<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 15, 1997
REGISTRATION NO. 333-34751
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
HEALTHWORLD CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 7311 13-3922288
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
------------------------
100 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10013
(212) 966-7640
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
STEVEN GIRGENTI
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
HEALTHWORLD CORPORATION
100 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10013
(212) 966-7640
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
Copies to:
<TABLE>
<S> <C>
HOWARD S. JACOBS, ESQ. EDWARD D. SOPHER, ESQ.
ROSENMAN & COLIN LLP STEPHEN E. OLDER, ESQ.
575 MADISON AVENUE AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P.
NEW YORK, NEW YORK 10022-2585 590 MADISON AVENUE
TEL: (212) 940-8800 NEW YORK, NEW YORK 10022-4616
FAX: (212) 940-8776 TEL: (212) 872-1000
FAX: (212) 872-1002
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, 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 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 SECTION 8(A), MAY
DETERMINE.
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<PAGE>
HEALTHWORLD CORPORATION
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
ITEM NUMBER AND
HEADING IN FORM S-1 LOCATION IN PROSPECTUS
------------------------------------------------------ ------------------------------------------------------
<S> <C> <C>
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus...................... Forepart; Outside Front Cover Page; Inside Cover Page;
Cross Reference Sheet
2. Inside Front and Outside Back Cover Pages of
Prospectus.......................................... Inside Front Cover Page; Additional Information;
Outside Back Cover Page
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges........................... Outside Front Cover Page; Prospectus Summary; Risk
Factors
4. Use of Proceeds....................................... Prospectus Summary; Use of Proceeds
5. Determination of Offering Price....................... Outside Front Cover Page; Underwriting
6. Dilution.............................................. Risk Factors; Dilution
7. Selling Security Holders.............................. *
8. Plan of Distribution.................................. Outside Front Cover Page; Underwriting
9. Description of Securities to be Registered............ Description of Capital Stock
10. Interests of Named Experts and Counsel................ Legal Matters; Experts
11. Information with Respect to the Registrant............ Outside Front Cover Page; Prospectus Summary; The
Consolidation; Risk Factors; Dividend Policy;
Dilution; Capitalization; Selected Pro Forma
Combined Financial Information; Selected Financial
Information of GHB&M and Milton; Management's
Discussion and Analysis of Financial Condition and
Results of Operations; Business; Management; Certain
Relationships and Related Transactions; Principal
Stockholders; Description of Capital Stock; Shares
Eligible for Future Sale; Financial Statements
12. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities...................... *
</TABLE>
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* Omitted because answer is not applicable or is negative.
<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.
PROSPECTUS SUBJECT TO COMPLETION
OCTOBER 15, 1997
2,100,000 SHARES
[LOGO]
HEALTHWORLD CORPORATION
COMMON STOCK
------------------------------
Healthworld Corporation (the 'Company') is hereby offering 2,100,000 shares
of its common stock, $.01 par value per share (the 'Common Stock'). It is
currently estimated that the initial public offering price for the Common Stock
will be between $8.00 and $9.50 per share. Prior to the Offering, there has been
no public market for the Common Stock of the Company. See 'Underwriting' for a
discussion of the factors considered in determining the initial public offering
price of the Common Stock. The Common Stock has been approved for quotation on
The Nasdaq National Market under the symbol 'HWLD.'
------------------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE 'RISK FACTORS' BEGINNING ON PAGE 7.
------------------------------
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.
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- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
<S> <C> <C> <C>
Per Share....................... $ $ $
Total(3)........................ $ $ $
</TABLE>
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(1) Excludes a non-accountable expense allowance payable by the Company to
Unterberg Harris and Pennsylvania Merchant Group Ltd, the representatives
(the 'Representatives') of the several underwriters (the 'Underwriters'),
equal to 1% of the gross proceeds of the Offering. The Company has agreed to
indemnify the Underwriters against certain liabilities, including
liabilities under the Securities Act of 1933, as amended. See
'Underwriting.'
(2) Before deducting expenses of the Offering payable by the Company, estimated
at $ .
(3) The Company has granted to the Underwriters an option, exercisable within 30
days after the date of this Prospectus, to purchase up to 315,000 additional
shares of Common Stock solely to cover over-allotments, if any. If such
option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions and Proceeds to Company will be $ ,
$ and $ , respectively. See 'Underwriting.'
The shares of Common Stock are offered by the Underwriters, subject to
receipt and acceptance of such shares by them. The Underwriters reserve the
right to reject any order in whole or in part. It is expected that the shares
will be ready for delivery in New York, New York, on or about ,
1997.
------------------------------
UNTERBERG HARRIS PENNSYLVANIA MERCHANT GROUP LTD
, 1997
<PAGE>
[THE NAME 'HEALTHWORLD CORPORATION' ABOVE A PICTURE OF THE EARTH, BENEATH WHICH
IS A LIST OF THE COMPANY'S SERVICES]
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH
SECURITIES AND THE IMPOSITION OF A PENALTY BID IN CONNECTION WITH THE OFFERING.
FOR A DESCRIPTION OF THESE ACTIVITIES, SEE 'UNDERWRITING.'
'Healthworld' and the Healthworld logo are registered trademarks for which
the Company holds a license. Trade names and trademarks of other companies
appearing in this Prospectus are the property of their respective holders.
2
<PAGE>
[Three page fold out containing the Healthworld name and logo, along with
the phrase underneath the name and logo 'Worldwide Healthcare Communications,'
various pictures of services provided by the Company and advertising campaigns
and campaign materials prepared by the Company, and the following textual
statements: 'The Company provides a wide array of marketing and communications
services to its clients, ranging from the execution of a discrete marketing
project, such as designing product packaging, to taking responsibility for the
overall marketing message, which enables the Company to incorporate a wide
variety of its services into one integrated marketing campaign' and 'The Company
is a licensee of Healthworld B.V., a worldwide network of licensed independent
agencies offering marketing and communications services. Through Healthworld
B.V., the Company is able to offer its clients the creative talents and
marketing expertise of experienced agencies, as well as their knowledge of local
markets, to develop consistent, integrated multinational programs.']
<PAGE>
PROSPECTUS SUMMARY
On the date of this Prospectus, Healthworld Corporation will acquire (the
'Consolidation'), in exchange for shares of its Common Stock, all of the issued
and outstanding common stock of each of (i) Girgenti, Hughes, Butler & McDowell,
Inc. ('GH') and its affiliated entities, consisting of Medical Education
Technologies, Inc., Syberactive, Inc., Brand Research Corporation, Black Cat
Graphics, Inc. and GHBM, Inc. (together with GH, 'GHB&M'), each of which is
under common control and management, and (ii) Milton Marketing Group Limited and
its subsidiaries ('Milton'). Unless otherwise indicated, all references herein
to the 'Company' include GHB&M and Milton and give effect to the Consolidation
and all references herein to 'Healthworld' refer to Healthworld Corporation
prior to the consummation of the Consolidation. The following summary does not
purport to be complete and is qualified in its entirety by the more detailed
information and financial statements and the related notes appearing elsewhere
in this Prospectus. Unless otherwise indicated, all share, per share and
financial information set forth herein assume no exercise of the Underwriters'
over-allotment option. All statistical and financial information presented in
this Prospectus with respect to Milton has been converted into U.S. Dollars
using an exchange rate as of June 30, 1997 of $1.67=pounds 1.00, except as
otherwise provided herein and except for such information contained in or
derived from Milton's financial statements included elsewhere herein.
THE COMPANY
Healthworld Corporation is an international marketing and communications
services company specializing in health care. On the date of this Prospectus,
Healthworld will acquire GHB&M and Milton, after which the Company will conduct
all of its operations in the United States through GHB&M and in the United
Kingdom through Milton. See 'The Consolidation.'
The Company provides many of the world's largest pharmaceutical and other
health care companies with a comprehensive range of integrated strategic
marketing services designed to accelerate the market acceptance of new products
and to sustain marketability throughout their life-cycles. The Company's
services include advertising and promotion, contract sales, consulting,
publishing, medical education, public relations, interactive multimedia,
database marketing and marketing research services. The Company offers its
clients global reach and expertise through its operations in the United States
and the United Kingdom, and through Healthworld B.V., a world-wide network of
licensed independent marketing and communications agencies located in 12 other
countries, in which GHB&M and Milton are founding licensees.
The Company believes that its understanding of the scientific and medical
issues relating to its clients' products and its in-depth knowledge of the
health care industry and regulatory environment are competitive advantages and
are critical for developing the most effective marketing and communications
campaigns and strategies. The Company relies on its creative talent and utilizes
new media and technologies to continually develop better ways to effectively
promote its clients' products. GHB&M, which has consistently been recognized in
the industry as one of the top health care communications agencies, was named
'Agency of the Year' in 1993 and 1996 by Med Ad News, a leading medical
advertising and communications trade publication, based on a number of criteria,
including creative marketing ability and account wins and losses, and was a
finalist for such award in 1992 and 1994. GHB&M was also named 'Most Creative
Agency' by Med Ad News in 1995 based on a poll of the presidents of the top 50
communications agencies. The Company believes that GHB&M was one of the first
companies to develop a direct-to-consumer marketing ('DTC') campaign for a
prescription drug, and that it is an industry leader in the development of DTC
campaigns based on the number of DTC assignments it has performed. The Company
also believes that Milton is an industry leader in the development of marketing
strategies and campaigns for 'switching' a drug from prescription to
over-the-counter status, based on the number of switching assignments it has
performed.
Pharmaceutical and other health care companies have been increasing their
spending on marketing and communications services and, in response to
cost-containment pressures, are increasingly outsourcing certain labor
intensive, high cost services, including marketing and sales and research
functions. According to industry sources, worldwide spending by pharmaceutical
and biotechnology companies on promotional marketing and contract sales is
estimated to reach $5.9 billion in 1997. The Company believes that these
spending levels will continue to increase as companies seek to recoup the high
costs of product development, maximize sales, develop
3
<PAGE>
brand loyalty and achieve a high market share in the shortest possible time
period due to a limited patent life on new products. In addition, cost
constraints imposed as a result of health care reform and the emergence of
managed care have forced pharmaceutical and other health care companies to spend
more on marketing and communications services to educate the market as to
cost-effectiveness as well as the safety and efficacy of their products.
Furthermore, the use of DTC to promote prescription drugs has grown rapidly
and is expected to continue to grow in the future. In 1996, the first year in
which more money was spent on DTC than on advertising to physicians, industry
sources report that pharmaceutical companies spent approximately $600 million on
DTC, which is twice as much as was spent in 1995 and almost 10 times more than
in 1991, and that figures for the first few months of 1997 suggest that the
total may double again and exceed $1.0 billion for the year. In 1994, 1995, 1996
and the six months ended June 30, 1996 and 1997, the Company's revenues from DTC
represented 18%, 21%, 20%, 18% and 14%, respectively, of the Company's pro forma
combined revenues.
The Company's contract sales teams form a network of trained professionals
that provides clients with substantial flexibility in selecting the extent and
costs of promoting products as well as such clients' level of involvement in
managing the sales effort. The Company believes that the speed of recruitment,
quality of training and management of sales representatives, supported by
advanced information technology, are key to providing clients with a sales force
tailored to meet their geographic and scheduling needs. Currently, the Company's
contract sales organization operates in the United Kingdom and provides its
services primarily to consumer products companies, utilities and other
non-health care related companies. The Company began providing contract sales
services to pharmaceutical and other health care companies in the United Kingdom
in May 1997, and, consequently, as of June 30, 1997, revenues generated from
such clients were not significant. The Company intends to expand its contract
sales organization into the United States in the first quarter of 1998 and
believes that such expansion will enable it to complement its existing
communications services with a flexible sales force designed to augment its
clients' sales activities.
The Company's strategy is to capitalize on continued growth in marketing
and communications spending by pharmaceutical and other health care companies by
(i) maintaining and enhancing its creative excellence and technical expertise,
(ii) offering its clients a comprehensive range of integrated services, (iii)
continuing to specialize in health care marketing and communications services,
(iv) increasing its contract sales services, and (v) further expanding globally.
The Company intends to implement its strategy through internal development and
potential acquisitions.
Healthworld was incorporated in Delaware in September 1996 and, upon
consummation of the Consolidation, will conduct all of its operations through
GHB&M and Milton, which have been operating in the marketing and communications
industry since April 1986 and August 1978, respectively. The Company's principal
executive offices are located at 100 Avenue of the Americas, New York, New York
10013. The Company's telephone number is (212) 966-7640.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company.......... 2,100,000 shares
Common Stock to be outstanding immediately
after the Offering......................... 7,100,000 shares(1)(2)
Use of Proceeds.............................. For (i) start-up and other funding costs relating to the expansion
of the Company's contract sales operations into the United States,
(ii) capital expenditures associated with the expansion of the
Company's New York facility, (iii) the repayment of a $456,000
loan, and (iv) working capital and general corporate purposes,
including potential acquisitions. See 'Use of Proceeds.'
Nasdaq National Market Symbol................ HWLD
</TABLE>
- ------------------
(1) Includes 5,000,000 shares of Common Stock to be issued in connection with
the Consolidation.
(2) Excludes 710,000 shares of Common Stock reserved for issuance upon the
exercise of stock options which may be granted under the Company's 1997
Stock Option Plan (the 'Stock Option Plan'), none of which have been granted
to date. As of the date of this Prospectus, the Company will grant options
under the Stock Option Plan to purchase up to an aggregate of 498,500 shares
of Common Stock, at an exercise price per share equal to the initial public
offering price. See 'Management--Stock Option Plan.'
5
<PAGE>
SUMMARY PRO FORMA COMBINED FINANCIAL INFORMATION
The following summary pro forma combined financial information gives effect
to the Consolidation, among other events, as more fully described in 'The
Consolidation,' and should be read in conjunction with the Company's unaudited
Pro Forma Combining Financial Statements and notes thereto, the Combined
Financial Statements of GHB&M and notes thereto, the Consolidated Financial
Statements of Milton and notes thereto and 'Management's Discussion and Analysis
of Financial Condition and Results of Operations' contained elsewhere in this
Prospectus. The Consolidation will be accounted for as a pooling of interests.
Such financial data covers periods when GHB&M and Milton were not under common
control or management and may not be indicative of results that would have been
reported had the Consolidation and the other pro forma adjustments occurred nor
may it be indicative of the Company's future financial position or operating
results.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31,(1) JUNE 30,(2)
----------------------------- ------------------
1994 1995 1996 1996 1997
------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues................................................... $13,081 $16,767 $24,209 $11,322 $14,783
Operating expenses:
Salaries and related costs............................... 7,890 9,857 15,733 7,701 10,510
Other operating expenses................................. 3,727 4,469 5,274 2,621 2,890
------- ------- ------- ------- -------
11,617 14,326 21,007 10,322 13,400
------- ------- ------- ------- -------
Income from operations..................................... 1,464 2,441 3,202 1,000 1,383
Income before provision for income taxes................... 1,450 2,439 3,133 1,048 1,404
Net income(3).............................................. $ 837 $ 1,401 $ 1,828 $ 623 $ 820
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Earnings per share......................................... $ 0.17 $ 0.28 $ 0.37 $ 0.12 $ 0.16
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Shares used in computing earnings per share................ 5,000 5,000 5,000 5,000 5,000
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1997
---------------------------
PRO FORMA
PRO FORMA AS ADJUSTED(4)
--------- --------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Working capital....................................................................... $ 48 $ 15,453
Total assets.......................................................................... 19,916 34,865
Long-term debt, including current portion............................................. 1,324 868
Stockholders' equity.................................................................. 5,557 20,962
</TABLE>
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(1) Includes financial data for GHB&M based on a December 31 fiscal year end and
for Milton based on a November 30 fiscal year end.
(2) Includes financial data for GHB&M and Milton for the six month period
commencing January 1 and ending June 30.
(3) Immediately upon consummation of the Consolidation, the status of the
companies comprising GHB&M as 'S Corporations' under Subchapter S of the
Internal Revenue Code of 1986, as amended (the 'Code'), will terminate. The
pro forma provision for income taxes reflects a provision for federal income
taxes as if each of such entities were a 'C Corporation' rather than an 'S
Corporation' for such periods. See 'The Consolidation.'
(4) Gives effect to the Offering at an assumed initial public offering price of
$8.75 per share and the application of the estimated net proceeds therefrom,
including the repayment of a $456,000 loan. See 'Use of Proceeds.'
6
<PAGE>
RISK FACTORS
An investment in the Common Stock offered hereby involves a high degree of
risk and immediate substantial dilution. In addition to the other information
contained in this Prospectus, prospective investors should carefully consider
the following considerations and risks in evaluating an investment in the
Company.
ABSENCE OF COMBINED OPERATING HISTORY. Although GHB&M and Milton have been
operating in the advertising, marketing and communications industry since April
1986 and August 1978, respectively, Healthworld, which was incorporated in
September 1996, has conducted no operations and generated no revenues to date.
In connection with the Consolidation, Healthworld entered into agreements to
acquire GHB&M and Milton on the date of this Prospectus. GHB&M and Milton have
been operating and, following the consummation of the Consolidation, will
continue to operate as separate independent entities. Following the
Consolidation, the Company intends to manage the operations of each of GHB&M and
Milton, institute necessary Company-wide systems and procedures to effectively
provide such management, and implement its growth strategy, and does not expect
to realize any cost reductions in the foreseeable future as a result of the
Consolidation. The inability of the Company to successfully manage GHB&M and
Milton would have a material adverse effect on the Company's business, financial
condition and results of operations and would make it unlikely that the
Company's growth strategy will be successful. The unaudited pro forma combining
historical financial results of the Company cover periods when GHB&M, Milton and
Healthworld were not under common control or management and, therefore, may not
be indicative of results that would have been reported by the Company had such
events occurred on the dates specified, nor may they be indicative of the
Company's future financial or operating results. See 'The Consolidation,'
'Management's Discussion and Analysis of Financial Condition and Results of
Operations,' the Company's Pro Forma Combining Financial Statements, the
Combined Financial Statements of GHB&M and the related notes thereto, and the
Consolidated Financial Statements of Milton and the related notes thereto.
DEPENDENCE ON CERTAIN KEY CLIENTS. The Company's revenues are highly
dependent upon the advertising, sales and marketing expenditures of
pharmaceutical and other health care companies and other clients. Generally,
clients are not bound to an individual marketing and communications company, and
any client of the Company could at any time in the future and for any reason,
including a prolonged economic recession or regulatory problems with respect to
a product, reduce its marketing budget, transfer its business to another agency
or take in-house all or part of the business performed by the Company.
The Company derives a large portion of its revenues from a small number of
clients. These clients generally do not engage the Company on an exclusive basis
and may engage different agencies for different services with respect to their
products or with respect to a particular product. Moreover, the contracts with
the Company's clients, except with respect to contract sales services, generally
have a term of one year and, with respect to long-term projects, are renewed on
a year-to-year basis. Such contracts typically relate to specific services or
services only for specific products and may be terminated by the client on short
notice. The Company's contracts relating to its contract sales services
generally are either short-term (i.e., one week to six months) or long-term
(i.e., up to three years), and may also be terminated by the client on short
notice. As a result, the Company's results of operations may be materially
adversely affected by the loss of one or more of its clients, the deterioration
of the Company's relationship with any of its major clients, a decline in the
business of its major clients or a decline in the marketing and communications
spending by its major clients, either generally or with respect to specific
products for which the Company is engaged. See 'Business--Clients' and
'--Competition.' In the third quarter of 1997, one of GHB&M's clients withdrew a
product due to possible side effects previously not associated with such
product, which, for the six months ended June 30, 1996 and 1997, accounted for
approximately 6.3% and 6.5%, respectively, of GHB&M's combined revenues and
approximately 3.6% and 3.3%, respectively, of the Company's pro forma combined
revenues. However, as is typically the case with the Company's clients, the
Company is retained by the client to provide marketing and communications
services with respect to multiple products, and the loss of business with
respect to the withdrawn product is not expected to have a material adverse
effect on the Company's results of operations.
For the 1996 fiscal year and the six months ended June 30, 1997, the five
largest clients of the Company represented an aggregate of 52% and 47%,
respectively, of the Company's pro forma combined revenues, the five largest
clients of GHB&M represented an aggregate of 78% and 79%, respectively, of
GHB&M's combined
7
<PAGE>
revenues, and the five largest clients of Milton represented an aggregate of 49%
and 50%, respectively, of Milton's consolidated revenues. For the 1996 fiscal
year, American Home Products (through its Wyeth-Ayerst Laboratories and
Whitehall Laboratories divisions), Ortho/McNeil Pharmaceuticals (a division of
Johnson & Johnson) and Kraft Jacobs Suchard Limited accounted for an aggregate
of approximately 27%, 9% and 6%, respectively, of the Company's pro forma
combined revenues, American Home Products, Ortho/McNeil Pharmaceuticals and
Sanofi Winthrop Pharmaceuticals accounted for approximately 42%, 16% and 9%,
respectively, of GHB&M's combined revenues, and Ionica plc, Kraft Jacobs Suchard
Limited and The Hospital Savings Association accounted for approximately 13%,
13% and 8%, respectively, of Milton's consolidated revenues. For the six months
ended June 30, 1997, American Home Products, Ionica plc and Ortho/McNeil
Pharmaceuticals accounted for approximately 18%, 8% and 8%, respectively, of the
Company's pro forma combined revenues, American Home Products, Ortho/McNeil
Pharmaceuticals and SmithKline Beecham Pharmaceuticals accounted for
approximately 35%, 17% and 10%, respectively, of GHB&M's combined revenues, and
Ionica plc, News International and Kraft Jacobs Suchard Limited accounted for
approximately 16%, 14% and 10%, respectively, of Milton's consolidated revenues.
MANAGEMENT OF GROWTH; ACQUISITION RISKS. The Company's growth will depend
on a number of factors, including the Company's ability to maintain the high
quality of the services it provides to customers and to increase the number of
services it provides to existing clients, as well as to recruit, motivate and
retain highly skilled creative, technical and marketing personnel. Competition
for highly qualified personnel in the health care communications industry is
intense and the inability to attract and retain key personnel could have a
material adverse effect upon the Company's business, results of operations or
financial condition.
The Company also intends to grow through the acquisition of businesses
specializing primarily in servicing the pharmaceutical and other health care
industries. Although the Company believes that opportunities for future
acquisitions are currently available, due to considerable acquisitions and
consolidations in the marketing and communications industry in recent years,
increased competition for acquisition candidates exists and may continue in the
future. Consequently, there may be fewer acquisition opportunities available to
the Company as well as higher acquisition prices. There can be no assurance that
the Company will be able to identify, acquire, manage or successfully integrate
acquired businesses without substantial costs, delays or operational or
financial problems. While the Company regularly evaluates and discusses
potential acquisitions, the Company currently has no understandings, commitments
or agreements with respect to any acquisitions. The Company may be required to
obtain additional financing to fund future acquisitions. The Company has no
current commitments or arrangements for such additional financing and there can
be no assurance that the Company will be able to obtain additional financing on
acceptable terms or at all. See 'Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources'
and 'Business--Strategy.'
FLUCTUATIONS IN QUARTERLY OPERATING RESULTS. The results of operations of
each of GHB&M and Milton have been and, following the Consolidation, the
Company's results of operations are expected to be, subject to quarterly
fluctuations. Generally, GHB&M's and Milton's revenues and profits are lowest in
the first quarter and highest in the fourth quarter. GHB&M's and Milton's
quarterly revenue trends result from a number of factors, including, among other
things, the timing of commencement, completion or cancellation of major projects
and industry billing practices which are tied to clients' annual marketing
budgets, while GHB&M's and Milton's communications services expenses generally
remain constant. The Company's quarterly results may fluctuate as a result of
such factors and a number of additional factors, including delays or costs
associated with acquisitions, government regulatory initiatives and conditions
in the health care industry generally. The Company believes that quarterly
comparisons of its financial results should not be relied upon as an indication
of future performance. See 'Management's Discussion and Analysis of Financial
Condition and Results of Operations--Quarterly Operating Results.'
CLIENT CONFLICTS OF INTEREST. Client conflicts of interest are inherent in
the marketing and communications industry, particularly with respect to
pharmaceutical and other health care clients for which the Company performs
marketing and communications services, due to the proprietary nature of such
clients' products. The Company's ability to compete for new clients and
assignments is limited by the Company's general practice, and the practice
followed by many of the Company's competitors, of not representing clients with
competing product lines. In addition, the Company is often contractually
precluded from representing companies with competing
8
<PAGE>
products. As a result, the Company may not be retained by existing, new or
potential clients with respect to certain products if the Company provides
marketing or communications services for competing products.
COMPETITION; INDUSTRY CONSOLIDATION. The health care marketing and
communications industry throughout the United States and Europe is highly
competitive. The Company competes with other marketing and communications firms,
including international and local full-service and specialty marketing and
communications firms and, with respect to contract sales and marketing services,
with in-house sales departments of its clients and other contract sales and
marketing organizations.
Consolidation within the pharmaceutical and health care industries as well
as a trend by pharmaceutical and health care companies to allocate outsourcing
of sales, marketing and communications services to fewer organizations, has
heightened the competition among such service providers for a smaller number of
clients. In addition, many of the larger consumer marketing and communications
companies have acquired health care marketing and communications companies,
which themselves have been increasingly consolidating in recent years. Many of
these companies have substantially greater financial resources, personnel and
facilities than the Company. In addition, if the previously described
consolidation trends continue, the Company may face greater competition for
clients. Although the Company believes it is able to compete on the basis of the
quality of its creative product, service, reputation and personal relationships
with clients, there can be no assurance that the Company will be able to
maintain its competitive position in the industry. See 'Business--Competition.'
EXPANSION OF CONTRACT SALES SERVICES. Currently, the Company's contract
sales organization operates only in the United Kingdom and provides its services
primarily to consumer products companies, utilities and other nonhealth care
related companies. The Company began providing contract sales services to
pharmaceutical and other health care companies in the United Kingdom to take
advantage of the increased use by such companies in the United Kingdom of
contract sales forces to market their products in May 1997 and, consequently, as
of June 30, 1997, revenues generated from such clients were not significant. In
addition, the Company currently intends to develop a contract sales organization
in the United States to provide contract sales services to pharmaceutical and
other health care companies. The successful expansion of the Company's contract
sales operations in the United Kingdom and in the United States will be
dependent on a number of factors, including (i) its ability to effectively
compete against the in-house sales departments of pharmaceutical companies and
contract sales organizations specializing in pharmaceutical and other health
care products; (ii) the hiring and training of qualified management personnel;
and (iii) the ability to integrate such contract sales operations into the
Company's current structure. An inability to manage future growth, compete
effectively, or successfully integrate such contract sales operations could have
a material adverse effect on the Company's business, financial condition or
results of operations. See 'Business--Strategy' and 'Business--Competition.'
DEPENDENCE ON KEY PERSONNEL. The Company is dependent on the efforts and
abilities of its senior management, including Steven Girgenti, its Chairman and
Chief Executive Officer, and William Leslie Milton, its Vice Chairman and
President. The loss of the services of either of Mr. Girgenti or Mr. Milton, or
any other key employee could have a material adverse effect on the Company.
Although the Company intends to obtain key person life insurance on the lives of
Messrs. Girgenti and Milton in the amounts of $4.0 million and $2.0 million,
respectively, as to which the Company will be the sole beneficiary, there can be
no assurance that such policies, if procured, would adequately compensate for
the loss of such individuals. Each of Messrs. Girgenti and Milton and certain
other executive officers of the Company will enter into employment agreements
with the Company upon the consummation of the Consolidation. Each member of the
Company's management and other key employees have or will have executed
confidentiality and non-solicitation agreements that restrict such persons from
misappropriating confidential information during such person's term of
employment and thereafter and from soliciting the Company's clients, prospects
or employees following termination of employment. Notwithstanding such
agreements, in the event of loss of any such personnel there can be no assurance
that the Company would be able to prevent the unauthorized disclosure or use of
its knowledge, practices, procedures or client lists. See 'Management.'
UNCERTAINTY IN HEALTH CARE INDUSTRY AND POSSIBLE HEALTH CARE REFORM. The
health care industry is subject to changing political, economic and regulatory
influences that may affect pharmaceutical and other health care companies,
particularly with respect to spending by such companies on marketing and
communications services to promote their products. Numerous governments have
undertaken efforts to control growing health
9
<PAGE>
care costs through legislation, regulation and voluntary agreements with medical
care providers and pharmaceutical and other health care product companies.
Implementation of government health care reform may adversely affect marketing
expenditures by pharmaceutical and other health care companies which could
decrease the business opportunities available to the Company. Management is
unable to predict the likelihood of health care reform legislation being enacted
or the effects such legislation would have on the Company. In addition, the
success of the Company's growth strategy depends on its ability to take
advantage of certain industry trends, including continued increases in overall
spending levels by pharmaceutical and other health care companies for marketing
and communications services. Such growth in spending levels has evolved rapidly
in recent years and the Company is unable to predict whether such growth in
spending will continue at present levels or at all. The Company's results of
operations could be materially adversely affected in the event the Company is
unable to respond effectively to the enactment of health care reform legislation
or changing industry trends which may affect future spending levels by
pharmaceutical and other health care companies for marketing and communications
services. See 'Business--Industry Background.'
INSURANCE AND POTENTIAL LITIGATION. The Company, as part of its business,
develops marketing and communications campaigns and materials and provides
contract sales services with respect to pharmaceutical and other health care
products, including newly developed drugs and other health care products. As a
result, the Company may, in the future, be subject to certain types of
litigation, including claims arising from false or misleading statements made
with respect to the use or efficacy of such pharmaceutical and health care
products or, in limited circumstances, product liability claims. Certain of the
Company's contracts with its clients provide for the client to indemnify the
Company against such liabilities. In addition, the Company maintains liability
insurance, although there can be no assurance that the coverage maintained by
the Company will be sufficient to cover all future claims. In certain limited
circumstances, however, the Company is obligated to indemnify its clients with
respect to such claims and liabilities. The Company could be materially and
adversely affected if it were required to pay damages or bear the costs of
defending any claim outside the scope of or in excess of a contractual
indemnification provision or beyond the level of insurance coverage or in the
event that an indemnifying party does not fulfill its indemnification
obligations. Even if any such claim was without merit, defending against such
claim could result in adverse publicity and diversion of management's time and
attention and could have a material adverse effect on the Company.
CONTROL OF THE COMPANY. Upon completion of the Consolidation and the
Offering, certain directors and executive officers of the Company will
collectively own approximately 70% of the Company's outstanding Common Stock.
Consequently, such stockholders will be able to control the outcome of matters
submitted to a vote by the Company's stockholders, such as the election of the
Company's Board of Directors, and control the direction and future operations of
the Company. Healthworld's Certificate of Incorporation allows for any action
which can be taken at a meeting of its stockholders to be taken by written
consent in lieu of a meeting. Such concentrations of share ownership and ease of
stockholder action may have the effect of discouraging, delaying or preventing a
change in control of the Company. See 'Principal Stockholders.'
DILUTION. Immediately upon issuance of the Common Stock offered hereby at
an assumed initial public offering price of $8.75 per share, purchasers of the
Common Stock will experience immediate and substantial dilution in the pro forma
net tangible book value per share of Common Stock of $6.31. See 'Dilution.'
FOREIGN EXCHANGE RATE RISKS. Exchange rates for some local currencies in
countries where the Company currently operates or may operate in the future may
fluctuate in relation to the U.S. Dollar and such fluctuations may have an
adverse effect on the Company's earnings or assets when local currencies are
translated into U.S. Dollars. In particular, because Milton currently operates
only in the United Kingdom, the Company is susceptible to foreign exchange rate
fluctuations between the British Pound Sterling and the U.S. Dollar. Any
weakening of the value of a local currency, including the British Pound
Sterling, against the U.S. Dollar could result in lower revenues and earnings
for the Company when such local currencies are translated into U.S. Dollars.
Therefore, there can be no assurance that currency exchange rates will not have
a material adverse effect on the Company. See 'Management's Discussion and
Analysis of Financial Condition and Results of Operations.'
NO PRIOR MARKET FOR THE COMMON STOCK; DETERMINATION OF OFFERING
PRICE. Prior to the Offering, there has been no public market for the Common
Stock of Healthworld. The initial public offering price for the Common Stock
will be determined through negotiations between the Company and the
Representatives based on
10
<PAGE>
such factors as the earnings prospects of the Company and prevailing market
conditions, and does not necessarily bear any relationship to the Company's book
value, past operating results or other established criteria of value. Such price
may not be indicative of the market price of the Common Stock after the Offering
has been consummated. The Common Stock has been approved for quotation on The
Nasdaq National Market under the symbol 'HWLD.' There can be no assurance that
an active trading market for the Common Stock will be established, or if so
established, sustained. See 'Underwriting.'
After the Offering, the market price of the Common Stock may be subject to
significant fluctuations in response to numerous factors, including, but not
limited to, variations in the annual or quarterly financial results of the
Company, changes by financial research analysts in their estimates of the
earnings of the Company, conditions in the economy in general or in the
Company's industry in particular, unfavorable publicity or changes in applicable
laws and regulations (or judicial or administrative interpretations thereof)
affecting the Company or the health care communications industry. From
time-to-time, the stock market experiences significant price and volume
volatility, which may affect the market price of the Common Stock for reasons
unrelated to the Company's performance.
SHARES ELIGIBLE FOR FUTURE SALE. Upon completion of the Offering, there
will be 7,100,000 shares of Common Stock outstanding, of which the 2,100,000
shares sold pursuant to the Offering will be tradeable without restriction by
persons other than 'affiliates' of the Company. The remaining 5,000,000 shares
of Common Stock will be issued in connection with the Consolidation and will be
'restricted' securities within the meaning of the Securities Act of 1933, as
amended (the 'Securities Act'), and may not be sold in the absence of
registration under the Securities Act or an exemption therefrom, including the
exemptions contained in Rule 144 under the Securities Act. No prediction can be
made as to the effect, if any, that future sales of shares of Common Stock will
have on the market price of the Common Stock prevailing from time-to-time. Sales
of substantial amounts of Common Stock, or the perception that these sales could
occur, could adversely affect prevailing market prices for the Common Stock and
could impair the ability of the Company to raise additional capital through the
sale of its equity securities or through debt financing. The Company and its
officers and directors and the stockholders of GHB&M and Milton who will receive
shares of Common Stock in the Consolidation have entered into agreements (the
'Lock-up Agreements') under which they will agree not to offer, sell or
otherwise dispose of any shares of Common Stock or other securities of the
Company for a period of 180 days commencing upon the date of this Prospectus,
without the prior written consent of Unterberg Harris, other than sales or
issuances by the Company pursuant to the exercise of the Underwriters'
over-allotment option or pursuant to the grants of stock options under the
Company's 1997 Stock Option Plan. Thereafter, shares of Common Stock held by the
stockholders of GHB&M and Milton may be sold under Rule 144 under the Securities
Act, subject to the volume, manner of sale and other restrictions of Rule 144.
In addition, the Company has granted to such stockholders unlimited piggy-back
registration rights with respect to such shares, commencing one year from the
date of this Prospectus. See 'Shares Eligible for Future Sale' and
'Underwriting.'
CERTAIN ANTI-TAKEOVER PROVISIONS. Healthworld's Certificate of
Incorporation authorizes the Board of Directors of Healthworld to issue
preferred stock in one or more series with such rights and preferences as may be
determined from time-to-time by the Board of Directors. Accordingly, the Board
of Directors may, without stockholder approval, issue shares of preferred stock
with voting, dividend, liquidation, conversion or other rights which could
adversely affect the voting power or other rights of the holders of Common
Stock. Although the Company does not currently intend to issue any shares of
preferred stock, there can be no assurance that the Company will not do so in
the future. The ability to issue preferred stock as described above, as well as
certain applicable provisions of the Delaware General Corporation Law relating
to business combinations, may have the effect of rendering more difficult,
delaying, discouraging or preventing an acquisition of the Company or change in
control of the Company. See 'Description of Capital Stock.'
ABSENCE OF DIVIDENDS. The Company has no current intention to pay
dividends on its Common Stock and anticipates that, for the foreseeable future,
working capital and earnings, if any, will be retained to finance the expansion
of its business and for general corporate purposes. See 'Dividend Policy' and
'Description of Capital Stock.'
11
<PAGE>
THE CONSOLIDATION
Healthworld was incorporated in Delaware on September 12, 1996 and has
conducted no operations to date. Healthworld entered into separate Agreements
and Plans of Organization (the 'Consolidation Agreements') in October 1997 with
the stockholders of GHB&M and Milton to acquire GHB&M and Milton on the date of
this Prospectus. Each of the companies comprising GHB&M is owned by Steven
Girgenti, the Chairman of the Board and Chief Executive Officer of the Company,
William Butler, the Executive Vice President of Global Communications Services
of GH, Herbert Ehrenthal, the Executive Vice President of U.S. Communications
Services of GH, and Francis Hughes, a director of the Company and Creative
Director of GH. Milton Marketing Group Limited ('MMGL') is owned by William
Leslie Milton, the Vice Chairman of the Board and President of the Company, and
minority interests of Milton Marketing Limited, Effective Sales Personnel (f/k/a
Milton Headcount Limited), PDM Communications Limited and Milton Cater Limited,
each a subsidiary of MMGL, are owned by Michael Bourne, Michael Garnham (the
Managing Director of U.K. Contract Sales Services), Leonard Moreton and Claire
Cater, respectively.
Pursuant to the terms of the Consolidation Agreements, in exchange for all
of the shares of common stock of the companies comprising GHB&M and all of the
shares of common stock of the companies comprising Milton, including Milton's
minority interests, Healthworld will, on the date of this Prospectus, issue an
aggregate of 5,000,000 shares of its Common Stock as follows: (i) 3,450,000
shares to the stockholders of the companies comprising GHB&M, (ii) 1,297,985
shares to the stockholder of MMGL (William Leslie Milton), and (iii) 252,015
shares to the holders of Milton's minority interests, other than Claire Cater,
who will not receive any of such shares since her minority interest will be
redeemed by Milton for no consideration pursuant to a prior agreement between
Milton and Ms. Cater. See 'Principal Stockholders.' The allocation of the shares
of Common Stock to be issued in the Consolidation to the GHB&M stockholders will
be made in the same proportion as each such stockholder's current ownership
interest in the GHB&M companies. The aggregate shares of Common Stock to be
issued to Milton's minority stockholders is equal to the aggregate purchase
price of $2.2 million (based upon an assumed initial offering price of $8.75 per
share) agreed to by such stockholders and Healthworld. Upon consummation of the
Consolidation, all of the shares of GHB&M and Milton (including the minority
interests in the subsidiaries of Milton) will be acquired by Healthworld as
described above, and GHB&M and Milton will become wholly owned subsidiaries of
Healthworld.
The Consolidation will be accounted for as a pooling of interests, which
method of accounting assumes that GHB&M and Milton have been combined from
inception and restates the historical financial statements for the periods prior
to the consummation of the Consolidation as though GHB&M and Milton had been
combined from inception.
Pursuant to the Consolidation Agreements, Messrs. Milton and Garnham and
each of the stockholders of GHB&M have agreed not to compete with the Company
for a two year period, and Messrs. Bourne and Moreton have agreed not to compete
with the Company for a six month period, commencing on the date of this
Prospectus. In addition, members of the Company's management have or will have
entered into agreements pursuant to which they will not compete with the Company
during their employment with the Company and for a certain time period
thereafter. See 'Management--Employment Agreements.'
Prior to the consummation of the Consolidation, the companies comprising
GHB&M (other than Syberactive, Inc. ('Syberactive'), which is treated as a C
Corporation) elected to be treated as S Corporations under the Code, pursuant to
which income or loss of each of such companies was allocated to its stockholders
by inclusion in their respective individual income tax returns. Immediately upon
consummation of the Consolidation, the status of each of the companies
comprising GHB&M as S Corporations will terminate and each of the companies
comprising GHB&M will then be subject to Federal and state income taxes at
applicable corporate rates.
In connection with the termination of the status of each of the companies
comprising GHB&M as S Corporations, GHB&M is currently negotiating to enter into
an agreement which will provide that GHB&M will, prior to the consummation of
the Consolidation, sell approximately $2.5 million of its accounts receivable to
an unaffiliated financial institution at a negotiated discount rate (the
'Accounts Receivable Sale'). Immediately prior to the consummation of the
Consolidation, GHB&M will make distributions (the 'S Corporation Distributions')
to its stockholders of approximately $3.5 million in the aggregate from existing
cash balances for the payment by such stockholders of taxes due on GHB&M's
estimated 1997 S Corporation earnings through the date of the Consolidation
(including taxable earnings arising from the Accounts Receivable Sale).
12
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of the 2,100,000 shares of Common Stock
offered hereby, at an assumed initial public offering price of $8.75 per share,
are estimated to be approximately $15.4 million, after deducting underwriting
discounts and commissions and other estimated expenses payable by the Company in
connection with the Offering (or approximately $17.9 million if the
Underwriters' over-allotment option is exercised in full).
The Company intends to use the net proceeds of the Offering for (i)
approximately $2.0 million of start-up and other funding costs related to the
expansion of the Company's contract sales operations into the United States,
(ii) approximately $1.3 million of capital expenditures associated with the
expansion of the Company's New York facility and the acquisition of additional
office furniture and computer equipment, and (iii) the repayment of a loan in
the principal amount of $456,000 which was originally issued in connection with
Milton's acquisition of Milton Headcount Limited (f/k/a Effective Sales
Personnel Limited), bears interest at the rate of 4% per annum and is payable in
March 1998. The remainder of such net proceeds will be used for working capital
and general corporate purposes, including (i) funding working capital needs
which will result from the Accounts Receivable Sale to be undertaken in
connection with the S Corporation Distributions of approximately $3.5 million,
and (ii) for potential acquisitions. The Company regularly evaluates and
discusses potential acquisitions. While the Company believes that opportunities
for future acquisitions are currently available, it currently has not entered
into any commitment, agreement or understanding with any third party with
respect to any possible acquisition, and there can be no assurance that the
Company will be able to identify or acquire suitable acquisition candidates, or
that if identified such acquisition candidate will be acquired by the Company or
successfully and profitably integrated into the Company. Pending use of the net
proceeds for the foregoing purposes, the Company intends to invest the net
proceeds in short-term, U.S. Dollar denominated, investment grade
interest-bearing securities. See 'The Consolidation,' 'Management's Discussion
and Analysis of Financial Condition and Results of Operations' and
'Business--Strategy--Growth Through Acquisitions.'
DIVIDEND POLICY
Healthworld has never declared or paid a dividend on its Common Stock. The
companies comprising GHB&M, as S Corporations (other than Syberactive, which is
treated as a C Corporation), made cash distributions on their common stock to
the stockholders of GHB&M of an aggregate of $209,000 in fiscal 1995, $1.5
million in fiscal 1996, $497,000 through June 30, 1997, and, immediately prior
to the consummation of the Consolidation, will make the S Corporation
Distributions of approximately $3.5 million. The companies comprising Milton
made cash distributions on their common stock to the stockholders of Milton of
an aggregate of $101,000 in fiscal 1995, none in fiscal 1996 and $55,000 through
June 30, 1997.
After the consummation of the Consolidation, the Company intends to retain
all earnings, if any, to finance the expansion of its business and for general
corporate purposes, including future acquisitions, and does not anticipate
paying any cash dividends on its Common Stock for the foreseeable future. Any
future determination to pay cash dividends will be at the discretion of the
Board of Directors and will be dependent on the Company's financial condition,
results of operations, financial requirements and such other factors as the
Board of Directors deems relevant.
13
<PAGE>
DILUTION
At June 30, 1997, the Company had a pro forma net tangible book value of
$1.9 million, or $0.38 per share of Common Stock. Pro forma net tangible book
value per share is, after giving effect to the Consolidation and the S
Corporation Distributions, the Company's total pro forma tangible assets less
its pro forma total liabilities, divided by the number of shares of outstanding
Common Stock. Pro forma tangible assets are defined as the pro forma assets of
the Company, excluding intangible assets, such as goodwill. After giving effect
to the sale by the Company of 2,100,000 shares of Common Stock offered hereby at
an assumed initial public offering price of $8.75 per share (and after deducting
underwriting discounts and commissions and Offering expenses payable by the
Company), the pro forma net tangible book value of the Company at June 30, 1997
would have been approximately $17.3 million or $2.44 per share. This represents
an immediate increase in pro forma net tangible book value of $2.06 per share to
existing stockholders and an immediate dilution of $6.31 per share to new
investors. Dilution represents the difference between the initial public
offering price paid by purchasers in the Offering and the net tangible book
value per share immediately after completion of the Offering. The following
table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Initial public offering price per share...................................... $8.75
Pro forma net tangible book value per share before the Offering............ $0.38
Increase in pro forma net tangible book value per share attributable to the
sale of the Common Stock offered hereby................................. 2.06
-----
Pro forma net tangible book value per share after the Offering............... 2.44
-----
Dilution per share to new investors.......................................... $6.31
-----
-----
</TABLE>
The following table sets forth, on a pro forma basis as of June 30, 1997,
after giving effect to the Consolidation and the S Corporation Distributions, a
comparison of the number of shares of Common Stock acquired from the Company,
the total consideration paid to the Company and the respective average purchase
price per share paid by existing stockholders and new investors. The following
computations are based on an assumed initial public offering price of $8.75 per
share, before deducting the underwriting discounts and commissions and estimated
Offering expenses payable by the Company.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- ---------------------- AVERAGE
NUMBER PERCENT AMOUNT PERCENT PRICE PER SHARE
--------- ------- ----------- ------- ---------------
<S> <C> <C> <C> <C> <C>
Existing stockholders................... 5,000,000 70.4% $ 5,557,000(1) 23.2% $1.11
New investors........................... 2,100,000 29.6% 18,375,000 76.8% 8.75
--------- ------- ----------- -------
Total................................. 7,100,000 100.0% $23,932,000 100.0%
--------- ------- ----------- -------
--------- ------- ----------- -------
</TABLE>
- ------------------
(1) Represents the pro forma combined stockholders' equity of the Company before
the Offering. See 'The Consolidation.'
14
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company at June
30, 1997, which, pro forma, gives effect to the Consolidation and the S
Corporation Distributions, and pro forma as adjusted, gives effect to the
Consolidation, the S Corporation Distributions and the sale of 2,100,000 shares
of Common Stock offered hereby at an assumed initial public offering price of
$8.75 per share and the application of the estimated net proceeds therefrom. See
'The Consolidation,' 'Use of Proceeds' and 'Selected Pro Forma Financial
Information.' This table should be read in conjunction with the Pro Forma
Combining Financial Statements of the Company and the related notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1997
---------------------------------
PRO FORMA
---------------------------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C>
Long-term obligations, less current maturities................... $ 582
Stockholders' equity:
Preferred Stock, $.01 par value, 1,000,000 shares authorized,
no shares outstanding(1).................................... --
Common Stock, $.01 par value, 20,000,000 shares authorized;
5,000,000 shares outstanding, pro forma; 7,100,000 shares
outstanding, pro forma as adjusted(1)....................... 50
Additional paid-in capital..................................... 4,581
Retained earnings.............................................. 926
-------
Total stockholders' equity.................................. 5,557
-------
Total capitalization........................................ $ 6,139
-------
-------
<CAPTION>
PRO FORMA
AS ADJUSTED
---------------------------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C>
Long-term obligations, less current maturities................... $ 582
Stockholders' equity:
Preferred Stock, $.01 par value, 1,000,000 shares authorized,
no shares outstanding(1).................................... --
Common Stock, $.01 par value, 20,000,000 shares authorized;
5,000,000 shares outstanding, pro forma; 7,100,000 shares
outstanding, pro forma as adjusted(1)....................... 71
Additional paid-in capital..................................... 19,965
Retained earnings.............................................. 926
----------
Total stockholders' equity.................................. 20,962
----------
Total capitalization........................................ $21,544
----------
----------
</TABLE>
- ------------------
(1) Healthworld changed its authorized capital stock on August 13, 1997 to
21,000,000 shares consisting of 1,000,000 shares of preferred stock, $.01
par value per share, and 20,000,000 shares of Common Stock, $.01 par value
per share. See 'Description of Capital Stock.'
