<PAGE>
As filed with the Securities and Exchange Commission on September 22, 1999
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 4
TO
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
Pursuant to Section 12(b) or 12(g) of
The Securities Exchange Act of 1934
----------------
VENTIV HEALTH, INC.
(formerly known as Snyder Healthcare Services, Inc.)
(Exact name of registrant as specified in its charter)
Delaware 52-2181734
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
200 Cottontail Lane
Vantage Court North
Somerset, New Jersey 08873
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code:
(732) 537-4800
Securities to be registered pursuant to Section 12(b) of the Act: None
Securities to be registered pursuant to Section 12(g) of the Act:
<TABLE>
<CAPTION>
Name of each exchange on which
Title of each class to be registered each class is to be registered
------------------------------------ ------------------------------
<S> <C>
Common Stock, par value $0.001 per share Nasdaq National Market
</TABLE>
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
<PAGE>
VENTIV HEALTH, INC.
I. INFORMATION INCLUDED IN INFORMATION STATEMENT AND INCORPORATED IN FORM 10 BY
REFERENCE
Cross Reference Sheet Between Information Statement and Items of Form 10
Item 1. Business
The information required by this item is contained in the sections "Summary,"
"Risk Factors," "The Distribution" and "Business" of the Information Statement
(the "Information Statement").
The registrant, Ventiv Health, Inc. (formerly known as Snyder Healthcare
Services, Inc.), a Delaware corporation ("Ventiv"), is presently a wholly-owned
subsidiary of Snyder Communications, Inc. ("Snyder").
Item 2. Financial Information
The information required by this item is contained in the sections "Summary,"
"Selected Financial Data," "Unaudited Pro Forma Financial Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" of the Information Statement.
Item 3. Properties
The information required by this item is contained in the section "Business"
of the Information Statement.
Item 4. Security Ownership of Certain Beneficial Owners and Management
The information required by this item is contained in the sections "Security
Ownership of Certain Beneficial Owners and Management" and "Executive
Compensation" of the Information Statement.
Item 5. Directors and Executive Officers
The information required by this item is contained in the sections "Summary,"
"Management--Directors" and "Management--Executive Officers" of the Information
Statement.
Item 6. Executive Compensation
The information required by this item is contained in the section "Executive
Compensation" of the Information Statement.
Item 7. Certain Relationships and Related Transactions
The information required by this item is contained in the section
"Relationship and Agreements between Ventiv and Snyder after the Distribution"
of the Information Statement.
Item 8. Legal Proceedings
The information required by this item is contained in the section "Business--
Legal Proceedings" of the Information Statement.
Item 9. Market Price of and Dividends on the Registrant's Common Equity and
Related Stockholder Matters
The information required by this item is contained in the sections "The
Distribution--Manner of Effecting the Distribution," "Security Ownership of
Certain Beneficial Owners and Management" and "Description of Capital Stock" of
the Information Statement.
2
<PAGE>
Item 11. Description of Registrant's Securities to be Registered
The information required by this item is contained in the sections
"Description of Capital Stock" and "Anti-Takeover Effects of Provisions of
Delaware Law, Ventiv's Certificate of Incorporation and By-Laws" of the
Information Statement.
Item 12. Indemnification of Directors and Officers
The information required by this item is contained in the sections
"Limitation on Liability and Indemnification of Officers and Directors" and
"Anti-Takeover Effects of Provisions of Delaware Law, Ventiv's Certificate of
Incorporation and By-Laws" of the Information Statement.
Item 13. Financial Statements and Supplementary Data
The information required by this item is identified in "Index to Financial
Statements" of the Information Statement.
Item 15. Financial Statements and Exhibits
(a)Financial Statements
1. See Index to Financial Statements on page F-1 of the Information
Statement.
2. Financial Statement Schedule:
Schedule II--Valuation and Qualifying Accounts
All Schedules, other than those indicated above, are inapplicable, and are
therefore omitted.
3
<PAGE>
(b)Exhibits
<TABLE>
<S> <C>
2.1 Information Statement (attached to this Registration Statement as
Annex A)
+ 3.1 Amended and Restated Certificate of Incorporation of Ventiv Health,
Inc.
+ 3.2 By-Laws of Ventiv Health, Inc.
+ 4.1 Specimen form of certificate representing Ventiv Health, Inc.
common stock
+ 10.1 Form of Distribution Agreement, to be entered into between Snyder
and Ventiv Health, Inc.
+ 10.2 Form of Tax Sharing Agreement, to be entered into between Snyder
and Ventiv Health, Inc.
+ 10.3 Form of Interim Services Agreement, to be entered into between
Snyder and Ventiv Health, Inc.
+ 10.4 Ventiv Health, Inc. 1999 Stock Incentive Plan
+ 10.5 Employment Agreement, dated June 14, 1999 by and between Eran
Broshy and Snyder Communications, Inc.
+ 10.6 Employment Agreement, dated February 13, 1998 by and between Dr.
Robert Brown and Health Products Research, Inc.
+ 10.7 Service Agreement, dated October 15, 1998 by and between Jeremy
Stone and Halliday Jones Sales Limited
+ 10.8 Employment Agreement, dated November 25, 1997 by and between Allan
R. Avery and GEM Communications, Inc.
+ 10.9 Employment Agreement, dated February 13, 1998 by and between
William Pollock and Healthcare Promotions, LLC
+ 10.10 Employment Agreement, dated August 18, 1999 by and between Gregory
S. Patrick and Ventiv Health, Inc.
+ 21.1 Subsidiaries of Ventiv Health, Inc.
27 Financial Data Schedule
+ 99.1 Consent of Daniel M. Snyder
+ 99.2 Consent of Michele D. Snyder
+ 99.3 Consent of Mortimer B. Zuckerman
+ 99.4 Consent of Fred Drasner
+ 99.5 Consent of A. Clayton Perfall
+ 99.6 Consent of Eran Broshy
</TABLE>
- - - --------
+Previously filed
4
<PAGE>
II.INFORMATION NOT INCLUDED IN INFORMATION STATEMENT
Item 10. Recent Sales of Unregistered Securities
On June 23, 1999, Ventiv Health, Inc. issued 100 shares of its common stock
to Snyder, which is and will be the sole stockholder of Ventiv Health, Inc.
until the distribution has been completed. The issuance of these 100 shares was
made in a transaction exempt from the registration requirements of the
Securities Act of 1933 pursuant to Section 4(2) thereof.
Item 14. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
5
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant has duly caused this Amendment No. 4 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized.
VENTIV HEALTH, INC.
By: /s/ Michele D. Snyder
Name: Michele D. Snyder
Title: Co-Chairperson of the Board
of Directors
September 22, 1999
6
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+Information contained herein is subject to completion or amendment. A +
+registration statement on Form 10 relating to these securities has been filed +
+with the Securities and Exchange Commission. These securities will not be +
+issued prior to the time the registration statement becomes effective. This +
+preliminary information statement shall not constitute an offer to sell or +
+the solicitation of an offer to buy these securities. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PRELIMINARY COPY, DATED SEPTEMBER 22, 1999
INFORMATION STATEMENT--FOR INFORMATION ONLY
[LOGO FOR VENTIV HEALTH, INC. APPEARS HERE]
Common Stock
(par value $0.001 per share)
We have prepared this information statement to provide you with information
regarding the pro rata distribution to Snyder Communications, Inc. common
stockholders of all of the shares of common stock of Ventiv Health, Inc., which
will conduct the business currently conducted by Snyder's healthcare services
group.
The shares of Ventiv common stock will be distributed on the effective date of
the distribution, which is September , 1999, to holders of Snyder common stock
at the close of business on the record date for the distribution, which is
September 20, 1999.
If you are a Snyder common stockholder at the close of business on the record
date, you will receive one share of Ventiv common stock for every three shares
of Snyder common stock you hold. Certificates for the shares will be mailed on
or about September , 1999. You will receive a check for the cash equivalent of
any fractional shares you otherwise would have received in the distribution.
If you have any questions regarding the distribution, you may call American
Stock Transfer and Trust Company at (800) 937-5449, the distribution agent, or
Snyder's investor relations contact at (301) 468-1010.
- - - --------------------------------------------------------------------------------
Consider carefully the risk factors beginning on page 9 of this information
statement.
Stockholder approval of the distribution of Ventiv common stock is not
required. We are not asking you for a proxy and we request that you do not send
us a proxy. Also, you are not required to make any payment for the shares of
Ventiv common stock.
This information state-ment is not an offer to sell, or a solicitation of an
offer to buy, any securities of Snyder or Ventiv.
- - - --------------------------------------------------------------------------------
No public market currently exists for the Ventiv common stock. However, we
are seeking to list the Ventiv common stock on the Nasdaq National Market. If
the shares are accepted for listing on the Nasdaq National Market, we expect
that a "when-issued" market will develop on or shortly before the record date
and regular trading will begin on the first business day after the effective
date of the distribution.
Proposed Nasdaq National Market Trading Symbol
"VTIV"
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved the Ventiv common stock, or determined
if this information statement is truthful or complete. Any representation to
the contrary is a criminal offense.
We first mailed this information statement to Snyder stockholders on
September , 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Item Page
- - - ---- ----
<S> <C>
SUMMARY................................................................... 1
Ventiv Health, Inc. .................................................... 1
Relationship between Ventiv and Snyder After the Distribution........... 2
Management.............................................................. 2
Key Terms of the Distribution........................................... 3
Information Regarding the Distribution and Ventiv....................... 4
Reasons for Furnishing This Information Statement....................... 5
Forward-Looking Statements.............................................. 5
Summary Historical Financial Data....................................... 6
Summary Unaudited Pro Forma Financial Data.............................. 7
RISK FACTORS.............................................................. 9
QUESTIONS AND ANSWERS ABOUT VENTIV AND THE DISTRIBUTION................... 13
THE DISTRIBUTION.......................................................... 15
Background and Reasons for the Distribution............................. 15
Manner of Effecting the Distribution.................................... 15
Material Federal Income Tax Consequences................................ 16
Market for Ventiv Common Stock.......................................... 17
Dividend Policy......................................................... 18
Distribution Conditions and Termination................................. 18
RELATIONSHIP AND AGREEMENTS BETWEEN VENTIV AND SNYDER AFTER THE
DISTRIBUTION............................................................. 19
General................................................................. 19
Distribution Agreement.................................................. 19
Tax Sharing Agreement................................................... 20
Interim Services Agreement.............................................. 20
BUSINESS.................................................................. 21
Overview................................................................ 21
Trends Affecting Growth................................................. 21
The Ventiv Approach..................................................... 23
The Ventiv Health, Inc. Support Continuum............................... 24
Ventiv's Operating Groups............................................... 25
Competitive Advantages.................................................. 31
Clients................................................................. 33
Competition............................................................. 33
Employees............................................................... 34
Government Regulation................................................... 34
Properties.............................................................. 35
Legal Proceedings....................................................... 35
SELECTED FINANCIAL DATA................................................... 36
UNAUDITED PRO FORMA FINANCIAL DATA........................................ 37
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS............................................................... 39
Overview................................................................ 39
Results of Operations................................................... 39
Liquidity and Capital Resources......................................... 45
Year 2000............................................................... 45
Effect of Inflation..................................................... 46
Quantitative and Qualitative Disclosures About Market Risk.............. 46
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Item Page
- - - ---- ----
<S> <C>
MANAGEMENT............................................................... 47
Directors.............................................................. 47
Directors' Meetings and Committees..................................... 48
Compensation of Directors.............................................. 48
Executive Officers..................................................... 48
EXECUTIVE COMPENSATION................................................... 50
Historical Compensation................................................ 50
Ventiv Compensation and Benefit Plans.................................. 51
1999 Stock Incentive Plan.............................................. 51
Treatment of Snyder Options Following the Distribution................. 57
Employment Agreements.................................................. 57
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT........... 59
DESCRIPTION OF CAPITAL STOCK............................................. 61
Authorized Capital Stock............................................... 61
Ventiv Common Stock.................................................... 61
Preferred Stock........................................................ 61
No Preemptive Rights................................................... 61
Transfer Agent and Registrar........................................... 61
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF DELAWARE LAW, VENTIV'S CERTIFICATE
OF INCORPORATION AND BY-LAWS............................................ 62
Delaware Law........................................................... 62
Certificate of Incorporation and By-Laws............................... 62
LIMITATION ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS.... 63
Limitation on Liability of Directors................................... 63
Indemnification and Insurance.......................................... 63
ADDITIONAL INFORMATION................................................... 64
INDEX TO FINANCIAL STATEMENTS............................................ F-1
</TABLE>
ii
<PAGE>
SUMMARY
This summary highlights selected information from this information statement,
but does not contain all details concerning the distribution of the Ventiv
common stock to Snyder stockholders, including information that may be
important to you. To better understand the distribution, and the business and
financial position of Ventiv, you should carefully review this entire document.
References in this information statement to "Ventiv" mean Ventiv Health, Inc.
and its subsidiaries. References in this information statement to "Snyder" mean
Snyder Communications, Inc. and its subsidiaries and affiliates.
Ventiv Health, Inc.
After the distribution, Ventiv will continue to be one of the leading public
companies based on revenues providing marketing and sales services for the
pharmaceutical and life sciences industries. Our salesforce ranks first or
second in size among outside providers in the United States, Germany, France
and the United Kingdom, which constitute four of the top six worldwide
pharmaceutical markets. Our clients include 18 of the 20 largest pharmaceutical
companies based on revenues, which clients accounted for approximately 65.9% of
our total revenues for the six months ended June 30, 1999. Our three operating
groups offer services which are designed to develop, establish and monitor
strategic marketing plans for pharmaceutical and other life sciences products,
conduct educational research and communications services for the medical
community and execute our clients' marketing strategies. Our Health Products
Research Group uses proprietary systems to analytically design and monitor
targeted marketing and sales programs. Our Healthcare Communications Group
provides services which create pharmaceutical product awareness and demand
within the medical community both prior and subsequent to a product's launch.
Our Contract Sales Group executes pharmaceutical product sales and marketing
programs through its salesforce.
As of the distribution date, the business conducted by Snyder's healthcare
services group will have been transferred to Ventiv Health, Inc., a newly
formed Delaware corporation. The shares of common stock of Ventiv will be
distributed to Snyder stockholders on a pro rata basis on the effective date of
the distribution, September , 1999.
The distribution of the shares of Ventiv common stock will be effective on
the distribution date, September , 1999. No vote of Snyder's stockholders is
required to approve the distribution of the Ventiv common stock, as this
distribution does not constitute a disposition of all or substantially all of
the assets of Snyder for purposes of Delaware law.
Snyder's management believes that separating Ventiv into a separate,
strategically focused public company will provide the following benefits:
. Tie Compensation to Performance. Ventiv's ability to effectively
attract, retain and incentivize its management team and employees of the
healthcare marketing services business is a principal purpose of the
distribution. The primary component of the compensation packages for
Eran Broshy, the Chief Executive Officer of Ventiv, and the other
members of Ventiv's management team will be Ventiv common stock.
. Develop Focused Business Strategies. Snyder's management believes that
the spin-off will enhance Ventiv's ability to focus its business
strategies on the unique characteristics of its healthcare marketing
business and enable Ventiv to compete more effectively in the
pharmaceutical and life sciences industries.
. Improve Access to Capital. As a separate company, with its own
management and structure, Ventiv will no longer compete with Snyder's
other businesses for Snyder's available capital and will be able to
directly access the debt and equity markets for the funding necessary to
execute its business plans and strategies.
1
<PAGE>
. Increase Visibility to the Capital Markets. Following the distribution,
the financial markets will be able to focus on the individual businesses
and strengths of Ventiv and Snyder.
Snyder's management has identified the following detriments entailed in
separating Ventiv into a separate public company:
. Inability to Rely on Snyder. Ventiv's has no operating history as an
independent company and has relied on Snyder for financial,
administrative and managerial support. Other than the administrative
services to be provided by Snyder pursuant to the Interim Services
Agreement to be entered into as part of the distribution, Ventiv will be
unable to access Snyder's available capital or rely on Snyder for
support in the conduct of Ventiv's business following the distribution.
. Less Diversified Business. Ventiv will be dependent on the life sciences
industries and its significant pharmaceutical company clients and will
no longer be part of a larger, more diversified marketing company.
. Absence of Trading History for Ventiv Common Stock. There is no existing
market for the Ventiv common stock and no assurance as to the trading
prices for the Ventiv common stock before or after the distribution
date.
See "Risk Factors" beginning on page 9 for a more complete discussion of the
risks that you should consider in respect of your ownership of Ventiv common
stock.
Relationship between Ventiv and Snyder After the Distribution
After the distribution, Snyder will focus its efforts on its worldwide direct
marketing, advertising, communications and Internet professional services
business. Snyder will retain responsibility for liabilities and obligations
relating to its continuing business, and for general corporate liabilities that
are not directly related to the healthcare services business.
After the distribution, Snyder will no longer own any Ventiv common stock,
although Daniel M. Snyder and Michele D. Snyder will beneficially own
approximately 13.1% and 4.7%, respectively, of Ventiv. However, Snyder and
Ventiv will enter into certain agreements to define their ongoing relationship
after the distribution. These agreements also will allocate responsibility for
obligations arising prior to the distribution and for certain obligations that
might arise in the future. See "Relationship and Agreements Between Ventiv and
Snyder After the Distribution" beginning on page 19.
Management
Eran Broshy will be the Chief Executive Officer of Ventiv. Mr. Broshy has
extensive experience in the pharmaceutical and life sciences industries,
working for 14 years at the Boston Consulting Group and serving as the firm's
North American healthcare practice leader from 1991 until 1998. Most recently,
Mr. Broshy was President and Chief Executive Officer of Coelcanth Corporation,
a privately held biotechnology company. Mr. Broshy will be supported by a
management team that will include Gregory S. Patrick, Robert Brown, Ph.D., R.
Jeremy Stone, M.D., Allan Avery and William Pollock. See "Management--Executive
Officers" beginning on page 48.
The Ventiv Board of Directors will consist of seven persons, including both
Daniel M. Snyder and Michele D. Snyder, who will serve as non-executive Co-
Chairpersons of the Board of Directors of Ventiv, and Eran Broshy, Fred
Drasner, A. Clayton Perfall, Mortimer Zuckerman and at least one additional
independent director that will be designated prior to or promptly following the
distribution. See "Management--Directors" beginning on page 47.
2
<PAGE>
Key Terms of the Distribution
No Stockholder Action No action is required by Snyder stockholders to
Required receive Ventiv common stock in the distribution.
You do not need to surrender Snyder common stock to
receive Ventiv common stock in the distribution.
The number of shares of Snyder common stock you own
will not change as a result of the distribution.
Record Date If you are a holder of Snyder common stock as of the
close of business on the record date (September 20,
1999), you will be entitled to receive Ventiv common
stock in the distribution.
Distribution Ratio You will receive one share of Ventiv common stock for
every three shares of Snyder common stock you own as
of the close of business on September 20, 1999.
No Fractional Shares Fractional shares will not be distributed. Instead,
Will Be Issued they will be aggregated and sold in the public market
by the distribution agent and the aggregate cash
proceeds will be distributed ratably to stockholders
otherwise entitled to fractional interests. See "The
Distribution--Manner of Effecting the Distribution"
beginning on page 15.
Shares To Be All of the Ventiv common stock will be distributed in
Distributed the distribution. Based on the 71,763,763 shares of
Snyder common stock outstanding as of September 17,
1999, 23,921,254 shares of Ventiv common stock will
be distributed.
Mailing Date The distribution agent will mail Ventiv common stock
certificates to Snyder stockholders on or about
September , 1999, which you should receive shortly
thereafter.
3
<PAGE>
Information Regarding the Distribution and Ventiv
Before the distribution, you should direct inquiries relating to the
distribution to:
Snyder Communications, Inc.
Two Democracy Center
6903 Rockledge Drive
Bethesda, MD 20817
Attention: Investor Relations
(301) 468-1010
After the distribution, you should direct inquiries relating to an investment
in Ventiv common stock to:
Ventiv Health, Inc.
200 Cottontail Lane
Vantage Court North
Somerset, NJ 08873
Attention: Investor Relations
(732) 537-4800
After the distribution, the transfer agent and registrar for the Ventiv common
stock will be:
American Stock Transfer and Trust Company
Shareholder Division
40 Wall Street, 46th Floor
New York, NY 10005
(800) 937-5449
4
<PAGE>
Reasons for Furnishing This Information Statement
This information statement is being furnished by Snyder solely to provide
information to Snyder stockholders who will receive Ventiv common stock in the
distribution. It is not, and is not to be construed as, an inducement or
encouragement to buy or sell any securities of Snyder or Ventiv. Snyder and
Ventiv believe that the information presented herein is accurate as of the date
hereof. Changes will occur after the date hereof, and neither Snyder nor Ventiv
will update the information except to the extent required in the normal course
of their respective public disclosure practices and as required pursuant to the
federal securities laws.
Forward-Looking Statements
We believe that many of the statements included in this information
statement, including those under the captions:
. "Summary;"
. "Risk Factors;"
. "Questions and Answers About Ventiv and the Distribution;"
. "The Distribution;"
. "Management's Discussion and Analysis of Financial Condition and
Results of Operations;" and
. "Business;"
may be forward-looking statements. Forward-looking statements can be identified
by the use of forward-looking words, such as "may," "will," "project,"
"estimate," "anticipate," "believe," "expect," "continue," "potential,"
"opportunity," or the negative of those terms or other variations of those
terms or comparable words or expressions.
All forward-looking statements are inherently uncertain as they are based on
our current expectations and assumptions concerning future events and they are
subject to numerous known and unknown risks and uncertainties.
We note that a variety of the risks and uncertainties that we discuss in
detail under "Risk Factors" could cause our actual results and experience to
differ materially from those expected. Readers are cautioned not to place undue
reliance on forward-looking statements in this information statement, which
speak only as of the date of this information statement.
5
<PAGE>
Summary Historical Financial Data
The following table summarizes certain historical financial data with respect
to Ventiv and is qualified in its entirety by reference to, and should be read
in conjunction with, the Ventiv Historical Financial Statements and related
notes included elsewhere in this information statement. The historical
financial data for the years ended December 31, 1998, 1997 and 1996 have been
derived from the audited financial statements of Ventiv. Historical financial
information may not be indicative of Ventiv's future performance as an
independent company. Prior to their respective acquisitions, certain U.S.-based
acquirees were not subject to federal or state income taxes. Pro forma adjusted
net income represents historical net income adjusted to reflect a provision for
income taxes as if Ventiv had been taxed similarly to a C corporation for all
periods presented. See also "Selected Financial Data," "Unaudited Pro Forma
Financial Data," "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Business."
<TABLE>
<CAPTION>
For the Six Months For the Years Ended
Ended June 30, December 31,
------------------- ----------------------------
1999 1998 1998 1997 1996
--------- --------- -------- --------- --------
(unaudited)
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of Income Data:
Revenues................... $ 181,259 $ 151,313 $321,500 $ 208,967 $144,704
========= ========= ======== ========= ========
Net income (loss).......... $ 12,639 $ 2,618 $ 1,446 $ (8,718) $ 83
========= ========= ======== ========= ========
Unaudited:
Pro forma historical basic
and diluted net income
(loss) per share (2)...... $ 0.53 $ 0.11 $ 0.06
========= ========= ========
Pro forma adjusted net
income (loss) ............ $ 12,639 $ 2,618 $ 1,446 $ (10,700) $ (2,729)
========= ========= ======== ========= ========
Pro forma adjusted basic
and diluted net income
(loss) per share (2)...... $ 0.53 $ 0.11 $ 0.06
========= ========= ========
Shares used in computing
net income (loss) per
share (2)................. 23,921 23,921 23,921
========= ========= ========
Balance Sheet Data:
Total assets............... $228,095 $193,644 $ 100,947 $ 51,180
========= ======== ========= ========
Long-term debt............. $ 1,270 $ 1,473 $ 4,154 $ 2,634
========= ======== ========= ========
Total investments and
advances from Snyder
Communications, Inc.(1) .. $158,771 $119,727 $ 10,371 $ 4,697
========= ======== ========= ========
</TABLE>
- - - --------
(1) Investments and advances from Snyder represent the net cash transferred to
Ventiv from Snyder and businesses acquired by Snyder and contributed to
Ventiv. No amounts are expected to be repaid to Snyder.
(2) For all periods presented, net income per share has been computed using
shares of Ventiv that will be issued upon the distribution based on the
number of outstanding shares of Snyder common stock on September 17, 1999.
Basic and diluted net income per share are the same for all periods
presented, as there will be no options to purchase Ventiv common stock
granted until the distribution.
6
<PAGE>
Summary Unaudited Pro Forma Financial Data
The following unaudited pro forma financial data reflect the distribution as
if it had occurred on January 1, 1998 for pro forma income statement data
purposes. No pro forma balance sheet is presented, as there were no pro forma
adjustments to the historical balance sheet. The unaudited pro forma data
reflect the estimated changes in corporate overhead as if Ventiv operated as an
independent entity, based on agreements currently in effect, Ventiv's effective
income tax rate subsequent to the distribution and the effects of significant
acquisitions as if they had been consummated on January 1, 1998. We have also
presented an estimate of additional expenses Ventiv expects to incur to hire
additional employees, enter into additional agreements for office space,
professional services, advertising and other general and administrative
services associated with operating as a stand-alone public company. These
additional expenses are only estimates and there can be no assurance that
actual costs will not exceed these estimates. These data do not necessarily
reflect the results of operations or financial position of Ventiv that would
have resulted had the distribution actually been consummated as of such date.
These data also exclude the estimated $16.0 million of transaction expenses
associated with the spin-off which will be borne by Snyder. These data are not
indicative of the future results of operations or future financial position of
Ventiv.
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME (LOSS)
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(in thousands)
<TABLE>
<CAPTION>
Purchased
Ventiv Subsidiary Pro Forma Pro Forma
Historical Historical (5) Entries Ventiv
---------- -------------- --------- ---------
<S> <C> <C> <C> <C>
Revenues..................... $181,259 $1,927 $ -- $183,186
Operating expenses:
Cost of services......... 137,028 976 -- 138,004
Selling, general, and
administrative expenses. 21,585 493 413 (1) 22,491
Restricted stock
compensation............ -- -- 475 (4) 475
Acquisition and related
costs................... 1,694 -- -- 1,694
-------- ------ ----- --------
Income (loss) from
operations.................. 20,952 458 (888) 20,522
Interest expense............. (123) -- -- (123)
Investment income............ 373 8 -- 381
-------- ------ ----- --------
Income (loss) before income
taxes....................... 21,202 466 (888) 20,780
Income tax (provision)
benefit..................... (8,563) (178) 360 (2) (8,381)
-------- ------ ----- --------
Net income (loss)............ $ 12,639 $ 288 $(528) $ 12,399
======== ====== ===== ========
Estimated Expenses, net of
taxes....................... 1,725(6)
--------
Estimated Net Income
including additional
expenses.................... $ 10,674(6)
========
</TABLE>
7
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME (LOSS)
FOR THE YEAR ENDED DECEMBER 31, 1998
(in thousands)
<TABLE>
<CAPTION>
Purchased Pro Pro
Ventiv Subsidiaries Forma Forma
Historical Historical (3) Entries Ventiv
---------- -------------- ------- --------
<S> <C> <C> <C> <C>
Net revenues................ $321,500 $14,128 $ -- $335,628
Operating expenses:
Cost of services........ 236,047 9,360 -- 245,407
Selling, general, and
administrative
expenses............... 43,029 3,516 825 (1) 47,370
Restricted stock
compensation........... -- -- 2,650 (4) 2,650
Compensation to
stockholders........... 742 -- -- 742
Acquisition and related
costs.................. 26,922 -- -- 26,922
-------- ------- ------- --------
Income (loss) from
operations................. 14,760 1,252 (3,475) 12,537
Interest expense............ (2,315) -- -- (2,315)
Investment income........... 1,850 49 -- 1,899
-------- ------- ------- --------
Income (loss) before income
taxes...................... 14,295 1,301 (3,475) 12,121
Income tax (provision)
benefit.................... (12,849) (658) 1,410 (2) (12,097)
-------- ------- ------- --------
Net income (loss)........... $ 1,446 $ 643 $(2,065) $ 24
======== ======= ======= ========
Estimated Expenses, net of
taxes...................... 3,451 (6)
--------
Estimated Net Loss including
additional expenses........ $ (3,427)(6)
========
</TABLE>
- - - --------
(1) Reflects additional costs associated with employment agreements executed
for the three newly created executive positions of Chief Executive
Officer, Chief Financial Officer and Vice President of Business
Development and Strategy of Ventiv Health, Inc. These employment
agreements provide for aggregate base compensation of $825,000 per year.
(2) Reflects the effect of the estimated increase in Ventiv's effective tax
rate subsequent to the date of the distribution, net of the tax effect of
the estimated incremental costs associated with operating as a stand-alone
public company. See footnote (1) above.
(3) Reflects the historical results of operations of Healthcare Promotions,
LLC, CLI Pharma S.A. and PromoTech Research Associates, Inc. from January
1, 1998 through their respective dates of acquisition.
(4) Reflects compensation expense of $2.7 million and $0.5 million for the
year ended December 31, 1998 and the six months ended June 30, 1999,
respectively, associated with restricted stock grants to be made to
certain officers and directors of Ventiv immediately following the
distribution pursuant to agreements entered into as part of the
distribution.
(5) Reflects the historical results of operations of PromoTech Research
Associates, Inc. from January 1, 1998 through its date of acquisition.
(6) In addition to the employment agreements described in (1) above, the
Company expects to hire additional employees, enter into additional
agreements for office space, professional services, advertising and other
general and administrative services associated with operations as a stand-
alone public company. The Company estimates that these additional expenses
would have been approximately $2.9 million ($1.7 million net of taxes) for
the six months ended June 30, 1999 and $5.8 million ($3.5 million net of
taxes) for the year ended December 31, 1998. There can be no assurance
that actual costs will not exceed these estimates.
8
<PAGE>
RISK FACTORS
You should carefully consider the following risk factors to which Ventiv has
been subject in the past, and which currently and in the future may have an
impact on Ventiv. The following risk factors are cautionary statements
identifying important factors that could cause actual results to differ
materially from those contained in this information statement.
Dependence on Expenditures by Companies in the Life Sciences Industries
Our revenues are highly dependent on promotional, marketing and sales
expenditures by companies in the life sciences industries, including the
pharmaceutical, medical device, diagnostics and biotechnology industries.
Promotional, marketing and sales expenditures by pharmaceutical manufacturers
have in the past been, and could in the future be, negatively impacted by,
among other things, governmental reform or private market initiatives intended
to reduce the cost of pharmaceutical products or by governmental, medical
association or pharmaceutical industry initiatives designed to regulate the
manner in which pharmaceutical manufacturers promote their products.
Furthermore, the trend in the life sciences industries toward consolidation, by
merger or otherwise, may result in a reduction in the use of contract sales
providers.
Dependence on Trend Toward Outsourcing in the Pharmaceutical and Life Sciences
Industries
Our business and growth depend in large part on the progression of the trend
in the pharmaceutical and life sciences industries toward the outsourcing of
marketing services. We can give no assurance that this trend in outsourcing
will continue, as companies may elect to perform such services internally. A
significant change in the direction of this trend generally, or a trend in the
pharmaceutical or life sciences industries, not to use, or to reduce the use
of, outsourced marketing services, such as those that we provide, would have a
material adverse effect on our business.
Reliance on Significant Pharmaceutical Clients
Our ten largest clients, based on revenues for the six months ended June 30,
1999, listed alphabetically, are Abbott Laboratories, AstraZeneca, Bristol-
Myers Squibb, Eli Lilly, Endo Pharmaceuticals, Glaxo Wellcome, Johnson &
Johnson, Merck, Novartis, Pfizer and Searle (Monsanto). These clients accounted
for approximately 59% of our revenues for the six months ended June 30, 1999,
with no single client accounting for more than 10% of our revenues for such
period. We provide services to many of our most significant clients under
contracts that our clients may cancel, typically on 60 to 90 days notice. As a
result, we cannot assure you that our most significant clients will continue to
do business with us over the long term. If any of our significant clients elect
not to renew their contracts, it could have material adverse effect on our
results of operations.
