<PAGE>
As filed with the Securities and Exchange Commission on August 10, 1999
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1
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
(State or other jurisdiction of 52-2181734
incorporation or organization) (I.R.S. employer 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>
<C> <C> <S>
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 Form of Ventiv Health, Inc. 1999 Stock Incentive Plan
10.5 Employment Agreement, dated June 14, 1999 by and between Eran Broshy
and Snyder Communications, Inc.
21.1 Subsidiaries of Ventiv Health, Inc.
27 Financial Data Schedule
</TABLE>
- - - --------
*To be filed by amendment
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. 1 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
August 10, 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 AUGUST 10, 1999
--FOR INFORMATION ONLY--
INFORMATION STATEMENT
[LOGO]
VENTIV HEALTH, INC.
Common Stock
(par value $0.001 per share)
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.
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 , 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.
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
Ventiv's Operating Groups.............................................. 25
Competitive Advantages................................................. 31
Clients................................................................ 33
Competition............................................................ 34
Employees.............................................................. 34
Government Regulation.................................................. 35
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........................................ 44
Year 2000.............................................................. 45
Effect of Inflation.................................................... 45
Quantitative and Qualitative Disclosures About Market Risk............. 45
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Item Page
- - - ---- ----
<S> <C>
MANAGEMENT............................................................... 46
Directors.............................................................. 46
Directors' Meetings and Committees..................................... 46
Compensation of Directors.............................................. 47
Executive Officers..................................................... 47
EXECUTIVE COMPENSATION................................................... 48
Historical Compensation................................................ 48
Ventiv Compensation and Benefit Plans.................................. 49
Treatment of Snyder Options and Other Benefits Following the
Distribution.......................................................... 51
Employment Agreements.................................................. 51
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT........... 53
DESCRIPTION OF CAPITAL STOCK............................................. 55
Authorized Capital Stock............................................... 55
Ventiv Common Stock.................................................... 55
Preferred Stock........................................................ 55
No Preemptive Rights................................................... 55
Transfer Agent and Registrar........................................... 55
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF DELAWARE LAW, VENTIV'S CERTIFICATE
OF INCORPORATION AND BY-LAWS............................................ 56
Delaware Law........................................................... 56
Certificate of Incorporation and By-Laws............................... 56
LIMITATION ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS.... 57
Limitation on Liability of Directors................................... 57
Indemnification and Insurance.......................................... 57
ADDITIONAL INFORMATION................................................... 58
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
providers of 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 core
client base, from which we derive the majority of our revenues, includes the 20
largest pharmaceutical companies based on revenues. 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, , 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 be better able to obtain the debt
and equity 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 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 12.7% and 4.5%, 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 Robert Brown, Ph.D., R. Jeremy Stone, M.D.,
Allan Avery and William Pollock. See "Management--Executive Officers" beginning
on page 47.
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, Mortimer Zuckerman and at least two additional independent directors
that will be designated prior to or promptly following the distribution. See
"Management--Directors" beginning on page 46.
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 ,
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 , 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 74,136,807 shares of
Snyder common stock outstanding as of August 6, 1999,
24,712,269 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;"
. ""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)...... $ 0.51 $ 0.11 $ 0.06 $ (0.35) $ --
========= ========= ======== ========= ========
Pro forma adjusted net in-
come
(loss) ................... $ 12,639 $ 2,618 $ 1,446 $ (10,700) $ (2,729)
========= ========= ======== ========= ========
Pro forma adjusted basic
and diluted net income
(loss) per share (2)...... $ 0.51 $ 0.11 $ 0.06 $ (0.43) $ (0.11 )
========= ========= ======== ========= ========
Shares used in computing
net income (loss) per
share (2)................. 24,712 24,712 24,712 24,712 24,712
========= ========= ======== ========= ========
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 August 6, 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, 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. 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. Also 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.. 21,585 483 3,305 (1) 25,373
Restricted stock
compensation............. -- -- 438 (4) 438
Acquisition and related
costs.................... 1,694 -- -- 1,694
-------- ------ ------- --------
Income from operations........ 20,952 468 (3,743) 17,677
Interest expense.............. (123) -- -- (123)
Investment income............. 373 8 -- 381
-------- ------ ------- --------
Income before income taxes.... 21,202 476 (3,743) 17,935
Income tax (provision)
benefit...................... (8,563) (178) 352 (2) (8,389)
-------- ------ ------- --------
Net income.................... $ 12,639 $ 298 $(3,391) $ 9,546
======== ====== ======= ========
</TABLE>
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 6,616 (1) 53,161
Restricted stock
compensation.............. -- -- 2,375 (4) 2,375
Compensation to
stockholders.............. 742 -- -- 742
Acquisition and related
costs..................... 26,922 -- -- 26,922
-------- ------- ------- --------
Income from operations......... 14,760 1,252 (8,991) 7,021
Interest expense............... (2,315) -- -- (2,315)
Investment income.............. 1,850 49 -- 1,899
-------- ------- ------- --------
Income (loss) before income
taxes......................... 14,295 1,301 (8,991) 6,605
Income tax (provision) benefit. (12,849) (658) 3,479 (2) (10,028)
-------- ------- ------- --------
Net income (loss).............. $ 1,446 $ 643 $(5,512) $ (3,423)
======== ======= ======= ========
</TABLE>
7
<PAGE>
- - - --------
(1) Reflects the estimated additional costs associated with operating as a
stand-alone public company, including additional finance and
administrative employees, professional services, office rent, advertising
and other general and administrative expenses. The estimate of additional
costs is based on existing agreements and also on Snyder Communications'
historical experience of what the additional requirements of operating as
a public company will cost. There can be no assurance that actual costs
will not exceed these estimates.
(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 $2.4 million and $0.4 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.
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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.
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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 for part-time, special project
employees. 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
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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 12.7% and 4.5%, 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.
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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 an opinion of Arthur Andersen
LLP 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 opinion of
Arthur Andersen LLP is 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
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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
, 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 an opinion from Arthur Andersen LLP substantially
States federal income to the effect that the distribution should be tax-
tax purposes? 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
, 1999. See "The Distribution--Market
for Ventiv Common Stock" beginning on page 17.
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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 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 "when-issued" basis,
reflecting an assumed post-distribution value for
Snyder common stock. Snyder common stock "when-
issued" 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 "wi", 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 Snyder common
stock as compared to the "regular-way" price of
Snyder common stock during this period. If Snyder
common stock "when-issued" 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
, 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 Options granted under Snyder's Incentive Stock Plan
existing employee stock to Ventiv employees will terminate on the
options to purchase distribution date if unvested, and to the extent
Snyder common stock? vested will terminate 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.
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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 be better able to obtain the debt and equity
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.
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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 an opinion from
Arthur Andersen LLP 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 opinion of Arthur
Andersen LLP is not binding on the Internal Revenue Service or the courts.
Additionally, the opinion of Arthur Andersen LLP is based on various
representations and assumptions described therein.
The opinion is 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 opinion of 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)
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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.
Arthur Andersen LLP has 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 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 , 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 opinion from 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 Arthur Andersen LLP in connection with its opinion.
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 after a period of 18 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 global provider of marketing 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 believe, based on our knowledge of the industry
and our competitors, that no other healthcare service provider offers the scope
of integrated marketing services which we provide.
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. Industry estimates
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. We estimate that the
level of outsourcing is much lower for higher value-added services such as
product launch design and medical communications services.
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 CAPSsm 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 priorities 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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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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<PAGE>
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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<PAGE>
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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<PAGE>
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. 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 one of the world's largest
providers of medical communications and strategic sales and marketing planning.
The healthcare marketing services industry is highly fragmented. Unlike our
competitors, which may offer only selected services in specific locations, we
operate capably with equal success in any geography by providing the full range
of our services to foreign clients in their home markets. We service the
largest number of physicians, nurses, pharmacists, and formularies in the
industry. 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.
Broadest and Most Integrated Service Offering. We offer the broadest 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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<PAGE>
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. This advantage is unique to
Ventiv, as competitors generally have narrow product offering bands which
result in an inability to cross-sell products. 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 the 20 largest
pharmaceutical companies comprise our core client base, 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. Our team of strong managers have
an average of 17 years experience in the pharmaceutical and marketing
industries. 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 4,400-person salesforce. We are known
throughout the industry for our innovative approach, both with pharmaceutical
clients and physicians. As a consequence, 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 all 20 of the largest pharmaceutical companies.
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
representative list of our clients, which includes significant clients of each
of our service offerings in various markets in the life sciences industries.
Representative Clients: Leading Life Sciences Companies
3M Merck
Abbott Laboratories Novartis
Allergan Pfizer
AstraZeneca Pharmacia & Upjohn
Bausch & Lomb Procter & Gamble
Baxter Rhone-Poulenc
Bayer Roche
Boehringer Ingelheim Sankyo
Bristol-Myers Squibb Sanofi-Synthelabo
Chiron Schering-Plough
Eisai Searle (Monsanto)
Eli Lilly SmithKline Beecham
Endo Pharmaceuticals Solvay
Glaxo Wellcome UCB
Hoechst Marion Warner-Lambert
Roussel Yamanouchi
Johnson & Johnson
--------
Note: As of December 31, 1998.
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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, 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 March 31, 1999, we employed over 4,800 people worldwide, including
approximately 2,900 employees in the United States and 1,900 in Europe. Of
these employees, approximately 32% 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............................... 2,596 31 2,627
U.K. Contract Sales............................... 550 31 581
French Contract Sales............................. 1,001 48 1,049
German Contract Sales............................. 252 28 280
----- --- -----
Total Contract Sales.............................. 4,399 138 4,537
Healthcare Communications......................... N/A 181 181
Health Products Research.......................... N/A 91 91
----- --- -----
Total Worldwide Employees......................... 4,399 410 4,809
===== === =====
</TABLE>
- - - --------
As of March 31, 1999.