15
<PAGE>
SELECTED PRO FORMA COMBINED FINANCIAL INFORMATION
The following selected pro forma combined financial information gives
effect to the Consolidation, among other events, as more fully described in 'The
Consolidation,' and should be read in conjunction with the Company's unaudited
Pro Forma Combining Financial Statements and notes thereto, the Combined
Financial Statements of GHB&M and notes thereto, the Consolidated Financial
Statements of Milton and notes thereto, and 'Management's Discussion and
Analysis of Financial Condition and Results of Operations' contained elsewhere
in this Prospectus. The Consolidation will be accounted for as a pooling of
interests. The selected pro forma combined statement of income data for the
years ended December 31, 1994, 1995 and 1996 and for the six months ended June
30, 1996 and 1997 and the selected pro forma combined balance sheet data as of
December 31, 1995 and 1996 and June 30, 1997 are derived from the Company's
unaudited Pro Forma Combining Financial Statements included elsewhere herein.
The selected pro forma combined statement of income data for the years ended
December 31, 1992 and 1993, and the selected pro forma combined balance sheet
data as of December 31, 1992, 1993 and 1994, is derived from the Company's
unaudited Pro Forma Combining Financial Statements not included herein. In the
opinion of management, all such financial data includes all adjustments
(consisting of normal recurring adjustments) necessary for a fair presentation
of such data. Such financial data covers periods when GHB&M and Milton were not
under common control or management and may not be indicative of results that
would have been reported had the Consolidation and the other pro forma
adjustments occurred nor may it be indicative of the Company's future financial
or operating results.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31,(1) JUNE 30,(2)
----------------------------------------------- -----------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues...................................... $10,569 $11,206 $13,081 $16,767 $24,209 $11,322 $14,783
------- ------- ------- ------- ------- ------- -------
Operating expenses:
Salaries and related costs.................. 6,876 7,554 7,890 9,857 15,733 7,701 10,510
Other operating expenses.................... 2,596 3,321 3,727 4,469 5,274 2,621 2,890
------- ------- ------- ------- ------- ------- -------
9,472 10,875 11,617 14,326 21,007 10,322 13,400
------- ------- ------- ------- ------- ------- -------
Income from operations........................ 1,097 331 1,464 2,441 3,202 1,000 1,383
Interest expense, net......................... 7 8 14 2 69 (48) (21)
------- ------- ------- ------- ------- ------- -------
Income before provision for income taxes...... 1,090 323 1,450 2,439 3,133 1,048 1,404
Provision for income taxes(3)................. 436 106 613 1,038 1,305 425 584
------- ------- ------- ------- ------- ------- -------
Net income.................................... $ 654 $ 217 $ 837 $ 1,401 $ 1,828 $ 623 $ 820
------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- -------
Earnings per share............................ $ 0.13 $ 0.04 $ 0.17 $ 0.28 $ 0.37 $ 0.12 $ 0.16
------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- -------
Shares used in computing earnings
per share................................... 5,000 5,000 5,000 5,000 5,000 5,000 5,000
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,(1)
---------------------------------------------------
1992 1993 1994 1995 1996 JUNE 30, 1997
------- ------- ------- ------- ------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.............................. $ 2,450 $ 1,835 $ 1,904 $ 3,904 $ 4,132 $ 48
Total assets................................. 11,327 13,792 13,848 18,703 22,597 19,916
Long-term debt, including current portion.... 1,216 838 662 1,223 1,419 1,324
Stockholders' equity......................... 3,501 2,914 3,880 7,339 8,576 5,557
</TABLE>
- ------------------
(1) Includes financial data for GHB&M based on a December 31 fiscal year end and
for Milton based on a November 30 fiscal year end.
(2) Includes financial data for GHB&M and Milton for the six month period
commencing January 1 and ending June 30.
(3) Immediately upon the consummation of the Consolidation, the status of the
companies comprising GHB&M as S Corporations under the Code will terminate.
The pro forma provision for income taxes reflects a provision for federal
income taxes as if each of such entities were a C Corporation rather than an
S Corporation for such periods. See 'The Consolidation.'
16
<PAGE>
SELECTED FINANCIAL INFORMATION OF GHB&M AND MILTON
The following selected financial information for each of GHB&M and Milton
should be read in conjunction with the Combined Financial Statements of GHB&M
and the notes thereto, the Consolidated Financial Statements of Milton and the
notes thereto, and 'Management's Discussion and Analysis of Financial Condition
and Results of Operations' contained elsewhere in this Prospectus. The selected
combined statement of income data of GHB&M for the years ended December 31,
1994, 1995, 1996 and the selected combined balance sheet data as of December 31,
1995 and 1996 are derived from GHB&M's audited Combined Financial Statements
which are included elsewhere herein. The selected combined statement of income
data of GHB&M for the years ended December 31, 1992 and 1993 and the selected
combined balance sheet data as of December 31, 1992, 1993 and 1994 are derived
from GHB&M's unaudited Combined Financial Statements not included herein, and in
the opinion of management, include all adjustments necessary for a fair
presentation of such data. The selected combined statement of income data of
GHB&M for the six months ended June 30, 1996 and 1997 and the selected combined
balance sheet data as of June 30, 1997 are derived from GHB&M's unaudited
Combined Financial Statements included elsewhere herein which, in the opinion of
management, include all adjustments (consisting of normal recurring adjustments)
necessary for a fair presentation of the combined financial position and results
of operations of GHB&M. The selected consolidated statement of income data of
Milton for the years ended November 30, 1994, 1995 and 1996 and the selected
consolidated balance sheet data as of November 30, 1995 and 1996 are derived
from Milton's audited Consolidated Financial Statements, which are included
elsewhere herein. The selected consolidated statement of income data of Milton
for the years ended November 30, 1992 and 1993 and the selected consolidated
balance sheet data as of November 30, 1992, 1993 and 1994 are derived from
Milton's audited Consolidated Financial Statements not included herein, and in
the opinion of management include all adjustments necessary for a fair
presentation of such data. The selected consolidated statement of income data of
Milton for the seven months ended June 30, 1996 and 1997 and the selected
consolidated balance sheet data as of June 30, 1997 are derived from Milton's
unaudited Consolidated Financial Statements included elsewhere herein which, in
the opinion of management, include all adjustments (consisting of normal
recurring adjustments) necessary for a fair presentation of the consolidated
financial position and results of operations of Milton. The results of
operations of GHB&M for the six months, and of Milton for the seven months,
ended June 30, 1997 are not necessarily indicative of the results for the full
fiscal year.
<TABLE>
<CAPTION>
GHB&M
-------------------------------------------------------------------------------------
(IN THOUSANDS)
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------------------------- -----------------------------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- ------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues................... $ 9,036 $ 9,234 $10,415 $12,368 $14,314 $ 6,383 $ 7,459
------- ------- ------- ------- ------- -------- --------
Income from operations..... 991 16 1,088 1,927 2,183 378 991
Net income................. 927 11 1,067 1,816 2,049 423 1,006
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------
1992 1993 1994 1995 1996 JUNE 30, 1997
------- ------- ------- ------- ------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.............................. $ 2,606 $ 1,974 $ 2,455 $ 4,061 $ 4,668 $ 4,680
Total assets................................. 10,264 11,190 12,232 13,287 14,049 14,180
Long-term debt, including current portion.... 875 785 587 82 223 176
</TABLE>
<TABLE>
<CAPTION>
MILTON
-------------------------------------------------------------------------
(IN THOUSANDS)
SEVEN MONTHS ENDED
YEAR ENDED NOVEMBER 30, JUNE 30,
----------------------------------------------- -----------------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- ------- ------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues..................................... $ 1,533 $ 1,972 $ 2,666 $ 4,399 $ 9,895 $ 5,434 $ 8,147
------- ------- ------- ------- ------- ------- -------------
Income from operations....................... 106 315 390 558 1,085 575 308
Net income................................... 64 230 222 316 502 257 29
</TABLE>
<TABLE>
<CAPTION>
NOVEMBER 30,
---------------------------------------------------
1992 1993 1994 1995 1996 JUNE 30, 1997
------- ------- ------- ------- ------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.............................. $ (145) $ (140) $ (64) $ (157) $ (536) $(1,132)
Total assets................................. 1,063 2,602 1,681 3,401 6,487 7,300
Long-term debt, including current portion.... 92 53 75 1,141 1,196 1,148
</TABLE>
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Company's
unaudited Pro Forma Combining Financial Statements and notes thereto, the
Combined Financial Statements of GHB&M and notes thereto and the Consolidated
Financial Statements of Milton and notes thereto appearing elsewhere herein.
INTRODUCTION
Healthworld was formed in September 1996 and has conducted no operations to
date. In October 1997, Healthworld entered into the Consolidation Agreements
pursuant to which Healthworld will acquire GHB&M and Milton on the date of this
Prospectus, after which, the entities comprising GHB&M and Milton will be wholly
owned subsidiaries of Healthworld and Healthworld will conduct all of its
operations in the marketing communications industry segment through GHB&M in the
United States and through Milton in the United Kingdom. For a discussion of the
Consolidation and other related events, including the S Corporation
Distributions, see 'The Consolidation.'
GHB&M, which is based in New York City, is comprised of the following
affiliated entities: (i) Girgenti, Hughes, Butler & McDowell, Inc. ('GH'),
founded in 1986, which through (x) its GHB&M Division, has been providing
traditional advertising and promotion services and public relations services
since 1986, (y) Rubin Ehrenthal & Associates, a division acquired through a
merger with GH in 1991, specializes in DTC campaigns, and (z) its Data Health
Division, organized in March 1996, provides database marketing services; (ii)
Medical Education Technologies, Inc., organized in 1986, which provides medical
education services; (iii) Syberactive, organized in January 1996, which provides
interactive multimedia services; (iv) Brand Research Corporation, organized in
1992, which provides marketing research services; and (v) Black Cat Graphics,
Inc., organized in 1986, which creates graphic designs and artwork for
advertising and promotion campaigns.
Milton, which is based in the United Kingdom, is comprised of the following
subsidiaries: (i) Milton Marketing Limited ('Milton Marketing'), organized in
1978, which provides traditional advertising and promotion services and
specializes in switching pharmaceutical products from prescription to 'over-the-
counter' status; (ii) Milton Headcount Limited ('Headcount') (f/k/a Effective
Sales Personnel Limited), originally formed as a division of Milton Marketing in
January 1994, which, along with Effective Sales Personnel Limited ('ESP') (f/k/a
Milton Headcount Limited), acquired in November 1995, provides contract sales
services; (iii) Milton Cater Limited ('Milton Cater'), organized in April 1996,
which provides public relations services; and (iv) PDM Communications Limited
('PDM'), acquired in November 1996, which provides direct marketing services.
The following discussion relating to the pro forma combined historical
financial results of the Company covers periods prior to the Consolidation when
GHB&M and Milton were not under common control or management and, therefore, may
not be indicative of results that would have been reported had the Consolidation
and other pro forma adjustments occurred. Accordingly, the results of operations
for the Company discussed below may not be indicative of future financial or
operating results.
GENERAL
The Company is retained by its clients on assignments ranging in duration
from several weeks to several years. The Company offers to its pharmaceutical
and other health care clients a comprehensive range of integrated services
throughout a product's life-cycle, from the development stage (pre-regulatory
approval) to product launch and continuing through the post-launch stage and, if
applicable, such product's switch from prescription to over-the-counter status.
The Company derives its revenues from fees generated from providing
marketing and communications services to its clients. For services such as the
production of advertising and promotion materials and medical education
programs, fees are recognized when the production materials or programs are
completed. With respect to services such as consulting, publishing and public
relations, the Company is either paid a monthly retainer or bills on an actual
time incurred basis. Advance production billings represent project costs and
fees that are billed to clients as projects progress, and are recognized at
completion. Income for field marketing support is recognized as services are
provided. In limited circumstances, the Company derives revenues through
commissions on media and production costs.
Milton operates only in the United Kingdom and, as a result, the Company is
susceptible to foreign exchange rate fluctuations between the British Pound
Sterling and the U.S. Dollar. The Company's financial
18
<PAGE>
statements are denominated in U.S. Dollars, and accordingly, changes in the
exchange rate between the British Pound Sterling and the U.S. Dollar will affect
the translation of Milton's financial results into U.S. Dollars for purposes of
reporting the Company's consolidated financial results.
The Company has provided contract sales services since January 1994.
Currently, the Company's contract sales organization operates only in the United
Kingdom and provides its services primarily to consumer products companies,
utilities and other non-health care related companies. The Company began
providing contract sales services to pharmaceutical and other health care
companies in order to take advantage of the increased use by such companies in
the United Kingdom of contract sales forces to market their products in May 1997
and, consequently, as of June 30, 1997, revenues generated from such clients
were not significant. The Company intends to expand its contract sales
operations into the United States by the end of the first quarter of 1998 and
anticipates that such operations will focus almost exclusively on pharmaceutical
and other health care products.
A significant portion of the Company's growth in recent years is
attributable to the expansion of the Company's contract sales operations.
Revenues from contract sales services for the years ended December 31, 1994,
1995 and 1996 and for the six months ended June 30, 1996 and 1997 were $280,000,
$1.5 million, $6.6 million, $3.3 million and $5.2 million, respectively, and
represented 2.0%, 9.0%, 27.0%, 29.0% and 35.0%, respectively, of the Company's
pro forma combined revenues. As a result of the continued growth and planned
expansion of the Company's contract sales operations, the Company anticipates
that, in the future, revenues derived from contract sales will continue to
increase as a percentage of total revenues. In addition, although profit margins
for contract sales have been lower than profit margins for other marketing and
communications services, the Company believes that the growth in its specialty
pharmaceutical and health care contract sales services will result in higher
profit margins for contract sales in the future. Due to the labor intensive
nature of providing contract sales services, the Company anticipates that its
direct labor costs will increase as its contract sales operations grow, and that
the Company's working capital requirements will also increase in order to enable
the Company to fund such increases in business.
RESULTS OF OPERATIONS--THE COMPANY
The following table set forth certain pro forma combined income statement
data of the Company expressed as a percentage of revenues for the periods
indicated.
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER ENDED
31,(1) JUNE 30,(2)
------------------------- ---------------
1994 1995 1996 1996 1997
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Revenues............................................ 100.0% 100.0% 100.0% 100.0% 100.0%
Operating expenses:
Salaries and related costs........................ 60.3 58.8 65.0 68.0 71.1
Other operating expenses.......................... 28.5 26.6 21.8 23.2 19.5
----- ----- ----- ----- -----
88.8 85.4 86.8 91.2 90.6
----- ----- ----- ----- -----
Income from operations.............................. 11.2 14.6 13.2 8.8 9.4
Interest expense, net............................... 0.1 -- 0.3 (0.5) (0.1)
----- ----- ----- ----- -----
Income before provisions for income taxes........... 11.1 14.6 12.9 9.3 9.5
Provision for income taxes.......................... 4.7 6.2 5.3 3.8 4.0
----- ----- ----- ----- -----
Net income.......................................... 6.4% 8.4% 7.6% 5.5% 5.5%
----- ----- ----- ----- -----
----- ----- ----- ----- -----
</TABLE>
- ------------------
(1) Includes financial data for GHB&M based on a December 31 fiscal year end and
for Milton based on a November 30 fiscal year end.
(2) Includes financial data for GHB&M and Milton for the six month period
commencing January 1 and ending June 30.
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
Revenues for the first six months of 1997 were $14.8 million, an increase
of $3.5 million, or 30.6%, from $11.3 million for the first six months of 1996.
Of such increase, (i) $1.9 million was attributable to the growth of the
Company's contract sales operations, which resulted from additional business
relating to the duration and size of assignments for existing clients and new
clients and (ii) $1.7 million was primarily attributable to the growth of the
Company's advertising and promotion services, which resulted primarily from
additional business relating to new projects from existing clients. Such
increases were partially offset by a decline in revenues from medical education
services resulting from the timing of clients' medical education related
activities.
Salaries and related costs include all compensation and related benefits
for all employees and contracted talent. Salaries and related costs for the
first six months of 1997 were $10.5 million, an increase of $2.8 million,
19
<PAGE>
or 36.5%, from $7.7 million for the first six months of 1996. Such increase was
primarily attributable to $1.4 million of labor and other direct costs relating
to the growth of the Company's contract sales operations, and $1.3 million
relating to additional staff hired to support the increased level of business
activity. Salaries and related costs represented 71.1% of revenues in the first
six months of 1997, compared to 68.0% in the first six months of 1996. Such
increase, as a percentage of revenues, was primarily attributable to growth of
the Company's contract sales operations and the corresponding increase in labor
costs. Generally, labor costs associated with contract
sales operations are greater as a percentage of corresponding revenues than
those for the Company's other services.
Other operating expenses primarily include rent and occupancy, client
development and other related administrative costs. Other operating expenses for
the first six months of 1997 were $2.9 million, an increase of $269,000, or
10.3%, from $2.6 million for the first six months of 1996. Such increase was
primarily attributable to increased business development costs of $135,000 and
additional rent and occupancy costs of $87,000 related to the expansion of
office space in the United Kingdom in connection with the acquisition by Milton
of PDM in November 1996 and the growth of the Company's contract sales
operations. Other operating expenses represented 19.5% of revenues in the first
six months of 1997, compared to 23.2% of revenues in the first six months of
1996. The decrease in other operating expenses, as a percentage of revenues, was
primarily attributable to such expenses generally being fixed relative to
increases in the Company's revenues.
Income from operations for the first six months of 1997 was $1.4 million,
an increase of $383,000, or 38.3%, from $1.0 million for the first six months of
1996. Income from operations represented 9.4% of revenues in the first six
months of 1997, compared to 8.8% in the first six months of 1996.
The provision for income taxes for the first six months of 1997 was
$584,000, an increase of $159,000, or 37.4%, from $425,000 for the first six
months of 1996. Such increase was primarily attributable to higher income before
taxes in the first six months of 1997, as compared to the first six months of
1996. The effective tax rate was 41.6% for the first six months of 1997,
compared to 40.6% for the first six months of 1996. The provision for income
taxes reflects a provision for Federal income taxes as if each of the companies
comprising GHB&M were treated as C Corporations rather than S Corporations for
such periods.
FISCAL 1996 COMPARED TO FISCAL 1995
Revenues for 1996 were $24.2 million, an increase of $7.4 million, or
44.4%, from $16.8 million for 1995. Of such increase, (i) $5.1 million was
attributable to the growth of the Company's contract sales operations, of which
$2.5 million was attributable to the operations of Headcount (acquired in
November 1995) and the remainder was primarily attributable to additional
business from new clients, and (ii) $1.3 million, $300,000, $300,000 and
$200,000 was attributable to additional revenues from advertising and promotion,
medical education, consulting and public relations services, respectively, which
all resulted primarily from additional business relating to new projects from
existing clients.
Salaries and related costs for 1996 were $15.7 million, an increase of $5.8
million, or 59.6%, from $9.9 million for 1995. Such increase was primarily
attributable to (i) $3.4 million of labor and other direct costs related to the
Company's contract sales operations, (ii) $1.5 million for additional staff
hired to support the higher level of business activity, (iii) $500,000 for
annual salary increases, and (iv) $400,000 related to the retention of the staff
of Headcount as a result of its acquisition by Milton. Salaries and related
costs represented 65.0% of revenues in 1996, compared to 58.8% in 1995. Such
increase, as a percentage of revenues, was primarily attributable to the growth
of the Company's contract sales operations and the corresponding increase in
labor costs of such operations, and increases in salaries and other costs.
Other operating expenses for 1996 were $5.3 million, an increase of
$805,000, or 18.0%, from $4.5 million for 1995. Such increase was primarily
attributable to additional rent and occupancy costs of $500,000 primarily
related to expanded office space, and increased business development costs of
$300,000 in the United States and the United Kingdom. Other operating expenses
represented 21.8% of revenues in 1996, compared to 26.6% in 1995. The decrease
in other operating expenses, as a percentage of revenues, was primarily
attributable to such expenses generally being fixed relative to increases in the
Company's revenues.
Income from operations for 1996 was $3.2 million, an increase of $761,000,
or 31.2%, from $2.4 million for 1995. Income from operations represented 13.2%
of revenues in 1996, compared to 14.6% in 1995.
The provision for income taxes for 1996 was $1.3 million, an increase of
$267,000, or 25.7%, from $1.0 million for 1995. Such increase was primarily
attributable to higher income before taxes in 1996, as compared to 1995. The
effective tax rate was 41.7% in 1996, compared to 42.6% in 1995. The provision
for
20
<PAGE>
income taxes reflects a provision for Federal income taxes as if each of the
companies comprising GHB&M were treated as C Corporations rather than S
Corporations for such periods.
FISCAL 1995 COMPARED TO FISCAL 1994
Revenues for 1995 were $16.8 million, an increase of $3.7 million, or
28.2%, from $13.1 million for 1994. Of such increase (i) $1.3 million was
attributable to growth in the Company's advertising and promotion services,
resulting primarily from additional business relating to new projects from
existing clients, (ii) $1.2 million was attributable to the expansion of the
Company's contract sales operations resulting primarily from business from new
clients as such operations continued to grow, (iii) $600,000 was attributable to
the growth in medical education services, resulting primarily from the
completion of two significant projects in fiscal 1995, and (iv) $300,000 was
attributable to growth in publishing services, resulting from an increase in
billing rates.
Salaries and related costs for 1995 were $9.9 million, an increase of $2.0
million, or 24.9%, from $7.9 million for 1994. Such increase primarily resulted
from $1.1 million related to the addition of staff, primarily in the U.S., to
support the higher level of business activity, and $800,000 of additional labor
and other direct costs of the Company's contract sales operations. Salaries and
related costs represented 58.8% of revenues in 1995, compared to 60.3% in 1994.
Other operating expenses for 1995 were $4.5 million, an increase of
$742,000, or 19.9%, from $3.7 million for 1994. Such increase primarily resulted
from additional rent and occupancy costs of $300,000 primarily related to
additional office space, and additional business development costs of $500,000,
which was partially offset by a decrease in professional fees. Other operating
expenses represented 26.6% of revenues in 1995, compared to 28.5% in 1994.
Income from operations for 1995 was $2.4 million, an increase of $977,000,
or 66.7%, from $1.5 million in 1994. Income from operations represented 14.6% of
revenues in 1995, compared to 11.2% in 1994.
The provision for income taxes for 1995 was $1.0 million, an increase of
$425,000, or 69.3%, from $613,000 for 1994. The increase was primarily
attributable to higher income before taxes in 1995, as compared to 1994. The
effective tax rate was 42.6% in 1995, compared to 42.3% in 1994. The provision
for income taxes reflects a provision for Federal income taxes as if each of the
companies comprising GHB&M were treated as C Corporations rather than S
Corporations for such periods.
QUARTERLY OPERATING RESULTS
GHB&M's and Milton's results of operations have been, and following the
Consolidation, the Company's results of operations are expected to be, subject
to quarterly fluctuations. Generally, GHB&M's and Milton's revenues and profits
are lowest in the first quarter and highest in the fourth quarter. GHB&M's and
Milton's quarterly revenue trends result from a number of factors including,
among other things, the timing of commencement, completion or cancellation of
major projects and industry billing practices which are tied to clients' annual
marketing budgets, while GHB&M's and Milton's communications services expenses
generally remain constant. The Company's quarterly results may fluctuate as a
result of such factors and a number of additional factors, including delays or
costs associated with acquisitions, government regulatory initiatives and
conditions in the health care industry generally. The Company believes that
because of such fluctuations, quarterly comparisons of its financial results
cannot be relied upon as an indication of future performance.
The following table sets forth, on a quarterly basis, certain pro forma
combined financial information of the Company for the periods indicated.
<TABLE>
<CAPTION>
1995(1) 1996(1) 1997(2)
------------------------------------- ------------------------------------- -----------------
1ST 2ND 3RD 4TH 1ST 2ND 3RD 4TH 1ST 2ND
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues.................... $3,387 $3,910 $4,235 $5,235 $4,705 $6,100 $5,954 $7,450 $6,628 $8,155
Operating expenses:
Salaries and related
costs.................. 2,209 2,245 2,523 2,880 3,691 4,010 3,782 4,250 5,097 5,413
Other operating
expenses............... 748 1,064 1,350 1,307 1,296 1,325 1,324 1,329 1,337 1,553
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
2,941 3,292 3,857 4,236 4,901 5,332 5,152 5,622 6,435 6,965
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income from operations...... $ 446 $ 618 $ 378 $ 999 $ (196 ) $ 768 $ 802 $1,828 $ 193 $1,190
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
</TABLE>
(Footnotes on next page)
21
<PAGE>
(Footnotes from previous page)
- ------------------
(1) Includes financial data for GHB&M based on quarterly fiscal periods for a
December 31 fiscal year end and for Milton based on quarterly fiscal periods
for a November 30 fiscal year end.
(2) Includes financial data for GHB&M and Milton for the three months ended
March 31, 1997 and the three months ended June 30, 1997.
LIQUIDITY AND CAPITAL RESOURCES
GHB&M's cash provided by operations for the six months ended June 30, 1997
was $936,000 and was comprised of net income of $1.0 million and a decrease in
accounts receivable of $2.1 million, partially offset by (i) an increase in
unbilled production charges of $1.8 million, and (ii) an increase in other
assets of $618,000. GHB&M's cash used in investing activities for the six months
ended June 30, 1997 was $157,000 consisting of capital expenditures. GHB&M's
cash used in financing activities for the six months ended June 30, 1997 was
$944,000 and was primarily comprised of S Corporation distributions to
stockholders of $497,000 and the repayment of bank debt of $447,000, in the
aggregate. GHB&M's accounts receivable tend to be highest during the fourth
quarter as a result of the timing of GHB&M's billings to its clients, which
generally are highest in the fourth quarter. The higher billings in the fourth
quarter are attributable to a number of factors, including the timing of
commencement, completion or cancellation of major projects and industry billing
practices which are tied to annual marketing budgets. GHB&M's unbilled
production charges may vary from period to period depending primarily on the
stage of completion of the Company's ongoing projects for its clients.
Milton's cash used in operating activities for the seven months ended June
30, 1997 was $502,000 and was comprised of (i) an increase in accounts
receivable of $244,000, (ii) an increase in unbilled production charges of
$186,000, (iii) an increase in other current assets and other assets of
$379,000, and (iv) a net decrease in accounts payable and accrued expenses of
$93,000, partially offset by an increase in advance billings of $150,000.
Milton's cash used in investing activities for the seven months ended June 30,
1997 was $72,000, consisting of capital expenditures. Milton's cash provided by
financing activities for the seven months ended June 30, 1997 was primarily
comprised of additional bank overdraft borrowings of $805,000, partially offset
by repayment of bank loans and capital lease obligations of $140,000.
Cash provided by operations of the Company on a combined basis for 1996 was
$3.4 million and primarily consisted of net income for the period of $2.6
million, a reduction in unbilled production charges of $1.6 million, and an
increase in accrued liabilities of $885,000, partially offset by an increase in
accounts receivable of $2.1 million and a reduction in accounts payable of
$394,000. Cash used in investing activities of the Company on a combined basis
for fiscal 1996 was $913,000 and was primarily attributable to capital
expenditures of $721,000, the acquisition of PDM and an additional equity
interest in Milton Marketing for an aggregate of $242,000. Cash used in
financing activities of the Company on a combined basis for fiscal 1996 was $1.4
million and was primarily comprised of S Corporation distributions to
stockholders of $1.5 million and repayment of long-term debt and capital lease
obligations of $66,000, which were partially financed by net proceeds from line
of credit and bank overdraft borrowings of $109,000.
With respect to the Company's billing practices for its non-contract sales
services, fee billings for time incurred are billed either on a monthly retainer
basis or in each month following a month in which services were provided by the
Company. Production billings are progress billed when costs are incurred and
final billed when completed. Fees for a portion of contract sales services are
advanced billed prior to commencement of the assignment and the remainder of
such fees are billed in the month following the month in which services were
provided by the Company. GHB&M and Milton have each maintained reserves for bad
debts, although neither GHB&M nor Milton has incurred any material losses from
bad debts. The Company does not expect to incur any material losses from bad
debts, although there can be no assurance to such effect. The Company believes
that the continued growth and planned expansion of its contract sales operations
will not materially adversely affect its ability to bill and collect on a timely
basis for services provided.
GHB&M's bank borrowings from Chase Manhattan Bank, N.A. (the 'GHB&M Credit
Facility') consist of (i) an uncommitted line of credit (the 'GHB&M Line of
Credit') which expired on July 31, 1997, pursuant to which GHB&M could request
borrowings of, but the bank was not obligated to lend, up to $3.5 million, (ii)
a term note in the principal amount of $300,000 (the 'GHB&M Term Note'), and
(iii) a letter of credit in the amount of $300,000 (the 'GHB&M Letter of
Credit'). The GHB&M Credit Facility is secured by a first security interest in
GHB&M's personal property and is personally guaranteed by certain of GHB&M's
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stockholders. The GHB&M Term Note, which was provided to GHB&M to finance the
construction of additional office space, had $176,000 outstanding as of June 30,
1997 and bears interest at 7.75% per annum and is payable in 36 equal monthly
installments with the last installment due February 1999. No amounts were
outstanding under the GHB&M Line of Credit as of its expiration at July 31,
1997. GHB&M is negotiating an extension of the GHB&M Credit Facility as well as
a new revolving credit facility, although no assurance can be given that an
extension will be approved or that a new revolving credit facility will be
available on acceptable terms, or at all.
Milton's borrowings consist of an overdraft facility (the 'Milton Overdraft
Facility') with The Bank of Scotland plc ('The Bank of Scotland') in the amount
of up to $1,252,500 through October 31, 1992, after which date the amount of the
Milton Overdraft Facility reduces to up to an aggregate amount of $835,000.
Amounts drawn under the Milton Overdraft Facility bear interest payable at the
United Kingdom base rate (7% as of June 30, 1997) plus 2% per annum (the
'Prevailing Rate'). As of June 30, 1997, Milton had an outstanding balance of
approximately $1.2 million under the facility at such time. Amounts owed by
Milton under the Milton Overdraft Facility, as well as any other amounts which
may be owed by Milton to The Bank of Scotland, are secured under a debenture
pursuant to which any securities held by MMGL in its subsidiaries are pledged to
The Bank of Scotland. The Milton Overdraft Facility expires on November 30,
1997, unless renewed or extended by The Bank of Scotland prior to such date. In
addition, as of June 30, 1997, Milton had the following outstanding
indebtedness: (i) a term loan from The Bank of Scotland plc (the 'Milton Term
Loan') in the principal amount of $588,000 (of which $407,000 was outstanding on
June 30, 1997), which bears interest payable at the Prevailing Rate with
principal payable in installments of $58,000 each May and November through
November 2000; (ii) a term loan in the principal amount of $456,000 (all of
which was outstanding), which bears interest at the rate of 4% per annum,
originally issued in connection with Milton's acquisition of Headcount, under
which principal is due and payable in March 1998, and (iii) a term loan from
National Westminster Bank plc in the principal amount of $75,000 ($23,000 of
which was outstanding as of June 30, 1997), which bears interest at 10.5% per
annum payable in monthly installments, with the final payment due in April 1998.
Immediately upon consummation of the Consolidation, the status of the
companies comprising GHB&M (other than Syberactive) as S Corporations will
terminate and GHB&M will then be subject to Federal and state income taxes at
applicable corporate rates. In connection with the termination of the S
Corporation status of such companies, GHB&M is currently negotiating to enter
into an agreement with respect to the Accounts Receivable Sale, which will
provide that GHB&M will, prior to the consummation of the Consolidation, sell
approximately $2.5 million of its accounts receivable to an unaffiliated
financial institution at a negotiated discount rate. Immediately prior to the
consummation of the Consolidation, GHB&M will make the S Corporation
Distributions to its stockholders of approximately $3.5 million in the aggregate
from existing cash balances for payment by such stockholders of income taxes due
on S Corporation earnings. See 'The Consolidation.'
The Company anticipates that capital expenditures for 1997 and 1998 will
total approximately $500,000 (of which $227,000 has been spent as of June 30,
1997) and $1.3 million, respectively. Such expenditures will primarily include
spending associated with the expansion of the Company's New York offices and the
acquisition of additional office furniture and computer equipment.
Upon consummation of the Consolidation, the entities comprising GHB&M and
Milton will be wholly owned subsidiaries of Healthworld and Healthworld will
conduct all of its operations through GHB&M and Milton. The Company's primary
capital needs after the Consolidation and the Offering will be for (i)
approximately $2 million of start-up and other funding costs relating to the
expansion of the Company's contract sales operations into the United States,
(ii) approximately $1.3 million of capital expenditures, (iii) the repayment of
a term loan in the principal amount of $456,000 which is due and payable in
March 1998, (iv) funding working capital requirements and general corporate
purposes, including working capital needs which will result from the Accounts
Receivable Sale to be undertaken in connection with the S Corporation
Distributions of approximately $3.5 million, and (v) potential acquisitions. The
Company believes that cash generated from operations of GHB&M and Milton and the
net proceeds received by the Company from the Offering will be sufficient to
fund such capital needs on a short-term basis and for at least the next 12
months.
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RESULTS OF OPERATIONS--GHB&M
GHB&M's revenues are derived primarily from providing advertising and
promotion, consulting, medical education, publishing and public relations
services to its clients.
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
Revenues for the first six months of fiscal 1997 were $7.5 million, an
increase of $1.1 million, or 16.9%, from $6.4 million for the first six months
of fiscal 1996. This increase was primarily attributable to a $1.3 million
increase in revenues from advertising and promotion services, which was
partially offset by declines in revenues from medical education and public
relations services. The increases in advertising and promotion services resulted
primarily from additional business relating to new projects from existing
clients. The decline in revenues derived from medical education and public
relations services primarily resulted from the timing of clients' medical
education and public relations related activities.
Salaries and related costs include all compensation and related benefits
for all employees and contracted talent. Salaries and related costs for the
first six months of fiscal 1997 were $4.9 million, an increase of $549,000,
or 12.6%, from $4.4 million for the first six months of fiscal 1996. The
increase was primarily attributable to the additional staff hired to support the
increased level of business activity. Salaries and related costs represented
65.7% of revenues in the first six months of fiscal 1997, as compared to 68.1%
in the first six months of fiscal 1996.
Other operating expenses primarily include rent and occupancy, client
development and other related administrative costs. Other operating expenses for
the first six months of fiscal 1997 were $1.6 million, a decrease of $86,000, or
5.2%, from $1.7 million for the first six months of fiscal 1996. Other operating
expenses represented 21.0% of revenues in the first six months of fiscal 1997,
as compared to 26.0% in the first six months of fiscal 1996.
Income from operations for the first six months of fiscal 1997 was
$991,000, an increase of $613,000, or 162.0%, from $378,000 for the first six
months of fiscal 1996. Income from operations represented 13.3% of revenues in
the first six months of fiscal 1997, as compared to 5.9% in the first six months
of fiscal 1996. The increase in income from operations, as a percentage of
revenues, resulted from the increase in revenues, without a commensurate
increase in operating expenses.
The provision for income taxes for the first six months of 1997 was
$64,000, an increase of $31,000, or 93.9%, from $33,000 for the first six months
of 1996. This increase was primarily attributable to higher income before taxes
in the first six months of 1997, as compared to the first six months of 1996.
The effective tax rate was 6.0% for the first six months of 1997, compared to
7.2% for the first six months of 1996. As S Corporations, the companies
comprising GHB&M (other than Syberactive) were not taxed at the Federal level
but were subject to certain state corporate taxes and the New York City General
Corporation Tax.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Revenues for fiscal 1996 were $14.3 million, an increase of $1.9 million,
or 15.7%, from $12.4 million for fiscal 1995. This increase was primarily
attributable to a $1.1 million increase in revenues from advertising and
promotion services, a $300,000 increase in revenues from consulting services and
a $300,000 increase in revenues from medical education services, all of which
principally resulted from additional business relating to new projects from
existing clients.
Salaries and related costs for fiscal 1996 were $8.9 million, an increase
of $1.6 million, or 22%, from $7.3 million for fiscal 1995. Of such increase,
$1.1 million was attributable to the additional staff hired to support the
higher level of business activity and $500,000 was attributable to annual salary
increases. Salaries and related costs represented 62.5% of revenues in fiscal
1996, as compared to 59.2% in fiscal 1995.
Other operating expenses for fiscal 1996 were $3.2 million, an increase of
$76,000, or 2.4%, from $3.1 million for fiscal 1995. Other operating expenses
represented 22.3% of revenues in fiscal 1996, as compared to 25.2% in fiscal
1995.
Income from operations for fiscal 1996 was $2.2 million, an increase of
$256,000, or 13.3%, from $1.9 million for fiscal 1995. Income from operations
represented 15.3% of revenues in fiscal 1996, as compared to 15.6% in fiscal
1995.
The provision for income taxes for fiscal 1996 was $158,000, an increase of
$34,000, or 27.4%, from $124,000 in fiscal 1995. This increase was primarily
attributable to higher income before taxes in fiscal 1996, as compared to fiscal
1995. The effective tax rate was 7.2% in fiscal 1996, compared to 6.4% for
fiscal 1995. As S
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Corporations, the companies comprising GHB&M (other than Syberactive) were not
taxed at the Federal level but were subject to certain state corporate taxes and
the New York City General Corporation Tax.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Revenues for fiscal 1995 were $12.4 million, an increase of $2.0 million,
or 18.8%, from $10.4 million for fiscal 1994. This increase was primarily
attributable to (i) an $800,000 increase in revenues from advertising and
promotion services, resulting primarily from additional business relating to new
projects from existing clients, (ii) a $600,000 increase in revenues from
medical education services, resulting primarily from the completion of two
significant projects in fiscal 1995, and (iii) a $300,000 increase in revenues
from publishing services, resulting primarily from an increase in billing rates.
Salaries and related costs for fiscal 1995 were $7.3 million, an increase
of $910,000, or 14.2%, from $6.4 million for fiscal 1994. The increase was
primarily attributable to the additional staff hired to support the higher level
of business activity. Salaries and related costs represented 59.2% of revenues
in fiscal 1995, as compared to 61.6% in fiscal 1994.
Other operating expenses for fiscal 1995 were $3.1 million, an increase of
$204,000, or 7.0%, from $2.9 million for fiscal 1994. This increase was
primarily attributable to increased new business development costs of $250,000
and additional rent and occupancy costs of $150,000 related to expanded office
space, which increases were partially offset by a decrease in professional fees
of $300,000. Other operating expenses represented 25.2% of revenues in fiscal
1995, as compared to 28% in fiscal 1994.
Income from operations for fiscal 1995 was $1.9 million, an increase of
$839,000, or 77.1%, from $1.1 million for fiscal 1994. Income from operations
represented 15.6% of revenues in 1995, as compared to 10.4% in fiscal 1994. The
increase in income from operations, as a percentage of revenues, resulted from
decreases in both salaries and related costs and other operating expenses as a
percentage of revenues.
The provision for income taxes for fiscal 1995 was $124,000, an increase of
$105,000, or 553.0%, from $19,000 in 1994. Such increase was attributable to an
increase in the effective tax rate of 6.4% in fiscal 1995, compared to 1.7% in
fiscal 1994, and higher income before taxes in fiscal 1995, as compared to
fiscal 1994. The increase in the effective tax rate was due to GHB&M's
relocation of its graphic design facility to New York City in fiscal 1995.
RESULTS OF OPERATIONS--MILTON
Milton's revenues are derived primarily from providing contract sales,
advertising and promotion and public relations services to its clients.
SEVEN MONTHS ENDED JUNE 30, 1997 COMPARED TO SEVEN MONTHS ENDED JUNE 30, 1996
Revenues for the first seven months of fiscal 1997 were $8.1 million, an
increase of $2.7 million, or 49.9%, from $5.4 million for the first seven months
of fiscal 1996. Such increase was primarily attributable to (i) a $2.1 million
increase in revenues from contract sales services which resulted from additional
business relating to the duration and size of assignments for existing clients
and new clients, and (ii) a $500,000 increase in revenues from advertising and
promotion services, which was primarily attributable to the operations of PDM
(acquired in November 1996).
Salaries and related costs include all compensation and related benefits
for all employees and contracted talent. Salaries and related costs for the
first seven months of fiscal 1997 were $6.3 million, an increase of $2.4
million, or 64.1%, from $3.9 million for the first seven months of fiscal 1996.
The increase was primarily attributable to (i) $1.6 million in increased labor
and other direct costs relating to Milton's contract sales operations, (ii)
$420,000 relating to additional managerial staff hired to support the increased
level of contract sales activity, and (iii) $380,000 relating to staffing costs
incurred in anticipation of increased business activity in advertising and
promotion (particularly business relating to 'switching' a drug from
prescription to over-the-counter status) and public relations, which did not
occur in the period. Salaries and related costs represented 77.7% of revenues in
the first seven months of fiscal 1997, compared to 71.0% in the first seven
months of fiscal 1996.
Other operating expenses primarily include rent and occupancy, client
development and other related administrative costs. Other operating expenses for
the first seven months of fiscal 1997 were $1.5 million, an increase of
$507,000, or 50.8%, from $1.0 million for the first seven months of fiscal 1996.
Such increase was primarily attributable to $250,000 of additional rent and
occupancy costs related to expanded office space in connection with the
acquisition of PDM and growth of Milton's contract sales operations, and
increased business
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development costs of $125,000. Other operating expenses represented 18.5% of
revenues in the first seven months of fiscal 1997, compared to 18.4% in the
first seven months of fiscal 1996.
Income from operations for the first seven months of fiscal 1997 was
$308,000, a decrease of $267,000, or 46.4%, from $575,000 for the first seven
months of fiscal 1996. Income from operations represented 3.8% of revenues for
the first seven months of fiscal 1997, compared to 10.6% in the first seven
months of fiscal 1996. Such declines were largely attributable to a reduction in
the number of products approved by the government for 'switching' a drug from
prescription to over-the-counter status. Milton has retained its talent pool in
anticipation of a reversal of such trend. Additionally, losses from the public
relations group added to the overall decline in income from operations. Milton
is in the process of reducing its overhead associated with public relations to
reflect current business activity.
The provision for income taxes for the first seven months of fiscal 1997
was $91,000, a decrease of $106,000 or 53.8%, from $197,000 for the first seven
months of fiscal 1996. The effective tax rate remained at 37.0% for both
periods.
YEAR ENDED NOVEMBER 30, 1996 COMPARED TO YEAR ENDED NOVEMBER 30, 1995
Revenues for fiscal 1996 were $9.9 million, an increase of $5.5 million, or
125.0%, from $4.4 million for fiscal 1995. Such increase was primarily
attributable to an increase of $5.1 million in revenues from Milton's contract
sales operations, including $2.5 million of revenues attributable to the
operations of Headcount (acquired by Milton in November 1995). The remainder of
such growth in contract sales services resulted primarily from additional
business from new clients.
Salaries and related costs for fiscal 1996 were $6.8 million, an increase
of $4.3 million, or 168.0%, from $2.5 million for fiscal 1995. Of such increase,
approximately $3.4 million was attributable to labor and other direct costs
attributable to Milton's contract sales operations, $400,000 was attributable to
retaining the staff of Headcount (acquired by Milton in November 1995) and
$400,000 was attributable to the additional managerial staff hired to support
the increased level of business activity of Milton's contract sales operations.
Salaries and related costs represented 68.7% of revenues in fiscal 1996,
compared to 57.5% in fiscal 1995. As a percentage of revenues, Milton's contract
sales operations generally have higher labor costs than those for other
marketing and communications services.
Other operating expenses for fiscal 1996 were $2.0 million, an increase of
$707,000, or 54.0%, from $1.3 million for fiscal 1995. This increase was
primarily attributable to additional rent and occupancy costs of $380,000
related to expanded office space and increased business development costs of
$180,000, both of which resulted from the growth of Milton's contract sales
operations (including the acquisition of ESP in November 1995) and the start-up
of Milton's public relations business in May 1996. Other operating expenses
represented 20.4% of revenues in fiscal 1996, compared to 29.8% in fiscal 1995.
The decrease, as a percentage of revenues, was primarily attributable to such
expenses generally being fixed relative to increases in Milton's revenues.
Income from operations for fiscal 1996 was $1.1 million, an increase of
$527,000, or 94.4%, from $558,000 for fiscal 1995. Income from operations
represented 11.0% of revenues in 1996, compared to 12.7% in 1995.
The provision for income taxes for fiscal 1996 was $366,000, an increase of
$207,000, or 130.2%, from $159,000 for fiscal 1995. This increase was primarily
attributable to higher income before taxes and minority interests in fiscal
1996, as compared to fiscal 1995. The effective tax rate was 37.0% in 1996, as
compared to 29.3% in fiscal 1995. The difference in effective tax rates was due
primarily to nondeductible goodwill in 1996 and United Kingdom marginal company
rate relief in fiscal 1995.
YEAR ENDED NOVEMBER 30, 1995 COMPARED TO YEAR ENDED NOVEMBER 30, 1994
Revenues for fiscal 1995 were $4.4 million, an increase of $1.7 million, or
65.0%, from $2.7 million for fiscal 1994. The increase was primarily
attributable to (i) an increase of $1.2 million in revenues from Milton's
contract sales operations which resulted primarily from business from new
clients as such operations continued to grow, and (ii) an increase of $500,000
from advertising and promotion services which resulted from additional business
from new and existing clients.
Salaries and related costs for fiscal 1995 were $2.5 million, an increase
of $1.0 million, or 71.7%, from $1.5 million for fiscal 1994. Of such increase,
$800,000 was attributable to labor and other direct costs of Milton's contract
sales operations, and the remainder was attributable to the addition of staff to
support the higher level of business activity and normal annual salary increases
to existing employees. Salaries and related costs represented 57.5% of revenues
in fiscal 1995, compared to 55.3% in fiscal 1994.
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Other operating expenses for fiscal 1995 were $1.3 million, an increase of
$508,000, or 63.3%, from $802,000 for fiscal 1994. This increase was primarily
attributable to additional business development costs of $200,000, additional
rent and occupancy costs of $100,000 and additional other operating expenses of
$100,000. Other operating expenses represented 30.0% of revenues in each of
fiscal 1995 and fiscal 1994.
Income from operations for fiscal 1995 was $558,000, an increase of
$168,000, or 43.1%, from $390,000 for fiscal 1994. Income from operations
represented 12.7% of revenues in fiscal 1995, compared to 14.6% in fiscal 1994.
The decrease, as a percentage of revenues, was primarily attributable to the
growth of Milton's contract sales operations.
