge, counsel for the Company, in form and
26
<PAGE>
substance satisfactory to counsel for the U.S. Underwriters, dated
such Date of Delivery, relating to the U.S. Option Securities to be
purchased on such Date of Delivery and otherwise to the same effect as
the opinion required by Section 5(b) hereof.
(iv) Opinion of Counsel for the Executive Selling Shareholders. The
------------------------------------------------------
favorable opinion of Shaw Pittman Potts & Trowbridge, counsel for the
Executive Selling Shareholders, in form and substance satisfactory to
counsel for the U.S. Underwriters, dated such Date of Delivery,
relating to the U.S. Option Securities to be purchased on such Date of
Delivery and otherwise to the same effect as the respective opinions
required by Section 5(c) hereof.
(v) Opinion of Counsel for U.S. Underwriters. The favorable opinion
----------------------------------------
of Debevoise & Plimpton, counsel for the U.S. Underwriters, dated such
Date of Delivery, relating to the U.S. Option Securities to be
purchased on such Date of Delivery and otherwise to the same effect as
the opinion required by Section 5(d) hereof.
(vi) Bring-down Comfort Letter. A letter from Arthur Andersen LLP, in
-------------------------
form and substance satisfactory to the U.S. Representatives and dated
such Date of Delivery, substantially in the same form and substance as
the letter furnished to the U.S. Representatives pursuant to Section
5(g) hereof, except that the "specified date" in the letter furnished
pursuant to this paragraph shall be a date not more than five days
prior to such Date of Delivery.
(o) Additional Documents. At Closing Time and at each Date of Delivery,
counsel for the U.S. Underwriters shall have been furnished with such documents
and opinions as they may require for the purpose of enabling them to pass upon
the issuance and sale of the Securities as herein contemplated, or in order to
evidence the accuracy of any of the representations or warranties, or the
fulfillment of any of the conditions, herein contained; and all proceedings
taken by the Company and the Selling Shareholders in connection with the
issuance and sale of the Securities as herein contemplated shall be satisfactory
in form and substance to the U.S. Representatives and counsel for the U.S.
Underwriters.
(p) Termination of Agreement. If any condition specified in this Section
shall not have been fulfilled when and as required to be fulfilled, this
Agreement, or, in the case of any condition to the purchase of U.S. Option
Securities on a Date of Delivery which is after Closing Time, the obligations of
the several U.S. Underwriters to purchase the
27
<PAGE>
relevant Option Securities, may be terminated by the U.S. Representatives by
notice to the Company at any time at or prior to Closing Time or such Date of
Delivery, as the case may be, and such termination shall be without liability of
any party to any other party except as provided in Section 4 and except that
Sections 1, 6, 7 and 8 shall survive any such termination and remain in full
force and effect.
SECTION 6. Indemnification.
---------------
(a) Indemnification of U.S. Underwriters. The Company and the Executive
Selling Shareholders, jointly and severally, agree to indemnify and hold
harmless each U.S. Underwriter, its directors, officers and employees, and each
person, if any, who controls any U.S. Underwriter within the meaning of Section
15 of the 1933 Act or Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement
(or any amendment thereto), including the Rule 430A Information and the
Rule 434 Information, if applicable, or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to
make the statements therein not misleading or arising out of any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus or the Prospectuses (or any amendment or supplement
thereto), or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission; provided that (subject to Section
6(e) hereof) any such settlement is effected with the written consent of
the Company and the Executive Selling Shareholders; and
(iii) against any and all expense whatsoever, as incurred (including
the fees and disbursements of counsel chosen by Merrill Lynch), reasonably
incurred in investigating, preparing or defending against any litigation,
or any investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever based upon any such untrue
statement or omission, or any
28
<PAGE>
such alleged untrue statement or omission, to the extent that any such
expense is not paid under (i) or (ii) above;
provided, however, that (a) this indemnity agreement shall not apply to any
- -------- ------- -
loss, liability, claim, damage or expense (x) to the extent arising out of any
-
untrue statement or omission or alleged untrue statement or omission made in
reliance upon and in conformity with written information furnished to the
Company by any U.S. Underwriter through the U.S. Representatives expressly for
use in the Registration Statement (or any amendment thereto), including the Rule
430A Information and the Rule 434 Information, if applicable, or any preliminary
prospectus or the U.S. Prospectus (or any amendment or supplement thereto) and
(y) with respect to any preliminary prospectus to the extent that any such loss,
-
liability, claim, damage or expense of such U.S. Underwriter results solely from
the fact that such U.S. Underwriter sold Securities to a person as to whom the
Company shall establish that there was not sent by commercially reasonable
means, at or prior to the written confirmation of such sale, a copy of the U.S.
Prospectus in any case where such delivery is required by the 1933 Act, if the
Company has previously furnished copies thereof in sufficient quantity to such
U.S. Underwriter and the loss, claim, damage or liability of such U.S.
Underwriter results from an untrue statement or omission of a material fact
contained in the preliminary prospectus that was corrected in the U.S.
Prospectus, and (b) each Executive Selling Shareholder's aggregate liability
-
under this Section 6 shall be limited to an amount equal to such Executive
Selling Shareholder's net proceeds (after deducting the underwriting discount,
but before deducting expenses) from the sale of such Executive Selling
Shareholder's Securities pursuant to this Agreement.
In making a claim for indemnification under this Section 6 (other than
pursuant to clause (a)(iii) of this Section 6), or contribution under Section 7,
by the Company or the Executive Selling Shareholders, the indemnified parties
may proceed against either (i) the Company and the Executive Selling
-
Shareholders or (ii) the Company only, but may not proceed solely against the
--
Executive Selling Shareholders. In the event that the indemnified parties are
entitled to seek indemnity or contribution hereunder against any loss,
liability, claim, damage and expense incurred with respect to a final judgment
from a trial court, then, as a precondition to any indemnified party obtaining
indemnification or contribution from any Executive Selling Shareholder, the
indemnified parties shall first obtain a final judgment from a trial court that
such indemnified parties are entitled to indemnity or contribution under this
Agreement with respect to such loss, liability, claim, damage or expense (the
"Final Judgment") from the Company and the Executive Selling Shareholder and
shall seek to satisfy such Final Judgment in full from the Company by making a
written demand upon the Company for such satisfaction. Only in the event such
Final Judgment shall remain unsatisfied in whole or in part 45 days following
the date of receipt by the Company of such demand shall any indemnified party
have the right to take action to satisfy such Final Judgment by making demand
directly on any Executive Selling
29
<PAGE>
Shareholder (but only if and to the extent the Company has not already satisfied
such Final Judgment, whether by settlement, release or otherwise). The
indemnified parties may exercise this right to first seek to obtain payment from
the Company and thereafter obtain payment from any Executive Selling Shareholder
without regard to the pursuit by any party of its rights to the appeal of such
Final Judgment. The indemnified parties shall, however, be relieved of their
obligation to first obtain a Final Judgment, seek to obtain payment from the
Company with respect to such Final Judgment or, having sought such payment, to
wait such 45 days after failure by the Company to satisfy immediately any such
Final Judgment if (i) the Company files a petition for relief under the United
-
States Bankruptcy Code (the "Bankruptcy Code"), (ii) an order for relief is
--
entered against the Company in an involuntary case under the Bankruptcy Code,
(iii) the Company makes an assignment for the benefit of its creditors, or (iv)
--- --
any court orders or approves the appointment of a receiver or custodian for the
Company or a substantial portion of either of their assets. The foregoing
provisions of this paragraph are not intended to require any indemnified party
to obtain a Final Judgment against the Company or any Executive Selling
Shareholder before obtaining reimbursement of expenses pursuant to clause
(a)(iii) of this Section 6. However, the indemnified parties shall first seek
to obtain such reimbursement in full from the Company by making a written demand
upon the Company for such reimbursement. Only in the event such expenses shall
remain unreimbursed in whole or in part 45 days following the date of receipt by
the Company of such demand shall any indemnified party have the right to receive
reimbursement of such expenses from any Executive Selling Shareholder by making
written demand directly on such Executive Selling Shareholder (but only if and
to the extent the Company has not already satisfied the demand for
reimbursement, whether by settlement, release or otherwise). The indemnified
parties shall, however, be relieved of their obligation to first seek to obtain
such reimbursement in full from the Company or, having made written demand
therefor, to wait such 45 days after failure by the Company to reimburse
immediately such expenses if (i) the Company files a petition for relief under
-
the Bankruptcy Code, (ii) an order for relief is entered against the Company in
--
an involuntary case under the Bankruptcy Code, (iii) the Company makes an
---
assignment for the benefit of its creditors, or (iv) any court orders or
--
approves the appointment of a receiver or custodian for the Company or a
substantial portion of its assets.
(b) Indemnification of U.S. Underwriters by the Non-Executive Selling
Shareholders. Each Non-Executive Selling Shareholder, severally and not
jointly, agrees to indemnify and hold harmless each U.S. Underwriter, its
directors, officers and employees, and each person, if any, who controls any
U.S. Underwriter within the meaning of Section 15 of the 1933 Act or Section 20
of the 1934 Act against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, with respect to any untrue statement or omission, or
alleged untrue statement or omission, contained in the Registration Statement
(or any amendment thereto), including the Rule 430 Information
30
<PAGE>
and the Rule 434 Information, if applicable, or any preliminary prospectus or
the Prospectuses (or any amendment or supplement thereto) in reliance upon and
in conformity with information furnished to the Company in writing by or on
behalf of such Non-Executive Selling Shareholder expressly for use therein;
provided, however, that (x) this indemnity agreement shall not apply to any
- -------- ------- -
loss, liability, claim, damage or expense (i) to the extent arising out of any
-
untrue statement or omission or alleged untrue statement or omission made in
reliance upon and in conformity with written information furnished to the
Company by any U.S. Underwriter through the U.S. Representatives expressly for
use in the Registration Statement (or any amendment thereto), including the Rule
430A Information and the Rule 434 Information, if applicable, or any preliminary
prospectus or the U.S. Prospectus (or any amendment or supplement thereto) and
(ii) with respect to any preliminary prospectus to the extent that any such
--
loss, liability, claim, damage or expense of such U.S. Underwriter results
solely from the fact that such U.S. Underwriter sold Securities to a person as
to whom the Company shall establish that there was not sent by commercially
reasonable means, at or prior to the written confirmation of such sale, a copy
of the U.S. Prospectus in any case where such delivery is required by the 1933
Act, if the Company has previously furnished copies thereof in sufficient
quantity to such U.S. Underwriter and the loss, claim, damage or liability of
such U.S. Underwriter results from an untrue statement or omission of a material
fact contained in the preliminary prospectus that was corrected in the U.S.
Prospectus, and (y) each Non-Executive Selling Shareholder's aggregate liability
-
under this Section 6(b) shall be limited to an amount equal to the net proceeds
(after deducting the underwriting discount, but before deducting expenses)
received by such Non-Executive Selling Shareholder from the sale of Securities
pursuant to this Agreement.
(c) Indemnification of Company, Directors and Officers and Selling
Shareholders. Each U.S. Underwriter severally agrees to indemnify and hold
harmless the Company, its directors, each of its officers who signed the
Registration Statement, and each person, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, and
each Selling Shareholder against any and all loss, liability, claim, damage and
expense described in the indemnity contained in subsection (a) of this Section,
as incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the Registration Statement (or any
amendment thereto), including the Rule 430A Information and the Rule 434
Information, if applicable, or any preliminary U.S. prospectus or the U.S.
Prospectus (or any amendment or supplement thereto) in reliance upon and in
conformity with written information furnished to the Company by such U.S.
Underwriter through the U.S. Representatives expressly for use in the
Registration Statement (or any amendment thereto) or such preliminary prospectus
or the U.S. Prospectus (or any amendment or supplement thereto).
31
<PAGE>
(d) Actions against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. In the case of parties indemnified pursuant to Section 6(a) or (b)
above, counsel to the indemnified parties shall be selected by Merrill Lynch,
and, in the case of parties indemnified pursuant to Section 6(c) above, counsel
to the indemnified parties shall be selected by the Company. An indemnifying
party may participate at its own expense in the defense of any such action;
provided, however, that counsel to the indemnifying party shall not (except with
the consent of the indemnified party) also be counsel to the indemnified party.
In no event shall the indemnifying parties be liable for fees and expenses of
more than one counsel (in addition to any local counsel) separate from their own
counsel for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances. No indemnifying party shall,
without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 6 or Section
7 hereof (whether or not the indemnified parties are actual or potential parties
thereto), unless such settlement, compromise or consent (i) includes an
-
unconditional release of each indemnified party from all liability arising out
of such litigation, investigation, proceeding or claim and (ii) does not include
--
a statement as to or an admission of fault, culpability or a failure to act by
or on behalf of any indemnified party.
(e) Settlement without Consent if Failure to Reimburse. If at any time an
indemnified party shall have requested in accordance with this Agreement an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel, such indemnifying party agrees that it shall be liable for any
settlement of the nature contemplated by Section 6(a)(ii) hereof effected
without its written consent if (i) such settlement is entered into more than 45
-
days after receipt by such indemnifying party of the aforesaid request, (ii)
--
such indemnifying party shall have received notice of the terms of such
settlement at least 30 days prior to such settlement being entered into and
(iii) such indemnifying party shall not have reimbursed such indemnified party
---
in accordance with such request prior to the date of such settlement.
(f) Other Agreements with Respect to Indemnification. The provisions of
this Section shall not affect any agreement among the Company and the Selling
Shareholders with respect to indemnification.
32
<PAGE>
SECTION 7. Contribution. If the indemnification provided for in Section
------------
6 hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
-
appropriate to reflect the relative benefits received by the Company and the
Selling Shareholders on the one hand and the U.S. Underwriters on the other hand
from the offering of the Securities pursuant to this Agreement or (ii) if the
--
allocation provided by clause (i) is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company and the
Selling Shareholders on the one hand and of the U.S. Underwriters on the other
hand in connection with the statements or omissions, which resulted in such
losses, liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations.
The relative benefits received by the Company and the Selling Shareholders
on the one hand and the U.S. Underwriters on the other hand in connection with
the offering of the U.S. Securities pursuant to this Agreement shall be deemed
to be in the same respective proportions as the total net proceeds from the
offering of the U.S. Securities pursuant to this Agreement (after deducting the
underwriting discount, but before deducting expenses) received by the Company
and the Selling Shareholders and the total underwriting discount received by the
U.S. Underwriters, in each case as set forth on the cover of the U.S.
Prospectus, or, if Rule 434 is used, the corresponding location on the Term
Sheet, bear to the aggregate initial public offering price of the U.S.
Securities as set forth on such cover.
The relative fault of the Company and the Selling Shareholders on the one
hand and the U.S. Underwriters on the other hand shall be determined by
reference to, among other things, whether any such untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact relates to information supplied by the Company or by the Selling
Shareholders in writing or by the U.S. Underwriters and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Company, the Selling Shareholders and the U.S. Underwriters agree that
it would not be just and equitable if contribution pursuant to this Section 7
were determined by pro rata allocation (even if the U.S. Underwriters were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to above in
this Section 7. The aggregate amount of losses, liabilities, claims, damages and
expenses incurred by an indemnified party and referred to above in this Section
7 shall be deemed to include any legal or other expenses
33
<PAGE>
reasonably incurred by such indemnified party in investigating, preparing or
defending against any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim whatsoever
based upon any such untrue or alleged untrue statement or omission or alleged
omission.
Notwithstanding the provisions of this Section 7, (x) no U.S. Underwriter
-
shall be required to contribute any amount in excess of the amount by which the
total price at which the U.S. Securities underwritten by it and distributed to
the public were offered to the public exceeds the amount of any damages which
such U.S. Underwriter has otherwise been required to pay by reason of any such
untrue or alleged untrue statement or omission or alleged omission, and (y) no
-
Non-Executive Selling Shareholder shall be required to contribute any amount in
excess of such Non-Executive Selling Shareholder's net proceeds (after deducting
the underwriting discount, but before deducting expenses) from the sale of
Securities pursuant to this Agreement or on a basis other than as specified in
Section 6(b).
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls a U.S.
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as such U.S.
Underwriter, and each director of the Company, each officer of the Company who
signed the Registration Statement, and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act shall have the same rights to contribution as the Company. The U.S.
Underwriters' respective obligations to contribute pursuant to this Section 7
are several in proportion to the number of Initial U.S. Securities set forth
opposite their respective names in Schedule A hereto and not joint.
The provisions of this Section shall not affect any agreement among the
Company and the Selling Shareholders with respect to contribution.
SECTION 8. Representations, Warranties and Agreements to Survive Delivery.
--------------------------------------------------------------
All representations, warranties and agreements contained in this Agreement or in
certificates of officers of the Company or the Selling Shareholders submitted
pursuant hereto, shall remain operative and in full force and effect, regardless
of any investigation made by or on behalf of any U.S. Underwriter or controlling
person, or by or on behalf of the Company or any controlling person or the
Selling Shareholders, and shall survive delivery of the Securities to the U.S.
Underwriters.
34
<PAGE>
SECTION 9. Termination of Agreement.
------------------------
(a) Termination; General. The U.S. Representatives may terminate this
Agreement, by notice to the Company, at any time at or prior to Closing Time (i)
-
if there has been, since the time of execution of this Agreement or since the
respective dates as of which information is given in the U.S. Prospectus, any
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company and its
subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business, or (ii) if there has occurred any material adverse
--
change in the financial markets in the United States or the international
financial markets, any outbreak of hostilities or escalation thereof or other
calamity or crisis or any change or development involving a prospective change
in national or international political, financial or economic conditions, in
each case the effect of which is such as to make it, in the judgment of the U.S.
Representatives, impracticable to market the Securities or to enforce contracts
for the sale of the Securities, or (iii) if trading in any securities of the
---
Company has been suspended or materially limited by the Commission or the New
York Stock Exchange, or if trading generally on the American Stock Exchange or
the New York Stock Exchange or in the Nasdaq National Market has been suspended
or materially limited, or minimum or maximum prices for trading have been fixed,
or maximum ranges for prices have been required, by any of said exchanges or by
such system or by order of the Commission, the NASD or any other governmental
authority, or (iv) if a banking moratorium has been declared by either Federal
--
or New York authorities.
(b) Liabilities. If this Agreement is terminated pursuant to this Section,
such termination shall be without liability of any party to any other party
except as provided in Section 4 hereof, and provided further that Sections 1, 6,
7 and 8 shall survive such termination and remain in full force and effect.
SECTION 10. Default by One or More of the U.S. Underwriters. If one or more
-----------------------------------------------
of the U.S. Underwriters shall fail at Closing Time or a Date of Delivery to
purchase the Securities which it or they are obligated to purchase under this
Agreement (the "Defaulted Securities"), the U.S. Representatives shall have the
right, within 24 hours thereafter, to make arrangements for one or more of the
non-defaulting U.S. Underwriters, or any other underwriters, to purchase all,
but not less than all, of the Defaulted Securities in such amounts as may be
agreed upon and upon the terms herein set forth; if, however, the U.S.
Representatives shall not have completed such arrangements within such 24-hour
period, then:
(a) if the number of Defaulted Securities does not exceed 10% of the
number of U.S. Securities to be purchased on such date, each of the non-
defaulting U.S. Underwriters shall be obligated, severally and not jointly,
to purchase the full
35
<PAGE>
amount thereof in the proportions that their respective underwriting
obligations hereunder bear to the underwriting obligations of all non-
defaulting U.S. Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the number
of U.S. Securities to be purchased on such date, this Agreement or, with
respect to any Date of Delivery which occurs after the Closing Time, the
obligation of the U.S. Underwriters to purchase and of the Company to sell
the Option Securities to be purchased and sold on such Date of Delivery
shall terminate without liability on the part of any non-defaulting U.S.
Underwriter.
No action taken pursuant to this Section shall relieve any defaulting U.S.
Underwriter from liability in respect of its default.
In the event of any such default which does not result in a termination of
this Agreement or, in the case of a Date of Delivery which is after the Closing
Time, which does not result in a termination of the obligation of the U.S.