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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 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).............. $ 0.51 $ 0.11 $ 0.06 $ (0.35) $ -- $ 0.34 $ 0.21
========= ========= ======== ========= ======== ======== =======
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)... $ 0.51 $ 0.11 $ 0.06 $ (0.43) $ (0.11) $ 0.21 $ 0.15
========= ========= ======== ========= ======== ======== =======
Shares used in computing
net income (loss) per
share (2).............. 24,712 24,712 24,712 24,712 24,712 24,712 24,712
========= ========= ======== ========= ======== ======== =======
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 August 6, 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, 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. 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. Also, 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.. 21,585 483 3,305 (1) 25,373
Restricted stock
compensation ............ -- -- 438 (4) 438
Acquisition and related
costs.................... 1,694 -- -- 1,694
-------- ------ ------- --------
Income from operations........ 20,952 468 (3,743) 17,677
Interest expense.............. (123) -- -- (123)
Investment income............. 373 8 -- 381
-------- ------ ------- --------
Income before income taxes.... 21,202 476 (3,743) 17,935
Income tax (provision)
benefit...................... (8,563) (178) 352 (2) (8,389)
-------- ------ ------- --------
Net income.................... $ 12,639 $ 298 $(3,391) $ 9,546
======== ====== ======= ========
</TABLE>
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 6,616 (1) 53,161
Restricted stock
compensation ............. -- -- 2,375 (4) 2,375
Compensation to
stockholders.............. 742 -- -- 742
Acquisition and related
costs..................... 26,922 -- -- 26,922
-------- ------- ------- --------
Income from operations......... 14,760 1,252 (8,991) 7,021
Interest expense............... (2,315) -- -- (2,315)
Investment income.............. 1,850 49 -- 1,899
-------- ------- ------- --------
Income (loss) before income
taxes......................... 14,295 1,301 (8,991) 6,605
Income tax (provision) benefit. (12,849) (658) 3,479 (2) (10,028)
-------- ------- ------- --------
Net income (loss).............. $ 1,446 $ 643 $(5,512) $ (3,423)
======== ======= ======= ========
</TABLE>
37
<PAGE>
- - - --------
(1) Reflects the estimated additional costs associated with operating as a
stand-alone public company, including additional finance and
administrative employees, professional services, office rent, advertising
and other general and administrative expenses. The estimate of additional
costs is based on existing agreements and also on Snyder Communications'
historical experience of what the additional requirements of operating as
a public company will cost. There can be no assurance that actual costs
will not exceed these estimates.
(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 $2.4 million and $0.4 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.
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> <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 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.
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, 185
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 and the decrease in nonrecurring
acquisition and related costs. 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.
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 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
42
<PAGE>
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 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.
43
<PAGE>
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.
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.
44
<PAGE>
We believe that our cash and equivalents, as well as cash provided by
operations, will be sufficient to fund our current operations, planned capital
expenditures and anticipated growth of our existing business over the next 12
months and also for a longer-term basis. 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 third quarter 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.
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, both written and
oral, that their systems are compliant or are expected to be compliant on time.
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
Ventiv is exposed to market risk from changes in interest rates and foreign
currency exchange rates, which could impact its results of operations and
financial position. For purposes of specific risk analysis, we used sensitivity
analysis to determine the impact that market risk exposures may have on the
foreign currency translations. The long-term debt outstanding at December 31,
1998 is $1.5 million and is fixed rate. A hypothetical change in the current
market interest rate would not materially impact the financial statements. We
do not currently engage in hedging or other market risk management tools.
Ventiv's results are affected by changes in the relative exchange rates of
non-U.S. currencies into the U.S. dollar. Assuming a hypothetical detrimental
change in the exchange rates of 10% at December 31, 1998, Ventiv's total assets
and liabilities would have decreased by 2.5% and 5.7%, respectively. The
exchange rate changes would also have resulted in an unfavorable impact on our
total revenues of approximately 4.6% for 1998.
45
<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
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.
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, two additional independent
directors will be designated prior to or promptly following the distribution.
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
46
<PAGE>
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
Robert Brown, Ph.D..................... 55 Chief Executive Officer,
Health Products Research
R. Jeremy Stone, M.D................... 34 President, UK Healthcare Sales
Allan Avery............................ 38 President, Healthcare Communications
William C. Pollock..................... 45 President, Healthcare Sales
</TABLE>
For a description of Eran Broshy's background, see "Management--Directors."
Robert Brown, Ph.D., served as President of Health Product 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.
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.
47
<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. 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 value of shares of Snyder common stock as of December 31, 1998 over the
respective exercise prices of outstanding stock options.
48
<PAGE>
<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. See "Executive Compensation--Employment
Agreements." Five other members of Ventiv's management team will be granted
$500,000 in restricted Ventiv common stock immediately following the
distribution at the fair market value of the Ventiv common stock as of 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
shares of restricted Ventiv common stock granted to the other five 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.
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.
Set forth below is a summary of the components of Ventiv's executive
compensation following the distribution:
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 a non-
qualified stock option, an incentive stock option, restricted stock, a stock
appreciation right, or a combination thereof, at the discretion of the
Compensation Committee.
Reservation of Shares. Under the 1999 Stock Incentive Plan,
shares of Ventiv common stock will be reserved for issuance. The shares of
Ventiv common stock to be issued will be made available from authorized but
unissued shares of Ventiv common stock or issued shares that have been
reacquired by Ventiv. If any shares of Ventiv common stock that are the subject
of an award are not issued and cease to be issuable for any reason, such shares
will no longer be charged against the maximum share limitations and may again
be made subject to awards. In the event of certain corporate reorganizations,
recapitalizations, or other specified corporate transactions affecting Ventiv
or the Ventiv common stock, proportionate adjustments may be made to the number
of shares available for grant, as well as the other maximum share limitations,
under the plan, and the number of shares and prices under outstanding awards.
49
<PAGE>
Duration. The 1999 Stock Incentive Plan has a term of ten years, subject to
earlier termination or amendment.
Administration. The 1999 Stock Incentive Plan will be administered by the
Compensation Committee of Ventiv's Board of Directors. Subject to the
limitations set forth in the plan, the Compensation Committee has the authority
to determine the persons to whom awards are granted, the types of awards to be
granted, the time at which awards will be granted, the number of shares, units
or other rights subject to each award, the exercise, base or purchase price of
an award (if any), the time or times at which the award will become vested,
exercisable or payable, and the duration of the award.
Eligibility. All employees of Ventiv and its subsidiaries and, in the case of
awards other than incentive stock options, any consultant or independent
contractor providing services to Ventiv or its subsidiaries, will be eligible
to be granted awards under the plan, as selected from time to time by the
Compensation Committee in its sole discretion.
Types of Awards. The 1999 Stock Incentive Plan authorizes the grant of the
following types of awards:
. Stock Options (nonqualified and incentive stock options). The maximum
number of shares that may be covered under options granted to any
individual in any calendar year is shares. The exercise
price of an option may be determined by the Compensation Committee,
provided that the exercise price per share of an option may not be less
than the fair market value of a share of Ventiv common stock on the date
of grant. The maximum term of any stock option will be years from
the date of grant. The Compensation Committee is to determine the extent
to which an option will become and/or remain exercisable in the event of
termination of employment or service of a participant under various
circumstances, including retirement, death or disability, subject to
certain limitations for incentive stock options. An option may be
exercised in whole or in part at any time during the term thereof by
written notice to Ventiv, together with payment of the aggregate
exercise price of the option. In addition to the exercise price, the
participant must pay Ventiv in cash or, at the Compensation Committee's
discretion, in Ventiv common stock, the full amount of all applicable
income tax and employment tax amounts required to be withheld in
connection with the exercise of the option.
. Stock Appreciation Rights. A stock appreciation right may be granted
either in tandem with an option or without a related option. A stock
appreciation right entitles the holder, upon exercise, to receive a
payment based on the difference between the base price of the stock
appreciation right (which may not be less than the fair market value of
a share of Ventiv common stock on the date of grant) and the fair market
value of a share of Ventiv common stock on the date of exercise,
multiplied by the number of shares as to which such stock appreciation
right is being exercised. The maximum term of a stock appreciation right
will be years from the date of grant. Stock appreciation rights are
payable, in the discretion of the Compensation Committee, in cash, in
shares of Ventiv common stock, or in a combination of cash and shares of
Ventiv common stock.
. Restricted Stock Awards. An award of restricted stock represents shares
of Ventiv common stock that are issued subject to such restrictions on
transfer and incidents of ownership, and such forfeiture conditions, as
the Compensation Committee deems appropriate. The restrictions imposed
upon an award of restricted stock will lapse in accordance with the
vesting requirements specified by the Compensation Committee in the
award agreement. Such vesting requirements may be based on the continued
employment of the participant for a specified time period or on the
attainment of specified business goals or performance criteria
established by the Compensation Committee. The Compensation Committee
may, in connection with an award of restricted stock, require the
payment of a specified purchase price. Subject to the transfer
restrictions and forfeiture restrictions relating to the restricted
stock award, the participant will have the rights of a stockholder of
Ventiv, including all
50
<PAGE>
voting and dividend rights, during the restriction period, unless the
Compensation Committee determines otherwise at the time of the grant.
The maximum number of shares of common stock that may be subject to a
restricted stock award granted to a participant during any one calendar
year shall be .
. Change-In-Control. The Compensation Committee may, in an award
agreement, provide for the effect of a change-in-control (as defined in
the 1999 Stock Incentive Plan) on the award. Such provisions may include
the acceleration of an award's vesting or extension of the time for
exercise, the elimination or modification of performance or other
conditions, the cash settlement of an award or other adjustments that
the Compensation Committee considers appropriate.
Treatment of Snyder Options Following the Distribution
Options granted under Snyder's Incentive Stock Plan to Ventiv employees will
terminate on the distribution date if unvested, and to the extent vested will
terminate 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.
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 fair market value of such shares as of 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.
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
51
<PAGE>
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.
52
<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 August 6,
1999. See "Executive Compensation--Ventiv Compensation and Benefit Plans--1999
Stock Incentive Plan."
<TABLE>
<CAPTION>
Number of Shares Projected % of Shares
Name to be Beneficially Owned Outstanding (1)
- - - ---- -------------------------- ---------------
<S> <C> <C>
Daniel M. Snyder (2)................ 3,126,541 12.7%
Michele D. Snyder (3)............... 1,113,990 4.5
Mortimer B. Zuckerman (4)........... 1,620,078 6.6
Fred Drasner (5).................... 783,535 3.2
Eran Broshy (6)..................... -- --
Dr. Robert Brown (6)................ 112,000 *
R. Jeremy Stone (6)................. -- --
Allan Avery (6)..................... 224,598 *
William C. Pollock (6).............. 12,430 *
All directors and executive officers
as a group (6) (9 persons)......... 6,993,172 27.4
</TABLE>
Based upon information available to Snyder concerning the ownership of shares
of Snyder common stock at August 6, 1999, no person, other than those listed in
the table above, is projected to 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
Beneficial Owner Distribution Percent of Class*
------------------- ------------ -----------------
<S> <C> <C>
Ark Asset Management Co., Inc. (7)......... 2,508,333 10.2%
Putnam Investments, Inc. (8)............... 2,975,278 12.0%
Capital Research and Management Co. (9).... 2,675,700 10.8%
</TABLE>
- - - --------
* Denotes less than 1%.