The provision for income taxes for fiscal 1995 was $159,000, an increase of
$42,000, or 35.9%, from $117,000 for fiscal 1994. This increase was primarily
attributable to higher income before taxes and minority interests in fiscal
1995, as compared to fiscal 1994. The effective tax rate was 29.3% in 1995, as
compared to 31.0% in 1994. The difference in effective tax rates was due to
differences in United Kingdom marginal company rate relief in fiscal 1994.
ACCOUNTING STANDARDS
In March 1997, the Financial Accounting Standards Board (the 'FASB') issued
SFAS No. 128, 'Earnings Per Share.' This statement establishes standards for
computing and presenting earnings per share ('EPS'), replacing the presentation
of currently required Primary EPS with a presentation of Basic EPS. For entities
with complex capital structures, the statement requires the dual presentation
for both Basic EPS and Diluted EPS on the face of the statement of earnings.
Under this new standard, Basic EPS is computed based on weighted average common
shares outstanding and excludes any potential dilution; Diluted EPS reflects
potential dilution from the exercise or conversion of securities into common
stock, or from other contracts to issue common stock, and is similar to the
currently required Fully Diluted EPS. SFAS No. 128 is effective for financial
statements issued for periods ending after December 15, 1997, including interim
periods, and earlier application is not permitted. The adoption by the Company
of SFAS No. 128 will have no impact on the Company's reporting of EPS.
In October 1995, the FASB issued SFAS No. 123, 'Accounting for Stock Based
Compensation.' The statement encourages, but does not require, companies to
account for stock compensation awards based on their fair value at the date the
awards are granted. The resulting compensation award would be shown as an
expense on the statement of earnings. Alternatively, the statement allows for
the continued use of Accounting Principles Boards ('APB') Opinion No. 25,
'Accounting for Stock Issued to Employees,' which generally results in no
compensation cost for most fixed stock-option plans, with pro forma disclosure
of net income and earnings per share determined as if the fair value based
method had been applied in measuring compensation cost. The Company will adopt
SFAS No. 123 in fiscal 1997 by continuing to apply the provisions of APB Opinion
No. 25 while providing the required pro forma disclosures as if the fair value
method had been applied.
In March 1995, the FASB issued SFAS No. 121, 'Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed of,' which is
effective for fiscal years beginning after December 15, 1995. SFAS No. 121
requires that long-lived assets be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of the asset in
question may not be recoverable. SFAS No. 121, which was adopted in fiscal 1996,
did not have a material impact on either GHB&M's or Milton's results of
operations, cash flows or financial position.
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BUSINESS
The following presentation contains forward looking statements which
involve risks and uncertainties. The Company's actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including those set forth under 'Risk Factors' and
elsewhere in this Prospectus.
OVERVIEW
The Company is an international marketing and communications services
company specializing in health care. The Company provides many of the world's
largest pharmaceutical and other health care companies with a comprehensive
range of integrated strategic marketing services designed to accelerate the
market's acceptance of new products and to sustain marketability throughout
their life-cycles. The Company's services include advertising and promotion,
contract sales, consulting, publishing, medical education, public relations,
interactive multimedia, database marketing and marketing research services.
Healthworld was incorporated in Delaware in September 1996 and has
conducted no operations to date. In connection with the Consolidation, the
entities comprising GHB&M and Milton will be, as of the date of this Prospectus,
wholly owned subsidiaries of Healthworld and Healthworld will conduct all of its
operations in the United States through GHB&M and in the United Kingdom through
Milton. GHB&M and Milton have been operating in the marketing and communications
industry since April 1986 and August 1978, respectively. See the Combined
Financial Statements of GHB&M and the Consolidated Financial Statements of
Milton contained elsewhere in this Prospectus.
INDUSTRY BACKGROUND
Pharmaceutical and other health care companies have been increasing their
spending on advertising, marketing and other communications services. Worldwide
spending by pharmaceutical and biotechnology companies on promotional marketing
and contract sales is estimated to reach $5.9 billion in 1997 and to increase by
$1.0 billion by 1999. Additionally, $3.0 billion is spent annually on continuing
medical education. The Company believes that such growth will continue due to a
number of factors, including the following:
NEED TO MAXIMIZE RETURNS ON NEW DRUGS. In response to the increasing costs
and time required to develop and commercialize a new pharmaceutical product,
pharmaceutical companies implement marketing and communications programs to
achieve rapid market penetration for newly developed products. The cost of
developing a new clinical drug is estimated to be approximately $500 million,
and the research and development process for a new clinical drug, from the
beginning stages of research to obtaining final regulatory approval in the
United States, is estimated to take approximately 15 years. As a result, once a
pharmaceutical company is ready to begin commercial introduction of a newly
developed drug, only approximately five years of patent protection may remain.
In order to recoup their costs of development, maximize sales, develop brand
acceptance and loyalty and achieve a higher market share in the shortest time
period possible, pharmaceutical companies now begin their marketing efforts for
a new drug in its development stage and, upon regulatory approval and
commercialization, continue with sophisticated large-scale advertising and
marketing campaigns.
CHANGES IN THE HEALTH CARE INDUSTRY. In response to governmental and
market pressures to reduce the cost of health care services and products while
providing such services to a greater portion of the population, the health care
industry has undergone significant changes, including the emergence of managed
care as a primary means for delivery of and payment for such services and
products. Pharmaceutical and other health care companies and providers are being
forced to deliver a greater volume of services and products at reduced costs. In
addition to justifying health care services and products on the basis of safety
and efficacy, pharmaceutical and health care companies and providers must now
also focus increasingly on economic factors and cost-efficiency with respect to
their services and products. As a result, health care companies are spending
more money on marketing and communications services to educate health care
providers, consumers and managed care companies and other third party payor
organizations as to the cost-effectiveness, as well as safety and efficacy, of
their products.
GROWTH OF DIRECT-TO-CONSUMER MARKETING. During the last five years the use
of direct-to-consumer marketing ('DTC') to promote prescription drugs to
consumers has grown rapidly. Prior to the emergence of
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DTC, prescription drugs were promoted almost exclusively to physicians. In 1996,
the first year in which more money was spent on DTC to promote prescription
drugs than on advertising to physicians, industry sources report that
pharmaceutical companies spent approximately $600 million on DTC, which is twice
as much as they spent in 1995 and almost 10 times more than in 1991, and that
figures for the first few months of 1997 suggest that the total may double again
and may exceed $1.0 billion for the year.
The Company believes that the tremendous growth in DTC in the United States
(DTC is currently prohibited in Europe by governmental regulations) evolved in
response to the increased costs of developing and commercializing new drugs and
the changes brought about by health care reform and managed care, as well as
increased consumer awareness of, and participation in, decisions concerning
health care treatment. As a result, DTC was developed to create brand awareness
and brand loyalty among consumers and to motivate the consumer to specifically
request more information from their physician with respect to a specific brand
of drug to determine its appropriateness for their treatment. In the past, DTC
has been primarily communicated through print media due to regulations imposed
by the United States Food and Drug Administration (the 'FDA') that controlled
the content of television advertisements. In August 1997, the FDA relaxed such
regulations by allowing televised DTC campaigns to promote the benefits of
specific brand-name drugs while only displaying the major side effects and risks
of such drugs in an easily understood format, as compared to the previously
required display of complex and lengthy data. The Company believes that the
relaxation of such FDA regulations will contribute to the rapid growth of DTC,
which the Company expects will continue, and that pharmaceutical companies will
increasingly rely primarily on marketing and communications firms with
particular expertise in DTC of prescription drugs.
INCREASED USE OF OUTSOURCED SALES AND MARKETING SERVICES. Pharmaceutical
and other health care companies, in response to cost-containment pressures, are
increasingly outsourcing labor intensive, high cost services, including
marketing and sales and research functions. For example, the introduction of a
new drug requires the immediate availability of a large number of specially
trained sales personnel. As a result, pharmaceutical and other health care
companies are increasingly relying on contract sales organizations to assemble,
train and provide them with the largest possible sales force covering numerous
locations to achieve rapid market penetration and increased sales volume.
NEW MEDIA. Advances in technology are dramatically influencing the
delivery of marketing information. Recent developments in digital technology
such as CD-ROM, the World Wide Web, the Internet, laptop PC presentations and
interactive kiosks are revolutionizing the marketing industry. For example,
interactive multimedia are increasingly being used for patient and physician
education, sales force training and public relations. The Company believes that
pharmaceutical and other health care companies will continue to seek to retain
progressive marketing and communications companies that have the resources and
expertise to develop and incorporate interactive multimedia and other new
technology in their programs and campaigns.
NEED FOR GLOBAL EXPERTISE. The Company believes globalization is
developing as a result of the recent surge of multinational consolidations in
the pharmaceutical industry, increased foreign protection of intellectual
property, the development of large multi-country trading blocks which may lead
to reduced barriers to foreign commerce, and world-wide access to common
information through the development and use of new media. The Company believes
that in the future, pharmaceutical and other health care companies will seek to
retain marketing and communications firms specializing in health care that have
international reach and experience and are capable of developing multinational
campaigns, or campaigns on a region-by-region basis, with consistent concepts.
STRATEGY
The Company's strategy is to capitalize on continued growth in marketing
and communications spending by pharmaceutical and other health care companies by
(i) maintaining and enhancing its creative excellence and technical expertise,
(ii) offering its clients a comprehensive range of integrated services, (iii)
continuing to specialize in health care marketing and communications services,
(iv) increasing its contract sales services, and (v) further expanding globally.
The Company intends to implement its strategy through internal development and
potential acquisitions.
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MAINTAIN AND ENHANCE CREATIVE EXCELLENCE AND TECHNICAL EXPERTISE. The
Company seeks to recruit the best available creative talent to maintain its
creative excellence. The Company believes that its creative talent enables it to
develop new ways to effectively promote its clients' products. The Company
believes that GHB&M is an industry leader in the development of DTC campaigns
for prescription drugs and that Milton is an industry leader in the development
of marketing strategies and campaigns for 'switching' a drug from prescription
to
over-the-counter (non-prescription) status based on the number of assignments
GHB&M and Milton have performed in such respective areas. The Company believes
that GHB&M was one of the first firms to develop a DTC campaign for a
prescription drug. GHB&M currently has 12 DTC assignments. GHB&M, which has
consistently been recognized in the industry as one of the top health care
communications agencies, was named 'Agency of the Year' in 1993 and 1996 by Med
Ad News, a medical advertising and communications trade publication, based on a
number of criteria, including creative marketing ability and account wins and
losses, and was a finalist for such award in 1992 and 1994. GHB&M was also named
'Most Creative Agency' by Med Ad News in 1995, based on a poll of the presidents
of the top 50 communications agencies. In addition, the Company maintains a high
level of technological expertise and utilizes new interactive multimedia and
other new technologies in its programs and campaigns.
OFFER A COMPREHENSIVE RANGE OF INTEGRATED SERVICES. The Company believes
that its clients are continuing to expand their sales and marketing efforts and
require marketing and communications companies that can provide a comprehensive
range of integrated services. The Company's communications services include
advertising and promotion, publishing, medical education, public relations,
consulting, interactive multimedia and database marketing services. The Company
also provides contract sales and marketing research services. Through such
diversification, the Company is able to provide a specific service or cross-sell
multiple services to its clients within a fully integrated campaign. The Company
believes that it will continue to realize significant benefits by capitalizing
on available opportunities which may arise to increase the number of services it
provides.
CONTINUED SPECIALIZATION IN HEALTH CARE. The Company will continue to
focus on providing its services primarily to pharmaceutical and other health
care companies. The Company believes that its expertise in and understanding of
the business, consumer, scientific, medical and regulatory issues relating to
the health care industry are critical in developing the most effective marketing
campaigns and strategies with respect to pharmaceutical and other health care
products and services. The Company's staff includes physicians, pharmacists,
biologists and other personnel with extensive experience in providing marketing
and communications services to health care companies. The Company intends to
continue to recruit experienced health care and scientific professionals to
ensure that its knowledge base remains up to date.
EXPANSION OF CONTRACT SALES SERVICES. Pharmaceutical and other health care
companies are increasingly outsourcing certain marketing and sales services to
contract sales organizations. Currently, the Company's contract sales
organization operates only in the United Kingdom and provides its services
primarily to consumer products companies, utilities and other non-health care
related companies. The Company began providing contract sales services to
pharmaceutical and other health care companies in order to take advantage of the
increased use by such companies in the United Kingdom of contract sales forces
to market their products in May 1997 and, consequently, as of June 30, 1997,
revenues generated from such clients were not significant. The Company intends
to expand its contract sales operations into the United States by the end of the
first quarter of 1998 and anticipates that such operations will focus almost
exclusively on pharmaceutical and other health care products. The Company
believes that contract sales will enable it to complement its existing
communications services with a flexible sales force designed to augment its
clients' sales activities.
EXTEND GLOBAL REACH. The Company believes that pharmaceutical and other
health care companies will increasingly seek to retain marketing and
communications companies with international reach and experience. The Company
believes that it is positioned to address such future demand through its
operations in the United States and the United Kingdom, and through Healthworld
B.V., a world-wide network of licensed independent advertising agencies located
in 12 other countries of which GHB&M and Milton are founding licensees.
Healthworld B.V. generally operates as a trade organization through which its
licensed agencies, including GHB&M and Milton, provide business referrals to one
another. In addition, Healthworld B.V. enables GHB&M and Milton and its other
member agencies to utilize the creative talents of other member agencies that
have expertise and knowledge of particular countries or geographic regions in
order to develop consistent and integrated multinational campaigns for its
clients. See '--Healthworld B.V.' The Company currently intends to
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continue to expand the Healthworld B.V. network and will regularly evaluate
opportunities to expand its business into other international locations.
GROWTH THROUGH ACQUISITIONS. The Company intends to pursue acquisitions of
marketing and communications companies specializing in health care in its
existing markets and internationally, including possibly acquiring Healthworld
B.V. licensed independent agencies. The Company anticipates that it will apply a
portion of the net proceeds of the Offering to undertake such acquisitions if
suitable acquisition candidates are identified. While the Company regularly
evaluates and discusses potential acquisitions, the Company currently has no
understandings, commitments or agreements with respect to any such acquisitions.
See 'Risk Factors--Management of Growth; Acquisition Risks,' 'Use of Proceeds'
and 'Management's Discussion and Analysis of Financial Condition and Results of
Operations.'
SERVICES
The Company provides a wide array of marketing and communications services
to its clients ranging from the execution of a discrete marketing project, such
as designing product packaging, to taking responsibility for the overall
marketing message, which enables the Company to incorporate a wide variety of
its services into one integrated marketing campaign. The Company seeks to
develop brand loyalty and awareness for its clients at any stage of a product's
life-cycle and approaches each project by carefully evaluating the product, the
client's goals with respect to such product and industry and competitive
considerations.
GHB&M's revenues are derived primarily from providing advertising and
promotion, consulting, publishing and medical education services to its clients.
In addition, GHB&M also offers other marketing and communications services to
its clients, including public relations, interactive multimedia, database
marketing and marketing research services. Milton's revenues are derived
primarily from providing contract sales, advertising and promotion and public
relations services to its clients.
The services provided by the Company include:
ADVERTISING AND PROMOTION. The Company's traditional advertising and
promotion services include developing creative concepts for advertising
campaigns for pharmaceutical and other health care products and applying such
creative concepts to the development and production of a wide variety of
marketing and promotional materials, including medical journal advertisements,
direct mail materials, sales force brochures, hospital displays, convention
exhibit panels, drug sample packages and reminder promotional items. Such
campaigns are targeted almost exclusively to physicians, nurses and other health
care providers and to wholesale distributors. The Company also analyzes
marketing research data, which is either developed by the Company (through
various methods including focus group studies, telephone interview studies and
mailings) or obtained from its clients and other third-party sources, to
determine the most appropriate audience to target as well as the types of
marketing and promotional materials to employ in a campaign.
In response to the rapid growth of DTC during the last five years, GHB&M
expanded its advertising and promotion services to include DTC. The Company
believes that GHB&M was one of the first firms to develop a DTC campaign for
prescription drugs and has become an industry leader in developing such DTC
campaigns based on the number of DTC assignments it has performed. Through a
dedicated team engaged exclusively in developing DTC campaigns, the Company
believes it offers more specialized and comprehensive services to its clients
than firms which focus primarily on the promotion of consumer products generally
or on non-DTC advertising and the promotion of pharmaceutical products. In 1994,
1995, 1996 and the six months ended June 30, 1996 and 1997, the Company's
revenues from DTC represented 18%, 21%, 20%, and 18% and 14%, respectively, of
the Company's pro forma combined revenues.
The Company also believes that Milton is an industry leader in Europe in
developing campaigns for 'switching' a drug from prescription to
over-the-counter status based on the number of switching assignments it has
performed. For example, in the United Kingdom, Regaine (Rogaine in the United
States), a product of Pharmacia & Upjohn, never achieved its sales expectations
as a prescription-only product despite being advertised and promoted to
physicians by other agencies. The Company believed that Regaine's lack of
success was primarily attributable to doctors' skepticism of the drug's
effectiveness and a general perception of hair loss being a cosmetic problem
rather than a medical disorder. In May 1995, the Company presented a
comprehensive
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plan to Pharmacia & Upjohn that included a new positioning and field marketing
program emphasizing the product's ability to stop further hair loss and
relegated the regeneration of hair to a secondary message. The Company developed
and implemented an integrated media plan which incorporated seven consumer
advertisements, special pharmacist programs (including in-store training manuals
and display materials), and a public relations launch in London.
GHB&M generated revenues from its advertising and promotion services of
approximately $7.7 million in fiscal 1994, $8.5 million in fiscal 1995, $9.6
million in fiscal 1996, $4.2 million for the six months ended June 30, 1996 and
$5.5 million for the six months ended June 30, 1997, constituting 74%, 68%, 67%,
66% and 74%, respectively, of GHB&M's combined revenues in each of such periods.
Milton generated revenues from its advertising and promotion services of
approximately $2.4 million in fiscal 1994, $2.9 million in fiscal 1995, $3.1
million in fiscal 1996, $1.6 million for the six months ended June 30, 1996 and
$1.9 million for the six months ended June 30, 1997, constituting 90%, 66%, 31%,
32% and 26%, respectively, of Milton's consolidated revenues in each of such
periods. The Company's pro forma combined revenues from advertising and
promotion services were approximately $10.0 million in fiscal 1994, $11.4
million in fiscal 1995, $12.7 million in fiscal 1996, $5.8 million for the six
months ended June 30, 1996 and $7.5 million for the six months ended June 30,
1997, constituting 77%, 68%, 52%, 51% and 51%, respectively, of the Company's
total pro forma combined revenues in each of such periods.
CONTRACT SALES SERVICES. The Company offers a flexible range of contract
sales services which are delivered through dedicated and syndicated sales teams.
The Company's contract sales teams form a network of trained professionals that
provides clients with substantial flexibility in selecting the extent and costs
of promoting products as well as the clients' level of involvement in managing
the sales effort. Dedicated sales teams are comprised of sales representatives
recruited by the Company in accordance with client specifications to conduct
sales efforts for a particular client. Dedicated sales teams can be managed by
the Company or can report directly to the client, depending on client
preference. Syndicated sales teams promote a number of products for different
clients and are generally managed directly by the Company.
The Company believes that speed of recruitment, quality of training and
management of sales representatives, supported by advanced information
technology, are key to providing clients with a sales force tailored to meet
their geographic and scheduling needs. The Company's ability to assemble a sales
team quickly is a product of combining the talents of experienced personnel for
screening and interviewing candidates with the use of information technology to
expedite recruitment. The Company believes that it can recruit client-specific
national sales force in as few as eight to 12 weeks, depending on the
assignment. Sound hiring procedures, including background screenings and drug
testing programs, supplemented by the Company's internal training and
development programs, help to ensure the quality of recruited personnel.
Currently, the Company provides its contract sales services in the United
Kingdom primarily to consumer product companies, utilities and other non-health
care related companies. The Company hires sales personnel on a
project-by-project basis, with the actual number of representatives retained
contingent upon a particular assignment. The Company maintains a database
listing approximately 5,000 sales personnel, and typically employs, either on a
part-time or full-time basis, approximately 1,000 sales persons at any given
time.
The Company began providing contract sales services to pharmaceutical and
other health care product companies in the United Kingdom in May 1997 and,
consequently, as of June 30, 1997, revenues generated from such clients were not
significant. In addition, the Company currently intends to begin providing
contract sales services in the United States by the end of the first quarter of
1998. The Company anticipates that its contract sales operations in the United
States will focus almost exclusively on pharmaceutical and other health care
products and services.
Milton generated revenues from its contract sales services of approximately
$280,000 in fiscal 1994, $1.5 million in fiscal 1995, $6.6 million in fiscal
1996, $3.3 million for the six months ended June 30, 1996 and $5.2 million for
the six months ended June 30, 1997, constituting 11%, 34%, 67%, 68% and 71%,
respectively, of Milton's consolidated revenues in each of such periods, and 2%,
9%, 27%, 29% and 35%, respectively, of the Company's total pro forma combined
revenues in each of such periods. GHB&M did not have any contract sales
operations during such periods.
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CONSULTING. The Company's consulting services include strategic planning,
new product development, clinical and regulatory affairs and health economics.
Clients retain the Company to assist them in the development of strategic and
business plans. Typically, the Company investigates and studies the results of
clinical trials and marketing research studies to formulate a strategic
direction for a client's products. The Company may recommend to its clients,
among other things, conducting cost effectiveness clinical studies, extending
patent life protection through line extensions, considering various approaches
to dealing with the FDA, and developing pricing strategies and specific clinical
trials to support certain marketing objectives. The Company currently
subcontracts clinical and regulatory affairs and health economics consulting
services to independent companies specializing in such services. While the
Company is currently considering expanding to provide such regulatory affairs
and health economics consulting services 'in-house,' there can be no assurance
that the Company will, in the future, expand into such services.
GHB&M generated revenues from its consulting services of approximately $1.4
million in fiscal 1994, $1.5 million in fiscal 1995, $1.8 million in fiscal
1996, $896,000 for the six months ended June 30, 1996 and $986,000 for the six
months ended June 30, 1997, constituting 14%, 13%, 13%, 14% and 13%,
respectively, of GHB&M's combined revenues in each of such periods, and 11%, 9%,
8%, 8% and 7%, respectively, of the Company's total pro forma combined revenues
in each of such periods. Milton does not provide consulting services.
PUBLISHING. DTC publications are increasingly being employed as an
additional element of an integrated marketing campaign to promote disease
awareness, understanding of and compliance with treatment, and brand awareness
and loyalty. As part of a DTC campaign developed by the Company for Wyeth-Ayerst
Laboratories' drug Premarin, an estrogen replacement for menopausal women, the
Company publishes and manages the circulation for Seasons, a bi-monthly magazine
for women who are on Premarin therapy, which is devoted to women's health care
issues, including issues concerning menopause and osteoporosis as well as the
efficacy and benefits of the drug and the means by which it can help improve
overall quality of life. The Company believes that the magazine's current per
issue circulation of 1.0 million Premarin patients makes it one of the most
popular women's health magazines ever published and that the Company's
integrated marketing campaign has contributed to Premarin becoming one of the
world's leading drugs in terms of prescription sales volume.
The Company is seeking to expand its publishing business by offering DTC
publications to pharmaceutical companies as a marketing tool with respect to
drugs used for long term therapy for chronic conditions or illnesses such as
asthma, arthritis, ulcers, heart disease, diabetes and obesity. In addition, the
Company believes that such DTC publications can be utilized by insurers and
managed care companies as part of a disease specific management program designed
to educate a patient as to his or her disease, including treatment options and
lifestyle advice which may lead to an overall reduction in the cost of treatment
and care.
GHB&M generated revenues from its publishing services of approximately
$757,000 in fiscal 1994, $1.1 million in fiscal 1995, $1.2 million in fiscal
1996, $500,000 for the six months ended June 30, 1996 and $494,000 for the six
months ended June 30, 1997, constituting 7%, 8%, 8%, 8% and 7%, respectively, of
GHB&M's combined revenues in each of such periods, and 6%, 6%, 5%, 4% and 3%,
respectively, of the Company's total pro forma combined revenues in each of such
periods. Milton does not have publishing operations.
MEDICAL EDUCATION. The Company develops medical educational programs
targeted primarily to health care providers that are tied closely to the
strategy and marketing goals for its clients, including continuing medical
education programs for which physicians obtain credit and are required to
complete to maintain their licenses. In addition to planning, implementing and
managing symposia, workshops and other conferences that commonly utilize a
multi-disciplinary faculty to address the full spectrum of care on featured
topics, the Company creates newsletters, articles, slide lecture kits and
posters. The Company also assists pharmaceutical and other health care companies
in developing, writing and placing journal articles and supplements, and offers
specialized training programs which incorporate new training technologies that
can be applied in selling pharmaceutical products to non-traditional purchasers,
including managed care organizations and public health officials. The Company
offers such services throughout a product's life-cycle, including prior to
regulatory approval, in order to create awareness and generate interest among
the health care community about such product prior to such approval.
GHB&M generated revenues from its medical education services of
approximately $530,000 in fiscal 1994, $1.1 million in fiscal 1995, $1.4 million
in fiscal 1996, $598,000 for the six months ended June 30, 1996 and
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$425,000 for the six months ended June 30, 1997, constituting 5%, 9%, 10%, 9%
and 6%, respectively, of GHB&M's combined revenues in each of such periods, and
4%, 7%, 6%, 5% and 3%, respectively, of the Company's total pro forma combined
revenues in each of such periods. Milton does not provide medical education
services.
PUBLIC RELATIONS. The Company provides a broad range of public relations
services to its clients, including tactical development, media relations, crisis
management, special events, public sponsorship packages, professional and
patient association liaison, grant and fellowship initiatives, editorial
projects, graphic design and video production. The Company typically integrates
its public relations programs into its overall marketing campaign for a client.
The Company believes that its in-depth knowledge of professional trade and
consumer media and its strong media contacts provide it with ongoing
opportunities to place high impact stories publicizing client products and
services.
INTERACTIVE MULTIMEDIA. The Company develops and incorporates interactive
multimedia and other new technologies into its programs and campaigns. The
Company has utilized virtually all existing digital formats, including laser
disc, kiosks, on-line and CD-ROM and owns an extensive archive of over 4,000
medical illustrations which it incorporates in such multimedia formats. The
Company also provides website design and updating, demographics targeting,
statistical measurement and list analysis. The Company believes that interactive
multimedia are particularly attractive to its clients because specific audiences
can be targeted.
DATABASE MARKETING. The Company employs database technology to develop and
implement marketing campaigns that are targeted to specific audience profiles.
The Company utilizes its own or its clients' databases as well as databases it
leases from third parties (including the American Medical Association). Through
its direct marketing division, the Company developed and manages a database of
1.5 million patients generated from current and former patient readers per issue
of Seasons.
MARKETING RESEARCH. The Company develops and offers its clients
specialized research programs to measure the 'return on investment' ('ROI') of
its DTC and other marketing programs. The ROI model utilized by the Company is a
proprietary model based on a consumer products research methodology that has
been adapted and modified for use with respect to prescription drugs. Through
the use of its ROI model, the Company has established normative data that it
will use as benchmarks for future ROI studies. The Company believes that data
from such programming assists the Company and its clients in determining the
most effective means of marketing a particular product.
Revenues from public relations, interactive multimedia, database marketing
and marketing research services, in the aggregate, did not constitute more than
3% of GHB&M's combined revenues, Milton's consolidated revenues or the Company's
pro forma combined revenues in any fiscal year.
HEALTHWORLD B.V.
Healthworld B.V. is a world-wide network of licensed independent marketing
and communications agencies which began operating in August 1993. Healthworld
B.V. was organized as a Dutch corporation by GHB&M, Milton and two other
founding licensees in response to the founders' belief that pharmaceutical and
other health care companies will increasingly seek to retain marketing and
communications companies with international reach and experience. Healthworld
B.V. generally operates as a trade organization through which its licensed
agencies, including GHB&M and Milton, provide business referrals to one another
and, where appropriate, work with other licensed agencies with respect to
projects which require expertise in other geographic markets. As such,
Healthworld B.V. does not generate revenues from operations and is funded solely
by membership fees and royalty payments from its licensees. Healthworld B.V.
enables its member agencies to utilize the creative talents of other member
agencies that have expertise and knowledge of particular countries or geographic
regions to develop consistent and integrated multinational campaigns for the
clients of such member agencies.
Healthworld B.V. currently consists of GHB&M in the United States, Milton
in the United Kingdom, and 12 other licensed independent marketing and
communications agencies located in Belgium, Canada, Denmark, Finland, France,
Holland, Hungary, Italy, Norway, South Africa, Spain and Sweden. Member agencies
are carefully selected based on, among other things, quality of work, local
reputation, client base and certain other organizational and financial criteria.
Each member agency has entered into a license agreement with Healthworld
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B.V. which provides, among other things, that such agency will perform services
for the clients of any other member agency upon request by such other member
agency. In addition, each such license agreement provides for the member agency
to pay a royalty fee to Healthworld B.V. and permits such member agency to use
certain of Healthworld's trademarks within its geographic market.
GHB&M and Milton each own 30.2% of the capital stock of Healthworld B.V.,
and the remainder is owned by nine other member agencies. Each agency that
enters into a license agreement with Healthworld B.V. is given the opportunity
to become a shareholder of Healthworld B.V. Healthworld B.V. is managed by a
Board of Directors consisting of five members, and each of GHB&M and Milton is
entitled to designate one of such members.
Although to date, Healthworld B.V. has neither conducted significant
operations nor contributed materially to GHB&M's or Milton's results of
operations, the Company believes that Healthworld B.V. has enabled the Company
to attract additional clients based upon the Company's ability to offer global
reach and expertise.
CLIENTS
The Company currently services approximately 45 clients. The Company's
clients are primarily pharmaceutical and other health care companies, including
health care service providers and manufacturers of diagnostic equipment, medical
equipment, medical devices and medical supplies. The Company's major clients
include many of the world's largest pharmaceutical companies. The Company has
enjoyed long-standing relationships with many of such clients, a number of which
have lasted for more than five years. The Company currently provides its
contract sales services in the United Kingdom primarily to consumer products
companies, utilities and other non-health care related companies.
The following list sets forth in alphabetical order pharmaceutical and
other health care clients of the Company who each represented $350,000 or more
of the Company's pro forma combined revenues in fiscal 1996, as well as the
corresponding percentage of the Company's pro forma combined revenues
represented by each such client in fiscal 1996:
Applied Microbiology, Inc. (1.7%)
Connaugh Laboratories (1.7%)
Eli Lilly & Co. (2.7%)
The Hospital Saving Association (3.0%)
Johnson & Johnson/Merck-Sharp-Dome
(a joint venture) (2.0%)
Ortho/McNeil Pharmaceuticals (a division of
Johnson & Johnson) (9.3%)
Roche Laboratories (4.3%)
Sanofi Winthrop Pharmaceuticals (a division
of Sanofi Winthrop, Inc.) (5.2%)
SmithKline Beecham Pharmaceuticals (1.5%)
Whitehall Laboratories (a division of American
Home Products) (2.0%)
Wyeth-Ayerst Laboratories (a division of
American Home Products) (24.8%)
The Company's contracts with its clients, except with respect to contract
sales services, generally have a term of one year and, with respect to long-term
projects, are renewed on a year-to-year basis. Such contracts typically relate
to specific services or services only for specific products and may be
terminated by the client on short notice. The Company's contracts relating to
its contract sales services generally are either short-term (i.e., one week to
six months) or long-term (i.e., up to three years), and may also be terminated
by the client on short notice. The Company typically enters into contracts with
new clients or contracts for additional projects from existing clients either by
being directly retained by such clients or after being invited to bid and
successfully bidding on projects for such clients.
Clients are not generally bound to an individual agency and may move their
accounts at any time from one agency to another. In addition, clients generally
tend to use more than one agency for their marketing requirements. Client
conflicts of interest are inherent in the marketing and communications industry,
particularly with respect to pharmaceutical and other health care clients for
whom the Company performs advertising services, due to the proprietary nature of
such clients' products. The Company's ability to compete for new clients and
assignments is limited by the Company's general practice, and the practice
followed by many of the Company's competitors, of not representing more than one
client with competing product lines. In addition, the Company is often
contractually precluded from representing companies with competing products. As
a result, the
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Company may not be retained by existing, new and potential clients with respect
to certain products if the Company provides marketing or communications services
for competing products.
INTELLECTUAL PROPERTY
In 1997, the Company entered into a 50-year license agreement (the 'License
Agreement') with Healthworld B.V. pursuant to which Healthworld B.V. granted the
Company rights to use the 'Healthworld' and 'Healthworld Communications'
trademarks, the tradename 'Healthworld,' and the Healthworld logo, for $1.00 per
year. Under the License Agreement, Healthworld B.V. must obtain the Company's
prior written consent before further licensing such licensed property.
Healthworld B.V. has trademarks registered with the United States Patent and
Trademark Office for the words 'Healthworld' and 'Healthworld Communications'
which expire in March 2004 and for the Healthworld name together with its logo
which expires in May 2005. Healthworld B.V. also has trademarks registered or
applications for such registrations pending for the tradename 'Healthworld' and
the Healthworld logo in the United Kingdom and in each of the other countries in
which licensed Healthworld B.V. agencies are located, as well as several other
countries. The Company considers all of such United States and United Kingdom
trademarks to be material to its operations.
COMPETITION
The health care marketing and communications industry throughout the United
States and Europe is highly competitive. The Company competes with many other
marketing and communications firms, including international and regional
full-service and specialty marketing and communications firms. Consolidation
within the pharmaceutical and health care industries as well as a trend by
pharmaceutical and health care companies to limit outsourcing of sales,
marketing and communications services to fewer organizations has heightened the
competition among such service providers for a smaller number of clients. In
addition, many of the larger consumer product marketing and communications
companies have acquired specialty health care marketing and communications
companies, which themselves have been increasingly consolidating in recent
years. For instance, each of Bozell, Jacobs, Kenyon & Eckhardt, Grey
Advertising, Interpublic Group, Omnicom Group, Inc., Saatchi & Saatchi
Advertising Affiliates Holdings, Inc. and Young & Rubicam, Inc., has one or more
divisions specializing in health care marketing and communications. Many of
these companies have substantially greater financial resources, personnel and
facilities than the Company. If the previously described consolidation trends
continue, the Company may face greater competition for its clients and for
acquisition candidates. Although the Company believes it is able to compete on
the basis of the quality of its creative product, service, reputation and
personal relationships with clients, there can be no assurance that the Company
will be able to maintain its competitive position in the industry.
With respect to contract sales services provided to consumer products
companies in the United Kingdom, the Company currently competes against in-house
sales departments of such companies and contract sales organizations operating
in the United Kingdom, many of which are larger and have substantially greater
financial resources. With respect to contract sales services targeted to
pharmaceutical and medical devices, the Company currently competes in the United
Kingdom, and, if such services are expanded into the United States, will compete
in the United States, against the in-house sales departments of pharmaceutical
companies and local contract sales organizations specializing in pharmaceutical
and medical device products. The primary competitive factor affecting contract
sales and marketing services is the ability to quickly assemble, train and
manage large qualified sales forces to handle broad scale sales campaigns. The
Company believes that it competes favorably in these areas in the United Kingdom
with respect to its non-health care related contract sales services. However,
with respect to health care related contract sales services, there can be no
assurance that the Company will compete favorably in these areas in the United
Kingdom or in the United States.
While there are relatively low barriers to entry into the marketing and
communications industry as a whole, the Company believes that its specific
expertise with respect to the pharmaceutical and health care industry
distinguish it from prospective competitors attempting to develop health care
communications businesses. Notwithstanding the Company's expertise, it expects
that it will face additional competition from new entrants into the industry in
the future. There can be no assurance that existing or future competitors will
not develop or offer marketing communications services and products that provide
significant performance, creative, technical or other advantages over those
offered by the Company.
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GOVERNMENT REGULATION
While there are no laws that specifically regulate the health care
communications industry, the health care and pharmaceutical industries are
generally subject to a high degree of government regulation, and the trend is
toward regulation of increasing stringency. Federal, state and local laws and
regulations affect the permissible form, content and timing of marketing
activities involving pharmaceutical and other health care products. Some of
these laws relate to general considerations such as truthfulness, comparative
advertising and the relative responsibilities of clients and advertising firms.
Other laws, such as the Food, Drug and Cosmetics Act and the anti-fraud and
abuse laws and regulations affecting the Medicare, Medicaid and other
governmental health care programs, regulate the form, content and/or timing of
marketing activities involving pharmaceutical and other health care products,
including the permissible activities the Company may undertake to develop
markets for its clients' products. The Company has implemented a rigorous review
process, emphasizing the importance of compliance with regulatory matters. In
addition, the Company's clients generally follow a rigorous internal review
process.
PROPERTIES
GHB&M maintains corporate headquarters in New York in a leased facility
which occupies approximately 44,600 square feet of office space. The lease for
such office space is due to expire on December 31, 2009 and has escalating rent
currently at the base rate of $575,000 per annum which will increase to $662,000
per annum in December 1997, $750,000 per annum in December 1998 and $970,000 per
annum from December 2003 through the expiration of the lease. GHB&M also leases
small offices in Bellmore, New York and Chicago, Illinois.
Milton leases approximately 2,850 square feet of office space in London for
its United Kingdom headquarters and approximately 5,218 square feet of office
space in Chertsey for its contract sales operations. Milton also leases small
offices located in Brighton and in two locations in each of Berkshire and
Surrey. The aggregate annual base rent for all of Milton's United Kingdom
facilities is approximately $393,000.
The Company believes that its existing facilities are adequate to meet its
current operating needs and that suitable additional space should be available
to the Company on reasonable terms should the Company require additional space
to accommodate future operations or expansion.
EMPLOYEES
As of August 1, 1997, the Company had four part-time employees and
approximately 190 full-time employees, 110 of which were employed in GHB&M's
United States operations and 80 of which were employed in Milton's United
Kingdom operations, excluding sales persons employed in Milton's contract sales
organization. In the United Kingdom, Milton typically employs approximately
1,000 sales persons for its contract sales organization at any given time, and
such sales persons are employed both on a full-time and part-time basis. The
Company is not a party to any collective bargaining agreement and the Company's
employees are not represented by any labor union. The Company considers its
relationship with its employees to be good. The Company's success depends in
large part, upon its ability to attract, develop, motivate and retain highly
skilled creative and technical employees, of which there can be no assurance.
LEGAL MATTERS
The Company is not a party to any pending litigation which, if decided
against the Company, would have a material adverse effect on the business,
financial condition or results of operations of the Company, and the Company is
not aware of any material threatened litigation which might involve the Company.
37
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information concerning Healthworld's
directors and the Company's executive officers and those persons who will become
directors of Healthworld (each, a 'Director Nominee') immediately upon
consummation of the Offering.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------------ --- ------------------------------------------------
<S> <C> <C>
Steven Girgenti................................. 51 Chairman of the Board and Chief Executive
Officer
William Leslie Milton........................... 53 Vice Chairman of the Board and President
Stuart Diamond.................................. 36 Executive Vice President, Chief Financial
Officer and Secretary
William Butler.................................. 52 Executive Vice President--Global Communications
Services of GH
Herbert Ehrenthal............................... 61 Executive Vice President--U.S. Communications
Services of GH
Francis Hughes.................................. 59 Creative Director of GH and Director
Michael Garnham................................. 42 Managing Director--U.K. Contract Sales Services
Peter Knight(1)(2).............................. 46 Director
Colin Lloyd(1)(2)(3)............................ 55 Director
Jonah Shacknai(1)(2)(3)......................... 40 Director
Alex Spizz(1)(3)................................ 49 Director
</TABLE>
- ------------------
(1) Director Nominee.
(2) Will become a member of the Compensation Committee immediately upon
consummation of the Offering.
(3) Will become a member of the Audit Committee immediately upon consummation of
the Offering.
Directors are elected annually. Each director holds office until the next
annual meeting of stockholders, or until his successor has been elected and
qualified. Executive officers are ordinarily elected annually and serve at the
discretion of the Board of Directors. See '--Employment Agreements' for a
description of certain employment agreements of executive officers.
STEVEN GIRGENTI has served as Chairman of the Board and Chief Executive
Officer of Healthworld since August 1997. Mr. Girgenti co-founded GH in April
1986 and has served as its President and Chief Executive Officer since then.
Beginning in 1969, Mr. Girgenti worked in the pharmaceutical industry for
advertising companies specializing in medical communications, including William
Douglas McAdams. Prior to that, Mr. Girgenti held a variety of positions with
pharmaceutical companies, including Director of Marketing Research and Product
Manager for DuPont Pharmaceuticals and Manager of Commercial Development for
Bristol-Myers Squibb Company.
WILLIAM LESLIE MILTON has served as Vice Chairman of the Board and
President of Healthworld since August 1997. Mr. Milton founded Milton Marketing
Limited in 1979 and has served as its Chairman of the Board and Chief Executive
Officer since such time. Prior to 1979, Mr. Milton held a variety of positions
with WarnerLambert Consumer Healthcare, Beecham Laboratories (South Africa),
Gillette Industries UK Limited, and Parke Davis Pty (South Africa) where he
developed an expertise in marketing management with respect to medical and
consumer health care products.
STUART DIAMOND has served as Executive Vice President, Chief Financial
Officer and Secretary of Healthworld since August 1997. Mr. Diamond was the Vice
President-Controller of the Licensing Division of Calvin Klein Inc., an apparel
company, from April 1996 to August 1997. He was the Vice President and Chief
Financial Officer of Fenway Partners Inc., a leveraged buyout firm, from April
1995 to April 1996. Mr. Diamond was the Senior Vice President and Chief
Financial Officer of Medicis Pharmaceutical Corp., a publicly traded
pharmaceutical company, from 1990 to April 1995.
38
<PAGE>
WILLIAM BUTLER will become Executive Vice President of GH's Global
Communications Services upon consummation of the Consolidation. Mr. Butler has
been President and Chief Operating Officer of the GHB&M Division of GH. Mr.
Butler co-founded GH in April 1986 and has served as its Executive Vice
President since such time. Mr. Butler has worked for various medical
communications firms, including Sudler & Hennessey and William Douglas McAdams.
Prior to that time, Mr. Butler worked in a number of marketing positions at
Pfizer Inc. and Continental Group.
HERBERT EHRENTHAL will become Executive Vice President of GH's U.S.
Communications Services upon consummation of the Consolidation. Mr. Ehrenthal
has been President and Chief Operating Officer of Rubin Ehrenthal & Associates,
a division of GH, since 1991 when Rubin, Reid, Noto & Ehrenthal, Inc. ('Rubin
Ehrenthal') (of which he was a founding member) merged with GH. Prior to his
employment with Rubin Ehrenthal, Mr. Ehrenthal held a variety of senior
management positions with various advertising agencies, including BBDO Worldwide
Inc. and Ted Bates.
FRANCIS HUGHES has been a director of Healthworld since August 1997 and has
been Creative Director since September 1995. Mr. Hughes co-founded GH in April
1986 and has served as its Secretary since then. In 1980, Mr. Hughes co-founded
William J. Bologna International, Inc., a health care communications company.
Prior to that time, Mr. Hughes worked in the medical divisions of various
advertising companies, including J. Walter Thompson Co., Compton and William
Douglas McAdams.
MICHAEL GARNHAM has been the Managing Director of U.K. Contract Sales
Services since August 1993. Mr. Garnham was the Associate Director of FMCG Field
Marketing Ltd., a field marketing company, from February 1992 to August 1993.
PETER KNIGHT will become a director of Healthworld upon consummation of the
Offering. Mr. Knight has been a partner of the law firm of Wunder, Knight,
Levine, Thelen & Forsey since 1991. In 1996, Mr. Knight took a leave of absence
from the firm to serve as Campaign Manager for the 1996 Clinton/Gore campaign.
Mr. Knight was General Counsel and Secretary of Medicis Pharmaceutical Corp.
from 1989 to 1991, and is currently a director of Comsat Corp., an international
telecommunications and network service company, Medicis Pharmaceutical Corp. and
Whitman Education Group Inc., a private for-profit education company.
COLIN LLOYD will become a director of Healthworld upon consummation of the
Offering. Mr. Lloyd has been the Chief Executive Officer of Direct Marketing
Association (U.K.) Ltd., a direct marketing trade association, since September
1993. Mr. Lloyd served as a consultant to and a director of various companies
from 1992 to 1993, and was President of Marketing Services Worldwide of Roux,
Seguile, Cyzak & Goudard, SA ('RSCG'), an international advertising group, from
February 1990 to August 1991. In 1969, Mr. Lloyd co-founded KLP Group plc
('KLP'), a sales promotion and marketing services company in the United Kingdom
in which he served as the Chief Executive Officer until August 1991. KLP was
acquired in 1990 by RSCG.
JONAH SHACKNAI will become a director of Healthworld upon consummation of
the Offering. Mr. Shacknai has been Chairman of the Board and Chief Executive
Officer of Medicis Pharmaceutical Corp. since 1988. From 1982 to 1988, Mr.
Shacknai was a senior partner in the law firm of Royer, Shacknai, and Mehle,
where he represented over 34 multinational pharmaceutical and medical device
companies. From 1983 to 1986, Mr. Shacknai was also an executive officer of Key
Pharmaceutical, Inc., prior to its acquisition by Schering-Plough Corp. From
1977 to 1982, Mr. Shacknai served as Chief Aide to a United States House of
Representatives committee with responsibility for health policy. Mr. Shacknai
serves as a member of the National Arthritis and Musculoskeletal and Skin
Diseases Advisory Council of the National Institute of Health, and the
U.S.-Israel Science and Technology Commission.
ALEX SPIZZ will become a director of Healthworld upon consummation of the
Offering. For more than the past five years, Mr. Spizz has been a senior member
of the law firm of Todtman, Nachamie, Hendler & Spizz, P.C., counsel to the
Company, GHB&M and Healthworld B.V. in connection with the Consolidation and
other corporate matters.
COMMITTEES OF THE BOARD
Upon consummation of the Offering, the Board of Directors will establish a
Compensation Committee and an Audit Committee. The Compensation Committee will
review and recommend to the Board of Directors the compensation and benefits of
all officers of the Company, review general policy matters relating to
compensation and benefits of employees of the Company and administer the
issuance of stock options to the Company's
39
<PAGE>
officers, employees, directors and consultants. The Audit Committee will be
responsible for recommending annually to the Board of Directors the independent
auditors to be retained by the Company, and will meet with management and the
Company's independent auditors to determine the adequacy of internal controls
and other financial reporting matters.
EXECUTIVE COMPENSATION
Healthworld, which was incorporated on September 12, 1996 and has conducted
limited operations and generated no revenues to date, did not pay any
compensation to its executive officers in 1996. The following table sets forth
the cash compensation paid by GHB&M for the fiscal year ended December 31, 1996,
and by Milton for the fiscal year ended November 30, 1996, to the Chief
Executive Officers of each of GHB&M and Milton, respectively, and to each of the
other most highly compensated executive officers of GHB&M and Milton whose cash
compensation exceeded $100,000 for such respective fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------------------------
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION SALARY($) BONUS($) COMPENSATION($) COMPENSATION($)
- ------------------------------------------------------- ------- ------- --------------- ---------------
<S> <C> <C> <C> <C>
Steven Girgenti
Chairman of the Board and
Chief Executive Officer.............................. -- -- $ 337,000(1) $ 981,500(2)
William Leslie Milton
Vice Chairman of the Board and President............. $98,280(3)(4) -- $ 32,340(3)(5) --
William Butler
Executive Vice President--Global Communications
Services of GH....................................... -- -- $ 275,000(1) $ 222,622(2)
Herbert Ehrenthal
Executive Vice President--U.S. Communications
Services of GH....................................... -- -- $ 275,000(1) $ 231,211(2)
Francis Hughes
Creative Director of GH.............................. -- -- $ 225,000(1) $ 52,372(2)
</TABLE>
- ------------------
(1) Represents consulting fees paid by certain of the companies comprising GHB&M
to certain companies wholly-owned by each respective officer.