Underwriters to purchase and the Company to sell the relevant U.S. Option
Securities, as the case may be, either the U.S. Representatives or the Company
shall have the right to postpone Closing Time or the relevant Date of Delivery,
as the case may be, for a period not exceeding seven days in order to effect any
required changes in the Registration Statement or Prospectus or in any other
documents or arrangements. As used herein, the term "U.S. Underwriter" includes
any person substituted for a U.S. Underwriter under this Section 10.
SECTION 11. Default by One or More of the Selling Shareholders or the
---------------------------------------------------------
Company. (a) If a Selling Shareholder shall fail at Closing Time or at a Date
- -------
of Delivery to sell and deliver the number of Securities that such Selling
Shareholder or Selling Shareholders are obligated to sell hereunder, the
remaining Selling Shareholders shall have the right to increase, pro rata or
otherwise, the number of Securities to be sold by them hereunder to the total
number of Securities to be sold by all Selling Shareholders as set forth in
Schedule B hereto. In the event that a Selling Shareholder or Selling
Shareholders shall so fail, and the remaining Selling Shareholders do not
exercise such right to increase the number of Securities to be sold by them, and
the Company does not exercise the right hereby granted to sell the Securities
that the defaulting Selling Shareholders are obligated to sell hereunder, then
the U.S. Underwriters may, at the option of the U.S. Representatives, by notice
from the U.S. Representatives to the Company and the non-defaulting Selling
Shareholders, either (i) terminate this Agreement without any liability on the
-
fault of any non-defaulting party except that the provisions of Sections 1, 4,
6, 7 and 8 shall remain in full force and effect or (ii) elect to purchase the
--
Securities which the non-defaulting Selling Shareholders have agreed to sell
hereunder. No action taken pursuant to this Section 11 shall relieve any
Selling Shareholder so defaulting from liability, if any,
36
<PAGE>
in respect of such default. If the remaining Selling Shareholders exercise the
right to sell the Securities that such defaulting Selling Shareholder is
obligated to sell hereunder, as used herein the term "Selling Shareholder" shall
not include such defaulting Selling Shareholder for purposes of determining
compliance with all agreements and conditions to be performed by the Selling
Shareholders hereunder.
In the event of a default by any Selling Shareholder as referred to in this
Section 11, each of the U.S. Representatives, the Company and the non-defaulting
Selling Shareholders shall have the right to postpone Closing Time or Date of
Delivery for a period not exceeding seven days in order to effect any required
change in the Registration Statement or Prospectuses or in any other documents
or arrangements.
(b) If the Company shall fail at Closing Time to sell the number of
Securities that it is obligated to sell hereunder, then this Agreement shall
terminate without any liability on the part of any nondefaulting party;
Provided, however, that the provisions of Sections 1, 4, 6, 7 and 8 shall remain
- -------- -------
in full force and effect. No action taken pursuant to this Section shall
relieve the Company from liability, if any, in respect of such default.
SECTION 12. Notices. All notices and other communications hereunder shall
-------
be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the U.S.
Underwriters shall be directed to the U.S. Representatives at North Tower, World
Financial Center, New York, New York 10281-1201, attention of Syndicate
Operations; notices to the Company shall be directed to the Company at Two
Democracy Center, 6903 Rockledge Drive, Fifteenth Floor, Bethesda, Maryland
20817, attention of A. Clayton Perfall; and notices to the Selling Shareholders
shall be directed to the Selling Shareholders care of the Company at the
foregoing address, attention of A. Clayton Perfall.
SECTION 13. Parties. This Agreement shall each inure to the benefit of and
-------
be binding upon the U.S. Underwriters, the Company and the Selling Shareholders
and their respective successors. Nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any person, firm or
corporation, other than the U.S. Underwriters, the Company and the Selling
Shareholders and their respective successors and the controlling persons and
officers and directors referred to in Sections 6 and 7 and their heirs and legal
representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein contained. This Agreement and
all conditions and provisions hereof are intended to be for the sole and
exclusive benefit of the U.S. Underwriters, the Company and the Selling
Shareholders and their respective successors, and said controlling persons and
officers and directors and their heirs and legal representatives, and for the
benefit of no other person, firm or corporation. No purchaser
37
<PAGE>
of Securities from any U.S. Underwriter shall be deemed to be a successor by
reason merely of such purchase.
SECTION 14. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY
----------------------
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SPECIFIED
TIMES OF DAY REFER TO NEW YORK CITY TIME.
SECTION 15. Effect of Headings. The Article and Section headings herein
------------------
and the Table of Contents are for convenience only and shall not affect the
construction hereof.
38
<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Company and the Attorney-in-Fact for the Selling
Shareholders a counterpart hereof, whereupon this instrument, along with all
counterparts, will become a binding agreement among the U.S. Underwriters, the
Company and the Selling Shareholders in accordance with its terms.
Very truly yours,
SNYDER COMMUNICATIONS, INC.
By__________________________________________
Name:
Title:
Daniel M. Snyder
By__________________________________________
As Attorney-in-Fact acting on behalf of
the Selling Shareholders named in
Schedule B hereto
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
GOLDMAN, SACHS & CO.
BEAR, STEARNS & CO. INC.
NATIONSBANC MONTGOMERY SECURITIES LLC
39
<PAGE>
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By _________________________________
Authorized Signatory
For themselves and as U.S. Representatives of the
other U.S. Underwriters named in Schedule A hereto.
40
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Number of
Initial U.S.
Name of U.S. Underwriter Securities
------------------------ ------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated........................
Goldman, Sachs & Co..............................
Bear, Stearns & Co. Inc..........................
NationsBanc Montgomery Securities LLC............ _________
Total............................................ [ ]
===========
</TABLE>
Sch A-1
<PAGE>
SCHEDULE B
<TABLE>
<CAPTION>
Maximum Number of
Number of Initial U.S. U.S. Option
Securities to be Sold Securities to be Sold
---------------------- ---------------------
<S> <C> <C>
---------------------- ---------------------
Total...........====================== =====================
</TABLE>
SchB-1
<PAGE>
SCHEDULE C
SNYDER COMMUNICATIONS, INC.
[__________] Shares of Common Stock
(Par Value $.001 Per Share)
1. The initial public offering price per share for the Securities,
determined as provided in said Section 2, shall be $[_____________].
2. The purchase price per share for the U.S. Securities to be paid by
the several U.S. Underwriters shall be $[_____________], being an amount
equal to the initial public offering price set forth above less $[_______]
per share.
Sch C-1
<PAGE>
SCHEDULE D
Snyder Communications, Inc.
Daniel M. Snyder
Michele D. Snyder
USN College Marketing, L.P.
MBZ Trust of 1996
Mortimer B. Zuckerman
Fred Drasner
A. Clayton Perfall
Philip Guarascio
Mark E. Jennings
Sch D-1
<PAGE>
SCHEDULE E
G.P. Snyder Marketing Services, Inc.
Snyder Marketing Services, Inc.
Snyder Direct Services, Inc.
Snyder Complete Target Marketing Solutions, Inc.
MMD, Inc.
Sampling Corporation of America
American List Corporation
American Student List Co., Inc.
Brann Holdings Limited
Brann Limited
Bounty Group Holdings Limited
Bounty Holdings Limited
Halliday Jones Sales Limited
GEM Communications Inc.
Rapid Deployment Group Limited
Rapid Deployment Limited
PharmFlex, Inc.
Snyder Communications Holdings (UK) Ltd.
Blau Marketing Technologies, Inc.
Arnold Communications, Inc.
Ellert Retail Operation Services Limited
Health Products Research, Inc.
Healthcare Promotions, LLC
Publimed Promotion S.A.
CLI Pharma S.A.
Sch E-1
<PAGE>
Exhibit A-1
FORM OF OPINION OF SHAW PITTMAN POTTS & TROWBRIDGE
TO BE DELIVERED PURSUANT TO SECTION 5(b)
1. The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware.
2. The Company has corporate power and authority to own, lease and operate
its properties and to conduct its business as described in the
Prospectuses and to enter into and perform its obligations under the
U.S. Purchase Agreement and the International Purchase Agreement.
3. The Company is in good standing in each jurisdiction that issued a
Company Good Standing Certificate.
4. The authorized, issued and outstanding capital stock of the Company is
as set forth in the Prospectuses in the column entitled "Actual" under
the caption "Capitalization" (except for subsequent issuances, if any,
pursuant to the U.S. Purchase Agreement and the International Purchase
Agreement or pursuant to reservations, agreements or employee benefit
plans referred to in the Prospectuses or pursuant to the exercise of
convertible securities or options referred to in the Prospectuses); the
shares of issued and outstanding capital stock of the Company
outstanding prior to the issuance of the Company Shares have been duly
authorized and validly issued and are fully paid and non-assessable and
no holder of the Company Shares is or will be subject to personal
liability by reason of being such a holder; the Company Shares have been
duly authorized and, when issued and delivered to the U.S. Underwriters
and the International Managers in accordance with the terms of the U.S.
Purchase Agreement and the International Purchase Agreement, will be
validly issued, fully paid and nonassessable; and none of the
outstanding shares of capital stock of the Company was issued in
violation of any preemptive rights under the General Corporation Law of
the State of Delaware.
5. To our knowledge, when issued and delivered to the U.S. Underwriters and
the International Managers against payment therefor in accordance with
the terms of the U.S. Purchase Agreement and the International Purchase
Agreement, the issuance and sale of the Company Shares by the Company
will not be subject to any preemptive or other similar contractual
A-1-1
<PAGE>
rights that would entitle any person to acquire any of the Company
Shares upon the issuance and sale by the Company.
6. Each Subsidiary is validly existing as a corporation or partnership, as
the case may be, in good standing under the laws of the jurisdiction of
incorporation, has corporate or partnership, as the case may be, power
and authority to own, lease and operate its properties and to conduct
its business as described in the Prospectuses and is duly qualified as a
foreign corporation or partnership, as the case may be, to transact
business and is in good standing in each jurisdiction that issued a
Subsidiary Good Standing Certificate.
7. All of the issued and outstanding capital stock of each Subsidiary has
been duly authorized and validly issued, is fully paid and non-
assessable and, based upon our review of the capital stock records of
the Subsidiaries, is owned by the Company directly or through
subsidiaries, free and clear of any security interest, mortgage, pledge,
lien, encumbrance, claim or equity. None of the outstanding shares of
capital stock of any Subsidiary was issued in violation of the
preemptive or similar rights of any securityholder of such subsidiary.
8. The U.S. Purchase Agreement and the International Purchase Agreement
have been duly authorized, executed and delivered by the Company. The
performance by the Company of its obligations under the U.S. Purchase
Agreement and the International Purchase Agreement and the consummation
of the transactions contemplated therein and compliance by the Company
with its obligations under the U.S. Purchase Agreement and the
International Purchase Agreement have been duly authorized by the
Company.
9. The Registration Statement was declared effective under the 1933 Act on
May , 1998, the U.S. Prospectus was filed with the Commission pursuant
to Rule 424(b) of the 1933 Act Regulations on May , 1998 and, to our
knowledge, no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceeding for that
purpose is pending or threatened by the Commission.
10.The Registration Statement and the Prospectuses, excluding the
documents incorporated by reference therein, as of their respective
effective or issue dates (except for the financial statements and the
notes thereto and the supporting schedules and other financial data
included therein, as to which
A-1-2
<PAGE>
we express no opinion) comply as to form in all material respects with
the requirements of the 1933 Act and the 1933 Act Regulations.
11. The documents incorporated by reference in the Prospectuses (except
for the financial statements and the notes thereto and the supporting
schedules included therein and other financial data included therein,
as to which we express no opinion), when they became effective or at
the time they were filed with the Commission, complied as to form in
all material respects with the requirements of the 1934 Act and the
rules and regulations of the Commission thereunder.
12. The form of certificate used to evidence the Common Stock complies in
all material respects with the requirements of the General Corporation
Law of the State of Delaware, any applicable requirements of the
Certificate of Incorporation and Bylaws of the Company and the
requirements of the New York Stock Exchange.
13. To our knowledge, except as set forth in the Prospectuses, there is
not pending any action, suit, proceeding, inquiry or investigation to
which the Company or any subsidiary is a party, or to which the
property of the Company or any subsidiary is subject, before or
brought by any court or governmental agency or body, domestic or
foreign which might reasonably be expected to result in a Material
Adverse Effect, or which might reasonably be expected to materially
and adversely affect the properties or assets of the Company and its
subsidiaries considered as one enterprise, or the consummation of the
transactions contemplated in the U.S. Purchase Agreement and the
International Purchase Agreement or the Exchange Agreement or the
performance by the Company of its obligations thereunder.
14. The information in the Prospectuses under "Risk Factors - Government
Regulation," "Risk Factors - Shares Eligible For Future Sale and
Registration Rights," "Risk Factors - Effect of Certain Charter and
Bylaw Provisions," "Shares Eligible for Future Sale," and
"Considerations for Non-United States Holders" and in the Registration
Statement under Item 15, to the extent that it describes matters of
law, summaries of legal matters, the Company's Certificate of
Incorporation or Bylaws, or legal proceedings, or legal conclusions,
has been reviewed by us and is correct in all material respects.
A-1-3
<PAGE>
15. To our knowledge, there are no statutes or regulations that are
required to be described in the Prospectuses that are not
described as required.
16. The descriptions in the Prospectuses of contracts and other legal
documents to which the Company or any subsidiary is a party are
accurate in all material respects. To our knowledge, there are no
franchises, contracts, indentures, mortgages, loan agreements,
notes, leases or other instruments required to be described or
referred to in the Prospectuses or to be filed as exhibits
thereto other than those described or referred to in the
Prospectuses or filed or as exhibits to the Registration
Statement, and the descriptions thereof or references thereto are
accurate in all material respects.
17. To our knowledge, neither the Company nor any Subsidiary is in
violation of its charter or bylaws or other organizational
instrument and no default by the Company or any Subsidiary exists
in the due performance or observance of any material obligation,
agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or other
agreement or instrument that is described or referred to in the
Registration Statement or the Prospectuses or filed as an exhibit
to the Registration Statement.
18. No filing with, or authorization, approval, consent, license,
order, registration, qualification or decree of, any domestic
court or governmental authority or agency (other than under the
1933 Act and the 1933 Act Regulations and the Securities Exchange
Act of 1934, which have been obtained, or as may be required
under the securities or blue sky laws of the various states, as
to which we express no opinion) is necessary or required in
connection with the due authorization, execution and delivery of
the U.S. Purchase Agreement and the International Purchase
Agreement by the Company, or for the offering, issuance, sale or
delivery by the Company of the Company Shares to the U.S.
Underwriters and the International Managers in accordance with
the U.S. Purchase Agreement and the International Purchase
Agreement.
19. The execution, delivery and performance of the U.S. Purchase
Agreement and the International Purchase Agreement by the
Company, and the consummation of the transactions contemplated
therein by the Company, and the compliance by the Company with
its obligations under the U.S. Purchase Agreement and the
International Purchase Agreement, do not and will not, whether
with or without the giving of notice or lapse of time or
A-1-4
<PAGE>
both, conflict with or constitute a breach of, or default or Repayment
Event (as defined in Section 1(a)(x) of the Purchase Agreements) under
or, to our knowledge, result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company
or any Subsidiary under any indenture, mortgage, deed of trust, note
agreement or other agreement or instrument to which the Company or any
Subsidiary is a party or by which any of them or their properties is
or may be bound, or to which any of them or their properties may be
subject, that is filed as an exhibit to the Registration Statement or
which is otherwise known to us, except for such conflicts, breaches or
defaults or liens, charges or encumbrances that would not have a
Material Adverse Effect, nor will such action result in any violation
of the provisions of the charter or bylaws or other organizational
document, as the case may be, of the Company or any Subsidiary or any
applicable law, statute, rule, regulation (other than the blue sky or
securities laws or regulations of the various states, as to which we
express no opinion), judgment, order, writ or decree, known to us, of
any government, government instrumentality or court, domestic or
foreign, having jurisdiction over the Company or any Subsidiary or any
of their respective properties, assets or operations.
20. To our knowledge, other than as described in the Prospectuses, there
are no persons with registration rights or other similar rights to
have any securities registered pursuant to the Registration Statement
or otherwise registered by the Company under the 1933 Act (other than
rights which have been waived or satisfied).
21. The Company is not and immediately after receiving the proceeds
from the sale of the Company Shares, will not be an "investment
company" or an entity "controlled" by an "investment company" as such
terms are defined in the Investment Company Act of 1940, as amended.
22. Each Selling Shareholder is the sole registered owner of the
Securities to be sold by it pursuant to the U.S. Purchase Agreement
and the International Purchase Agreement.
A-1-5
<PAGE>
Exhibit A-2
Because the primary purpose of our professional engagement was not to
establish or confirm factual matters or financial or accounting matters and
because of the wholly or partially non-legal character of many of the statements
contained in the Registration Statement or the Prospectuses, we are not passing
upon and do not assume any responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration Statement or the
Prospectuses and we make no representation that we have independently verified
the accuracy, completeness or fairness of such statements. Without limiting the
foregoing, we assume no responsibility for, and have not independently verified,
the accuracy, completeness or fairness of the financial statements and the notes
thereto and the schedules and other financial data included in the Registration
Statement and we have not examined the accounting or financial records from
which such financial statements, notes, schedules and data are derived.
However, on the basis of our participation, as counsel to the Company,
with representatives of the Company and its subsidiaries in the preparation of
the Registration Statement and the Prospectuses, and our participation with
representatives of the Company, its independent public accountants and the
Underwriters at meetings in which the contents of the Registration Statement and
the Prospectuses and related matters were discussed and the examination by us of
such corporate records, statutes, documents and questions of law as we deemed
necessary, but without independent verification by us of the accuracy,
completeness and fairness of the statements contained in the Registration
Statement and the Prospectuses, and without commenting as to the financial
statements and the notes thereto and the schedules and other financial data
included therein, nothing has come to our attention that would lead us to
believe that the Registration Statement, at the time it became effective under
the Securities Act, contained an untrue statement of material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, or that the Prospectuses, or any amendment or
supplement thereto (except for the financial statements and the notes thereto
and the schedules and other financial data included or incorporated or deemed to
be incorporated by reference therein or omitted therefrom, as to which we make
no statement), as of its date and as of the Closing Time, contained or contains
any untrue statement of material fact or omitted or omits to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
A-2-1
<PAGE>
Exhibit B
FORM OF OPINION OF COUNSEL FOR THE SELLING SHAREHOLDERS
TO BE DELIVERED PURSUANT TO SECTION 5(c)
1. No filing with, or consent, approval, authorization, license,
order, registration, qualification or decree of, any court or
governmental authority or agency, domestic or foreign, other than
the issuance of the order of the Commission declaring the
Registration Statement effective and such authorizations, approvals
or consents as may be necessary under state securities laws (as to
which we need express no opinion), is necessary or required to be
obtained by the Selling Shareholders for the performance by each
Selling Shareholder of its obligations under the U.S. Purchase
Agreement and the International Purchase Agreement or in the
Custody Agreement and Power of Attorney, or in connection with the
offer, sale or delivery of the Securities.
2. Each Custody Agreement and Power of Attorney has been duly executed
and delivered by the respective Selling Shareholder named therein
and constitutes the legal, valid and binding agreement of such
Selling Shareholder, enforceable in accordance with its terms,
subject to the qualification that the enforceability of such
Selling Shareholder's obligations under the Custody Agreement and
Power of Attorney may be limited by bankruptcy, fraudulent
conveyance, insolvency, reorganization, moratorium, and other laws
relating to or affecting creditors' rights generally, and by
general equitable principles (whether applied by a court of law or
equity).
3. The U.S. Purchase Agreement and the International Purchase
Agreement have been duly authorized, executed and delivered by or
on behalf of each Selling Shareholder.
4. American Stock Transfer & Trust Company has been duly authorized by
each Selling Shareholder to deliver the Securities on behalf of
such Selling Shareholder in accordance with the terms of the U.S.
Purchase Agreement and the International Purchase Agreement and the
Custody Agreement and Power of Attorney.