Risk Associated with Our International Operations and Expansion in the United
Kingdom and Continental Europe
Ventiv has a number of operations in the United Kingdom and continental
Europe. The following are the material risks inherent in conducting our
international operations:
. difficulties in complying with a variety of foreign laws,
. unexpected changes in regulatory requirements,
. difficulties in staffing and managing foreign operations,
. potentially adverse tax consequences,
. foreign currency risk, and
. the risk of economic downturn in non-U.S. locations where Ventiv does
business.
We cannot assure you that one or more of these factors will not have a
material adverse effect on our international operations and consequently on our
business, financial condition and results of operations.
9
<PAGE>
Also, approximately 45% of our revenues in 1998 were generated from
operations outside of the United States. Approximately 38% of our foreign-
generated revenues were denominated in British pounds and 44% in French francs.
The U.S. dollar value of our foreign-generated revenues varies with currency
exchange rate fluctuations. Significant increases in the value of the U.S.
dollar relative to the British pound or French franc could have a material
adverse effect on our results of operations. We continually evaluate our
exposure to exchange rate risk but do not currently hedge this risk.
Management of Our Growth
Ventiv has grown rapidly over the past several years. Our continued growth
depends to a significant degree on our ability to successfully utilize our
existing infrastructure to perform services for new clients, as well as on our
ability to develop and successfully implement new marketing methods or channels
for new services. Our continued growth will also depend on a number of other
factors, including our ability to maintain the high quality of the services we
provide to our customers and to increase our penetration with existing
customers; to recruit, motivate and retain qualified personnel; and to
economically train existing sales representatives and recruit new sales
representatives. Our continued growth will also require us to implement
enhanced operational and financial systems and additional management resources.
We cannot assure you that we will be able to manage our expanding operations
effectively or that we will be able to maintain our growth. If we are unable to
manage growth effectively, this could materially adversely affect our business,
financial condition and results of operations.
Dependence on Labor Force and Specially Trained Employees
Many aspects of our business are very labor intensive and the turnover rate
of employees in our industry generally is high. Our turnover rate ranges from
10% to 35% annually depending on the geographic location, whether the employees
are full-time or part-time, and whether the employees are hired on a project
basis, with the higher turnover occurring among our part-time, special project
employees. Our part-time and special project employees account for
approximately 30% of our workforce. We believe our turnover rate is not
materially higher than comparable contract service organizations in our
industry. An increase in the turnover rate among our employees would increase
our recruiting and training costs and decrease our operating efficiencies and
productivity. Our operations typically require specially trained persons, such
as those employees in the pharmaceutical detailing business. Growth in our
business will require us to recruit and train qualified personnel at an
accelerated rate from time to time. The labor markets for quality personnel are
competitive, and we cannot assure you that we will be able to continue to hire,
train and retain a sufficient labor force of qualified persons.
Reliance on Technology; Risk of Business Interruption
We have invested significantly in sophisticated and specialized computer
technology and have focused on the application of this technology to provide
customized solutions to meet many of our clients' needs. We have also invested
significantly in sophisticated end-user databases and software that enable us
to market our clients' products to targeted markets. We anticipate that it will
be necessary to continue to select, invest in and develop new and enhanced
technology and end-user databases on a timely basis in the future in order to
maintain our competitiveness. In addition, our business is dependent on our
computer equipment and software systems, and the temporary or permanent loss of
these equipment or systems, through casualty or operating malfunction, could
have a material adverse effect on our business. Our property and business
interruption insurance may not adequately compensate us for all losses that we
may incur in any such event.
Government Regulation of Handling and Distribution of Pharmaceutical Samples
In connection with the handling and distribution of samples of pharmaceutical
products, we are subject to regulation by the Prescription Drug Marketing Act
of 1987 and other applicable federal, state and local laws and regulations in
the United States and certain regulations in the United Kingdom, France,
Germany and the European Union. These laws regulate the distribution of drug
samples by mandating storage, handling and record-keeping requirements for drug
samples and by banning the purchase or sale of drug samples. In certain
jurisdictions, including the United Kingdom and France, pharmaceutical sales
representatives are subject to examination and licensing requirements under
local law and industry guidelines. Our physician education services are subject
to a variety of foreign, federal and state regulations relating to both the
education of
10
<PAGE>
medical professionals and the marketing and sales of pharmaceuticals. In
addition, certain ethical guidelines promulgated by the American Medical
Association govern the receipt by physicians of gifts in connection with the
marketing of healthcare products. These guidelines govern the honoraria and
other items of value which AMA physicians may receive, directly or indirectly,
from pharmaceutical companies. Ventiv follows similar guidelines in effect in
other countries where it provides services. Any changes in these regulations
and guidelines or their application could have a material adverse effect on our
business. Failure to comply with these requirements could result in the
imposition of fines, loss of licenses and other penalties and could have a
material adverse effect on Ventiv.
Government Regulation of Pharmaceutical and Life Sciences Industries
Pharmaceutical manufacturers and the health care industry in general are
subject to significant U.S. federal and state, U.K., French, German and
European Union regulation. In particular, regulations affecting the pricing or
marketing of pharmaceuticals could make it uneconomical or infeasible for
pharmaceutical companies to market their products through medical marketing
detailers. Other changes in the domestic and international regulation of the
pharmaceutical industry could also have a material adverse effect on Ventiv.
Influence of Daniel M. Snyder and Michele D. Snyder
Immediately after the distribution, Daniel M. Snyder and Michele D. Snyder,
the non-executive Co-Chairpersons of our Board of Directors, will beneficially
own approximately 13.1% and 4.7%, respectively, of the outstanding shares of
Ventiv common stock. As a result, each individually, and both Mr. Snyder and
Ms. Snyder, if they act in concert, will be able to exercise substantial
influence over our business through their voting power with respect to the
election of directors and all other matters requiring action by stockholders.
This concentration of share ownership may have the effect of discouraging,
delaying or preventing a change in control of Ventiv.
Year 2000
The year 2000 problem is the potential for system and processing failures of
date-related data arising from the use of two digits by computer-controlled
systems, rather than four digits, to define the applicable year. We believe
that our internal software and hardware systems will function properly with
respect to dates in the year 2000 and beyond. However, we cannot assure you
that this will be the case until these systems are operational in the year
2000. In addition, year 2000 problems of our clients could affect our systems
or operations. Widespread year 2000 difficulties could also decrease demand for
our services as companies expend resources upgrading their computer systems. As
part of our analysis of the year 2000 problem, we have analyzed the impact of
the "worst case scenario" on our business. The "worst case scenario" would
occur if the statements and warranties of our vendors concerning their year
2000 compliance and upgrade programs were entirely false, our current upgrades
were unsuccessful and our contingency plan failed, resulting in a critical
systems failure throughout Ventiv as a whole.
Euro Conversion
On January 1, 1999, eleven member countries of the European Union established
fixed conversion rates between their existing currencies and one common
currency, the Euro. Uncertainties exist as to the effects the Euro may have on
our European clients, as well as the impact of the Euro conversion on the
economies of the participating countries. Of the 45% of our 1998 revenue
derived from outside the U.S., 38% of such foreign-generated revenues was
denominated in British pounds, 44% in French francs, and the remaining 18%
primarily in German marks and Dutch guilders. All of the foregoing currencies,
with the exception of the British pound, have been linked to the Euro since
January 1, 1999. Any negative economic developments which occur in the combined
EU economy and the possible devaluation of the Euro could have a material
negative impact on our business.
11
<PAGE>
Our operations affected by the Euro currency conversion have established
plans to address the systems and business issues raised by the Euro currency
conversion. These issues include:
. the need to modify business systems to recognize the Euro as a
functional currency:
- In France and Germany, we have addressed the need to adapt computer
and other business systems and equipment to accommodate Euro-
denominated transactions by upgrading all computer systems in 1999
to Euro-compliant systems;
- In the U.K., we are in the process of implementing new Euro-
compliant systems which we expect to complete prior to November
1999, and
. the competitive impact of cross-border price transparency which may make
it more difficult for a business to charge different prices for the same
products on a country-by-country basis, particularly once the Euro
currency begins circulation in 2002.
We will continue to evaluate the impact of the introduction of the Euro as we
continue to expand our services and the European locations in which we operate.
Lack of Operating History as an Independent Company
Ventiv has no operating history as an independent, publicly traded company
and has historically relied on Snyder for various financial, administrative and
managerial expertise relevant to the conduct of its business. We are currently
in discussions with proposed lenders to enter into a secured credit facility
which will provide financing of $75 million to $100 million in September 1999.
However, Ventiv currently has no established financing sources or other
external source of funds and there is no assurance a credit facility will be
obtained. After the distribution, we will maintain our own banking
relationships, employ our own senior executives and perform our own
administrative functions (except that for an interim period Snyder will
continue to provide certain support services to Ventiv on a contractual basis).
Although the healthcare services business has been profitable as part of
Snyder, there can be no assurance that, as a stand-alone company, Ventiv's
future results will be comparable to reported historical consolidated results
before the distribution. See "Unaudited Pro Forma Financial Data" and
"Relationship and Agreements Between Snyder and Ventiv After the Distribution."
Tax Consequences of the Distribution to Snyder and Snyder's Stockholders
The distribution is conditioned upon receipt of the opinions of Weil, Gotshal
and Manges LLP, counsel to Snyder, and Arthur Andersen LLP, Snyder's
independent public accountants, that the distribution should be a tax-free
spin-off to Snyder and to Snyder's U.S. stockholders. No ruling has been
requested from the Internal Revenue Service as to the tax consequences of the
distribution. The opinions of Weil, Gotshal and Manges LLP and Arthur Andersen
LLP are not binding on the Internal Revenue Service or the courts. If the
distribution does not qualify as a tax-free distribution, Snyder would
recognize gain equal to the excess of the fair market value of the Ventiv
common stock distributed to its stockholders over Snyder's basis in the Ventiv
common stock, and each U.S. holder of Snyder common stock would be generally
treated as if such stockholder had received a taxable dividend in an amount
equal to the fair market value of the Ventiv common stock received. See "The
Distribution--Material Federal Income Tax Consequences."
Absence of Trading History for Ventiv Common Stock
There is no existing market for the Ventiv common stock. Although Ventiv is
seeking to list its common stock on the Nasdaq National Market, there can be no
assurance as to the trading prices for the security before or after the
distribution date. Until the Ventiv common stock is fully distributed and
orderly markets develop, the trading prices for such securities may fluctuate.
The lack of orderly markets for the Ventiv common stock will result in less
liquidity for the Ventiv common stock immediately following the distribution.
Prices for the Ventiv common stock will be determined in the trading markets
and may be influenced by many factors, including the depth and liquidity of the
market for such securities, investor perceptions of Ventiv and its
12
<PAGE>
business, the results of Ventiv, the dividend policies of Ventiv and general
economic and market conditions. The Ventiv common stock distributed to Snyder
stockholders in the distribution generally will be freely transferable under
the Securities Act of 1933, as amended (the "Securities Act"), and the sale of
a substantial number of shares of Ventiv common stock after the distribution
could adversely affect the market price of Ventiv common stock. See "The
Distribution--Market for Ventiv Common Stock."
Absence of Dividends on Ventiv Common Stock
We do not anticipate paying cash dividends in the foreseeable future. See
"The Distribution--Dividend Policy."
QUESTIONS AND ANSWERS ABOUT VENTIV AND THE DISTRIBUTION
What do I have to do to Nothing. No proxy or vote is necessary for the
participate in the distribution. If you own Snyder common stock as of
distribution? the close of business on the record date, September
20, 1999, shares of Ventiv common stock will be
mailed to you or credited to your brokerage account
on September , 1999. You do not need to mail in
Snyder stock certificates to receive Ventiv common
stock certificates. You will not receive new Snyder
common stock certificates.
Explain the distribution One share of Ventiv common stock will be
ratio. distributed for every three shares of Snyder common
stock you own on the record date. For example, if
you own 150 shares of Snyder common stock as of the
close of business on the record date, you will
receive 50 shares of Ventiv common stock in the
distribution. You will receive a check for the cash
equivalent of any fractional shares you otherwise
would have received in the distribution.
Is the distribution The distribution is conditioned on Snyder receiving
taxable for United opinions from Weil, Gotshal & Manges LLP and Arthur
States federal income Andersen LLP substantially to the effect that the
tax purposes? distribution should be tax-free to Snyder and to
Snyder's U.S. stockholders except with respect to
cash you are paid in lieu of fractional shares of
Ventiv common stock. See "Risk Factors--Tax
Consequences of the Distribution to Snyder and
Snyder's Stockholders" beginning on page 12 and
"The Distribution--Material Federal Income Tax
Consequences" beginning on page 16, for a more
complete discussion of the United States federal
income tax consequences of the distribution to
holders of Snyder common stock.
Will I be paid any Ventiv does not anticipate paying any cash
dividends on the Ventiv dividends on its common stock in the foreseeable
common stock? future. See "The Distribution--Dividend Policy"
beginning on page 18.
Where will my shares of At present, there is no public market for Ventiv
Ventiv common stock common stock. Ventiv is seeking to list its common
trade? stock on the Nasdaq National Market. If the shares
are accepted for listing, we expect that a "when-
issued" trading market for Ventiv common stock will
develop on or shortly before the record date, and
that "regular-way" trading will begin on September
, 1999. See "The Distribution--Market for Ventiv
Common Stock" beginning on page 17.
Will the distribution After the distribution, the trading price of Snyder
affect the trading price common stock may be lower than the trading price
of my Snyder common immediately prior to the distribution. Moreover,
stock? until the market has evaluated the operations of
Snyder
13
<PAGE>
without the business of Ventiv, the trading price
of Snyder common stock may fluctuate. The combined
trading prices of Snyder common stock and Ventiv
common stock may not equal the trading price of
Snyder common stock prior to the distribution. See
"The Distribution--Market for Ventiv Common Stock"
beginning on page 17.
Will shares trade any Yes. A temporary form of interim trading called
differently as a result "when-issued" trading is likely to develop for
of the distribution? Ventiv common stock on or shortly before the record
date and to continue through the effective date of
the distribution, which is September , 1999. A
"when-issued" listing can be identified by the
letters "wi" next to the Ventiv common stock on the
Nasdaq National Market. If "when-issued" trading
develops, you may buy or sell Ventiv common stock
in advance of the distribution date on a "when-
issued" basis. During this time, Snyder common
stock will continue to trade on a "regular-way"
basis and may also trade on a "ex-dividend" basis,
reflecting an assumed post-distribution value for
Snyder common stock. Snyder common stock "ex-
dividend" trading, if available, could begin on or
shortly before the record date and continue through
the distribution date. If this occurs, an
additional listing for Snyder common stock,
followed by the letters "ex", will appear on the
New York Stock Exchange. "When-issued" trading
occurs in order to develop an orderly market and
trading price for Ventiv common stock (and possibly
Snyder common stock) after the distribution. There
may be differences between the combined value of
"when-issued" Ventiv common stock and "ex-dividend"
Snyder common stock as compared to the "regular-
way" price of Snyder common stock during this
period. If Snyder common stock "ex-dividend"
trading is not available, the New York Stock
Exchange will require that shares of Snyder common
stock that are sold or purchased from the period
beginning on September 16, 1999 and ending on the
distribution date be accompanied by due bills
representing the Ventiv common stock distributable
with respect to such shares, and that during such
period neither the Snyder common stock nor the due
bills may be purchased or sold separately.
What will happen to
existing employee stock Options granted under Snyder's Stock Incentive Plan
options to purchase to Ventiv employees will terminate on the
Snyder common stock? distribution date if unvested, and to the extent
vested will terminate in accordance with the terms
of Snyder's Stock Incentive Plan unless exercised
within 90 days following the distribution date.
Ventiv intends to grant options under its 1999
Stock Incentive Plan to Ventiv employees whose
existing Snyder stock options are terminated as a
consequence of the distribution. The new Ventiv
options granted on the distribution date
immediately following the distribution will have
exercise prices equal to the closing price of the
Ventiv common stock on the distribution date and
will be exercisable for a number of shares of
Ventiv common stock determined by Ventiv's Board of
Directors or the compensation committee thereof
based on the seniority and performance of the
individual employee, in accordance with the terms
of Ventiv's 1999 Stock Incentive Plan. A percentage
of the new Ventiv options granted to the Ventiv
employees equal to the vested percentage of the
existing Snyder options held by each such employee
will vest immediately upon the grant of the new
Ventiv options. See "Executive Compensation--1999
Stock Incentive Plan" beginning on page 51 and
"Executive Compensation--Treatment of Snyder
Options Following the Distribution" beginning on
page 57.
14
<PAGE>
THE DISTRIBUTION
Background and Reasons for the Distribution
Snyder is a leading international provider of direct marketing, advertising
and communications services, including services provided to developers and
producers of pharmaceutical and life-science products. In June 1999, Snyder
determined that a separation of its healthcare marketing services business into
a separate company would allow it to more effectively attract and retain key
employees for its healthcare services business, focus on its direct marketing,
advertising, communications and Internet professional services business in its
core product markets, and provide its healthcare marketing services business a
better platform to compete in the pharmaceutical and life sciences markets.
Snyder's management believes that separating Snyder and Ventiv into two
separate, strategically focused public companies will provide the following
benefits:
. Tie Compensation to Performance. Following the distribution, Ventiv will
be able to attract and retain key employees through the use of stock-
based incentives and more closely tie compensation incentives for its
employees to the performance of the healthcare marketing services
business. The primary component of the compensation packages for Eran
Broshy, the Chief Executive Officer of Ventiv, and the other members of
Ventiv's management team will be Ventiv common stock. Ventiv intends to
establish certain employee benefit plans for the benefit of Ventiv
employees, including a stock incentive plan. These equity incentives are
expected to help Ventiv attract and retain talented and effective
management and to motivate employees throughout the organization. In
addition, Ventiv intends to grant options under its 1999 Stock Incentive
Plan to Ventiv employees whose existing Snyder stock options are
terminated as a consequence of the distribution. Ventiv's ability to
effectively attract, retain and incentivize its management team and
employees of the healthcare marketing services business is a principal
purpose of the distribution.
. Develop Focused Business Strategies. Snyder's management believes that
because of the unique characteristics of its healthcare marketing
services business, the business strategies of Ventiv need to be
distinguished from those pursued by Snyder in its core markets. As a
separate company, Ventiv will have more flexibility in responding to the
needs of its client base. This focus will enable Ventiv to compete more
effectively in the pharmaceutical and life sciences industries.
. Improve Access to Capital. The distribution will give Ventiv direct
access to capital markets. As a group within Snyder, Ventiv competed
with the other operating businesses and groups within Snyder for
management attention, support resources and capital to finance expansion
and growth opportunities. As a separate company, with its own management
and structure, Ventiv will no longer compete with Snyder's other
businesses for Snyder's available capital and will be able to directly
access the debt and equity markets for the funding necessary to execute
its business plans and strategies.
. Increase Visibility to the Capital Markets. Following the distribution,
the financial markets will be able to focus on the individual businesses
and strengths of Ventiv and Snyder, and more accurately evaluate the
performance of each distinct business compared to companies in the same
or similar businesses.
Manner of Effecting the Distribution
The general terms and conditions relating to the distribution are set forth
in a Distribution Agreement between Snyder and Ventiv. See "Relationship and
Agreements Between Snyder and Ventiv After the Distribution--Distribution
Agreement."
On the distribution date, Snyder will effect the distribution by delivering
all of the outstanding shares of Ventiv common stock to American Stock Transfer
and Trust Company, as distribution agent, for distribution to the holders of
record of Snyder common stock at the close of business on the record date. The
distribution will be made on the basis of one share of Ventiv common stock for
every three shares of Snyder common stock.
15
<PAGE>
The actual number of shares of Ventiv common stock that will be distributed
will depend on the number of shares of Snyder common stock outstanding on the
record date. The shares of Ventiv common stock will be fully paid and
nonassessable, and the holders of such shares will not be entitled to
preemptive rights. See "Description of Capital Stock." It is expected that
certificates representing shares of Ventiv common stock will be mailed to
Snyder stockholders on or about September , 1999.
Certificates or script representing fractional shares of Ventiv common stock
will not be issued to Snyder stockholders as part of the distribution. Instead,
each holder of Snyder common stock who would otherwise be entitled to receive a
fractional share will receive cash for such fractional interests. The
distribution agent will, on or within two business days after the distribution
date, aggregate and sell all such fractional interests on the Nasdaq National
Market at then prevailing market prices and within five business days following
the distribution date distribute the aggregate proceeds ratably to Snyder
stockholders otherwise entitled to such fractional interests. Snyder will pay
all brokers' fees and commissions in respect of such sale. See "--Material
Federal Income Tax Consequences" for a discussion of the United States federal
income tax treatment of proceeds from fractional share interests.
Material Federal Income Tax Consequences
The distribution is conditioned upon receipt by Snyder of opinions from Weil,
Gotshal & Manges LLP, counsel to Snyder, and Arthur Andersen LLP, Snyder's
independent public accountants, substantially to the effect that, among other
things, the distribution should qualify as a tax-free spin-off to Snyder and to
Snyder's U.S. stockholders under the tax-free spin-off provisons of the
Internal Revenue Code of 1986 (the "Code"). No rulings have been requested from
the Internal Revenue Service with respect to these matters and the opinions of
Weil, Gotshal & Manges LLP and Arthur Andersen LLP are not binding on the
Internal Revenue Service or the courts. Additionally, the opinions of Weil,
Gotshal & Manges LLP and Arthur Andersen LLP are based on various
representations and assumptions described therein.
The opinions are based on current provisions of the Code, existing
regulations thereunder and current administrative rulings and court decisions,
all of which are subject to change. No attempt has been made to comment on all
federal income tax consequences of the distribution that may be relevant to
particular holders, including holders that are subject to special tax rules
such as dealers in securities, foreign persons, mutual funds, insurance
companies, tax-exempt entities, stockholders who acquire their Ventiv common
stock pursuant to the exercise of employee stock options or otherwise as
compensation and holders who do not hold their Snyder common stock as capital
assets. Holders of Snyder common stock are urged to consult their own tax
advisors regarding the federal income tax consequences of the distribution in
light of their personal circumstances and the consequences under applicable
state, local and foreign tax laws.
In the opinions of Weil, Gotshal & Manges LLP and Arthur Andersen LLP the
distribution should qualify as a tax-free distribution under the tax-free spin-
off provisons of the Code. Accordingly:
(i) A Snyder stockholder should not recognize any income, gain or loss as a
result of the distribution, except, as described below, in connection
with fractional share proceeds from the deemed receipt and sale of any
Ventiv common stock;
(ii) A Snyder stockholder's aggregate tax basis for his or her Snyder
common stock on which Ventiv common stock is distributed and the
Ventiv common stock received by such stockholder in the distribution
(including any fractional shares of Ventiv common stock to which such
stockholder may be entitled) should be the same as the basis of Snyder
common stock held by such stockholder immediately prior to the
distribution. A Snyder stockholder's aggregate tax basis should be
allocated between his or her Snyder common stock and Ventiv common
stock received in the distribution (including any fractional shares of
Ventiv common stock deemed received) in proportion to the fair market
value of both the Snyder common stock and Ventiv common stock on the
distribution date;
(iii) A Snyder stockholder's holding period for the Ventiv common stock
received in the distribution (including any fractional shares of
Ventiv common stock to which such stockholder may be entitled)
16
<PAGE>
should include the holding period of the Snyder common stock on which
the distribution is made, provided that such Snyder common stock is held
as a capital asset by such stockholder on the distribution date;
(iv) A Snyder stockholder who receives fractional share proceeds as a
result of the sale of shares of Ventiv common stock by the
distribution agent will be treated as if such fractional share had
been received by the stockholder as part of the distribution and then
sold by such stockholder. Accordingly, such stockholder should
recognize gain or loss equal to the difference between the cash so
received and the portion of the tax basis in Ventiv common stock that
is allocable to such fractional share. Such gain or loss should be
capital gain or loss, provided that such fractional share was held by
such stockholder as a capital asset at the time of the distribution;
and
(v) Snyder should not recognize any gain or loss on the distribution.
There are numerous requirements that must be satisfied in order for the
distribution to be accorded tax-free treatment under the Code. Due to the
inherently factual and subjective nature of certain of these requirements,
Weil, Gotshal & Manges LLP and Arthur Andersen LLP are unable to render
unqualified opinions as to the tax-free nature of the distribution. Weil,
Gotshal & Manges LLP and Arthur Andersen LLP have advised Snyder that if the
distribution does not qualify as a tax-free spin-off under the tax-free spin-
off provisions of the Code, Snyder would be required to recognize gain equal
to the excess of the fair market value of the Ventiv common stock distributed
to its stockholders over Snyder's basis in the Ventiv common stock. Snyder has
agreed to indemnify Ventiv for any tax liability imposed on Ventiv or any of
its subsidiaries as a result of the distribution being determined to be a
taxable transaction other than due to any act or failure to act of Ventiv or
any of its subsidiaries. In addition, based on the advice of Weil, Gotshal &
Manges LLP and Arthur Andersen LLP, if the distribution fails to qualify as a
tax-free spin-off under the tax-free spin-off provisions of the Code, each
Snyder stockholder would be generally treated as if such stockholder had
received a taxable dividend in an amount equal to the fair market value of the
Ventiv common stock received.
Current United States Treasury regulations require each Snyder stockholder
who receives Ventiv common stock pursuant to the distribution to attach to his
or her federal income tax return for the year in which the distribution occurs
a detailed statement setting forth such data as may be appropriate in order to
show the applicability under the tax-free spin-off provisions of the Code to
the distribution. Snyder will provide the appropriate information to each
stockholder of record as of the record date (September 20, 1999).
Under the Code, a holder of Snyder common stock may be subject, under
certain circumstances, to backup withholding at a rate of 31% with respect to
the amount of cash, if any, received as a result of the sale of fractional
share interests unless such holder provides proof of an applicable exemption
or correct taxpayer identification number, and otherwise complies with
applicable requirements of the backup withholding rules. Any amounts withheld
under the backup withholding rules are not additional tax and may be refunded
or credited against the holder's federal income tax liability, provided the
required information is furnished to the Internal Revenue Service.
Market for Ventiv Common Stock
There is no existing market for Ventiv common stock. Ventiv is seeking to
list its common stock on the Nasdaq National Market. If the shares are
accepted for listing, a "when-issued" trading market for Ventiv common stock
is expected to develop on or shortly before the record date. The term "when-
issued" means that shares can be traded prior to the time certificates are
actually available or issued. There can be no assurance about the trading
prices for Ventiv common stock before or after the distribution date, and
until the common stock is fully distributed and an orderly market develops,
the trading prices for these securities may fluctuate. Prices for Ventiv
common stock will be determined in the trading markets and may be influenced
by many factors, including the depth and liquidity of the market for such
securities, developments generally affecting Ventiv's business, the impact of
the factors referred to in "Risk Factors," investor perceptions of Ventiv and
its business, the results of Ventiv, the dividend policy of Ventiv, and
general economic and market conditions. It is anticipated that Ventiv common
stock will be traded on the Nasdaq National Market under the symbol "VTIV."
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The transfer agent and registrar for the Ventiv common stock will be American
Stock Transfer and Trust Company.
Shares of Ventiv common stock distributed to Snyder stockholders in the
distribution will be freely transferable under the Securities Act, except for
shares of Ventiv common stock received by persons who may be deemed to be
affiliates of Ventiv. Persons who may be deemed to be affiliates of Ventiv
after the distribution generally include individuals or entities that control,
are controlled by, or are under common control with Ventiv and may include
certain officers and directors, or principal stockholders, of Ventiv. After
Ventiv becomes a publicly traded company, securities held by persons who are
its affiliates will be subject to resale restrictions under the Securities Act.
Affiliates of Ventiv will be permitted to sell shares of the entity of which
such persons are affiliates only pursuant to an effective registration
statement or an exemption from the registration requirements of the Securities
Act, such as the exemption afforded by Rule 144 under the Securities Act.
Dividend Policy
Ventiv currently intends to retain its earnings for use in the operation of
its business and therefore does not anticipate declaring or paying any cash
dividends in the foreseeable future. Any future determination to declare or pay
cash dividends will be made by Ventiv's Board of Directors. The actual amount
and timing of dividends, if any, will depend on Ventiv's financial condition,
results of operations, business prospects, capital requirements and such other
matters as Ventiv's Board of Directors may deem relevant. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources."
Distribution Conditions and Termination
It is expected that the distribution will be effective on the distribution
date, September , 1999, provided that, among other things:
1. the Registration Statement on Form 10 under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), filed by Ventiv shall have
been declared effective and no stop order relating to the registration
statement shall be in effect;
2. all necessary permits, registrations and consents required under the
securities or blue sky laws of states or other political subdivisions of
the United States in connection with the distribution shall have been
received or become effective;
3. the tax opinions from Weil, Gotshal & Manges LLP and Arthur Andersen LLP
shall have been received and shall not have been revoked or modified in
any material respect;
4. the Ventiv common stock shall have been approved for listing on the
Nasdaq National Market, subject to official notice of issuance;
5. the transfers of assets and liabilities to Ventiv required to constitute
Ventiv as described herein shall have been completed; and
6. no order, injunction or decree issued by any court of competent
jurisdiction or other legal restraint or prohibition preventing
consummation of the distribution or any of the transactions related
thereto (including the transfers of assets and liabilities contemplated
by the Distribution Agreement) shall be in effect.
The fulfillment of the foregoing conditions shall not create any obligation
on the part of Snyder to effect the distribution, and Snyder's Board of
Directors has reserved the right to amend, modify or abandon the distribution
and the related transactions at any time prior to the distribution date.
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RELATIONSHIP AND AGREEMENTS BETWEEN VENTIV
AND SNYDER AFTER THE DISTRIBUTION
General
Immediately prior to the distribution, Ventiv will be wholly owned by Snyder
and, until the distribution, the results of operations of the assets and
entities that will constitute Ventiv will be included in Snyder's consolidated
financial statements. After the distribution, Snyder will not have any
ownership interest in Ventiv, which will be an independent, publicly traded
company. See "Security Ownership of Certain Beneficial Owners and Management."
After the distribution, Ventiv will not have any ownership interest in Snyder.
Immediately prior to the distribution, Snyder and Ventiv will enter into
certain agreements to define their ongoing relationship after the distribution
and to allocate tax, employee benefits and certain other liabilities and
obligations arising from periods prior to the distribution date. These
agreements are being entered into between Snyder and Ventiv while Ventiv is
still a wholly owned subsidiary of Snyder, and certain terms of these
agreements are not the same as would have been obtained through negotiations
with an unaffiliated third party. These agreements are summarized below and
have been filed as exhibits to the registration statement. The following
descriptions include a summary of the material terms of these agreements but do
not purport to be complete and are qualified in their entirety by reference to
the filed agreements.
Distribution Agreement
Snyder and Ventiv will enter into a Distribution Agreement which will provide
for, among other things, certain corporate transactions required to effect the
distribution and other arrangements among Snyder and Ventiv subsequent to the
distribution. The Distribution Agreement also sets forth the conditions to the
distribution. See "The Distribution--Distribution Conditions and Termination."
Transfers of Assets to Ventiv
The Distribution Agreement provides that Snyder will transfer or cause to be
transferred all of its right, title and interest in the assets constituting its
healthcare services business to Ventiv. The Distribution Agreement further
provides that Ventiv will take such action, if any, as may be necessary to
transfer assets owned by us so that, upon completion of all asset transfers by
Snyder and Ventiv, the assets constituting the healthcare services business are
owned by Ventiv and the assets constituting the remaining businesses of Snyder
are owned by Snyder.