(1) Based upon 74,136,807 shares of Common Stock outstanding as of August 6,
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) Consists of shares held by USN College Marketing, L.P. ("College
Marketing") (a limited partnership in which USN College Marketing, Inc.
("USN Inc.") is the general partner and Fred Drasner is the sole limited
partner) and attributable to USN Inc.'s general partnership interest in
College Marketing. USN Inc. is owned one-third by Mortimer B. Zuckerman and
two-thirds by the MBZ Trust of 1996, for which an outside person acts as
the Trustee. Mr. Zuckerman is the sole director of USN Inc. Does not
include 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) Consists 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.
53
<PAGE>
(6) Does not include options that may be granted under Ventiv's 1999 Stock
Incentive Plan to Ventiv employees whose Snyder stock options are
terminated as a consequence of the distribution or $2,500,000 in restricted
Ventiv common stock to be granted to Mr. Broshy or $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. The address of Drs. Brown and Stone and Messrs. Avery and
Pollock is 200 Cottontail Lane, Vantage Court North, Somerset, New Jersey
08873.
(7) 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.
(8) 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").
(9) 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.
54
<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 August
6, 1999 and the distribution ratio, it is expected that 24,712,269 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.
55
<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.
56
<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.
57
<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.
58
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Ventiv Health, Inc.
Combined Financial Statements
Report of Independent Public Accountants.................................. F-2
Combined Balance Sheet as of December 31, 1998 and 1997 and June 30, 1999
(unaudited).............................................................. F-3
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-4
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-5
Notes to Combined Financial Statements.................................... F-6
CLI Pharma S.A.
Consolidated Financial Statements of Acquired Business
Report of Independent Public Accountants.................................. F-20
Consolidated Balance Sheet as of December 31, 1997........................ F-21
Consolidated Statement of Income for the year ended December 31, 1997..... F-22
Consolidated Statement of Equity for the year ended December 31, 1997..... F-23
Consolidated Statement of Cash Flows for the year ended December 31, 1997. F-24
Notes to Consolidated Financial Statements................................ F-25
</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 combined balance sheets of Ventiv Health,
Inc. (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 Ventiv Health, Inc.
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
Washington, D.C.
June 22, 1999
F-2
<PAGE>
VENTIV HEALTH, INC.
(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-3
<PAGE>
VENTIV HEALTH, INC.
(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... $ 0.51 $ 0.11 $ 0.06 $ (0.35) $ --
======== ======== ======== ======== ========
Pro forma adjusted net
income (loss) per share
(unaudited) (See Notes 1
and 3)
Basic and diluted net
income (loss) per share... $ 0.51 $ 0.11 $ 0.06 $ (0.43) $ (0.11)
======== ======== ======== ======== ========
Shares used in computing
net income (loss) per
share..................... 24,712 24,712 24,712 24,712 24,712
======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of this combined statement of
income.
F-4
<PAGE>
VENTIV HEALTH, INC.
(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-5
<PAGE>
VENTIV HEALTH, INC.
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 consummate the
Distribution in the third quarter of 1999 through a special dividend of one
share of common stock of a newly formed subsidiary, Ventiv Health, Inc. (as
defined below, the "Company"), 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 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, Inc.
F-6
<PAGE>
VENTIV HEALTH, INC.
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-7
<PAGE>
VENTIV HEALTH, INC.
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...................... 0.52 0.13 0.09 (0.35)
</TABLE>
The Company's other purchase business combinations are immaterial to the
combined financial statements.
F-8
<PAGE>
VENTIV HEALTH, INC.
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 August
6, 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-9
<PAGE>
VENTIV HEALTH, INC.
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-10
<PAGE>
VENTIV HEALTH, INC.
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-11
<PAGE>
VENTIV HEALTH, INC.
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-12
<PAGE>
VENTIV HEALTH, INC.
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-13
<PAGE>
VENTIV HEALTH, INC.
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-14
<PAGE>
VENTIV HEALTH, INC.
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-15
<PAGE>
VENTIV HEALTH, INC.
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-16
<PAGE>
VENTIV HEALTH, INC.
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, 185 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-17
<PAGE>
VENTIV HEALTH, INC.
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-18
<PAGE>
VENTIV HEALTH, INC.
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).............. (0.16) 0.27 (0.15) 0.10 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).............. (0.16) 0.27 (0.15) 0.10 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 historical net
income (loss) per share
(diluted).............. 0.01 0.11 (0.44) (0.03) (0.35)
Pro forma adjusted net
income (loss).......... (302) 2,281 (10,269) (2,410) (10,700)
Pro forma adjusted net
income (loss) per share
(diluted).............. (0.01) 0.09 (0.41) (0.10) (0.43)
</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.
F-19
<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-20
<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-21
<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-22
<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-23
<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-24
<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-25
<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-26
<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-27
<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, Inc. (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
Washington, D.C.
June 22, 1999
S-1
<PAGE>
VENTIV HEALTH, INC.
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 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
VENTIV HEALTH, INC.
The name of the corporation is Ventiv Health, Inc. The original
Certificate of Incorporation of the Corporation was filed with the Secretary of
State of the State of Delaware on June 22, 1999.
This Amended and Restated Certificate of Incorporation amends and, as
amended, restates in its entirety the Corporation's Certificate of Incorporation
and has been duly proposed by resolutions adopted by the Board of Directors of
the Corporation, duly adopted by the stockholders of the Corporation and duly
executed and acknowledged by an officer of the Corporation in accordance with
Sections 103, 228, 242 and 245 of the General Corporation Law of the State of
Delaware.
The text of the Certificate of Incorporation of the Corporation is
hereby amended and restated to read in its entirety:
FIRST: The name of the corporation (hereinafter referred to as the
"Corporation") is Ventiv Health, Inc.
SECOND: The address of the registered office of the Corporation in
the State of Delaware is c/o The Corporation Service Company, 1013 Centre Road,
City of Wilmington, County of New Castle, Delaware 19805. The name of the
registered agent of the Corporation in the State of Delaware at such address is
The Corporation Service Company.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware, as from time to time amended.
FOURTH: The total number of shares of capital stock which the
Corporation shall have the authority to issue is 60,000,000 shares, of which
50,000,000 shall be Common Stock, par value $0.001, and 10,000,000 of which
shall be Preferred Stock, par value $0.001, with such voting powers, if any,
preferences and relative, participating, optional and other special rights of
each such series and the qualifications, limitations and restrictions thereof,
if any, as the Board of Directors shall, in the exercise of its business
judgement, deem advisable. All shares of Common Stock shall be identical in all
respects and shall entitle the holders thereof to the same rights and
privileges, subject to the same qualifications, limitations and restrictions.
FIFTH: The name and mailing address of the incorporator is Maura
Mandell, c/o Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York, New York
10153. Upon filing this Amended and Restated Certificate of Incorporation, the
names of
<PAGE>
the persons who are to serve as directors until the first annual meeting of the
stockholders or until their successors are elected and qualify are Daniel M.
Snyder, Michele D. Snyder, Mortimer B. Zuckerman, Fred Drasner and Eran Broshy.
SIXTH: The business of the Corporation shall be managed by a board of
directors. Election of directors need not be by written ballot. The number of
directors that shall constitute the full Board shall be fixed by the By-laws of
the Corporation. Newly created directorships resulting from any increase in the
authorized number of directors and any vacancies on the Board resulting from
death, resignation, disqualification, removal or other cause shall be filled as
set forth in the By-laws of the Corporation.
SEVENTH: In furtherance and not in limitation of the powers conferred
by law, subject to any limitations contained elsewhere in this Amended and
Restated Certificate of Incorporation, By-laws of the Corporation may be
adopted, amended or repealed by a majority of the board of directors of the
Corporation, but any By-laws adopted by the board of directors may be amended or
repealed by the stockholders entitled to vote thereon.
EIGHTH: (a) A director of the Corporation shall not be personally
liable either to the Corporation or to any stockholder for monetary damages for
breach of fiduciary duty as a director, except (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, or (ii) for
acts or omissions which are not in good faith or which involve intentional
misconduct or knowing violation of the law, or (iii) for any matter in respect
of which such director shall be liable under Section 174 of Title 8 of the
General Corporation Law of the State of Delaware or any amendment thereto or
successor provision thereto, or (iv) for any transaction from which the director
shall have derived an improper personal benefit. Neither amendment nor repeal
of this paragraph (a) nor the adoption of any provision of the Certificate of
Incorporation of the Corporation inconsistent with this paragraph (a) shall
eliminate or reduce the effect of this paragraph (a) in respect of any matter
occurring, or any cause of action, suit or claim that, but for this paragraph
(a) of this Article, would accrue or arise, prior to such amendment, repeal or
adoption of an inconsistent provision.
(b) The Corporation shall have power to indemnify any person who was
or is a party or is threatened to be made a party to, or testifies in, any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative in nature, by reason of the fact that
such person is or was a director, officer, employee or agent of the Corporation,
or is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, employee
benefit plan, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding to
the full extent permitted by law, and the Corporation may adopt By-laws or enter
into agreements with any such person for the purpose of providing for such
indemnification.
(c) To the extent that a director or officer of the Corporation has
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred
2
<PAGE>
to in paragraph (b) of this Article, or in defense of any claim, issue or matter
therein, such person shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by such person in connection therewith.
(d) Expenses incurred by an officer, director, employee or agent in
defending or testifying in a civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that such director or officer is not entitled
to be indemnified by the Corporation against such expenses as authorized by this
Article, and the Corporation may adopt By-laws or enter into agreements with
such persons for the purpose of providing for such advances.
(e) The indemnification permitted by this Article shall not be deemed
exclusive of any other rights to which any person may be entitled under any
agreement, vote of stockholders or disinterested directors or otherwise, both as
to action in such person's official capacity and as to action in another
capacity while holding an office, and shall continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such person.
(f) The Corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, employee benefit plan trust or other enterprise against any
liability asserted against such person and incurred by such person in any such
capacity, or arising out of such person's status as such, whether or not the
Corporation would have the power to indemnify such person against such liability
under the provisions of this Article or otherwise.