B-1
<PAGE>
5. The execution, delivery and performance of the U.S. Purchase
Agreement, the International Purchase Agreement and the Custody
Agreement and Power of Attorney and the sale and delivery of the
Securities and the consummation of the transactions contemplated in
the U.S. Purchase Agreement and the International Purchase
Agreement and in the Registration Statement and compliance by each
Selling Shareholder with its obligations under the U.S. Purchase
Agreement and the International Purchase Agreement have been duly
authorized by all necessary action on the part of such Selling
Shareholder and, to the best of our knowledge, (i) do not and will
not, whether with or without the giving of notice or passage of
time or both, result in the creation or imposition of any tax,
lien, charge or encumbrance upon the Securities to be sold by such
Selling Shareholder nor (ii) will such action result in any
violation of the provisions of the charter or by-laws of any
Selling Shareholder, if applicable, or any law, administrative
regulation, judgment or order of any governmental agency or body or
any administrative or court decree having jurisdiction over such
Selling Shareholder or any of its properties.
6. Each Selling Shareholder is the sole registered owner of the
Securities to be sold by such Selling Shareholder pursuant to the
U.S. Purchase Agreement and the International Purchase Agreement
and has full right, power and authority to sell, transfer and
deliver such Securities pursuant to the U.S. Purchase Agreement and
the International Purchase Agreement. Upon delivery of such
Securities, such Selling Shareholder will transfer to the
Underwriters who have purchased such Securities pursuant to the
U.S. Purchase Agreement and the International Purchase Agreement
(without notice of any adverse claim of such Selling Shareholder
and who are otherwise bona fide purchasers for purposes of the
Uniform Commercial Code) good and valid title to such Securities,
free and clear of any pledge, lien, security interest, charge,
claim, equity or encumbrance of any kind.
B-2
<PAGE>
Exhibit C
FORM OF LOCK-UP FROM DIRECTORS, OFFICERS OR OTHER
SHAREHOLDERS PURSUANT TO SECTION 5(k)
May , 1998
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated,
GOLDMAN, SACHS & CO.
BEAR, STEARNS & CO. INC.
NATIONSBANC MONTGOMERY SECURITIES LLC
as U.S. Representatives of the several
U.S. Underwriters to be named in the
within-mentioned U.S. Purchase Agreement
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Re: Proposed Public Offering by Snyder Communications, Inc.
-------------------------------------------------------
Dear Sirs:
The undersigned, a stockholder and an officer and/or director/*/ of Snyder
Communications, Inc., a Delaware corporation (the "Company"), understands that
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch"), Goldman, Sachs & Co., Bear, Stearns & Co. Inc. and
NationsBanc Montgomery Securities LLC propose to enter into a U.S. Purchase
Agreement (the "U.S. Purchase Agreement") with the Company and the other parties
named therein providing for the public offering of shares (the "Securities") of
the Company's common stock, par value $.001 per share (the "Common Stock"). In
recognition of the benefit that such an offering
______________________
* Delete or revise language as appropriate
C-1
<PAGE>
will confer upon the undersigned as a stockholder and an officer and/or
director/*/ of the Company, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the undersigned agrees
with each underwriter to be named in the U.S. Purchase Agreement that, during a
period of 90 days from the date of the U.S. Purchase Agreement, the undersigned
will not, without the prior written consent of Merrill Lynch, directly or
indirectly, (i) offer, pledge, sell, contract to sell, sell any option or
-
contract to purchase, purchase any option or contract to sell, grant any option,
right or warrant for the sale of, or otherwise dispose of or transfer any shares
of Common Stock or any securities convertible into or exchangeable or
exercisable for Common Stock, whether now owned or hereafter acquired by the
undersigned or with respect to which the undersigned has or hereafter acquires
the power of disposition, or file any registration statement under the
Securities Act of 1933, as amended, with respect to any of the foregoing or (ii)
--
enter into any swap or any other agreement or any transaction that transfers, in
whole or in part, directly or indirectly, the economic consequence of owner-
ship of the Common Stock, whether any such swap or transaction is to be settled
by delivery of Common Stock or other securities, in cash or otherwise.
[Notwithstanding the foregoing, the undersigned may, at any time after 30
days from the date of the Closing Time (as defined in the U.S. Purchase
Agreement), pledge as security for borrowed money up to [50%]/**/ [all]/***/ of
the shares of Common Stock then owned by the undersigned to any commercial
banking institution that is a member of the Federal Reserve System or any
institutional lender that makes loans secured by margin securities in the
ordinary course of business having combined capital and surplus in excess of
$500,000,000 (a "Pledgee") as long as such Pledgee shall have agreed in writing
to be bound by the obligations and restrictions applicable to the Common Stock
under Section 1(c) of the U.S. Purchase Agreement and the U.S. Representatives
shall have received an
_______________________
* Delete or revise language as appropriate.
[** Include in the case of lock-up agreement of Daniel M. Synder and
Michele D. Snyder.
[*** Include in the case of lock-up agreement of USN College Marketing, L.P.
C-2
<PAGE>
agreement substantially in the form of Exhibit D to the U.S. Purchase Agreement
signed by such Pledgee.]*
Very truly yours,
Signature:_______________
Print Name:______________
_____________________
[* Include in the case of lock-up agreement of Daniel M. Snyder, Michele D.
Snyder and USN College Marketing, L.P.]
C-3
<PAGE>
Exhibit D
FORM OF LOCK-UP FROM PLEDGEE PURSUANT TO SECTION 1(c)
___________, 1998
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated,
GOLDMAN, SACHS & CO.
BEAR, STEARNS & CO. INC.
NATIONSBANC MONTGOMERY SECURITIES LLC
as U.S. Representatives of the several
U.S. Underwriters named in the
within-mentioned U.S. Purchase Agreement
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Re: Public Offering by Snyder Communications, Inc.
----------------------------------------------
Dear Sirs:
The undersigned, a pledgee of shares (the "Pledged Shares") of Common
Stock, par value $.001 per share, of Snyder Communications, Inc., a Delaware
corporation (the "Company"), understands that Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), Goldman, Sachs &
Co., Bear, Stearns & Co. Inc. and NationsBanc Montgomery Securities LLC and have
entered into a U.S. Purchase Agreement, dated May __, 1998 (the "U.S. Purchase
Agreement"), with the Company and the other parties named therein providing for
the public offering of shares of the Company's Common Stock. For good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the undersigned agrees with each underwriter named in the U.S.
Purchase Agreement that, during a period of 90 days from the date of the U.S.
Purchase Agreement, the undersigned will not, without the prior written consent
of Merrill Lynch, directly or indirectly, (i) offer, pledge, sell, contract to
-
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant
D-1
<PAGE>
any option, right or warrant for the sale of, or otherwise dispose of or
transfer any Pledged Shares or any securities convertible into or exchangeable
or exercisable for any Pledged Shares, whether now owned or hereafter acquired
by the undersigned or with respect to which the undersigned has or hereafter
acquires the power of disposition, or file any registration statement under the
Securities Act of 1933, as amended, with respect to any of the foregoing or (ii)
--
enter into any swap or any other agreement or any transaction that transfers, in
whole or in part, directly or indirectly, the economic consequence of ownership
of any Pledged Shares, whether any such swap or transaction is to be settled by
delivery of any Pledged Shares or other securities, in cash or otherwise.
Very truly yours,
Name of Pledgee
By:_____________________
Name:
Title:
D-2
<PAGE>
EXHIBIT 1.2
Draft -- May 15, 1998
________________________________________________________________________
________________________________________________________________________
SNYDER COMMUNICATIONS, INC.
(a Delaware corporation)
[__________] Shares of Common Stock
INTERNATIONAL PURCHASE AGREEMENT
--------------------------------
Dated: May , 1998
________________________________________________________________________
________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
INTERNATIONAL PURCHASE AGREEMENT......................................................1
SECTION 1. Representations and Warranties...............................4
(a) Representations and Warranties by the Company................4
(i) Compliance with Registration Requirements.............4
(ii) Incorporated Documents................................6
(iii) Independent Accountants...............................6
(iv) Financial Statements..................................6
(v) No Material Adverse Change in Business................7
(vi) Good Standing of the Company..........................7
(vii) Good Standing of Subsidiaries.........................7
(viii) Capitalization........................................8
(ix) Authorization.........................................8
(x) Authorization and Description of Securities...........9
(xi) Absence of Defaults and Conflicts.....................9
(xii) Absence of Labor Dispute.............................10
(xiii) Absence of Proceedings...............................10
(xiv) Accuracy of Exhibits.................................10
(xv) Possession of Intellectual Property..................10
(xvi) Absence of Further Requirements......................11
(xvii) Possession of Licenses and Permits...................11
(xviii)Title to Property....................................12
(xix) Investment Company Act...............................12
(xx) Environmental Laws...................................12
(xxi) Registration Rights..................................13
(xxii) Compliance with Laws.................................13
(xxiii)Taxes................................................13
(xxiv) Insurance............................................13
(b) Representations, Warranties and Covenants by the Selling
Shareholders................................................14
(i) Authorization of Agreements..........................14
(ii) Good and Valid Title.................................14
(iii) Due Execution of Custody Agreement and Power of
Attorney.............................................15
(iv) Absence of Manipulation..............................15
(v) Absence of Further Requirements......................15
(vi) Certificates Suitable for Transfer; Instruments
of Transfer..........................................15
(vii) No Association with NASD.............................16
(c) Additional Representations and Warranties by the
Executive Selling Shareholders..............................16
(d) Officer's Certificates......................................17
(e) Agreements of the International Managers....................17
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
SECTION 2. Sale and Delivery to International Managers; Closing........18
(a) Initial Securities..........................................18
(b) Option Securities...........................................18
(c) Payment.....................................................19
(d) Denominations; Registration.................................20
SECTION 3. Covenants of the Company....................................20
(a) Compliance with Securities Regulations and Commission
Requests....................................................20
(b) Filing of Amendments........................................20
(c) Delivery of Registration Statement..........................21
(d) Delivery of Prospectuses....................................21
(e) Continued Compliance with Securities Laws...................21
(f) Blue Sky Qualifications.....................................22
(g) Rule 158....................................................22
(h) Use of Proceeds.............................................23
(i) Listing.....................................................23
(j) Restriction on Sale of Securities...........................23
(k) Reporting Requirements......................................23
SECTION 4. Payment of Expenses.........................................23
(a) Expenses....................................................23
(b) Expenses of the Selling Shareholders........................24
(c) Termination of Agreement....................................24
(d) Allocation of Expenses......................................25
SECTION 5. Conditions of International Managers' Obligations...........25
(a) Effectiveness of Registration Statement.....................25
(b) Opinion of Counsel for Company..............................25
(c) Opinions of Counsel for the Selling Shareholders............26
(d) Opinion of Counsel for International Managers...............26
(e) Officers' Certificate.......................................26
(f) Certificate of Selling Shareholders.........................27
(g) Accountant's Comfort Letter.................................27
(h) Bring-down Comfort Letter...................................27
(i) Approval of Listing.........................................27
(j) No Objection................................................28
(k) Lock-up Agreements..........................................28
(l) Form W-9 and Form W-8.......................................28
(m) Purchase of Initial U.S. Securities.........................28
(n) Conditions to Purchase of International Option Securities...28
(o) Additional Documents........................................29
(p) Termination of Agreement....................................29
SECTION 6. Indemnification.............................................30
(a) Indemnification of International Managers...................30
(b) Indemnification of International Managers by the
Non-Executive Selling Shareholders..........................33
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
(c) Indemnification of Company, Directors and Officers and
Selling Shareholders........................................33
(d) Actions against Parties; Notification.......................34
(e) Settlement without Consent if Failure to Reimburse..........34
(f) Other Agreements with Respect to Indemnification............35
SECTION 7. Contribution................................................35
SECTION 8. Representations, Warranties and Agreements to Survive
Delivery....................................................37
SECTION 9. Termination of Agreement....................................37
(a) Termination; General........................................37
(b) Liabilities.................................................38
SECTION 10. Default by One or More of the International Managers..........38
SECTION 11. Default by One or More of the Selling Shareholders or
the Company...................................................39
SECTION 12. Notices.......................................................40
SECTION 13. Parties.......................................................40
SECTION 14. GOVERNING LAW AND TIME........................................40
SECTION 15. Effect of Headings............................................40
SCHEDULES
Schedule A - List of International Managers....................Sch A-1
Schedule B - List of Selling Shareholders......................Sch B-1
Schedule C - Pricing Information...............................Sch C-1
Schedule D - List of Persons Subject to Lock-up................Sch D-1
EXHIBITS
Exhibit A - Form of Opinion of Company's Counsel...................A-1
Exhibit B - Form of Opinion of Selling Shareholders' Counsel.......B-1
Exhibit C - Form of Lock-up Letter.................................C-1
Exhibit D - Form of Pledgee Lock-up Letter.........................D-1
</TABLE>
iii
<PAGE>
SNYDER COMMUNICATIONS, INC.
(a Delaware corporation)
[___________] Shares of Common Stock
(Par Value $.001 Per Share)
INTERNATIONAL PURCHASE AGREEMENT
--------------------------------
May __, 1998
MERRILL LYNCH INTERNATIONAL
Goldman, Sachs International
Bear, Stearns International Limited
NationsBanc Montgomery Securities LLC
as Lead Managers of the several International Managers
c/o Merrill Lynch International
Ropemaker Place
25 Ropemaker Street
London EC2Y 9LY
England
Ladies and Gentlemen:
Snyder Communications, Inc., a Delaware corporation (the "Company") and the
persons listed in Schedule B hereto (collectively, the "Selling Shareholders")
confirm their respective agreements with Merrill Lynch International ("Merrill
Lynch") and each of the other international underwriters named in Schedule A
hereto (collectively, the "International Managers", which term shall also
include any underwriter substituted as hereinafter provided in Section 10
hereof), for whom Merrill Lynch, Goldman, Sachs International, Bear, Stearns
International Limited and NationsBanc Montgomery Securities LLC are acting as
representatives (in such capacity, the "Lead Managers"), with respect to (i) the
-
sale by the Company and the Selling Shareholders, acting severally and not
jointly, and the purchase by the International Managers, acting severally and
not jointly, of the respective numbers of shares of Common Stock, par value
$.001 per share,
<PAGE>
of the Company ("Common Stock") set forth in Schedules A and B hereto and (ii)
--
the grant by Daniel M. Snyder and Michele D. Snyder (collectively, the
"Executive Selling Shareholders") to the International Managers, acting
severally and not jointly, of the option described in Section 2(b) hereof to
purchase all or any part of [________] additional shares of Common Stock to
cover over-allotments, if any. The aforesaid [_________] shares of Common Stock
(the "Initial International Securities") to be purchased by the International
Managers and all or any part of the [_______] shares of Common Stock subject to
the option described in Section 2(b) hereof (the "International Option
Securities") are hereinafter called, collectively, the "International
Securities".
It is understood that the Company and the Selling Shareholders are
concurrently entering into an agreement dated the date hereof (the "U.S.
Purchase Agreement") providing for the offering by the Company and the Selling
Shareholders, acting severally and not jointly, of an aggregate of [_________]
shares of Common Stock (the "Initial U.S. Securities") through arrangements with
certain underwriters in the United States and Canada (the "U.S. Underwriters")
for which Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Goldman, Sachs & Co., Bear, Stearns & Co. Inc. and NationsBanc
Montgomery Securities LLC are acting as representatives (the "U.S.
Representatives") and the grant by the Executive Selling Shareholders to the
U.S. Underwriters, acting severally and not jointly, of an option to purchase
all or any part of the U.S. Underwriters' pro rata portion of up to [_______]
additional shares of Common Stock solely to cover over-allotments, if any (the
"U.S. Option Securities" and, together with the International Option Securities,
the "Option Securities"). The Initial U.S. Securities and the U.S. Option
Securities are hereinafter called the "U.S. Securities". It is understood that
the Company and the Selling Shareholders are not obligated to sell, and the
International Managers are not obligated to purchase, any Initial International
Securities unless all of the Initial U.S. Securities are contemporaneously
purchased by the U.S. Underwriters.
The International Managers and the U.S. Underwriters are hereinafter
collectively called the "Underwriters", the Initial International Securities and
the Initial U.S. Securities are hereinafter collectively called the "Initial
Securities", and the International Securities and the U.S. Securities are
hereinafter collectively called the "Securities". The Selling Shareholders
other than the Executive Selling Shareholders are hereinafter collectively
called the "Non-Executive Selling Shareholders".
The Underwriters will concurrently enter into an Intersyndicate Agreement
of even date herewith (the "Intersyndicate Agreement") providing for the
coordination of certain transactions among the Underwriters under the direction
of Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated (in
such capacity, the "Global Coordinator").
2
<PAGE>
The Company and the Selling Shareholders understand that the International
Managers propose to make an offering of the International Securities as soon as
the Lead Managers deem advisable after this Agreement has been executed and
delivered.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (No. 333-50929) covering the
registration of the Securities under the Securities Act of 1933, as amended (the
"1933 Act"), including the related preliminary prospectus or prospectuses.
Promptly after execution and delivery of this Agreement, the Company will either
(i) prepare and file a prospectus in accordance with the provisions of Rule 430A
-
("Rule 430A") of the rules and regulations of the Commission under the 1933 Act
(the "1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule 424(b)") of
the 1933 Act Regulations or (ii) if the Company has elected to rely upon Rule
--
434 ("Rule 434") of the 1933 Act Regulations, prepare and file a term sheet (a
"Term Sheet") in accordance with the provisions of Rule 434 and Rule 424(b).
Two forms of prospectus are to be used in connection with the offering and sale
of the Securities: one relating to the International Securities (the "Form of
International Prospectus") and one relating to the U.S. Securities (the "Form of
U.S. Prospectus"). The Form of International Prospectus is identical to the
Form of U.S. Prospectus, except for the front cover and back cover pages and the
information under the caption "Underwriting". The information included in any
such prospectus or in any such Term Sheet, as the case may be, that was omitted
from such registration statement at the time it became effective but that is
deemed to be part of such registration statement at the time it became effective
(a) pursuant to paragraph (b) of Rule 430A is referred to as "Rule 430A
-
Information" or (b) pursuant to paragraph (d) of Rule 434 is referred to as
-
"Rule 434 Information." Each Form of International Prospectus and Form of U.S.
Prospectus used before such registration statement became effective, and any
prospectus that omitted, as applicable, the Rule 430A Information or the Rule
434 Information, that was used after such effectiveness and prior to the
execution and delivery of this Agreement, is herein called a "preliminary
prospectus." Such registration statement, including the exhibits thereto and
schedules thereto and the documents incorporated by reference therein pursuant
to Item 12 of Form S-3 under the 1933 Act, at the time it became effective and
including the Rule 430A Information and the Rule 434 Information, as applicable,
is herein called the "Registration Statement." Any registration statement filed
pursuant to Rule 462(b) of the 1933 Act Regulations is herein referred to as the
"Rule 462(b) Registration Statement," and after such filing the term
"Registration Statement" shall include the Rule 462(b) Registration Statement.
The final Form of International Prospectus and the final Form of U.S. Prospectus
including in each case the documents incorporated by reference therein pursuant
to Item 12 of Form S-3 under the 1933 Act, in the forms first furnished to the
Underwriters for use in connection with the offering of the Securities are
herein called the "International Prospectus" and the "U.S. Prospectus,"
respectively, and collectively, the "Prospectuses." If Rule 434 is relied on,
the terms "International
3
<PAGE>
Prospectus" and "U.S. Prospectus" shall refer to the preliminary International
Prospectus dated May 1, 1998 and preliminary U.S. Prospectus dated May 1, 1998,
respectively, each together with the applicable Term Sheet, and all references
in this Agreement to the date of such Prospectuses shall mean the date of the
applicable Term Sheet. For purposes of this Agreement, all references to the
Registration Statement, any preliminary prospectus, the International
Prospectus, the U.S. Prospectus or any Term Sheet or any amendment or supplement
to any of the foregoing shall be deemed to include the copy filed with the
Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval
system ("EDGAR").