(2) Represents distributions made to such individuals by certain of the
companies comprising GHB&M. A portion of such distributions were made to
cover each individual's 1995 and estimated 1996 tax liabilities associated
with the election of the companies comprising GHB&M to be treated as S
Corporations (other than Syberactive, which was treated as a C Corporation)
during such periods.
(3) Calculated using the 1996 average exchange rate of $1.56 = pounds 1.00.
(4) Compensation paid by Milton Marketing.
(5) Includes (i) a $15,600 contribution by Milton Marketing to Mr. Milton's
pension plan, and (ii) an aggregate of $10,952 for automobile expenses.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Compensation policies and decisions, including those relating to salary,
bonuses and benefits of executive officers, have been set or made by Mr.
Girgenti, with respect to GHB&M, and Mr. Milton, with respect to Milton, since
the formation of such companies. Upon consummation of the Offering, the Board of
Directors of the Company will establish a Compensation Committee which will,
among other things, recommend to the Board of Directors the compensation to be
paid to the Company's officers. See '--Committees of the Board.'
EMPLOYMENT AGREEMENTS
The Company will enter into a three-year employment agreement with each of
Messrs. Girgenti, Milton, Butler, Ehrenthal, and Garnham (the 'Executive
Employment Agreements'), which will provide that Messrs. Girgenti, Milton,
Butler, Ehrenthal and Garnham (the 'Executives') will serve as Chairman of the
Board and Chief Executive Officer of the Company, Vice Chairman of the Board and
President of the Company, Executive Vice President--Global Communications
Services of GH, Executive Vice President--U.S. Communications Services of GH and
Managing Director--Headcount, respectively, at an annual salary of
40
<PAGE>
$360,000, $325,000, $300,000, $300,000, and $175,000, respectively, subject to
review and increase at the discretion of the Board of Directors of the Company.
Messrs. Girgenti's and Milton's Executive Employment Agreements provide that
each of Messrs. Girgenti and Milton will serve as members of the Board of
Directors of the Company. Each Executive Employment Agreement is automatically
renewable after the initial three-year term for successive one year periods
unless either the Company or the Executive notifies the other at least 90 days
prior to the expiration of any term of its or his desire to terminate the
agreement. Each Executive Employment Agreement will also contain a
confidentiality provision as well as a noncompetition provision which will
prohibit the Executive from competing with the Company during the term of the
applicable agreement and for a two year period after the expiration of such
term. Under Messrs. Girgenti's or Milton's Executive Employment Agreement, in
the event that the Company terminates Mr. Girgenti or Milton without cause (as
defined in the agreement) prior to the expiration of the agreement, the Company
will be obligated to pay Messrs. Girgenti or Milton, as the case may be,
severance in an amount equal to twice his then current base salary.
Furthermore, each Executive Employment Agreement will provide that Messrs.
Girgenti, Milton, Butler, Ehrenthal and Garnham will be entitled to a bonus
based on achieving or exceeding certain profits and revenue performance goals
set by the Company during the term of their respective employment agreement, and
may be entitled to an additional bonus to be determined at the sole discretion
of the Compensation Committee of the Company. Mr. Ehrenthal's agreement will
also provide that he will be entitled to a two year consulting arrangement, at
the end of his employment term, for $120,000 per annum.
In August 1997, the Company entered into a three-year employment agreement
with Stuart Diamond (the 'Diamond Employment Agreement'), which provides that
Mr. Diamond will serve as the Company's Executive Vice President and Chief
Financial Officer at an annual base salary of $175,000, subject to annual review
and increase at the discretion of the Board of Directors of the Company. The
Diamond Employment Agreement also provides that Mr. Diamond will receive a
minimum bonus of $30,000 for the year ending December 31, 1997 and may be
entitled to additional annual bonuses and awards under any plans established by
the Company as determined by the Board of Directors or Compensation Committee in
their sole discretion. The Diamond Employment Agreement is automatically
renewable after the initial three-year term for successive one year periods
unless either the Company or Mr. Diamond notifies the other at least 30 days
prior to the expiration of any term of its or his desire to terminate the
agreement. The Diamond Employment Agreement contains a confidentiality provision
as well as a non-competition provision which prohibits Mr. Diamond from
competing with the Company during the term of the agreement. Under the Diamond
Employment Agreement, the Company will be obligated to pay Mr. Diamond severance
in an amount equal to (i) six months base salary, in the event that the Company
terminates Mr. Diamond without cause (as defined in the agreement) prior to or
subsequent to the expiration of the agreement, and (ii) a minimum of three
months base salary (subject to increase at the discretion of the Board of
Directors) in the event that the Company is sold or a change of control in the
Company occurs (in addition to the amount payable in (i) above).
In September 1995, the Company entered into a three-year employment
agreement (the 'Hughes Employment Agreement') with Francis Hughes, a member of
Healthworld's Board of Directors, which provides that Mr. Hughes will serve as
the Creative Director and Secretary of GH for an annual base salary of $225,000.
Under the Hughes Employment Agreement, Mr. Hughes is obligated to work a total
of six out of 12 months per calendar year in accordance with a pre-approved
schedule. The Hughes Employment Agreement may be extended by Mr. Hughes at his
sole discretion for up to two additional one-year periods upon at least 30 days
prior written notice to the Company. The Hughes Employment Agreement contains a
confidentiality provision as well as a non-competition provision which prohibits
Mr. Hughes from competing with the Company during the term of the agreement and
for five years thereafter.
STOCK OPTION PLAN
Prior to the date of this Prospectus, the Board of Directors will adopt,
and the stockholders will approve, the Company's 1997 Stock Option Plan ('Stock
Option Plan'). The Stock Option Plan will provide for the grant of (i) options
that are intended to qualify as incentive stock options ('Incentive Stock
Options') within the meaning of Section 422 of the Code to certain employees
(including officers and directors who are employees) and (ii) options not
intended to so qualify to the Company's employees, officers, directors and
consultants. The total number of shares of Common Stock for which options may be
granted under the Stock Option Plan will be 710,000. To date, no stock options
have been granted under the Stock Option Plan. On the effective date of the
41
<PAGE>
Offering, Options will be granted by the Company under the Stock Option Plan to
purchase up to an aggregate of 498,500 shares of Common Stock at an exercise
price per share equal to the initial public offering price, which includes (i)
options to purchase 25,000 shares of Common Stock granted to each of Messrs.
Girgenti, Milton, Diamond, Butler, Ehrenthal and Hughes and options to purchase
12,500 shares granted to Mr. Garnham and (ii) options to purchase 10,000 shares
granted to each of Messrs. Knight, Lloyd, Shacknai and Spizz.
The Stock Option Plan will be administered by the Compensation Committee
(the 'Committee') of the Board of Directors, which, under such plan, must be
comprised of two or more non-employee directors who will determine the terms of
options to be granted under such plan, including the exercise price, the number
of shares subject to the option and the terms and conditions of exercise. The
Committee may appoint a separate committee comprised of the Chief Executive
Officer and the Chief Financial Officer of the Company (the 'Administrative
Committee') to act on its behalf and administer the Stock Option Plan with
respect to certain employees of the Company who are not officers of the Company,
provided that (i) the Administrative Committee may not grant options to purchase
more than an aggregate of 50,000 shares of Common Stock in any one calendar year
and (ii) unless otherwise determined by the Committee, no single employee may be
granted options to purchase more than 2,500 shares of Common Stock. No option
granted under the Stock Option Plan will be transferable by the optionee other
than by will or the laws of descent and distribution and each option will be
exercisable during the lifetime of the optionee only by such optionee. The Stock
Option Plan provides that no person shall be granted options to purchase more
than an aggregate of 200,000 share of Common Stock during any fiscal year.
The exercise price of all stock options granted under the Stock Option Plan
must be at least equal to the fair market value of such shares on the date of
grant. With respect to any participant who owns stock possessing more than 10%
of the voting rights of the Company's outstanding capital stock, the exercise
price of any Incentive Stock Option must be not less than 110% of the fair
market value on the date of grant. The term of each option granted pursuant to
the Stock Option Plan will be established by the Committee in its sole
discretion; provided, however, that the maximum term of each Incentive Stock
Option granted pursuant to the Stock Option Plan is ten years. With respect to
any Incentive Stock Option granted to a participant who owns stock possessing
more than 10% of the total combined voting power of all classes of the Company's
outstanding capital stock, the maximum term is five years. Options are subject
to earlier termination upon termination of employment. Except as otherwise
provided by the Committee at the time of grant, options shall become exercisable
ratably over three years commencing on the first anniversary of the date of
grant.
The Stock Option Plan also will provide for an automatic annual option
grant for the non-employee directors. Each non-employee director will
automatically receive an option grant for 10,000 shares of Common Stock on the
date of this Prospectus and on the date of the first meeting of the Board of
Directors following each annual meeting of stockholders thereafter. In addition,
a non-employee director who becomes a director subsequent to the date of this
Prospectus and other than on the date of any annual meeting of stockholders will
receive an option grant for 10,000 shares of Common Stock on the date he or she
becomes a director. Each grant will be at an exercise price per share equal to
the market price of the Common Stock on the grant date, will become fully
exercisable on the first anniversary of the date of grant, and will have a term
of ten years measured from the grant date, subject to earlier termination if an
optionee's service as a Board member is terminated.
In the event of a change of control (as defined in the Stock Option Plan)
of the Company, each option granted under the Stock Option Plan which has not
previously expired or been cancelled, shall become immediately exercisable in
full.
COMPENSATION OF DIRECTORS
Each non-employee member of the Board of Directors will receive an annual
fee of $2,000 plus reimbursement of expenses incurred in attending meetings.
Additionally, each non-employee member of the Board of Directors will
automatically receive option grants, as provided in the Stock Option Plan. See
'Stock Option Plan.'
KEY PERSON LIFE INSURANCE
The Company intends to obtain $4 million and $2 million term life insurance
policies covering Mr. Girgenti and Mr. Milton, respectively. The Company will be
the sole beneficiary of such policies.
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Healthworld entered into the Consolidation Agreements with the stockholders
of GHB&M and Milton in October 1997 pursuant to which, on the date of this
Prospectus, Healthworld will acquire all of the issued and outstanding stock of
each of GHB&M and Milton from the stockholders of GHB&M and Milton in exchange
for an aggregate of 5,000,000 shares of Common Stock of the Company, at which
time GHB&M and Milton will become wholly-owned subsidiaries of Healthworld. See
'The Consolidation.'
Immediately prior to the consummation of the Consolidation, GHB&M will make
the S Corporation Distributions to its stockholders of approximately $3.5
million in the aggregate from existing cash balances for the payment by such
stockholders of taxes due on S Corporation earnings. See 'The Consolidation.'
GHB&M has incurred indebtedness which is personally guaranteed by its
stockholders or by entities controlled by its stockholders. In particular, the
payment of all obligations under the GHB&M Credit Facility is guaranteed jointly
and severally by Messrs. Girgenti, Hughes, Butler and Ehrenthal, individually,
and by certain of the companies comprising GHB&M. At June 30, 1997, the
aggregate principal amount of indebtedness outstanding under the GHB&M Credit
Facility was $176,000. In addition, Mr. Milton has personally guaranteed
Milton's obligations under its lease for office space located in Windsor,
Berkshire. The lease expires in June 2004, and the current annual base rent
under the lease is approximately $127,000. Pursuant to the terms of the
Consolidation Agreements, the Company will use commercially reasonable efforts
to have such stockholders' personal guarantees on the balance of the
indebtedness and the obligations under the lease released within 120 days after
the consummation of the Consolidation and, in the event that the guarantee on
the indebtedness cannot be released, to repay the balance of such indebtedness
or to assume the obligations under the lease, as the case may be.
In 1991, each of the companies comprising GHB&M and each of their
stockholders entered into certain stockholder agreements. In connection with the
Consolidation, GHB&M and its stockholders have entered into an agreement to
terminate such stockholder agreements, concurrent with the consummation of the
Consolidation.
Todtman, Nachamie, Hendler & Spizz, P.C., of which Alex Spizz, a Director
Nominee, is a partner, represents GHB&M, Healthworld B.V. and the Company in
connection with the Consolidation and other corporate matters.
43
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of shares of Common Stock as of the date of this Prospectus, after
giving effect to the Consolidation, for (i) each director and Director Nominee,
(ii) each person known by the Company to be the beneficial owner of more than 5%
of the outstanding shares of Common Stock, (iii) each executive officer of the
Company, and (iv) all directors, Director Nominees and executive officers of the
Company as a group. Each stockholder has sole voting and investment power with
respect to the shares set forth opposite such stockholder's name. All persons
listed below have an address c/o the Company's principal executive offices in
New York.
<TABLE>
<CAPTION>
PERCENTAGE BENEFICIALLY OWNED
------------------------------------
NAME NUMBER OF SHARES BEFORE OFFERING AFTER OFFERING
- ----------------------------------------------------------- ------------------- --------------- -----------------
<S> <C> <C> <C>
Steven Girgenti............................................ 2,195,925 43.9% 30.9%
William Leslie Milton...................................... 1,297,330 25.9% 18.3%
Stuart Diamond............................................. -- -- --
William B. Butler.......................................... 485,070 9.7% 6.8%
Herbert Ehrenthal.......................................... 596,505 11.9% 8.0%
Francis Hughes............................................. 172,500 3.5% 2.4%
Michael Garnham............................................ 188,571 3.8% 2.7%
Peter Knight............................................... -- -- --
Colin Lloyd................................................ -- -- --
Jonah Shacknai............................................. -- -- --
Alex Spizz................................................. -- -- --
All directors, Director Nominees and executive officers as
a group (11 persons)..................................... 4,935,901 98.7% 69.5%
</TABLE>
44
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following summary description of Healthworld's capital stock and
certain provisions of Healthworld's Certificate of Incorporation and Bylaws does
not purport to be complete and is qualified in its entirety by reference to
Healthworld's Certificate of Incorporation and Bylaws, copies of which have been
filed with the Securities and Exchange Commission (the 'Commission') as exhibits
to Healthworld's registration statement on Form S-1 (the 'Registration
Statement') of which this Prospectus forms a part.
GENERAL
Healthworld's authorized capital stock consists of 20,000,000 shares of
Common Stock, par value $.01 per share, and 1,000,000 shares of preferred stock,
par value $.01 per share (the 'Preferred Stock'). After giving effect to the
Consolidation, but prior to the consummation of the Offering, Healthworld will
have outstanding 5,000,000 shares of Common Stock and no shares of Preferred
Stock, and will have eight holders of record of Common Stock. Upon completion of
the Offering, Healthworld will have outstanding 7,100,000 shares of Common Stock
(7,415,000 shares if the Underwriters' over-allotment option is exercised in
full) and no shares of Preferred Stock.
COMMON STOCK
Holders of Common Stock are entitled to one vote for each share held of
record on each matter submitted to a vote of stockholders. Subject to the prior
rights of any series of Preferred Stock which may from time to time be
outstanding, holders of Common Stock are entitled to receive ratably, dividends
when, as and if declared by the Board of Directors out of funds legally
available therefor and, upon the liquidation, dissolution, or winding up of the
Company, are entitled to share ratably in all assets remaining after payment of
liabilities and payment of accrued dividends and liquidation preferences on the
Preferred Stock, if any. Holders of Common Stock have no preemptive rights and
have no rights to convert their Common Stock into any other securities. The
outstanding Common Stock is, and the shares of Common Stock to be issued
pursuant to the Consolidation and the Offering will be, upon payment therefor,
fully paid and nonassessable.
PREFERRED STOCK
The Preferred Stock may be issued from time-to-time by the Board of
Directors in one or more series. Subject to the provisions of Healthworld's
Certificate of Incorporation and limitations prescribed by law, the Board of
Directors is expressly authorized to adopt resolutions to issue shares, to fix
the number of shares and to change the number of shares constituting any series
and to provide for or change the voting powers, designations, preferences and
relative, participating, optional or other special rights, qualifications,
limitations or restrictions thereof, including dividend rights (including
whether dividends are cumulative), dividend rates, terms of redemption
(including sinking fund provisions), redemption prices, conversion rights and
liquidation preferences of the shares constituting any series of the Preferred
Stock, in each case without any further action or vote by the stockholders. The
Company has no current plans to issue any shares of Preferred Stock.
The issuance of Preferred Stock, while providing desired flexibility in
connection with possible acquisitions and other corporate purposes, could have
the effect of rendering more difficult or discouraging an attempt to obtain
control of the Company by means of a tender offer, proxy contest, merger or
otherwise, thereby protecting the continuity of the Company's management. The
issuance of shares of the Preferred Stock pursuant to the Board of Directors'
authority described above may adversely affect the rights of the holders of
Common Stock. For example, Preferred Stock issued by Healthworld may rank prior
to the Common Stock as to dividend rights, liquidation preference or both, may
have full or limited voting rights and may be convertible into shares of Common
Stock. Accordingly, the issuance of shares of Preferred Stock may discourage
bids for the Common Stock or may otherwise adversely affect the market price of
the Common Stock.
LIMITATION OF LIABILITY
Healthworld's Certificate of Incorporation and By-laws include provisions
which eliminate the personal liability of Healthworld's directors and officers
for monetary damages resulting from breaches of their fiduciary duty of care
(provided that such provision does not eliminate liability for breaches of the
duty of loyalty, acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, violations of Section 174
of the Delaware General Corporation Law, or for any transaction from which the
director derived an
45
<PAGE>
improper personal benefit). These provisions do not limit or eliminate the right
of Healthworld or any stockholder to seek non-monetary relief such as an
injunction or rescission in the event of a breach of a director's duty of care.
The Certificate of Incorporation also provides that Healthworld shall indemnify
its directors and officers to the fullest extent permitted by Section 145 of the
Delaware General Corporation Law, including circumstances in which
indemnification is otherwise discretionary. The Company believes that these
provisions are necessary to attract and retain qualified directors and officers.
It is the position of the Commission that indemnification for liabilities under
the Securities Act is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.
DELAWARE ANTI-TAKEOVER LAW
Under Section 203 of the Delaware General Corporation Law (the 'Delaware
anti-takeover law'), certain 'business combinations' are prohibited between a
Delaware corporation, the stock of which is generally publicly traded or held of
record by more than 2,000 stockholders, and an 'interested stockholder' of such
corporation for a three-year period following the date that such stockholder
became an interested stockholder, unless (i) the corporation has elected in its
certificate of incorporation not to be governed by the Delaware anti-takeover
law (Healthworld has not made such an election), (ii) the business combination
is approved by the board of directors of the corporation before the other party
to the business combination became an interested stockholder, (iii) upon
consummation of the transaction which resulted in the stockholder becoming an
interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the commencement of the
transaction (excluding voting stock owned by directors who are also officers or
held in employee benefit plans in which the employees do not have a confidential
right to tender or vote stock held by the plan), or (iv) the business
combination was approved by the board of directors of the corporation and
ratified by 66 2/3% of the voting stock which the interested stockholder did not
own. The three-year prohibition also does not apply to certain business
combinations proposed by an interested stockholder following the announcement or
notification of certain extraordinary transactions involving the corporation and
a person who had not been an interested stockholder during the previous three
years or who became an interested stockholder with the approval of a majority of
the corporation's directors. The term 'business combination' is defined
generally to include mergers or consolidations between a Delaware corporation
and an interested stockholder, transactions with an interested stockholder
involving the assets or stock of the corporation or its majority-owned
subsidiaries, and transactions which increase an interested stockholder's
percentage ownership of stock. The term 'interested stockholder' is defined
generally as those stockholders who become beneficial owners of 15% or more of a
Delaware corporation's voting stock.
These provisions could delay or frustrate the removal of incumbent
directors or a change in control of the Company. The provisions also could
discourage, impede, or prevent a merger, tender offer or proxy contest, even if
such event would be favorable to the interests of stockholders.
TRANSFER AGENT
American Stock Transfer & Trust Company is the transfer agent and registrar
for the Common Stock.
46
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon consummation of the Consolidation and completion of the Offering,
Healthworld will have outstanding 7,100,000 shares of Common Stock. All of the
2,100,000 shares of Common Stock offered hereby (plus any additional shares sold
upon exercise of the Underwriters' over-allotment option) will be freely
tradeable without restriction or further registration under the Securities Act,
except for any shares purchased by any person who is or thereby becomes an
'affiliate' of the Company, which shares will be subject to the resale
limitations contained in Rule 144 promulgated under the Securities Act as
described below. The remaining 5,000,000 shares of Common Stock which will be
issued to the stockholders of GHB&M and Milton in the Consolidation, will be
'restricted securities' within the meaning of Rule 144 under the Securities Act
and, in general, if held for at least one year, will be eligible for sale in the
public market in reliance upon and subject to the limitations of Rule 144.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including a person who may be deemed to be an
'affiliate' of the Company as that term is defined under the Securities Act, is
entitled to sell, within any three month period, the number of shares
beneficially owned for at least one year that does not exceed the greater of (i)
one percent of the number of the then outstanding shares of Common Stock; or
(ii) the average weekly trading volume of the Common Stock during the four
calendar weeks preceding the date on which notice of the proposed sale is sent
to the Commission. Sales under Rule 144 are also subject to certain requirements
as to the manner of sale, notice and the availability of current public
information about the Company. Furthermore, a person who is deemed not to have
been an affiliate of the Company during the 90 days preceding a sale by such
person and who has beneficially owned such shares for at least two years is
entitled to sell such shares without regard to the volume, manner of sale or
notice requirement.
The Company and its officers and directors and the stockholders of GHB&M
and Milton who will receive shares of Common Stock in the Consolidation have
entered into Lock-up Agreements ('Lock-up Agreements') under which they will
agree not to offer, sell or otherwise dispose of any of their shares of Common
Stock or other securities of Healthworld for a period of 180 days, commencing
upon the date of this Prospectus, without the prior written consent of Unterberg
Harris, other than sales or issuances by Healthworld pursuant to the exercise of
the Underwriters' over-allotment option or pursuant to the grant of stock
options under Healthworld's Stock Option Plan.
The stockholders of GHB&M and Milton will, pursuant to the Consolidation
Agreements, be granted the right by Healthworld, commencing one year from the
date of this Prospectus, to require Healthworld, subject to certain exceptions,
to include their shares (up to 5,000,000 in the aggregate) in any and all
offerings in which Healthworld proposes to register shares of Common Stock for
its own account or for the account of others under the Securities Act, subject
to the right of any managing underwriter of any such offering to exclude some or
all of the shares for marketing reasons.
Prior to the Offering, no public market for Healthworld's securities has
existed. Following the Offering, no predictions can be made as to the effect, if
any, of future public sales of restricted shares or the availability of
restricted shares for sale in the public market. Nevertheless, the sale or
availability for sale of substantial amounts of Common Stock in the public
market could adversely affect prevailing market prices and the ability of the
Company to raise equity capital in the future.
47
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
(the 'Underwriting Agreement'), the Company has agreed to sell to each of the
Underwriters named below, and each of the Underwriters, for whom Unterberg
Harris and Pennsylvania Merchant Group Ltd are acting as Representatives, have
severally agreed to purchase, the respective number of shares of Common Stock
set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
- ------------------------------------------------------------------------------------------- ---------
<S> <C>
Unterberg Harris...........................................................................
Pennsylvania Merchant Group Ltd............................................................
---------
Total................................................................................. 2,100,000
---------
---------
</TABLE>
In the Underwriting Agreement, the several Underwriters have agreed,
subject to the terms and conditions set forth therein, to purchase all of the
shares of Common Stock offered hereby if any such shares are purchased. In the
event of a default by an Underwriter, the Underwriting Agreement provides that,
in certain circumstances, such commitments of the non-defaulting Underwriters
may be increased or the Underwriting Agreement may be terminated.
The Representatives have advised the Company that the Underwriters propose
initially to offer the shares of Common Stock offered hereby to the public at
the public offering price per share 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. The Underwriters may allow, and such dealers may reallow,
a discount not in excess of $ per share on sales to certain other
dealers. After the public offering, the offering price, discount and reallowance
may be changed.
The Company has granted the Underwriters an option, which may be exercised
within 30 days after the date of this Prospectus, to purchase up to an
additional 315,000 shares of Common Stock to cover over-allotments, if any, at
the initial public offering price, less the underwriting discount. To the extent
that the Underwriters exercise the option, each of the Underwriters will have a
firm commitment, subject to certain conditions, to purchase approximately the
same percentage of shares that the number of shares of Common Stock to be
purchased by it shown on the foregoing table bears to the total number of shares
initially offered hereby.
The Company has agreed to indemnify the Underwriters against certain civil
liabilities, including liabilities under the Securities Act, or to contribute to
payments the Underwriters may be required to make in respect thereof.
The Company has agreed to pay the Representatives a non-accountable expense
allowance equal to 1% of the aggregate offering price of the shares of Common
Stock offered hereby (including any shares of Common Stock purchased pursuant to
the exercise of the Underwriters' over-allotment option).
In connection with the Offering, the Underwriters may purchase and sell the
Common Stock in the open market. These transactions may include (i)
over-allotment transactions, (ii) stabilizing transactions, consisting of
certain bids or purchases for the purpose of preventing or restraining a decline
in the market price of the Common Stock, and (iii) purchases to cover syndicate
short positions created in connection with the Offering. The Underwriters also
may impose a penalty bid, whereby selling concessions allowed to syndicate
members or other broker-dealers in respect of the Common Stock sold in the
Offering for their account may be reclaimed by the
48
<PAGE>
syndicate if such shares of Common Stock are repurchased by the syndicate in
stabilizing or covering transactions. These activities may stabilize, maintain
or otherwise affect the market price of the Common Stock which may be higher
than the price that might otherwise prevail in the open market. These
transactions may be effected on The Nasdaq National Market or otherwise, and
these activities, if commenced, may be discontinued at any time.
The Underwriters have informed the Company that they do not intend to
confirm sales to any accounts over which they exercise discretionary authority.
The Common Stock has been approved for quotation on The Nasdaq National
Market under the symbol 'HWLD.'
The Company and its officers and directors and the stockholders of GHB&M
and Milton who will receive shares of Common Stock in the Consolidation have
entered into Lock-Up Agreements under which they will agree not to offer, sell
or otherwise dispose of any of their shares of Common Stock or other securities
of the Company for a period of 180 days after the date of this Prospectus
without the prior written consent of Unterberg Harris, other than sales or
issuances by the Company pursuant to the exercise of the Underwriters'
over-allotment option or pursuant to the grant of stock options under
Healthworld's Stock Option Plan.
Prior to the Offering, there has been no public market for the Common
Stock. The initial public offering price of the Common Stock offered hereby will
be determined by negotiation between the Company and the Representatives and
will not necessarily be related to the Company's asset value, net worth or other
established criteria of value. In determining the initial public offering price,
the Representatives and the Company will consider, among other things, market
prices of similar securities of comparable publicly traded companies, the
financial conditions and operating information of companies engaged in
activities similar to those of the Company, the financial condition and
prospects of the Company and the general condition of the securities market.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Rosenman & Colin LLP, New York, New York. Certain legal
matters in connection with the sale of the shares offered hereby will be passed
upon for the Underwriters by Akin, Gump, Strauss, Hauer & Feld, L.L.P., New
York, New York.
EXPERTS
The combined financial statements of GHB&M and the consolidated financial
statements of Milton included elsewhere in this Prospectus have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
reports.
FORWARD LOOKING STATEMENTS
This Prospectus and the Registration Statement, of which this Prospectus is
a part, contain various forward-looking statements and information that are
based on management's beliefs as well as assumptions made by and information
currently available to management for the Company. Although the Company believes
that the expectations reflected in such forward-looking statements are
reasonable, no assurance can be given that such expectations will prove to have
been correct. Such statements are subject to certain risks, uncertainties and
assumptions. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may vary
materially from those expected. Among the key factors that may have a direct
bearing on the Company's operating results are fluctuations in the economy,
successful integration of future acquisitions and the impact of competition.
49
<PAGE>
ADDITIONAL INFORMATION
The Company is not subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the 'Exchange Act'). The Company has filed
with the Commission a Registration Statement, together with exhibits thereto,
relating to the shares of Common Stock offered hereby. This Prospectus, which
constitutes a part of the Registration Statement, omits certain of the
information set forth in the Registration Statement. For further information
with respect to the Company and to the shares of Common Stock offered hereby,
reference is made to such Registration Statement. Statements contained in this
Prospectus as to the contents of any contract or other documents referred to are
not necessarily complete, and in each instance, reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference. The Registration Statement and exhibits may be inspected and copied
at the public reference section at the Commission's principal office, 450 5th
Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at the Commission's
Regional Offices located at the Northwestern Atrium Center, Suite 1400, 500 West
Madison Street, Chicago, Illinois 60661-2511, and 7 World Trade Center, 13th
Floor, New York, New York 10048. Copies may be obtained from the Commission's
principal office upon payment of the fees prescribed by the Commission. Copies
of such materials can be obtained from the Commission at Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20545, at prescribed rates. In addition,
the Commission maintains a Website on the Internet that contains reports, proxy
and information statements and other information regarding registrants that file
electronically with the Commission. The address of the Commission's Website is
http://www.sec.gov.
Following the Offering, the Company will be subject to the reporting and
other requirements of the Exchange Act and intends to furnish to its
stockholders annual reports containing audited financial statements and
quarterly reports containing unaudited consolidated summary financial
information for each of the first three quarters of each fiscal year.
50
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
HEALTHWORLD CORPORATION PRO FORMA COMBINING
Introduction to Unaudited Pro Forma Combining Financial Statements......................................... F-2
Pro Forma Combining Balance Sheets (unaudited)............................................................. F-3
Pro Forma Combining Statements of Income (unaudited)....................................................... F-6
Notes to Unaudited Pro Forma Combining Financial Statements................................................ F-11
HEALTHWORLD CORPORATION
Report of Independent Public Accountants................................................................... F-13
Balance Sheet.............................................................................................. F-14
Notes to Balance Sheet..................................................................................... F-15
GIRGENTI, HUGHES, BUTLER & MCDOWELL, INC. AND AFFILIATES
Report of Independent Public Accountants................................................................... F-16
Combined Balance Sheets.................................................................................... F-17
Combined Statements of Income.............................................................................. F-18
Combined Statements of Stockholders' Equity................................................................ F-19
Combined Statements of Cash Flows.......................................................................... F-20
Notes to Combined Financial Statements..................................................................... F-21
MILTON MARKETING GROUP LIMITED AND SUBSIDIARIES
Report of Independent Public Accountants................................................................... F-26
Consolidated Balance Sheets................................................................................ F-27
Consolidated Statements of Income.......................................................................... F-28
Consolidated Statements of Stockholders' Equity............................................................ F-29
Consolidated Statements of Cash Flows...................................................................... F-30
Notes to Consolidated Financial Statements................................................................. F-31
</TABLE>
F-1
<PAGE>
HEALTHWORLD CORPORATION
UNAUDITED PRO FORMA COMBINING FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The following unaudited pro forma combining financial statements give
effect to the contributions of the outstanding capital stock of Girgenti,
Hughes, Butler and McDowell, Inc. and its affiliated entities ('GHB&M') and
Milton Marketing Group Limited and its subsidiaries ('Milton'), including the
minority interest stockholders in such subsidiaries, to Healthworld Corporation
(the 'Company') in exchange for an aggregate of 5,000,000 shares of common stock
of the Company (collectively, the 'Consolidation'). The Consolidation will occur
on the effective date of the Offering made by this Prospectus and will be
accounted for using the pooling of interests method of accounting.
The unaudited pro forma combining balance sheets give effect to the
Consolidation, S Corporation distributions to the stockholders of the companies
comprising GHB&M (other than Syberactive, Inc.), the contribution by the
stockholders of GHB&M to the Company of undistributed S Corporation earnings,
the purchase by the Company of minority interests in certain of Milton's
subsidiaries, and the sale by GHB&M of certain of its accounts receivable, as if
each event had occurred on the date of each respective balance sheet. The
unaudited pro forma combining statements of income give effect to the
Consolidation, the tax impact of the termination of 'S' Corporation status of
the companies comprising GHB&M, and the purchase of Milton's minority interests,
as if each event had occurred at the beginning of each period presented.
The pro forma adjustments are based on the historical financial position
and results of operations for the periods presented, preliminary estimates,
available information and certain assumptions. While these pro forma adjustments
are not subject to material fluctuation as of and for the periods presented,
they may be revised based on future results of operations and the financial
position of the Company as of the date of the future transaction for which pro
forma effects are resolved. The amount of GHB&M's S Corporation distributions
are based on management's estimate of the tax liability of GHB&M's stockholders
for GHB&M's 1997 taxable income at the time of the Consolidation. The proceeds
from the sale of certain of GHB&M's accounts receivable sale are based on an
estimate of the aggregate amount of GHB&M's fee-based accounts receivable at the
time of the Consolidation. The pro forma financial data does not purport to
represent what the Company's financial position or results of operations would
actually have been if such transactions in fact had occurred on the dates
indicated or to project the Company's financial position or results of
operations for any future period. Since GHB&M and Milton were not under common
control or management, historical combined results may not be comparable to, or
indicative of, future performance. The unaudited pro forma combining financial
statements should be read in conjunction with the other financial statements and
notes thereto included elsewhere in this Prospectus. For a discussion of the
risk factors associated with the Company and its business, see 'Risk Factors'
included elsewhere in this Prospectus.
F-2
<PAGE>
HEALTHWORLD CORPORATION
UNAUDITED PRO FORMA COMBINING BALANCE SHEETS
DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
GHB&M MILTON ADJUSTMENTS PRO FORMA
------- ------ ----------- ---------
(NOTE 2)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................ $ 627 $ 511 $ -- $ 1,138
Accounts receivable.............................................. 7,854 1,058 -- 8,912
Unbilled production charges...................................... 3,060 49 -- 3,109
Other current assets............................................. 242 147 -- 389
------- ------ ----------- ---------
Total current assets............................................... 11,783 1,765 -- 13,548
Furniture, equipment and leasehold improvements, net............... 1,136 634 -- 1,770
Goodwill, net...................................................... -- 994 2,015(d) 3,009
Other assets....................................................... 368 8 -- 376
------- ------ ----------- ---------
$13,287 $3,401 $ 2,015 $18,703
------- ------ ----------- ---------
------- ------ ----------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit................................................... $ 600 $ -- $ -- $ 600
Bank loans and overdrafts........................................ -- 24 -- 24
Current portion of long-term debt................................ 82 107 -- 189
Current portion of capitalized lease obligation.................. -- 74 -- 74
Accounts payable................................................. 1,361 340 -- 1,701
Accrued expenses................................................. 110 936 -- 1,046
Advance billings................................................. 5,569 441 -- 6,010
------- ------ ----------- ---------
Total current liabilities.......................................... 7,722 1,922 -- 9,644
Long-term debt..................................................... -- 882 -- 882
Capitalized lease obligation....................................... -- 78 -- 78
Minority interests................................................. -- 89 (89)(d) --
Deferred rent...................................................... 642 -- -- 642
Deferred income taxes.............................................. 118 -- -- 118
------- ------ ----------- ---------
Total liabilities.................................................. 8,482 2,971 (89) 11,364
------- ------ ----------- ---------
Stockholders' equity:
Common stock..................................................... 289 -- (241)(a) 50
2(d)
Additional paid-in capital....................................... -- 13 241(a) 2,356
2,102(d)
Retained earnings................................................ 4,516 423 -- 4,939
Cumulative foreign currency translation adjustments.............. -- (6) -- (6)
------- ------ ----------- ---------
Total stockholders' equity......................................... 4,805 430 2,104 7,339
------- ------ ----------- ---------
$13,287 $3,401 $ 2,015 $18,703
------- ------ ----------- ---------
------- ------ ----------- ---------
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
combining financial statements.
F-3
<PAGE>
HEALTHWORLD CORPORATION
UNAUDITED PRO FORMA COMBINING BALANCE SHEETS
DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
GHB&M MILTON ADJUSTMENTS PRO FORMA
------- ------ ----------- ---------
(NOTE 3)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................ $ 2,214 $ -- $ -- $ 2,214
Accounts receivable.............................................. 8,539 3,266 -- 11,805
Unbilled production charges...................................... 1,477 87 -- 1,564
Other current assets............................................. 122 415 -- 537
------- ------ ----------- ---------
Total current assets............................................... 12,352 3,768 -- 16,120
Furniture, equipment and leasehold improvements, net............... 1,242 870 -- 2,112
Goodwill, net...................................................... -- 1,800 2,061(d) 3,861
Other assets....................................................... 455 49 -- 504
------- ------ ----------- ---------
$14,049 $6,487 $ 2,061 $22,597
------- ------ ----------- ---------
------- ------ ----------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit................................................... $ 400 $ -- $ -- $ 400
Bank loans and overdrafts........................................ -- 406 -- 406
Current portion of long-term debt................................ 98 118 -- 216
Current portion of capitalized lease obligation.................. -- 125 -- 125
Accounts payable................................................. 1,327 1,144 -- 2,471
Accrued expenses................................................. 120 1,977 -- 2,097
Advance billings................................................. 5,739 534 -- 6,273
------- ------ ----------- ---------
Total current liabilities.......................................... 7,684 4,304 -- 11,988
Long-term debt..................................................... 125 825 -- 950
Capitalized lease obligation....................................... -- 128 -- 128
Minority interests................................................. -- 143 (143)(d) --
Deferred rent...................................................... 665 -- -- 665
Deferred income taxes.............................................. 207 -- -- 207
Other liabilities.................................................. -- 83 -- 83
------- ------ ----------- ---------
Total liabilities.................................................. 8,681 5,483 (143) 14,021
------- ------ ----------- ---------
Stockholders' equity:
Common stock..................................................... 290 -- (242)(a) 50
2(d)
Additional paid-in capital....................................... -- 13 242(a) 2,457
2,202(d)
Retained earnings................................................ 5,078 925 -- 6,003
Cumulative foreign currency translation adjustments.............. -- 66 -- 66
------- ------ ----------- ---------
Total stockholders' equity......................................... 5,368 1,004 2,204 8,576
------- ------ ----------- ---------
$14,049 $6,487 $ 2,061 $22,597
------- ------ ----------- ---------
------- ------ ----------- ---------
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
combining financial statements.
F-4
<PAGE>
HEALTHWORLD CORPORATION
UNAUDITED PRO FORMA COMBINING BALANCE SHEETS
JUNE 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
GHB&M MILTON ADJUSTMENTS PRO FORMA
------- ------ ----------- ---------
(NOTE 2)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................ $ 2,049 $ 19 $(3,500)(b) $ 1,068
2,500(e)
Accounts receivable.............................................. 6,477 3,510 (2,500)(e) 7,487
Unbilled production charges...................................... 3,307 273 -- 3,580
Other current assets............................................. 71 581 -- 652
------- ------ ----------- ---------
Total current assets............................................... 11,904 4,383 (3,500) 12,787
Furniture, equipment and leasehold improvements, net............... 1,203 948 -- 2,151
Goodwill, net...................................................... -- 1,707 1,936(d) 3,643
Other assets....................................................... 1,073 262 -- 1,335
------- ------ ----------- ---------
$14,180 $7,300 $(1,564) $19,916
------- ------ ----------- ---------
------- ------ ----------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank loans and overdrafts........................................ -- 1,211 -- 1,211
Current portion of long-term debt................................ 78 595 -- 673
Current portion of capitalized lease obligation.................. -- 69 -- 69
Accounts payable................................................. 1,076 1,538 -- 2,614
Accrued expenses................................................. 154 1,418 -- 1,572
Advance billings................................................. 5,916 684 -- 6,600
------- ------ ----------- ---------
Total current liabilities.......................................... 7,224 5,515 -- 12,739
Long-term debt..................................................... 98 291 -- 389
Capitalized lease obligation....................................... -- 193 -- 193
Minority interests................................................. -- 268 (268)(d) --
Deferred rent...................................................... 715 -- -- 715
Deferred income taxes.............................................. 266 -- -- 266
Other liabilities.................................................. -- 57 -- 57
------- ------ ----------- ---------
Total liabilities.................................................. 8,303 6,324 (268) 14,359
------- ------ ----------- ---------
Stockholders' Equity:
Common stock..................................................... 290 -- (242)(a) 50
2(d)
Additional paid-in capital....................................... -- 13 242(a) 4,581
2,202(d)
2,124(c)
Retained earnings................................................ 5,587 914 (3,500)(b) 877
(2,124)(c)
Cumulative foreign currency translation adjustments.............. -- 49 -- 49
------- ------ ----------- ---------
Total stockholders' equity......................................... 5,877 976 (1,296) 5,557
------- ------ ----------- ---------
$14,180 $7,300 $(1,564) $19,916
------- ------ ----------- ---------
------- ------ ----------- ---------
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
combining financial statements.
F-5
<PAGE>
HEALTHWORLD CORPORATION
UNAUDITED PRO FORMA COMBINING STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1994
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
GHB&M MILTON ADJUSTMENTS PRO FORMA
------- ------ ----------- ---------
(NOTE 3)
<S> <C> <C> <C> <C>
Revenues........................................................... $10,415 $2,666 $ -- $13,081
------- ------ ----------- ---------
Operating expenses:
Salaries and related costs.................................... 6,416 1,474 -- 7,890
Other operating expenses...................................... 2,911 802 14(b) 3,727
------- ------ ----------- ---------
9,327 2,276 14 11,617
Income from operations............................................. 1,088 390 (14) 1,464
Interest expense, net.............................................. 2 12 -- 14
------- ------ ----------- ---------
Income before provision for income taxes and minority interests.... 1,086 378 (14) 1,450
Provision for income taxes......................................... 19 117 477(a) 613
Minority interests in net earnings of subsidiaries................. -- 39 (39)(b) --
------- ------ ----------- ---------
Net income......................................................... $ 1,067 $ 222 $ (452) $ 837
------- ------ ----------- ---------
------- ------ ----------- ---------
Earnings per share................................................. $ 0.17
---------
---------
Shares used in computing earnings per share........................ 5,000
---------
---------
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
combining financial statements.
F-6
<PAGE>
HEALTHWORLD CORPORATION
UNAUDITED PRO FORMA COMBINING STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
GHB&M MILTON ADJUSTMENTS PRO FORMA
------- ------ ----------- ---------
(NOTE 3)
<S> <C> <C> <C> <C>
Revenues........................................................... $12,368 $4,399 $ -- $16,767
------- ------ ----------- ---------
Operating expenses:
Salaries and related costs.................................... 7,326 2,531 -- 9,857
Other operating expenses...................................... 3,115 1,310 44(b) 4,469
------- ------ ----------- ---------
10,441 3,841 44 14,326
Income from operations............................................. 1,927 558 (44) 2,441
Interest expense, net.............................................. (13) 15 -- 2
------- ------ ----------- ---------
Income before provision for income taxes and minority interests.... 1,940 543 (44) 2,439
Provision for income taxes......................................... 124 159 755(a) 1,038
Minority interests in net earnings of subsidiaries................. -- 68 (68)(b) --
------- ------ ----------- ---------
Net income......................................................... $ 1,816 $ 316 $ (731) $ 1,401
------- ------ ----------- ---------
------- ------ ----------- ---------
Earnings per share................................................. $ 0.28
---------
---------
Shares used in computing earnings per share........................ 5,000
---------
---------
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
combining financial statements.
F-7
<PAGE>
HEALTHWORLD CORPORATION
UNAUDITED PRO FORMA COMBINING STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
GHB&M MILTON ADJUSTMENTS PRO FORMA
------- ------ ----------- ---------
(NOTE 3)
<S> <C> <C> <C> <C>
Revenues........................................................... $14,314 $9,895 $ -- $24,209
------- ------ ----------- ---------
Operating expenses:
Salaries and related costs.................................... 8,940 6,793 -- 15,733
Other operating expenses...................................... 3,191 2,017 66(b) 5,274
------- ------ ----------- ---------
12,131 8,810 66 21,007
Income from operations............................................. 2,183 1,085 (66) 3,202
Interest expense, net.............................................. (24) 93 -- 69
------- ------ ----------- ---------
Income before provision for income taxes and minority interests.... 2,207 992 (66) 3,133
Provision for income taxes......................................... 158 366 781(a) 1,305
Minority interests in net earnings of subsidiaries................. -- 124 (124)(b) --
------- ------ ----------- ---------
Net income......................................................... $ 2,049 $ 502 $ (723) $ 1,828
------- ------ ----------- ---------
------- ------ ----------- ---------
Earnings per share................................................. $ 0.37
---------
---------
Shares used in computing earnings per share........................ 5,000
---------
---------
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
combining financial statements.
F-8
<PAGE>
HEALTHWORLD CORPORATION
UNAUDITED PRO FORMA COMBINING STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
GHB&M MILTON ADJUSTMENTS PRO FORMA
------- ------ ----------- ---------
(NOTE 3)
<S> <C> <C> <C> <C>
Revenues........................................................... $ 6,383 $4,939 $ -- $11,322
------- ------ ----------- ---------
Operating expenses:
Salaries and related costs.................................... 4,350 3,351 -- 7,701
Other operating expenses...................................... 1,655 933 33(b) 2,621
------- ------ ----------- ---------
6,005 4,284 33 10,322
Income from operations............................................. 378 655 (33) 1,000
Interest expense, net.............................................. (78) 30 -- (48)
------- ------ ----------- ---------
Income before provision for income taxes and minority interests.... 456 625 (33) 1,048
Provision for income taxes......................................... 33 231 161(a) 425
Minority interests in net earnings of subsidiaries................. -- 69 (69)(b) --
------- ------ ----------- ---------
Net income......................................................... $ 423 $ 325 $ (125) $ 623
------- ------ ----------- ---------
------- ------ ----------- ---------
Earnings per share................................................. $ 0.12
---------
---------
Shares used in computing earnings per share........................ 5,000
---------
---------
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
combining financial statements.
F-9
<PAGE>
HEALTHWORLD CORPORATION
UNAUDITED PRO FORMA COMBINING STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
GHB&M MILTON ADJUSTMENTS PRO FORMA
------- ------ ----------- ---------
(NOTE 3)
<S> <C> <C> <C> <C>
Revenues........................................................... $ 7,459 $7,324 $ -- $14,783
------- ------ ----------- ---------
Operating expenses:
Salaries and related costs.................................... 4,899 5,611 -- 10,510
Other operating expenses...................................... 1,569 1,288 33(b) 2,890
------- ------ ----------- ---------
6,468 6,899 33 13,400
Income from operations............................................. 991 425 (33) 1,383
Interest expense, net.............................................. (79) 58 -- (21)
------- ------ ----------- ---------
Income before provision for income taxes and minority interests.... 1,070 367 (33) 1,404
Provision for income taxes......................................... 64 135 385(a) 584
Minority interests in net earnings of subsidiaries................. -- 126 (126)(b) --
------- ------ ----------- ---------
Net income......................................................... $ 1,006 $ 106 $ (292) $ 820
------- ------ ----------- ---------
------- ------ ----------- ---------
Earnings per share................................................. $ 0.16
---------
---------
Shares used in computing earnings per share........................ 5,000
---------
---------
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
combining financial statements.