(g) A director of the Corporation shall not in the absence of fraud be
disqualified by the holding of such office from dealing or contracting with the
Corporation either as a vendor, as a purchaser or otherwise, nor in the absence
of fraud shall a director of the Corporation be liable to account to the
Corporation for any profit realized by said director, from or through any
transaction or contract of the Corporation by reason of the fact that said
director, or any firm of which said director is a member, or any corporation of
which said director is an officer, director or stockholder, was interested in
such transaction or contract if such transaction or contract has been
authorized, approved or ratified in the manner provided in the Business
Corporation Law of the State of Delaware for authorization, approval or
ratification of transactions or contracts between the Corporation and one or
more of its directors or officers, or between the Corporation and any other
corporation, partnership, association or other organization in which one or more
of its directors or officers are directors or officers or have a financial
interest.
NINTH: The Corporation is to have perpetual existence.
3
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Amended and
Restated Certificate of Incorporation to be duly executed by _____________, its
___________________________, and attested by _____________, its ______________,
as of this __ day of _________________, 1999.
VENTIV HEALTH, INC.
By:
------------------------------
Name:
Title:
ATTEST:
- - - ----------------------------
Name:
Title: Secretary
4
<PAGE>
Exhibit 3.2
BY-LAWS
OF
VENTIV HEALTH, INC.
(a Delaware corporation)
ARTICLE I
Stockholders
------------
SECTION 1. Annual Meetings. The annual meeting of stockholders for the
---------------
election of directors and for the transaction of such other business as may
properly come before the meeting shall be held each year at such date and time,
within or without the State of Delaware, as the Board of Directors shall
determine.
SECTION 2. Special Meetings. Special meetings of stockholders for the
----------------
transaction of such business as may properly come before the meeting may be
called by order of the Board of Directors or by stockholders holding together at
least a majority of all the shares of the Corporation entitled to vote at the
meeting, and shall be held at such date and time, within or without the State of
Delaware, as may be specified by such order. Whenever the directors shall fail
to fix such place, the meeting shall be held at the principal executive office
of the Corporation.
SECTION 3. Notice of Meetings. Written notice of all meetings of the
------------------
stockholders shall be mailed or delivered to each stockholder not less than ten
(10) nor more than sixty (60) days prior to the meeting. Notice of any special
meeting shall state in general terms the purpose or purposes for which the
meeting is to be held. If mailed, such notice shall be deemed to have been
given when deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the Corporation.
SECTION 4. Place of Meetings. All meetings of the stockholders shall be
-----------------
held at such places either within or without the State of Delaware as shall be
designated from time to time by the Board of Directors and stated in the notice
of the meeting or in a duly executed waiver of notice thereof.
SECTION 5. Stockholder Lists. The officer who has charge of the stock
-----------------
ledger of the Corporation shall prepare and make, at least ten (10) days before
every meeting of stockholders, a complete list of the stockholders entitled to
vote at the meeting, arranged in alphabetical order, and showing the address of
each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder, for
any purpose germane to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
<PAGE>
The stock ledger shall be the only evidence as to who are the stockholders
entitled to examine the stock ledger, the list required by this section or the
books of the Corporation, or to vote in person or by proxy at any meeting of
stockholders.
SECTION 6. Quorum. Except as otherwise provided by law or the
------
Corporation's Certificate of Incorporation, a quorum for the transaction of
business at any meeting of stockholders shall consist of the holders of record
of a majority of the issued and outstanding shares of the capital stock of the
Corporation entitled to vote at the meeting, present in person or by proxy. At
all meetings of the stockholders at which a quorum is present, all matters,
except as otherwise provided by law or the Certificate of Incorporation, shall
be decided by the vote of the holders of a majority of the shares entitled to
vote thereat present in person or by proxy. If there be no such quorum, the
holders of a majority of such shares so present or represented may adjourn the
meeting from time to time, without further notice, until a quorum shall have
been obtained. At such adjourned meeting, at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the original meeting. If the adjournment is for more than thirty (30) days, or
if after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting. When a quorum is once present it is not broken
by the subsequent withdrawal of any stockholder.
SECTION 7. Organization. Meetings of stockholders shall be presided over
------------
by one of the Co-Chairpersons, if any, or in the Co-Chairperson's absence the
Vice-Chairman, if any, or if none or in the Vice-Chairman's absence the
President, if any, or if none or in the President's absence a Vice-President,
or, if none of the foregoing is present, by a chairman to be chosen by the
stockholders entitled to vote who are present in person or by proxy at the
meeting. The Secretary of the Corporation, or in the Secretary's absence an
Assistant Secretary, shall act as secretary of every meeting, but if neither the
Secretary nor an Assistant Secretary is present, the presiding officer of the
meeting shall appoint any person present to act as secretary of the meeting.
SECTION 8. Voting; Proxies; Required Vote. (a) At each meeting of
------------------------------
stockholders, every stockholder shall be entitled to vote in person or by proxy
appointed by instrument in writing, subscribed by such stockholder or by such
stockholder's duly authorized attorney-in-fact (but no such proxy shall be voted
or acted upon after three (3) years from its date, unless the proxy provides for
a longer period), and, unless the Certificate of Incorporation provides
otherwise, shall have one vote for each share of stock entitled to vote
registered in the name of such stockholder on the books of the Corporation on
the applicable record date fixed pursuant to these By-laws. At all elections of
directors the voting may but need not be by ballot and a plurality of the votes
cast there shall elect. Except as otherwise required by law or the Certificate
of Incorporation, any other action shall be authorized by a majority of the
votes cast.
(b) Any action required or permitted to be taken at any meeting of
stockholders may, except as otherwise required by law or the Certificate of
Incorporation, be taken without a meeting, without prior notice and without a
vote, if a consent in writing, setting forth the action so taken, shall be
signed by the holders of record of the issued and outstanding capital stock of
the Corporation having a majority of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted, and the writing or writings are filed with the permanent
records of the Corporation.
2
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Prompt notice of the taking of corporate action without a meeting by less than
unanimous written consent shall be given to those stockholders who have not
consented in writing.
(c) Where a separate vote by a class or classes, present in person or
represented by proxy, shall constitute a quorum entitled to vote on that matter,
the affirmative vote of the majority of shares of such class or classes present
in person or represented by proxy at the meeting shall be the act of such class,
unless otherwise provided in the Corporation's Certificate of Incorporation.
SECTION 9. Inspectors. The Board of Directors, in advance of any meeting,
----------
may, but need not, appoint one or more inspectors of election to act at the
meeting or any adjournment thereof. If an inspector or inspectors are not so
appointed, the person presiding at the meeting may, but need not, appoint one or
more inspectors. In case any person who may be appointed as an inspector fails
to appear or act, the vacancy may be filled by appointment made by the directors
in advance of the meeting or at the meeting by the person presiding thereat.
Each inspector, if any, before entering upon the discharge of his or her duties,
shall take and sign an oath faithfully to execute the duties of inspector at
such meeting with strict impartiality and according to the best of his ability.
The inspectors, if any, shall determine the number of shares of stock
outstanding and the voting power of each, the shares of stock represented at the
meeting, the existence of a quorum, and the validity and effect of proxies, and
shall receive votes, ballots or consents, hear and determine all challenges and
questions arising in connection with the right to vote, count and tabulate all
votes, ballots or consents, determine the result, and do such acts as are proper
to conduct the election or vote with fairness to all stockholders. On request of
the person presiding at the meeting, the inspector or inspectors, if any, shall
make a report in writing of any challenge, question or matter determined by such
inspector or inspectors and execute a certificate of any fact found by such
inspector or inspectors.
ARTICLE II
Board of Directors
------------------
SECTION 1. General Powers. The business, property and affairs of the
--------------
Corporation shall be managed by, or under the direction of, the Board of
Directors.
SECTION 2. Qualification; Number; Term; Remuneration. (a) Each director
-----------------------------------------
shall be at least 18 years of age. A director need not be a stockholder, a
citizen of the United States, or a resident of the State of Delaware. The number
of directors constituting the entire Board shall be seven (7), or such larger
number as may be fixed from time to time by action of the stockholders or Board
of Directors, one of whom may be selected by the Board of Directors to be its
Chairman. The use of the phrase "entire Board" herein refers to the total number
of directors which the Corporation would have if there were no vacancies.
(b) Directors who are elected at an annual meeting of stockholders, and
directors who are elected in the interim to fill vacancies and newly created
directorships, shall hold office until the next annual meeting of stockholders
and until their successors are elected and qualified or until their earlier
resignation or removal.
3
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(c) Directors may be paid their expenses, if any, of attendance at each
meeting of the Board of Directors and may be paid a fixed sum for attendance at
each meeting of the Board of Directors or a stated salary as director. No such
payment shall preclude any director from serving the Corporation in any other
capacity and receiving compensation therefor. Members of special or standing
committees may be allowed like compensation for attending committee meetings.
SECTION 3. Quorum and Manner of Voting. Except as otherwise provided by
---------------------------
law, a majority of the entire Board shall constitute a quorum. A majority of the
directors present, whether or not a quorum is present, may adjourn a meeting
from time to time to another time and place without notice. The vote of the
majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors.
SECTION 4. Places of Meetings. Meetings of the Board of Directors may be
------------------
held at any place within or without the State of Delaware, as may from time to
time be fixed by resolution of the Board of Directors, or as may be specified in
the notice of meeting.
SECTION 5. Annual Meeting. Following the annual meeting of stockholders,
--------------
the newly elected Board of Directors shall meet for the purpose of the election
of officers and the transaction of such other business as may properly come
before the meeting. Such meeting may be held without notice immediately after
the annual meeting of stockholders at the same place at which such stockholders'
meeting is held.
SECTION 6. Regular Meetings. Regular meetings of the Board of Directors
----------------
shall be held at such times and places as the Board of Directors shall from time
to time by resolution determine. Notice need not be given of regular meetings of
the Board of Directors held at times and places fixed by resolution of the Board
of Directors.
SECTION 7. Special Meetings. Special meetings of the Board of Directors
----------------
shall be held whenever called by either of the Co-Chairpersons of the Board or
by a majority of the directors then in office.
SECTION 8. Notice of Meetings. A notice of the place, date and time and
------------------
the purpose or purposes of each meeting of the Board of Directors shall be given
to each director by mailing the same at least two days before any special
meeting, or by telegraphing or telephoning the same or by delivering the same
personally not later than the day before the day of the meeting.
SECTION 9. Participation By Conference Telephone. Members of the Board of
-------------------------------------
Directors, or any committee thereof, may participate in a meeting of the board
or any committee by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this subsection shall
constitute presence in person at such meeting.
