<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
Commission file number 0-28202
WALSH INTERNATIONAL INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 51-0309207
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification Number)
45 Rockefeller Plaza, Suite 912, New York, New York 10111
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code 212-841-0610
----------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report.)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing
requirements for the past 90 days Yes X No
As of May 22, 1996, there were outstanding 10,464,085 shares
of Common Stock of Walsh International Inc.
<PAGE>
WALSH INTERNATIONAL INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Operations
(unaudited) for the Three and Nine Months
Ended March 31, 1996 and 1995............................ 3
Consolidated Balance Sheets as of
March 31, 1996 (unaudited) and
June 30, 1995............................................ 4
Consolidated Statements of Cash Flows
(unaudited) for the Nine Months Ended
March 31, 1996 and 1995.................................. 5
Notes to Consolidated Financial Statements............... 6
Item 2. Management's Discussion and Analysis
of Results of Operations and
Financial Condition...................................... 10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K......................... 12
Signatures............................................... 14
Index to Exhibits........................................ 15
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
WALSH INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Dollars in thousands, except per share amounts, unaudited
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31, March 31, March 31,
1996 1995 1996 1995
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
Revenue $ 12,108 $ 10,096 $ 34,181 $ 29,441
Production costs (4,709) (4,575) (13,597) (12,972)
Selling, general and administrative
expenses (5,241) (4,780) (15,518) (14,436)
Research and development costs (873) (1,034) (2,601) (2,782)
Amortization of intangible assets (28) (28) (84) (84)
------------ ------------ ----------- ----------
Total costs and expenses (10,851) (10,417) (31,800) (30,274)
----------- ---------- ---------- ----------
Operating profit (loss) 1,257 (321) 2,381 (833)
Interest income 131 272 655 671
Interest expense (559) (590) (1,747) (1,729)
Equity income of PMSI - 416 - 786
------------ ----------- ------------ -----------
Income (loss) from continuing operations
before income taxes 829 (223) 1,289 (1,105)
Income tax provision (740) (1,065) (229) (1,370)
----------- ---------- ---------- ----------
Income (loss) from continuing operations 89 (1,288) 1,060 (2,475)
Discontinued operations:
Loss from discontinued operations, net - (861) (1,755) (382)
------------ ---------- ---------- ----------
Net income (loss) $ 89 $ (2,149) $ (695) $ (2,857)
=========== ========= ========== ==========
Pro forma income (loss) per share from contin-
uing operations $ 0.01 $ (0.17) $ 0.14 $ (0.34)
Pro forma loss per share from
discontinued operations, net - (0.12) (0.23) (0.05)
------------ ---------- ---------- ----------
Pro forma net income (loss) per share $ 0.01 $ (0.29) $ (0.09) $ (0.39)
=========== ========== ========== ==========
Shares used in computing pro forma
income (loss) per share 7,539,135 7,348,573 7,569,612 7,344,741
</TABLE>
3
<PAGE>
WALSH INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Dollars in thousands
<TABLE>
<CAPTION>
Pro Forma
Balance
Sheet at
March 31, March 31, June 30,
1996 1996 1995
--------- -------- --------
(Unaudited) (Restated)
<S> <C> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 22,553 $ 4,509 $ 15,110
Accounts receivable, principally trade 10,879 12,171 11,466
Prepaid expenses and other current assets 341 341 347
--------- ------- --------
Total current assets 33,773 17,021 26,923
Property and equipment, net 5,087 5,087 5,194
Goodwill, net 3,579 3,579 3,663
Investment in PMSI (contributed to the Source Business April 16, 1996) - 15,915 10,510
Other assets, net 2,842 3,642 3,101
--------- --------- ---------
Total assets $ 45,281 $ 45,244 $ 49,391
======== ======== ========
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Current maturities of long-term debt $ 16 $ 16 $ 1,162
Current portion of capital lease obligations 281 281 278
Accounts payable 5,916 5,916 6,481
Accrued liabilities 17,100 17,750 17,686
Unearned income 5,438 5,438 5,174
Net liabilities of discontinued operations - 5,113 10,310
-------- -------- -------
Total current liabilities 28,751 34,514 41,091
Long-term debt 62 14,643 15,541
Capital lease obligations 1,636 1,636 1,481
Deferred income taxes 1,198 1,198 3,920
Other liabilities 4,472 4,472 2,291
-------- -------- --------
Total liabilities 36,119 56,463 64,324
-------- -------- -------
Series A Convertible Preferred Stock, redemption value $25,000,000 _ 24,226 23,911
Commitments
Stockholders' equity (deficit):
Common stock, $0.01 par value, 20,000,000 shares
authorized; 5,808,847 and 5,811,742 shares issued,
10,464,085 shares issued pro forma 105 58 58
Paid-in capital 120,676 73,437 73,685
Accumulated deficit (112,351) (115,961) (115,266)
Cumulative translation adjustment 1,092 1,092 932
Unrealized gain on available-for-sale securities,
net of tax - 6,289 2,107
Treasury stock, at cost, 20,000 shares (360) (360) (360)
--------- ----------- ----------
Total stockholders' equity (deficit) 9,162 (35,445) (38,844)
--------- --------- ---------
Total liabilities and stockholders' equity (deficit) $ 45,281 $ 45,244 $ 49,391
========= ========= =========
The accompanying notes are an integral part of these financial statements
</TABLE>
4
<PAGE>
WALSH INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Dollars in thousands, unaudited
<TABLE>
<CAPTION>
Nine Months Ended
-----------------
March 31, March 31,
1996 1995
---- ----
<S> <C> <C>
Net cash flows used in operating activities $(1,983) $ (114)
------- --------
Cash flows used in investing activities:
Capital expenditures (712) (607)
Capitalized software (670) (764)
------- ---------
Net cash used in investing activities (1,382) (1,371)
------- ---------
Cash flows (used in) provided by financing activities:
Collateral receipts 1,088 106
Repayment of capital leases (103) (323)
Repayment of long-term debt (1,073) (9)
------- ---------
Net cash used in financing activities (88) (226)
-------- ---------
Effect of exchange rate movements (295) 434
Effect of discontinued operations (6,853) 2,725
------- ---------
Net (decrease) increase in cash and cash equivalents (10,601) 1,448
Cash and cash equivalents at beginning of period 15,110 11,881
------- ---------
Cash and cash equivalents at end of period $ 4,509 $ 13,329
======= ========
The accompanying notes are an integral part of these financial statements
</TABLE>
5
<PAGE>
WALSH INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. INTERIM UNAUDITED FINANCIAL INFORMATION
The consolidated financial statements include the accounts of
Walsh International Inc. and all of its majority-owned subsidiaries
other than the Source Business. The "Source Business", which is
accounted for as discontinued operations (see Note 3), includes a range
of products and services, primarily marketed under the name Source,
that utilize proprietary databases of prescriptions dispensed by retail
outlets in the United States. The Consolidated financial statements
have been restated for discontinued operations.
The accompanying consolidated statements of operations for the
three and nine months ended March 31, 1996 and 1995, the consolidated
statements of cash flows for the nine months ended March 31, 1996 and
1995, the consolidated balance sheets as of March 31, 1996 and the
related information of Walsh International Inc. (the "Company")
included in these notes to the consolidated financial statements are
unaudited. In the opinion of management, the interim financial
information reflects all adjustments (consisting only of items of a
normal recurring nature except for discontinued operations) necessary
for the fair presentation of the financial position, results of
operations and cash flows for the periods presented. Results of
continuing operations for the three and nine months ended March 31,
1996 are not necessarily indicative of the results to be expected for
the entire year.
The June 30, 1995 balance sheet was derived from the Company's
June 30, 1995 audited consolidated financial statements, but does not
include all disclosures required by generally accepted accounting
principles, and includes certain reclassifica- tions to conform to the
unaudited March 31, 1996 balance sheet.
These interim financial statements should be read in
conjunction with the audited consolidated financial statements and
related notes thereto included in the Company's Registration Statement
on Form S-1.
2. PRO FORMA BALANCE SHEET
The Pro Forma Balance Sheet as of March 31, 1996 is included
to reflect the estimated effects of the Spin-Off of the Source Business
to its stockholders (the "Spin-Off"); the proceeds generated from the
initial public offering of the Company's
6
<PAGE>
Common Stock, including the over-allotment, and the use of a portion of
the proceeds to retire the Company's subordinated debentures.
As of April 16, 1996, the Company consummated the Spin-Off.
Pursuant to an agreement with the holders of the Preferred Stock, at
the time of the Spin-Off, one-half of the shares of Preferred Stock
were exchanged for shares of preferred stock of Source having
substantially similar terms, and the redemption price of the Preferred
Stock was increased to $25.34. Based on the relative fair value of
Walsh and Source, $11,802,000 of obligations of the Preferred Stock
were transferred to Source as part of the Spin-Off. The remaining
issued and outstanding Preferred Stock after the Spin-Off was converted
into 1,486,252 shares of Common Stock concurrently with the
consummation of the offering.
The unaudited Pro Forma Balance Sheet reflects the impact of
the Spin-Off. In addition to the transaction described in the preceding
paragraph and the identifiable net liabilities of the Source Business
as described in Note 3, the Company contributed the Pharmaceutical
Marketing Services Inc. ("PMSI") shares, certain other corporate assets
and cash to fund the working capital requirements of the Source
business.
The consummation of the initial public offering, including the
over-allotment, resulted in the issuance of 3,186,091 shares of the
Company's Common Stock and the generation of net proceeds of
approximately $34.8 million. The Company has used approximately $14.2
million of the net proceeds to repay its subordinated debentures due
March 31, 1997 and intends to use approximately $0.5 million of the net
proceeds to repay the remainder of those debentures. The Pro Forma
Balance Sheet reflects the above transactions.
3. DISCONTINUED OPERATIONS - SOURCE BUSINESS
The Company consummated the Spin-Off on April 16, 1996. This
was accomplished by the distribution of all the issued and outstanding
capital stock of Source to the Company's shareholders.
As a result of the above, results of operations of Source have
been reclassified as discontinued operations.
The loss in the nine months ended March 31, 1996 includes an
estimate of the losses expected to be incurred form the Source business
from April 1, 1996 through the date of the Spin-Off of $192,000.
The revenues for the discontinued operations were $12,470,000,
$11,366,000, $37,805,000 and $36,969,000 for the three months ended
March 31, 1996 and 1995 and for the nine months ended March 31, 1996
and 1995, respectively.
7
<PAGE>
Net Liabilities of Discontinued Operations
Dollars in thousands
June 30, March 31,
1995 1996
---- ----
Cash $ 7,856 $ 5,149
Accounts receivable 7,786 9,618
Other assets 10,777 12,696
Accrued liabilities (9,086) (8,359)
Unearned income (15,130) (14,256)
Other liabilities (12,513) (9,961)
------- -------
Identifiable net liabilities
of discontinued operations $(10,310) $(5,113)
======== =======
4. PRO FORMA INCOME (LOSS) PER SHARE
Pro Forma income (loss) per share is computed using the
weighted average number of shares of Common Stock outstanding. Common
equivalent shares from the Preferred Stock (using the if-converted
method) and stock options and warrants (using the treasury stock
method) have been included in the computation where dilutive (except
that, pursuant to the Securities and Exchange Commission rules, the
Preferred stock which was converted into Common Stock in connection
with the Company's initial public offering is included as if converted
even though inclusion may be anti-dilutive).
Pursuant to a Securities and Exchange Commission Staff
Accounting Bulletin, all Common and Common equivalent shares issued by
the Company at an exercise price below the public offering price during
the twelve-month period prior to the offering have been included in the
calculation as if they were outstanding for all periods through
December 31, 1995, the interim period included in the initial public
offering prospectus (using the treasury stock method and the initial
public offering price of $12.00 per share for stock options and
warrants). After December 31, 1995, Common equivalent shares are
included only if they have a dilutive effect. The Pro Forma Income
(loss) per share calculation does not include the shares issued in
conjunction with the initial public offering.
8
<PAGE>
5. INCOME TAXES
For the three and nine months ended March 31, 1996 the
effective tax rates were 89% and 18% respectively compared to a tax
provision on a loss for the equivalent periods of fiscal 1995. These
rates were 56% and 8% after adding back the debenture interest which
will not be a continuing expense and is not deductible for tax
purposes. The effective income tax rate is based on the Company's
projected mix of the profits of its subsidiaries operating in different
countries.
9
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
WALSH INTERNATIONAL INC. AND SUBSIDIARIES
Three Months Ended March 31, 1996 and March 31, 1995
Revenue for the Company's third quarter of fiscal year 1996 was $12.1
million, an increase of 20% over the comparable period of the prior year. The
increase was principally due to a 21% increase in PRECISE revenues. Although
lower as a percentage of revenue, increased direct mail marketing sales also
contributed to the higher revenues. Currency exchange rates had no material
impact on the level of increase.
Production costs in the third quarter were $4.7 million (39% of
revenue) compared with $4.6 million (45% of revenue) in the comparable quarter
of fiscal year 1995. The decline in production costs as a percentage of total
revenues reflect the company's operating leverage. Production costs have
increased in the quarter due to the higher direct mail marketing sales which
have a lower gross margin than the Company's other products.
Selling, general and administrative expenses in the third quarter were
$5.2 million (43% of revenue), compared with $4.8 million (47% of revenue) in
the comparable quarter of the prior year. The 10% increase is due to higher
investment in sales resources.
Research and development costs decreased by $0.2 million compared with
the comparable quarter of fiscal 1995 reflecting reduced outside consultancy
costs associated with the development of Premiere. The percentage of software
development costs capitalized has remained at similar rates in each period.
Net interest expense for the quarter ended March 31, 1996 was $0.4
million, compared to $0.3 million for the comparable fiscal 1995 period, a
result of reduced levels of cash following the consumption of cash by the
discontinued operations.
The effective tax rate for the quarter ended March 31, 1996 was 89%
which compares to a tax provision on a loss for the comparable fiscal 1995
period. Excluding the non- continuing debenture interest for which no tax
benefit is obtained, the effective rate was 56%. The rate differential reflects
the Company's higher utilization during fiscal 1996 of net operating loss carry
forwards.
Nine Months Ended March 31, 1996 and 1995
Revenue for the nine months ended March 31, 1996 was $34.2 million, an
increase of 16% over the comparable period of the prior fiscal year. Eliminating
the impact of currency exchange rate fluctuations, revenues increased by 15%.
The increase was principally due to 22% growth in PRECISE revenues.
10
<PAGE>
Production costs for the nine months ended March 31, 1996 were $13.6
million (40% of revenue), compared with $13.0 million (44% of revenue) in the
comparable fiscal 1995 period. The increase in costs was primarily due to
increased revenues. Production costs declined as a percentage of revenue
demonstrating the company's operating leverage.
Selling, general and administrative expenses for the nine months ended
March 31, 1996 were $15.5 million (45% of revenue) compared with $14.4 million
(49% of revenue) for the comparable period of the prior fiscal year. The
increase in expenses was due to costs associated with the impending launch of
Premiere, including $0.2 million of one time promotional costs and increased
investment in senior sales resources.
Research and development costs were $2.6 million and $2.8 million for
each of the nine months ended March 31, 1996 and 1995, respectively. The
decrease for fiscal 1996 reflects lower development costs for Premiere,
principally reduced expenditure on software development consultants.
Net interest expense for the nine months ended March 31, 1996 was $1.1
million, unchanged from the comparable fiscal 1995 period.
The effective tax rate for the nine months ended March 31, 1996 was 18%
which compares to a tax provision on a loss for the comparable fiscal 1995
period. The lower rate is due to tax credits in the first half of the fiscal
year arising from the transfer of the PMSI shares to the Source business in
order to fund working capital. Excluding debenture interest, the effective rate
would have been 8%. The rate differential reflects changes in the anticipated
mix of profits of the Company's subsidiaries operating in different countries
for the fiscal year ending June 30, 1996 plus the higher utilization of net
operating loss carry forwards in fiscal 1996.
Liquidity and Capital Resources
At March 31, 1996, the Company's cash and cash equivalents totaled $4.5
million, a decrease of $10.6 million from the $15.1 million balance at June 30,
1995. The decrease is primarily due to the consummation of cash by the
discontinued operations.
The consummation of the initial public offering, including the
over-allotment, resulted in the issuance of 3,186,091 shares of the Company's
Common Stock and the generation of net proceeds of approximately $34.8 million.
The Company has used approximately $14.2 million of the net proceeds to repay
its subordinated debentures due March 31, 1997 and intends to use approximately
$0.5 million of the net proceeds to repay the remainder of those debentures. The
Company anticipates that the net proceeds from the initial public offering of
its Common Stock, together with anticipated cash flow from operations and
existing cash balances will satisfy the Company's projected working capital and
capital expenditure requirements through at least the end of fiscal 1998.
11
<PAGE>
PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number
3.1 Restated Certificate of Incorporation of Walsh
International Inc., incorporated by reference to Exhibit
3.1 to the Registration Statement on Form S-1 of the
Company (file no. 333-316)
3.2 By-laws of Walsh International Inc., as amended,
incorporated by reference to Exhibit 3.2 to the
Registration Statement on Form S-1 of the Company (file no.
333-316)
10.1 Employment Agreement dated January 1, 1996 between Walsh
International Inc. and Michael A. Hauck, incorporated by
reference to Exhibit 10.8 to the Registration Statement on
Form S-1 of the Company (file no. 333-316)
10.2 Employment Agreement dated January 1, 1996 between Walsh
International Inc. and Robert Mander, incorporated by
reference to Exhibit 10.9 to the Registration Statement on
Form S-1 of the Company (file no. 333-316)
10.3 Employment Agreement dated January 1, 1996 between Walsh
International Inc. and Martyn D. Williams, incorporated by
reference to Exhibit 10.10 to the Registration Statement on
Form S-1 of the Company (file no. 333-316)
10.4 Employment Agreement dated January 1, 1996 between Walsh
International Inc. and Leonard R. Benjamin, incorporated by
reference to Exhibit 10.11 to the Registration Statement on
For` S-1 of the Company (file no. 333-316)
10.5 Walsh International Inc. and Its Subsidiaries Restated
Stock Option and Restricted Stock Purchase Plan,
incorporated by reference to Exhibit 10.12 the Registration
Statement on Form S-1 of the Company (file no. 333-316)
12
<PAGE>
10.6 Walsh International Inc. Non-Employee Directors' Stock
Option Plan effective April 19, 1993, as amended,
incorporated by reference to Exhibit 10.13 to the
Registration Statement on Form S-1 of the Company (file no.
333-316)
10.7.1 Master Reorganization Agreement dated as of April 16, 1996
between Walsh International Inc. and Source Informatics
Inc.
10.7.2 Services Agreement dated as of April 16, 1996 between Walsh
International Inc. and Source Informatics Inc.
10.7.3 Support Services Agreement dated as of April 16, 1996
between Walsh International Inc. and Source Informatics
Inc.
10.7.4 Preferred Technology Partner Agreement dated as of April
16, 1996 between Walsh International Inc. and Source
Informatics Inc.
10.7.5 Pharbase License Agreement dated as of April 16, 1996
between Walsh International Inc. and Source Informatics
Inc.
10.7.6 Facilities Agreement entered into as of April 16, 1996 by
and between Walsh International Inc. and Source Informatics
Inc.
10.8 Agreement dated as of April 16, 1996 by and among Walsh
Interna- tional Inc., Source Informatics Inc. and those
holders of Series A Convertible Preferred Stock, $1.00 par
value per share of the Company which have entered into the
Agreement and whose names are set forth on the signature
pages thereof
10.9 Joint Venture Agreement dated January 25, 1996 between
Walsh International Inc. and Interpacific Holding S.A. and
Company, incorporated by reference to Exhibit 10.16 to the
Registration State- ment on Form S-1 of the Company (file
no. 333-316)
11.1 Computation of Earnings (Loss) per Share
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Date: May 30, 1996 Walsh International Inc.
------------------------
By /s/ Martyn D. Williams
-------------------------
Martyn D. Williams
Chief Financial Officer
On behalf of the registrant and as
principal financial officer.
14
<PAGE>
INDEX TO EXHIBITS
Exhibit Description Page Number
3.1 Restated Certificate of Incorporation of Walsh --
International Inc., incorporated by reference to
Exhibit 3.1 to the Registration Statement on Form
S-1 of the Company (file no. 333-316)
3.2 By-laws of Walsh International Inc., as amended, --
incorporated by reference to Exhibit 3.2 to the
Registration Statement on Form S-1 of the Compa-
ny (file no. 333-316)
10.1 Employment Agreement dated January 1, 1996 --
between Walsh International Inc. and Michael A.
Hauck, incorporated by reference to Exhibit 10.8 to
the Registration Statement on Form S-1 of the
Company (file no. 333-316)
10.2 Employment Agreement dated January 1, 1996 --
between Walsh International Inc. and Robert
Mander, incorporated by reference to Exhibit 10.9
to the Registration Statement on Form S-1 of the
Company (file no. 333-316)
10.3 Employment Agreement dated January 1, 1996 --
between Walsh International Inc. and Martyn D.