All references in this Agreement to financial statements and schedules
and other information which is "contained," "included" or "stated" in the
Registration Statement, any preliminary prospectus or the Prospectuses (or other
references of like import) shall be deemed to mean and include all such
financial statements and schedules and other information which is incorporated
by reference in the Registration Statement, any preliminary prospectus or the
Prospectuses, as the case may be; and all references in this Agreement to
amendments or supplements to the Registration Statement, any preliminary
prospectus or the Prospectuses shall be deemed to mean and include the filing of
any document under the Securities Exchange Act of 1934 (the "1934 Act") which is
incorporated by reference in the Registration Statement, such preliminary
prospectus or the Prospectuses, as the case may be.
Capitalized terms used herein without definition have the respective
meanings specified therefor in the Prospectuses.
SECTION 1. Representations and Warranties.
------------------------------
(a) Representations and Warranties by the Company. The Company represents
and warrants to each International Manager as of the date hereof, as of the
Closing Time referred to in Section 2(c) hereof, and as of each Date of Delivery
(if any) referred to in Section 2(b), hereof and agrees with each International
Manager, as follows:
(i) Compliance with Registration Requirements. The Company meets the
-----------------------------------------
requirements for use of Form S-3 under the 1933 Act. Each of the
Registration Statement and any Rule 462(b) Registration Statement has
become effective under the 1933 Act and no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b) Registration
Statement has been issued under the 1933 Act and no proceedings for that
purpose have been instituted or are pending or, to the knowledge of the
Company, are contemplated by the Commission, and any request on the part of
the Commission for additional information has been complied with.
4
<PAGE>
At the respective times the Registration Statement, any Rule 462(b)
Registration Statement and any post-effective amendments thereto became
effective and at the Closing Time (and, if any International Option
Securities are purchased, at the Date of Delivery), the Registration
Statement, the Rule 462(b) Registration Statement and any amendments and
supplements thereto complied and will comply in all material respects with
the requirements of the 1933 Act and the 1933 Act Regulations and did not
and will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading. Neither of the Prospectuses nor any
amendments or supplements thereto, at the time the Prospectuses or any
amendments or supplements thereto were issued and at the Closing Time (and,
if any International Option Securities are purchased, at the Date of
Delivery), included or will include an untrue statement of a material fact
or omitted or will omit to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading. If Rule 434 is used, the Company will comply
with the requirements of Rule 434 and the Prospectuses shall not be
"materially different", as such term is used in Rule 434, from the
prospectuses included in the Registration Statement at the time it became
effective. The representations and warranties in this subsection shall not
apply to statements in or omissions from the Registration Statement or the
International Prospectus made in reliance upon and in conformity with
information furnished to the Company in writing by any International
Manager through the Lead Managers expressly for use in the Registration
Statement or the International Prospectus.
Each preliminary prospectus and the prospectuses filed as part of the
Registration Statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the 1933 Act, complied when so
filed in all material respects with the 1933 Act Regulations and each
preliminary prospectus and the Prospectuses delivered to the Underwriters
for use in connection with this offering was identical to the
electronically transmitted copies thereof filed with the Commission
pursuant to EDGAR, except to the extent permitted by Regulation S-T.
(ii) Incorporated Documents. The documents incorporated or deemed to
----------------------
be incorporated by reference in the Registration Statement and the
Prospectuses, when they became effective or at the time they were or
hereafter are filed with the Commission, complied and will comply in all
material respects with the requirements of the 1934 Act and the rules and
regulations of the Commission thereunder (the "1934 Act Regulations"), and,
when read together with the other information in the Prospectuses, at the
time the Registration Statement became
5
<PAGE>
effective, at the time the Prospectuses were issued and at the Closing Time
(and if any Option Securities are purchased, at the Date of Delivery), did
not and will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading.
(iii) Independent Accountants. The accountants who certified the
-----------------------
financial statements and supporting schedules included in the Registration
Statement are independent public accountants as required by the 1933 Act
and the 1933 Act Regulations.
(iv) Financial Statements. The financial statements included in the
--------------------
Registration Statement and the Prospectuses, together with the related
schedules and notes, present fairly the financial position of the Company
and its consolidated subsidiaries at the dates indicated and the statement
of operations, stockholders' equity and cash flows of the Company and its
consolidated subsidiaries for the periods specified; said financial
statements have been prepared in conformity with generally accepted
accounting principles ("GAAP") applied on a consistent basis throughout the
periods involved. The supporting schedules included in the Registration
Statement present fairly in accordance with GAAP the information required
to be stated therein. The summary financial information included in the
Prospectuses present fairly the information shown therein and have been
compiled on a basis consistent with that of the audited financial
statements included in the Registration Statement. The financial
statements have been prepared in accordance with the Commission's rules and
guidelines with respect to consolidated financial statements and have been
properly compiled on the bases described therein. The pro forma financial
data included in the Registration Statement and the Prospectuses present
fairly the information shown therein, have been prepared in accordance with
the Commission's rules and guidelines with respect to pro forma financial
statements and have been properly compiled on the bases described therein,
and the assumptions used in the preparation thereof are reasonable and the
adjustments used therein are appropriate to give effect to the transactions
and circumstances referred to therein.
(v) No Material Adverse Change in Business. Since March 31, 1998
--------------------------------------
or such later dates as of which information is given in the Registration
Statement and the Prospectuses, except as otherwise stated therein, (A)
-
there has been no material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of
the Company and its subsidiaries considered as one enterprise, whether or
not arising in the ordinary course of business (a "Material Adverse
Effect"), (B) there have been no transactions
-
6
<PAGE>
entered into by the Company or any of its subsidiaries, other than those in
the ordinary course of business, which are material with respect to the
Company and its subsidiaries considered as one enterprise, and (C) there
-
has been no dividend or distribution of any kind declared, paid or made by
the Company or any subsidiary on any class of its capital stock or any
partnership interest, as the case may be.
(vi) Good Standing of the Company. The Company has been duly
----------------------------
organized and is validly existing as a corporation in good standing under
the laws of the State of Delaware and has corporate power and authority to
own, lease and operate its properties and to conduct its business as
described in the Prospectuses and to enter into and perform its obligations
under this Agreement; and the Company is duly qualified as a foreign
corporation to transact business and is in good standing in each other
jurisdiction in which such qualification is required, whether by reason of
the ownership or leasing of property or the conduct of business, except
where the failure so to qualify or to be in good standing would not result
in a Material Adverse Effect.
(vii) Good Standing of Subsidiaries. Each subsidiary of the Company
-----------------------------
listed on Schedule E hereto (each, a "Subsidiary" and, collectively, the
"Subsidiaries") has been duly organized and is validly existing as a
corporation or partnership, as the case may be, in good standing under the
laws of the jurisdiction of its incorporation or organization, as the case
may be, has corporate or partnership, as the case may be, power and
authority to own, lease and operate its properties and to conduct its
business as described in the Prospectuses and is duly qualified as a
foreign corporation or partnership, as the case may be, to transact
business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to qualify
or to be in good standing would not result in a Material Adverse Effect;
all of the issued and outstanding capital stock of each corporate
Subsidiary has been duly authorized and validly issued, is fully paid and
non-assessable and is owned by the Company directly or indirectly through
subsidiaries, free and clear of any security interest, mortgage, pledge,
lien, encumbrance, claim or equity; none of the outstanding shares of
capital stock or other equity interests, as the case may be, of any
Subsidiary was issued in violation of the preemptive or similar rights of
any securityholder of such Subsidiary. The only subsidiaries of the Company
are (a) the subsidiaries listed on Schedule E hereto and (b) certain other
- -
subsidiaries which, considered in the aggregate as a single subsidiary, do
not constitute a "significant subsidiary" as defined in Rule 1-02 of
Regulation S-X.
7
<PAGE>
(viii) Capitalization. The authorized, issued and outstanding capital
--------------
stock of the Company is as set forth in the Prospectuses in the column
entitled "Actual" under the caption "Capitalization" (except for subsequent
issuances, if any, pursuant to this Agreement, pursuant to reservations,
agreements or employee benefit plans referred to in the Prospectuses or
pursuant to the exercise of convertible securities or options referred to
in the Prospectuses). The shares of issued and outstanding capital stock
of the Company, including the Securities to be purchased by the
Underwriters from the Selling Shareholders, have been (or, in the case of
the Securities underlying options to be sold by certain former shareholders
of Blau Marketing Technologies, Inc. (the "Blau Option Securities"), prior
to the Closing Time will be) duly authorized and validly issued and are
(or, in the case of the Blau Option Securities, prior to the Closing Time
will be) fully paid and non-assessable; none of the outstanding shares of
capital stock of the Company, including the Securities to be purchased by
the Underwriters from the Selling Shareholders, was (or, in the case of the
Blau Option Securities, prior to the Closing Time will be) issued in
violation of the preemptive or other similar rights of any securityholder
of the Company.
(ix) Authorization. This Agreement and the U.S. Purchase Agreement
-------------
have been duly authorized, executed and delivered by the Company. The
performance of this Agreement and the U.S. Purchase Agreement and the
consummation of the transactions contemplated in this Agreement, the U.S.
Purchase Agreement and the Registration Statement (including the issuance
and sale of the Securities and the use of the proceeds from the sale of the
Securities as described in the Prospectuses under the caption "Use Of
Proceeds") and compliance by the Company with its obligations under this
Agreement and the U.S. Purchase Agreement have been duly authorized by the
Company.
(x) Authorization and Description of Securities. The Securities to
-------------------------------------------
be purchased by the International Managers and the U.S. Underwriters from
the Company have been duly authorized for issuance and sale to the
International Managers pursuant to this Agreement and the U.S. Underwriters
pursuant to the U.S. Purchase Agreement, respectively, and, when issued and
delivered by the Company pursuant to this Agreement and the U.S. Purchase
Agreement, respectively, against payment of the consideration set forth
herein and the U.S. Purchase Agreement, respectively, will be validly
issued, fully paid and non-assessable; the Common Stock conforms to all
statements relating thereto contained in the Prospectuses and such
description conforms to the rights set forth in the instruments defining
the same; no holder of the Securities will be subject to personal liability
by reason of being such a holder; and the issuance of the
8
<PAGE>
Securities is not subject to the preemptive or other similar rights of any
securityholder of the Company.
(xi) Absence of Defaults and Conflicts. Neither the Company nor any of
---------------------------------
the Subsidiaries is in violation of its charter or by-laws or partnership
agreement, as the case may be, or in default in the performance or
observance of any obligation, agreement, covenant or condition contained in
any contract, indenture, mortgage, deed of trust, loan or credit agreement,
note, lease or other agreement or instrument to which the Company or any of
the Subsidiaries is a party or by which any of them may be bound, or to
which any of the property or assets of the Company or any of the
Subsidiaries is subject (collectively, "Agreements and Instruments"),
except for such defaults that would not result in a Material Adverse
Effect; and the execution, delivery and performance of this Agreement and
the U.S. Purchase Agreement and the consummation of the transactions
contemplated in this Agreement, the U.S. Purchase Agreement and in the
Registration Statement (including the issuance and sale of the Securities
and the use of the proceeds from the sale of the Securities as described in
the Prospectuses under the caption "Use of Proceeds") and compliance by the
Company with its obligations under this Agreement and the U.S. Purchase
Agreement have been duly authorized by all necessary corporate action and
do not and will not, whether with or without the giving of notice or
passage of time or both, conflict with or constitute a breach of, or
default or Repayment Event (as defined below) under, or result in the
creation or imposition of any lien, charge or encumbrance upon any property
or assets of the Company or any Subsidiary pursuant to, the Agreements and
Instruments (except for such conflicts, breaches or defaults or liens,
charges or encumbrances that would not result in a Material Adverse
Effect), nor will such action result in any violation of the provisions of
the charter or by-laws or other organizational instrument of the Company or
any Subsidiary or any applicable law, statute, rule, regulation, judgment,
order, writ or decree of any government, government instrumentality or
court, domestic or foreign, having jurisdiction over the Company or any
Subsidiary or any of their assets, properties or operations. As used
herein, a "Repayment Event" means any event or condition which gives the
holder of any note, debenture or other evidence of indebtedness (or any
person acting on such holder's behalf) the right to require the repurchase,
redemption or repayment of all or a portion of such indebtedness by the
Company or any Subsidiary.
(xii) Absence of Labor Dispute. No labor dispute with the employees of
------------------------
the Company or any Subsidiary exists or, to the knowledge of the Company,
is imminent, and the Company is not aware of any existing or imminent labor
disturbance by the employees of any of its or any Subsidiary's principal
suppliers,
9
<PAGE>
manufacturers, customers or contractors, which might reasonably be expected
to result in a Material Adverse Effect.
(xiii) Absence of Proceedings. There is no action, suit, proceeding,
----------------------
inquiry or investigation before or brought by any court or governmental
agency or body, domestic or foreign, now pending, or, to the knowledge of
the Company, threatened, against or affecting the Company or any
subsidiary, which is required to be disclosed in the Registration Statement
(other than as disclosed therein), or which might reasonably be expected to
result in a Material Adverse Effect, or which might reasonably be expected
to materially and adversely affect the properties or assets thereof or the
consummation of the transactions contemplated in this Agreement and the
U.S. Purchase Agreement or the performance by the Company of its
obligations hereunder or thereunder; the aggregate of all pending legal or
governmental proceedings to which the Company or any subsidiary is a party
or of which any of their respective properties or assets is the subject
which are not described in the Registration Statement, including ordinary
routine litigation incidental to the business, could not reasonably be
expected to result in a Material Adverse Effect.
(xiv) Accuracy of Exhibits. There are no contracts or documents which
--------------------
are required to be described in the Registration Statement or the
Prospectuses or the documents incorporated by reference therein or to be
filed as exhibits thereto which have not been so described and filed as
required.
(xv) Possession of Intellectual Property. The Company and the
-----------------------------------
Subsidiaries own or possess, or can acquire on reasonable terms, adequate
patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
trademarks, service marks, trade names or other intellectual property
(collectively, "Intellectual Property") necessary to carry on the business
now operated by them, and the Company has not received any notice or is not
otherwise aware of any infringement of or conflict with asserted rights of
others with respect to any Intellectual Property or of any facts or
circumstances which would render any Intellectual Property invalid or
inadequate to protect the interest of the Company or any of the
Subsidiaries therein, and which infringement or conflict (if the subject of
any unfavorable decision, ruling or finding) or invalidity or inadequacy,
singly or in the aggregate, would result in a Material Adverse Effect.
(xvi) Absence of Further Requirements. No filing with, or
-------------------------------
authorization, approval, consent, license, order, registration,
qualification or decree of, any court
10
<PAGE>
or governmental authority or agency is necessary or required by or on
behalf of the Company for the performance by the Company of its obligations
hereunder, in connection with the offering, issuance or sale of the
Securities under this Agreement and the U.S. Purchase Agreement or the
consummation of the transactions contemplated by this Agreement and the
U.S. Purchase Agreement, except such as have been already obtained or as
may be required under the 1933 Act or the 1933 Act Regulations and foreign
or state securities or blue sky laws.
(xvii) Possession of Licenses and Permits. The Company and the
----------------------------------
Subsidiaries possess such permits, licenses, approvals, consents and other
authorizations (collectively, "Governmental Licenses") issued by the
appropriate federal, state, local or foreign regulatory agencies or bodies
necessary to conduct the business now operated by them; the Company and the
Subsidiaries are in compliance with the terms and conditions of all such
Governmental Licenses, except where the failure so to comply would not,
singly or in the aggregate, have a Material Adverse Effect; all of the
Governmental Licenses are valid and in full force and effect, except when
the invalidity of such Governmental Licenses or the failure of such
Governmental Licenses to be in full force and effect would not have a
Material Adverse Effect; and neither the Company nor any of the
Subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such Governmental Licenses which, singly
or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, would result in a Material Adverse Effect.
(xviii) Title to Property. The Company and the Subsidiaries have good
-----------------
and marketable title to all real property owned by the Company and the
Subsidiaries and good title to all other properties owned by them, in each
case, free and clear of all mortgages, pledges, liens, security interests,
claims, restrictions or encumbrances of any kind except such as (a) are
-
described in the Prospectuses, including those disclosed in the financial
statements and the related notes included therein, or (b) do not, singly or
-
in the aggregate, materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by the
Company or any of the Subsidiaries; and all of the leases and subleases
material to the business of the Company and its subsidiaries, considered as
one enterprise, and under which the Company or any of its subsidiaries
holds properties described in the Prospectuses, are in full force and
effect, and the Company does not have any notice of any material claim of
any sort that has been asserted by anyone adverse to the rights of the
Company or any Subsidiary under any of the leases or subleases mentioned
above, or affecting or questioning the rights of the Company or such
Subsidiary to the continued possession of the leased or subleased premises
under any such lease or sublease.
11
<PAGE>
(xix) Investment Company Act. The Company is not, and upon the
----------------------
issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom as described in the Prospectuses
will not be, an "investment company" or an entity "controlled" by an
"investment company" as such terms are defined in the Investment Company
Act of 1940, as amended (the "1940 Act").
(xx) Environmental Laws. Except as described in the Registration
------------------
Statement and except as would not, singly or in the aggregate, result in a
Material Adverse Effect, (A) neither the Company nor any of the
-
Subsidiaries is in violation of any federal, state, local or foreign
statute, law, rule, regulation, ordinance, code, policy or rule of common
law or any judicial or administrative interpretation thereof, including any
judicial or administrative order, consent, decree or judgment, relating to
pollution or protection of human health, the environment (including,
without limitation, ambient air, surface water, groundwater, land surface
or subsurface strata) or wildlife, including, without limitation, laws and
regulations relating to the release or threatened release of chemicals,
pollutants, contaminants, wastes, toxic substances, hazardous substances,
petroleum or petroleum products (collectively, "Hazardous Materials") or to
the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials (collectively,
"Environmental Laws"), (B) the Company and the Subsidiaries have all
-
permits, authorizations and approvals required under any applicable
Environmental Laws and are each in compliance with their requirements, (C)
-
there are no pending or threatened administrative, regulatory or judicial
actions, suits, demands, demand letters, claims, liens, notices of
noncompliance or violation, investigation or proceedings relating to any
Environmental Law against the Company or any of the Subsidiaries and (D)
-
there are no events or circumstances that might reasonably be expected to
form the basis of an order for clean-up or remediation, or an action, suit
or proceeding by any private party or governmental body or agency, against
or affecting the Company or any of the Subsidiaries relating to Hazardous
Materials or any Environmental Laws.
(xxi) Registration Rights. Except as described in the Registration
-------------------
Statement and the Prospectuses, there are no persons with registration
rights or other similar rights to have any securities registered pursuant
to the Registration Statement or otherwise registered by the Company under
the 1933 Act.
(xxii) Compliance with Laws. Each of the Company and the Subsidiaries
--------------------
is in compliance with all applicable laws, statutes, ordinances, rules or
regulations
12
<PAGE>
of any applicable jurisdiction, the enforcement of which, singly or in the
aggregate, could reasonably be expected to result in a Material Adverse
Effect.
(xxiii) Taxes. Each of the Company and the Subsidiaries has filed all
-----
material federal, state, local and foreign income and franchise tax returns
required to be filed by it and has paid all taxes shown as due thereon,
other than taxes which are being contested in good faith or state
withholding taxes and for both of which adequate reserves have been
established in accordance with GAAP; and the Company does not have
knowledge of any tax deficiency which has been or might be asserted or
threatened against the Company or any Subsidiary other than those for which
adequate reserves have been established in accordance with GAAP. Adequate
charges, accruals and reserves have been provided for in the financial
statements referred to in Section 1(a)(iv) hereof in respect of all
material federal, state, local and foreign taxes for all periods as to
which the tax liability of the Company or any Subsidiary has not been
finally determined or remains open to examination by applicable taxing
authorities.
(xxiv) Insurance. Each of the Company and the Subsidiaries carries or
---------
is entitled to the benefits of insurance in such amounts and covering such
risks as it reasonably believes are sufficient to cover potential losses or
damages, and all such insurance is in full force and effect.
(b) Representations, Warranties and Covenants by the Selling Shareholders.
