<PAGE>
As filed with the Securities and Exchange Commission on September 21, 1999
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 3
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. 3 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 20, 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 21, 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. Based on the
closing price of Snyder common stock on September 17, 1999, the amount of such
payment would result in non-cash expense 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. 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
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
<PAGE>
Exhibit 4.1
<TABLE>
<S> <C> <C>
NUMBER SHARES
VHC
[LOGO OF VENTIV HEALTH, INC.
COMMON STOCK APPEARS HERE] COMMON STOCK
INCORPORATED UNDER THE LAWS OF CUSIP 833472 10 3
THE STATE OF DELAWARE
VENTIV HEALTH, INC. SEE REVERSE FOR CERTAIN DEFINITIONS
THIS CERTIFICATE IS TRANSFERABLE IN
NEW YORK, NEW YORK
- - - ------------------------------------------------------------------------------------------------------------------------------------
THIS CERTIFIES that
is the owner of
- - - ------------------------------------------------------------------------------------------------------------------------------------
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK, PAR VALUE $0.001, OF
VENTIV HEALTH, INC.
transferable on the books of the Corporation by the owner hereof in person or by duly authorized attorney upon surrender of this
Certificate properly endorsed. This Certificate and the shares represented hereby are issued and shall be held subject to all of
the provisions of the Certificate of Incorporation of the Corporation and any amendments thereto, a copy of which is on file at the
office of the Transfer Agent. This Certificate is not valid until countersigned and registered by the Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers.
CERTIFICATE OF STOCK
Dated:
Ventiv Health, Inc.
CORPORATE
/s/ Gregory S. Patrick SEAL /s/ Eran Broshy
1999
Secretary DELAWARE President and Chief Executive Officer
</TABLE>
COUNTERSIGNED AND REGISTERED:
AMERICAN STOCK TRANSFER & TRUST COMPANY
TRANSFER AGENT
AND REGISTRAR
BY
AUTHORIZED SIGNATURE
<PAGE>
VENTIV HEALTH, INC.
THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO
REQUESTS, THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREOF OF THE
CORPORATION, AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH
PREFERENCES AND/OR RIGHTS. SUCH REQUEST SHOULD BE MADE TO THE CORPORATION OR TO
THE TRANSFER AGENT.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT-_______________Custodian______________
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act_______________________________
in common. (State)
UNIF TRANS MIN ACT-______________Custodian______________
(Cust) (Minor)
under Uniform Transfers to Minors
Act____________________________
(State)
Additional abbreviations may also be used though not in the above list.
For value received, ________________________________________hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- - - --------------------------------------
________________________________________________________________________________________________________
________________________________________________________________________________________________________
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF ASSIGNEE
________________________________________________________________________________________________________
________________________________________________________________________________________________________
__________________________________________________________________________________________________Shares
of the Common Stock represented by the within Certificate, and do hereby irrevocably constitute and
________________________________________________________________________________________________________
appoint Attorney to transfer the said stock on the books of the within-named Corporation with full power
________________________________________________________________________________________________________
of substitution in the premises.
Dated, _________________________________
X__________________________________________________
(Signature)
NOTICE:
THE SIGNATURE(S) TO THIS
ASSIGNMENT MUST CORRES-
POND WITH THE NAME(S) AS
WRITTEN UPON THE FACE OF ====>
THE CERTIFICATE IN EVERY
PARTICULAR WITHOUT ALTER-
ATION OR ENLARGEMENT OR
ANY CHANGE WHATEVER.
X__________________________________________________
(Signature)
Signature(s) Guaranteed:______________________
By:
______________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN
ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS
AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED
SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT
TO S.E.C. RULE 17Ad-15.
</TABLE>
<PAGE>
Exhibit 10.1
DISTRIBUTION AGREEMENT
BY AND BETWEEN
SNYDER COMMUNICATIONS, INC.,
A DELAWARE CORPORATION
AND
VENTIV HEALTH, INC.,
A DELAWARE CORPORATION
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I DEFINITIONS.......................................... 1
1.01 General................................................ 1
1.02 References to Time..................................... 10
ARTICLE II CERTAIN TRANSACTIONS PRIOR TO THE DISTRIBUTION DATE.. 10
2.01 Certificate of Incorporation; By-laws.................. 10
2.02 Issuance of Stock...................................... 10
2.03 Transfer of Assets and Assumption of Liabilities....... 10
2.04 Conduct of Business Pending the Distribution Date...... 10
2.05 Refinancing............................................ 10
2.06 Registration and Listing............................... 11
ARTICLE III THE DISTRIBUTION..................................... 11
3.01 Record Date and Distribution Date...................... 11
3.02 The Agent.............................................. 11
3.03 Delivery of Share Certificates to the Agent............ 11
3.04 Distribution........................................... 12
3.05 Payment In Lieu of Fractional Shares................... 12
ARTICLE IV SURVIVAL, ASSUMPTION AND INDEMNIFICATION............. 12
4.01 Survival of Agreements................................. 12
4.02 Taxes and Employee-Related Assets and Liabilities...... 12
4.03 Assumption and Indemnification......................... 12
4.04 Procedure for Indemnification.......................... 15
4.05 Remedies Cumulative.................................... 16
ARTICLE V CERTAIN ADDITIONAL COVENANTS......................... 16
5.01 Further Assurances..................................... 16
5.02 Ventiv Board of Directors.............................. 17
5.03 Continuing Contractual Arrangements.................... 17
5.04 Intercompany Accounts.................................. 17
5.05 Cash Accounts.......................................... 17
5.06 Other Agreements....................................... 17
5.07 Transfer Taxes......................................... 17
5.08 Healthcare Services Support Agreements................. 18
ARTICLE VI ACCESS TO INFORMATION................................ 18
6.01 Provision of Corporate Records......................... 18
6.02 Access to Information.................................. 18
</TABLE>
2
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
6.03 Production of Witnesses.................................. 18
6.04 Retention of Records..................................... 19
6.05 Confidentiality.......................................... 19
ARTICLE VII EMPLOYEE BENEFITS....................................... 19
7.01 Qualified Plans.......................................... 19
7.02 [Intentionally Omitted].................................. 22
7.03 Welfare Plans............................................ 22
7.04 [Intentionally Omitted].................................. 22
7.05 [Intentionally Omitted].................................. 22
7.06 Severance Pay............................................ 23
7.07 [Intentionally Omitted].................................. 23
7.08 Post-Distribution Liabilities............................ 23
7.09 Other Balance Sheet Adjustments.......................... 23
7.10 Preservation of Rights to Amend or Terminate Plans....... 23
7.11 Reimbursement; Indemnification........................... 24
7.12 Further Transfers........................................ 24
7.13 Officers and Employees................................... 24
7.14 Employment Agreements.................................... 25
7.15 Other Liabilities........................................ 25
7.16 Compliance............................................... 25
ARTICLE VIII NO REPRESENTATIONS OR WARRANTIES; EXCEPTIONS 25
8.01 No Representations or Warranties; Exceptions............. 25
ARTICLE IX INSURANCE............................................... 26
9.01 Insurance Policies and Rights Included Within Healthcare
Services Assets.......................................... 26
9.02 Post-Distribution Date Claims............................ 26
9.03 Administration and Reserves.............................. 26
9.04 Insurance Premiums....................................... 27
9.05 Allocation of Insurance Proceeds; Cooperation............ 27
9.06 Reimbursement of Expenses................................ 27
9.07 Insurer Insolvency....................................... 28
9.08 Letters of Credit........................................ 28
9.09 No Reduction of Coverage................................. 28
9.10 Future Insurance Coverage................................ 28
9.11 Assistance, Waiver of Conflict and Shared Defense........ 28
</TABLE>
3
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE X MISCELLANEOUS........................................ 28
10.01 Conditions to Obligations............................. 28
10.02 Complete Agreement.................................... 30
10.03 Expenses.............................................. 30
10.04 Governing Law......................................... 30
10.05 Notices............................................... 30
10.06 Amendment and Modification............................ 31
10.07 Successors and Assigns; No Third-Party Beneficiaries.. 31
10.08 Counterparts.......................................... 31
10.09 Interpretation........................................ 31
10.10 Legal Enforceability.................................. 31
10.11 References; Construction.............................. 32
10.12 Termination........................................... 32
</TABLE>
4
<PAGE>
DISTRIBUTION AGREEMENT
----------------------
This DISTRIBUTION AGREEMENT, dated as of September __, 1999, between Snyder
Communications, Inc., a Delaware corporation ("Snyder") and Ventiv Health, Inc.
(formerly known as Snyder Healthcare Services, Inc.), a newly formed Delaware
corporation which is a wholly-owned subsidiary of Snyder ("Ventiv").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of Snyder and Ventiv have determined that it is
appropriate and desirable: (i) to consolidate into Ventiv certain of the
businesses currently conducted by Snyder through certain of its subsidiaries;
and (ii) to distribute to the holders of the issued and outstanding shares of
common stock, par value $0.001 per share, of Snyder all of the issued and
outstanding shares of common stock, par value $0.001 per share, of Ventiv in
accordance with Article III hereof (the "Distribution");
WHEREAS, the Distribution is intended to qualify as a tax-free spinoff under
Section 355 of the Internal Revenue Code of 1986, as amended; and
WHEREAS, the parties hereto have determined that it is necessary and desirable
to set forth the principal corporate transactions required to effect the
Distribution and to set forth other agreements that will govern certain other
matters prior to or following the Distribution;
NOW, THEREFORE, in consideration of the premises and the mutual covenants herein
contained and intending to be legally bound thereby, the parties hereto agree as
follows:
5
<PAGE>
ARTICLE I
DEFINITIONS
1.01 GENERAL. As used in this Agreement, the following terms shall have the
following meanings (such meanings to be equally applicable to both the singular
and plural forms of the terms defined):
Affiliate: with respect to any specified Person, a Person that directly,
or indirectly through one or more intermediaries, controls, is controlled
by, or is under common control with, such specified Person;
provided, however, that for purposes of this Agreement, no member of
--------------------------------------------------------------------
either
-------
Group shall be deemed to be an Affiliate of any member of the other
Group.
Agent: American Stock Transfer and Trust Company.
Asset: any and all assets and properties, tangible or intangible,
including the following: (1) cash, notes and accounts receivable (whether
current or non-current); (2) certificates of deposit, banker's
acceptances, stock, debentures, evidences of indebtedness, certificates
of interest or participation in profit-sharing agreements, collateral-
trust certificates, preorganization certificates or subscriptions,
transferable shares, investment contracts, voting-trust certificates,
fractional undivided interests in oil, gas or other mineral rights, puts,
calls, straddles, options and other securities of any kind; (3) trade
secrets, confidential information, registered and nonregistered
trademarks, service marks, service names, trade styles and trade names,
product bar codes and associated goodwill; statutory, common law and
registered copyrights; applications for any of the foregoing, rights to
use the foregoing and other rights in, to and under the foregoing; (4)
rights under leases, contracts, licenses, permits, distribution
arrangements, sales and purchase agreements, other agreements and
business arrangements; (5) real estate and buildings and other
improvements thereon; (6) leasehold improvements, fixtures, trade
fixtures, machinery, equipment (including transportation and office
equipment), tools and furniture; (7) office supplies, production
supplies, spare parts, other miscellaneous supplies and other tangible
property of any kind; (8) raw materials, work-in-process, finished goods,
consigned goods and other inventories; (9) prepayments or prepaid
expenses; (10) claims, causes of action, choses in action, rights of
recovery and rights of set-off of any kind; (11) the right to receive
mail, payments on accounts receivable and other communications; (12)
lists of advertisers, records pertaining to advertisers and accounts,
personnel records, lists and records pertaining to suppliers and agents,
and books, ledgers, files and business records of every kind; (13)
advertising materials and other printed or written materials; (14)
goodwill as a
6
<PAGE>
going concern and other intangible properties; (15) employee contracts,
including any rights thereunder to restrict an employee from competing in
certain respects; and (16) licenses and authorizations issued by any
governmental authority.
Business Day: any day other than a Saturday, a Sunday or a day on which
banking institutions located in the States of Maryland, New York or
Delaware are authorized or obligated by law or executive order to close.
Claims Administration: the processing of claims made under the Insurance
Policies, including the reporting of claims to the insurance carrier,
management and defense of claims and providing for appropriate releases
upon settlement of claims.
Code: the Internal Revenue Code of 1986, as amended, or any successor
legislation and the regulations promulgated thereunder.
Current Plan Year: the plan year or fiscal year, to the extent
applicable with respect to any Plan, during which the Distribution Date
occurs.
DGCL: the Delaware General Corporation Law.
Disclosure Document: the Registration Statement on Form 10 and the
related Information Statement.
Distribution: the distribution to holders of shares of Snyder Common
Stock to be effected pursuant to Article III on the basis of one share of
Ventiv Common Stock for every three shares of Snyder Common Stock held of
record as of the Record Date.
Distribution Date: the date, to be determined by the Board of Directors
of Snyder as of which the Distribution shall be effected.
ERISA: the Employee Retirement Income Security Act of 1974, as amended,
or any successor legislation, and any regulations promulgated thereunder.
Exchange Act: the Securities Exchange Act of 1934, as amended, together
with the rules and regulations promulgated thereunder.
Final Date: the fifteenth (15th) Business Day after the Distribution
Date.
7
<PAGE>
Foreign Exchange Rate: with respect to any currency other than United States
dollars as of any date, the average of the opening bid and asked rates on
such date at which such currency may be exchanged for United States dollars
as quoted by Citibank, N.A., except that, with respect to any Indemnifiable
Loss covered by insurance, the Foreign Exchange Rate for such currency shall
be determined as set forth in Section 4.03(e)(2).
Former Snyder Businesses: all of the businesses and operations (1) heretofore
but not currently conducted by any member of the Snyder Group, or (2)
currently or heretofore conducted by any former Subsidiary of any such
member.
Gains Tax: the applicable foreign, state and local taxes related to any gains
from the transfer of any real property constituting Healthcare Services
Assets.
Group: the Snyder Group or the Healthcare Services Group.
Healthcare Services Assets: subject to the provisions of the Other
Agreements, (1) all of the Assets held by any member of either Group
immediately prior to the Distribution Date, which Assets are used primarily
in, held for use primarily in, or necessary for, the operation of the
Healthcare Services Business, (2) all of the outstanding shares of all
classes of capital stock of the Healthcare Services Subsidiaries and (3) all
of the Assets listed on Schedule 1.01(b)(i).
Healthcare Services Business: all of the businesses conducted immediately
prior to the Distribution Date by any member of either Group and reported by
Snyder in the "Healthcare Services" segment in the footnotes to the Snyder
consolidated financial statements (or which would have been so reported had
it been conducted as of December 31, 1998) in the Annual Report on Form 10-K
for the year ended December 31, 1998.
Healthcare Services Claim: any claim against any Healthcare Services
Employee, Healthcare Services Individual or member of the Healthcare Services
Group with respect to any injury, loss, Liability, damage or expense that (1)
is or was incurred or asserted to have been incurred prior to the
Distribution Date in, or in connection with, the conduct of the Snyder
Assets, the Healthcare Services Assets, the Snyder Business or the Healthcare
Services Business, and (2) arose or may have arisen out of one or more
occurrences or events that are or may be insured or insurable under one or
more of the Snyder Policies.
Healthcare Services Director: any individual who is a director of Ventiv.
Healthcare Services Employee: any individual who (1) immediately prior to
the Distribution Date is an officer or employee of any member of either Group
and (A)
8
<PAGE>
is primarily employed in the Healthcare Services Business, or (B) will be an
employee of the Healthcare Services Group immediately following the
Distribution, or (2) immediately prior to the Distribution Date is not an
officer or employee of any member of either Group but at any time prior to
the Distribution Date was an officer or employee of any member of either
Group and throughout such period was primarily employed in the Healthcare
Services Business.
Healthcare Services Free-Standing Qualified Plans: the plans listed in
Schedule 7.01(a) hereto.
Healthcare Services Group: Ventiv and the Healthcare Services Subsidiaries.
Healthcare Services Individual: any individual who (1) is a Healthcare
Services Employee or (2) is a beneficiary of any individual specified in
clause (1) above.
Healthcare Services Liabilities: subject to the provisions of the Other
Agreements, all of the Liabilities of any member of either Group (1) which
relate directly to the Healthcare Services Assets or the Healthcare Services
Business as conducted immediately prior to the Distribution Date, whether
incurred or arising prior to, on or after, the Distribution Date, (2) which
are specifically assumed by Ventiv under an express provision of this
Agreement or (3) which are listed on Schedule 1.01(b)(ii).
Healthcare Services Option Plan: a new Plan to be adopted by Ventiv in
connection with the Distribution, pursuant to which, among other things,
options to purchase shares of Ventiv Common Stock, and restricted shares of
Ventiv Common Stock, may be granted to Healthcare Services Employees and
Healthcare Services Directors.
Healthcare Services Plan: any Plan maintained or contributed to by any
member of either Group prior to the Distribution Date primarily for the
benefit of Healthcare Services Employees.
Healthcare Services Policies: all Insurance Policies, current and past,
which relate to the Healthcare Services Business and do not relate to the
Snyder Business, including the Insurance Policies listed on Schedule 1.01(c).
Healthcare Services Qualified Plan: a Qualified Plan that (1) will be
sponsored or maintained by any member of the Healthcare Services Group, (2)
will provide benefits for Healthcare Services Individuals who, immediately
prior to the Distribution Date, are active or inactive participants in or
otherwise entitled to benefits under any Joint Qualified Plan or Healthcare
Services Free-Standing Qualified Plan and (3) is expected to provide benefits
substantially identical to those provided by the Joint Qualified Plan or
Healthcare Services Free-Standing Qualified Plan in which such Healthcare
Services Individual currently participates.
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Healthcare Services Restricted Stock: shares of Ventiv Common Stock issued
to an individual pursuant to the Healthcare Services Option Plan subject to
forfeiture in the event that certain terms and conditions are not satisfied.
Healthcare Services Subsidiaries: all of the corporations listed on Schedule
1.01(d).
Healthcare Services Support Agreements: any obligation or agreement of the
Snyder Group under any guarantee, letter of credit, letter of comfort or
working capital maintenance agreement obtained prior to the Distribution Date
for the benefit of the Healthcare Services Business or any member of the
Healthcare Services Group.
Indemnifiable Losses: all losses, Liabilities, damages, claims, demands,
judgments or settlements of any nature or kind, known or unknown, fixed,
accrued, absolute or contingent, liquidated or unliquidated, including all
reasonable costs and expenses (legal, accounting or otherwise as such costs
are incurred) relating thereto, suffered by an Indemnitee.
Indemnifying Party: a Person who or which is obligated under this Agreement
to provide indemnification.
Indemnitee: a Person who may seek indemnification under this Agreement.
Indemnity Payment: an amount that an Indemnifying Party is required to pay
to an Indemnitee pursuant to Article IV hereof.
Information: all records, books, contracts, instruments, computer data and
other data and information.
Information Statement: the Information Statement to be sent to the holders
of Snyder Common Stock as of the Record Date in connection with the
Distribution.
Insurance Administration: with respect to each Insurance Policy, (1) the
accounting for premiums (including retrospectively-rated premiums), defense
costs, indemnity payments, deductibles and retentions as appropriate under
the terms and conditions of each of the Insurance Policies, (2) the reporting
to excess insurance carriers of any losses or claims which may cause the per-
occurrence or aggregate limits of any Insurance Policy to be exceeded and (3)
the distribution of Insurance Proceeds as contemplated by this Agreement.
Insurance Policy: insurance policies and insurance contracts of any kind
that are owned or maintained by any member of either Group as the insured
interest, including primary and excess policies, comprehensive general
liability policies, automobile, aircraft and workers' compensation insurance
policies, and self-
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insurance and captive insurance company arrangements, together with the
rights, benefits and privileges thereunder.
Insurance Proceeds: those monies received by an insured from an insurance
carrier or paid by an insurance carrier on behalf of the insured, in either
case, net of any applicable premium adjustment, retrospectively- rated
premium, deductible, retention, cost or reserve paid or held by or for the
benefit of such insured.
Insured Claims: those Liabilities that, individually or in the aggregate,
are covered within the terms and conditions of any of the Insurance Policies,
whether or not subject to deductibles, coinsurance, uncollectability or
retrospectively-rated premium adjustments, but only to the extent that such
Liabilities are within applicable Insurance Policy limits, including
aggregates.
Interim Services Agreement: an interim services agreement to be entered into
between Snyder and Ventiv, substantially in the form attached hereto as
---------
Exhibit A, with such changes as may be satisfactory to Snyder and Ventiv,
------------------------------------------------------------------
providing for the Snyder Group to make available certain personnel and
services to the Healthcare Services Group for a period of time following the
Distribution Date.
IRS: the Internal Revenue Service.
Joint Qualified Plan: the plans listed in Schedule 7.01(b) hereto.
Joint Savings Plan: the plans listed in Schedule 7.01(c) hereto.
Liabilities: all debts, liabilities and obligations, whether absolute or
contingent, matured or unmatured, liquidated or unliquidated, accrued or
unaccrued, known or unknown, whenever arising, and whether or not the same
would properly be reflected on a balance sheet, including all costs and
expenses related thereto.