F-10
<PAGE>
HEALTHWORLD CORPORATION
NOTES TO UNAUDITED PRO FORMA COMBINING FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
1. GENERAL
Healthworld Corporation (the 'Company') was incorporated in Delaware on
September 12, 1996. The Company has conducted no operations to date and will
acquire all of the outstanding common stock of Girgenti, Hughes, Butler and
McDowell, Inc. and its affiliated entities ('GHB&M') and Milton Marketing Group
Limited and its subsidiaries ('Milton'), including the minority interest
stockholders in such subsidiaries in exchange for an aggregate of 5,000 shares
of common stock of the Company (the 'Consolidation') as of the effective date of
the Offering made by this Prospectus. The Consolidation will be accounted for
using the pooling of interests method of accounting.
The periods included in these unaudited pro forma combining financial
statements include, (i) with respect to periods as of and for the year ended
December 31, financial data for GHB&M based on a December 31 fiscal year end and
for Milton based on a November 30 fiscal year end and (ii) with respect to
periods as of June 30, financial data for GHB&M and Milton at June 30.
2. UNAUDITED PRO FORMA BALANCE SHEET ADJUSTMENTS
The following pro forma adjustments have been made to the Company's pro
forma combining balance sheets to reflect:
a. the Consolidation;
b. an estimated $3,500 distribution to be made to the stockholders of the
companies comprising GHB&M (other than Syberactive, Inc.) immediately
prior to the consummation of the Consolidation from existing cash
balances for payment by such stockholders of income taxes on GHB&M's
estimated 1997 'S' Corporation earnings through the date of the
Consolidation;
c. an increase in additional paid-in capital of $2,124 and a corresponding
decrease in 'S' Corporation retained earnings of GHB&M as if the 'S'
Corporation status of the companies comprising GHB&M was terminated on
June 30, 1997;
d. the acquisition of minority interests in Milton's subsidiaries and the
goodwill resulting therefrom. The holders of minority interests in
certain of Milton's subsidiaries will exchange all of their shares in
such subsidiaries for an agreed upon aggregate purchase price of $2,204
to be paid for in shares of the Company's common stock based upon the
per share public offering price. The acquisition will be accounted for
using the purchase method of accounting;
e. the sale of an estimated $2,500 of accounts receivable of GHB&M to an
unaffiliated financial institution at a negotiated discount rate prior
to the consummation of the Consolidation. Such sale will be undertaken
in connection with the termination of the status of each of the
companies comprising GHB&M as 'S' Corporations, which will occur as a
result of and upon consummation of the Consolidation.
3. UNAUDITED PRO FORMA STATEMENT OF INCOME ADJUSTMENTS
The following pro forma adjustments have been made to the Company's pro
forma combining statements of income to reflect:
a. a provision for federal and state income taxes as if each of the
companies comprising GHB&M were treated as 'C' Corporations rather than
'S' Corporations for such periods; and
b. the acquisition of minority interests in Milton's subsidiaries and the
goodwill resulting therefrom. The holders of minority interests in
certain of Milton's subsidiaries will exchange all of their shares in
such subsidiaries for an agreed upon aggregate purchase price of $2,204
to be paid for in shares of the
F-11
<PAGE>
HEALTHWORLD CORPORATION
NOTES TO UNAUDITED PRO FORMA COMBINING FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
3. UNAUDITED PRO FORMA INCOME STATEMENT ADJUSTMENTS--(CONTINUED)
Company's common stock based upon the per share public offering price.
The acquisition will be accounted for using the purchase method of
accounting.
4. INITIAL PUBLIC OFFERING
The Company is pursuing an initial public offering of its common stock. The
Offering presently contemplates the sale of 2,100 shares of common stock at an
assumed initial offering price of $8.75 per share. The Company plans to use a
portion of the proceeds of the Offering to repay a loan. The Company's
supplementary pro forma net income per share for the year ended December 31,
1996 and the six months ended June 30, 1997, which follows, gives supplemental
effect to the issuance of 53 and 52 shares of its common stock, respectively,
which is the number of additional shares of its common stock which would need to
be issued in the Offering from which the proceeds from such additional issuance
could be used to repay the $462 loan which was outstanding at December 31, 1996
or the $456 of such loan which was outstanding at June 30, 1997, as well as to
effect the reduction of related interest expense for such periods. Such
additional shares are presumed outstanding for supplementary purposes only, and
were neither issued nor outstanding for any purpose during the year ended
December 31, 1996 or the six months ended June 30, 1997.
<TABLE>
<CAPTION>
FOR THE YEAR
ENDED FOR THE SIX MONTHS ENDED
DECEMBER 31, 1996 JUNE 30, 1997
----------------- ------------------------
<S> <C> <C>
Supplementary pro forma net income per share..... $ .36 $ .16
Supplementary weighted average common shares
outstanding.................................... 5,053 5,052
</TABLE>
F-12
<PAGE>
After the execution of definitive agreements to undertake the Consolidation
discussed in Note 1 to the financial statements of Healthworld Corporation, we
expect to be in a position to render the following audit report.
__________/s/ ARTHUR ANDERSEN_________
Arthur Andersen
October 15, 1997
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Healthworld Corporation:
We have audited the accompanying balance sheet of Healthworld Corporation (a
Delaware corporation) as of October 13, 1997. This financial statement is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the balance sheet is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the balance sheet. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Healthworld Corporation as of
October 13, 1997, in conformity with generally accepted accounting principles.
Melville, New York
October 13, 1997
(except with respect to the matters
discussed in Note 1 as to which
the date is , 1997)
F-13
<PAGE>
HEALTHWORLD CORPORATION
BALANCE SHEET
AS OF OCTOBER 13, 1997
<TABLE>
<S> <C>
ASSETS
Cash........................................................................................... $ 100
------
Total assets.............................................................................. $ 100
------
------
LIABILITIES AND STOCKHOLDERS' EQUITY
Total liabilities.............................................................................. $ --
Stockholders' Equity:
Preferred stock, $.01 par value; 1,000,000 shares authorized; no shares outstanding.......... --
Common stock, $.01 par value; 20,000,000 shares authorized; 100 shares outstanding........... 1
Additional paid-in capital................................................................... 99
------
Total stockholders' equity................................................................ 100
------
Total liabilities and stockholders' equity................................................ $ 100
------
------
</TABLE>
The accompanying notes are an integral part of this balance sheet.
F-14
<PAGE>
HEALTHWORLD CORPORATION
NOTES TO BALANCE SHEET
OCTOBER 13, 1997
1. ORGANIZATION AND BUSINESS
Healthworld Corporation ('Healthworld') was incorporated in Delaware on
September 12, 1996 and has conducted no operations to date. Prior to the
consummation of the initial public offering of its common stock (the
'Offering'), Healthworld entered into separate Agreements and Plans of
Organization (the 'Consolidation Agreements'), dated October , 1997, with the
stockholders of Girgenti, Hughes, Butler & McDowell, Inc. and affiliates
('GHB&M') and Milton Marketing Group and subsidiaries ('Milton'), including the
minority interest stockholders in such subsidiaries. Pursuant to the
Consolidation Agreements, on the effective date of the Offering, Healthworld
will acquire all of the issued and outstanding stock of each of GHB&M and Milton
from the stockholders of GHB&M and Milton in exchange for an aggregate of
5,000,000 shares of common stock of Healthworld, at which time GHB&M and Milton
will become wholly-owned subsidiaries of Healthworld.
2. STOCK ISSUANCE
On October 13, 1997, Healthworld issued one hundred shares of common stock
to the stockholders of GHB&M in exchange for cash in the amount of $100.
F-15
<PAGE>
After the execution of definitive agreements to undertake the Consolidation
discussed in Note 9 to the combined financial statements of Girgenti, Hughes,
Butler & McDowell, Inc. and Affiliates, we expect to be in a position to render
the following audit report.
__________/s/ Arthur Andersen_________
Arthur Andersen
October 15, 1997
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Girgenti, Hughes, Butler & McDowell, Inc.
and Affiliates:
We have audited the accompanying combined balance sheets of Girgenti, Hughes,
Butler & McDowell, Inc. (a New York corporation) and Affiliates as of December
31, 1995 and 1996, and the related combined statements of income, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1996. 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 financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Girgenti, Hughes, Butler &
McDowell, Inc. and Affiliates 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.
Melville, New York
January 24, 1997
(except with respect to the matters
discussed in Note 9 as to which
the date is , 1997)
F-16
<PAGE>
GIRGENTI, HUGHES, BUTLER & MCDOWELL, INC. AND AFFILIATES
COMBINED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------ JUNE 30,
1995 1996 1997
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................................................... $ 627 $ 2,214 $ 2,049
Accounts receivable.......................................................... 7,854 8,539 6,477
Unbilled production charges, at cost......................................... 3,060 1,477 3,307
Other current assets......................................................... 242 122 71
------- ------- -----------
Total current assets........................................................... 11,783 12,352 11,904
Furniture, equipment and leasehold improvements, net........................... 1,136 1,242 1,203
Other assets................................................................... 368 455 1,073
------- ------- -----------
$13,287 $14,049 $14,180
------- ------- -----------
------- ------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit............................................................... $ 600 $ 400 $ --
Current portion of long-term debt............................................ 82 98 78
Accounts payable............................................................. 1,361 1,327 1,076
Accrued expenses............................................................. 110 120 154
Advance production billings.................................................. 5,569 5,739 5,916
------- ------- -----------
Total current liabilities...................................................... 7,722 7,684 7,224
Commitments (Note 7)
Long-term debt................................................................. -- 125 98
Deferred rent.................................................................. 642 665 715
Deferred income taxes.......................................................... 118 207 266
------- ------- -----------
8,482 8,681 8,303
------- ------- -----------
Stockholders' equity:
Common stock................................................................. 289 290 290
Retained earnings............................................................ 4,516 5,078 5,587
------- ------- -----------
Total stockholders' equity..................................................... 4,805 5,368 5,877
------- ------- -----------
$13,287 $14,049 $14,180
------- ------- -----------
------- ------- -----------
</TABLE>
The accompanying notes to combined financial statements are an integral part of
these balance sheets.
F-17
<PAGE>
GIRGENTI, HUGHES, BUTLER & MCDOWELL, INC. AND AFFILIATES
COMBINED STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
----------------------------- ----------------
1994 1995 1996 1996 1997
------- ------- ------- ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues..................................................... $10,415 $12,368 $14,314 $6,383 $7,459
------- ------- ------- ------ ------
Operating expenses:
Salaries and related costs................................. 6,416 7,326 8,940 4,350 4,899
Other operating expenses................................... 2,911 3,115 3,191 1,655 1,569
------- ------- ------- ------ ------
9,327 10,441 12,131 6,005 6,468
Income from operations....................................... 1,088 1,927 2,183 378 991
Interest expense, net........................................ 2 (13) (24) (78) (79)
------- ------- ------- ------ ------
Income before provision for income taxes..................... 1,086 1,940 2,207 456 1,070
Provision for income taxes................................... 19 124 158 33 64
------- ------- ------- ------ ------
Net income................................................... $ 1,067 $ 1,816 $ 2,049 $ 423 $1,006
------- ------- ------- ------ ------
------- ------- ------- ------ ------
Pro forma information--unaudited (note 9):
Income before provision for income taxes................... $ 1,086 $ 1,940 $ 2,207 $ 456 $1,070
Pro forma provision for income taxes....................... 496 879 939 194 449
------- ------- ------- ------ ------
Pro forma net income....................................... $ 590 $ 1,061 $ 1,268 $ 262 $ 621
------- ------- ------- ------ ------
------- ------- ------- ------ ------
</TABLE>
The accompanying notes to combined financial statements are an integral part of
these statements.
F-18
<PAGE>
GIRGENTI, HUGHES, BUTLER & MCDOWELL, INC. AND AFFILIATES
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON RETAINED
STOCK EARNINGS
------ --------
<S> <C> <C>
Balance, December 31, 1993................................................................... $289 $2,386
Net income................................................................................. -- 1,067
Stockholders' distributions................................................................ -- (544)
------ --------
Balance, December 31, 1994................................................................... 289 2,909
Net income................................................................................. -- 1,816
Stockholders' distributions................................................................ -- (209)
------ --------
Balance, December 31, 1995................................................................... 289 4,516
Net income................................................................................. -- 2,049
Stockholders' distributions................................................................ -- (1,487)
Issuance of common stock in new affiliate.................................................. 1 --
------ --------
Balance, December 31, 1996................................................................... 290 5,078
Net income (unaudited)..................................................................... -- 1,006
Stockholders' distributions (unaudited).................................................... -- (497)
------ --------
Balance, June 30, 1997 (unaudited)........................................................... $290 $5,587
------ --------
------ --------
</TABLE>
The accompanying notes to combined financial statements are an integral part of
these statements.
F-19
<PAGE>
GIRGENTI, HUGHES, BUTLER & MCDOWELL, INC. AND AFFILIATES
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
------------------------ ----------------
1994 1995 1996 1996 1997
------ ------ ------ ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income..................................................... $1,067 $1,816 $2,049 $ 423 $1,006
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................. 214 274 402 174 196
Deferred rent............................................. 80 200 23 12 50
Deferred income taxes..................................... -- 83 89 33 59
Changes in operating assets and liabilities:
Accounts receivable....................................... (1,652) 336 (685) 703 2,062
Unbilled production charges............................... 287 (719) 1,583 555 (1,830)
Other current assets...................................... 18 (88) 120 (108) 51
Other assets.............................................. 95 30 (88) (34) (618)
Accounts payable.......................................... (145) 253 (35) (798) (251)
Advanced production billing............................... 1,313 (1,653) 171 (1) 177
Accrued expenses.......................................... (125) 98 9 10 34
------ ------ ------ ------ ------
Net cash provided by operating activities........................ 1,152 630 3,638 969 936
------ ------ ------ ------ ------
Cash flows from investing activities:
Capital expenditures, net...................................... (258) (563) (507) (203) (157)
------ ------ ------ ------ ------
Net cash (used in) investing activities.......................... (258) (563) (507) (203) (157)
------ ------ ------ ------ ------
Cash flows from financing activities:
Distributions to stockholders.................................. (544) (209) (1,487) (621) (497)
Net (repayment) proceeds from line of credit................... (100) 200 (200) (100) (400)
Issuance of long-term debt..................................... -- -- 300 300 --
Repayment of long-term debt.................................... (97) (105) (158) (86) (47)
Issuance of common stock in new affiliate...................... -- -- 1 1 --
------ ------ ------ ------ ------
Net cash (used in) financing activities.......................... (741) (114) (1,544) (506) (944)
------ ------ ------ ------ ------
Net increase/(decrease) in cash and cash equivalents............. 153 (47) 1,587 260 (165)
Cash and cash equivalents at beginning of year................... 521 674 627 627 2,214
------ ------ ------ ------ ------
Cash and cash equivalents at end of year......................... $ 674 $ 627 $2,214 $ 887 $2,049
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Supplemental disclosure of cash flow information:
Cash paid for taxes............................................ $ 17 $ 45 $ 64 $ 45 $ 64
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Cash paid for interest......................................... $ 30 $ 31 $ 41 $ 31 $ 8
------ ------ ------ ------ ------
------ ------ ------ ------ ------
</TABLE>
The accompanying notes to combined financial statements are an integral part of
these statements.
F-20
<PAGE>
GIRGENTI, HUGHES, BUTLER & MCDOWELL, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
1. BUSINESS
Girgenti, Hughes, Butler & McDowell, Inc. and Affiliates (the 'Company') is
a combined group of six affiliated companies: Girgenti, Hughes, Butler &
McDowell, Inc. ('GHB&M'); Black Cat Graphics, Inc. ('Black Cat'); Medical
Educational Technologies, Inc. ('MET'); Brand Research Corporation ('Brand');
GHBM, Inc. and Syberactive Inc. ('Syberactive'). Each of these companies is
controlled and managed by a stockholder group consisting of four individuals and
each is owned in the same proportion by such stockholders.
The Company operates in the marketing communications industry segment and
provides a broad range of integrated services including advertising and
promotion, publishing, medical education, public relations, consulting,
interactive multimedia, database marketing and marketing research services.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Combination
The combined financial statements include the accounts of the affiliated
companies. All inter-company balances and transactions have been eliminated.
Revenue Recognition
Revenues and fees are derived from clients for creative concept
development, production of advertising and marketing materials and the
communication of a client's product message to target markets through the use of
educational projects. For services such as the production of advertising and
promotion materials and medical education programs, fees are recognized when the
production materials or programs are completed. With respect to services such as
consulting, publishing and public relations, the Company is either paid a
monthly retainer or bills on an actual time incurred basis, which, in each case,
the Company recognizes as income each month to match its monthly payroll and
operating costs.
Accounts receivable include fees recognized, project costs, and media and
production costs incurred on behalf of clients, which are paid for by the
Company and rebilled to clients.
Concentration of Credit Risk
The Company provides marketing and communications services to a wide range
of clients who operate primarily in the health care industry. For the year ended
December 31, 1996, the Company had three clients which constituted approximately
42%, 16% and 9% of total revenues. In addition, the Company's five largest
clients represent 78% of combined revenues for that period. The Company had
three clients which constituted approximately 36%, 17% and 13% of total 1995
revenues and 24%, 18% and 9% of total 1994 revenues. As of December 31, 1995 and
1996, primarily all of the Company's trade accounts receivable were concentrated
in companies in the health care industry. The Company extends credit to all
qualified clients, but does not believe that it is exposed to any undue
concentration of credit risk to any significant degree. The Company maintains
reserves for potential credit losses, but has not experienced any material
losses to individual clients or groups of clients.
Cash and Cash Equivalents
For purposes of the combined balance sheets and combined statements of cash
flows, the Company considers all highly liquid debt instruments purchased with
original maturities of three months or less to be cash equivalents, including
commercial paper and money market mutual funds.
F-21
<PAGE>
GIRGENTI, HUGHES, BUTLER & MCDOWELL, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Unbilled Production Charges
Unbilled production charges consist principally of costs incurred in
producing advertisements and marketing communications for clients. Such amounts
are generally billed to clients when costs are incurred for radio and television
production and when print production is complete.
Furniture, Equipment and Leasehold Improvements
Furniture, equipment and leasehold improvements are stated at cost, net of
accumulated depreciation and amortization. Depreciation and amortization are
computed using the straight-line method over the estimated useful lives of the
assets as follows:
<TABLE>
<S> <C>
Furniture................................. 5-7 years
Equipment................................. 5-7 years
Leasehold improvements.................... Lesser of lease term or useful life
</TABLE>
Advance Production Billing
Advance production billings consist of progress billings for production
jobs that are not completed, as well as accrued media placements that have been
billed to clients.
Income Taxes
The companies comprising the Company (other than Syberactive, which is
treated as a 'C Corporation'), with the consent of the stockholders, elected to
have their Federal and state income taxed as subchapter 'S Corporations.' In
lieu of Federal and certain state corporate income taxes, the shareholders are
taxed on their proportionate share of income, or receive the benefit of any
losses individually. New York City Corporation taxes are provided, if required,
at statutory rates.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
New Accounting Pronouncements
During 1996, the Company adopted Statement of Financial Accounting
Standards No. 121 (SFAS No. 121), 'Accounting for the Impairment of Long-Lived
Assets and Long-Lived Assets to be Disposed of.' This statement requires the
Company to review long-lived assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The effect of adoption was not material.
Recently Issued Accounting Standards
In March 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ('SFAS') No. 128, Earnings Per Share. This
Statement establishes standards for computing and presenting earnings per share
('EPS'), replacing the presentation of currently required primary EPS with a
presentation of Basic EPS. For entities with complex capital structures, the
statement requires the dual presentation of both Basic EPS and Diluted EPS on
the face of the statement of income. Under this new standard, Basic EPS is
computed based on weighted average shares outstanding and excludes any potential
dilution; Diluted EPS reflects potential dilution from the exercise or
conversion of securities into common stock or from
F-22
<PAGE>
GIRGENTI, HUGHES, BUTLER & MCDOWELL, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
other contracts to issue common stock and is similar to the currently required
fully diluted EPS. SFAS 128 is effective for financial statements issued for
periods ending after December 15, 1997, including interim periods, and earlier
application is not permitted.
3. FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Furniture, equipment and leasehold improvements consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, JUNE 30,
1995 1996 1997
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Furniture and equipment........................................... $1,607 $2,117 $2,188
Leasehold improvements............................................ 465 465 460
------------ ------------ ------------
2,072 2,582 2,648
Less: Accumulated depreciation and amortization................... 936 1,340 1,445
------------ ------------ ------------
$1,136 $1,242 $1,203
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
Depreciation and amortization expense of furniture, equipment and leasehold
improvements for the years ended December 31, 1994, 1995 and 1996 amounted to
approximately $214, $274 and $402, respectively, and for the six months ended
June 30, 1996 and 1997 amounted to approximately $174 and $196, respectively
(unaudited).
4. RESTRICTED CASH
In connection with the lease for office space, the Company was required to
establish an Irrevocable Standby Letter of Credit with a face amount of $300.
The Company has set aside a Certificate of Deposit in the amount of $300 as
collateral for the Letter of Credit. The Certificate of Deposit has been
included within Other Assets due to the term of the underlying lease commitment.
5. BANK LOANS AND LINE OF CREDIT
The Company has in place a $4,100 credit facility with a bank. The facility
currently consists of: (i) an uncommitted $3,500 line of credit ('Line of
Credit'), (ii) a $300 term note ('Term Note'), and (iii) a $300 irrevocable
letter of credit. The facility is secured by a first security interest in the
Company's personal property and a personal guarantee of several of the
stockholders of the Company. Borrowings under the facility are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, JUNE 30,
1995 1996 1997
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Line of Credit..................................................... $600(a) $400(a) $ --
Term Note/Loan..................................................... 82(b) 223(c) 176
------ ------ ------
682 623 176
Less: Current portion.............................................. 682 498 78
------ ------ ------
$ -- $125 $ 98
------ ------ ------
------ ------ ------
</TABLE>
- ------------------
a) Borrowings under the Line of Credit are limited to 80% of eligible trade
receivables, as defined in the agreement. The Line of Credit matures on July
31, 1997 and bears interest at prime (8.25% as of December 31, 1996) plus 1%
per annum. The Line of Credit requires the Company to maintain certain
financial ratios. As of December 31, 1996, the Company was in compliance with
all of the provisions of the Line of Credit.
F-23
<PAGE>
GIRGENTI, HUGHES, BUTLER & MCDOWELL, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
5. BANK LOANS AND LINE OF CREDIT--(CONTINUED)
b) This represented the outstanding principal balance of borrowings under a $400
term note to finance certain leasehold improvements. The note bore interest
at 7.5% per annum and was payable in 48 monthly installments commencing
October 1992. As of December 31, 1996, such note had been repaid.
c) During February 1996, the bank provided a Term Loan of $300 to finance the
construction of additional office space. This Term Loan bears interest at
7.75% per annum and is payable in 36 monthly installments commencing March
1996.
At December 31, 1996, maturities of debt are as follows:
<TABLE>
<S> <C>
1997.............................................................. $498
1998.............................................................. 106
1999.............................................................. 19
</TABLE>
6. STOCKHOLDERS' EQUITY
The financial statements are presented on a combined basis. Since there is
no parent-subsidiary relationship, there is no basis for eliminating the equity
accounts of any of the entities. As of December 31, 1995 and 1996, and as of
June 30, 1997 (unaudited), stockholders' equity consisted of the following:
<TABLE>
<CAPTION>
COMMON STOCK RETAINED EARNINGS/
--------------------------- (ACCUMULATED DEFICIT)
-----------------------------------
SHARES JUNE 30, JUNE 30,
COMPANY ISSUED 1995 1996 1997 1995 1996 1997
- ------------------------------------- ------ ---- ---- ----------- ------ ------ -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
GHBM................................. 85.25 $192 $192 $ 192 $1,517 $1,540 $ 2,157
Black Cat............................ 120.90 89 89 89 2,434 2,655 2,654
MET.................................. 120.90 6 6 6 477 847 764
Brand................................ 120.90 1 1 1 88 43 49
GHBM, Inc............................ 120.90 1 1 1 -- (1) --
Syberactive.......................... 100.00 -- 1 1 -- (6) (37)
---- ---- ----------- ------ ------ -----------
$289 $290 $ 290 $4,516 $5,078 $ 5,587
---- ---- ----------- ------ ------ -----------
---- ---- ----------- ------ ------ -----------
</TABLE>
7. COMMITMENTS
Lease
In 1994, the Company entered into a fifteen year lease for office space in
New York City. The lease is payable in monthly installments which include
certain rent holidays and escalations, which have been accounted for on a
straight-line basis over the life of the lease. As a security deposit, the
Company put in place an Irrevocable Standby Letter of Credit (see Note 4) in the
amount of $300. This amount will decrease on November 1, 1997 to $200 and to
$132 on November 1, 1998. During 1996, the Company terminated a lease agreement
on another property. The cost to terminate the lease was insignificant.
The following is a schedule of the minimum annual lease payments due:
<TABLE>
<S> <C>
1997....................................................................... $ 608
1998....................................................................... 690
1999....................................................................... 750
2000....................................................................... 750
2001....................................................................... 750
Thereafter................................................................. 7,337
</TABLE>
Total rent expense incurred for the years ended December 31, 1994, 1995 and
1996 was approximately $662, $759 and $814, respectively, and for the six months
ended June 30, 1996 and 1997 was approximately $414 and $394, respectively
(unaudited).
F-24
<PAGE>
GIRGENTI, HUGHES, BUTLER & MCDOWELL, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
7. COMMITMENTS--(CONTINUED)
Employment Agreements
The Company has entered into employment agreements (the 'Agreements') with
certain key employees. The Agreements contain provisions for base salary and
incentives based upon certain performance measures, and are subject to
termination by either party. The aggregate annual minimum base compensation
required by the Agreements is approximately $880.
Employee Benefits
The Company maintains a '401 K' Plan for eligible employees, who have
completed the minimum service requirement of the plan. The Company matches up to
4% of salary for participating employees. For the years ended December 31, 1994,
1995 and 1996, the Company has contributed $64, $105 and $124, respectively, and
for the six months ended June 30, 1996 and 1997, the Company has contributed $60
and $90, respectively (unaudited), to the Plan.
8. INTERIM FINANCIAL STATEMENTS
The combined financial statements of Girgenti, Hughes, Butler & McDowell,
Inc. as of and for the six months ended June 30, 1996 and 1997, presented herein
have been prepared by the Company without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. The financial statements
reflect all adjustments (consisting of only normal recurring adjustments) which,
in the opinion of management, are necessary to present fairly the combined
financial position, results of operations and cash flows of the Company as of
June 30, 1996 and 1997, and for the periods ended. The Company's interim results
may fluctuate as a result of a number of factors and are not necessarily
indicative of the results to be obtained for the full year.
9. SUBSEQUENT EVENTS
Pursuant to the Agreements and Plans of Organization (the 'Consolidation
Agreements'), dated October , 1997, the stockholders of the Company and Milton
Marketing Group Limited and its subsidiaries ('Milton'), including the minority
interest stockholders in such subsidiaries, have agreed to exchange all of the
outstanding shares of common stock of each of the companies comprising the
Company and Milton for shares of common stock of Healthworld Corporation
('Healthworld') as of the effective date of the Offering (as defined below) (the
'Consolidation'). Upon consummation of the Consolidation, the entities
comprising the Company (other than Syberactive, which is already treated as a C
Corporation) will no longer be treated as S Corporations. The pro forma effect
of a subchapter 'C' Corporation income tax provision has been included in the
calculation of pro forma net income in the accompanying combined statements of
income.
In connection with the termination of the status of each of the companies
comprising the Company as S Corporations, the Company is currently negotiating
to enter into an agreement which will provide that the Company will, prior to
the consummation of the Consolidation, sell an estimated $2,500 of its accounts
receivable to an unaffiliated financial institution at a negotiated discount
rate. Immediately prior to the consummation of the Consolidation, the Company
will make distributions to its stockholders of approximately $3,500 in the
aggregate from existing cash balances for the payment by such stockholders of
taxes due on GHB&M's S Corporation earnings.
Healthworld is pursuing an initial public offering of its securities (the
'Offering'). The Offering contemplates the sale of 2,100 shares of Healthworld's
common stock at an offering price between $8.00 and $9.50 per share before
underwriting commissions and Offering expenses.
F-25
<PAGE>
After the execution of definitive agreements to undertake the Consolidation
discussed in Note 11 to the consolidated financial statements of Milton
Marketing Group Limited and Subsidiaries, we expect to be in a position to
render the following audit report.
/s/ Arthur Andersen
-----------------------------
Arthur Andersen
October 15, 1997
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Milton Marketing Group Limited and Subsidiaries:
We have audited the accompanying consolidated balance sheets of Milton Marketing
Group Limited (a United Kingdom corporation, formerly known as Siteinput
Limited) and Subsidiaries as of November 30, 1995 and 1996, and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the three years in the period ended November 30, 1996. 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 financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Milton Marketing Group Limited
and Subsidiaries as of November 30, 1995 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
November 30, 1996 in conformity with generally accepted accounting principles.
Melville, New York
January 27, 1997
(except with respect to the matters
discussed in Note 11 as to which
the date is , 1997)
F-26
<PAGE>
MILTON MARKETING GROUP LIMITED
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
NOVEMBER 30,
---------------- JUNE 30,
1995 1996 1997
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................................................... $ 511 $ -- $ 19
Accounts receivable............................................................ 1,058 3,266 3,510
Unbilled production charges, at cost........................................... 49 87 273
Other current assets........................................................... 147 415 581
------ ------ -----------
Total current assets........................................................ 1,765 3,768 4,383
Furniture, equipment and leasehold improvements, net............................. 634 870 948
Goodwill, net of accumulated amortization of $2, $44 and $79, respectively....... 994 1,800 1,707
Other assets..................................................................... 8 49 262
------ ------ -----------
$3,401 $6,487 $ 7,300
------ ------ -----------
------ ------ -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank loans and overdrafts...................................................... $ 24 $ 406 $ 1,211
Current portion of long-term debt.............................................. 107 118 595
Current portion of capitalized lease obligation................................ 74 125 69
Accounts payable............................................................... 340 1,144 1,538
Accrued expenses............................................................... 936 1,977 1,418
Advance billings............................................................... 441 534 684
------ ------ -----------
Total current liabilities................................................... 1,922 4,304 5,515
Commitments (Note 9)
Long-term debt................................................................... 882 825 291
Capitalized lease obligation..................................................... 78 128 193
Minority interests............................................................... 89 143 268
Other liabilities................................................................ -- 83 57
------ ------ -----------
2,971 5,483 6,324
------ ------ -----------
Stockholders' equity:
Common stock, $1.68 par value, 10,000 shares authorized, and 2 shares issued
and outstanding............................................................. -- -- --
Additional paid-in capital..................................................... 13 13 13
Retained earnings.............................................................. 423 925 914
Cumulative foreign currency translation adjustments............................ (6) 66 49
------ ------ -----------
Total stockholders' equity.................................................. 430 1,004 976
------ ------ -----------
$3,401 $6,487 $ 7,300
------ ------ -----------
------ ------ -----------
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these balance sheets.
F-27
<PAGE>
MILTON MARKETING GROUP LIMITED
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEVEN MONTHS
YEAR ENDED NOVEMBER 30, ENDED JUNE 30,
------------------------ ----------------
1994 1995 1996 1996 1997
------ ------ ------ ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues......................................................... $2,666 $4,399 $9,895 $5,434 $8,147
------ ------ ------ ------ ------
Operating expenses:
Salaries and related costs..................................... 1,474 2,531 6,793 3,860 6,333
Other operating expenses....................................... 802 1,310 2,017 999 1,506
------ ------ ------ ------ ------
2,276 3,841 8,810 4,859 7,839
Income from operations........................................... 390 558 1,085 575 308
Interest expense, net............................................ 12 15 93 40 62
------ ------ ------ ------ ------
Income before provision for income taxes and minority
interests...................................................... 378 543 992 535 246
Provision for income taxes....................................... 117 159 366 197 91
Minority interests in net earnings of subsidiaries............... 39 68 124 81 126
------ ------ ------ ------ ------
Net income....................................................... $ 222 $ 316 $ 502 $ 257 $ 29
------ ------ ------ ------ ------
------ ------ ------ ------ ------
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-28
<PAGE>
MILTON MARKETING GROUP LIMITED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
CUMULATIVE
ADDITIONAL FOREIGN CURRENCY
COMMON PAID-IN RETAINED TRANSLATION
STOCK CAPITAL EARNINGS ADJUSTMENTS TOTAL
------ ---------- -------- ---------------- -----
<S> <C> <C> <C> <C> <C>
Balance, November 30, 1993............................ $ -- $ 13 $101 $ (1) $ 113
Net income.......................................... -- -- 222 -- 222
Dividends........................................... -- -- (130) -- (130)
Foreign currency translation adjustments............ -- -- -- 8 8
------ --- -------- ----- -----
Balance, November 30, 1994............................ -- 13 193 7 213
Net income.......................................... -- -- 316 -- 316
Dividends........................................... -- -- (86) -- (86)
Foreign currency translation adjustments............ -- -- -- (13) (13)
------ --- -------- ----- -----
Balance, November 30, 1995............................ -- 13 423 (6) 430
Net income.......................................... -- -- 502 -- 502
Foreign currency translation adjustments............ -- -- -- 72 72
------ --- -------- ----- -----
Balance, November 30, 1996............................ -- 13 925 66 1,004
Net income (unaudited).............................. -- -- 29 -- 29
Dividends (unaudited)............................... -- -- (40) -- (40)
Foreign currency translation adjustments
(unaudited)...................................... -- -- -- (17) (17)
------ --- -------- ----- -----
Balance, June 30, 1997 (unaudited).................... $ -- $ 13 $914 $ 49 $ 976
------ --- -------- ----- -----
------ --- -------- ----- -----
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-29
<PAGE>
MILTON MARKETING GROUP LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30, SEVEN MONTHS
ENDED JUNE 30,
----------------------- ---------------
1994 1995 1996 1996 1997
----- ----- ------- ------- -----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income........................................................... $ 222 $ 316 $ 502 $ 257 $ 29
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................................... 114 136 225 100 121
Minority interest in net earnings................................ 39 68 124 81 126
(Gain)/loss on sale of fixed assets.............................. (24) 1 18 -- --
Changes in operating assets and liabilities, net of effect of
acquisitions:
Accounts receivable.............................................. 418 (138) (1,456) (2,197) (244)
Unbilled production charges...................................... 538 28 (21) (193) (186)
Other current assets............................................. -- (22) (166) (9) (166)
Other assets..................................................... -- -- -- -- (213)
Accounts payable................................................. (536) (614) (359) 640 394
Accrued expenses................................................. 7 763 876 833 (487)
Advance billings................................................. (502) 74 50 380 150
Other liabilities................................................ -- -- 18 60 (26)
----- ----- ------- ------- -----
Net cash provided by (used in) operating activities.................... 276 612 (189) (48) (502)
----- ----- ------- ------- -----
Cash flows from investing activities:
Net purchase price of acquisitions (Note 3).......................... -- (639) (242) (215) --
Capital expenditures, net............................................ (95) (203) (214) (66) (72)
Proceeds from the sale of fixed assets............................... 58 63 50 -- --
----- ----- ------- ------- -----
Net cash (used in) investing activities................................ (37) (779) (406) (281) (72)
----- ----- ------- ------- -----
Cash flows from financing activities:
Payment of majority stockholder dividends............................ (130) (86) -- -- --
Payment of minority interest shareholders dividends.................. (23) (15) -- -- (55)
Proceeds from bank overdraft......................................... -- -- 309 (23) 805
Repayment of bank loans.............................................. -- -- (131) (27) (57)
Proceeds from bank loans............................................. -- 613 -- -- --
Capital lease repayments............................................. (88) (152) (77) (21) (83)
----- ----- ------- ------- -----
Net cash (used in) provided by financing activities.................... (241) 360 101 (71) 610
----- ----- ------- ------- -----
Effect of exchange rate changes on cash................................ 12 (14) (17) 22 (17)
----- ----- ------- ------- -----
Net increase/(decrease) in cash and cash equivalents................... 10 179 (511) (378) 19
Cash and cash equivalents at beginning of year......................... 322 332 511 511 --
----- ----- ------- ------- -----
Cash and cash equivalents at end of year............................... $ 332 $ 511 $ -- $ 133 $ 19
----- ----- ------- ------- -----
----- ----- ------- ------- -----
Supplemental disclosure of cash flow information:
Cash paid for taxes.................................................. $ 113 $ 151 $ 67 $ 58 $ 262
----- ----- ------- ------- -----
----- ----- ------- ------- -----
Cash paid for interest............................................... $ 21 $ 22 $ 88 $ 40 $ 62
----- ----- ------- ------- -----
----- ----- ------- ------- -----
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-30
<PAGE>
MILTON MARKETING GROUP LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
1. ORGANIZATION AND BUSINESS
In 1997, the company formerly known as Siteinput Limited changed its name
to Milton Marketing Group Limited. Milton Marketing Group Limited ('Milton'), a
United Kingdom corporation, was formed in October 1995. Through its predecessor,
Milton Marketing Limited, Milton, together with its subsidiaries (Milton and its
subsidiaries are collectively referred to as the 'Company'). The Company
operates in the marketing communications industry segment and provides
integrated services including contract sales, advertising and promotion and
public relations services to its clients. Milton is comprised of its
wholly-owned subsidiary Milton Headcount Limited (formerly Effective Sales
Personnel Limited) ('MHL') and its majority-owned subsidiaries, Milton Marketing
Limited ('MML'), Effective Sales Personnel (formerly Milton Headcount Limited)
('ESP'), PDM Communications Limited ('PDM') and Milton Cater Limited ('MCL').
2. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned and majority-owned subsidiaries. All
intercompany accounts and transactions have been eliminated.
Foreign Currency Translation
All assets and liabilities of the Company are translated into United States
dollars from United Kingdom Pound Sterling at period-end exchange rates. Income
and expense items are translated at average exchange rates prevailing during
each fiscal period. The resulting translation adjustments are recorded as a
separate component of stockholders' equity.
Revenue Recognition
Revenues and fees are derived from clients for creative concept
development, production of advertising and marketing materials, the supply of
long and short-term personnel for client promotional purposes and the provision
of public relations services to public health service institutions. For services
such as the production of advertising and promotion materials, fees are
recognized when the production materials are completed. With respect to services
such as public relations, the Company is either paid a monthly retainer or bills
on an actual time incurred basis, which, in each case, the Company recognizes as
income each month to match its monthly payroll and operating costs.
Additionally, revenues associated with contract sales services are recognized as
such services are provided and payroll expenses are incurred.
Accounts receivable include fees recognized, project costs, and media and
production costs incurred on behalf of clients, which are paid for by the
Company and billed to clients. The Company records gross contract revenues for
contract sales services and the related direct costs are included in salaries
and related costs on the accompanying consolidated statements of income.
Concentration of Credit Risk
The Company provides services to a range of clients operating mostly in the
healthcare, food and beverage and communication industries. For the year ended
November 30, 1996, the Company had three clients which constituted approximately
13%, 13% and 8% of total revenues. In addition, the Company's five largest
clients represented 49% of total revenues for that period. The Company had three
clients which constituted approximately 16%, 13% and 10% and 27%, 18% and 11% of
total 1995 and 1994 revenues, respectively. The Company extends credit to all
qualified clients, but does not believe that it is exposed to any undue
concentration of credit risk to any significant degree. The Company maintains
reserves for potential credit losses, but has not experienced any material
losses to individual clients or groups of clients.
F-31
<PAGE>
MILTON MARKETING GROUP LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
2. SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Cash and Cash Equivalents
For purposes of the consolidated balance sheets and consolidated statements
of cash flows, the Company considers all highly liquid debt instruments
purchased with original maturities of three months or less to be cash
equivalents, including commercial paper and money market mutual funds.
Unbilled Production Charges
Unbilled production charges consists principally of costs incurred in
producing marketing communications for clients and field marketing personnel to
be billed. Such amounts will be billed to clients at either a defined stage of
the project or when production is complete.
Furniture, Equipment and Leasehold Improvements
Furniture, equipment and leasehold improvements are stated at cost, net of
accumulated depreciation and amortization. Depreciation and amortization are
computed using both accelerated and straight-line methods over the following
periods:
<TABLE>
<S> <C>
Furniture................................. 4-10 years
Equipment................................. 4-14 years
Motor Vehicles............................ 4-8 Years
Leasehold Improvements.................... Lesser of lease term or useful life
</TABLE>
Equipment Held under Capital Leases
Assets held under capital leases is accounted for in accordance with
Statement of Financial Accounting Standards No. 13, 'Accounting for Leases,' and
recorded in Property, Plant and Equipment. The present value of the related
liability is included in capitalized lease obligations.
Goodwill
Goodwill represents the Company's excess cost over net assets acquired and
is being amortized on a straight-line basis over the estimated useful life of
the assets. Amounts recognized to date have been amortized over 30 years from
the original date of acquisition. Amortization expense of goodwill for the years
ended November 30, 1994, 1995 and 1996 amounted to $0, $2 and $42, respectively,
and for the seven months ended June 30, 1996 and 1997 amounted to $23 and $35,
respectively (unaudited).
During 1996, the Company adopted Statement of Financial Accounting
Standards No. 121 (SFAS No. 121), 'Accounting for the Impairment of Long-Lived
Assets and Long-Lived Assets to be Disposed of.' This statement requires the
Company to review long-lived assets, including certain intangibles and goodwill,
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. The effect of adoption was
not material.
Income Taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, 'Accounting for Income Taxes.' This
statement requires a liability approach for measuring deferred taxes based on
temporary differences between the financial statement and income tax bases of
assets and liabilities existing at each balance sheet date using enacted rates
for the years in which the taxes are expected to be paid or recovered. The
Company has not recorded any deferred tax assets or liabilities as any
differences between book and income tax recognition are immaterial.
F-32
<PAGE>
MILTON MARKETING GROUP LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
2. SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affects the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Recently Issued Accounting Standards
In March 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ('SFAS') No. 128, Earnings Per Share. This
statement establishes standards for computing and presenting earnings per share
('EPS'), replacing the presentation of currently required primary EPS with a
presentation of Basic EPS. For entities with complex capital structures, the
statement requires the dual presentation of both Basic EPS and Diluted DPS on
the face of the statement of income. Under this new standard, Basic EPS is
computed based on weighted average shares outstanding and excludes any potential
dilution; Diluted EPS reflects potential dilution from the exercise or
conversion of securities into common stock or from other contracts to issue
common stock and is similar to the currently required fully diluted EPS. SFAS
128 is effective for financial statements issued for periods ending after
December 15, 1997, including interim periods, and earlier application is not
permitted.
3. ACQUISITIONS OF BUSINESSES
Milton Headcount Limited (formerly Effective Sales Personnel Limited)
In November 1995, the Company acquired all of the outstanding stock of MHL
for a purchase price of $1,130. The purchase price was funded by cash and a $462
note due March 1998.
Milton Cater Limited
MCL was formed in April 1996, and the Company acquired 51% of its equity in
May 1996. The remaining 49% of MCL's equity is owned by a key employee and must
be purchased by the Company on the earliest of May 23, 2001, the sale or
disposal of MCL or the Company, or the Company being the subject of an initial
public offering. The purchase price is set at 60% of defined average annual
Gross Profits of MCL, as defined in the agreement, in excess of $588 for the
three years prior to purchase, subject to a maximum purchase price of $504. At
November 30, 1996 the purchase price would be immaterial.
Milton Marketing Limited
In April 1996, the Company acquired an additional 7.5% interest in MML for
$234, which increased the Company's interest in MML to 92.5%.
PDM Communications Limited
In November 1996, the Company acquired a 75% interest in PDM for a cash
purchase price of $32.
The minority stockholder has a put option and the Company has a call option
with respect to the remaining 25% of PDM shares not owned by the Company. The
stockholder put option would require payment of 18.5% of Gross Income of PDM, as
defined in the agreement, for the period from November 26, 1996 to date of
exercise. The Company's call option would require payment on 25% of Gross Income
to date of exercise. The stockholder put option is exercisable at any time up to
November 30, 1998, provided that PDM has generated positive Gross Income, after
personnel costs during the period. The Company's call option is exercisable if a
certain key employee leaves PDM, or if PDM or the Company is sold or the subject
of an initial public offering.
The three acquisitions discussed above were all accounted for using the
purchase method of accounting. Accordingly, a portion of the purchase price was
allocated to the net assets acquired based on their estimated fair
F-33
<PAGE>
MILTON MARKETING GROUP LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
3. ACQUISITIONS OF BUSINESSES--(CONTINUED)
values. The excess of the purchase price over the fair value of net assets
acquired was recorded as goodwill. Goodwill was recorded as follows:
<TABLE>
<CAPTION>
ESP MML PDM
------ ---- -------
<S> <C> <C> <C>
Assets...................................................................... $ 346 $ -- $ 717
Minority share of net assets acquired....................................... -- 46 --
Goodwill.................................................................... 1,027 188 523
Liabilities................................................................. (243) -- (1,208)
------ ---- -------
Total purchase price...................................................... $1,130 $234 $ 32
------ ---- -------
------ ---- -------
</TABLE>
Pro Forma Results of Operations
Summarized below are the unaudited pro forma results of operations of the
Company as though the ESP acquisition had occurred at the beginning of 1994 and
the MML and PDM acquisitions had occurred at the beginning of 1995. Adjustments
have been made for pro forma income taxes and amortization of goodwill related
to these transactions.
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
---------------------------
Pro Forma: 1994 1995 1996
------ ------ -------
<S> <C> <C> <C>
Revenues................................................................ $5,609 $6,634 $10,282
Net income.............................................................. 357 392 135
</TABLE>
These pro forma results of operations are not necessarily indicative of the
actual results of operations that would have occurred had the acquisitions been
made at the beginning of 1994 or 1995 or of results which may occur in the
future.
4. FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Motor vehicles, furniture, equipment and leasehold improvements consist of
the following:
<TABLE>
<CAPTION>
JUNE 30,
1997
NOVEMBER 30, NOVEMBER 30, -----------
1995 1996
------------ ------------ (UNAUDITED)
<S> <C> <C> <C>
Motor vehicles............................................... $ 204 $ 265 $ 265
Furniture and equipment...................................... 670 996 1,070
Leasehold improvements..................................... 126 163 163
Equipment held under capital leases.......................... 284 395 485
------------ ------------ -----------
1,284 1,819 1,983
Less: Accumulated depreciation and amortization.............. 650 949 1,035
------------ ------------ -----------
$ 634 $ 870 $ 948
------------ ------------ -----------
------------ ------------ -----------
</TABLE>
Depreciation and amortization expense of furniture, equipment and leasehold
improvements for the years ended November 30, 1994, 1995 and 1996 amounted to
approximately $114, $134 and $183, respectively, and for the seven months ended
June 30, 1996 and 1997 amounted to $84 and $106, respectively (unaudited).