Williams, incorporated by reference to Exhibit
10.10 to the Registration Statement on Form S-1 of
the Company (file no. 333-316)
10.4 Employment Agreement dated January 1, 1996 --
between Walsh International Inc. and Leonard R.
Benjamin, incorporated by reference to Exhibit
10.11 to the Registration Statement on Form S-1 of
the Company (file no. 333-316)
10.5 Walsh International Inc. and Its Subsidiaries Re- --
stated Stock Option and Restricted Stock Purchase
Plan, incorporated by reference to Exhibit 10.12 to
the Registration Statement on Form S-1 of the
Company (file no. 333-316)
15
<PAGE>
10.6 Walsh International Inc. Non-Employee Directors' --
Stock Option Plan effective April 19, 1993, as
amended, incorporated by reference to Exhibit
10.13 to the Registration Statement on Form S-1 of
the Company (file no. 333-316)
10.7.1 Master Reorganization Agreement dated as of 17
April 16, 1996 between Walsh International Inc.
and Source Informatics Inc.
10.7.2 Services Agreement dated as of April 16, 1996 49
between Walsh International Inc. and Source
Informatics Inc.
10.7.3 Support Services Agreement dated as of April 16, 54
1996 between Walsh International Inc. and Source
Informatics Inc.
10.7.4 Preferred Technology Partner Agreement dated as 62
of April 16, 1996 between Walsh International Inc.
and Source Informatics Inc.
10.7.5 Pharbase License Agreement dated as of April 16, 71
1996 between Walsh International Inc. and Source
Informatics Inc.
10.7.6 Facilities Agreement entered into as of April 16, 84
1996 by and between Walsh International Inc. and
Source Informatics Inc.
10.8 Agreement dated as of April 16, 1996 by and 101
among Walsh International Inc., Source Informatics
Inc. and those holders of Series A Convertible
Preferred Stock, $1.00 par value per share of the
Company which have entered into the Agreement
and whose names are set forth on the signature
pages thereof
10.9 Joint Venture Agreement dated January 25, 1996 --
between Walsh International Inc. and Interpacific
Holding S.A. and Company, incorporated by refer-
ence to Exhibit 10.16 to the Registration Statement
on Form S-1 of the Company (file no. 333-316)
11.1 Computation of Earnings (Loss) per Share 115
27.1 Financial Data Schedule --
16
<PAGE>
EXHIBIT 10.7.1
===============================================================
MASTER REORGANIZATION AGREEMENT
Between
WALSH INTERNATIONAL INC.
and
SOURCE INFORMATICS INC.
Dated as of April 16, 1996
===============================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I. WALSH REORGANIZATION; FORMATION OF SOURCE
Section 1.01 Walsh Corporate Reorganization............................................................ 1
Section 1.02 Formation of Source Corporate Organization................................................ 4
ARTICLE II. TRANSFER OF SOURCE BUSINESS; ISSUANCE OF SOURCE
COMMON STOCK
Section 2.01 Transfer of Source Assets................................................................. 4
Section 2.02 Issuance of Source Common and Preferred
Stock................................................................................. 4
Section 2.03 Excluded Assets .......................................................................... 5
Section 2.04 Instruments of Conveyance and Transfer.................................................... 5
Section 2.05 Assumption of Liabilities ................................................................ 6
Section 2.06 Non-Assumption of Certain Liabilities .................................................... 6
Section 2.07 Nonassignable Contracts ................................................................ 6
ARTICLE III. CLOSING; DISTRIBUTION OF SOURCE COMMON STOCK
Section 3.01 Closing .................................................................................. 7
Section 3.02 Distribution of the Source Common Stock................................................... 7
Section 3.03 Restructuring of Source .................................................................. 7
Section 3.04 Additional Agreements..................................................................... 8
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF WALSH
Section 4.01 Organization, Power, Etc...................................................................8
Section 4.02 The Source Business .......................................................................9
Section 4.03 Authorization of Agreements ...............................................................9
Section 4.04 Effect of Agreements.......................................................................9
Section 4.05 Governmental Approvals....................................................................10
Section 4.06 Compliance with Law ......................................................................10
Section 4.07 Investment Representation.................................................................10
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF SOURCE
Section 5.01 Organization, Power, Etc..................................................................11
Section 5.02 Authorization of Agreements...............................................................11
Section 5.03 Effect of Agreements .....................................................................12
Section 5.04 Authorized Capital Stock..................................................................12
Section 5.05 Governmental Approvals....................................................................12
Section 5.06 Compliance with Law ......................................................................13
Section 5.07 Investment Representation.................................................................13
ARTICLE VI. COVENANTS
Section 6.01 Conduct of the Source Business............................................................13
Section 6.02 Stockholder Approval; Third-Party
<PAGE>
Consents..............................................................................15
Section 6.03 Transferred Assets........................................................................15
Section 6.04 Financial Information.....................................................................16
Section 6.05 Confidentiality...........................................................................16
Section 6.06 Transferred Employees.....................................................................16
Section 6.07 Stock Options and Warrants................................................................17
Section 6.08 Further Assurances........................................................................18
Section 6.09 Inspection and Preservation of
Records, Etc..........................................................................18
ARTICLE VII. CONDITIONS PRECEDENT
Section 7.01 Conditions Precedent to Obligations
of Source.............................................................................20
Section 7.02 Conditions Precedent to Obligations
of Walsh..............................................................................21
ARTICLE VIII. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
Section 8.01 Survival of Representations...............................................................22
Section 8.02 Tax Indemnity.............................................................................22
Section 8.03 General Indemnity.........................................................................23
Section 8.04 Conditions of Indemnification.............................................................24
Section 8.05 Remedies Cumulative.......................................................................25
ARTICLE IX. MISCELLANEOUS
Section 9.01 Expenses..................................................................................25
Section 9.02 Bulk Transfer Laws........................................................................25
Section 9.03 Execution in Counterparts.................................................................26
Section 9.04 Notices...................................................................................26
Section 9.05 Amendments, Supplements, Etc..............................................................26
Section 9.06 Entire Agreement..........................................................................26
Section 9.07 Applicable Law............................................................................27
Section 9.08 Binding Effect............................................................................27
Section 9.09 Assignability.............................................................................27
TESTIMONIUM......................................................................................................28
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INDEX TO EXHIBITS AND SCHEDULES
Exhibit ss. Ref. Description
A 3.04(a) Management Services Agreement
B 3.04(b) Support Services Agreement
C 3.04(c) Preferred Technology Partner Agreement
D 3.04(d) Pharbase License Agreement
E 3.04(e) Facilities Agreement
Schedule Description
1.01 Walsh Corporate Reorganization
2.01 Transfer of Source Business
4.05 Governmental Approvals (Walsh)
5.04 Stock Options, Warrants, Etc. (Source)
5.05 Governmental Approvals (Source)
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MASTER REORGANIZATION AGREEMENT, dated as of April 16, 1996,
between WALSH INTERNATIONAL INC., a Delaware corporation ("Walsh"), and SOURCE
INFORMATICS INC., a Delaware corporation ("Source").
WHEREAS Walsh, through various direct and indirect
subsidiaries, operates in two business segments: (i) the "Walsh Business," which
includes sales force management and integrated sales and marketing information
services for the pharmaceutical industry, associated medical professional
databases and other services related to those databases, such as direct mail
marketing and consulting, and (ii) the "Source Business," which includes a range
of products and services for such industry, primarily marketed under the name
"Source," that utilize proprietary databases of prescriptions dispensed by
retail outlets in the United States; and
WHEREAS the Board of Directors of Walsh has determined, in
light of the substantially different characteristics of the Walsh Business and
the Source Business, the need of the Source Business for significant additional
investment in database development and certain other factors, to separate the
Walsh and Source Businesses into two independent companies; and
WHEREAS a subsidiary of Walsh has recently formed
Source for the purpose of acting as the holding company for the
Source Business; and
WHEREAS on the Closing Date (as hereinafter defined), Walsh
and certain of its subsidiaries (the "Walsh Subsidiaries") will contribute to
Source and its designated subsidiaries (the "Source Subsidiaries") their
respective ownership interests in the Source Business, those being (i) the
assets and properties of Walsh and the Walsh Subsidiaries used exclusively or
primarily in connection with the Source Business, subject to certain liabilities
and (ii) all of the issued and outstanding capital stock of certain Walsh
Subsidiaries that are engaged in the Source Business (collectively, the "Source
Assets") in return for shares of preferred and common stock of Source as
provided herein; and
WHEREAS Walsh intends to distribute the shares of common stock
of Source issued in exchange for the Source Assets to the common stockholders of
Walsh as provided herein; and
WHEREAS, in accordance with the Restated Certificate of
Incorporation of Walsh and Section 1 of the Agreement, dated as of April 16,
1996, by and among Walsh, Source and the holders of the Series A Convertible
Preferred Stock of Walsh (the "Walsh Preferred Stock") named therein
(individually, a "Preferred Stockholder," and collectively, the "Preferred
Stockholders"), the Preferred Stockholders shall, upon the Closing Date (as
hereinafter defined), exchange one-half of the aggregate number
<PAGE>
of shares of Series A Convertible Preferred Stock of Walsh held by them for
shares of Series A Convertible Preferred Stock of Source; and
WHEREAS Walsh has agreed to provide Source and the Source
Subsidiaries with certain professional management and technical support services
and licenses to use certain databases and to collaborate with Source in the
development of their respective technologies, all in connection with the
operation of the Source Business, as such support services, licenses and
collaborative efforts shall be provided for in the service, license and
technology agreements to be entered into pursuant to this Agreement; and
WHEREAS Walsh proposes to issue to the public up to 3,277,500
shares of its Common Stock in an underwritten public offering and, to that end,
has filed a Registration Statement on Form S-1 (No. 333-316) (the "Walsh
Registration Statement") with the Securities and Exchange Commission to register
such shares under the Securities Act of 1933, and the transactions contemplated
hereby are to be consummated prior to the effective date of the Walsh
Registration Statement;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the parties hereby agree as follows:
ARTICLE I
WALSH REORGANIZATION; FORMATION OF SOURCE
SECTION 1.01. Walsh Corporate Reorganization. On the
terms and subject to the conditions hereinafter set forth, Walsh shall cause the
following transactions to be consummated on or prior to the Closing Date:
(a) Walsh America Ltd., an indirect wholly-owned subsidiary of
Walsh ("Walsh America"), shall:
(i) form a new subsidiary ("Walsh Delaware");
(ii) contribute to Walsh Delaware all of Walsh America's
ownership interest in the Walsh Busi- ness, and
(iii) distribute the shares of Walsh Delaware to Walsh
International Holdings Limited, the corporate parent
of Walsh America ("Walsh Holdings");
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(b) Walsh Holdings shall:
(i) form a new subsidiary ("WA Software"), and
(ii) contribute to it all of Walsh Holdings' ownership
interest in the software and trademarks associated
with Walsh's Precise, Premiere and Pharbase ser-
vices;
(c) Walsh Holdings shall thereupon contribute the shares of WA
Software to Walsh Delaware;
(d) DMA Healthcare Marketing Inc., a direct wholly-owned
subsidiary of Walsh Holdings ("DMA"), shall be merged with and
into Walsh America;
(e) Walsh America shall:
(i) transfer its ownership rights in all trademarks
associated with the Source Business to Walsh Hold-
ings;
(f) Walsh shall:
(i) contribute its ownership rights in all trademarks
associated with the Source Business to Walsh Hold-
ings,
(g) Walsh Holdings shall:
(i) form a new subsidiary ("SI Software"), and
(ii) contribute its ownership rights in all trademarks
associated with the Source Business (along with those
received from Walsh America pursuant to subsection
(e) hereof) to SI Software;
(h) Walsh Holdings shall:
(i) form a new subsidiary ("SI PMSI"), and
(ii) contribute 721,144 shares of the 1,201,144 shares of
Common Stock of Pharmaceutical Marketing Ser- vices
Inc. (collectively, the "PMSI Shares") held by it to
SI PMSI;
(j) Walsh shall:
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(i) contribute the outstanding capital stock of its
wholly-owned subsidiary Walsh International Domes-
tic Finance Ltd. ("WIDF") to Walsh Holdings; and
(ii) contribute the outstanding capital stock of its
wholly-owned subsidiary Walsh International For- eign
Finance Ltd. ("WIFF") to Walsh Holdings;
(k) Walsh Holdings shall, in turn, contribute the outstand- ing
capital stock of WIFF to Walsh Delaware.
The transactions contemplated by this Agreement, as well as
the corporate structure of Walsh and Source before and after the consummation of
such transactions, are described in Schedule 1.01 hereto.
SECTION 1.02. Formation of Source Corporate Organization. On
the terms and subject to the conditions hereinafter set forth, on or prior to
the Closing Date, Source shall form a new subsidiary, Source Informatics
Holdings Inc. ("Source Holdings"), which shall, in turn, form a subsidiary in
the Netherlands, Source Informatics Europe B.V. ("Source Europe"). Source
Holdings shall also form subsidiaries (the "European Subsidiaries") in those
foreign jurisdictions in which the Source Business will be conducted after the
Closing Date.
ARTICLE II
TRANSFER OF SOURCE BUSINESS; ISSUANCE OF SOURCE COMMON STOCK
SECTION 2.01. Transfer of Source Assets. (a) On the terms and
subject to the conditions hereinafter set forth, on the Closing Date, Walsh
shall, or shall cause each of the Walsh Subsidiaries listed under the heading
"Walsh Entity" in Schedule 2.01 hereto (individually a "Walsh Entity," and
collectively, the "Walsh Entities"), to convey, transfer, deliver and assign to
Source or the Source Subsidiary whose name appears opposite the name of such
Walsh Entity on such Schedule under the heading "Source Entity" (each a "Source
Entity," and collectively, the "Source Entities") all of the assets of such
Walsh Entity used exclusively or primarily in connection with the Source
Business (including, without limitation, the stock of any subsidiaries of such
Walsh Entity listed under the heading "Transferred Subsidiaries" or the assets
of any such Walsh Entity listed under the heading "Special Source Assets"), and
such Source Entity shall acquire and assume the liabilities and obligations of
such Walsh Entity related to the Source Assets or the Source Business so
conveyed.
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SECTION 2.02. Issuance of Source Common and Preferred Stock.
On the terms and subject to the conditions hereinafter set forth, on the Closing
Date, in consideration of the transfer of the Source Assets in accordance with
Section 2.01 hereof, subject to the assumption of liabilities provided for
herein, Source shall
(a) issue to Walsh Holdings an aggregate 5,790,992 shares of
its Common Stock, $.01 par value (the "Source Common Stock"); and
(b) issue to Walsh Holdings an aggregate 1,041,667 shares of
its Series A Convertible Preferred Stock, $1.00 par value (the "Source
Preferred Stock").
SECTION 2.03. Excluded Assets. Anything herein contained to
the contrary notwithstanding, the following assets and properties of Walsh and
the Walsh Subsidiaries are specifically excluded from the Source Assets and
shall be retained by Walsh or the Walsh Subsidiaries, as the case may be:
(a) all assets and properties used exclusively or primarily in
connection with the Walsh Business, as described in the Walsh
Registration Statement;
(b) claims for refunds of United States Federal, state and
local taxes, foreign taxes and other governmental charges for periods
ending on or prior to the Closing Date;
(c) claims or rights against third parties relating to
liabilities or obligations that are not assumed by Source hereunder;
and
(d) the corporate name "Walsh", its logo and the trademarks,
trade names, trademark and trade name registrations, service marks and
service mark registrations owned by Walsh or by any of the Walsh
Subsidiaries that are not used exclusively or primarily in connection
with the Source Business.
SECTION 2.04. Instruments of Conveyance and Transfer. On the
terms and subject to the conditions hereinafter set forth, on the Closing Date,
Walsh shall, or shall cause each Walsh Entity to execute and deliver to the
Source Entity whose name appears opposite such Walsh Entity on Schedule 2.01
hereof (i) a bill of sale transferring to such Source Entity the properties,
assets and capital stock to be acquired by it under the terms of this Agreement,
(ii) instruments of assignment and assumption with respect to all contracts,
licenses, leases and similar agreements to be assigned to and assumed by such
Source Entity
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pursuant to this Agreement, (iii) certificates evidencing any shares of capital
stock to be transferred to such Source Entity hereunder, duly endorsed for
transfer to such Source Entity as provided in Section 2.01 hereof, or
accompanied by stock transfer powers duly endorsed in blank, with all requisite
stock transfer taxes paid and stamps affixed, and (iv) such other bills of sale,
instruments of assignment and other appropriate documents as may be reasonably
necessary in order to carry out the intentions and purposes of Section 2.01 of
this Agreement.
SECTION 2.05. Assumption of Liabilities. Subject to the
conditions hereinafter set forth, on the Closing Date, Source shall, or shall
cause each Source Entity acquiring any Source Assets hereunder to execute and
deliver to the Walsh Entity whose name appears opposite such source entity on
Schedule 2.01 hereof an undertaking, in form satisfactory to Walsh, pursuant to
which such Source Entity shall assume and agree to pay, perform and discharge
when due the liabilities and obligations of such Walsh Entity related to the
Source Assets being transferred, and other appropriate documents as may be
reasonably necessary to carry out the intentions and purposes of Section 2.01 of
this Agreement.
SECTION 2.06. Non-Assumption of Certain Liabilities. Neither
Source nor any Source Subsidiary is assuming, nor shall be deemed to have
assumed, any liabilities or obligations of Walsh or of any Walsh Subsidiary of
any kind or nature whatsoever, except (i) to the extent such liabilities or
obligations are liabilities or obligations of the Source Business and (ii) as
expressly provided above in Section 2.05 hereof.
SECTION 2.07. Nonassignable Contracts. Walsh shall promptly
apply for or otherwise seek and use reasonable efforts to obtain all
authorizations, consents, waivers and approvals as may be required in connection
with the assignment of the leases, agreements, contracts, commitments, licenses,
permits, service marks and other rights to be assigned hereunder, and shall
provide Source with copies of all such authorizations, consents, waivers and
approvals promptly after they have been obtained. To the extent that the
assignment of any lease or other right shall require the consent of any other
party thereto, this Agreement shall not constitute an agreement to assign the
same if an attempted assignment would constitute a breach thereof. In the event
that any lease or other right, property or asset of Walsh or any Walsh
Subsidiary cannot be effectively transferred to Source or a Source Subsidiary
without the consent of a third party, and if on the Closing Date Walsh does not
receive such consent, Walsh shall thereafter be obligated to use its best
efforts to assure Source of the benefits of such lease or other right, property
or asset.
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ARTICLE III
CLOSING; DISTRIBUTION OF SOURCE COMMON STOCK
SECTION 3.01. Closing. The closing of the transactions
contemplated by this Agreement shall take place at the offices of Reboul,
MacMurray, Hewitt, Maynard & Kristol, 45 Rockefeller Plaza, New York, New York,
immediately prior to the time Walsh expects the Walsh Registration Statement to
be declared effective by the Securities and Exchange Commission, or at such
other place or at such other date and time as Walsh and Source may mutually
agree (such date and time of closing is herein called the "Closing Date").
SECTION 3.02. Distribution of the Source Common Stock. Subject
to the conditions hereinafter set forth, upon consummation of the transfer of
the Source Assets and the issuance of the Source Common Stock and the Source
Preferred Stock as contemplated hereby on the Closing Date, Walsh Holdings shall
distribute the Source Common Stock and the Source Preferred Stock to Walsh, and
Walsh shall thereupon distribute to each holder of record of the Common Stock,
$.01 par value, of Walsh ("Walsh Common Stock") as set forth in Walsh's stock
transfer books as of the close of business on the day immediately preceding the
Closing Date (the "Record Date"), certificates representing one share of Source
Common Stock for each share of Walsh Common Stock held of record by such holder.
SECTION 3.03. Restructuring of Source. On the terms
and subject to the conditions hereinafter set forth, Source shall cause the
following transactions to be consummated on the Closing Date or as soon as
practicable thereafter:
(a) Source shall contribute the capital stock of Walsh America
to Source Holdings.
(b) Source shall contribute the capital stock of SI Software,
SI PMSI and WIDF to Source Holdings, which shall, in turn, contribute
the capital stock of such subsidiaries to Walsh America.
(c) Source Holdings shall contribute the capital stock of the
European Subsidiaries to Source Europe.
SECTION 3.04. Additional Agreements. Subject to the
conditions hereinafter set forth, on the Closing Date, Walsh, the Walsh
Subsidiaries, Source and the Source Subsidiaries shall execute and deliver the
following agreements to which they are parties (collectively with the
instruments of transfer and
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assumption to be executed and delivered as provided in Sections 2.04 and 2.05
hereof (the "Additional Agreements"):
(a) the Services Agreement, substantially in the form annexed
hereto as Exhibit A;
(b) the Support Services Agreement, substantially in the form
annexed hereto as Exhibit B;
(c) the Preferred Technology Partner Agreement, sub-
stantially in the form annexed hereto as Exhibit C; and
(d) the Pharbase License Agreement, substantially in the form
annexed hereto as Exhibit D.