Each party to the Distribution Agreement agrees to exercise its reasonable
efforts to obtain promptly any necessary consents and approvals and to take
such actions as may be reasonably necessary or desirable to carry out the
purposes of the Distribution Agreement and the other agreements summarized
below. In the event that any transfers contemplated by the Distribution
Agreement are not effected on or prior to the distribution date, the parties
agree to cooperate to effect such transfers as promptly as practicable
following the distribution date, and pending any such transfers, to hold any
asset not so transferred in trust for the use and benefit of the party entitled
thereto (at the expense of the party entitled thereto), and to retain any
liability not so transferred for the account of the party by whom such
liability is to be assumed. All assets are being transferred without any
representation or warranty, on an "as is-where is" basis and the relevant
transferee bears the risk that any necessary consent to transfer is not
obtained.
Allocation of Financial Responsibility
The Distribution Agreement provides for, among other things, assumptions of
liabilities and cross-indemnities designed to allocate generally, effective as
of the distribution date, financial responsibility for the liabilities arising
out of or in connection with:
. the assets and entities that will constitute Ventiv and its subsidiaries
(including liabilities arising in respect of the transfer of such assets
and entities to Ventiv), as well as the registration statement, to
Ventiv; and
. the assets and entities that will constitute Snyder and its subsidiaries
to Snyder.
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Tax Sharing Agreement
Snyder and Ventiv will enter into a tax sharing agreement, which will
allocate tax liabilities between Snyder and Ventiv and address certain other
tax matters such as responsibility for filing tax returns and the conduct of
audits and other tax proceedings for taxable periods before and after the
distribution date. Snyder will be responsible for and will indemnify Ventiv
against all tax liabilities relating to the assets and entities that will
constitute Snyder and its subsidiaries, and Ventiv will be responsible for and
will indemnify Snyder against all tax liabilities relating to the assets and
entities that will constitute Ventiv and its subsidiaries.
In addition, Ventiv and Snyder will indemnify the other against all tax
liabilities incurred by Snyder or any of its subsidiaries, on the one hand, or
Ventiv or any of its subsidiaries, on the other hand, in connection with the
distribution, as a result of any act or failure to act of the other, including,
without limitation, any act or failure to act that results in a breach of any
representation made to Weil, Gotshal & Manges LLP and Arthur Andersen LLP in
connection with their opinions. Furthermore, Snyder will be liable for and will
indemnify Ventiv against all tax liabilities imposed on Ventiv (or its
subsidiaries) as a result of the distribution being determined to be a taxable
transaction other than due to an act or failure to act of Ventiv or any of its
subsidiaries.
Interim Services Agreement
Snyder will enter into an Interim Services Agreement with Ventiv. Pursuant to
this agreement, Snyder will continue to furnish various administrative services
to Ventiv until Ventiv develops sufficient capabilities to perform these
duties. These services will consist of administrative services including
financial accounting and reporting, budgeting and analysis, income tax
preparation and employee benefit plan administration. Ventiv estimates that it
would have paid approximately $3.0 million to Snyder for these services during
fiscal 1998. This agreement will terminate after a period of twelve (12)
months, but may be terminated earlier by either party as to specific services.
Ventiv will pay fees to Snyder for services provided in amounts based on
Snyder's costs incurred in providing such services.
We will assume our responsibility as employer in respect of our employees
from and after the distribution date. We will also retain liabilities in
respect of former employees associated with the facilities and operations of
Ventiv who terminated employment on or prior to the distribution date. Benefit
plans established by Ventiv generally will recognize past service with Snyder.
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BUSINESS
Overview
Ventiv is a leading public company based on revenues providing global
marketing and sales services for the life sciences industry. Our clients
include leading pharmaceutical, biotechnology, medical device, and diagnostics
companies. We offer a broad range of integrated services, including educational
programs which target leading physicians, specially-designed strategic
marketing plans and product sales programs which are executed through our
extensive sales network.
Our organization and service offerings reflect the changing needs of our
clients as their new products move through the development and regulatory
approval process. As a potential drug or device advances in the clinical trial
process towards commercialization, our clients must first educate medical
decision makers through a variety of informational media. These pharmaceutical
and life sciences companies subsequently need to design a focused launch
campaign to maximize product profitability upon regulatory approval of their
product. Prescription products are typically sold through product detailing,
which involves one-on-one meetings between a sales representative and a
targeted prescriber. Pharmaceutical manufacturers in particular rely on this
sales process as the most effective means of influencing prescription-writing
patterns, although these companies increasingly supplement their marketing
programs with direct-to-consumer advertising. In the past, product detailing
was handled by the pharmaceutical manufacturers themselves. However, the recent
focus among our clients on flexibility in cost management has lead to an
increased frequency of this work being outsourced to contract providers.
The trend among Ventiv's clients to outsource marketing and sales functions
to the healthcare marketing services industry began during the 1980s in the
United Kingdom. This was the result of significant regulatory and cost
containment pressures which ultimately led pharmaceutical manufacturers to
search for more effective methods of promoting new and existing products. By
outsourcing portions of their marketing and sales activities, pharmaceutical
manufacturers were able to shift from internally generated fixed costs to
outsourced variable costs. This trend has since spread to all segments of the
life sciences industry. A further benefit of using outside organizations for
these marketing activities is that it allows life sciences companies to refocus
resources on their core competency: discovering and developing new products.
Since the early 1990s, outsourcing has gained significant momentum among U.S.
pharmaceutical manufacturers and other life sciences companies. The specific
support services purchased by these companies have since expanded beyond
product detailing to include every facet of the marketing and sales process.
Over time, the leading healthcare marketing service providers have offered a
wider range of value-added services to their clients, although most have
retained a specific focus.
We estimate that the market for healthcare marketing services among global
pharmaceutical manufacturers was approximately $41.5 billion in 1998, with
approximately $1.4 billion of these services performed by outside providers
such as Ventiv, according to Datamonitor, an independent market research firm.
Currently, the principal purchasers of outsourced healthcare marketing services
are pharmaceutical manufacturers. Although pharmaceutical companies currently
spend the majority of their marketing dollars on product detailing,
expenditures on promotional events and direct-to-consumer advertising are
growing at a rapid pace. These marketing techniques are under-utilized by
contract providers, representing significant opportunities for expansion,
especially among non-pharmaceutical companies in the life sciences industry. We
estimate that outsourcing has penetrated only approximately 3.4% of the total
market for healthcare marketing services among pharmaceutical companies.
Trends Affecting Growth
We believe that the healthcare marketing services industry will continue to
grow at a rapid pace due to the following factors:
Trend Towards Outsourcing. Outsourcing marketing and sales activities
provides several benefits for life sciences companies. By utilizing outside
providers, they are able to convert fixed costs to variable costs. In
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addition, outsourcing these marketing activities allows life sciences companies
to focus resources on their core competency: discovering and developing new
products. Utilization of outsourced marketing services provides strategic
financial flexibility to the client by allowing it to shift assets quickly and
flexibly without causing internal dislocation. As the trend towards outsourcing
continues, we expect the amount spent on outsourced healthcare marketing
activities to increase substantially.
Low Market Penetration. We believe that the current low level of market
penetration provides a tremendous growth opportunity for a well-positioned,
fully integrated healthcare marketing services provider. Estimates cited by
Hambrecht & Quist in an industry research report indicate that the number of
outsourced sales representatives utilized by the pharmaceutical industry in the
United States increased from approximately 2.6% of the total number of sales
representatives in 1994 to 11.2% in 1997, leaving a large potential for market
share gains by the industry.
Technological Breakthroughs. Pharmaceutical, biotechnology, medical device,
and diagnostics companies' ability to increase revenue and increase
profitability depends largely on introducing successful and innovative new
products. Scientific breakthroughs in the pharmaceutical and life sciences
industries have revolutionized the discovery process and caused the number of
new products to increase in recent years. Life sciences companies are
significantly increasing research and development expenses to develop new
products and maintain a steady flow of marketable products. For example, during
1998, the industry trade group Pharmaceutical Research and Manufacturers of
America estimated that U.S. pharmaceutical companies spent approximately $21.1
billion worldwide on research and development, up over 10% from 1997 figures.
Investment in research and development has produced a robust pipeline of future
opportunities for the life sciences industry, and, by extension, for healthcare
marketing service providers. As these companies continue to expand the pipeline
with the introduction of new products, the need for educational programs and
focused marketing plans will increase in tandem. In addition, new launches will
increasingly be focused on specific conditions and patient segments, creating a
greater benefit from a more flexible and targeted sales and marketing effort.
Regulatory Approval Process Streamlined and Harmonized. Changes in the U.S.
Food and Drug Administration approval process have complemented the increasing
research and development effort to bring new products to market. The FDA was
the subject of significant scrutiny during the early 1990s to improve
efficiency and reduce the review time for new drug applications. The result of
this scrutiny was the adoption of the FDA Modernization Act of 1997. Average
approval process times have declined dramatically during the 1990s, from 30.3
months for drugs approved in 1991 to 11.7 months for drugs approved in 1998.
Also, products designed for conditions with few existing treatment options
receive special "fast-track" process approval. The result of these reforms is
that the FDA renders faster approval decisions. In addition, regulatory
harmonization across countries is the norm, driven by the International
Conference on Harmonisation's efforts over the years. Pharmaceutical
manufacturers that file and receive regulatory approval in parallel in key
global markets now face the challenge of coordinating simultaneous launches
across these markets. An improving regulatory environment has contributed to
the large number of new life sciences products entering the market, increasing
the need for concentrated marketing efforts.
Favorable Demographics. Several demographic and medical trends also
contribute to strong sales growth prospects for pharmaceuticals and other life
sciences products. The aging baby boomer generation will have a tremendous
impact on the average age of the U.S. population, with adults over 65 as a
percentage of the population forecasted to increase from just over 30% in 1995
to over 50% of the population in 2020 according to the U.S. Census Bureau.
Since older adults tend to spend more money on pharmaceuticals than any other
segment of the population, we expect this demographic shift to stimulate the
demand for pharmaceutical and other life sciences products in the future.
Additionally, as total healthcare expenditures steadily increase, the potential
for national healthcare reform and the growing influence of managed care in the
U.S. has created substantial pressure to reduce healthcare costs. Cost control
pressures have also led to a growth in demand for
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minimally invasive treatments, including the use of drug therapy as an
alternative to surgery. Many managed care companies view pharmaceuticals as an
alternative to expensive hospital stays, as well as an inexpensive preventative
care mechanism that is likely to reduce the frequency of emergency room visits.
These trends represent a significant growth opportunity for healthcare
marketing services providers.
The Ventiv Approach
By providing a complete line of value-added marketing services for the life
sciences industry, Ventiv is positioned to take advantage of this growth
opportunity. Our service offerings are designed to facilitate the development
and execution of marketing strategies as new products advance from clinical
trials to product launch and throughout their useful life. We believe that we
are not only one of the leading providers of healthcare marketing services, but
that we are also uniquely positioned to provide global integrated services that
address the full spectrum of client demands. To date, our clients are primarily
comprised of pharmaceutical companies, which are estimated to have outsourced
only 3.4% of the more than $41.5 billion annually they spend worldwide on such
services.
We serve our clients through three operating groups: Health Products Research
("HPR"), the Healthcare Communications Group ("HCG") and the Contract Sales
Group ("CSG"). These groups reflect the three primary aspects of the marketing
process for pharmaceutical and other life sciences products. First, the
product's targeted marketing and sales effort must be carefully designed to
maximize the manufacturer's return on investment (HPR); second, product
awareness and demand within the medical community must be created and
maintained throughout the pre- and post-launch marketing effort (HCG); third,
the product must be sold by a team of highly trained sales representatives
(CSG); and, finally, sales results must be constantly monitored and sales
strategies must be adjusted to respond to a dynamic marketplace (HPR). Each
group is integrated as part of the overall program but performs very specific
functions. Our clients have the choice of working with us across our full
spectrum of services or narrowly within one of these groups. There is
significant overlap among product lines and extensive opportunities for cross-
selling. Most of our largest clients have already begun to utilize the services
of more than one group.
Our three operating groups possess significant combined experience, having
developed and conducted successful marketing programs for hundreds of
individual pharmaceutical and life science products. This expertise spans most
therapeutic categories, including the significant markets of cardiology, anti-
infectives, oncology, and neurology. Our core competencies and track record of
proven success enables us to establish strong relationships with our clients'
senior marketing and sales personnel, leading to a high rate of repeat
business. Repeat business, which we define as recurring and contracted new
business from existing clients, is projected to account for approximately 80%
of our total revenues in fiscal 2000, which is consistent with our historical
trends.
Our strategic goal is to provide the pharmaceutical and life sciences
industries with value-added support services that will enable our clients to
achieve superior product sales through higher market penetration.
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[Included here is a chart depicting the offering of Ventiv's services over the
pharmaceutical product development time line. The chart shows each group's role
in the product development time line.]
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Ventiv's Operating Groups
We offer the full spectrum of marketing and sales services through our three
operating groups: Health Products Research, the Healthcare Communications Group
and the Contract Sales Group.
Health Products Research
HPR is responsible for the design of a product launch program and monitoring
the program's development to maximize the potential for a product's success.
This is achieved by using proprietary software to analyze data compiled from
internal sources (such as the contract pharmaceutical salesforce) and third
parties (such as IMS Health Inc., a provider of market research data for the
healthcare industry) to determine specifically how a targeted strategy can
maximize asset utilization and return on investment for our clients.
HPR offers the following core services which it customizes for particular
clients:
. Market Segmentation Analyses
HPR conducts segmentation analyses of the physician universe using
pharmacy-level data in combination with numerous variables such as
product potential, market share, the medical professionals' specialties
and reputations as innovators, and many other individually weighted
qualitative and quantitative data points. Segmenting this physician-
level data supports analyses and modeling that is designed to address
issues such as promotion response, targeting, message development, and
forecasting. HPR also links segment data to primary market research to
identify differences in attitudes and estimate future prescribing
patterns.
. Promotion Planning and Evaluation (PROM sm)
HPR's proprietary PROMsm family of analytical models measures
historical promotion response by physicians from various personal and
non-personal promotional events (including market trials). This
provides a comprehensive understanding of the sales responsiveness to
an individual product or marketing effort. PROM sm is unique in that it
can measure a separate response for individual physicians by
promotional channel. PROM sm is also designed to quantify the
interactive effect of promotional media. This data is used to determine
the optimal promotional mix. Ultimately, PROM sm is used to provide
market intelligence to enhance market share, identify optimal sampling
levels, evaluate the cost of a detail over time, understand the impact
of marketing programs and measure field force(s) effectiveness.
. Resource Allocation (Single and Multi-Product)
Utilizing segmentation and promotional response data, HPR's resource
allocation models determine the resource needs for single-product or
multiple brand promotions.
The UniBrandsm model uses the output of a PROM sm analysis and market
research as inputs into a causal forecasting model that develops, by
brand, future promotion response curves and optimal, unconstrained
details by physician segment while considering future market events and
the knowledge of product management. Based on the response by promotion
type and an understanding of the interaction among promotion types, a
promotion mix analysis can determine the optimal promotion by brand.
The UniBrand sm approach focuses on increasing return on investment
through the evaluation of content and capital employed for each
promotion type. Additionally, it also identifies how one type of
promotion can substitute for and/or enhance other promotion types.
Once the future response curves have been calibrated by UniBrand sm,
this leading-edge technology can be incorporated in a multi-product
resource allocation model, or RAM sm. RAM sm is designed to maximize
sales and profits by determining optimal salesforce size and structure,
as well as
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constrained details across brands. The RAM(SM) approach also can be used
to examine "what if" scenarios for different strategic and tactical
alternatives.
. Call Planning System (CAPS(SM))
Through its proprietary technologies, HPR's CAPS(SM) provides an easily
implemented targeting plan for the sales representative while ensuring the
optimum allocation of field force effort across brands and physicians. The
CAPS(SM) system determines the best call frequency and brand detailing
prioriti)es for each physician. CAPS(SM) also supports changes in the
portfolio focus on short notice, thereby enabling organizations to respond
quickly to internal and external developments.
. Salesforce Deployment and Analysis Group
HPR provides strategic salesforce alignment and deployment strategies for
home office and field teams. Alignment services are conducted by analysts
with technical expertise as well as healthcare industry experience who are
committed to the design and realignment of salesforces.
. Data Services
HPR provides healthcare-specific data management services by integrating
data from multiple sources, including internal legacy systems and purchased
third-party data, to identify opportunities that drive business
performance. Data service consultants design customized data collection and
manipulation software programs which analyze data, maintain report
generation functions and manage operational activities such as production
control, data clean-up, matching and ad hoc projects.
. Strategic Consulting
HPR's consultants in the strategic planning group work with clients,
designing solutions for issues such as resource allocation, forecasting,
pricing, and compensation. Their focus on incorporating best practices
within the culture of organizations yields pragmatic and easily implemented
business solutions that can be integrated throughout the organization.
HPR's distinctive process for developing strategic and tactical resource
allocation is predicated upon the linking of services and data through
solutions based on doctor-level intelligence. The direct link that exists
between the strategy and the data ensures pragmatic and effective solutions
and yields tangible results for our clients.
Healthcare Communications Group
HCG is responsible for the education of physicians and other decision makers
in the medical community regarding the profile of a new product. According to
the requirements of the client's marketing department, HCG will specifically
target the appropriate decision makers for maximum impact. The goal is to
provide sufficient information to generate interest and stimulate demand both
prior to and after a product launch. Therefore, the educational process begins
in early-stage clinical trials and is accomplished through a variety of media
customized to a client's needs.
HCG maintains accreditation status with both the Accreditation Counsel for
Continuing Medical Education ("ACCME") and American College of Physician
Executives ("ACPE"). This distinction provides our programs essential
credibility in the medical community and mitigates the skepticism of many
physicians regarding information provided directly by life sciences companies.
In fact, our ACCME and ACPE accreditations have resulted in significant
attendance at HCG events because physicians are required by law to participate
in accredited education activities in order to maintain their licenses.
The following is a description of several of our more frequently used product
formats for the delivery of information:
Monographs. HCG publishes highly focused educational reports which typically
carry ACCME or ACPE accreditation. Usually 12 to 24 pages in length, these
reports present topical, state-of-the-art materials on a specific clinical
issue by leading the practitioner through the treatment analysis for
appropriate patients.
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Interactive CD-ROMs. Pharmaceutical companies have been allocating more
promotional spending into "alternative media," and HCG is well positioned to
serve their needs with its successful track record of developing CD-ROM
products. These interactive programs can be designed as a training tool for a
pharmaceutical company's own salesforce, a board review study guide for
physicians, or a self-paced instructional package on a wide variety of topics
for doctors, nurses, patients, and other target groups.
Full-Color Books. The group also publishes full-color books which range from
100 to 250 pages in length that can be designed to offer in-depth educational
discussion pieces or simply provide an attractive photographic journal narrated
by a well respected physician or medical archivist. As tabletop volumes or
softcover reference books, they provide ongoing reminders of the sponsoring
pharmaceutical company and/or product.
Audio Cassettes. Audio cassettes typically deliver topical information to
doctors such as lectures by leading physicians, roundtable discussions,
summaries of conferences, interviews with prominent specialists, and similar
information. Generally 30 to 60 minutes in length, they can be accredited or
non-accredited, but are always educational in nature or content.
Symposia. HCG products and services include the development and management of
all types of meetings, including symposia, satellite training teleconferences,
and advisory panels. Medical symposia typically involve physicians hearing
presentations regarding a drug or treatment protocol presented by a faculty of
experts in the field for the purpose of being trained to serve as consultants
and spokespeople for the sponsoring pharmaceutical company. Attendees and
faculty from numerous remote locations can also interact in satellite-
transmitted symposia organized by HCG.
Telemarketing. By providing a complete staff of trained telemarketers, our
telemarketing services significantly enhance a life sciences company's ability
to communicate effectively with physicians. These services give us the ability
to conduct physician awareness programs, focus group recruitment, physician
profiling, physician detailing, sampling follow-ups, qualification of sales
leads, phone surveys, consumer surveys, customer service, compliance building
and patient care management.
Direct Mail. HCG's direct mail capabilities are usually combined with its
integrated marketing programs to efficiently deliver materials to its target
audience. We offer a full complement of packaging and mailing services, as well
as state-of-the-art warehousing that provides quick and efficient assembly of
promotional programs and inventory tracking.
Sample Fulfillment. Registered with the FDA as a secondary re-packager, HCG
can assemble promotional materials, insert pharmaceutical samples under
controlled conditions and ship samples to potential prescribers from its
warehouse. The group's combination of pharmaceutical warehousing and direct
mail capabilities allow it to coordinate sample delivery with sales calls on
physicians as well as administer drug recalls and rebate programs, all part of
a seamless automated product offering for the client.
Other Products. In addition, HCG offers a number of auxiliary products and
services and maintains an ability to deliver content in substantially all forms
of media that life sciences companies use to communicate promotional
educational messages. Other media can involve drug utilization reviews, color
atlases, posters, videotapes, convention kiosks, screen savers, and Internet
educational programs. HCG also assists its clients through higher value-added
services such as product marketing strategy consulting, database management
focused towards sales targeting, and field sales support services.
HCG's ability to deliver its marketing and educational messages through a
wide range of media has enhanced our reputation as a "one-stop shop" offering
an integrated range of services to life sciences companies. However, each
marketing solution is customized to deliver a specific message to a highly
targeted audience. HCG also searches constantly for ways to expand its products
to meet the needs of our clients and combine its services with those of our
other operating groups. For example, offering avenues of support
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<PAGE>
through the direct mail and sample fulfillment programs enables CSG's
salesforces to operate more efficiently and effectively by automating a
significant portion of the post-physician consultation follow-up work (such as
literature and sample mailings).
Contract Sales Group
CSG is responsible for the implementation and execution of outsourced sales
programs for prescription pharmaceutical and other life sciences products. This
service is otherwise known as "product detailing." CSG maintains and operates
the requisite systems, facilities, and support services to recruit and deploy a
customized, full-service and highly targeted salesforce within 8-12 weeks.
Currently, CSG operates one of the largest sales organizations in the United
States (larger, in fact, than many pharmaceutical companies), with
approximately 2,600 sales representatives in the U.S. and approximately 4,400
worldwide. It also has significant global coverage through its operations in
the United Kingdom, France, Germany, and Hungary.
Life sciences companies, particularly pharmaceutical manufacturers, have
traditionally relied upon product detailing as the primary means of influencing
prescription writing patterns and promoting their products. Product detailing
consists of a one-on-one meeting in a physician's office where a sales
representative reviews the medical profile of a product's FDA-approved
indications. Information provided by the sales representative includes the
product's role in treatment, efficacy, potential side-effects, dosage, danger
of contra-interactions with other drugs, cost, and any other appropriate
information. The dialogue is two-way with the salesperson collecting the views
of each individual physician. Discussions will often include topics such as the
type of patient most likely to benefit from a particular therapy as well as the
relative benefits of alternative products. This requires the salesperson to be
well-educated and highly trained, both of which are core competencies of CSG.
In addition, engaging in an educational dialogue with the medical professional,
the sales representative will provide free product samples as a supplement to
the sales effort. This affords the prescription writer and his or her patients
first-hand exposure to the medical product and creates a sense of familiarity
and comfort with the product.
Providing clients with the highest quality sales people requires effective
recruiting and training. To accomplish a coordinated recruiting effort, we
maintain a national recruitment office that locates and hires potential sales
representatives. Our in-house human resources team adheres to selective hiring
criteria and conducts detailed evaluations to ensure the highest-quality
representation for our clients. CSG's recruiters maintain a fully automated
database of qualified candidates for immediate hiring opportunities, and its
Internet home page offers an online application for employment. CSG hires a mix
of full-time and flex-time representatives in order to accommodate the
detailing level required by clients and maximize cost efficiency.
We also emphasize the training of our personnel, and believe we are the only
contract sales organization with a fully dedicated stand-alone training
department. CSG's professional development group has the largest dedicated
training facility of its type in the United States. Our goal is to ensure that
sales representatives are knowledgeable and operate professionally,
effectively, and efficiently. Topics such as sample accountability, negotiation
tactics, personal writing skills, integrity selling, time and territory
management, team productivity, and pharma-manager leadership are covered
extensively in order to prepare the representative for their eventual contact
with medical professionals. CSG's trainers are the top professionals in their
field and rely upon proprietary information regarding physician prescribing
behavior and industry best practices. In all, CSG offers over 20 separate
training programs. As the students are from both CSG's and our clients'
salesforces, the training and recruiting services are essential to maintaining
and building our relationships with the pharmaceutical companies. These
strengths are widely recognized as differentiating factors which benefit the
overall contract sales effort.
Once recruited and trained, CSG operates two types of salesforces: dedicated
and syndicated. A dedicated salesforce is responsible for the sales of only one
product or of multiple products of a single manufacturer. Dedicated salesforces
facilitate focus and one-on-one conversations with prescribing physicians. A
syndicated salesforce represents products of multiple manufacturers, and, as
such, the client purchases a share of the time
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the salesperson spends with the physician, thereby decreasing overall cost for
the service. The applicability of each salesforce depends on the specific
circumstance and the client's portfolio of products. Syndicated salesforces are
seldom used in the U.S., but are common in the U.K. and parts of continental
Europe.
We are committed to providing our clients with customized cost-effective
sales support. This is reflected in the variety of options clients have to
choose from, including the type of salesforce (dedicated vs. syndicated), the
specialties of the salesforce (oncology, cardiology, etc.), the methodology
employed targeting decision makers in the medical community and the type of
analysis which is conducted based on the information the salesforce collects.
We work closely with our clients in all aspects of our service offering to
ensure maximum impact of the product's promotional effort.
The combination of our contract sales capabilities with HPR and HCG has
resulted in our proven ability to:
Maximize product launch tactics
Our salesforce has launched products where it had both partial and complete
promotional responsibility. The emphasis is on speed-to-market and impact, and
there are examples where CSG's efforts have helped our client's product to
become the most prescribed drug in its category within the first three months.
Provide globally targeted pharmacy promotions
International and domestic coverage of independent and chain pharmacies for
product launch, pipeline fill, and other related programs enable us to provide
a simultaneous geographic launch. Given that regulatory filings by
pharmaceutical customers are now coordinated on a global basis, this capability
is an increasingly important competitive advantage.
Mobilize specialized field salesforces
CSG's ability to execute and implement tailored programs and sales teams for
managed care initiatives; hospital coverage for surgery, cardiac device, and
advanced wound care treatment products; and clinical laboratory programs
collectively demonstrate the utility to our clients of Ventiv's high level of
salesforce training, mobilization and integration.
Support mature lines
Our services include the promotion of existing products in addition to
products emerging from our client's research pipeline. For example, we helped a
client elevate a ten-year-old product to a number one market share position in
13 months.
Collect and analyze sales information
We believe that CSG leads the industry in the collection and analysis of data
necessary to make marketing resource allocation decisions. Sales
representatives are equipped with palm-top computers, in order to collect sales
call and physician profiling information, which is uploaded into a central data
storage server after each day of sales calls. Our state-of-the-art information
processing system allows sales management teams to analyze real-time data
constantly, compare the results with targeted initiatives and historical data,
and make necessary adjustments to the sales strategy.
Our ability to increase the incremental sales of older life sciences products
and enhance the sale of newer products is critical to the financial success of
our clients. Our integrated approach to contract sales, experienced management
team, recruiting, professional training and development, and use of technology
provide the company with a competitive advantage in marketing products for our
clients. With the ability to leverage off of
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the capabilities of HPR and HCG, CSG is well-positioned to provide value-added
services across an array of product types in the life sciences industry.
Case Study
The following case study illustrates the way in which we provide our clients
with integrated value-added marketing solutions across the full spectrum of our
product offerings.
A multinational pharmaceutical client was preparing to launch a group of new
drugs with an annual revenue potential in excess of $750 million. Due to a high
volume of new product launches, our client's internal marketing organization
was unable to properly address its newly expanded product offering. As a
result, our client sought an outside partner which could provide it with
effective sales and marketing solutions for its new brands. The goal was to
enable the client's salesforce to focus on the existing product lines rather
than dilute its efforts by forcing it to conduct marketing programs for an
expanded offering. Additionally, by outsourcing this component of its marketing
effort, our client would not have to re-allocate resources from other areas,
such as research and development, to compensate for an expanded sales and
marketing program.
Our client charged us with the task of developing a comprehensive strategy
and requested that we submit a proposal which included a detailed overview of
an "optimal marketing program." As part of our proposal, we prepared a
customized program including identification of all anticipated
sales/promotional resources (sales representatives, medical education and
product sampling) required to properly market these new products. In addition,
we presented a strategy which outlined the development of a full field sales
support group as well as other ancillary services necessary to insure the
proper sales growth and market penetration of the new products. This client
ultimately signed a contract with us based upon our proposal, including a five
year marketing contract for the new products, with a long-term promotional
partnership extending beyond the contract that is designed to perpetuate the
sales effort until the patents expire.
To develop the optimal marketing program, Health Products Research used its
proprietary background research along with information gathered from strategy
meetings conducted with our client. These meetings were crucial in establishing
the preliminary expectations for the appropriate promotional requirements. In
addition, these meetings established which marketing techniques would be
acceptable from the client's perspective. The optimal marketing program
developed by our three operating groups included provisions for the sales group
size, management, and resource deployment, as well as plans for ancillary
services such as salesforce training through our professional development
group, field force automation to handle the call reporting and sample
accountability, and the automation of management reports that will be required
to track sales and promotion progress. In addition, the marketing program
outlined the creation of educational materials, medical symposia, and sales
aids provided by the Healthcare Communications Group and ongoing analysis by
HPR to maximize the effectiveness of the effort.
To implement this marketing program, the Contract Sales Group began to
assemble the salesforce and prepare the supplemental marketing materials.
First, by utilizing our 18 dedicated regional recruiters we screened and
selected the appropriate candidates for the sales force. Secondly, all training
materials and programs were customized for the new products and sales team. A
lead trainer was assigned to oversee the training and compilation of the
materials and to ensure that the highest levels of quality were maintained
throughout the training process. During the instruction, the managers and
representatives received product and systems training and gained exposure to
our proprietary selling skills program designed to teach behavioral traits
which are most successful in driving market share and revenue. Our management
information systems group ordered all the equipment necessary for the sales
team and worked directly with outside providers of salesforce automation
software to ensure that their products were properly customized to meet out
client's needs.
Concurrently, HPR obtained and analyzed the pharmacy-level data (outlining
prescription writing trends among doctors) in order to identify and target the
appropriate audience within the medical community. In addition, HPR determined
the proper marketing approach and frequency of the representative visits to
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maximize the promotional effort. The data were then loaded into our proprietary
Pharm-align program to identify the most lucrative sales territories. HPR then
created a call plan for each representative that was downloaded to the sales
representatives' palm-top computers.
Once deployed, the salesforce was continually supported by our normal
business model which includes a consistent ongoing effort from all of our
groups. The project's national business director was part of all decisions
relating to the group and continues to sit on a team that oversees the
outsourced project. Additionally, HCG provided the medical education programs
created for the specific drugs. During the course of the five-year contract,
HPR will also conduct ongoing analysis of the promotional effort, gauging the
reaction to the medical education programs and continually monitoring market
conditions to insure that we are maximizing the return on investment for our
client's marketing expenditures.
This example provides an illustration of a situation where a client
approached us with a specific sales and marketing problem and, because of our
integrated service offering, we addressed all of the client's issues while
constantly evaluating and adjusting the marketing program to improve its
effectiveness.
In summary, we believe we are the leading global provider of value-added
service offerings to pharmaceutical and life sciences companies throughout the
product marketing and sales process. Our extensive corporate network offers a
comprehensive array of targeted marketing solutions to ensure results.