Nasdaq: the Nasdaq National Market.
Ventiv: as defined in the Recitals to this Agreement.
Ventiv Common Stock: the common stock, par value $0.001 per share, of
Ventiv.
NYSE: the New York Stock Exchange, Inc.
Other Agreements: the Interim Services Agreement and the Tax Sharing
Agreement.
Person: an individual, a partnership, a limited liability company, a joint
venture, a corporation, a trust, an unincorporated organization or a
government or any department or agency thereof.
Plan: any plan, policy or arrangement or contract or agreement providing
benefits
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(including bonuses, deferred compensation, incentive compensation, savings,
stock purchases, pensions, profit sharing or retirement or other retiree
benefits, including retiree medical benefits) for any group of employees or
former employees or individual employee or former employee, or the
beneficiary or beneficiaries of any such employee or former employee, whether
formal or informal or written or unwritten and whether or not legally
binding, and including any means, whether or not legally required, pursuant
to which any benefit is provided by an employer to any employee or former
employee or the beneficiary or beneficiaries of any such employee or former
employee.
Prior Plan Year: to the extent applicable with respect to any Plan, any plan
year or fiscal year that ended on or prior to the Distribution Date.
Qualified Plan: a Plan which is an employee pension benefit plan (within the
meaning of Section 3(2) of ERISA) and which constitutes or is intended in
good faith to constitute a qualified plan under Section 401(a) of the Code.
Record Date: the date to be determined by the Board of Directors of Snyder as
the record date for determining stockholders of Snyder Common Stock entitled
to receive the Distribution.
Registration Statement: a registration statement on Form 10 to effect the
registration of the Ventiv Common Stock pursuant to the Exchange Act.
Representative: with respect to any Person, any of such Person's directors,
officers, employees, agents, consultants, advisors, accountants, attorneys
and representatives.
SEC: the Securities and Exchange Commission.
Securities Act: the Securities Act of 1933, as amended, together with the
rules and regulations promulgated thereunder.
Service Agreement: any third-party administrator or claims handling agreement
of any kind or nature to which any member of either Group is directly or
indirectly a party, in effect as of the date hereof, related to the handling
of Healthcare Services Claims.
Snyder: as defined in the recitals to this Agreement.
Snyder Assets: subject to the provisions of the Other Agreements, all of the
Assets, other than the Healthcare Services Assets, held immediately prior to
the Distribution Date by any member of either Group.
Snyder Business: all of the businesses, other than the Healthcare Services
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Business, conducted immediately prior to the Distribution Date by any member of
either Group.
Snyder Common Stock: the common stock, par value $0.001 per share, of Snyder.
Snyder Director: any individual who is a director of Snyder following the
Distribution.
Snyder Employee: any individual who at any time prior to the Distribution Date
is or was an officer or employee of any member of any Group, other than a
Healthcare Services Employee.
Snyder Group: Snyder and its Affiliates, other than members of the Healthcare
Services Group.
Snyder Individual: any individual who (1) is a Snyder employee, (2) at any time
prior to the Distribution Date is or was an officer or employee of any Former
Snyder Business, or (3) is a beneficiary of any individual specified in clause
(1) or (2).
Snyder Liabilities: subject to the provisions of the Other Agreements, all of
the Liabilities, other than the Healthcare Services Liabilities, of any member
of either Group including, without limitation, all liabilities specified on
Schedule 1.01(e).
Snyder Option: an option to purchase shares of Snyder Common Stock granted
pursuant to the Snyder Option Plan, together with any stock appreciation right
or limited stock appreciation right issued in connection therewith.
Snyder Option Plan: the 1996 Stock Incentive Plan of Snyder.
Snyder Plan: any Plan maintained or contributed to by any member of either Group
prior to the Distribution Date, other than a Healthcare Services Plan.
Snyder Policies: all Insurance Policies, current and past, which relate to both
the Snyder Business and the Healthcare Services Business, including the
Insurance Policies listed on Schedule 1.01(g).
Snyder Restricted Stock: shares of Snyder Common Stock issued to an individual
pursuant to the Snyder Option Plan subject to forfeiture in the event that
certain terms and conditions are not satisfied.
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Subsidiary: with respect to any specified Person, any corporation or other legal
entity of which such Person or any of its Subsidiaries controls or owns,
directly or indirectly, more than fifty percent (50%) of the stock or other
equity interest entitled to vote on the election of members to the board of
--------
directors or similar governing body; provided, however, that for purposes of
- - - ----------------------------------------------------------------
this Agreement, (1) the Healthcare Services Subsidiaries shall be deemed to be
Subsidiaries of Ventiv and (2) the Healthcare Services Subsidiaries shall not be
deemed to be Subsidiaries of Snyder or any of Snyder's Subsidiaries.
Tax: as defined in the Tax Sharing Agreement.
Tax Sharing Agreement: a tax sharing agreement to be entered into between Snyder
and Ventiv, substantially in the form attached hereto as Ehibit B, with such
-------------------
changes as may be mutually satisfactory to Snyder and Ventiv.
- - - -------------------------------------------------
Third-Party Claim: any claim, suit, arbitration, inquiry, proceeding or
investigation by or before any court, any governmental or other regulatory or
administrative agency or commission or any arbitration tribunal asserted by a
Person who is not a party hereto.
Transfer Tax: the applicable foreign, state and local real estate transfer taxes
associated with the transfer of any Assets constituting Healthcare Services
Assets.
Welfare Plan: any Plan, including but not limited to the Plans listed on
Schedule 1.01(h), which is not a Qualified Plan and which provides medical,
health, disability, accident, life insurance, death, dental or other welfare
benefits, including any post-employment benefits or retiree medical benefits.
1.02 REFERENCES TO TIME. All references in this Agreement to times of the day
shall be to Washington, D.C. Time.
ARTICLE II
CERTAIN TRANSACTIONS PRIOR TO THE DISTRIBUTION DATE
2.01 CERTIFICATE OF INCORPORATION; BY-LAWS. Snyder and Ventiv shall take all
action necessary so that, at the Distribution Date, the Amended and Restated
Certificate of Incorporation and By-laws of Ventiv shall be in the forms
attached hereto as Exhibit C and Exhibit D, respectively.
- - - ---------------------------------------------------------
2.02 ISSUANCE OF STOCK. Prior to or as of the Distribution Date, the parties
hereto shall take all steps necessary to reclassify the outstanding shares of
Ventiv Common Stock so that, except as otherwise contemplated by this Agreement,
immediately prior to
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or as of the Distribution Date the number of shares of Ventiv Common Stock
outstanding and held by Snyder shall be equal to one-third (l/3) the number of
shares of Snyder Common Stock outstanding on the Record Date.
2.03 TRANSFER OF ASSETS AND ASSUMPTION OF LIABILITIES. Prior to the
Distribution Date, the parties hereto shall take all action necessary to
transfer to Ventiv, and to cause Ventiv to assume, as the case may be, effective
as of the Distribution Date, (1) all of the shares of capital stock of the
Healthcare Services Subsidiaries held by the Snyder Group, (2) all of the right,
title and interest of the Snyder Group in the Healthcare Services Assets, and
(3) all of the Healthcare Services Liabilities, as more-fully set forth on
Schedule 2.03 hereto.
2.04 CONDUCT OF BUSINESS PENDING THE DISTRIBUTION DATE. Each of the parties
hereto agrees that from the date hereof until the Distribution Date, except as
otherwise contemplated by this Agreement, it will use its best efforts to carry
on the Healthcare Services Business diligently in the ordinary course and
substantially in the same manner as heretofore conducted and to preserve intact
the business organization and goodwill of the Healthcare Services Business
(including using its best efforts to cause its Subsidiaries to take such
actions).
2.05 REFINANCING. Each of the parties hereto agrees that it will use
reasonable efforts to obtain, prior to the Distribution Date, all necessary
consents, waivers or amendments to each bank credit agreement, debt security or
other financing facility to which it and its Subsidiaries is a party or by which
it or any of its Subsidiaries is bound, or to refinance such agreement, security
or facility, in each case on terms satisfactory to Snyder and Ventiv and to the
extent necessary to permit the Distribution to be consummated without any
material breach of the terms of such agreement, security or facility.
2.06 REGISTRATION AND LISTING. Prior to the Distribution Date:
(a) Snyder and Ventiv shall prepare the Information Statement and the
Registration Statement. Ventiv shall file the Registration Statement with
the SEC. Snyder and Ventiv shall use reasonable efforts to cause the
Registration Statement to become effective under the Exchange Act as
promptly as reasonably practicable. Snyder and Ventiv shall prepare the
Information Statement; and after the Registration Statement becomes
effective, Snyder shall cause the Information Statement to be mailed to
the holders of Snyder Common Stock as of the Record Date.
(b) The parties hereto shall use their best efforts to take all such
action as may be necessary or appropriate under state securities and
"blue sky" laws in connection with the transactions contemplated by this
Agreement.
(c) Snyder and Ventiv shall prepare, and Ventiv shall file and seek to
make
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effective, an application for the listing of the Ventiv Common Stock on
Nasdaq, subject to official notice of issuance.
(d) The parties hereto shall cooperate in preparing, filing with the SEC
and causing to become effective any registration statements or amendments
thereto which are necessary or appropriate in order to effect the
transactions contemplated hereby or to reflect the establishment of, or
amendments to, any Plans contemplated hereby.
ARTICLE III
THE DISTRIBUTION
3.01 RECORD DATE AND DISTRIBUTION DATE. Subject to the satisfaction of the
conditions set forth in Section 10.01(a) hereof, the Board of Directors of
Snyder shall establish the Record Date and the Distribution Date and any
appropriate procedures in connection with the Distribution.
3.02 THE AGENT. Prior to the Distribution Date, Snyder shall cause the Agent to
make appropriate arrangements for, among other things, the payment of the
Distribution to the holders of Snyder Common Stock in accordance with this
Article III.
3.03 DELIVERY OF SHARE CERTIFICATES TO THE AGENT. Prior to or as of the
Distribution Date, Snyder shall deliver to the Agent a share certificate
representing all of the outstanding shares of Ventiv Common Stock to be
distributed in connection with the payment of the Distribution. After the
Distribution Date, upon the request of the Agent, Ventiv shall provide all
certificates for shares of Ventiv Common Stock that the Agent shall require in
order to effect the Distribution.
3.04 DISTRIBUTION. Except as otherwise contemplated by this Agreement, the
Agent shall distribute, as of the Distribution Date, one (1) share of Ventiv
Common Stock in respect of every three (3) shares of Snyder Common Stock held by
holders of record of Snyder Common Stock on the Record Date. All shares of
Ventiv Common Stock issued in the Distribution shall be duly authorized, validly
issued, fully paid and nonassessable.
3.05 PAYMENT IN LIEU OF FRACTIONAL SHARES. In lieu of the distribution of
fractional shares of Ventiv Common Stock to holders of record of Snyder Common
Stock as of the Record Date, the parties shall cause the Agent to cause all such
fractional shares to be aggregated and the resulting shares sold for the account
of such stockholders. Such sales shall be effected as soon as practicable after
the Distribution Date. Following the sale of the aggregated fractional shares of
Ventiv Common Stock, the parties shall cause the Agent to distribute the
proceeds of the sale of the aggregated fractional shares to such
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stockholders.
ARTICLE IV
SURVIVAL, ASSUMPTION AND INDEMNIFICATION
4.01 SURVIVAL OF AGREEMENTS. All covenants and agreements of the parties hereto
contained in this Agreement shall survive the Distribution Date.
4.02 TAXES AND EMPLOYEE-RELATED ASSETS AND LIABILITIES. This Article IV shall
not be applicable to any Plan Assets or any Indemnifiable Losses or Liabilities
related to (1) Taxes which shall be governed by the Tax Sharing Agreement, or
(2) the current or former employment of any Snyder Individual or Healthcare
Services Individual, or the compensation or benefits for any Snyder Director or
Healthcare Services Director, under any Plan or otherwise, which shall be
governed by Article VII hereof.
4.03 ASSUMPTION AND INDEMNIFICATION.
(a) Subject to Section 4.02 hereof, the Tax Sharing Agreement and
Article VII hereof, from and after the Distribution Date, Snyder shall
retain or assume, as the case may be, and shall indemnify, defend and
hold harmless each Healthcare Services Individual and each member of
the Healthcare Services Group, and each of their Representatives and
Affiliates, from and against, (1) all liabilities for third party
claims relating to, arising out of or due to, directly or indirectly,
the service by any Healthcare Services Individual as an officer,
director or employee of any member of the Snyder Group prior to the
Distribution, except to the extent covered by insurance and provided
such indemnification would be permitted by law if such officer,
director or employee made a claim for indemnification, (2) all
Liabilities of the Snyder Group under this Agreement or any of the
Other Agreements, and (3) all Indemnifiable Losses of any such
Healthcare Services Individual, member of the Healthcare Services
Group, Representative or Affiliate relating to, arising out of or due
to, directly or indirectly, the Snyder Assets, the Snyder Liabilities,
the Snyder Business, the Snyder Individuals or the Snyder Group's
Representatives, whether relating to or arising out of occurrences
prior to, on or after the Distribution Date.
(b) Subject to Section 4.02 hereof, the Tax Sharing Agreement and
Article VII, and except as specifically provided in Section 4.03(a)
hereof, from and after the Distribution Date, Ventiv shall assume, and
shall indemnify, defend and hold harmless each Snyder Individual and
each member of the Snyder Group, and each of their Representatives and
Affiliates, from and against, (1) all Liabilities of the Healthcare
Services Group under this Agreement or any of the Other Agreements and
(2) all Indemnifiable Losses of any such Snyder Individual, member of
the
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Snyder Group, or any Representative or Affiliate of the Snyder Group
relating to, arising out of or due to, directly or indirectly, the
Healthcare Services Assets, the Healthcare Services Liabilities, the
Healthcare Services Business, the Healthcare Services Employees or the
Healthcare Services Group's Representatives, whether relating to or
arising out of occurrences prior to or after the Distribution Date.
(c) If an Indemnitee realizes a Tax benefit or detriment by reason of
having incurred an Indemnifiable Loss for which such Indemnitee
receives an Indemnity Payment from an Indemnifying Party or by reason
of receiving an Indemnity Payment, then such Indemnitee shall pay to
such Indemnifying Party an amount equal to the Tax benefit, or such
Indemnifying Party shall pay to such Indemnitee an additional amount
equal to the Tax detriment (taking into account any Tax detriment
resulting from the receipt of such additional amounts), as the case
may be. If, in the opinion of counsel to an Indemnifying Party
reasonably satisfactory in form and substance to the affected
Indemnitee, there is a substantial likelihood that the Indemnitee will
be entitled to a Tax benefit by reason of an Indemnifiable Loss, the
Indemnifying Party promptly shall notify the Indemnitee and the
Indemnitee promptly shall take any steps (including the filing of such
returns, amended returns or claims for refunds consistent with the
claiming of such Tax benefit) that, in the reasonable judgment of the
Indemnifying Party, are necessary and appropriate to obtain any such
Tax benefit. If, in the opinion of counsel to an Indemnitee reasonably
satisfactory in form and substance to the affected Indemnifying Party,
there is a substantial likelihood that the Indemnitee will be
subjected to a Tax detriment by reason of an Indemnification Payment,
the Indemnitee promptly shall notify the Indemnifying Party and the
Indemnitee promptly shall take any steps (including the filing of such
returns or amended returns or the payment of Tax underpayments
consistent with the settlement of any Liability for Taxes arising from
such Tax detriment) that, in the reasonable judgment of the
Indemnitee, are necessary and appropriate to settle any Liabilities
for Taxes arising from such Tax detriment. If, following a payment by
an Indemnitee or an Indemnifying Party pursuant to this Section
4.03(c) in respect of a Tax benefit or detriment, there is an
adjustment to the amount of such Tax benefit or detriment, then each
of Snyder and Ventiv shall make appropriate payments to the other,
including the payment of interest thereon at the federal statutory
rate then in effect, to reflect adjustments.
(d) The amount which an Indemnifying Party is required to pay to any
Indemnitee pursuant to this Section 4.03 shall be reduced (including
retroactively) by any Insurance Proceeds and other amounts actually
recovered by such Indemnitee in reduction of the related Indemnifiable
Loss, it being understood and agreed that each of Snyder and Ventiv
shall use its best efforts to collect any such proceeds or other
amounts to which it or any of its Subsidiaries is entitled, without
regard to whether it is the Indemnifying Party hereunder. If an
Indemnitee receives an Indemnity Payment in respect of an
Indemnifiable Loss and subsequently receives Insurance Proceeds or
other amounts in respect of such Indemnifiable Loss, then such
Indemnitee shall pay to such Indemnifying Party an amount equal to
the
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difference between (1) the sum of the amount of such Indemnity Payment
and the amount of such Insurance Proceeds or other amounts actually
received and (2) the amount of such Indemnifiable Loss, adjusted (at
such time as appropriate adjustment can be determined) in each case to
reflect any premium adjustment attributable to such claim.
(e) If any Indemnity Payment required to be made hereunder or under
any Other Agreement is denominated in a currency other than United
States dollars, the amount of such payment shall be translated into
United States dollars using the Foreign Exchange Rate for such
currency determined in accordance with the following rules:
(1) with respect to an Indemnifiable Loss arising from payment by a
financial institution under a guarantee, comfort letter, letter of
credit, foreign exchange contract or similar instrument, the Foreign
Exchange Rate for such currency shall be determined as of the date on
which such financial institution is reimbursed;
(2) with respect to an Indemnifiable Loss covered by insurance, the
Foreign Exchange Rate for such currency shall be the Foreign Exchange
Rate employed by the insurance company providing such insurance in
settling such Indemnifiable Loss with the Indemnifying Party; and
(3) with respect to an Indemnified Loss not described in clause (1) or
(2) of this Section 4.03(e), the Foreign Exchange Rate for such currency
shall be determined as of the date that notice of the claim with respect
to such Indemnifiable Loss is given to the Indemnitee.
4.04 PROCEDURE FOR INDEMNIFICATION.
(a) If any Indemnitee receives notice of the assertion of any Third-
Party Claim with respect to which an Indemnifying Party is obligated
under this Agreement to provide indemnification, such Indemnitee shall
give such Indemnifying Party notice thereof promptly after becoming
aware of such Third-Party Claim; provided, however, that the failure
------------------------------------------------------
of any Indemnitee to give notice as provided in this Section 4.04
--------------------
shall not relieve any Indemnifying Party of its obligations under this
Article IV, except to the extent that such Indemnifying Party is
actually prejudiced by such failure to give notice. Such notice shall
describe such Third-Party Claim in reasonable detail and, if
practicable, shall indicate the estimated amount of the Indemnifiable
Loss that has been or may be sustained by such Indemnitee.
(b) An Indemnifying Party, at such Indemnifying Party's own expense
and through counsel chosen by such Indemnifying Party (which counsel
shall be reasonably satisfactory to the Indemnitee), may elect to
defend any Third-Party Claim; provided, however, that such an election
-----------------------------------------------
by the Indemnifying Party shall be deemed
-------------------
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an admission of its obligation to Indemnify the Indemnitee with respect to
such Third-Party Claim. If an Indemnifying Party elects to defend a Third-
Party Claim, then, within ten (10) Business Days after receiving notice of
such Third-Party Claim (or sooner, if the nature of such Third-Party Claim so
requires), such Indemnifying party shall notify the Indemnitee of its intent
to do so, and such Indemnitee shall cooperate in the defense of such Third-
Party Claim. Such Indemnifying Party shall pay such Indemnitee's reasonable
out-of-pocket expenses incurred in connection with such cooperation. After
notice from an Indemnifying Party to an Indemnitee of its election to assume
the defense of a Third-Party Claim, such Indemnifying Party shall not be
liable to such Indemnitee under this Article IV for any legal or other
expenses subsequently incurred by such Indemnitee in connection with the
defense thereof; provided, however, that such Indemnitee shall have the right
------------------------------------------------------------
to employ one law firm as counsel to represent such Indemnitee (which firm
-----------------
shall be reasonably acceptable to the Indemnifying Party) if, in such
Indemnitee's reasonable judgment, either a conflict of interest between such
Indemnitee and such Indemnifying Party exists in respect of such claim or
there may be defenses available to such Indemnitee which are different from
or in addition to those available to such Indemnifying Party, and in that
event (1) the reasonable fees and expenses of such separate counsel shall be
paid by such Indemnifying Party and (2) each of such Indemnifying Party and
such Indemnitee shall have the right to run its own defense in respect of
such claim. If an Indemnifying Party elects not to defend against a Third-
Party Claim, or fails to notify an Indemnitee of its election as provided in
this Section 4.04 within the period of ten (10) Business Days described
above, such Indemnitee may defend, compromise and settle such Third- Party
Claim; provided, however, that no such Indemnitee may compromise or settle
-----------------
any such Third-Party Claim without the prior written consent of the
Indemnifying Party, which consent shall not be withheld unreasonably.