Each Selling Shareholder severally and not jointly represents and warrants to
each International Manager as of the date hereof, as of the Closing Time, and,
if the Selling Shareholder is selling International Option Securities on a Date
of Delivery, as of each such Date of Delivery, and agrees with each
International Manager, as follows:
(i) Authorization of Agreements. Each Selling Shareholder has
---------------------------
the full right, power and authority to enter into this Agreement and a
Custody Agreement and Power of Attorney (the "Custody Agreement and Power
of Attorney") and to sell, transfer and deliver the Securities to be sold
by such Selling Shareholder hereunder. The execution and delivery of this
Agreement, the U.S. Purchase Agreement and the Custody Agreement and Power
of Attorney and the sale and delivery of the Securities to be sold by such
Selling Shareholder and the consummation by such Selling Shareholder of the
transactions contemplated herein, in the U.S. Purchase Agreement and in the
Registration Statement and compliance by such Selling Shareholder with its
obligations hereunder have been duly authorized by each Selling Shareholder
that is not an individual and do not and will not, whether with or without
the giving of notice or passage of time or both, result in the creation or
imposition of any tax, lien, charge or encumbrance upon the
13
<PAGE>
Securities to be sold by such Selling Shareholder, nor will such action
result in any violation of the provisions of the charter or by-laws or
other organizational instrument of such Selling Shareholder, if applicable,
or, to the best of such Selling Shareholder's knowledge, any applicable
treaty, law, statute, rule, regulation, judgment, order, writ or decree of
any government, government instrumentality or court, domestic or foreign,
having jurisdiction over such Selling Shareholder or any of its properties.
(ii) Good and Valid Title. Such Selling Shareholder has (or, in the
--------------------
case of a holder of Blau Option Securities, prior to the Closing Time will
have) and will at the Closing Time and, if any International Option
Securities are purchased, such Executive Selling Shareholder will on the
Date of Delivery have good and valid title to the Securities to be sold by
such Selling Shareholder hereunder, free and clear of any security
interest, mortgage, pledge, lien, charge, claim, equity or encumbrance of
any kind, other than pursuant to this Agreement or the Custody Agreement
and Power of Attorney; and upon delivery of such Securities and payment of
the purchase price therefor as herein contemplated, assuming each such
International Manager has no notice of any adverse claim, each of the
International Managers will receive good and valid title to the Securities
purchased by it from such Selling Shareholder, free and clear of any
security interest, mortgage, pledge, lien, charge, claim, equity or
encumbrance of any kind created, directly or indirectly, by or through such
Selling Shareholder.
(iii) Due Execution of Custody Agreement and Power of Attorney. Such
--------------------------------------------------------
Selling Shareholder has duly executed and delivered, in the forms
heretofore furnished to the Lead Managers, the Custody Agreement and Power
of Attorney with Daniel M. Snyder, A. Clayton Perfall and Fred Drasner, or
any of them, as attorneys-in-fact (the "Attorneys-in-Fact") and American
Stock Transfer & Trust Company, as custodian (the "Custodian"); the
Custodian is authorized to deliver the Securities to be sold by such
Selling Shareholder hereunder and to accept payment therefor, pursuant to
the Custody Agreement and Power of Attorney; and each Attorney-in-Fact is
authorized to execute and deliver this Agreement and the certificate
referred to in Section 5(f) or that may be required pursuant to Sections
5(n) (in the case of any Executive Selling Shareholder) and 5(o) on behalf
of such Selling Shareholder, to sell, assign and transfer to the
International Managers the Securities to be sold by such Selling
Shareholder hereunder, subject to the provisions thereof, to determine the
purchase price to be paid by the International Managers to such Selling
Shareholder, as provided in Section 2 hereof, to authorize the delivery of
the Securities to be sold by such Selling Shareholder hereunder, to accept
payment therefor, and otherwise to act on behalf of such
14
<PAGE>
Selling Shareholder in connection and in accordance with this Agreement and
the Custody Agreement and Power of Attorney.
(iv) Absence of Manipulation. Such Selling Shareholder has not taken,
-----------------------
and will not take, directly or indirectly, any action which is designed to
or which has constituted or which might reasonably be expected to cause or
result in a violation of Regulation M of the 1934 Act Regulations with
respect to any security of the Company.
(v) Absence of Further Requirements. To the best of such Selling
-------------------------------
Shareholder's knowledge, no filing with, or consent, approval,
authorization, order, registration, qualification or decree of, any court
or governmental authority or agency, domestic or foreign, is necessary or
required by such Selling Shareholder for the performance by such Selling
Shareholder of its obligations hereunder or in the Custody Agreement and
Power of Attorney, or in connection with the offering, sale and delivery of
the Securities hereunder or the consummation of the transactions
contemplated by this Agreement and the U.S. Purchase Agreement, except such
as may have previously been made or obtained or as may be required under
the 1933 Act or the 1933 Act Regulations or state securities laws.
(vi) Certificates Suitable for Transfer; Instruments of Transfer.
-----------------------------------------------------------
Certificates for all of the Securities sold by such Selling Shareholder
pursuant to this Agreement, in suitable form for transfer by delivery or
accompanied by duly executed instruments of transfer or assignment in
blank, or, in the case of uncertificated stock, duly executed stock powers,
in each case with signatures guaranteed (or notarized, in the case of any
such Selling Shareholder not resident in the United States), have been
placed in custody with the Custodian with irrevocable conditional
instructions to deliver such Securities or stock powers to the
International Managers pursuant to this Agreement and the Custody Agreement
and Power of Attorney.
(vii) No Association with NASD. Except as described in the
------------------------
Registration Statement and the Prospectuses, neither such Selling
Shareholder nor any of its affiliates directly, or indirectly through one
or more intermediaries, controls, or is controlled by, or is under common
control with, or has any other association with (within the meaning of
Article I, Section 1(m) of the By-laws of the NASD), any member firm of the
NASD, except that each of 3i Group plc and NatWest Ventures Investments
Limited may be affiliated or associated with certain member firms of the
NASD.
15
<PAGE>
(c) Additional Representations and Warranties by the Executive Selling
Shareholders. Each Executive Selling Shareholder further severally represents
and warrants to each International Manager as of the date hereof, as of the
Closing Time, and, if the Executive Selling Shareholder is selling International
Option Securities on a Date of Delivery, as of each such Date of Delivery, and
agrees with each International Manager as follows:
(i) During a period of 90 days from the date of the Prospectuses, such
Executive Selling Shareholder will not, without the prior written consent
of the Global Coordinator, (i) offer, pledge, sell, contract to sell, sell
-
any option or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant to purchase or otherwise transfer
or dispose of, directly or indirectly, any share of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock
or file any registration statement under the 1933 Act with respect to any
of the foregoing or (ii) enter into any swap or any other agreement or any
--
transaction that transfers, in whole or in part, directly or indirectly,
the economic consequence of ownership of the Common Stock, whether any such
swap or transaction described in clause (i) or (ii) above is to be settled
by delivery of Common Stock or such other securities, in cash or otherwise;
provided that any Executive Selling Shareholder may, at any time after
--------
30 days from the date of the Closing Time, pledge as security for borrowed
money up to 50% of the shares of Common Stock then owned by such Executive
Selling Shareholder to any commercial banking institution that is a member
of the Federal Reserve System or any institutional lender that makes loans
secured by margin securities in the ordinary course of business having
combined capital and surplus in excess of $500,000,000 (a "Pledgee") as
long as such Pledgee shall have agreed in writing to be bound by the
obligations and restrictions applicable to the Common Stock under this
Section 1(c) and the Lead Managers shall have received an agreement
substantially in the form of Exhibit D hereto signed by such Pledgee. The
foregoing sentence shall not apply to the Securities to be sold hereunder.
(ii) To the best of such Executive Selling Shareholder's knowledge, the
representations and warranties of the Company contained in Section 1(a)
hereof are true and correct; such Executive Selling Shareholder has
reviewed and is familiar with the Registration Statement and the
Prospectuses and the Prospectuses do not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading; and such person is not prompted to sell the
Securities to be sold by it, he or she, as the case may be, hereunder by
any information concerning any of the Company or any of its subsidiaries
which is not set forth in the Prospectuses. The representations and
16
<PAGE>
warranties in this subsection shall not apply to statements in or omissions
from the Registration Statement or the International Prospectus made in
reliance upon and in conformity with information furnished to the Company
in writing by any International Manager through the Lead Managers expressly
for use in the Registration Statement or the International Prospectus.
(d) Officer's Certificates. Any certificate signed by any officer of the
Company delivered to the Global Coordinator, the Lead Managers or to counsel for
the International Managers shall be deemed a representation and warranty by the
Company to each International Manager as to the matters covered thereby; and
any certificate signed by or on behalf of any Selling Shareholder as such and
delivered to the Global Coordinator, the Lead Managers or to counsel for the
International Managers pursuant to the terms of this Agreement shall be deemed a
representation and warranty by such Selling Shareholder to each International
Manager as to matters covered thereby.
(e) Agreements of the International Managers. Each International Manager,
severally and not jointly, agrees with the Company that such International
Manager will not offer or sell, directly or indirectly, International
Securities, nor distribute or publish the International Prospectus or any other
offering material or advertisements in connection with the International
Securities, in or from any country or jurisdiction except in compliance in all
material respects with any applicable rules and regulations of any such country
or jurisdiction. Each International Manager will comply with all applicable laws
and regulations, and make or obtain all necessary filings, consents or
approvals, in each jurisdiction in which such International Manager offers,
sells or delivers International Securities.
SECTION 2. Sale and Delivery to International Managers; Closing.
----------------------------------------------------
(a) Initial Securities. On the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth, the
Company and the Selling Shareholders, severally and not jointly, agree to sell
to each International Manager, severally and not jointly, and each International
Manager, severally and not jointly, agrees to purchase from the Company and the
Selling Shareholders, at the price per share set forth in Schedule C, that
proportion of the number of International Securities set forth in Schedule B
opposite the name of the Company or the Selling Shareholders, as the case may
be, which the number of Initial International Securities set forth in Schedule A
opposite the name of such International Manager, plus any additional number of
Initial International Securities which such International Manager may become
obligated to purchase pursuant to the provisions of Section 10 hereof, bears to
the total number of Initial International Securities, subject, in each case, to
such adjustments among the
17
<PAGE>
International Managers as the Lead Managers in their sole discretion shall make
to eliminate any sales or purchases of fractional securities.
(b) Option Securities. In addition, on the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Executive Selling Shareholders, acting severally and not jointly,
hereby grant an option to the International Managers, severally and not jointly,
to purchase up to an additional [________] shares of Common Stock, as set forth
in Schedule B, at the price per share set forth in Schedule C. The option
hereby granted will expire 30 days after the date hereof and may be exercised in
whole or in part from time to time only for the purpose of covering over-
allotments which may be made in connection with the offering and distribution of
the Initial International Securities upon notice by the Global Coordinator to
the Company and the Executive Selling Shareholders setting forth the number of
International Option Securities as to which the several International Managers
are then exercising the option and the time and date of payment and delivery for
such International Option Securities. Any such time and date of delivery for
the International Option Securities (a "Date of Delivery") shall be determined
by the Global Coordinator, but shall not be later than seven full business days
after the exercise of said option, nor in any event prior to the Closing Time,
as hereinafter defined. If the option is exercised as to all or any portion of
the International Option Securities, each of the International Managers, acting
severally and not jointly, will purchase that proportion of the total number of
International Option Securities then being purchased which the number of Initial
International Securities set forth in Schedule A opposite the name of such
International Manager bears to the total number of Initial International
Securities, subject in each case to such adjustments as the Global Coordinator
in its discretion shall make to eliminate any sales or purchases of fractional
shares.
(c) Payment. Payment of the purchase price for, and delivery of certificates
for, the Initial Securities shall be made at the offices of Debevoise &
Plimpton, 875 Third Avenue, New York, New York, or at such other place as shall
be agreed upon by the Global Coordinator and the Company, at 9:00 A.M. (Eastern
time) on the third (fourth, if the pricing occurs after 4:30 P.M. (Eastern time)
on any given day) business day after the date hereof (unless postponed in
accordance with the provisions of Section 10 hereof), or such other time not
later than ten business days after such date as shall be agreed upon by the
Global Coordinator and the Company (such time and date of payment and delivery
being herein called "Closing Time").
In addition, in the event that any or all of the International Option
Securities are purchased by the International Managers, payment of the purchase
price for, and delivery of certificates for, such International Option
Securities shall be made at the above-mentioned offices, or at such other place
as shall be agreed upon by the Global
18
<PAGE>
Coordinator and the Company, on each Date of Delivery as specified in the notice
from the Global Coordinator to the Company and the Executive Selling
Shareholders.
Payment shall be made to the Company and the Selling Shareholders by wire
transfer of immediately available funds to bank accounts designated by the
Company and the Custodian pursuant to each Selling Shareholder's Custody
Agreement and Power of Attorney against delivery to the Lead Managers for the
respective accounts of the International Managers of certificates for the
International Securities to be purchased by them. It is understood that each
International Manager has authorized the Lead Managers, for its account, to
accept delivery of, receipt for, and make payment of the purchase price for, the
Initial International Securities and the International Option Securities, if
any, which it has agreed to purchase. Merrill Lynch, individually and not as
representative of the International Managers, may (but shall not be obligated
to) make payment of the purchase price for the Initial International Securities
or the International Option Securities, if any, to be purchased by any
International Manager whose funds have not been received by the Closing Time or
the relevant Date of Delivery, as the case may be, but such payment shall not
relieve such International Manager from its obligations hereunder.
(d) Denominations; Registration. Certificates for the Initial International
Securities and the International Option Securities, if any, shall be in such
denominations and registered in such names as the Lead Managers may request in
writing at least one full business day before the Closing Time or the relevant
Date of Delivery, as the case may be. The certificates for the Initial
International Securities and the International Option Securities, if any, will
be made available for examination and packaging by the Lead Managers in The City
of New York not later than 10:00 A.M. (Eastern time) on the business day prior
to the Closing Time or the relevant Date of Delivery, as the case may be.
SECTION 3. Covenants of the Company. The Company covenants with each
------------------------
International Manager as follows:
(a) Compliance with Securities Regulations and Commission Requests. The
Company, subject to Section 3(b) hereof, will comply with the requirements of
Rule 430A or Rule 434, as applicable, and will notify the Global Coordinator
immediately, and confirm the notice in writing, (i) when any post-effective
-
amendment to the Registration Statement, shall become effective, or any
supplement to the Prospectuses or any amended Prospectuses shall have been
filed, (ii) of the receipt of any comments from the Commission, (iii) of any
-- ---
request by the Commission for any amendment to the Registration Statement or
any amendment or supplement to the Prospectuses or for additional
information, and (iv) of the
--
19
<PAGE>
issuance by the Commission of any stop order suspending the effectiveness of
the Registration Statement or of any order preventing or suspending the use
of any preliminary prospectus, or of the suspension of the qualification of
the Securities for offering or sale in any jurisdiction, or of the initiation
or threatening of any proceedings for any of such purposes. The Company will
promptly effect the filings necessary pursuant to Rule 424(b) and will take
such steps as it deems necessary to ascertain promptly whether the form of
prospectus transmitted for filing under Rule 424(b) was received for filing
by the Commission and, in the event that it was not, it will promptly file
such prospectus. The Company will make every reasonable effort to prevent the
issuance of any stop order and, if any stop order is issued, to obtain the
lifting thereof at the earliest possible moment.
(b) Filing of Amendments. The Company will give the Global Coordinator
notice of the Company's intention to file or prepare any amendment to the
Registration Statement (including any filing under Rule 462(b)), any Term
Sheet or any amendment, supplement or revision to either the prospectus
included in the Registration Statement at the time it became effective or to
the Prospectuses, whether pursuant to the 1933 Act, the 1934 Act or
otherwise, will furnish the Global Coordinator with copies of any such
documents a reasonable amount of time prior to such proposed filing or use,
as the case may be, and will not file or use any such document to which the
Global Coordinator or counsel for the International Managers shall object.
(c) Delivery of Registration Statement. The Company has furnished or
will deliver to the Lead Managers and counsel for the International Managers,
without charge, signed copies of the Registration Statement as originally
filed and of each amendment thereto (including exhibits filed therewith or
incorporated by reference therein) and signed copies of all consents and
certificates of experts, and will also deliver to the Lead Managers, without
charge, a conformed copy of the Registration Statement as originally filed
and of each amendment thereto (without exhibits) for each of the
International Managers. The copies of the Registration Statement and each
amendment thereto furnished to the International Managers will be identical
to the electronically transmitted copies thereof filed with the Commission
pursuant to EDGAR, except to the extent permitted by Regulation S-T.
(d) Delivery of Prospectuses. The Company has delivered to each
International Manager, without charge, as many copies of each preliminary
prospectus as such International Manager reasonably requested, and the
Company hereby consents to the use of such copies for purposes permitted by
the 1933 Act. The Company will furnish to each International Manager,
without charge, during
20
<PAGE>
the period when the International Prospectus is required to be delivered
under the 1933 Act or the 1934 Act, such number of copies of the
International Prospectus (as amended or supplemented) as such International
Manager may reasonably request. The International Prospectus and any
amendments or supplements thereto furnished to the International Managers
will be identical to the electronically transmitted copies thereof filed
with the Commission pursuant to EDGAR, except to the extent permitted by
Regulation S-T.
(e) Continued Compliance with Securities Laws. The Company will
comply with the 1933 Act and the 1933 Act Regulations and the 1934 Act and
the 1934 Act Regulations so as to permit the completion of the distribution
of the Securities as contemplated in this Agreement, the U.S. Purchase
Agreement and in the Prospectuses. If at any time when a prospectus is
required by the 1933 Act to be delivered in connection with sales of the
Securities, any event shall occur or condition shall exist as a result of
which it is necessary, in the opinion of counsel for the International
Managers or for the Company, to amend the Registration Statement or amend
or supplement any Prospectus in order that the Prospectuses will not
include any untrue statements of a material fact or omit to state a
material fact necessary in order to make the statements therein not
misleading in the light of the circumstances existing at the time it is
delivered to a purchaser, or if it shall be necessary, in the opinion of
such counsel, at any such time to amend the Registration Statement or amend
or supplement any Prospectus in order to comply with the requirements of
the 1933 Act or the 1933 Act Regulations, the Company will promptly prepare
and file with the Commission, subject to Section 3(b) hereof, such
amendment or supplement as may be necessary to correct such statement or
omission or to make the Registration Statement or the Prospectuses comply
with such requirements, and the Company will furnish to the International
Managers such number of copies of such amendment or supplement as the
International Managers may reasonably request.
(f) Blue Sky Qualifications. The Company will use its best efforts,
in cooperation with the International Managers, to qualify the Securities
for offering and sale under the applicable securities laws of such states
and other jurisdictions (domestic or foreign) as the Global Coordinator may
designate and to maintain such qualifications in effect for such period
after the effective date of the Registration Statement and any Rule 462(b)
Registration Statement as the Prospectuses are required by the 1933 Act or
such state securities laws to be delivered in connection with sales of the
Securities by any underwriter or dealer; provided, however, that the
Company shall not be obligated to file any general consent to service of
process or to qualify as a foreign corporation or as a dealer in securities
in any jurisdiction in which it is not so qualified or to subject itself to
21
<PAGE>
taxation in respect of doing business in any jurisdiction in which it is
not otherwise so subject. In each jurisdiction in which the Securities have
been so qualified, the Company will file such statements and reports as may
be required by the laws of such jurisdiction to continue such qualification
in effect for the period specified above.
(g) Rule 158. The Company will timely file such reports pursuant to
the 1934 Act as are necessary in order to make generally available to its
securityholders as soon as practicable an earnings statement for the
purposes of, and to provide the benefits contemplated by, the last
paragraph of Section 11(a) of the 1933 Act.
(h) Use of Proceeds. The Company will use the net proceeds received
by the Company from the sale of the Securities in the manner specified in
the Prospectuses under "Use of Proceeds".
(i) Listing. The Company will use its best efforts to effect the
listing of the Securities on the New York Stock Exchange.