Competitive Advantages
Leading Global Healthcare Marketing and Sales Services Company. We are one of
the largest competitors in the global market for outsourced pharmaceutical
marketing solutions, with an estimated 23% worldwide market share and
significant operations throughout Western Europe (United Kingdom, Germany,
France and Hungary) and the United States. The healthcare marketing services
industry is highly fragmented. We are one of only two large-scale providers of
contract sales with at least a 20% worldwide market share and a salesforce
ranked first or second in size among outside providers in the United States,
Germany, France and the United Kingdom, constituting four of the top six
worldwide pharmaceutical markets. We are also a significant provider of medical
communications and strategic sales and marketing planning. We service a large
number of physicians, nurses, pharmacists and formularies. We reached an
estimated 2.3 million individual healthcare professionals during the past year.
These people are regularly contacted by our representatives--4.5 million calls
on physicians in 1998 alone--enabling the collection of valuable profiling
data. Our large-scale presence in each key market provides significant
advantages in terms of experience, speed, capabilities, and technology. Our
broad geographic scope provides us with a unique ability to serve our global
pharmaceutical clients across their key markets, an increasingly critical need
in an era of simultaneous global launches.
A Broad and Integrated Service Offering. We offer a broad and integrated
range of services, from the education of physicians on a drug's development,
through the strategic analysis and design of a targeted product launch, to the
availability of approximately 4,400 sales representatives to implement the
plan. The comprehensive education programs include conventions, symposia and
Continuing Medical Education ("CME") credit classes necessary for physicians to
retain their license. When a drug is ready to be launched, Health Products
Research utilizes proprietary call planning, territory alignment and workload
analysis to ascertain the ideal staff levels and coverage required to reach
forecasts, subsequently monitoring progress on a real-time basis to maximize
return on investment for pharmaceutical clients. The deployment of our highly
trained salesforce is managed by a national recruitment team that ensures that
calls begin on a coordinated basis within 8-12 weeks.
Our business model is configured so that each product line supplements the
full spectrum of other product lines. Our relationship with our clients is
perpetuated by continual expansion of the services utilized by our
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client base. The self-perpetuating nature of our business model also has
significant financial benefits. Our level of integration enables us to
participate in each cross-selling opportunity, which in turn guarantees the
potential to generate additional revenue streams. We have leveraged our
position to capture higher-margin business and retain our focus on providing
significant value-added services. In addition, our ability to offer our sales
and marketing services on either a stand-alone or single-stop bundled basis
enables higher market share capture and a higher proportion of repeat business.
Proprietary Technologies and Data. We maintain and operate a number of
proprietary software programs and systems for marketing development and data
gathering. HCG develops interactive CD-ROMs for our clients which can be
designed to educate and train a pharmaceutical salesforce about a new drug,
provide a board review study guide for a physician, or function as a self-paced
instructional package on a wide variety of topics for medical target groups.
Pharmaceutical companies are allocating more marketing dollars to instructional
software due to the success of these tools, and our established expertise makes
us well positioned to serve this segment. To conduct strategic studies, HPR
employs a series of programs which were designed in-house and utilizes data
which is gathered and processed by our Contract Sales Group. Simultaneous
access to the aforementioned resources enables HPR to produce unique and
intricate value-added studies for the benefit of our clients. These value-added
offerings are a significant advantage for us, directly translating into an
increase in our clients' return on investment through better salesforce sizing
and targeting and higher salesforce productivity. Moreover, we have made a
considerable investment in technology and are focused on using cutting-edge
salesforce automation tools to increase our efficiency. At present,
approximately half of our salesforce is currently equipped with palm-top
computers, and our deployment of this technology will increase throughout 1999.
Such real-time data is important for pharmaceutical clients during the launch
of a drug, allowing rapid profiling of the impact on targeted physicians and
facilitating the refinement of calling frequency and marketing tactics. We
believe these proprietary tools and technologies translate into higher
salesforce productivity and lower cost relative to many of our competitors.
Existing Broad "Blue Chip" Client Base. In addition to having 18 of the 20
largest pharmaceutical companies as clients, we also serve a large number of
mid-size and smaller life sciences companies. As each of these companies uses
our services, our relationship is expanded and the opportunity to cross-sell
products increases. Due to the nature of the business, contracts tend to be
longer in duration and are rarely terminated prior to their expiration. Our
business is not overly concentrated on a small number of clients. As a result,
the existing client base, while not captive, is likely to become more
intertwined with us as the relationship grows in tandem with the client's need
for additional services.
Experienced and Visionary Management Team. The experience of our management
team in the pharmaceutical and marketing industries ranges from 9 to 26 years.
This group includes entrepreneurs who founded their respective businesses and
continued to manage them after transitioning to Snyder, as well as executives
with substantial expertise managing pharmaceutical salesforces and establishing
sales and marketing strategies. We believe our mix of senior management with
pharmaceutical salesforce management, entrepreneurial talent and strategic
perspective is unique in the industry.
Our senior management team has outlined an exciting vision which includes
expanding the services offered by our communications unit, expanding HPR and
HCG in Europe, and developing Internet applications which allow physicians to
access our training materials online. Additionally, we intend to capitalize on
our real-time data access through our 4,200-person salesforce. Because of our
high level of quality service, our pharmaceutical clients have rewarded us with
contract extensions and high rates of repeat business. Physicians routinely
give us the highest marks in surveys of medical education programs. Our CME
program was recently awarded a four-year accreditation period by ACCME. We are
one of only a few ACCME-accredited commercial enterprises. Additionally, we
provide the most advanced strategic analysis in the industry through Health
Products Research.
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Clients
We provide our services to leading pharmaceutical, biotechnology, medical
device and diagnostics companies on a global basis. During 1998, we maintained
contracts with 210 clients, an increase of 50 individual clients from 1997. Our
blue chip client base includes 18 of the 20 largest pharmaceutical companies,
which clients accounted for approximately 65.9% of our total revenues for the
six months ended June 30, 1999. Our ten largest clients comprised approximately
60.9% and 56.5% of our revenues in fiscal years 1997 and 1998, respectively,
although no single client accounted for more than 14% of our revenues in fiscal
years 1998 and 1997, respectively. In 1997, Bristol-Myers Squibb and
AstraZeneca represented 12.7% and 12.0%, respectively, of our revenues. In
1998, AstraZeneca and Bristol-Myers Squibb represented 13.9% and 10.4%,
respectively, of our revenues. For the six months ended June 30, 1999, no
single client represented more than 10% of our revenues. We consider our close
relationship with leading pharmaceutical manufacturers to be an important
competitive advantage, providing us with a source for recurring revenues as
well as sales growth opportunities as new products are developed and launched.
The services are sold to the same target groups for each client, namely their
marketing and sales departments. This provides the basis for continuous
interaction and feedback, allowing us to continuously improve our services and
identify new business opportunities, a process augmented by the long-term
nature of our contracts.
The vast majority of our largest clients are companies which have
international operations. We believe that these and other multinational
companies will seek outside providers that can provide sales and marketing
solutions which transcend national boundaries. We believe that we currently
have the scope and scale of services needed to effectively provide healthcare
marketing solutions to multinational clients.
We have developed sustained relationships with blue chip clients that provide
us with recurring revenue streams and service cross-selling opportunities. Our
ability to add value at every part of the product life cycle enhances our
ability to form long-lasting relationships with clients.
Our relationships with a client's marketing and sales organizations also
benefit from high switching costs, as retaining another salesforce and
redesigning a market program would create substantial additional expense and
cause losses in time and productivity for our clients. In addition, the
successful medical marketing outsourcers have established their reputations due
to sophisticated performance evaluation capabilities, and clients are unlikely
to use vendors without widely recognized expertise. Set forth below is a list
of our clients which provided 3% or more of our revenues for the six months
ended June 30, 1999:
Abbott Laboratories Glaxo Wellcome
AstraZeneca Johnson & Johnson
Bristol-Myers Squibb Merck
Eli Lilly Monsanto Company
Endo Pharmaceuticals Novartis
Forest Laboratories
Competition
We believe that no other organization offers the same scope of integrated
healthcare marketing services as we offer our clients. Our competitors include
contract sales organizations as well as contract research organizations that
offer healthcare marketing services. Additionally, drug distribution companies
have indicated a desire to enter this lucrative market by leveraging their
knowledge base and effecting strategic acquisitions. Each of our operating
groups faces distinct competitors in the individual markets in which the group
operates. However, none of our competitors provide the full scope of services
we currently offer through our three operating groups.
Contract Sales. A small number of providers comprise the market for contract
sales, which represents more than 75% of outsourcing revenues in the healthcare
marketing services market as a whole. Ventiv,
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Innovex (Quintiles), Professional Detailing Inc., and Pharmaceutical Detailing
Network combined accounted for nearly 95% of the United States contract sales
market share in 1997, with Ventiv and Innovex being the only participants to
have an international presence. None of these organizations are a significant
competitor with regard to healthcare marketing services other than contract
sales. The rest of the industry is highly fragmented, with a large number of
small providers attempting to develop niche services.
Contract Marketing Services. The contract marketing services sector contains
many more competitors and is also highly fragmented. This is due in part to the
wide variety of marketing activities required by medical product companies,
including promotional meetings, symposia, video satellite conferencing, peer-
to-peer meetings, medical educational material and conferences, teleservices,
field force logistics and product management. As a result, accurate relative
market share is more difficult to define as we encounter different competitors
for each of these services. The only competitors of significant scale in the
broad marketing sector are narrowly focused: Boron LePore & Associates, which
provides peer-to-peer physician education meetings, and privately owned ZS
Associates, which provides strategic assessments similar to the services of
HPR. Neither of these organizations compete with us in the contract sales
market.
Employees
At June 30, 1999, we employed over 4,700 people worldwide, including
approximately 2,900 employees in the United States and 1,800 in Europe. Of
these worldwide employees, approximately 30% are part-time, primarily serving
in the contract salesforces in the United States and United Kingdom. For the
most part, we hire individuals with experience in pharmaceutical product sales
and with scientific or medical backgrounds. Approximately 40% of our employees
have advanced degrees. Our contract sales representatives also undergo
specialized training in order to gain knowledge of the products they sell,
including an understanding of its competitive position. Approximately 70% of
our employees have pharmaceutical industry experience, with an average of 11
years experience among our U.S. salesforce.
<TABLE>
<CAPTION>
Sales Reps
and Managers Operations Total
------------ ---------- -----
<S> <C> <C> <C>
U.S. Contract Sales............................... 2,448 105 2,553
U.K. Contract Sales............................... 510 42 552
French Contract Sales............................. 1,041 29 1,070
German Contract Sales............................. 218 30 248
----- --- -----
Total Contract Sales.............................. 4,217 206 4,423
Healthcare Communications......................... N/A 245 245
Health Products Research.......................... N/A 99 99
----- --- -----
Total Worldwide Employees......................... 4,217 550 4,767
===== === =====
</TABLE>
- - - --------
As of June 30, 1999.
Government Regulation
Several of the industries in which our clients operate are subject to varying
degrees of governmental regulation, particularly the pharmaceutical and
healthcare industries. Generally, compliance with these regulations is the
responsibility of our clients. However, we could be subject to a variety of
enforcement or private actions for our failure or the failure of our clients to
comply with such regulations.
In connection with the handling and distribution of pharmaceutical products
samples, we are subject to regulation by the Prescription Drug Marketing Act of
1987 and other applicable federal, state and local laws and regulations in the
United States, and certain regulations of the United Kingdom, France, Hungary,
Germany and the European Union. These laws regulate the distribution of drug
samples by mandating storage, handling and record-keeping requirements for drug
samples and by banning the purchase or sale of drug
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samples. In certain jurisdictions, including the United Kingdom and France,
pharmaceutical sales representatives are subject to examination and licensing
requirements under local law and industry guidelines. Ventiv believes it is in
compliance in all material respects with these regulations.
Our physician education services are also subject to a variety of federal and
state regulations relating to both the education of medical professionals and
the marketing and sale of pharmaceuticals. In addition, certain ethical
guidelines promulgated by the American Medical Association govern the receipt
by physicians of gifts in connection with the marketing of healthcare products.
These guidelines govern the honoraria and other items of value which AMA
physicians may receive, directly or indirectly, from pharmaceutical companies.
Ventiv follows similar guidelines in effect in other countries where it
provides services. Any changes in such regulations or their application could
have a material adverse effect on Ventiv. Failure to comply with these
requirements could result in the imposition of fines, loss of licenses and
other penalties and could have a material adverse effect on Ventiv.
From time to time, state and federal legislation is proposed with regard to
the use of proprietary databases of consumer and health groups. The uncertainty
of the regulatory environment is increased by the fact that we generate and
receive data from many sources. As a result, there are many ways both domestic
and foreign governments might attempt to regulate our use of its data. Any such
restriction could have a material adverse effect on Ventiv.
Properties
Our headquarters is located in Somerset, New Jersey at a site we lease.
Ventiv and its operating subsidiaries own facilities in Boulder, Colorado and
Lenggries, Germany, with a total approximate area of 27,000 square feet, and
lease approximately 17 facilities with a total approximate area of 141,300
square feet, which includes warehouses, stores and offices, in the United
States, the United Kingdom and in continental Europe. Of the total 168,300
square feet of owned and leased space, 21,100 square feet are utilized by the
Health Products Research Group, 80,100 by the Healthcare Communications Group,
and 67,100 by the Contract Sales Group. We believe that our properties are well
maintained and are in good operating condition.
Legal Proceedings
From time to time we are involved in litigation incidental to our business.
In our opinion, no pending or threatened litigation of which we are aware has
had or is expected to have a material adverse effect on our results of
operations, financial condition or liquidity.
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SELECTED FINANCIAL DATA
The following table summarizes certain historical financial data with respect
to Ventiv and is qualified in its entirety by reference to, and should be read
in conjunction with, the Ventiv Historical Financial Statements and related
notes included elsewhere in this information statement. The historical
financial data for the years ended December 31, 1998, 1997 and 1996 have been
derived from the audited financial statements of Ventiv. Historical financial
information may not be indicative of Ventiv's future performance as an
independent company. Prior to their respective acquisitions, certain U.S.-based
acquirees were not subject to federal or state income taxes. Pro forma adjusted
net income represents historical net income adjusted to reflect a provision for
income taxes as if Ventiv had been taxed similarly to a C corporation for all
periods presented. See also "Unaudited Pro Forma Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business."
<TABLE>
<CAPTION>
For the Six Months
Ended June 30, For the Years Ended December 31,
------------------- ----------------------------------------------
1999 1998 1998 1997 1996 1995 1994
--------- --------- -------- --------- -------- -------- -------
(unaudited)
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Income
Data:
Revenues................ $ 181,259 $ 151,313 $321,500 $ 208,967 $144,704 $120,354 $91,865
========= ========= ======== ========= ======== ======== =======
Net income (loss)....... $ 12,639 $ 2,618 $ 1,446 $ (8,718) $ 83 $ 8,430 $ 5,306
========= ========= ======== ========= ======== ======== =======
Unaudited:
Pro forma historical
basic and diluted net
income (loss) per
share (2).............. $ 0.53 $ 0.11 $ 0.06
========= ========= ========
Pro forma adjusted net
income (loss).......... $ 12,639 $ 2,618 $ 1,446 $ (10,700) $ (2,729) $ 5,131 $ 3,745
========= ========= ======== ========= ======== ======== =======
Pro forma adjusted basic
and diluted net income
(loss) per share (2)... $ 0.53 $ 0.11 $ 0.06
========= ========= ========
Shares used in computing
net income (loss) per
share (2).............. 23,921 23,921 23,921
========= ========= ========
Balance Sheet Data:
Total assets............ $228,095 $193,644 $ 100,947 $ 51,180 $ 58,623 $41,742
========= ======== ========= ======== ======== =======
Long-term debt.......... $ 1,270 $ 1,473 $ 4,154 $ 2,634 $ 1,420 $ 3,628
========= ======== ========= ======== ======== =======
Total investments and
advances from Snyder
Communications, Inc.
(1).................... $158,771 $119,727 $ 10,371 $ 4,697 $ 13,591 $ 6,683
========= ======== ========= ======== ======== =======
</TABLE>
- - - --------
(1) Investments and advances from Snyder represent the net cash transferred to
Ventiv from Snyder and businesses acquired by Snyder and contributed to
Ventiv. No amounts are expected to be repaid to Snyder.
(2) For all periods presented, net income per share has been computed using
shares of Ventiv that will be issued upon the distribution based on the
number of outstanding shares of Snyder common stock on September 17, 1999.
Basic and diluted net income per share are the same for all periods
presented, as there will be no options to purchase Ventiv Common Stock
granted until the distribution.
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UNAUDITED PRO FORMA FINANCIAL DATA
The following unaudited pro forma financial data reflect the distribution as
if it had occurred on January 1, 1998 for pro forma income statement data
purposes. No pro forma balance sheet is presented as there were no pro forma
adjustments to the historical balance sheet. The unaudited pro forma data
reflect the estimated changes in corporate overhead as if Ventiv operated as an
independent entity, based on agreements currently in effect, Ventiv's effective
income tax rate subsequent to the distribution and the effects of significant
acquisitions as if they had been consummated on January 1, 1998. We have also
presented an estimate of additional expenses Ventiv expects to incur to hire
additional employees, enter into additional agreements for office space,
professional services, advertising and other general and administrative
services associated with operating as a stand-alone public company. These
additional expenses are only estimates and there can be no assurance that
actual costs will not exceed these estimates. These data do not necessarily
reflect the results of operations or financial position of Ventiv that would
have resulted had the distribution actually been consummated as of such date.
These data also exclude the estimated $16.0 million of transaction expenses
associated with the spin-off which will be borne by Snyder. These data are not
indicative of the future results of operations or future financial position of
Ventiv.
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(in thousands)
<TABLE>
<CAPTION>
Purchased
Ventiv Subsidiary Pro Forma Pro Forma
Historical Historical (5) Entries Ventiv
---------- -------------- --------- ---------
<S> <C> <C> <C> <C>
Revenues.................... $181,259 $1,927 $ -- $183,186
Operating expenses:
Cost of services........ 137,028 976 -- 138,004
Selling, general, and
administrative
expenses............... 21,585 493 413 (1) 22,491
Restricted stock
compensation .......... -- -- 475 (4) 475
Acquisition and related
costs.................. 1,694 -- -- 1,694
-------- ------ ----- --------
Income (loss) from
operations................. 20,952 458 (888) 20,522
Interest expense............ (123) -- -- (123)
Investment income........... 373 8 -- 381
-------- ------ ----- --------
Income (loss) before income
taxes...................... 21,202 466 (888) 20,780
Income tax (provision)
benefit.................... (8,563) (178) 360 (2) (8,381)
-------- ------ ----- --------
Net income (loss)........... $ 12,639 $ 288 $(528) $ 12,399
======== ====== ===== ========
Estimated Expenses, net of
taxes...................... 1,725 (6)
--------
Estimated Net Income
including additional
expenses .................. $ 10,674 (6)
========
</TABLE>
37
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME (LOSS)
FOR THE YEAR ENDED DECEMBER 31, 1998
(in thousands)
<TABLE>
<CAPTION>
Purchased Pro Pro
Ventiv Subsidiaries Forma Forma
Historical Historical (3) Entries Ventiv
---------- -------------- ------- --------
<S> <C> <C> <C> <C>
Net revenues................ $321,500 $14,128 $ -- $335,628
Operating expenses:
Cost of services........ 236,047 9,360 -- 245,407
Selling, general, and
administrative
expenses............... 43,029 3,516 825 (1) 47,370
Restricted stock
compensation .......... -- -- 2,650 (4) 2,650
Compensation to
stockholders........... 742 -- -- 742
Acquisition and related
costs.................. 26,922 -- -- 26,922
-------- ------- ------- --------
Income (loss) from
operations................. 14,760 1,252 (3,475) 12,537
Interest expense............ (2,315) -- -- (2,315)
Investment income........... 1,850 49 -- 1,899
-------- ------- ------- --------
Income (loss) before income
taxes...................... 14,295 1,301 (3,475) 12,121
Income tax (provision)
benefit.................... (12,849) (658) 1,410 (2) (12,097)
-------- ------- ------- --------
Net income (loss)........... $ 1,446 $ 643 $(2,065) $ 24
======== ======= ======= ========
Estimated Expenses, net of
taxes...................... 3,451 (6)
--------
Estimated Net Loss including
additional expenses ....... $ (3,427)(6)
========
</TABLE>
- - - --------
(1) Reflects additional costs associated with employment agreements executed
for the three newly created executive positions of Chief Executive
Officer, Chief Financial Officer and Vice President of Business
Development and Strategy of Ventiv Health, Inc. These employment
agreements provide for aggregate base compensation of $825,000 per year.
(2) Reflects the effect of the estimated increase in Ventiv's effective tax
rate subsequent to the date of the distribution, net of the tax effect of
the estimated incremental costs associated with operating as a stand-alone
public company. See footnote (1) above.
(3) Reflects the historical results of operations of Healthcare Promotions,
LLC, CLI Pharma S.A. and PromoTech Research Associates, Inc. from January
1, 1998 through their respective dates of acquisition.
(4) Reflects compensation expense of $2.7 million and $0.5 million for the
year ended December 31, 1998 and the six months ended June 30, 1999,
respectively, associated with restricted stock grants to be made to
certain officers and directors of Ventiv immediately following the
distribution pursuant to agreements entered into as part of the
distribution.
(5) Reflects the historical results of operations of PromoTech Research
Associates, Inc. from January 1, 1998 through its date of acquisition.
(6) In addition to the employment agreements, described in (1) above, the
Company expects to hire additional employees, enter into additional
agreements for office space, professional services, advertising and other
general and administrative services associated with operating as a stand-
alone public company. The Company estimates that these additional expenses
would have been approximately $2.9 million ($1.7 million net of taxes) for
the six months ended June 30, 1999 and $5.8 million ($3.5 million net of
taxes) for the year ended December 31, 1998. There can be no assurance
that actual costs will not exceed these estimates.
38
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and Results
of Operations covers periods prior to the Distribution, during which the
operating units of Ventiv were integrated with Snyder's other operating units.
The following information should be read in conjunction with Ventiv's Financial
Statements and notes thereto included elsewhere in this Information Statement.
See "Index to Financial Statements."
Overview
Ventiv's services are designed to develop, execute and monitor strategic
marketing plans for pharmaceutical and other life sciences products to conduct
educational research and communication services for the medical community.
Snyder created the business conducted by Ventiv in January 1997 in a merger
transaction with a U.S. provider of pharmaceutical sales and marketing
services. During 1998 and 1997, Snyder issued 6,475,105 and 4,035,184 shares,
respectively, in pooling of interests transactions with companies in the
healthcare marketing services industry. Of the total shares issued in pooling
of interests transactions, 1,318,798 were to Health Products Research,
6,008,210 were to companies in Ventiv's Contract Sales Group, and 3,183,281
were to companies in Ventiv's Healthcare Communications Group. We further
expanded the size and geographic presence of our Contract Sales Group with a
purchase transaction valued at $19.4 million in August 1997 and with two
purchase transactions valued at $54.4 million in the first quarter of 1998. We
also increased the scope of services offered by the Healthcare Communications
Group with a purchase transaction valued at $16.3 million in March 1999. We
plan to focus on internal growth for the foreseeable future as the primary
means of our expansion, although we will consider attractive acquisition
opportunities as they arise.
We expect that the complementary services which Ventiv is able to offer to
its customers as a result of the acquisitions described above will increase our
opportunities and strengthen our client relationships. We strive to integrate
our service capabilities within as well as across our three operating groups to
provide a spectrum of healthcare marketing and sales services. Health Products
Research designs and monitors product launches and sales strategies with our
proprietary programs to maximize asset utilization and return on investment for
pharmaceutical and other life sciences companies. The Healthcare Communications
Group provides educational programs to physicians and other healthcare
professionals. The Contract Sales Group implements and executes outsourced
sales programs for pharmaceutical and other life sciences products. Most of
Ventiv's largest clients utilize the services of more than one of our operating
groups.
Results of Operations
Revenues and associated costs under pharmaceutical detailing contracts are
generally based on the number of physician calls made or the number of sales
representatives utilized. For consulting and educational services, Ventiv
revenues are generally based on a fixed project amount.
Cost of services consists of all costs specifically associated with client
programs, such as salary, commissions and benefits paid to personnel, including
senior management associated with specific service offerings, payments to
third-party vendors and systems and other support facilities specifically
associated with client programs.
Selling, general and administrative expenses consist primarily of costs
associated with administrative functions, such as finance, accounting, human
resources, and information technology, as well as personnel costs of senior
management not specifically associated with client services.
Compensation to stockholders consists of excess compensation paid to certain
stockholders of acquired companies prior to their respective mergers with
Ventiv. The amount by which the historical compensation of these stockholders
exceeds that provided in their employment contracts with Ventiv has been
classified as compensation to stockholders.
Recapitalization costs were recorded by one of the companies acquired by
Ventiv in 1998 at the time of its recapitalization in 1997.
39
<PAGE>
Acquisition and related costs consist primarily of investment banking fees,
other professional service fees, certain tax payments and other contractual
payments resulting from the consummation of the pooling of interests
transactions, as well as the costs of consolidating certain of our acquired
operations.
The following sets forth, for the periods indicated, certain components of
Ventiv's income statement data, including such data as a percentage of
revenues. Pro forma net income includes a provision for income taxes as if all
operations of Ventiv had been taxed as a C corporation for all periods
presented. Compensation to stockholders, recapitalization costs and acquisition
costs are considered to be nonrecurring by Ventiv because Ventiv's current
operations will not result in any compensation to stockholders,
recapitalization costs or acquisition costs in future periods.
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
(unaudited) For the Years Ended December 31,
------------------------------ --------------------------------------------------
1999 1998 1998 1997 1996
-------------- -------------- --------------- --------------- ---------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Revenues................ $181,259 100% $151,313 100% $321,500 100.0% $208,967 100.0% $144,704 100.0%
Operating expenses:
Cost of services........ 137,028 75.6 109,677 72.5 236,047 73.4 156,346 74.8 104,922 72.5
Selling, general, and
administrative
expenses............... 21,585 11.9 19,929 13.2 43,029 13.4 32,787 15.7 25,960 17.9
Compensation to
stockholders........... -- -- 515 0.3 742 0.2 15,638 7.5 12,340 8.5
Recapitalization costs.. -- -- -- -- -- -- 1,889 0.9 -- --
Acquisition and related
costs.................. 1,694 0.9 11,356 7.5 26,922 8.4 8,042 3.8 -- --
-------- ---- -------- ---- -------- ----- -------- ----- -------- -----
Income (loss) from
operations............. 20,952 11.6 9,836 6.5 14,760 4.6 (5,735) (2.7) 1,482 1.1
Interest expense........ (123) (0.1) (1,078) (0.7) (2,315) (0.7) (1,617) (0.8) (691) (0.5)
Investment income....... 373 0.2 655 0.4 1,850 0.6 568 0.3 796 0.6
-------- ---- -------- ---- -------- ----- -------- ----- -------- -----
Income (loss) before
income taxes........... 21,202 11.7 9,413 6.2 14,295 4.5 (6,784) (3.2) 1,587 1.2
Income tax provision.... (8,563) (4.7) (6,795) (4.5) (12,849) (4.0) (1,934) (0.9) (1,504) (1.0)
-------- ---- -------- ---- -------- ----- -------- ----- -------- -----
Net income (loss)....... $ 12,639 7.0% $ 2,618 1.7% $ 1,446 0.5% $ (8,718) (4.1)% $ 83 0.2%
======== ==== ======== ==== ======== ===== ======== ===== ======== =====
Pro forma adjusted net
income (loss).......... $ 12,639 7.0% $ 2,618 1.7% $ 1,446 0.5% $(10,700) (5.1)% $ (2,729) (1.9)%
======== ==== ======== ==== ======== ===== ======== ===== ======== =====
</TABLE>
Six Months Ended June 30, 1999, Compared to Six Months Ended June 30, 1998
Revenues. Revenues increased $30.0 million, or 19.8%, to $181.3 million in
the first half of 1999 from $151.3 million in the first half of 1998. $14.0
million, or 46.7%, of the revenue growth was achieved within our French sales
operation mainly as a result of the purchase of CLI Pharma S.A. ("CLI Pharma")
in March of 1998. $14.9 million, or 49.7%, of the revenue growth was achieved
within our U.S. Contract Sales Group primarily as a result of new contracts
which were secured in the first half of 1999, an incentive compensation payment
received from a client and also by the purchase of Healthcare Promotions, LLC
("HCP") in 1998 which has been integrated into our U.S. Contract Sales Group.
Decreases in revenues at our U.K. and German sales operations of $5.9 million,
or 14.9%, resulted from a lower level of contracted sales service performed in
1999 compared with 1998. This decrease in revenue was offset by a $3.6 million,
or 47.1%, increase in revenue from our Health Products Research group which
reflects new business contracts secured for 1999, and $3.0 million in revenue
from PromoTech Research Associates which was purchased by Ventiv in March of
1999. Revenue at our European contract sales organizations is typically lower
during the third quarter due to the traditional European holiday season in July
and August.
Cost of services. Cost of services increased $27.3 million, or 24.9%, to
$137.0 million in the first half of 1999 from $109.7 million in the first half
of 1998. The dollar fluctuation in cost of services at our various
40
<PAGE>
operating units corresponds to the revenue changes discussed above. Cost of
services was favorably impacted by a one-time $2.0 million reduction in the
estimated amount of employee-related social costs to be paid as a result of the
integration of our French sales force. Cost of services as a percentage of
revenues increased to 75.6% in the first half of 1999 from 72.5% in the first
half of 1998 due in part to the start-up costs associated with the new
contracts in both the Health Products Research group and the U.S. Contract
Sales Group. We expect to continue to incur start-up costs as we secure
additional contracts for new business and will also continue to make
investments in our operating infrastructure which could result in increased
costs.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $1.7 million, or 8.5%, to $21.6 million in
the first half of 1999 from $19.9 million in the first half of 1998. Selling,
general, and administrative expenses as a percentage of revenue decreased to
11.9% in the first half of 1999 from 13.2% in the first half of 1998 as a
result of the integration of acquired businesses into our existing operations
and the close monitoring and containment of these expenses as our revenues have
increased. Selling, general, and administrative expenses include only those
amounts specifically identifiable to Ventiv and may increase in future periods
when Ventiv operates as a separate publicly traded company.
Compensation to Stockholders. No compensation to stockholders was recorded
during the six months ended June 30, 1999. Compensation to stockholders was
$0.5 million during the six months ended June 30, 1998. Compensation to
stockholders reflects compensation paid to certain stockholders of acquired
companies prior to their respective mergers with Ventiv that is in excess of
the compensation provided for in their employment contracts with Ventiv. No
compensation to stockholders is recorded subsequent to an acquisition by
Ventiv.
Acquisition and Related Costs. Ventiv recorded $1.7 million in acquisition
and related costs during the six months ended June 30, 1999 due to the
consolidation and integration of certain of Ventiv's acquired operations within
the Healthcare Communications Group. The charge consists of $1.3 million in
severance and related costs associated with the termination of 23 employees,
and $0.4 million in consulting services and other costs related to these
integration activities. In 1998, we recorded a charge of approximately $10.7
million for costs necessary to consolidate and integrate certain of our
acquired operations in the U.S., the U.K. and France. As of June 30, 1999, 149
employees had terminated employment with Ventiv and $9.0 million had been
charged against the total liability of $12.4 million. Ventiv recorded $11.4
million in acquisition and related costs during the six months ended June 30,
1998, and $7.0 million of these costs were related to the consummation of
pooling of interests transactions during the six months ended June 30, 1998.
Ventiv completed two pooling of interests transactions valued at approximately
$91.4 million during the six months ended June 30, 1998. The remaining $4.4
million was due to the consolidation and integration of certain of Ventiv's
acquired operations within the Contract Sales Group.
Interest Expense. Ventiv recorded $0.1 million of interest expense during the
six months ended June 30, 1999 and $1.1 million of interest expense during the
six months ended June 30, 1998. Ventiv does not have any significant debt
obligations outstanding. The interest expense recorded during the six months
ended June 30, 1998 consists primarily of interest on debt at acquired
companies prior to their acquisition by Ventiv. Ventiv generally repaid the
debt of its acquired companies. If Ventiv borrows money for acquisitions or for
other purposes following the spin-off, interest expense will increase in future
periods.