Notwithstanding the foregoing, the Indemnifying Party shall not, without the
prior consent of the Indemnitee, (1) settle or compromise any Third- Party
Claim or consent to the entry of any judgment which does not include as an
unconditional term thereof the delivery by the claimant or plaintiff to the
Indemnitee of a written release from all Liability in respect of such Third-
Party Claim or (2) settle or compromise any Third-Party Claim in any manner
that may adversely affect the Indemnitee.
4.05 REMEDIES CUMULATIVE. The remedies provided in this Article IV shall be
cumulative and shall not preclude assertion by any Indemnitee of any other
rights or the seeking of any other remedies against any Indemnifying Party.
ARTICLE V
CERTAIN ADDITIONAL COVENANTS
5.01 FURTHER ASSURANCES.
(a) In addition to the actions specifically provided for elsewhere in
this
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Agreement, each of the parties hereto shall use its best efforts to
take, or cause to be taken, all actions, and to do, or cause to be
done, all things reasonably necessary, proper or advisable under
applicable laws, regulations and agreements to consummate and make
effective the transactions contemplated by this Agreement. Without
limiting the foregoing, each party hereto shall cooperate with the
other parties, and execute and deliver, or use its best efforts to
cause to be executed and delivered, all instruments, including
instruments of conveyance, assignment and transfer, and to make all
filings with, and to obtain all consents, approvals or authorizations
of, any governmental or regulatory authority or any other Person under
any permit, license, agreement, indenture or other instrument, and
take all such other actions as such party may reasonably be requested
to take by any other party hereto from time to time, consistent with
the terms of this Agreement, in order to effectuate the provisions and
purposes of this Agreement and the transfers of Assets and Liabilities
and the other transactions contemplated hereby. If any such transfer
of Assets or Liabilities is not consummated prior to or at the
Distribution Date, then the party hereto retaining such Asset or
Liability shall thereafter hold such Asset in trust for the use and
benefit of the party entitled thereto (at the expense of the party
entitled thereto), or shall retain such Liability for the account of
the party by whom such Liability is to be assumed pursuant hereto, as
the case may be, and shall take such other action as may be reasonably
requested by the party to whom such Asset is to be transferred, or by
whom such Liability is to be assumed, as the case may be, in order to
place such party, insofar as reasonably possible, in the same position
as if such Asset or Liability had been transferred as contemplated
hereby. If and when any such Asset or Liability becomes transferable,
such transfer shall be effected forthwith. The parties hereto agree
that, as of the Distribution Date, each party hereto shall be deemed
to have acquired complete and sole beneficial ownership of all of the
Assets, together with all rights, powers and privileges incident
thereto, and shall be deemed to have assumed in accordance with the
terms of this Agreement all of the Liabilities, and all duties,
obligations and responsibilities incident thereto, that such party is
entitled to acquire or required to assume pursuant to the terms of
this Agreement.
(b) Without limiting the generality of Section 5.01(a) hereof, Snyder, as
the sole stockholder of Ventiv, shall ratify any actions which are
reasonably necessary or desirable to be taken by Ventiv to effectuate
the transactions contemplated by this Agreement in a manner consistent
with the terms of this Agreement, including the preparation and
implementation of appropriate Plans for Healthcare Services
Employees.
5.02 VENTIV BOARD OF DIRECTORS. Prior to, or simultaneously with, the
Distribution Date, Ventiv shall take such actions as are necessary such that
its Board of Directors is comprised of those individuals named as directors in
the Information Statement.
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5.03 CONTINUING CONTRACTUAL ARRANGEMENTS. Notwithstanding anything in this
Agreement to the contrary, except as set forth in Sections 5.04 hereof,
to the extent that any member of either Group is now providing or selling, or in
the future may provide or sell, to any member of the other Group any services,
benefits or products pursuant to any written or oral agreement or understanding
whatsoever, such agreement or understanding shall not be deemed altered, amended
or terminated as a result of this Agreement or the consummation of the
transactions contemplated hereby.
5.04 INTERCOMPANY ACCOUNTS. Effective as of the Distribution Date all
intercompany payables, loans or advances from Snyder to Ventiv shall be deemed
contributed to capital and thereby cancelled without the payment of any cash by
Ventiv to Snyder.
5.05 CASH ACCOUNTS. The cash accounts on the Distribution Date of Snyder and
each Snyder Subsidiary and Ventiv and each Healthcare Services Subsidiary shall
remain the property of each respective company or Subsidiary.
5.06 OTHER AGREEMENTS. Each of Snyder and Ventiv shall use reasonable efforts to
enter into or to cause the appropriate members of its Group to enter into, the
Other Agreements prior to the Distribution Date. If there shall be a conflict
between the provisions of this Agreement and the provisions of the Other
Agreements, the provisions of the Other Agreements shall control.
5.07 TRANSFER TAXES. Ventiv shall pay any Gains Tax, Transfer Tax and similar
transfer Taxes in any jurisdiction (and any penalties and interest with respect
to such Taxes), which become payable in connection with the restructuring of
Ventiv and the transfer of the Healthcare Services Subsidiaries held by the
Snyder Group to Ventiv and the Healthcare Services Assets and Healthcare
Services Liabilities to Ventiv as contemplated in Section 2.03 and the
Distribution on behalf of the stockholders of Snyder or Ventiv. Ventiv shall
indemnify and hold harmless the stockholders of Snyder and Ventiv from and
against any Liability with respect to such Taxes (including any penalties,
interest and reasonable professional fees). Ventiv shall prepare and file any
required returns with respect to such Taxes (including returns on behalf of the
stockholders of Snyder and Ventiv).
5.08 HEALTHCARE SERVICES SUPPORT AGREEMENTS. Effective as of the Distribution
Date, Ventiv shall cause itself or one or more members of the Healthcare
Services Group to be substituted in all respects for the Snyder Group or any
member thereof in respect of all Healthcare Services Support Agreements.
Subsequent to the Distribution Date, with respect to any uncancelled Healthcare
Services Support Agreement for which no substitution has yet been effected,
Ventiv shall indemnify the Snyder Group against Liabilities under any such
Healthcare Services Support Agreement in accordance with the provisions of
Article IV hereof.
22
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ARTICLE IV
ACCESS TO INFORMATION
6.01 PROVISION OF CORPORATE RECORDS. Prior to or as promptly as practicable
after the Distribution Date, Snyder shall deliver to Ventiv all corporate books
and records of the Healthcare Services Group and copies of all corporate books
and records of the Snyder Group relating to the Healthcare Services Assets, the
Healthcare Services Liabilities, or the Healthcare Services Business, including
in each case all active agreements, active litigation files and government
filings. From and after the Distribution Date, all books, records and copies so
delivered shall be the property of Ventiv.
6.02 ACCESS TO INFORMATION. From and after the Distribution Date, each of
Snyder and Ventiv shall afford to the other and to the other's Representatives
reasonable access and duplicating rights during normal business hours to all
Information within such party's possession relating to such other party's
businesses, Assets or Liabilities, insofar as such access is reasonably required
by such other party. Without limiting the foregoing, Information may be
requested under this Section 6.02 for audit, accounting, claims, litigation and
Tax purposes, as well as for purposes of fulfilling disclosure and reporting
obligations.
6.03 PRODUCTION OF WITNESSES. After the Distribution Date, each of Snyder and
Ventiv shall use reasonable efforts to make available to the other, upon written
request, its directors, officers, employees and agents as witnesses to the
extent that any such Person may reasonably be required (giving consideration to
business demands of such Person) in connection with any legal, administrative or
other proceedings in which the requesting party may from time to time be
involved.
6.04 RETENTION OF RECORDS. Except as otherwise required by law or agreed in
writing, or as otherwise provided in the Tax Sharing Agreement, each of Snyder
and Ventiv shall retain, for a period of at least ten (10) years following the
Distribution Date, all significant Information in such party's possession or
under its control relating to the business, Assets or Liabilities of the other
party and, after the expiration of such ten-year period, prior to destroying or
disposing of any of such Information, (a) the party proposing to dispose of or
destroy any such Information shall provide no less than thirty (30) days' prior
written notice to the other party, specifying the Information proposed to be
destroyed or disposed of, and (b) if, prior to the scheduled date for such
distribution or disposal, the other party requests in writing that any of the
Information proposed to be destroyed or disposed of be delivered to such other
party, the party proposing to dispose of or destroy such Information shall
promptly arrange for the delivery of the requested Information to a location
specified by, and at the expense of, the requesting party.
6.05 CONFIDENTIALITY. From and after the Distribution Date, each of Snyder and
Ventiv shall hold, and shall use its reasonable best efforts to cause its
Affiliates and Representatives to hold, in strict confidence all Information
concerning the other party obtained by it prior to the Distribution Date or
furnished to it by such other party pursuant
23
<PAGE>
to this Agreement or the Other Agreements and shall not release or disclose such
Information to any other Person, except its Representatives, who shall be bound
by the provisions of this Section 6.05; provided, however, that Snyder and
-----------------
Ventiv may disclose such Information to the extent that (a) disclosure is
compelled by judicial or administrative process or, in the opinion of such
party's counsel, by other requirements of law, or (b) such party can show that
such Information was (1) available to such party on a nonconfidential basis
prior to its disclosure by the other party, (2) in the public domain through no
fault of such party or (3) lawfully acquired by such party from other sources
after the time that it was furnished to such party pursuant to this Agreement or
the Other Agreements. Notwithstanding the foregoing, each of Snyder and Ventiv
shall be deemed to have satisfied its obligations under this Section 6.05 with
respect to any Information if it exercises the same care with regard to such
Information as it takes to preserve confidentiality for its own similar
Information.
ARTICLE VII
EMPLOYEE BENEFITS
7.01 QUALIFIED PLANS.
(a) As soon as practicable after the date hereof and effective as of
the Distribution Date, Ventiv shall take, or cause to be taken, all
actions necessary and appropriate to establish and administer one or
more Healthcare Services Qualified Plans and to provide benefits
thereunder for all Healthcare Services Individuals who, immediately
prior to the Distribution Date, were participants in or otherwise
entitled to benefits under any Joint Qualified Plan. Ventiv agrees that
each such Healthcare Services Individual shall be, to the extent
applicable, entitled, for all purposes under any applicable Healthcare
Services Qualified Plan, to be credited with the term of service and any
accrued benefit or account balance credited to such Healthcare Services
Individual as of the Distribution Date under the terms of any applicable
Joint Qualified Plan as if such accrued benefit or account balance had
originally been credited to such Healthcare Services Individual under
the Healthcare Services Qualified Plan. Snyder agrees to provide Ventiv,
as soon as practicable after the Distribution Date (with the cooperation
of Ventiv to the extent that relevant information is in the possession
of the Healthcare Services Group), with a list of the Healthcare
Services Individuals who were, to the best knowledge of Snyder,
participants in or otherwise entitled to benefits under each Joint
Qualified Plan immediately prior to the Distribution Date, together with
a listing, if requested by Ventiv, of each such Healthcare Services
Individual's term of service for eligibility and vesting purposes under
such Plan and a listing of each such Healthcare Services Individual's
accrued benefit or account balance thereunder. Snyder shall, as soon as
practicable after the Distribution Date, provide Ventiv with such
additional information (in the possession of the Snyder Group and not
already in the possession of the Healthcare Services
24
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Group) as may be reasonably requested by Ventiv and necessary in order
for the Healthcare Services Group to establish and administer
effectively any Healthcare Services Qualified Plan.
(b) Snyder agrees, as soon as practicable following the Distribution Date, to
direct the trustee of the trust funding each Joint Qualified Plan which is a
Joint Savings Plan to transfer to the trustee or other funding agent of any
applicable Healthcare Services Qualified Plan in cash, securities or other
property or a combination thereof, as reasonably determined by Snyder, an
amount equal to the account balances as of the date of transfer attributable
to the participants and beneficiaries in such Joint Savings Plan who are
Healthcare Services Individuals plus the portion of any unallocated
contributions and trust earnings attributable to such participants and
beneficiaries who are Healthcare Services Individuals. To the extent
practicable such transfers shall be effected so as to preserve investment
elections of the participants and beneficiaries in each Joint Savings Plan.
(c) In connection with the transfers described in this Section 7.01, Snyder
and Ventiv shall cooperate in making any and all appropriate filings required
under the Code or ERISA, and the regulations thereunder, and any applicable
securities laws and take all such action as may be necessary and appropriate
to cause such transfers to take place as soon as practicable after the
---------
Distribution Date; provided, however, that each such transfer shall not take
-------------------------------------------------------------
place until as soon as practicable after the later of (1) the expiration of a
thirty (30) day period following the date of filing the required Forms 5310-A
(or any successor form thereto) with the IRS and (2) the earlier of (A) the
receipt of a favorable IRS determination letter with respect to the
qualification of each applicable Healthcare Services Qualified Plan under
Section 401(a) of the Code or (B) the receipt by Snyder of an opinion of
counsel reasonably satisfactory in form and substance to Snyder and Ventiv to
the effect that such counsel believes each applicable Healthcare Services
Qualified Plan is qualified under Section 401(a) of the Code. Snyder and
Ventiv agree to provide to such counsel such information in the possession of
the Snyder Group and the Healthcare Services Group, respectively, as may be
reasonably requested by such counsel in connection with the issuance of such
opinion. Snyder agrees, during the period ending with the date of complete
transfer of assets and liabilities to each such Healthcare Services Qualified
Plan, to cause distributions in respect of terminated or retired participants
who are Healthcare Services Individuals to be made, on behalf of Ventiv, from
the relevant Joint Qualified Plan in accordance with applicable law and
pursuant to plan provisions.
(d) Snyder and Ventiv shall take, or cause to be taken, all such action as
may be necessary or appropriate in order to establish Ventiv or one or more
members of the Healthcare Services Group, as appropriate, as successor to all
rights, assets, duties, Liabilities and obligations as of the Distribution
Date under, or with respect to, each Healthcare Services Free-Standing
Qualified Plan. Snyder agrees that, prior to the Distribution Date or as soon
as practicable thereafter, it shall provide Ventiv with all
25
<PAGE>
information (in the possession of the Snyder Group and not already in the
possession of the Healthcare Services Group) as may be reasonably requested by
Ventiv and necessary for the Healthcare Services Group to administer
effectively such Healthcare Services Free-Standing Qualified Plan.
(e) Except as specifically set forth in this Section 7.01, from and after the
Distribution Date, (1) the Snyder Group shall cease to have any liability or
obligation whatsoever with respect to Healthcare Services Individuals under
the Joint Qualified Plans, and Ventiv shall assume or retain, as the case may
be, and shall be solely responsible for, all liabilities and obligations
whatsoever of either Group with respect to Healthcare Services Individuals
under the Joint Qualified Plans and shall be solely responsible for all
liabilities and obligations whatsoever of either Group with respect to
Healthcare Services Individuals under the Joint Qualified Plans and shall be
solely responsible for all liabilities and obligations whatsoever under the
Healthcare Services Qualified Plans and (2) the Snyder Group shall cease to
have any liability or obligation whatsoever under the Healthcare Services
Free-Standing Qualified Plans and Ventiv shall assume or retain, as the case
may be, and shall be solely responsible for, all liabilities and obligations
whatsoever of either group under the Healthcare Services Free-Standing Plans;
-------------------------------------------------
provided, however, that Snyder shall either be responsible for or make all
-----------------------
required contributions, no later than the later of the Distribution Date and
the date such contributions are legally required to be made (A) in respect of
Healthcare Services Individuals with respect to each Joint Qualified Plan and
(B) with respect to all participants in the Healthcare Services Free-Standing
Qualified Plans, in each case, for all Prior Plan Years and for the portion of
the Current Plan Year ending on the Distribution Date, to the extent not
previously made.
7.02 [INTENTIONALLY OMITTED].
7.03 WELFARE PLANS.
(a) As of the Distribution Date, Ventiv shall assume or retain, or cause one
or more members of the Healthcare Services Group to assume or retain, as the
case may be, and shall be solely responsible for, or cause its insurance
carriers to be responsible for all liabilities and obligations whatsoever of
either Group whether or not incurred prior to the Distribution Date, in
connection with claims under any Welfare Plan (including any Welfare Plan
providing for post-retirement or retiree medical benefits) in respect of any
Healthcare Services Individual and the Snyder Group shall cease to have any
liability or obligation with respect thereto.
(b) Ventiv shall take, or cause to be taken, all actions necessary and
appropriate on behalf of itself and the Healthcare Services Group (1) to
assume any existing Welfare Plan of either Group, which Welfare Plan, as of
the Distribution Date, provides benefits solely for Healthcare Services
Individuals or (2) otherwise to
26
<PAGE>
adopt such Welfare Plans as necessary to provide welfare benefits, effective
as of the Distribution Date, and to assume the liabilities and obligations to
Healthcare Services Individuals which are or shall become the responsibility
of Ventiv to the extent specified in Section 7.03(a) hereof. For this purpose,
with respect to any Healthcare Services Individual, Ventiv or a member of the
Healthcare Services Group shall, to the extent applicable, credit such
Healthcare Services Individual with any term of service provided to any member
of either Group, and consider such Healthcare Services Individual to have
satisfied any other eligibility criteria (including satisfaction of applicable
deductibles or coinsurance amounts) to the extent so satisfied as of the
Distribution Date, as if such service had been rendered to Ventiv or the
member of the Healthcare Services Group and as if such eligibility criteria
had been satisfied while employed by Ventiv or the member of the Healthcare
Services Group. In connection with the foregoing, Snyder agrees to provide
Ventiv or its designated insurance representative with such information (in
the possession of the Snyder Group and not already in the possession of the
Healthcare Services Group) as may be reasonably requested by Ventiv and
necessary for the Healthcare Services Group to assume or establish any such
Welfare Plan.
(c) The Snyder Group shall assume, or retain, all liabilities and
obligations whatsoever of either Group for benefits under any Welfare Plan
other than as set forth in Section 7.03(a) hereof.
7.04 [INTENTIONALLY OMITTED.]
7.05 [INTENTIONALLY OMITTED.]
7.06 SEVERANCE PAY.
(a) Snyder and Ventiv agree that, with respect to individuals who, in
connection with the Distribution, cease to be employees of the Snyder
Group and become employees of the Healthcare Services Group, such
cessation shall not be deemed a severance of employment from either
Group for purposes of any Plan that provides for the payment of
severance, salary continuation or similar benefits and shall, if and to
the extent appropriate, in connection with the Distribution obtain
waivers from individuals against any such assertion.
(b) The Snyder Group shall assume and be solely responsible for all
liabilities and obligations whatsoever in connection with claims made by
or on behalf of Snyder Individuals and the Healthcare Services Group
shall assume and be solely responsible for all liabilities and
obligations whatsoever in connection with claims made by or on behalf of
Healthcare Services Individuals in respect of severance pay, salary
continuation and similar obligations relating to the termination or
alleged termination of any such person's employment either before, to
the extent unpaid, or on or after the Distribution Date.
27
<PAGE>
7.07 [INTENTIONALLY OMITTED].
7.08 POST-DISTRIBUTION LIABILITIES. The Snyder Group shall be solely
responsible for the payment of all liabilities and obligations whatsoever
arising with respect to any Snyder Individual and attributable to any period
subsequent to the Distribution Date and the Healthcare Services Group shall be
solely responsible for the payment of all liabilities and obligations whatsoever
arising with respect to any Healthcare Services Individual and attributable to
any period subsequent to the Distribution Date.
7.09 OTHER BALANCE SHEET ADJUSTMENTS. To the extent not otherwise provided in
this Agreement, Snyder and Ventiv shall take such action as is necessary to
effect an adjustment to the books of Snyder and Ventiv so that, as of the
Distribution Date, the prepaid expense balances and accrued employee liabilities
with respect to any employee liability or obligation assumed or retained as of
the Distribution Date by the Snyder Group and the Healthcare Services Group are
appropriately reflected on the consolidated balance sheets as of the
Distribution Date of Snyder and Ventiv, respectively.
7.10 PRESERVATION OF RIGHTS TO AMEND OR TERMINATE PLANS. No provisions of this
Agreement, including the agreement of Snyder or Ventiv that it, or any member of
the Snyder Group or the Healthcare Services Group, respectively, will make a
contribution or payment to or under any Plan herein referred to for any period,
shall be construed as a limitation on the right of Snyder or Ventiv or any
member of the Snyder Group or the Healthcare Services Group to amend such Plan
or terminate its participation therein which Snyder or Ventiv or any member of
the Snyder Group or the Healthcare Services Group, respectively, would otherwise
have under the terms of such Plan or otherwise, and no provision of this
Agreement shall be construed to create a right in any employee or former
employee or beneficiary of such employee or former employee under a Plan which
such employee or former employee or beneficiary would not otherwise have under
the terms of the Plan itself.
7.11 REIMBURSEMENT; INDEMNIFICATION. Each of the parties hereto acknowledges
that the Snyder Group, on the one hand, and the Healthcare Services Group, on
the other hand, may incur costs and expenses (including contributions to Plans
and the payment of insurance premiums) arising from or related to any of the
Plans which are, as set forth in this Agreement, the responsibility of the other
party hereto. Accordingly, Snyder and Ventiv agree to reimburse each other, as
soon as practicable but in any event within thirty (30) days of receipt from the
other party of appropriate verification, for all such costs and expenses reduced
by the amount of any tax reduction or recovery of tax benefit realized by Snyder
or Ventiv, as the case may be, in respect of
28
<PAGE>
the corresponding payment made by it; provided, however, that notwithstanding
-----------------
anything in this Section 7.11 to the contrary, costs and expenses or other
recovery arising from any challenge by the U.S. Government to the allocation of
assets set forth in Section 7.01 shall not be subject to reimbursement, and
indemnification under this Agreement or the Distribution Agreement.