(e) the Facilities Agreement, substantially in the form
annexed hereto as Exhibit E.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF WALSH
Walsh represents and warrants to Source as follows:
SECTION 4.01. Organization, Power, Etc. (a) Walsh is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and is duly licensed or qualified to do business as a
foreign corporation in each jurisdiction where the failure to so qualify would
have a material adverse effect on the business of Walsh and its subsidiaries
considered as a whole. Walsh has all requisite corporate power and authority to
own, operate and lease its properties, to carry on its business as it is now
being conducted and to execute and deliver this Agreement and the Additional
Agreements to which it is a party and to perform its obligations hereunder and
thereunder.
(b) Each Walsh Subsidiary that is a party to an Additional
Agreement or that is transferring any of the Source Assets (hereinafter referred
to as a "Walsh Contract Party") is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation, and each is duly licensed or qualified to do business as a
foreign corporation in each jurisdiction where the failure to so qualify would
have a material adverse effect on the business of Walsh and its subsidiaries
considered as a whole. Each Walsh Contract Party has all requisite corporate
power and authority to own, operate and lease its properties, to carry on its
business as it is now being conducted and to execute and deliver the Additional
Agree-
8
<PAGE>
ments to which it is a party and to perform its obligations thereunder.
SECTION 4.02. The Source Business. The Source Assets are the
only assets or properties of Walsh and the Walsh Subsidiaries used exclusively
or primarily in connection with the Source Business. Delivery of the Source
Assets to Source or a Source Subsidiary on the Closing Date, together with the
execution and delivery of the Additional Agreements, will vest in or confer upon
Source or such Source Subsidiary, as the case may be, good title to all assets
and properties, all approvals, authorizations, consents, licenses or other
rights and access to all services, support functions and facilities necessary to
the conduct of the Source Business.
SECTION 4.03. Authorization of Agreements. The execution,
delivery and performance by Walsh of this Agreement and each Additional
Agreement to which it is a party, and the consummation by it of the transactions
contemplated hereby and thereby, have been duly and effectively authorized by
all requisite corporate action on the part of Walsh, subject only to the
approval of the stockholders of Walsh as contemplated by Section 6.01 hereof,
and this Agreement constitutes, and each Additional Agreement to which Walsh is
a party, when executed and delivered by Walsh in accordance with this Agreement,
will constitute, subject to such stockholder approval as aforesaid, the legal,
valid and binding obligation of Walsh, enforceable against Walsh in accordance
with its terms. The execution, delivery and performance of each of the
Additional Agreements by the Walsh Contract Party that is a party thereto, and
the consummation by such Walsh Contract Party of the transactions contemplated
thereby, have been duly authorized by all requisite corporate action on the part
of such Walsh Contract Party, and, when executed and delivered by such Walsh
Contract Party in accordance with this Agreement, each such Additional Agreement
will constitute the legal, valid and binding obligation of such Walsh Contract
Party, enforceable against such Walsh Contract Party in accordance with its
terms.
SECTION 4.04. Effect of Agreements. Except with respect to
certain agreements that, individually and in the aggregate, are immaterial to
Walsh and the Walsh Subsidiaries considered as a whole, the execution and
delivery of this Agreement by Walsh and the execution and delivery of the
Additional Agreements by Walsh or the Walsh Contract Parties that are parties
thereto, and the performance by them of their respective obligations hereunder
and thereunder, will not violate any provision of law, the charter or by-laws of
Walsh or any Walsh Contract Party or any judgment, award or decree or any
indenture, agreement or other instrument to which Walsh or any Walsh Con-
9
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tract Party is a party, or by which Walsh or any Walsh Contract Party or any of
their respective properties or assets is bound, or conflict with, result in a
breach of or constitute (with due notice or lapse of time or both) a default
under, any such indenture, agreement or other instrument, or result in the
creation or imposition of any lien, charge, security interest or encumbrance of
any nature upon any of the properties or assets of Walsh or any Walsh Contract
Party.
SECTION 4.05. Governmental Approvals. Except as set forth in
Schedule 4.05 hereto, no approval, authorization, consent or order or action of
or filing with any court, administrative agency or other governmental authority
is required for the execution and delivery by Walsh of this Agreement or for the
execution and delivery of the Additional Agreements by Walsh and the Walsh
Contract Parties that are parties thereto or the consummation by Walsh and such
Walsh Contract Parties of the transactions contemplated hereby and thereby.
SECTION 4.06. Compliance With Law. Neither Walsh nor any Walsh
Subsidiary is in default with respect to the Source Business under any order of
any court, governmental authority or arbitration board or tribunal to which
Walsh or such Walsh Subsidiary is a party or is subject, and neither Walsh nor
any Walsh Subsidiary is in violation of any laws, ordinances, governmental rules
or regulations to which it is subject or has failed to obtain any licenses,
permits, franchises or other governmental authorizations necessary to its
ownership of the Source Assets, or to the conduct of the Source Business, which
violation or failure to obtain might reasonably be expected to have a material
adverse effect on the operations or financial condition of the Source Business.
SECTION 4.07. Investment Representation. Except for the
distribution of the Source Common Stock and the source Preferred Stock as
contemplated by Section 3.02 hereof, Walsh is acquiring the Source Common Stock
and Source Preferred Stock issuable pursuant to Section 2.02 hereof for the
purpose of investment and not with a view to or for sale in connection with any
distribution thereof. Walsh acknowledges that the Source Common Stock (i) have
not been registered under the Securities Act of 1933 by reason of the exemption
contained in Section 4(2) thereof and (ii) may not be sold or otherwise disposed
of unless registered under said Act or unless an exemption from such
registration is available.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SOURCE
Source represents and warrants to Walsh as follows:
SECTION 5.01. Organization, Power, Etc. (a) Source is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and is duly licensed or qualified to do business as a
foreign corporation in each jurisdiction where the failure to so qualify would
have a material adverse effect on its business. Source has all requisite
corporate power and authority to acquire, own, lease and operate the Source
Assets to be conveyed to it, to continue the Source Business, and to execute and
deliver this Agreement and the Additional Agreements to which it is a party and
to perform its obligations hereunder and thereunder.
(b) Each Source Subsidiary that is a party to an Additional
Agreement (hereinafter referred to as a "Source Contract Party") is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation, and each is duly licensed or qualified to
do business as a foreign corporation in each jurisdiction where the failure to
so qualify would have a material adverse effect on the business of Source and
its subsidiaries considered as a whole. Each Source Contract Party has all
requisite corporate power and authority to acquire, own, lease and operate the
Source Assets to be conveyed to it, to continue the Source Business, and to
execute and deliver the Additional Agreements to which it is a party and to
perform its obligations thereunder.
SECTION 5.02. Authorization of Agreements. The execution,
delivery and performance by Source of this Agreement and each Additional
Agreement to which it is a party, and the consummation by it of the transactions
contemplated hereby and thereby, have been duly and effectively authorized by
all requisite corporate action on the part of Source, and this Agreement
constitutes, and each Additional Agreement to which Source is a party, when
executed and delivered in accordance with this Agreement, will constitute, the
legal, valid and binding obligation of Source, enforceable against Source in
accordance with its terms. The execution, delivery and performance of each of
the Additional Agreements by the Source Contract Party that is a party thereto,
and the consummation by such Source Contract Party of the transactions
contemplated thereby, have been duly authorized by all requisite corporate
action on the part of such Source Contract Party, and, when executed and
delivered by such Source Contract Party in accordance with this Agreement, each
such Additional Agreement will constitute the legal, valid and
11
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binding obligation of such Source Contract Party, enforceable against such
Source Contract Party in accordance with its terms.
SECTION 5.03. Effect of Agreements. The execution and delivery
of this Agreement by Source and the execution and delivery of the Additional
Agreements by Source and the Source Contract Parties that are parties thereto,
and the performance by them of their respective obligations hereunder and
thereunder, will not violate any provision of law, the charter or by-laws of
Source or any Source Contract Party or any judgment, award or decree or any
indenture, agreement or other instrument to which Source or any Source Contract
Party is a party, or by which Source or any Source Contract Party or any of
their respective properties or assets is bound, or conflict with, result in a
breach of or constitute (with due notice or lapse of time or both) a default
under, any such indenture, agreement or other instrument, or result in the
creation or imposition of any lien, charge, security interest or encumbrance of
any nature upon any of the properties or assets of Source or any Source Contract
Party.
SECTION 5.04. Authorized Capital Stock. The authorized capital
stock of Source consists of (i) 2,000,000 shares of Preferred Stock, $1 par
value, and (ii) 12,000,000 shares of Common Stock, $.01 par value, of which
1,041,667 shares of Preferred Stock and 5,790,992 shares of Common Stock will be
validly issued and outstanding, fully paid and nonassessable after giving effect
to the transactions contemplated by this Agreement. Except as contemplated by
Section 6.07 hereof or as set forth in Schedule 5.04 hereto, (i) no
subscription, warrant, option, convertible security or other right (contingent
or other) to purchase or acquire any shares of any class of capital stock of
Source is authorized or outstanding and (ii) there is not any commitment of
Source to issue any shares, warrants, options or other such rights or to
distribute to holders of any class of its capital stock any evidences of
indebtedness or assets. Except as set forth in Schedule 5.04, Source does not
have any obligation (contingent or other) to purchase, redeem or otherwise
acquire any shares of the capital stock of Source or any interest therein or to
pay any dividend or make any other distribution in respect thereof.
SECTION 5.05. Governmental Approvals. Except as set forth in
Schedule 5.05 hereto, no approval, authorization, consent or order or action of
or filing with any court, administrative agency or other governmental authority
is required for the execution and delivery by Source of this Agreement, or for
the execution and delivery of the Additional Agreements by Source or the Source
Contract Parties that are parties thereto or the
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consummation by Source and such Source Contract Parties of the transactions
contemplated hereby and thereby.
SECTION 5.06. Compliance With Law. Neither Source nor any
Source Subsidiary is in default under any order of any court, governmental
authority or arbitration board or tribunal to which Source or such Source
Subsidiary is a party or is subject, and neither Source nor any Source
Subsidiary is in violation of any laws, ordinances, governmental rules or
regulations to which it is subject or has failed to obtain any licenses,
permits, franchises or other governmental authorizations necessary to its
ownership and operation of the Source Assets or to the conduct of the Source
Business, which violation or failure to obtain might reasonably be expected to
have a material adverse effect on the operations or financial condition of the
Source Business.
SECTION 5.07. Investment Representation. Source is acquiring
the PMSI Shares pursuant to Section 2.01 hereof for the purpose of investment
and not with a view to or for sale in connection with any distribution thereof.
Source acknowledges that the PMSI Shares (i) have not been registered under the
Securities Act of 1933 by reason of the exemption contained in Section 4(1)
thereof and (ii) may not be sold or otherwise disposed of unless registered
under said Act or unless an exemption from such registration is available.
ARTICLE VI
COVENANTS
SECTION 6.01. Conduct of the Source Business. (a) With respect
to the Source Assets and the Source Business, Walsh agrees that, at all times
after the date hereof and prior to the Closing Date, except as required by the
transactions contemplated hereby (including, without limitation, as provided in
Section 1.01 hereof) and as described in the Walsh Registration Statement, Walsh
will, and will cause each Walsh Subsidiary to:
(i) operate its business only in the usual, regular and
ordinary manner and, to the extent consistent with such operations, use
its best efforts to preserve its current business organization intact,
keep available the services of its current officers and employees and
preserve its current relationships with persons having business
dealings with it, provided that it shall not be required to institute
litigation or pay additional consideration to another party for the
purpose;
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(ii) maintain all its material assets and properties deemed
reasonably necessary for the conduct of the Source Business in current
state of repair, order and condition, reasonable wear and tear
excepted;
(iii) maintain its books of account and records in the usual,
regular and ordinary manner, on a basis consistent with past practice,
and use its best efforts to comply in all material respects with laws
applicable to it and to the conduct of the Source Business and perform
all its material obligations without default;
(iv) not change the character of the Source Business in any
material manner;
(v) not (A) incur any obligation or liability (fixed or
contingent), except normal trade or business obligations incurred in
the ordinary course and consistent with past practice; (B) discharge or
satisfy any lien, security interest or encumbrance or pay any
obligation (fixed or contingent), other than in the ordinary course of
business and consistent with past practice; (C) mortgage, pledge or
subject to any lien, security interest or encumbrance any of the Source
Assets (other than mechanic's, materialman's and similar statutory
liens arising in the ordinary course of business and purchase money
security interests arising in the ordinary course of business between
the date of delivery and payment); (D) transfer, lease or otherwise
dispose of any of the Source Assets, except for a fair consideration in
the ordinary course of business and consistent with past practice or,
except in the ordinary course of business and consistent with past
practice, acquire any assets or properties; (E) cancel or compromise
any debt or claim or waive or release any rights of material value; (F)
transfer or grant any rights under any concessions, leases, licenses,
agreements, patents, inventions, trademarks, trade names, servicemarks
or copyrights or with respect to any know-how (other than licenses
customarily granted in connection with the services provided by the
Source Business); (G) make or grant any wage or salary increase
applicable to any group or classification of employees generally, enter
into any employment contract with, or make any loan to, or enter into
any material transaction of any other nature with, any officer or
employee of Walsh or any subsidiary or affiliate of Walsh; (H) enter
into any transaction, contract or commitment, except in the ordinary
course of business and consistent with past practice; or (I) except in
the ordinary course of business and consistent with past practice,
amend or modify in any way adverse to the interests of the Source
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Business any contract to be assigned to Source or any Source Subsidiary
hereunder.
SECTION 6.02. Stockholder Approval; Third-Party Consents.
Promptly after the date hereof, Walsh shall take all steps necessary in order to
obtain approval by the stockholders of Walsh of the transactions contemplated by
this Agreement. In addition, Walsh shall, with Source's assistance and
cooperation, promptly apply for or otherwise seek and use its reasonable best
efforts to obtain all authorizations, consents, waivers and approvals as may be
required in connection with the assignment of the contracts, agreements,
licenses, leases, sales orders, purchase orders and other commitments to be
assigned to Source or any Source Subsidiary pursuant hereto, provided that Walsh
shall not be required to institute litigation or pay additional consideration to
a third party for such purpose. Source agrees that at all times after the date
hereof and prior to the Closing Date it will cooperate with Walsh in its efforts
to obtain such authorizations, consents, waivers and approvals.
SECTION 6.03. Transferred Assets. Walsh and Source covenant
and agree to use their best efforts to obtain any requisite governmental
approvals for the acquisition of the Source Assets by Source and/or any Source
Subsidiary. In the event that Source has not received on the Closing Date a
requisite approval of any governmental entity to permit purchase of any Source
Assets or the transfer of any component of the Source Business at such time,
Walsh or the Walsh Subsidiary, as the case may be, shall continue, consistent
with applicable law, to hold such Source Assets or operate the Source Business
component, as the case may be, for the account of Source until such approval
shall have been received, at which time Walsh or the Walsh Subsidiary, as the
case may be, shall transfer such Source Assets to Source or the Source
Subsidiary promptly with the appropriate documentation as required by Section
2.04 hereof. For purposes of this Agreement, "operate the Source Business
component" shall mean that Walsh or the Walsh Subsidiary, as the case may be,
shall respond to the direction of Source in the daily operations of such
component insofar as consistent with applicable law, but Walsh or such Walsh
Subsidiary shall not be liable for loss of profits or other claims relating to
the conduct of the business of such component except such as result from the
gross negligence or wilful misconduct of Walsh or such Walsh Subsidiary. In the
event that Source is unable to obtain a required approval to acquire any Source
Assets, the parties agree to cooperate and to use their best efforts to
restructure the transaction so as to obtain such approval or restructure the
transaction so as not to require such approval, in either case consistent with
applicable law.
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<PAGE>
SECTION 6.04. Financial Information. Walsh and Source each
covenant and agree with the other to provide to the other all financial
information, reports and other data relating to the Source Business required by
the requesting party in satisfying its reporting obligations to governmental
agencies and in completing its tax and other governmental returns.
SECTION 6.05. Confidentiality. Walsh shall not at any time
after the date hereof divulge, furnish or make accessible to anyone any
knowledge or information with respect to confidential or secret processes,
inventions, discoveries, improvements, formulae, plans, material, devices or
ideas or know-how, whether patentable or not, relating to any confidential or
secret aspects of the Source Business; provided, however, that (i) nothing
herein shall prohibit Walsh from complying with any order or decree of any court
of competent jurisdiction or governmental authority and (ii) the foregoing
provision shall not apply to any information that is or becomes generally
available to the public through no breach of this Agreement.
SECTION 6.06. Transferred Employees. (a) Source agrees that it
will offer each employee of Walsh or any Walsh Subsidiary identified by Walsh as
being employed in the conduct of the Source Business the opportunity for
employment as employees of Source or a Source Subsidiary (with terms and
conditions of employment and benefits substantially similar to those previously
in effect while such employee was employed by Walsh or any Walsh Subsidiary
unless otherwise agreed) effective on the Closing Date, it being understood
that, except as provided in any existing employment agreements or by applicable
law, such employment shall be employment at will.
(b) Walsh employees who accept employment offered by Source
(collectively, the "Transferred Employees") and who are actively at work on the
day prior to the Closing Date shall become employees of Source or a Source
Subsidiary on the Closing Date. Transferred Employees who are not actively at
work on the day prior to the Closing Date shall become employees of Source on
the day they return to work.
(c) On the date a Transferred Employee becomes an employee of
Source, Source will credit the Transferred Employee with, and entitle the
Transferred Employee to, the number of vacation and sick leave days that the
Transferred Employee was credited with on the day prior to employment by Source
or a Source Subsidiary. In addition, on the day a Transferred Employee becomes
an employee of Source, the Transferred Employee will be credited with all years
of service that the Transferred Employee was credited with at Walsh for the
purposes of determining eligibility to participate in any of Source's employee
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<PAGE>
benefit plans, benefits and services, as well as for the application of
policies, practices and procedures, including, but not limited to, seniority for
layoff, sick leave, service awards, severance pay and vacation accrual. Each
Transferred Employee shall be eligible to participate in Source's medical
benefit plans on the date he or she becomes an employee of Source or in a plan
or plans substantially similar to the plans of Walsh effective on the Closing
Date.
SECTION 6.07. Stock Options and Warrants. (a) On and after the
Closing Date, employment or termination of employment with Source or any Source
Subsidiary, as the case may be, shall be deemed employment or termination of
employment, as the case may be, with Walsh or any Walsh Subsidiary for purposes
of the vesting and termination provisions of the Walsh stock options held by the
Transferred Employees. All unvested Walsh stock options held by Transferred
Employees as of the Closing Date shall continue to vest and all vested Walsh
stock options held by Transferred Employees as of such date shall remain
exercisable all in accordance with the terms of the related stock option
agreements.
(b) Source shall grant to each employee of Walsh or any Walsh
Subsidiary (whether or not such employee becomes a Transferred Employee) holding
a Walsh stock option as of the Closing Date a stock option to purchase the
number of shares of Source Common Stock representing the same percentage of
Source's fully-diluted equity as the percentage of Walsh's fully-diluted equity
represented by the Walsh stock options held by such employee. Each such Source
stock option shall vest in accordance with same vesting schedule set forth in,
and the same percentage of shares shall be deemed vested as of the date of grant
as have vested under, the Walsh stock option held by the employee.
(c) Source shall grant to each holder of Walsh's outstanding
stock purchase warrants as of the Closing Date a warrant to purchase the number
of shares of Source Common Stock representing the same percentage of Source's
fully diluted equity as the percentage of Walsh's fully-diluted equity
represented by the Walsh stock purchase warrant held by such holder.
(d) The aggregate exercise price of each outstanding Walsh
option or warrant in respect of which a Source option or warrant shall be issued
by Source pursuant to this Section 6.07 shall be allocated, as of the Closing
Date, between such Walsh option or warrant and the Source option or warrant so
issued in proportion to the relative fair market values of the Walsh Common
Stock and the Common Stock of Source as of such date. The fair market value of
the Walsh Common Stock shall be equal to its initial public offering price in
the Walsh underwritten public
17
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offering and the fair market value of the Source Common Stock shall be
determined in good faith by the Board of Directors of Source.
(e) The issuance of stock options and warrants by source
pursuant to this Section 6.07 shall be subject to any necessary compliance with
Federal securities laws and state "blue sky" securities laws.
SECTION 6.08. Further Assurances. (a) At any time and from
time to time on and after the Closing Date, Walsh shall, at the request of
Source, execute and deliver or cause to be executed and delivered to Source all
such deeds, assignments, consents, documents and further instruments of transfer
and conveyance, and take or cause to be taken all such other actions, as Source
may reasonably deem necessary or desirable in order to fully and effectively
vest in Source or any Source Subsidiary, as the case may be, or to confirm its
title to and possession of, the Source Assets, or to assist Source in exercising
rights with respect thereto which Source is entitled to exercise pursuant to the
terms of this Agreement; and Source shall execute and deliver or cause to be
executed and delivered such further instruments and take or cause to be taken
such further actions as Walsh may reasonably deem necessary or desirable to
carry out the terms and provisions of this Agreement.