Investment Income. Ventiv recorded $0.4 million of investment income during
the six months ended June 30, 1999 and $0.7 million of investment income during
the six months ended June 30, 1998. Variations in investment income result from
differences in average amounts of cash and cash equivalents available for
investment during these periods.
Income Tax Provision. Ventiv recorded a tax provision of $8.6 million during
the six months ended June 30, 1999. Ventiv's effective tax rate on its
recurring operations is approximately 39.1% for the six months ended June 30,
1999. The actual tax provision recorded differs from the effective rate due to
the nondeductibility of certain of the nonrecurring costs recorded during the
period.
41
<PAGE>
Net Income (Loss). Net income increased $10.0 million to $12.6 million in the
first half of 1999 from $2.6 million in the first half of 1998 due primarily to
Ventiv's overall growth discussed above, the decrease in nonrecurring
acquisition and related costs and other factors discussed above. To facilitate
our growth, we intend to make investments in Ventiv over the next 12 to 18
months to promote the business and its name, to further enhance the skills of
our employees, to further business development efforts, and to make further
investment in technology. We expect that our additional investment in Ventiv to
expand the business will increase our expenses over the next 12 to 18 months.
In August 1999, we entered into an agreement with an existing client to
expand the level of service provided. Under this service agreement, which is
cancelable by our client with six months prior notice, we expect to recognize
over $100 million in revenues over the next 18 months. During the third and
fourth quarters of 1999, we expect to recognize a total of approximately $12.0
million of start-up related expenses to hire, train, and equip our salesforce
in connection with this new agreement, with new recorded revenue directly
associated with these expenses during these periods.
We have agreed to provide incremental consideration for the acquisition of
PromoTech Research Associates based on the average trading price of one or more
classes of Snyder common stock and Ventiv common stock for the twenty trading
days ending on October 15, 1999 (or such lesser number of days that a public
market exists for these securities up to October 15, 1999). The incremental
consideration was not provided for in the purchase agreement and is not part of
the purchase price for accounting purposes. Snyder intends to enter into a
separate agreement with the prior owners of PromoTech whereby Snyder would pay
the incremental consideration to the prior owners in exchange for the release
of any and all claims against Snyder relating to the transaction. Based on the
closing price of Snyder common stock on September 17, 1999, the amount of such
payment would result in non-cash expense on the date the agreement is executed
of approximately $5.8 million, payable in Ventiv common stock.
Year Ended December 31, 1998, Compared to Year Ended December 31, 1997
Revenues. Revenues increased $112.5 million, or 53.8%, to $321.5 million in
1998 from $209.0 million in 1997. We experienced revenue growth at each of our
operating companies during 1998 and it consists of an $82.3 million, or 50.7%,
increase at our Contract Sales Group, a $26.7 million, or 77.9%, increase at
our Healthcare Communications Group, and a $3.5 million, or 28.0%, increase at
our Health Products Research group. The increased revenue in our Contract Sales
Group resulted in the growth of services provided to both new and existing
customers during 1998, the purchase of HCP and CLI Pharma in the first quarter
of 1998, and the purchase of Halliday Jones in the third quarter of 1997. The
increased revenue in both the Healthcare Communications Group and the Health
Products Research group is attributable to the growth services provided to new
and existing customers during 1998.
Cost of Services. Cost of Services increased $79.7 million, or 51.0%, to
$236.0 million in 1998 from $156.3 million in 1997 as a result of the increased
revenues discussed above. Cost of services as a percentage of revenues
decreased to 73.4% in 1998 from 74.8% in 1997. This is due to Ventiv's overall
growth and the ability of the client support personnel to handle increased
client services.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $10.2 million, or 31.1%, to $43.0 million in
1998 from $32.8 million in 1997 as a result of the growth in revenues discussed
above. Selling, general and administrative expenses as a percentage of revenues
decreased to 13.4% in 1998 from 15.7% in 1997 due primarily to the revenue
growth from the significant increase in services provided throughout 1998 and
the lower proportional increase in selling, general and administrative expenses
necessary to support the revenue growth.
Compensation to Stockholders. Compensation to stockholders was $0.7 million
in 1998 and $15.6 million in 1997. Compensation to stockholders reflects
compensation paid to certain stockholders of acquired companies prior to their
respective mergers with Ventiv that is in excess of the compensation provided
for in their employment contracts with Ventiv. The amount by which the
historical compensation paid to these stockholders exceeds the amount provided
for in their respective employment contracts with Ventiv has been classified as
compensation to stockholders. No compensation to stockholders is recorded
subsequent to an acquisition by Ventiv. The $0.7 million recorded in 1998
relates to certain companies acquired in the third and
42
<PAGE>
fourth quarters of 1998, and therefore, was incurred during 1998 by the
acquired companies prior to their acquisition.
Acquisition and Related Costs. Ventiv recorded $26.9 million in nonrecurring
acquisition and related costs during 1998. These costs were primarily related
to the consummation of acquisitions and consisted of investment banking fees,
expenses associated with the accelerated vesting of options held by employees
of certain acquired companies, other professional service fees, transfer taxes
and other contractual payments. In addition, this amount included a charge of
approximately $10.7 million for costs necessary to consolidate and integrate
certain of Ventiv's acquired operations in the U.S., the U.K. and France.
Ventiv is integrating acquired subsidiaries that provide similar services
within the same geographic regions. Approximately nine locations have been
consolidated into four, and the efforts have not had a significant impact on
Ventiv's workforce. Ventiv expects these integration activities to be
substantially complete by the third quarter of 1999. The charge consists of
$4.1 million to consolidate and terminate lease obligations, $5.3 million of
severance and other costs associated with the termination of 142 employees, and
$1.3 million of fees incurred for consulting services and other costs related
to these integration activities. The employees who were terminated were
primarily redundant operations and administrative personnel, as well as one
under-utilized sales team in the U.K.
Ventiv recorded $8.0 million in nonrecurring acquisition and related costs
during 1997 related to the consummation of acquisitions. These costs are
discussed further in the review of Ventiv's results of operations for 1997 as
compared to 1996.
Interest Expense. Ventiv recorded $2.3 million of interest expense in 1998
and $1.6 million of interest expense in 1997. Ventiv does not have any
significant debt obligations outstanding. The interest expense recorded in both
1998 and 1997 consists primarily of interest on debt at acquired companies
prior to their acquisition by Ventiv. Ventiv generally repaid the debt of
acquired companies.
Investment Income. Ventiv recorded $1.9 million of investment income in 1998
and $0.6 million of investment income in 1997. The increase in investment
income corresponds to the increase in funds available for investment.
Income Tax Provision. Ventiv recorded a tax provision of $12.8 million during
1998. Ventiv's effective tax rate on its recurring operations is approximately
41.0% in 1998. The actual tax provision recorded differs from the effective
rate due to the nondeductibility of certain of the nonrecurring costs recorded
during the period. Pro forma income discussed below includes a provision for
income taxes as if all our operations had been taxed as a C corporation for the
year ended 1998.
Net Income (Loss). Net income increased $10.1 million to income of $1.4
million in 1998 from a loss of $8.7 million in 1997 due primarily to Ventiv's
overall growth and containment of costs.
Pro Forma Adjusted Net Income (Loss). Pro forma adjusted net income (loss)
shows the effect on net income (loss) assuming Ventiv and its subsidiaries were
taxed as C corporations for all of 1998 and 1997. Pro forma adjusted net income
(loss) is less than net income (loss) for 1997. Pro forma adjusted net income
(loss) increased $12.1 million to pro forma net income of $1.4 million in 1998
from a pro forma net loss of $10.7 million in 1997, due primarily to the
overall growth in revenues and containment of costs. Revenue growth exceeded
the growth in cost of services and selling, general and administrative
expenses.
Year Ended December 31, 1997, Compared to Year Ended December 31, 1996
Revenues. Revenues increased $64.3 million, or 44.4%, to $209.0 million in
1997 from $144.7 million in 1996. We experienced revenue growth at each of our
operating companies during 1997 including a $53.6 million, or 49.4%, increase
at our Contract Sales Group, an $8.3 million, or 31.5%, increase at our
Healthcare Communications Group, and a $2.4 million, or 23.9%, increase at our
Health Products Research group. The
43
<PAGE>
increased revenue in our Contract Sales Group resulted from the growth of
services provided to both new and existing customers during 1997 and the
purchase of Halliday Jones in 1997. The increased revenue in both the
Healthcare Communications Group and the Health Products Research group is
attributable to the growth services provided to new and existing customers
during 1997.
Cost of Services. Cost of services increased $51.4 million, or 49.0%, to
$156.3 million in 1997 from $104.9 million in 1996 as a result of the increased
revenues discussed above. Cost of services as a percentage of revenues
increased to 74.8% in 1997 from 72.5% in 1996. An increase in cost of services
as a percentage of revenues to provide healthcare educational services was
offset by a decrease in cost of services as a percentage of revenues to provide
contract sales services, resulting in the overall increase in cost of services
as a percentage of revenues.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $6.8 million, or 26.2%, to $32.8 million in
1997 from $26.0 million in 1996 as a result of the increased revenues discussed
above. Selling, general and administrative expenses as a percentage of revenues
decreased to 15.7% in 1997 from 17.9% in 1996 because a moderate increase in
overhead expenses was spread over a larger base of revenues.
Compensation to Stockholders. Compensation to stockholders was $15.6 million
in 1997 and $12.3 million in 1996. Compensation to stockholders reflects
compensation paid to certain stockholders of acquired companies prior to their
respective mergers with Ventiv that is in excess of the compensation provided
for in their employment contracts with Ventiv. The amount by which the
historical compensation paid to these stockholders exceeds the amount provided
for in their respective employment contracts with Ventiv has been classified as
compensation to stockholders. No compensation to stockholders is recorded
subsequent to an acquisition by Ventiv. The composition of the amount recorded
in 1997 varies from the amount recorded in 1996 because the amounts recorded
were based on specific criteria and agreements at certain acquired companies
that existed in 1997 and in 1996 prior to their respective mergers with Ventiv.
Recapitalization Costs. Recapitalization costs were $1.9 million in 1997. One
of our acquired entities completed a recapitalization in 1997 prior to its 1998
merger with Ventiv. No recapitalization costs were incurred in 1996, and Ventiv
does not expect to incur any recapitalization costs in future periods.
Acquisition and Related Costs. Ventiv recorded $8.0 million in nonrecurring
acquisition and related costs during 1997. These costs were directly related to
the consummation of acquisitions and included primarily investment banking
fees, other professional service fees and certain U.K. excise and transfer
taxes.
Interest Expense. Ventiv recorded $1.6 million of interest expense in 1997
and $0.7 million of interest expense in 1996. Ventiv does not have any
significant debt obligations outstanding. The interest expense recorded in both
1997 and 1996 consists primarily of interest on debt at acquired companies
prior to their acquisition by Ventiv. Ventiv generally repaid the debt of
acquired companies.
Investment Income. Ventiv recorded $0.6 million of investment income in 1997
and $0.8 million of investment income in 1996. The amount recorded in
investment income is directly related to the amount of funds available for
investment.
Income Tax Provision. Ventiv recorded a tax provision of $1.9 million during
1997. Ventiv's effective tax rate on its recurring operations is approximately
48.8% in 1997. The actual tax provision recorded differs from the effective
rate due to the nondeductibility of certain of the nonrecurring costs recorded
during the period. Pro forma income discussed below includes a provision for
income taxes as if all of our operations had been taxed as a C corporation for
the year ended 1997.
Net Income (Loss). Net income decreased $8.8 million to a loss of $8.7
million in 1997 from income of $83,000 in 1996 due primarily to the
nonrecurring costs incurred by Ventiv through its 1997 acquisitions.
44
<PAGE>
Pro Forma Adjusted Net Income (Loss). Pro forma adjusted net income (loss)
shows the effect on net income (loss) assuming Ventiv and its subsidiaries were
taxed as C corporations for all of 1997 and 1996. Pro forma adjusted net income
(loss) is less than net income (loss) for both 1997 and 1996. Pro forma
adjusted net loss increased $8.0 million to a pro forma net loss of $10.7
million in 1997 from a pro forma net loss of $2.7 million in 1996. The
nonrecurring costs recorded in 1997, slightly offset by the growth of Ventiv,
resulted in the overall increase in pro forma net loss.
Liquidity and Capital Resources
At June 30, 1999, Ventiv had $21.3 million in cash and equivalents. Cash and
equivalents decreased $4.3 million during the six months ended June 30, 1999,
due to the $10.8 million used in operating activities, the $3.1 million used in
investing activities and the $0.1 million effect of changes in the exchange
rate offset by the $9.5 million provided by financing activities. The $9.5
million in cash provided by financing activities consists primarily of $11.2
million investments and advances from Snyder offset by $1.7 million net
repayments of debt. The $3.1 million in cash used in investing activities
consists primarily of capital expenditures and the purchases of PromoTech, net
of cash acquired. Cash and cash equivalents increased $7.6 million for the year
ended December 31, 1998, due to $15.8 million provided by financing activities
and the $0.2 million effect of exchange rate changes, offset by $1.2 million
used in operating activities and the $7.2 million used in investing activities.
In 1997 and 1998, we incurred approximately $34.9 million in acquisition and
related costs as a result of pooling of interests transactions and integration
of acquired companies. As a result, cash provided from operations was not
sufficient to fund operations, including acquisition and related costs, during
those years. For the first six months of 1999, a net of $10.9 million cash was
used in operating activities due to working capital changes. We believe that
our cash and equivalents, as well as cash provided by operations, will be
sufficient to fund our current operations and planned capital expenditures over
the next 12 months and also for a longer-term basis. We plan to focus on
internal growth for the foreseeable future as the primary means of our
expansion, although we will consider attractive acquisition opportunities as
they arise. Cash provided from operations may not be sufficient to fund
internal growth initiatives which we may pursue. If we pursue significant
internal growth initiatives or if we acquire additional businesses in
transactions that include any cash payment as part of the purchase price, both
in the short-term and the long-term, we will first use excess cash available
from operations and then pursue additional debt or equity financing as sources
of cash necessary to complete any acquisitions. Ventiv does not currently have
its own line of credit. We expect to obtain a multi-year line of credit for
acquisitions and general corporate purposes during the second half of 1999. In
addition to borrowing under a line of credit, once available, Ventiv could
pursue additional debt or equity transactions to finance its acquisitions,
depending on market conditions. We can't assure you that we will be successful
in raising the cash required to complete all acquisition opportunities which we
may pursue in the future.
We are subject to the impact of foreign currency fluctuations, specifically
that of the British pound and French franc. To date, changes in the British
pound and French franc exchange rates have not had a material impact on our
liquidity or results of operations. We continually evaluate our exposure to
exchange rate risk but do not currently hedge such risk.
We do not expect the introduction of the Euro to have a material impact on
our operations or cash flows in the near term. We will continue to evaluate the
impact of the introduction of the Euro as we continue to expand our services in
Europe.
As of June 30, 1999, Ventiv's management believes that the fair value of
Ventiv exceeds its book value.
Year 2000
Ventiv has assessed its current systems and equipment with regard to year
2000. We believe that these systems and equipment are year 2000 compliant and
that no material additional costs will be incurred. However, we cannot assure
you that this will be the case until these systems are operational in 2000.
45
<PAGE>
Approximately $0.5 million was incurred through June 30, 1999 to address
specific year 2000 requirements. We have made inquiries of our vendors and
other third parties that we have identified whose year 2000 problems could
affect our systems or operations and have received assurances from
approximately 96% of the vendors contacted, both written and oral, that their
systems are compliant or are expected to be compliant on time. Approximately
52% of vendors contacted indicated to us that they are currently year 2000
compliant and approximately 44% of vendors contacted indicated to us that they
will be year 2000 compliant before the year 2000 begins. Approximately 4% of
the vendors contacted did not provide information in response to our inquiries.
In the event the statements and warranties of these third parties concerning
their year 2000 compliance are incorrect resulting in critical systems failure,
our business and operations may be materially adversely affected.
Effect of Inflation
Because of the relatively low level of inflation experienced in the United
States and Europe, inflation did not have a material impact on our consolidated
results of operations for 1998, 1997 or 1996.
Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risk from changes in market interest rates and
foreign currency exchange rates. We are subject to interest rate risk on our
debt for changes in the fair value of our debt caused by changes in the
interest rates. We are subject to foreign currency exchange rate risk related
to our international operations. The long-term debt outstanding at December 31,
1998 is $1.5 million and is fixed rate. A change in the current market interest
rates on all outstanding debt interest rates at December 31, 1998 would not
materially impact the financial statements as the amount of debt effected would
not be material. We do not currently engage in hedging or other market risk
management tools.
Foreign Currency Exchange Rate Exposures. Fluctuations in foreign currency
exchange rates affect the reported amounts of our assets, liabilities and
operations. For purposes of quantifying the risk associated with fluctuations
in the foreign exchange rate, we used a sensitivity analysis model. We assumed
a hypothetical detrimental change of 10% in the exchange rates on our assets,
liabilities and revenues denominated in a foreign currency. A 10% fluctuation
was assumed for all exchange rates at December 31, 1998. Our material exposures
to foreign exchange rate fluctuations on continuing operations are the French
franc, British pound and German mark. Approximately 44%, 38% and 15% of our
1998 international operations were conducted in France, the United Kingdom and
Germany, respectively. The amounts below represent the impact of all exchange
rates on our total assets, liabilities and revenues.
<TABLE>
<CAPTION>
10% Decrease in value
Balance at of Local Currencies to
December 31, 1998 U.S. Dollar
----------------- ----------------------
<S> <C> <C>
Assets.............................. $193,644 $188,903
Liabilities......................... $ 73,917 $ 69,915
Revenue............................. $321,500 $307,354
</TABLE>
46
<PAGE>
MANAGEMENT
Directors
The following individuals are expected to serve as directors of Ventiv after
the distribution.
<TABLE>
<CAPTION>
Name Age Position
- - - ---- --- --------
<S> <C> <C>
Daniel M. Snyder................... 34 Co-Chairperson of the Board of Directors
Michele D. Snyder.................. 37 Co-Chairperson of the Board of Directors
Mortimer B. Zuckerman.............. 62 Director
Fred Drasner....................... 56 Director
A. Clayton Perfall................. 40 Director
Eran Broshy........................ 40 Director and Chief Executive Officer
</TABLE>
Daniel M. Snyder, Co-Chairperson of the Board of Directors, is a founder of
Snyder Communications, and has served as Chairman of the Board of Directors and
Chief Executive Officer of Snyder Communications since its predecessor company
was founded in 1987.
Michele D. Snyder, Co-Chairperson of the Board of Directors, is a founder of
Snyder, and serves as Vice Chairman, President and Chief Executive Officer and
a director of Snyder. Ms. Snyder is Mr. Snyder's sister.
Mortimer B. Zuckerman, a director of Ventiv, has been a director of Snyder
since 1996 and has been the Chairman of Boston Properties, Inc., a national
real estate development and management company, since 1970. He has served as
Chairman of U.S. News & World Report, L.P. and Editor-in-Chief of U.S. News &
World Report since 1985, Chairman of Daily News, L.P. and Co-Publisher of the
New York Daily News since 1993, Chairman of The Atlantic Monthly Company since
1980 and Chairman of the Board of Directors of Applied Graphics Technologies,
Inc. since April 1996.
Fred Drasner, a director of Ventiv, has been a director of Snyder since 1996,
the Chief Executive Officer of Daily News, L.P. and Co-Publisher of the New
York Daily News since 1993, the President of U.S. News & World Report, L.P.
from 1985 to February 1997 and Chief Executive Officer of U.S. News & World
Report since 1985, the Chairman and Chief Executive Officer of Applied Graphics
Technologies, Inc. since April 1996, the Chief Executive Officer of Applied
Printing Technologies, L.P. since 1986 and the Vice-Chairman and Chief
Executive Officer of The Atlantic Monthly Company since 1986.
A. Clayton Perfall, a director of Ventiv, has served as Chief Financial
Officer and a director of Snyder since September 1996. Prior to joining Snyder,
Mr. Perfall spent fifteen years with Arthur Andersen. During his tenure as a
partner with Arthur Andersen, Mr. Perfall had a wide range of responsibilities
with the Washington, D.C., Baltimore, Maryland and Richmond, Virginia
marketplaces, including responsibility for the firm's Structured Financial
Products tax practice and responsibility for its Business Valuation Services
Group. Mr. Perfall was a key participant in the development of Arthur
Andersen's business strategies, the hiring of its professional staff and the
development and marketing of its services.
Eran Broshy, Chief Executive Officer and a director of Ventiv, served as the
practice leader of the North American healthcare consulting practice of the
Boston Consulting Group from 1991 to 1998. During his tenure at the Boston
Consulting Group, Mr. Broshy consulted broadly with senior executives from a
number of the major global pharmaceutical leaders, managed care organizations,
and academic medical centers and advised on a range of strategic,
organizational and operational issues. Since 1998, Mr. Broshy served as
President and Chief Executive Officer of Coelcanth Corporation, a privately-
held biotechnology company. Mr. Broshy is a graduate of the Harvard School of
Business Administration (MBA), Stanford University (MS), and Massachusetts
Institute of Technology (BS).
In addition to the above-named directors, one additional independent director
will be designated prior to or promptly following the distribution.
47
<PAGE>
Directors' Meetings and Committees
The Board of Directors of Ventiv will have a number of standing committees,
including an Audit Committee and a Compensation Committee.
Audit Committee. The Audit Committee of the Board of Directors of Ventiv will
review and make reports and recommendations to the full Board of Directors with
respect to the selection of the independent auditors of Ventiv and its
subsidiaries, the arrangements for the scope of the audits to be performed by
them and the internal audit activities, accounting procedures and controls of
Ventiv, and will review the annual financial statements of Ventiv. The members
of the Audit Committee will be designated prior to or promptly following the
distribution.
Compensation Committee. The Compensation Committee of the Board of Directors
of Ventiv will be responsible for approving compensation arrangements for
executive management, reviewing compensation plans relating to officers, grants
of options and other benefits under Ventiv's employee benefit plans and
reviewing generally Ventiv's employee compensation policy. The members of the
Compensation Committee will be designated prior to or promptly following the
distribution.
Compensation of Directors
We are currently in the process of reviewing our director compensation. We
anticipate that each director who is neither an officer nor an employee of
Ventiv will receive an annual director's fee paid in either cash, shares of
Ventiv common stock, or stock options. Directors will also be reimbursed for
expenses incurred in connection with attending meetings.
Executive Officers
The following individuals are expected to serve as executive officers of
Ventiv after the distribution.
<TABLE>
<CAPTION>
Name Age Position
- - - ---- --- --------
<S> <C> <C>
Eran Broshy............................ 40 Chief Executive Officer and Director
Gregory S. Patrick..................... 48 Chief Financial Officer
Robert Brown, Ph.D..................... 55 Chief Executive Officer,
Health Products Research
R. Jeremy Stone, M.D................... 34 President, UK Healthcare Sales
Allan Avery............................ 39 President, Healthcare Communications
William C. Pollock..................... 46 President, Healthcare Sales
</TABLE>
For a description of Eran Broshy's background, see "Management--Directors."
Gregory S. Patrick, Chief Financial Officer of Ventiv, served as Vice
President and Group Controller of Merck & Co., Inc., with responsibility for
Merck's research laboratories, vaccines and Asia/Pacific human health marketing
divisions since February 1999. From 1991 to February 1999, Mr. Patrick served
as Vice President and Controller of Merck's manufacturing division, where he
structured and negotiated a number of Merck's significant joint ventures and
licensing agreements. Prior to joining Merck, Mr. Patrick was an associate with
the consulting firm Booz, Allen & Hamilton and also held a range of financial
and engineering positions at Exxon Chemical Company. Mr. Patrick has an MBA
from New York University and an ME and BS from Rensselaer Polytechnic
Institute.
Robert Brown, Ph.D., served as President of Health Products Research, Inc.
(HPR), a subsidiary of Snyder, for over 25 years. For the last 20 years, Dr.
Brown has consulted on a worldwide basis to many major pharmaceutical and
medical products companies. Before joining HPR, Dr. Brown was a manager of
Corporate Marketing Services at Johnson & Johnson. He holds a doctorate in
Operations Research from George Washington University.
48
<PAGE>
R. Jeremy Stone, M.D., has served as President of Snyder's UK Healthcare
Sales division since December 1998. Prior to joining Snyder in 1998, Dr. Stone
founded the healthcare practice for the search firm Heidrick & Struggles
International in 1997. From 1994 to 1997, Dr. Stone served as a Senior Managing
Consultant for Gemini Consulting, a strategy, change and general management
implementation firm. Dr. Stone has an MBA and diploma in Management for Doctors
from the University of Keele and a diploma in Anaesthetics from the Royal
College of Anaesthestists.
Allan Avery has served as President of Snyder Healthcare Communications
Worldwide, Inc., a subsidiary of Snyder since 1997 and has over 16 years of
healthcare industry experience. Mr. Avery led the integration of two world-
class integrated educational and marketing solutions companies for the
pharmaceutical industry, including GEM Communications, Inc., which he founded
in 1992. He previously held management positions with PRO Communications, an
educational project company, and Marion Laboratories (now Hoechst Marion
Roussel).
William C. Pollock has served as President of Snyder's US Healthcare Sales
division since February 1998. Prior to joining Snyder, Mr. Pollock served as
the President of Healthcare Promotions, LLC from August 1994 until February
1998, and held an executive position with Schering-Plough Corporation for the
four preceeding years. With 18 years of experience in the pharmaceutical
industry, Mr. Pollock's responsibilities have ranged from sales management to
marketing. He also previously held an executive position with Johnson &
Johnson.
49
<PAGE>
EXECUTIVE COMPENSATION
Historical Compensation
The following table sets forth certain information with respect to the annual
and long-term compensation of Ventiv's four most highly compensated executive
officers for fiscal 1998 and Ventiv's Chief Executive Officer, who was not
employed by Ventiv until June 1999. Mr. Patrick, Ventiv's Chief Financial
Officer, was not employed by Ventiv until August 1999 and is not included in
the table below. During the periods presented, the individuals were compensated
in accordance with Snyder's plans and policies. All references in the following
tables to stock options relate to awards of options to purchase shares of
Snyder common stock.
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
---------------------------- ------------------
Awards Payouts
---------- -------
Restricted Securities All Other
Name and Fiscal Stock Underlying LTIP Compensation
Principal Position Year Salary Bonus($) Award(s) Options(#) Payouts ($)
- - - ------------------ ------ -------- -------- ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Eran Broshy(1).......... 1998 -- -- -- -- -- --
Robert Brown, Ph.D. .... 1998 $210,000 -- -- 100,000 -- --
R. Jeremy Stone,
M.D.(2)................ 1998 $ 20,125 -- -- 105,000 -- --
Allan Avery............. 1998 $218,750 -- -- 200,000 -- --
William C. Pollock...... 1998 $240,000 $155,000 -- 75,000 -- --
</TABLE>
- - - --------
(1) Mr. Broshy was not employed by Snyder in 1998. He joined Snyder in June
1999.
(2) Dr. Stone began his employment with Snyder in December 1998, and the salary
amount included in the table above reflects compensation received in 1998.
If Dr. Stone had been employed for the full year, his annual base salary
would have been $241,500.
Option Grants in Fiscal 1998
The following table sets forth information with respect to option grants
during fiscal 1998 to the individuals named in the Summary Compensation Table
pursuant to Snyder plans.
<TABLE>
<CAPTION>
Individual Grants
-------------------------------------------
Potential Realizable
% of Total Value at Assumed Annual
Options Rates of Stock Price
Number of Granted to Exercise Appreciation for Option Term
Options Employees in Price Expiration -----------------------------
Name Granted Fiscal Year ($/Share) Date 5% 10%
- - - ---- --------- ------------ --------- ---------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Eran Broshy............. -- -- -- -- -- --
Robert Brown, Ph.D. .... 100,000 0.91% 30.43750 2/12/08 $ 1,759,591.21 $ 4,377,190.27
R. Jeremy Stone, M.D. .. 100,000 0.91% 28.3750 12/16/08 $ 1,784,488.50 $ 4,522,244.23
5,000 0.05% 28.3750 12/16/08 $ 89,224.43 $ 226,112.21
Allan Avery............. 50,000 0.46% 30.43750 11/25/07 $ 854,567.25 $ 2,112,836.76
150,000 1.37% 28.3750 12/16/08 $ 2,676,732.76 $ 6,783,366.35
William C. Pollock...... 75,000 0.68% 30.43750 2/12/08 $ 1,319,693.41 $ 3,282,892.70
</TABLE>
Option Exercises in Fiscal 1998
The following table sets forth the number of shares of Snyder common stock
covered by both exercisable and unexercisable stock options held by each of the
individuals named in the Summary Compensation Table on December 31, 1998. Also
reported are the values for "in-the-money" options, calculated as the excess of
the
50
<PAGE>
value of shares of Snyder common stock as of December 31, 1998 over the
respective exercise prices of outstanding stock options.
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised In-the-Money
Snyder Options at Snyder Options at
Shares Fiscal Year-End(#) Fiscal Year-End($)
Acquired on Value ------------------------- -------------------------
Name Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
- - - ---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Eran Broshy............. -- -- -- -- -- --
Robert Brown, Ph.D. .... -- -- -- 100,000 -- $331,250.00
R. Jeremy Stone, M.D.... -- -- 5,000 100,000 $26,875.00 $537,500.00
Allan Avery............. -- -- 12,500 187,500 $41,406.75 $930,468.75
William C. Pollock...... -- -- -- 75,000 -- $248,437.50
</TABLE>
Ventiv Compensation and Benefit Plans
The separation of the healthcare services business from the remaining
businesses of Snyder in connection with the distribution will allow Ventiv to
compensate its executive officers based on the performance of its healthcare
marketing services business. In particular, Eran Broshy, Chief Executive
Officer, and the other key members of Ventiv's management team will receive
stock compensation in the form of options to purchase Ventiv common stock.
Pursuant to Eran Broshy's employment agreement, he will receive an aggregate
of $4,000,000 in options to purchase shares of Ventiv common stock and an
aggregate of $2,500,000 in restricted Ventiv common stock immediately following
the consummation of the distribution. Pursuant to Mr. Patrick's employment
agreement, he will receive an aggregate of $2,000,000 in options to purchase
shares of Ventiv common stock and an aggregate of $1,000,000 in restricted
Ventiv common stock immediately following the consummation of the distribution.
See "Executive Compensation--Employment Agreements." The other four members of
Ventiv's management team will each be granted $500,000 in restricted Ventiv
common stock immediately following the distribution at the closing price of the
Ventiv common stock on the distribution date. Twenty percent of Mr. Broshy's
restricted shares of Ventiv common stock will vest immediately following the
distribution, and the balance will vest in equal installments over the next
four years. Forty percent of the restricted shares of Ventiv common stock
granted to Mr. Patrick and each of the other four members of Ventiv's
management team will vest immediately following the distribution, and the
balance will vest in equal installments over the next four years. Mr. Broshy's
and Mr. Patrick's options to purchase Ventiv common stock vest at the rate of
25% per year on each anniversary of the grant date, provided each is still
employed by Ventiv on the applicable vesting date.
It is anticipated that total compensation for Ventiv's executive officers
after the distribution will include base salary, the stock-based incentives
described above and other benefits pursuant to the employee benefit plans
described below. It is anticipated that base salaries and total compensation
opportunities will be competitive as measured against industry norms.