(j) Restriction on Sale of Securities. During a period of 90 days
from the date of the Prospectuses, the Company will not, without the prior
written consent of the Global Coordinator, (i) directly or indirectly,
-
offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right
or warrant to purchase or otherwise transfer or dispose of any share of
Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock or file any registration statement under the
1933 Act with respect to any of the foregoing or (ii) enter into any swap
--
or any other agreement or any transaction that transfers, in whole or in
part, directly or indirectly, the economic consequence of ownership of the
Common Stock, whether any such swap or transaction described in clause (i)
or (ii) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise. The foregoing sentence shall not apply
to (A) the Securities to be sold hereunder or under the U.S. Purchase
Agreement, (B) any options to purchase shares of Common Stock granted or
shares of Common Stock sold pursuant to any employee benefit plan of the
Company whether existing at the date of this Agreement or adopted
subsequent hereto and the filing of any registration statement on Form S-8
related thereto or (C) any option or warrant to purchase shares of Common
Stock or shares of Common Stock issued or sold in connection with an
acquisition by the Company and the filing of any registration statement on
Form S-4 in connection therewith as long as all executive officers,
directors and
22
<PAGE>
other affiliates of the person being acquired have agreed in writing to be
bound by the obligations and restrictions of the foregoing sentence of this
Section 3(j).
(k) Reporting Requirements. The Company, during the period when the
Prospectuses are required to be delivered under the 1933 Act or the 1934
Act, will file all documents required to be filed with the Commission
pursuant to the 1934 Act within the time periods required by the 1934 Act
and the 1934 Act Regulations.
SECTION 4. Payment of Expenses. (a) Expenses. The Company will pay all
-------------------
expenses incident to the performance of its obligations under this Agreement,
including (i) the preparation, printing (or reproduction) and filing of the
-
Registration Statement (including financial statements and exhibits) as
originally filed and of each amendment thereto, (ii) the preparation, printing
--
(or reproduction) and delivery to the Underwriters of this Agreement, any
Agreement among Underwriters and such other documents as may be required in
connection with the offering, purchase, sale, issuance or delivery of the
Securities, (iii) the preparation, issuance and delivery of the certificates for
the Securities to the Underwriters, including any stock or other transfer taxes
and any stamp or other duties payable upon the sale, issuance or delivery of the
Securities to the Underwriters and the transfer of the Securities between the
U.S. Underwriters and the International Managers, (iv) the fees and
--
disbursements of the Company's counsel, accountants and other advisors, (v) the
-
qualification of the Securities under securities laws in accordance with the
provisions of Section 3(f) hereof, including filing fees and the reasonable fees
and disbursements of counsel for the Underwriters in connection therewith and in
connection with the preparation of the Blue Sky Survey and any supplement
thereto, (vi) the printing and delivery to the Underwriters of copies of each
--
preliminary prospectus, any Term Sheets and of the Prospectuses and any
amendments or supplements thereto, (vii) the preparation, printing (or
---
reproduction) and delivery to the Underwriters of copies of the Blue Sky Survey
and any supplement thereto, (viii) the fees and expenses of any transfer agent
----
or registrar for the Securities, (ix) the filing fees incident to, and the
--
reasonable fees and disbursements of counsel to the Underwriters in connection
with, the review by the NASD of the terms of the sale of the Securities, and (x)
-
the fees and expenses incurred in connection with the listing of the Securities
on the New York Stock Exchange.
(b) Expenses of the Selling Shareholders. The Selling Shareholders,
severally and not jointly, will pay all expenses incident to the performance of
their respective obligations under, and the consummation of the transactions
contemplated by, this Agreement, including (i) any stamp duties, capital duties
-
and stock transfer taxes, if any, payable upon the sale of the Securities to the
International Managers, and their transfer between Underwriters pursuant to any
agreement between Underwriters, and (ii) the fees and disbursements of their
--
respective counsel and accountants, except in each case (as
23
<PAGE>
between the Company and any Selling Stockholder) as otherwise provided in any
agreement between the Company and any Selling Shareholder.
(c) Termination of Agreement. If this Agreement is terminated by the Lead
Managers in accordance with the provisions of Section 5 (other than Section
5(j)), Section 9(a)(i) or Section 11 hereof, the Company, and each of the
Selling Shareholders, severally and not jointly, shall reimburse the
International Managers for all of their out-of-pocket expenses, including the
reasonable fees and disbursements of counsel for the International Managers,
except (as between the Company and any Selling Shareholder) as otherwise
provided in any agreement between the Company and any Selling Shareholder.
(d) Allocation of Expenses. The provisions of this Section shall not
affect any agreement that the Company and the Selling Shareholders may make for
the sharing of such costs and expenses.
SECTION 5. Conditions of International Managers' Obligations. The
-------------------------------------------------
obligations of the several International Managers hereunder are subject to the
accuracy of the representations and warranties of the Company and the Selling
Shareholders contained in Section 1 hereof or in certificates of any officer of
the Company or by or on behalf of any Selling Shareholder delivered pursuant to
the provisions hereof, to the performance by the Company of its covenants and
other obligations hereunder, and to the following further conditions:
(a) Effectiveness of Registration Statement. The Registration
Statement, including any Rule 462(b) Registration Statement, has become
effective and at Closing Time no stop order suspending the effectiveness of
the Registration Statement shall have been issued under the 1933 Act or
proceedings therefor initiated or threatened by the Commission, and any
request on the part of the Commission for additional information shall have
been complied with to the reasonable satisfaction of counsel to the
International Managers. A prospectus containing the Rule 430A Information
shall have been filed with the Commission in accordance with Rule 424(b)
(or a post-effective amendment providing such information shall have been
filed and declared effective in accordance with the requirements of Rule
430A) or, if the Company has elected to rely upon Rule 434, a Term Sheet
shall have been filed with the Commission in accordance with Rule 424(b).
(b) Opinion of Counsel for Company. At Closing Time, the Lead
Managers shall have received the favorable opinion and letter, in each case
dated as of Closing Time, of Shaw Pittman Potts & Trowbridge, counsel for
the Company, in form and substance satisfactory to counsel for the
International
24
<PAGE>
Managers, together with signed or reproduced copies of such opinion and
letter for each of the other International Managers to the effect set forth
in Exhibit A-1 and Exhibit A-2, respectively, hereto. In giving such
opinion such counsel may rely, as to all matters governed by the laws of
jurisdictions other than the law of the State of New York, the federal law
of the United States and the General Corporation Law of the State of
Delaware, upon the opinions of counsel satisfactory to the Lead Managers.
Such counsel may also state that, insofar as such opinion involves factual
matters, they have relied, to the extent they deem proper, upon
certificates of officers of the Company and its subsidiaries and
certificates of public officials.
(c) Opinions of Counsel for the Selling Shareholders. At Closing
Time, the Lead Managers shall have received the favorable opinions, dated
as of Closing Time, of the several counsel for the Selling Shareholders in
each case in form and substance satisfactory to counsel for the
International Managers, together with signed or reproduced copies of such
letter for each of the other International Managers, to the effect set
forth in Exhibit B hereto. In giving such opinion such counsel may rely, as
to all matters governed by the laws of jurisdictions other than the law of
the State of New York, the federal law of the United States and the General
Corporation Law and the Revised Uniform Limited Partnership Act of
Delaware, as applicable, upon the opinions of counsel satisfactory to the
Lead Managers. Such counsel may also state that, insofar as such opinion
involves factual matters, they have relied, to the extent they deem proper,
upon certificates of the Selling Shareholders or officers of the Company
and its subsidiaries and certificates of public officials.
(d) Opinion of Counsel for International Managers. At Closing Time,
the Lead Managers shall have received the favorable opinion, dated as of
Closing Time, of Debevoise & Plimpton, counsel for the International
Managers, together with signed or reproduced copies of such letter for each
of the other International Managers with respect to the matters set forth
in clauses 1, 2, 4 (as to the third clause thereof), 5 (solely as to
preemptive or other similar rights arising by operation of law or under the
charter or by-laws of the Company), 8 through 10, inclusive, 12 and Exhibit
A-2 hereto. In giving such opinion such counsel may rely, as to all matters
governed by the laws of jurisdictions other than the law of the State of
New York, the federal law of the United States and the General Corporation
Law of the State of Delaware, upon the opinions of counsel satisfactory to
the Lead Managers. Such counsel may also state that, insofar as such
opinion involves factual matters, they have relied, to the extent they deem
proper, upon certificates of officers of the Company and its subsidiaries
and certificates of public officials.
25
<PAGE>
(e) Officers' Certificate. At Closing Time, there shall not have
been, since the date hereof or since the respective dates as of which
information is given in the Prospectuses, any material adverse change in
the condition, financial or otherwise, or in the earnings, business affairs
or business prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business, and
the Lead Managers shall have received a certificate of each of the Chairman
of the Board, the President or a Vice President of the Company and of the
chief financial or chief accounting officer of the Company dated as of
Closing Time and to the effect that (i) there has been no such material
-
adverse change, (ii) the representations and warranties in Section 1(a)
--
hereof are true and correct with the same force and effect as though
expressly made at and as of Closing Time, (iii) the Company has complied
---
with all agreements and satisfied all conditions on its part to be
performed or satisfied at or prior to Closing Time, and (iv) no stop order
--
suspending the effectiveness of the Registration Statement has been issued
and no proceedings for that purpose have been instituted or are pending or
are contemplated by the Commission.
(f) Certificate of Selling Shareholders. At the Closing Time, the
Lead Managers shall have received a certificate of an Attorney-in-Fact on
behalf of each Selling Shareholder, dated as of Closing Time, to the effect
that (i) the representations and warranties of each Selling Shareholder
-
contained in Section 1(b) and (c) hereof are true and correct in all
respects with the same force and effect as though expressly made at and as
of Closing Time and (ii) each Selling Shareholder has complied in all
--
material respects with all agreements and all conditions on its part to be
performed under this Agreement at or prior to Closing Time.
(g) Accountant's Comfort Letter. At the time of the execution of
this Agreement, the Lead Managers shall have received from Arthur Andersen
LLP a letter dated such date, in form and substance satisfactory to the
Lead Managers, together with signed or reproduced copies of such letter for
each of the other International Managers, containing statements and
information of the type ordinarily included in accountants' "comfort
letters" to underwriters with respect to the financial statements and
certain financial information contained in the Registration Statement and
the Prospectuses.
(h) Bring-down Comfort Letter. At Closing Time, the Lead Managers
shall have received from Arthur Andersen LLP a letter, dated as of Closing
Time, to the effect that they reaffirm the statements made in the letter
furnished pursuant to subsection (g) of this Section, except that the
specified date referred to shall be a date not more than three business
days prior to Closing Time.
26
<PAGE>
(i) Approval of Listing. At Closing Time, the Securities shall have
been approved for listing on the New York Stock Exchange, subject only to
official notice of issuance.
(j) No Objection. The NASD shall not have raised any objection with
respect to the fairness and reasonableness of the underwriting terms and
arrangements.
(k) Lock-up Agreements. At the date of this Agreement, the Lead
Managers shall have received an agreement substantially in the form of
Exhibit C hereto signed by the persons listed on Schedule D hereto.
(l) Form W-9 and Form W-8. At or prior to Closing Time, the Lead
Managers shall have received from each Selling Shareholder a properly
completed and executed United States Treasury Form W-9 or Form W-8, as
applicable.
(m) Purchase of Initial U.S. Securities. Contemporaneously with the
purchase by the International Managers of the Initial International
Securities under this Agreement, the U.S. Underwriters shall have purchased
the Initial U.S. Securities under the U.S. Purchase Agreement.
(n) Conditions to Purchase of International Option Securities. In
the event that the International Managers exercise their option provided in
Section 2(b) hereof to purchase all or any portion of the International
Option Securities, the representations and warranties of the Company and
the Executive Selling Shareholders contained herein and the statements in
any certificates furnished by any of them hereunder shall be true and
correct as of each Date of Delivery and, at the relevant Date of Delivery,
and the Lead Managers shall have received:
(i) Officers' Certificates. A certificate, dated such Date of
----------------------
Delivery, of each of the Chairman of the Board, President or a Vice
President of the Company and of the chief financial or chief
accounting officer of the Company confirming that the certificate
delivered at the Closing Time pursuant to Section 5(e) hereof remains
true and correct as of such Date of Delivery.
(ii) Certificate of the Executive Selling Shareholders. A
--------------------------------------------------
certificate, dated such Date of Delivery, of an Attorney-in-Fact on
behalf of each Executive Selling Shareholder, confirming that the
certificate delivered at Closing
27
<PAGE>
Time pursuant to Section 5(f) hereof remains true and correct as of
such Date of Delivery.
(iii) Opinion of Counsel for Company. The favorable opinion of Shaw
------------------------------
Pittman Potts & Trowbridge, counsel for the Company, in form and
substance satisfactory to counsel for the International Managers,
dated such Date of Delivery, relating to the International Option
Securities to be purchased on such Date of Delivery and otherwise to
the same effect as the opinion required by Section 5(b) hereof.
(iv) Opinion of Counsel for the Executive Selling Shareholders. The
---------------------------------------------------------
favorable opinion of Shaw Pittman Potts & Trowbridge, counsel for the
Executive Selling Shareholders, in form and substance satisfactory to
counsel for the International Managers, dated such Date of Delivery,
relating to the International Option Securities to be purchased on
such Date of Delivery and otherwise to the same effect as the
respective opinions required by Section 5(c) hereof.
(v) Opinion of Counsel for International Managers. The favorable
---------------------------------------------
opinion of Debevoise & Plimpton, counsel for the International
Managers, dated such Date of Delivery, relating to the International
Option Securities to be purchased on such Date of Delivery and
otherwise to the same effect as the opinion required by Section 5(d)
hereof.
(vi) Bring-down Comfort Letter. A letter from Arthur Andersen LLP,
-------------------------
in form and substance satisfactory to the Lead Managers and dated such
Date of Delivery, substantially in the same form and substance as the
letter furnished to the Lead Managers pursuant to Section 5(g) hereof,
except that the "specified date" in the letter furnished pursuant to
this paragraph shall be a date not more than five days prior to such
Date of Delivery.
(o) Additional Documents. At Closing Time and at each Date of Delivery,
counsel for the International Managers shall have been furnished with such
documents and opinions as they may require for the purpose of enabling them to
pass upon the issuance and sale of the Securities as herein contemplated, or in
order to evidence the accuracy of any of the representations or warranties, or
the fulfillment of any of the conditions, herein contained; and all proceedings
taken by the Company, and the Selling Shareholders in connection with the
issuance and sale of the Securities as herein contemplated shall be satisfactory
in form and substance to the Lead Managers and counsel for the International
Managers.
28
<PAGE>
(p) Termination of Agreement. If any condition specified in this Section
shall not have been fulfilled when and as required to be fulfilled, this
Agreement, or, in the case of any condition to the purchase of International
Option Securities on a Date of Delivery which is after Closing Time, the
obligations of the several International Managers to purchase the relevant
Option Securities, may be terminated by the Lead Managers by notice to the
Company at any time at or prior to Closing Time or such Date of Delivery, as the
case may be, and such termination shall be without liability of any party to any
other party except as provided in Section 4 and except that Sections 1, 6, 7 and
8 shall survive any such termination and remain in full force and effect.
SECTION 6. Indemnification.
---------------
(a) Indemnification of International Managers. The Company and the
Executive Selling Shareholders, jointly and severally, agree to indemnify and
hold harmless each International Manager, its directors, officers and employees,
and each person, if any, who controls any International Manager within the
meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement
(or any amendment thereto), including the Rule 430A Information and the
Rule 434 Information, if applicable, or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to
make the statements therein not misleading or arising out of any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus or the Prospectuses (or any amendment or supplement
thereto), or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission; provided that (subject to Section
6(e) hereof) any such settlement is effected with the written consent of
the Company and the Executive Selling Shareholders; and
(iii) against any and all expense whatsoever, as incurred (including
the fees and disbursements of counsel chosen by Merrill Lynch), reasonably
incurred in
29
<PAGE>
investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced
or threatened, or any claim whatsoever based upon any such untrue statement
or omission, or any such alleged untrue statement or omission, to the
extent that any such expense is not paid under (i) or (ii) above;
provided, however, that (a) this indemnity agreement shall not apply to any
- -------- -------
loss, liability, claim, damage or expense (x) to the extent arising out of any
untrue statement or omission or alleged untrue statement or omission made in
reliance upon and in conformity with written information furnished to the
Company by any International Manager through the Lead Managers expressly for use
in the Registration Statement (or any amendment thereto), including the Rule
430A Information and the Rule 434 Information, if applicable, or any preliminary
prospectus or the International Prospectus (or any amendment or supplement
thereto) and (y) with respect to any preliminary prospectus to the extent that
any such loss, liability, claim, damage or expense of such International Manager
results solely from the fact that such International Manager sold Securities to
a person as to whom the Company shall establish that there was not sent by
commercially reasonable means, at or prior to the written confirmation of such
sale, a copy of the International Prospectus in any case where such delivery is
required by the 1933 Act, if the Company has previously furnished copies thereof
in sufficient quantity to such International Manager and the loss, claim, damage
or liability of such International Manager results from an untrue statement or
omission of a material fact contained in the preliminary prospectus that was
corrected in the International Prospectus, and (b) each Executive Selling
Shareholder's aggregate liability under this Section 6 shall be limited to an
amount equal to such Executive Selling Shareholder's net proceeds (after
deducting the underwriting discount, but before deducting expenses) from the
sale of such Executive Selling Shareholder's Securities pursuant to this
Agreement.
In making a claim for indemnification under this Section 6 (other than
pursuant to clause (a)(iii) of this Section 6), or contribution under Section 7,
by the Company or the Executive Selling Shareholders, the indemnified parties
may proceed against either (i) the Company and the Executive Selling
Shareholders, (ii) the Company only, but may not proceed solely against the
Executive Selling Shareholders. In the event that the indemnified parties are
entitled to seek indemnity or contribution hereunder against any loss,
liability, claim, damage and expense incurred with respect to a final judgment
from a trial court, then, as a precondition to any indemnified party obtaining
indemnification or contribution from any Executive Selling Shareholder, the
indemnified parties shall first obtain a final judgment from a trial court that
such indemnified parties are entitled to indemnity or contribution under this
Agreement with respect to such loss, liability, claim, damage or expense (the
"Final Judgment") from the Company and the Executive Selling Shareholder and
shall seek to satisfy such Final Judgment in full from the Company by
30
<PAGE>
making a written demand upon the Company for such satisfaction. Only in the
event such Final Judgment shall remain unsatisfied in whole or in part 45 days
following the date of receipt by the Company of such demand shall any
indemnified party have the right to take action to satisfy such Final Judgment
by making demand directly on any Executive Selling Shareholder (but only if and
to the extent the Company has not already satisfied such Final Judgment, whether
by settlement, release or otherwise). The indemnified parties may exercise this
right to first seek to obtain payment from the Company and thereafter obtain
payment from any Executive Selling Shareholder without regard to the pursuit by
any party of its rights to the appeal of such Final Judgment. The indemnified
parties shall, however, be relieved of their obligation to first obtain a Final
Judgment, seek to obtain payment from the Company with respect to such Final
Judgment or, having sought such payment, to wait such 45 days after failure by
the Company to satisfy immediately any such Final Judgment if (i) the Company
files a petition for relief under the United States Bankruptcy Code (the
"Bankruptcy Code"), (ii) an order for relief is entered against the Company in
an involuntary case under the Bankruptcy Code, (iii) the Company makes an
assignment for the benefit of its creditors, or (iv) any court orders or
approves the appointment of a receiver or custodian for the Company or a
substantial portion of either of their assets. The foregoing provisions of this
paragraph are not intended to require any indemnified party to obtain a Final
Judgment against the Company or any Executive Selling Shareholder before
obtaining reimbursement of expenses pursuant to clause (a)(iii) of this Section
6. However, the indemnified parties shall first seek to obtain such
reimbursement in full from the Company by making a written demand upon the
Company for such reimbursement. Only in the event such expenses shall remain
unreimbursed in whole or in part 45 days following the date of receipt by the
Company of such demand shall any indemnified party have the right to receive
reimbursement of such expenses from any Executive Selling Shareholder by making
written demand directly on such Executive Selling Shareholder (but only if and
to the extent the Company has not already satisfied the demand for
reimbursement, whether by settlement, release or otherwise). The indemnified
parties shall, however, be relieved of their obligation to first seek to obtain
such reimbursement in full from the Company or, having made written demand
therefor, to wait such 45 days after failure by the Company to reimburse
immediately such expenses if (i) the Company files a petition for relief under
the Bankruptcy Code, (ii) an order for relief is entered against the Company in
an involuntary case under the Bankruptcy Code, (iii) the Company makes an
assignment for the benefit of its creditors, or (iv) any court orders or
approves the appointment of a receiver or custodian for the Company or a
substantial portion of its assets.