(b) In the event that Source shall determine at any time after
the Closing Date that it has not acquired hereunder any properties or any
authorizations, licenses or other rights, or any services or facilities
necessary to the conduct of the Source Business, Walsh shall, to the extent such
assets or rights are unavailable to Source from third parties on reasonable
terms and to the extent Walsh is capable of doing so, negotiate in good faith
with Source to provide Source with such assets or rights on terms comparable to
those on which Walsh has agreed to provide similar assets or rights under the
Additional Agreements.
SECTION 6.09. Inspection and Preservation of Records, Etc. (a)
On and after the Closing Date, each party hereto upon request will permit, and
Source will cause each Source Subsidiary to permit, the other party hereto, its
representatives and any firm designated by such requesting party to act as its
independent public accountants, at all reasonable times during business hours,
to inspect the files, books, records and accounts of the Source Business
reflecting transactions through the Closing Date or relating to transactions as
to which Walsh or any Walsh Subsidiary shall continue to have primary or
contingent liability after the Closing Date and will give such requesting party
and such accountants access to all accounting and other records and documents of
the Source Business to enable such accountants to
18
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conduct any audit or any other procedures which such requesting party or such
accountants may deem necessary in connection with the preparation, review or
audit of any financial statements or tax returns of such requesting party or to
comply with any other request of a governmental entity. The party holding the
records being inspected will render, at the requesting party's expense, such
assistance as the requesting party and such accountants may request in
completing any of the foregoing determinations or such other reviews, audits or
procedures or in complying with any government request.
(b) On and after the Closing Date, each party will permit, and
Source will cause each Source Subsidiary to permit, the other party hereto, its
representatives and its counsel, at reasonable times during business hours, to
inspect all the files, books, records and accounts of the Source Business held
by a party or such Source Subsidiary, as well as access to any employee of the
Source Business or former employee of the Source Business employed by Walsh
having knowledge of the information therein contained, if such inspection and
access are reasonably necessary for the defense by such requesting party of any
litigation relating to the Source Business prior to the Closing Date or relating
to transactions as to which Walsh or any Walsh Subsidiary shall continue to have
primary or contingent liability after the Closing Date.
(c) For a period of six years after the Closing Date, each
party shall preserve the business records of the Source Business owned by them,
shall allow the other party hereto and its representatives reasonable access to
such records and the right to make copies and extracts therefrom at any
reasonable time during normal business hours, and shall not dispose of any
thereof, provided that, commencing three years after the Closing Date, a party
may give the other party written notice of its intention to dispose of any part
thereof, specifying the items to be disposed of in reasonable detail. Any party
may, within a period of 60 days from receipt of any such notice, notify the
disposing party of its desire to retain one or more of the items to be disposed
of. The disposing party shall, upon receipt of such notice, deliver to the
requesting party, at its expense, the items specified therein.
ARTICLE VII
CONDITIONS PRECEDENT
SECTION 7.01. Conditions Precedent to Obligations of Source.
The obligations of Source under this Agreement are sub-
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ject, at the option of Source, to the satisfaction at or prior to the Closing
Date of each of the following conditions:
(a) Accuracy of Representations and Warranties. The
representations and warranties of Walsh contained in this Agreement or in any
certificate or document delivered to Source pursuant hereto shall be true and
correct in all material respects on and as of the Closing Date as though made at
and as of that date, except for changes expressly contemplated hereby or by the
Walsh Registration Statement.
(b) Compliance with Covenants. Walsh and the Walsh Contract
Parties shall have performed and complied with all terms, agreements, covenants
and conditions of this Agreement to be performed or complied with by them at or
prior to the Closing
Date.
(c) Condition of Assets. The Source Assets shall not have been
destroyed by fire or other casualty so as to materially adversely affect the
operations or financial condition of the Source Business.
(d) All Proceedings To Be Satisfactory. All corporate and
other proceedings to be taken by Walsh and the Walsh Contract Parties in
connection with the transactions contemplated hereby and by the Additional
Agreements and all documents incident thereto shall be satisfactory in form and
substance to Source and its counsel, and Source and said counsel shall have
received all such counterpart originals or certified or other copies of such
documents as it or they may reasonably request.
(e) Additional Agreements. Walsh and each Walsh Contract Party
shall have executed and delivered to Source each of the Additional Agreements to
which Walsh or such Walsh Contract Party is a party.
(f) Governmental Approvals. All governmental approvals or
filings described in Schedules 4.05 or 5.05 hereto shall have been duly obtained
or made.
(g) Legal Actions or Proceedings. No legal action or
proceeding shall have been instituted or threatened seeking to restrain,
prohibit, invalidate or otherwise affect the consummation of the transactions
contemplated hereby or by any Additional Agreement or that would, if adversely
decided, materially adversely affect the operations or financial condition of
the Source Business.
(h) Preferred Stockholder Agreement. The Agreement dated as of
April 16, 1996 between Walsh and the holders of
20
<PAGE>
outstanding shares of Walsh Preferred Stock shall have been executed and
delivered by Walsh and the record and beneficial holders of at least two-thirds
of the outstanding Walsh Preferred Stock, and such letter agreement shall be in
full force and effect on and as of the Closing Date.
(i) Stockholder Approval. The transactions contemplated hereby
shall have been approved by the stockholders of Walsh.
SECTION 7.02. Conditions Precedent to Obligations of Walsh.
The obligations of Walsh under this Agreement are subject, at the option of
Walsh, to the satisfaction at or prior to the Closing Date of each of the
following conditions:
(a) Accuracy of Representations and Warranties. The
representations and warranties of Source contained in this Agreement or in any
certificate or document delivered to Walsh pursuant hereto shall be true and
correct in all material respects on and as of the Closing Date as though made at
and as of that date.
(b) Compliance with Covenants. Source and the Source Contract
Parties shall have performed and complied with all terms, agreements, covenants
and conditions of this Agreement to be performed or complied with by them at or
prior to the Closing
Date.
(c) All Proceedings To Be Satisfactory. All corporate and
other proceedings to be taken by Source and the Source Subsidiaries in
connection with the transactions contemplated hereby and all documents incident
thereto shall be satisfactory in form and substance to Walsh and its counsel,
and Walsh and said counsel shall have received all such counterpart originals or
certified or other copies of such documents as it or they may reasonably
request.
(d) Additional Agreements. Source and each Source Contract
Party shall have executed and delivered to Walsh each of the Additional
Agreements to which Source or such Source Contract Party is a party.
(e) Governmental Approvals. All governmental approvals or
filings described in Schedules 4.05 or 5.05 hereto shall have been duly obtained
or made.
(f) Legal Actions or Proceedings. No legal action or
proceeding shall have been instituted or threatened seeking to restrain,
prohibit, invalidate or otherwise affect the consummation of the transactions
contemplated hereby or by any Additional Agreement or that would, if adversely
decided, materially ad-
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versely affect the operations or financial condition of the Source Business.
(g) Preferred Stockholder Agreement. The letter agreement
dated as of April 16, 1996 between Walsh and the holders of outstanding shares
of Walsh Preferred Stock shall have been executed and delivered by Walsh and the
record and beneficial holders of at least two-thirds of the outstanding Walsh
Preferred Stock, and such letter agreement shall be in full force and effect on
and as of the Closing Date.
(h) Stockholder Approval. The transactions contemplated hereby
shall have been approved by the stockholders of Walsh.
(i) Underwriting Agreement. Walsh and the Representatives of
the Underwriters for its underwritten public offering shall have executed and
delivered the Underwriting Agreement for the offering, substantially in the form
filed as an exhibit to the Walsh Registration Statement.
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
SECTION 8.01. Survival of Representations. All representations
and warranties made by any party hereto in this Agreement or pursuant hereto
shall survive the Closing Date for a period of one year.
SECTION 8.02. Tax Indemnity. (a) Source agrees to and shall
indemnify and hold harmless Walsh and each Walsh Subsidiary from and against (i)
any and all taxes (including, without limitation, income taxes, taxes based on
or measured by income or franchise taxes), tax deficiencies, any interest or
penalties thereon, and reasonable legal fees and expenses imposed on or incurred
by Walsh or any Walsh Subsidiary insofar as the same are attributable to the
Source Assets or the Source Business, whether arising with respect to
transactions or events occurring prior to or after the Closing Date, and (ii)
any and all such taxes, tax deficiencies, any interest or penalties thereon, and
reasonable legal fees and expenses, arising out of the consummation of the
transactions contemplated hereby, but only to the extent that such taxes,
deficiencies, interest or penalties exceed, in the aggregate, Walsh's available
United States net operating loss carryforwards.
(b) If at any time after the Closing Date any consolidated or
combined federal, state, local or foreign income tax
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return of Walsh shall be audited for any year during which any component of the
Source Business was included in any such consolidated or combined return, Source
shall provide Walsh with any information and documentation in its possession
required for said audit. In addition, if at any time after the Closing Date any
consolidated, combined or separate federal, state, local or foreign income tax
return of Source or any component of the Source Business shall be audited, Walsh
shall provide Source with any information and documentation in Walsh's
possession required for said audit.
(c) The indemnities provided for in this Section 7.02 shall be
independent of and in addition to any other indemnity provision hereof and shall
survive the Closing Date for the applicable statutory periods of limitation (as
the same may be extended).
SECTION 8.03. General Indemnity. (a) Subject to the terms and
conditions of this Article VIII, Walsh agrees to and shall indemnify, defend and
hold harmless Source and each Source Subsidiary from and against all demands,
claims, actions or causes of action, assessments, losses, damages, liabilities,
costs and expenses, including, without limitation, interest, penalties and
reasonable attorneys' fees and expenses (collectively, "Damages"), asserted
against, resulting to, imposed upon or incurred by Source or any Source
Subsidiary by reason of or resulting from (i) a breach of any representation,
warranty or covenant of Walsh or any Walsh Contract Party contained in or made
pursuant to or in connection with this Agreement or any of the Additional
Agreements or (ii) any liabilities or obligations of, or claims against or
imposed on, Source or any Source Subsidiary (whether absolute, accrued,
contingent or otherwise), and whether a contractual, tax (except as specifically
covered in Section 8.02 hereof) or any other type of liability, obligation or
claim), which was not required to be assumed by Source or any Source Subsidiary
pursuant to this Agreement.
(b) No claim for indemnification may be made under Section
8.03(a) hereof in respect of the first $100,000 in the aggregate of Damages that
would otherwise have been required to be paid by Walsh as the indemnifying party
under such Section 8.03(a).
(c) Subject to the terms and conditions of this Article VII,
Source hereby agrees to and shall indemnify, defend and hold harmless Walsh and
each Walsh Subsidiary from and against all Damages asserted against, resulting
to, imposed upon or incurred by Walsh or any Walsh Subsidiary by reason of or
resulting from (i) a breach of any representation, warranty or covenant of
Source contained in or made pursuant to this Agree-
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ment or any of the Additional Agreements, (ii) the failure of Source or any
Source Subsidiary to pay, perform and discharge when due the liabilities and
obligations of the Source Business, including those assumed by Source or such
Source Subsidiary pursuant to this Agreement, or (iii) any action made out
against Walsh or any Walsh Subsidiary that arises out of or results from the
operation of the Source Business, whether arising with respect to transactions
or events occurring prior to or after the Closing Date; provided, however, that
the indemnity provided for by clause (iii) of this subparagraph (c) shall not
apply to any actions made out against Walsh or any Walsh Subsidiary in
connection with the performance of their respective obligations under the
Additional Agreements.
SECTION 8.04. Conditions of Indemnification. The respective
obligations and liabilities of Walsh and Source (herein sometimes called the
"indemnifying party") to the other (herein sometimes called the "party to be
indemnified") under Sections 8.02 and .03 hereof with respect to claims
resulting from the assertion of liability by third parties shall be subject to
the following terms and conditions:
(a) Within 30 days after receipt of notice of commencement of
any action or the assertion in writing of any claim by a third party, the party
to be indemnified shall give the indemnifying party written notice thereof
together with a copy of such claim, process or other legal pleading, and the
indemnifying party shall have the right to undertake the defense thereof by
representatives of its own choosing.
(b) In the event that the indemnifying party, by the 30th day
after receipt of notice of any such claim (or, if earlier, by the tenth day
preceding the day on which an answer or other pleading must be served in order
to prevent judgment by default in favor of the person asserting such claim),
does not elect to defend against such claim, the party to be indemnified will
(upon further notice to the indemnifying party) have the right to undertake the
defense, compromise or settlement of such claim on behalf of and for the account
and risk of the indemnifying party, subject to the right of the indemnifying
party to assume the defense of such claim at any time prior to settlement,
compromise or final determination thereof.
(c) Anything in this Section 8.04 to the contrary
notwithstanding, (i) if there is a reasonable probability that a claim may
materially and adversely affect the indemnifying party other than as a result of
money damages or other money payments, the indemnifying party shall have the
right, at its own cost and expense, to compromise or settle such claim, but (ii)
the indemnifying party shall not, without the prior written consent of the
24
<PAGE>
party to be indemnified, settle or compromise any claim or consent to the entry
of any judgment that does not include as an unconditional term thereof the
giving by the claimant or the plaintiff to the party to be indemnified a release
from all liability in respect of such claim.
(d) In connection with any such indemnification, the
indemnified party will cooperate in all reasonable requests of the indemnifying
party.
SECTION 8.05. Remedies Cumulative. Except as herein provided,
the remedies provided herein shall be cumulative and shall not preclude
assertion by any party hereto of any other rights or the seeking of any other
remedies against the other party hereto.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Expenses. Whether or not the transactions
contemplated hereby are consummated, any and all costs, fees and expenses
incurred by the parties hereto in connection with the transactions contemplated
hereby and by the Additional Agreements shall be paid by the party incurring
such expenses, provided that, if such transactions are consummated, Source shall
pay (i) the costs of any transfer, documentary, stamp or other tax or fee
arising in connection with the transfer of the Source Assets hereunder and (ii)
any sales tax imposed in connection with the transactions contemplated hereby.
Payment of any such sales tax shall be made by Source no later than the sixtieth
day following the Closing Date to the party (if other than Source) required
under applicable law to collect and/or pay such tax.
SECTION 9.02. Bulk Transfer Laws. Source hereby waives
compliance by Walsh with any applicable bulk transfer laws, including, without
limitation, the bulk transfer provisions of the Uniform Commercial Code of any
state, or any similar statute, with respect to the transactions contemplated
hereby.
SECTION 9.03. Execution in Counterparts. For the convenience
of the parties, this Agreement may be executed in one or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
SECTION 9.04. Notices. All notices that are required or may be
given pursuant to the terms of this Agreement shall be in writing and shall be
sufficient in all respects if given in
25
<PAGE>
writing and delivered by hand or by a national overnight courier service or
mailed by registered or certified mail, postage prepaid, as follows:
If to Walsh, to
Walsh International Inc.
45 Rockefeller Plaza
Suite 912
New York, New York 10111
Attention: Leonard R. Benjamin, Esq.
Vice President and General Counsel
If to Source, to
Source Informatics Inc.
45 Rockefeller Plaza
Suite 912
New York, New York 10111
Attention: Warren J. Hauser, Esq.
Vice President and General Counsel
or such other address or addresses as either party hereto shall have designated
by notice in writing to the other party hereto.
SECTION 9.05. Amendments, Supplements, Etc. Before or after
approval by stockholders of Walsh, this Agreement may at any time be amended or
supplemented by such additional agreements, articles or certificates, as may be
determined by the parties hereto to be necessary, desirable or expedient to
further the purposes of this Agreement, or to clarify the intention of the
parties hereto, or to add to or modify the covenants, terms or conditions hereof
or to effect or facilitate any governmental approval or acceptance of this
Agreement or to effect or facilitate the filing or recording of this Agreement
or the consummation of any of the transactions contemplated hereby. Any such
instrument must be in writing and signed by both parties.
SECTION 9.06. Entire Agreement. This Agreement, its Exhibits
and Schedules, and the documents executed on the Closing Date in connection
herewith, constitute the entire agreement between the parties hereto with
respect to the subject matter hereof and supersede all prior agreements and
understandings, oral and written, between the parties hereto with respect to the
subject matter hereof.
SECTION 9.07. Applicable Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of Delaware.
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<PAGE>
SECTION 9.08. Binding Effect. This Agreement shall
inure to the benefit of and be binding upon the parties hereto
and their respective successors and permitted assigns.
SECTION 9.09. Assignability. Neither this Agreement
nor any of the parties' rights hereunder shall be assignable by either party
hereto without the prior written consent of the other party hereto.
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of the parties hereto as of the date
first above written.
WALSH INTERNATIONAL INC.
By /s/ Michael A. Hauck
------------------------------
SOURCE INFORMATICS INC.
By /s/ Dennis M.J. Turner
------------------------------
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</TABLE>
EXHIBIT 10.7.2
SERVICES AGREEMENT
THIS AGREEMENT, dated as of April 16, 1996, between WALSH
INTERNATIONAL INC., a Delaware corporation ("Walsh") and SOURCE INFORMATICS
INC., a Delaware corporation ("Source").
WHEREAS, pursuant to the Master Reorganization Agreement,
dated as of the date hereof (the "Master Agreement"), between Walsh and Source,
Walsh has agreed to transfer to Source certain of Walsh's assets including
products and services that are based on proprietary databases of prescriptions
dispensed in the United States and other counties, and are designed to be used
by the pharmaceutical industry in sales force compensation, territory
realignment and focused promotion (the "Source Business"); and
WHEREAS, in spite of the formation of a Source business
distinct from Walsh and Source having its own management and professional staff,
Source nevertheless wishes to avail itself, during a transition period after
consummation of the transfer to it of the Source Business, of the experience and
expertise of certain Management, financial and professional Walsh personnel to
assure continuity in its business operations and to facilitate further growth
and development; and
WHEREAS, Walsh is willing to make available to Source and its
subsidiaries the services of certain management, financial and professional
personnel to provide required support services required by Source, under the
following terms and conditions.
NOW, THEREFORE, in view of the premises stated above and of
the mutual covenants and agreements hereinafter set forth, the parties hereto
agree as follows:
1. MANAGEMENT, FINANCIAL AND LEGAL SERVICES
(a) Commencing with the Closing (the "Closing") of the trans-
actions contemplated by the Master Agreement, and subject to
the provisions of Paragraph 2, continuing thereafter for a
initial period of 24 months with respect to general management
services, and a period of not more than six months with
respect to financial and legal services and, Walsh shall, and
shall cause its subsidiaries to provide, the following
employees to Source and its subsidiaries, on a part-time
basis, to provide management and function- al support services
specified below:
(i) General Management Services -- Michael A. Hauck
<PAGE>
(ii) Financial Services -- Martyn D. Williams
(iii) Legal Services -- Leonard R. Benjamin
(iv) Any other executives of Walsh or its subsidiaries who
are deemed by the individuals named above to be
necessary or appropriate to provide, or to assist in
providing, management, financial, and legal services
hereunder.
(b) Notwithstanding anything herein to the contrary, it is
understood that the individuals identified in Paragraph 1(a)
hereof shall devote at least 80% of their business time to
Walsh.
(c) In the event that any of the individuals identified in
Paragraph 1(a) hereof is unable to provide the services in the
areas described above, Walsh shall provide other individuals,
acceptable to Source, to perform the specified services.
(d) In consideration for the services provided by Walsh pursuant
to Paragraph 1(a), Source shall pay to Walsh a fee calculated
based on an allocation of the actual costs to Walsh and its
subsidiaries in providing the services hereunder. Within 10
days after the end of each calendar quarter, Walsh shall
provide Source with an analysis setting forth the amount of
time spent on Source activi- ties and the details of the
remuneration (and other related costs) attributable to said
Walsh personnel for the purposes of verifying the fee payable
by Source to Walsh. The fee shall be payable by Source
quarterly on the last day of April, July, October and January
of each year.
2. TERM OF AGREEMENT AND TERMINATION
(a) This Agreement shall commence with the Closing and shall
continue for a period of 24 months. Thereafter, this Agreement
shall automatically be renewed for successive three month
periods unless either Walsh or Source notifies the other party
in writing of its intention to terminate the Agreement, or
specific services provided pursuant thereto, at least one
month prior to the beginning of the applicable renewal period.
(b) Either Walsh or Source may terminate this Agreement if the
other has defaulted in any material obligation hereunder by
giving at least 30 days, written notice to the breaching
party; provided, however, that if the
2
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breaching party corrects such default within said 30 day
period, this Agreement shall continue in full force and
effect.
(c) Either Walsh or Source may terminate this Agreement by
immediate written notice if the other party becomes insolvent,
or a court of competent jurisdiction enters an order or decree
in respect of such party under any bankruptcy or similar law,
approving a petition for reorganization or appointing a
custodian for all or a substantial part of its assets or
ordering the liquida- tion of such party.