1999 Stock Incentive Plan
The purpose of the 1999 Stock Incentive Plan is to promote the long-term
growth of Ventiv by rewarding key management employees, consultants and
directors of Ventiv with a proprietary interest in Ventiv for outstanding long-
term performance and also to attract, motivate and retain highly qualified and
capable personnel to these positions. The plan is administered by the
Compensation Committee of the Board of Directors of Ventiv. The participants in
the plan are the officers, key employees, directors and consultants of Ventiv,
and the awards to a participant under the plan may be in the form of an option,
restricted stock, a stock appreciation right, or a combination thereof, at the
discretion of the Compensation Committee.
Shares Subject to the 1999 Stock Incentive Plan. Subject to adjustment as
discussed below, we will make available under the stock incentive plan
4,800,000 shares of Ventiv common stock, increased by 17.5% of the number of
shares of Ventiv common stock authorized for issuance after the effective date
of the plan by Ventiv's Board of Directors.
51
<PAGE>
Types of Awards. Awards granted under the stock incentive plan may be in any
combination of the following:
. options to purchase shares of Ventiv common stock;
. stock appreciation rights. These are rights to receive the spread or
difference between the fair market value of shares of Ventiv common
stock subject to an option and the corresponding exercise price of the
option. The spread may be payable in either stock, cash or both; and
. restricted stock. These are awards of stock on which various
restrictions and conditions are imposed which must be satisfied in order
for the award to vest in the participant.
Eligibility. Under the terms of the stock incentive plan,
. directors,
. officers,
. employees and
. consultants
of Ventiv and its subsidiaries designated by the compensation committee
administering the stock plan are eligible to participate in the plan.
Limitation on Awards to Any Individual. Under the stock incentive plan, the
maximum number of shares of Ventiv common stock with respect to which options
or other awards may be granted to any individual in any calendar year may not
exceed 1,000,000 shares.
Administration. The compensation committee of our board of directors will
administer the stock incentive plan. The compensation committee may delegate
its authority to make grants of stock options and stock appreciation rights to
persons below the rank of Senior Vice President.
Stock Options
Exercise Price. The purchase price of a share of Ventiv common stock covered
by an option may not be less than 100% of the fair market value of a share of
Ventiv common stock on the date of grant.
Option Vesting and Exercising. The compensation committee administering the
plan will determine the vesting period and all other terms and conditions of
each option, except that no option may be exercisable more than ten years from
the date of its grant. The compensation committee may, in its discretion,
accelerate the vesting of any option.
An option may only be exercised to the extent that it is vested. Generally,
options will not vest during the first six months after being granted.
Participants may exercise options by delivering cash, Ventiv common stock or
any combination thereof.
Termination of Employment. The compensation committee will determine when, if
at all, an option will vest when a participant in the plan leaves Ventiv.
Generally, if a participant's employment or service is terminated other than by
death or disability, his or her options will cease to vest immediately and the
options will terminate three months after termination of employment or service.
If a participant dies or becomes disabled, his or her options will terminate
after one year. In no event may an option terminate later than ten years after
granted.
Stock Appreciation Rights
Stock appreciation rights may only be granted in conjunction with options
granted under the plan, either at the time of the option grant or at any time
after the option grant.
52
<PAGE>
Stock appreciation rights may not be exercised by a participant who is a
director or officer (as defined under the securities laws) within six months
after being granted, except in the case of the death or disability of the
participant. Stock appreciation rights are exercisable only when the related
option is exercisable.
Upon exercise of a stock appreciation right, the participant will be entitled
to the difference between
. the fair market value of a share of Ventiv common stock underlying
the related option and
. the per share exercise price of the related option,
multiplied by the number of shares represented by the stock appreciation right.
The compensation committee will determine the form of payment, which may be in
cash, Ventiv common stock or any combination of cash and stock.
A stock appreciation right may be exercised without exercising the related
option, but the related option will be cancelled to the extent the right is
exercised. Similarly, a related option may be exercised without exercising the
stock appreciation right, but the stock appreciation right will be cancelled to
the extent the option is exercised.
Restricted Stock
The compensation committee may make restricted stock awards in Ventiv common
stock. The compensation committee will determine:
. the terms and conditions of the restricted stock award;
. the restricted period for the award;
. the restrictions applicable to an award, which may include continued
employment and specific corporate, divisional or individual performance
standards or goals;
. whether the participant will receive dividends and other distributions
on the restricted stock during the restricted period or whether they
will be withheld until the restrictions have been satisfied;
. whether the award will vest in the event of the participant's death or
disability prior to expiration of the restrictions; and
. whether to waive any or all of the restrictions.
Upon an award of restricted stock, a participant will be a stockholder with
respect to those shares of restricted stock and will be entitled to vote those
shares. The stock certificate representing the restricted stock will be held by
Ventiv, together with stock powers executed by the participant in favor of
Ventiv, until the restricted period expires and any restrictions imposed are
satisfied.
Awards of restricted stock granted under the plan may qualify for the
performance-based compensation exemption to Section 162(m) of the Code. As
determined by the compensation committee in its sole discretion, either the
granting or vesting of these performance-based awards will be based upon
achievement of hurdle rates and/or growth in one or more of the following
business criteria:
. net earnings;
. earnings per share;
. net sales growth;
. market share;
. net operating profit;
. expense targets;
53
<PAGE>
. working capital targets relating to accounts receivable;
. operating margin;
. return on equity;
. return on assets;
. planning accuracy (as measured by comparing planned results to actual
results);
. market price per share; and
. total return to stockholders.
In addition, these performance-based awards may include comparisons to the
performance of other companies, which would be measured by one or more of the
criteria listed above. With respect to these performance-based awards, the
compensation committee will establish in writing the performance goals
applicable to a given period, and these goals will state, in terms of an
objective formula or standard, the method for computing the amount of
compensation payable to the participant if the performance goals are obtained.
The compensation committee will also establish in writing the individual
employees or class of employees to which the performance goals apply no later
than 90 days after the commencement of the period of service (but in no event
after 25% of the period has elapsed). No performance-based awards shall be
payable to, or vest with respect to, any participant for a given fiscal period
until the compensation committee certifies in writing that the objective
performance goals (and any other material terms) applicable to the period have
been satisfied.
Amendment of the 1999 Stock Incentive Plan and Options
The board of directors may amend the stock incentive plan from time to time,
except that stockholder approval is needed to:
. change the number of shares of Ventiv common stock subject to the plan
or that may be granted to any individual in any calendar year;
. change the class of eligible participants;
. change the performance criteria; or
. remove the administration of the stock incentive plan from the committee
administering the plan.
Non-Transferability of Options
Except as provided by the compensation committee, awards may (1) not be
transferred by a participant during the participant's lifetime, (2) not be
assigned or otherwise disposed of except by will or by applicable laws of
descent and distribution or (3) only be exercised during the participant's
lifetime by the participant or the participant's guardian or legal
representative.
Corporate Changes
The stock incentive plan provides that the compensation committee may adjust,
as it deems appropriate, the maximum number of shares that may be subject to
options or awards or that may be granted to any individual in any calendar
year, and the terms of any outstanding options or awards under the stock
incentive plan, to reflect changes in outstanding stock that occur because of
stock dividends, stock splits, recapitalizations, reorganizations, liquidations
or other similar events.
If we merge or consolidate with another corporation, liquidate or dispose of
all or substantially all of our assets while there are unexercised options
outstanding:
54
<PAGE>
. after the effective date of the merger, consolidation, liquidation or
disposition, as the case may be, each holder of an option will be
entitled, upon exercise of the option, to receive, in place of the
Ventiv common stock, the number and class or classes of stock or other
securities or property to which the holder would have been entitled if
the holder had held the stock underlying the option directly immediately
prior to the event in question; or
. if the options have not already become exercisable, the compensation
committee may accelerate vesting so that the options will be exercisable
in full.
Certain Federal Income Tax Consequences
The statements in the following paragraphs of the principal federal income
tax consequences of awards under the 1999 Stock Incentive Plan are based on
statutory authority and judicial and administrative interpretations, as of the
date of this information statement, which are subject to change at any time
(possibly with retroactive effect). The law is technical and complex, and the
discussion below represents only a general summary.
Stock Options and Stock Appreciation Rights. An individual who receives an
option or a stock appreciation right will not recognize any taxable income upon
the grant of an option or right. However, the individual generally will
recognize ordinary income upon exercise of an option in an amount equal to the
excess of the fair market value of the shares of Ventiv common stock at the
time of exercise over the exercise price. Similarly, upon the receipt of cash
or shares pursuant to the exercise of a right, the individual generally will
recognize ordinary income in an amount equal to the sum of the cash and the
fair market value of the share received.
As a result of Section 16(b) of the Exchange Act, the timing of income
recognition may be deferred (generally for up to six months) for any individual
who is an officer or director of Ventiv or a beneficial owner of more than ten
percent (10%) of any class of equity securities of Ventiv. Absent a Section
83(b) election (as we describe it below under "Other Awards"), recognition of
income by the individual will be deferred until the expiration of the deferral
period, if any.
The ordinary income recognized with respect to the receipt of shares or cash
upon exercise of an option or a right will be subject to both wage withholding
and other employment taxes. In addition to the customary methods of satisfying
the withholding tax liabilities that arise upon the exercise of a stock
appreciation right for shares or upon the exercise of an option, Ventiv may
satisfy the liability in whole or in part by withholding shares of Ventiv
common stock from those that otherwise would be issuable to the individual or
by the individual tendering other shares owned by him or her, valued at their
fair market value as of the date that the tax withholding obligation arises.
A federal income tax deduction generally will be allowed to Ventiv in an
amount equal to the ordinary income included by the individual with respect to
his or her option or right, provided that such amount constitutes an ordinary
and necessary business expense to Ventiv and is reasonable and the limitations
of Sections 280G and 162(m) of the Code do not apply.
If an individual exercises an option by delivering shares of Ventiv common
stock, the individual will not recognize gain or loss with respect to the
exchange of such shares, even if their then fair market value is different from
the individual's tax basis. The individual, however, will be taxed as described
above with respect to the exercise of the option as if he or she paid the
exercise price in cash, and Ventiv likewise generally will be entitled to an
equivalent tax deduction.
55
<PAGE>
Other Awards. With respect to other awards under the plan that are either
transferable or not subject to a substantial risk of forfeiture (as defined in
the Code and the regulations), individuals generally will recognize ordinary
income equal to the amount of cash or the fair market value of the Ventiv
common stock received.
With respect to awards under the plan that are settled in shares of Ventiv
common stock that are restricted as to transferability and subject to a
substantial risk of forfeiture--absent a written election pursuant to Section
83(b) of the Code filed with the Internal Revenue Service within 30 days after
the date of transfer of such shares pursuant to the award (a "Section 83(b)
election")--an individual will recognize ordinary income at the earlier of the
time at which (1) the shares become transferable or (2) the restrictions that
impose a substantial risk of forfeiture of the shares lapse, in an amount
equal to the excess of the fair market value (on such date) of such shares
over the price paid for the award, if any.
The ordinary income recognized with respect to the receipt of cash, shares
of Ventiv common stock or other property under the plan will be subject to
both wage withholding and other employment taxes.
Ventiv will be allowed a deduction for federal income tax purposes in an
amount equal to the ordinary income recognized by the individual, provided
that such amount constitutes an ordinary and necessary business expense to
Ventiv and is reasonable and the limitations of Sections 280G and 162(m) of
the Code do not apply.
If the compensation committee permits an individual to transfer an option to
a member or members of the individual's immediate family or to a trust for the
benefit of these persons or other entity owned by these persons and the
individual makes such a transfer and the transfer constitutes a completed gift
for gift tax purposes (which determination may depend on a variety of factors
including whether the option or a portion thereof has vested) then such
transfer will be subject to federal gift tax except, generally, to the extent
protected by the individual's $10,000 per donee annual exclusion, by his or
her lifetime unified credit or by the marital deduction. The amount of the
individual's gift is the value of the option at the time of the gift. If the
transfer of the option constitutes a completed gift and the individual retains
no interest in or power over the option after the transfer, the option
generally will not be included in his or her gross estate for federal estate
tax purposes. The transfer of the option will not cause the transferee to
recognize taxable income at the time of the transfer. If the transferee
exercises the option while the transferor is alive, the transferor will
recognize ordinary income as described above as if the transferor had
exercised the option. If the transferee exercises the option after the death
of the transferor, it is uncertain whether the transferor's estate or the
transferee will recognize ordinary income for federal income tax purposes.
Dividends and Dividend Equivalents. To the extent awards under the plan earn
dividends or dividend equivalents, whether paid currently or credited to an
account established under the plan, an individual generally will recognize
ordinary income with respect to the dividends or dividend equivalents.
Change in Control. In general, if the total amount of payments to an
individual that are contingent upon a "change of control" of Ventiv (as
defined in Section 280G of the Code), including payments under the plan that
vest upon a "change in control," equals or exceeds three times the
individual's "base amount" (generally, the individual's average annual
compensation for the five calendar years preceding the change in control),
then, the payments may be treated as "parachute payments" under the Code, in
which case a portion of such payments would be non-deductible to Ventiv and
the individual would be subject to a 20% excise tax on that portion of the
payments.
Certain Limitations on Deductibility of Executive Compensation. With certain
exceptions, Section 162(m) of the Code denies a deduction to publicly held
corporations for compensation paid to certain executive officers in excess of
$1 million per executive per taxable year (including any deduction with
respect to the exercise of an option or stock appreciation right). One of
these exceptions applies to certain performance-based compensation that has,
among other things, been approved by stockholders in a separate vote. Certain
awards under the plan may qualify for the performance-based compensation
exception to Section 162(m) of the Code.
56
<PAGE>
Treatment of Snyder Options Following the Distribution
Options granted under Snyder's Stock Incentive Plan to Ventiv employees will
terminate on the distribution date if unvested, and to the extent vested will
terminate in accordance with the terms of Snyder's Stock Incentive Plan unless
exercised within 90 days following the distribution date. Ventiv intends to
grant options under its 1999 Stock Incentive Plan to Ventiv employees whose
existing Snyder stock options are terminated as a consequence of the
distribution. The new Ventiv options granted on the distribution date
immediately following the distribution will have exercise prices equal to the
closing price of the Ventiv common stock on the distribution date and will be
exercisable for a number of shares of Ventiv common stock determined by
Ventiv's compensation committee based on the seniority and performance of the
individual employee, in accordance with the terms of Ventiv's 1999 Stock
Incentive Plan. A percentage of the new Ventiv options granted to the Ventiv
employees equal to the vested percentage of the existing Snyder options held by
each such employee will vest immediately upon the grant of the new Ventiv
options.
Employment Agreements
Eran Broshy. On June 14, 1999, Snyder retained the services of Eran Broshy as
President of Snyder's healthcare group. Under the terms of Mr. Broshy's
employment agreement, he will initially receive an annual base salary of
$425,000. He is also eligible for an annual bonus award based on certain
performance measures, which may not exceed $125,000.
Under his employment agreement, Ventiv agreed to grant to Mr. Broshy non-
qualified options to purchase an aggregate of $4,000,000 of Ventiv common stock
at an exercise price equal to the closing price of Ventiv common stock on the
distribution date. Mr. Broshy's options vest at the rate of 25% per year on
each anniversary of the grant date, provided he is still employed by Ventiv on
the applicable vesting date. Mr. Broshy's employment agreement also provides
for a grant of an aggregate of $2,500,000 in restricted Ventiv common stock,
20% of which will vest on the distribution date and the remaining 80% vesting
in equal increments over the next four years, provided he is still employed by
Ventiv on the applicable vesting date. The restricted stock grant provided for
in his employment agreement will prohibit Mr. Broshy from transferring any of
his Ventiv common stock for a period of four years after the distribution date.
The agreement provides that upon a "change in control" of Ventiv, the vesting
of both the stock options and restricted stock will accelerate so that Mr.
Broshy's options and restricted stock are fully vested. For purposes of his
employment agreement, "change in control" means any sale, transfer or other
disposition of all or substantially all of the assets of Ventiv or the
consummation of a merger or consolidation of Ventiv which results in the Ventiv
stockholders immediately prior to such transaction owning, in the aggregate,
less than a majority of the surviving entity. Furthermore, Mr. Broshy's
employment agreement provides that he may borrow up to $500,000 from Ventiv
exclusively for the purchase of Ventiv common stock.
Gregory S. Patrick. In August 1999, Ventiv retained the services of Gregory
S. Patrick as Chief Financial Officer of Ventiv. Under the terms of Mr.
Patrick's employment agreement, he will initially receive an annual base salary
of $250,000. He is also eligible for an annual bonus award based on certain
performance measures, which may not exceed $100,000. Under his employment
agreement, Ventiv agreed to grant to Mr. Patrick non-qualified options to
purchase an aggregate of $2,000,000 of Ventiv common stock at an exercise price
equal to the closing price of Ventiv common stock on the distribution date. Mr.
Patrick's options vest at the rate of 25% per year on each anniversary of the
grant date, provided he is still employed by Ventiv on the applicable vesting
date. Mr. Patrick's employment agreement also provides for a grant of an
aggregate of $1,000,000 in restricted Ventiv common stock, 40% of which will
vest on the distribution date and the remaining 60% vesting in equal increments
over the next four years, provided he is still employed by Ventiv on the
applicable vesting date. The restricted stock grant provided for in his
employment agreement will prohibit Mr. Patrick from transferring any of his
Ventiv common stock for a period of four years after the distribution date.
Furthermore, Mr. Patrick's employment agreement provides that he may borrow
from Ventiv an amount necessary to pay any federal and state income taxes
resulting from the restricted stock grant.
57
<PAGE>
Robert Brown, Ph.D. Health Products Research, Inc., a subsidiary of Snyder,
entered into an employment agreement with Dr. Brown on February 13, 1998. Dr.
Brown's initial base salary under his employment agreement is $210,000. Dr.
Brown's employment agreement also provides for a grant of stock options to
purchase 100,000 shares of Snyder common stock at an exercise price of $30.44
per share, vesting over a four-year period. In the event of Dr. Brown's
termination without cause, voluntary termination for "good reason," or his
termination pursuant to sale or transfer of Health Products Research, Inc., Dr.
Brown is entitled to a severance payment equal to one-half of his annual base
salary.
R. Jeremy Stone, M.D. Halliday Jones Sales Limited, a subsidiary of Snyder,
entered into an employment agreement with Dr. Stone on October 15, 1998. Dr.
Stone's initial base salary under his employment agreement is (Pounds)150,000.
Dr. Stone's employment agreement also provides for a grant of stock options to
purchase 100,000 shares of Snyder common stock at an exercise price of $28.37
per share, vesting over a four-year period. In the event of Dr. Stone's
termination without cause, Dr. Stone is entitled to a severance payment equal
to one-half of his annual base salary or the remaining term of his employment
agreement, whichever is less.
Allan Avery. GEM Communications, Inc., a subsidiary of Snyder, entered into
an employment agreement with Mr. Avery on November 25, 1997. Mr. Avery's
initial base salary under his employment agreement is $200,000. Mr. Avery's
employment agreement also provides for a grant of stock options to purchase
50,000 shares of Snyder common stock at an exercise price of $30.44 per share,
vesting over a four-year period. In the event of Mr. Avery's termination
without cause or the sale or transfer of GEM Communications, Inc., Mr. Avery is
entitled to a severance payment equal to one-half of his annual base salary.
William C. Pollock. Healthcare Promotions, LLC, a subsidiary of Snyder,
entered into an employment agreement with Mr. Pollock on February 13, 1998. Mr.
Pollock's initial base salary under his employment agreement is $240,000. Mr.
Pollock's employment agreement also provides for a grant of stock options to
purchase 75,000 shares of Snyder common stock at an exercise price of $30.44
per share, vesting over a four-year period. In the event of Mr. Pollock's
termination without cause or the sale or transfer of Healthcare Promotions,
LLC, Mr. Pollock is entitled to a severance payment equal to one-half of his
annual base salary.
Each of the employment agreements described above contains a non-competition
commitment during the term of employment and for a period of 12 months after
termination of employment. Additionally, each employment agreement contains a
non-solicitation provision and provides for assignment by the employee to his
employer of any work products developed by him during the term of his
employment.
Ventiv will assume the obligations of Snyder, Health Products Research, Inc.,
Halliday Jones Sales Limited, GEM Communications, Inc. and Healthcare
Promotions, LLC, respectively, under these employment contracts in connection
with the consummation of the distribution.
58
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of Ventiv common
stock immediately following the distribution date by each of Ventiv's
directors, its Chief Executive Officer and the executive officers who were
Ventiv's four most highly compensated executive officers in fiscal 1998 and all
directors and executive officers as a group, based upon information available
to Snyder concerning ownership of shares of Snyder common stock at September
17, 1999. See "Executive Compensation--1999 Stock Incentive Plan."
<TABLE>
<CAPTION>
Number of Shares % of Shares
Name to be Beneficially Owned Outstanding (1)
- - - ---- ------------------------ ---------------
<S> <C> <C>
Daniel M. Snyder (2).................. 3,126,541 13.1%
Michele D. Snyder (3)................. 1,113,990 4.7
Mortimer B. Zuckerman (4)............. 1,620,078 6.8
Fred Drasner (5)...................... 783,535 3.3
A. Clayton Perfall (6)................ 86,666 *
Eran Broshy (7)....................... -- --
Dr. Robert Brown (8).................. 112,000 1.0
R. Jeremy Stone (8)................... 33,333 *
Allan Avery (8)....................... 224,598 1.0
William C. Pollock (8)................ 12,430 *
All directors and executive officers
as a group (7)(8)(9) (11 persons).... 7,113,171 29.7
</TABLE>
Based upon information available to Snyder concerning the ownership of shares
of Snyder common stock at September 17, 1999, no person, other than those
listed in the table above, will own beneficially more than 5% of the
outstanding Ventiv common stock on the distribution date except as follows:
<TABLE>
<CAPTION>
Shares of
Ventiv
Common
Stock to be
Received
Name and Address of in the % of Shares
Beneficial Owner Distribution Outstanding (1)
------------------- ------------ ---------------
<S> <C> <C>
Ark Asset Management Co., Inc. (10).......... 2,508,333 10.5%
Putnam Investments, Inc. (11)................ 2,975,278 12.4%
Capital Research and Management Co. (12)..... 2,675,700 11.2%
</TABLE>
- - - --------
* Denotes less than 1%.
(1) Based upon 71,763,763 shares of Snyder common stock outstanding as of
September 17, 1999.
(2) The address of Mr. Snyder is 6903 Rockledge Drive, 15th Floor, Bethesda,
Maryland 20817.
(3) The address of Ms. Snyder is 6903 Rockledge Drive, 15th Floor, Bethesda,
Maryland 20817.
(4) Based upon the number of shares of Snyder common stock consisting of shares
held by USN College Marketing, L.P. ("College Marketing") (a limited
partnership in which USN College Marketing, Inc. ("USN Inc.") is the
general partner and Fred Drasner is the sole limited partner) and
attributable to USN Inc.'s general partnership interest in College
Marketing. USN Inc. is owned one-third by Mortimer B. Zuckerman and two-
thirds by the MBZ Trust of 1996, for which an outside person acts as the
Trustee. Mr. Zuckerman is the sole director of USN Inc. Does not include
408,434 shares held by College Marketing that are beneficially owned by Mr.
Drasner. See Note 5. Mr. Zuckerman's address is 599 Lexington Avenue, Suite
1300, New York, New York 10022. The address of MBZ Trust of 1996 is c/o
Boston Properties, 8 Arlington Street, Boston, Massachusetts 02116.
(5) Based upon the number of shares of Snyder common stock consisting of (i)
108,434 shares owned by Mr. Drasner in his individual capacity and over
which he exercises sole voting and investment discretion, (ii) 408,434
shares beneficially owned by Mr. Drasner as limited partner in College
Marketing and (iii) 266,666 shares beneficially owned by Mr. Drasner as a
result of his ownership of F.D. Sutton, LLC ("Sutton"), a limited liability
company of which Mr. Drasner is the sole member. Mr. Drasner's address is
450 W. 33rd Street, New York, New York 10001.
59
<PAGE>
(6) Based upon shares of Snyder common stock issuable upon exercise of
currently exercisable Snyder options. The address of Mr. Perfall is 6903
Rockledge Drive, 15th Floor, Bethesda, Maryland 20817.
(7) Does not include shares of Ventiv common stock issuable pursuant to the
exercise of $4,000,000 in Ventiv stock options to be issued to Mr. Broshy
immediately following the distribution or $2,500,000 in restricted Ventiv
common stock to be granted to Mr. Broshy immediately following the
distribution, as there is no existing per share price of Ventiv common
stock to calculate the number of shares of Ventiv common stock to be
received pursuant to such grants.
(8) Does not include $500,000 in restricted Ventiv common stock to be granted
to each of Drs. Brown and Stone and Messrs. Avery and Pollock, in each case
immediately following the distribution, as there is no existing per share
price of Ventiv common stock to calculate the number of shares of Ventiv
common stock to be received by these individuals pursuant to such grants.
The address of Drs. Brown and Stone and Messrs. Avery and Pollock is 200
Cottontail Lane, Vantage Court North, Somerset, New Jersey 08873.
(9) Does not include shares of Ventiv common stock issuable pursuant to the
exercise of $2,000,000 in Ventiv stock options to be issued to Mr. Patrick
immediately following the distribution or $1,000,000 in restricted Ventiv
common stock to be granted to Mr. Patrick immediately following the
distribution, as there is no existing per share price of Ventiv common
stock to calculate the number of shares of Ventiv common stock to be
received pursuant to such grants.
(10) Ownership is as reported on Schedule 13G of Ark Asset Management Co., Inc.
and is as of January 6, 1999. Ark's address is One New York Plaza, 29th
Floor, New York, New York 10004.
(11) Ownership is as reported in the Schedule 13G dated February 11, 1999,
filed by Putnam Investments, Inc. ("Putnam"), Putnam, a wholly owned
subsidiary of Marsh & McLennan Companies, Inc. ("MMC").
(12) Ownership is as reported in Schedule 13G of Capital Research and
Management Co. and is as of July 9, 1999. Capital's address is 333 South
Hope Street, 55th Floor, Los Angeles, California 90071.
60
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Authorized Capital Stock
The total number of shares of all classes of stock that Ventiv presently has
authority to issue is 1,000 shares of Ventiv common stock. Under the
certificate that will be in effect on the distribution date, Ventiv will have
authority to issue a total of 60,000,000 shares of all classes of stock, of
which 10,000,000 may be shares of preferred stock and 50,000,000 may be shares
of common stock.
Based on the number of shares of Snyder common stock outstanding as of
September 17, 1999 and the distribution ratio, it is expected that 23,921,254
shares of Ventiv common stock will be distributed to Snyder stockholders in the
distribution. All the shares of Ventiv common stock to be distributed to Snyder
stockholders in the distribution will be fully paid and non-assessable. The
Ventiv common stock to be distributed will constitute all the shares of capital
stock of Ventiv that will be outstanding immediately after the distribution.
Ventiv Common Stock
Holders of Ventiv common stock are entitled to one vote for each share on all
matters voted on by stockholders. Holders of Ventiv common stock do not have
cumulative voting rights in the election of directors. The first annual meeting
of stockholders is expected to be held during 2000.
Holders of Ventiv common stock do not have subscription, redemption or
conversion privileges. Subject to the preferences or other rights of any
preferred stock that may be issued from time to time, holders of Ventiv common
stock are entitled to participate ratably in dividends on Ventiv common stock
as declared by the Ventiv Board of Directors. Holders of Ventiv common stock
are entitled to share ratably in all assets available for distribution to
stockholders in the event of liquidation or dissolution of Ventiv, subject to
distribution of the preferential amount, if any, to be distributed to holders
of preferred stock.
Preferred Stock
Ventiv's certificate of incorporation that will be in effect on the
distribution date will authorize the Ventiv Board of Directors, without any
vote or action by the holders of Ventiv common stock, to issue up to 10,000,000
shares of preferred stock from time to time in one or more series. The Ventiv
Board of Directors is authorized to determine the number of shares and
designation of any series of preferred stock and the dividend rights, dividend
rate, conversion rights and terms, voting rights (full or limited, if any),
redemption rights and terms, liquidation preferences and sinking fund terms of
any series of preferred stock. Issuances of preferred stock would be subject to
the applicable rules of the Nasdaq National Market or other organizations on
whose systems the stock of Ventiv may then be quoted or listed. Depending upon
the terms of preferred stock established by Ventiv Board of Directors, any or
all series of preferred stock could have preference over Ventiv common stock
with respect to dividends and other distributions and upon liquidation of
Ventiv. Issuance of any such shares with voting powers, or issuance of
additional shares of Ventiv common stock, would dilute the voting power of the
outstanding Ventiv common stock. Ventiv has no present plans to issue any
preferred stock.
No Preemptive Rights
No holder of any capital stock of Ventiv authorized at the distribution date
will have any preemptive right to subscribe for or purchase any securities of
any class or kind of Ventiv.
Transfer Agent and Registrar
American Stock Transfer and Trust Company will be the transfer agent and
registrar for Ventiv common stock commencing upon the distribution date.
61
<PAGE>
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF DELAWARE LAW, VENTIV'S
CERTIFICATE OF INCORPORATION AND BY-LAWS
The following discussion concerns certain provisions of Delaware law, the
Ventiv certificate of incorporation and our by-laws that could be viewed as
having the effect of discouraging an attempt to obtain control of Ventiv.
Delaware Law
Section 203 of the General Corporation Law. Under certain circumstances,
Section 203 of the Delaware General Corporation Law limits the ability of an
"interested stockholder" to effect various business combinations with Ventiv
for a three-year period following the time that a stockholder became an
interested stockholder. An "interested stockholder" is defined as a holder of
more than 15% of the outstanding voting stock.
An interested stockholder may engage in a business combination transaction
with Ventiv within the three-year period only if:
. Ventiv's Board of Directors approved the transaction before the
stockholder became an interested stockholder or approved the transaction
in which the stockholder became an interested stockholder;
. the interested stockholder acquired at least 85% of the voting stock in
the transaction in which it became an interested stockholder; or
. Ventiv's Board of Directors and the holders of shares entitled to cast
two-thirds of the votes entitled to be cast by all of the outstanding
voting shares held by all disinterested stockholders approve the
transaction.
Special Meetings. Under Delaware law, unless the certificate of incorporation
or the by-laws provide otherwise, stockholders are not permitted to call a
special meeting of the stockholders. Ventiv's certificate of incorporation and
by-laws do not permit stockholders to call a special meeting.
Certificate of Incorporation and By-Laws
Authorized Shares. The certificate of incorporation will provide that Ventiv
may from time to time issue shares of preferred stock in one or more series,
the terms of which will be determined by Ventiv's Board of Directors, and
common stock. Ventiv will not solicit approval of our stockholders unless
Ventiv's Board of Directors believes that approval is advisable or is required
by Nasdaq National Market regulations or Delaware law. This could enable
Ventiv's Board of Directors to issue shares to persons friendly to current
management which would render more difficult or discourage an attempt to obtain
control of Ventiv by means of a merger, tender offer, proxy contest or
otherwise and protect the continuity of our management. These additional shares
also could be used to dilute the stock ownership of persons seeking to obtain
control of our company.
62
<PAGE>
LIMITATION ON LIABILITY AND INDEMNIFICATION
OF OFFICERS AND DIRECTORS
Limitation on Liability of Directors
Section 145 of the Delaware General Corporation Law permits the
indemnification of directors, officers, employee and agents of a Delaware
corporation. Ventiv's by-laws provide that Ventiv shall indemnify its directors
and officers to the fullest extent permitted by the Delaware General
Corporation Law. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or person controlling
Ventiv pursuant to the foregoing provisions, the opinion of the Securities and
Exchange Commission is that such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
As permitted by the Delaware General Corporation Law, Ventiv's certificate of
incorporation also limits the liability of directors of Ventiv for damages in
derivative and third party lawsuits for breach of a director's fiduciary duty
except for liability:
. for any breach of the director's duty of loyalty to Ventiv or its
stockholders;
. for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
. for unlawful payments of dividends or unlawful stock purchases or
redemptions as provided in Section 174 of the Delaware General
Corporation Law; or
. for any transaction for which the director derived improper personal
benefit.