7.12 FURTHER TRANSFERS. Snyder and Ventiv recognize that there may be
Healthcare Services Individuals who will, after the Distribution Date, become
employed by Snyder and there may be Snyder Individuals who become employed,
after the Distribution Date, by Ventiv. If Snyder and Ventiv so agree with
respect to any such individuals, the assets and liabilities with respect to such
employees which are associated with the Plans and programs described in this
Agreement may be transferred and assumed in a manner consistent with this
Agreement. Any such transfers or assumptions will be considered to be governed
by the terms of this Agreement and shall not require the agreement of Snyder and
Ventiv if they occur within three (3) months of the Distribution Date.
7.13 OFFICERS AND EMPLOYEES.
(a) Officers and employees of either Group who are employed in the
Healthcare Services Business immediately prior to the Distribution Date
shall be officers and employees of the Healthcare Services Group
immediately following the Distribution Date; provided, however, that
--------------------------------------------------------
nothing herein shall give to any individual a right of employment, or
--------------
continued employment, by any member of the Healthcare Services Group.
(b) Except as otherwise agreed by the parties hereto, effective as of the
Distribution Date, (1) all officers or employees of the Snyder Group who
are acting as directors or officers of the Healthcare Services Group and
are not employed in the Healthcare Services Business shall resign from
such positions with the Healthcare Services Group and (2) all officers or
employees of the Healthcare Services Group who are acting as directors or
officers of the Snyder Group and are not employed in the Snyder Business
shall resign from such positions with the Snyder Group.
7.14 EMPLOYMENT AGREEMENTS. Prior to the Distribution Date, Snyder and Ventiv
shall use their best efforts to induce such individuals as they mutually agree
to enter into employment agreements with Ventiv on terms which are mutually
agreeable to Snyder and Ventiv; provided, however, that, except as otherwise
-------- -------
provided in this Agreement, Snyder shall have no obligation to make any payments
to such individuals to induce them to enter into such employment agreements.
7.15 OTHER LIABILITIES. As of the Distribution Date: (a) Ventiv shall assume
and be solely responsible for all Liabilities whatsoever of the Snyder Group
with respect to claims made by the Healthcare Services Individuals relating to
any employment-related
29
<PAGE>
Liability not otherwise expressly provided for in this Agreement, including
earned salary, wages, severance payments or other compensation and accrued
holiday, vacation, health, dental or retirement benefits, regardless of whether
such employment-related Liability was incurred before, on or after the
Distribution Date, and (b) Snyder shall retain all such Liabilities with respect
to (1) Snyder Individuals and (2) directors of Snyder who served as such prior
to the Distribution Date.
7.16 COMPLIANCE. Notwithstanding anything to the contrary in this Article VII,
to the extent any actions of the parties contemplated in this Article are
determined prior to Distribution to violate applicable law or result in
unintended tax liability for Snyder Individuals or Healthcare Services
Individuals, such action may be modified to avoid such violation of law or
unintended tax liability.
ARTICLE VIII
NO REPRESENTATIONS OR WARRANTIES; EXCEPTIONS
8.01 NO REPRESENTATIONS OR WARRANTIES; EXCEPTIONS. Ventiv understands and
agrees that no member of the Snyder Group is, in this Agreement or in any other
agreement or document, representing or warranting to Ventiv in any way as to the
Healthcare Services Assets, the Healthcare Services Liabilities, or the
Healthcare Services Business or as to any consents or approvals required in
connection with the consummation of the transactions contemplated by this
Agreement, it being agreed and understood that Ventiv shall take all of the
Healthcare Services Assets "as is, where is" and that, except as provided in
Section 5.01 hereof, Ventiv shall bear the economic and legal risk that
conveyances of the Healthcare Services Assets shall prove to be insufficient or
that the title of any member of the Healthcare Services Group to any Healthcare
Services Assets shall be other than good and marketable and free from
encumbrances.
ARTICLE IX
INSURANCE
9.01 INSURANCE POLICIES AND RIGHTS INCLUDED WITHIN HEALTHCARE SERVICES ASSETS.
Without limiting the generality of the definition of Healthcare Services Assets
set forth in Section 1.01 hereof, the Healthcare Services Assets shall include
(a) any and all rights of an insured party under each of the Snyder Policies,
including rights of indemnity and the right to be defended by or at the expense
of the insurer, with respect to all Healthcare Services Claims; provided,
---------
however, that nothing in this clause (a) shall be deemed to constitute (or to
- - - --------
reflect) the assignment of any of the Snyder Policies to Ventiv, and (b) the
Healthcare Services Policies. Ventiv shall be entitled to receive from Snyder
any Insurance Proceeds paid to any member of the Snyder Group with respect to
any third-party Healthcare Services Claim under any Snyder Policy.
30
<PAGE>
9.02 POST-DISTRIBUTION DATE CLAIMS. If, subsequent to the Distribution Date,
any Person shall assert a Healthcare Services Claim, then Snyder shall at the
time such Healthcare Services Claim is asserted be deemed to assign, without
need of further documentation, to Ventiv all of the Snyder Group's rights, if
any, as an insured party under the applicable Snyder Policy with respect to such
Healthcare Services Claim, including rights of indemnity and the right to be
defended by or at the expense of the insurer; provided, however, that nothing in
-----------------
this Section 9.02 shall be deemed to (1) constitute (or to reflect) the
assignment of any of the Snyder Policies to Ventiv or (2) affect the Snyder
indemnity set forth in Section 4.03 of this Agreement.
9.03 ADMINISTRATION AND RESERVES. Notwithstanding the provisions of Article IV
hereof, from and after the Distribution Date:
(a) Snyder shall be responsible for (1) Insurance Administration with
respect to the Snyder Policies and (2) Claims Administration with respect
to any Liabilities of Snyder; provided, however, that the retention of
-----------------
the Snyder Policies by Snyder is in no way intended to limit, inhibit or
preclude any right to insurance coverage for any Insured Claim of a named
insured under the Snyder Policies;
(b) Ventiv shall be responsible for (1) Insurance Administration with
respect to the Healthcare Services Policies, and (2) Claims
Administration with respect to any Liabilities of Ventiv; provided,
---------
however, that the retention of the Healthcare Services Policies by Ventiv
--------
is in no way intended to limit, inhibit or preclude any right to
insurance coverage for any Insured Claim of a named insured under the
Healthcare Services Policies;
(c) Snyder shall be entitled to reserves established by any member of
either Group, or the benefit of reserves held by any insurance carrier,
with respect to any Snyder Liabilities; and
(d) Ventiv shall be entitled to reserves established by any member of
either Group, or the benefit of reserves held by any insurance carrier,
with respect to any Healthcare Services Liabilities.
9.04 INSURANCE PREMIUMS. Ventiv shall pay premiums (retrospectively-rated or
otherwise) under the Snyder Policies with respect to Healthcare Services
Liabilities which are Insured Claims under the Snyder Policies. Snyder shall
have the right, but not the obligation, to pay premiums (retrospectively-rated
or otherwise) under the Snyder Policies with respect to Healthcare Services
Liabilities which are Insured Claims under the Snyder Policies to the extent
that Ventiv does not pay such premiums, whereupon Ventiv shall forthwith
reimburse Snyder for any premiums paid by Snyder with respect to such Healthcare
Services Liabilities.
31
<PAGE>
9.05 ALLOCATION OF INSURANCE PROCEEDS; COOPERATION. Insurance Proceeds received
with respect to claims, costs and expenses under the Insurance Policies shall be
paid to Snyder with respect to Snyder Liabilities which are Insured Claims under
the Snyder Policies and to Ventiv with respect to the Healthcare Services
Liabilities which are Insured Claims under the Snyder Policies. Payment of the
allocable portions of indemnity costs of Insurance Proceeds resulting from the
Liability Policies will be made to the appropriate party upon receipt from the
insurance carrier. In the event of the exhaustion of coverage under any Snyder
Policy, Snyder and Ventiv shall allocate Insurance Proceeds equitably based upon
the bona fide claims of the Snyder Group and the Healthcare Services Group,
respectively. The parties hereto agree to use their best efforts to cooperate
with respect to insurance matters.
9.06 REIMBURSEMENT OF EXPENSES. Ventiv shall (a) upon the request of Snyder,
reimburse the relevant insurer of the relevant third-party administrator, to the
extent required under any Insurance Policy or Service Agreement with respect to
any and all Healthcare Services Claims which are paid, settled, adjusted,
defended and/or otherwise handled by such insurer or third- party administrator
pursuant to the terms and conditions of such Insurance Policy or Service
Agreement and (b) to the extent the cost incurred exceeds internal charges made
by Snyder to Ventiv prior to the Distribution Date, pay and/or reimburse Snyder,
or such third party as Snyder may require, for any and all costs, premiums,
expenses, losses paid, attorneys' fees and/or charges incurred prior to the
Distribution Date by either Group or after the Distribution Date by the Snyder
Group arising directly or indirectly in connection with the payment, settlement,
adjustment, defense and/or handling of any such Healthcare Services Claim or
under the terms and conditions of any Insurance Policies or Service Agreements
(including any reimbursement paid by Snyder with respect to any such Healthcare
Services Claim to any insurer or third-party administrator pursuant to the terms
of any Insurance Policy or Service Agreement). Ventiv shall make any
reimbursement required by clause (a) of this Section 9.06 at the time required
by the relevant Insurance Policy or Service Agreement. Ventiv shall make any
reimbursement required by clause (b) of this Section 9.06, on a monthly basis.
9.07 INSURER INSOLVENCY. Snyder shall not be obligated to reimburse Ventiv for
any Healthcare Services Claim under any Insurance Policies where such Healthcare
Services Claim would have been paid by the insurer or other third party, but for
the insolvency of such insurer or other third party or the refusal by any
insurer or other third party to pay such Healthcare Services Claim.
9.08 LETTERS OF CREDIT. Ventiv shall post such letters of credit in favor of
such Persons as Snyder may reasonably request for any amounts due or reasonably
expected to
32
<PAGE>
come due under Section 9.06 hereof. Ventiv shall make reasonable efforts to
negotiate agreements with any and all insurers or third- party administrators
whereby Ventiv shall assume direct responsibility for any and all Liabilities
related to it under any Insurance Policies and/or Service Agreements and Snyder
shall provide reasonable assistance in this effort.
9.09 NO REDUCTION OF COVERAGE. Snyder shall take no action to eliminate or
materially reduce coverage under any Snyder Policy or Service Agreement for any
Healthcare Services Claim.
9.10 FUTURE INSURANCE COVERAGE. For a period of one (1) year following the
Distribution Date, Snyder shall assist Ventiv, to the extent reasonably
requested by Ventiv, with the efforts of the Healthcare Services Group to secure
alternative insurance coverage or claim handling services.
9.11 ASSISTANCE, WAIVER OF CONFLICT AND SHARED DEFENSE. Each of the parties
hereto agrees to provide reasonable assistance to the other parties hereto as
regards any dispute with any third party (including insurers, third- party
administrators and state guaranty funds) as to any matter related to the
Insurance Policies or Service Agreements, but only insofar as such dispute
arises out of the acts or omissions of any third party with respect to a
Healthcare Services Claim. In the event that Insured Claims of more than one
Group exist relating to the same occurrence, the parties hereto agree to defend
such Insured Claims jointly and to waive any conflict of interest necessary to
the conduct of such joint defense. Nothing in this Section 9.11 shall be
construed to limit or otherwise alter in any way the indemnity obligations of
the parties hereto, including those created by this Agreement or by operation of
law.
ARTICLE X
MISCELLANEOUS
10.01 CONDITIONS TO OBLIGATIONS.
(a) The obligations of the parties hereto to consummate the payment of
the Distribution are subject to the satisfaction of each of the
following conditions:
(1) The transactions contemplated by Sections 2.01, 2.02, 2.03,
2.05 and 2.06 shall have been consummated in all material
respects;
(2) The Ventiv Common Stock shall have been approved for listing
on the Nasdaq, subject to official notice of issuance;
(3) The Registration Statement shall have been filed with the
SEC and shall have become effective, and no stop order with
respect thereto shall
33
<PAGE>
be in effect;
(4) All authorizations, consents, approvals and clearances of all
federal, state, local and foreign governmental agencies required to
permit the valid consummation by the parties hereto of the
transactions contemplated by this Agreement shall have been
obtained; and no such authorization, consent, approval or clearance
shall contain any conditions which would have a material adverse
effect on (A) the Snyder Business or the Healthcare Services
Business, (B) the Assets, results of operations or financial
condition of the Snyder Group or the Healthcare Services Group, in
each case taken as a whole, or (C) the ability of Snyder or Ventiv
to perform its obligations under this Agreement; and all statutory
requirements for such valid consummation shall have been fulfilled;
(5) Snyder shall have provided the NYSE with the prior written
notice of the Record Date required by Rule 10b-17 of the Exchange
Act and the rules and regulations of the NYSE;
(6) No preliminary or permanent injunction or other order, decree
or ruling issued by a court of competent jurisdiction or by a
government, regulatory or administrative agency or commission, and
no statute, rule, regulation or executive order promulgated or
enacted by any governmental authority, shall be in effect preventing
the payment of the Distribution;
(7) The Distribution shall be payable in accordance with applicable
law;
(8) All necessary consents, waivers or amendments to each bank
credit agreement, debt security or other financing facility to which
any member of the Snyder Group or the Healthcare Services Group is a
party or by which any such member is bound shall have been obtained,
or each such agreement, security or facility shall have been
refinanced, in each case on terms satisfactory to Snyder and Ventiv
and to the extent necessary to permit the Distribution to be
consummated without any material breach of the terms of such
agreement, security or facility;
(9) Snyder shall have received an opinion from each of Weil,
Gotshal & Manges LLP, counsel to Snyder, and Arthur Andersen LLP,
Snyder's independent public accountants, that, for federal income
tax purposes, the Distribution should be tax-free to Snyder and to
stockholders of Snyder Common Stock;
(10) One or more of members of the Healthcare Services Group shall
have been substituted, as of the Distribution Date, in all respects
for the
34
<PAGE>
Snyder Group in respect of all Healthcare Services Support
Agreements.
(b) Any determination made by the Board of Directors of Snyder in
good faith prior to the Distribution Date concerning the
satisfaction or waiver of any or all of the conditions set forth in
Section 10.01(a) shall be conclusive.
10.02 COMPLETE AGREEMENT. This Agreement, the Exhibits and Schedules hereto and
the agreements and other documents referred to herein shall constitute the
entire agreement between the parties hereto with respect to the subject matter
hereof and shall supersede all previous negotiations, commitments and writings
with respect to such subject matter.
10.03 EXPENSES. Except as otherwise provided in this Agreement and the Other
Agreements, all costs and expenses of any party hereto in connection with the
preparation, execution, delivery and implementation of this Agreement and with
the consummation of the transactions contemplated by this Agreement shall be
paid by the party for whose benefit such costs and expenses are incurred, with
any costs and expenses that cannot be allocated on the foregoing basis to be
divided equally among the parties hereto.
10.04 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York (other than the laws regarding
choice of laws and conflicts of laws) as to all matters, including matters of
validity, construction, effect, performance and remedies.
10.05 NOTICES. All notices requests, claims, demands and other communications
hereunder (collectively, "Notices") shall be in writing and shall be given (and
shall be deemed to have been duly given upon receipt) by delivery in person, by
cable, telegram, telex or other standard form of telecommunications, or by
registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
If to Snyder:
Snyder Communications, Inc.
Two Democracy Center
6903 Rockledge Drive, 15th Floor
Bethesda, Maryland 20817
Attention: Chief Executive Officer
35
<PAGE>
If to Ventiv:
Ventiv Health, Inc.
200 Cottontail Lane
Vantage Court North
Somerset, New Jersey 08873
Attention: Chief Executive Officer
or to such other address as any party hereto may have furnished to the
other parties by a notice in writing in accordance with this Section 10.05.
Copies of all notices, requests, claims, demands and other communications
hereunder shall also be given to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Norman D. Chirite, Esq.
10.06 AMENDMENT AND MODIFICATION. This Agreement may be amended, modified or
supplemented only by a written agreement signed by all of the parties hereto.
10.07 SUCCESSORS AND ASSIGNS; NO THIRD-PARTY BENEFICIARIES. This Agreement and
all of the provisions hereof shall be binding upon and inure to the benefit of
the parties hereto and their successors and permitted assigns, but neither this
Agreement nor any of the rights, interests and obligations hereunder shall be
assigned by any party hereto without the prior written consent of each of the
other parties (which consent shall not be unreasonably withheld). Except for the
provisions of Sections 4.03 and 4.04 hereof relating to Indemnities, which are
also for the benefit of the Indemnitees, this Agreement is solely for the
benefit of the parties hereto and their Subsidiaries and Affiliates and is not
intended to confer upon any other Persons any rights or remedies hereunder.
10.08 COUNTERPARTS. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
10.09 INTERPRETATION. The Article and Section headings contained in this
Agreement are solely for the purpose of reference, are not part of the agreement
of the parties hereto and shall not in any way affect the meaning or
interpretation of this Agreement.
10.10 LEGAL ENFORCEABILITY. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
36
<PAGE>
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof. Any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. Each party acknowledges
that money damages would be an inadequate remedy for any breach of the
provisions of this Agreement and agrees that the obligations of the parties
hereunder shall be specifically enforceable.
10.11 REFERENCES; CONSTRUCTION. References to any "Article", "Exhibit",
"Schedule" or "Section", without more, are to Appendices, Articles, Exhibits,
Schedules and Sections to or of this Agreement. Unless otherwise expressly
stated, clauses beginning with the term "including" set forth examples only and
in no way limit the generality of the matters thus exemplified.
10.12 TERMINATION. Notwithstanding any provision hereof this Agreement may be
terminated and the Distribution abandoned at any time prior to the Distribution
Date by and in the sole discretion of the Board of Directors of Snyder without
the approval of any other party thereto or of Snyder's stockholders. In the
event of such termination, no party hereto shall have any Liability to any
Person by reason of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first above written.
SNYDER COMMUNICATIONS, INC.,
a Delaware corporation
By:
----------------------------
Name:
Title:
VENTIV HEALTH, INC.,
a Delaware corporation
By:
----------------------------
Name:
Title:
37
<PAGE>
Exhibit 10.2
FORM OF TAX SHARING AGREEMENT
TAX SHARING AGREEMENT (the "Agreement") dated as of ___________, 1999
---------
by and among SNYDER COMMUNICATIONS, INC., a Delaware corporation ("Snyder"), and
------
VENTIV HEALTH, INC., a Delaware corporation and a wholly owned subsidiary of
Snyder ("Ventiv").
------
W I T N E S S E T H
-------------------
WHEREAS Snyder and its subsidiaries are currently members of the
Snyder Consolidated Group (as defined herein);
WHEREAS the Board of Directors of Snyder has determined that the
interests of Snyder's businesses would be best served by distributing to Snyder
shareholders, Ventiv's healthcare businesses;
WHEREAS Snyder will undertake a restructuring (the "Restructuring")
following which Snyder will distribute all the shares of Ventiv common stock
held by Snyder, on a pro rata basis, to the holders of the common stock of
Snyder (the "Distribution");
WHEREAS, the parties intend that for federal income tax purposes
certain aspects of the Restructuring and the Distribution shall qualify as tax-
free transactions pursuant to Sections 332, 351, 355 and 368 of the Code (as
defined herein);
WHEREAS, the parties wish (i) to provide for the payment of tax
liabilities and entitlement to refunds thereof, allocate responsibility for, and
cooperation in, the filing of Tax Returns and provide for certain other matters
relating to Taxes (as defined herein) and (ii) to set forth certain
representations, warranties, covenants and indemnities relating to the
preservation of the tax-free status of the Restructuring and the Distribution.
NOW, THEREFORE, in consideration of the mutual promises and
undertakings contained herein, the parties agree as follows:
1. Definitions.
------------
(a) General. For purposes of this Agreement, the following terms
-------
shall have the meanings set forth below:
(i) "Agreement" shall have the meaning set forth in the
---------
preamble to this Agreement.
(ii) "Code" shall mean the Internal Revenue Code of 1986, as
----
amended.
<PAGE>
(iii) "Combined Return" shall mean a consolidated, combined
---------------
or unitary income Tax Return that includes one or more members of the Snyder
Subgroup and one or more members of the Ventiv Subgroup.
(iv) "Distribution" shall have the meaning set forth in the
------------
recitals to this Agreement.
(v) "Distribution Date" shall mean the date on which the
-----------------
Distribution occurs.
(vi) "Indemnified Party" shall mean any Person which is
-----------------
seeking indemnification from an Indemnifying Party pursuant to the provisions of
this Agreement.