3. EXPENSES
Source shall reimburse Walsh for all reasonable travel, accommodation,
living and entertainment expenses actually incurred by Walsh or its
subsidiaries in providing any of the services specified in this
Agreement.
4. CONFIDENTIALITY
For the purposes of enabling Walsh to perform the services required by
this Agreement, Source shall grant Walsh access to Source's premises,
files and staff and shall fully disclose to Walsh all confidential and
proprietary information necessary to enable Walsh and its subsidiaries
to provide the services hereunder. In addition to any covenants with
respect to confidentiality contained in the Master Agreement, Walsh
agrees that it shall, and cause its subsidiaries to, maintain the
confidentiality, and neither disclose to third parties nor use for its
own purposes (except as separately agreed), all such information so
disclosed to it; provided, however, that the obligation of
confidentiality specified above shall not extend to: (i) information
that is or subsequently becomes public knowledge through no fault of
Walsh or any other Walsh subsidiary; or to (ii) information that comes
into the possession of Walsh or a Walsh subsidiary from a third party
not under an obligation of confidentiality to Source.
5. LIABILITY OF WALSH
(a) This Agreement constitutes a contract for the provision by
Walsh of services as an independent contractor and not a
contract of employment. Accordingly, Walsh shall pay all
salaries and other compensation due to employees of Walsh or
any Walsh subsidiary engaged in the performance of the
services specified herein. Walsh shall withhold, deduct and
remit all taxes, contributions or imposts
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<PAGE>
required by any Government having jurisdiction over the
relationship between Walsh employees and Walsh.
(b) Walsh agrees to use its best efforts to render the ser- vices
required of it hereunder in a diligent and profes- sional
manner.
(c) Walsh's liability, however, for wrongful acts or omissions in
breach of this Agreement shall not extend to damages for lost
profits or other consequential damages.
6. MISCELLANEOUS PROVISIONS
(a) This Agreement shall not be assignable by either party without
the prior written consent of the other, except to a
wholly-owned subsidiary of either Walsh or Source, as the case
may be. In the event of a permitted assignment, however, the
assigning party shall guarantee the performance of all the
obligations under this Agreement.
(b) No waiver, modification or alteration of any of the provisions
of this Agreement shall be binding unless approved in writing
by duly authorized representatives of the parties.
(c) This Agreement embodies the entire contractual relationship
between the parties in relation to the subject matter hereof,
and no other agreement or understanding, verbal or otherwise,
exists between the parties at the time of execution hereof.
(d) All notices in connection with this Agreement shall be in
writing and personally delivered or mailed by registered or
certified mail, return receipt requested, or telegraphed,
telecopied or teletyped to the following addresses:
If to Walsh, to it at:
Suite 912
New York, NY 10111
If to Source to it at:
2345 E. Camelback Road
Phoenix, AZ 85016
(e) This Agreement shall be construed in accordance with and
governed by the laws of the State of Delaware.
4
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
WALSH INTERNATIONAL INC.
By: /s/ Michael A. Hauck
--------------------------
SOURCE INFORMATICS INC.
By: /s/ Dennis M.J. Turner
---------------------------
5
<PAGE>
EXHIBIT 10.7.3
SUPPORT SERVICES AGREEMENT
THIS AGREEMENT, dated as of April 16, 1996, is between WALSH
INTERNATIONAL INC., a Delaware corporation ("Walsh") and SOURCE INFORMATICS
INC., a Delaware corporation ("Source").
WHEREAS, pursuant to the Master Reorganization Agreement,
dated as of the date hereof (the "Master Agreement"), between Walsh and Source,
Walsh has agreed to transfer to Source certain of Walsh's assets including
products and services that are based on proprietary databases of prescriptions
dispensed in the United States and in other countries and designed to be used by
the pharmaceutical industry in sales force compensation, territory realignment
and focused promotion (the "Source Business"); and
WHEREAS, in spite of the formation of a Source business
distinct from Walsh and Source having its own management and professional staff,
Walsh nevertheless wishes to avail itself, during a transition period after
consummation of the transfer to Source of the Source Business, of the support of
certain functional support and consulting services of Source to assure
continuity on Walsh's business operations; and
WHEREAS, Source is willing to make available to Walsh the
functional support services required by Walsh or its subsidiaries under the
following terms and conditions.
<PAGE>
NOW, THEREFORE, in view of the premises stated above and
of the mutual covenants and agreements hereinafter set forth, the
parties hereto agree as follows:
1. SERVICES
(a) Commencing with the Closing (the "Closing") of the
transactions contemplated by the Master Agreement and, subject
to the provisions of Paragraph 2, continuing thereafter for an
initial period of 24 months, Source shall, or shall cause its
subsidiaries to, provide the following functional support and
consulting services to Walsh and its subsidiaries, as
requested by Walsh or its subsidiaries.
(i) Executive Services;
(ii) Human Resources Services;
(iii) Financial Services; and
(iv) Any other functional support and consulting services
of Source which are deemed by Walsh to be necessary
or appropriate to reasonably assure continuity in its
business operations.
(b) Source shall cause such services to be provided so as to
ensure that the transition after the transfer of the Source
Business is conducted in an efficient and orderly manner.
(c) In consideration for the services provided by Source and its
subsidiaries pursuant to Clause 1(a), Walsh shall pay
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<PAGE>
to Source a fee calculated quarterly based on an allocation of
the actual costs to Source and its subsidiaries in providing
the services hereunder. Within 10 days at the end of each
calendar quarter Source shall provide Walsh with an analysis
setting forth the amount of time spent by Source and its
subsidiaries in providing services hereunder and the details
of the remuneration (and other related costs) attributable to
the personnel providing such services for the purposes of
verifying the fee payable by Walsh to Source. The fee shall be
payable by Walsh on the last day of April, July, October and
January of each year.
2. TERM OF AGREEMENT AND TERMINATION
(a) This Agreement shall commence with the Closing and shall
continue for a period of 24 months. Thereafter, this Agreement
shall automatically be renewed for successive three-month
periods unless either Walsh or Source notifies the other party
in writing of its intention to terminate the Agreement, or
specific services provided pursuant thereto, at least one
month prior to the beginning of the applicable renewal period.
(b) Either Walsh or Source may terminate this Agreement if the
other has defaulted in any material obligation hereunder by
giving at least 30 days written notice to the breaching party;
provided, however, that if the
3
<PAGE>
breaching party corrects such default within said 30-day
period, this Agreement shall continue in full force and
effect.
(c) Either Walsh or Source may terminate this agreement by
immediate written notice of the other party becomes insolvent,
or a court of competent jurisdiction enters an order or decree
in respect of such party under any bankruptcy or similar law,
approving a petition for reorganization or appointing a
custodian for all or a substantial part of its assets or
ordering the liquida- tion of such party.
3. EXPENSES
Walsh shall reimburse Source for all reasonable travel, accommodation,
living and entertainment expenses actually incurred by the Source and
its subsidiaries in providing any of the services specified in this
Agreement.
4. CONFIDENTIALITY
For the purpose of enabling the Source to perform the services required
by this Agreement, Walsh shall grant Source access to Walsh's premises,
files and staff and shall fully disclose to the Source all confidential
and proprietary information necessary to enable Source and its
subsidiaries to provide the services hereunder. In addition to any
covenants with respect to confidentiality contained in the Master
Agreement, Source agrees that it shall, and shall cause its
subsidiaries to,
4
<PAGE>
maintain the confidentiality, and neither disclose to third parties nor
use for its own purposes (except as separately agreed), all such
information so disclosed to it; provided, however, that the obligation
of confidentiality specified above shall not extend to: (i) information
that is or subsequently becomes public knowledge through no fault of
the Source Group; or to (ii) information that comes into the possession
of the Source Group from a third party not under an obligation of
confidentiality to Walsh or any of its subsidiaries.
5. LIABILITY OF SOURCE
(a) This Agreement constitutes a contract for the provision by
Source of services as an independent contractor and not a
contract of employment. Accordingly, Source shall pay all
salaries and other compensation due to employees of Source
engaged in the performance of the services specified herein.
Source shall withhold, deduct and remit all taxes,
contributions or imposts required by any Government having
jurisdiction over the relationship between Source employees
and Source.
(b) Source shall use its best efforts to render the services
required of it hereunder in a diligent and professional
manner.
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<PAGE>
(c) Source's liability, however, for wrongful acts or omissions in
breach of this Agreement shall not extend to damages for lost
profits or other consequential damages.
6. MISCELLANEOUS PROVISIONS
(a) This Agreement shall not be assignable by either party without
the prior written consent of the other, except to a
wholly-owned subsidiary of either Walsh or Source, as the case
may be. In the event of a permitted assignment, however, the
assigning party shall guarantee the performance of all the
obligations under this Agreement.
(b) No waiver, modification or alteration of any of the provisions
of this Agreement shall be binding unless approved in writing
by duly authorized representatives of the parties.
(c) This Agreement embodies the entire contractual relationship
between the parties in relation to the subject matter hereof,
and no other agreement or understanding, verbal or otherwise,
exists between the parties at the time of execution hereof.
(d) All notices in connection with this Agreement shall be writing
and may be personally delivered or delivered by registered or
certified mail, return receipt requested, or telegraphed,
telecopies or teletyped to the following address: If to Walsh,
to it at:
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<PAGE>
45 Rockefeller Plaza
Suite 912
New York, NY 10111
If to Source to it at:
Biltmore Financial Centre
2394 E. Camelback Road
Phoenix, AZ 85016
(e) This Agreement shall be construed in accordance with and
governed by the laws of the State of Delaware.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
WALSH INTERNATIONAL INC.
By: /s/ Michael A. Hauck
--------------------------
SOURCE INFORMATICS INC.
By: /s/ Dennis M.J. Turner
---------------------------
8
<PAGE>
EXHIBIT 10.7.4
PREFERRED TECHNOLOGY PARTNER AGREEMENT
PREFERRED TECHNOLOGY PARTNER AGREEMENT, dated as of April 16, 1996,
between WALSH INTERNATIONAL INC., a Delaware corporation ("Walsh"), and SOURCE
INFORMATICS INC., a Delaware corporation ("Source").
WHEREAS Walsh is engaged in the business of providing sales force
management and integrated sales and marketing information services, associated
medical professional databases and other services related to those databases to
and on behalf of the pharmaceutical industry (the "Walsh Business"); and
WHEREAS, pursuant to the Master Reorganization Agreement, dated as of
the date hereof (the "Master Agreement"), between Walsh and Source, Walsh has
agreed to transfer to Source certain of Walsh's assets including its products
and services that are based on proprietary databases of prescriptions dispensed
in the United States and in other countries and designed to be used by the
pharmaceutical industry in sales force compensation, territory realignment and
focused promotion (the "Source Business"); and
WHEREAS, in view of the complementary nature of the Walsh Business and
the Source Business, the parties have decided to enter into a development
project in order to facilitate the delivery of Source prescription data to its
(Source) clients utilizing Walsh technology services.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties agree as follows:
ARTICLE I
AGREEMENT TO COLLABORATE
Section 1.01. Development and Maintenance of Data Interface. Walsh and
Source hereby agree to collaborate on the creation, maintenance, modification,
updating (including routine updating of the databases and the information
contained therein), revising, enhancing and testing of a computer interface (the
"Interface") between their respective technologies enabling Source's data on
prescriptions dispensed in the United States and any other jurisdiction where
Source provides such data ("Prescription Data") to be delivered by Source
directly to its client through Walsh technology services, minimizing the need
for reprocessing.
<PAGE>
Section 1.02. Promotion of Interface. Walsh and Source hereby agree
that each of them and any of their respective subsidiaries shall have the right
to promote the Interface between their technologies in marketing their
respective products and services to the pharmaceutical and healthcare industries
wherever Source provides Prescription Data. Such promotional activities may
include any activities and decision-making related to the commercialization of
products and services included in the Walsh Business or the Source Business that
utilize the Interface including, without limitation, all activities and
decision-making relating to marketing, pricing, product strategy and
positioning, detailing, sale, delivery, servicing, and training in the use of
such products and services.
ARTICLE II
JOINT OBLIGATIONS OF THE PARTIES
Section 2.01. Development of the Interface. (a) The parties shall meet
within no later than 60 days of the date hereof in order to begin development of
the Interface.
(b) Each of Walsh and Source will supply to the other all technical
information and data necessary to the design and development, manufacture,
testing, operation and maintenance of the Interface. Such information may
include only information which the disclosing party has a right to disclose and
may include data, techniques, know-how, equipment specifications, equipment
performance or other information essential to the development of the Interface.
Section 2.02. Consulting Services. Each party will provide training
and/or consulting services to the other in connection with the development of
the Interface.
Section 2.03. Responsibilities of the Parties to Employees. Each party
will be responsible for its own employees and in no event shall any employee of
either party be deemed an employee of the other party. Matters governing the
terms and conditions of the employment of any employee, such as supervision,
compensation, taxes and disability and other benefits, are exclusively the
responsibility of the respective party.
Section 2.04. Managing Coordinators. (a) Each party hereto will
promptly designate a Managing Coordinator. Each party may change its Managing
Coordinator (or designate a temporary acting Managing Coordinator) at any time
and from time to time during the term of this Agreement by notifying the
Managing Coordinator for the other party in writing.
2
<PAGE>
(b) The Managing Coordinator or his or her designated alternate will be
solely authorized to monitor schedules and progress of the design and
development of the Interface and agree or disagree as to successful completion
of the Interface.
Section 2.05. Reporting. (a) During the term of this Agree- ment, Walsh
and Source will meet and will furnish each other with timely progress reports.
(b) Such reports shall include, but shall not be limited to, the
following: (i) progress of work to date, (ii) technical difficulties encountered
and their solutions, (iii) anticipated or potential difficulties that may
adversely impact schedules, development costs or performance and (iv) action
recommended or plans to overcome such anticipated or potential difficulties.
(c) Such final report shall include a summary of the entire performance
hereunder.
Section 2.06. Joint Promotion. (a) Upon the request of either party,
the parties shall jointly promote the Interface to a client or prospective
client.
(b) The parties shall cooperate to create appropriate promotional
material and demonstration systems, including, as appropriate, brochures,
demonstration diskettes and other support materials.
(c) Although each party retains full responsibility for any quotation
of the cost of its services to clients and prospective clients, the parties will
collaborate to create joint proposals, if appropriate, with each party being
responsible for determining the discounts, if any, for its services.
(d) Each party shall, at least five (5) business days before submitting
any proposal to a client or prospective client that calls for collaboration with
a provider of services or products, that are the same as or similar to those of
the other party, notify such party thereof.
Section 2.07. Expenses. (a) Expenses directly related to the
development of the Interface shall be allocated evenly between the parties
hereto.
(b) Except as provided in subsection (a) above, each party shall bear
its own expenses incurred in connection with this Agreement, including but not
limited to the payment of employee compensation and any expenses incurred in
connection with the development of the Interface prior to the effective date
hereof.
3
<PAGE>
ARTICLE III
CONFIDENTIALITY
Section 3.01. (a) In addition to any covenants with respect to
confidentiality contained in the Master Agreement, during the term of this
Agreement and for a period of five years thereafter, neither party shall reveal
or disclose to third parties, nor use for any purposes other than the
fulfillment of this Agreement, any confidential information received from the
other party in connection with this Agreement without first obtaining the
written consent of such party. This obligation of confidentiality shall not
apply to any information that (i) is or becomes a matter of public knowledge,
(ii) is already in the possession of the recipient, (iii) is disclosed to the
recipient by a third party having the right to do so, (iv) is in response to a
valid order of a court or other governmental body to which a party hereto may be
subject or otherwise required by law; provided, however, that in the case of
disclosure by the receiving party hereunder, such party shall first have given
as much notice to the disclosing party as practical, or (v) is necessary to
establish patent rights, copyrights or other intellectual property rights which
are capable of being registered, but only after receiving the written consent of
the disclosing party, which consent shall not be unreasonably withheld.
(b) The promotion of the Interface which inherently discloses
confidential information of either party shall not in itself be prohibited.
(c) All information supplied by either party hereto in connection with
the development of the Interface shall be treated as confidential information of
the party so supplying such information. Information developed during the course
of the development of the Interface and in connection therewith shall be treated
as the confidential information of both parties.
(d) Notwithstanding any other provision of this Article III, no
copyright license is granted in this Article III by either party to the other
with respect to (i) any program code or microcode or (ii) any document or other
media containing a notice of copyright which may be included in the information
exchanged hereunder.
(e) No public announcement or other disclosure to third parties
concerning the existence of or the terms of this Agreement shall be made, either
directly or indirectly, by any party to this Agreement, except as may be legally
required, without first obtaining the approval of the other party and agreement
upon the nature and text of such announcement or disclosure.
4
<PAGE>
ARTICLE IV
OWNERSHIP OF INTERFACE
Section 4.01. (a) The copyrights and other intellectual property rights
in the Interface, and any related documentation or information containing media
developed under this Agreement (hereinafter "Work Product") shall be jointly and
equally owned and, subject to Article III, each party shall have the
unrestricted right to grant licenses (including the right for any sublicensee to
grant sublicenses) to a third party thereunder without accounting and with
necessary consent hereby given to the other party as may be required by any
country law in granting such licenses to a third party. Notwithstanding the
foregoing, neither party may use the Interface in connection with the products
or services that compete with products or services of the other party.
(b) Each party shall have the right to obtain and to hold in the joint
owners' name copyrights, registrations and such other statutory and common law
protection as may be available, and any extensions and renewals thereof, in the
Work Product referred to in this Article IV in which it has joint ownership.
Each party agrees to give the other party, and any person designated by the
other party, at such other party's expense, all assistance reasonably required
to perfect the rights defined in this Article IV.
(c) Subject to Article III, to the extent that any pre-exist- ing
materials, other than program code or microcode, of one party are contained in
the Work Product which is owned solely or jointly by the other party, the party
providing the pre-existing materials agrees to grant and hereby grants to the
owner of the Work Product a non-exclusive, worldwide, and, subject to Section
2.06 hereto, fully paid-up right and license under copyright to use, execute,
reproduce, display, perform, distribute copies of, and prepare derivative works
of, such pre-existing materials, and to authorize others to do any, some, or all
of the foregoing.
(d) Notwithstanding any other provision of this Agreement, no program
code or microcode is licensed under this Agreement. The notice of copyright
shall reflect the respective ownership of the materials.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
Section 5.01. No Restrictions. Each party represents and warrants that
it is under no obligation or restriction, nor will it assume any such obligation
or restriction which would in any way
5
<PAGE>
interfere or be inconsistent with the activities to be undertaken pursuant to
this Agreement.
Section 5.02. Authority to Disclose Information. Each party covenants
that, regarding any information to be disclosed to the other party under this
Agreement, it has or will have the full right and power to disclose same and
that the use of any such information by the other party will not constitute a
misuse or misappropriation of any trade secret or any other type of confidential
information of any third party.
Section 5.03. No Liability. Neither party shall be liable to the other
party for any lost revenue, lost profits or other consequential damages, even if
advised of the possibility of such damages, which may result from its failure to
perform its obligations under this Agreement and neither party shall be liable
for any claim against the other party by any third party. Notwithstanding this
limitation of liability clause, nothing in this Agreement will limit either
party's payment obligations hereunder.
ARTICLE VI
TERM AND TERMINATION
Section 6.01. Term. This Agreement shall commence upon the closing of
the transactions contemplated by the Master Agreement and shall continue
thereafter for a term of five years. Thereaf- ter, this Agreement shall be
renewed only upon mutual consent of and for the periods agreed to by the parties
hereto.
Section 6.02. Termination. Either party may terminate this Agreement
(a) by immediate written notice if the other party hereto becomes insolvent, or
if a court of competent jurisdiction enters an order or decree in respect of
such company under any bankruptcy or similar law, or approving a petition for
reorganization or appointing a custodian for all or a substantial part of its
assets or ordering liquidation of such company or (b) if the other party has
defaulted in any material obligation hereunder by giving at least 30 days'
written notice to the breaching party; provided, however, that if the breaching
party corrects such default within said 30 day period, this Agreement shall
continue in full force and effect.
Section 6.03. Effect of Termination. Upon termination of this
Agreement, the obligations to make payments in accordance with Section 2.07
hereof and the obligations of confidentiality specified in Article III shall
nevertheless survive. Upon termina- tion, however, Walsh or Source, as the case
may be, shall return to
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the other all promotional material and other confidential information in its
possession regarding the other company's business.
ARTICLE VII
MISCELLANEOUS PROVISIONS
Section 7.01. Relationship of the Parties. Nothing in this Agreement
shall constitute or be deemed to constitute (a) a partnership between the
parties or (b) any party as agent of the other for any purpose, nor shall any
party have the authority or power to bind the other without the prior written
consent of the
other.
Section 7.02. No Default. No party shall be considered in default
because of any failure in the performance of this Agreement if such failure
arises out of causes or conditions beyond its control and without its fault or
negligence. Such causes may include, but are not limited to, acts of God, fire,
labor disputes, Government regulatory action or the like.