The limitation of liability applies only to monetary damages and, presumably,
would not affect the availability of equitable remedies such as injunction or
recission. The limitation of liability applies only to the acts or omission of
directors as directors and does not apply to any such act or omission as an
officer of Ventiv or to any liabilities imposed under federal securities law.
Indemnification and Insurance
Ventiv intends to obtain directors' and officers' insurance providing
indemnification for certain of Ventiv's directors, officers, affiliates,
partners and employees for certain liabilities.
Ventiv's by-laws, among other things, indemnify Ventiv's directors and
executive officers for certain expenses, including attorney's fees, judgments,
fines and settlement amounts incurred by any such person in any action or
proceeding, including any action by or in the right of Ventiv, arising out of
such person's services as a director or executive officer of Ventiv, any
subsidiary of Ventiv or any other company or enterprise to which the person
provides services at the request of Ventiv. We believe that these provisions
are necessary to attract and retain qualified directors and executive officers.
At present, there are no pending litigation or proceeding involving any
director, officer, employee or agent of Ventiv where indemnification is
expected to be required or permitted. We are not aware of any threatened
litigation or proceeding that might result in a claim for such indemnification.
63
<PAGE>
ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission the registration
statement under the Exchange Act with respect to Ventiv common stock being
received by Snyder stockholders in the distribution. This information statement
does not contain all of the information set forth in the registration statement
and the exhibits thereto, to which reference is hereby made. Statements made in
this information statement as to the contents of any contract, agreement or
other document referred to herein and filed as an exhibit are not necessarily
complete. With respect to each such contract, agreement or to other documents
filed as an exhibit to the registration statement, reference is made to such
exhibit for more complete description of the matter involved, and each such
statement shall be deemed qualified in its entirety by such reference. The
registration statement and the exhibits thereto filed by us with the Securities
and Exchange Commission may be inspected at the public reference facilities of
the Securities and Exchange Commission listed below.
After the distribution, Ventiv will be subject to the information
requirements of the Exchange Act, and in accordance therewith will file
reports, proxy statements and other information with the Securities and
Exchange Commission. Such reports, proxy statements and other information can
be inspected and copied at the public reference facilities maintained by the
Securities and Exchange Commission at its principal offices at 450 Fifth
Street, N.W., Washington, D.C. 20549, and at its regional offices at
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and 7 World Trade Center, 13th Floor, New York, New York 10048.
Copies of such material may be obtained at prescribed rates from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549. Such material may also be accessed electronically by means of the
Commission's home page on the Internet at http://www.sec.gov. Application has
been made to list the shares of Ventiv common stock on the Nasdaq National
Market and, if and when such shares of Ventiv common stock commence trading on
the Nasdaq National Market, such reports, proxy statements and other
information concerning the Company will be available for inspection at 1735 K
Street, N.W., Washington, D.C. 20006-1500.
----------------
We intend to furnish our stockholders with annual reports containing
consolidated financial statements (beginning with fiscal year 1999) audited by
independent accountants.
----------------
You should rely only on the information contained in this information
statement and other documents referred to in this information statement. Snyder
and Ventiv have not authorized anyone to provide you with information that is
different.
64
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Ventiv Health, Inc.
This financial statement represents the financial position of the newly
formed subsidiary of Snyder Communications, Ventiv Health, Inc. Snyder
Communications intends to contribute its healthcare marketing services
business to this subsidiary and distribute it to Synder Communication's
stockholders through a special dividend of one share of common stock of
Ventiv Health, Inc. for every three shares of existing common stock of
Snyder Communications, Inc.
Report of Independent Public Accountants.................................. F-2
Balance Sheet as of June 30, 1999......................................... F-3
Ventiv Health
Combined Financial Statements
These combined financial statements present the financial position,
results of operations and cash flows of Snyder Communications, Inc.'s
healthcare marketing services business which Snyder Communications
intends to distribute to its common stockholders in the third quarter of
1999 through the special dividend described above.
Report of Independent Public Accountants.................................. F-4
Combined Balance Sheet as of December 31, 1998 and 1997 and June 30, 1999
(unaudited).............................................................. F-5
Combined Statement of Income for the years ended December 31, 1998, 1997
and 1996 and the six months ended June 30, 1999 (unaudited) and 1998
(unaudited).............................................................. F-6
Combined Statement of Cash Flows for the years ended December 31, 1998,
1997 and 1996 and the six months ended June 30, 1999 (unaudited) and 1998
(unaudited).............................................................. F-7
Notes to Combined Financial Statements.................................... F-8
CLI Pharma S.A.
Consolidated Financial Statements of Acquired Business
Report of Independent Public Accountants.................................. F-22
Consolidated Balance Sheet as of December 31, 1997........................ F-23
Consolidated Statement of Income for the year ended December 31, 1997..... F-24
Consolidated Statement of Equity for the year ended December 31, 1997..... F-25
Consolidated Statement of Cash Flows for the year ended December 31, 1997. F-26
Notes to Consolidated Financial Statements................................ F-27
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of Snyder Communications, Inc.:
We have audited the accompanying balance sheet of Ventiv Health, Inc.
("Ventiv"), as of June 30, 1999. This balance sheet is the responsibility of
Ventiv's management. Our responsibility is to express an opinion on this
balance sheet 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 Ventiv as of June 30, 1999 in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Vienna, VA
August 23, 1999
F-2
<PAGE>
VENTIV HEALTH, INC.
BALANCE SHEET
AS OF JUNE 30, 1999
<TABLE>
<S> <C>
ASSETS
Cash .................................................................... $ 100
-----
Total Assets .......................................................... $ 100
=====
LIABILITIES AND STOCKHOLDER'S EQUITY
Total Liabilities ..................................................... $ --
Preferred stock, $.001 par value per share, 10,000 shares authorized,
none issued and outstanding at June 30, 1999 ........................... --
Common stock, $.001 par value per share, 50,000 shares authorized, 100
shares issued and outstanding at June 30, 1999 ......................... --
Additional paid-in capital............................................... 100
-----
Total Liabilities and Stockholder's Equity ............................ $ 100
=====
</TABLE>
- - - --------
(1) Ventiv Health, Inc. was created as a Delaware corporation on June 22, 1999
and had no operations other than matters relating to its organization and
registration. On June 22, 1999, Snyder Communications, Inc.'s ("Snyder")
Board of Directors approved a plan to effect the distribution of Snyder's
healthcare marketing services business to existing stockholders. Snyder
intends to consummate the distribution in the third quarter of 1999 through
a special dividend of one share of common stock of this newly formed
subsidiary, Ventiv Health, Inc., for every three shares of existing common
stock of Snyder.
(2) On June 23, 1999, Ventiv Health, Inc. issued 100 shares of common stock to
Snyder Communications, Inc. for $100.
F-3
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of Snyder Communications, Inc.:
We have audited the accompanying combined balance sheets of Ventiv Health
(the "Company"), as defined in Note 1 to the combined financial statements, as
of December 31, 1998 and 1997, and the related combined statements of income
and cash flows for each of the years in the three year period ended December
31, 1998. These combined financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
combined 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 combined financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the combined 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 combined financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
December 31, 1998 and 1997, and the results of their operations and their cash
flows for each of the years in the three year period ended December 31, 1998,
in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Vienna, VA
June 22, 1999
F-4
<PAGE>
VENTIV HEALTH
(See Note 1)
COMBINED BALANCE SHEET
(in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
----------- -----------------
1999 1998 1997
----------- -------- --------
(unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and equivalents........................... $ 21,347 $ 25,664 $ 18,040
Marketable securities.......................... -- -- 1,108
Accounts receivable, net of allowance for
doubtful accounts of $2,645, $2,971 and $3,924
at June 30, 1999, December 31, 1998 and 1997,
respectively.................................. 55,812 43,521 29,331
Unbilled services.............................. 25,998 15,212 6,769
Current portion of deferred tax asset.......... -- 683 852
Other current assets........................... 9,871 10,369 7,141
-------- -------- --------
Total current assets......................... 113,028 95,449 63,241
-------- -------- --------
Property and equipment, net...................... 13,455 10,028 4,880
Goodwill and other intangible assets, net........ 96,103 80,728 26,283
Deferred tax asset............................... 4,822 3,414 4,569
Deposits and other assets........................ 687 4,025 1,974
-------- -------- --------
Total assets................................. $228,095 $193,644 $100,947
======== ======== ========
LIABILITIES AND INVESTMENTS
AND ADVANCES FROM SNYDER
Current liabilities:
Lines of credit................................ $ 76 $ 198 $ 22,875
Current maturities of long-term debt........... -- -- 137
Accrued payroll................................ 16,149 13,989 14,278
Accounts payable............................... 8,740 5,791 5,771
Accrued expenses............................... 30,785 40,613 29,225
Client advances................................ 4,944 1,965 --
Unearned revenue............................... 7,357 8,446 14,125
-------- -------- --------
Total current liabilities.................... 68,051 71,002 86,411
-------- -------- --------
Related party borrowings......................... -- -- 457
Long-term debt................................... 1,270 1,473 3,697
Other liabilities................................ 3 1,442 11
Commitments and contingencies
Investments and advances from Snyder............. 158,771 119,727 10,371
-------- -------- --------
Total liabilities and investments and
advances from Snyder........................ $228,095 $193,644 $100,947
======== ======== ========
</TABLE>
The accompanying notes are an integral part of this combined balance sheet.
F-5
<PAGE>
VENTIV HEALTH
(See Note 1)
COMBINED STATEMENT OF INCOME
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
For the
Six Months Ended For the Years Ended
June 30, December 31,
------------------ ----------------------------
1999 1998 1998 1997 1996
-------- -------- -------- -------- --------
(unaudited)
<S> <C> <C> <C> <C> <C>
Revenues..................... $181,259 $151,313 $321,500 $208,967 $144,704
Operating expenses:
Cost of services........... 137,028 109,677 236,047 156,346 104,922
Selling, general and
administrative expenses... 21,585 19,929 43,029 32,787 25,960
Compensation to
stockholders.............. -- 515 742 15,638 12,340
Recapitalization costs..... -- -- -- 1,889 --
Acquisition and related
costs..................... 1,694 11,356 26,922 8,042 --
-------- -------- -------- -------- --------
Income (loss) from
operations.................. 20,952 9,836 14,760 (5,735) 1,482
Interest expense............. (123) (1,078) (2,315) (1,617) (691)
Investment income............ 373 655 1,850 568 796
-------- -------- -------- -------- --------
Income (loss) from operations
before income taxes......... 21,202 9,413 14,295 (6,784) 1,587
Income tax provision......... (8,563) (6,795) (12,849) (1,934) (1,504)
-------- -------- -------- -------- --------
Net income (loss)............ $ 12,639 $ 2,618 $ 1,446 $ (8,718) $ 83
======== ======== ======== ======== ========
Pro forma net income (loss)
per share data (unaudited):
Pro forma Historical net
income (loss) per share
(unaudited) (See Note 1)
Basic and diluted net
income (loss) per share... $ 0.53 $ 0.11 $ 0.06
======== ======== ========
Pro forma adjusted net
income (loss) per share
(unaudited) (See Notes 1
and 3)
Basic and diluted net
income (loss) per share... $ 0.53 $ 0.11 $ 0.06
======== ======== ========
Shares used in computing
net income (loss) per
share..................... 23,921 23,921 23,921
======== ======== ========
</TABLE>
The accompanying notes are an integral part of this combined statement of
income.
F-6
<PAGE>
VENTIV HEALTH
(See Note 1)
COMBINED STATEMENT OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
For the
Six Months For the Years Ended
Ended June 30, December 31,
---------------- -------------------------
1999 1998 1998 1997 1996
------- ------- ------- ------- -------
(unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activi-
ties:
Net income (loss)................ $12,639 $ 2,618 $ 1,446 $(8,718) $ 83
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and amortization.. 3,789 2,570 5,359 2,169 1,151
Noncash charge from accelerated
vesting of acquired subsidiary
options....................... -- 9 2,173 -- --
Deferred taxes................. 737 329 1,324 (3,914) (213)
(Gain) loss on disposal of
assets........................ 196 (118) 151 371 (168)
Other noncash amounts.......... -- 126 126 (934) (445)
Changes in assets and
liabilities:
Accounts receivable, net....... (11,014) (2,741) (1,040) (7,043) (573)
Unbilled services.............. (10,620) (1,342) (8,443) (3,074) (2,110)
Deposits and other assets...... 3,339 705 (3,533) (1,066) 238
Other current assets........... 756 (6,232) (813) 1,314 1,314
Accrued payroll, accounts
payable and accrued expenses.. (10,453) 9,291 8,599 16,385 4,896
Client advances................ 1,011 203 1,965 -- --
Unearned revenue............... (1,130) (3,041) (8,535) 2,586 (3,255)
------- ------- ------- ------- -------
Net cash provided by (used
in) operating activities.... (10,750) 2,377 (1,221) (1,924) 918
------- ------- ------- ------- -------
Cash flows from investing activi-
ties:
Cash on hand at acquired
businesses...................... 2,917 6,083 6,083 452 --
Purchase of subsidiaries......... (1,135) (9,585) (10,386) -- --
Purchase of property and
equipment....................... (4,775) (2,768) (4,916) (2,127) (915)
Proceeds from sale of equipment.. -- 780 780 184 246
Net sales (purchases) of
marketable securities........... -- 1,062 1,262 2,274 (159)
Purchase of license agreements... (151) (503) (13) (4,359) (871)
------- ------- ------- ------- -------
Net cash used in investing
activities.................. (3,144) (4,931) (7,190) (3,576) (1,699)
------- ------- ------- ------- -------
Cash flows from financing activi-
ties:
Net proceeds (repayment) of
long-term debt.................. (1,639) (3,767) (4,210) (1,838) (1,038)
Debt issuance costs.............. -- -- -- -- (25)
Proceeds from mandatorily
redeemable preferred stock...... -- -- -- -- 2,147
Redemption of mandatorily
redeemable preferred stock...... -- -- -- (2,147) --
Net borrowings (repayments) on
lines of credit................. (122) (2,385) (22,707) 20,603 (1,842)
Loans provided by related
parties......................... -- -- -- 10,000 --
Payment of related party loans... -- -- -- (10,000) --
Investments and advances from
Snyder.......................... 11,227 14,080 42,753 (167) (7,998)
------- ------- ------- ------- -------
Net cash provided by (used
in) financing activities.... 9,466 7,928 15,836 16,451 (8,756)
------- ------- ------- ------- -------
Effect of exchange rate changes... 111 7 199 (177) 76
Net increase (decrease)in cash and
equivalents...................... (4,317) 5,381 7,624 10,774 (9,461)
Cash and equivalents, beginning of
period........................... 25,664 18,040 18,040 7,266 16,727
------- ------- ------- ------- -------
Cash and equivalents, end of
period........................... $21,347 $23,421 $25,664 $18,040 $ 7,266
======= ======= ======= ======= =======
Disclosure of supplemental cash
flow information:
Cash paid for interest........... $ 211 $ 404 $ 1,526 $ 899 $ 480
Cash paid for income taxes....... 6,141 1,867 2,542 1,550 244
Disclosure of noncash activities:
Businesses acquired with Snyder
stock........................... $16,336 $51,358 $64,546 $13,320 $ --
</TABLE>
The accompanying notes are an integral part of this combined statement of cash
flows.
F-7
<PAGE>
VENTIV HEALTH
NOTES TO COMBINED FINANCIAL STATEMENTS
(Information as of June 30, 1999 and for the six months ended June 30, 1999 and
June 30, 1998 is unaudited)
1. Organization, Basis of Presentation and Business:
Organization
Snyder Communications, Inc. ("Snyder"), a Delaware corporation, was
incorporated on June 25, 1996, to continue the business operations of
Collegiate Marketing and Communications, L.P. Snyder completed an initial
public offering of its common stock on September 24, 1996.
Snyder provides direct marketing and communications services and Internet
professional services to its clients.
On June 22, 1999, the Board of Directors of Snyder approved a plan to effect
the distribution (the "Distribution") of Snyder's healthcare marketing services
business to existing stockholders. Snyder intends to contribute its healthcare
marketing business in the third quarter of 1999 to a newly formed subsidiary,
Ventiv Health, Inc. Snyder intends to consummate the Distribution in the third
quarter of 1999 through a special dividend of one share of common stock of
Ventiv Health, Inc. for every three shares of existing common stock of Snyder.
Basis of Presentation
Subsequent to the Distribution, operations of Ventiv Health, Inc. will
consist principally of the healthcare sales, healthcare market research and
strategic planning, and healthcare educational communications services formerly
conducted by the healthcare marketing services operating group of Snyder.
The combined financial statements present the financial position, results of
operations and cash flows of Snyder's healthcare marketing services business,
referred to herein as "Ventiv Health" or the Company, as if it were formed as a
separate entity of Snyder for all periods presented. Snyder's historical basis
in the assets and liabilities of the Company have been carried over to the
combined financial statements. All expenses reflected in the combined financial
statements are costs specifically identified to the Company. It is not
practicable to estimate costs that would have been incurred by the Company if
it had been operated on a stand-alone basis.
Throughout 1998 and 1997, acquisitions were completed by the healthcare
services operating group of Snyder that were accounted for as poolings of
interests for financial reporting purposes. During 1999, 1998 and 1997, several
additional acquisitions were made that have been accounted for as purchase
business combinations. The companies with which Snyder has entered into mergers
accounted for as poolings of interests for financial reporting purposes will be
collectively referred to as the "Pooled Entities," and their mergers will be
referred to herein as the "Acquisitions." The accompanying combined financial
statements have been retroactively restated to reflect the combined financial
position and combined results of operations and cash flows of the Company and
the Pooled Entities, after elimination of all significant intercompany
transactions, for all periods presented, giving effect to the Acquisitions as
if they had occurred at the beginning of the earliest period presented.
Changes in the investments and advances from Snyder represent the net income
(loss) of the Company, the comprehensive income (loss) of the Company, the net
change in cash transferred between the Company and Snyder (or previous owners
with respect to the Pooled Entities prior to their merger with Snyder) and the
effect of businesses acquired by Snyder in purchase transactions and
contributed to Ventiv Health.
F-8
<PAGE>
VENTIV HEALTH
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
An analysis of the investments and advances from Snyder for each of the three
years ended December 31, 1998 and the six months ended June 30, 1999, is as
follows (in thousands):
<TABLE>
<S> <C>
Balance, December 31, 1995......................................... $ 13,591
Net income....................................................... 83
Comprehensive income............................................. 108
Cash transfers to Snyder, net.................................... (9,085)
--------
Balance, December 31, 1996......................................... 4,697
--------
Net loss......................................................... (8,718)
Comprehensive income............................................. 152
Noncash transfers from Snyder.................................... 13,320
Cash transfers from Snyder, net.................................. 920
--------
Balance, December 31, 1997......................................... 10,371
--------
Net income....................................................... 1,446
Comprehensive income............................................. 611
Noncash transfers from Snyder.................................... 64,546
Cash transfers from Snyder, net.................................. 42,753
--------
Balance, December 31, 1998......................................... 119,727
--------
Net income (unaudited)........................................... 12,639
Comprehensive loss (unaudited)................................... (1,158)
Noncash transfers from Snyder (unaudited)........................ 16,336
Cash transfers from Snyder, net (unaudited)...................... 11,227
--------
Balance, June 30, 1999 (unaudited)................................. $158,771
========
</TABLE>
Business
The Company provides integrated marketing services for its clients, primarily
pharmaceutical companies. The Company's operations are conducted throughout the
United States ("U.S."), the United Kingdom ("U.K."), France, Germany, Hungary
and the Netherlands.
The Company's services are designed to establish and monitor strategic
marketing plans, to provide face-to-face interaction with physicians and to
conduct educational research and communication services. Snyder created the
business conducted by the Company in January 1997 in a merger transaction with
a U.S. provider of pharmaceutical sales and marketing services. During 1998 and
1997, Snyder issued 6,475,105 and 4,035,184 shares, respectively, in pooling of
interests transactions with companies in the healthcare marketing services
industry. Of the total shares issued in pooling of interests transactions,
1,318,798 were to Health Products Research, 6,008,210 were to companies in the
Company's Contract Sales Group, and 3,183,281 were to companies in the
Company's Healthcare Communications Group. The Contract Sales Group includes
MMD, Inc., PharmFlex, Inc., Rapid Deployment Group Limited, Publimed Promotions
S.A. and MKM Marketinginstitut GmbH. The Healthcare Communications Group
includes GEM Communications, Inc. and Clinical Communications Group, Inc. We
further expanded the size and geographic presence of our Contract Sales Group
with the purchase of Halliday Jones Sales Ltd. which was valued at $19.4
million including 425,478 shares issued in August 1997 and with the purchases
of Healthcare Promotions, LLC which was valued at $23.7 million including
584,951 shares issued and CLI Pharma S.A. which was valued at $30.7 million
including 576,078 shares issued in the first quarter of 1998. We also increased
the scope of services offered by the Healthcare Communications Group with the
purchase of PromoTech Research Associates, Inc. which was valued at $16.3
million including 583,431 shares issued in March 1999.
F-9
<PAGE>
VENTIV HEALTH
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
Health Products Research designs and monitors product launches and sales
strategies with our proprietary programs to maximize asset utilization and
return on investment for pharmaceutical and other life sciences companies. The
Healthcare Communications Group provides educational programs to physicians and
other healthcare professionals. The Contract Sales Group implements and
executes outsourced sales programs for pharmaceutical and other life sciences
products. Most of the Company's largest clients utilize the services of more
than one of our operating groups.
The following details revenues and net income (loss) for each of the years
ended December 31, 1998, 1997 and 1996 as well as the six months ended June 30
, 1999 and June 30, 1998 of the Company and the Pooled Entities through the
dates of their respective Acquisitions:
<TABLE>
<CAPTION>
For the Six
Months Ended For the Years Ended
June 30, December 31,
----------------- ----------------------------
1999 1998 1998 1997 1996
-------- -------- -------- -------- --------
(in thousands)
(unaudited)
<S> <C> <C> <C> <C> <C>
Revenues:
The Company................... $181,259 $112,044 $270,323 $ 60,124 $ --
Pooled Entities............... -- 39,269 51,177 148,843 144,704
-------- -------- -------- -------- --------
$181,259 $151,313 $321,500 $208,967 $144,704
======== ======== ======== ======== ========
Net Income (loss):
The Company................... $ 12,639 $ 4,181 $ 5,933 $ 1,987 $ --
Pooled Entities............... -- (1,563) (4,487) (10,705) 83
-------- -------- -------- -------- --------
$ 12,639 $ 2,618 $ 1,446 $ (8,718) $ 83
======== ======== ======== ======== ========
</TABLE>
During 1999, the Company completed the acquisition of PromoTech Research
Associates, Inc. ("PromoTech") (March 25, 1999). The total consideration paid
was $16.3 million and consisted of 583,431 shares of Snyder common stock. This
purchase business combination has resulted in additional goodwill of $18.1
million. During 1998, the Company completed purchase business combinations,
including CLI Pharma S.A. ("CLI Pharma") (March 25, 1998) and Healthcare
Promotions, LLC ("HCP") (February 13, 1998), for total consideration paid of
approximately $64.0 million (1,211,029 shares of Snyder common stock and
$4.3 million in net cash). Based upon an allocation of purchase consideration,
these purchase business combinations have resulted in additional goodwill of
approximately $55.7 million. During 1997, the Company completed the acquisition
of Halliday Jones Ltd. ("HJ") (August 28, 1997), and the total consideration
paid, including the repayment of assumed debt, was $19.4 million and consisted
of 425,478 shares of Snyder common stock and $7.4 million in cash. This
purchase business combination has resulted in additional goodwill of $19.5
million. The following table presents pro forma financial information as if the
1999 purchase of PromoTech, the 1998 purchases of HCP and CLI Pharma and 1997
purchase of HJ had been consummated at the beginning of each of the periods
presented and all of the Company's operations had been taxed as a C
corporation.
<TABLE>
<CAPTION>
For the Six For the Years
Months Ended June Ended December
30, 31,
----------------- -----------------
1999 1998 1998 1997
-------- -------- -------- --------
(unaudited)
(in thousands, except per share
data)
<S> <C> <C> <C> <C>
Pro forma revenues..................... $183,186 $163,474 $335,628 $270,842
Pro forma net income (loss)............ 12,955 3,268 2,113 (8,759)
Pro forma basic and diluted net income
(loss) per share...................... 0.54 0.14 0.09
</TABLE>
The Company's other purchase business combinations are immaterial to the
combined financial statements.
F-10
<PAGE>
VENTIV HEALTH
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
Unaudited Pro Forma Net Income (Loss) Per Share
The Company has applied Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("SFAS No. 128") to all periods presented in these
financial statements. SFAS No. 128 requires disclosure of basic and diluted
EPS. Basic EPS is computed by dividing reported earnings available to common
stockholders by the weighted average number of shares outstanding without
consideration of common stock equivalents or other potentially dilutive
securities. Diluted EPS gives effect to common stock equivalents and other
potentially dilutive securities outstanding during the period. For all periods
presented EPS has been computed using the shares that will be issued upon the
Distribution based on the number of outstanding Snyder common shares on
September 17, 1999. Basic and diluted EPS are the same for all years presented
as there will be no Healthcare options granted until the date of the
Distribution.
Unaudited Interim Financial Statements
The accompanying unaudited combined balance sheet as of June 30, 1999 and the
combined statements of income and cash flows for the six months ended June 30,
1999 and June 30, 1998 have been prepared by the Company without audit. Certain
information and footnote disclosures normally included in financial statements
presented in accordance with generally accepted accounting principles have been
omitted. The Company believes the disclosures made are adequate to make the
information presented not misleading. In the opinion of the Company, the
accompanying unaudited combined financial statements reflect all adjustments,
including only normal recurring adjustments, necessary to present fairly the
financial position of the Company at June 30, 1999 and the results of
operations and cash flows for the six months ended June 30, 1999 and
June 30, 1998.
Business Considerations
There are important risks associated with the Company's business and
financial results. These risks include (i) the Company's reliance on two
significant clients; (ii) the Company's ability to sustain and manage future
growth; (iii) the Company's ability to manage and successfully integrate the
businesses it has acquired and may acquire in the future; (iv) the Company's
ability to successfully manage its international operations; (v) the potential
adverse effects of fluctuations in foreign exchange rates; (vi) the Company's
dependence on industry trends toward outsourcing of marketing services in the
pharmaceutical industry; (vii) the risks associated with the Company's reliance
on technology and the risk of business interruption resulting from a temporary
or permanent loss of such technology; (viii) government regulation of the
pharmaceutical industry; (ix) the Company's ability to recruit and retain
qualified personnel; and (x) lack of operating history as an independent
company.
2. Significant Clients:
During the six months ended June 30, 1999, no one client represented more
than 10% of the Company's total revenue. The Company had two clients that
represented 13.9% and 10.4% for the year ended 1998, 12.0% and 12.7% for the
year ended 1997, and 14.0% and 11.1% for the year ended 1996 of the Company's
total revenue.
3. Summary of Significant Accounting Policies:
Cash and Equivalents
Cash and equivalents are comprised principally of amounts in operating
accounts, money market investments and other short-term instruments, stated at
cost, which approximates market value, with original maturities of three months
or less.
F-11
<PAGE>
VENTIV HEALTH
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
Marketable Securities
The Company's securities classified as "available-for-sale" are reported at
market value. Unrealized gains and losses from securities "available-for-sale"
are reported as comprehensive income (loss) and included as a component of
investments and advances from Snyder.
Property and Equipment
Property and equipment is stated at cost. The Company depreciates furniture,
fixtures and office equipment on a straight-line basis over three to ten years;
computer equipment over two to four years and buildings over forty years.
Leasehold improvements are amortized on a straight-line basis over the shorter
of the term of the lease or the estimated useful lives of the improvements.
When assets are retired or sold, the cost and related accumulated
depreciation and amortization are removed from the accounts, and any gain or
loss is reflected in income.
Revenue Recognition
On pharmaceutical detailing contracts, the Company recognizes revenue and
associated costs when services have been performed by account executives. For
strategic consulting services and educational marketing programs, the Company
recognizes revenues and associated costs as services are performed on behalf of
clients. Unbilled services represent revenues earned on contracts but billed in
a subsequent accounting period. Unearned revenue represents billings or client
payments made in advance of services performed. Client advances represent
amounts received to be disbursed to third parties for payment on behalf of
clients.
Goodwill and Other Intangible Assets
Goodwill equal to the fair value of consideration paid in excess of the fair
value of net assets purchased has been recorded in conjunction with several of
the Company's purchase business combinations and is being amortized on a
straight-line basis over periods of fifteen to thirty years.
The costs of licenses to market pharmaceutical products and contractual
covenants are amortized on a straight-line basis over the term of the related
agreements, which are ten to fifteen years and four years, respectively.
When conditions or events occur that management believes might indicate that
the goodwill or any other intangible asset is impaired, an analysis of
estimated future undiscounted cash flows is undertaken to determine if any
write down in the carrying value of the asset is required.
Income Taxes
Prior to their merger with Snyder, certain of the U.S.-based Pooled Entities
were treated as S corporations or limited liability companies for income tax
purposes. Accordingly, no provision for federal or state income taxes, except
in certain states that do not recognize S corporations or limited liability
companies, has been made for these entities through the date of their mergers
with the Company in the accompanying combined financial statements.
The Company's subsidiaries with operations in the U.K., France and Germany
pay taxes in their respective countries, on a corporate level similar to a C
corporation in the U.S.
F-12
<PAGE>
VENTIV HEALTH
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
Pro Forma Adjusted Income (Loss) Data (Unaudited)
The following unaudited pro forma adjusted net income (loss) amounts include
a provision for federal and state income taxes as if the Company had been a
taxable C corporation for all periods presented. The pro forma income tax rate
on the Company's recurring operations reflects the combined federal, state and
foreign income taxes of approximately 41.0%, 48.8% and 46.9%, for the years
ended December 31, 1998, 1997 and 1996, respectively. The pro forma income tax
rates in the table below differ from the pro forma income tax rates on the
Company's recurring operations due to the nondeductibility of certain of the
acquisition and related costs. The Company's December 31, 1996 and 1998 tax
provisions exceed its statutory rate due to the recognition of
certain acquisition and related costs, which are not deductible for income tax
purposes, and the pass through of S corporation losses directly to owners.
The table below presents this pro forma calculation of net income (loss):
<TABLE>
<CAPTION>
For the Six
Months For the Years
Ended June 30, Ended December 31,
---------------- ---------------------------
1999 1998 1998 1997 1996
------- ------- -------- -------- -------
(in thousands)
<S> <C> <C> <C> <C> <C>
Pro forma adjusted net income
(loss) data (unaudited):
Historical income (loss) from
continuing operations before
income taxes................ $21,202 $ 9,413 $ 14,295 $ (6,784) $ 1,587
Pro forma provision for in-
come taxes.................. (8,563) (6,795) (12,849) (3,916) (4,316)
------- ------- -------- -------- -------
Pro forma adjusted net income
(loss)...................... $12,639 $ 2,618 $ 1,446 $(10,700) $(2,729)
======= ======= ======== ======== =======
</TABLE>
Foreign Currency Translations
Assets and liabilities of the Company's international operations are
translated using the exchange rate in effect at the balance sheet date. Revenue
and expense accounts for these subsidiaries are translated using the average
exchange rate during the period. Foreign currency translation adjustments are
reported as comprehensive income (loss) and included as a component of
investments and advances from Snyder.
Estimates and Assumptions
The preparation of combined financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Fair Value of Financial Instruments
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments,"
requires disclosure of the fair value of certain financial instruments. For
purposes of this disclosure, the fair value of a financial instrument is the
amount at which the instrument could be exchanged in a current transaction
between willing parties. Cash and equivalents, accounts receivable, unbilled
services and accounts payable approximate fair value because of the relatively
short maturity of these instruments.