SECTION 10. Organization. At all meetings of the Board of Directors, one
------------
of the Co-Chairpersons, if any, or in the Co-Chairperson's absence or inability
to act the President, or in the President's absence or inability to act any
Vice-President who is a member of the Board of
4
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Directors, or in such Vice-President's absence or inability to act a chairman
chosen by the directors, shall preside.
SECTION 11. Resignation. Any director may resign at any time upon written
-----------
notice to the Corporation and such resignation shall take effect upon receipt
thereof by the President or Secretary, unless otherwise specified in the
resignation. Any or all of the directors may be removed, with or without cause,
by the holders of a majority of the shares of stock outstanding and entitled to
vote for the election of directors.
SECTION 12. Vacancies. Unless otherwise provided in these By-laws,
---------
vacancies on the Board of Directors, whether caused by resignation, death,
disqualification, removal, an increase in the authorized number of directors or
otherwise, may be filled by the affirmative vote of a majority of the remaining
directors, although less than a quorum, or by a sole remaining director, or at a
special meeting of the stockholders, by the holders of shares entitled to vote
for the election of directors.
SECTION 13. Action by Written Consent. Any action required or permitted to
-------------------------
be taken at any meeting of the Board of Directors may be taken without a meeting
if all the directors consent thereto in writing, and the writing or writings are
filed with the minutes of proceedings of the Board of Directors.
ARTICLE III
Committees
----------
SECTION 1. Appointment. From time to time the Board of Directors by a
-----------
resolution adopted by a majority of the entire Board may appoint any committee
or committees for any purpose or purposes, to the extent lawful, which shall
have powers as shall be determined and specified by the Board of Directors in
the resolution of appointment. Each committee may consist of one or more of the
directors of the Corporation. The Board of Directors may designate one or more
directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. Any such committee, to the
extent provided in the resolution, and subject to any restrictions imposed by
statute, shall have and may exercise the powers of the Board of Directors in the
management of the business and affairs of the Corporation, and may authorize the
seal of the Corporation to be affixed to all papers which may require it;
provided, however, that in the absence or disqualification of any member of such
- - - -------- -------
committee or committees, the member on members thereof present at any meeting
and not disqualified from voting, whether or not he, she or they constitute a
quorum, may unanimously appoint another member of the Board of Directors to act
at the meeting in the place of any such absent or disqualified member.
SECTION 2. Procedures, Quorum and Manner of Acting. Each committee shall
---------------------------------------
fix its own rules of procedure, and shall meet where and as provided by such
rules or by resolution of the Board of Directors. Except as otherwise provided
by law, the presence of a majority of the then appointed members of a committee
shall constitute a quorum for the transaction of business by that committee, and
in every case where a quorum is present the affirmative vote of a majority of
the members of the committee present shall be the act of the
5
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committee. Each committee shall keep minutes of its proceedings, and actions
taken by a committee shall be reported to the Board of Directors.
SECTION 3. Minutes of Committee Meetings. Each committee shall keep regular
-----------------------------
minutes of its meetings and report the same to the Board of Directors when
required.
SECTION 4. Action by Written Consent. Any action required or permitted to
-------------------------
be taken at any meeting of any committee of the Board of Directors may be taken
without a meeting if all the members of the committee consent thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the committee.
SECTION 5. Term; Termination. In the event any person shall cease to be a
-----------------
director of the Corporation, such person shall simultaneously therewith cease to
be a member of any committee appointed by the Board of Directors.
ARTICLE IV
Officers
--------
SECTION 1. Election and Qualifications. The Board of Directors shall elect
---------------------------
the officers of the Corporation, which shall include a President and a
Secretary, and may include, by election or appointment, one or more Vice-
Presidents (any one or more of whom may be given an additional designation of
rank or function), a Treasurer and such assistant secretaries, such Assistant
Treasurers and such other officers as the Board may from time to time deem
proper. Each officer shall have such powers and duties as may be prescribed by
these By-laws and as may be assigned by the Board of Directors or the President.
Any two or more offices may be held by the same person except the offices of
President and Secretary.
SECTION 2. Term of Office and Remuneration. The term of office of all
-------------------------------
officers shall be one year and until their respective successors have been
elected and qualified, but any officer may be removed from office, either with
or without cause, at any time by the Board of Directors. Any vacancy in any
office arising from any cause may be filled for the unexpired portion of the
term by the Board of Directors. The remuneration of all officers of the
Corporation may be fixed by the Board of Directors or in such manner as the
Board of Directors shall provide.
SECTION 3. Resignation; Removal. Any officer may resign at any time upon
--------------------
written notice to the Corporation and such resignation shall take effect upon
receipt thereof by the President or Secretary, unless otherwise specified in the
resignation. Any officer shall be subject to removal, with or without cause, at
any time by vote of a majority of the entire Board.
SECTION 4. Co-Chairpersons of the Board. One of the Co-Chairpersons of the
----------------------------
Board of Directors, if there be one, shall preside at all meetings of the Board
of Directors and shall have such other powers and duties as may from time to
time be assigned by the Board of Directors.
6
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SECTION 5. President and Chief Executive Officer. The President shall be
-------------------------------------
the chief executive officer of the Corporation, and shall have such duties as
customarily pertain to that office. The President shall have general management
and supervision of the property, business and affairs of the Corporation and
over its other officers; may appoint and remove assistant officers and other
agents and employees[, other than officers referred to in Section 1 of this
Article IV]; and may execute and deliver in the name of the Corporation powers
of attorney, contracts, bonds and other obligations and instruments.
SECTION 6. Chief Executive Officer. The Chief Executive Officer may sign,
-----------------------
on behalf of the Corporation, certificates for shares of the Corporation, any
deeds, mortgages, bonds, contracts or other instruments which the Board of
Directors has authorized to be executed, except in cases where the signing and
execution thereof shall be expressly delegated by the Board of Directors or by
these By-laws to some other officer or agent of the Corporation, or shall be
required by law to be otherwise signed or executed.
SECTION 7. Vice-President. A Vice-President may execute and deliver in the
--------------
name of the Corporation contracts and other obligations and instruments
pertaining to the regular course of the duties of said office, and shall have
such other authority as from time to time may be assigned by the Board of
Directors or the President.
SECTION 8. Treasurer. The Treasurer shall in general have all duties
---------
incident to the position of Treasurer and such other duties as may be assigned
by the Board of Directors or the President.
SECTION 9. Secretary. The Secretary shall in general have all the duties
---------
incident to the office of Secretary and such other duties as may be assigned by
the Board of Directors or the President.
SECTION 10. Assistant Officers. Any assistant officer shall have such
------------------
powers and duties of the officer such assistant officer assists as such officer
or the Board of Directors shall from time to time prescribe.
ARTICLE V
Books and Records
-----------------
SECTION 1. Location. The books and records of the Corporation may be kept
--------
at such place or places within or outside the State of Delaware as the Board of
Directors or the respective officers in charge thereof may from time to time
determine. The record books containing the names and addresses of all
stockholders, the number and class of shares of stock held by each and the dates
when they respectively became the owners of record thereof shall be kept by the
Secretary as prescribed in the By-laws and by such officer or agent as shall be
designated by the Board of Directors.
SECTION 2. Addresses of Stockholders. Notices of meetings and all other
-------------------------
corporate notices may be delivered personally or mailed to each stockholder at
the stockholder's address as it appears on the records of the Corporation.
7
<PAGE>
SECTION 3. Fixing Date for Determination of Stockholders of Record. (a) In
-------------------------------------------------------
order that the Corporation may determine the stockholders entitled to notice of
or to vote at any meeting of stockholders or any adjournment thereof, the Board
of Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which record date shall not be more than sixty (60) nor less than
ten (10) days before the date of such meeting. If no record date is fixed by the
Board of Directors, the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any adjournment
of the meeting; provided, however, that the Board of Directors may fix a new
record date for the adjourned meeting.
(b) In order that the Corporation may determine the stockholders entitled
to consent to corporate action in writing without a meeting, the Board of
Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which date shall not be more than ten (10) days after the date
upon which the resolution fixing the record date is adopted by the Board of
Directors. If no record date has been fixed by the Board of Directors, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting, when no prior action by the Board of Directors is
required, shall be the first date on which a signed written consent setting
forth the action taken or proposed to be taken is delivered to the Corporation
by delivery to its registered office in this State, its principal place of
business, or an officer or agent of the Corporation having custody of the book
in which proceedings of meetings of stockholders are recorded. Delivery made to
the Corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested. If no record date has been fixed by
the Board of Directors and prior action by the Board of Directors is required by
this chapter, the record date for determining stockholders entitled to consent
to corporate action in writing without a meeting shall be at the close of
business on the day on which the Board of Directors adopts the resolution taking
such prior action.
(c) In order that the Corporation may determine the stockholders entitled
to receive payment of any dividend or other distribution or allotment of any
rights or the stockholders entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action, the Board of Directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall not be more than sixty (60) days prior to
such action. If no record date is fixed, the record date for determining
stockholders for any such purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto.
8
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ARTICLE VI
Certificates Representing Stock
-------------------------------
SECTION 1. Certificates; Signatures. The shares of the Corporation shall
------------------------
be represented by certificates, provided that the Board of Directors of the
Corporation may provide by resolution or resolutions that some or all of any or
all classes or series of its stock shall be uncertificated shares. Any such
resolution shall not apply to shares represented by a certificate until such
certificate is surrendered to the Corporation. Notwithstanding the adoption of
such a resolution by the Board of Directors, every holder of stock represented
by certificates and upon request every holder of uncertificated shares shall be
entitled to have a certificate, signed by or in the name of the Corporation by
the Co-Chairpersons or Vice-Chairperson of the Board of Directors, or the
President or Vice-President, and by the Treasurer or an Assistant Treasurer, or
the Secretary or an Assistant Secretary of the Corporation, representing the
number of shares registered in certificate form. All certificates for shares of
the Corporation shall be consecutively numbered or otherwise identified. The
name and address of the person to whom the shares of the Corporation represented
thereby are issued, with the number of shares of the Corporation and date of
issue, shall be entered on the stock transfer books of the Corporation. Any and
all signatures on any such certificate may be facsimiles. In case any officer,
transfer agent or registrar who has signed or whose facsimile signature has been
placed upon a certificate shall have ceased to be such officer, transfer agent
or registrar before such certificate is issued, it may be issued by the
Corporation with the same effect as if he were such officer, transfer agent or
registrar at the date of issue. The name of the holder of record of the shares
represented thereby, with the number of such shares and the date of issue, shall
be entered on the books of the Corporation. The Board of Directors shall have
power and authority to make all such rules and regulations as it may deem
expedient concerning the issue, transfer and registration of certificates
representing shares of the Corporation.