F-34
<PAGE>
MILTON MARKETING GROUP LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
5. ACCRUED EXPENSES
Major components of accrued expenses included:
<TABLE>
<CAPTION>
JUNE 30,
1997
NOVEMBER 30, NOVEMBER 30, -----------
1995 1996
------------ ------------ (UNAUDITED)
<S> <C> <C> <C>
Value added and payroll taxes................................ $ 445 $1,155 $ 836
Payroll...................................................... -- 356 387
Directors fees............................................... 130 -- --
Other........................................................ 361 466 195
------------ ------------ -----------
$ 936 $1,977 $ 1,418
------------ ------------ -----------
------------ ------------ -----------
</TABLE>
6. BANK LOANS AND OVERDRAFT
The Company has the following loans outstanding:
<TABLE>
<CAPTION>
JUNE 30,
1997
NOVEMBER 30, NOVEMBER 30, -----------
1995 1996
------------ ------------ (UNAUDITED)
<S> <C> <C> <C>
Term loan(a)................................................. $ 535 $ 470 $ 407
Business development loan(b)................................. 57 38 23
Overdraft facility(c)........................................ -- 379 1,211
4% loan notes(d)............................................. 421 462 456
------------ ------------ -----------
1,013 1,349 2,097
Less: Current portion........................................ 131 524 1,806
------------ ------------ -----------
$ 882 $ 825 $ 291
------------ ------------ -----------
------------ ------------ -----------
</TABLE>
- ------------------
a) During November 1995, a bank provided a term loan of $588 to the Company
which bears interest at the UK base rate (6% as of November 30, 1996) plus 2%
per annum and is payable in installments of $58 every May and November with
the final installment due in November 2000. The term loan requires the
Company to maintain certain financial covenants. As of November 30, 1996, the
Company was in compliance with all of the provisions of the term loan.
b) This loan bears interest at 10.5% per annum and matures in April 1998.
c) The Company has in place a $672 overdraft facility with a bank which bears
interest at the UK base rate plus 2% per annum. As of November 30, 1996, the
outstanding balance was approximately $379. At June 30, 1997, the bank has
allowed the Company to exceed the overdraft facility limit. The Company is
currently negotiating with the bank to increase the limit of the facility
(unaudited).
d) In connection with the MHL acquisition the Company has issued a $462, 4%
unsecured note, which is payable in March 1998.
At November 30, 1996, maturities of debt are as follows:
<TABLE>
<S> <C>
1997........................................................................ $524
1998........................................................................ 593
1999........................................................................ 116
2000........................................................................ 116
</TABLE>
7. CAPITALIZED LEASE OBLIGATION
The Company enters into leases for computer equipment and motor vehicles.
The lease payments are payable monthly on a straight-line basis. The assets
relating to the leases are capitalized and amortized over a period approximating
the lease period.
F-35
<PAGE>
MILTON MARKETING GROUP LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
7. CAPITALIZED LEASE OBLIGATION--(CONTINUED)
Minimum future lease payments under capital leases as of November 30 are as
follows:
<TABLE>
<S> <C>
1997.................................................................................. $141
1998.................................................................................. 101
1999.................................................................................. 44
----
Total minimum lease payments.......................................................... 286
Less: Amount representing interest.................................................... 33
----
Present value of minimum lease payments............................................... $253
----
----
</TABLE>
Interest rates on capitalized leases vary from 11% to 15% and are imputed
based on the lessor's implicit rate of return.
8. INCOME TAXES
The following table reconciles the U.K. Federal statutory rate to the
Company's effective income tax rate for the years ended November 30, 1994, 1995
and 1996:
<TABLE>
<CAPTION>
NOVEMBER 30,
--------------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Statutory rate..................................................................... 33% 33% 33%
Nondeductible goodwill............................................................. -- -- 4%
Small and marginal company rate relief............................................. (2%) (4%) --
---- ---- ----
Effective rate..................................................................... 31% 29% 37%
---- ---- ----
---- ---- ----
</TABLE>
The Company has not recorded any deferred tax assets or liabilities as any
differences between book and income tax recognition are immaterial.
9. COMMITMENTS
The Company has entered into various leases for property. All leases are
payable in quarterly installments, and are accounted for on a straight line
basis over the term of the lease.
The following is a schedule of the minimum annual lease payments due:
<TABLE>
<S> <C>
1997....................................................................... $ 393
1998....................................................................... 393
1999....................................................................... 393
2000....................................................................... 393
2001....................................................................... 393
Thereafter................................................................. 2,048
</TABLE>
Total rent expense incurred for the years ended November 30, 1994, 1995 and
1996 was approximately $116, $107 and $229, respectively, and for the seven
months ended June 30, 1996 and 1997 was approximately $118 and $225,
respectively (unaudited).
Employment Agreements
The Company has entered into employment agreements (the 'Agreements') with
certain key employees. The Agreements contain provisions for base salary and
incentives based upon certain performance measures, and are subject to
termination by either party. The aggregate annual minimum base compensation
required by the Agreements is approximately $312.
F-36
<PAGE>
MILTON MARKETING GROUP LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
9. COMMITMENTS--(CONTINUED)
Employee Benefits
The Company makes non-contractual payments into the personal pension plans
of various directors and senior management. For the years ended November 30,
1994, 1995, and 1996, the Company has contributed $56, $74, and $41,
respectively, and for the seven months ended June 30, 1996 and 1997, the Company
has contributed $34 and $37, respectively (unaudited).
10. INTERIM FINANCIAL STATEMENTS
The consolidated financial statements of Milton Marketing Group Limited as
of and for the seven months ended June 30, 1996 and 1997, presented herein have
been prepared by the Company without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. The financial statements
reflect all adjustments (consisting of only normal recurring adjustments) which,
in the opinion of management, are necessary to present fairly the combined
financial position, results of operations and cash flows of the Company as of
June 30, 1996 and 1997, and for the periods then ended. The Company's interim
results may fluctuate as a result of a number of factors and are not necessarily
indicative of the results to be obtained for the full year.
11. SUBSEQUENT EVENTS
Pursuant to the Agreements and Plans of Organization (the 'Consolidation
Agreements'), dated October , 1997, the stockholders of the Company and
Girgenti, Hughes, Butler & McDowell, Inc. and its affiliated entities ('GHB&M')
have agreed to exchange all of the outstanding shares of common stock of each of
the companies comprising the Company and GHB&M for shares of common stock of
Healthworld Corporation ('Healthworld') as of the effective date of the Offering
(as defined below) (the 'Consolidation'). Concurrent with the Consolidation,
three of the stockholders holding minority interests in certain of the Company's
subsidiaries will contribute their interests in such respective companies to
Healthworld in exchange for shares of common stock of Healthworld, and the
remaining shares of common stock in one of the Company's subsidiaries held by a
fourth stockholder will be redeemed by the Company for no consideration pursuant
to a prior agreement between the Company and such stockholder. The agreed upon
aggregate purchase price is approximately $2,204 for the minority interests.
These acquisitions will be accounted for using the purchase method of
accounting. The excess purchase price over the underlying equity of the minority
interests will be recorded as goodwill.
Healthworld is pursuing an initial public offering of its securities (the
'Offering'). The Offering contemplates the sale of 2,100 shares of Healthworld's
common stock at an offering price between $8.00 and $9.50 per share before
underwriting commissions and Offering expenses.
F-37
<PAGE>
================================================================================
NO UNDERWRITER, DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY
SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE OF THIS PROSPECTUS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary................................ 3
Risk Factors...................................... 7
The Consolidation................................. 12
Use of Proceeds................................... 13
Dividend Policy................................... 13
Dilution.......................................... 14
Capitalization.................................... 15
Selected Pro Forma Combined Financial
Information..................................... 16
Selected Financial Information of GHB&M
and Milton...................................... 17
Management's Discussion and Analysis of Financial
Condition and Results of Operations............. 18
Business.......................................... 28
Management........................................ 38
Certain Relationships and Related
Transactions.................................... 43
Principal Stockholders............................ 44
Description of Capital Stock...................... 45
Shares Eligible for Future Sale................... 47
Underwriting...................................... 48
Legal Matters..................................... 49
Experts........................................... 49
Forward Looking Statements........................ 49
Additional Information............................ 50
Index to Financial Statements..................... F-1
</TABLE>
------------------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
================================================================================
================================================================================
2,100,000 SHARES
[LOGO]
HEALTHWORLD
CORPORATION
COMMON STOCK
------------------------
PROSPECTUS
------------------------
UNTERBERG HARRIS
PENNSYLVANIA MERCHANT
GROUP LTD
, 1997
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Set forth below is an estimate of the approximate amount of fees and
expenses (other than underwriting commissions and discounts) payable by the
Registrant in connection with the issuance and distribution of the Common Stock
pursuant to the Prospectus contained in this Registration Statement.
<TABLE>
<CAPTION>
APPROXIMATE
AMOUNT
-----------
<S> <C>
Securities and Exchange Commission registration fee......... $ 6,952
NASD filing fee............................................. 2,794
Nasdaq National Market listing fee.......................... 36,250
Accountants' fees and expenses.............................. 424,000
Blue Sky fees and expenses.................................. --
Legal fees and expenses..................................... 921,000
Transfer Agent and Registrar fees and expenses.............. 3,500
Printing and engraving expenses............................. 100,000
Miscellaneous............................................... 10,000
-----------
Total.................................................. $1,504,496
-----------
-----------
</TABLE>
- ------------------
* To be completed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant's Certificate of Incorporation and By-laws provide that the
Registrant shall indemnify its directors to the full extent permitted by the
General Corporation Law of the State of Delaware (the 'DGCL') and may indemnify
its officers and employees to such extent, except that the Registrant shall not
be obligated to indemnify any such person (i) with respect to proceedings,
claims or actions initiated or brought voluntarily by any such person and not by
way of defense, or (ii) for any amounts paid in settlement of an action
indemnified against by the Registrant without the prior written consent of the
Registrant without the prior written consent of the Registrant. The Registrant
intends to enter into indemnity agreements with each of its directors. These
agreements may require the Registrant, among other things, to indemnify such
directors against certain liabilities that may arise by reason of their status
or service as directors, and to advance expenses to them as they are incurred,
provided that they undertake to repay the amount advanced if it is ultimately
determined by a court that they are not entitled to indemnification, and to
obtain directors' liability insurance if available on reasonable terms.
In addition, the Registrant's Certificate of Incorporation provides that a
director of the Registrant shall not be personally liable to the Registrant or
its stockholders for monetary damages for breach of his or her fiduciary duty as
director, except for liability (i) for any breach of the director's duty of
loyalty to the Registrant or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) for willful or negligent conduct in paying dividends or repurchasing
stock out of other than lawfully available funds or (iv) for any transaction
from which the director derives an improper personal benefit.
Reference is made to Section 145 of the DGCL which provides for
indemnification of directors and officers in certain circumstances.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
On October 13, 1997, the Registrant issued an aggregate of 100 founders
shares of Common Stock to the stockholders of GHB&M for an aggregate of $100.
Such transaction was effected in reliance upon the exemption from registration
under the Securities Act contained in Section 4(2) of the Securities Act. In
connection with the Consolidation, the Registrant will, as of the date of this
Registration Statement, issue an aggregate of 5,000,000 shares of Common Stock
to the stockholders of GHB&M and Milton in exchange for all of their stock of
GHB&M and Milton. Such transaction will be effected in reliance upon the
exemption from registration under the Securities Act contained in Section 4(2)
of the Securities Act. No underwriters were engaged with respect to such
transactions and no underwriting discounts or commissions will be paid in
connection with the sale of such securities.
II-1
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
The following documents are filed as part of this Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
*1.01 -- Form of Underwriting Agreement between the Registrant and Unterberg Harris and Pennsylvania
Merchant Group Ltd, as representatives of several underwriters.
*2.01 -- Letter of Intent between Girgenti, Hughes, Butler & McDowell, Inc. ('GH') and its affiliated
entities and Milton Marketing Group Limited and its subsidiaries, dated November 14, 1996, as
amended July 24, 1997.
*2.02 -- Form of Agreement and Plan of Organization by and among the Registrant, Steven Girgenti, Francis
Hughes, William Butler and Herbert Ehrenthal.
*2.03 -- Form of Agreement and Plan of Organization between the Registrant and William Leslie Milton.
**2.04 -- Form of Agreement and Plan of Organization by and between the Registrant and Michael Garnham.
**2.05 -- Form of Agreement and Plan of Organization between the Registrant and Leonard Moreton.
**2.06 -- Form of Agreement and Plan of Organization between the Registrant and Michael Bourne.
*3.01 -- Restated Certificate of Incorporation of the Registrant.
*3.02 -- Amended and Restated Bylaws of the Registrant.
4.01 -- Specimen Common Stock Certificate.
**5.01 -- Opinion of Rosenman & Colin LLP.
*10.01 -- Term Loan Facility, dated November 6, 1995, by and between Siteinput Limited (n/k/a Milton
Marketing Group Limited) and Bank of Scotland, as amended by letter dated July 23, 1997.
*10.02 -- Line of Credit between The Chase Manhattan Bank, N.A. ('Chase') and GH and each of its affiliated
entities, dated January 22, 1996.
*10.03 -- Line of Credit between Chase and GH and each of its affiliated entities, dated January 17, 1997.
*10.04 -- Promissory Note made by GH and its affiliated entities for the benefit of Chase, dated January 31,
1996.
10.05 -- Registrant's 1997 Incentive Stock Option Plan.
</TABLE>
<TABLE>
<S> <C> <C>
10.06 -- Form of Employment Agreement by and between the Registrant and Steven Girgenti.
10.07 -- Form of Employment Agreement by and between the Registrant and William Leslie Milton.
10.08 -- Form of Employment Agreement by and between GH and William Butler.
**10.09 -- Form of Employment Agreement by and between GH and Herbert Ehrenthal.
10.10 -- Employment Agreement by and between GH and Francis Hughes, dated as of September 8, 1995.
*10.11 -- Employment Agreement by and between the Registrant and Stuart Diamond.
*10.12 -- License Agreement between the Registrant and Healthworld, B.V.
*10.13 -- Lease for office space located at 100 Avenue of the Americas, New York, NY, between The Rector,
Church-Wardens and Vestrymen of Trinity Church in the City of New York and GH, dated July 15,
1994.
*10.14 -- Agreement for the sale and purchase of share capital of Effective Sales Personnel Limited between
Gloria Olive Sargent and Siteinput Limited, dated November 8, 1995.
*10.15 -- Supplemental Agreement relating to the sale and purchase of share capital of Effective Sales
Personnel Limited between Gloria Olive Sargent and Siteinput Limited, dated November 29, 1996.
*10.16 -- Agreement for the sale and purchase of shares in PDM Communications Limited among Leonard Moreton,
Lizabeth Jenny Moreton, Leonard Moreton & Co. and Siteinput Limited, dated November 26, 1996.
*10.17 -- Agreement for the sale and purchase of shares in PDM Communications Limited between William
Annandale and Siteinput Limited, dated November 21, 1996.
*10.18 -- Joint Venture Agreement between Siteinput Limited and Claire Denise Cater dated May 23, 1996.
*10.19 -- Share Sale Agreement between Wendy Carter and Siteinput Limited dated April 4, 1996.
*10.20 -- Overdraft Facility, dated November 6, 1995, between Siteinput Limited and The Bank of Scotland.
</TABLE>
- ------------------
* Previously filed.
** To be filed by amendment.
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
10.21 -- Multi Option Facility by and between Bank of Scotland and Milton Marketing Group Limited, Milton
Marketing Limited, Milton Cater Limited, Milton Headcount Limited, Effective Sales Personnel
Limited and PDM Communications Ltd.
**10.22 -- Form of Employment Agreement by and between Milton Headcount Limited and Michael Garnham.
11.01 -- Statement regarding computation of supplemental pro forma per share earnings.
*21.01 -- Subsidiaries of the Registrant.
23.01 -- Consent of Arthur Andersen LLP.
**23.02 -- Consent of Rosenman & Colin LLP (included in Exhibit 5.01).
*24.01 -- Power of attorney (included on page II-4).
*27.01 -- Financial Data Schedule.
*27.02 -- Financial Data Schedule.
*27.03 -- Financial Data Schedule.
*27.04 -- Financial Data Schedule.
*27.05 -- Financial Data Schedule.
*27.06 -- Financial Data Schedule.
*27.07 -- Financial Data Schedule.
*27.08 -- Financial Data Schedule.
*99.01 -- Consents of Nominee Directors.
</TABLE>
- ------------------
* Previously filed.
** To be filed by amendment.
(b) Financial Statement Schedule
None.
ITEM 17. UNDERTAKINGS
The Registrant hereby undertakes:
(1) To provide to the Underwriters at the closing specified in the
underwriting agreement, certificates in such denominations and registered
in such names as required by the Underwriters to permit prompt delivery to
each purchaser.
(2) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(3) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the applicable provisions of the DGCL, or otherwise, the
Registrant has been advised that in the opinion of the Commission, such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of New
York, State of New York, on the 15th day of October 1997.
HEALTHWORLD CORPORATION
By: /s/ STEVEN GIRGENTI
---------------------------------
Steven Girgenti
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to this Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------------------- -------------------
<S> <C> <C>
/s/ STEVEN GIRGENTI Chairman of the Board and Chief Executive October 15, 1997
- ------------------------------------------ Officer (principal executive officer)
Steven Girgenti
/s/ STUART DIAMOND Executive Vice President, Chief Financial October 15, 1997
- ------------------------------------------ Officer and Secretary (principal financial
Stuart Diamond and accounting officer)
/s/ WILLIAM LESLIE MILTON* Vice Chairman of the Board and President October 15, 1997
- ------------------------------------------
William Leslie Milton
/s/ FRANCIS HUGHES* Director October 15, 1997
- ------------------------------------------
Francis Hughes
</TABLE>
- ---------------
*By: /s/ STEVEN GIRGENTI
- ------------------------------
Steven Girgenti, as
Attorney-in-Fact
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- --------------------------------------------------------------------------------------------
<S> <C> <C>
*1.01 -- Form of Underwriting Agreement between the Registrant and Unterberg Harris and
Pennsylvania Merchant Group Ltd, as representatives of several underwriters.
*2.01 -- Letter of Intent between Girgenti, Hughes, Butler & McDowell, Inc. ('GH') and its
affiliated entities and Milton Marketing Group Limited and its subsidiaries, dated
November 14, 1996, as amended July 24, 1997.
*2.02 -- Form of Agreement and Plan of Organization by and among the Registrant, Steven
Girgenti, Francis Hughes, William Butler and Herbert Ehrenthal dated October , 1997.
*2.03 -- Form of Agreement and Plan of Organization between the Registrant and William Leslie
Milton.
**2.04 -- Form of Agreement and Plan of Organization by and between the Registrant and Michael
Garnham.
**2.05 -- Form of Agreement and Plan of Organization between the Registrant and Leonard Moreton.
**2.06 -- Form of Agreement and Plan of Organization between the Registrant and Michael Bourne.
*3.01 -- Restated Certificate of Incorporation of the Registrant.
*3.02 -- Amended and Restated Bylaws of the Registrant.
4.01 -- Specimen Common Stock Certificate.
**5.01 -- Opinion of Rosenman & Colin LLP.
*10.01 -- Term Loan Facility, dated November 6, 1995, by and between Siteinput Limited (n/k/a
Milton Marketing Group Limited) and Bank of Scotland, as amended by letter dated July
23, 1997.
*10.02 -- Line of Credit between The Chase Manhattan Bank, N.A. ('Chase') and GH and each of its
affiliated entities, dated January 22, 1996.
*10.03 -- Line of Credit between Chase and GH and each of its affiliated entities, dated January
17, 1997.
*10.04 -- Promissory Note made by GH and its affiliated entities for the benefit of Chase, dated
January 31, 1996.
10.05 -- Registrant's 1997 Incentive Stock Option Plan.
</TABLE>
<TABLE>
<S> <C> <C> <C>
10.06 -- Form of Employment Agreement by and between the Registrant and Steven Girgenti.
10.07 -- Form of Employment Agreement by and between the Registrant and William Leslie Milton.
10.08 -- Form of Employment Agreement by and between GH and William Butler.
**10.09 -- Form of Employment Agreement by and between GH and Herbert Ehrenthal.
10.10 -- Employment Agreement by and between GH and Francis Hughes, dated as of September 8,
1995.
*10.11 -- Employment Agreement by and between the Registrant and Stuart Diamond.
*10.12 -- License Agreement between the Registrant and Healthworld, B.V.
*10.13 -- Lease for office space located at 100 Avenue of the Americas, New York, NY, between
The Rector, Church-Wardens and Vestrymen of Trinity Church in the City of New York and
GH, dated July 15, 1994.
</TABLE>
- ------------------
* Previously filed.
** To be filed by amendment.
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- --------------------------------------------------------------------------------------------
<S> <C> <C>
*10.14 -- Agreement for the sale and purchase of share capital of Effective Sales Personnel
Limited between Gloria Olive Sargent and Siteinput Limited, dated November 8, 1995.
*10.15 -- Supplemental Agreement relating to the sale and purchase of share capital of Effective
Sales Personnel Limited between Gloria Olive Sargent and Siteinput Limited, dated
November 29, 1996.
*10.16 -- Agreement for the sale and purchase of shares in PDM Communications Limited among
Leonard Moreton, Lizabeth Jenny Moreton, Leonard Moreton & Co. and Siteinput Limited,
dated November 26, 1996.
*10.17 -- Agreement for the sale and purchase of shares in PDM Communications Limited between
William Annandale and Siteinput Limited, dated November 21, 1996.
*10.18 -- Joint Venture Agreement between Siteinput Limited and Claire Denise Cater dated May
23, 1996.
*10.19 -- Share Sale Agreement between Wendy Carter and Siteinput Limited dated April 4, 1996.
*10.20 -- Overdraft Facility, dated November 6, 1995, between Siteinput Limited and The Bank of
Scotland.
10.21 -- Multi Option Facility by and between Bank of Scotland and Milton Marketing Group
Limited, Milton Marketing Limited, Milton Cater Limited, Milton Headcount Limited,
Effective Sales Personnel Limited and PDM Communications Ltd.
**10.22 -- Form of Employment Agreement by and between Milton Headcount Limited and Michael
Garnham.
11.01 -- Statement regarding computation of supplemental pro forma per share earnings.
*21.01 -- Subsidiaries of the Registrant.
23.01 -- Consent of Arthur Andersen LLP.
**23.02 -- Consent of Rosenman & Colin LLP (included in Exhibit 5.01).
*24.01 -- Power of attorney (included on page II-4).
*27.01 -- Financial Data Schedule.
*27.02 -- Financial Data Schedule.
*27.03 -- Financial Data Schedule.
*27.04 -- Financial Data Schedule.
*27.05 -- Financial Data Schedule.
*27.06 -- Financial Data Schedule.
*27.07 -- Financial Data Schedule.
*27.08 -- Financial Data Schedule.
*99.01 -- Consents of Nominee Directors.
</TABLE>
- ------------------
* Previously filed.
** To be filed by amendment.
<PAGE>
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP 42222E 10 3
COMMON STOCK
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF THE PAR
VALUE OF $.01 EACH OF THE COMMON STOCK OF
HEALTHWORLD CORPORATION
transferable on the books of the Corporation byo the holder hereof in person or
by duly authorized attorney upon surrender of this Certificate properly
endorsed. This Certificate is not valid unless countersigned by the Transfer
Agent and registered by the Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
Dated:
SECRETARY
CHAIRMAN
COUNTERSIGNED AND REGISTERED:
AMERICAN STOCK TRANSFER & TRUST COMPANY
TRANSFER AGENT AND REGISTRAR
BY
AUTHORIZED SIGNATURE
<PAGE>
The Corporation will furnish without charge to each stockholder who so requests
a copy of the provisions setting forth the powers, designations, preferences and
relative, participating, optional, or other special rights of each class of
stock or series thereof which the Corporation is authorized to issue and the
qualifications, limitations or restrictions of such preferences and/or rights.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM
TEN ENT
JT TEN
as tenants in common
as tenants by the entireties
as joint tenants with right
of survivorship and not as tenants
in common
UNIF GIFT MIN ACT- Custodian
(Cust) (Minor)
under Uniform Gifts to Minors
Act
(State)
Additional abbreviations may also be used though not in the above list.
For value received, hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING ZIP CODE OF ASSIGNEE)
Shares
of the Common Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint Attorney to transfer the said stock on the
books of the within-named Corporation with full power of substitution in the
premises.
Dated
NOTICE:
THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON
THE FACE OF THE CERTIFICATE, IN EVERY PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATEVER.
SIGNATURE(S) GUARANTEED
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM) PURSUANT
TO S.E.C. RULE 17Ad-15.
KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN, MUTILATED OR
DESTROYED, THE CORPORATION WILL REQUIRE A BOND OF INDEMNITY AS A
CONDITIONTO THE ISSUANCE OF A REPLACEMENT CERTIFICATE.
<PAGE>
HEALTHWORLD CORPORATION
1997 STOCK OPTION PLAN
<PAGE>
TABLE OF CONTENTS
Page
1. Purpose............................................... 1
2. Effective Date of the Plan............................ 2
3. Stock Subject to Plan................................. 2
4. Committee............................................. 2
5. Administration........................................ 3
6. Eligibility........................................... 5
7. Option Prices......................................... 7
8. Option Term........................................... 9
9. Limitations on Amount of Options Granted.............. 9
10. Exercise of Options................................... 10
11. Transferability....................................... 13
12. Termination of Employment............................. 13
13. Adjustment of Number of Shares........................ 15
14. Purchase for Investment, Withholding and Waivers...... 18
15. No Stockholder Status................................. 19
16. No Restrictions on Corporate Acts..................... 19
17. Options Granted in Connection With Acquisitions....... 19
18. No Employment or Service Right........................ 20
19. Termination and Amendment of the Plan................. 20
20. Expiration and Termination of the Plan................ 21
<PAGE>
DRAFT 9/23/97
HEALTHWORLD CORPORATION
1997 STOCK OPTION PLAN
1. Purpose.
The purposes of the 1997 Stock Option Plan (the "Plan") are to induce
certain employees, directors and consultants to remain in the employ or service
of Healthworld Corporation (the "Company") and its present and future subsidiary
corporations (each a "Subsidiary"), as defined in Section 424(f) of the Internal
Revenue Code of 1986, as amended (the "Code"), to attract new individuals to
enter into such employment or service and to encourage such individuals to
secure or increase on reasonable terms their stock ownership in the Company. The
Board of Directors of the Company (the "Board") believes that the granting of
stock options (the "Options") under the Plan will promote continuity of
management and increased incentive and personal interest in the welfare of the
Company by those who are or may become primarily responsible for shaping and
carrying out the long range plans of the Company and securing its continued
growth and financial success. Options granted hereunder are intended to be
either (a) "incentive stock options" (which term, when used herein, shall have
the meaning ascribed thereto by the provisions of Section 422(b) of the Code) or
(b) options which
<PAGE>
are not incentive stock options ("non-qualified stock options") or (c) a
combination thereof, as determined by the Committee (the "Committee") referred
to in Section 4 hereof at the time of the grant thereof.
2. Effective Date of the Plan.
The Plan became effective on ____________, 1997 by action of the Board
ratified by the holders of all of the issued and outstanding shares of the
common stock of the Company.
3. Stock Subject to Plan.
710,000 of the authorized but unissued shares of the Common Stock, $.01
par value, of the Company (the "Common Stock") are hereby reserved for issue
upon the exercise of Options granted under the Plan; provided, however, that the
number of shares so reserved may from time to time be reduced to the extent that
a corresponding number of issued and outstanding shares of the Common Stock are
purchased by the Company and set aside for issue upon the exercise of Options.
If any Options expire or terminate for any reason without having been exercised
in full, the unpurchased shares subject thereto shall again be available for the
purposes of the Plan.
4. Committee.
The Committee shall consist of two or more members of the Board both or
all of whom shall be "non-employee directors" within the meaning of Rule
16b-3(b)(3) promulgated under the
2
<PAGE>
Securities Exchange Act of 1934, as amended (the "Exchange Act"). In addition,
from and after the date of the first meeting of the stockholders of the Company
occurring after December 31, 2000 at which directors are to be elected, all
members of the Committee shall be "outside directors" within the contemplation
of Section 162(m)(4)(C)(i) of the Code. The Chief Executive Officer of the
Company shall also be a member of the Committee, ex-officio, whether or not he
or she is otherwise eligible to be a member of the Committee. The Committee
shall be appointed annually by the Board, which may at any time and from time to
time remove any members of the Committee, with or without cause, appoint
additional members to the Committee and fill vacancies, however caused, in the
Committee. A majority of the members of the Committee shall constitute a quorum.
All determinations of the Committee shall be made by a majority of its members
present at a meeting duly called and held. Any decision or determination of the
Committee reduced to writing and signed by all of the members of the Committee
shall be fully as effective as if it had been made at a meeting duly called and
held.
5. Administration.
A. Subject to the express provisions of the Plan, the Committee shall
have complete authority, in its discretion, to interpret the Plan, to prescribe,
amend and rescind rules and regulations relating to it, to determine the terms
and provisions of the respective option agreements or certificates (which need
not be identical), to determine the individuals (each a "Partici-
3
<PAGE>
pant") to whom and the times and the prices at which Options shall be granted,
the periods during which each Option shall be exercisable, the number of shares
of the Common Stock to be subject to each Option and whether such Option shall
be an incentive stock option or a non-qualified stock option and to make all
other determinations necessary or advisable for the administration of the Plan;
provided, however, that directors of the Company who are not employed by the
Company or any of the Subsidiaries (each a "Non-Employee Director") shall only
be granted Options in accordance with the provisions of Section 6B. In making
such determinations, the Committee may take into account the nature of the
services rendered by the respective employees and consultants, their present and
potential contributions to the success of the Company and the Subsidiaries and
such other factors as the Committee in its discretion shall deem relevant. The
Committee's determination on the matters referred to in this Section 5 shall be
conclusive. Any dispute or disagreement which may arise under or as a result of
or with respect to any Option shall be determined by the Committee, in its sole
discretion, and any interpretations by the Committee of the terms of any Option
shall be final, binding and conclusive.
B. The Committee may appoint a separate committee comprised of
the Chief Executive Officer and Chief Financial Officer of the Company (the
"Administrative Committee") to administer the Plan with respect to employees of
the Company or a Subsidiary (I) who are not officers of the Company who are
4
<PAGE>
subject to the provisions of Section 16 of the Exchange Act and (ii) whose
compensation is not subject to the provisions of Section 162(m) of the Code,
subject to such conditions, restrictions and limitations as may be imposed by
the Committee, including but limited to: (a) Options to purchase not more than
50,000 shares of the Common Stock may be granted in any one calendar year by the
Administrative Committee to all employees of the Company in the aggregate and
(b) the Committee shall establish a maximum number of shares that may be subject
to Options granted under the Plan in any one calendar year to any single
employee by the Administrative Committee. Unless and until the Committee shall
take further action, the maximum number of shares that may be subject to Options
granted under the Plan in any one calendar year by the Administrative Committee
to any single employee shall be 2,500. Any actions duly taken by the
Administrative Committee with respect to the grant of Options to employees shall
be deemed to have been taken by the Committee for purposes of the Plan.
6. Eligibility.
A. An Option may be granted only to (i) an employee or consultant of
the Company or a Subsidiary, (ii) to the extent provided in Section 6B, a
Non-Employee Director and (iii) employees of a corporation or other business
enterprise which has been acquired by the Company or a Subsidiary, whether by
exchange or purchase of stock, purchase of assets, merger or reverse
5
<PAGE>
merger or otherwise, who hold options with respect to the stock of such
corporation which the Company has agreed to assume.
B. (i) Upon the effective date (the "Effective Date") of the Company's
Registration Statement on Form S-1 (Registration No. 333-34751), filed with the
Securities and Exchange Commission under the Securities Act of 1933, as amended,
on August 29, 1997, each Non-Employee Director shall be granted an Option (a
"Non-Employee Director's Formula Option") to purchase 10,000 shares of the
Common Stock at the initial per share option price equal to the initial public
offering price in the offering made under such registration statement.
(ii) At the first meeting of the Board immediately following the annual
meeting of the stockholders of the Company held in 1998, and at the first
meeting of the Board immediately following each subsequent annual meeting of the
stockholders of the Company, each Non-Employee Director shall be granted a Non-
Employee Director's Formula Option to purchase 10,000 shares of the Common Stock
at the initial per share option price equal to the fair market value of a share
of the Common Stock on the date of grant.
(iii) Each Non-Employee Director who becomes a director subsequent to
the Effective Date, and prior to the date of any annual meeting of the
stockholders of the Company, shall be granted, on the date he or she becomes a
director, a Non-Employee Director's Formula Option to purchase 10,000 shares of
the Common
6
<PAGE>
Stock at the initial per share option price equal to the fair market value of a
share of the Common Stock on the date of grant.
(iv) A Non-Employee Director may not exercise a Non-Employee
Director's Formula Option during the period commencing on the date of the
granting of such Option to him or her and ending on the day next preceding the
first anniversary of such date. A Non-Employee Director may during the period
commencing on the first anniversary of the date of the granting of a Non-
Employee Director's Formula Option to him or her exercise such Option with
respect to all of the shares granted thereby.
7. Option Prices.
A. Except as otherwise provided in Section 17, the initial per share
option price of any Option shall be the price determined by the Committee but
not less than the fair market value of a share of the Common Stock on the date
of grant; provided, however, that, in the case of a Participant who owns (within
the meaning of Section 424(d) of the Code) more than 10% of the total combined
voting power of the Common Stock at the time an Option which is an incentive
stock option is granted to him or her, the initial per share option price shall
not be less than 110% of the fair market value of a share of the Common Stock on
the date of grant.
B. For all purposes of the Plan, the fair market value of a
share of the Common Stock on any date shall be determined by the Committee as
follows:
7
<PAGE>
(i) If the Common Stock is listed on the OTC Electronic Bulletin Board,
its fair market value shall be the closing selling price on such date for the
Common Stock as reported on the OTC Electronic Bulletin Board. If there are no
sales of the Common Stock on that date, then the reported closing selling price
for the Common Stock on the next preceding date for which such closing selling
price is quoted shall be determinative of fair market value; or,
(ii) If the Common Stock is listed on any established stock exchange or
a national market system, including without limitation, The Nasdaq National
Market or The Nasdaq SmallCap Market, its fair market value shall be the
reported closing selling price for the Common Stock on the principal securities
exchange or national market system on which the Common Stock is at such date
listed for trading. If there are no sales of Common Stock on that date, then the
reported closing selling price for the Common Stock on the next preceding day
for which such closing selling price is quoted shall be determinative of fair
market value; or,
(iii) If the Common Stock is not traded on the OTC Electronic Bulletin
Board, an exchange, or a national market system, its fair market value shall be
determined in good faith by the Committee, and such determination shall be
conclusive and binding on all persons.
8
<PAGE>
8. Option Term.
Participants shall be granted Options for such term as the Committee
shall determine, not in excess of ten years from the date of the granting
thereof; provided, however, that, except as otherwise provided in Section 17, in
the case of a Participant who owns (within the meaning of Section 424(d) of the
Code) more than 10% of the total combined voting power of the Common Stock of
the Company at the time an Option which is an incentive stock option is granted
to him or her, the term with respect to such Option shall not be in excess of
five years from the date of the granting thereof; provided, further, however,
that the term of each Non-Employee Director's Formula Option shall be ten years
from the date of the granting thereof.
9. Limitations on Amount of Options Granted.
A. Except as otherwise provided in Section 17, the aggregate fair
market value of the shares of the Common Stock for which any Participant may be
granted incentive stock options which are exercisable for the first time in any
calendar year (whether under the terms of the Plan or any other stock option
plan of the Company) shall not exceed $100,000.
B. Except as otherwise provided in Section 17, no Participant shall,
during any fiscal year of the Company, be granted Options to purchase more than
200,000 shares of the Common Stock.
9
<PAGE>
10. Exercise of Options.
A. Except as otherwise provided in Section 17 and except as otherwise
determined by the Committee at the time of the grant of an Option other than a
Non-Employee Director's Formula Option, a Participant may not exercise an Option
during the period commencing on the date of the granting of such Option to him
or her and ending on the day next preceding the first anniversary of such date.
Except as otherwise set forth in Sections 9A and 17 and in the preceding
sentence, a Participant may (i) during the period commencing on the first
anniversary of the date of the granting of an Option to him or her and ending on
the day next preceding the second anniversary of such date, exercise such Option
with respect to one-third of the shares granted thereby, (ii) during the period
commencing on such second anniversary and ending on the day next preceding the
third anniversary of the date of the granting of such Option, exercise such
Option with respect to two-thirds of the shares granted thereby, and (iii)
during the period commencing on such third anniversary, exercise such Option
with respect to all of the shares granted thereby.
B. Except as hereinbefore otherwise set forth, an Option may be
exercised either in whole at any time or in part from time to time.
C. An Option may be exercised only by a written notice of intent to
exercise such Option with respect to a specific number of shares of the Common
Stock and payment to the Company of the
10
<PAGE>
amount of the option price for the number of shares of the Common Stock so
specified.
D. Except in the case of a Non-Employee Director's Formula Option, the
Board may, in its discretion, permit any Option to be exercised, in whole or in
part, prior to the time when it would otherwise be exercisable.
E. (i) Notwithstanding the provisions of paragraph A of this Section
10, in the event that a Change of Control of the Company shall occur, then, each
Option theretofore granted to any Participant which shall not have theretofore
expired or otherwise been cancelled or become unexercisable shall become
immediately exercisable in full. For purposes hereof a "Change in Control" of
the Company shall occur or be deemed to have occurred only if any of the
following events occurs: (a) any "person," as such term is used in Sections
13(d) and 14(d) of the Exchange Act (other than the Company, any trustee or
other fiduciary holding securities under an employee benefit plan of the
Company, or any corporation owned directly or indirectly by the stockholders of
the Company in substantially the same proportion as the ownership of stock of
the Company) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing more than 50% of the combined voting power of the Company's then
outstanding securities; (b) individuals who, as of the Effective Date,
constitute the Board (as of the Effective Date, the "Incumbent Board") cease for
any reason to constitute at least a
11
<PAGE>
majority of the Board, provided that any person becoming a director subsequent
to the date hereof whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board (other than an election or nomination of an
individual whose initial assumption of office is in connection with an actual or
threatened election contest relating to the election of the directors of the
Company, as such terms are used in Rule 14a-11 of Regulation 14A under the
Exchange Act) shall be, for purposes of this Agreement, considered as though
such person were a member of the Incumbent Board; or (c) the stockholders of the
Company approve a merger or consolidation of the Company with any other
corporation, other than (I) a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than 60% of the combined
voting power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation or (II) a merger or
consolidation effected to implement a recapitalization of the Company (or
similar transaction) in which no "person" (as hereinabove defined) acquires more
than 50% of the combined voting power of the Company's then outstanding
securities; or (d) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or
12
<PAGE>
disposition by the Company of all or substantially all of the Company's assets.
(ii) In the event that a Change in Control shall occur, then, from and
after the time of such event, neither the provisions of this paragraph E nor any
of the rights of any Participant thereunder shall be modified or amended in any
way.
11. Transferability.
No Option shall be assignable or transferable except by will and/or by
the laws of descent and distribution and, during the life of any Participant,
each Option granted to him or her may be exercised only by him or her.
12. Termination of Employment.
A. In the event a Participant leaves the employ of the Company and the
Subsidiaries or ceases to serve as a consultant to the Company and/or as a
Non-Employee Director of the Company, whether voluntarily or otherwise but other
than by reason of his or her retirement, permanent disability or death, each
Option theretofore granted to him or her which shall not have theretofore
expired or otherwise been cancelled shall, to the extent exercisable on the date
of such termination of employment or service and not theretofore exercised,
terminate upon the earlier to occur of the expiration of three months after the
date of such Participant's termination of employment or service and the date of
termination specified in such Option.
13
<PAGE>
Notwithstanding the foregoing, if a Participant's employment by the Company and
the Subsidiaries or service as a consultant and/or as a Non-Employee Director of
the Company is terminated for "cause", each Option theretofore granted to him or
her which shall not have theretofore expired or otherwise been cancelled shall,
to the extent not theretofore exercised, terminate forthwith. For purposes of
the foregoing, the term "cause" shall mean: (i) the commission by a Participant
of any act or omission that would constitute a crime under federal, state or
equivalent foreign law, (ii) the commission by a Participant of any act of moral
turpitude, (iii) fraud, dishonesty or other acts or omissions that result in a
breach of any fiduciary or other material duty to the Company and/or the
Subsidiaries or (iv) continued alcohol or other substance abuse that renders a
Participant incapable of performing his or her material duties to the
satisfaction of the Company and/or the Subsidiaries.
B. In the event a Participant leaves the employ of the Company and the
Subsidiaries or ceases to serve as a consultant to the Company and/or as a
Non-Employee Director of the Company by reason of his or her retirement (other
than by reason of his or her death) on or after his or her 65th birthday, each
Option theretofore granted to him or her which shall not have theretofore
expired or otherwise been cancelled shall, to the extent exercisable on the date
of such retirement and not theretofore exercised, terminate upon the earlier to
occur of the
14
<PAGE>
expiration of two years after the date of such retirement and the date of
termination specified in such Option.
C. In the event a Participant's employment with the Company and the
Subsidiaries or service as a consultant and/or as a Non-Employee Director of
the Company terminates by reason of his or her permanent disability, each Option
theretofore granted to him or her which shall not have theretofore expired or
otherwise been cancelled shall, to the extent exercisable on the date of such
termination of employment or service and not theretofore exercised, terminate
upon the earlier to occur of one year after the date of such termination of
employment or service and the date of termination specified in such option.
D. In the event a Participant's employment with the Company and the
Subsidiaries or service as a consultant and/or as a Non-Employee Director of
the Company terminates by reason of his or her death, each Option theretofore
granted to him or her which shall not have theretofore expired or otherwise been
cancelled shall, to the extent exercisable on the date of his or her death and
not theretofore exercised, terminate upon the earlier to occur of the expiration
of one year after the date of the qualification of a representative of his or
her estate and the date of termination specified in such Option.
13. Adjustment of Number of Shares.
A. In the event that a dividend shall be declared upon the Common
Stock payable in shares of the Common Stock, the number of
15
<PAGE>
shares of the Common Stock then subject to any Option and the number of shares
of the Common Stock reserved for issuance in accordance with the provisions of
the Plan but not yet covered by an Option and the number of shares set forth in
Sections 6B and 9B shall be adjusted by adding to each share the number of
shares which would be distributable thereon if such shares had been outstanding
on the date fixed for determining the stockholders entitled to receive such
stock dividend. In the event that the outstanding shares of the Common Stock
shall be changed into or exchanged for a different number or kind of shares of
stock or other securities of the Company or of another corporation, whether
through reorganization, recapitalization, stock split-up, combination of shares,
sale of assets, merger or consolidation in which the Company is the surviving
corporation, then, there shall be substituted for each share of the Common Stock
then subject to any Option and for each share of the Common Stock reserved for
issuance in accordance with the provisions of the Plan but not yet covered by an
Option and for each share of the Common Stock referred to in Sections 6B and 9B,
the number and kind of shares of stock or other securities into which each
outstanding share of the Common Stock shall be so changed or for which each such
share shall be exchanged.
B. In the event that there shall be any change, other than as specified
in Section 13, in the number or kind of outstanding shares of the Common Stock,
or of any stock or other securities into which the Common Stock shall have been
changed, or for which
16
<PAGE>
it shall have been exchanged, then, if the Committee shall, in its sole
discretion, determine that such change equitably requires an adjustment in the
number or kind of shares then subject to any Option and the number or kind of
shares reserved for issuance in accordance with the provisions of the Plan but
not yet covered by an Option and the number or kind of shares referred to in
Sections 6B and 9B, such adjustment shall be made by the Committee and shall be
effective and binding for all purposes of the Plan and of each stock option
agreement or certificate entered into in accordance with the provisions of the
Plan.
C. In the case of any substitution or adjustment in accordance with the
provisions of this Section 13, the option price in each stock option agreement
or certificate for each share covered thereby prior to such substitution or
adjustment shall be the option price for all shares of stock or other securities
which shall have been substituted for such share or to which such share shall
have been adjusted in accordance with the provisions of this Section 13.
D. No adjustment or substitution provided for in this Section 13 shall
require the Company to sell a fractional share under any stock option agreement
or certificate. Any fractional share resulting from an adjustment or
substitution provided for in this Section 13 shall be rounded up to the nearest
whole share.
17
<PAGE>
E. In the event of the dissolution or liquidation of the Company, or
a merger, reorganization or consolidation in which the Company is not the
surviving corporation, then, except as otherwise provided in the second sentence
of Section 13A, each Option, to the extent not theretofore exercised, shall
terminate forthwith.
14. Purchase for Investment, Withholding and Waivers.
A. Unless the shares to be issued upon the exercise of an Option by a
Participant shall be registered prior to the issuance thereof under the
Securities Act of 1933, as amended, such Participant will, as a condition of the
Company's obligation to issue such shares, be required to give a representation
in writing that he or she is acquiring such shares for his or her own account as
an investment and not with a view to, or for sale in connection with, the
distribution of any thereof.
B. In the event of the death of a Participant, a condition of
exercising any Option shall be the delivery to the Company of such tax waivers
and other documents as the Committee shall determine.
C. In the case of each non-qualified stock option, a condition of
exercising the same shall be the entry by the person exercising the same into
such arrangements with the Company with respect to withholding as the Committee
may determine.
18
<PAGE>
15. No Stockholder Status.
Neither any Participant nor his or her legal representatives, legatees
or distributees shall be or be deemed to be the holder of any share of the
Common Stock covered by an Option unless and until a certificate for such share
has been issued. Upon payment of the purchase price thereof, a share issued upon
exercise of an Option shall be fully paid and non-assessable.
16. No Restrictions on Corporate Acts.
Neither the existence of the Plan nor any Option shall in any way
affect the right or power of the Company or its stockholders to make or
authorize any or all adjustments, recapitalizations, reorganizations or other
changes in the Company's capital structure or its business, or any merger or
consolidation of the Company, or any issue of bonds, debentures, preferred or
prior preference stock ahead of or affecting the Common Stock or the rights
thereof, or dissolution or liquidation of the Company, or any sale or transfer
of all or any part of its assets or business, or any other corporate act or
proceeding whether of a similar character or otherwise.
17. Options Granted in Connection With Acquisitions.
In the event that the Committee determines that, in connection with the
acquisition by the Company or a Subsidiary of another corporation which will
become a Subsidiary or division of the Company or a Subsidiary (such corporation
being hereafter
19
<PAGE>
referred to as an "Acquired Subsidiary"), Options may be granted hereunder to
employees and other personnel of an Acquired Subsidiary in exchange for then
outstanding options to purchase securities of the Acquired Subsidiary. Such
Options may be granted at such option prices, may be exercisable immediately or
at any time or times either in whole or in part, and may contain such other
provisions not inconsistent with the Plan, or the requirements set forth in
Section 19 that certain amendments to the Plan be approved by the stockholders
of the Company, as the Committee, in its discretion, shall deem appropriate at
the time of the granting of such Options.
18. No Employment or Service Right.
Neither the existence of the Plan nor the grant of any Option shall
require the Company or any Subsidiary to continue any Participant in the employ
of the Company or such Subsidiary or require the Company to continue any
Participant as a director of the Company.