(vii) "Indemnifying Party" shall mean any Person from which
------------------
Distribution occurs. Party is seeking indemnification pursuant to the provisions
of this Agreement.
(viii) "Independent Accounting Firm" shall mean a nationally
---------------------------
recognized independent accounting firm, jointly selected by Snyder and Ventiv.
(ix) "Overpayment Rate" shall mean the annual rate of interest
----------------
specified in Section 6621(a)(1) of the Code (or similar provision of state,
local or foreign tax law, as applicable) for overpayments of Tax.
(x) "Person" shall mean and includes any individual,
------
partnership, joint venture, limited liability company, corporation, association,
joint stock company, trust, unincorporated organization or similar entity.
(xi) "Post-Distribution Taxable Period" shall mean a taxable
--------------------------------
period that begins after the Distribution Date.
(xii) "Pre-Distribution Taxable Period" shall mean a taxable
-------------------------------
period that ends on or before the Distribution Date.
(xiii) "Present Value Benefit" shall mean the present value
---------------------
(based on a discount rate equal to the short-term applicable federal rate as
determined under Section 1274(d) of the Code at the time of determination, and
assuming that the Indemnified Party will be liable for Taxes at all relevant
times at the maximum marginal rates) of any income tax benefit.
(xiv) "Proceeding" shall mean any audit or other examination,
----------
or any judicial or administrative proceeding, relating to liability for or
refunds or adjustments with respect to Taxes.
(xv) "Refund" shall mean any refund of Taxes, including any
------
reduction in liability for such Taxes by means of a credit, offset or otherwise.
<PAGE>
(xvi) "Restructuring" shall have the meaning set forth in the
-------------
recitals to this Agreement.
(xvii) "Snyder" shall have the meaning set forth in the
------
preamble to this Agreement.
(xviii) "Snyder Consolidated Group" shall mean the affiliated
-------------------------
group of corporations, within the meaning of Section 1504(a) of the Code, of
which Snyder is the common parent, and any member of such group.
(xix) "Snyder Business" shall mean all businesses, operations,
---------------
assets, and liabilities of any member of the Snyder Consolidated Group other
than those businesses, operations, assets and liabilities that comprise the
Ventiv Business.
(xx) "Snyder Business Tax Liabilities" shall mean all Tax
-------------------------------
Liabilities other than Ventiv Business Tax Liabilities.
(xxi) "Snyder Subgroup" shall mean each member of the Snyder
---------------
Consolidated Group other than any member of the Ventiv Subgroup.
(xxii) "Straddle Period" shall mean a taxable period that
---------------
includes, but does not end on, the Distribution Date.
(xxiii) "Tax" or "Taxes" shall mean all taxes, charges, fees,
--- -----
imposts, levies or other assessments, including, without limitation, all net
income, gross receipts, capital, sales, use, gains, ad valorem, value added,
transfer, franchise, profits, inventory, capital stock, license, withholding,
payroll, employment, social security, unemployment, excise, severance, stamp,
occupation, property and estimated taxes, customs duties, fees, assessments and
charges of any kind whatsoever, together with any interest and any penalties,
fines, additions to tax or additional amounts imposed by any taxing authority
(domestic or foreign) and shall include any transferee liability in respect of
Taxes.
(xxiv) "Tax Liabilities" shall mean all liabilities for Taxes.
---------------
(xxv) "Tax Returns" shall mean all reports, returns,
-----------
declarations, forms and statements filed or required to be filed with respect to
Taxes, including attachments thereto and amendments thereof.
(xxvi) "Transaction Related Proceeding" shall mean a
------------------------------
Proceeding, to the extent it relates to the qualification of the Restructuring
and the Distribution as tax-free transactions pursuant to Sections 332, 351, 355
and 368 of the Code.
(xxvii) "Transaction Tax Returns" shall mean all Tax Returns
-----------------------
filed or required to be filed with respect to Transaction Taxes.
(xxviii) "Transaction Taxes" shall mean all sales, use,
-----------------
license, transfer, stamp, and other similar taxes or fees (including, without
limitation, all real
<PAGE>
estate, patent, copyright, and trademark transfer taxes and recording fees)
incurred in connection with the Restructuring or Distribution.
(xxix) "Ventiv" shall have the meaning set forth in the
------
preamble to this Agreement.
(xxx) "Ventiv Business" shall mean all businesses, operations,
---------------
assets and liabilities of any member of the Snyder Consolidated Group that
comprise the pharmaceutical and life sciences businesses.
(xxxi) "Ventiv Business Tax Liabilities" shall mean all Tax
-------------------------------
Liabilities arising out of or attributable to the Ventiv Business, including,
without limitation, Tax Liabilities arising out of the acquisition of any Ventiv
Business.
(xxxii) "Ventiv Subgroup" shall mean Ventiv and its present
---------------
and future direct and indirect subsidiaries.
(b) Other Definitional Provisions.
(i) The words "hereof", "herein", and "hereunder" and words
of similar import, when used in this Agreement, shall refer to this Agreement as
a whole and not to any particular provision of this Agreement.
(ii) The terms defined in the singular shall have a comparable
meaning when used in the plural, and vice versa.
2. Certain Operating Conventions.
------------------------------
(a) Termination of Taxable Years. For federal income tax purposes,
----------------------------
the taxable year of each member of the Ventiv Subgroup shall end as of the close
of the Distribution Date. Snyder and Ventiv shall, unless prohibited by
applicable law, take all action necessary or appropriate to close the taxable
period of each member of the Ventiv Subgroup for all Tax purposes as of the
close of the Distribution Date.
3. Filing of Tax Returns; Payment of Taxes.
----------------------------------------
(a) Tax Returns Required to Be Filed Prior to Distribution Date.
-----------------------------------------------------------
Snyder shall file or cause to be filed all Tax Returns of Snyder and any member
of the Snyder Consolidated Group required to be filed (after giving effect to
any valid extension of time in which to make such filings) prior to the
Distribution Date and shall pay or cause to be paid all Tax Liabilities due with
respect to such Tax Returns.
(b) Tax Returns for Pre-Distribution Taxable Periods and Straddle
-------------------------------------------------------------
Periods. Snyder shall prepare or cause to be prepared, for Pre-Distribution
- - - -------
Taxable Periods and Straddle Periods, all (1) Combined Returns and (2) Tax
Returns required to be filed on a separate return basis by any member of the
Snyder Consolidated Group, in each case, which Tax Returns are not required to
be (after giving effect to any valid extensions), and are not, filed on or prior
to the Distribution Date. Snyder shall pay or
<PAGE>
cause to be paid all Snyder Business Tax Liabilities due with respect to Tax
Returns described in (1) and (2), and Ventiv shall pay or cause to be paid all
Ventiv Business Tax Liabilities due with respect to such Tax Returns. Snyder
shall provide Ventiv with a copy of any such Tax Returns which reflect Ventiv
Business Tax Liabilities at least twenty (20) days prior to the due date for
filing such Tax Returns. Ventiv shall have the right to review any such Tax
Returns and Ventiv and Snyder shall attempt in good faith mutually to resolve
any disagreements regarding such Tax Returns. With respect to any Tax Returns
described in (2) relating to a member of the Ventiv Subgroup, Snyder shall
timely file such Tax Returns with the appropriate Tax authority pursuant to a
power of attorney executed and delivered to Snyder by Ventiv pursuant to Section
9(d) hereof.
(c) Tax Returns for Post-Distribution Taxable Periods. Ventiv shall be
-------------------------------------------------
responsible for (1) preparing and filing or causing to be prepared and filed all
Tax Returns required to be filed by any member of the Ventiv Subgroup for any
Post-Distribution Taxable Period and (2) paying or causing to be paid any Tax
Liability due with respect to such Tax Returns. Snyder shall be responsible for
(1) preparing and filing or causing to be prepared and filed all Tax Returns
required to be filed by any member of the Snyder Subgroup for any Post-
Distribution Taxable Period and (2) paying or causing to be paid any Tax
Liability due with respect to such Tax Returns.
(d) Transaction Taxes. Each of Snyder and Ventiv shall be
-----------------
responsible for preparing and filing or causing to be prepared and filed all
Transaction Tax Returns required to be filed by it and each of Snyder and Ventiv
shall pay or cause to be paid all Transaction Taxes required to be paid by it.
4. Indemnification for Taxes.
--------------------------
(a) Indemnification by Ventiv. Ventiv shall pay, and shall indemnify
-------------------------
and hold each member of the Snyder Subgroup and their respective shareholders,
directors, officers, employees, affiliates, agents and successors harmless from
and against, without duplication, (1) all Ventiv Business Tax Liabilities, (2)
all Tax Liabilities which Ventiv is required to pay under Section 3 hereof, (3)
all Tax Liabilities incurred by any member of the Snyder Subgroup by reason of
the breach by Ventiv of any of its covenants hereunder, and (4) any costs and
expenses related to the foregoing (including, without limitation, reasonable
attorneys' fees and expenses). Any payments made pursuant to this Section 4(a)
shall be on an after-Tax basis.
(b) Liability of Ventiv Subgroup for Undertaking Certain Transactions.
-----------------------------------------------------------------
Notwithstanding any other provision of this Agreement to the contrary, if, as a
result of any event, action, or failure to act wholly or partially within the
control of any member of the Ventiv Subgroup including, without limitation, any
event, action or failure to act that results in a breach of any representation
or covenant or in the inaccuracy of any statement set forth in Exhibit A hereto,
or any other event related to the acquisition of Ventiv stock any Taxes are
imposed on any member of the Snyder Subgroup with respect to any action taken
pursuant to the Restructuring or the Distribution and the transactions related
to the Restructuring or the Distribution, including without limitation, the
transactions that were intended to be tax-free under
<PAGE>
Sections 332, 351, 355 and 368 of the Code, then Ventiv shall indemnify and hold
harmless each member of the Snyder Subgroup with respect to any such Taxes on an
after-tax basis.
(c) Indemnification by Snyder. Snyder shall pay, and shall indemnify
-------------------------
and hold each member of the Ventiv Subgroup and their respective shareholders,
directors, officers, employees, affiliates, agents and successors harmless from
and against, without duplication, (1) all Snyder Business Tax Liabilities, (2)
all Tax Liabilities which Snyder is required to pay under Section 3 hereof, (3)
all Tax Liabilities incurred by any member of the Ventiv Subgroup by reason of
the breach by Snyder of any of its covenants hereunder, (4) except as set forth
in Section 4(b) hereof, all Tax Liabilities imposed on any member of the Ventiv
Subgroup as a result of any of the transactions related to the Restructuring or
the Distribution being determined to be taxable transactions and (5) any costs
and expenses related to the foregoing (including, without limitation, reasonable
attorneys' fees and expenses). Any payments made pursuant to this Section 4(c)
shall be on an after-Tax basis.
(d) Payment. If the Indemnifying Party is required to indemnify the
-------
Indemnified Party pursuant to this Section 4, the Indemnified Party shall submit
its calculations of the amount required to be paid pursuant to this Section 4
(which shall be net of the Present Value Benefit realized or realizable by the
Indemnified Party), showing such calculations in sufficient detail so as to
permit the Indemnifying Party to understand the calculations. Subject to the
following sentence, the Indemnifying Party shall pay to the Indemnified Party,
no later than 10 days after the Indemnifying Party receives the Indemnified
Party's calculations, the amount that the Indemnifying Party is required to pay
the Indemnified Party under this Section 4. If the Indemnifying Party disagrees
with such calculations, it must notify the Indemnified Party of its disagreement
in writing within 10 days of receiving such calculations. Any dispute regarding
such calculations shall be resolved in accordance with Section 8 of this
Agreement.
(e) Time Limits. Any claim under this Section 4 with respect to a Tax
-----------
Liability must be made no later than 30 days after the expiration of the
applicable statute of limitations for assessment of such Tax Liability.
(f) No Duplication. No payments pursuant to this Section 4 shall be
--------------
duplicative of any payments under the Distribution Agreement entered into as of
the date hereof or vice versa. To the extent that, without regard to this
---- -----
sentence, any Person has a right to be indemnified under both this Agreement and
such other agreement with respect to any Tax Liability, such Person's
indemnification right with respect to such Tax Liability shall be governed
exclusively by this Agreement.
5. Carrybacks and Carryovers. In the event that any member of the
-------------------------
Ventiv Subgroup realizes any loss, credit or other Tax attribute in any Post-
Distribution Taxable Period, such member may elect to carry back such loss,
credit or Tax attribute to a prior Snyder Consolidated Group taxable year.
Snyder shall cooperate with Ventiv in seeking from the appropriate taxing
authority any Refund that reasonably would result from such carryback. Ventiv
shall be entitled to any Refund (or other Tax benefit)
<PAGE>
realized by a member of the Snyder Subgroup (including any interest thereon
received from such taxing authority) attributable to such carryback, within 10
days after such Refund (or other benefit) is received; provided, however, that
-------- -------
Snyder shall be entitled to Refunds that result from the carryback of a loss,
credit or other Tax attribute by a member of the Snyder Subgroup from a Post-
Distribution Taxable Period to a Pre-Distribution Taxable Period. Except as
otherwise provided by applicable law, if a member of the Ventiv Subgroup and a
member of the Snyder Subgroup both may carry back a loss or other Tax attribute
to the same Snyder Consolidated Group taxable year, any Refund (or other Tax
benefit) resulting therefrom shall be allocated between Ventiv and Snyder
proportionately based on the relative amounts of the Refunds (or other Tax
benefits) to which the Ventiv Subgroup and the Snyder Subgroup, respectively,
would have been entitled had its carrybacks been the only carrybacks to such
taxable year. Similarly, Ventiv shall be entitled to the benefit, in Post-
Distribution Taxable Periods, of any net operating loss, capital loss, unused
investment or foreign tax credit or other Tax attribute arising in a Pre-
Distribution Taxable Period (including with respect to an affiliated group of
which Ventiv was a member) and properly apportioned to a member of the Ventiv
Subgroup in accordance with Treasury Regulation Sections 1.1502-21 and 1.1502-22
or other applicable law.
6. Refunds of Taxes. Except as provided in Section 5 above, Ventiv shall
----------------
be entitled to all Refunds relating to Taxes (plus any interest thereon received
with respect thereto from the applicable taxing authority) for which Ventiv is
or may be liable pursuant to the provisions of Sections 3 and 4 of this
Agreement, and Snyder shall be entitled to all Refunds relating to Taxes (plus
any interest thereon received with respect thereto from the applicable taxing
authority) for which Snyder is or may be liable pursuant to the provisions of
Sections 3 and 4 of this Agreement. A party receiving a Refund to which another
party is entitled pursuant to this Agreement shall pay the amount to which such
other party is entitled within 10 days after the receipt of the Refund (plus any
interest thereon received with respect thereto from the applicable taxing
authority less any Taxes payable with respect to such Refund or credit).
7. Cooperation; Maintenance and Retention of Records. Snyder and Ventiv
-------------------------------------------------
shall, and shall cause the members of the Snyder Subgroup and the Ventiv
Subgroup, respectively, to provide the requesting party with such assistance and
documents as may be reasonably requested by such party in connection with (i)
the preparation of any Tax Return, (ii) the conduct of any Proceeding, (iii) any
matter relating to Taxes of any member of the Snyder Consolidated Group, the
Snyder Subgroup or the Ventiv Subgroup and (iv) any other matter that is a
subject of this Agreement, and the requesting party shall pay any reasonable
out-of-pocket expenses incurred in connection therewith. Snyder and Ventiv shall
retain or cause to be retained all Tax Returns, schedules and workpapers, and
all material records or other documents relating thereto, until the expiration
of the statute of limitations (including any waivers or extensions thereof) of
the taxable years to which such Tax Returns and other documents relate or until
the expiration of any additional period that any party reasonably requests, in
writing, with respect to specific material records or documents. A party
intending to destroy any material records or documents shall provide the other
party with reasonable advance notice and the opportunity to copy or take
possession of such records and
<PAGE>
documents. The parties hereto will notify each other in writing of any waivers
or extensions of the applicable statute of limitations that may affect the
period for which the foregoing records or other documents must be retained.
8. Disputes. If the parties disagree as to the amount of any payment to be
--------
made under, or any other matter arising out of, this Agreement, the parties
shall attempt in good faith to resolve such dispute, and any agreed upon amount
shall be paid to the appropriate party. If such dispute is not resolved within
15 days or such other time period as may be set forth in this Agreement, the
parties shall jointly retain the Independent Accounting Firm to resolve the
dispute. The fees of the Independent Accounting Firm shall be borne equally by
Ventiv and Snyder, and the decision of such Independent Accounting Firm shall be
final and binding on all parties. Following the decision of the Independent
Accounting Firm, the parties shall each take or cause to be taken any action
that is necessary or appropriate to implement such decision of the Independent
Accounting Firm, including, without limitation, the prompt payment of
underpayments or overpayments, with interest calculated on such overpayments and
underpayments at the Overpayment Rate from the date such payment was due through
the date such underpayment or overpayment is paid or refunded.
9. Proceedings.
------------
(a) Notification.
-------------
(i) Snyder shall, promptly upon receipt of notice thereof by
any member of the Snyder Subgroup, notify Ventiv in writing of any communication
with respect to any pending or threatened Proceeding in connection with a Tax
Liability (or an issue related thereto) for which Ventiv may be responsible
pursuant to this Agreement. Snyder shall include with such notification a true,
correct and complete copy of any written communication, and an accurate and
complete written summary of any oral communication, so received by a member of
the Snyder Subgroup. The failure of Snyder timely to forward such notification
in accordance with the immediately preceding sentence shall not relieve Ventiv
of its obligation to pay such Tax Liability or indemnify Snyder therefor, except
to the extent that the failure timely to forward such notification prejudices
the ability of Ventiv to contest such Tax Liability or increases the amount of
such Tax Liability.
(ii) Ventiv shall, promptly upon receipt of notice thereof by
any member of the Ventiv Subgroup, notify Snyder in writing of any communication
with respect to any pending or threatened Proceeding in connection with a Tax
Liability (or an issue related thereto) for which Snyder may be responsible
pursuant to this Agreement. Ventiv shall include with such notification a true,
correct and complete copy of any written communication, and an accurate and
complete written summary of any oral communication, so received by a member of
the Ventiv Subgroup. The failure of Ventiv timely to forward such notification
in accordance with the immediately preceding sentence shall not relieve Snyder
of its obligation to pay such Tax Liability or indemnify Ventiv therefor, except
to the extent that the failure timely to forward such notification
<PAGE>
prejudices the ability of Snyder to contest such Tax Liability or increases the
amount of such Tax Liability.
(b) Pre-Distribution Taxable Periods, Post-Distribution Taxable
-----------------------------------------------------------
Periods and Straddle Periods. Snyder (or such member of the Snyder Subgroup
- - - ----------------------------
as Snyder shall designate) shall have the sole right to represent its interests
in any Proceeding relating to Snyder Business Tax Liabilities and to employ
counsel of its choice at its expense. Ventiv (or such member of the Ventiv
Subgroup as Ventiv shall designate) shall have the sole right to represent its
interests in any Proceeding relating to Ventiv Business Tax Liabilities and to
employ counsel of its choice at its expense. Snyder and Ventiv shall jointly
represent their respective interests in any Proceeding relating to both Snyder
Business Tax Liabilities and Ventiv Business Tax Liabilities.
(c) Transaction-Related Proceedings. Snyder and Ventiv shall jointly
-------------------------------
represent the interests of the Snyder Consolidated Group, the Ventiv Subgroup
and the Snyder Subgroup in any Proceeding relating to Transaction Taxes, or any
Transaction-Related Proceeding for which Ventiv has acknowledged its obligation
to indemnify Snyder pursuant to Section 4(b) hereof. Except as set forth in the
preceding sentence, Snyder shall have the sole right to represent the interests
of the Snyder Consolidated Group, the Ventiv Subgroup and the Snyder Subgroup in
any Transaction-Related Proceeding and to employ counsel of its choice at its
expense.
(d) Power of Attorney. Each member of the Ventiv Subgroup shall
-----------------
execute and deliver to Snyder (or such member of the Snyder Subgroup as Snyder
shall designate) any power of attorney or other document reasonably requested by
Snyder (or such designee) in connection with the filing of Tax Returns as
described in Section 3(b) hereof or the representation by Snyder of the
interests of the Ventiv Subgroup in any Transaction-Related Proceeding as
described in Section 9(c) hereof.
10. Payments.
---------
(a) Interest; Method of Payment. Any payment required by this
---------------------------
Agreement that is not made on or before the date provided hereunder shall bear
interest after such date at the Overpayment Rate. All payments made pursuant to
this Agreement shall be made in immediately available funds.
(b) Characterization of Payments. For all Tax purposes, the parties
----------------------------
hereto agree to treat, and to cause their respective affiliates to treat, (1)
any payment required by this Agreement as either a contribution by Snyder to
Ventiv or a distribution by Ventiv to Snyder, as the case may be, occurring
immediately prior to the Distribution and (2) any payment of interest or non-
federal Taxes by or to a taxing authority as taxable or deductible, as the case
may be, to the party entitled under this Agreement to retain such payment or
required under this Agreement to make such payment, in either case except as
otherwise mandated by applicable law.