F-13
<PAGE>
VENTIV HEALTH
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
Concentration of Credit Risk
Concentration of credit risk is limited to cash and equivalents, marketable
securities, accounts receivable and unbilled services. The Company places its
investments in highly rated financial institutions, U.S. Treasury bills,
investment grade short-term debt instruments and state and local
municipalities, while limiting the amount of credit exposure to any one entity.
The Company's receivables are concentrated with customers in the pharmaceutical
industry. The Company does not require collateral or other security to support
clients' receivables.
New Accounting Pronouncements
During 1998, the Company adopted Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income" ("SFAS No. 130"). Included within
accumulated other comprehensive income are the cumulative amounts for foreign
currency translation adjustments and unrealized gains and losses on marketable
securities. The cumulative foreign currency translation adjustment was $(0.4)
million, $0.9 million and $0.2 million as of June 30, 1999, December 31, 1998
and 1997, respectively. There was no cumulative unrealized gain on marketable
securities as of June 30, 1999 and December 31, 1998. The cumulative unrealized
gain on marketable securities was $53,000 as of December 31, 1997.
During 1998, the Company adopted Statement of Financial Accounting Standards
No. 131, "Disclosures about Segments of an Enterprise and Related Information."
The Company's management considers its business to be a single reportable
segment--the providing of integrated marketing and sales services to
pharmaceutical and life sciences companies. The Company's foreign operations
are disclosed in Note 15.
Accounting for Stock Options
Following the Distribution, the Company will account for its stock-based
compensation plan using the intrinsic value based method in accordance with the
provisions of APB Opinion No. 25, "Accounting for Stock Issued to Employees."
Pro forma disclosure will be made of net income and earnings per share,
calculated as if the Company accounted for its stock-based compensation plan
using the fair value based method in accordance with the provisions of
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-
Based Compensation" ("SFAS No. 123").
4. Marketable Securities:
The unrealized gains and losses and market values of the Company's available-
for-sale securities as of December 31, 1997, are summarized as follows (in
thousands).
<TABLE>
<CAPTION>
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ---------- ------
<S> <C> <C> <C> <C>
December 31, 1997
Available for sale:
Equity securities................. $ 832 $ 54 $-- $ 886
Municipal tax-exempt bonds........ 223 -- (1) 222
------ ---- ---- ------
$1,055 $ 54 $ (1) $1,108
====== ==== ==== ======
</TABLE>
The Company did not have any marketable securities outstanding as of December
31, 1998.
F-14
<PAGE>
VENTIV HEALTH
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
5. Property and Equipment:
Property and equipment consist of the following:
<TABLE>
<CAPTION>
As of December
31,
---------------
1998 1997
------- ------
(in thousands)
<S> <C> <C>
Buildings and leasehold improvements........................ $ 5,178 $1,250
Computers and equipment..................................... 8,465 5,727
Furniture and fixtures...................................... 1,331 1,261
------- ------
14,974 8,238
Accumulated depreciation.................................... (4,946) (3,358)
------- ------
$10,028 $4,880
======= ======
</TABLE>
Depreciation expense totaled $2.2 million, $1.0 million, and $0.3 million in
1998, 1997 and 1996, respectively.
6. Goodwill and Other Intangible Assets:
Goodwill and other intangible assets consist of the following:
<TABLE>
<CAPTION>
As of December
31,
----------------
1998 1997
------- -------
(in thousands)
<S> <C> <C>
Goodwill................................................... $80,436 $21,612
License agreements......................................... 6,159 5,669
Contractual covenant and marketing rights.................. 1,112 1,112
------- -------
87,707 28,393
Accumulated amortization................................... (6,979) (2,110)
------- -------
$80,728 $26,283
======= =======
</TABLE>
Amortization expense of goodwill and other intangible assets totaled $3.2
million, $1.2 million and $0.9 million in 1998, 1997 and 1996, respectively.
7. Debt:
Long-Term Borrowings
Long-term borrowings consist of the following:
<TABLE>
<CAPTION>
As of
December 31,
-------------
1998 1997
------ ------
(in
thousands)
<S> <C> <C>
German bank debt, 6.3% weighted average interest rate, due
April 2004,
partially secured by building in Germany.................... $1,388 $ --
French bank debt, 8.02% weighted average rate, due August
2002........................................................ 85 3,697
Other........................................................ -- 137
------ ------
1,473 3,834
Current maturities of long-term borrowings................... -- (137)
------ ------
$1,473 $3,697
====== ======
</TABLE>
F-15
<PAGE>
VENTIV HEALTH
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
The foreign term debt requires certain subsidiaries to meet restrictive
covenants concerning net worth and debt service coverage and are secured by the
assets of those subsidiaries.
In addition to the debt listed above, approximately $0.6 million in debt with
a weighted average interest rate of 8.6%, primarily classified as current as of
December 31, 1996, was paid in full during 1997.
Future minimum payments as of December 31, 1998, on long-term borrowings, are
as follows (in thousands):
<TABLE>
<S> <C>
1999.................................................................. $ --
2000.................................................................. 332
2001.................................................................. 293
2002.................................................................. 292
2003.................................................................. 278
Thereafter............................................................ 278
------
Total............................................................... $1,473
======
</TABLE>
Related Party Borrowings
Related party borrowings as of December 31, 1997, consist of a $457,000
promissory note payable to a founder of one of the acquired subsidiaries.
Interest on the note accrued at 6.0%. The note was repaid in full on September
30, 1998, together with accrued interest of $14,000.
In accordance with the provisions of its formation agreement and prior to its
merger with Snyder, a subsidiary issued promissory notes to its founder and an
investor in the principal amounts of $6.7 million and $10.0 million,
respectively. The notes were unsecured, with interest at the prime rate plus
2.0%, and were payable no later than August 1, 1998. The notes were repaid in
full on November 25, 1997, together with accrued interest of $0.5 million.
Lines of Credit
Lines of credit consist of the following:
<TABLE>
<CAPTION>
As of
December 31,
------------
1998 1997
---- -------
(in
thousands)
<S> <C> <C>
French bank line of credit, 8.02% weighted average stated
interest rate,
$4.1 million aggregate borrowing limit, renewable on a monthly
basis ........................................................ $198 $ 2,609
Secured revolving loan of acquired U.S. subsidiary, 7.5%, due
December 31, 2003, reflected as current liability as
subsidiary was not in compliance with certain financial
covenants, terminated by the Company in 1998.................. -- 20,000
U.S. bank line of credit, 8.6% weighted average interest rate,
terminated by the Company..................................... -- 266
---- -------
$198 $22,875
==== =======
</TABLE>
The Company maintains various lines of credit with banking and financial
institutions, requiring certain subsidiaries to meet restrictive covenants
concerning net worth and debt service coverage and are secured by the assets of
those subsidiaries. In aggregate, the Company had lines of credit available for
$5.8 million with interest rates ranging from 7.75% to 8.75% at December 31,
1998.
F-16
<PAGE>
VENTIV HEALTH
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
8.Income Taxes:
The Company's income tax provision includes the following components:
<TABLE>
<CAPTION>
For the Years
Ended December 31,
------------------------
1998 1997 1996
------- ------- ------
(in thousands)
<S> <C> <C> <C>
Current:
U.S.--Federal.................................... $ 5,826 $ 2,228 $ 365
U.S.--State and city............................. 1,672 1,207 85
Foreign.......................................... 4,622 3,078 1,297
------- ------- ------
$12,120 $ 6,513 $1,747
------- ------- ------
Deferred:
U.S.--Federal.................................... $ 807 $(3,984) $ --
U.S.--State and city............................. 260 (766) --
Foreign.......................................... (338) 171 (243)
------- ------- ------
729 (4,579) (243)
------- ------- ------
Income tax provision............................. $12,849 $ 1,934 $1,504
======= ======= ======
</TABLE>
The provision for taxes on income differs from the amount computed by
applying the U.S. federal income tax rate as a result of the following:
<TABLE>
<CAPTION>
For the Years
Ended December
31,
------------------
1998 1997 1996
---- ----- ----
<S> <C> <C> <C>
Taxes at statutory U.S.
federal income tax
rate................... 35.0% 35.0 % 35.0%
Losses passed through to
owners................. 0.0 40.9 15.1
State and city income
taxes, net of federal
tax benefit............ 9.4 (9.4) 10.7
Tax effect of acquired
subsidiary
reorganization......... 0.0 (4.4) 0.0
Foreign tax rate
differential........... 2.1 (5.5) 0.9
Goodwill amortization... 3.7 (2.0) 0.0
Acquisition costs and
other permanent
differences............ 39.7 (83.1) 33.1
---- ----- ----
Effective tax rate...... 89.9% (28.5)% 94.8%
==== ===== ====
</TABLE>
F-17
<PAGE>
VENTIV HEALTH
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
Deferred income taxes are recorded based upon differences between the
financial statement and tax bases of assets and liabilities. As of December 31,
1998 and 1997, temporary differences that give rise to the deferred tax assets
and liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
As of
December 31,
--------------
1998 1997
------ ------
<S> <C> <C>
Reserve for doubtful accounts................................ $ 724 $1,411
Accrued expenses............................................. 2,498 2,141
Deferred compensation........................................ 128 134
Tax losses of subsidiaries................................... 3,955 4,569
Other........................................................ 337 59
------ ------
Gross deferred tax assets.................................... 7,642 8,314
------ ------
Property and equipment....................................... (180) --
Deferred revenues............................................ (2,868) (2,858)
Other........................................................ (497) (35)
------ ------
Gross deferred tax liabilities............................... (3,545) (2,893)
------ ------
Valuation allowance.......................................... -- --
------ ------
Net deferred tax asset....................................... $4,097 $5,421
====== ======
</TABLE>
Several of the Company's subsidiaries have operating loss tax carryforwards
that can be realized only if these subsidiaries generate taxable operating
income. Management continually assesses whether the Company's deferred tax
asset is realizable and believes that the deferred tax asset is realizable at
December 31, 1998.
At December 31, 1998, cumulative combined undistributed deficit of the
Company's foreign subsidiaries was approximately $0.9 million. However,
undistributed earnings exist at several of the Company's foreign subsidiaries.
No provision for U.S. income taxes or foreign withholding taxes has been made
since the Company considers the undistributed earnings to be permanently
invested in the foreign countries. Determination of the amount of unrecognized
deferred tax liability, if any, for the cumulative undistributed earnings of
the foreign subsidiaries is not practicable since it would depend upon a number
of factors which cannot be known until such time as a decision to repatriate
the earnings is made.
9. Acquisition and Related Costs:
The Company recorded $26.9 million in nonrecurring acquisition and related
costs during 1998. These costs consist of investment banking fees, expenses
associated with the accelerated vesting of options held by employees of certain
of the Company's acquirees, other professional service fees, transfer taxes and
other contractual payments. In addition, this amount includes a charge of
approximately $10.7 million for costs necessary to consolidate and integrate
certain of the Company's acquired operations in the U.S., the U.K. and France.
The Company is integrating acquired subsidiaries that provide similar services
within the same geographic regions. Approximately nine locations will be
combined into four, and the efforts will not have a significant impact on the
Company's workforce. The Company expects these integration activities to be
substantially complete by the third quarter of 1999. The charge consists of
approximately $4.1 million to consolidate and terminate lease obligations, $5.3
million of severance and other costs associated with the termination of 142
employees, and $1.3 million of fees incurred for consulting services and other
costs related to these integration activities. The employees who were
terminated are primarily redundant operations and administrative personnel, as
well as one underutilized sales team in the United Kingdom. As of December 31,
1998, 58 employees had terminated employment with the Company and $2.7 million
had been charged against the total liability, including $1.5 million in
severance and related payments.
F-18
<PAGE>
VENTIV HEALTH
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
The Company recorded $8.0 million in nonrecurring acquisition and related
costs during 1997. These costs consist primarily of investment banking fees,
professional service fees, travel expenses and other contractual payments.
During the six months ended June 30, 1999, the Company recorded $1.7 million
in nonrecurring acquisition and related costs. This amount is for additional
costs necessary to consolidate and integrate certain of the Company's acquired
operations in the U.S. and U.K. under the Company's plan initiated in 1998.
The charge recorded in the six months ended June 30, 1999 consists of $1.3
million in severance and related costs associated with the termination of 23
employees, and $0.4 million in consulting services and other costs related to
these integration activities. As of June 30, 1999, 149 employees had
terminated employment with the Company and $9.0 million had been charged
against the total liability of $12.4 million.
During the six months ended June 30, 1998, the Company recorded $11.4
million in nonrecurring acquisition and related costs. These costs are
primarily related to the consummation of pooling of interests transactions in
the first quarter of 1998 and consist of investment banking fees, other
professional service fees and other contractual payments. In addition, this
amount includes a charge of approximately $4.4 million for costs necessary to
consolidate and integrate certain of the Company's acquired operations in the
U.S. and the U.K.
The integration activities recorded in 1998 were recorded in accordance with
Emerging Issues Task Force 94-3, "Liability Recognition for Costs to Exit an
Activity (including certain costs incurred in a restructuring)" ("EITF 94-3").
Additional expenses for the Company's integration activities recorded in 1999
represent additional costs incurred that did not qualify for accrual at
December 31, 1998 in accordance with EITF 94-3.
The following table summarizes the activity in the integration activities
liability account:
<TABLE>
<CAPTION>
Beginning Deductions for Balance at End
Balance Additions Amounts Paid of Period
--------- --------- -------------- --------------
<S> <C> <C> <C> <C>
Year Ended December 31, 1998. -- 10,654 (2,683) 7,971
Six Months Ended June 30,
1999........................ 7,971 1,696 (6,439) 3,228
</TABLE>
10. Compensation to Stockholders:
Prior to their merger with Snyder, certain stockholders of the acquired
companies received annual compensation in their roles as managers in excess of
amounts that they will receive pursuant to employment agreements they have
entered into with the Company. The amount by which the historical compensation
paid to these managers exceeds that provided in their employment contracts has
been classified as compensation to stockholders in the accompanying combined
statement of income.
11. Stock Incentive Plans:
At the time of the Distribution, the Company expects to adopt a stock
incentive plan to provide for share-based incentive compensation for key
employees, consultants and directors. Ventiv intends to grant options under
its stock incentive plan to Ventiv employees whose existing Snyder
Communications options are terminated as a consequence of the distribution.
On the date of the Distribution, the Company will issue shares of restricted
stock of Ventiv Health, Inc. to certain officers and directors of the Company.
The Company will recognize approximately $5.0 million of compensation expense
associated with these grants. Of the total compensation expense approximately
$1.5 million will be recorded at the time of the Distribution for the portion
of the shares which are immediately vested. The balance will be recorded
ratably over the four year vesting period.
F-19
<PAGE>
VENTIV HEALTH
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
12. Pension and Profit-Sharing Plans:
Snyder and certain of its subsidiaries maintain defined contribution benefit
plans. Pension and profit sharing costs of the Company related to these plans
amounted to approximately $0.8 million, $0.2 million and $0.2 million for 1998,
1997 and 1996, respectively.
13. Leases:
The Company leases certain facilities, office equipment and other assets. The
following is a schedule of future minimum lease payments for these operating
leases at December 31, 1998 (in thousands):
<TABLE>
<S> <C>
Years Ending December 31,
1999................................................................. $4,695
2000................................................................. 2,668
2001................................................................. 1,059
2002................................................................. 600
2003................................................................. 600
------
Total minimum lease payments......................................... $9,622
======
</TABLE>
Rental expense for all operating leases was approximately $8.2 million, $8.0
million and $6.7 million for the years ended December 31, 1998, 1997 and 1996,
respectively.
14. Commitments and Contingencies:
The Company has entered into employment agreements with certain key
executives and consulting agreements with certain former executives that call
for guaranteed minimum salaries and bonuses for varying terms.
The Company is subject to lawsuits, investigations and claims arising out of
the conduct of its business, including those related to commercial
transactions, contracts, government regulation and employment matters. Certain
claims, suits and complaints have been filed or are pending against the
Company. In the opinion of management and based on the advice of legal counsel,
all matters are without merit or are of such kind, or involve such amounts, as
would not have a material effect on the financial position or results of
operations of the Company if disposed of unfavorably.
15. Geographical Data:
The Company has operations in the United States, as well as the more mature
markets of Western Europe, which include the United Kingdom, France and
Germany.
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Revenues:
United States................................... $175,840 $118,293 $ 82,374
Western Europe.................................. 145,660 90,674 62,330
-------- -------- --------
Total......................................... $321,500 $208,967 $144,704
======== ======== ========
</TABLE>
F-20
<PAGE>
VENTIV HEALTH
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
16. Selected Quarterly Financial Data (unaudited, in thousands):
The following table summarizes financial data by quarter for the Company for
1998 and 1997.
<TABLE>
<CAPTION>
1998 Quarter Ended
---------------------------------------------------
March 31 June 30 September 30 December 31 Total
-------- ------- ------------ ----------- --------
<S> <C> <C> <C> <C> <C>
Revenues................ $67,356 $83,957 $80,232 $89,955 $321,500
Gross profit............ 18,193 23,443 20,091 23,726 85,453
Net income (loss)....... (4,052) 6,670 (3,771) 2,599 1,446
Pro forma historical net
income (loss) per share
(diluted).............. (0.17) 0.28 (0.16) 0.11 0.06
Pro forma adjusted net
income (loss).......... (4,052) 6,670 (3,771) 2,599 1,446
Pro forma adjusted net
income (loss) per share
(diluted).............. (0.17) 0.28 (0.16) 0.11 0.06
<CAPTION>
1997 Quarter Ended
---------------------------------------------------
March 31 June 30 September 30 December 31 Total
-------- ------- ------------ ----------- --------
<S> <C> <C> <C> <C> <C>
Revenues................ $41,520 $47,343 $51,021 $69,083 $208,967
Gross profit............ 10,235 12,373 12,645 17,368 52,621
Net income (loss)....... 222 2,806 (10,891) (855) (8,718)
Pro forma adjusted net
income (loss).......... (302) 2,281 (10,269) (2,410) (10,700)
</TABLE>
The pro forma amounts include a provision for federal, foreign and state
income taxes as if the Company had been a taxable C corporation for all periods
presented.
17. Subsequent Event to June 30, 1999 Financial Statements (unaudited):
In August 1999, Snyder Communications agreed to provide incremental
consideration for the acquisition of PromoTech Research Associates based on the
average trading price of SNC stock, circle.com stock, and Ventiv Health, Inc.
stock for the twenty trading days ending on October 15, 1999 (or such lesser
number of days that a public market exists for the securities up to October 15,
1999). The incremental consideration was not provided for in the purchase
agreement and is not part of the purchase price for accounting purposes. Snyder
Communications intends to enter into a separate agreement with the prior owners
of Promotech whereby Snyder Communications would pay the incremental
consideration to the prior owners in exchange for the release of any and all
claims against Snyder Communications relating to the transaction. Based on the
closing price of the Snyder Communications stock on September 17, 1999, the
amount of such payment would result in non-cash expense on the date the
agreement is executed of approximately $5.8 million, payable in Ventiv Health,
Inc. common stock.
F-21
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of Snyder Communications, Inc.:
We have audited the accompanying consolidated balance sheet of CLI Pharma
S.A. and subsidiaries as of December 31, 1997, and the related statements of
income, equity, and cash flows for the year then ended. 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 U.S. 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 audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
presents fairly, in all material respects, the financial position of CLI Pharma
S.A. as of December 31, 1997 and the results of its operations and its cash
flows for the year then ended in conformity with the accounting principles
generally accepted in the United States.
ARTHUR ANDERSEN LLP
Neuilly-sur-Seine, France
June 21, 1999
F-22
<PAGE>
CLI PHARMA S.A.
CONSOLIDATED BALANCE SHEET
As of December 31, 1997
(in FRFk)
<TABLE>
<S> <C>
ASSETS
Current Assets:
Cash and equivalents................................................. 25,473F
Accounts receivable.................................................. 49,183
Unbilled services.................................................... 1,762
Prepaid expenses..................................................... 1,970
VAT receivable....................................................... 4,052
Other current assets................................................. 1,513
------
Total current assets............................................... 83,953
Property and equipment, net............................................ 6,293
Intangible assets, net................................................. 31
Other non-current assets............................................... 2,481
------
Total assets....................................................... 92,758F
======
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable..................................................... 4,858F
Accrued payroll...................................................... 16,947
Accrued expenses..................................................... 6,948
VAT payable.......................................................... 17,578
Unearned revenue..................................................... 533
------
Total current liabilities.......................................... 46,864
Long-term obligations under capital leases............................. 66
Commitments and contingencies
Equity:
Capital stock, nominal value 100 FRF, 2,500 shares issued and
outstanding......................................................... 250
Retained earnings.................................................... 45,578
------
Total equity........................................................... 45,828
------
Total liabilities and equity........................................... 92,758F
======
</TABLE>
The accompanying notes are an integral part of this consolidated balance sheet.
F-23
<PAGE>
CLI PHARMA S.A.
CONSOLIDATED STATEMENT OF INCOME
For the Year Ended December 31, 1997
(in FRFk)
<TABLE>
<S> <C>
Revenues............................................................... 214,250F
Operating expenses:
Costs of services...................................................... 167,534
Selling, general and administrative.................................... 18,865
-------
186,399
-------
Income from operations................................................. 27,851
Interest expense....................................................... (61)
Investment income...................................................... 318
-------
Income before taxes.................................................... 28,108
Income tax provision................................................... 12,253
-------
Net income 15,855F
=======
</TABLE>
The accompanying notes are an integral part of this consolidated statement of
income.
F-24
<PAGE>
CLI PHARMA S.A.
CONSOLIDATED STATEMENT OF EQUITY
For the Year Ended December 31, 1997
(in FRFk)
<TABLE>
<CAPTION>
Retained
Capital Stock Earnings Total
------------- -------- ------
<S> <C> <C> <C>
Balance, December 31, 1996....................... 250F 32,772F 33,022F
Net income....................................... -- 15,855 15,855
Dividends........................................ -- (3,049) (3,049)
------ ------ ------
Balance, December 31, 1997....................... 250F 45,578F 45,828F
====== ====== ======
</TABLE>
The accompanying notes are an integral part of this consolidated statement of
equity.
F-25
<PAGE>
CLI PHARMA S.A.
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Year Ended December 31, 1997
(in FRFk)
<TABLE>
<S> <C>
Cash flows from operating activities:
Net income............................................................ 15,855F
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization....................................... 805
Loss on disposal of property and equipment.......................... 2
Other noncash amounts............................................... 109
Changes in assets and liabilities:
Accounts receivable................................................. (7,753)
Other receivables................................................... (333)
Prepaid expenses.................................................... (1,059)
Accrued payroll, accounts payable and accrued expenses.............. 10,825
Unearned revenue.................................................... 323
Other non-current assets............................................ (133)
------
Net cash provided by operating activities............................. 18,641
------
Cash flows from investing activities:
Purchase of property and equipment.................................. (2,472)
Purchase of license agreements...................................... (120)
Proceeds from sales of property and equipment....................... 86
------
Net cash used in investing activities................................. (2,506)
------
Cash flows from financing activities:
Dividends........................................................... (3,049)
------
Net cash used in financing activities................................. (3,049)
------
Net increase in cash and equivalents.................................. 13,086
Cash and equivalents, beginning of period............................. 12,387
------
Cash and equivalents, end of period................................... 25,473F
======
Supplemental Disclosure of cash flow information:
Cash paid for interest.............................................. 60F
Cash paid for income taxes.......................................... 6,555F
</TABLE>
The accompanying notes are an integral part of this consolidated statement of
cash flows.
F-26
<PAGE>
CLI PHARMA S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1997
(in FRF)
1. ORGANIZATION AND BUSINESS
Organization and business
In 1984, Christian Levistre founded CLI Pharma S.A. ("CLI Pharma" or the
"Company"), a French Societe Anonyme. CLI Pharma's initial operations were
devoted to the recruitment of healthcare operations managers on behalf of large
pharmaceutical companies. Since 1984, CLI Pharma has expanded its scope of
services to include: the formation of regional doctor teams who assist
laboratories in marketing pharmaceutical products and the recruitment of
clinical research and medical sales personnel on behalf of large pharmaceutical
companies. The consolidated financial statements include the Company's ten
operating subsidiaries: (WP Medica, WP Sante, WP Production, WPConseil, WP
Pharma, CLI Medica, CLI Sante, CLI Conseil, CLI Promotion and CLI France).
At December 31, 1997, CLI Pharma was owned directly by Christian Levistre
(41%) and Raymat Finance SA (59%), which is itself owned by Christian Levistre
and his family (99.99%).
Business considerations
There are important risks associated with the Company's business and
financial results. These risks include (i) the Company's reliance on
significant clients; four clients each represented more than 10% of its 1997
revenues (see Note 3); (ii) the Company's dependence on industry trends toward
outsourcing of marketing services; and (iii) the Company's ability to recruit
and retain qualified personnel.
2. SUBSEQUENT EVENT
On March 25, 1998, Snyder Communications, Inc. ("Snyder") acquired all of the
outstanding shares of the Company's capital stock in a purchase transaction.
The purchase price consideration consisted entirely of Snyder common stock.
3. SIGNIFICANT CLIENTS
The Company had four clients that individually represented 13.3%, 13.2%,
12.4% and 11.0%, respectively, of its revenues for the year ended December 31,
1997.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Equivalents
Cash and equivalents are mainly composed of amounts in operating accounts,
money market investments and other short-term instruments, stated at cost,
which approximate their market value, with original maturities of three months
or less.
Property and equipment
Property and equipement is stated at cost. The Company depreciates furniture,
fixtures and office equipment on a straight-line basis over three to ten years;
computer equipment over two to four years; and buildings over twenty years.
Leasehold improvements are amortized on a straight-line basis over their
estimated useful lives.
When assets are retired or sold, the costs and related accumulated
depreciation and amortization are removed from the accounts, and any gain or
loss is reflected in income.
F-27
<PAGE>
CLI PHARMA S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in FRF)
Revenue recognition
Services provided by the Company consist primarily of pharmaceutical sales.
On pharmaceutical sales contracts, the Company recognizes revenue and
associated costs when services have been performed by account representatives,
in accordance with the terms of the contract.
Income taxes
The Company incurred income taxes on its 1997 taxable income at a rate of
41.7%, the legal income tax rate in France.
Estimates and Assumptions
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Concentration of credit risk
Concentration of credit risk is limited to cash and equivalents, accounts
receivable and unbilled services. The Company's receivables are concentrated
with customers in pharmaceutical industries. The Company does not require
collateral or other security to support clients' receivables.
5. PROPERTY AND EQUIPMENT
Property and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
1997
-------------
<S> <C>
Buildings and leasehold improvements 4,430F
Computer and equipment...................................... 1,136
Furniture and fixtures...................................... 2,249
------
7,815
Accumulated depreciation.................................... (1,522)
------
Net property and equipment 6,293F
======
6. INTANGIBLE ASSETS
Intangible assets consist of the following (in thousands):
<CAPTION>
December 31,
1997
-------------
<S> <C>
License agreements 222F
Less accumulated amortization............................... (191)
------
Net intangible assets 31F
======
</TABLE>
License agreements are amortized over their useful lives which are generally
one year.
F-28
<PAGE>
CLI PHARMA S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN FRF)
7. INCOME TAXES
The income tax provision of 12,253,000F in the accompanying consolidated
statement of income consists entirely of income taxes to the French government.
All of the provision relates to current income taxes. No deferred income tax
provision or benefit was incurred during the year ended December 31, 1997.
8. LEASES
The Company leases certain facilities, office equipment and other assets. The
following is a schedule of future minimum lease payments for capital leases and
for operating leases with initial or remaining terms in excess of one year at
December 31, 1997 (in thousands):
<TABLE>
<CAPTION>
Capital Operating
Years ending December 31, Leases Leases
-------------------------------------------------------- ------- ---------
<S> <C> <C>
1998.................................................... 36F 1,352F
1999.................................................... 36 789
2000.................................................... 36 --
2001.................................................... 36 --
2002.................................................... 23 --
--- -----
Total minimum lease payments............................ 167 2,141F
=====
Less : Amount representing interest..................... (49)
---
Total obligation under capital leases................... 118
Less : Current portion.................................. (52)
---
Long-term portion....................................... 66F
===
</TABLE>
Property and equipment, net, on the consolidated balance sheet includes
118,000F for equipment purchased under capital leases as of December 31, 1997.
Rental expense for all operating leases was approximately 1,352,000F for the
year ended December 31, 1997. Rental expense included 341,000F to a related
party (see Note 9).
9. RELATED PARTIES
The Company leases office space from an entity owned by the Levistre family.
Rent expense related to this space in 1997 equalled 341,000F and is included in
selling, general and administrative expense on the accompanying consolidated
statement of income.
10. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following (in
thousands):
<TABLE>
<CAPTION>
December 31,
1997
------------
<S> <C>
Payroll and related taxes 16,947F
Accrued income taxes......................................... 6,096
Accounts payable............................................. 4,858
Other accrued tax liabilities................................ 590
Other accrued expenses....................................... 210
Current portion of capital lease obligations................. 52
------
28,753F
======
</TABLE>
F-29
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of Snyder Communications, Inc.:
We have audited in accordance with generally accepted auditing standards, the
combined financial statements of Ventiv Health (the "Company"), as defined in
Note 1 to the combined financial statements, included in this Form 10 and have
issued our report thereon dated June 22, 1999. Our audits were made for the
purpose of forming an opinion on the basic combined financial statements taken
as a whole. Schedule II Valuation and Qualifying Accounts included in the Form
10 is the responsibility of the Company's management and is presented for
purposes of complying with the Securities and Exchange Commission's rules and
is not part of the basic combined financial statements. This schedule has been
subjected to the auditing procedures applied in the audits of the basic
combined financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic combined financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Vienna, VA
June 22, 1999
S-1
<PAGE>
VENTIV HEALTH
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
(in thousands)
<TABLE>
<CAPTION>
Balance at Additions Deductions from Reserve Balance at
Beginning Charged to Cost for Purpose for Which Translation End of
of Year and Expense Reserve was Created Adjustment Year
---------- --------------- ----------------------- ----------- ----------
<S> <C> <C> <C> <C> <C>
1998 allowance for
doubtful accounts...... $3,924 $ 1,162 $2,118 $ 3 $2,971
1997 allowance for
doubtful accounts...... 510 3,717 296 (7) 3,924
1996 allowance for
doubtful accounts...... 301 220 7 (4) 510
<CAPTION>
Balance at Balance at
Beginning Deductions for Translation End of
of Year Additions Amounts Paid Adjustment Year
---------- --------------- ----------------------- ----------- ----------
<S> <C> <C> <C> <C> <C>
1998 accrual for
integration activities. $ -- $10,654 $2,683 $-- $7,971
1997 accrual for
integration activities. -- -- -- -- --
1996 accrual for
integration activities. -- -- -- -- --
</TABLE>
S-2
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1998 JUN-30-1999
<CASH> 25,664 21,347
<SECURITIES> 0 0
<RECEIVABLES> 46,492 58,457
<ALLOWANCES> 2,971 2,645
<INVENTORY> 0 0
<CURRENT-ASSETS> 95,449 113,028
<PP&E> 14,974 19,251
<DEPRECIATION> 4,946 5,796
<TOTAL-ASSETS> 193,644 228,095
<CURRENT-LIABILITIES> 71,002 68,051
<BONDS> 1,473 1,270
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 119,727 158,771
<TOTAL-LIABILITY-AND-EQUITY> 193,644 228,095
<SALES> 0 0
<TOTAL-REVENUES> 321,500 181,259
<CGS> 236,047 137,028
<TOTAL-COSTS> 306,740 160,307
<OTHER-EXPENSES> (1,850) (373)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 2,315 123
<INCOME-PRETAX> 14,295 21,202
<INCOME-TAX> 12,849 8,563
<INCOME-CONTINUING> 1,446 12,639
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,446 12,639
<EPS-BASIC> .06 .51
<EPS-DILUTED> .06 .51
</TABLE>