(b) Indemnification of International Managers by the Non-Executive Selling
Shareholders. Each Non-Executive Selling Shareholder, severally and not
jointly, agrees to indemnify and hold harmless each International Manager, its
directors, officers and employees, and each person, if any, who controls any
International Manager within the
31
<PAGE>
meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act against any
and all loss, liability, claim, damage and expense whatsoever, as incurred, with
respect to any untrue statement or omission, or alleged untrue statement or
omission, contained in the Registration Statement (or any amendment thereto),
including the Rule 430 Information and the Rule 434 Information, if applicable,
or any preliminary prospectus or the Prospectuses (or any amendment or
supplement thereto) in reliance upon and in conformity with information
furnished to the Company in writing by or on behalf of such Non-Executive
Selling Shareholder expressly for use therein; provided, however, that (x) this
-------- ------- -
indemnity agreement shall not apply to any loss, liability, claim, damage or
expense (i) to the extent arising out of any untrue statement or omission or
alleged untrue statement or omission made in reliance upon and in conformity
with written information furnished to the Company by any International Manager
through the Lead Managers expressly for use in the Registration Statement (or
any amendment thereto), including the Rule 430A Information and the Rule 434
Information, if applicable, or any preliminary prospectus or the International
Prospectus (or any amendment or supplement thereto) and (ii) with respect to any
preliminary prospectus to the extent that any such loss, liability, claim,
damage or expense of such International Manager results solely from the fact
that such International Manager sold Securities to a person as to whom the
Company shall establish that there was not sent by commercially reasonable
means, at or prior to the written confirmation of such sale, a copy of the
International Prospectus in any case where such delivery is required by the 1933
Act, if the Company has previously furnished copies thereof in sufficient
quantity to such International Manager and the loss, claim, damage or liability
of such International Manager results from an untrue statement or omission of a
material fact contained in the preliminary prospectus that was corrected in the
International Prospectus, and (y) each Non-Executive Selling Shareholder's
-
aggregate liability under this Section 6(b) shall be limited to an amount equal
to the net proceeds (after deducting the underwriting discount, but before
deducting expenses) received by such Non-Executive Selling Shareholder from the
sale of Securities pursuant to this Agreement.
(c) Indemnification of Company, Directors and Officers and Selling
Shareholders. Each International Manager severally agrees to indemnify and hold
harmless the Company, its directors, each of its officers who signed the
Registration Statement, and each person, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, and
each Selling Shareholder against any and all loss, liability, claim, damage and
expense described in the indemnity contained in subsection (a) of this Section,
as incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the Registration Statement (or any
amendment thereto), including the Rule 430A Information and the Rule 434
Information, if applicable, or any preliminary international prospectus or the
International Prospectus (or any amendment or supplement thereto) in reliance
upon
32
<PAGE>
and in conformity with written information furnished to the Company by such
International Manager through the Lead Managers expressly for use in the
Registration Statement (or any amendment thereto) or such preliminary prospectus
or the International Prospectus (or any amendment or supplement thereto).
(d) Actions against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. In the case of parties indemnified pursuant to Section 6(a) or (b)
above, counsel to the indemnified parties shall be selected by Merrill Lynch,
and, in the case of parties indemnified pursuant to Section 6(c) above, counsel
to the indemnified parties shall be selected by the Company. An indemnifying
party may participate at its own expense in the defense of any such action;
provided, however, that counsel to the indemnifying party shall not (except with
the consent of the indemnified party) also be counsel to the indemnified party.
In no event shall the indemnifying parties be liable for fees and expenses of
more than one counsel (in addition to any local counsel) separate from their own
counsel for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances. No indemnifying party shall,
without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 6 or Section
7 hereof (whether or not the indemnified parties are actual or potential parties
thereto), unless such settlement, compromise or consent (i) includes an
-
unconditional release of each indemnified party from all liability arising out
of such litigation, investigation, proceeding or claim and (ii) does not include
--
a statement as to or an admission of fault, culpability or a failure to act by
or on behalf of any indemnified party.
(e) Settlement without Consent if Failure to Reimburse. If at any time an
indemnified party shall have requested in accordance with this Agreement an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel, such indemnifying party agrees that it shall be liable for any
settlement of the nature contemplated by Section 6(a)(ii) hereof effected
without its written consent if (i) such settlement is entered into more than 45
-
days after receipt by such indemnifying party of the aforesaid request, (ii)
--
such indemnifying party shall have received notice of the terms of such
settlement at least 30 days prior to such settlement being entered into and
(iii)
---
33
<PAGE>
such indemnifying party shall not have reimbursed such indemnified party in
accordance with such request prior to the date of such settlement.
(f) Other Agreements with Respect to Indemnification. The provisions of
this Section shall not affect any agreement among the Company and the Selling
Shareholders with respect to indemnification.
SECTION 7. Contribution. If the indemnification provided for in Section
------------
6 hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
-
appropriate to reflect the relative benefits received by the Company and the
Selling Shareholders on the one hand and the International Managers on the other
hand from the offering of the Securities pursuant to this Agreement or (ii) if
--
the allocation provided by clause (i) is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company and
the Selling Shareholders on the one hand and of the International Managers on
the other hand in connection with the statements or omissions, which resulted in
such losses, liabilities, claims, damages or expenses, as well as any other
relevant equitable considerations.
The relative benefits received by the Company and the Selling Shareholders
on the one hand and the International Managers on the other hand in connection
with the offering of the International Securities pursuant to this Agreement
shall be deemed to be in the same respective proportions as the total net
proceeds from the offering of the International Securities pursuant to this
Agreement (after deducting the underwriting discount, but before deducting
expenses) received by the Company and the Selling Shareholders and the total
underwriting discount received by the International Managers, in each case as
set forth on the cover of the International Prospectus, or, if Rule 434 is used,
the corresponding location on the Term Sheet, bear to the aggregate initial
public offering price of the International Securities as set forth on such
cover.
The relative fault of the Company and the Selling Shareholders on the one
hand and the International Managers on the other hand shall be determined by
reference to, among other things, whether any such untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact relates to information supplied by the Company or by the Selling
Shareholders in writing or by the International Managers and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
34
<PAGE>
The Company, the Selling Shareholders and the International Managers agree
that it would not be just and equitable if contribution pursuant to this Section
7 were determined by pro rata allocation (even if the International Managers
were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations referred
to above in this Section 7. The aggregate amount of losses, liabilities, claims,
damages and expenses incurred by an indemnified party and referred to above in
this Section 7 shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in investigating, preparing or defending
against any litigation, or any investigation or proceeding by any governmental
agency or body, commenced or threatened, or any claim whatsoever based upon any
such untrue or alleged untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, (x) no International
-
Manager shall be required to contribute any amount in excess of the amount by
which the total price at which the International Securities underwritten by it
and distributed to the public were offered to the public exceeds the amount of
any damages which such International Manager has otherwise been required to pay
by reason of any such untrue or alleged untrue statement or omission or alleged
omission, and (y) no Non-Executive Selling Shareholder shall be required to
-
contribute any amount in excess of such Non-Executive Selling Shareholder's net
proceeds (after deducting the underwriting discount, but before deducting
expenses) from the sale of Securities pursuant to this Agreement or on a basis
other than as specified in Section 6(b).
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls an
International Manager within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act shall have the same rights to contribution as such
International Manager, and each director of the Company, each officer of the
Company who signed the Registration Statement, and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act or Section
20 of the 1934 Act shall have the same rights to contribution as the Company.
The International Managers' respective obligations to contribute pursuant to
this Section 7 are several in proportion to the number of Initial International
Securities set forth opposite their respective names in Schedule A hereto and
not joint.
The provisions of this Section shall not affect any agreement among the
Company and the Selling Shareholders with respect to contribution.
35
<PAGE>
SECTION 8. Representations, Warranties and Agreements to Survive Delivery.
--------------------------------------------------------------
All representations, warranties and agreements contained in this Agreement or in
certificates of officers of the Company or the Selling Shareholders submitted
pursuant hereto, shall remain operative and in full force and effect, regardless
of any investigation made by or on behalf of any International Manager or
controlling person, or by or on behalf of the Company or any controlling person
or the Selling Shareholders, and shall survive delivery of the Securities to the
International Managers.
SECTION 9. Termination of Agreement.
------------------------
(a) Termination; General. The Lead Managers may terminate this Agreement,
by notice to the Company, at any time at or prior to Closing Time (i) if there
-
has been, since the time of execution of this Agreement or since the respective
dates as of which information is given in the International Prospectus, any
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company and its
subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business, or (ii) if there has occurred any material adverse
--
change in the financial markets in the United States or the international
financial markets, any outbreak of hostilities or escalation thereof or other
calamity or crisis or any change or development involving a prospective change
in national or international political, financial or economic conditions, in
each case the effect of which is such as to make it, in the judgment of the Lead
Managers, impracticable to market the Securities or to enforce contracts for the
sale of the Securities, or (iii) if trading in any securities of the Company has
---
been suspended or materially limited by the Commission or the New York Stock
Exchange, or if trading generally on the American Stock Exchange or the New York
Stock Exchange or in the Nasdaq National Market has been suspended or materially
limited, or minimum or maximum prices for trading have been fixed, or maximum
ranges for prices have been required, by any of said exchanges or by such system
or by order of the Commission, the NASD or any other governmental authority, or
(iv) if a banking moratorium has been declared by either Federal or New York
--
authorities.
(b) Liabilities. If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party except as provided in Section 4 hereof, and provided further that Sections
1, 6, 7 and 8 shall survive such termination and remain in full force and
effect.
SECTION 10. Default by One or More of the International Managers. If one
----------------------------------------------------
or more of the International Managers shall fail at Closing Time or a Date of
Delivery to purchase the Securities which it or they are obligated to purchase
under this Agreement (the "Defaulted Securities"), the Lead Managers shall have
the right, within 24 hours thereafter, to make arrangements for one or more of
the non-defaulting International
36
<PAGE>
Managers, or any other underwriters, to purchase all, but not less than all, of
the Defaulted Securities in such amounts as may be agreed upon and upon the
terms herein set forth; if, however, the Lead Managers shall not have completed
such arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10% of the
number of International Securities to be purchased on such date, each of
the non-defaulting International Managers shall be obligated, severally and
not jointly, to purchase the full amount thereof in the proportions that
their respective underwriting obligations hereunder bear to the
underwriting obligations of all non-defaulting International Managers, or
(b) if the number of Defaulted Securities exceeds 10% of the number
of International Securities to be purchased on such date, this Agreement
or, with respect to any Date of Delivery which occurs after the Closing
Time, the obligation of the International Managers to purchase and of the
Company to sell the Option Securities to be purchased and sold on such Date
of Delivery shall terminate without liability on the part of any non-
defaulting International Manager.
No action taken pursuant to this Section shall relieve any defaulting
International Manager from liability in respect of its default.
In the event of any such default which does not result in a termination of
this Agreement or, in the case of a Date of Delivery which is after the Closing
Time, which does not result in a termination of the obligation of the
International Managers to purchase and the Company to sell the relevant
International Option Securities, as the case may be, either the Lead Managers or
the Company shall have the right to postpone Closing Time or the relevant Date
of Delivery, as the case may be, for a period not exceeding seven days in order
to effect any required changes in the Registration Statement or Prospectus or in
any other documents or arrangements. As used herein, the term "International
Manager" includes any person substituted for an International Manager under this
Section 10.
SECTION 11. Default by One or More of the Selling Shareholders or the
---------------------------------------------------------
Company. (a) If a Selling Shareholder shall fail at Closing Time or at a Date
- -------
of Delivery to sell and deliver the number of Securities that such Selling
Shareholder or Selling Shareholders are obligated to sell hereunder, the
remaining Selling Shareholders shall have the right to increase, pro rata or
otherwise, the number of Securities to be sold by them hereunder to the total
number of Securities to be sold by all Selling Shareholders as set forth in
Schedule B hereto. In the event that a Selling Shareholder or Selling
Shareholders shall so fail, and the remaining Selling Shareholders do not
exercise such right to increase the number of Securities to be sold by them, and
the Company does not exercise the right
37
<PAGE>
hereby granted to sell the Securities that the defaulting Selling Shareholders
are obligated to sell hereunder, then the International Managers may, at the
option of the Lead Managers, by notice from the Lead Managers to the Company and
the non-defaulting Selling Shareholders, either (i) terminate this Agreement
-
without any liability on the fault of any non-defaulting party except that the
provisions of Sections 1, 4, 6, 7 and 8 shall remain in full force and effect or
(ii) elect to purchase the Securities which the non-defaulting Selling
--
Shareholders have agreed to sell hereunder. No action taken pursuant to this
Section 11 shall relieve any Selling Shareholder so defaulting from liability,
if any, in respect of such default. If the remaining Selling Shareholders
exercise the right to sell the Securities that such defaulting Selling
Shareholder is obligated to sell hereunder, as used herein the term "Selling
Shareholder" shall not include such defaulting Selling Shareholder for purposes
of determining compliance with all agreements and conditions to be performed by
the Selling Shareholders hereunder.
In the event of a default by any Selling Shareholder as referred to in this
Section 11, each of the Lead Managers, the Company and the non-defaulting
Selling Shareholders shall have the right to postpone Closing Time or Date of
Delivery for a period not exceeding seven days in order to effect any required
change in the Registration Statement or Prospectuses or in any other documents
or arrangements.
(b) If the Company shall fail at Closing Time to sell the number of
Securities that it is obligated to sell hereunder, then this Agreement shall
terminate without any liability on the part of any nondefaulting party;
provided, however, that the provisions of Sections 1, 4, 6, 7 and 8 shall remain
- -------- -------
in full force and effect. No action taken pursuant to this Section shall
relieve the Company from liability, if any, in respect of such default.
SECTION 12. Notices. All notices and other communications hereunder shall
-------
be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
International Managers shall be directed to the Lead Managers at North Tower,
World Financial Center, New York, New York 10281-1201, attention of Syndicate
Operations; notices to the Company shall be directed to the Company at Two
Democracy Center, 6903 Rockledge Drive, Fifteenth Floor, Bethesda, Maryland
20817, attention of A. Clayton Perfall; and notices to the Selling Shareholders
shall be directed to the Selling Shareholders care of the Company at the
foregoing address, attention of A. Clayton Perfall.
SECTION 13. Parties. This Agreement shall each inure to the benefit of
-------
and be binding upon the International Managers, and the Selling Shareholders and
their respective successors. Nothing expressed or mentioned in this Agreement
is intended or shall be construed to give any person, firm or corporation, other
than the International Managers, the Company and the Selling Shareholders and
their respective successors and the
38
<PAGE>
controlling persons and officers and directors referred to in Sections 6 and 7
and their heirs and legal representatives, any legal or equitable right, remedy
or claim under or in respect of this Agreement or any provision herein
contained. This Agreement and all conditions and provisions hereof are intended
to be for the sole and exclusive benefit of the International Managers and the
Selling Shareholders and their respective successors, and said controlling
persons and officers and directors and their heirs and legal representatives,
and for the benefit of no other person, firm or corporation. No purchaser of
Securities from any International Manager shall be deemed to be a successor by
reason merely of such purchase.
SECTION 14. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY
----------------------
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SPECIFIED
TIMES OF DAY REFER TO NEW YORK CITY TIME.
SECTION 15. Effect of Headings. The Article and Section headings herein
------------------
and the Table of Contents are for convenience only and shall not affect the
construction hereof.
39
<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Company and the Attorney-in-Fact for the Selling
Shareholders a counterpart hereof, whereupon this instrument, along with all
counterparts, will become a binding agreement among the International Managers,
the Company, and the Selling Shareholders in accordance with its terms.
Very truly yours,
SNYDER COMMUNICATIONS, INC.
By___________________________
Name:
Title:
Daniel M. Snyder
By_____________________________
As Attorney-in-Fact acting on behalf of
Michele D. Snyder
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH INTERNATIONAL
GOLDMAN SACHS INTERNATIONAL
BEAR, STEARNS INTERNATIONAL LIMITED
NATIONSBANC MONTGOMERY SECURITIES LLC
By: MERRILL LYNCH INTERNATIONAL
By ________________________________________
Attorney-in-Fact
For themselves and as Lead Managers of the
other International Managers named
in Schedule A hereto.
40
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Number of
Initial
International
Name of International Manager Securities
----------------------------- ----------------
<S> <C>
Merrill Lynch International...................................
Goldman Sachs International...................................
Bear, Stearns International Limited...........................
NationsBanc Montgomery Securities LLC.........................
Total..................................................... [ ]
=============
</TABLE>
Sch A-1
<PAGE>
SCHEDULE B
Number of Initial Maximum Number of
International International Option
Securities to be Sold Securities to be Sold
--------------------- ----------------------
-------------- --------------
Total [ ] [ ]
============== ==============
Sch B-1
<PAGE>
SCHEDULE C
SNYDER COMMUNICATIONS, INC.
[________] Shares of Common Stock
(Par Value $.001 Per Share)
1. The initial public offering price per share for the Securities,
determined as provided in said Section 2, shall be $[______].
2. The purchase price per share for the International Securities to
be paid by the several International Managers shall be $[______], being an
amount equal to the initial public offering price set forth above less
$[____] per share.
Sch B-2
<PAGE>
SCHEDULE D
Snyder Communications, Inc.
Daniel M. Snyder
Michele D. Snyder
USN College Marketing, L.P.
MBZ Trust of 1996
Mortimer B. Zuckerman
Fred Drasner
A. Clayton Perfall
Philip Guarascio
Mark E. Jennings
Sch D-1
<PAGE>
SCHEDULE E
G.P. Snyder Marketing Services, Inc.
Snyder Marketing Services, Inc.
Snyder Direct Services, Inc.
Snyder Complete Target Marketing Solutions, Inc.
MMD, Inc.
Sampling Corporation of America
American List Corporation
American Student List Co., Inc.
Brann Holdings Limited
Brann Limited
Bounty Group Holdings Limited
Bounty Holdings Limited
Halliday Jones Sales Limited
GEM Communications Inc.
Rapid Deployment Group Limited
Rapid Deployment Limited
PharmFlex, Inc.
Snyder Communications Holdings (UK) Ltd.
Blau Marketing Technologies, Inc.
Arnold Communications, Inc.
Ellert Retail Operation Services Limited
Health Products Research, Inc.
Healthcare Promotions, LLC
Publimed Promotion S.A.
CLI Pharma S.A.
Sch E-1
<PAGE>
Exhibit A-1
FORM OF OPINION OF SHAW PITTMAN POTTS & TROWBRIDGE
TO BE DELIVERED PURSUANT TO SECTION 5(b)
1. The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware.
2. The Company has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Prospectuses and to enter into and perform its obligations under the
U.S. Purchase Agreement and the International Purchase Agreement.
3. The Company is in good standing in each jurisdiction that issued a
Company Good Standing Certificate.
4. The authorized, issued and outstanding capital stock of the Company is
as set forth in the Prospectuses in the column entitled "Actual" under
the caption "Capitalization" (except for subsequent issuances, if any,
pursuant to the U.S. Purchase Agreement and the International Purchase
Agreement or pursuant to reservations, agreements or employee benefit
plans referred to in the Prospectuses or pursuant to the exercise of
convertible securities or options referred to in the Prospectuses);
the shares of issued and outstanding capital stock of the Company
outstanding prior to the issuance of the Company Shares have been duly
authorized and validly issued and are fully paid and non-assessable
and no holder of the Company Shares is or will be subject to personal
liability by reason of being such a holder; the Company Shares have
been duly authorized and, when issued and delivered to the U.S.