11. Certain Covenants.
-----------------
<PAGE>
(a) Snyder and the Snyder Subgroup.
------------------------------
(i) Snyder shall comply and shall cause each member of the
Snyder Subgroup to comply with and otherwise not take action inconsistent with
each representation, statement and covenant set forth on Exhibit A hereto; and
(ii) until two years after the Distribution Date, Snyder will
remain in the active conduct of a trade or business, as defined in Section
355(b) of the Code.
(b) Ventiv and the Ventiv Subgroup.
------------------------------
(i) Ventiv shall comply and shall cause each member of the
Ventiv Subgroup to comply with and otherwise not take action inconsistent with
each representation, statement and covenant set forth on Exhibit A hereto; and
(ii) until two years after the Distribution Date, Ventiv will
remain in the active conduct of a trade or business, as defined in Section
355(b) of the Code.
12. Termination of Prior Tax Sharing Agreements. This Agreement shall take
-------------------------------------------
effect on the Distribution Date and shall replace all other agreements, whether
or not written, in respect of any Taxes between or among any members of the
Snyder Subgroup on the one hand and the Ventiv Subgroup on the other. All such
replaced agreements shall be cancelled as of the Distribution Date to the extent
they relate to any members of the Ventiv Subgroup, and any rights or obligations
of any members of the Snyder Subgroup or the Ventiv Subgroup existing thereunder
thereby shall be fully and finally settled without any payment by any party
thereto.
13. Amendment. This Agreement may be amended, modified or supplemented
---------
only by a written agreement signed by all of the parties hereto.
14. Governing Law. This Agreement shall be governed by, and construed in
-------------
accordance with, the laws of the State of New York, without reference to choice
of law principles, including matters of construction, validity and performance.
15. Notices. Notices, requests, permissions, waivers, and other
-------
communications hereunder shall be in writing and shall be deemed to have been
duly given if signed by the respective persons giving them (in the case of any
corporation the signature shall be by an officer thereof) and delivered by hand
or by telecopy or on the date of receipt indicated on the return receipt if
mailed (registered or certified, return receipt requested, properly addressed
and postage prepaid):
If to Snyder, to:
Snyder Communications, Inc.
Two Democracy Center
6903 Rockledge Drive, 15th floor
<PAGE>
Bethesda, Maryland 20817
Attention: Chief Executive Officer
If to Ventiv, to:
Ventiv Health, Inc.
200 Cottontail Lane
Vantage Court North
Somerset, New Jersey 08873
Attention: Chief Executive Officer
or to such other address as either party hereto may have furnished to the other
party by a notice in writing in accordance with this Section 15. Copies of all
notices, requests, claims, demands and other communications hereunder shall also
be given to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Norman D. Chirite, Esq.
16. Entire Agreement. This Agreement contains the entire understanding
----------------
of the parties hereto with respect to the subject matter contained herein, and
supersedes and cancels all prior agreements, negotiations, correspondence,
undertakings and communications of the parties, oral or written, respecting such
subject matter.
17. Headings; References. The article, section and paragraph headings
--------------------
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. All references
herein to "Sections" shall be deemed to be references to Sections hereof unless
otherwise indicated.
18. Counterparts. This Agreement may be executed in one or more
------------
counterparts and each counterpart shall be deemed to be an original, but all of
which shall constitute one and the same original.
19. Parties in Interest; Assignment; Successor. Neither this Agreement
------------------------------------------
nor any of the rights, interest or obligations hereunder shall be assigned by
either of the parties hereto without the prior written consent of the other
party. Subject to the preceding sentence, this Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. Nothing in this Agreement, express or implied,
is intended to confer upon any other Person, other than members of the Ventiv
Subgroup and the Snyder Subgroup, any rights or remedies under or by reason of
this Agreement.
20. Severability; Enforcement. The invalidity of any portion hereof shall
-------------------------
not affect the validity, force or effect of the remaining portions hereof. If it
is ever held that any restriction hereunder is too broad to permit enforcement
of such restriction to its
<PAGE>
fullest extent, each party agrees that a court of competent jurisdiction may
enforce such restriction to the maximum extent permitted by law, and each party
hereby consents and agrees that such scope may be judicially modified
accordingly in any proceeding brought to enforce such restriction.
21. Effective Date. This Agreement shall become effective only upon the
--------------
occurrence of the Distribution Date.
IN WITNESS WHEREOF, each of the parties has caused this Tax Sharing
Agreement to be executed on its behalf by its officers thereunto duly
authorized, all as of the day and year first written above.
SNYDER COMMUNICATIONS, INC.
By:______________________________
Name:
Title:
VENTIV HEALTH, INC.
By:______________________________
Name:
Title:
<PAGE>
Exhibit 10.3
INTERIM SERVICES AGREEMENT
This Interim Services Agreement is made as of the _____ day of September, 1999,
between Snyder Communications, Inc., a Delaware corporation ("Snyder"), and
Ventiv Health, Inc., a Delaware corporation ("Ventiv"). Capitalized terms used
herein but not otherwise defined herein shall have the meanings ascribed to such
terms in that certain Distribution Agreement, dated as of September__, 1999, by
and between Snyder and Ventiv (the "Distribution Agreement").
In consideration of the premises and mutual covenants herein contained and
intending to be legally bound thereby, the parties hereto agree as follows:
1. PURPOSES.
1.1 Pursuant to the Distribution Agreement and certain other agreements to be
executed among Snyder, Ventiv and certain Subsidiaries thereof, Snyder will
transfer its healthcare services business to Ventiv, and thereafter, Snyder will
distribute to holders of Snyder Common Stock on the Distribution Date one share
of Common Stock of Ventiv for every three shares of Snyder Common Stock held by
such holders of record on the Record Date. Snyder will distribute in the
Distribution all of the issued and outstanding shares of capital stock of
Ventiv, and thereafter, Ventiv will be a corporation independent of Snyder.
1.2 Prior to the Distribution Date, Snyder provided certain services to and on
behalf of its healthcare services business.
1.3 After the Distribution Date, Ventiv will require for a limited term that
Snyder provides certain administrative and support services to Ventiv and its
Subsidiaries until Ventiv and its Subsidiaries are able to otherwise contract or
arrange for such services.
2. TERM. Subject to the provisions of Section 5 hereof, this Agreement shall
be effective on the Distribution Date and shall continue until the earlier of
(i) one (1) year following the Distribution Date, and (ii) termination of all
Services (as herein defined) pursuant to Section 5 of this Agreement ("Term").
3. AGREEMENT TO PERFORM SELECTED SERVICES.
3.1 Subject to all of the terms and conditions hereof, Snyder and Ventiv hereby
agree that Snyder shall make available to Ventiv and its Subsidiaries
during the Term those services described on Schedule A hereto (the "Services").
- - - -------------------------------------------------------------------------------
Services heretofore provided by Snyder to Ventiv will be provided on a basis
consistent with prior practice. Services to be provided hereunder that were not
heretofore provided by Snyder shall be provided on a reasonably timely basis.
Charges for Services shall be as set forth in Section 4 hereof.
3.2 If Ventiv elects to utilize any available Services not previously utilized
prior to the Distribution Date, it shall notify Snyder in writing of those
Services it elects to use. If no such notice is given by the Distribution Date,
Snyder shall have no further obligation to furnish such new Services.
4. CHARGES FOR SERVICES; PAYMENT.
4.1 It is the intention of the parties hereto that the charges for Services
requested and provided hereunder shall consist of fully allocated direct and
indirect costs of providing Services but without any profit to Snyder.
4.2 Snyder shall bill Ventiv monthly for all charges for Services provided
hereunder, which bill shall be accompanied by reasonable documentation or
explanation supporting such charges, and Ventiv shall pay Snyder in full for all
charges for Services within thirty (30) days after receipt of such bill and
other documentation or explanation.
5. REDUCTION IN SERVICES; TERMINATION.
5.1 The parties recognize that during the Term hereof the requirements of
Ventiv for certain Services will decrease and that Ventiv intends to reduce or
completely phase out any Services no longer required. Accordingly, at any time
after the Distribution Date, Ventiv may request termination of all or any part
of the Services received from Snyder (including termination of any part of any
individual Service) by giving Snyder not less than ninety (90) days' advance
notice in writing of any anticipated termination of any Services or part thereof
and, to the extent practicable, the parties will agree to an orderly reduction
or phase-out of such Services.
<PAGE>
Once a Service is discontinued, Snyder shall not again be obligated to later
reinstate such Service.
5.2 Following the termination or discontinuance of any Service as provided
herein, to the extent Snyder is thereafter requested to provide any terminated
or discontinued Service, including any transition-related assistance necessary
for Ventiv to perform the terminated or discontinued Service, and Snyder
consents to perform such Service, Snyder shall be entitled to compensation
reflecting incurred costs in accordance with Section 4.1 herein.
6. MUTUAL COVENANT. Except to the extent otherwise provided herein, Snyder
covenants and warrants that the charges for Services hereunder are and shall be
determined in a fair and equitable manner.
7. FORCE MAJEURE. If either party is unable to perform any of its duties or
fulfill any of its covenants or obligations under this agreement as a result of
causes beyond its control and without its fault or negligence, including but not
limited to acts of god or government, fire, flood, war, governmental controls,
and labor strife, then such party shall not be deemed to be in default of this
agreement during the continuance of such events which rendered it unable to
perform; such party shall have such additional time thereafter as is reasonably
necessary to enable it to resume performance of its duties and obligations under
this agreement; and Ventiv shall not be required to pay Snyder for any service
to the extent that Snyder is unable to perform. Notwithstanding the foregoing,
if the suspension of a party's obligation to perform under this agreement is of
such a nature or duration as to substantially frustrate the purpose of this
agreement, then Snyder or Ventiv, as the case may be, shall have the right to
terminate this agreement by giving to the other thirty (30) days' prior written
notice of termination, in which case termination shall be effective upon the
expiration of such thirty (30) day period unless performance is resumed prior to
such expiration.
8. COMPLETE AGREEMENT. This Agreement, the Exhibits and Schedules hereto and
the agreements and other documents referred to herein shall constitute the
entire agreement between the parties hereto with respect to the subject matter
hereof and shall supersede all previous negotiations, commitments and writings
with respect to such subject matter.
9. SEVERABILITY. The invalidity of any provision of this agreement as
determined by a court of competent jurisdiction in no way shall affect the
validity of any other provision hereof. if a provision is determined to be
invalid, the parties shall negotiate in good faith in an effort to agree upon a
suitable and equitable alternative provision to effect the original intent of
the parties.
10. TIME OF THE ESSENCE. The parties hereto agree that with respect to the
performance of all terms, conditions and covenants of this agreement, time is of
the essence.
11. CAPTIONS. Section captions are not a part hereof and are merely for the
convenience of the parties.
12. BINDING EFFECT; CHOICE OF LAW. Subject to any provisions hereof, this
agreement shall bind the parties, their successors and assigns. this agreement
shall be governed by the laws of the state of delaware without reference to the
conflict or choice of law provisions thereof.
13. ASSIGNMENT. Neither party shall assign or sublease this agreement or any
service to be provided hereunder without the prior written consent of the other,
which consent shall not be unreasonably withheld. notwithstanding the
foregoing, consent shall not be required for an assignment or sublease of this
agreement or any service provided hereunder by Snyder to a subsidiary of Ventiv
or to any third party vendor or third party recordkeeper who had been providing
all or a material portion of the services to or on behalf of snyder prior to the
distribution date.
14. AMENDMENT. This agreement may not be amended without the express written
agreement of all parties hereto.
15. NOTICES. All notices under this agreement must be in writing and delivered
personally or sent by united states mail, postage prepaid, addressed as follows,
except that any party by written notice given as aforesaid, may change its
address for subsequent notices to be given hereunder.
If to Snyder:
Snyder Communications, Inc. Two Democracy Center 6903 Rockledge Drive, 15th
Floor Bethesda, Maryland 20817, Attention: Mr. A. Clayton Perfall
If to Ventiv:
Ventiv Health, Inc. 200 Cottontail Lane Vantage Court North Somerset, New Jersey
08873, Attention: Mr. Eran Broshy
Notice sent by U.S. mail will be deemed given when deposited with the U.S.
postal service.
2
<PAGE>
16. LIABILITY FOR NONPERFORMANCE. Snyder shall not have any liability to
Ventiv for failure to perform its obligations hereunder unless such failure
arises out of, directly or indirectly, the willful misconduct on the part of
Snyder. Snyder shall not be required to perform any Service (or any part of any
Service) to the extent that performance of such Service (or such part of such
Service) would violate any law, rule or regulation. In no event shall Snyder be
liable for any Services provided or the failure to provide any Services for an
amount in excess of the compensation payable to Snyder in respect of such
Services pursuant to Section 4.1 hereof. In no event shall any party be liable
hereunder for consequential, incidental or punitive damages.
17. INDEPENDENT ENTITIES. In carrying out the provisions of this agreement,
Ventiv and Snyder are and shall be deemed to be for all purposes, separate and
independent entities. Snyder shall select its employees and agents, and such
employees and agents shall be under the exclusive and complete supervision and
control of Snyder. Snyder hereby acknowledges responsibility for full payment of
wages and other compensation to all employees and agents engaged in the
performance of its services under this agreement. It is the express intent of
this agreement that the relationship of Ventiv to Snyder and Snyder to Ventiv
shall be solely that of separate and independent companies and not that of a
joint venture, partnership or any other joint relationship.
18. NONFIDUCIARY STATUS. In carrying out the provisions of this agreement,
neither party shall be a fiduciary (as defined in section 3(21) of ERISA) with
respect to any employee benefit plan, program or arrangement maintained by or on
behalf of the other party. Snyder will provide services pursuant to the terms
and conditions of this agreement in accordance with the directions, guidelines
and/or procedures established by Ventiv, or the plan administrator (as defined
in section 3(16) of ERISA) of each party's employee benefit plans or
arrangements.
19. THIRD PARTY BENEFICIARIES. The provisions of this agreement are solely for
the benefit of the parties and are not intended to confer upon any person except
the parties any rights or remedies hereunder. There are no third party
beneficiaries of this agreement, and this agreement shall not provide any third
person with any remedy, claim, liability, reimbursement, action or other right
in excess of those existing prior to such date.
20. CONSTRUCTION. For purposes of this agreement, references to Ventiv, with
respect to events or periods prior to the distribution date, shall mean and
include, where appropriate, Snyder's healthcare services business as it existed
prior to such date.
21. COUNTERPARTS. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, this Agreement has been executed in multiple counterparts on
the date set forth above, each of which shall, for all purposes, be deemed an
original and all of which shall evidence but one agreement between the parties
hereto.
SNYDER COMMUNICATIONS, INC., VENTIV HEALTH, INC.,
a Delaware corporation a Delaware corporation
By: By:
- - - ---
Name: Name:
Title: Title:
3
<PAGE>
EXHIBIT 10.4
VENTIV HEALTH, INC.
1999 STOCK INCENTIVE PLAN
(Effective , 1999)
1. Purposes.
The purposes of the Ventiv Health, Inc. 1999 Stock Incentive Plan are to
promote the long-term growth of Ventiv Health, Inc. and its subsidiaries by
rewarding key management employees, consultants and directors of Ventiv Health,
Inc. and its subsidiaries with a proprietary interest in Ventiv Health, Inc. for
outstanding long-term performance and to attract, motivate and retain highly
qualified and capable employees, consultants and directors.
2. Definitions.
Unless the context clearly indicates otherwise, the following terms shall
have the following meanings:
2.1 "Award" means an award granted to a Participant under the Plan in the
form of an Option, Restricted Stock, a Stock Appreciation Right, or any
combination of the foregoing.
2.2 "Board" means the Board of Directors of the Corporation.
2.3 "Code" means the Internal Revenue Code of 1986, as amended, or any
successor law.
2.4 "Commission" means the Securities and Exchange Commission or any
successor agency.
2.5 "Compensation Committee" shall mean the Compensation Committee of the
Board, which Committee shall consist of at least two (2) members of the Board,
each of whom qualifies as both an "outside director" (within the meaning of
Section 162(m)(4) of the Code) and a "non-employee director" (within the
meaning of Rule 16b-3(b)(3) issued under the Securities Exchange Act of 1934).
2.6 "Consultant" means any person performing consulting or advisory
services for the Corporation or any Subsidiary, with or without compensation,
including a person or entity providing services pursuant to a management
services agreement with the Corporation, to whom the Compensation Committee
chooses to grant an Option, Restricted Stock or Stock Appreciation Right in
accordance with the Plan, provided that bona fide services must be rendered by
such person and such services are not rendered in connection with the sale of
securities in a capital raising transaction.
<PAGE>
2.7 "Corporation" means Ventiv Health, Inc., a Delaware corporation, or any
successor thereto.
2.8 "Director" means for purposes of the grant of Awards under the Plan, a
member of the Board of Directors of the Corporation or a Subsidiary.
2.9 "Disability" means total disability as defined in Section 22(e)(3) of
the Code.
2.10 "Exchange Act" means the Securities Exchange Act of 1934, as amended.
2.11 "Fair Market Value" means, on any given date, the current fair market
value of shares as determined below:
(a) If the Shares are listed upon an established stock exchange or
exchanges, "Fair Market Value" means the closing price of such Shares on the
New York Stock Exchange, or if the Shares are not traded on the New York Stock
Exchange, the exchange that trades the largest volume of Shares on the date of
the Award.
(b) If the Shares are traded on the Nasdaq National Market, "Fair Market
Value" means the closing price of such Shares reported on the Nasdaq National
Market on the date of the Award, provided that if there should be no sales of
such Shares reported on such date, the Fair Market Value of such Share on such
date shall be deemed equal to the closing price as reported by the Nasdaq
National Market for the last preceding date on which sales of such Shares were
reported.
(c) In all other cases, "Fair Market Value" shall be determined by the
Compensation Committee using any reasonable method in good faith, provided
that, with respect to the initial public offering of Shares by the
Corporation, "Fair Market Value" means the initial offering price to the
public of such Shares.
2.12 "Option" means an option awarded under Section 7 to purchase Shares.
2.13 "Option Exercise Period" means the period from the Option Grant Date to
the date on which an Option expires.
2
<PAGE>
2.14 "Option Grant Date" means the date upon which the Compensation
Committee grants an Option to an Optionee.
2.15 "Optionee" means an employee, Director or Consultant of the Corporation
or any Subsidiary to whom an Option has been granted.
2.16 "Participant" means an employee, Director or Consultant of the
Corporation or any Subsidiary to whom an Award has been granted which has not
terminated, expired or been fully exercised.
2.17 "Plan" means this Ventiv Health, Inc. 1999 Stock Incentive Plan, as it
may be amended and restated from time to time.
2.18 "Restricted Period" means the period of time, which may be a single
period or multiple periods, during which Restricted Stock awarded to a
Participant remains subject to the Restrictions imposed on such Shares, as
determined by the Compensation Committee.
2.19 "Restricted Stock" means an award of Shares on which are imposed
Restricted Periods and Restrictions which subject the Shares to a "substantial
risk of forfeiture" as defined in Section 83 of the Code.
2.20 "Restricted Stock Agreement" means a written agreement between a
Participant and the Corporation evidencing an award of Restricted Stock.
2.21 "Restricted Stock Award Date" means the date on which the Compensation
Committee awards Restricted Shares to the Participant.
2.22 "Restrictions" means the restrictions and conditions imposed on
Restricted Stock awarded to a Participant, as determined by the Compensation
Committee, which must be satisfied in order for the Restricted Stock award to
vest, in whole or in part, in the Participant.
2.23 "Shares" means shares of Ventiv Stock.
2.24 "Stock Appreciation Right" means a right to receive the spread or
difference between the Fair Market Value of Shares subject to an Option and the
corresponding Option exercise price, either in stock or in cash, or in a
combination thereof.
2.25 "Stock Appreciation Rights Agreement" means a written agreement between
a Participant and the Corporation evidencing an award of Stock Appreciation
Rights.
2.26 "Stock Option Agreement" means a written agreement between a Participant
and the Corporation evidencing an award of an Option.
3
<PAGE>
2.27 "Subsidiary" means any domestic or foreign corporation or entity of
which the Corporation owns, directly or indirectly, at least 50% of the total
combined voting power of such corporation or other entity.
2.28 "Ventiv Stock" means shares of common stock, par value $0.001 per share,
of the Corporation.
2.29 "Voting Stock" means all capital stock of the Corporation which by its
terms is entitled under ordinary circumstances to vote in the election of
directors.
3.Administration of the Plan.
3.1 Administrator of Plan. The Plan shall be administered by the
Compensation Committee of the Board.
3.2 Authority of Compensation Committee. The Compensation Committee shall
have full power and authority to:
(i) designate the Participants to whom Options, Restricted Stock, or
Stock Appreciation Rights may be awarded from time to time;
(ii) determine the type of Award to be granted to each Participant under
the Plan and the number and class of Shares subject thereto;
(iii) determine the duration of the Restricted Period and the Restrictions
to be imposed with respect to each Award;
(iv) interpret and construe the Plan and adopt such rules and regulations
as it shall deem necessary and advisable to implement and administer the Plan;
(v) approve the form and terms and conditions of the Restricted Stock
Agreement, Stock Option Agreement, or Stock Appreciation Rights Agreement, as
the case may be, between the Corporation and the Participant; and
4
<PAGE>
(vi) designate persons other than members of the Compensation Committee to
grant Awards consisting of Options and Stock Appreciation Rights, to persons
below the rank of Senior Vice President.