19. Termination and Amendment of the Plan.
The Board may at any time terminate the Plan or make such modifications
of the Plan as it shall deem advisable; provided, however, that the Board may
not without further approval of the holders of a majority of the shares of the
Common Stock present in person or by proxy at any special or annual meeting of
the stockholders, increase the number of shares as to which Options may be
granted under the Plan (as adjusted in accordance with the
20
<PAGE>
provisions of Section 13), or change the manner of determining the option
prices, or extend the period during which an Option may be granted or exercised;
provided, however, the provisions of the Plan governing the grant of
Non-Employee Director's Formula Options may not be amended except by the vote of
a majority of the members of the Board and by the vote of a majority of the
members of the Board who are employees of the Company or a Subsidiary. Except as
otherwise provided in Section 13, no termination or amendment of the Plan may,
without the consent of the Participant to whom any Option shall theretofore have
been granted, adversely affect the rights of such Participant under such Option.
20. Expiration and Termination of the Plan.
The Plan shall terminate on _________ ___, 2007 or at such earlier time
as the Board may determine. Options may be granted under the Plan at any time
and from time to time prior to its termination. Any Option outstanding under the
Plan at the time of the termination of the Plan shall remain in effect until
such Option shall have been exercised or shall have expired in accordance with
its terms.
21
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of ___________, 1997, between
HEALTHWORLD CORPORATION, a Delaware corporation with offices at 100 Avenue of
the Americas, New York, New York 10013 (the "Company"), and STEVEN GIRGENTI,
residing at 3312 Judith Drive, Bellmore, New York 11710 ("Employee").
W I T N E S S E T H:
WHEREAS, as of the Effective date (as defined in Section 1),
the Company desires to engage Employee to perform services for the Company, and
any present or future parent, subsidiary or affiliate of the Company, and their
successors and assigns (the "Companies"), and Employee desires to perform such
services, on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the representations,
warranties and mutual covenants set forth herein, the parties agree as follows:
1. Term.
The Company agrees to employ Employee, and Employee agrees to
serve, on the terms and conditions of this Agreement for a period commencing on
the effective date (the "Effective Date") of the Parent's Registration Statement
on Form S-1 (Registration No. 333-34751), filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, and ending on December
31, 2000 (the "Termination Date"), or such shorter period as may be provided for
herein; provided, however, that the term of this Agreement shall be extended
(subject to earlier termination as provided herein) for successive one year
periods unless at least 90 days prior to the end of the then current term
hereof, the Company or Employee has notified the other party in writing that
Employee's employment hereunder shall terminate at the end of the then current
term. The period during which Employee is employed hereunder is hereinafter
referred to as the "Employment Period." As used herein, the term "Employment
Year" shall mean a one-year period of Employee's employment hereunder commencing
on each January 1 during the Employment Period, provided that the first
Employment Year shall be the period commencing on January 1, 1998 and ending on
December 31, 1998.
<PAGE>
2. Duties and Services.
During the Employment Period, Employee shall be employed as
the Chairman of the Board and Chief Executive Officer of the Company, and shall
perform the duties incident to that position. In the performance of his duties,
Employee shall be subject to the direction of the Board of Directors of the
Company. In addition, during the Employment Period, Employee shall be elected to
and shall serve, if so elected, as a member of the Board of Directors of the
Company and may be elected to and shall serve, if so elected, as a member of the
Board of Directors of any of the other Companies as may from time to time be
prescribed by the Board of Directors of the Company. Employee agrees to his
employment as described in this Section 2. Employee agrees to devote all of his
time and efforts to the performance of his duties under this Agreement. Employee
shall be available to travel as the needs of the business require.
3. Compensation.
(a) As full compensation for his full-time services hereunder,
the Company shall pay Employee, during the Employment Period, a base salary at
the annual rate of $360,000 (prorated for periods that are less than one year)
payable at such intervals as salaries are paid by the Company to other
executives of the Company. Employee's base salary shall be subject to increase
at the sole discretion of the Board of Directors of the Company.
(b) During the Employment Period, Employee shall receive an
annual incentive bonus (the "Annual Incentive Bonus") for each Employment Year,
payable not later than 110 days after the end of the applicable Employment Year,
in an amount to be determined as follows:
(i) if EBIT (as defined below) for the fiscal year
corresponding to the applicable Employment Year does not
exceed the Base EBIT (as defined below), Employee shall not be
entitled to an Annual Incentive Bonus with respect to such
Employment Year;
(ii) if EBIT for the fiscal year corresponding to the
applicable Employment Year exceeds the Base EBIT by an amount
equal to or less than 10%, Employee shall receive an Annual
Incentive Bonus with respect to such Employment Year in an
amount equal to 12.5% of Employee's annual base salary for
such Employment Year, subject to reduction pursuant to Section
3(c) below;
(iii) if EBIT for the fiscal year corresponding to
the applicable Employment Year exceeds the Base EBIT by an
amount in excess of 10% but less than or equal to 15%,
Employee shall receive an Annual Incentive
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<PAGE>
Bonus with respect to such Employment Year in an amount equal
to 18.5% of Employee's annual base salary for such Employment
Year, subject to reduction pursuant to Section 3(c) below;
(iv) if EBIT for the fiscal year corresponding to the
applicable Employment Year exceeds the Base EBIT by an amount
in excess of 15% but less than or equal to 20%, Employee shall
receive an Annual Incentive Bonus with respect to such
Employment Year in an amount equal to 26% of Employee's annual
base salary for such Employment Year, subject to reduction
pursuant to Section 3(c) below; and
(v) if EBIT for the fiscal year corresponding to the
applicable Employment Year exceeds the Base EBIT by an amount
in excess of 20%, Employee shall receive an Annual Incentive
Bonus with respect to such Employment Year in an amount equal
to 35% of Employee's annual base salary for such Employment
Year, subject to reduction pursuant to Section 3(c) below.
(c) The amount of the Annual Incentive Bonus which Employee
may be entitled to receive for each Employment Year as calculated above shall be
subject to the following reductions:
(i) if Revenues (as defined below) for the fiscal
year corresponding to the applicable Employment Year do not
exceed the Base Revenues (as defined below), Employee shall
only be entitled to an Annual Incentive Bonus with respect to
such Employment Year in an amount equal to 25% of the amount
calculated in Section 3(b) above;
(ii) if Revenues for the fiscal year corresponding to
the applicable Employment Year exceed the Base Revenues by an
amount equal to or less than 7.5%, Employee shall receive an
Annual Incentive Bonus with respect to such Employment Year in
an amount equal to 40% of the amount calculated in Section
3(b) above;
(iii) if Revenues for the fiscal year corresponding
to the applicable Employment Year exceed the Base Revenues by
an amount in excess of 7.5% but less than or equal to 12.5%,
Employee shall receive an Annual Incentive Bonus with respect
to such Employment Year in an amount equal to 60% of the
amount calculated in Section 3(b) above;
(iv) if Revenues for the fiscal year corresponding to
the applicable Employment Year exceed the Base Revenues by an
amount in excess of 12.5% but less than or equal to 18.5%,
Employee shall receive an Annual Incentive Bonus with respect
to such Employment Year in an amount equal to 80% of the
amount calculated in Section 3(b) above; and
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<PAGE>
(v) if Revenues for the fiscal year corresponding to
the applicable Employment Year exceed the Base Revenues by an
amount in excess of 18.5%, Employee shall receive an Annual
Incentive Bonus in an amount equal to the amount calculated in
Section 3(b) above.
The Company shall deliver to Employee a calculation of the
Annual Incentive Bonus together with its payment thereof.
(d) As used herein, the term "EBIT" shall mean the earnings
from operations of the Company and its subsidiaries on a consolidated basis
before interest, taxes and extraordinary items, determined in accordance with
generally accepted accounting principles ("GAAP"). As used herein, the term
"Revenues" shall mean the revenues of the Company and its subsidiaries on a
consolidated basis, determined in accordance with GAAP.
(e) As used herein, the term "Base EBIT" shall mean (i) with
respect to calculating the Annual Incentive Bonus for the first Employment Year,
EBIT for the fiscal year ending December 31, 1997, and (ii) the "Base EBIT" used
to calculate the Annual Incentive Bonus for each successive Employment Year
shall be determined by increasing the Base EBIT used for calculating the Annual
Incentive Bonus for the prior Employment Year by 10%, compounded annually. As
used herein, the term "Base Revenues", shall mean (x) with respect to
calculating the Annual Incentive Bonus for the first Employment Year, the
Revenues for the fiscal year ending December 31, 1997, and (y) the "Base
Revenues" used to calculate the Annual Incentive Bonus for each successive
Employment Year shall be determined by increasing the Base Revenues used for
calculating the Annual Incentive Bonus for the prior Employment Year by 10%,
compounded annually.
(f) In addition, Employee may be entitled to receive an
additional annual bonus at the sole discretion of the Board of Directors of the
Company.
(g) All compensation hereunder (whether in the form of base
salary or incentive compensation) shall be subject to payroll deductions as may
be necessary or customary in respect of salaried personnel of the Company.
4. Benefits.
(a) During the Employment Period, Employee may participate, to
the extent eligible, in each insurance (including, without limitation, any life,
travel and accident and medical and other health insurance), pension, disability
and other employee benefit plans maintained by the Company for its senior
management or employees generally in accordance with the terms thereof.
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<PAGE>
(b) Employee shall be entitled to such number of sick days
every year during the Employment Period as are generally provided from time to
time by the Company to its senior management. Any unused sick days at the end of
the calendar year shall not accrue or cumulate from year to year.
(c) During the Employment Period, Employee shall be entitled
to reimbursement for all lease payments, gasoline, maintenance and other costs
and expenses for his automobile in the aggregate amount not to exceed $10,000
per year, upon submission and approval of written statements and bills in
accordance with the then regular procedures of the Company.
(d) During the Employment Period, Employee shall be entitled
to reimbursement for all reasonable travel, entertainment and other
out-of-pocket expenses necessarily incurred in the performance of his duties
hereunder (excluding automobile expenses as described in subsection (c) above),
upon submission and approval of written statements and bills in accordance with
the then regular procedures of the Company.
5. Vacation.
Employee shall be entitled to such number of weeks of paid
vacation every year during the Employment Period as are generally provided from
time to time by the Company to its senior management. The time during which
vacation will be taken shall be coordinated with other senior management of the
Company. Any unused vacation time at the end of a calendar year shall not accrue
or cumulate from year to year and Employee shall not be entitled to compensation
for unused vacation time.
6. Representations, Warranties
and Covenants of Employee.
Employee represents and warrants to the Company that (a)
Employee is under no contractual or other restriction or obligation which is
inconsistent with the execution of this Agreement, the performance of his duties
hereunder, or the other rights of the Company hereunder and (b) Employee is
under no physical or mental disability that would hinder his performance of
duties under this Agreement.
7. Non-Competition.
(a) In view of the unique and valuable services it is expected
Employee will render to the Company, and in consideration of the compensation to
be received hereunder, Employee agrees (i) that he will not, during the period
he is employed by the Company under this Agreement or otherwise, Participate In
(as defined below) any other
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<PAGE>
business or organization, whether or not such business or organization now is or
shall then be competing with or of a nature similar to the business or
profession of the Company or any of the Companies, and (ii) for a period of two
years after he ceases to be employed by the Company under this Agreement as a
result of Employee's voluntary action or pursuant to Section 11(a) hereof, he
will not compete with or be engaged in the same business as or Participate In
any other business or organization which during such two year period competes
with or is engaged in the same business as the Company or any of the Companies
with respect to any product or service sold or proposed to be sold or activity
engaged in or proposed to be engaged in up to the time of such cessation within
a 100-mile radius of the location of the Company's or any of the Companies'
principal offices on the date on which Employee ceases to be employed by the
Company under this Agreement, except that in each case the provisions of this
Section 7 will not be deemed breached merely because Employee owns not more than
1% of the outstanding common stock of a corporation, if, at the time of its
acquisition by Employee, such stock is listed on a national securities exchange,
is reported on Nasdaq, or is regularly traded in the over-the-counter market by
a member of a national securities exchange.
As used in this Agreement, the term "Participate In" shall
mean: "directly or indirectly, for his own benefit or for, with, or through any
other person, firm, or corporation, own, manage, operate, control, loan money
to, or participate in the ownership, management, operation, or control of, or be
connected as a director, officer, employee, partner, consultant, agent,
independent contractor, or otherwise with, or acquiesce in the use of his name
in."
(b) Employee will not directly or indirectly reveal the name
of, solicit or interfere with, or endeavor to entice away from the Company or
any of the Companies any of its respective employees. Employee will not directly
or indirectly employ any person who is an employee of the Company or any of the
Companies for a period of two years after the Employee leaves the employ of the
Company.
(c) Since a breach of the provisions of this Section 7 could
not adequately be compensated by money damages, the Company shall be entitled,
in addition to any other right and remedy available to it, to an injunction
restraining such breach or a threatened breach, and in either case no bond or
other security shall be required in connection therewith, and Employee hereby
consents to the issuance of such injunction. Employee agrees that the provisions
of this Section 7 are necessary and reasonable to protect the Company or any of
the Companies in the conduct of its respective business. If any restriction
contained in this Section 7 shall be deemed to be invalid, illegal, or
unenforceable by reason of the extent, duration, or geographical scope thereof,
or otherwise, then the court making such determination shall have the right to
reduce such extent, duration, geographical scope, or other provisions hereof,
and in its reduced form such restriction shall then be enforceable in the manner
contemplated hereby.
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<PAGE>
8. Copyrights, Patents, Etc.
Any interest in patents, patent applications, inventions,
technological innovations, copyrights, copyrightable works, developments,
discoveries, designs, and processes ("Such Inventions") which Employee now or
hereafter during the period he is employed by the Company under this Agreement
or otherwise and for one year thereafter may own, conceive of, or develop and
either relating to the fields in which the Company or any of the Companies may
then be engaged or contemplates being engaged or conceived of or developed
utilizing the time, material, facilities, or information of the Company or any
of the Companies, shall belong to the Company or any of the Companies, as the
case may be. As soon as Employee owns, conceives of, or develops any Such
Invention, he agrees immediately to communicate such fact in writing to the
Company, and without further compensation, but at the Company's expense (except
as noted in clause (a) of this Section 8), forthwith upon request of the
Company, Employee shall execute all such assignments and other documents
(including applications for patents, copyrights, trademarks, and assignments
thereof) and take all such other action as the Company may reasonably request in
order (a) to vest in the Company all Employee's right, title, and interest in
and to Such Inventions, free and clear of liens, mortgages, security interests,
pledges, charges, and encumbrances ("Liens") (Employee to take such action, at
his expense as is necessary to remove all such Liens) and (b), if patentable or
copyrightable, to obtain patents or copyrights (including extensions and
renewals) therefor in any and all countries in such name as the Company shall
determine.
9. Confidential Information.
All confidential information which Employee may now possess,
may obtain during or after the Employment Period, or may create prior to the end
of the period he is employed by the Company under this Agreement or otherwise
relating to the business of the Company or any of the Companies shall not be
published, disclosed, or made accessible by him to any other person, firm, or
corporation either during or after the termination of his employment or used by
him except during the Employment Period in the business and for the benefit of
the Company and the Companies, in each case without prior written permission of
the Company. Employee shall return all tangible evidence of such confidential
information to the Company prior to or at the termination of his employment.
10. Life Insurance.
If requested by the Company, Employee shall submit to such
physical examinations and otherwise take such actions and execute and deliver
such documents as may be reasonably necessary to enable the Company, at its
expense and for its own benefit, to obtain life insurance on the life of
Employee.
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<PAGE>
11. Termination.
Notwithstanding anything herein contained, if, prior to the
end of the Employment Period:
(a) either (i) Employee shall be physically or mentally
incapacitated or disabled (as determined by an independent physician selected by
the Board of Directors of the Company) or otherwise unable fully to discharge
his duties hereunder for a period of 13 consecutive weeks or an aggregate of 13
weeks in any six-month period, (ii) Employee shall be convicted by, or shall
have entered a plea of guilty or nolo contendere in, a court of competent and
final jurisdiction for any crime involving moral turpitude, fraud, embezzlement,
misappropriation, or any other felony or crime punishable by imprisonment, (iii)
Employee shall commit any act of fraud, embezzlement or other act of
misappropriation, (iv) Employee shall fail or refuse to perform his duties as
required hereunder or shall refuse to follow direct instructions from the Board
of Directors of the Company or shall materially violate his duty of loyalty to
the Company, or any of the other Companies or otherwise shall breach any term of
this Agreement and fail to correct such breach within 20 days after commission
thereof, then, in each such case, the Company shall have the right to give
notice of termination of Employee's services hereunder as of a date (not earlier
than ten days from such notice) to be specified in such notice, and this
Agreement shall terminate on the date so specified; or
(b) Employee shall die, then this Agreement shall terminate
on the date of Employee's death.
(c) Upon termination of this Agreement pursuant to subsection
(a)(i) or (b) of this Section 11, neither party shall have any further
obligations hereunder except that (i) Employee (or his estate in the event of
his death) shall be entitled to receive his salary which shall not have
previously been paid to the date of termination, any bonus (including, without
limitation, the Annual Incentive Bonus) for the Employment Year prior to the
Employment Year in which Employee is terminated to the extent accrued but not
yet paid, and any bonus (including, without limitation, the Annual Incentive
Bonus) for the Employment Year in which Employee is terminated pro-rata to the
date of termination, and (ii) for obligations or covenants contained herein that
extend beyond the term of this Agreement.
(d) Upon termination of this Agreement as a result of
Employee's voluntary action or pursuant to subsections (a)(ii), (a)(iii) or
(a)(iv) of this Section 11, neither party shall have any further obligations
hereunder except (i) Employee shall be entitled to receive his salary which
shall not have previously been paid to the date of termination, and any bonus
(including, without limitation, the Annual Incentive Bonus) for the Employment
Year prior to the Employment Year in which Employee is terminated to the extent
accrued but not yet paid, and (ii) for obligations or covenants contained herein
that extend beyond the term of this Agreement.
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<PAGE>
(e) In the event Employee's employment is terminated during
the term of this Agreement other than by Employee's voluntary action or pursuant
to subsection (a) or (b) of this Section 11, Employee shall be entitled to
receive (i) an amount equal to twice his current annual base salary, less any
compensation received or receivable by Employee as a result of any other
employment obtained by Employee during such period, which amounts shall be
payable in accordance with the Company's normal payroll practices then in
effect, (ii) any bonus (including, without limitation, the Annual Incentive
Bonus) for the Employment Year prior to the Employment Year in which Employee is
terminated, to the extent accrued but not yet paid, and any bonus (including,
without limitation, the Annual Incentive Bonus) for the Employment Year in which
Employee is terminated pro rata to the date of termination; (iii) any benefits
then vested under any benefit plans and otherwise payable in accordance with the
provisions of the applicable benefit plan and applicable laws, (iv) continued
coverage (net of any Employee contributions) to the extent any such coverage was
provided immediately prior to the termination of Employee for medical, health,
hospital and disability insurance from the date of termination through the later
of (A) the balance of the scheduled term of the Agreement or (B) eighteen
months, under the benefit plans maintained by the Company for its senior
management or employees generally in accordance with the terms thereof or, if
the Company is unable to provide such coverage under its benefits plans as they
may from time to time be in effect, the Company will provide or pay (without
gross-up for taxes), at the Company's sole discretion, for coverage (net of any
Employee contributions) having substantially the same aggregate value as the
coverage provided under such plans, and (v) continued coverage (net of any
Employee contributions) from the date of termination through the balance of the
scheduled term of this Agreement under any life insurance policies maintained
for Employee immediately prior to the termination of Employee (other than any
policy under which the Company is the beneficiary) or, if the Company is unable
to provide such coverage, the Company will pay (net of any Employee
contributions) to Employee (without gross-up for taxes) an amount sufficient for
Employee to purchase such life insurance policy and pay the premiums thereon
through the balance of the scheduled term of this Agreement. Employee shall
promptly notify the Company in writing of any other employment obtained or
undertaken by Employee, and the salary, compensation or other amounts received
or to be received by Employee therefrom. In the event Employee's employment is
terminated during the term of this Agreement other than by Employee's voluntary
action or pursuant to subsection (a) or (b) of this Section 11, this subsection
(e) of this Section 11 will apply in place of any Company severance policies
that might otherwise be applicable, and the Company will have no obligation to
make any payments to Employee except those expressly set forth in this
subsection (e) of this Section 11.
12. Survival.
The covenants, agreements, representations, and warranties
contained in or made pursuant to this Agreement shall survive Employee's
termination of employment.
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<PAGE>
13. Modification.
This Agreement sets forth the entire understanding of the
parties with respect to the subject matter hereof, supersedes all existing
agreements between them concerning such subject matter, and may be modified only
by a written instrument duly executed by each party.
14. Notices.
Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be mailed by certified mail,
return receipt requested, or delivered against receipt to the party to whom it
is to be given at the address of such party set forth in the preamble to this
Agreement (or to such other address as the party shall have furnished in writing
in accordance with the provisions of this Section 14). Notice to the estate of
Employee shall be sufficient if addressed to Employee as provided in this
Section 14. Any notice or other communication given by certified mail (or such
comparable method) shall be deemed given at the time of certification thereof
(or comparable act), except for a notice changing a party's address which shall
be deemed given at the time of receipt thereof.
15. Waiver.
Any waiver by either party of a breach of any provision of
this Agreement shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of this
Agreement. The failure of a party to insist upon strict adherence to any term of
this Agreement on one or more occasions shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement. Any waiver must be in writing.
16. Binding Effect.
Employee's rights and obligations under this Agreement shall
not be transferable by assignment or otherwise, such rights shall not be subject
to commutation, encumbrance, or the claims of Employee's creditors, and any
attempt to do any of the foregoing shall be void. The provisions of this
Agreement shall be binding upon and inure to the benefit of Employee and his
heirs and personal representatives, and shall be binding upon and inure to the
benefit of the Company and its successors and assigns.
17. No Third Party Beneficiaries.
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<PAGE>
This Agreement does not create, and shall not be construed as
creating, any rights enforceable by any person not a party to this Agreement
(except as provided in Section 16).
18. Headings.
The headings in this Agreement are solely for the convenience
of reference and shall be given no effect in the construction or interpretation
of this Agreement.
19. Counterparts; Governing Law.
This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without giving
0effect to conflict of laws.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date first above written.
HEALTHWORLD CORPORATION
By:____________________________________
Name:
Title:
_______________________________________
Steven Girgenti
-11-
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of ___________, 1997, between
HEALTHWORLD CORPORATION, a Delaware corporation with offices at 100 Avenue of
the Americas, New York, New York 10013 (the "Company"), and WILLIAM LESLIE
MILTON, residing at LadsLove Dean Lane, Cookham Dean, Berkshire SL6 9BG, England
("Employee").
W I T N E S S E T H:
WHEREAS, as of the Effective Date (as defined in Section 1),
Milton Marketing Group Limited, an England corporation ("Milton Marketing") will
be a wholly owned subsidiary of the Company; and
WHEREAS, as of the Effective Date, the Company desires to
engage Employee to perform services for the Company, and any present or future
parent, subsidiary or affiliate of the Company and their successors and assigns
(the "Companies"), and Employee desires to perform such services, on the terms
and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the representations,
warranties and mutual covenants set forth herein, the parties agree as follows:
1. Term.
The Company agrees to employ Employee, and Employee agrees to
serve, on the terms and conditions of this Agreement for a period commencing on
the effective date (the "Effective Date") of the Parent's Registration Statement
on Form S-1 (Registration No. 333-34751), filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, and ending on December
31, 2000 (the "Termination Date"), or such shorter period as may be provided for
herein; provided, however, that the term of this Agreement shall be extended
(subject to earlier termination as provided herein) for successive one year
periods unless at least 90 days prior to the end of the then current term
hereof, the Company or Employee has notified the other party in writing that
Employee's employment hereunder shall terminate at the end of the then current
term. The period during which Employee is employed hereunder is hereinafter
referred to as the "Employment Period." As used herein, the term "Employment
Year" shall mean a one-year period of Employee's employment hereunder commencing
on each January 1 during the Employment Period, provided that
<PAGE>
the first Employment Year shall be the period commencing on January 1, 1998 and
ending on December 31, 1998.
2. Duties and Services.
During the Employment Period, Employee shall be employed as
the Vice Chairman of the Board and President of the Company, and shall perform
the duties incident to that position which shall include responsibility for
Milton Marketing and any present or future subsidiary thereof and any businesses
located in or operating in the United Kingdom or Europe which may be acquired
after the Effective Date by the Company or any of the Companies. In the
performance of his duties, Employee shall be subject to the direction of the
Chairman of the Board and Chief Executive Officer of the Company and the Board
of Directors of the Company. In addition, during the Employment Period, Employee
shall be elected to and shall serve, if so elected, as a member of the Board of
Directors of the Company and may be elected to and shall serve, if so elected,
as a member of the Board of Directors of any of the other Companies as may from
time to time be prescribed by the Chairman of the Board and Chief Executive
Officer of the Company or the Board of Directors of the Company. Employee agrees
to his employment as described in this Section 2. Employee agrees to devote all
of his time and efforts to the performance of his duties under this Agreement.
Employee shall be available to travel as the needs of the business require.
3. Compensation.
(a) As full compensation for his full-time services hereunder,
the Company shall pay Employee, during the Employment Period, a base salary at
the annual rate of U.S. $325,000 (prorated for periods that are less than one
year) payable at such intervals as salaries are paid by the Company to other
executives of the Company. Employee's base salary shall be subject to increase
at the sole discretion of the Board of Directors of the Company.
(b) During the Employment Period, Employee shall receive an
annual incentive bonus (the "Annual Incentive Bonus") for each Employment Year,
payable not later than 110 days after the end of the applicable Employment Year,
in an amount to be determined as follows:
(i) if EBIT (as defined below) for the fiscal year
corresponding to the applicable Employment Year does not
exceed the Base EBIT (as defined below), Employee shall not be
entitled to an Annual Incentive Bonus with respect to such
Employment Year;
(ii) if EBIT for the fiscal year corresponding to
the applicable Employment Year exceeds the Base EBIT by an
amount equal to or less
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than 10%, Employee shall receive an Annual Incentive Bonus
with respect to such Employment Year in an amount equal to
12.5% of Employee's annual base salary for such Employment
Year, subject to reduction pursuant to Section 3(c) below;
(iii) if EBIT for the fiscal year corresponding to
the applicable Employment Year exceeds the Base EBIT by an
amount in excess of 10% but less than or equal to 15%,
Employee shall receive an Annual Incentive Bonus with respect
to such Employment Year in an amount equal to 18.5% of
Employee's annual base salary for such Employment Year,
subject to reduction pursuant to Section 3(c) below;
(iv) if EBIT for the fiscal year corresponding to the
applicable Employment Year exceeds the Base EBIT by an amount
in excess of 15% but less than or equal to 20%, Employee shall
receive an Annual Incentive Bonus with respect to such
Employment Year in an amount equal to 26% of Employee's annual
base salary for such Employment Year, subject to reduction
pursuant to Section 3(c) below; and
(v) if EBIT for the fiscal year corresponding to the
applicable Employment Year exceeds the Base EBIT by an amount
in excess of 20%, Employee shall receive an Annual Incentive
Bonus with respect to such Employment Year in an amount equal
to 35% of Employee's annual base salary for such Employment
Year, subject to reduction pursuant to Section 3(c) below.
(c) The amount of the Annual Incentive Bonus which Employee
may be entitled to receive for each Employment Year as calculated above shall be
subject to the following reductions:
(i) if Revenues (as defined below) for the fiscal
year corresponding to the applicable Employment Year do not
exceed the Base Revenues (as defined below), Employee shall
only be entitled to an Annual Incentive Bonus with respect to
such Employment Year in an amount equal to 25% of the amount
calculated in Section 3(b) above;
(ii) if Revenues for the fiscal year corresponding to
the applicable Employment Year exceed the Base Revenues by an
amount equal to or less than 7.5%, Employee shall receive an
Annual Incentive Bonus with respect to such Employment Year in
an amount equal to 40% of the amount calculated in Section
3(b) above;
(iii) if Revenues for the fiscal year corresponding
to the applicable Employment Year exceed the Base Revenues by
an amount in excess of 7.5% but less than or equal to 12.5%,
Employee shall receive an Annual
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Incentive Bonus with respect to such Employment Year in an
amount equal to 60% of the amount calculated in Section 3(b)
above;
(iv) if Revenues for the fiscal year corresponding to
the applicable Employment Year exceed the Base Revenues by an
amount in excess of 12.5% but less than or equal to 18.5%,
Employee shall receive an Annual Incentive Bonus with respect
to such Employment Year in an amount equal to 80% of the
amount calculated in Section 3(b) above; and
(v) if Revenues for the fiscal year corresponding to
the applicable Employment Year exceed the Base Revenues by an
amount in excess of 18.5%, Employee shall receive an Annual
Incentive Bonus in an amount equal to the amount calculated in
Section 3(b) above.
The Company shall deliver to Employee a calculation of the
Annual Incentive Bonus together with its payment thereof.
(d) As used herein, the term "EBIT" shall mean the earnings
from operations of the Company and its subsidiaries on a consolidated basis
before interest, taxes and extraordinary items, determined in accordance with
generally accepted accounting principles ("GAAP"). As used herein, the term
"Revenues" shall mean the revenues of the Company and its subsidiaries on a
consolidated basis, determined in accordance with GAAP.
(e) As used herein, the term "Base EBIT" shall mean (i) with
respect to calculating the Annual Incentive Bonus for the first Employment Year,
EBIT for the fiscal year ending December 31, 1997, and (ii) the "Base EBIT" used
to calculate the Annual Incentive Bonus for each successive Employment Year
shall be determined by increasing the Base EBIT used for calculating the Annual
Incentive Bonus for the prior Employment Year by 10%, compounded annually. As
used herein, the term "Base Revenues", shall mean (x) with respect to
calculating the Annual Incentive Bonus for the first Employment Year, the
Revenues for the fiscal year ending December 31, 1997, and (y) the "Base
Revenues" used to calculate the Annual Incentive Bonus for each successive
Employment Year shall be determined by increasing the Base Revenues used for
calculating the Annual Incentive Bonus for the prior Employment Year by 10%,
compounded annually.
(f) In addition, Employee may be entitled to receive an
additional annual bonus at the sole discretion of the Board of Directors of the
Company.
(g) All compensation hereunder (whether in the form of base
salary or incentive compensation) shall be subject to payroll deductions as may
be necessary or customary in respect of salaried personnel of the Company.
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4. Benefits.
(a) During the Employment Period, Employee may participate, to
the extent eligible, in each insurance (including, without limitation, any life,
travel and accident and medical and other health insurance), pension, disability
and other employee benefit plans maintained by the Company for its senior
management or employees generally in accordance with the terms thereof.
(b) Employee shall be entitled to such number of sick days
every year during the Employment Period as are generally provided from time to
time by the Company to its senior management. Any unused sick days at the end of
the calendar year shall not accrue or cumulate from year to year.
(c) During the Employment Period, Employee shall be entitled
to reimbursement for all lease payments, gasoline, maintenance and other costs
and expenses for his automobile in the aggregate amount not to exceed U.S.
$20,000 per year, upon submission and approval of written statements and bills
in accordance with the then regular procedures of the Company.
(d) During the Employment Period, Employee shall be entitled
to reimbursement for all reasonable travel, entertainment and other
out-of-pocket expenses necessarily incurred in the performance of his duties
hereunder (excluding automobile expenses as described in subsection (c) above),
upon submission and approval of written statements and bills in accordance with
the then regular procedures of the Company.
5. Vacation.
Employee shall be entitled to such number of weeks of paid
vacation every year during the Employment Period as are generally provided from
time to time by the Company to its senior management. The time during which
vacation will be taken shall be coordinated with other senior management of the
Company. Any unused vacation time at the end of a calendar year shall not accrue
or cumulate from year to year and Employee shall not be entitled to compensation
for unused vacation time.
6. Representations, Warranties
and Covenants of Employee.
Employee represents and warrants to the Company that (a)
Employee is under no contractual or other restriction or obligation which is
inconsistent with the execution of this Agreement, the performance of his duties
hereunder, or the other rights of the Company hereunder and (b) Employee is
under no physical or mental disability that would hinder his performance of
duties under this Agreement.
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7. Non-Competition.
(a) In view of the unique and valuable services it is expected
Employee will render to the Company, and in consideration of the compensation to
be received hereunder, Employee agrees (i) that he will not, during the period
he is employed by the Company under this Agreement or otherwise, Participate In
(as defined below) any other business or organization, whether or not such
business or organization now is or shall then be competing with or of a nature
similar to the business or profession of the Company or any of the Companies,
and (ii) for a period of two years after he ceases to be employed by the Company
under this Agreement as a result of Employee's voluntary action or pursuant to
Section 11(a) hereof, he will not compete with or be engaged in the same
business as or Participate In any other business or organization which during
such two year period competes with or is engaged in the same business as the
Company or any of the Companies with respect to any product or service sold or
proposed to be sold or activity engaged in or proposed to be engaged in up to
the time of such cessation within a 100-mile radius of the location of the
Company's or any of the Companies' principal offices on the date on which
Employee ceases to be employed by the Company under this Agreement, except that
in each case the provisions of this Section 7 will not be deemed breached merely
because Employee owns not more than 1% of the outstanding common stock of a
corporation, if, at the time of its acquisition by Employee, such stock is
listed on a national securities exchange, is reported on Nasdaq, or is regularly
traded in the over-the-counter market by a member of a national securities
exchange.
As used in this Agreement, the term "Participate In" shall
mean: "directly or indirectly, for his own benefit or for, with, or through any
other person, firm, or corporation, own, manage, operate, control, loan money
to, or participate in the ownership, management, operation, or control of, or be
connected as a director, officer, employee, partner, consultant, agent,
independent contractor, or otherwise with, or acquiesce in the use of his name
in."
(b) Employee will not directly or indirectly reveal the name
of, solicit or interfere with, or endeavor to entice away from the Company or
any of the Companies or any of its respective employees. Employee will not
directly or indirectly employ any person who is an employee of the Company or
any of the Companies for a period of two years after the Employee leaves the
employ of the Company.
(c) Since a breach of the provisions of this Section 7 could
not adequately be compensated by money damages, the Company shall be entitled,
in addition to any other right and remedy available to it, to an injunction
restraining such breach or a threatened breach, and in either case no bond or
other security shall be required in connection therewith, and Employee hereby
consents to the issuance of such injunction. Employee agrees that the provisions
of this Section 7 are necessary and reasonable to protect the Company or any of
the Companies in the conduct of its respective business. If any restriction
contained in this Section 7 shall be deemed to be invalid, illegal, or
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<PAGE>
unenforceable by reason of the extent, duration, or geographical scope thereof,
or otherwise, then the court making such determination shall have the right to
reduce such extent, duration, geographical scope, or other provisions hereof,
and in its reduced form such restriction shall then be enforceable in the manner
contemplated hereby.
8. Copyrights, Patents, Etc.
Any interest in patents, patent applications, inventions,
technological innovations, copyrights, copyrightable works, developments,
discoveries, designs, and processes ("Such Inventions") which Employee now or
hereafter during the period he is employed by the Company under this Agreement
or otherwise and for one year thereafter may own, conceive of, or develop and
either relating to the fields in which the Company or any of the Companies may
then be engaged or contemplates being engaged or conceived of or developed
utilizing the time, material, facilities, or information of the Company or any
of the Companies, shall belong to the Company or any of the Companies, as the
case may be. As soon as Employee owns, conceives of, or develops any Such
Invention, he agrees immediately to communicate such fact in writing to the
Company, and without further compensation, but at the Company's expense (except
as noted in clause (a) of this Section 8), forthwith upon request of the
Company, Employee shall execute all such assignments and other documents
(including applications for patents, copyrights, trademarks, and assignments
thereof) and take all such other action as the Company may reasonably request in
order (a) to vest in the Company all Employee's right, title, and interest in
and to Such Inventions, free and clear of liens, mortgages, security interests,
pledges, charges, and encumbrances ("Liens") (Employee to take such action, at
his expense as is necessary to remove all such Liens) and (b), if patentable or
copyrightable, to obtain patents or copyrights (including extensions and
renewals) therefor in any and all countries in such name as the Company shall
determine.
9. Confidential Information.
All confidential information which Employee may now possess,
may obtain during or after the Employment Period, or may create prior to the end
of the period he is employed by the Company under this Agreement or otherwise
relating to the business of the Company or any of the Companies shall not be
published, disclosed, or made accessible by him to any other person, firm, or
corporation either during or after the termination of his employment or used by
him except during the Employment Period in the business and for the benefit of
the Company and the Companies, in each case without prior written permission of
the Company. Employee shall return all tangible evidence of such confidential
information to the Company prior to or at the termination of his employment.
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<PAGE>
10. Life Insurance.
If requested by the Company, Employee shall submit to such
physical examinations and otherwise take such actions and execute and deliver
such documents as may be reasonably necessary to enable the Company, at its
expense and for its own benefit, to obtain life insurance on the life of
Employee.
11. Termination.
Notwithstanding anything herein contained, if, prior to the
end of the Employment Period:
(a) either (i) Employee shall be physically or mentally
incapacitated or disabled (as determined by an independent physician selected by
the Board of Directors of the Company) or otherwise unable fully to discharge
his duties hereunder for a period of 13 consecutive weeks or an aggregate of 13
weeks in any six-month period, (ii) Employee shall be convicted by, or shall
have entered a plea of guilty or nolo contendere in, a court of competent and
final jurisdiction for any crime involving moral turpitude, fraud, embezzlement,
misappropriation, or any other felony or crime punishable by imprisonment, (iii)
Employee shall commit any act of fraud, embezzlement or other act of
misappropriation, (iv) Employee shall fail or refuse to perform his duties as
required hereunder or shall refuse to follow direct instructions from the
Chairman of the Board and Chief Executive Officer of the Company or the Board of
Directors of the Company or shall materially violate his duty of loyalty to the
Company or any of the other Companies or otherwise shall breach any term of this
Agreement and fail to correct such breach within 20 days after commission
thereof, then, in each such case, the Company shall have the right to give
notice of termination of Employee's services hereunder as of a date (not earlier
than ten days from such notice) to be specified in such notice, and this
Agreement shall terminate on the date so specified; or
(b) Employee shall die, then this Agreement shall
terminate on the date of Employee's death.
(c) Upon termination of this Agreement pursuant to subsection
(a)(i) or (b) of this Section 11, neither party shall have any further
obligations hereunder except that (i) Employee (or his estate in the event of
his death) shall be entitled to receive his salary which shall not have
previously been paid to the date of termination, any bonus (including, without
limitation, the Annual Incentive Bonus) for the Employment Year prior to the
Employment Year in which Employee is terminated to the extent accrued but not
yet paid, and any bonus (including, without limitation, the Annual Incentive
Bonus) for the Employment Year in which Employee is terminated pro-rata to the
date of termination, and (ii) for obligations or covenants contained herein that
extend beyond the term of this Agreement.
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<PAGE>
(d) Upon termination of this Agreement as a result of
Employee's voluntary action or pursuant to subsections (a)(ii), (a)(iii) or
(a)(iv) of this Section 11, neither party shall have any further obligations
hereunder except (i) Employee shall be entitled to receive his salary which
shall not have previously been paid to the date of termination, and any bonus
(including, without limitation, the Annual Incentive Bonus) for the Employment
Year prior to the Employment Year in which Employee is terminated to the extent
accrued but not yet paid, and (ii) for obligations or covenants contained herein
that extend beyond the term of this Agreement.
(e) In the event Employee's employment is terminated during
the term of this Agreement other than by Employee's voluntary action or pursuant
to subsection (a) or (b) of this Section 11, Employee shall be entitled to
receive (i) an amount equal to twice his current base salary, less any
compensation received or receivable by Employee as a result of any other
employment obtained by Employee during such period, which amounts shall be
payable in accordance with the Company's normal payroll practices then in
effect, (ii) any bonus (including, without limitation, the Annual Incentive
Bonus) for the Employment Year prior to the Employment Year in which Employee is
terminated, to the extent accrued but not yet paid, and any bonus (including,
without limitation, the Annual Incentive Bonus) for the Employment Year in which
Employee is terminated pro rata to the date of termination; (iii) any benefits
then vested under any benefit plans and otherwise payable in accordance with the
provisions of the applicable benefit plan and applicable laws, (iv) continued
coverage (net of any Employee contributions) to the extent any such coverage was
provided immediately prior to the termination of Employee for medical, health,
hospital and disability insurance from the date of termination through the
balance of the scheduled term of the Agreement under the benefit plans
maintained by the Company for its senior management or employees generally in
accordance with the terms thereof or, if the Company is unable to provide such
coverage under its benefits plans as they may from time to time be in effect,
the Company will provide or pay (without gross-up for taxes), at the Company's
sole discretion, for coverage (net of any Employee contributions) having
substantially the same aggregate value as the coverage provided under such
plans, and (v) continued coverage (net of any Employee contributions) from the
date of termination through the balance of the scheduled term of this Agreement
under any life insurance policies maintained for Employee immediately prior to
the termination of Employee (other than any policy under which the Company is
the beneficiary) or, if the Company is unable to provide such coverage, the
Company will pay (net of any Employee contributions) to Employee (without
gross-up for taxes) an amount sufficient for Employee to purchase such life
insurance policy and pay the premiums thereon through the balance of the
scheduled term of this Agreement. Employee shall promptly notify the Company in
writing of any other employment obtained or undertaken by Employee, and the
salary, compensation or other amounts received or to be received by Employee
therefrom. In the event Employee's employment is terminated during the term of
this Agreement other than by Employee's voluntary action or pursuant to
subsection (a) or (b) of this Section 11, this subsection (e) of this Section 11
will apply in place of any Company severance policies that might otherwise be
applicable, and the Company will have no obligation to
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make any payments to Employee except those expressly set forth in this
subsection (e) of this Section 11.
12. Survival.
The covenants, agreements, representations, and warranties
contained in or made pursuant to this Agreement shall survive Employee's
termination of employment.
13. Modification.
This Agreement sets forth the entire understanding of the
parties with respect to the subject matter hereof, supersedes all existing
agreements between them concerning such subject matter, and may be modified only
by a written instrument duly executed by each party.
14. Notices.
Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be mailed by certified mail,
return receipt requested, or delivered against receipt to the party to whom it
is to be given at the address of such party set forth in the preamble to this
Agreement (or to such other address as the party shall have furnished in writing
in accordance with the provisions of this Section 14). Notice to the estate of
Employee shall be sufficient if addressed to Employee as provided in this
Section 14. Any notice or other communication given by certified mail (or such
comparable method) shall be deemed given at the time of certification thereof
(or comparable act), except for a notice changing a party's address which shall
be deemed given at the time of receipt thereof.
15. Waiver.
Any waiver by either party of a breach of any provision of
this Agreement shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of this
Agreement. The failure of a party to insist upon strict adherence to any term of
this Agreement on one or more occasions shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement. Any waiver must be in writing.
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16. Binding Effect.
Employee's rights and obligations under this Agreement shall
not be transferable by assignment or otherwise, such rights shall not be subject
to commutation, encumbrance, or the claims of Employee's creditors, and any
attempt to do any of the foregoing shall be void. The provisions of this
Agreement shall be binding upon and inure to the benefit of Employee and his
heirs and personal representatives, and shall be binding upon and inure to the
benefit of the Company and its successors and assigns.
17. No Third Party Beneficiaries.
This Agreement does not create, and shall not be construed as
creating, any rights enforceable by any person not a party to this Agreement
(except as provided in Section 16).
18. Headings.
The headings in this Agreement are solely for the convenience
of reference and shall be given no effect in the construction or interpretation
of this Agreement.
19. Counterparts; Governing Law.
This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to conflict of laws.
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IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date first above written.
HEALTHWORLD CORPORATION
By:________________________________
Name:
Title:
_______________________________
William Leslie Milton
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EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of ___________, 1997, between GIRGENTI,
HUGHES, BUTLER & McDOWELL, INC., a New York corporation with offices at 100
Avenue of the Americas, New York, New York 10013 (the "Company"), and WILLIAM
BUTLER, residing at Post Office Box 1430, Olive Bridge, New York 12461-0430
("Employee").
W I T N E S S E T H:
WHEREAS, as of the Effective Date (as defined in Section 1), the
Company will be a wholly owned subsidiary of Healthworld Corporation, a Delaware
corporation (the "Parent"); and
WHEREAS, as of the Effective Date, the Company desires to engage
Employee to perform services for the Company, and any present or future parent,
subsidiary or affiliate of the Company, and their successors and assigns (the
"Companies"), and Employee desires to perform such services, on the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the representations, warranties and
mutual covenants set forth herein, the parties agree as follows:
1. Term.
The Company agrees to employ Employee, and Employee agrees to serve, on
the terms and conditions of this Agreement for a period commencing on the
effective date (the "Effective Date") of the Parent's Registration Statement on
Form S-1 (Registration No. 333-34751), filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, and ending on December
31, 2000 (the "Termination Date"), or such shorter period as may be provided for
herein; provided, however, that the term of this Agreement shall be extended
(subject to earlier termination as provided herein) for successive one year
periods unless at least 90 days prior to the end of the then current term
hereof, the Company or Employee has notified the other party in writing that
Employee's employment hereunder shall terminate at the end of the then current
term. The period during which Employee is employed hereunder is hereinafter
referred to as the "Employment Period." As used herein, the term "Employment
Year" shall mean a one-year period of Employee's employment hereunder commencing
on each January 1 during the Employment Period, provided that the first
Employment Year shall be the period commencing on January 1, 1998 and ending on
December 31, 1998.
<PAGE>
2. Duties and Services.
During the Employment Period, Employee shall be employed as the
Executive Vice President - Global Communications Services of the Company, and
shall perform the duties incident to that position which shall include
responsibility for the Company's U.S. Medical Division. In the performance of
his duties, Employee shall be subject to the direction of the President and
Chief Executive Officer of the Company and the Board of Directors of the
Company. In addition, during the Employment Period, Employee may be elected to
and shall serve, if so elected, as a member of the Board of Directors of the
Company and any of the other Companies as may from time to time be prescribed by
the President and Chief Executive Officer of the Company or the Board of
Directors of the Company. Employee agrees to his employment as described in this
Section 2. Employee agrees to devote all of his time and efforts to the
performance of his duties under this Agreement. Employee shall be available to
travel as the needs of the business require.
3. Compensation.
(a) As full compensation for his full-time services hereunder, the
Company shall pay Employee, during the Employment Period, a base salary at the
annual rate of $300,000 (prorated for periods that are less than one year)
payable at such intervals as salaries are paid by the Company to other
executives of the Company. Employee's base salary shall be subject to annual
increase at the sole discretion of the Board of Directors of the Company.