SECTION 2. Transfers of Stock. Upon compliance with provisions restricting
------------------
the transfer or registration of transfer of shares of stock, if any, shares of
capital stock shall be transferable on the books of the Corporation only by the
holder of record thereof in person, or by duly authorized attorney, upon
surrender and cancellation of certificates for a like number of shares, properly
endorsed, and the payment of all taxes due thereon.
SECTION 3. Fractional Shares. The Corporation may, but shall not be
-----------------
required to, issue certificates for fractions of a share where necessary to
effect authorized transactions, or the Corporation may pay in cash the fair
value of fractions of a share as of the time when those entitled to receive such
fractions are determined, or it may issue scrip in registered or bearer form
over the manual or facsimile signature of an officer of the Corporation or of
its agent, exchangeable as therein provided for full shares, but such scrip
shall not entitle the holder to any rights of a stockholder except as therein
provided.
SECTION 4. Lost, Stolen or Destroyed Certificates. The Corporation may
--------------------------------------
issue a new certificate of stock in place of any certificate, theretofore issued
by it, alleged to have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the owner claiming the certificate of stock to be
lost, stolen or destroyed. The Board of Directors may require the owner of any
lost, stolen or destroyed certificate, or his legal representative, to give the
Corporation a bond sufficient to indemnify the Corporation against any claim
that may be made against it on
9
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account of the alleged loss, theft or destruction of any such certificate or the
issuance of any such new certificate.
SECTION 5. Registered Stockholders. The Corporation shall be entitled to
-----------------------
treat the record holder of any shares of stock of the Corporation as the owner
thereof for all purposes, including all rights deriving from such shares, and
except as required by law shall not be bound to recognize any equitable or other
claim to, or interest in, such shares or rights deriving from such shares, on
the part of any other person, including, but without limiting the generality
thereof, a purchaser, assignee or transferee of such shares or rights deriving
from such shares, unless and until such purchaser, assignee, transferee or other
person becomes the record holder of such shares, whether or not the Corporation
shall have either actual or constructive notice of the interest of such
purchaser, assignee, transferee or other person. Any such purchaser, assignee,
transferee or other person shall not be entitled to receive notice of the
meetings of stockholders, to vote at such meetings, to examine a complete list
of the stockholders entitled to vote at meetings, or to own, enjoy, and exercise
any other property or rights deriving from such shares against the Corporation,
until such purchaser, assignee, transferee or other person has become the record
holder of such shares.
SECTION 6. Voting Shares in Other Corporations. In the absence of other
-----------------------------------
arrangements by the Board of Directors, shares of stock issued by any other
corporation and owned or controlled by this Corporation may be voted at any
stockholders' meeting of the other corporation by the Chief Executive Officer of
this Corporation, if any, the President of this Corporation or, if he or she is
not present at the meeting, by the Chief Operating Officer of this Corporation,
if any, or if so determined by the Board of Directors, by a Vice President of
the Corporation designated by the Board of Directors, and in the event that none
of the Chief Executive Officer, the President, the Chief Operating Officer or
such Vice President are present at a meeting, the shares may be voted by such
person as the President and Secretary of this Corporation shall by duly executed
proxy designate to represent this Corporation.
ARTICLE VII
Dividends
---------
Subject always to the provisions of law and the Certificate of
Incorporation, the Board of Directors shall have full power to determine whether
any, and, if any, what part of any, funds legally available for the payment of
dividends shall be declared as dividends and paid to stockholders; the division
of the whole or any part of such funds of the Corporation shall rest wholly
within the lawful discretion of the Board of Directors, and it shall not be
required at any time, against such discretion, to divide or pay any part of such
funds among or to the stockholders as dividends or otherwise; and before payment
of any dividend, there may be set aside out of any funds of the Corporation
available for dividends such sum or sums as the Board of Directors from time to
time, in its absolute discretion, thinks proper as a reserve or reserves to meet
contingencies, or for equalizing dividends, or for repairing or maintaining any
property of the Corporation, or for such other purpose as the Board of Directors
shall think conducive to the interest of the Corporation, and the Board of
Directors may modify or abolish any such reserve in the manner in which it was
created.
10
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ARTICLE VIII
Ratification
------------
Any transaction, questioned in any law suit on the ground of lack of
authority, defective or irregular execution, adverse interest of director,
officer or stockholder, non-disclosure, miscomputation, or the application of
improper principles or practices of accounting, may be ratified before or after
judgment, by the Board of Directors or by the stockholders, and if so ratified
shall have the same force and effect as if the questioned transaction had been
originally duly authorized. Such ratification shall be binding upon the
Corporation and its stockholders and shall constitute a bar to any claim or
execution of any judgment in respect of such questioned transaction.
ARTICLE IX
Corporate Seal
--------------
The corporate seal shall have inscribed thereon the name of the Corporation
and the year of its incorporation, and shall be in such form and contain such
other words and/or figures as the Board of Directors shall determine. The
corporate seal may be used by printing, engraving, lithographing, stamping or
otherwise making, placing or affixing, or causing to be printed, engraved,
lithographed, stamped or otherwise made, placed or affixed, upon any paper or
document, by any process whatsoever, an impression, facsimile or other
reproduction of said corporate seal.
ARTICLE X
Fiscal Year
-----------
The fiscal year of the Corporation shall be fixed, and shall be subject to
change, by the Board of Directors. Unless otherwise fixed by the Board of
Directors, the fiscal year of the Corporation shall be the calendar year.
ARTICLE XI
NOTICE
------
SECTION 1. Manner of Giving Notice. Whenever by these By-laws or the
-----------------------
Certificate of Incorporation or by law notice is required to be given to any
director or stockholder, it shall not be construed to require personal notice,
but such notice may be given in writing, by mail, addressed to such director or
stockholder, at his address as it appears on the records of the Corporation,
with postage thereon prepaid, and such notice shall be deemed to be given at the
time when the same shall be deposited in the United States mail. Notice may
also be given by telegram, express courier, or facsimile.
11
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SECTION 2. Waiver of Notice. Whenever notice is required to be given by
----------------
these By-laws or by the Certificate of Incorporation or by law, a written waiver
thereof, signed by the person or persons entitled to said notice, whether before
or after the time stated therein, shall be deemed equivalent to notice.
ARTICLE XII
Bank Accounts, Drafts, Contracts, Etc.
--------------------------------------
SECTION 1. Bank Accounts and Drafts. In addition to such bank accounts as
------------------------
may be authorized by the Board of Directors, the primary financial officer or
any person designated by said primary financial officer, whether or not an
employee of the Corporation, may authorize such bank accounts to be opened or
maintained in the name and on behalf of the Corporation as he may deem necessary
or appropriate, payments from such bank accounts to be made upon and according
to the check of the Corporation in accordance with the written instructions of
said primary financial officer, or other person so designated by the Treasurer.
SECTION 2. Contracts. The Board of Directors may authorize any person or
---------
persons, in the name and on behalf of the Corporation, to enter into or execute
and deliver any and all deeds, bonds, mortgages, contracts and other obligations
or instruments, and such authority may be general or confined to specific
instances.
SECTION 3. Proxies; Powers of Attorney; Other Instruments. The Co-
----------------------------------------------
Chairpersons, the President or any other person designated by any of them shall
have the power and authority to execute and deliver proxies, powers of attorney
and other instruments on behalf of the Corporation in connection with the rights
and powers incident to the ownership of stock by the Corporation. The Co-
Chairpersons, the President or any other person authorized by proxy or power of
attorney executed and delivered by either of them on behalf of the Corporation
may attend and vote at any meeting of stockholders of any company in which the
Corporation may hold stock, and may exercise on behalf of the Corporation any
and all of the rights and powers incident to the ownership of such stock at any
such meeting, or otherwise as specified in the proxy or power of attorney so
authorizing any such person. The Board of Directors, from time to time, may
confer like powers upon any other person.
SECTION 4. Financial Reports. The Board of Directors may appoint the
-----------------
primary financial officer or other fiscal officer or any other officer to cause
to be prepared and furnished to stockholders entitled thereto any special
financial notice and/or financial statement, as the case may be, which may be
required by any provision of law.
ARTICLE XIII
Amendments
----------
The Board of Directors shall have power to adopt, amend or repeal By-laws.
By-laws adopted by the Board of Directors may be repealed or changed, and new
By-laws made,
12
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by the stockholders, and the stockholders may prescribe that any By-law made by
them shall not be altered, amended or repealed by the Board of Directors.
ARTICLE XIV
Indemnification of Directors and Officers
-----------------------------------------
SECTION 1. Definitions. As used in this article, the term "person" means
-----------
any past, present or future director or officer of the Corporation or any
subsidiary or operating division thereof.
SECTION 2. Indemnification Granted. The Corporation shall indemnify, to
-----------------------
the full extent and under the circumstances permitted by the General Corporation
Law of the State of Delaware in effect from time to time, any person as defined
above, made or threatened to be made a party to any threatened, pending or
completed action, suit or proceeding. whether civil, criminal, administrative or
investigative, by reason of the fact that such person is or was a director or
officer of the Corporation or a subsidiary or operating division thereof, or is
or was an employee or agent of the Corporation, or is or was serving at the
specific request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise, or
by reason of any action alleged to have been taken or omitted in such capacity,
against costs, charges, expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person
or on such person's behalf in connection with such action, suit or proceeding
and any appeal therefrom, if such person acted in good faith and in a manner he
or she reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe that his or her conduct was unlawful. The
termination of any action, suit, or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he or she reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that such conduct was unlawful.
SECTION 3. Requirements for Indemnification. The Corporation shall
--------------------------------
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that such
person is or was a director, officer, employee or agent of the corporation, or a
subsidiary thereof or a designated officer of an operating division of the
Corporation, or is or was serving at the specific request of the Corporation as
a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, or by reason of any action alleged to
have been taken or omitted in such capacity, against costs, charges and expenses
(including attorneys' fees) actually and reasonably incurred by such person or
on such person's behalf in connection with the defense or settlement of such
action or suit and any appeal therefrom, if such person acted in good faith and
in a manner that such person reasonably believed to be in or not opposed to the
best interests of the Corporation except that no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation unless and only to the extent that the
Court of Chancery of Delaware or the court in which such action or suit was
brought shall
13
<PAGE>
determine upon application that, despite the adjudication of such liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such costs, charges and expenses which the
Court of Chancery or such other court shall deem proper.