Underwriters and the International Managers in accordance with the
terms of the U.S. Purchase Agreement and the International Purchase
Agreement, will be validly issued, fully paid and nonassessable; and
none of the outstanding shares of capital stock of the Company was
issued in violation of any preemptive rights under the General
Corporation Law of the State of Delaware.
5. To our knowledge, when issued and delivered to the U.S. Underwriters
and the International Managers against payment therefor in accordance
with the terms of the U.S. Purchase Agreement and the International
Purchase Agreement, the issuance and sale of the Company Shares by the
Company will
A-1-1
<PAGE>
not be subject to any preemptive or other similar contractual rights
that would entitle any person to acquire any of the Company Shares
upon the issuance and sale by the Company.
6. Each Subsidiary is validly existing as a corporation or partnership,
as the case may be, in good standing under the laws of the
jurisdiction of incorporation, has corporate or partnership, as the
case may be, power and authority to own, lease and operate its
properties and to conduct its business as described in the
Prospectuses and is duly qualified as a foreign corporation or
partnership, as the case may be, to transact business and is in good
standing in each jurisdiction that issued a Subsidiary Good Standing
Certificate.
7. All of the issued and outstanding capital stock of each Subsidiary has
been duly authorized and validly issued, is fully paid and non-
assessable and, based upon our review of the capital stock records of
the Subsidiaries, is owned by the Company directly or through
subsidiaries, free and clear of any security interest, mortgage,
pledge, lien, encumbrance, claim or equity. None of the outstanding
shares of capital stock of any Subsidiary was issued in violation of
the preemptive or similar rights of any securityholder of such
subsidiary.
8. The U.S. Purchase Agreement and the International Purchase Agreement
have been duly authorized, executed and delivered by the Company. The
performance by the Company of its obligations under the U.S. Purchase
Agreement and the International Purchase Agreement and the
consummation of the transactions contemplated therein and compliance
by the Company with its obligations under the U.S. Purchase Agreement
and the International Purchase Agreement have been duly authorized by
the Company.
9. The Registration Statement was declared effective under the 1933 Act
on May __, 1998, the U.S. Prospectus was filed with the Commission
pursuant to Rule 424(b) of the 1933 Act Regulations on May __, 1998
and, to our knowledge, no stop order suspending the effectiveness of
the Registration Statement has been issued and no proceeding for that
purpose is pending or threatened by the Commission.
10. The Registration Statement and the Prospectuses, excluding the
documents incorporated by reference therein, as of their respective
effective or issue dates (except for the financial statements and the
notes thereto and the supporting schedules and other financial data
included therein, as to which we express no opinion) comply as to form
in all material respects with the requirements of the 1933 Act and the
1933 Act Regulations.
A-1-2
<PAGE>
11. The documents incorporated by reference in the Prospectuses (except
for the financial statements and the notes thereto and the supporting
schedules included therein and other financial data included therein,
as to which we express no opinion), when they became effective or at
the time they were filed with the Commission, complied as to form in
all material respects with the requirements of the 1934 Act and the
rules and regulations of the Commission thereunder.
12. The form of certificate used to evidence the Common Stock complies in
all material respects with the requirements of the General Corporation
Law of the State of Delaware, any applicable requirements of the
Certificate of Incorporation and Bylaws of the Company and the
requirements of the New York Stock Exchange.
13. To our knowledge, except as set forth in the Prospectuses, there is
not pending any action, suit, proceeding, inquiry or investigation to
which the Company or any subsidiary is a party, or to which the
property of the Company or any subsidiary is subject, before or
brought by any court or governmental agency or body, domestic or
foreign which might reasonably be expected to result in a Material
Adverse Effect, or which might reasonably be expected to materially
and adversely affect the properties or assets of the Company and its
subsidiaries considered as one enterprise, or the consummation of the
transactions contemplated in the U.S. Purchase Agreement and the
International Purchase Agreement or the Exchange Agreement or the
performance by the Company of its obligations thereunder.
14. The information in the Prospectuses under "Risk Factors - Government
Regulation," "Risk Factors - Shares Eligible For Future Sale and
Registration Rights", "Risk Factors - Effect of Certain Charter and
Bylaw Provisions," "Shares Eligible for Future Resale," and
"Considerations for Non-United States Holders" and in the Registration
Statement under Item 15, to the extent that it describes matters of
law, summaries of legal matters, the Company's Certificate of
Incorporation or Bylaws, or legal proceedings, or legal conclusions,
has been reviewed by us and is correct in all material respects.
15. To our knowledge, there are no statutes or regulations that are
required to be described in the Prospectuses that are not described as
required.
16. The descriptions in the Prospectuses of contracts and other legal
documents to which the Company or any subsidiary is a party are
accurate in all material
A-1-3
<PAGE>
respects. To our knowledge, there are no franchises, contracts,
indentures, mortgages, loan agreements, notes, leases or other
instruments required to be described or referred to in the
Prospectuses or to be filed as exhibits thereto other than those
described or referred to in the Prospectuses or filed as exhibits to
the Registration Statement, and the descriptions thereof or references
thereto are accurate in all material respects.
17. To our knowledge, neither the Company nor any Subsidiary is in
violation of its charter or bylaws or other organizational instrument,
and no default by the Company or any Subsidiary exists in the due
performance or observance of any material obligation, agreement,
covenant or condition contained in any contract, indenture, mortgage,
loan agreement, note, lease or other agreement or instrument that is
described or referred to in the Registration Statement or the
Prospectuses or filed as an exhibit to the Registration Statement.
18. No filing with, or authorization, approval, consent, license, order,
registration, qualification or decree of, any domestic court or
governmental authority or agency (other than under the 1933 Act and
the 1933 Act Regulations and the Securities Exchange Act of 1934,
which have been obtained, or as may be required under the securities
or blue sky laws of the various states, as to which we express no
opinion) is necessary or required in connection with the due
authorization, execution and delivery of the U.S. Purchase Agreement
and the International Purchase Agreement by the Company, or for the
offering, issuance, sale or delivery by the Company of the Company
Shares to the U.S. Underwriters and the International Managers in
accordance with the U.S. Purchase Agreement and the International
Purchase Agreement.
19. The execution, delivery and performance of the U.S. Purchase Agreement
and the International Purchase Agreement by the Company, and the
consummation of the transactions contemplated therein by the Company,
and the compliance by the Company with its obligations under the U.S.
Purchase Agreement and the International Purchase Agreement, do not
and will not, whether with or without the giving of notice or lapse of
time or both, conflict with or constitute a breach of, or default or
Repayment Event (as defined in Section 1(a)(x) of the Purchase
Agreements) under or, to our knowledge, result in the creation or
imposition of any lien, charge or encumbrance upon any property or
assets of the Company or any Subsidiary under any indenture, mortgage,
deed of trust, note agreement or other agreement or instrument to
which the Company or any Subsidiary is a party or by which any of them
or their properties is or may be bound, or to which any of them or
their properties may be subject, that is filed as an exhibit to the
Registration Statement or which is otherwise known
A-1-4
<PAGE>
to us, except for such conflicts, breaches or defaults or liens,
charges or encumbrances that would not have a Material Adverse Effect,
nor will such action result in any violation of the provisions of the
charter or bylaws or other organizational instrument, as the case may
be, of the Company or any Subsidiary or any applicable law, statute,
rule, regulation (other than the blue sky or securities laws or
regulations of the various states, as to which we express no opinion),
judgment, order, writ or decree, known to us, of any government,
government instrumentality or court, domestic or foreign, having
jurisdiction over the Company or any Subsidiary or any of their
respective properties, assets or operations.
20. To our knowledge, other than as described in the Prospectuses, there
are no persons with registration rights or other similar rights to
have any securities registered pursuant to the Registration Statement
or otherwise registered by the Company under the 1933 Act (other than
rights which have been waived or satisfied).
21. The Company is not and, immediately after receiving the proceeds from
the sale of the Company Shares, will not be an "investment company" or
an entity "controlled" by an "investment company" as such terms are
defined in the Investment Company Act of 1940, as amended.
22. Each Selling Stockholder is the sole registered owner of the
securities to be sold by it pursuant to the U.S. Purchase Agreement
and the International Purchase Agreement.
A-1-5
<PAGE>
Exhibit A-2
Because the primary purpose of our professional engagement was not to
establish or confirm factual matters or financial or accounting matters and
because of the wholly or partially non-legal character of many of the statements
contained in the Registration Statement or the Prospectuses, we are not passing
upon and do not assume any responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration Statement or the
Prospectuses and we make no representation that we have independently verified
the accuracy, completeness or fairness of such statements. Without limiting the
foregoing, we assume no responsibility for, and have not independently verified,
the accuracy, completeness or fairness of the financial statements and the notes
thereto and the schedules and other financial data included in the Registration
Statement and we have not examined the accounting or financial records from
which such financial statements, notes, schedules and data are derived.
However, on the basis of our participation, as counsel to the Company,
with representatives of the Company and its subsidiaries in the preparation of
the Registration Statement and the Prospectuses, and our participation with
representatives of the Company, its independent public accountants and the
Underwriters at meetings in which the contents of the Registration Statement and
the Prospectuses and related matters were discussed and the examination by us of
such corporate records, statutes, documents and questions of law as we deemed
necessary, but without independent verification by us of the accuracy,
completeness and fairness of the statements contained in the Registration
Statement and the Prospectuses, and without commenting as to the financial
statements and the notes thereto and the schedules and other financial data
included therein, nothing has come to our attention that would lead us to
believe that the Registration Statement, at the time it became effective under
the Securities Act, contained an untrue statement of material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, or that the Prospectuses, or any amendment or
supplement thereto (except for the financial statements and the notes thereto
and the schedules and other financial data included or incorporated or deemed to
be incorporated by reference therein or omitted therefrom, as to which we make
no statement), as of its date and as of the Closing Time, contained or contains
any untrue statement of material fact or omitted or omits to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
A-2-1
<PAGE>
Exhibit B
FORM OF OPINION OF COUNSEL FOR THE SELLING SHAREHOLDERS
TO BE DELIVERED PURSUANT TO SECTION 5(c)
1. No filing with, or consent, approval, authorization, license, order,
registration, qualification or decree of, any court or governmental
authority or agency, domestic or foreign, other than the issuance of the
order of the Commission declaring the Registration Statement effective and
such authorizations, approvals or consents as may be necessary under state
securities laws (as to which we need to express no opinion), is necessary
or required to be obtained by the Selling Shareholders for the performance
by each Selling Shareholder of its obligations under the U.S. Purchase
Agreement and the International Purchase Agreement or in the Custody
Agreement and Power of Attorney, or in connection with the offer, sale or
delivery of the Securities.
2. Each Custody Agreement and Power of Attorney has been duly executed and
delivered by the respective Selling Shareholder named therein and
constitutes the legal, valid and binding agreement of such Selling
Shareholder, enforceable in accordance with its terms, subject to the
qualification that the enforceability of such Selling Shareholder's
obligations under the Custody Agreement and Power of Attorney may be
limited by bankruptcy, fraudulent conveyance, insolvency, reorganization,
moratorium, and other laws relating to or affecting creditors' rights
generally, and by general equitable principles (whether applied by a court
of law or equity).
3. The U.S. Purchase Agreement and the International Purchase Agreement have
been duly authorized, executed and delivered by or on behalf of each
Selling Shareholder.
4. American Stock Transfer & Trust Company has been duly authorized by each
Selling Shareholder to deliver the Securities on behalf of such Selling
Shareholder in accordance with the terms of the U.S. Purchase Agreement and
the International Purchase Agreement and the Custody Agreement and Power of
Attorney.
5. The execution, delivery and performance of the U.S. Purchase Agreement, the
International Purchase Agreement and the Custody Agreement and Power of
Attorney and the sale and delivery of the Securities and the consummation
of the transactions contemplated in the U.S. Purchase Agreement and the
International Purchase Agreement and in the Registration Statement and
compliance by each Selling Shareholder with its obligations under the U.S.
Purchase Agreement and the International Purchase Agreement have been duly
authorized by all necessary action
B-1
<PAGE>
on the part of such Selling Shareholder and, to the best of our knowledge,
(i) do not and will not, whether with or without the giving of notice or
-
passage of time or both, result in the creation or imposition of any tax,
lien, charge or encumbrance upon the Securities to be sold by such Selling
Shareholder nor (ii) will such action result in any violation of the
--
provisions of the charter or by-laws of any Selling Shareholder, if
applicable, or any law, administrative regulation, judgment or order of any
governmental agency or body or any administrative or court decree having
jurisdiction over such Selling Shareholder or any of its properties.
6. Each Selling Shareholder is the sole registered owner of the Securities to
be sold by such Selling Shareholder pursuant to the U.S. Purchase Agreement
and the International Purchase Agreement and has full right, power and
authority to sell, transfer and deliver such Securities pursuant to the
U.S. Purchase Agreement and the International Purchase Agreement. Upon
delivery of such Securities, such Selling Shareholder will transfer to the
Underwriters who have purchased such Securities pursuant to the U.S.
Purchase Agreement and the International Purchase Agreement (without notice
of any adverse claim of such Selling Shareholder and who are otherwise bona
fide purchasers for purposes of the Uniform Commercial Code) good and valid
title to such Securities, free and clear of any pledge, lien, security
interest, charge, claim, equity or encumbrance of any kind.
B-2
<PAGE>
Exhibit C
FORM OF LOCK-UP FROM DIRECTORS, OFFICERS OR OTHER
SHAREHOLDERS PURSUANT TO SECTION 5(k)
May , 1998
MERRILL LYNCH INTERNATIONAL
GOLDMAN SACHS INTERNATIONAL
BEAR, STEARNS INTERNATIONAL LIMITED
NATIONSBANC MONTGOMERY SECURITIES LLC
as Lead Managers of the several
International Managers to be named in the
within-mentioned International Purchase Agreement
c/o Merrill Lynch International
Ropemaker Place
25 Ropemaker Street
London EC2Y 9L4
England
Re: Proposed Public Offering by Snyder Communications, Inc.
-------------------------------------------------------
Dear Sirs:
The undersigned, a stockholder and an officer and/or director/*/ of Snyder
Communications, Inc., a Delaware corporation (the "Company"), understands that
Merrill Lynch International ("Merrill Lynch") and Goldman Sachs International,
Bear, Stearns International Limited and NationsBanc Montgomery Securities LLC
propose to enter into an International Purchase Agreement (the "International
Purchase Agreement") with the Company and the other parties named therein
providing for the public offering of shares (the "Securities") of the Company's
common stock, par value $.001 per share (the "Common Stock"). In recognition of
the benefit that such an offering will confer upon the undersigned as a
stockholder and an officer and/or director/*/ of the Company, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the undersigned agrees with each underwriter to be named in the
International Purchase
_______________________
/*/ Delete or revise bracketed language as appropriate
C-1
<PAGE>
Agreement that, during a period of 90 days from the date of the International
Purchase Agreement, the undersigned will not, without the prior written consent
of Merrill Lynch, directly or indirectly, (i) offer, pledge, sell, contract to
-
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant for the sale of, or otherwise
dispose of or transfer any shares of Common Stock or any securities convertible
into or exchangeable or exercisable for Common Stock, whether now owned or
hereafter acquired by the undersigned or with respect to which the undersigned
has or hereafter acquires the power of disposition, or file any registration
statement under the Securities Act of 1933, as amended, with respect to any of
the foregoing or (ii) enter into any swap or any other agreement or any
--
transaction that transfers, in whole or in part, directly or indirectly, the
economic consequence of ownership of the Common Stock, whether any such swap or
transaction is to be settled by delivery of Common Stock or other securities, in
cash or otherwise.
[Notwithstanding the foregoing, the undersigned may, at any time after 30
days from the date of the Closing Time (as defined in the International Purchase
Agreement), pledge as security for borrowed money up to [50%/*/] [all/*/] of
the shares of Common Stock then owned by the undersigned to any commercial
banking institution that is a member of the Federal Reserve System or any
institutional lender that makes loans secured by margin securities in the
ordinary course of business having combined capital and surplus in excess of
$500,000,000 (a "Pledgee") as long as such Pledgee shall have agreed in writing
to be bound by the obligations and restrictions applicable to the Common Stock
under Section 1(c) of the
______________________________
/*/ Include in the case of lock-up agreement of Daniel M. Snyder and Michele
D. Snyder.
/**/ Include in the case of lock-up agreement of USN College Marketing, L.P.
C-2
<PAGE>
International Purchase Agreement and the Lead Managers shall have received an
agreement substantially in the form of Exhibit D to the International Purchase
Agreement signed by such Pledgee.]/*/
Very truly yours,
Signature:____________________
Print Name:___________________
_______________________
/*/ Include in the case of lock-up agreement of Daniel M. Snyder, Michele D.
Snyder and USN College Marketing, L.P.
C-3
<PAGE>
Exhibit D
FORM OF LOCK-UP FROM PLEDGEE PURSUANT TO SECTION 1(c)
, 1998
MERRILL LYNCH INTERNATIONAL
GOLDMAN SACHS INTERNATIONAL
BEAR, STEARNS INTERNATIONAL LIMITED
NATIONSBANC MONTGOMERY SECURITIES LLC
as Lead Managers of the several
International Managers named in the
within-mentioned International Purchase Agreement
c/o Merrill Lynch International
Ropemaker Place
25 Ropemaker Street
London EC2Y 9L4
England
Re: Public Offering by Snyder Communications, Inc.
----------------------------------------------
Dear Sirs:
The undersigned, a pledgee of shares (the "Pledged Shares") of Common
Stock, par value $.001 per share, of Snyder Communications, Inc., a Delaware
corporation (the "Company"), understands that Merrill Lynch International
("Merrill Lynch"), Goldman Sachs International, Bear, Stearns International
Limited and NationsBanc Montgomery Securities LLC have entered into an
International Purchase Agreement, dated May , 1998 (the "International
Purchase Agreement"), with the Company and the other parties named therein
providing for the public offering of shares of the Company's Common Stock. For
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the undersigned agrees with each underwriter named in the
International Purchase Agreement that, during a period of 90 days from the
date of the International Purchase Agreement, the undersigned will not, without
the prior written consent of Merrill Lynch, directly or indirectly, (i) offer,
-
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant for
the sale of, or otherwise dispose of or transfer any Pledged Shares or any
securities convertible into or exchangeable or exercisable for any Pledged
Shares, whether now owned or hereafter acquired by the
D-1
<PAGE>
undersigned or with respect to which the undersigned has or hereafter acquires
the power of disposition, or file any registration statement under the
Securities Act of 1933, as amended, with respect to any of the foregoing or (ii)
enter into any swap or any other agreement or any transaction that transfers, in
whole or in part, directly or indirectly, the economic consequence of ownership
of any Pledged Shares, whether any such swap or transaction is to be settled by
delivery of any Pledged Shares or other securities, in cash or otherwise.
Very truly yours,
Name of Pledgee
By:_____________________
Name:
Title:
D-2
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports and to all references to our Firm included in or made part of the
registration statement.
ARTHUR ANDERSEN LLP
Washington, D.C.
May 15, 1998
<PAGE>
Exhibit 23.3
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated April 11, 1997 accompanying the
consolidated financial statements of American List Corporation included in the
Registration Statement and Prospectus of Snyder Communications, Inc. on Pre-
Effective Amendment No. 2 to Form S-3 (File No. 333-50929) (the consolidated
financial statements of American List Corporation are not presented separately
therein). We consent to the use of the aforementioned report in such
Registration Statement and Prospectus and to the use of our name as it appears
under the caption "Experts".
GRANT THORNTON LLP
Melville, New York
May 15, 1998
<PAGE>
Exhibit 23.4
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectuses constituting part of
this Registration Statement on Form S-3 of Snyder Communications, Inc. of our
report dated May 30, 1997, on the financial statements of Brann Holdings Limited
as of and for the three years ended December 31, 1996 which appear in such
Prospectuses. We also consent to the reference to us under the heading
"Experts" in such Prospectuses.
PRICE WATERHOUSE
Price Waterhouse
Chartered Accountants
and Registered Auditors
Bristol, England
May 15, 1998