(b) During the Employment Period, Employee shall receive an annual
incentive bonus (the "Annual Incentive Bonus") for each Employment Year, payable
not later than 110 days after the end of the applicable Employment Year, in an
amount to be determined as follows:
(i) if EBIT (as defined below) for the fiscal year
corresponding to the applicable Employment Year does not exceed the
Base EBIT (as defined below), Employee shall not be entitled to an
Annual Incentive Bonus with respect to such Employment Year;
(ii) if EBIT for the fiscal year corresponding to the
applicable Employment Year exceeds the Base EBIT by an amount equal to
or less than 10%, Employee shall receive an Annual Incentive Bonus with
respect to such Employment Year in an amount equal to 10% of Employee's
annual base salary for such Employment Year, subject to reduction
pursuant to Section 3(c) below;
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(iii) if EBIT for the fiscal year corresponding to the
applicable Employment Year exceeds the Base EBIT by an amount in excess
of 10% but less than or equal to 15%, Employee shall receive an Annual
Incentive Bonus with respect to such Employment Year in an amount equal
to 15% of Employee's annual base salary for such Employment Year,
subject to reduction pursuant to Section 3(c) below;
(iv) if EBIT for the fiscal year corresponding to the
applicable Employment Year exceeds the Base EBIT by an amount in excess
of 15% but less than or equal to 20%, Employee shall receive an Annual
Incentive Bonus with respect to such Employment Year in an amount equal
to 22% of Employee's annual base salary for such Employment Year,
subject to reduction pursuant to Section 3(c) below; and
(v) if EBIT for the fiscal year corresponding to the
applicable Employment Year exceeds the Base EBIT by an amount in excess
of 20%, Employee shall receive an Annual Incentive Bonus with respect
to such Employment Year in an amount equal to 30% of Employee's annual
base salary for such Employment Year, subject to reduction pursuant to
Section 3(c) below.
(c) The amount of the Annual Incentive Bonus which Employee may be
entitled to receive for each Employment Year as calculated above shall be
subject to the following reductions:
(i) if Revenues (as defined below) for the fiscal year
corresponding to the applicable Employment Year do not exceed the Base
Revenues (as defined below), Employee shall only be entitled to an
Annual Incentive Bonus with respect to such Employment Year in an
amount equal to 20% of the amount calculated in Section 3(b) above;
(ii) if Revenues for the fiscal year corresponding to the
applicable Employment Year exceed the Base Revenues by an amount equal
to or less than 10%, Employee shall receive an Annual Incentive Bonus
with respect to such Employment Year in an amount equal to 40% of the
amount calculated in Section 3(b) above;
(iii) if Revenues for the fiscal year corresponding to the
applicable Employment Year exceed the Base Revenues by an amount in
excess of 10% but less than or equal to 20%, Employee shall receive an
Annual Incentive Bonus with respect to such Employment Year in an
amount equal to 60% of the amount calculated in Section 3(b) above;
(iv) if Revenues for the fiscal year corresponding to the
applicable Employment Year exceed the Base Revenues by an amount in
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excess of 20% but less than or equal to 30%, Employee shall receive an
Annual Incentive Bonus with respect to such Employment Year in an
amount equal to 80% of the amount calculated in Section 3(b) above; and
(v) if Revenues for the fiscal year corresponding to the
applicable Employment Year exceed the Base Revenues by an amount in
excess of 30%, Employee shall receive an Annual Incentive Bonus in an
amount equal to the amount calculated in Section 3(b) above.
The Company shall deliver to Employee a calculation of the Annual
Incentive Bonus together with its payment thereof.
(d) As used herein, the term "EBIT" shall mean the earnings solely from
operations of the Company's U.S. Medical Division before interest, taxes and
extraordinary items, determined in accordance with generally accepted accounting
principles ("GAAP"). As used herein, the term "Revenues" shall mean the net
commissions and fees solely of the Company's U.S. Medical Division, determined
in accordance with GAAP.
(e) As used herein, the term "Base EBIT" shall mean (i) with respect to
calculating the Annual Incentive Bonus for the first Employment Year, EBIT for
the fiscal year ending December 31, 1997, and (ii) the "Base EBIT" used to
calculate the Annual Incentive Bonus for each successive Employment Year shall
be determined by increasing the Base EBIT used for calculating the Annual
Incentive Bonus for the prior Employment Year by 10%, compounded annually. As
used herein, the term "Base Revenues", shall mean (x) with respect to
calculating the Annual Incentive Bonus for the first Employment Year, the
Revenues for the fiscal year ending December 31, 1997, and (y) the "Base
Revenues" used to calculate the Annual Incentive Bonus for each successive
Employment Year shall be determined by increasing the Base Revenues used for
calculating the Annual Incentive Bonus for the prior Employment Year by 10%,
compounded annually.
(f) In addition, Employee may be entitled to receive an additional
annual bonus at the sole discretion of the Board of Directors of the Parent and
the Company.
(g) All compensation hereunder (whether in the form of base salary or
incentive compensation) shall be subject to payroll deductions as may be
necessary or customary in respect of salaried personnel of the Company.
4. Benefits.
(a) During the Employment Period, Employee may participate, to the
extent eligible, in each insurance (including, without limitation, any life,
travel and accident and medical and other health insurance), pension, disability
and other employee
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benefit plans maintained by the Company for its senior management or employees
generally (and, in particular, those employee benefit plans in which the
Chairman of the Board and Chief Executive Officer of the Company participates)
in accordance with the terms thereof.
(b) Employee shall be entitled to such number of sick days every year
during the Employment Period as are generally provided from time to time by the
Company to its senior management. Any unused sick days at the end of the
calendar year shall not accrue or cumulate from year to year.
(c) During the Employment Period, Employee shall be entitled to
reimbursement for all lease payments, gasoline, maintenance and other costs and
expenses for his automobile in the aggregate amount not to exceed $10,000 per
year, upon submission and approval of written statements and bills in accordance
with the then regular procedures of the Company.
(d) During the Employment Period, Employee shall be entitled to
reimbursement for all reasonable travel, entertainment and other out-of-pocket
expenses necessarily incurred in the performance of his duties hereunder
(excluding automobile expenses as described in subsection (c) above), upon
submission and approval of written statements and bills in accordance with the
then regular procedures of the Company.
5. Vacation.
Employee shall be entitled to such number of weeks of paid vacation
every year during the Employment Period as are generally provided from time to
time by the Company to its senior management. The time during which vacation
will be taken shall be coordinated with other senior management of the Company.
Any unused vacation time at the end of a calendar year shall not accrue or
cumulate from year to year and Employee shall not be entitled to compensation
for unused vacation time.
6. Representations, Warranties
and Covenants of Employee.
Employee represents and warrants to the Company that (a) Employee is
under no contractual or other restriction or obligation which is inconsistent
with the execution of this Agreement, the performance of his duties hereunder,
or the other rights of the Company hereunder and (b) Employee is under no
physical or mental disability that would hinder his performance of duties under
this Agreement.
7. Non-Competition.
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(a) In view of the unique and valuable services it is expected Employee
will render to the Company, and in consideration of the compensation to be
received hereunder, Employee agrees (i) that he will not, during the period he
is employed by the Company under this Agreement or otherwise, Participate In (as
defined below) any other business or organization, whether or not such business
or organization now is or shall then be competing with or of a nature similar to
the business or profession of the Company, and (ii) for a period of two years
after he ceases to be employed by the Company under this Agreement, he will not
compete with or be engaged in the same business as or Participate In any other
business or organization which during such two year period competes with or is
engaged in the same business as the Company with respect to any product or
service sold or proposed to be sold or activity engaged in or proposed to be
engaged in up to the time of such cessation within a 100-mile radius of the
location of the Company's principal offices on the date on which Employee ceases
to be employed by the Company under this Agreement, except that in each case the
provisions of this Section 7 will not be deemed breached merely because Employee
owns not more than 1% of the outstanding common stock of a corporation, if, at
the time of its acquisition by Employee, such stock is listed on a national
securities exchange, is reported on Nasdaq, or is regularly traded in the
over-the-counter market by a member of a national securities exchange.
As used in this Agreement, the term "Participate In" shall mean:
"directly or indirectly, for his own benefit or for, with, or through any other
person, firm, or corporation, own, manage, operate, control, loan money to, or
participate in the ownership, management, operation, or control of, or be
connected as a director, officer, employee, partner, consultant, agent,
independent contractor, or otherwise with, or acquiesce in the use of his name
in."
(b) Employee will not directly or indirectly reveal the name of,
solicit or interfere with, or endeavor to entice away from the Company or any of
the Companies or any of its respective employees. Employee will not directly or
indirectly employ any person who is an employee of the Company or any of the
Companies for a period of two years after the Employee leaves the employ of the
Company.
(c) Since a breach of the provisions of this Section 7 could not
adequately be compensated by money damages, the Company shall be entitled, in
addition to any other right and remedy available to it, to an injunction
restraining such breach or a threatened breach, and in either case no bond or
other security shall be required in connection therewith, and Employee hereby
consents to the issuance of such injunction. Employee agrees that the provisions
of this Section 7 are necessary and reasonable to protect the Company or any of
the Companies in the conduct of its respective business. If any restriction
contained in this Section 7 shall be deemed to be invalid, illegal, or
unenforceable by reason of the extent, duration, or geographical scope thereof,
or otherwise, then the court making such determination shall have the right to
reduce such extent, duration, geographical scope, or other provisions hereof,
and in its reduced form such restriction shall then be enforceable in the manner
contemplated hereby.
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<PAGE>
8. Copyrights, Patents, Etc.
Any interest in patents, patent applications, inventions, technological
innovations, copyrights, copyrightable works, developments, discoveries,
designs, and processes ("Such Inventions") which Employee now or hereafter
during the period he is employed by the Company under this Agreement or
otherwise and for one year thereafter may own, conceive of, or develop and
either relating to the fields in which the Company or any of the Companies may
then be engaged or contemplates being engaged or conceived of or developed
utilizing the time, material, facilities, or information of the Company or any
of the Companies, shall belong to the Company or any of the Companies, as the
case may be. As soon as Employee owns, conceives of, or develops any Such
Invention, he agrees immediately to communicate such fact in writing to the
Company, and without further compensation, but at the Company's expense (except
as noted in clause (a) of this Section 8), forthwith upon request of the
Company, Employee shall execute all such assignments and other documents
(including applications for patents, copyrights, trademarks, and assignments
thereof) and take all such other action as the Company may reasonably request in
order (a) to vest in the Company all Employee's right, title, and interest in
and to Such Inventions, free and clear of liens, mortgages, security interests,
pledges, charges, and encumbrances ("Liens") (Employee to take such action, at
his expense as is necessary to remove all such Liens) and (b), if patentable or
copyrightable, to obtain patents or copyrights (including extensions and
renewals) therefor in any and all countries in such name as the Company shall
determine.
9. Confidential Information.
All confidential information which Employee may now possess, may obtain
during or after the Employment Period, or may create prior to the end of the
period he is employed by the Company under this Agreement or otherwise relating
to the business of the Parent, the Company or any of the Companies shall not be
published, disclosed, or made accessible by him to any other person, firm, or
corporation either during or after the termination of his employment or used by
him except during the Employment Period in the business and for the benefit of
the Company and the Companies, in each case without prior written permission of
the Company. Employee shall return all tangible evidence of such confidential
information to the Company prior to or at the termination of his employment.
10. Life Insurance.
If requested by the Company, Employee shall submit to such physical
examinations and otherwise take such actions and execute and deliver such
documents as may be reasonably necessary to enable the Company, at its expense
and for its own benefit, to obtain life insurance on the life of Employee.
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<PAGE>
11. Termination.
Notwithstanding anything herein contained, if, prior to the end of the
Employment Period:
(a) either (i) Employee shall be physically or mentally incapacitated
or disabled (as determined by an independent physician selected by the Board of
Directors of the Company) or otherwise unable fully to discharge his duties
hereunder for a period of 13 consecutive weeks or an aggregate of 13 weeks in
any six-month period, (ii) Employee shall be convicted by, or shall have entered
a plea of guilty or nolo contendere in, a court of competent and final
jurisdiction for any crime involving moral turpitude, fraud, embezzlement,
misappropriation, or any other felony or crime punishable by imprisonment, (iii)
Employee shall commit any act of fraud, embezzlement or other act of
misappropriation, (iv) Employee shall fail or refuse to perform his duties as
required hereunder or shall refuse to follow direct instructions from the
President and Chief Executive Officer of the Company or the Board of Directors
of the Company or shall materially violate his duty of loyalty to the Company,
or any of the other Companies or otherwise shall breach any term of this
Agreement and fail to correct such breach within 20 days after commission
thereof, then, in each such case, the Company shall have the right to give
notice of termination of Employee's services hereunder as of a date (not earlier
than ten days from such notice) to be specified in such notice, and this
Agreement shall terminate on the date so specified; or
(b) Employee shall die, then this Agreement shall terminate on the date
of Employee's death.
(c) Upon termination of this Agreement pursuant to subsection (a)(i) or
(b) of this Section 11, neither party shall have any further obligations
hereunder except that (i) Employee (or his estate in the event of his death)
shall be entitled to receive his salary which shall not have previously been
paid to the date of termination, any bonus (including, without limitation, the
Annual Incentive Bonus) for the Employment Year prior to the Employment Year in
which Employee is terminated to the extent accrued but not yet paid, and any
bonus (including, without limitation, the Annual Incentive Bonus) for the
Employment Year in which Employee is terminated pro-rata to the date of
termination, and (ii) for obligations or covenants contained herein that extend
beyond the term of this Agreement.
(d) Upon termination of this Agreement as a result of Employee's
voluntary action or pursuant to subsections (a)(ii), (a)(iii) or (a)(iv) of this
Section 11, neither party shall have any further obligations hereunder except
(i) Employee shall be entitled to receive his salary which shall not have
previously been paid to the date of termination, and any bonus (including,
without limitation, the Annual Incentive Bonus) for the Employment Year prior to
the Employment Year in which Employee is terminated to the extent accrued but
not yet paid, and (ii) for obligations or covenants contained herein that extend
beyond the term of this Agreement.
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<PAGE>
(e) In the event Employee's employment is terminated during the term of
this Agreement other than by Employee's voluntary action or pursuant to
subsection (a) or (b) of this Section 11, Employee shall be entitled to receive
(i) an amount equal to his current base salary for the period from the date of
termination through the balance of the scheduled term of this Agreement, less
any compensation received or receivable by Employee as a result of any other
employment obtained by Employee during such period, which amounts shall be
payable in accordance with the Company's normal payroll practices then in
effect, (ii) any bonus (including, without limitation, the Annual Incentive
Bonus) for the Employment Year prior to the Employment Year in which Employee is
terminated, to the extent accrued but not yet paid, and any bonus (including,
without limitation, the Annual Incentive Bonus) for the Employment Year in which
Employee is terminated pro rata to the date of termination; (iii) any benefits
then vested under any benefit plans and otherwise payable in accordance with the
provisions of the applicable benefit plan and applicable laws, (iv) continued
coverage (net of any Employee contributions) to the extent any such coverage was
provided immediately prior to the termination of Employee for medical, health,
hospital and disability insurance from the date of termination through the
balance of the scheduled term of the Agreement under the benefit plans
maintained by the Company for its senior management or employees generally in
accordance with the terms thereof or, if the Company is unable to provide such
coverage under its benefits plans as they may from time to time be in effect,
the Company will provide or pay (without gross-up for taxes), at the Company's
sole discretion, for coverage (net of any Employee contributions) having
substantially the same aggregate value as the coverage provided under such
plans, and (v) continued coverage (net of any Employee contributions) from the
date of termination through the balance of the scheduled term of this Agreement
under any life insurance policies maintained for Employee immediately prior to
the termination of Employee (other than any policy under which the Company is
the beneficiary) or, if the Company is unable to provide such coverage, the
Company will pay (net of any Employee contributions) to Employee (without
gross-up for taxes) an amount sufficient for Employee to purchase such life
insurance policy and pay the premiums thereon through the balance of the
scheduled term of this Agreement. Employee shall promptly notify the Company in
writing of any other employment obtained or undertaken by Employee, and the
salary, compensation or other amounts received or to be received by Employee
therefrom. In the event Employee's employment is terminated during the term of
this Agreement other than by Employee's voluntary action or pursuant to
subsection (a) or (b) of this Section 11, this subsection (e) of this Section 11
will apply in place of any Company severance policies that might otherwise be
applicable, and the Company will have no obligation to make any payments to
Employee except those expressly set forth in this subsection (e) of this Section
11.
12. Survival.
The covenants, agreements, representations, and warranties contained in
or made pursuant to this Agreement shall survive Employee's termination of
employment.
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<PAGE>
13. Modification.
This Agreement sets forth the entire understanding of the parties with
respect to the subject matter hereof, supersedes all existing agreements between
them concerning such subject matter, and may be modified only by a written
instrument duly executed by each party.
14. Notices.
Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be mailed by certified mail, return
receipt requested, or delivered against receipt to the party to whom it is to be
given at the address of such party set forth in the preamble to this Agreement
(or to such other address as the party shall have furnished in writing in
accordance with the provisions of this Section 14). Notice to the estate of
Employee shall be sufficient if addressed to Employee as provided in this
Section 14. Any notice or other communication given by certified mail (or such
comparable method) shall be deemed given at the time of certification thereof
(or comparable act), except for a notice changing a party's address which shall
be deemed given at the time of receipt thereof.
15. Waiver.
Any waiver by either party of a breach of any provision of this
Agreement shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of this
Agreement. The failure of a party to insist upon strict adherence to any term of
this Agreement on one or more occasions shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement. Any waiver must be in writing.
16. Binding Effect.
Employee's rights and obligations under this Agreement shall not be
transferable by assignment or otherwise, such rights shall not be subject to
commutation, encumbrance, or the claims of Employee's creditors, and any attempt
to do any of the foregoing shall be void. The provisions of this Agreement shall
be binding upon and inure to the benefit of Employee and his heirs and personal
representatives, and shall be binding upon and inure to the benefit of the
Company and its successors and assigns.
17. No Third Party Beneficiaries.
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This Agreement does not create, and shall not be construed as creating,
any rights enforceable by any person not a party to this Agreement (except as
provided in Section 16).
18. Headings.
The headings in this Agreement are solely for the convenience of
reference and shall be given no effect in the construction or interpretation of
this Agreement.
19. Counterparts; Governing Law.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York, without giving effect to
conflict of laws.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
GIRGENTI, HUGHES, BUTLER & McDOWELL, INC.
By:
-----------------------------------------
Name:
Title:
--------------------------------------------
Willian Butler
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EMPLOYMENT AGREEMENT
AGREEMENT made and entered into as of the 8th day of September, 1995,
between GIRGENTI, HUGHES, BUTLER & McDOWELL, INC., a New York corporation, with
offices at 100 Avenue of the Americas, New York, New York 10013 (the "Company"),
and FRANCIS HUGHES, residing at 425 Park Avenue South, New York, New York 10016
(the "Employee").
WITNESSETH:
WHEREAS, entering into this Agreement is a condition of closing under
a certain Stock Purchase Agreement dated the date hereof ("Purchase Agreement").
WHEREAS, the Employee was employed by the Company and the Company
wishes to ensure the continued employment of Employee and the Employee wishes to
accept such employment, subject to the terms and conditions hereinafter set
forth.
NOW, THEREFORE, the parties hereto, in consideration of the premises
and mutual promises contained herein and for other good and valuable
consideration, receipt of which is hereby acknowledged, agree as follows:
1. Scope of Employment.
A. During the term of this Agreement, the Employee shall have the
position of Secretary and Creative Director of the Company.
B. The Employee shall have all of the powers, duties and
responsibilities as are assigned to him from time-to-time by the President of
the Company and/or the Company's Board of Directors. The Employee shall report
to the Board of Directors of the Company and the Chief Executive Officer or
President at such time and in such details as they shall reasonably require. If
requested, Employee shall serve on behalf of one or more subsidiaries or
affiliates of the Company without additional compensation.
C. The Employee shall serve the Company and devote his best efforts
and all his skill and ability in the performance of his duties hereunder.
Employee shall carry out his duties in a competent and professional manner,
shall work with other employees of the Company and its affiliates and generally
promote the best interests of the Company and its clients. The Employee shall
work a total of six out of twelve months per calendar year in accordance with
a schedule
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approved in advance by the Company. During the term of this Agreement, the
Employee shall not engage in any capacity or activity which is, or may be,
contrary to the welfare, interest or benefit of the business now or hereafter
conducted by the Company.
2. Term of Agreement.
This Agreement shall commence on the date hereof and shall continue
for a period of three (3) years from such date unless sooner terminated pursuant
to paragraph 4 (the "Term"). Subject to Employee's compliance with and
satisfaction of all the terms and conditions of this Agreement, the Term may be
extended by Employee, in his sole discretion, for two (2) additional one year
periods upon written notice to the Company delivered at least thirty (30) days
prior to the expiration of the Term (or, as the case may be, of the first
one-year extension). The terms and conditions of this Agreement shall continue
to govern Employee's employment by the Company during any extension of the Term.
3. Compensation.
A. The Employee shall be paid base compensation at the rate of Two
Hundred and Twenty Five Thousand ($225,000) Dollars per annum, payable in
accordance with the Company's normal payroll practices ("Base Salary").
B. In addition to his Base Salary, the Employee shall be entitled to
participate in an incentive compensation plan to be adopted by the Company. The
determination of any payment to Employee pursuant to such incentive compensation
plan shall be in the sole discretion of the Company's Board of Directors.
C. Employee shall be entitled to compensation for holidays on the
same basis as available to other employees of the Company.
4. Termination for Cause; Death of the Employee.
A. (i) The Company may terminate this Agreement with the Employee for
"cause", immediately upon notice to the Employee. For purposes of this
Agreement, "cause" shall be limited to the occurrence of any of the following by
or concerning the Employee:
1. An act of dishonesty.
2. Commission of a felony.
3. Material breach of any term of this
Ageeement.
4. Continuing, repeated wilful failure or
refusal to substantially perform his
responsibilities on behalf of the Company.
5. An act of moral turpitude.
6. An act or omission that is materially
adverse to the business or reputation of
the Company.
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7. A determination by a physician licensed in
the State of New York that the Employee is
a chronic alcoholic or a narcotics addict
(as such term is defined under the New York
Mental Hygiene Law, as amended).
8. The death or "disability" (as defined below)
of the Employee.
9. The willful misappropriation of the funds
or property of the Company.
(ii) Upon termination of the employment of Employee with the
Company, subject to appropriate offsets, Employee shall be entitled
to his Base Salary through the date of termination. Except as
provided in this paragraph, in connection with the Employee's
termination by the Company for "cause", the Company shall have no
further liability to the Employee or to the Employee's heirs,
beneficiaries, or estate for damages, compensation, benefits,
indemnities or other amounts.
(iii) The term "disability", as used in this paragraph 4,
shall mean the inability of the Employee by reason of physical or
mental sickness, injury or illness to perform the same or similar
duties for the Company as he performed prior to such sickness, injury
or illness. Such disability must be for a continuous period of twelve
(12) months, or for an aggregate period of eighteen (18) months out
of any continuous twenty-four (24) month period. The determination of
disability shall be made by a duly licensed physician acceptable to
the Employee and the Company. If no physician is acceptable to both
the Employee and Company, the determination shall be made by two duly
licensed physicians, one of whom shall be selected by the Employee
and the other by the Company. If said two physicians cannot agree,
the determination shall be made by a third duly licensed physician
selected by the aforementioned two physicians.
5. Covenant Not to Compete.
A. The Employee agrees that his services to the Company are of a
special, unique, extraordinary and intellectual character, and his position
with the Company places him in a position of confidence and trust with the
clients and employees of the Company. The Employee "further acknowledges that
the rendering of services to the clients of the Company necessarily requires
the disclosure of confidential information and trade secrets of the Company
(such as, without limitation, marketing plans, budgets, designs and client
preferences and policies). The Employee and the Company agree that in the
course of employment with the Company, the Employee has and will continue to
develop a personal acquaintanceship and relationship with the clients of the
Company and a knowledge of those clients' affairs and requirements. The
Employee acknowledges that the relationships of the Company with its clientele
may be placed in the Employee's hands in confidence and trust and the Employee
consequently agrees that it is reasonable and necessary for the protection of
the goodwill and business of the Company that
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the Employee make the covenants contained herein. Accordingly, during the Term
and for five (5) years thereafter, the Employee agrees not to do any of the
following:
(i) engage, directly or indirectly, in any business which
competes with the business now or hereafter conducted by the Company,
or any affiliate, thereof within the continental United States.
(ii) attempt in any manner, direct or indirect, to solicit
from any client of the Company, or any affiliate, or to persuade any
client of the Company or any affiliate to cease to do business or
reduce the amount of business which any such client has customarily
done or contemplates doing with the Company, or any affiliate,
whether or not the relationship between the Company (or such
affiliate) was originally established in whole or in pan through
Employee's efforts;
(iii) engage, directly or indirectly, in any business which
uses as its corporate or trade name any distinctive part of the
Company's name, or any affiliate thereof, or any other name then
used by the Company, its parents, divisions, subsidiaries or
affiliates;
(iv) interfere in any way, directly or indirectly, whether for
his own benefit or for the benefit of any other person or any firm,
corporation or other business organization, with the Company's, or
any affiliate's, relationship with, or endeavor to entice away from
the Company, or any affiliate, or solicit any person, firm,
corporation or other entity who or which was or is an employee,
consultant, distributor, independent contractor, supplier, source
of material and/or product of, or in the habit of dealing with, the
Company or any affiliate thereof.
(v) render to or for any client of the Company, or any
affiliate, any services of the type rendered by the Company or any
affiliate.
B. For purposes of this paragraph 5, the Employee shall be deemed
directly or indirect]y engaged in a business or activity if he participates in
such business or activity himself, or as proprietor, partner, joint venturer,
stockholder, director, officer, manager, employee, consultant, advisor or agent
of an entity engaged in such business or entity, or if he otherwise controls
such entity. Notwithstanding the above, the Employee shall not be deemed engaged
in such business or activity merely by reason of holding less than five (5%)
percent of the outstanding equity of any publicly owned corporation, provided
that the Employee shall not be in a control position with regard to such
corporation.
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6. Confidential Information.
A. The Employee shall not at any time during the Term or thereafter
use for his own benefit and/or reveal, divulge or publish or make known,
directly or indirectly, to any person, firm or corporation, any of the Company's
or any affiliate's confidential information or trade secrets, whether written or
oral, that the Employee has acquired during the Term (hereinafter referred to as
"Confidential Information"). Notwithstanding the above, the term "Confidential
Information" shall not include any information which is in the public domain and
could readily be known or determined without being employed by the Company or
which enters the public domain through no breach of the Employee's obligations
hereunder.
B. The Employee shall hold in trust and confidence for the benefit of
the Company all Confidential Information and the Employee shall not disclose
such Confidential Information to any person, firm or corporation, or use such
Confidential Information for any purpose other than on behalf of the Company in
accordance with his duties under this Agreement. The Employee shall not make any
copies of Confidential Information without the express prior written consent of
the Company. It is hereby expressly understood that by disclosing said
Confidential Information to the Employee, the Company does not grant any
express, implied or other license or right of any nature to the Employee with
respect to the Confidential Information.
C. Upon termination of the Term or termination of the Employee's
services for the Company irrespective of the time, manner or cause of same, the
Employee shall surrender to the Company all customer lists, books, records and
documents provided by, belonging to, relating to or used in connection with the
Company's business and/or all other property belonging to the Company or to the
Company's customers.
D. The Company does not wish to receive any confidential information
from the Employee. Any and all information disclosed by the Employee to the
Company shall not be deemed confidential, and the Company shall be under no
obligation to retain any such information in confidence.
7. Enforcement of Restrictive Covenants.
The parties acknowledge that the type and periods of restriction
imposed in the provisions of Sections 5 and 6 above are fair and reasonable and
are reasonably required for the protection of the Company; and that the time,
scope, geographic area and other provisions of such sections have been
specifically negotiated by sophisticated commercial parties and are given as an
integral part of the transactions contemplated by the Purchase Agreement, it
being understood that the clients of the Company may be serviced from any
location and accordingly it is reasonable that the restrictive covenants set
forth herein are not limited by narrow geographic area but generally by the
location of such clients and potential clients. The Employee specifically
acknowledges that his being restricted from servicing clients and prospective
clients as contemplated by this Agreement will not prevent him from being
employed
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<PAGE>
or earning a livelihood in the type of business conducted by the Company. If any
of the covenants in Sections 5 or 6 above, or any part thereof, is hereafter
construed to be invalid or unenforceable, it is the intention of the parties
that the same shall not affect the remainder of the covenant or covenants, which
shall be given full effect without regard to the invalid portions. If any of the
covenants contained in Sections 5 or 6, or any part thereof, is held to be
unenforceable because of the duration of such provision or the area covered
thereby, the parties agree that the court making such determination should
reduce the duration and/or areas of such provision such that, in its reduced
form, said provision shall then be enforceable. The parties hereto intend to
and hereby confer jurisdiction to enforce the covenants contained in Sections
5 or 6 above upon the courts of any jurisdiction within the geographical scope
of such covenants. In the event that the courts of any one or more of such
jurisdictions shall hold such covenants wholly unenforceable by reason of the
breadth of such scope or otherwise, it is the intention of the parties hereto
that such determination not bar or in any way affect the Company's right to
the relief provided above in the courts of any other jurisdiction within the
geographical scope of such covenants, as to breaches of such covenants in such
other respective jurisdictions, the above covenants as they relate to each
jurisdiction being, for this purpose, severable into diverse and independent
covenants.
8. Intellectual Property.
During the Term, the Employee will disclose to the Company all ideas,
inventions, advertising campaigns, designs, logos, slogans and business plans
developed by him during such period, either individually or in collaboration
with others, which relate to the business of the Company or any affiliate,
including without limitation, any process, operation, product or improvement
which may be patentable or copyrightable. The Employee agrees that such will be
the sole property of the Company and that he will at the Company's request and
cost do whatever is reasonably necessary to secure the rights thereto by patent,
copyright or otherwise to the Company.
9. Equitable Relief.
The parties hereto recognize that irreparable harm will result to the
Company and its business and properties if the Employee fails or refuses to
perform his obligations under this Agreement, and that the remedy at law for any
such failure or refusal will be inadequate. Accordingly, in addition to any
other remedies and damages available, the Company shall be entitled to
injunctive relief, specific performance and any other appropriate equitable
relief. Such relief may be taken against any employee, consultant or
representative of the Employee, or any corporation in which the Employee is a
shareholder or has a management position, or any partnership in which the
Employee is a partner or has a management position. Nothing herein shall be
construed as prohibiting the Company from pursuing any other remedies in
addition to equitable relief, including the recovery of damages.
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10. Invalidity and Severability.
If any provisions of this Agreement are held invalid or unenforceable
by a court of competent jurisdiction, such invalidity or unenforceability shall
not affect the other provisions of this Agreement, and, to that extent, the
provisions of this Agreement are intended to be and shall be deemed severable.
11. Notices.
Any notice required or permitted to be given under this Agreement
shall be sufficient if in writing and if personally delivered, sent via
facsimile or overnight courier, or sent by registered or certified mail, return
receipt requested, as follows:
As to the Employee: Francis Hughes
425 Park Avenue South
New York, New York 10016
As to the Company: Girgenti, Hughes, Butler &
McDowell, Inc.
100 Avenue of the Americas
New York, New York 10013
With copies to: Todtman, Young, Tunick, Nachamie,
Hendler & Spizz, P.C.
425 Park Avenue
New York, N.Y. 10022
Ann: Martin Todtman, Esq.
or to such other address as any such party or attorney may designate by notice
to the others in accordance with this Agreement. Notices shall be deemed given
on the date personally delivered or sent via facsimile, the day after being sent
via overnight courier, or five (5) days after being sent by registered or
certified mail (return receipt requested).
12. Assignment.
A. This Agreement and the rights and obligations of the parties
hereto shall be binding upon and inure to the benefit of the parties hereto and
their respective successors, assigns, heirs, beneficiaries and personal
representatives.
B. The parties acknowledge that the services to be provided by the
Employee hereunder are unique to the Employee. Accordingly, the Employee may not
assign any obligation hereunder without the prior written consent of the
Company, which may be withheld for any or no reason. The Company may assign its
rights and obligations under this Agreement upon the submission of a 10 day
written notice to the Employee.
7
<PAGE>
13. No Conflict.
Employee represents and warrants that he is not subject to any
agreement, instrument, order, judgment or decree of any kind, or any other
restrictive agreement of any character, which would prevent him from entering
into this Agreement or which would be breached by Employee upon the performance
of his duties pursuant to this Agreement.
14. Waiver of Breach.
Waiver by either party of a breach of any provision of this Agreement
by the other shall not operate or be construed as a waiver of any subsequent
breach by such other party. The failure of any party hereto to take any action
by reason of such breach shall not deprive such party of the right to take
action at any time while such breach continues.
15. Entire Agreement.
This instrument contains the entire agreement of the parties as to
the subject matter hereof and supersedes any and all other agreements of the
parties as to the subject matter hereof. It may not be changed, modified,
extended or discharged orally, and no provision hereof may be waived orally, but
only by an agreement in writing signed by the party against whom enforcement of
any change, modification, extension, discharge or waiver is sought.
16. Applicable Law.
This Agreement shall be construed in accordance with the laws of the
State of New York.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
as of the day and year first above written.
/s/ Francis Hughes
_____________________________________________
Francis Hughes
GIRGENTI, HUGHES, BUTLER & McDOWELL, INC.
By: /s/ Steven Girgenti
________________________________________
Steven Girgenti, President
8
[LETTERHEAD OF BANK OF SCOTLAND]
PRIVATE AND CONFIDENTIAL
The Directors
Milton Marketing Group Limited
Milton Marketing Limited
Milton Headcount Limited
Milton Cater Limited
PDM Communications Limited and
Effective Sales Personnel Limited
1 Thames Street
Windsor
Berkshire SL4 1PL
Multi Option Facility
The Bank is pleased to offer a multi option facility to the undernoted Borrower
on the following terms and conditions ("this Offer"):
1. Main Financial Provisions
1.1. Name and Address of each Borrower:
Milton Marketing Group Limited Milton Marketing Limited
1 Thames Street 1 Thames Street
Windsor Windsor
Berkshire SL4 1PL Berkshire SL4 1PL
Milton Headcount Limited Milton Cater Limited
1 Thames Street 1 Thames Street
Windsor Windsor
Berkshire SL4 1PL Berkshire SL4 1PL
PDM Communications Limited Effective Sales Personel Ltd
1 Thames Street 1 Thames Street
Windsor Windsor
Berkshire SL4 1PL Berkshire SL4 1PL
Where there is more than one Borrower any reference to "the
Borrower" shall mean and include each of the above and their
obligations and liabilities under this facility shall be joint
and several.
1.2. Facility limit: (Pound)750,000 until 31st October 1997 and
thereafter the facility limit will be (Pound)500,000.
This facility may be drawn as overdraft or business visa
facilities. The amounts drawn under each option shall not
exceed, in total, the facility limit.
<PAGE>
2
1.3. An Arrangement Fee of [pound]6,000 is payable on acceptance of
this Offer. Bank charges in relation to the facility will also
be payable in accordance with the Bank's tariff issued to the
Borrower from time to time.
1.4. The Bank will review the facility on 30th November 1997 (the
"Review Date"); the facility will cease to be available at that
date at the latest (unless before then the Bank has specifically
agreed to renew or extend the facility).
If the facility ceases to be available or repayment is demanded
of the overdraft then the Bank shall be entitled to request the
Borrower to lodge such sums as the Bank shall require in a
written demand as security for all other outstanding liabilities
(whether actual or contingent) under the facility and the
Borrower shall forthwith comply with such request.
1.5. Overdraft
1.5.1. The expression "the Cleared Debit Balance" is used in
the following paragraphs. It means, at any time, the
amount due to the Bank by the Borrower on any applicable
account, ignoring any payments which are not cleared
funds. The expression "cleared funds" means cash and
other payments into an applicable account but not
including cheques until the Bank has actually received
payment from another bank.
1.5.2. All overdrafts are repayable on demand, so the Borrower
must immediately pay the Bank the Cleared Debit Balance
on the Borrower's account(s) (plus interest and charges
accrued but not yet added), whenever the Bank requires
the Borrower to do so. The facility will cease to be
available as from the date of any such demand. Please
note that in some circumstances the Bank may demand
payment before the Review Date given in paragraph 1.4;
this may happen if the Bank considers that:-
(a) any of the terms or conditions of the facility
have been breached; or
(b) the financial condition of any Borrower has
altered in any material way; or
(c) the facility was agreed on the basis of
incorrect or incomplete information from the
Borrower; or
(d) the basis upon which the facility was agreed by
the Bank has altered in any material way.
1.5.3. Interest accruing will be applied to the Borrower's
account(s) monthly. A notice of the accrued interest
will be issued each month and interest applied 14 days
after the date of the notice. The interest rate will be
2% per annum over the Bank's Base Rate, as fluctuating
from time to time.
1.5.4. The Bank's Base Rate at the date of this Offer is 6.75%
per annum. Changes are notified in national newspapers
and all the Bank's Branches.
<PAGE>
3
1.5.5. The Borrower must at all times provide sufficient funds
to ensure that the Cleared Debit Balance on the
Borrower's account(s) and the Sterling equivalent of
any drawings under this Offer never exceed the facility
limit set out in 1.2 above less the contingent
liabilities due under this Offer.
1.5.6. The Borrower must not exceed the facility limit
specified in this Offer; and the Bank may refuse to pay
a cheque (or allow any other payment or withdrawal)
which would have that effect. If the Bank does pay such
a cheque or allows such payment or withdrawal, that does
not mean that the facility limit has changed, or that
the Bank will agree to pay any other cheque or meet any
other payment instruction which would have the effect
of exceeding that limit. Unless otherwise agreed by the
Bank, any debit balance of the facility over the agreed
limit and, where the facility has ceased to be available
(whether on the Review Date or by earlier demand) the
total debit balance of the facility, will attract
interest at the Bank's unauthorised rate, which shall be
4% per annum over the Bank's Base Rate, as fluctuating
from time to time.
1.5.7. As from the date on which the facility is made available
by the Bank, the Borrower ceases to be entitled to use
any facility previously made available by the Bank.
1.6 Business Visa
The facility may be drawn subject to the published terms and
conditions and charges applicable to the Bank's Business Visa
Cards.
2. Use of Facility
The facility may be used only for working capital purposes.
Where the facility is to be used for the purchase of an asset (or
assets) or proerty then any proceeds of sale of such asset (or assets)
or property shall be paid to the Bank in reduction or repayment of the
facility.
3. Financial Information
Throughout the period the facility is available (including any
extension of the facility) the Borrower must provide the Bank with the
following financial information in relation to the Borrower and each of
its subsidiaries:
Annual audited financial statements, within three months after the end
of the financial year to which they relate;
Budget and cash flow projections, not less than one month before the
start of the period to which they relate;
Monthly management accounts in a consolidated and individual basis,
within one month after the end of the period to which they relate,
together with a covenant compliance certificate detailing the age
profile of debtors.
<PAGE>
4
4. Financial Covenants
During the period of the facility and thereafter while any sum remains
owing to the Bank under the Offer the Borrower shall ensure that:-
4.1. Tangible Net Worth of the Group shall not at any time be less
than (pound)500,000.
4.2. The ratio of Trade Debtors to Borrowings due to the Bank shall
not at any time be less than 1.75:1.0.
4.3. The ratio of EBIT to Bank Interest shall not be less than
5.0:1.0.
These covenants shall be measured with reference to monthly management
accounts and annual audited accounts except 4.3. which shall be
measured on a quarterly 12 month rolling basis.
Financial Definitions
"Borrowings" means all obligations and liabilities in the nature of
indebtedness (whether present or future, actual or contingent)
including (a) money borrowed or raised and capitalised interest thereon
(b) liabilities under any bond, note, debenture, loan stock or other
instrument or security (c) liabilities in respect of acceptance of
documentary credits or discounted instruments (d) liabilities in
respect of the acquisition cost of assets or services to the extent
payable on deferred payment terms (e) liabilities under guarantees or
indemnities (except product warranties) (f) liabilities under debt
purchase, factoring and similar agreements and capital amounts owing
under finance leases, hire purchase or conditional sale agreements;
"Group" means, at any time, each Borrower and its Subsidiaries, each
Borrower's Holdings Company and each such Holding Company's
Subsidiaries. "Holding Company" and "Subsidiary" shall have the
meanings given in s.736 of the Companies Act 1985; and "Group Company"
shall be construed accordingly as any one of these;
"Bank Interest" means, in relation to any specified period, the
aggregate amount of interest, commission and other recurrent financial
expenses attributable to Borrowings of the Group from the Bank charged
or accrued for that period;
"EBIT" means, in relation to any specified period, the earnings of the
Group attributable to such period before deduction of taxation and
interest with such adjustments as the Bank, acting reasonably, shall
from time to time consider to be appropriate in the context of each
Group Company's business and the facility;
"Tangible Net Worth" means the aggregate of the amount from time to
time paid up on the issued share capital of the Group's parent company
and the amount standing to the credit of its consolidated capital and
reserves (including any share premium account or capital redemption
reserve, but excluding any revaluation reserve, goodwill and/or
intangible assets which have not been approved by the Bank) plus or
minus the amount standing to the credit or debit of the consolidated
profit and loss account of the Group all as shown in the latest annual
audited financial statements or the latest management accounts approved
by the Bank:
<PAGE>
5
"Trade Debtors" means debts due to each Group Company which arise out
of and are due and owing in the ordinary course of business, which have
not been outstanding for more than ninety days from the date of the
applicable invoice (or such other period as may be agreed with the
Bank) and which are not bad or doubtful or determined by the Bank to be
bad or doubtful (and the Bank shall act reasonably in making such
determination) but excluding (a) any debt owed by a Group Company, (b)
any debt owed by any person who is also a creditor of a Group Company
to the extent of the amount owed by that Group Company to that creditor
and (c) any debt which has been assigned to or is held in trust for any
third party or is subject to any factoring or invoice discounting or
similar agreement, with such adjustments as the Bank, acting
reasonably, shall from time to time consider to be appropriate in the
context of each Group Company's business and the facility.
5. Additional conditions
5.1. Memorandum of Satisfaction to be lodged at Companies House by
PDM Communications Ltd in respect of a rent deposit deed of
(pounds)5,465 in favour of Scottish Mutual Assurance Plc.
5.2. No further corporate acquisitions are to be made during the
period of this facility.
5.3. The Bank agrees with the Borrower(s) that the Borrower(s) may
operate a number of bank accounts on which the facility may be
available. For the purpose of ascertaining compliance with the
facility and the Overdraft limit the Bank shall notionally set
off the credit balances of the Borrower(s) accounts(s) against
the debit balances of the Borrower(s) accounts(s) and the Bank
shall be entitled to refuse to pay any cheques, orders or
withdrawals on any one or more of the Borrower(s) accounts
where such payments would result in the Overdraft limit (taking
into account the amounts notionally offset) being exceeded. The
Bank may exercise its legal right to actually offset creditor
balances against any debtor balances of the Borrower(s)
account(s) at any time.
6. Security
The following security already held by the Bank shall be available as
security for the amounts owing to the Bank under this Offer (as well as
for any other amounts covered by that security):
A debenture incorporating fixed and floating charges over each Group
Company's undertaking and assets, including uncalled capital.
Guarantee from each Group Company for all sums due and to become due by
the Borrower.
In addition the Borrower will grant or cause to be granted to the Bank
security in a form acceptable to the Bank (which, unless otherwise
stated below, must be first-ranking and cover not only the amounts
owing to the Bank under this Offer but also all other sums due and to
become due to the Bank) as follows:
Assignment of term cover acceptable to the Bank over the Life of Les
Milton.
<PAGE>
6
Any security which may subsequently be held by the Bank shall be
available to secure the amounts owing to the Bank under this Offer
and all other sums due to the Bank, to the full extent that the terms
of such security permit.
7. Time Limit for acceptance of Offer
To accept this Offer, each Borrower named in Paragraph 1.1. should
please sign below where indicated, and the completed Offer should be
returned to the Bank at the above address within one calendar month
from the date of this Offer. A duplicate of this Offer is enclosed for
the Borrower to keep. Where the Borrower does not return this Offer
indicating acceptance, then, this Offer will nevertheless be deemed to
be accepted should the Borrower proceed to use the facility within that
one month period. Where there is more than one Borrower, then (unless
the Bank agrees otherwise) deemed acceptance of this Offer shall apply
only to each Borrower using the facility within or after that one month
period.
Date of Offer 23/7/97
- -----------------------------------
For and on behalf of the Bank
We accept the above Offer.
For and on behalf of Milton Marketing Group Limited
23/8/97 Date
- ----------------------------------- ------------------
For and on behalf of Milton Marketing Limited
23/8/97 Date
- ----------------------------------- ------------------
For and on behalf of Milton Cater Limited
23/8/97 Date
- ----------------------------------- ------------------
For and on behalf of Milton Headcount Limited
23/8/97 Date
- ----------------------------------- ------------------
For and on behalf of Effective Sales Personnel Limited
23/8/97 Date
- ----------------------------------- ------------------
For and on behalf of PDM Communications Limited
23/8/97 Date
- ----------------------------------- ------------------
<PAGE>
HEALTHWORLD CORPORATION
SUPPLEMENTAL PRO FORMA NET INCOME
PER COMMON SHARE COMPUTATION
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE SIX
ENDED MONTHS ENDED
DECEMBER 31, 1996 JUNE 30, 1997
-------------------- ----------------
<S> <C> <C>
Calculation of Supplemental Shares Outstanding:
Debt repaid by offering proceeds........................................ $ 462,000 $ 456,000
Proceeds per share...................................................... 8.75 8.75
-------------------- ----------------
Additional shares assumed outstanding................................... 52,800 52,114
Weighted average common shares outstanding.............................. 5,000,000 5,000,000
-------------------- ----------------
Supplemental weighted average common shares outstanding................. 5,052,800 5,052,114
-------------------- ----------------
-------------------- ----------------
Supplemental Net Income Per Share:
Pro forma net income.................................................... $1,828,000 $ 820,000
Pro forma impact of use of proceeds on interest expense,
net of tax........................................................... 11,592 5,746
-------------------- ----------------
Supplemental net income................................................. 1,839,592 825,746
Supplemental weighted average common shares outstanding................. 5,052,800 5,052,114
-------------------- ----------------
Supplemental pro forma net income per common share...................... $ .36 $ .16
-------------------- ----------------
-------------------- ----------------
</TABLE>
<PAGE>
EXHIBIT 23.01
After the execution of definitive agreements to undertake the Consolidation
discussed in Note 9 of the combined financial statements of Girgenti, Hughes,
Butler & McDowell, Inc. and Affiliates, Note 11 of the consolidated financial
statements of Milton Marketing Group Limited and Subsidiaries, and Note 1 of the
financial statements of Healthworld Corporation, we expect to be in a position
to render the following consent.
October 15, 1997 /s/ ARTHUR ANDERSEN
-------------------------------
Arthur Andersen
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report of
the combined financial statements of Girgenti, Hughes, Butler & McDowell, Inc.
and Affiliates, dated January 24, 1997 (except with respect to the matters
discussed in Note 9 as to which the date is , 1997), our
report of the consolidated financial statements of Milton Marketing Group
Limited and Subsidiaries, dated January 27, 1997 (except with respect to the
matters discussed in Note 11 as to which the date is , 1997),
and our report of the financial statements of Healthworld Corporation, dated
October 13, 1997 (except with respect to the matters discussed in Note 1 as to
which the date is , 1997), and to all references to our Firm
included in or made a part of this registration statement.
Melville, New York
, 1997