Section 7.03. Assignability. This Agreement shall not be assignable by
any party without the prior written consent of the others, other than to a
wholly-owned subsidiary of Walsh or Source, as the case may be. In the event of
a permitted assignment, however, the assigning party shall guarantee the
performance of all its obligations under this Agreement.
Section 7.04. Amendment. No waiver, modification or alter- ation of any
of the provisions of this Agreement shall be binding unless approved in writing
by duly authorized representatives of the parties.
Section 7.05. Entire Agreement. This Agreement embodies the entire
contractual relationship between the parties in relation to the subject matter
hereof, and no other agreement or understanding, verbal or otherwise, exists
between the parties at the time of execution hereof.
Section 7.06. Severability. In case any one or more of the provisions
contained in this Agreement should be invalid, illegal, or unenforceable in any
respect for any reason against a party hereto, the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby and such invalidity, illegality or unenforceabi-
lity shall only apply as to such party in the specific jurisdiction where such
judgment shall be made.
7
<PAGE>
Section 7.07. Notices. All notices in connection with this Agreement
shall be in writing and may be personally delivered or delivered by an overnight
delivery service, or registered or certified mail, return receipt requested, or
telegraphed, telecopi- ed or teletyped to the following addresses:
If to Walsh, to it at:
45 Rockefeller Plaza
Suite 912
New York, NY 10111
If to Source, to it at:
2394 E. Camelback Road
Phoenix, AZ 85016
Section 7.08. Governing Law. This Agreement shall be con- strued in
accordance with and governed by the laws of the State of Delaware.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
WALSH INTERNATIONAL INC.
By: /s/ Michael A. Hauck
--------------------------
SOURCE INFORMATICS INC.
By: /s/ Dennis M.J. Turner
---------------------------
9
<PAGE>
EXHIBIT 10.7.5
PHARBASE LICENSE AGREEMENT
THIS AGREEMENT, dated as of April 16, 1996, by and between
WALSH INTERNATIONAL INC., a corporation organized under the laws of the State of
Delaware (hereinafter "WALSH"), and SOURCE INFORMATICS INC., a corporation
organized under the laws of the State of Delaware (hereinafter "SOURCE").
WITNESSETH:
WHEREAS, WALSH has developed Medical Professional
Databases containing detailed demographic information about
physicians; and
WHEREAS, WALSH has licensed its Medical Professional Databases
(the "Pharbase Databases") to pharmaceutical companies in certain countries to
help them identify, and promote to, specific doctors or groups of doctors within
the total doctor population; and
WHEREAS, pursuant to the Master Reorganization Agreement,
dated as of April 16, 1996 (the "Master Agreement"), between WALSH and SOURCE,
WALSH has agreed to transfer to SOURCE or its subsidiaries certain of WALSH's
assets including its products and services that are based on proprietary
databases of prescriptions dispensed in the United States and in other
countries, and designed to be used by the pharmaceutical industry in sales force
compensation, territory alignment and focused promotion (SOURCE and such
subsidiaries being hereinafter referred to collectively as the "SOURCE Group");
WHEREAS, the SOURCE Group intends to provide physician-linked
prescription database services to pharmaceutical and
<PAGE>
healthcare companies operating in the United Kingdom, France, Germany, Belgium,
The Netherlands, Spain and Italy; and
WHEREAS, WALSH is willing to license the Pharbase Databases to
the SOURCE Group for use internally in the development and maintenance of the
SOURCE Group's SOURCE prescription database products and related services; and
WHEREAS, SOURCE is interested in becoming a licensee of the
Pharbase Databases.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants and agreements hereinafter set forth, the parties hereto agree
as follows:
1. LICENSE RIGHTS
(a) WALSH hereby grants to SOURCE a non-exclusive and non-
transferable license in the countries of the United Kingdom,
France, Germany, Belgium, The Netherlands, Spain and Italy
(hereinafter collectively the "Territory" and each separately
a "the Country") to:
(i) use the Pharbase Databases described in Appendix A
and owned by WALSH and its subsidiaries for inter-
nal use in the development and maintenance of the
SOURCE Group's SOURCE products and related servic-
es;
(ii) use the Pharbase Databases for the purposes of
collecting, verifying and disseminating physician
linked prescribing information; and
(iii) use the information derived from the Pharbase
Databases that becomes part of the SOURCE physi-
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cian-linked prescription record in the normal course
of selling and exploiting its SOURCE services. Such
use shall exclude the resale of information from the
Pharbase Databases to third parties where such
information is not enhanced by incorporation into a
SOURCE physician linked prescribing record or where
it reduces WALSH's ability to sell its Pharbase
Database service to third parties.
(b) SOURCE shall not, however, be permitted to make available,
sell or license to any third party the Pharbase Databases or
any data and information delivered to the SOURCE Group by
WALSH in connection therewith except as provided in Paragraph
1(a)(ii) above.
2. TERM OF LICENSE
The initial term of the licenses shall be a period of 10 years from the
date of execution of this Agreement. Thereafter, this Agreement shall
be automatically renewed for successive five year periods unless either
WALSH or SOURCE notifies the other party in writing of its intention to
terminate the Agreement at least six months prior to the applicable
renewal year.
3. ROYALTIES
(a) In consideration for each license right granted to SOURCE
hereunder, SOURCE shall pay to WALSH a royalty for the fiscal
year ending June 30, 1996, equal to One U.S. Dollar (US$1.00)
for each physician in the Country on the Pharbase Database in
regard to whom data and information
3
<PAGE>
have been provided by WALSH to the SOURCE Group during that
year. For the fiscal year ending June 30, 1997, the royalty
per physician shall be US$0.75; for the fiscal year ending
June 30, 1998, the royalty shall be US$0.50 per physician and
for the fourth and subsequent fiscal years US$0.25 per
physician, provided that should SOURCE fail to provide
information to Walsh as updates as provided in Paragraph 8(a)
for any fiscal year, Walsh may in addition to any other rights
or remedies it may have, increase the royalty to One
U.S.Dollar (US$1.00) for that fiscal year. The royalty shall
be paid by September 30 of each fiscal year during the term of
this Agreement in respect of the physician data and
information supplied by WALSH for the preceding fiscal year.
For purposes of this Agreement a fiscal year shall be the 12
month period beginning July 1 and ending June 30, except that
the first fiscal year of this Agreement shall begin as of the
date first set forth above and end June 30, 1996.
(b) WALSH shall increase the royalty for the licensed products
specified in Paragraph 3(a) annually. Said royalties for each
Country in the Territory shall increase by the rate of
inflation in that Country for the previous year. The effective
date of the increase shall be July 1 of each fiscal year and
each WALSH Company shall notify the SOURCE Company in the
relevant country
4
<PAGE>
of the increase and provide supporting documentary evidence
therefor.
(c) WALSH shall submit an invoice to SOURCE, as soon as possible
after the beginning of each calendar year, specifying the
total number of physicians in regard to whom data has been
provided by WALSH to SOURCE. SOURCE shall pay said invoice on
the later of (i) twenty (20) days after receipt of such
invoice and (ii) September 30 of the relevant fiscal year.
4. IMPROVEMENTS AND ENHANCEMENTS
During the term of this Agreement, WALSH shall provide SOURCE on a
monthly basis with all updates to the Pharbase Databases that are made
by WALSH. All maintenance and support services provided by WALSH to
SOURCE in the Territory, when so requested by SOURCE, shall be charged
at a rate of One Thousand U.S. Dollars (US$1,000) per diem plus
expenses.
5. INTELLECTUAL PROPERTY RIGHTS
The ownership of the Pharbase Databases, all software associated
therewith, and any copyrights, service marks and associated
intellectual property rights relating to the Pharbase Databases shall
remain the exclusive property of WALSH and its wholly-owned
subsidiaries.
6. CONFIDENTIALITY
(a) All confidential and proprietary information disclosed by the
SOURCE Group to WALSH or to the personnel of WALSH in the
course of the performance of this Agreement shall remain the
exclusive property of SOURCE. WALSH shall
5
<PAGE>
maintain the confidentiality, and neither disclose to third
parties nor use for its own purposes (except as separately
agreed), all such information; provided, however, that the
obligation of confidentiality specified above shall not extend
to: (i) information that is or subsequently becomes public
knowledge through no fault of WALSH or (ii) information that
comes into the possession of WALSH from a third party not
under an obligation of confidentiality to SOURCE.
(b) All confidential and proprietary information disclosed by
WALSH to the SOURCE Group or to the personnel of SOURCE in the
course of the performance of this Agreement shall remain the
exclusive property of WALSH. The SOURCE Group shall maintain
the confidentiality, and neither disclose to third parties nor
use for its own purposes (except as separately agreed), all
such information; provided, however, that the obligation of
confidentiality specified above shall not extend to (i)
information that is or subsequently becomes public knowledge
through no fault of the SOURCE Group, or (ii) information that
comes into the possession of the SOURCE Group from a third
party not under an obligation of confidentiality to WALSH.
7. WARRANTIES AND LIMITATIONS
(a) WALSH warrants that the Pharbase Databases licensed hereunder
will perform the functions for which they are being provided
to the SOURCE Group and will materially
6
<PAGE>
conform with the specifications agreed on from time to time by
the parties.
(b) The express terms of this Agreement are in lieu of all
warranties, conditions, terms, undertakings and obligations
implied by statute, common law, custom, trade usage, course of
dealing or otherwise, all of which are hereby excluded to the
fullest extent permitted by law.
(c) WALSH's liability to the SOURCE Group arising by reason of or
in connection with a defect in the Pharbase Databases or any
aspect of the data or information provided by WALSH to the
SOURCE Group hereunder shall not exceed in any Country in the
Territory an amount equal to the annual royalties paid by
SOURCE in that Country.
(d) In no event shall WALSH be liable to the SOURCE Group for
indirect, consequential or incidental damages, including,
without limitation, loss of profits, injury to persons or
damage to or loss of use of any property, except injury to
persons or damage to or loss of use of any property arising
out of the willful misconduct of WALSH.
8. ADDITIONAL AGREEMENTS OF PARTIES
(a) In the event the SOURCE Group acquires information with
respect to the names, addresses and telephone numbers of new
physicians or the new addresses and telephone numbers of
previously listed physicians, SOURCE shall promptly disclose
said information to the WALSH subsidiary in the country in
which the physician is located. In such event, WALSH shall
validate the information and, if
7
<PAGE>
accurate, promptly incorporate the information received from
SOURCE in its physician database universe.
(b) Pursuant to Clause 1(a)(iii), should SOURCE deliver its SOURCE
database service at the physician level to a pharmaceutical or
healthcare company which is not a client of Walsh for its
Pharbase service in that Country, Source will pay to Walsh a
sum each year that such data is delivered to the client a fee
of 75% of the current list price of the Pharbase service in
that Country.
(c) In the event that WALSH develops a medical professional
database in the other countries in which SOURCE intends to
develop physician linked prescription databases, WALSH shall
grant to SOURCE licenses to utilize said databases for the
same purposes and under substantially similar terms as
specified herein. The terms of said licenses shall be
coincidental with the term of this Agreement irrespective of
their commencement date. In such event, the parties shall
execute an amendment to this Agreement confirming the terms
and conditions of said additional license rights.
9. TERMINATION
(a) Either party may terminate this Agreement forthwith at any
time by notice in writing to the other party if the other
party commits an irremediable breach of this Agreement or
commits any remediable breach and fails to remedy it within 30
days after receipt of written notice of the breach.
8
<PAGE>
(b) Either WALSH or SOURCE may terminate this Agreement as it
applies to a particular Country by immediate written notice if
the other party becomes insolvent, or if a court of competent
jurisdiction enters an order or decree in respect of such
party under any bankruptcy or similar law, approving a
petition for reorganization or appoint- ing a custodian for
all or substantially all its assets or ordering the
liquidation of such party.
(c) Each party may exercise any right to terminate as provided
herein by providing notice of its intention to terminate the
entire Agreement or as it is in effect in any particular
Country in the Territory. In the event the Agreement is
terminated in one or more Countries it shall continue in full
force and effect in the remaining countries in the Territory.
(d) Notwithstanding the termination of this Agreement, the terms
and provisions of Paragraph 6 herein shall survive. Upon
termination, each party shall return to the other any
confidential materials or information in its possession
pursuant to this Agreement.
10. MISCELLANEOUS PROVISIONS
(a) All notices in connection with this Agreement shall be in
writing and may be personally delivered or delivered by
overnight delivery services, or registered or certified mail,
return receipt requested, or telegraphed, tele- copied, or
teletyped to the following addresses:
9
<PAGE>
If to WALSH, to it at: 45 Rockefeller Plaza
Suite 912
New York, N.Y. 10111
If to SOURCE, to it at: 2394 E. Camelback Road
Phoenix, AZ 85016
(b) This Agreement shall not be assignable by either party without
the prior written consent of the other, except to a
wholly-owned subsidiary of either WALSH or SOURCE, as the case
may be. In the event of a permitted assignment, however, the
assigning party shall guarantee the performance of all of the
obligations under this Agreement.
(c) This Agreement supersedes any previous agreement between the
parties in relation to the matters dealt with herein,
represents (together with any documents referred to herein)
the entire agreement between the parties in relation thereto
and no variation hereof shall be effective unless made in
writing.
(d) Notwithstanding that the whole or any part of any provision of
this Agreement may prove to be illegal or unenforceable, the
other provisions of this Agreement and the remainder of the
provision in question shall continue in full force and effect.
(e) The failure by either party at any time to require performance
by the other party or to claim a breach of any term of this
Agreement shall not be deemed to be a waiver of any right
under this Agreement.
(f) This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware.
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
WALSH INTERNATIONAL INC.
By: /s/ Michael A. Hauck
--------------------------
SOURCE INFORMATICS INC.
By: /s/ Dennis M.J. Turner
--------------------------
11
APPENDIX A
Pharbase DATABASES
1. Physician Specific Data To Be Supplied
The Walsh Medical Professional Database is customized to reflect each country's
unique medical infrastructure and therefore differs in detailed respect across
markets. The physician demographic information supplied to SOURCE shall include
those fields described
below:
Unique Walsh Identifier
Name
Specialty
Medical Qualifications (1)(2)
Date of Qualification or Birth (1)(2)
Status (e.g. Consultant) (1)
Type of Practice (e.g. private) (1)(2)
Practicing Address
Practicing Address Brick or Postal Zip (1)
Secondary Practicing Addresses (1)(2)
Notes
(1) If available and as appropriate in local market.
(2) On some physicians this field may be blank.
2. Data Supply
Walsh will supply the Pharbase Databases for the specialties requested by the
local SOURCE operations four times per annum at dates to be agreed locally. The
Pharbase Databases will be supplied on computer readable magnetic media or in
another format agreed locally. Should a SOURCE operation require more frequently
updated versions of the Pharbase Database, each extra updated version may be
purchased by SOURCE from the local Walsh operation at a rate equivalent to one
quarter of the annual royalty as specified in Paragraph 3(a).
<PAGE>
APPENDIX B
SOURCE CHARGES FOR MEDICAL PROFESSIONAL
DATABASE UPDATING SERVICES
GERMANY (INCLUDING AUSTRIA) DM.550,000 per annum, payable
in equal monthly installments.
THE NETHERLANDS DFL.400,000 per annum, payable
monthly.
FRANCE FF.50,000 per annum, payable
monthly.
<PAGE>
EXHIBIT 10.7.6
FACILITIES AGREEMENT
--------------------
THIS AGREEMENT, entered into as of April 16, 1996, by and between WALSH
INTERNATIONAL INC., a Delaware corporation (hereinafter "WALSH"), and SOURCE
INFORMATICS INC., a Delaware corporation (hereinafter "SOURCE").
WITNESSETH:
----------
WHEREAS, pursuant to the Master Reorganization Agreement, dated as of
April 16, 1996 (the "Master Agreement"), between WALSH and SOURCE, WALSH has
agreed to transfer, or cause the transfer, to SOURCE or its subsidiaries the
certain assets of certain of WALSH's subsidiaries (the companies to which such
assets are being transferred hereinafter referred to collectively as the "SOURCE
Group" and the companies from which such assets are being transferred
hereinafter referred to collectively as the "WALSH Group"); and
WHEREAS, for some period of time, the SOURCE Group will occupy office
space and utilize certain tangible assets owned or leased by companies in the
WALSH Group; and
WHEREAS, SOURCE now desires to enter into an Agreement pursuant to
which, after the transfer to the SOURCE Group pursuant to the Master Agreement,
companies in the SOURCE Group will have the continued right and ability to
occupy and utilize the facilities of the WALSH Group.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements hereinafter set forth, the parties hereto agree as
follows:
<PAGE>
1. DEFINITIONS
-----------
The following terms, whenever used in this Agreement, shall
have the following meanings:
(a) The term "WALSH Companies" shall mean WALSH and the
wholly-owned subsidiaries of WALSH listed in Appendix A
attached hereto.
(b) The term "SOURCE Companies" shall mean SOURCE and the
wholly-owned subsidiaries of SOURCE listed in Appendix A
attached hereto.
2. SUB-LEASE OF SPACE
------------------
(a) Commencing with the closing (the "Closing") of the
transactions contemplated by the Master Agreement, WALSH shall
cause the WALSH Companies to sub-lease office, storage and
warehouse space to the SOURCE Companies in the countries of
Belgium, France, Italy and the United
Kingdom.
(b) The respective superior leases pursuant to which each
WALSH Company occupies office, storage and warehouse
space in each of the locations identified on Appendix A
----------
(hereinafter the "Superior Leases") have, prior to the
date hereof, been delivered to representatives of SOURCE.
SOURCE hereby acknowledges receipt of the Superior Leas-
es. WALSH hereby represents that each WALSH Company is
in compliance with the material terms of the Superior
Lease applicable to it.
(c) Unless and until otherwise mutually agreed, the specific
locations in the WALSH facilities subleased to the SOURCE
2
<PAGE>
Companies shall be the space occupied, as of the date hereof
by the SOURCE Companies in the WALSH facilities.
(d) WALSH shall procure the consents of the Lessors under the
Superior Leases, if necessary, to each of the sub-leases to
SOURCE Companies specified hereinabove. In the event that
WALSH fails to procure the necessary consent and SOURCE or any
other SOURCE Company suffers loss or damage as a result
thereof, WALSH shall indemnify and hold harmless SOURCE and
any other SOURCE Company from and against any losses or
damages (including any reasonable legal fees that may have
been incurred in connection therewith) suffered by any such
SOURCE Company as a result of such failure.
(e) In the event that any WALSH Company sub-leasing space to a
SOURCE Company pursuant hereto desires to vacate any office,
storage or warehouse space that it presently occupies, it
shall, prior to seeking to sub-lease said space to an
independent third party, afford the partic- ular SOURCE
Company in such country the first opportunity to sub-lease the
available space on terms to be mutually agreed. Neither WALSH
nor any WALSH Company shall enter into any subsequent
sub-lease with a third party without SOURCE's consent on terms
more favorable than those offered to the SOURCE Company in
said country.
3. ADDITIONAL FACILITIES AND SERVICES
------------------------------------
In conjunction with the sub-lease of office, storage and
warehouse space to SOURCE as provided in Paragraph 2 herein-
3
<PAGE>
above, WALSH shall also cause the WALSH Companies to provide the
following additional facilities and services:
(a) All utilities, including electricity, gas and water, but not
including telephone;
(b) Janitorial service, trash collection,security services and all
other maintenance services; all the same or equivalent to the
services currently furnished by or provided to the WALSH Company
in the sub-leased space;
(c) The use of the cafeteria and kitchen facilities, if any, contained
within the space retained by the WALSH Company. (SOURCE employees
of SOURCE Companies shall, however, be required to pay the
standard charges for the food consumed therein.)
4. RENTAL AND OTHER CHARGES
------------------------
(a) SOURCE or the appropriate SOURCE Company shall, in consideration
for the space and other facilities provided to it hereunder, pay
the rental charges specified in respect of each country on the
attached Appendix A. All said rental payments shall be made by the
fifteenth day of each month.
(b) In addition, in the event that a WALSH Company is responsible for
the payment of any taxes or other local levies, including
landlord's provisions for repairs, under the Superior Lease
pursuant to which the WALSH Company occupies said space, the
SOURCE Company sub- leasing in such location shall pay a
proportionate amount of the taxes or other levies due thereunder
based upon the amount of space that the SOURCE Company occupies at
4
<PAGE>
said location as a percentage of the total amount of space leased
to the WALSH Company.
(c) All rental payments shall be delivered by the SOURCE Company
sub-leasing the premises to the Financial Director or Controller
of the WALSH Company serving as the Lessor under the said
sub-lease at the location designated in Appendix A hereto.