SECTION 4. Success on Merits of any Action. Notwithstanding any other
-------------------------------
provision of this Article, to the extent that a director, officer, employee or
agent of the corporation or any subsidiary or operating division thereof has
been successful on the merits or otherwise, including, without limitation, the
dismissal of an action without prejudice, in defense of any action, suit or
proceeding referred to in this Article, or in defense of any claim, issue or
matter therein, such person shall be indemnified against all costs, charges and
expenses (including attorneys' fees) actually and reasonably incurred by such
person or on such person's behalf in connection therewith.
SECTION 5. Determination of Standard of Conduct. Any indemnification under
------------------------------------
Sections 2 and 3 of this Article (unless ordered by a court) shall be paid by
the Corporation only after a determination has been made (1) by the board of
directors by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or (2) if such quorum is not
obtainable, or even if obtainable, a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (3) by the
stockholders, that indemnification of the director, officer, employee or agent
is proper in the circumstances of the specific case because such person has met
the applicable standard of conduct set forth in Sections 2 and 3 of this
Article.
SECTION 6. Advance Payment; Representation by Corporation. Costs, charges
----------------------------------------------
and expenses (including attorneys' fees) incurred by a person referred to in
Sections 2 and 3 of this Article in defending a civil or criminal action, suit
or proceeding shall be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding; provided, however, that the
-------- -------
payment of such costs, charges and expenses incurred by a director or officer in
such capacity as officer or director (and not in any other capacity and which
service was or is rendered by such person while a director or officer) in
advance of the final disposition of such action, suit or proceeding shall be
made only upon receipt of an undertaking by or on behalf of the director or
officer to repay all amounts so advanced in the event that it shall ultimately
be determined that such director or officer is not entitled to be indemnified by
the Corporation as authorized in this Article. Such costs, charges and expenses
incurred by other employees and agents may be so paid upon such terms and
conditions, if any, as the board of directors deems appropriate. The Corporation
may, in the manner set forth above, and upon approval of such director, officer,
employee or agent, authorize the Corporation's counsel to represent such person,
in any action, suit or proceeding, whether or not the Corporation is a party to
such action, suit or proceeding.
SECTION 7. Procedure for Obtaining Indemnity. Any indemnification under
---------------------------------
Sections 2, 3 and 4, or advance of costs, charges and expenses under Section 6
of this Article, shall be made promptly, and in any event within sixty (60)
days, of the written notice of the director, officer, employee or agent. The
right to indemnification or advances as granted by this Article shall be
enforceable by the director, officer, employee or agent in any court of
competent jurisdiction if the Corporation denies such request, in whole or in
part, or if no disposition thereof is made within sixty (60) days. Such
person's costs and expenses incurred in connection with successfully
establishing a right to indemnification, in whole or in part, in any such action
14
<PAGE>
shall also be indemnified by the Corporation. It shall be a defense to any such
action (other than an action brought to enforce a claim for the advance of
costs, charges and expenses under Section 6 of this Article where the required
undertaking, if any, has been received by the Corporation) that the claimant has
not met the standard of conduct set forth in Section 2 or 3 of this Article, but
the burden of proving such defense shall be on the Corporation. Neither failure
of the Corporation (including its board of directors, its independent legal
counsel, and its stockholders) to have made a determination that indemnification
of the claimant is proper in the circumstances because such person has met the
applicable standard of conduct set forth in Section 2 or 3 of this Article, nor
the fact that there has been an actual determination by the Corporation
(including its board of directors, its independent legal counsel, and its
stockholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard of conduct.
SECTION 8. Indemnification Not Exclusive. This right of indemnification
-----------------------------
shall not be deemed exclusive of any other rights to which a person indemnified
herein may be entitled by law, agreements vote of stockholders or disinterested
directors or otherwise, and shall continue as to a person who has ceased to be a
director, officer, designated officer, employee or agent and shall inure to the
benefit of the heirs, executors, administrators and other legal representatives
of such person. It is not intended that the provisions of this article be
applicable to, and they are not to be construed as granting indemnity with
respect to, matters as to which indemnification would be in contravention of the
laws of Delaware or of the United States of America, whether as a matter of
public policy or pursuant to statutory provision.
SECTION 9. Invalidity of Certain Provisions. If this Article or any
--------------------------------
portion hereof shall be invalidated on any ground by any court of competent
jurisdictions, then the Corporation shall nevertheless indemnify each director,
officer, employee and agent of the Corporation or any subsidiary or operating
division thereof as to costs, charges and expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement with respect to any action, suit
or proceeding, whether civil, criminal, administrative or investigative,
including any action by or in the right of the Corporation, to the full extent
permitted by any applicable portion of this Article that shall not have been
invalidated and to the full extent permitted by applicable law.
SECTION 10. Miscellaneous. The board of directors may also on behalf of
-------------
the Corporation grant indemnification to any individual other than a person
defined herein to such extent and in such manner as the board in its sole
discretion may from time to time and at any time determine.
15
<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
Page
----
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
i
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TABLE OF CONTENTS
(continued)
Page
----
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
ii
<PAGE>
TABLE OF CONTENTS
(continued)
Page
----
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
iii
<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 directly and 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:
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.
<PAGE>
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 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.
2
<PAGE>
Cut-Off Date: the last day of the calendar month immediately
preceding the Distribution Date or, if such day is less than fourteen (14)
days before the Distribution Date, the last day of the next preceding
calendar month.
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.
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 state and local income 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,
3
<PAGE>
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 occurrence 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) 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 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
4
<PAGE>
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 Cut-Off 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.
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.
5
<PAGE>
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-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,
6
<PAGE>
providing for (1) the Snyder Group to make available certain personnel and
services to the Healthcare Services Group and (2) the Healthcare Services
Group to make available certain personnel and services to the Snyder Group,
in each case for a period of time following the Distribution Date.
IRS: the Internal Revenue Service.
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 (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 Cut-Off Date.
7
<PAGE>
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 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.
8
<PAGE>
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.
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
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purposes of this Agreement, (1) the Healthcare Services Subsidiaries shall
be deemed to be Subsidiaries of Snyder Healthcare Services 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
Exhibit 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.
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Transfer Tax: the applicable 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.
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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 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
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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 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, 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, Ventiv shall deliver to the Agent a share certificate
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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 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
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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 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
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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 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
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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
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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
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Party shall be deemed 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-
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Party Claim; provided, however, that no such Indemnitee may compromise or
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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 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
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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.
5.03 CONTINUING CONTRACTUAL ARRANGEMENTS. Notwithstanding anything in this
Agreement to the contrary, except as set forth in Sections 5.04 and 5.05 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 receivables, payables, loans or advances between Snyder and Ventiv
shall be deemed contributed to capital and thereby cancelled without the payment
of any cash by either Snyder or Ventiv to the other.
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
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to such Taxes), which become payable in connection with 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.
ARTICLE VI
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.
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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 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
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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 Cut-Off 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 Cut-Off
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
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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 Cut-Off
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 Cut-Off 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 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
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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
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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
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 Cut-Off Date, to the extent not
previously made.
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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 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.]
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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.
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
23
<PAGE>
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 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) Except for officers of Ventiv who are also officers of Snyder,
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
24
<PAGE>
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 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.
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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.
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
26
<PAGE>
(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.
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.
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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 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:
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(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 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;
29
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(9) Snyder shall have received an opinion from Arthur Andersen
LLP, substantially in the form attached hereto as Exhibit E, that
the Distribution should be tax-free to Snyder and to U.S.
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 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
30
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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 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
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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.
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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:
33
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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) eighteen (18) months 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.
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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. 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
2
<PAGE>
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.
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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.
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.
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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:
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Exhibit 10.5
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made this 14th day of June,
1999 (the "Effective Date") by Snyder Communications, Inc., a Delaware
corporation with its principal place of business at 6903 Rockledge Drive,
Bethesda, Maryland 20817 (the "Corporation"), and Eran Broshy, residing at 88
Central Park West, Apartment 1W, New York, NY 10023, (the "Executive"). The
Corporation, and/or its assignee, 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. Position; Title; Duties
-----------------------
The Employer hereby employs the Executive, and the Executive hereby accepts
employment with the Employer, in the capacity of Group President of Snyder
Healthcare, upon the terms set forth in this Agreement. The Executive's
employment with the Employer shall commence on June 21, 1999. The Executive
shall report initially directly to the President and Chief Operating Officer of
Snyder Communications, Inc., Michele D. Snyder, or such other person as may be
designated by her, 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.
It is anticipated that this Agreement will be assigned to a new corporate
entity which has not yet been formed. For purposes of this Agreement, the
to-be-formed-corporate entity shall be referred to throughout as "Snyder
Healthcare". Upon assignment of this Agreement to Snyder Healthcare, Executive
shall report to the Board of Directors at Snyder Healthcare and shall become a
member of such Board of Directors. At such time, Executive shall serve as Chief
Executive Officer of Snyder Healthcare and shall perform services consistent
with that position and as may be assigned to him from the Snyder Healthcare
Board of Directors.
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 Maryland and New Jersey
<PAGE>
metropolitan area offices and will be required to travel as necessary to perform
the services required of him under this Agreement. It is understood that the
Executive will maintain his principle residence in New York City and it is
anticipated that his principal place of business will be in the New York - New
Jersey metropolitan area. 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.
Employer recognizes that a reasonable portion of the Executive's business
time will be utilized through July 31, 1999 to effect a reasonable transition
with his former employer.
3. Base Salary
-----------
The Employer shall pay the Executive a base annual salary of $425,000.
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.
4. Bonus
-----
The Executive shall be eligible for a bonus in each calendar year, based on
the Executive's success in reaching or exceeding performance objectives as
determined by the President and Chief Operating Officer or her designee, or the
Board of Directors of Snyder Healthcare. The amount of such bonus, if any, will
be determined in the discretion of the Employer, but not to exceed $125,000.
With respect to the Stock Loan referred to in paragraph 7(c) below, the
Employer agrees to also pay Executive an additional bonus equivalent to any
interest repaid to the Employer pursuant to said paragraph. This additional
bonus shall be payable at the time Executive's calendar year bonus is paid to
Executive.
5. Term of Employment
------------------
The Executive is an employee "at will" and may be terminated by the
Employer at any time with or without cause.