The foregoing determinations shall be made in accordance with the
Compensation Committee's best business judgment as to the best interests of the
Corporation and its stockholders and in accordance with the purposes of the
Plan.
3.3 Determinations of Compensation Committee. A majority of the Compensation
Committee shall constitute a quorum at any meeting of the Compensation
Committee, and all determinations of the Compensation Committee shall be made by
a majority of its members. Any action which the Compensation Committee shall
take through a written instrument signed by all of its members shall be as
effective as though it had been taken at a meeting duly called and held. The
Compensation Committee shall report all actions taken by it to the Board.
3.4 Delegation. The Compensation Committee may delegate such non-
discretionary administrative duties under the Plan to one or more agents as it
shall deem necessary and advisable.
3.5 Effect of Compensation Committee Determinations. No members of the
Compensation Committee or the Board shall be personally liable for any action or
determination made in good faith with respect to the Plan, any Award or any
settlement of any dispute between a Participant and the Corporation. Any
decision made or action taken by the Compensation Committee or the Board with
respect to an Award or the administration or interpretation of the Plan shall be
conclusive and binding upon all persons.
4. Awards Under the Plan.
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.
5. Eligibility
The Participants in the Plan shall be the officers, key employees, Directors
and Consultants of the Corporation and its Subsidiaries designated by the
Compensation Committee. A Participant who has been granted an Award under the
Plan may be granted additional Awards under the Plan under such circumstances,
and at such times, as the Compensation Committee may determine.
5
<PAGE>
6. Shares Subject to Plan.
Subject to adjustment as provided in Section 15 hereof, the aggregate number
of Shares which may be issued upon the exercise of Options or Stock Appreciation
Rights and the award of Restricted Stock under the Plan shall not exceed
4,800,000 shares of Ventiv Stock, increased (except as provided below) on the
date the Board authorizes the issuance of additional shares of Ventiv Stock by
seventeen and five-tenths (17.5%) percent of the number of such additional
shares of Ventiv Stock which are authorized to be issued; provided, however,
that any such increase shall be made only to the extent the Corporation has
authorized and unreserved Shares of Ventiv Stock for such purposes. Such
increases shall occur on the date of each such authorization of the issuance of
additional Shares of Ventiv Stock by the Board, except for authorized issuances
of Shares issued with respect to Awards under the Plan or relating to changes in
capitalization for which an adjustment to the Shares available under the Plan is
required by Section 15. Subject to adjustment as provided in Section 15 hereof,
the aggregate number of Shares which may be issued upon the exercise of Options
or Stock Appreciation Rights and the Awards of Restricted Stock under this Plan
to any one Participant during any calendar year shall not exceed 1,000,000
Shares of Ventiv Stock. If all or any portion of any outstanding Award under the
Plan for any reason expires or is terminated, the Shares allocable to the
unexercised or forfeited portion of such Award may again be subject to an Award
under the Plan. The preceding sentence shall apply only for purposes of
determining the aggregate number of Shares of Ventiv Stock which may be issued
upon the exercise of Options or Stock Appreciate Rights and the Award of
Restricted Stock but shall not apply for purposes of determining the aggregate
number of Shares which may be issued upon the exercise of Options or Stock
Appreciation Rights and the Award of Restricted Stock under this Plan to any one
Participant during any calendar year.
7. Options.
7.1 Terms of Options. Options granted under the Plan shall be subject to
the following terms and conditions :
(a) Option Price. The option price per Share under each Option (the
"Option Price") may not be less than 100% of the Fair Market Value of a
Share on the Option Grant Date. In no event shall the Option Price be less
than the par value of such Share on the Option Grant Date.
(b) Vesting of Options. Except as provided in this Section 7.1 hereof,
Options shall vest in accordance with the terms provided by the Compensation
Committee in the Stock Option Agreement. The Compensation Committee may
accelerate the vesting of any Option in its discretion.
(c) Exercise of Options. Each Option shall be exercisable on the dates
and for the number of Shares as shall be provided in the related Stock Option
Agreement, provided that (i) unless provided otherwise in the Stock Option
Agreement, an Option shall not be exercisable earlier than six (6) months
after the Option Grant Date, and (ii) in no event shall the Option Exercise
Period exceed ten (10) years from the Option Grant Date.
6
<PAGE>
Options may be exercised (in full or in part) only by written notice
delivered to the Corporation at its principal executive office, accompanied by
payment of the Option Price for the Shares as to which such Option is
exercised. The Option Price of each Share as to which an Option is exercised
shall be paid in full at the time of exercise (i) in cash, (ii) with Shares
owned by the Participant, (iii) by delivery to the Corporation of (x)
irrevocable instructions to deliver directly to a broker the stock
certificates representing the Shares for which the Option is being exercised,
and (y) irrevocable instructions to such broker to sell such Shares and
promptly deliver to the Corporation the portion of the proceeds equal to the
Option Price and any amount necessary to satisfy the Corporation's obligation
for withholding taxes, or (iv) any combination thereof. For purposes of making
payment in Shares, such Shares shall be valued at their Fair Market Value on
the date of exercise of the Option and shall have been held by the Participant
for at least six (6) months.
(d) Termination of Employment or Service of Optionee. The Compensation
Committee shall have authority to determine the circumstances under which an
Option will vest upon termination of the employment or service of the Optionee
for any reason. Unless otherwise determined by the Compensation Committee,
the Compensation Committee shall provide that vesting of the Option shall
cease on the date of termination of employment or service and the Option shall
terminate on the date which is three (3) months after the date on which the
Optionee terminates employment or service. In the event an Optionee terminates
employment or service by reason of the Optionee's death or Disability, the
Option shall terminate one (1) year after the date on which the Optionee
terminates employment or service as a result of death or Disability. In any
event, each Option shall terminate no later than ten (10) years after the
Option Grant Date. Such provisions shall be contained in the Stock Option
Agreement given to each Optionee.
(e) Rights as a Stockholder. An Optionee or a transferee of an Option
shall have no rights as a stockholder with respect to any Shares covered by
any Option until the date of the issuance of a stock certificate to such
person evidencing such Shares. No adjustment shall be made for dividends
(ordinary or extraordinary, whether in cash, securities or other property) or
distributions or other rights for which the record date is prior to the date
such stock certificate is issued, except as provided in Section 14 hereof.
(f) Investment Purpose. The Corporation shall not be obligated to sell or
issue any Shares pursuant to any Option unless the Shares with respect to
which the Option is being
7
<PAGE>
exercised are at that time registered or exempt from registration under the
Securities Act of 1933, as amended.
(g) Assumption of Options. The Corporation may issue or assume under the
Plan any stock option previously granted by the Corporation or in connection
with any transaction or transactions upon such terms and conditions and, in
the case of any option so assumed, with such modifications or adjustments
therein, as shall be determined by the Compensation Committee. Any such option
so issued or assumed shall be deemed to be an Option granted under this Plan,
notwithstanding that any provision of this Plan would not, except for this
Section 7, permit the grant of an option having the terms and conditions,
including the option price, of such option as so issued or assumed.
(h) Forfeiture of Options for Misconduct. If the Compensation Committee
determines an Optionee has committed an act of embezzlement, fraud,
dishonesty, nonpayment of any obligation owed to the Corporation, breach of
fiduciary duty or deliberate disregard of Corporation policy resulting in
loss, damage, or injury to the Corporation, or if an Optionee makes any
unauthorized disclosure of any trade secret or confidential information,
breaches any written agreement with the Corporation, engages in any conduct
constituting unfair competition, induces any customer to breach a contract
with the Corporation, or solicits or attempts to solicit any employee of the
Corporation to terminate employment with the Corporation, neither the Optionee
nor the Optionee's estate shall be entitled to exercise any Option whatsoever.
In making such determination, the Compensation Committee shall act fairly and
shall give the Optionee an opportunity to appear and present evidence on his
or her behalf at a hearing before the Compensation Committee.
(i) Transferability of Options. Section 11 hereof to the contrary
notwithstanding, if the Compensation Committee so provides in the Stock Option
Agreement, an Option may be transferred by an Optionee to the Optionee's
children, grandchildren, spouse, one or more trusts for the benefit of such
family members or a partnership in which such family members are the only
partners; provided, however, that Optionee may not receive any consideration
for the transfer. The holder of an Option transferred pursuant to this section
shall be bound by the same terms and conditions that governed the Option
during the period that it was held by the Participant. In the event of any
such transfer, the Option and any Stock Appreciation Rights that relate to
such Option must be transferred to the same person or persons or entity or
entities.
8
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8. Restricted Stock.
8.1 Terms of Restricted Stock Awards. Subject to and consistent with the
provisions of the Plan, with respect to each Award of Restricted Stock to a
Participant, the Compensation Committee shall determine:
(a) the terms and conditions of the Restricted Stock Agreement between
the Corporation and the Participant evidencing the Award;
(b) the Restricted Period for all or a portion of the Award;
(c) the Restrictions applicable to the Award, including, but not limited
to, continuous employment with the Corporation or any of its Subsidiaries for
a specified term or the attainment of specific corporate, divisional or
individual performance standards or goals, which Restricted Period and
Restrictions may differ with respect to each Participant;
(d) whether the Participant shall receive the dividends and other
distributions paid with respect to an Award of Restricted Stock as declared
and paid to the holders of the Shares during the Restricted Period or shall
be withheld by the Corporation for the account of the Participant until the
Restricted Periods have expired or the Restrictions have been satisfied, and
whether interest shall be paid on such dividends and other distributions
withheld, and if so, the rate of interest to be paid, or whether such
dividends may be reinvested in Shares; or
(e) the percentage of the Award which shall vest in the Participant in
the event of such Participant's death or Disability prior to the expiration
of the Restricted Period or the satisfaction of the Restrictions applicable
to an award of Restricted Stock.
8.2 Delivery of Shares. Upon an Award of Restricted Stock to a Participant,
the stock certificate representing the Restricted Stock shall be issued and
transferred to and in the name of
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<PAGE>
the Participant, whereupon the Participant shall become a stockholder of the
Corporation with respect to such Restricted Stock and shall be entitled to vote
the Shares. Such stock certificate shall be held in custody by the Corporation,
together with stock powers executed by the Participant in favor of the
Corporation, until the Restricted Period expires and the Restrictions imposed on
the Restricted Stock are satisfied.
9. Performance-Based Awards of Restricted Stock.
Certain Awards of Restricted Stock granted under the Plan may be granted in
a manner that the Awards qualify for the performance-base compensation exemption
of Section 162(m) of the Code ("Performance-Based Awards"). As determined by the
Compensation Committee in its sole discretion, either the granting or vesting of
such Performance-Based Awards shall be based on achievement of hurdle rates
and/or growth rates in one or more business criteria that apply to the
individual participant or one or more business units or the Corporation as a
whole. The business criteria shall be as follows, individually or in comb-
ination: (i) net earnings; (ii) earnings per share; (iii) net sales growth;
(iv) market share; (v) net operating profit; (vi) expense targets; (vii) working
capital targets relating to accounts receivable; (viii) operating margin; (ix)
return on equity; (x) return on assets; (xi) planning accuracy (as measured by
comparing planned results to actual results); (xii) market price per share; and
(xiii) total return to stockholders. In addition, Performance-Based Awards may
include comparisons to the performance of other companies, such performance to
be measured by one or more of the foregoing business criteria. With respect to
Performance-Based Awards, (i) the Compensation Committee shall establish in
writing (x) the performance goals applicable to a given period, and such
performance goals shall state, in terms of an objective formula or standard, the
method for computing the amount of compensation payable to the Participant if
such performance goals are obtained and (y) the individual employees or class of
employees to which such performance goals apply no later than 90 days after the
commencement of such period (but in no event after 25% of such period has
elapsed) and (ii) no Performance-Based Awards shall be payable to or vest with
respect to, as the case may be, any Participant for a given period until the
Compensation Committee certifies in writing that the objective performance goals
(and any other material terms) applicable to such period have been satisfied.
With respect to Awards intended to qualify as Performance-Based Awards, after
establishment of a performance goal, the Compensation Committee shall not revise
such performance goal or increase the amount of compensation payable thereunder
(as determined in accordance with Section 162(m) of the Code) upon the
attainment of such performance goal. Notwithstanding the preceding sentence, the
Compensation Committee may reduce or eliminate the number of Shares granted or
the number of Shares vested upon the attainment of such performance goal.
10. Stock Appreciation Rights.
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<PAGE>
10.1 Grants of Stock Appreciation Rights. Stock Appreciation Rights
("SARs") may be granted in conjunction with all or a part of any Option
granted under the Plan, either at the time of the grant of such Option or at any
subsequent time prior to the expiration of such Option; provided, however, that
SARs shall not be offered or granted in connection with a prior Option without
the consent of the holder of such Option. SARs may not be exercised by an
Optionee who is a director or officer (within the meaning of Rule 16a-1(f) under
the Exchange Act) of the Corporation within six (6) months after the SAR is
granted, except that this limitation shall not be applicable in the event of the
death or Disability of such Optionee occurring prior to the expiration of such
six-month period.
10.2 Terms of Stock Appreciation Rights. All SARs shall be subject to the
following terms and conditions:
(a) SARs shall be exercisable only at such time and to the extent that
the Option to which they relate (the "Related Option") shall be exercisable.
(b) Upon exercise of a SAR, the Optionee shall be entitled to the
difference between the Fair Market Value of one Share and the Option Price of
one Share specified in the Related Option times the number of Shares in
respect of which the SARs shall have been exercised ("the Economic Value").
An Optionee, upon the exercise of SARs, shall receive the Economic Value
thereof, and the Compensation Committee in its sole discretion shall determine
the form in which payment of such Economic Value will be made, whether in
cash, Shares or any combination thereof. For purposes of this Section 10.2(b),
the Fair Market Value of the Shares shall be determined as of the date of
exercise of the SAR.
(c) An SAR may be exercised without exercising the Related Option, but
the Related Option shall be canceled for all purposes under the Plan to the
extent of the SAR exercise. A Related Option may be exercised without
exercising the SAR, but the SAR shall be canceled for all purposes under the
Plan to the extent of the Related Option Exercise.
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<PAGE>
11. Non-Transferability of Awards.
Except as may be provided by the Committee in accordance with Section
7.1(j)hereof, Awards granted under the Plan shall not be transferable by the
Participant during the Participant's lifetime and may not be assigned,
exchanged, pledged, transferred or otherwise encumbered or disposed of except by
will or by the applicable laws of descent and distribution. Except as may be
provided by the Compensation Committee in accordance with Section 7.1(j) hereof,
Options and Stock Appreciation Rights shall be exercisable during the
Participant's lifetime only by the Participant or by the Participant's guardian
or legal representative.
12. Withholding of Taxes.
Federal, state or local law may require the withholding of taxes
applicable to income resulting from an Award. A Participant shall be required to
make appropriate arrangements with the Corporation or Subsidiary, as the case
may be, for satisfaction of any federal, state or local taxes the Corporation or
Subsidiary is required to withhold. The Compensation Committee may, in its
discretion and subject to such rules as it may adopt, permit the Participant to
pay all or a portion of the federal, state or local withholding taxes arising in
connection with an Award by electing to (i) have the Corporation withhold
Shares, (ii) tender back Shares received in connection with such Award or (iii)
deliver other previously owned Shares, under each election such Shares having a
Fair Market Value on the date specified in the rules adopted by the Committee
equal to the amount to be withheld. The Corporation shall be under no obligation
to issue Shares to the Participant unless the Participant has made the necessary
arrangements for payment of the applicable withholding taxes.
13. No Right to Continued Employment.
Neither the establishment of the Plan nor the granting of an Award shall
confer upon any Participant any right to continue in the employ of the
Corporation or any of its Subsidiaries or interfere in any way with the right of
the Corporation or any of its Subsidiaries to terminate such employment at any
time. No Award shall be deemed to be salary or compensation for the purpose of
computing benefits under any employee benefit, pension or retirement plans of
the Corporation or any of its Subsidiaries, unless the Compensation Committee
shall determine otherwise.
14. Amendment and Termination of Plan.
The Board may amend the Plan from time to time, except that, without
approval of the stockholders of the Corporation, no such revision or amendment
shall change the total number of
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<PAGE>
Shares which may be issued pursuant to the Plan or the maximum number of shares
subject to Awards that may be granted to any individual under the Plan, change
the designation of the classes of employees, Directors or Consultants eligible
to receive Options, remove the administration of the Plan from the Compensation
Committee or modify the business criteria for Performance-Based Awards. Unless
sooner terminated as provided herein, the Plan shall terminate on the tenth
anniversary of its effective date. The Board may terminate this Plan at any time
it deems advisable, except that Options, Restricted Stock and Stock Appreciation
Rights granted under the Plan before its termination shall continue to be
administered under the Plan until such Options and Stock Appreciation Rights are
canceled, terminated, or are exercised and the Restricted Stock is canceled,
vested or is forfeited.
15. Changes in Capitalization.
Subject to any required action by the stockholders, the number of Shares
covered by each outstanding Award and the exercise price per each such Share
subject to an Option or Stock Appreciation Right shall be proportionately
adjusted for any increase or decrease in the number of issued Shares of the
Corporation resulting from a subdivision or consolidation of Shares or the
payment of a stock dividend (but only on the Shares) or any other increase or
decrease in the number of such Shares effected without receipt of consideration
by the Corporation.
If the Corporation merges or is consolidated with another corporation,
whether or not the Corporation is a surviving corporation, or if the Corporation
is liquidated or sells or otherwise disposes of substantially all of its assets
while unexercised Options remain outstanding under the Plan, (i) after the
effective date of the merger, consolidation, liquidation, sale or other
disposition, as the case may be, each holder of an outstanding Option shall be
entitled, upon exercise of that Option, to receive, in lieu of Shares, the
number and class or classes of shares of stock or other securities or property
to which the holder would have been entitled if, immediately prior to the
merger, consolidation, liquidation, sale or other disposition, the holder had
been the holder of record of a number of Shares equal to the number of Shares as
to which that Option may be exercised; or (ii) if Options have not already
become exercisable, the Compensation Committee may accelerate the exercise so
that all Options, from and after a date prior to the effective date of that
merger, consolidation, liquidation, sale or other disposition, as the case may
be, specified by the Compensation Committee, shall be exercisable in full.
If the Corporation is merged into or consolidated with another corporation
under circumstances where the Corporation is not the surviving corporation
(other than circumstances involving a mere change in the identity, form or place
of organization of the Corporation), or if the Corporation is liquidated or
dissolved, or sells or otherwise disposes of substantially all of its assets to
another entity while unexercised Options remain outstanding under the Plan,
unless provisions are made in connection with the transaction for the
continuance of the Plan and/or the assumption or substitution of Options with
new options covering the stock of the successor
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<PAGE>
corporation, or the parent or subsidiary thereof, with appropriate adjustments
as to the number and kind of shares and exercise prices, then all outstanding
Options shall be canceled as of the effective date of such merger,
consolidation, liquidation, dissolution, or sale.
In the event of a change of all of the Corporation's authorized Shares with
par value into the same number of Shares with a different par value or without
par value, the Shares resulting from any such change shall be deemed to be the
Shares within the meaning of the Plan.
To the extent that the foregoing adjustments relate to stock or securities
of the Corporation, such adjustments shall be made by the Compensation
Committee, whose determination in that respect shall be final, binding and
conclusive.
Except as hereinbefore expressly provided in this Section 15, the
Participant shall have no rights (i) by reason of any subdivision or
consolidation of shares of stock of any class, the payment of any stock dividend
or any other increase or decrease in the number of shares of stock of any class,
or (ii) by reason of any dissolution, liquidation, merger, or consolidation,
spin-off of assets or stock of another corporation, or any issue by the
Corporation of shares of stock of any class, nor shall any of these actions
affect, or cause an adjustment to be made with respect to, the number or price
of Shares subject to any Option.
The grant of any Award pursuant to the Plan shall not affect in any way the
right or power of the Corporation (i) to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure, (ii) to merge
or consolidate, (iii) to dissolve, liquidate, or sell or transfer all or any
part of its business or assets or (iv) to issue any bonds, debentures, preferred
or other preference stock ahead of or affecting the Shares. If any action
described in the preceding sentence results in a fractional Share for any
Participant under any Award hereunder, such fraction shall be completely
disregarded and the Participant shall only be entitled to the whole number of
Shares resulting from such adjustment.
16. Governing Law.
The Plan and each Stock Option Agreement, Restricted Stock Agreement and
Stock Appreciation Rights Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware.
17. Effective Date.
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<PAGE>
The Plan as amended shall be effective on September , 1999, subject to
the approval of the Plan within twelve (12) months of such date by a majority of
the voting shares represented and entitled to vote.
VENTIV HEALTH, INC.