5. TERM OF AGREEMENT
-----------------
(a) The term of this sub-lease shall be for a period com- mencing with
the Closing and ending on the June 30, 1999, unless the Superior
Lease pursuant to which the WALSH Company occupies the premises
sub-leased hereunder shall expire earlier. In such event, the
sub-lease between WALSH and SOURCE in respect of such premises
shall expire simultaneously with the expiration or termination of
the Superior Lease between the WALSH Company and the Lessor.
(b) Each of the SOURCE Companies and the WALSH Companies shall
have the right, in respect of the individual sub- leases
identified on the attached Appendix A, to terminate the sub-lease
at the end of the initial term thereof by providing written notice
to the other at least six (6) months prior to the expiration
thereof. In the absence, however, of such written notice of
termination given by either party, the particular sub-lease shall
automatical- ly continue thereafter for an additional term of one
(1) year on the same terms and conditions; provided, however, that
WALSH shall have the right to increase the rental charges payable
pursuant to Paragraph 4(a) by an amount
5
<PAGE>
equal to the proportionate increase in the costs incurred by WALSH
in providing the space, facilities and services specified herein
from the date of this Agreement through the effective date of the
increased rental charge. In addition, SOURCE shall continue to be
responsible for its pro-rata share of taxes and levies, if any, as
provided in Paragraph 4(b) hereinabove. Written notice of any such
increase shall be given by WALSH at least sixty (60) days prior to
the effective date of the increase.
6. COMMON AREAS
-------------
(a) Each SOURCE Company sub-leasing facilities hereunder shall be
entitled to use, in common with the particular WALSH Company
serving as sub-lessor, the lobbies, corridors, elevators, parking
lots and other public portions of the leased premises. All
employees of SOURCE Companies having parking spaces at the leased
premises prior to the date hereof shall be permitted to continue
to utilize said parking spaces.
(b) Each WALSH Company serving as Lessor hereunder shall keep the
exterior, common areas, structural parts and the heating,
ventilation and air conditioning systems of the leased premises in
good and operable condition and shall keep the modes of ingress
and egress clear of snow and other impediments; all such expenses
shall be prorated between the WALSH Company and its SOURCE Company
subles- see based upon their respective square footage alloca-
tion.
6
<PAGE>
(c) Except where otherwise provided under the Superior Lease, each
SOURCE Company shall have the right to place a sign on the
exterior of the building in which the premises are located
identifying it as an occupant of the building. Said sign shall be
of a size comparable to the exterior sign identifying the WALSH
Company as an occupant of said premises. The cost of installation
of the sign shall be borne by SOURCE.
7. LEASEHOLD IMPROVEMENTS
-----------------------
(a) If the terms of the Superior Lease between the Lessor of the
premises and the particular WALSH Company serving as Lessee so
permit, the right and title to all leasehold improvements existing
within the sub-leased premises as of the date of execution of this
Agreement shall vest in the particular SOURCE Company occupying
said premises.
(b) Commencing on the date of this Agreement, SOURCE shall not
undertake any alterations, additions or improvements to the
sub-leased premises without first having obtained the consent in
writing of the particular WALSH Company serving as sub-lessor and,
if required, the Lessor under the Superior Lease. If such consent
has been obtained, any leasehold improvements rendered to the
premises by SOURCE shall, if the Superior Lease so permits, become
the property of SOURCE.
(c) At the expiration of the term of any particular sub-lease
hereunder, the SOURCE Company serving as sub-lessee shall, if so
requested either by the particular WALSH Company or the Lessor
under the Superior Lease, remove
7
<PAGE>
all leasehold improvements or additions contained within the
sub-leased premises. The costs of such removal shall be borne by
SOURCE.
8. SUPERIOR LEASE
--------------
SOURCE hereby agrees to be bound, and to cause each other SOURCE
Company that will occupy any of the premises to be sub-leased hereunder
to be bound, by all of the terms and conditions of the Superior Lease
between the particular WALSH Company and the Lessor pertaining to such
premises. Moreover, SOURCE shall not engage in any activity, or fail to
take the necessary action if such action is required, that would put it
and/or WALSH in violation of any Governmental regulation or authority
or otherwise put WALSH or any WALSH Company in breach of its
obligations under any Superior Lease.
9. CONDITION OF THE SUB-LEASED PREMISES
------------------------------------
(a) Each SOURCE Company hereby agrees to accept the sub-leased
premises in "as is" condition and WALSH makes no representation of
any kind concerning said condition.
(b) At the expiration of this Agreement or of any sub-lease in any
particular country, SOURCE shall deliver up and surrender to WALSH
possession of the sub-leased premises in the same condition as the
premises were in on the date on which the SOURCE Company first
occupied the same, excepting only ordinary wear and tear.
(c) WALSH shall maintain in full force and effect all public liability
and property damage insurance coverage pertaining to the occupancy
and use of the leased premises that WALSH had in place prior to
the effective date of this
8
<PAGE>
sub-lease. WALSH shall name SOURCE or the appropriate SOURCE
Company as an additional insured under each policy of insurance
pertaining thereto.
(d) SOURCE shall reimburse to WALSH a proportionate share of the
premiums incurred by WALSH in connection with the maintenance of
said insurance coverage based upon the amount of space occupied by
the SOURCE Companies as a percentage of the total space utilized
by both WALSH and SOURCE at any particular location. SOURCE shall
reim- burse WALSH for such proportionate insurance premiums within
thirty (30) days after receipt of an invoice from WALSH or a
particular WALSH Company together with appropriate documentation
evidencing the payment of the premium by WALSH.
10. REPAIRS TO SUB-LEASED PREMISES
------------------------------
(a) Whenever repairs to the sub-leased premises are required to be
made by the Lessor under the Superior Lease pertaining to the
premises, WALSH shall take all steps necessary to ensure that the
Lessor promptly fulfills its obligation to repair as provided
therein.
(b) In the event that the Superior Lease does not require that the
Lessor undertake any repair of the premises sub-leased by SOURCE,
then the appropriate SOURCE Company shall perform and pay for said
repair to the sub-leased premises.
11. INDEMNIFICATION
---------------
(a) SOURCE shall defend, indemnify and hold harmless WALSH and each
other WALSH Company from any liability, loss,
9
<PAGE>
cost or expense, including reasonable attorneys' fees, arising out
of the use and occupancy by SOURCE Companies of the premises
identified in Appendix A hereto and the performance or
non-performance by any SOURCE Company of any obligation contained
in this Agreement (or any Superior Lease) including but not
limited to claims for injury or damage to persons or property
arising from any source or cause whatsoever.
(b) WALSH shall defend, indemnify and hold harmless SOURCE and any
SOURCE Company from any liability, loss, cost or expense,
including reasonable attorneys' fees, arising out of a breach or
default by any WALSH Company of any provision of this Agreement or
any Superior Lease (other than breaches or defaults of provisions
of any Superior Lease caused by the action or inaction of any
SOURCE Company).
12. ADDITIONAL FACILITIES AND SERVICES PROVIDED BY WALSH
------------------------------------------------------
(a) In addition to the sub-lease of office space, equipment and other
facilities provided herein, each WALSH Company shall provide, or
otherwise make available to, each SOURCE Company the following
additional services and facilities necessary during a transition
period prior to the establishment of these facilities and services
within the SOURCE Companies to the extent such services are
currently furnished by or provided to the Walsh Company in the
sub-leased space:
(i) warehouse, storage and retrieval of records;
10
<PAGE>
(ii) all mailroom functions, including overnight pickup and
deliveries of mail, outbound general business mailings,
including staffing and labor consistent with prior
business practice;
(iii) telephone switchboard coverage and transfers of inbound
calls;
(iv) maintenance of internal telephone listings consistent with
prior practice;
(v) participation in internal training classes for management
and supervisory employees; Each WALSH Company may agree to
continue any or all of the above services for the
appropriate SOURCE Company beyond the transition period
for a fee to be agreed based on the WALSH Companies' cost
for so doing.
(b) WALSH shall provide the services specified hereinabove to SOURCE
on a general parity with similar services rendered by WALSH to its
own subsidiaries, divisions or personnel, subject to reasonable
variations based upon the manner and priority in which said
services have previously been rendered to the SOURCE Companies
when they were part of the WALSH Group.
(c) The services provided in accordance with Paragraph 12(a)
hereinabove shall be included in the rental charges specified in
Paragraph 4(a) hereof; provided, however, that any out-of-pocket
charges incurred by any WALSH Company, such as telephone charges,
purchase of supplies, postage and freight, etc., shall be
reimbursed by the SOURCE Companies within thirty (30) days after
presenta-
11
<PAGE>
tion of an invoice stating the amount due together with
appropriate documentation thereof. This paragraph 12(c) shall be
inapplicable in the U.S.
13. TERMINATION
-----------
(a) Either party may terminate this Agreement if the other has
defaulted in any material obligation hereunder by giving at least
thirty (30) days' written notice to the breaching party; provided,
however, that if the breaching party corrects such default within
said thirty (30) day period, this Agreement shall continue in full
force and effect.
(b) Either WALSH or SOURCE may terminate this Agreement, and any WALSH
Company or SOURCE Company may terminate this Agreement as it
applies to a particular country, by immediate written notice if
the other party becomes insolvent, or if a court of competent
jurisdiction enters an order or decree in respect of such party
under any bankruptcy or similar law, approving a petition for
reorganization or appointing a custodian for all or substantially
all its assets or ordering the liquidation of such party.
(c) Each party may exercise a right of termination as specified
hereinabove by providing notice of its intention to terminate this
Agreement in its entirety or, in the alternative, in respect of
any particular country in which a material breach has occurred. In
the event that a notice of termination is given with respect to a
particular sub-lease between a WALSH Company and a SOURCE
12
<PAGE>
Company but not with respect to this Agreement in its entirety,
this Agreement shall thereupon continue in full force and effect
in respect of the countries still covered by the terms of
Paragraph 2(a) hereof.
(d) This Agreement shall automatically terminate with respect to a
specific sub-lease upon the assignment of such sublease from the
applicable WALSH Company to the applicable SOURCE Company.
14. ADDITIONAL AGREEMENTS OF THE PARTIES
---------------------------------------
(a) The SOURCE Company conducting the SOURCE business in the U.S.
shall sub-lease to the WALSH Company conducting the WALSH business
in the U.S. the space occupied by that business as of the date
hereof at 2394 E. Camelback Road, Phoenix, Arizona and at 105
Terry Drive, Suite 118, Newtown, Pennsylvania.
(b) Unless otherwise mutually agreed, the monthly rental charge for
such space shall be determined based on the full allocation of all
space and other facilities related costs at that location. The
basis for allocation will be the square footage occupied pro rata
by the SOURCE Company (including square footage occupied by its
other lessee) and the WALSH Company at that location. Such
sub-leases shall be under the same terms and conditions as
provided herein, except that the WALSH Company may also terminate
such subleases at any time upon at least ninety (90) days notice
to the applicable SOURCE Company.
13
<PAGE>
15. MISCELLANEOUS PROVISIONS
------------------------
(a) This Agreement may not be assigned by SOURCE or by any other
SOURCE Company; nor may the premises sub-leased to a SOURCE
Company in any individual country be further sub-let by such
SOURCE Company, without the written consent of WALSH.
(b) This Agreement embodies the entire contractual relationship
between the parties in regard to the subject matter hereof and no
other agreement or understanding, verbal or otherwise, exists
between the parties in respect thereto at the time of execution
hereof.
(c) No waiver, modification or alteration of any of the provisions of
this Agreement shall be binding unless executed in writing by duly
authorized representatives of the parties hereto.
(d) Notices in connection with this Agreement shall be sufficiently
delivered if given by hand or sent by overnight delivery service
or by registered mail, return receipt requested, or telegraphed,
cabled, telecopied or teletyped to the parties at the following
addresses:
If to WALSH: 45 Rockefeller Plaza
Suite 912
New York, New York 10111
If to SOURCE: 2394 E. Camelback Rd.
Phoenix, Arizona 05016
(e) This Agreement shall be construed in accordance with and governed
by the laws of the State of Delaware with respect to the premises
sub-leased in the United States and, in respect of the other
premises subject to sub-
14
<PAGE>
leases, by the laws of the countries in which the premises are
located.
15
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
WALSH INTERNATIONAL INC.
By: /s/ Michael A. Hauck
--------------------
SOURCE INFORMATICS INC.
By: /s/ Dennis M.J. Turner
----------------------
16
<PAGE>
APPENDIX A
WALSH COMPANY SOURCE COMPANY LOCATION OF RENTAL
(LESSOR) (LESSEE) SPACE LEASED CHARGES
Walsh U.K. Limited Source Coltex House Unless otherwise
Informatics Rectory Place mutually agreed,
U.K. Limited Loughborough the monthly rental
Leicestershire charge for each
LE11 1TW location shall be
determined based
Craven House on the full alloca-
The Green tion of all space
Hampton Court Rd. and other facili-
Hampton Court ties related costs
Surrey KT8 9BX at that location.
The basis for allo-
Walsh Belgium Source Rue de Stalle 63 cation will be the
S.A. Informatics 1180 Brussels square footage occu-
Belgium S.A pied pro rata by the
SOURCE Company and
Walsh France S.A. Source Burospace 9 the WALSH Company
Informatics 91571 Bievres (including the
France S.A. Cedex square footage occu-
pied by its other
Walsh Italia Source Centro Uffici lessee(s)) at that
S.r.l. Informatics S. Siro location.
Italia S.r.l. Via Caldera 21
20153 Milan
17
<PAGE>
EXHIBIT 10.8
EXECUTION COPY
AGREEMENT
AGREEMENT dated as of April 16, 1996 by and among Walsh
International Inc. (the "Company"), Source Informatics Inc., a wholly-owned
subsidiary of the Company ("Source"), and those holders of Series A Convertible
Preferred Stock, $1.00 par value per share ("Series A Preferred Shares") of the
Company which have entered into this Agreement and whose names are set forth on
the signature pages hereof (collectively, the "Preferred Stockholder Parties").
WITNESSETH:
WHEREAS, each of the parties hereto is a party to (i) one or
more of the Share Purchase Agreements dated as of September 8, 1993 (together,
the "Purchase Agreements") between the Company and the respective purchasers
named therein, including each of the Preferred Stockholder Parties, and (ii) the
Stockholders' Agreement dated as of September 8, 1993 among the Company and the
Stockholders named therein, including the Preferred Stockholder Parties (the
"Walsh Stockholders' Agreement");
WHEREAS, the Company has filed with the Securities and
Exchange Commission a registration statement on Form S-1 (the "Registration
Statement") pursuant to which it proposes to register shares of its common
stock, $.01 par value per share ("Company Common Stock") for sale in its initial
public offering (the "Offering");
WHEREAS, the Company has entered into that certain Master
Reorganization Agreement dated as of the date hereof with Source, pursuant to
which the "Source Business" of the Company will be transferred to Source (the
closing of such transaction being hereinafter referred to as the "Reorganization
Closing");
WHEREAS, the Company has proposed the spin-off to its existing
stockholders of all the issued and outstanding capital stock of Source, all as
described in the preliminary prospectus (the "Preliminary Prospectus") prepared
and filed with the Securities and Exchange Commission as part of the
Registration Statement (the "Spin-Off");
NOW, THEREFORE, in consideration of the premises and the
mutual promises herein contained, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
<PAGE>
1. Amendments to Terms of Series A Preferred Shares. The
parties acknowledge that the Restated Certificate of Incorporation of the
Company in the form attached hereto as Exhibit A (the "Restated Certificate of
Incorporation") will amend the terms of the Series A Preferred Shares as
provided therein, with the effect that (i) effective as of the filing with the
Secretary of State of the State of Delaware of the Restated Certificate of
Incorporation, each outstanding Series A Preferred Share shall be reclassified
into 1/4 of one Series A Preferred Share and all references to per share dollar
amounts (e.g., in the definitions of "Mandatory Redemption Price" and "Special
Optional Redemption Price" and in the conversion formulas set forth in Section 7
of the Restated Certificate of Incorporation) shall be appropriately adjusted;
(ii) effective as of the Spin-Off, each holder of Series A Preferred Shares
shall automatically, and without action on the part of the Company or such
holder, be deemed to have exchanged one-half the aggregate number of Series A
Preferred Shares held by such holder for the number of shares of preferred stock
of Source ("Source Preferred Shares"), having the powers, preferences and rights
set forth in the Certificate of Designations, Powers, Preferences and Rights
attached hereto as Exhibit B (the "Source Certificate of Designations"),
determined by multiplying (x) the number of Series A Preferred Shares so
exchanged by such holder, times (y) 2; (iii) simultaneously with the issuance of
the Source Preferred Shares in such exchange, the references to "$24.00" in the
definitions of "Mandatory Redemption Price" and "Special Optional Redemption
Price" and in the conversion formula set forth in Section 6 of the Restated
Certificate of Incorporation (as amended in accordance with clause (i) above)
shall be changed to be references to "$25.34"; and (iv) effective upon the
consummation of the Offering, each then outstanding Series A Preferred Share
shall automatically, without any action by the Company or any holder thereof, be
converted into a number of shares of Company Common Stock equal to the greater
of (A) 2.24 and (B) the number determined by dividing $25.34 by 74% of the price
to the public of the Company Common Stock sold in the Offering. Concurrently
with the Spin-Off, the Company will exchange Series A Preferred Stock for Source
Preferred Shares pursuant to the Restated Certificate of Incorporation.
2. Certain Stockholder Actions. Concurrently with its
execution and delivery of this Agreement, each of the Preferred Stockholder
Parties has delivered to the Company its written consent, as a holder of Series
A Preferred Shares, to:
(i) the Restated Certificate of Incorporation, which effects
certain amendments to the Company's Amended and Restated Certificate of
Incorporation, including (A) reclas- sification of the outstanding
Company Common Stock and Series A Preferred Shares to provide for a 1:4
reverse split of such stock; (B) a change in the authorized capital
stock
2
<PAGE>
of the Company from 40,000,000 shares of Company Common Stock and
5,000,000 shares of preferred stock, $1.00 par value, of which an
aggregate 4,166,667 shares have been designated as the Series A
Preferred Shares, to 20,000,000 shares of Company Common Stock and
5,000,000 shares of preferred stock, $1.00 par value, of which an
aggregate 1,041,667 shares have been designated as the Series A
Preferred Shares; (C) the amendments to the terms of the Series A
Preferred Stock described in paragraph 1 hereof; and (D) certain other
changes described therein;
(ii) the restatement of the Bylaws of the Company in
the form attached hereto as Exhibit C (the "Restated By-
Laws"); and
(iii) the Spin-Off.
3. Source Stockholders' Agreement. Concurrently with the
Spin-Off, Source shall enter into a stockholders' agreement in substantially the
form of Exhibit D hereto (the "Source Stockholders Agreement"). Following the
Spin-Off, Source shall use reasonable efforts to obtain the signatures of any
parties to the Walsh Stockholders Agreement that have not executed and delivered
the Source Stockholders Agreement prior to the Spin-Off.
4. Certain Waivers and Amendments. (a) Pursuant to
Section 15 of the Purchase Agreements, the Preferred Stockholder Parties, being
the "Majority Shareholders" (as such term is defined in each of the Purchase
Agreements) hereby:
(i) waive any requirement under Section 7.13 of the Purchase
Agreements that the Company cause a fairness opinion to be delivered to
the holders of the Series A Preferred Shares in connection with the
sale of the Scriptrac business to Pharmaceutical Marketing Services
Inc. ("PMSI") or the amendment of the Alpha Database License Agreement
between certain subsidiaries of the Company and PMSI;
(ii) agree with the Company that paragraph (b) of Section
7.20, "Maintenance of Public Market" of each of the Purchase Agreements
is hereby amended to read in its entire-
ty as follows:
(b) If the Company shall have consummated an initial public
offering of Common Stock pursuant to a registration statement
filed under the Securities Act, then at any time following the
date of consummation of such initial public offering, the
Company may without violating the provisions of Section
7.20(a) hereof (but without affecting any other rights of the
holders of Shares and Conversion Shares) take such action
which results in the acquisition by the Company or a third
3
<PAGE>
party of all of the outstanding shares of Common Stock of the
Company so long as (i) in connection with such transaction,
holders of shares of Common Stock of the Company shall have
the right to receive the same securities or other property
(containing the same terms and the same rights) with respect
to each such share of Common Stock and (ii) the holders of
Shares and Conversion Shares shall have the right to receive
in connection with such transaction the same such securities
or other property (including the same terms and with the same
rights) on account of the number of shares of Common Stock
which are then represented by such Conversion Shares or which
are then obtainable upon conversion of such Shares as are
received by the other holders of Common Stock on account of
the shares of Common Stock held by such holders.
(iii) agree with the Company that, effective upon the
consummation of the Offering and conversion of the Series A Preferred
Shares as contemplated in paragraph 1(iv) hereof, the provisions of
Section 7 of each of the Purchase Agreements (except for each of
Sections 7.1, "Use of Proceeds"; 7.7, "Environmental Matters"; 7.18
"Listing of Shares"; 7.19, "Securities Act Registration"; 7.20,
"Maintenance of Public Market" (amended as provided above) and 7.22,
"Delivery of Information," which shall remain in full force and effect
in accordance with the Purchase Agreements), shall terminate and be of
no further force and effect.