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6. Stock Options and Restricted Stock
----------------------------------
(a) Initial Grant.
--------------
The Executive shall be granted by Snyder Healthcare nonqualified stock
option(s) valued at a gross exercise price of $4,000,000 for the purchase of
shares of the common stock of Snyder Healthcare with an exercise price equal to
the value of the common stock of Snyder Healthcare as set forth below. These
stock options will be issued after the adoption of the Snyder Healthcare stock
incentive plan, but in advance of the date on which Snyder Healthcare becomes a
publicly traded company. The value of Snyder Healthcare will be determined by a
valuation prepared on behalf of the Compensation Committee of Snyder
Communications, Inc.
Executive shall enter into a stock option agreement which shall provide for
the grant of the shares and shall provide that the option(s) shall vest at the
rate of twenty-five (25%) per year on each anniversary of the date of grant,
provided that the Executive continues to be employed by the Employer on each
such anniversary date, such that all such stock options shall be fully vested
on the fourth anniversary of such date.
In the event there is a change in control in Snyder Healthcare, Executive's
vesting will be accelerated so he is fully vested in the Initial Grant. For the
purposes hereof, a "change in control" is defined as a sale, transfer or other
disposition of all or substantially all of the assets of Snyder Healthcare, at a
time of which it is a publicly traded corporation, or of Snyder Communications,
Inc. if Snyder Healthcare is not a publicly traded corporation, or the
consummation of a merger or consolidation of Snyder Healthcare which results in
the stockholders of Snyder Healthcare immediately prior to such transaction
owning, in aggregate, less than a majority of the surviving or resulting entity.
(b) Restricted Grant
----------------
The Executive shall also be granted by Snyder Healthcare restricted stock
valued at $2,500,000.00 (determined in the same manner as the exercise price is
determined under 6a. above) for shares of common stock of Snyder Healthcare.
Executive shall enter into a Restricted Stock Agreement which shall provide
that such restricted shares shall vest as follows:
(1) Twenty percent (20%) on the grant date; and
(2) Twenty percent (20%) on the first and each successive
anniversary date of the date on which Snyder Healthcare
becomes a publicly traded company provided the Executive is
employed by Snyder Healthcare on each such anniversary date.
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<PAGE>
In the event there is a change in control in Snyder Healthcare,
Executives's vesting will be accelerated so he is fully vested in the
Restricted Grant. For the purposes hereof, a "change in control" is
defined as a sale, transfer or other disposition of all or substantially
all of the assets of Snyder Healthcare, at a time of which is it a
publicly traded corporation, or of Snyder Communications, Inc. if Snyder
Healthcare is not a publicly traded corporation, or the consummation of a
merger or consolidation of Snyder Healthcare which results in the
stockholders of Snyder Healthcare immediately prior to such transaction
owning, in aggregate, less than a majority of the surviving or resulting
entity.
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 on which Snyder Healthcare becomes a publicly traded company.
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 Snyder Healthcare
upon the later of 4 years and 30 days from the date on which Snyder
Healthcare becomes a publicly traded company or 30 days after termination.
The specific terms of any loan will be set forth in a separate Loan
Agreement.
If the Employer terminates the employment of the Executive, other
than for cause, prior to the date on which Snyder Healthcare becomes a
publicly traded company, then in lieu of the Restricted Stock otherwise
provided under 6(b), Executive will be issued $500,000 of vested
Unrestricted Stock in Snyder Communications, Inc. If the employer
terminates the employment of the Executive, other than for cause, after the
date on which Snyder Healthcare becomes a publicly traded company, then no
restrictions will be imposed upon the 20% portion of the Restricted Grant
that was vested at the time of the grant.
(c) Alternative Incentive Stock Arrangement
---------------------------------------
In the event Snyder Healthcare does not become a publicly traded
company by June 30, 2000, then in lieu of the benefits provided under 6(a)
and 6(b) Executive shall be granted stock in Snyder Communications, Inc. in
equivalent amounts as set forth in paragraphs 6(a) and 6(b) above (i.e.,
$4,000,000 in Snyder Communications, Inc. nonqualified stock options and
$2,500,000 in Snyder Communications, Inc. restricted common stock), subject
to the same provisions as paragraphs 6(a) and 6(b) except that for purposes
of vesting, the grant date shall be the Effective Date.
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<PAGE>
In the event that non-qualified stock options or restricted stock are granted
under this section 6(c)and that there is a subsequent change in control in
Snyder Communications, Inc., Executive's vesting under this Alternative
Incentive Stock Arrangement will be accelerated and he will be fully vested in
these non-qualified stock options and restricted stock. For the purposes hereof,
a "change in control" is defined as a sale, transfer or other disposition of all
the assets of Synder Communications, Inc., or the consummation of a merger or
consolidation of Synder Communications, Inc. which results in the stockholders
of Synder Communications, Inc. immediately prior to such transaction owing, in
aggregate, less than a majority of the surviving or resulting entity.
(d) Stock Option Plan
-----------------
The above stock options shall be issued under a stock option plan to be
established by the Employer. The stock option agreement may contain such other
and further terms as 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.
7. Fringe Benefits
---------------
(a) The Executive shall entitled to all benefits generally available to
executive employees of the Employer.
(b) The Executive shall be entitled to (3) weeks of vacation during
each year of employment. Such vacation shall be taken at such times as the
Executive and the President and Chief Operating Officer and/or its Board of
Directors 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) Stock Loan. The Employer further agrees to lend Executive a total
----------
of $500,000, which loan proceeds are to be used exclusively for the purchase of
Snyder Healthcare stock. The specific terms and conditions of the loan will be
set forth in a separate agreement executed by Employer and Executive at the time
of the loan. The terms of the loan will include: (1) that the loan will be
secured by the purchased stock; (2) that the loan must be repaid within thirty
days of the earlier of the sale of the stock or Executive's termination of
employment (regardless of the reason); (3) that it will be a nonrecourse loan;
(4) that the interest on the loan will be at an annual rate of 6%.
(d) Car allowance. Executive shall entitled to monthly car allowance
-------------
$450, paid as taxable wages. The allowance will end effective with the
executive's termination.
8. Reimbursement of Business Expenses
----------------------------------
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<PAGE>
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 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, or (ii) interfere with
any of Employer's 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 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.
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<PAGE>
(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 equity the equity securities of which
are traded on a national securities exchange or other public market and (ii) are
approved by the Employer.
(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, injuctive relief will be
necessary to affect the intent of such Section. Accordingly, Executive hereby
consents to the imposition of a preliminary or permanent injuction 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 enforceable
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 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.
(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
7
<PAGE>
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. 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.
12. 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 attorney's fees and costs related to instituting and
maintaining such action.
13. 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 intentions so as to provide the Employer with the opportunity to
assess whether Executive's employment or retention may potentially violate any
provisions of this Agreement.
8
<PAGE>
14. 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 Maryland, 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.
(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.
(j) Cooperation of the Parties. The Employer and the Executive agree to
--------------------------
make all reasonable efforts to cooperate to insure compliance with this
Agreement.
9
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the Day
and year first above written.
EMPLOYER EXECUTIVE
Snyder Communications, Inc.
By: /s/ Michele Snyder /s/ Eran Broshay
--------------------------- --------------------------
Eran Broshay
10
<PAGE>
EXHIBIT 21.1
21.1 Subsidiaries
- - - --------------------
All of the below listed subsidiaries of the Company are 100% owned by
the Company.
<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
Huckleberry Corporation Connecticut 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
Clinical Communications (UK) Limited UK
Consultancy Practice Limited UK
Halliday Jones Sales Limited UK
Health Products Research (UK) Limited UK
Kestrel Healthcare Limited UK
Newbury Direct Marketing Services UK
Palcon Limited UK
Partners Andrews Aldridge Limited UK
Partners BDDH Limited UK
Rapid Deployment Group Limited UK
Rapid Deployment Limited UK
Snyder Healthcare Services UK
Snyder Limited 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 GmbH (LLC) Germany
MKM Infothek Gesellschaft fur Marktanalysen mbH Germany
MKM Marketinginstitut GmbH (LLC) Germany
</TABLE>
<PAGE>
Exhibit 21.1
------------
<TABLE>
<CAPTION>
Legal Entity Incorporation State Country
- - - ----------------------------------------------------------------------------------------------------
<S> <C> <C>
MKM Verlagsgesellschaft mbH Germany
Snyder SGA GmbH Germany
Snyder SGRE GmbH Germany
Actimed SARL France
Actipharm SARL France
Cli Pharma S.A. France
I.E.P.V.M. SARL (Ex. I.P.V.M.) France
Informed SARL France
Laboratorie Socopharm SARL France
Locaplaisance EURL France
Marques Pharma S.A. France
Medicapharma SARL France
Pharmacom SARL France
Pharmafi (Ex Socopharm SARL) France
Pharmafi, SA (Publimed Subsidiary) France
Pharminfo SARL (Ex Pharminter) France
Promosante SARL France
Publimed Promo, SA France
Publimed SARL France
Publipharma SARL France
Ramax, SA (Publimed Parent) France
Raymat Finance S.A. France
S.A. Hotel Royal Navarin France
S.A. Publimed Promotion France
S.A. Sogesphar France
S.N.V.M. SARL France
Snyder Healthcare Services France France
Snyder Medical Services France France
W.P.S.D. SARL France
</TABLE>
2
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1998 JUN-30-1999
<CASH> 25,664 21,347
<SECURITIES> 0 0
<RECEIVABLES> 46,492 58,457
<ALLOWANCES> 2,971 2,645
<INVENTORY> 0 0
<CURRENT-ASSETS> 95,449 113,028
<PP&E> 14,974 19,251
<DEPRECIATION> 4,946 5,796
<TOTAL-ASSETS> 193,644 228,095
<CURRENT-LIABILITIES> 71,002 68,051
<BONDS> 1,473 1,270
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 119,727 158,771
<TOTAL-LIABILITY-AND-EQUITY> 193,644 228,095
<SALES> 0 0
<TOTAL-REVENUES> 321,500 181,259
<CGS> 236,047 137,028
<TOTAL-COSTS> 306,740 160,307
<OTHER-EXPENSES> (1,850) (373)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 2,315 123
<INCOME-PRETAX> 14,295 21,202
<INCOME-TAX> 12,849 8,563
<INCOME-CONTINUING> 1,446 12,639
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,446 12,639
<EPS-BASIC> .06 .51
<EPS-DILUTED> .06 .51
</TABLE>