By:__________________________________
Name:
Title:
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<PAGE>
Exhibit 10.10
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made this 18th day of
August, 1999 (the "Effective Date") by Ventiv Health, Inc., a Delaware
corporation with its principal place of business at 1114 Avenue of the Americas,
New York, NY 10036, (the "Corporation"), and Gregory S. Patrick, residing at 110
Morningside Road, Verona, New Jersey 07044 (the "Executive"). The Corporation
shall be referred to herein as the "Employer."
WHEREAS, the parties wish to set forth the terms and conditions upon which
the Employer will employ the Executive;
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the parties
agree as follows:
1. Title; Duties
-------------
The Employer hereby employs the Executive, and the Executive hereby accepts
employment with the Employer, upon the terms set forth in this Agreement. The
Executive's employment with the Employer shall commence on August 18, 1999. The
Executive shall serve as Chief Financial Officer during the term of his
employment under this Agreement. The Executive shall report directly to the
Chief Executive Officer or such other person as may be designated by him, who
shall have the authority to direct, control and supervise the activities of the
Executive. The Executive shall perform such services consistent with his
position as may be assigned to him from time to time by such person.
2. Extent of Services
------------------
The Executive agrees to devote his entire business time and attention to
the performance of his duties under this Agreement. He shall perform his duties
to the best of his ability and shall use his best efforts to further the
interests of the Employer. The Executive shall perform his duties in the
Employer's New York metropolitan area office and will be required to travel as
necessary to perform the services required of him under this Agreement. The
Executive represents and warrants to the Employer that he is able to enter into
this Agreement and that his ability to enter into this Agreement and to fully
perform his duties hereunder are not limited to or restricted by any agreements
or understandings between the Executive and any other person. For the purposes
of this Agreement, the term "person" means any natural person, corporation,
partnership, limited liability partnership, limited liability company, or any
other entity of any nature.
3. Base Salary
-----------
The Employer shall pay the Executive a base annual salary of $250,000.
This salary shall be payable in biweekly installments minus such deductions as
may be required by law or reasonably requested by the Executive. The Employer
will review the Executive's base salary no less often than annually in
conjunction with its regular review of executive salaries.
<PAGE>
4. Bonus
-----
The Executive shall be eligible for a bonus of up to $100,000 in each
calendar year, based on the Executive's success in reaching or exceeding
performance objectives as determined by the President and Chief Executive
Officer or his designee, the amount of such bonus, if any, to be determined in
the discretion of the Employer. Notwithstanding the foregoing, if the Executive
remains employed by the Employer through December 31, 1999, the Executive shall
be entitled to an annualized bonus of up to $100,000 with the annualized bonus
prorated for the time period between August 18, 1999 and December 31, 1999.
Bonus payments will be done within 60 days after the close of each calendar
year. The Employee can elect to defer his bonus with the prior approval of the
Chief Executive Officer.
5. Term of Employment
------------------
This contract shall have a three year term and will automatically renew for
successive one year periods unless terminated by either party with 90 days
notice. Not withstanding the term of this contract, the Executive is an
employee "at will" and may be terminated by the Employer at any time with or
without cause.
6. Stock Options and Restricted Stock
----------------------------------
(a) Stock Options
-------------
Employer shall grant Executive nonqualified stock options for the purchase
of a number of shares of the common stock of the Employer. The grant date shall
be the date of distribution and the Fair Market Value will be the closing price
at the date of distribution. The nonqualified stock options will be for a
number of shares of common stock of the Employer having an aggregate Fair Market
Value of $2,000,000 and an aggregate exercise price equal to such Fair Market
Value. The Compensation Committee of the Board of Directors of the Employer
shall grant such options as soon as practicable after execution of this
Agreement and adoption of the stock option plan by the Employer's Board of
Directors.
The Executive shall be required to enter into a stock option agreement
providing for the grant of options, which shall provide that the options shall
vest at the rate of twenty-five (25%) per year on each anniversary of the date
of grant, such that the stock options shall be fully vested on the fourth
anniversary of such date, and provided that the Executive continues to be
employed by the Employer on each respective anniversary date.
The stock options shall be issued under the Employer's stock option plan
and subject to the terms of the stock option agreement, which are not
inconsistent with this Agreement or the stock option plan.
The Executive acknowledges and agrees that nothing in this Section 6
changes, alters or modifies the "at will" status of his employment with the
Employer.
(b) Restricted Stock
----------------
The Executive shall also be granted by Employer restricted stock valued at
$1,000,000.00 (determined in the same manner as determined under 6(a) above) for
shares of common stock of Employer.
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Executive shall enter into a Restricted Stock Agreement which shall provide
that such restricted shares shall vest as follows:
(1) Forty percent (40%) will vest on the grant date;
(2) Fifteen percent (15%) will vest on the first and each successive
anniversary date of the grant date provided the Executive is
employed by Employer on each such anniversary date.
The Restricted Stock Agreement shall also provide that Executive is
precluded from selling, hedging, pledging or otherwise transferring any shares
of restricted stock in any manner for a period of four years from the date of
the grant.
With respect to this restricted grant only, and so long as Executive is
actively employed by Employer, Employer agrees to annually lend to Executive an
amount necessary for Executive to pay all federal and state income taxes
required of Executive as a result of the periodic vesting of such restricted
stock. In the event Executive is terminated for any reason, all outstanding
principal and interest under such loans shall be accelerated and become due and
payable, and be repaid to Employer upon the later of 4 years and 30 days from
the date of the grant or 30 days after termination. The specific terms of any
loan will be set forth in a separate Loan Agreement. Unless otherwise agreed to
by the parties, such terms will include the following: (i) so long as Executive
remains actively employed by Employer, each loan will be due and payable one
year after all restrictions lapse on all of the restricted stock, provided that
if Executive sells any of the formerly restricted stock before the end of such
one-year period, the loans shall be accelerated and due and payable upon the
consummation of such sale, but only to the extent of the proceeds of such sale
reduced by income taxes payable; and (ii) the principal amount of each loan
shall bear interest at the simple rate of 8% accruing from the date of
disbursement of such principal amount.
In the event that the Executive files an election pursuant to Section 83(b)
of the Internal Revenue Code of 1986, as amended (the "Code"), to be taxed with
respect to the fair market value of the restricted stock of this restricted
grant only, on the date such shares are transferred to the Executive the
Company will provide you with a loan, with the principal amount equal to the
amount of taxes payable on the compensation recognized as a result of the shares
of restricted stock and the 83(b) election. Interest shall be charged on this
loan at a rate of 8%. In the event Executive is terminated for any reason, all
outstanding principal and interest under such loan shall be accelerated and
become due and payable, and be repaid to Employer upon the later of 4 years and
30 days from the date of the grant or 30 days after termination. The specific
terms of any loan will be set forth in a separate Loan Agreement.
7. Fringe Benefits
- - - -- ---------------
a. The Executive shall be entitled to all benefits generally available to
executive employees of the Employer.
b. The Executive shall be entitled to three (3) weeks of vacation during
each year of employment. Such vacation shall be taken at such times as
the Executive and the Chief Executive Officer of the Employer shall
agree. The Executive shall be entitled to sick leave and holidays in
accordance with the policy of the Employer as to its executive
employees.
c. The Employer will reimburse the Employee the full cost of COBRA which
Executive has elected from his former employer's health plan, until such
time that the Employee becomes eligible for the Employer's health plan.
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<PAGE>
8. Reimbursement of Business Expenses
----------------------------------
The Employer shall reimburse the Executive in accordance with Employer's
policies for all reasonable out-of-pocket costs incurred or paid by the
Executive in connection with or related to, the performance of his duties,
responsibilities or services under this Agreement, upon presentation by the
Executive of documentation, expense statements, vouchers, and/or such other
supporting information as the Employer may reasonably request.
9. Non-Solicitation and Non-Competition
------------------------------------
a. Except as provided in paragraph (f) below, the Executive agrees that
while the Executive is employed pursuant to this Agreement and for a
period of twelve (12) months following termination of the Executive's
employment by the Employer for any reason (the "Non-Competition
Period"), whether by action of the Executive or the Employer, the
Executive will not, except as otherwise provided herein, engage or
participate, directly or indirectly as principal, agent, executive,
employer, consultant, stockholder, partner or in any other individual
capacity whatsoever, in the conduct or management of, or own any stock
or any other equity investment in or debt of, any business which is
competitive with any business conducted by the Employer.
b. For the purpose of this Agreement, a business shall be considered to be
competitive with the business of the Employer if such business is
engaged in providing outsourced marketing services to the pharmaceutical
and life sciences industry or any other business in which the Employer
is engaged at the time of termination of the Executive's employment.
c. During the Non-Competition Period, the Executive will not, for his own
benefit or for the benefit of any person or entity other than the
Employer, (i) solicit, or assist any person or entity other than the
Employer to solicit any officer, director, executive or employee of the
Employer to leave his/her employment, (ii) hire or cause to be hired for
Executive's benefit any present or former officer, director, executive
or employee of the Employer, or (iii) engage any present or former
officer, director, executive or employee of the Employer as a partner,
contractor, sub-contractor, employee, consultant or other business
associate of the Executive.
d. During the Non-Competition Period, the Executive will not (i) solicit,
or assist any person or entity other than the Employer to solicit, any
person or entity that is a client of the Employer, or has been a client
of the Employer during the twelve (12) months prior to the date of
termination of the Executive's employment, to purchase outsourced
marketing services or any other products or services the Employer
provides to a client at the time of termination of Executive's
employment, or (ii) interfere with any of Employers' business
relationships.
e. The Executive acknowledges that (i) the markets served by the Employer
are national in scope and are not dependent on the geographic location
of
4
<PAGE>
the executive personnel or the businesses by which they are employed,
and (ii) the above covenants are manifestly reasonable on their face,
and the parties expressly agree that such restrictions have been
designed to be reasonable and no greater than is required for the
protection of the Employer.
f. Nothing in this Agreement shall be deemed to prohibit the Executive from
owning equity or debt investments in any corporation, partnership or
other entity which is competitive with the Employer, provided that such
--------
investments (i) are passive investments and constitute one percent (1%)
or less of the outstanding equity securities of such an entity the
equity securities of which are traded on a national securities exchange
or other public market.
g. The parties to this Agreement mutually agree that, in recognition of
Employer's dependence on Executive's experience to carry out its
business plan and Executive's senior and key position in the Employer,
the restrictions detailed in Section 9 of this Agreement are necessary
and appropriate to give effect to the intended relationships of the
parties. Executive agrees that because damages arising from violations
of Section 9 of this Agreement are extremely difficult to quantify with
certainty, injunctive relief will be necessary to effect the intent of
such Section. Accordingly, Executive hereby consents to the imposition
of a preliminary or permanent injunction as a remedy to this breach of
Section 9 of this Agreement.
It is the desire and intent of the parties hereto that the restrictions set
forth in Section 9 of this Agreement shall be enforced and adhered to in every
particular, and in the event that any provision, clause or phrase shall be
declared by a court of competent jurisdiction to be judicially unenforceable
either in whole or in part whether the fault be in duration, geographic
coverage or scope of activities precluded the parties agree that they will
mutually petition the court to sever or limit the unenforceable provisions so as
to retain and effectuate to the greatest extent legally permissible the intent
of the parties as expressed in this Section 9 of this Agreement.
10. Confidential Information
------------------------
a. The Executive shall not (for his own benefit or the benefit of any
person or entity other than the Employer) use or disclose any of the
Employer's trade secrets or other confidential information. The term
"trade secrets or other confidential information" includes, by way of
example, matters of a technical nature, "know-how", computer programs
(including documentation of such programs), research projects, and
matters of a business nature, such as proprietary information about
costs, profits, markets, sales, lists of customers, and other
information of a similar nature to the extent not available to the
public, and plans for future development. After termination of this
Agreement, the Executive shall not use or disclose trade secrets or
other confidential information unless such information becomes a part
of the public domain other than through a breach of this Agreement or
is disclosed to the Executive by a third party who is entitled to
receive and disclose such information or the
5
<PAGE>
information is required to be disclosed by the order of a court or
governmental agency.
b. Upon the effective date of notice of the Executive's or the Employer's
election to terminate this Agreement, or at any time upon the request
of the Employer, the Executive (or his heirs or personal
representatives) shall deliver to the Employer all documents and
materials containing either trade secrets and confidential information
relating to the Employer's business or privileged information, and all
documents, materials and other property belonging to the Employer,
which in either case are in the possession or under the control of the
Executive (or his heirs or personal representatives).
c. All discoveries and works made or conceived by the executive during his
employment by the Employer, jointly or with others, that relate to the
Employer's activities shall be owned by the Employer. The terms
"discoveries and works" include, by way of example, inventions,
computer programs (including documentation of such programs), technical
improvements, processes, drawings, and works of authorship, including
sales materials which relate to wall media products, sampling/comparing
or services. The Executive shall promptly notify and make full
disclosure to, and execute and deliver any documents requested by, the
Employer to evidence or better assure title to such discoveries and
works by the Employer, assist the Employer in obtaining or maintaining
for itself at its own expense United States and foreign patents,
copyrights, trade secret protection and other protection of any and all
such discoveries and works, and promptly execute, whether during his
employment or thereafter, all applications or other endorsements
necessary or appropriate to maintain patents and other rights for the
Employer and to protect its title thereto. Any discoveries and works
which, within six (6) months after the termination of the Executive's
employment by the Employer, are made, disclosed, reduced to a tangible
or written form or description, or are reduced to practice by the
Executive and which pertain to work performed by the Executive while
with the Employer shall, as between the Executive and the Employer, be
presumed to have been made during the Executive's employment by the
Employer.
11. Severance
---------
a. The Executive is an employee "at will" and may be terminated by the
Employer at any time with or without cause.
b. Subject to the provisions of paragraph 11(e) below, if the Executive is
terminated or this Agreement is terminated by the Employer without
cause at any time, then so long as the Executive remains in
compliance withthe remaining obligations contained in this Agreement,
including paragraphs 9 and 10 hereof, the Executive shall continue to
receive from the Employer payments of his Base Salary then in effect
for a period of six months, minus such deductions as may be required by
law or reasonably requested by the Executive (the "Severance Payment").
In addition,
6
<PAGE>
regarding any vested portion of the Restricted Stock, all restrictions
imposed by the Employer shall lapse with respect to 50% of the vested
portion upon such termination.
c. For the purposes of this Agreement, "cause" shall mean any of the
following: (i) gross negligence or willful misconduct in the
performance of the Executive's duties hereunder; (ii) conviction of any
felony, or any misdemeanor involving dishonesty, fraud or moral
turpitude; (iii) subject to the provisions of the Americans With
Disabilities Act, physical or mental incapacity for a period of five
(5) consecutive months (such period of incapacity shall be deemed to be
continuously consecutive unless Executive has returned to work on a
full-time basis for eight (8) consecutive weeks); (iv) the occurrence
of any wrongful and intentional act or omission by the Executive which
has had or would reasonably be expected to have a material adverse
impact on the business, properties, results of operations, condition
(financial or otherwise) or prospects of the Employer; of (v) the
material failure of the Executive, for any reason, to devote his full
time and efforts in a diligent manner to the performance of his duties
and responsibilities hereunder.
d. Notwithstanding the above provisions, in the event there is a "change
in control" in Ventiv Health, Inc., then so long as the Executive
remains in compliance with the remaining obligations contained in this
Agreement, including paragraphs 9 and 10 hereof, the Executive shall
continue to receive from the Employer payments of his Base Salary then
in effect for a period of six months, minus such deductions as may be
required by law or reasonably requested by the Executive. The
provisions of this paragraph 11(d) shall have no effect if, following
such change in control and for a period of 1 year thereafter, Executive
remains employed by Employer. For the purposes of this paragraph 11(d),
a "change in control" is defined as a sale, transfer or other
disposition of all or substantially all of the assets of Ventiv Health,
Inc., or the consummation of a merger or consolidation of Ventiv
Health, Inc. which results in the stockholders of Ventiv Health, Inc.
immediately prior to such transaction owning, in aggregate, less than a
majority of the surviving or resulting entity or the sale of at least
80% of the outstanding capital stock of Employer to a person or group
of persons acting in concert.
e. In order to be eligible to receive any Severance Payment pursuant to
this paragraph 11, Executive must sign, prior to receiving such
Severance Payment, a complete release of all claims against Employer,
in a format to be determined by Employer.
12. Enforcement
-----------
The Executive agrees that the Employer's remedies at law for any breach or
threat of breach by him of the provisions of Sections 9 and 10 hereof will be
inadequate, and that the Employer shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of Sections 9 and 10 hereof
and to enforce specifically the terms and provisions thereof, in addition to any
other remedy to which the Employer may be entitled at law or equity.
7
<PAGE>
13. Attorney's Fees and Costs
-------------------------
Executive agrees that in the event the Employer institutes any action to
enforce and/or prosecute this agreement, the Employer shall be entitled to
recover from Executive its reasonable attorney's fees and costs related to
instituting and maintaining such action.
14. Advance Notice of Prospective Employment
----------------------------------------
Executive agrees that following the termination of his employment, prior to
accepting employment with, or agreeing to perform services for, any entity that
competes with the Employer, he will notify the Employer in writing of
Executive's employment or retention that may potentially violate any provision
of this Agreement.
15. Miscellaneous Provisions
------------------------
a. Notices. All notices required or permitted under this Agreement shall
-------
be in writing and shall be deemed effective upon personal delivery or
upon deposit with the United States Postal Service, by registered or
certified mail, postage prepaid, addressed to the other party at the
address set forth in the Employer's records.
b. Pronouns. Whenever the context may require, any pronouns used in this
--------
Agreement shall include the corresponding masculine, feminine or neuter
forms, and the singular forms of nouns and pronouns shall include the
plural, and vice versa.
c. Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties and supersedes all prior agreements and
understandings, whether written or oral, relating to the subject matter
of this Agreement, including, but not limited to, all prior agreements
and understandings relating to stock options or stock ownership in the
Employer.
d. Amendment. This Agreement may be amended or modified only by a written
----------
instrument executed by both the Employer and the Executive.
e. Governing Law. This Agreement shall be construed, interpreted and
-------------
enforced in accordance with the laws of the State of New York, without
regard to its conflict of law principles.
f. Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of both parties and their respective successors
and assigns; provided, however, that the obligations of the Executive
are personal and shall not be assigned or delegated by him.
g. Waiver. No delays or omissions by the Employer or the Executive in
------
exercising any right under this Agreement shall operate as a waiver of
that or any other right. A waiver or consent given by the Employer or
the Executive on any one occasion shall be effective only in that
instance and shall not be construed as a bar or waiver of any right on
any other occasion.
8
<PAGE>
h. Captions. The captions appearing in this Agreement are for the
--------
convenience of reference only and in no way define, limit or affect the
scope or substance of any section of this Agreement.
i. Severability. In case any provision of this Agreement shall be held by
------------
a court with jurisdiction over the parties to this Agreement to be
invalid, illegal or otherwise unenforceable, the validity, legality and
enforceability of the remaining provisions shall in no way be affected
or impaired thereby.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the Day
and year first above written.
EMPLOYER EXECUTIVE
VENTIV HEALTH, INC.
By: /s/ Eran Broshy /s/ Gregory S. Patrick
-------------------------------- -----------------------------------
Eran Broshy Gregory S. Patrick
9
<PAGE>
EXHIBIT 21.1
21.1 Subsidiaries
- - - --------------------
As of the distribution date, all of the below listed direct or
indirect subsidiaries of Ventiv Health, Inc. and their direct and indirect
subsidiaries will be, directly or indirectly, 100% owned by Ventiv Health, Inc.
<TABLE>
<CAPTION>
Legal Entity Incorporation State Country
- - - ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Clinical Communications Group, Inc. Delaware US
Clinical Communications Group International, Inc. Delaware US
Clinical Communications Holdings, Inc. Delaware US
Clinical Communications, Inc. Delaware US
GEM Communications, Inc. Connecticut US
Greenwich Press, Inc. Connecticut US
Health Products Research, Inc. New Jersey US
Imedex USA, Inc. Georgia US
MMD, Inc. New Jersey US
Promotech Research Associates, Inc. Colorado US
Scientific Exchange, Inc. Connecticut US
Snyder HealthCare Communications Worldwide, Inc. Delaware US
Snyder HealthCare Sales, Inc. New Jersey US
Clinical Communications (UK) Limited UK
Consultancy Practice Limited UK
Halliday Jones Sales Limited UK
Health Products Research (UK) Limited UK
Kestrel Healthcare Limited UK
Rapid Deployment Group Limited UK
Rapid Deployment Limited UK
Snyder Healthcare Services UK
Houdstermaatschappij Boussauw Holding, B.V. Netherlands
Imedex Holding, B.V. Netherlands
Imedex Netherlands Netherlands
Silver Blue Holding, B.V. Netherlands
RDL Magyarorszag KFT Hungary
Brain Box Company Fuhurngs-und
Verhaltenstraining GmbH (LLC) Germany
Co-Pharma Aufsendienst KG (LLC) Germany
MKM Infothek Gesellschaft fur Marktanalysen mbH Germany
MKM Marketinginstitut KG (LLC) Germany
MKM Verwaltungsgesellschaft mbH Germany
MKM Beteiligungs GmbH Germany
</TABLE>
<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>