(b) Each of the Preferred Stockholder Parties hereby waives
any rights under Section 19 of the Walsh Stockholders' Agreement or otherwise to
acquire Company Common Stock in connection with the issuance of warrants to
purchase up to 200,000 shares of Company Common Stock at an exercise price of
$6.00 per share to Comdisco, Inc.
5. Certain Registration Rights Matters. Pursuant to Section 15
of each of the Purchase Agreements, the Preferred Stockholder Parties, being the
holders of at least two-thirds in interest of the "Conversion Shares" (as such
term is defined in the Purchase Agreements), hereby waive written notice of the
Offering and any right to request that Conversion Shares be included in the
Offering under Section 8.2(a) of each of the Purchase Agreements; provided, that
such waivers are conditioned upon the Company obtaining similar waivers from any
other persons possessing registration rights with respect to the Company's
securities and that the Offering consists solely of the offer and sale of
securities by and on behalf of the Company. The Company confirms, pursuant to
Section 8.2(b) of each of the Purchase Agreements, that the managing underwriter
of the Offering has advised the Company that it has determined in good faith
that the inclusion of Conversion Shares or any other securities of the
4
<PAGE>
Company would jeopardize the successful sale of the Company Common Stock to be
sold in the Offering.
6. Termination of Walsh Stockholders' Agreement. Pursuant to
Section 33 of the Walsh Stockholders' Agreement, the Preferred Stockholder
Parties, constituting the holders of a majority of the shares of Common Stock
currently held by the "New Shareholder Group" (as such term is defined in the
Walsh Stockholders' Agreement), and the Company agree that, effective upon the
consummation of the Offering and the receipt of the requisite consent of the
"Welsh Stockholders", the "Crown Stockholders" and the "Management Stockholders"
(as such terms are defined in the Walsh Stockholders' Agreement), the Walsh
Stock- holders' Agreement shall terminate and be of no further force and effect.
7. ELI Observer Rights. Following the consummation of the
Offering, for so long as Equity-Linked Investors, L.P. and Equity-Linked
Investors II, L.P. (collectively, the "ELI Stockholders") shall hold, in the
aggregate, at least 1/2 of the number of Conversion Shares held by them as of
the date of consummation of the Offering (as such number may be appropriately
adjusted to take account of stock splits, stock dividends, recapitalizations,
reclassifications and other similar events), the ELI Stockholders (acting
through the holder or holders of a majority of the Shares held by the ELI
Stockholders) will have the collective right, at the request of the ELI
Stockholders, to send one representative to meetings of the Company's Board of
Directors, such representative to act as an observer without a vote or other
rights as a director (except the right to receive sufficient notice to enable
such attendance and the right to receive all other communications, information
and materials furnished, from time to time, to directors of the Company and the
right to receive reimbursement for travel expenses to the same extent as
directors of the Company); provided, that any such representative shall, before
attending any meetings of the Company's Board of Directors, execute and deliver
to the Company a confidentiality agreement in form and substance reasonably
satisfactory to the Company and its counsel.
8. Representations and Warranties of the Company and Source.
Each of the Company and Source hereby represents and warrants to each holder of
Series A Preferred Shares, as of the date hereof and as of the date of the
Reorganization Closing, as follows:
(a) Each of the Company and Source is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware, and is duly qualified, licensed and authorized to do
business and is in good standing in each jurisdiction in which it owns
or leases any material property or in which the conduct of its business
5
<PAGE>
requires it to so qualify or to be so licensed, except for such
jurisdictions where the failure to so qualify or be so licensed would
not have a material adverse effect on the Company or Source, as the
case may be.
(b) The Company has all requisite corporate power and
authority to enter into this Agreement and, upon receipt of the
stockholder consents referred to in paragraph 2 hereof, will have all
requisite corporate power and authority to consummate the transactions
contemplated hereby (including, without limitation, the Offering, the
Spin-Off and the issuance of Conversion Shares upon conversion of the
Series A Preferred Shares in accordance with the Restated Certificate
of Incorporation). This Agreement has been duly executed by the Company
and constitutes the legal, valid and binding obligation of the Company,
enforceable against it in accordance with its terms.
(c) The Conversion Shares, when issued upon conversion of the
Series A Preferred Shares in accordance with the Restated Certificate
of Incorporation, will be duly authorized, validly issued, fully paid
and non-assessable.
(d) Source has all requisite corporate power and authority to
enter into this Agreement and the Stockholders Agreement and to
consummate the transactions contemplated hereby and thereby (including,
without limitation, the issuance and delivery of shares of Source
Preferred Stock in accordance with the terms hereof and of the Restated
Certificate of Incorporation). This Agreement has been duly executed by
Source and constitutes the legal, valid and binding obligation of
Source, enforceable against it in accordance with its terms. Upon
execution and delivery by Source of the Stockholders Agreement as
contemplated hereby, the Stockholders Agreement will constitute the
legal, valid and binding obligation of Source, enforceable against it
in accordance with its terms.
(e) The authorized capital stock of Source consists solely of
common stock and an aggregate 2,000,000 shares of preferred stock, the
only designated series of which is the Source Preferred Shares.
Immediately prior to the Spin-Off, the only issued and outstanding
shares of capital stock of Source shall be shares of Source Common
Stock and the Source Preferred Shares. Immediately prior to the
Spin-Off, all the Source Preferred Shares will be duly authorized,
validly issued, fully paid and non-assessable, and the Company will own
all the Source Preferred Shares free and clear of any and all pledges,
security interests, liens, adverse claims, charges or other
encumbrances of any nature whatsoever. The shares of Source Common
Stock into which the Source Preferred Shares are convertible (the
"Source Conversion
6
<PAGE>
Shares") have been duly reserved for issuance upon conversion of the
Source Preferred Shares in accordance with the Source Certificate of
Designations and, when so issued and delivered, will be duly
authorized, validly issued, fully paid and non-assessable.
(f) The exchange of Series A Preferred Stock for Source
Preferred Shares pursuant to the Restated Certificate of Incorporation
will transfer valid title to such Source Preferred Shares, free and
clear of any and all pledges, security interests, liens, adverse
claims, charges or other
encumbrances of any nature whatsoever.
(g) The execution and delivery of this Agreement by the
Company and Source and of the Source Stockholders Agreement by Source,
and the performance by each of the Company and Source of its
obligations hereunder and thereunder (including, without limitation,
the Offering, the Spin-Off, the issuance of the Source Preferred Shares
in exchange for Series A Preferred Shares and the issuance of
Conversion Shares upon conversion of the Series A Preferred Shares in
accordance with the Restated Certificate of Incorporation) will not
violate any provision of law, any order of any court or other agency of
government, the Restated Certificate of Incorporation or Restated
By-Laws of the Company, the Certificate of Incorporation or By-Laws of
Source, the Source Certificate of Designations, or any judgment, award
or decree or any indenture, agreement or other instrument to which
either of the Company or Source is a party or by which any of their
respective assets are bound or affected, or conflict with, result in a
breach or constitute (with due notice or passage of time or both) a
default under, any such indenture, agreement or other instrument,
except for any such violations, conflicts, breaches or defaults which,
individually or in the aggregate, would not materially and adversely
affect either of the Company or Source.
9. Representations and Warranties of the Preferred Stockholder
Parties. Each of the Preferred Stockholder Parties hereby represents and
warrants to each of the Company and Source and to the other Preferred
Stockholder Parties, as to itself, as of the date hereof and as of the date of
the Reorganization Closing, as follows:
(a) Such Preferred Stockholder Party is the record and
beneficial owner of the number of Series A Preferred Shares set forth
opposite such Preferred Stockholder Party's name on the signature pages
hereof (before giving effect to the reclassification of the Company's
capital stock contemplated
herein).
7
<PAGE>
(b) Such Preferred Stockholder Party has all requisite power
and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly executed
by such Preferred Stockholder Party and constitutes the legal, valid
and binding obligation of such Preferred Stockholder Party, enforceable
against it in accordance with its terms.
(c) Such Preferred Stockholder Party has had a full
opportunity to request from the Company and to review and has received
all information which it deems relevant in connection with the
Spin-Off, the issuance of the Conversion Shares and the issuance of the
Source Preferred Shares.
(d) Such Preferred Stockholder Party is an "accredited
investor" as such term is defined in Regulation D under the Securities
Act of 1933, as amended (the "Securities Act").
(e) Such Preferred Stockholder Party is acquiring the Source
Preferred Shares, and will, upon conversion of the same, acquire the
shares of Source Common Stock into which they are convertible (the
"Source Conversion Shares") for its own account for the purpose of
investment and not with a view to or for sale in connection with any
distribution thereof in violation of any securities laws.
(f) Such Preferred Stockholder Party understands that none of
the Source Preferred Shares or the Source Conversion Shares have been
registered under the Securities Act by reason of their issuance in a
transaction exempt from the registration requirements of the Securities
Act.
(g) Such Preferred Stockholder Party understands that the
Source Preferred Shares and the Source Conversion Shares must be held
indefinitely unless a subsequent disposition thereof is registered
under the Securities Act or is exempt from such registration, such
securities will bear a legend to such effect and the Company will make
a notation on its transfer books to such effect.
10. Conditions to the Spin-Off of Source. The Company shall
not carry out the Spin-Off until each of the following conditions shall have
fulfilled:
(a) Holders of not less than two-thirds of the Series A
Preferred Shares shall have executed and delivered this Agreement, the
written consents referred to herein and the Source Stockholders
Agreement, and all conditions to the amendment of the Certificate of
Incorporation of Walsh and the Walsh Stockholders Agreement shall have
been satisfied;
8
<PAGE>
(b) Source shall have caused the Source Certificate of
Designations to be filed with the Delaware Secretary of State;
(c) The Company shall have caused the Restated Cer- tificate
of Incorporation to be filed with the Delaware Secretary of State;
(d) Source shall have executed and delivered the Source
Stockholders Agreement and the Registration Rights Agreement in the
form attached hereto as Exhibit E (the "Preferred Stockholder
Registration Rights Agreement");
(e) The Reorganization Closing shall have occurred;
(f) In connection with the Offering, Walsh shall have entered
into a firm commitment underwriting agreement with J.P. Morgan
Securities Inc. and Montgomery Securities; and
(g) Reboul, MacMurray, Hewitt, Maynard & Kristol, counsel for
the Company and Source, shall have delivered to each of the Preferred
Stockholder Parties an opinion dated the date of the Spin-Off, in form
and substance reasonably satisfactory to the Preferred Stockholders and
their counsel, to the effects provided in paragraphs 8 (a)-(g) hereof.
11. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to principles of conflict of laws.
12. Expenses. Whether or not the transactions herein
contemplated are consummated, the Company will pay the fees and expenses of
Morgan, Lewis & Bockius LLP in connection with this Agreement, the Restated
Certificate of Incorporation, the Source Certificate of Designations, the Source
Stockholders' Agreement and the Preferred Stockholder Registration Rights
Agreement and the transactions contemplated hereby and thereby (whether or not a
closing occurs hereunder and if a closing occurs the Company will make such
payment at the closing).
9
<PAGE>
IN WITNESS WHEREOF the undersigned have executed this
Agreement as of the date first above written.
WALSH INTERNATIONAL INC.
By/s/ Michael A. Hauck
---------------------------------
Name: Michael A. Hauck
-----------------------------
Title: Chief Executive Officer
----------------------------
SOURCE INFORMATICS INC.
By/s/ Dennis M.J. Turner
---------------------------------
Name: Dennis M.J. Turner
-----------------------------
Title: Chief Executive Officer
----------------------------
EQUITY-LINKED INVESTORS, L.P.
By Rohit M. Desai Associates
---------------------------------
General Partner
By /s/ Frank J. Pados
---------------------------------
Name: Frank J. Pados
-----------------------------
Title: Executive VP
----------------------------
EQUITY-LINKED INVESTORS-II
By Rohit M. Desai Associates-II
---------------------------------
General Partner
By /s/ Frank J. Pados
---------------------------------
Name: Frank J. Pados
-----------------------------
Title: Executive VP
----------------------------
10
<PAGE>
NATIO FONDS VENTURE I
By /s/ D. Bellanger
------------------------------
Name: D. Bellanger
-------------------------
Title: Fund Manager
------------------------
NATIO FONDS VENTURE II
By /s/ D. Bellanger
------------------------------
Name: D. Bellanger
-------------------------
Title: Fund Manager
------------------------
NATIO VIE DEVELOPPEMENT
By /s/ D. Bellanger
------------------------------
Name: D. Bellanger
-------------------------
Title: Fund Manager
------------------------
ASSU VENTURE
By /s/ D. Bellanger
------------------------------
Name: D. Bellanger
-------------------------
Title: Fund Manager
------------------------
ESSEX SPECIAL GROWTH
OPPORTUNITIES FUND, L.P.
By /s/ Susan P. Stickells
------------------------------
Name: Susan P. Stickells
-------------------------
Title: Vice President
------------------------
OLYMPUS PRIVATE PLACEMENT
FUND, L.P.
By PGP Partners, L.P.
-----------------------------
General Partner
By /s/ Robert S. Morris
------------------------------
Robert S. Morris
-------------------------
Managing Partner of the
General Partner
11
<PAGE>
Spears Benzak Group:
John Merck Fund
Rockefeller Brothers Fund
Spears Benzak Salomon &
Farrell
Riverbank Associates
River Branch Foundation
The Henry B. Babson 1959 Trust
Patricia W. Hewitt
Revocable Trust Dtd 3/23/76
Cape Branch Foundation
The Zellerbach Family Fund
Rees L. Jones
Saidye Rosner Bronfman Ava
Trust
The Turbo Trust
Joshua Associates
Crocodile Associates
Greenwich Hospital
Association Long-Term
Greenwich Hospital
Retirement Trust
Jennifer U. Johnson
Joan B. Spears
Clement C. Moore II
Christie C. Salomon
Christina Salomon
Roger S. Kuhn
Belle O. Kuhn
David Kuhn
David R. Salomon
Edna B. Salomon &
Christie Salomon
Tstees f/b/o David Salomon
U/A 12/27/70 #2
Christie Salomon a/c/f
Evanne Salomon YGMA
Edna B. Salomon &
Christie Salomon
Tstees f/b/o Evanne
Salomon U/A 12/27/72 #2
Christie Salomon
a/c/f Jennifer Salomon
Edna B. Salomon &
Christie Salomon
Tstees f/b/o Christina
Salomon U/A 12/12/70 #2
Judith Kuhn
Parkland Capital Fund I,
L.P. - Special Investments
By SPEARS BENZAK SALOMON &
FARRELL, as Attorney-in-Fact
for each of the above
Stockholders
By /s/ Richard J. Buoncore
Name: Richard J. Buoncore
Title: Managing Director and CFO
12
<PAGE>
ACORN FUND
By /s/ Ralph Wanger
Ralph Wanger
President
FRANK ENTERPRISES
By /s/ Warren J. Hauser
Name: Warren J. Hauser
Title: Attorney-in-Fact
MEGA-ASSETS
By /s/ Warren J. Hauser
Name: Warren J. Hauser
Title: Attorney-in-Fact
Lily Tong
HONG KONG BANK INTERNATIONAL
TRUSTEE LTD.
By /s/ Warren J. Hauser
Name: Warren J. Hauser
Title: Attorney-in-Fact
Victor Lee
By /s/ Warren J. Hauser
Attorney-in-Fact
Wendy Ng and/or Cindy Ng
Anthony Ng
13
<PAGE>
BRIDLINGTON INVESTMENT LIMITED
By /s/ Warren J. Hauser
Name: Warren J. Hauser
Title: Attorney-in-Fact
Leung Ping Chiu
By /s/ Warren J. Hauser
Attorney-in-Fact
Tan Eng Soon
By /s/ Warren J. Hauser
Attorney-in-Fact
MONTGOMERY SECURITIES
By
Name:
Title:
14
<PAGE>
EXHIBIT 11.1
<TABLE>
<CAPTION>
WALSH INTERNATIONAL INC. AND SUBSIDIARIES
Computation of Earnings (Loss) Per Common Share
Dollars in thousands, except per share amounts
Three Months Ended Nine Months Ended
------------------ -----------------
March 31, March 31, March 31, March 31,
--------- --------- --------- ---------
1995 1996 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Primary and Fully Diluted - Historical Shares
Historical weighted average number of common
shares outstanding 5,808,960 5,811,742 5,805,128 5,809,995
Weighted average number of common and
common equivalent shares issued (1) 1,820,327 1,727,393 1,803,880 1,759,617
------------------- -------------- ---------------- ----------------
Weighted average number of common and
common equivalent shares outstanding 7,629,287 7,539,135 7,609,008 7,569,612
=================== ============== ================ ================
Income (loss) from continuing operations $ (1,288) $ 89 $ (2,474) $ 1,060
(Loss) income from discontinued operations, net (861) ___ (382) (1,755)
------------------- -------------- ---------------- ----------------
Net Loss $ (2,149) $ 89 $ (2,856) $ (695)
=================== ============== ================ ================
Income (loss) per share from continuing
operations $ (0.16) $ 0.01 $ (0.33) $ 0.14
(Loss) income per share from discontinued
operations, net (0.12) ___ (0.05) (0.23)
-------------------
-------------- ---------------- ----------------
Net Loss per Share $ (0.28) $ 0.01 $ (0.38) $ (0.09)
=================== ============== ================ ================
Primary and Fully Diluted - Pro Forma Shares
Pro Forma weighted average number of com-
mon 5,808,960 5,811,742 5,805,128 5,809,995
shares outstanding
Weighted average number of common equiva-
lent 1,539,613 1,727,393 1,539,613 1,759,617
shares issued (2)
------------------- -------------- ---------------- ----------------
Weighted average number of common and
common equivalent shares outstanding 7,348,573 7,539,135 7,344,741 7,569,612
=================== ============== ================ ================
Income (loss) from continuing operations $ (1,288) $ 89 $ (2,474) $ 1,060
Loss from discontinued operations, net (861) ___ (382) (1,755)
------------------- -------------- ---------------- ----------------
Net Income (Loss) $ (2,149) $ 89 $ (2,856) $ (695)
=================== ============== ================
Income (loss) per share from continuing $ (0.17) $ 0.01 $ (0.34) $ 0.14
operations
(Loss) income per share from discontinued
operations, net $ (0.12) ___ (0.05) (0.23)
------------------- -------------- ---------------- ----------------
Net Earnings (Loss) per Share $ (0.29) $ 0.01 $ (0.39) $ (0.09)
=================== ============== ================ ================
<PAGE>
<FN>
1) The Common Share equivalents consist of stock options, warrants and the
Series A Convertible Preferred Stock. The Stock options and warrant
equivalent shares are calculated using the treasury stock method and
the $12.00 initial public offering price per share as the average
and/or closing price for all periods. For the purposes of this Exhibit
all common equivalent shares have been included even where they are
dilutive.
2) The Common Stock equivalents consist of stock options, warrants and the
Series A Convertible Preferred Stock. Common equivalent shares from
convertible preferred stock (using the if- converted method) and stock
options and warrants (using the treasury stock method) have been
included in the computation when dilutive (except that, pursuant to the
Securities and Exchange Commission rules, the Series A Convertible
Preferred Stock which has converted into Common Stock in connection
with the Company's initial public offering is included as if converted
at the original date of issuance even though inclusion may be
anti-dilutive). Pursuant to the Securities and Exchange Commission
Staff Accounting Bulletin all common and common equivalent shares
issued by the Company at an exercise price below the assumed public
offering price during the twelve-month period prior to the offering
have been included in the calculation as if they were outstanding for
all periods through December 31, 1995, the interim period included in
the initial public offering prospectus, (using the treasury stock
method and the initial public offering price of $12.00 per share).
After December 31, 1995 Common equivalent shares are included only if
they have a dilutive effect.
</FN>
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> $4,509
<SECURITIES> $0
<RECEIVABLES> $12,361
<ALLOWANCES> $191
<INVENTORY> $0
<CURRENT-ASSETS> $17,021
<PP&E> $8,015
<DEPRECIATION> $2,928
<TOTAL-ASSETS> $45,244
<CURRENT-LIABILITIES> $34,514
<BONDS> $16,279
<COMMON> $58
$24,226
$0
<OTHER-SE> ($35,503)
<TOTAL-LIABILITY-AND-EQUITY> $45,244
<SALES> $0
<TOTAL-REVENUES> $34,181
<CGS> $0
<TOTAL-COSTS> $13,597
<OTHER-EXPENSES> $18,119
<LOSS-PROVISION> $0
<INTEREST-EXPENSE> $1,747
<INCOME-PRETAX> $1,289
<INCOME-TAX> $229
<INCOME-CONTINUING> $1,060
<DISCONTINUED> ($1,755)
<EXTRAORDINARY> $0
<CHANGES> $0
<NET-INCOME> ($695)
<EPS-PRIMARY> ($0.09)
<EPS-DILUTED> ($0.09)
</TABLE>
